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HomeMy WebLinkAbout1997 CON Cox Television Franchise - Transfer to CoxCom IncMEETING DATE AGENDA ITEM NO. 1 1- ITEM TITLE City of National City, California COUNCIL AGENDA STATEMENT August 12, 1997 PROPOSED TRANSFER OF CABLE TELEVISION FRANCHISE FROM COX COMMUNICATIONS SAN DIEGO, INC. TO COXCOM, INC. ,ram PREPARED BY Park Morse Jc DEPARTMENT /_ 1 City Manager EXPLANATION On February 12, 1997, Cox Communications requested that the City approve an "assignment" of their existing franchise (which expires in 2009) to CoxCom, Inc. CoxCom appears to simply be a reformulated subsidiary of Cox's parent company. Cox describes the assignment as an "internal reorganization." As your Honorable Body is aware, the City makes use of outside special counsel on telecommunications issues. We referred this request to our counsel at Rutan & Tucker. Mr. William Marticorena, Esq. Has reviewed the request with COX and has negotiated a transfer agreement with them on our behalf. That proposed transfer agreement is before you tonight for approval. The Agreement's important points include: (1) that the transfer will not affect rates charged to area customers; (2) that the City's costs in reviewing the transfer proposal will be partially offset by COX, and; (3) that the successor company shall incur all liabilities, rate positions and franchise obligations of the former company. (Continued) Environmental Review Financial Statement N/A STAFF RECOMMENDATION X N/A Account No. Approve attached Resolution authorizing the Mayor to sign Agreement providing for the transfer. BOARD/COMMISSION RECOMMENDATION ATTACHMENTS (Listed Below) 1. Resolution 2. Feb. 12, 1997 letter from Cox 3. Agreement Resolution No. 97-104 A-200 (Rev. 9/80) August 12, 1997 Proposed Transfer of COX Cable TV Franchise Agenda Item # 1 (continued) The realignment transfers the COX San Diego entity with 472,000 subscribers to the parent company whose subscriber base is 3,316,382. City Code Section 6.10.070 proscribes the method of transfer of a cable franchise. Included in this section is a requirement that the assignee must show financial responsibility for the proposed transaction. Inasmuch as the assets and liabilities of the Cox San Diego operation pass to the larger parent which has considerably more financial resources, we believe that the financial test has been met. A copy of the Federal Communications Commission Form 394 on the proposed transfer and the Securities and Exchange Commission's Form 10-Q filing are available for viewing in the City Manager's Office. RESOLUTION NO. 97-104 RESOLUTION OF THE CITY COUNCIL OF THE CITY OF NATIONAL CITY AUTHORIZING THE MAYOR TO EXECUTE AN AGREEMENT CONSENTING TO THE TRANSFER OF THE FRANCHISE AGREEMENT HELD BY COX COMMUNICATIONS SAN DIEGO, INC. TO COX COM, INC. WHEREAS, Cox Communications San Diego, Inc. ("the Transferor") was granted a franchise by the City to construct, improve, operate and maintain a cable television system within the City as more particularly defined therein (the "Franchise Agreement"); and WHEREAS, the Transferor has filed a written application to the City wherein it has requested the consent of the City to the transfer of the Franchise Agreement to Cox Corn, Inc. (the "Transferee"); and WHEREAS, the City Council has reviewed the proposed transaction, as well as all relevant documents, staff reports and recommendations; and WHEREAS, the Transfer cannot go forth without written consent of the City; and WHEREAS, based upon the evidence presented to the City Council, it has determined that the Transferee has shown financial responsibility and has agreed to comply with Chapter 6.10 of the Municipal Code, and that it would be in the public interest to conditionally approve the Transfer; and WHEREAS, the terms and conditions of the transfer have been memorial- ized in a document entitled "Agreement Relating to the Consent of the City of National City to the Transfer of the Franchise Agreement Held by Cox Communications San Diego, Inc." NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of National City that the Mayor is hereby authorized to execute the "Agreement Relating to the Consent of the City of National City to the Transfer of the Franchise Agreement Held by Cox Communications San Diego, Inc." Said agreement is on file in the office of the City Clerk. Resolution No. 97-104 Page Two PASSED and ADOPTED this 12th day of August, 1997. ATTEST: is ael RDail City R. y Clerk APPROVED AS TO FORM: George H. riser, III City Attorney George I-P. Waters, Mayor Passed and adopted by the Council of the City of National City, California, on August 12, 1997, by the following vote, to -wit: Ayes: Council Members Beauchamp, Inzunza, Morrison, Zarate, Waters. Nays: None. Absent: None. Abstain: None. AUTHENTICATED BY: GEORGE H. WATERS Mayor of the City of National City, California By: Clerk of the of National City, California Deputy I HEREBY CERTIFY that the above and foregoing is a full, true and correct copy of RESOLUTION NO. 97-104 of the City of National City, California, passed and adopted by the Council of said City on August 12, 1997. City Clerk of the City of National City, California By: Deputy AGREEMENT RELATING TO THE CONSENT OF THE CITY OF NATIONAL CITY TO THE TRANSFER OF THE FRANCHISE AGREEMENT HELD BY COX COMMUNICATIONS SAN DIEGO, INC. This Agreement (the "Transfer Agreement") is entered into this 12th day of August, 1997, between and among the City of National City ("City"), Cox Communications San Diego, Inc. (the "Transferor"), and CoxCom, Inc. (the "Transferee"). WHEREAS, the Transferor was granted a franchise by the City to construct, improve, operate and maintain a cable television system within the City as more particularly defined therein (the "Franchise Agreement"); and WHEREAS, the Transferor has filed a written application to the City wherein it has requested the consent of the City to the transfer of the Franchise Agreement to the Transferee (the "Transfer"); and WHEREAS, the City Council of the City has reviewed the proposed transaction, as well as all relevant documents, staff reports and recommendations; and WHEREAS, the Transfer cannot go forth without written consent of the City; and WHEREAS, based upon the evidence presented to the City Council, it has determined that it would be in the public interest to conditionally approve the Transfer. 124/017656-0001/3070319.2 a07/25/97 -1- NOW, THEREFORE, it is agreed by and between the parties as follows: 1. The City Council of the City hereby gives its consent and approval to the Transfer whereby the Franchise Agreement and the Cable Television System within the City (the "System"), including all of the assets thereof, shall be directly acquired and held by the Transferee. 2. Upon closing of the Transfer, the Grantee, within the meaning of the Franchise Agreement, shall be the Transferee. 3. The granting of the consent to the Transfer, or the consents described in Paragraph 1 above, do not render or waive the right of the City to approve any subsequent change not described herein in the ownership of the Franchise Agreement or the ownership or control of the Transferee, as provided for in the Franchise Agreement on any controlling ordinance (the "Ordinance"). 4. By executing this Transfer Agreement, the Transferee agrees and acknowledges that this Transfer Agreement and consent ordinance is not a new franchise agreement, the granting of a franchise, or the renewal of the existing franchise, but rather is exclusively an agreement to transfer. the Franchise Agreement and said Transfer Agreement neither affects nor prejudices in any way the City's rights thereunder, and that compliance with the Franchise Agreement as it exists as of the date of this Transfer Agreement, and assuming the economic impact, or lack thereof, of Federal, State and local statutes and administrative regulations existing as of the date of this Transfer Agreement, is not commercially impracticable as the term is used in Section 625 (e) of 124/017656-0001/3070319.2 a07/25/97 -2- the Cable Communications Policy Act of 1984, the Cable Television Consumer Protection and Competition Act of 1992 (collectively the "Cable Act") and the Telecommunications Act of 1996 (the "TCA"). Under Section 625 of the Cable Act, the term "commercially impracticable" means, with respect, to a cable operator, that it is commercially impracticable for the operator to comply with such requirements as a result of an unforeseeable change in conditions which is beyond the control of the operator and the nonoccurrence of which was a basic assumption on which the requirement was based. Transferee agrees that in judging whether particular obligations are commercially impracticable, the parties will not consider the economic burden of debt service and equity requirements incurred directly or indirectly to fund the Transfer to the extent such debt service and equity exceeds the debt service and equity requirements of the Transferor and the predecessor -in -interest to the Transferor as they existed prior to the Transfer. 5. The Transferee agrees and acknowledges that it has found the Franchise Agreement and the Ordinance to be legally sufficient, valid, and binding and agrees to accept the same without condition or reservation to the extent, and of like quality, as it was accepted by the Transferor. all existing disclosed and Nothing herein shall material breaches or if discovered after notice to the Transferee The Transferor assumes liability for non -disclosed breaches and defaults. limit or prevent the City from utilizing any defaults committed prior to the Effective Date the Effective Date and which it has provided and an opportunity to cure such material 124/017656.0001/3070319.2 a07/25197 -3- breach or default in any renewal proceeding or other proceeding relating to the Franchise Agreement. To the extent that the Transferee, or any related person or entity, challenges the validity, interpretation, implementation, or application of said above -listed documents, or provisions thereof, in the future in any administrative proceeding or court of law, such a challenge shall be subject to all defenses which would have been available to the City had the Transferor, or any related person or entity, brought said challenge(s) including, but not limited to, waiver, estoppel, consent, unclean hands and accord and satisfaction, as well as any and all defenses independently available to the City against the Transferee. The Transferee agrees that any and all of the operating history of the Transferor, including but not limited to the channel capacity of the System while owned by the Transferor and any franchise breaches or defaults of the Transferor for which the Transferor was provided notice and an opportunity to cure, during the term of the Franchise Agreement prior to the Transfer shall be deemed to be a portion of the performance of the Transferee for the purpose of any renewal application pursuant to § 626 of the Cable Act. 6. The Transferor and Transferee agree, and so covenant and warrant, that the Transfer constitutes an internal reorganization with no change in actual control of the Franchise Agreement or the System and that the Transfer, and any economic or legal effects thereof, shall be transparent and legally irrelevant for the purpose of any proceeding relating to or establishing a regulated rate(s) . 124/017656-0001/3070319.2 a07/25/97 -4- 7. Any violation of this Transfer Agreement shall be deemed to be a violation of the Franchise Agreement. 8. The Transferee agrees to pay when due any possessory interest taxes which may be lawfully levied due to the grant of the Franchise Agreement and/or this Transfer Agreement to operate a cable television system in the City and to indemnify the City against any liability for such taxes and for all interest and penalties thereon, if any. This section constitutes valid notice for the purpose of Revenue and Taxation Code Section 107.6. 9. By executing this Transfer Agreement, the Transferor agrees to pay the City a sum specified by the City in writing (the "Reimbursement Amount") but not to exceed $500.00 to fully reimburse the City for reasonable costs incurred by it associated with this Transfer proceeding including, but not limited to, attorneys' fees incurred directly or in cooperation with other reviewing franchising authorities. The Transferor shall pay to the City this amount within ten (10) days of the approval of this Transfer Agreement by the City Council. Failure of the Transferor to pay said cost within said ten (10) days thereof shall result in this Transfer Agreement and the approving resolution being null and void and the consent to the Transfer becoming void and deemed disapproved as of the date of the approving resolution of this Transfer Agreement. 10. By executing this Transfer Agreement, the Transferee hereby accepts all the tetras and conditions of the Franchise Agreement, the Ordinance, the Prior Transfer Agreement and any lawful orders or directives of any administrative agency relating 124/017656-0001/3070319.2 a07/25/97 -5- to the Franchise Agreement or the System including, but not limited to, the Commission, and Transferee represents and warrants that it has examined the requirements of the Franchise Ordinance, this Transfer Agreement, as well as federal, state, or local laws or regulations, and Agreement, the the applicable agrees to abide by all the terms and conditions thereof. The Transferee shall, among other things, assume all rate refund obligations, both actual and contingent, of the System. 11. The Transferor, Transferee, or any affiliate party will not pass -through, externalize, or otherwise attempt to add the costs of compliance with any obligations arising out of this Transfer Agreement, including the reimbursement of expenses pursuant to Paragraph 9 hereof, to any regulated rate or otherwise attempt to pass the costs of compliance herewith to subscribers. The costs of compliance shall be fully borne by the Transferor and the Transferee. All costs of compliance with this Transfer franchise - related costs subsequent to the Effective Date of rate regulation in the City. The Transferor and Transferee hereby expressly waive and relinquish any right or privilege which they may have to pass through or externalize these costs. 12. This Transfer Agreement may be executed in any number of Agreement are deemed not to be counterparts, each of which shall be an changes or increases in which together shall constitute one instrument. The parties agree that this Transfer Agreement will be considered signed when the signature of a party is delivered by facsimile transmission. Such original, but all of 124/017656-0001/3070319.2 407/25/97 -6- facsimile signature shall be treated in all respects as having the same effect as an original signature. 13. This Transfer Agreement shall be deemed effective upon the issuance of a Certificate of Closing (the "Certificate of Closing") by the City Attorney or Special Counsel (the "Effective Date"). If this Transfer Agreement is not executed by the Transferor, and the Transferee and returned to the City within ten (10) days of approval by the City Council, it shall become null and void and the Transfer shall be deemed disapproved for good cause as of the date of approval of this Transfer Agreement by the City Council. 14. A Certificate of Closing shall Attorney or Special Counsel at such documents have been provided to the form acceptable to the ATTEST: City Attorney be issued by the City time that the following City or acts completed in or Special Counsel: 1. Certificates of authenticity and authority. a 2. The receipt of the payment referenced by Section 9 by check or wire transfer of funds to an account designated by the City. 3. Mutual execution and delivery of this Transfer Agreement. APPROVED AS TO FO f City Attorney 124/017656-0001/3070319.2 a07/25/97 -7- CITY OF NATIONAL CITY Mayo/ r COXCOM, INC. By: Its: �C.L Le.�ae.lE.4e� 124/017656-0001/3070319.2 a07/25/97 -8- February 12, 1997 Mr. Park Morse Asst. City Manager City of National City 1243 National City Blvd. National City CA 91950 CITYH ; E 97 FE8 i 8 1)1112: 10 NATIONAL CITY . .e: Assignment of Cable Television Franchise Dear Mr. Morse: 5159 Federal Boulevard San Diego, California 92105-5486 (619) 263-9251 co COMMUNICATIONS As you know, the Cable Television Franchise for your City is presently held by Cox Communications San Diego, Inc., a wholly -owned subsidiary of Cox Communications, Inc., which is based in Atlanta, Georgia. Cox Communications, Inc. is in the process of consolidating its subsidiaries in order to improve operational efficiency, reduce administrative burdens and to simplify our corporate organizational structure. All existing subsidiaries which operate cable television systems will be merged into a new company called CoxCom, Inc., which is also a wholly -owned subsidiary of Cox Communications, Inc. This is only an internal reorganization for tax purposes and there will be no changes in management at Cox Communications San Diego. Even though this is simply a corporate reorganization, the terms of our franchise with the City require approval of the transfer by the City. Therefore, the City's approval of the transfer of the cable television franchise from Cox Communications San Diego, Inc. to CoxCom, Inc. is requested to occur at the earliest possible date. Attached you will find a sample resolution which may be of use to you in preparing this item for a future city council agenda. Thank you in advance for your consideration of this matter and should you have any questions or require additional information, please don't hesitate to contact me at 266-5203. Sincerely, MAR E. T Z i Government Relations Manager RESOLUTION NO. RESOLUTION OF THE OF ASSIGNMENT OF THE CABLE TELEVISION FRANCHISE. WHEREAS, Cox Communications San Diego, Inc. a cable television system ("System") in the City of pursuant to a franchise dated the duly authorized holder of the Franchise; and APPROVING THE ("Franchisee") owns, operates and maintains (the "Franchise Authority"), 19 (the "Franchise"), and Franchisee is WHEREAS, Franchisee and CoxCom Inc. ("CoxCom") are wholly owned subsidiaries of Cox Communications, Inc. ("CCI"); and WHEREAS, CCI is in the process of consolidating its many subsidiaries into a smaller number of subsidiaries to improve operational efficiency, reduce administrative burdens and to simplify CCI's organizational structure; and WHEREAS, this consolidation will result in (i) the Franchisee being merged with and into CoxCom with CoxCom being the surviving corporation (the "Merger"); and WHEREAS, Franchisee has requested consent of the Franchise Authority to the Merger and the assignment of the Franchise to CoxCom (the "Assignment") in accordance with the requirements of the Franchise; and WHEREAS, the Merger and the Assignment are deemed to be in the best interests of the residents of the of NOW, THEREFORE, BE IT RESOLVED BY THE AS FOLLOWS: OF SECTION 1. The Franchise Authority hereby consents to the Merger and the Assignment, all in accordance with the terms of the Franchise. SECTION 2. This Resolution shall be deemed effective for purposes of the Merger and the Assignment upon the effective date of the Merger. PASSED, ADOPTED AND APPROVED this BY: ATTEST: Clerk I, undersigned, being , hereby copy as fully and day of , 1997. duly appointed, qualified and acting Clerk of the of certify that the foregoing Resolution No. is a true, correct and accurate lawfully passed and adopted by the governing body of the on the day of 1997. Clerk City of National City Office of the City Clerk 1243 National City Boulevard, National City, CA 91950-4397 Michael R. Della - City Clerk (619) 336-4226 Fax (619) 336-4376 August 14, 1997 Ms. Mary E. Ball Government Relations Manager Cox Communications 5159 Federal Boulevard San Diego, CA 92105-5486 Dear Ms. Ball: Enclosed are two certified copies of Resolution No. 97-104 of the City Council of the City of National City, which was passed and adopted on August 12, 1997. The resolution authorized the Mayor to execute an agreement consenting to the transfer of the Franchise Agreement held by Cox Communications San Diego, Inc. to Cox Com, Inc. Attached to each Resolution is a fully -executed original copy of the agreement. erely, evitiLL2) Janie Daniels Secretary to the City Clerk Enclosures (2) cc: Assistant City Manager Park Morse ® Recycled Paper