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HomeMy WebLinkAboutResolution 88-48RESOLUTION NO. 88-48 A RESOLUTION OF FINDINGS OF FACTS, CONCLUSIONS, AND ORDER OF THE CITY OF COLUMBIA HEIGHTS, MINNESOTA REAFFIRMING THE FINDING OF GROUP W CABLE OF COLUMBIA HEIGHTS/HILLTOP, INC. IN VIOLATION OF THE CABLE COMMUNICATIONS CODE WHEREAS, the City of Columbia Heights, Minnesota (hereinafter the "City") is a municipal corporation under the laws of the State of Minnesota and has the authority to award, administer and enforce a non-exclusive cabte television franchise; and WHEREAS, the City has assessed certain penatities against Group W Cable of Columbia Heights/Hilltop, Inc. d/b/a/ Cable TV North Central (herein- after ~'Group W" or "the company"); and WHEREAS, under the Cable Communications Code (hereinafter the "Code") whenever a penalty has been assessed, Group W may notify the City that there is a dispute as to whether a violation or failure has, in fact, occurred; and WHEREAS, on April 20, 1988 Group W advised the City that there is a dispute as to whether Group W violated the Code; and WHEREAS, the City heard Group W's dispute at its meeting of Monday, June 13, 1988; and WHEREAS, the Code requires that the Council decision be supplemented with written findings of fact; and WHEREAS, the Code states at Section ]1.117(4) that in case of any dispute or question as to the meaning, interpretation or application of any term, provision or condition of the Code, the City Council, in its sole discretion, shall resolve such dispute or question. NOW, THEREFORE, BE IT RESOLVED, that the City Council of the City of Columbia Heights, Minnesota does hereby make the following Findings of Fact, Conclusions and Orders reaffirming its findings of Group W to be in violation of the Code: FINDINGS OF FACT On May 8, 198t Teleprompter of Columbia Heights/Hilltop submitted a three volume proposal to construct, operate and maintain a cable television system for the Cities of Columbia Heights and Hilltop. The proposal specified at Volume 11, Form 1 that "derro]d" equipment would be used at the company's headend, or that ]ocation where the television signals originate, for distribution to the subscribers. l~eso~ut~on 1~o. ~-48 page 2 2. On or about December 9, 1981, the City adopted a Cable Television Franchise Ordinance, ("Code"), awarding a cable television fran- chise to Teleprompter of Columbia Heights/Hilltop, Inc.. In adopting the Code the Council made certain Findings. Two of'those Findings were as follows: a. The Grantee's technical ability, financial condition, legal qualifications and character were considered and approved in a full public hearing affording reasonable notice and reason- able opportunity to be heard; and b. The Grantee's plans for constructing and operating the system were considered and found to be adequate and feasible in a full public hearing affording reasonable notice and reasonable op- portunity to be heard. 3. The Code specifies at Section 11.118(3) that the company shall provide all services and offerings specifically set forth in the company's proposal to provide cable television service within the City .... and, by its acceptance of the franchise, the company specifically agreed to be bound by the company's proposal, including all promises, offers, representations and inducements contained therein. The Code further specifies that the failure to refer to the company's proposal in any specific provision of the Code is not to be a limitation on the obligation of the company to fully comp]y with the proposal that all promises, offers, representations and inducements contained in the company.'s proposal were freety and voluntarily made to the City by the company. 4. In September, 1984 the City commenced to undertake a performance audit of Group W, the.lawful succession to Teleprompter of Columbia Heights/Hilltop, Inc... This performance audit was designed to compare the System then being operated in the City to that System proposed in the company's three (3) volume proposal. 5. The performance audit .included an on-site inspection by an indepen- dent engineer, Mr. John Gort, on or about November 14th and 15th, 1984. Based upon this on-site inspection a written report was pre- pared where in Hr. Gort noted: In the original application submitted by Teleprompter, Jerrold Headend signal processing equipment is specified. Since the application was submitted, however, the cable company has used Phase-Com equipment...it is apparent that the De-Mod/Re-Mod tech- nique of signal processing is degrading the "Off-Air" and "l/NetI' signals within the Headend itself. The Phase-Com modulators which handle video only...degrade the video signal in the modulation and filtering process. 6. In his conclusion, Hr. Gort offered the following recommendation: The Phase-Com modulators degrade pictures by an increase in back- ground noise, loss of color elements and fine detail...in view of the degradation of the signals in the processing equipment it is Resolution No. 88-48 page 3 recommended that the headend equipment be changed from Phase-Corn to a "Hedrodyne" signal processor .... 7. Group W responded to the issue raised in the performance audit through a letter dated February 20, 1985 from Mark Matthews, then General Manager of Group W. tn his letter, Mr. ~atthews noted that the consultant recommended that the Headend equipment be changed. Mr. Matthews stated that the company would remove the Phase-Com headend, with the exception of the institutional network channels, and transport the satellite and off-air signals to Columbia Heights from the Hetrodyne headend currently used in Roseville. 8. Upon receipt of the response from Group W negotiations transpired between the City and Group W. In a letter dated November 13, 1985, to Mr. Bob Bocwinski, Mark Matthews set forth a description of the feed-forward interconnect from the Rosevitle headend to Col- umbia Heights. In this letter, attached hereto as Exhibit l, Hr. Matthews stated the interconnect would be a feed-forward FM trunk system. 9. On May 27, 1986 the City Council PaSsed and adopted Ordinance No. 1t25 (hereinafter the ~'Ordinance") which amended the Code and granted Group W certain modifications. Section 1 of that Ordinance amended Article 11.105 (1) of the Code by stating as follows: The Grantee shall provide a system serviced by a headend in the City of Roseville feeding a single-cable subscriber network and a separate mldsplit institutional network. Both networks shall utilize 400 MHz equipment fully activated for two-way transmission. The extension from the Headend in Roseville shall utilize feed- forward FM technology... 10. Section 14 of the Ordinance amended Article 11,117(10) of the Code by setting forth a process for verifying the completion of con- struction of the system. Under this Section the following elements were necessary for the completion of construction: a. Verification of Headend equipment and System extension equipment as required therein. b. Satisfactory test results using the technical standards at various or up to twelve (t2) widely separated subscriber locations selected by the independent engineer and using certain specified tests. c. Verification that the emergency alert system is working to the reasonable satisfaction of the City. d. Compliance with all applicable codes and standards. tl. The Ordinance required that Group W accept the amendment in writing before the Ordinance became effective. In a document dated May 9, 1986 Group W accepted tbe Ordinance and m~de certain representations and warranties to the City. Group W represented and warranted that it had carefully read the terms and conditions of the Ordinance and ~esolution No. 88-48 page 4 accepted without reservation of the obligations imposed by the terms and conditions of the Ordinance. In addition, Group W represented and warranted that the Ordinance and the acceptance were valid, binding and legally enforceable against it in accordance with the terms and conditions contained therein. 12. On or about March 4, 1987 Group W advised the City that it had com- pleted construction of the System and the System was ready for in- spection by an independent engineer if deemed necessary by the City. 13. On Tuesday, May 26, Jane Bremer, Community Affairs Consultant for Group W, advised Gary Matz, Cable Television Consultant for the City, that Group W had recently discovered that the extension from Roseville did not utilize the FM technology required by the Ordinance but rather AM technology was used. 14. The City retained Mr. John Gort to once again conduct an inspection of the cable television system in light of the use of the extension from Roseville. On May 27, 1987 a meeting was held with representatives of the City and Group W. Those in attendance included, but were not necessarily limited to, Jane Bremer, John Eddy, dohn Gort, Bob Boc- wlnski, and Gary Matz. Group W once again stated that the extension from Roseville was ~onstructed with AM technology as opposed to the required FM technology. 15. On or about August 20, 1987 the Columbia Heights/Hilltop CATV Advisory Commission requested that Mr. John Gort answer certain questions regarding the discrepancy between the extension equipment from Roseville. 16. In a letter dated August 31, 1987 and supplemented by an Affidavit dated February 19, 1988, attached hereto as Exhibit 2, Mr. Gort stated that, in his professional judgement, FM transmission is inherently superior to AM transmission for several reasons. The reasons include, but are not necessarily limited to, the following: a. The transmission of an FM carrier as compared to an AM carrier over the same number of amplifiers has a superior carrier to noise ratio. This means that a noisy or poor quality video pic- ture will have less degradation (noise added to the picture by the amplifiers the picture is passing through) than if the carrier was AM. b. FM transmission is "transparent" which means that the FM trans- mission neither causes nor adds any distortion to the video being carried. c. FM transmission, unlike AM transmission, is not subject to outside interference that may enter into the cable television distribution system. ~esolution No. 88-48 page 5 17. Mr. John Gort also stated in the letter and Affidavit referenced above that, based upon his experience and in his professional judge- ment, Group W achieved a very substantial cost savings by construc- ting the extension with AM technology as opposed to FM technology. 18. At its meeting of Thursday, December 17, 1987 the Columbia Heights/ Hilttop CATV Advisory Commission discussed extensively the dis- crepancy between the AM/FM extension. The Commission made the fol- lowing recommendation: That the Cable Commission state that the cable company has not completed construction on the cable system as required by the Frachise Agreement and that the cable company is therefore in violation of the Franchise Agreement. The Cable Commission requests the cable company to submit a written request to the Columbia Heights City Council via the City Manager regarding the possible ordinance change to rectify this situation. 19. In a letter dated January 8, 1988 John R. Eddy, Chief Operating Officer of Cable TV North Central, and Jane E. Bremer, requested that the City Council amend the Code to read "AM" as opposed to "FM". The letter further stated the representatives of the com- pany woutd be in attendance at the January It, 1988 meeting of the City Council to answer any questions. 20. At the City Council meeting of January 11, 1988, the above-described letter from Group W was acknowledged and the Council noted that the purpose of the ]etter did not adequately address economic issues. The Council further authorized the City Manager to proceed with action leading to the imposition of penalty fees against Group W for non-compliance provided under the Code; however, such action would not be taken if the Group W submitted to the City Manager by January 15, t988 a proposal for consideration of the Council, or its designee, to ameliorate or eliminate the sources of non- compliance. 21. In a letter dated January 13, 1988 and attached hereto as Exhibit 3, Group W was given notice of the violation and the fact that the City would assess penalities upon the Letter of Credit posted by Group W. 22. On Wednesday, January 13, 1988 'representatives of the City met with Ms. Jane Bremer, representative of Group W, to hand-deliver the above-described letter and to verbally inform her that no action would be taken against the Letter of Credit if Group W submitted by January 15, 1988 a proposal to ameliorate or elimi- nate the source of non-compliance. 23. On January 15, 1988 both Mr. Eddy and Ms. Bremer submitted a letter once again proposing that the Code be amended to allow the use of AM technology for the interconnect system. 24. At the City Council meeting of January 25, t988 the Council autho- rized the City Manager to notify the bond company of a pending claim based on the Code violation and authorized the City Manager ~esolution ~o. 88-48 page 6 to write a letter to Mr. Gustav Hauser, Chairman of North Central Cable Communications Corporation, the parent of Group W, to advise him that the Council believed that GroUp W had not been acting in good faith and its displeasure with the company's apparent lack of cooperation. 25. On or about January 25, 1988 the City Manager.advised the Great American Insurance Company, the company ~holding the performance bond, that the City had found Group W in vio- lation of the Code due to the company's failure to construct the cable television system as required. 26. On or about February 11, 1988 the City Manager submitted a claim to the Great American Insurance Company against the performance bond provided by the Group W. 27. At the City Council meeting of March 28, 1988, the City Council directed the City Manager to direct a claim to either the First National Bank of Boston or First Bank of Boston in the amount to be determined by the City's cable counsel, against the Letter of Credit. 28. On or about April 7, 1988 the City Manager submitted a draft to the Bank of Boston for the purposes of making a claim in the amount of $15,8OO against the Letter of Credit provided by Group W. 29. On April 20, 1988 Mr. James C. Erickson, Esq., on behalf of Group W, advised the City that there was no dispute as to whether Group W had violated the Code and that the City has no right to assess penalities against Group W. A copy of the letter from Mr. Erickson is attached as Exhibit 4. 30. The City Council heard the dispute of Group W at its meeting on Monday, June 13, 1988 at which time representatives of Group W were afforded the opportunity to be heard and presented evidence. CONCLUSIONS Based on the foregoing, the City Council of Columbia Heights~ does hereby move the following conclusions: I. The action of the City Council on Monday, January ll, 1988 was sufficient and adequate to find Group W in non-compliance with the Code ana commence the non-compliance proceedings under Section 11.113(5)(D) et. seq. Specifically, Section 11,113(5) (B) does not requi~re written findings of fact. 2. The letter of January 13, 1988 from Mr. Gary Matz to Mr. dohn Eddy was sufficient and adequate written notice informing Group W of the violation and, accordingly, satisfies the requirements of Section It-113(5)(D) of the Code. 3. The proposal submitted by Group W on January t5, 1988 and in response to the City Council action on danuary 11, 1988 did not Resolution No. 88-48 page 7 constitute a good faith proposal since that proposal had been previously rejected by the City Council on January Il, 1988. Accordingly, the proposal of January 15, ]988 did not vitiate the notice of January 13, 1988. Under Section 11.117(10) the City had ninety (90) days from notice by Group W to determine whether all construction, upgrading and adjustments contemplated by the Ordinance were completed. The City discovered within the requisite time period the faiture to construct the extension from Roseville with FM technology. Accordingly, based upon this non-compliance being discovered in a timely manner and there being no further action the City could have taken at that time, the System cannot, as a matter of law, be deemed completed. 5. The City has the authority under local, state and federal law to enforce the requirment that the extension from Roseville be constructed with FM technology. ORDER Based on the foregoing the City Council does hereby Order the following: 1. That the City Manager continue to assess penalities in the amount of $200 per day against the Letter of Credit posted by Group W commencing from the day following the last draw, as determined by the City Manager, and continuing until the violation has been corrected or a settlement has been approved by the City Council. 2. That Group W replace the Letter of Credit as required under the Code at Section 11,113(5)(G) by July 26, 1988. 3. That in the event the Letter of Credit is not replaced by duly 26, 1988 the City Manager is authorized to impose penalities in the amount of $50 per day pursuant to Section 1t.113(5)(C)(3) commencing on July 27, 1988. 4. That the City Manager shalt provide a copy of this executed Resolution to an authorized representative of Group W. Passed this llth day of July, 1988. Offered by: Petkoff Seconded by: Paulson Roll call: Ail ayes - nne Student~, Cou~ecretary Mayor Dale V. Hadtrath