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HomeMy WebLinkAbout18339 ORD - 07/17/1984AN ORDINANCE AMENDING ORDINANCE NO. 13193 TO PROVIDE A NEW SCHEDULE OF RATES FOR MONTHLY CABLE TELEVISION SERVICES BY ATHENA CABLEVISION OF CORPUS CHRISTI, INC. WHEREAS, on January 10, 1984, Athena Cablevision of Corpus Christi, Inc. (Athena) filed its request for an increase in basic cable television service rates pursuant to the rate revision provision set forth in Section 23 of the franchise granted by the City Council by Ordinance No. 16133; and WHEREAS, on January 10, 1984, the City Council acknowledged receipt of Athena's petition for rate revision, authorized the hiring of Touche Ross and Company as rate consultants, and authorized the Cable Communications Commission to conduct a special performance evaluation pursuant to Section 28 of the franchise and to make written recommendation to the City Council prior to the Council's public hearing on Athena's rate request; and WHEREAS, the Cable Communications Commission held its public hearing and special performance evaluation on May 30-31, 1984, and filed its written recommendation to the City Council on June 20, 1984; and WHEREAS, on June 26, 1984, the City Council held its public hearing on Athena's request for an increase in basic service rates pursuant to Section 23 of the franchise ordinance; and WHEREAS, at such hearing the City Council received and considered the evidence and comments concerning Athena's investment in the system, Athena's general financial condition, the cost of rendering services, and other matters relevant to a determination of proper rates; and WHEREAS, the City Council finds that based upon clear and convincing evidence presented to the Cable Communications Commission at its public hearing and the City Council at its public hearing that the monthly basic cabletelevision service rates charged by Athena Cablevision of Corpus Christi should be increased in accordance with the recommendations of the Cable Communications Commission as contained in its written recommendations to the City Council, dated June 20, 1984: NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF CORPUS CHRISTI, TEXAS: SECTION 1. That the "Monthly Services Rate" portion of Section 1 of Ordinance No. 13193, passed and approved by the City Council on May 26, 1976, be and is hereby amended to read as follows: 1®339` SEP 2 81984 Monthly Basic Service Rate Customer Class Residential First Outlet Additional Outlet, ea F.M., ea Multi -family Residential First Outlet Additional Outlet, ea. F,M., ea Hotel/Motel/Commercial (non-residential) First Outlet Additional Outlet, ea. F.M., ea Other Public Schools Colleges Non-profit Hospitals Municipal Buildings Rate $8.55 3.11 2.50 8.55 3.11 2.50 8.55 3.11 3.00 No Charge No Charge No Charge No Charge SECTION 2. That the remaining provisions of Ordinance No. 13193 remain in effect. SECTION 3. That the provisions of Ordinance No. 16859 (the converter rate ordinance) passed and approved by the City Council on February 10, 1982, remain in effect. That the recommendations of the Cable Communications Commission contained in its letter dated June 20, 1984, attached hereto as Exhibit A, is adopted herein by reference. SECTION 4. That nothing herein shall be construed to alter or amend the provisions of Ordinance No. 16133 (Athena's franchise ordinance). SECTION 5. That Athena pays the City 50 percent of the City's expenses incurred in employing the rate consulting firm of Touche Ross and Company for this rate case in accordance with Section 230(4) of the franchise. SECTION 6. If, for any reason, any section, paragraph, subdivision, clause, phrase, word, or provision of this ordinance shall be held invalid or unconstitutional by final judgment of a court of competent jurisdiction, it shall not affect any other section, paragraph, subdivision, clause, phrase, word, or provision of this ordinance for it is the definite intent of this City Council that every section, paragraph, subdivision, clause, phrase, word, or provision hereof be given full force and effect for that purpose. SECTION 7. Publication shall be made one time in the official publication of the City of Corpus Christi, by publishing the caption of this ordinance and the rate schedule set forth in Section 1 of this ordinance. City of Corpus Christi June 20, 1984 Mayor and Members of the City Council City of Corpus Christi P. 0. Box 9277 Corpus Christi, Texas 78469 Re: Cable Communications Commission's Recommendation - Request for Rate Increase of Athena Cablevision of Corpus Christi, Inc. Dear Mayor and Members of the City Council: IO On 10, 1984, Athena Cablevision of Corpus Christi, Inc. (Athena) filed its request for an increase in basic cable television service rates pursuant to the rate revision provisions set forth in Section 23 of the franchise granted by, the City Council by Ordinance No. 16133 passed and approved on March 25, 1981. On January 18, 1984, the City Council (1) acknowledged receipt of Athena's petition for rate revision, (2) authorized the City Manager to hire Touche Ross & Company as rate consultants, (3) authorized the Cable Communications Commission to conduct a special performance evaluation pursuant to Section 28 of the franchise and make written recommendations to the City Council prior to the Council's public hearing on Athena's rate request, (4) denied Athena's request for rate deregulation, and (5) tabled Athena's request for approval of an interim basic service rate increase. BACKGROUND Pursuant to the Council's authorization and the provisions of Section 28 of the franchise, the Cable Communications Commission held its public hearing and special performance evaluation, beginning Wednesday, May 30, 1984, at 7:30 p.m. in the Bayfront Plaza Convention Center, Room 227. The public hearing was called to order at 7:40 p.m. with Commissioners Wyatt, Fuller, Rangel, Viamonte, Etheridge, and Irby present. Commissioner Littleton was absent. This hearing was publicly announced by newspaper legal notice and by announcement on at least two channels of Athena's system between the hours of 7:00 and 9:00 p.m. for five consecutive days preceding the session as required by the franchise. PERFORMANCE EVALUATION Randy Grimes, General Manager of Athena Cablevision of Corpus Christi gave a report on the performance of Athena in meeting its franchise commitments. The City staff through Grace McNett and Jay Doegey, and the City consultant, Touche Ross & Company through Greg Tarasar, commented on the performance of Athena. The Commission found that Athena has substantially 302 South Shoreline - P.O. Box 9277 - Corpus Christi,TX 78469 (512) 884-3011 City of Corp sti performed its commitments under the franchise. Particularly noteworthy was a significant drop in the number of service complaints since November, 1983. However, the Commission noted a lack of significant marketing effort by Athena in trying to increase subscribership for both basic and pay services. The carriage of KHTV continues to be a significant problem because of poor signal quality caused by the present microwave signal relay system's susceptibility to weather pattern interference. CONSULTANTS' PRESENTATIONS Athena's consultant, Frederick Bolte, described the revenue requirement he felt was necessary to provide the Company with a fair return on investment. Athena's request is for an increase in basic cable service rates of $1,180,600 which represents a 32.7% increase over current basic service revenues. In its request, Athena contends that an even greater increase in basic service revenue is needed to provide a fair return on investment. However, Mr. Bolte explained that Athena proposed the smaller increase because the larger increase would result in unacceptably high rates for the Corpus Christi market. The last basic service rate increase occurred in May, 1976 as authorized by Ordinance No. 13193. Converter rates are established by Ordinance No. 16859, passed in February, 1982 when the cable system expanded beyond 12 -channel capacity pursuant to Phase I of the system rebuild and activation, described in Section 22 of the franchise. Appendix A is a summary comparison of the existing, Athena -proposed, and the Touche Ross recommended schedule of rates by customer class. Mr. Bolte explained that Athena proposes a 24% return on equity. He recom- mended that 90% of Athena's gross value of tangible property, accumulated depreciation, and operating costs should be allocated to basic cable television service and 10% to pay service. Mr. Bolte explained that this allocation is based upon the number of channels used to provide pay TV as a percentage of 54 -channel capacity system. Athena also proposes to provide converters to its customers without additional charge so that each customer would be able to receive all basic service channels without having to purchase or rent a converter. The City's consultant, Touche Ross & Company, represented by Greg Tarasar and Ann Seybolt, reviewed the Touche Ross recommendation. Touche Ross recommended that Athena be granted an increase in basic service revenues which would provide an overall rate of return of 13.69% and a 20% return on equity. Touche Ross also recommended a 70% allocation to basic cable television service and a 30% allocation to pay service. This recommenda- tion is based on the average number of subscribers and activated system channels. Touche Ross also recommended that the present converter rental system should continue. Mr. Tarasar explained that increasing the monthly basic rate in order to provide free converters would result in a majority of the subscribers subsidizing the .converter cost for those who would use it. Mr. Tarasar also explained that residential and multi -family customer rates should be the same. Further, each multi -family customer should be billed at the first outlet rate plus additional outlet charges for additional hookups within the customer's dwelling unit. Touche Ross also recommended that hotel/motel customers continue to be charged for one primary connection and charged the additional outlet rate for each unit outlet. Mr. Tarasar and Ms. Seybolt pointed out that the Touche Ross City of Corpt .sti recommendation represented only a $174,900 decrease from Athena's request and would provide Athena with a 27.9% increase over current basic service revenues. They felt that such an increase would provide Athena with a fair profit on its operations. Mr. Bolte contended that rate analysis calculations should include an adjustment for price elasticity which assumes a loss of 1% of subscribers for each 10% increase in the proposed rate. The City staff, through Mr. Doegey, contended that an adjustment for price elasticity was not warranted since the last rate increase occurred in 1976, the quality of service and type of service had changed substantially from that time, that additional marketing could have some off -setting effect, and that the record lacked evidence to support any price elasticity adjustment. PUBLIC COMMENTS Five persons in the audience addressed the Cable Commission. Mr. Earl Aldridge and Mr. Ed Novak stated that they opposed Athena's proposal to include "free" converters as part of its rate request. They felt that this was unfair to people who had already purchased converters or owned cable ready television sets. Mr. Novak added that converters cannot be readily used by the handicapped. Mrs. George Clark stated religious access programming should be moved from Channel 10 to another channel so that the Christian Broadcasting Network could fully occupy the programming time on Channel 10. Ms. Alice Lopez described how cable reception had improved greatly in the past year and half, but she complained of a billing problem and cut-off notice she recently received. Mr. Grimes stated that he would look into the problem and correct it as necessary. Mr. Lee Bergada complained of intermittent loss of KHTV signal, particularly at night. COMMISSION MOTIONS Commissioner Viamonte moved and Commissioner Fuller seconded that the Touche Ross recommendation be accepted and recommended to the City Council. The motion failed by a vote of 2 (Viamonte, Fuller) to 4 (Etheridge, Rangel, Wyatt, and Irby) after a number of Commissioners expressed the need for some additional information and a desire to give the consultants for the company and the City an opportunity to compare methodology and calculations. Commissioner Etheridge moved that the Commission recommend to the City Council a $2 rate increase, but the motion failed for lack of a second. The meeting was recessed and reconvened in Room 226 the next day at 6:00 p.m. for further discussion. Commissioners Rangel, Wyatt, Irby, Fuller, and Viamonte were present and Commissioners Etheridge and Littleton were absent. After additional questions, responses, and statements of Athena and the City staff and consultants, the public hearing was closed. Commissioner Viamonte moved and Chairman Irby seconded that the Commission vote on the recommendations as a package. This motion failed 1 (Viamonte) to 4 (Fuller, Wyatt, Rangel, and Irby). Commissioner Irby then moved and Commissioner Wyatt seconded that the Commission accept the City's staff recommendation concerning the rate of return, i.e., that Athena be granted an increase in basic service revenues which would provide an overall rate of return of 13.69% and a 20% return on equity. The motion passed unanimously. City of Corp isti Next, Commissioner Viamonte moved and Commission Rangel seconded that the Commission accept the City's staff recommendation concerning allocation to basic service, i.e., that 70% of Athena's gross value of tangible property, accumulated depreciation, and operating costs should be allocated to basic cable television service, based on the average number of subscribers and activated system channels. This motion passed by a vote of 3 (Viamonte, Wyatt, and Rangel) to 2 (Fuller and Irby). Commissioner Rangel moved and Commissioner Fuller seconded that the Commission accept the City's staff recommendation concerning converters, i.e., that the present converter rental system should continue. This motion passed unanimously. Next, Commissioner Wyatt moved and Commissioner Viamonte seconded that the Commission accept the City's staff recommendation concerning uniformity of residential and multi -family customer rates and billing of multi -family customers, i.e., that residential and multi -family customers should be charged the same rates, and that all multi -family customers should be billed at the first outlet rate plus additional outlet charges for addi- tional hookups within each unit. This motion did not pass by a vote of 2 (Viamonte and Wyatt) to 3 (Fuller, Irby, and Rangel). Commissioner Viamonte then moved and Commissioner Rangel seconded that the maximum authorized rates for residential and multi -family customers shall be set at the same levels. This motion passed by a vote of 4 (Viamonte, Fuller, Irby, and Rangel) to 1 (Wyatt). Commissioner Viamonte then moved and Commissioner Wyatt seconded that within a multi -family complex, first outlets shall be charged equally and additional outlets within an individual unit shall be charged equally. This motion passed unanimously. Commissioner Viamonte moved and Commissioner Wyatt seconded that the Commission accept the City's staff recommendations concerning the rates to be authorized, i.e., that Athena should be authorized to charge the rates recommended by Touche Ross & Company and the City staff as set forth in Appendix A. This motion passed unanimously. Finally, Commissioner Rangel moved and Commissioner Wyatt seconded that the Commission recommend to the City Council that within one year the Commission study the price elasticity factor which was not sufficiently substantiated at the time of this hearing. This motion passed unanimously. COMMISSION RECOMMENDATIONS The Cable Communications Commission recommends to the City Council of the City of Corpus Christi, Texas that: (1) Athena be granted an increase in basic service revenues which would provide an overall rate of return of 13.69% and a 20% return on equity. (2) Seventy percent of Athena's gross value of tangible property, accumulated depreciation, and operating costs be allocated to basic cable television service based on the average number of subscribers and activated system channels. City of Corp. sti (3) The present converter rental system continue. (4) The maximum authorized rates for residential and multi -family customers be set at the same level. (5) Within a multi -family complex, first outlets be charged equally and additional outlets within an individual unit be charged equally. (6) Athena be authorized to charge the following described monthly rates by customer class. Residential First Outlet $8.55 Additional Outlet 3.11 Multi -family First Outlet 8.55 Additional Outlet 3.11 Hotel/Motel First Outlet 8.55 Additional Outlet 3.11 Converter Rental 2.50 (7) The Cable Communications Commission be authorized to hold a special performance evaluation to study within one year the effect, if any, of price elasticity with respect to any rate increase by this proceeding. The meeting adjourned at 10:00 on May 31, 1984. A copy of the proposed minutes of the above meeting is attached for your consideration. These minutes will be submitted for approval at the next meeting of the Cable Communications Commission. Very truly yours,; Mary Wya , Chair an Pro Tem Cable Communications Commission JD/mb xc: Edward A. Martin, City Manager Randy Grimes, General Manager Athena Cablevision of Corpus Christi, Inc. That the foregoing ordinance Avas read for t f fi st time and p s d to its second reading on this the day of j � , , 19 c, by the following vote: Luther Jones Betty N. Turner David Berlanga, Sr. Welder Brown That the foregoing ordinance w read for second time and sed to its third reading on this the day of , 19 rf , by the following vote: Leo Guerrero Dr. Charles W. Kennedy Joe McComb Frank Mendez Mary Pat Slavik Luther Jones Betty N. Turner David Berlanga, Sr. Welder Brown That the fore ogpg ordinance *:s read for th hird time and passed finally on this the /77A -day of /�� , 198? , by the followin vote: Leo Guerrero Dr. Charles W. Joe McComb Frank Mendez Mary Pat Slavik Kennedy Luther Jones Betty N. Turner David Berlanga, Sr. Welder Brown Leo Guerrero Dr. Charles W. Kennedy Joe McComb Frank Mendez Mary Pat Slavik PASSED AND APPROVED, this the ITWA- day of ATTEST: APPROVED: DAY OF lr , 19/14: J. BRUCE AYCOCK, CITY ATTORNEY By Ass istar� MAYOR THE CI Y OF CORPUS CHRISTI, TEXAS 18.139 STATE OF TEXAS, tss: County of Nueces. J PUBLISHER'S AFFIDAVIT N 33'7 Before me, the undersigned, a Notary Public, this day personally came...._._.______._.. MARGARET RAMAGE who being first duly sworn, according to law. says that he is the COMMUNITY RELATIONS SUPERVISOR of the Corpus Christi Caller and The Corpus Christi Mmes. Daily Newspapers published at Corpus Christi, Texas,, in said County and State, and that the publication of NOTICE OF PASSAGE OF ORDINANCE NO. 18337 AMENDING ORDINANCE NO. 13193 of which the annexed is a true copy, was published in CALLER -TIMES PUBLISHING CO. on the.54.N.D day of .— .T»y. 19.84.., and once each__day. .__..._..thereafter for r e consecutive da,. ....................._...._... _ONE_ .Times. 45.10 MARFARET RAMAGE Subscribed and sworn to before me this ?3rd . EDNA KOSTER 11-30-84 of JULY • 19_ 84 ary Public, N1Lec4a County, Texas rNOTICE OF PASSAGE OF,,��RRDINP.ICE NO 1833 AMLNDING ORDINANCE NO. 13193 TO PROVIDE A NEW SCHEDULE OF RATES FOR MONTHLY CABLE TELEVI- SION SERVICES BY ATHENA CABLEVISION OF CORPUS CHRISTI, INC., PROVIDING FOR AN EFFECTIVE DATE OF SEPTEMBER 1, 1984. Customer Class Rate Residential Fast Outlet $8.55 Additional Outlet, ea. 3.11 RAM , ea 2.50 Multi-family Residential First Outlet S8 55 FAdditional Outlet. ea. 3.11 F M., ea. 2.50 Hotel/Motel/Commercial (non-residential First Outlet $8 55 Additional Outlet, ea. 3.11 M.,ea 300 Other Public School no charge Colleges no charge Non-profit Hospitals no charge Municipal Buildings no charge', Was passed and approved by the City Council of the City of Corpus Christi, Texas on the 17th day of July, 1984. The full text of said ordinance is available to the public in the Office of the City Secretary. -s-Bill G. Read, City Secretary, Corpus Christi, Texas