Loading...
10-28-96 agenda• CITY OF RICHFIELD, MINNESOTA MONDAY, OCTOBER 28, 1996 REGULAR CITY COUNCIL MEETING 7:00 P.M. COUNCIL CHAMBERS AGENDA INTRODUCTORY PROCEEDINGS CALL TO ORDER PLEDGE OF ALLEGIANCE ROLL CALL APPROVAL OF MINUTES OF THE REGULAR CITY COUNCIL MEETING OF OCTOBER 14, 1996 PRESENTATION • 1. OPPORTUNITY FOR CITIZENS TO ADDRESS THE COUNCIL ON ITEMS NOT ON THE AGENDA AGENDA APPROVAL 2. COUNCIL APPROVAL OF AGENDA CONSENT CALENDAR 3. CONSENT CALENDAR CONTAINS SEVERAL SEPARATE ITEMS WHICH ARE ACTED UPON BY THE CITY COUNCIL IN ONE MOTION. ONCE THE CONSENT CALENDAR HAS BEEN APPROVED, THE INDIVIDUAL ITEMS AND RECOMMENDED ACTIONS HAVE ALSO BEEN APPROVED. NO FURTHER COUNCIL ACTION IS NECESSARY. HOWEVER, ANY COUNCIL MEMBER MAY REQUEST THAT AN ITEM BE REMOVED FROM THE CONSENT CALENDAR AND PLACED ON THE REGULAR AGENDA FOR COUNCIL DISCUSSION AND ACTION. ALL ITEMS LISTED ON THE CONSENT CALENDAR ARE RECOMMENDED FOR APPROVAL. A. CONSIDERATION OF APPROVAL OF RESOLUTION AUTHORIZING SUBDIVISION WAIVER FOR SHOPS AT LYNDALE, 700-1150 WEST 78TH STREET C.L. 318 B. CONSIDERATION OF APPROVAL OF RESOLUTION AUTHORIZING CONTINUED PARTICIPATION IN LIVABLE COMMUNITIES ACT PROGRAMS ADMINISTERED BY METROPOLITAN COUNCIL C.L. 319 C. CONSIDERATION OF APPROVAL OF EXTENDING CONTRACT NO. A01384 WITH HENNEPIN COUNTY TO ALLOW CONTINUED ACCESS TO PROPERTY INFORMATION SYSTEM C.L. 320 D. CONSIDERATION OF APPROVAL OF PURCHASE IN EXCESS OF $25,000 FOR ESTIMATED 1,400 TON OF ROCK SALT FOR 1996/97 WINTER SEASON FROM CARGILL INCORPORATED, SALT DIVISION, LANSING, NEW YORK FOR ESTIMATED TOTAL AMOUNT OF $38,934 C.L. 321 E. CONSIDERATION OF APPROVAL OF PURCHASE IN EXCESS OF $25,000 FOR ONE NEW ASPHALT ROLLER FROM HAYDEN-MURPHY EQUIPMENT COMPANY FOR TOTAL AMOUNT OF $33,015 C.L. 322 F. CONSIDERATION OF APPROVAL OF REQUEST FOR PUBLIC DANCE LICENSE FOR EL PULSO DE LA VIDA AT ST. PETER'S CATHOLIC CHURCH, 6730 NICOLLET AVENUE, FOR NOVEMBER 2, 9 AND 23, 1996 C.L. 323 PUBLIC HEARINGS 4. PUBLIC HEARING AND CONSIDERATION OF RESOLUTION REGARDING APPROVAL OF MODIFICATION TO RICHFIELD REDEVELOPMENT PROJECT AREA REDEVELOPMENT PLAN; ESTABLISHMENT OF INTERCHANGE TAX INCREMENT FINANCING DISTRICT; AND ADOPTION OF INTERCHANGE TAX INCREMENT FINANCING PLAN 0 COUNCIL LETTER NO. 324 5. CONSIDERATION OF REQUEST FOR CONDITIONAL USE PERMIT TO ALLOW CONSTRUCTION OF 100,000 SQUARE FOOT RETAIL STORE AND UP TO 20,000 SQUARE FEET OF ADDITIONAL RETAIL SPACE AT 1700 WEST 78TH STREET (TABLED FROM SEPTEMBER 23, 1996) COUNCIL LETTER NO. 325 PROPOSED ORDINANCES 6. CONSIDERATION OF FIRST READING OF ORDINANCE TO REGULATE GRANTING FRANCHISES TO OPERATE AND MAINTAIN CABLE SYSTEM IN RICHFIELD; SETTING FORTH CONDITIONS FOR FRANCHISE AND PROVIDING FOR REGULATION AND USE OF SYSTEM; AND PRESCRIBING PENALTIES FOR VIOLATIONS OF PROVISIONS COUNCIL LETTER NO. 326 7. CONSIDERATION OF FIRST READING OF CABLE FRANCHISE AGREEMENT ORDINANCE COUNCIL LETTER NO. 327 ADMINISTRATIVE REPORTS AND OTHER BUSINESS 8. CONSIDERATION OF COUNCIL CONFIRMATION OF MAYOR'S APPOINTMENT OF HOUSING AND REDEVELOPMENT AUTHORITY COMMISSIONER FOR FIVE YEAR TERM COUNCIL LETTER NO. 328 9. CONSIDERATION OF AUTHORIZATION OF EXPENDITURE OF 1996 GENERAL FUND BALANCE FOR MODIFICATIONS TO HEATING, VENTILATION AND AIR CONDITIONING SYSTEM AT CITY HALL AS RECOMMENDED BY CHASNEY ASSOCIATES IN AMOUNT OF $220,000 10. AIRPORT STATUS REPORT 11. LEGISLATIVE REPORT COUNCIL LETTER NO. 329 AIRPORT BUSINESS CORRESPONDENCE COUNCIL CHOICE 12. COUNCIL DISCUSSION ITEMS 13. CLAIMS AND PAYROLLS 14. ADJOURNMENT Auxiliary aids for individuals with disabilities are available upon request. Requests must be made at least 96 hours in advance to the Administrative Services Director at 861-9702. • 9 CITY OF RICHFIELD, MINNESOTA Council Letter No. 329 Agenda October 28, 1996 Issue Statement: Approval of expenditures to update the heating, ventilation and air conditioning at City Hall. Background: In response to recurring problems concerning public and employee comfort at City Hall, an engineering consultant, Chasney Associates, was hired to perform a study of the heating, ventilating and air conditioning systems (HVAC) of the building. The purpose of the study was to conduct a comprehensive analysis of the mechanical systems serving the building, and to offer a list of possible modifications, with cost estimates, that would improve system performance. A summary of the major items of concern pertaining to the HVAC system according to the study are: 1. The existing mechanical systems serving the old City Hall building represent 30 year-old technology where large areas within buildings were controlled by a single thermostat. In City Hall, the large areas were initially open spaces that could be • satisfactorily controlled by a single thermostat. Over the years, the open spaces have been partitioned off into smaller areas to the detriment of comfort control. 2. The existing mechanical systems serving the Public Safety building, which were installed in 1981 represent the early stages of present day technology where multiple thermostats were used to serve individual offices or much smaller areas of the building. The equipment and control strategies used to provide the smaller areas of control have been improved considerably over the last 15 years. A major limitation of the existing mechanical system on both sides of the building is its inability to provide heating and cooling simultaneously or to change from one to the other in a short period of time. The system cannot maintain comfort conditions during the spring and fall when the requirements can shift from heating to cooling during the course of a single day. Chasney Associates proposed a number of modifications to bring the buildings HVAC system to present day standards. These modifications include: • Installing an additional boiler and new controls in the building to be used in the spring and fall to improve the response time of the system. • Replacing heating and cooling coils in City Hall, the Council Chambers, Community Development and Public Safety areas. q-I • Adding fans in City Hall and the Council Chambers. • Install additional controls and upgrade existing controls in all areas. • Replace outdated unit heaters, variable air volume (VAV) boxes with new units that can both heat and cool. • Checking and calibrate all controls. The total estimated cost of the modifications proposed by Chasney Associates is $220,000. The current 1996 revised budget does not provide for funds to address this need. However, it is anticipated that at the end of the 1996 fiscal year, the General Fund will have at least an additional $250,000 to $300,000 of fund balance. If the funds are not spent, they would be included in the on-going fund balance of the General Fund. The General Fund Balance is adequate at its current level. It is suggested that the City Council give consideration to providing authorization to modify the 1996 revised budget to include the expenditure of $220,000 for these important improvements to the City's HVAC system. This would allow staff to take the necessary steps to begin work on the needed improvements as soon as possible. • In addition to the HVAC work at City Hall, a number of other projects which are identified on Attachment A are in need of attention. Staff will closely monitor the projected year-end fund balance during the next several weeks with the intention of identifying any additional work from the listing which could be funded through available funds in the 1996 budget. If such projects and available funding are identified, that information will be brought to the City Council for action at a future meeting. Recommended Motion: Authorize the expenditure of $220,000 of 1996 General Fund balance for modifications to the heating and air condition system at City Hall as recommended by Chasney Associates. Basis of Recommendation: 1. The existing HVAC system is outdated and no longer is providing the needed climate control for City Hall facilities. 2. The existing HVAC system is not capable of providing parallel heating and air conditioning. To switch from one mode to the other now requires a total shut down of the system. 3. Comments from City employees and other users of City Hall regarding the heating and air conditioning system have steadily increased over the past few years, especially during the spring and fall seasons. 9-)- 4. An independent consultant was engaged to analyze the HVAC. problems at City Hall and made a recommendation for a solution. The recommendation by the consultant outlines system modifications totaling about $220,000 to rectify the problems. 5. It is projected that at least $250,000 to $300,000 of 1996 year end General Fund balance will be available to fund the project. Alternative Recommendation: 1. The City Council could decide to postpone the HVAC to the future. Discussion/Decision Mode: If the City Council decides to proceed with the HVAC improvements, it would be desirable to begin the groundwork necessary to prepare the necessary contracts and related documentation so the work may begin as soon as possible and 1996 funds may be expended for the project. Resp ctfully submitted, Jame D. Prosser City Manager • JDP:ds ATTACHMENT A LISTING OF SELECTED CITY NEEDS • C ITEM COST ESTIMATE Heating & Air Conditioning - City Hall $150,000-250,000 Irrigation Repairs - Taft Park $10,000 Furnaces, Roofs & Windows in Park Buildings - Augsburg, Taft & Donaldson $20,000 Asphalt Path Repairs - Taft & Donaldson $10,000 Dugouts - Donaldson Park $10,000 Replacement Asphalt Roller $15,000 Finish Concrete Driveway - Fire Station 1 $40,000 Repair Concrete Driveway - Fire Station II $15,000 Replace/Add Office Furnishings & Chairs - Assessing, City Manager's Office & Conference Room $10,000 Mini Pick-up for Maintenance Services $15,000 Practice Court & Bang Walls - Augsburg, Donaldson & Memorial $11,000 Water Fountains & Portable Restroom Enclosures - Augsburg, Taft, Christian, Roosevelt, Donaldson & Washington $10,000 . CITY OF RICHFIELD, MINNESOTA Council Letter No. 328 Agenda October 28, 1996 Issue Statement: Council confirmation of Mayor's appointment of Housing and Redevelopment Authority Commissioner. Background: The term of HRA Commissioner Joan Helmberger will expire in October 1996. Commissioner Helmberger was appointed to the HRA in 1980. Under state law, the Mayor appoints HRA Commissioners subject to confirmation of the City Council. The Mayor has indicated he will make an appointment to the HRA for a five year term at the October 28, 1996 Council meeting. Recommended Motion: Confirm the Mayor's appointment of a Commissioner to the Housing and Redevelopment Authority for a five year term which will expire in October 2001. Basis of Recommendation: 1. An appointment needs to be made for a term which expires in October 1996. Alternative Recommendation: 1. Continue the appointment to a future Council meeting. Discussion/Decision Mode: This item has been scheduled for the October 28, 1996 Council meeting so the appointment can be made to ensure a full complement of members on the Housing and Redevelopment Authority. Respectfully submitted, Ja . Prosser City Manager JDP:cak C7 7 CITY OF RICHFIELD, MINNESOTA Council Letter No. 327 Agenda October 28, 1996 Issue Statement: First reading consideration of Cable Franchise Agreement Ordinance. Background: The first reading of the Cable Franchise Agreement Ordinance is the second part of the cable issues for consideration at the October 28 Council meeting. The City Council has just considered first reading of a regulatory ordinance that re-established the City's authority governing any cable operator within the community. The Cable Franchise Agreement Ordinance is an agreement entered into, by the City of Richfield and KBL 'Cable Systems of the Southwest Inc. a wholly-owned subsidiary of Time Warner Inc. doing business as Paragon Cable. Once again, the City of Richfield as one of the member cities of the Southwest Suburban Cable Commission (SWSCC), is joined with the cities of Eden Prairie, Edina, Hopkins and Minnetonka in securing a cable franchise agreement for a franchise to provide cable television services through the Southwest Suburban Cable Commission area. The SWSCC has reviewed and approved the franchise ordinance and has voted to approve it and recommend it to each of the member cities. Each member city must take independent action to consider and ratify the ordinance with Paragon Cable. City staff, along with representatives of the cable company and legal representative of the SWSCC, have appeared before the City Council during one of two Study Sessions held in June and August 1996, to informally discuss progress in the negotiations for a new franchise ordinance. The final terms of the Franchise Agreement Ordinance are substantially the same as those previously discussed during the August Study Session. In summary, the following are the major issues that are included in the new ordinance: 1. The new ordinance would provide for an upgraded cable system from the present configuration to a 750 megahertz system. It would include increasing channel capacity from 58 to 79 and significantly improve picture quality. 2. The City of Richfield would continue to receive 5% franchise fees However, the franchise fees would be subject to level playing field language which sets forth a mechanism by which Paragon may reduce franchise payments to the member cities down to a floor of 2% providing that certain competitive conditions occur within the cable franchise area. 3. With respect to public access, Paragon may consolidate its current three studios into . one studio which would provide for an area for audience participation, additional editing suites and additional hours of operation during weekends and week nights. q-1 • A second part of the public access provisions would require Paragon to provide a total of $200,128 for public, educational and government (PEG) access for the first year of the franchise agreement. Paragon must maintain that same level of PEG service in the future as is provided by the $200,000 contribution in 1997. 4. The cable company would continue to provide a connection and basic service to public schools and public buildings and to private schools under specified conditions. The new proposed franchise ordinance is a reflection of the current environment within which providers of wired cable services do business. The competition for providing cable services to citizens of Richfield whether through wired equipment or satellite based equipment is far different from that of the original franchise ordinance in approximately 1980. The cable television system currently in place within Richfield does not have the channel capacity necessary to be competitive with some of the newer cable providers and does not afford all of the channel selection which citizens have indicated they would like to receive. The upgrading of the system to a 750 megahertz system using the extra channel capacity will provide a much broader selection of cable channels to Richfield customers than is now possible with the existing system. In addition, the recognition of a balance between the City's right to require PEG funding and franchise fees in the competitive environment within which the Paragon Cable system must operate is contained in the proposed ordinance. Representatives of Paragon Cable and legal representatives of the SWSCC will be present at the meeting to address any questions or concerns regarding this franchise agreement ordinance. Recommended Motion: Adopt the first reading of the Cable Television Franchise Agreement Ordinance between the City of Richfield and KBL Cable Systems of the Southwest Inc. and to schedule a public hearing and second reading of the ordinance for November 25, 1996. Basis of Recommendation: 1. The representatives of the five member cities of the SWSCC and Paragon Cable have conducted extensive negotiations to fashion a franchise agreement which would provide incentive for Paragon Cable to upgrade its system to 750 megahertz while at the same time insuring that the cities preserve their cable franchising rights. This agreement is a result of those negotiations. 2. The agreement has been reviewed by legal council of the SWSCC, has been passed by the Southwest Cable Commission, and was recommended for approval by each of the member cities. is 3. The franchise ordinance under consideration, provides for an early renewal to the current franchise which would have expired at the end of 1999. Passing this ?-a ordinance at this time allows the cable franchise operator some certainty with respect to their future operations and obligations and a basis for investing the significant funds necessary to upgrade the current system to a state-of-the-art 750 megahertz system. Alternative Recommendation: 1. The City of Richfield could decide not to approve the proposed franchise ordinance in its current form and seek changes through further negotiations between the City of Richfield and Paragon Cable. 2. The City of Richfield could reject the proposed franchise ordinance and at the same time reject the concept of the early franchise renewal and instead wait until the expiration of the current ordinance at the end of 1999. However, it is staffs opinion that waiting until the end of 1999 will not put the City in a more competitive position with respect to seeking better terms or conditions of the franchise ordinance. Discussion/Decision Mode: This item is being considered for first reading on October 28, 1996 so that a public hearing and second reading may be accomplished during the month of November. It is the desire of both the SWSCC and Paragon Cable that the franchise renewal be completed by the end of November so that the company may take steps to begin upgrading the current system. Respectfully submitted, Jam Prosser City Manager JDP:cak • Cable Television Franchise Agreement Ordinance CITY of ,MINNESOTA Prepared by: Adrian E. Herbst, Esq. Theresa M. Harris, Esq. Fredrikson & Byron, P.A. 1100 International Centre 900 Second Avenue South Minneapolis, MN 55402 Telephone: (612) 347-7000 Fax: (612) 347-7077 With the assistance of. The Southwest Suburban Cable Commission 0 TABLE OF CONTENTS Page SECTION 1. 'RENEWAL OF GRANT OF FRANCHISE ................... 2 SECTION 2. SHORT TITLE .................................... 2 SECTION 3. DEFINITIONS ..................................... 2 SECTION 4. EFFECTIVE DATE AND TERM OF RENEWAL .............. 2 SECTION 5. WRI'T'TEN NOTICE ................................. 2 SECTION 6. DESIGN PROVISIONS ............................... 3 6.1 System Design ..................................... 3 6.2 Cable Nodes System Connect ............................ 3 6.3 Service to the Schools and Government Buildin-as ................ 3 6.4 Parental Control Lock ............... 4 6.5 Standby Power ..................................... 4 6.6 Periodic Review Provisions ............................. 4 SECTION 7. PUBLIC, EDUCATIONAL AND GOVERNMENTAL ACCESS PROGRAMMING ................................... 5 7.1 Access Channels .................................... 5 7.2 Studio/Facilities ................................... 6 7.3 Funding for PEG Access ............................... 7 7.4 Regional Channel Six ................................. 7 7.5 Override of the Government Access Channel .................. 7 SECTION 8. PERIODIC CUSTOMER SURVEYS ....................... 8 SECTION 9. LINE EXTENSION POLICY ............................ 8 SECTION 10. GENERAL FINANCIAL AND INSURANCE PROVISIONS ....... 9 10.1 Payment to City .................................... 9 10.2 Bonds .......................................... 9 10.3 Security Fund ..................................... 10 SECTION 11. SOCIAL CONTRACT ............................... 13 SECTION 12. COMPETITION ADJUSTMENT ......................... 13 588638 Franchise Agreement Ordinance October 16, 1996 - Page i SECTION I3. ACCEPTANCE ...................................17 13.1 Other Franchises .................................... 17 13.2 Time of Acceptance: Incorporation of Offering: Exhibits . .................................. 18 E)CMITS Exhibit A - Franchise Fee Payment Worksheet .......................... 20 Exhibit B - Time Warner Social Contract ............................. 21 Exhibit C - Paragon Cable Initial Programming ......................... 22 588638 Franchise Agreement Ordinance October 16, 1996 - Page ii • FRANCHISE AGREEMENT ORDINANCE This Agreement, made and entered into this day of , 19_, by and between the City of , a municipal corporation of the State of Minnesota, and KBL Cable Systems of the Southwest Inc., a wholly-owned subsidiary of Time Warner Inc. WITNESSETH WHEREAS, KBL Cable Systems of the Southwest Inc. has operated a Cable System in the City of , pursuant to Ordinance No. , also known as the Cable Communications Ordinance, which expires on December 31, 1999; and WHEREAS, KBL Cable Systems of the Southwest Inc. has requested an early renewal of its Franchise because KBL Cable Systems of the Southwest Inc. intends to rebuild its System to a modern state of the art design as described herein and at substantial cost; and WHEREAS, KBL Cable Systems of the Southwest Inc. and the City of , based on City's understanding the rebuilt System will provide considerable new service capabilities and economic benefit opportunities to its institutions, residents and businesses, have agreed to enter into an early renewal of the Franchise; and WHEREAS, the City of , will repeal Ordinance No. also known as the Cable Communications Ordinance, including amendments and agreements relating to it beginning with the effective date of this Agreement Ordinance, and enact Ordinance No. , also known as the Cable Regulatory Ordinance, through which the City is authorized to grant and renew one or more nonexclusive revocable Franchises to operate, construct, maintain and reconstruct a Cable Television System within the City; and WHEREAS, the City, reviewed the legal, technical and financial qualifications of KBL Cable Systems of the Southwest Inc. and after a properly noticed public hearing, has determined that it is in the best interest of the City and its residents to renew its Franchise with KBL Cable Systems of the Southwest Inc.. NOW, THEREFORE, the City of (hereinafter also known as the "City" or "Grantor") hereby grants to KBL Cable Systems of the Southwest Inc. (hereinafter the "Grantee") renewal of its cable television Franchise in accordance with the provisions of Ordinance No. and this Agreement. 588638 Franchise Agreement Ordinance October 16, 1996 - Page 1 SECTION 1. RENEWAL OF GRANT OF FRANCHISE The cable television Franchise granted through Ordinance Number on the day of '19 and now held by Grantee is renewed. Ordinance Number that granted the original franchise is repealed and replaced by the Cable Television Franchise Ordinance, Ordinance Number and this Franchise Agreement Ordinance. This Franchise shall be subject to the terms and conditions of this Franchise Agreement Ordinance and shall be subordinate to the Cable Television Franchise Ordinance and all applicable federal, state and local law. SECTION 2. SHORT TITLE This Agreement shall be known and cited as the "City of Cable Television Franchise Agreement Ordinance. " Within this document it shall also be referred to as "this Franchise" or "the Franchise." SECTION 3. DEFINITIONS The definitions contained in Ordinance Number of the City of are incorporated herein by reference and adopted as fully as if set out verbatim. SECTION 4. EFFECTIVE DATE AND TERM OF RENEWAL This Franchise shall commence on the effective date described in Section 13 and shall expire 15 years thereafter. SECTION 5. WRITTEN NOTICE All notices, reports or demands required to be given in writing under this Franchise shall be deemed to be given when delivered personally to any officer of Grantee or City's Manager of this Franchise or 48 hours after it is deposited in the United States mail in a sealed envelope, with registered or certified mail postage prepaid thereon, addressed to the party to which notice is being given, as follows: If to City: If to Grantee: Such addresses may be changed by either party upon notice to the other party given as provided in this section. 588638 Franchise Agreement Ordinance October 16, 1996 - Page 2 • SECTION 6. DESIGN PROVISIONS. 6.1 System Design. Grantee agrees to upgrade its System to a capacity of 750 MHz which is the equivalent of 112 6 MHz analog video channels. However, Grantee will initially use the 54 MHz-550 MHz section of the System to deliver analog signals and reserve the 550 MHz to 750 MHz section for future applications. Stated in terms of 6 MHz analog channels the 54 MHz to 550 MHz of the System has capacity for 79 channels. The upgraded System shall have the technical capacity for non- voice return communications which means the provision of appropriate system design techniques with the installation of cable and amplifiers suitable for the subsequent insertion of necessary non-voice communications electronic modules. Such upgrade shall be completed and in use by December 31, 1999. 6.2 Cable Nodes System Connect. Grantee will locate its "nodes" near schools where possible, without in Grantee's opinion, comprising the engineering design of the System. The City will provide maps showing the location of the schools. 6.3 Service to the Schools and Government Buildings. 0 A. Service to Pubic Schools and Public Buildings The Grantee shall continue to provide one outlet of Basic Service, the Cable Programming Service Tier and one Converter, if needed, to those facilities presently served. Service to public schools and municipally owned buildings constructed or occupied after the effective date of this Franchise shall be similarly provided subject to the building being located within 200 feet of the Grantee's then existing System. 2. If facility is over 200 feet from Grantee's then existing System, the school or municipality shall be responsible for all equipment, construction costs and additional wiring beyond the first 200 feet that are the Grantee's responsibility. 3. All internal wiring cost beyond the one outlet that Grantee agrees to provide shall be the responsibility of the school or municipality. 4. The financial responsibility for any additional Converters desired by the school or municipality shall be their responsibility. 588638 Franchise Agreement Ordinance October 16, 1996 - Page 3 B. Service to Private Schools Grantee shall provide Installation to private schools within 200 feet of plant. A private school is defined as any private secondary school that receives funding pursuant to Title 1 of the Elementary and Secondary Education Act of 1965. Installation and Cable Service shall be provided for free to such private schools through the year 2000. 6.4 Parental Control Lock. Grantee shall provide, for sale or lease, to Subscribers, upon request, a parental control locking device. 6.5 Standby Power. Grantee shall continue to provide standby power throughout the System now and as rebuilt capable of providing at least three hours of emergency supply. 6.6 Periodic Review Provisions. The City may request a State-of-the-Art review at any time between the sixth year anniversary and the twelfth year anniversary of the granting of this Franchise. In conducting a State-of-the-Art review, the City shall undertake the following process: A. The City and the Grantee shall undertake a review of the then existing Cable System. This review shall, at a minimum, take into account the following: 1. Characteristics of the existing System; B. C. 2. The State-of-the-Art; 3. Additional benefits provided to customers by the State-of-the-Art; 4. The market. place demand for the State-of-the-Art; and 5. The financial feasibility of the State-of-the-Art taking into account associated rate increases, and the premature retirement of assets.. The City shall hold at least two public hearings to enable the general public and Grantee to comment and to present evidence. For the purposes of this Section the term "State-of-the-Art" shall mean equipment or facilities that: • • 588638 Franchise Agreement Ordinance October 16, 1996 - Page 4 1. Are readily available with reasonable delivery schedules from two or more sources of supply; 2. Have the capability to perform the intended functions demonstrated within communities with similar characteristic (including, but not necessarily limited to, population, density, Subscriber penetration, etc.) under actual operating conditions for purposes other than tests or experimentation; and 3. Are technically and economically feasible to implement. The term "State-of-the-Art" shall not include equipment or facilities associated with or dedicated to the general public, educational or governmental access or telecommunication services. D. Notwithstanding anything to the contrary, the City may not undertake a State-of-the-Art review at any time the Grantee is deemed subject to effective competition pursuant to then applicable state or federal law. E. As a result of any review based on this Section, City and Grantee may enter into good faith negotiations to amend this Franchise as agreed upon. SECTION 7. PUBLIC EDUCATIONAL AND GOVERNMENTAL ACCESS PROGRANBENG. 7.1 Access Channels. A. Grantee shall provide four public, educational and government (PEG) Access Channels (the "Access Channels"). One channel shall be dedicated to public access, one channel shall be dedicated to governmental access, and two channels shall be dedicated to educational access. B. Grantee shall provide to each of its Subscribers who receive all or any part of the total services offered on the System, reception of each public, educational and governmental Access Channel. C. Grantee shall provide at least one specially designated access channel available for lease on a first come, nondiscriminatory basis by commercial and noncommercial users. This Section is not applicable to Subscribers receiving only alarm system services or only data transmission services for computer operated functions. The VHF spectrum shall be used for at least one of the specially designated noncommercial public Access Channels required. D. Whenever any of the Access Channels are in use during 80 percent of the weekdays (Mo'nday-Friday), for 80 percent of the time during any 588638 Franchise Agreement Ordinance October 16, 1996 - Page 5 consecutive three hour period for six weeks running, and there is demand for use of an additional channel for the same purpose, Grantee shall then have six months in which to provide a new specially designated access channel for the same purpose at no additional cost to Subscribers. E. Grantee must establish rules and regulations for the public, educational and leased Access Channels. The rules and regulations established by the Grantee are subject to approval by the City. F. Subscribers receiving programs on one or more special service channels without also receiving the regular Subscriber services may receive only one specially designated composite Access Channel composed of the programming on Access Channels. Subscribers receiving only alarm system services or only data transmission services for computer operated functions shall not be included in this requirement. 7.2 Studio/Facilities. A. Subject to a transition plan that shall be filed with the City before the City executes this Agreement and that shall be updated annually until the transition is complete, Grantee will provide one large facility containing one studio with the current square footage of 1440 square feet in the Eden Prairie studio for public, educational and governmental access production which will be located in Eden Prairie. The studio will have the capacity for audience participation. The facility will include two separate editing suites, storage space and the entire studio facility will be wheelchair accessible. The facility shall meet the current hours of Monday through Friday 10:00 a.m. to 6:00 p.m. and by appointment on evenings and weekends. The facility shall also add regular weekend hours and some regular week night hours. B. Grantee shall make readily available for public use at least minimal equipment necessary for the production of programming and playback of prerecorded programs for the specially designated noncommercial public Access Channel. The Grantee shall also make readily available upon need being shown, the minimum equipment necessary to make it possible to record programs at remote locations with battery operated portable equipment. C. No charges shall be made for channel time or playback of prerecorded programming on the specially designated noncommercial public Access Channel. Grantee can include any costs associated with production and playback for the noncommercial public Access Channel in the total sum allocated for public, educational and governmental access programming as stated in Section 7.3. Additionally, at the City's request, Grantee will 388638 Franchise Agreement Ordinance October 16, 1996 - Page 6 work with the City to institute a nominal membership fee for users of the PEG access facility. D. Need within the meaning of this section shall be determined in the sole discretion of City or by Subscriber petition. Said petition must contain the signatures of at least 10 percent of the Subscribers of System, but in no case more than 500 nor fewer than 100 signatures. 7.3 Funding for PEG Access. In the first year after the effective date of this Franchise, Grantee shall provide no less than $200,128 annually for PEG access operating expenses collectively for the cities of Edina, Eden Prairie, Hopkins, Minnetonka, and Richfield. After the first year of the Franchise, Grantee shall provide sufficient financial and in- kind support to maintain a substantially equivalent level of services, facilities and equipment in the remaining years of the Franchise Agreement Ordinance comparable to the services, facilities and equipment provided in the first year of the Franchise. These expenses will be itemized on customers' bills. This amount will provide the following services: (a) labor costs; (b) educational consultant; (c) facilities and utilities; (d) access expenses; (e) educational expenses; (f) equipment maintenance; (g) technical support; and (h) replay expenses. This funding shall not be deducted from the Franchise Fee within the meaning of this Agreement. Grantee shall not calculate a Franchise Fee upon funds itemized on the customers' bills for public, educational or governmental access production and programming. 7.4 Regional Channel Six. Under Minnesota Cable Communications Act, standard VHF Channel six has been designated for usage as the regional channel. Also known as Metro Cable Network, this independent, non-commercial, non-profit channel shall be made available without charge. This provision shall remain in effect as long as a regional channel is required by the State of Minnesota. 7.5 Override of the Government Access Channel. Grantee agrees to provide the capability such that the City, from its City Hall, can switch its government Access Channel in the following ways: A. Insert live Council meetings from City Hall; B. Replay government access programming from City Hall; C. Transmit character generated programming; 588638 Franchise Agreement Ordinance October 16, 1996 - Page 7 D. Schedule for Grantee to replay City-provided tapes in pre-arranged time slot on the government Access Channel; and E. Switch to C-SPAN 2 or other comparable programming provided by Grantee at any time when not carrying live or taped government access programming. SECTION 8. PERIODIC CUSTOMER SURVEYS 8.1 The Grantee shall upon request of the City and at times mutually agreed upon by the parties, but no more frequent than once every three years conduct a random survey of a representative sample of Subscribers. Each questionnaire shall be prepared and conducted in good faith so as to provide reasonably reliable measure of customer satisfaction with: (1) audio and signal quality; (2) response to customer complaints; (3) billing practices; (4) programming; and (5) Installation practices; 8.2 The survey shall be conducted in conformity with standard research procedures including the use of telephone survey conducted by an independent person in the business of regularly conducting such surveys. The survey shall consist of a sample size of 300 customers or such other sample size as to yield a margin of error of plus or minus six percent or less of the total customer base. 8.3 The Grantee shall report the results of the survey and any steps the Grantee may be taking in response to the survey within 60 days of the completion of the survey. 8.4 Notwithstanding anything to the contrary, the Grantee shall be under no obligation to conduct a survey at any time the Grantee is deemed subject 'to effective competition under then applicable state or federal law. SECTION 9. LINE EXTENSION POLICY. 9.1 The Grantee shall within 12 months of receiving a request, extend the System to any residences within the City served by City water and sewer facilities. 9.2 The City recognizes that in some instances the Grantee needs the permission of private property owners to extend service to others who may be interested in service and agrees that should the Grantee be unable to obtain these needed permissions under terms reasonable to the Grantee and the property owners from whom permission is required that the Grantee shall be under no obligation to extend service. • 588638 Franchise Agreement Ordinance October 16, 1996 - Page 8 SECTION 10. GENERAL FINANCIAL AND INSURANCE PROVISIONS. 10.1 Payment to City. A. Grantee shall pay to the City a Franchise Fee in an amount equal to five percent (5 %) of its annual Gross Revenues. B. The foregoing payment shall be compensation for use of Streets. C. Payments due the City under this provision shall be computed at the end of each calendar quarter. Payments shall be due and payable for each quarter not later than 60 days from the last day of the quarter. Each payment shall be accompanied by a brief report showing the basis for the computation. At the end of each calendar year, Grantee shall complete a Franchise Fee Payment Worksheet attached hereto as Exhibit A. Grantee shall file a completed Franchise Fee Payment Worksheet no later than 60 days after the last day of the calendar year. D. No acceptance of any payment shall be construed as an accord that the amount paid is in fact the correct amount, nor shall such acceptance of payment be construed as a release of any claim the City may have for further or additional sums payable under the provisions of this Franchise. All amounts paid shall be subject to audit and recomputation by the City. E. In the event any payment is not made on the due date, interest on the amount due shall accrue from such date at the annual rate of 12 %. 10.2 Bonds. A. At the commencement of this Franchise, and at all times thereafter until Grantee has completed the System Upgrade in Section 6.1 of this Franchise, Grantee shall maintain with City a bond in the sum of $300,000.00 in such form and with such sureties as shall be acceptable to City, conditioned upon the faithful performance by Grantee of this Franchise and the acceptance hereof given by City and upon the further condition that in the event Grantee shall fail to comply with any law, ordinance or regulation, there shall be recoverable jointly and severally from the principal and surety of the bond, any damages or losses suffered by City as a result, including the full amount of any compensation, indemnification or cost of removal of any property of Grantee, including a reasonable allowance for attorneys' fees and costs (with interest at two percent in excess of the then prime rate), up to the full amount of the bond, and which bond shall further guarantee payment by Grantee of all claims and liens against City or any, public property, and taxes due to City, which arise by reason of the construction, operation, maintenance 588638 Franchise Agreement Ordinance October 16, 1996 - Page 9 or use of the System. Upon completion of the System Upgrade as described in Section 6.1 of this Franchise, the City may reduce the bond to the sum of $100,000. B. The rights reserved by City with respect to the bond are in addition to all other rights the City may have under this Franchise or any other law. C. City may, in its sole discretion, reduce the amount of the bond. 10.3 Security. A. In the event the Grantee is given notice of a non-compliance pursuant to Section 34 of the Ordinance, the Grantee shall within ten (10) days thereof deposit into a bank account, established by the City, and maintain on deposit the sum of Twenty Thousand and 00/100 Dollars ($20,000.00) or deliver to the City a letter of credit in the same amount as a common Security Fund for the faithful performance by it of all the provisions of this Franchise and compliance with all orders, permits and directions of the City and the payment by Grantee of any claim, liens, costs, expenses and taxes due the City which arise by reason of the construction, operation or maintenance of the System. Interest on this deposit shall be paid to Grantee by the bank on an annual basis. The security may be terminated by the Grantee upon the Resolution of the alleged non-compliance. B. Provision shall be made to permit the City to withdraw funds from the Security Fund. Grantee shall not use the Security Fund for other purposes and shall not assign, pledge or otherwise use this Security Fund as security for any purpose. C. Within ten (10) days after notice to it that any amount has been withdrawn by the City from the Security Fund pursuant to (A) of this section, Grantee shall deposit a sum of money sufficient to restore such Security Fund to the required amount. D. In addition to recovery of any monies owed by Grantee to City or damages to City as a result of any acts or omissions by Grantee pursuant to the Franchise, City in its sole discretion may charge to and collect from the Security Fund the following penalties: 1. For failure to complete System construction in accordance with Grantee's upgrade plan, unless City approves the delay, the penalty shall be $200.00 per day for each day, or part thereof, such failure occurs or continues. 588638 Franchise Agreement Ordinance October 16, 1996 - Page 10 2. For failure to provide data, documents, reports or information or to cooperate with City during an Application process or System review, the penalty shall be $50.00 per day for each day, or part thereof, such failure occurs or continues. 3. For failure to comply with any of the provisions of this Franchise for which a penalty is not otherwise specifically provided pursuant to this Paragraph C, the penalty shall be $50.00 per day for each day, or part thereof, such failure occurs or continues. 4. For failure to test, analyze and report on the performance of the System following a request by City, the penalty shall be $50.00 per day for each day, or part thereof, such failure occurs or continues. 5. For failure by Grantee to provide additional services as negotiated between City and Grantee at a periodic review session within 45 days after a request by City the penalty shall be $200.00 per day for each day, or part thereof, such failure occurs or continues. 6. Forty-five days following notice from City of a failure of Grantee to comply with construction, operation or maintenance standards, the penalty shall be $200.00 per day for each day, or part. thereof, such failure occurs or continues. 7. For failure to provide the services Grantee has proposed, including but not limited to the implementation and the utilization of the Access Channels and the making available for use of the equipment and other facilities to City, the penalty shall be $100.00 per day for each day, or part thereof, such failure occurs or continues. 8. Each violation of any provision of this Franchise shall be considered a separate violation for which a separate penalty can be imposed. E. Exclusive of the contractual penalties set out above in this section, a violation of any provision of this Franchise is a misdemeanor. F. If Grantee fails to pay to the City any taxes due and unpaid; or fails to repay to the City, any damages, costs or expenses which the City shall be compelled to pay by reason of any act or default of the Grantee in connection with this Franchise; or fails, after thirty (30) days notice of such failure by the City to comply with any provision of the Franchise which the City reasonably determines can be remedied by an expenditure 588638 Franchise Agreement Ordinance October 16, 1996 - Page 11 of the security, the City may then withdraw such funds from the Security Fund. Payments are not Franchise Fees as defined in Section 29 of the Ordinance. G. Whenever the City finds that Grantee has allegedly violated one or more terms, conditions or provisions of this Franchise, a written notice shall be given to Grantee. The written notice shall describe in reasonable detail the alleged violation so as to afford Grantee an opportunity to remedy the violation. Grantee shall have 30 days subsequent to receipt of the notice in which to correct the violation before the City may require Grantee to make payment of penalties, and further to enforce payment of penalties through the Security Fund. Grantee may, within 10 days of receipt of notice, notify the City that there is a dispute as to whether a violation or failure has, in fact, occurred. Such notice by Grantee shall specify with particularity the matters the matters disputed by Grantee and shall stay the running of the above-described time. 1. City shall hear Grantee's dispute at the next regularly scheduled or specially scheduled Council meeting. Grantee shall have the right to subpoena and cross-examine witnesses. The City shall determine if Grantee has committed a violation and shall make written findings of fact relative to its determination. If a violation is found, Grantee may petition for reconsideration. 2. If after hearing the dispute, the claim is upheld by the City, then Grantee shall have 30 days within which to remedy the violation before the City may require payment of all penalties due it. 3. The time for Grantee to correct any alleged violation may be extended by the City if the necessary action to correct the alleged violation is of such a nature or character as to require more than 30 days within which to perform provided Grantee commences corrective action within 15 days and thereafter uses reasonable diligence, as determined by the City, to correct the violation. H. If City draws upon the Security Fund delivered pursuant hereto, in whole or in part, Grantee shall replace the same within three days and shall deliver to City a like replacement Security Fund for the full amount stated in Paragraph A of this section as a substitution of the previous Security Fund. I. If any Security Fund is not so replaced, City may draw on said Security Fund for the whole amount thereof and hold the proceeds, without interest, and use the proceeds to pay costs incurred by City in performing and paying for any or all of the obligations, duties and responsibilities of 588638 Franchise Agreement Ordinance October 16, 1996 - Page 12 Grantee under this Franchise that are not performed or paid for by Grantee pursuant hereto, including attorneys' fees incurred by the City in so performing and paying. The failure to so replace any Security Fund may also, at the option of City, be deemed a default by Grantee under this Franchise. The drawing on the Security Fund by City, and use of the money so obtained for payment or performance of the obligations, duties and responsibilities of Grantee which are in default, shall not be a waiver or release of such default. J. The collection by City of any damages, monies or penalties from the Security Fund shall not affect any other right or remedy available to City, nor shall any act, or failure to act, by City pursuant to the Security Fund, be deemed a waiver of any right of City pursuant to this Franchise or otherwise. SECTION 11. SOCIAL CONTRACT. The Social Contract between Grantee and the Federal Communications Commission is attached hereto as Exhibit B. It is expressly understood by the City and the Grantee that the Social Contract is made a part hereof for informational purposes only. Inclusion of the Social Contract by reference is not intended to nor shall it create any right of the City to enforce any provisions of the Social Contract directly or indirectly under the terms of this Franchise. The parties expressly acknowledge and understand that the Social Contract and the obligations contained therein are enforceable exclusively by the FCC as more fully set forth in the Social Contract. SECTION 12. COMPETITION ADJUSTMENT. 12.1 In consideration of Grantee's substantial investment estimated at $20 million dollars to rebuild its System at an early date for the Cities of Eden Prairie, Edina, Minnetonka, Hopkins and Richfield, MN, the City agrees to include the following provisions. 12.2 Any additional or subsequent cable Franchise granted to cable or non-cable companies who may compete with Grantee within the Franchise area will be granted only on substantially similar terms and conditions as this Franchise and shall not contain less burdensome nor more favorable terms than those imposed on Grantee by this Franchise. 12.3 The City and Grantee agree that all Franchise provisions that Grantee is subject to are effective against the Grantee only if such requirements are applied as well to any and all wired competitors of the Grantee within the Franchise area. For purposes of this subsection, a wired competitor is any video provider using Streets and offering at least 12 channels of video programming at least one of which is a broadcast signal, which uses wires, coaxial cables, optical fiber or other similar technology and places or attaches such wires, cables or fibers on 588638 Franchise Agreement Ordinance October 16, 1996 - Page 13 Streets or public utility facilities. This definition of wired competitor does not include a Satellite Master Antenna Television system located wholly on private M property within a building. 12.4 Any Franchise provision or other regulation enforced by the City upon Grantee which is not also imposed upon Grantee(s) wired competitors within the Franchise area of the City, shall be void as to Grantee, subject to the following requirements: A. The existence of a wired competitor in the Franchise area of the City shall not relieve Grantee of an obligation to provide an annual minimum Franchise Fee of two percent of Gross Revenues. If the wired competitor obtains a cable Franchise which requires it to pay a Franchise Fee or substantially similar fee of an equivalent amount to the City, the State of Minnesota or any other governmental entity which is less than five percent of Gross Revenues, the City shall reduce Grantee's Franchise Fee to the same level, but in no event less than two percent of Gross Revenues. If the wired competitor does not obtain a cable Franchise, but it is required to pay a Franchise Fee or substantially similar fee to the City, State of Minnesota or any other governmental entity, then Grantee shall pay the same fee, but in no event less than two percent of Gross Revenues. If the wired competitor is not required to pay a Franchise Fee or similar fee to the City or the State of Minnesota, then the two percent minimum Franchise Fee shall apply to Grantee for all homes and customers who are passed by the wired competitor's system. If at any time a wired competitor with a cable Franchise pays a Franchise Fee of more than two percent, or if a wired competitor without a Franchise Fee pays a Franchise Fee or similar fee of more than two percent, Grantee shall pay the same Franchise Fee. In no event shall Grantee be required to pay more than a five percent Franchise Fee. If the wired competitor discontinues providing multichannel video services, the Grantee's Franchise Fee shall immediately return to its original level. B. The existence of a wired competitor shall not relieve Grantee of an obligation to provide at least one channel for public, educational and governmental access programming. If the wired competitor obtains a cable Franchise which requires it to provide less than four public, educational and governmental Access Channels, the City shall, upon the effective date of the subsequent Franchise, reduce Grantee's requirement to the same number of channels, but in no event shall Grantee provide less than one public, educational and governmental access channel. If the wired competitor does not obtain a cable Franchise, but it is required to provide less than four public, educational and governmental Access Channels, or if the wired competitor is not required to provide any public, 588638 Franchise Agreement Ordinance October 16, 1996 - Page 14 • educational or governmental Access Channels, then the City shall reduce the number of Access Channels required of Grantee as follows: (i) If the wired competitor passes less than 25 % of the homes and customers in the cities of Edina, Eden Prairie, Hopkins, Minnetonka and Richfield, Grantee shall provide at least four public, educational and governmental Access Channels. (ii) If the wired competitor passes 25 % or more but less than 50 % of the homes and customers in the cities of Edina, Eden Prairie, Hopkins, Minnetonka and Richfield, Grantee shall provide at least three public, educational and governmental Access Channels. (iii) If the wired competitor passes 50% or more of the homes and customers in the cities of Edina, Eden Prairie, Hopkins, Minnetonka and Richfield, Grantee shall provide at least one public, educational and governmental Access Channel. If at any time, a wired competitor provides channels for public, educational and governmental access which exceed the channels provided by Grantee, Grantee shall provide the same number of channels as the wired competitor. In no event shall Grantee be required to provide more public, educational or governmental Access Channels than it has agreed to in this Franchise Agreement Ordinance. If the wired competitor discontinues providing multichannel video services, the Grantee's requirement for the provision of public, educational and governmental Access Channels shall immediately return to its original level. C. If a wired competitor obtains a cable Franchise which requires it to provide less funding for equipment or facilities for public, educational and governmental access or less facilities and equipment than Grantee, the City shall reduce the Grantee's requirement for funding for public, educational and governmental access and facilities and equipment to the level of the wired competitor. If the wired competitor does not obtain a cable Franchise, including open video providers in accordance with the Telecommunications Act of 1996 and FCC rules, but it is required to provide less funding for public, educational and governmental access or less equipment or facilities than Grantee, or if the wired competitor is not required to provide any funding for public, educational or governmental access or equipment or facilities, then the City shall reduce the Grantee's required funding as follows: 588638 Franchise Agreement Ordinance October 16, 1996 - Page 15 (i) If the wired competitor passes less than 25 % of the homes and customers in the cities of Edina, Eden Prairie, Hopkins, Minnetonka and Richfield, Grantee shall continue to provide the same level of funding for public, educational and governmental access facilities and equipment as indicated in this Ordinance. (ii) If the wired competitor passes 25 % or more but less than 50 % of the homes and customers in the cities of Edina, Eden Prairie, Hopkins, Minnetonka and Richfield, the City shall reduce the funding and, equipment and facilities requirements of the Grantee by 30%. (iii) If the wired competitor passes 50 % or more of the homes and customers in the cities of Edina, Eden Prairie, Hopkins, Minnetonka and Richfield, the City shall eliminate the funding and, equipment and facilities requirements for public, educational and governmental access funding. It is not the intent of this section to reduce Grantee's funds, equipment and facilities requirements regarding public, educational and governmental access programming to an amount less than the amount provided by its wired competitors. If at any time a wired competitor provides funds, equipment or facilities for public, educational and governmental access that exceed the funds, equipment or facilities provided by Grantee under this paragraph, Grantee shall provide the same amount of funds, equipment and facilities. In no event shall Grantee be required to provide more funds, equipment or facilities than it has agreed to provide in Section 7 of this Franchise Agreement Ordinance. If the wired competitor discontinues providing multichannel video services, the Grantee's requirement for the provision of funding and, equipment and facilities for public, educational and governmental access and, facilities and equipment shall immediately return to its original level. D. For all other Franchise provisions imposed upon Grantee in this Ordinance, if a wired competitor obtains a cable Franchise which does not require it to meet the same Franchise provision, the City shall not require Grantee to meet that Franchise provision. If the wired competitor does not obtain a cable Franchise and it is not required to meet the same Franchise provision, then the City shall relieve the Grantee from that Franchise provision as follows: (i) If the wired competitor passes less than 50% of the homes and customers in the cities of Edina, Eden Prairie, Hopkins, 588638 Franchise Agreement Ordinance October 16, 1996 - Page 16 Minnetonka and Richfield, Grantee shall continue to comply with the Franchise provision. (ii) If the wired competitor passes 50% or more of the homes and customers in the cities of Edina, Eden Prairie, Hopkins, Minnetonka and Richfield, the City shall not require Grantee to meet the Franchise provision. If at any time a wired competitor provides a requirement contained originally in this cable Franchise, Grantee shall comply with that same requirement. If the wired competitor discontinues providing multichannel video services, the Grantee shall be required to meet the Franchise provision. 12.5 If Grantee is aware of a Franchise provision imposed by the City upon Grantee which is not also imposed by the City or the State of Minnesota upon a wired competitor, it shall identify the wired competitor, including the basis for stating that the entity is a "wired competitor" as defined above; it shall identify the Franchise provision in question; and it shall provide this information to the City. Within 90 days, the City shall: (1) pass a resolution declaring that Grantee is subject to this section for that requirement; (2) declare why the entity in question is not a wired competitor; or (3) state that the "wired competitor" is subject to a requirement that substantially duplicates the Franchise provision. During the above process, the Grantee shall escrow any funds at issue in the above process that the Franchise requires be remitted during the time period of the above process and Grantee shall continue to meet any and all requirements in question. If the City declares such requirement void as to Grantee, the City is not liable for Grantee's past compliance with the requirement, including any past fees remitted to the City. 12.6 If the City and Grantee are unable to agree upon the operation of this section of the Ordinance within 90 days after one party provides notice to the other party, the parties may agree to enter mediation. SECTION 13. ACCEPTANCE. 13.1 Other Franchises. A. The System intended for City, may be part of a joint system that serves the cities of Eden Prairie, Edina, Hopkins, Minnetonka and Richfield, Minnesota. B. Grantee will, in good faith, apply for and accept, if offered to it, a Franchise (similar Franchise) from each of the other cities on all the same 588638 Franchise Agreement Ordinance October 16, 1996 - Page 17 terms and conditions herein provided, except provisions omitted as inapplicable. 13.2 Time of Acceptance: Incorporation of Offering: Exhibits. A. Grantee shall have 30 days from the last date of adoption of a similar Franchise by all of the cities listed in Section 13.1(A) of this Section, to accept this Franchise in form and substance acceptable to City. Such acceptance by Grantee shall be deemed the grant of this Franchise for all purposes. B. Upon acceptance of this Franchise, Ordinance No. _, also known as the Cable Communications Ordinance, shall be repealed and Grantee shall be bound by all the terms and conditions contained in Ordinance No. , also known as the Cable Regulatory Ordinance, and herein. With its acceptance, Grantee also shall deliver to City an opinion from its legal counsel, acceptable to City, stating that this Franchise has been duly accepted by Grantee, that this Franchise is enforceable against Grantee in accordance with its terms, and which opinion shall otherwise be in form and substance acceptable to City. C. With its acceptance, Grantee also shall deliver to City true and correct copies of documents creating Grantee and evidencing the power and authority referred to in the opinion of Grantee's counsel, certified as of a then current date by public office holders to the extent possible and otherwise by an officer of Grantee. D. At the time of acceptance, Grantee shall provide a copy of its initial services which shall be attached hereto as Exhibit C. E. The effective date of this Franchise Agreement Ordinance shall be the date executed by Grantee including acceptances as described in this Section 13. 588638 Franchise Agreement Ordinance October 16, 1996 - Page 18 IN WITNESS WHEREOF, Grantor and Grantee have executed this Franchise Agreement the date and year first above written. (SEAL) (Corporate Seal) Date: STATE OF ) COUNTY OF ) The foregoing instrument was acknowledged before me on , 199_, by the of the City of , on behalf of the City. CTTY OF , Minnesota By, Date: Mayor ATTEST: City Clerk KBL CABLE SYSTEMS OF THE SOUTHWEST, INC., A WHOLLY-OWNED SUBSIDIARY OF TIME WARNER INC. By Notary Public 588638 Franchise Agreement Ordinance October 16, 1996 - Page 19 STATE OF ) ) COUNTY OF ) The foregoing instrument was acknowledged before me on , 199_, by the of KBL Cable Systems of the Southwest, Inc., a wholly-owned subsidiary of Time Warner Inc., on behalf of the company. Notary Public 588638 Franchise Agreement Ordinance October 16, 1996 - Page 20 • • • 588638 Franchise Agreement Ordinance October 16, 1996 - Page 21 IT A FRANCHISE FEE PAYMENT WORKSHEET y x(J) o O O O O 0 0 11 0) z ; tl `- W i 11 Q = O Q i i II i 11 i II y ? a ? ? II V/ ; 0 0 O o 0 1 O II 1 ? 1 1 ? 11 1 L II ' It (1f 1 1 11 i tl c ! 11 i n ; 0 Cl 0 0 1 1 ? O i tl i o II ? v? u 1 n 1 u 1 , d u u J 1 i II D i i II w OFR O O O O ; to II = L = i i II i CO co 1 1 11 Z i i II LLI _ i tl i i II } Q ' O O O O a i ? O ' O 11 ? u? It 1 I : i (? i 11 = II u y' i i 1 II i II i 0 0 0 0 0 1 , o II O O O O O i jj o 0 C) O O O O CD O II i c 0 O O O O O O wQ O G O O O = 0 11 i 11 Q W F- m D 0 W W W QQ U' w J Q Q F- i Q Z 0 o m 1 (n O Q' m , z w i a z J ~ Z _ w V 0 Z Q Z Y L-L 0?w Z d 1 13 w i U ! w C0 ?w> ------ - w U ----- - ---- -- -- -- - . ? X U) X W = o) u o 0 0 0 0 0 0 0 o u i 0 0 o 1 o c o u r? Z U u 1 1 i 1 n 1 Zz Z u II 1 1 1 1 1 n 1 II Q O II , i , i , i II w II 1 1 1 II 0 LL II i i i i i 11 i U) w II II 1 i 1 i 1 II i II C?D m II i i II LL CO 11 O z II cf) _ U) Cl) O F- Z II W !n W U W U W > o w U Z Z Q JJU Q?w w II 0 W F-LL w II p z 0 mU W Lt_ O ?Q UJa ? W Uw D w ii az w?z? Z w? > oQ W m W cn ?Ln. w 0 z II C-) > II Z W Z . 0 W QO W (=j co -0 II UOa?aZWdW J mJ W- QQ2 a: II ?0?}}Q>O= H U) y Q Q Q fn F-W QwQ QOOQQXO=F- O WW = LL OWrn aoa ?- p M<WaCL l-<W0 I- -j -1 0 X F- U. • EXHIBIT B TIME WARNER SOCIAL CONTRACT • 588638 Franchise Agreement Ordinance October 16, 1996 - Page 22 FOR FCC RECORD ONLY $// M08A, Time Warner Social Contract, FCC 95-478//f $/ 79.922 Rates for the basic service tier and cable programming services tier /$ S/ 76.942 Refunds /S S/ 76.950 Complaints regarding cable programming service tiers /$ FCC 95-478 Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 In the Matter of) Social Contract for ) Time Warner ) MEMORANDUM OPINION AND ORDER Adopted: November 30, 1995 Released: November 30, 1995 By the Commission: Table of Contents Paragraphs: 1. Introduction 1 II. Backg round 2 A. Overview of the Social Contract 5 III. Discussion A. Waiver 14 B. Preemption of State and Local Notice Requirements 20 C. Provisions of the Social Contract 24 a. System Upgrades and CPS Price Cap Increases i. Terms of the Social Contract25 ii. Comments 28 iii. Discussion 31 b. Equipment and Installation Averaging i. Terms of the Social ContractV ii. Comments 38 iii. Discussion 40 C. Resolution of Pending Cases i. Terms of the Social Contract42 ii. Comments 43 iii. Discussion 45 d. Lifeline Basic Tier Rates i. Terms of the Social Contract52 ii. Comments 54 iii. Discussion 56 e. Migrated Product Tier i. Terms of the Social Contract59 ii. Comments 62 iii. Discussion 63 f. Services to Schools i. Terms of the Social Contract65 ii. Comments 68 iii. Discussion 71 g. Home Wiring . i. Terms of the Social Contract74 ii. Comments 75 M. Discussion 76 h. System Acquisitions and Divestitures i. Terms of Social Contract 77 ii. Comments 78 iii. Discussion 79 i. Nodification and Termination Provisions i. Teams of the Social Contract8l ii. Comments 83 iii. Discussion 84 j. Preemption i. Terms of the Social Contract85 ii. Comments 86 iii. Discussion 87 k. Other Issues 88 IV. Conclusion and Ordering Clauses 92 1. INTRODUCTION 1. Time Warner Cable (Time Warner) and the Federal Communications Commission ("Commission") have negotiated a Social Contract designed to provide upgrade incentives for Time Warner and to provide rate stability and increased quality of service for its consumers. In addition, the Social Contract resolves over 900 rate cases and provides refunds of approximately $4.7 million plus interest to subscribers. In this order we approve the Time Warner Social Contract ("Social Contract"), which is attached as Appendix A. The proposed Social Contract was placed on Public Notice and comment periods were established. The Commission received both initial and reply comments. II. BACKGROUND 2. In the Cable Television Consumer Protection and Competition Act of 1992 ("1992 Cable Act"), Congress set as one of its policy goals to ensure that cable operators continue to expand the capacity and programs offered over their systems, where economically viable. In implementation of Sections of the Cable Television Consumer Protection and Competition Act of 1992: Rate Regulation, MM Docket No. 93-215, Report and Order and Further Notice of Proposed Rutemeking ("Cost Order") establishing interim regulations for cost of service filings, we adopted an upgrade incentive plan on an experimental basis. We noted that the basic outline of this approach would be "to permit an operator to enter into a social contract with its customers under which the operator would be given substantial flexibility in setting rates for new regulated services it introduces, such as new service tiers offering additional program channels. In exchange, customers would be guaranteed that rates for current services would be kept stable and reasonable, . and that this rate would purchase at least the same program channels, or channels of equivalent value to customers. The operator would also commit to otherwise maintaining or improving its service quality. The contract would be effective for a term of years and would be overseen by this Commission, and reviewed before the end of the term." We also noted that this plan "protects the rates and quality of current cable service tiers, while providing profit incentives for operators to introduce new and improved regulated services, may help carry out the purposes of the Cable Act while also being fair to customers of current services, less burdensome on cable operators and those responsible for their regulation, and more likely to encourage worthwhile investments to upgrade cable service." We recently have approved such a social contract with Continental Coblevision, Inc. (the "Continental Contract"). The Continental Contract was approved by the Commission in an Order adopted on August 1, 1995. 3. On Nay 4, 1995, pursuant to special ex parte procedures available in certain cable rate proceedings, Time Warner requested relaxed ex parte treatment to enable it to discuss broad rate related matters with Commission officials. The Bureau orally approved this request on Nay 16, 1995. Consistent with these ex parte procedures the Cable Services Bureau ('Bureau") and Time Warner negotiated the terms of the Social Contract. On August 3, 1995, the Commission approved the release of the draft of the Social Contract for public comment. 4. The Commission has reviewed and considered the comments it received in approving the terms and conditions of the Social Contract and making modifications to it. A. Overview of the Social Contract 5. The Social Contract is for a term of five years. From 1995 through 2000, Time Warner is required to invest S4 billion to rebuild and upgrade all of its domestic cable systems, including deployment of fiber optic technology, increased channel capacity and improved system reliability and signal quality. At least 60% of all capital expended in connection with the upgrade commitment will be applied for the benefit of basic service tier ("BST") and cable programming service tier ("CPST") subscribers. In addition, at least 60% of the new analog capacity added as a result of the upgrade will be used for traditionally regulated CPSTs, and, on average, traditionally regulated CPSTs on the upgraded systems will have at least 15 additional channels. To fund this investment, Time Warner will be allowed to increase the monthly rate for the most highly penetrated CPST in each system by $1 during each year of the Social Contract. If Time Warner fails to meet the upgrade commitment within the time provided for under the Social Contract, subscribers to the cable systems that have not been upgraded will be entitled to refunds equal to the CPST rate increases provided by the Social Contract, with interest, plus a liquidated damages penalty of 15% of such amount. The Social Contract contains a provision that allows Time Warner to average broad categories of equipment and installation and associated costs for all of its systems on a geographic regional basis. 6. The Social Contract will resolve Time Warner's pending CPST cases, including CPST cases against the systems Time Warner recently acquired from Houston Industries, Inc. (KBLCOM) and Newhouse Broadcasting Corporation. Altogether this resolves 946 complaints. To resolve these cases, Time Warner will make cash refunds in the form of bill credits to certain customers totalling approximately $4.7 million plus interest for the period beginning on the date of the applicable complaint and ending with the date of payment. Time Warner cannot implement any rate adjustment for the upgrade of a particular system unless the refund provided for under the Social Contract has been issued to such system or the issuance of the refund begins simultaneously with such rate adjustment. All refunds must be issued within six months of the first rate adjustment implemented with respect to the upgrade for the Tim Warner systems. BST cases will not be resolved by the Social Contract. Those cases will continue to be resolved by Time Warner and the local franchising authorities pursuant to Commission rules. 7. Time Warner will create a "lifeline basic tier," priced to enhance the affordability of BST. Time Warner will accomplish this in two ways. First, on systems serving at least 85% of its total subscribers, Time Warner will reduce the price on its BST by 10% within six months of the effective date of the Social Contract, with a revenue neutral increase in CPST rates. Local franchising authorities may elect not to have this reduction by notifying Time Warner and the Commission in writing within 45 days of the effective date of the Social Contract. Second, on the remaining systems where BST rates have not been reduced by 10%, The streamlined lifeline basic tiers will carry only those stations required bylaw, such as must-carry stations, public, educational and governmental ("PEG") stations, and local origination. Any additional channels will be moved from the BST to the CPST with a corresponding revenue neutral decrease in the price of the BST and increase in the CPST price. 8. Time Warner wilt offer a free cable connection to alt of the public schools located in the franchise areas where Time Warner provides cable service and that are passed by its systems. Time Warner also will provide a cable connection at cost to all secondary private schools whose students receive funding under Title I of the Education and Secondary School Act in such franchises that are passed by its systems. Time Warner wilt wire additional classrooms in existing schools at cost. For new public schools and existing public schools undergoing extensive rehabilitation, Time Warner wilt coordinate with the local officials and contractors to wire each of the classrooms in new schools free of charge, if Time Warner is notified of construction. BST and CPST will be provided to each outlet in the connected public and private schools without cost. Time Warner will also provide the connected schools with a monthly educational program guide with curriculum support ideas to assist educators in effectively using the new services. In addition, Time Warner and Time Inc. are developing an on-line personal computer service. Once this service has been developed and test-marketed, Time Warner wilt offer this service to each connected school in areas in which the service is generally offered, free of charge, during the school year and will also provide a free modem to access the service. Time Warner will provide schools with additional modems at cost and will provide free service to each additional modem purchased. Time Warner also will sponsor workshops and materials so that teachers have the training necessary to appropriately use the services provided. 9. The Social Contract further provides that, in Time Warner systems where neither Time Warner nor its predecessors have created a la carte packages, Time Warner will be permitted to create Migrated Product Tiers ("MPTs"), consisting of up to four services migrated from the regulated tiers. The migrated channels will be priced at the rate regulated price with increases allowed for inflation and external costs in accordance with the Commission's price cap rules. There will be no limitation on the number of new channels that Time Warner may add to the MPTs at the price of up to 5.20 per channel plus license fees. After April 1, 1997, Time Warner may convert any MPT into a new product tier. ("NPT"), as defined by Implementation of Sections of the Cable Television Consumer Protection and Competition Act of 1992: Rate Regulation, MM Nos. 92-266, 92-215, Sixth Order On Reconsideration, Fifth Report And Order, and Seventh Notice of Proposed Rule Making, ("Going Forward") provided that the tier is offered without a buy-through requirement other than BST. 10. Finally, during the term of the Social Contract, Time Warner will forego its right to use a cost of service justification to support any future rate increases in any franchise area covered by the Social Contract. The Social Contract requires that no later than 90 days following the end of each calendar year during which the Social Contract is in effect, and within 90 days following the end of the last month following expiration of the Social Contract other than calendar year end, Time Warner will provide the Commission and each local franchising authority having jurisdiction over an area covered by the Social Contract with a progress report outtining the amount of capital investments made, the number of subscribers affected by those investments, improvements in system reliability and service, and projected expenditure and upgrades for the following year. 11. The Social Contract may not be modified or terminated without the mutual agreement of both parties to the Social.Contract. Time Warner may petition the Commission to modify or terminate the Social Contract based on any relevant change in applicable laws, regulations or circumstances. In addition, in the event of any changes to the provisions of the 1992 Cable Act or any material changes to the Commission's rules thereunder relating to rates (BST, CPST or equipment) that are favorable to Time Warner, any Time Warner system may elect to be relieved from the relevant rate provisions in the Social Contract, but shall remain bound by all other provisions of the Social Contract. 12. We believe that the Social Contract is consistent with the goals for upgrade incentive plans which were outlined in the Cost Order. The Social Contract benefits subscribers by assuring reasonable and stable rates in all Time Warner systems, improving service offerings and picture quality with state of the art technology, increasing consumer choice by lifeline basic tier pricing and elimination of buy-through requirements, and providing refunds to customers. The Social Contract further benefits subscribers through Time Warner's agreement not to restrict subscribers' ability to remove, replace, or rearrange wiring so long as it does not interfere with TWC's ability to provide services and collect revenues from that subscriber or other subscribers in a multiple dwelling. Local franchising authorities benefit from the opportunity to assist elderly, low income, and basic only subscribers with the lifeline basic pricing. In addition, the Social Contract will reduce the administrative burden and cost of regulation for Time Warner, local governments, and the Commission. The Social Contract also provides a significant public benefit to all public schools and certain private secondary schools that are located within Time Warner franchise areas and passed by its systems. 13. The Social Contract will permit a rate structure that will allow Time Warner to focus on its tong-term strategic planning and growth, having resolved its outstanding rate complaints. Local franchising authorities will retain their right to regulate rates for basic service, their right to negotiate upgrades and other benefits for their individual franchises, and their ability to comment and participate on any changes in this Social Contract that would affect their localities. The Social Contract ensures that the rights of local franchise authorities and subscribers to seek redress at the Commission will be preserved. III. DISCUSSION A. Waiver 14. Upgrade Incentive Plans represent an alternative to the Commission's usual procedures for resolving rate complaints against cable operators. Indeed, the Commission recognized in the Cost Order the experimental nature of this type of social contract. There are several aspects of the Social Contract that do not conform precisely to the Commission's rate regulation rules or to the stated experimental Upgrade Incentive Plan outlined in the Cost Order. We believe that the Social Contract furthers the Commission's policy goals of ensuring that cable operators expand the capacity and programs offered over their systems where economically viable, and reducing regulatory burdens while still ensuring that cable rates are reasonable. As a result, we conclude that special circumstances warrant a deviation from our generally applicable rules and that waiver of certain of the Commission's rules is in the public interest. 15. In particular, Time Warner seeks a waiver of ^U 76.923 to allow equipment cost averaging. This section of the rules sets forth the methodology for determining the rates for equipment and installation used to receive BST service. The intended purpose of the section is to ensure that equipment is charged at cost and that all BST subscribers pay for the equipment. Waiver of this provision to enable Time Warner to average equipment costs on a regional basis is consistent with the purpose of ^U76.923 because equipment will continue to be charged at cost; this cost will be spread across all subscribers in a region, rather than a franchise area. 16. Time Warner also seeks a waiver of ^U 76.961(e), which requires local franchising authorities to reimburse Time Warner for CPST franchise fees that were based on CPST charges that are being refunded to subscribers. Time Warner has agreed to waive its right to reimbursement by the franchising authorities; thus, this waiver provides a benefit to the local franchising authority and subscribers, and we see no reason to deny it. Time Warner also seeks a waiver of ^U^U 76.309(c)(i)(6) and 76.964 on a one-time basis to allow Time Warner to add service and change tine-ups on less than 30 days' notice. 17. Time Warner seeks a one-time waiver of ^U 76.933 to allow it to implement rate and service restructuring and annual rate adjustments to the BST and the CPST on 30 days' notice, or less, subject to refunds and subject to the further condition that, if a local franchising authority exercises the opt-out provision after Time Warner commences implementation of the January 1, 1996 rate and service restructuring and adjustment, Time Warner will restore the 10% reduction in the BST rate in the next billing cycle (i.e. the difference between the new rate and the rate charged under the Social Contract, if a subscriber cancels service during the first month of implementation of the Social Contract). These provisions set forth customer service standards to ensure, ammong other things, that customers have adequate notice of changes in their service and time to cancel services. The Social Contract further provides that if any subscriber cancels its subscription to the relevant CPST within 30 days after the date of the first bill reflecting the CPST adjustment authorized by the Social Contract, Time Warner will issue a refund to that subscriber for the incremental amount attributable to such increase. 18. We understand the need for a waiver of these provisions if Time Warner is to implement the necessary changes by January 1, 1996. These waivers are on a one-time basis only. Subscribers will be protected if the local franchising authority opts out of the creation of a lifeline basic tier, or if subscribers choose not to receive the restructured service. We conclude that a waiver of these provisions is not inconsistent with the purposes of the provisions. 19. In addition, Time Warner seeks waivers of various Commission rules that it states are necessary to effectuate the terms of the Social Contract. At the core of the Social Contract is the upgrade incentive plan whereby Time Warner will rebuild and upgrade all of its domestic cable systems and in turn will be allowed to recover the costs of the upgrade over time by adding a charge to the highest penetrated CPST during the years of the Social Contract. Consequently, Time Warner seeks a waiver of ^U^U 76.922 and 76.933 to allow Time Warner to recover the CPST rate increase for the upgrade in lieu of the methodology provided under our Going Forward rules. Time Warner also seeks to waive: 1) ^U 76. 960, requiring that prior approval be sought for rate increases for one year after CPST rate reduction under ^U 76. 933; 2) ^U^U 76.922(b),,76.930, and 76.956, to allow Time Warner to use a one-time restructuring form in situations where systems become newly regulated; and 3) ^U 76.922 to allow revenue neutral, pro-rata adjustments rather than adjustments to the maximum permitted rate less previous external costs ("residual rate") where the lifeline tier and/or an MPT are created in accordance with the Social Contract terms. We believe that the Social Contract provides significant overall benefits and that the waiver of these provisions is not inconsistent with the purposes of the provisions and such waiver is in the public interest. Accordingly, we hereby find good cause to waive these provisions of the Commission's rules necessary to effectuate the terms of the Social Contract. B. Preemption of State and Local Notice Requirements 20. Time Warner asked the Commission to preempt, on a one-time basis, those local franchise rules that require advance notice of rates and service charges to subscribers in connection with its initial implementation of the Social Contract. Time Warner asserts that it will otherwise be unable to comply with the January 1, 1996 rate restructuring date contained in the Social Contract and to fulfill 60 or 90 day local notice requirements. 21. We believe that preemption is appropriate in this case as the state and local notice requirements way hinder Time Warner's ability to implement rate adjustments uniformly pursuant to the terms of the Social Contract by January 1, 1996. Preemption generally is held to be appropriate in cases such as this one where the local law conflicts with agency regulation or frustrates the purposes of the regulation. Indeed, many of the goals regarding upgrade incentive plans outlined in the Cost Order, and met in this Social Contract, could not be achieved if implementation of rate restructuring does not occur by January 1, 1996. For example, many of the programming cost increases occur on January 1 of each year. As such, Time Warner would seek to adjust its rates to account for these increased costs as provided for under our rules. in order to achieve the Social Contract's goal of having a one time rate adjustment, and thus provide rate stability to subscribers, it is essential that Time Warner implement the upgrade surcharge provided for under the Social Contract by January 1, 1996. 22. We further believe that prompt implementation of the Social Contract best serves the public interest. Thus, to allow Time Warner to implement the rate restructuring and MPT provisions of the Social Contract, any Local franchise agreement or any state or local law or regulation is preempted on a one-time basis to the extent that it requires Time Warner to give greater than 30 days advance notice of rate and service changes to subscribers. Such preemption shall be limited to the period prior to February 1, 1996. if Time Warner is unable to commence implementation of such refunds and rate adjustments by January 1, 1996, but commences such implementation between the period January 1, 1996 and February 1, 1996, it shall provide at least 30 days' notice to local franchising authorities and subscribers. 23. The Social Contract further provides that if any subscriber cancels its subscription to the relevant CPST within 30 days after the date of the first bill reflecting the CPST adjustment authorized by the Social Contract, Time Warner will issue a refund to that subscriber for the incremental amount attributable to such increase. Accordingly, the preemption of state and local notice requirements and the waiver of Commission notice comments will not injure subscribers. C. Provisions of the Social Contract 24. The Commission received numerous comments on several terms of the proposed Social Contract. This section addresses the concerns of the commenters and sets forth modifications to the proposed Social Contract. a. System Upgrades and CPS Price Cap increases (i) Terms of the Social Contract 25. The Social Contract provides for an investment of $4 billion over a five year period to upgrade all of Time Warner's systems. As part of this investment, each'Time Warner system will have a minimum bandwidth capacity of 550 MHz and at least 50% of Time Warner's subscribers will have access to a minimum bandwidth capacity of 750 MHz. In the 750 MHz systems, at least 200 MHz is expected to be used for digital distribution. All Time Warner systems will be deployed to include fiber to the node architecture, which will improve signal quality and reliability for all subscribers. Time Warner's ability to correct outages in a more timely mercer will also be improved through the use of telemetry to locate problems within the system. 26. To fund this investment, Time Warner will be permitted to increase the monthly rate for the most highly penetrated CPST in each of its systems by 51.00 during each year of the Social Contract. Further, this increase will serve as the only increase on the CPST with the exception of revenue-neutral adjustments provided elsewhere in the Social Contract and adjustments for inflation and external costs permitted under the Commission rules. For the term of this contract, Time Warner waives its right to increase its CPST rates pursuant to the Commission's Going Forward rules. Moreover,, Time Warner will add 60% of all new analog services to the CPST offered without any further increase in rates beyond the $1.00 per year permitted by the Social Contract. This will equal an average of 15 new channels to the CPSTs on Time Warner systems. Additionally, 60% of the capital cost of the upgrade will be used for regulated purposes. Time Warner waives its right to file a cost of service showing to justify any rate increases during the term of the Social Contract. 27. The Social Contract mandates that Time Warner's investment in the upgrade of its system will be conducted without discrimination based on the socio-economic status of Time Warner's subscribers. if Time Warner fails to upgrade all of its systems as prescribed in the Social Contract, Time Warner will provide refunds (in the form of bill credits) to all subscribers not receiving the upgraded service. The refunds will equal the amount of the total surcharge levied on each subscriber plus interest and a 15% liquidated damages penalty on the refund amount. (i i ) Comments 28. Most commenters express support for the system upgrades, maintaining that subscribers will benefit from more advanced technology, access to the information 0 superhighway, and improved picture quality. For example, Kern County, California states 10 that Time Warner will bring information superhighway services to a "vast number of its residents", a substantial number of whom "are underserved and Live in rural areas." Many commenters support Time Warner's plan to phase in rate adjustments over a five year period because it spreads the costs over a period of time and provides for rate certainty. 29. Many commenters did not oppose the concept of the system upgrade but . nevertheless raised various objections to provisions in the Social Contract. Some commenters claim that the upgrade would be required in any event either because of the efforts of local franchising authorities or competitive requirements. Other commenters claim either that too much or too Little of the upgrade is to be dedicated to digital services and that those jurisdictions which had already required upgrades will be disadvantaged vis-a-vis those jurisdictions that previously did not require upgrades. Some commenters oppose any CPST rate increase that exceeds the Limits of the Commission's Going Forward rules. First; these commenters claim that the rate increase: 1) should be limited to the amount of the Going Forward increase which Tim Warner could have received during the same period, 2) should not cover the cost of new services which customers have not requested, 3) should not be required for an upgrade which is a settlement concession, or 4) should not include external costs). Second, these commenters claim that the Commission's cost-of-service rulings require that the rate increase not be implemented before the upgrade is in service. Finally, some of these commenters state that the rate increase will require users of regulated cable services to subsidize other Time Warner services. Ameritech New Media Enterprises, Inc., Bell Atlantic Telephone Companies and Cincinnati Bell Telephone Company contend that Time Warner will use the revenues from the rate increases to enter the local telephone market. In particular, these companies propose that Time Warner: 1) account for the costs of the upgrade so that those costs can be properly allocated; 2) file an application for a certificate of public convenience and necessity under Section 214 of the Communications Act; and 3) be required to adhere to the rules applicable to telephone companies on cost accounting, cost allocation, depreciation, transactions with affiliates, and joint marketing of services. The City of Gardena raises a question as to whether system upgrades required by franchising authorities could be passed through to subscribers along with the upgrades required by the Social Contract. Finally, some commenters raise questions as to the implementation of the rate increase, and some have misconceptions about the meaning of language in the Social Contract. For example, one community inquired as to how the rate increase will relate to the increase in the CPST to offset the BST rate reduction. 30. In its reply comments, Time Warner contends that the Social Contract requires all communities it serves to have upgrade benefits. Time Warner further maintains that, even where Time Warner already is committed to making upgrades, the Social Contract provides a firm completion deadline and a federally-enforceable upgrade commitment with meaningful penalties. Time Warner denies that its rate increase includes the cost of any equipment needed to provide telephone service, such as telephone switches, and further contends that the Commission has carefully reviewed Time Warner's costs to preclude cross-subsidies. Time Warner states that it believes that it has accomplished the goal of undertaking only those upgrades that are economically justified and best meet customer needs in the most efficient manner possible. According to Time Warner, the purpose of the upgrade is to improve reliability and picture quality, and to allow increased system addressability and interactive capability. Time Warner also argues that phasing in the cost of the upgrade, as provided under the Social Contract, provides predictable, though modest, rate increases, avoiding rate shock. Time Warner states that subscribers.wdll benefit because spreading the cost over five years is preferable to paying one Large sun once the upgrade is completed. To the extent that commenters argue that the rate increases will exceed the amount allowed by the Going Forward rules, Time Warner argues that those rules provide an incentive to add programming services, not an incentive to add capital for the upgrade of channel capacity. Time Warner also notes that it has agreed to waive any right it may have to take any future increases under the Going Forward rules as of the effective date of the Social Contract. Finally, Time Warner maintains that it has no intention of passing through the cost of any local franchising upgrade requirement that does not exceed the requirements in the Social Contract. (iii) Discussion 31. The majority of the commenters have expressed support for the provision of the Social Contract that requires Time Warner to invest $4 billion to rebuild and upgrade Time Warner's cable systems. The commenters support the deployment of advanced technology and improved picture quality. They also support Time Warner's plan to phase in the payments over a five year period to avoid rate shock. 32. We find that the upgrade provision of the Social Contract represents a valuable benefit to subscribers in terms of advanced technology, improved reliability and picture quality, and increased programming choices. Further, we conclude that phasing in the cost of the upgrade, in contrast to a one-time increase when the upgrade is completed, is preferable because it provides predictable rate increases, avoiding rate shock. 33. While Time Warner may have chosen voluntarily to upgrade or have been required by local franchising authorities to upgrade some sections of its system, the Social Contract binds Time Warner Cable to continue to make significant upgrades throughout its systems. Those local franchising authorities that have negotiated upgrade benefits will not be disadvantaged. The Social Contract makes clear that local franchising authorities can enforce local franchise agreements or negotiate future agreements which provide for upgrade benefits exceeding the upgrade benefits of the Social Contract. Section 111. J. 2. a. states that "[n]othing herein shall affect the enforceability of any otherwise valid preexisting local franchise agreement, ordinance, local law or regulation which provides benefits which exceed those provided in this Contract relating to system upgrades or the wiring of schools, nor shall local franchising authorities be restricted in their authority to negotiate for such additional benefits after the Effective Date of this Contract." Further, Time Warner has agreed to modify the Social Contract to make clear that, except in those situations where a local franchising authority places upgrade requirements on Time Warner that exceed the requirements of the Social Contract, Time Warner will not seek to pass through any capital costs (other than the surcharge provided under the Social Contract) to the subscribers. 34. The upgrade provision embodies a balance between a guarantee of an average of 15 new analog channels to benefit CPST subscribers and the initiation of digital distribution technology, which will expand the capacity of Time Warner to add programming and improve picture quality. As noted in the Social Contract, Time Warner agrees that at least 60% of all capital expended in connection with the upgrade commitment described in the Social Contract wilt be applied for the benefit of BST and CPST subscribers. The Commission does not believe that it is in the public interest for it to determine how much digital and analog capacity Time Warner should use for particular programs and markets, since such a requirement might limit the economic feasibility of the upgrade. However, we point out that Time Warner may use digital capacity for the benefit of regulated services. 35. We are mindful of the concerns expressed by some.commenters that the rate increases may be used to pay for Time Warner's plans to provide competitive services. We have examined Time Warner's cost data and believe that the costs of the upgrade are reasonable and necessary and that Time Warner has fairly allocated the costs of the upgrade between its current regulated and non-regulated operations. Further, Time Warner has agreed to a modification to the Social Contract which provides that the amount of the capital costs of the upgrade that will be recovered in the rate increases on regulated services will be applied for the benefit of regulated BST and CPST subscribers during the period of the Social Contract. The Commission also has the authority under the Social Contract to audit Time Warner's books and records and to interview Time Warner corporate employees to ensure compliance with this amendment. Indeed, if it is determined that Time Warner has not complied with the obligations under the Social Contract, we may exercise any of the rights and remedies which are attendant to violations of a Commission order. Under these circumstances, we find it unnecessary to adopt the suggestion of several telephone companies that Time Warner be required to comply with the rules applicable to telephone companies. 36. The contention that the upgrade increases will exceed the amount permitted under the Going Forward Order is misplaced. The Going Forward order was intended to be an incentive for operators to add a small number of cable channels to existing systems. The increases under the Social Contract, on the other hand, are intended to enable Time Warner to undertake a major system upgrade, which will modernize facilities to provide improved quality and efficiency and to add new tiers of services and new types of services. Consequently, the rate increases are not primarily being paid for new services, but for improved quality of services as a result of modernization. The Social Contract does not change the requirements of the Commission's rules governing the pass-through of external costs and inflation. Finally, the Social Contract provides that the upgrade rate increase is to be assessed annually on all CPST subscribers, in addition to any amount necessary to offset the 10% BST rate reduction. b. Equipment and Installation Averaging M Terms of the Social Contract 37. Under the Social Contract, Time Warner will be permitted to establish a blended average regional rate for the equipment basket categories of hourly service charge, installations, remote control devices, addressable converters, non-addressable converters, other leased equipment, and customer tier changes. The geographic regions used for averaging are shown on Appendix B of the Social Contract and essentially correspond with the Areas of Dominant Influence ("ADIs") served by Time Warner. Regional averaging wilt be accomplished by the filing of a Form 1205 Equipment Form or its equivalent with the Commission on an annual basis beginning no sooner than December 1, 1995. Time Warner may begin charging revised equipment rates upon 30 days' notice to the Commission subject to a refund pursuant to Commission rules. The local franchising authorities will be responsible for reviewing the rates charged to ensure consistency with the rates approved by the Commission. If Time Warner charges rates in excess of those permitted by the Commission, the local franchising authority may order a refund. (ii) Comments 38. Commenters who support the equipment and installation averaging contend that it will streamline the process for review of these rates. On the other hand, some local franchising authorities claim that both Commission regulation of equipment rates and averaging of equipment rates violate the 1992 Cable Act. Other local franchising authorities raise specific questions about blending, including whether blended rates will track costs, whether there will be different rates for different types of equipment, whether addressable converters wilt be subsidizing non-addressable converters, whether the geographic regions are appropriate for blending, the effect blending will have on the level of rates, and how the Commission and the local franchising authorities will work together under the blending proposal. 39. In its reply comments, Time Warner notes that, in the Continental Contract Order, we granted a waiver to permit Continental to aggregate equipment and installation costs on a state or regional basis. Time Warner notes that we granted this waiver because it was our belief that equipment averaging will serve the objectives of the upgrade Incentive Plan and mitt minimize drastic increases in rates for subscribers as upgrades take place. Time Warner contends that because the Social Contract has a similar equipment averaging provision, the rationale in the Continental Contract Order applies here. Time Warner states that it would be willing to establish separate charges for addressable and non-addressable converters, due to specific concerns raised regarding converters. Time Warner further explains that, in those situations where any local franchising authority is still reviewing a Form 1205, the process will continue under local franchising authority jurisdiction. According to Time Warner, after the effective date of the Social Contract, the Commission will review future equipment rates, but the local franchising authority may order roll-becks and refunds of any rate in excess of that approved by the Commission, subject to the normal Commission appeal process. (iii) Discussion 40. We believe that a waiver of our rules to allow Time Warner to average broad categories of equipment and various installation costs for all of its systems on a regional basis is in the public interest. As in the case of the Continental Contract, we conclude that equipment averaging will minimize drastic increases in rates for subscribers as upgrades take place and will reduce the administrative burdens on Time Warner to prepare rates on a franchise by franchise basis. While the rates for particular franchise areas may change, the overall impact will be revenue neutral. We conclude that the geographical regions established in the Social Contract are appropriate because they reflect Time Warners regional cost centers and therefore would simplify cost tracking. We do note, however, a concern raised by commenters that addressable converters wilt be subsidizing non-addressable converters. To address this concern, Time Warner has agreed to a modification to the Social Contract which provides that the prices of addressable and non-addressable converters will be separately established. 41. We conclude that this provision of the Social Contract does not violate any provision of the 1992 Cable Act. As we recognized in the Continental Contract Order, the 1992 Cable Act does not mandate the level at which equipment and installation rates are established, i.e. the franchise, system, regional or company level. Rather, Congress specified that the rates must be based on actual cost. This provision in the Social Contract is consistent with the 1992 Cable Act's directive that the Commission establish standards by which local franchising authorities establish rates for installation and equipment used to receive basic service. We will review new regional rates submitted by Time Warner for compliance with the requirement that they be true regional averages of the local equipment and installation costs. Notice of our decisions will be provided to local franchising authorities. Through refuels or rate roll-backs, the local franchising authorities will continue to enforce the requirement that Time Warner charge equipment and installation rates which comply with our standards. c. Resolution of Pending Cases (i) Terms of the Social Contract 42. lMder the Social Contract, Time Warner will settle its existing benchmark CPST cases. Time Warner is required to provide refunds of approximately $4.7 million to customers in the franchise areas shown in Appendix A of the Social Contract. Refunds wilt continue to accrue interest until the date that the refunds are actually paid. Time Warner is also precluded from making any rate adjustment allowed under the Social Contract prior to the time such refunds are made to affected subscribers. The refunds were determined based upon the Commission's review of Time Warner's rate justifications for the CPST where a complaint had been filed. Pending cases justifying rates for the BST will continue to be resolved with the local franchising authorities. (ii) Comments 43. Numerous commenters expressed support for the resolution of the pending Time Warner rate cases in the Social Contract as a way to avoid litigation expenses and to conserve resources. However, a number of local franchising authorities raised concerns regarding the settlement of the rate cases in this Social Contract. Among the concerns, some local franchising authorities contended that complainants have the statutory right to have their complaints adjudicated individually on the record, that the Commission violated its own ex parte rules, and that the Commission's proposed procedures for social contracts were not followed. Others argued that the local franchising authorities should receive refunds and punitive damages, and that the refunds should be paid earlier than provided for under the Social Contract. Further, the City of St. Petersburg expressed co(cern that there was no finding of wrongdoing and that the refund amounts can be recovered by Time Warner's price cap and other increases allowed under the Social Contract. Some local franchising authorities contend that the finding that the Time Warner rates are reasonable will result in rate increases in the BST rates. 44. In its reply comments, Time Warner states that the Commission has stated a general policy "to make every effort possible to resolve appropriate disputes through mediation, arbitration, settlement negotiation, negotiated Rule Making and other means of dispute resolution." Citing the Rate Order, Time Warner further contends that the Commission has advocated the use of alternative dispute resolution techniques to decide cable rate cases. Time Warner further contends that each complaint has in fact been reviewed on an individual basis, and that the resolution of the complaints in this Social Contract will result in immediate bill credits to subscribers in contrast to the delay that will result if each case is individually litigated. In reply to the City of St. Petersburg, Time Warner states that findings of no wrongdoing are necessary to give operators the incentive to enter into social contracts, and that here there is no evidence of wrongdoing. Time Warner further states that the ability of Time Warner to recover its future costs under the price cap provision is irrelevant to refunds for past overcharges. Finally, in response to comments that the Commission's ex parte rules and other social contract procedures were not followed, Time Warner first notes that the commenters fail to specify which particular provisions of the Commission's ex parte rules have been violated. In any event, Time Warner states that it has followed the same procedure as the Commission approved with respect to the Continental Contract, i.e., it has made an initial proposal to the Commission, including an outline of its objectives. Time Warner notes that in the Continental Contract Order, the Commission waived its requirement that a company's initial proposal for an upgrade incentive plan include statements from affected local franchising authorities because there are "significant number of franchises with diverse interests and concerns". Time Warner argues that given the number of commenters and affected franchising authorities in this case, waiver of this requirement is even more applicable here. Time Warner further notes that the social contract negotiation procedures followed here were announced in the Commission's Cable Ex Parte Order and that consistent with that Order, (and similar to the case with the Continental Contract), all interested parties have had an opportunity to comment on the Social Contract. (iii) Discussion 45. We conclude that proper procedures were followed with respect to the Social Contract. As an initial matter, we address the comments regarding the resolution of the rate complaints as part of the Social Contract. We note that the 1992 Cable Act provides the Commission with broad discretion to resolve cable rate complaints. The 1992 Cable Act directs the Commission to create "fair and expeditious procedures for the receipt, consideration, and resolution of complaints." Under the 1992 Cable Act, the Commission also is charged with establishing "the procedures to be used to reduce rates for cable programming services that are determined by the Commission to be unreasonable and to refund such portion of the rates or charges that were paid by subscribers after the filing of such complaint and that are determined to be unreasonable. Pursuant to these statutory provisions, the Commission adopted rules providing for the use of social contracts as one method of setting cable rates. We believe that the broad language of Congress' mandate allows the Commission to choose the procedures used to resolve complaints. We further believe that Congress' desire to simplify cable rate regulation supports the adoption of the most expeditious means of resolving complaints that will afford adequate protection for the subscribers. Contrary to the claims of some commenters, there is no statutory requirement that each rate complaint be individually adjudicated. Rather, the Commission is required to establish procedures to resolve rate complaints and to provide refunds of excessive charges. A social contract is one such procedure. 46. We find that the rates provided for in the Social Contract are reasonable. Although past rates are not found to be unreasonable, the Social Contract provides for refunds of amounts paid in excess of rates we find in this order to be reasonable. Those rates were arrived at after making certain adjustments claimed by Time Warner and after factoring in the public interest benefit to consumers of prompt, certain relief. Moreover, although we do not rule on the merits of each of Time Warner's claims, we believe that it is fully consistent with the 1992 Cable Act to consider the benefits of avoiding the delays and uncertainty of litigation in setting rates within the range of reasonableness. Further, we believe that it is fully consistent with the 1992 Cable Act, as well as the social contract rules, to consider upgrades and other improvements in service as part of a determination of what constitutes a reasonable rate. Finally, we do not believe that deviation from our usual practice of requiring refunds to subscribers and instead requiring refunds and punitive damages to local franchising authorities is warranted. Our rules provide for refunds to subscribers and do not provide for punitive damages in any case. Further, we do not believe that six months is an unreasonable period for Time Warner to make refunds, in view of the implementation and billing problems involved in a nationwide settlement. Thus, we conclude that the Commission has the authority to resolve rate complaints in the manner embodied in the Social Contract. 47. In the Cable Ex Parte Order, we noted that "Ev)arious cable television system operators have made presentations to the Commission on issues relating to the Commission's cable television rate regulations. These communications have generally been in the nature and context of broad policy discussions regarding the rules as well as the future application of the rules to the operators, but frequently also have focused on the specific economic situation and future prospects of a particular company." We held that relaxed ex parte rules are applicable to such discussions "that are general in nature although they potentially implicate specific pending rate proceedings." These are the very type of discussions that occurred here. A party wishing to take advantage of the modified ex parte procedures must: 1) submit to the Cable Services Bureau a written request to meet and, if applicable, a request for relaxed ex parte treatment; 2) receive Bureau approval to meet and, approval of the relaxed treatment; and 3) in the event of the development of a specific company-wide proposal or proposed resolution, serve all parties to each affected pending rate complaint and/or appeal proceeding with the final version of the proposal or proposed resolution. The Cable Ex Parte Order states that "the Commission will take no action based on any such proposal or proposed resolution without it having first been served on all parties to each affected pending rate compliant and appeal proceeding and without providing not less than thirty days for comment." 48. We conclude that these requirements were complied with here. on May 4, 1995 Time Warner made the necessary written request for application of relaxed ex parte rules in order to engage in general discussions. This request was subsequently granted by the Cable Services Bureau. All complainants and affected local franchising authorities were served with a copy of the proposed Social Contract and given 40 days to comment. These comments have been reviewed and considered by the Commission and, in many instances, have resulted in changes to the Social Contract. The Commission's ex parte procedures set forth in the Cable Ex Parte Order have been fully complied with as to the Social Contract. 49. We further address those comments that the Social Contract procedures set forth in the Cost Order were not followed. In the Cost Order, the Commission stated that it would consider upgrade proposals and directed any interested cable operator to "submit a proposal . . accompanied by a written statement by any certified franchising authority with jurisdiction over cable systems affected by the plan of its views concerning the proposed agreement." In the Continental Contract Order, we noted that "given that the initial proposal and subsequent negotiations affected a significant number of franchises with diverse interests and concerns, it is more efficient and has proven more practical for the Commission to negotiate the proposed Social Contract with Continental." In the Continental proceeding, we waived, on our own motion and for good cause shown, the requirement that at the time a proposal is made a statement be filed by the local franchising authority. However, consistent with the requirement in the Cable Ex Parte order, this waiver was conditioned on local franchising authorities and complainants being given the opportunity to express their views after the Public Notice was issued. We note here that there are significantly more local franchising authorities affected by the Social Contract than were affected by the Continental Contract and that these local franchising authorities likewise have diverse interests and concerns. We conclude that the rationale stated in the Continental Contract Order for waiving the requirement that statements from affected local franchising authorities be included in the proposal is applicable in this case. As noted above, the comment period and extensions have provided significant opportunity for local franchising authorities to express their views as to the Social Contract. We believe it is appropriate to waive, on our own motion and for good cause shown, the requirement in the Cost Order that a company's initial proposal for an upgrade incentive plan include statements from affected local franchising authorities. 50. The City of St. Peterburg's concern that there is no finding of wrongdoing is misplaced. One of the goats of the Social Contract is to resolve disputed issues without requiring the Commission to spend significant time and resources to make a finding of any wrongdoing as to these issues. We also note that the statement in the Social Contract finding that the CPST rates, other than those resolved in Appendix A to the Social Contract, are reasonable has no bearing on determinations by local franchising authorities as to the reasonableness of BST rates. Local franchising authorities may continue to make their own determination as to the reasonableness of BST rates without being bound by rates derived as a result of negotiations of the Social Contract. 51. Finally, under Sections 76.942(f) and 76.%1(e) of the Commission's rules, local franchising authorities are required to return to cable operators an amount equal to that portion of the franchise fee that was paid based on the total amount of refunds, when refunds are ordered by the local franchising authority or the Commission. We wish to clarify that local franchising authorities for Time Warner's systems are not required to return any portion of franchise fees collected from Tim Warner pursuant to the terms of the Social Contract. The Commission has not made a determination that Time Warner has imposed unreasonable rates on subscribers in the Social Contract. d. Lifeline Basic Tier Rates (i) Terms of the Social Contract 52. The Social Contract provides that Time Warner will create a "lifeline basic tier" priced to enhance the affordability of basic service. Time Warner will accomplish this in two ways. First, on systems serving at least 85% of its total subscribers, Time Warner wilt reduce the price of its BST by 10%, with a corresponding revenue neutral increase in CPST rates. In systems where Time Warner proposes to apply the 10% BST reduction, local franchising authorities may elect not to have this lifeline reduction by notifying Time Warner and the Commission in writing within 45 days of the effective date of the Social Contract.. Second, on the remaining systems, Time Warner will restructure the BST to create a lifeline type service consisting only of stations required by law to be carried on the BST. ALL other existing BST channels wilt be moved from the BST to a CPST with a corresponding revenue neutral decrease in the price of the BST and an increase in the CPST price. 53. Time Warner will not add any additional satellite channels to the BST for the term of this contract, except as required by law or regulation. Furthermore, in the event that the Commission's must-carry rules are rendered invalid, Time Warner may discontinue carriage of local broadcast stations but all local broadcast stations that it continues to carry must be carried on the BST. To the extent that Time Warner discontinues the carriage of any broadcast station, Time Warner may substitute any programming service in place of the discontinued station to maintain the size of the BST. This substitution is limited to an average of three services per system over alt Time Warner systems and five services for any individual Time Warner system. The Social Contract provides that these substitutions only will affect BST rates and only to the extent there are changes in external programming charges to Time Warner. 0i) Comments 54. Most commenters support the creation of a lifeline BST because low cable rates are essential to various groups including the elderly and Low-income persons. Of those commenters who expressed opposition, the concerns are: 1) a large number of CPST users will be supporting a low rate for a few BST-only subscribers; 2) BST is not important where the reception of broadcast television is clear; 3) local franchising authorities might prefer other benefits to the creation of a lifeline BST; and 4) the restructuring of the SSTs will enable Time Warner to remove important channels from BST and increase prices for services that previously were regulated. Commenters also raise various questions with respect to the creation of a lifeline basic tier. They question whether the Social Contract permits Time Warner to exclude 15% of its systems from the reduction in BST (in light of the Social Contract provision that at least 85% of Time Warner's systems mitt be changed to a tifeline basic). They ask whether the restrictions contained in the Social Contract precluding increases in BST rates and the number of BST channels should be changed (either because of the desire of a local franchising authority to make more extensive BST services available or the desirability of promoting low power television). They also raise concerns as to: 1) whether the reduction in BST channels will reduce franchise fees; 2) what effect a local franchising authorityes decision to opt out of the Lifeline BST provision will have; 3) whether the Commission wilt review the CPST rate increase that is me& to offset the BST price decrease; 4) why the discount is 10% instead of 15% as it was in the Continental Contract Order; and 5) whether the Social Contract should contain a date for completion of the restructuring of the BST. 55. In its reply comments, Time Warner contends that a low- priced BST was one of the goals of the 1992 Cable Act and, in connection with the continental Contract, the Commission approved that goal and its implementation with minimal cross-subsidization (between CPST and BST) in the creation of a lifeline basic tier. In addition, Time Warner contends that any local franchising authority that does not agree with the creation of a lifeline BST may opt-out of this provision of the Social Contract. Time Warner also contends that its right to determine the channels that it will include on the BST, other than must-carry stations, PEG access stations, and television broadcast stations except for superstations has been upheld by the Commission and the Court of Appeals for the District of Columbia Circuit. Time Warner states that a local franchising authority's decision to opt-out will alleviate the need to offset a BST rate reduction with a CPST rate increase, but otherwise will not affect the terms of the Social Contract. Finally, Time Warner explains that services retiered from the BST will not be unregulated, except for those services that are placed on an MPT in systems which are eligible for a new MPT under the Social Contract, and that all communities which do not opt out will receive the 10% rate reduction during the term of the Social Contract. (iii) Discussion 56. In the Continental Contract Order, we approved the creation of a lifeline BST noting that there were strong social benefits to the creation of a lifeline BST that furthered the goals of the 1992 Cable Act. In particular, we noted that the creation of a lifeline BST increases the option of consumers and increases competition for services on the upper .tiers. We also noted our belief that any increase in rates for subscribers that receive both the BST and the CPST will be de minimis. We find that the same circumstances exist here and thus approve the similar provision in the Time Warner Social Contract. In view of the valuable public benefits brought by the creation of a lifeline BST, as well as the other benefits of the Social Contract discussed elsewhere in this Order, the preference for other benefits cited by the Ithaca City Cable Commission in the Social Contract does not warrant a rejection of the Social Contract. One of the main arguments advanced by commenters opposing the lifeline BST was that it was not necessary because there were so few BST-only subscribers. However, because there are few BST-only subscribers the overall impact on the majority of subscribers who receive both BSTand CPST will be minimal. In addition, we note that the Social Contract contains a provision that allows local franchising authorities to elect not to have Time Warner implement the BST rate reduction and corresponding CPST adjustment in its franchise area. This provision provides subscribers additional protection if lifeline BST is inadvisable in a particular area. 57. Because some Time Warner systems contain only one tier, not all of the Time Warner systems can immediately provide for a lifeline BST. However, Time Warner has represented that those systems that initially are not given the benefit of a 10% reduction will subsequently be restructured and will have the right to a per channel rate reduction after the restructuring is accomplished. Because the restructuring is likely to include the upgrading of Time Warner's facilities, we find that a requirement to complete the restructuring by a specific date prior to the termination of the Social Contract would be inconsistent with the Social Contract, which permits Time Warner to upgrade its facilities over the five-year term of the Social Contract. We thus reject the suggestion that the Social Contract contain a date for completion of the restructuring of the BST. We also note that while the restructuring wilt require Time Warner to shift programming between the BST and the CPST, Time Warner already has that right and can exercise it independent of the Social Contract. Likewise, Time Warner has the discretion, independent of the Social Contract, not to increase the number of BST channels. We believe that allowing Time Warner to add more channels to the BST, and subsequently increase rates, is contrary to the purpose of creating a lifeline service. Thus, we reject the suggestion by some commenters that these provisions in the Social Contract require modification. However, in order to alleviate some of the concerns raised by the commenters, Time Warner has agreed to modify the Social Contract to ensure that any restructuring (other than for the creation of MPTs) will not result in the shifting of channels from the BST to unregulated tiers. Further, while we note the argument of the New Jersey Board of Public Utilities that a reduction in the BST will reduce franchise fees under New Jersey law, we point out that Time Warner has agreed to waive its right to a credit for the franchise fee paid to a local franchising authority an CPST refund amounts. If a local franchising authority wishes to preserve its rights under New Jersey law to a franchise fee for a more expensive BST, it has the right to opt out of the lifeline BST provision. 58. Finally, we address the effect on the Social Contract of an local franchising authority's decision not to elect the lifeline BST provision. The only effect a local franchising authority's decision to opt out of the lifeline provision is that there will be no reduction in the BST and no offsetting CPST rate increase. For purposes of clarification, Time Warner has agreed to modify the Social Contract to specifically state that the opt-out provision contained in the Social Contract is limited to local franchising authorities opting out of the creation of a BST lifeline tier, e. Migrated Product Tier (i) Terms of the Social Contract 59. The Social Contract provides that in the Time Warner systems where Time Warner or its predecessors did not create a to carte packages, Time Warner will be permitted to migrate up to four existing services from its cable programming services tier to an MPT. The channels migrated from the BST or CPST will continue to be priced at the rate regulated price, subject to increases allowed for inflation and external costs under the Commission's rules. There will be no limitation on the number of new channels that Time Warner may add to an MPT at a price of up to S.20 cents per channel plus license fees. After April 1, 1997, Time Warner may convert the MPT into an NPT as defined by the Commission's Going Forward rules. The Social Contract provides that Time Warner may not require the subscription to any tier other than the BST as a condition for subscribing to an MPT, and may not require subscription to an MPT as a condition for subscribing to a CPST. Time Warner also my not offer an NPT with a buy-through requirement of any tier other than the BST. 60. For the Newhouse Systems that had a Is carte packages, Time Warner will be permitted to create two MPTs. One MPT will consist of typically three superstitions and one satellite channel and will initially be priced at its current rate, the average price of which is less than 29 cents per channel (exclusive of copyright fees). Time Warner also will be allowed to create an MPT consisting of channels currently located in a Is carte packages, so that the total number of migrated services is no greater than six. These channels will be priced at the current per channel rate. (Newhouse's ran-superstation a Is carte packages were affirmatively marketed and had traditionally low penetration rates, ranging from 26% to 59% of BST subscribers). Time Warner wilt be able to add an unlimited number of maw channel offerings at the rate of up to S.20 cents per channel plus license fees to these MPTs as well. The remaining channels that had been offered in a Is carte packages on Newhouse Systems will be returned to CPSTs. The rates for CPSTs will increase due to the addition of these channels; however, the increases will be limited to up to $0.25 per channel. 61. In systems where Time Warner has, created a is carte packages that are being treated as NPTs in areas contiguous with franchises where MPTs will be created pursuant to the Social Contract, Time Warner will be permitted to lower the prices of the NPts and raise the prices of the adjacent MPTs in a revenue neutral manner to provide uniform rates for uniform offerings in those systems. In those circumstances, the MPTs will be subject to the price caps applicable to the MPTs under the Social Contract (i.e. prior to April 1, 1997, the price may be adjusted solely to reflect unrecovered inflation and external cost increases). (ii) Comments 62. The majority of comments on these provisions raised questions and requests for clarifications. The questions raised included: how many channels Time Warner is allowed to move to MPTs; how many MPTs can be created; and what the effect will be on rates in the regulated tiers. in addition, as to subscribers to the Newhouse Systems, a question was raised as to whether the provision in the Social Contract allowing for price uniformity in contiguous Time Warner and Newhouse Systems will lead to excessive rate increases. Other commenters contended that channets should not be removed from the regulated tiers, but just duplicated. Commenters urged that a Is carte channels created between April 1993 and September 1994 by Newhouse which had previously been marketed as a separate tier and are not required to be returned to a CPST should be subject to anti-buy-through and price restriction rules. Some commenters proposed that there should be specific requirements as to the number of packages of channels on non-BSTs and that there be a uniform rate schedule and channel line-up throughout the Charlotte-Meckenburg community. Finally, there were comments which misperceived the meaning of the Social Contract. In its reply comments, Time Warner notes that a total of only four channels may be migrated from both the BST and CPST, that the rate for any regulated tier from which the channels are taken to create an MPT will be proportionally reduced so that the creation of any MPT wilt be done in a revenue-neutral menrer to Time Warner, and that the Commission recognized in the Cost Order that the rate-regulated services will provide competition for new services offered under social contracts. (iii) Discussion 63. In the Continental Contract Order, which contained provisions similar to those in the Social Contract, we waived the channel migration provisions of the Cost Order and the Going Forward Order to the extent that they prohibited the migration of up to four existing services from its cable programming services to an MPT. We found that a waiver was in the public interest in the context of the Continental Contract because the creation of MPTs and MPTs expands the programming choices for subscribers. We believe that the public interest also will be served and that a similar waiver of the channel migration provisions of these orders is appropriate in the context of the Social Contract. Except in the case of the Newhouse Systems, only four channels can be migrated to a MPT, whether the channels are migrated from the BST, the CPST, or a combination of both. Further, the Social Contract provides that only one MPT per franchise area can be created, except in a limited number of Newhouse Systems where there will be superstation tiers and a second package containing such number of channels as brings the total number of channels on MPTs in the franchise area to six, offered as separate MPTs. Similar to the Continental Contract, pricing for the MPT may be increased only if Time Warner adds additional channels to the tier. Like the Continental Contract, the Social Contract also provides that if Time Warner elects to convert the MPT to an NPT, the elimination of all buy-through requirements wilt ensure that the product offerings and rates on the MPT are competitive with the regulated SSTs and CPSTs. Thus, the MPT option will increase customer choice while maintaining reasonable rates, and warrants our authorization. We do not believe that we should prescribe what channels should be in the MPTs, since this might require Time Warner to engage in services that are not economically feasible. In response to the New York State Commission on Cable Television, we clarify that any a la carte packages created on Newhouse Systems between April 1, 1993 and September 30, 1994, from which no channels are required to be returned to a CPST, are MPTs for the purpose of the anti-buy-through and price constraining provisions. Finally, under the Social Contract, any adjustments between contiguous Time Warner systems and Newhouse Systems must be accomplished on a revenue neutral basis. 64. We conclude that the provisions in the Social Contract that allow for the creation of MPTs wilt bring benefits to subscribers. However, for purposes of clarification, and to alleviate the concern raised that the creation of MPTs wilt increase the prices of the regulated tiers, Time Warner has agreed to a provision in the Social Contract that states that the rates for any BST or CPST from which channels are moved to create MPTs shall be reduced so that the creation of any such MPT will be revenue neutral to Time Warner. f. Service To Schools (i) Terms of the Social Contract 65. Under the Social Contract, Time Warner has agreed to provide a cable connection free of charge to all public schools in its franchise areas that are passed by Time Warner systems. Time Warner also will provide a cable connection at cost to alt secondary private schools having students that receive funding under Title I of the Education and Secondary School Act of 1965 and that are passed by Time Warner systems. BST and CPST cable service will be provided to all connected public and private schools without cost. Time Warner will wire additional classrooms in existing schools at cost, and provide BST and CPST service to each such outlet free of charge. With respect to new public schools and existing public schools undergoing rehabilitation, if Time Warner is notified of new construction or rehabilitation, Time Warner will coordinate with local officials and contractors to wire each of the classrooms in the new or rehabilitated public schools free of charge. 66. Time Warner also will provide a free monthly educational program listing to each connected school and will provide materials explaining the educational applications of Time Warner's broadband cable systems. Each school district will receive one copy of the materials free of charge with the opportunity to purchase additional copies at cost. 67. Time Warner will provide each connected school with a free connection to the Time Warner/Time Inc. on-line service for personal computers, assuming this service is successfully developed. If requested, each school will receive one free modem to use this service with additional modems provided at cost. Time Warner also will sponsor a workshop in each franchise area to demonstrate the service and its educational uses to teachers. (ii) Comments 68. The majority of comments support this provision of the Social Contract because the schools need advanced tools to enable their students to compete in a technological world, and these technological tools can help equalize the gap between affluent and less affluent schools. The Orange County Public Schools state that they would greatly benefit from the Social Contract, commenting that of "special interest to our educators are the educational materials, educational programs and the future on-line computer service, all of which will enable our teachers and students to keep current with the latest information and technology." The Spring Independent School District, Houston, Texas, praises Time Warner's commitment to supporting the educational process as shown by its "efforts in providing free installation and cable services for educational use in their 'Cable for the Classroom' project'" and further comments that the additional services such as on-line computer services and technical training are "of tremendous value to our District considering our limited funds." 69. A nxmber of commenters requested that the proposed services be expanded to is colleges and universities, private schools, local governments, and schools which are not passed by Time Warner, but are close to Time Warner facilities. Some commenters contend that the benefits in the Social Contract are already provided under Time Warner's franchise obligations, and that the Social Contract fails to require equipment in schools which has been required by the local franchising authority, such as video distribution amplifiers. some commenters claims that Time Warner will only incur minimal costs in providing the school benefits, but will gain through the advertising it will provide. Others comment that these benefits will force schools to spend money on such things as VCRs and maintenance. Finally, some commenters asked that the schools be permitted to do their own wiring. 70. In its reply comments, Time Warner acknowledges that many schools already are connected or are planning to be connected pursuant to franchise agreements, but that in many cases these connections are a new benefit to the schools. Time Warner further states that the Social Contract provides additional benefits not typically contained in the school service clauses of franchising agreements, such as internal wiring at cost, connections to certain private schools, educational training for teachers, program guides, on-line service, and modems. (iii) Discussion 71. We believe that the school services to be provided by Time Warner are a significant provision of the Social Contract. While the Social Contract cannot, and is not intended to, provide benefits to every institution that desires them (e.g., universities and hospitals) we note that it does bring new and improved educational opportunities to public and private schools. We note that the cost to Time Warner of these services will be borne by Time Warner, and is not included within the $4 billion upgrade cost that forms the basis for the rate increases authorized under this Social Contract. These benefits will be provided across the economic spectrum, helping many schools that otherwise could not access the "information superhighway." We believe that the benefits to the schools are significant even if the schools incur certain secondary costs, such as televisions, VCRs, or maintenance. While we cannot be certain what these costs would be, we note that the schools have the option to accept or reject the benefits being offered by Time Warner and can decide whether or not they should expend any necessary funds. 72. Despite the significant benefits these provisions will provide to students, we are mindful of some of the concerns expressed by some commenters and, as a result, have negotiated same modifications to the Social Contract. In particular, as originally drafted, the Social Contract provided that Time Warner would offer service connections free of charge at one outlet in 100% of the public schools passed by its cable systems and at cost to any private secondary school which receives funding pursuant to Title I of the Elementary and Secondary Education Act and which are passed by its cable systems. In response to requests by commenters that connections be provided to schools which are close to Time Warner facilities, Time Warner agreed to offer free of charge service connections in 100% of public schools and at cost connections to any private secondary school which receives funding pursuant to Title I of the Elementary and Secondary Education Act which are located within 200 feet of the activated plant of its cable systems and are within its service area.. In making this modification, Time Warner relied upon the definition of "Standard" installation provided under Section 76.309(c)(2)(i) of the Commission's regulations which defines a "Standard" installation as "those that are located up to 125 feet from the existing distribution system." Time Warner extended the range to 200 feet of its activated plant. Time Warner further agreed to provide such connections at cost to any other public or private schools located beyond 200 feet from its activated plant and within its franchised service areas. In addition, we agree that schools, like the subscribers themselves, should have the option to do their own wiring. Time Warner has agreed to this request and has modified the Social Contract to state that any such public or private school my elect to install its own internal wiring at its own cost. 73. Some commenters raised concerns that the Social Contract fails to provide some of the benefits already provided under certain Time Warner franchise obligations. We wish to clarify that the Social Contract is not intended to affect any agreements that a franchising authority has otherwise obtained from Time Warner. To make this clear, Time Warner has agreed to modify the Social Contract to state that "Nothing herein shall affect the enforceability of any otherwise valid preexisting local franchise agreement, ordinance, local law or regulation which provides benefits which exceed those provided in this Contract relating to system upgrades or the wiring of schools, nor shall local franchising authorities be restricted in their authority to negotiate for such additional benefits after the Effective Date of this Contract." Further, the Social Contract provides that to the extent a local franchise agreement contains an obligation to provide connections to schools as agreed to in the Social Contract, Time Warner cannot seek to recover any such costs for these connections as external or other costs. Accordingly, any school benefits obtained outside of this Social Contract will not be affected. g. Nome Wiring 0 (i) Terms of the Social Contract 74. Under the Social Contract, Time Warner will not restrict the ability of a subscriber to remove, to replace, to rearrange, or to maintain any cable wiring located within the interior of a his or her dwelling as long as these actions do not interfere with the ability of Time Warner to collect revenues from that subscriber or any other adjacent subscribers. Subscribers will be responsible for the cost of remedying any improper installation resulting in a violation of the Commission rules. Time Warner will provide high quality home wiring and materials at cost to its subscribers. (ii) Comments 75. Some commenters claim that the home wiring provision in the Social Contract merely restates the Commission's preexisting rules. Other comments relate to the fact that the Social Contract does not specifically extend the subscriber's rights to cable located at least twelve inches outside the subscriber's dwelting; a misconception that there has been a total deregulation of inside wiring and thus no need for the Social Contract provision; a question as to the ownership of the wiring and whether Time Warner has maintenance obligations if the subscriber does not maintain the home wiring. In its reply comments, Time Warner claims that the Social Contract goes further than the Commission's rules because, unlike the Commission's rules, the contractual provisions here apply before a customer terminates cable service. (iii) Discussion 76. Contrary to the claims of some commenters, the home wiring provision of the Social Contract does not merely restate our existing rules, but rather goes beyond those rules to cover situations prior to the time a customer terminates its cable service. However, the provision does not exempt Time Warner from these rules; therefore, those rules continue to be applicable to cable wiring located at least twelve inches outside the subscriber's dwelling. While telephone rate regulation of inside wiring has been terminated, our cable home wiring rules have not been eliminated. We find that the honk wiring provisions of the Social Contract provide a benefit to subscribers as the provisions enable subscribers to change the location of their cable without incurring additional costs. Further, the provisions provide that Time Warner wilt inform the customers of their rights to remove, to replace, to rearrange, or to maintain home wiring, as well as their obligations if signal leakage occurs as a result of their installation or rearrangement. This education process will be a public benefit since it will enable customers to make rational choices whether to install or to rearrange home wiring. h. System Acquisitions and Divestitures (i) Terms of the Social Contract . 77. Time Warner has a pending contract to acquire cable systems from Cablevision Industries Corporation (CVI). The Social Contract provides that at its option, Time Warner may include any cable systems acquired from CVI, provided that the CPST settlement provisions of the Contract will not apply until any applicable settlements are mutually agreed upon between Time Warner and the Commission. The Social Contract further provides that the addition of any other newly acquired systems by Time Warner to the provisions of the Social Contract will be subject to Commission approval, which will be expeditiously decided and not unreasonably withheld. Finally, in the event of a sale of any system during the period of the Social Contract, the purchaser my elect, with the concurrence of the Commission, for the provisions of the Social Contract to continue to apply to such systems and the Commission's concurrence shall be expeditiously decided and not unreasonably withheld. In the event the purchaser elects not to have the provisions of the Social Contract apply to any such system, the CPST subscribers to such system shall be eligible for the refunds calculated under the Social Contract in the event the upgrade commitment has not been completed prior to the consummation of such sale. (ii) Comments 78. The comments regarding this provision were from communities served by CVI, contending that they should be part of the Social Contract. In addition, the City of Los Angeles contends that it should not have to comment on this issue until the acquisition of CVI is finalized, but that CVI systems should not be added to the Social Contract without the consent of the local franchising authority. In its reply comments, Time Warner stated that it has no objection to including CVI communities as part of the Social Contract. (iii) Discussion 79. In view of the desire of franchising authorities (with the exception of Los Angeles) of CVI systems to be included in the Social Contract and Time Warnerts agreement to include all CVI systems in the Social Contract, we find that the inclusion of such systems is in the public interest. The Social Contract is thus modified to state that Time Warner shall include any cable systems acquired from CVI within the provisions of the Social Contract. In addition a provision in the Social Contract has been added providing for 45 days, notice of the Social Contract to the affected local franchising authorities in order to provide them with an opportunity to opt out of the lifeline BST provision of the Social Contract. 80. Because the upgrade capital costs committed by Time Warner in the Social Contract are tied to the systems it currently owns, any such acquisition or divestiture of systems by Time Warner, as provided for under this section, could change the amount of capital costs expended for the upgrade. As part of our oversight responsibilities with respect to the Social Contract, a provision in the Social Contract has been added that states that the upgrade capital costs set forth in the Social Contract will be adjusted, as mutually agreed to by Time Warner and the Commission, to reflect any additions or deletion of systems subject to the Social Contract. To address the parties' desire to have the required review and approval of additions and deletions of smaller systems accomplished expeditiously, the Social Contract further provides that the approval from the Commission of such adjustments shall be expeditiously decided and not be unreasonably withheld. In view of the fact that these capital commitment decisions must be made expeditiously and involve a thorough examination of the upgrade plan, we believe that, with respect to acquisitions or dispositions of cable assets involving 400,000 or fewer subscribers, the Cable Services Bureau is in the best position to take any actions contemplated under section III F. 6 of the Social Contract, including approval or disapproval of additions or deletions from the provisions of the Social Contract and the adjustments in the monetary amount of the upgrade which results from such additions or deletions as well as any other actions contemplated under this section. Therefore, on our own motion, we order that the Cable Services Bureau be given delegated authority to take any actions contemplated under section III F. 6 of the Social Contract. i. Modification and Termination (i) Terms of the Social Contract 81. The Social Contract provides that it may not be modified or terminated without the mutual' agreement of both parties. Time Warner may petition the Commission to modify or terminate the Social Contract based on any relevant change in applicable laws, regulations, or circumstances. Any petition to modify or terminate this contract wilt be served on the local franchising authorities for the affected systems. The Commission will allow 30 days after the release of the Public Notice for interested parties to comment and 15 days for reply comments before acting on any such petition. 82. In the event of a material change in the 1992 Cable Act or the Commission rules that would favorably impact Time Warner, any Time Warner system may elect not to be bound by the relevant provisions of the contract addressing the BST price cap (III.A.2), additions to the BST (III.A.3), equipment rates MPTs (III.D.), and the CPST price cap (III.F.4). All other provisions of the Social Contract would remain valid and enforceable. (ii) Comments 83. Several commenters contend that the provision in the Social Contract permitting Time Warner systems to elect not to be bound by certain sections of the Social Contract is one-sided because it allows Time Warner to terminate the Social Contract unilaterally if any applicable law or regulations change. Some commenters also contended that the local franchising authorities should have input on any modifications or terminations. In its reply comments, Time Warner contends that this provision relates only to certain rate provisions in the Social Contract, and that notwithstanding any such changes in the law or in regulations, Time Warner still is required to comply with other non-rate provisions and that Time Warner will be subject to the rate regulation rules in effect at that time. (iii) Discussion 84. We believe that the provision in the Social Contract allowing Time Warner to take advantage of any changes in the current rate regulations is both justified and necessary. We are mindful of the pending telecommunications legislation and the reality that we could not reasonably expect Time Warner to agree to comply with existing rate regulations in the event they are eliminated. Thus, under the Social Contract, Time Warner, similar to all other cable operators, will be able to take advantage of any changes in either the 1992 Cable Act or the Commission's regulations with respect to the rate provisions in the Social Contract, i.e. Time Warner will be subject to whatever rate regulation.is in effect at that time. However, even if the statutory or regulatory provisions concerning rate regulation change, Time Warner is not relieved of any other provisions in the Social Contract. We retain our oversight authority with respect to these non-rate provisions and do not believe further review by local franchising authorities is necessary. j. Preemption (i) Terms of the Social Contract 85. The Social Contract provides that to the extent that any state or local law, regulation, ordinance, or franchise is inconsistent with the terms of the Social Contract, the Social Contract preempts those requirements. Additionally, the Social Contract provides that all waivers of the Commission's rules and modifications to the Commission forms necessary to effectuate the terms of the Social Contract are granted. The Social Contract does not preempt the right of local franchising authorities to negotiate upgrades which exceed the scope of the Social Contract. (ii) Comments 86. Many local franchising authorities argue that the Social Contract contains language which could be interpreted as precluding them from requiring that Time Warner adhere to the conditions imposed in franchising agreements or from imposing certain conditions in future franchising agreements. In its reply comments, Time Warner contends that the language does not preclude any local franchising authority from negotiating with Time Warner for a higher level of upgrades. (iii) Discussion 87. In view of the concerns raised by many local franchising authorities, Time Warner has agreed to a modification to the Social Contract that limits the scope of the preemption. In particular, the Social Contract only preempts the local franchising authority from regulating rates or ordering refunds in a manner inconsistent with its terms. As stated in Section 111. I. 2. a. of the Social Contract, the provision added specifically affirms the enforceability of any "otherwise valid preexisting local franchise agreement, ordinance, local law or regulation which provides benefits which exceed those provided in this Contract relating to system upgrades or the wiring of schools, nor shall (local franchising authorities] be restricted in their authority to negotiate for such additional benefits after the Effective Date of this Contract." • We believe this language sufficiently addresses the concerns raised by various local franchising authorities as it clarifies that the Social Contract is not intended to preempt any preexisting or future franchising agreement that provides for a different or higher level of upgrades or benefits. k. Other Issues (i ) Comments 88. A variety of other issues and questions were raised by commenters. Among the issues raised are that (1) the comment period was too short; (2) the Commission has abdicated its oversight responsibilities over the cable monopoly; (3) local franchising authorities should be permitted to deny franchise renewals for failure to comply with the Social Contract; and (4) the Commission should address the issue of scrambling. Further, a number of comments discuss matters related to Time Warner's behavior in particular communities including claims of unfair competition and discrimination. In its reply comments, Time Warner did not respond to all of these issues, but did contend that it is subject to an increasing amount of competition and that the Commission has ample power to enforce the Social Contract without further harsh penalties being added by local franchising authorities. (ii) Discussion 89. We have allowed almost two months for comments and reply comments on the Time Warner Social Contract. It is our view that this period of time correctly balances the need for public comment with the need to make the public benefits of the Social Contract available as soon as possible. One of the rosin goals of the 1992 Cable Act is to protect the interests of subscribers. Comments that we have abdicated our oversight responsibilities over Time Warner are without support. To the contrary, the Social Contract is a regulatory mechanism expressly provided for in our rules for cable systems not subject to effective competition. Moreover, under the Social Contract, we have retained oversight responsibilities for Time Warner's compliance with the Social Contract. We believe that the goals of the 1992 Cable Act are being met in this Social Contract. The Social Contract provides reasonable, stable rates to subscribers, as well as various social benefits. 0 90. We find that the Social Contract provides remedies for violations, and, thus, further enforcement procedures by local franchising authorities are not necessary. We note that the Social Contract provides that each local franchising authority will be served with progress reports no later than 90 days following the end of each calendar year that the Social Contract is in effect. The Social Contract provides that any violation of its terms shalt be treated as a violation of a Commission order with the corresponding rights and remedies associated with the enforcement of an order. Time Warner will report to the Commission on an amual basis within 90 days following the end of each calendar year of the Social Contract. This report will detail the number of BST and CPST subscribers benefitting from upgraded service, the system reliability and service improvements resulting from the upgrade, and the projected upgrade activities for the following year. This report will be served on each local franchising authority. To verify the accuracy of these reports and ensure compliance, the Commission reserves the right to inspect the books and records of Time Warner and to interview corporate employees. 91. To the extent that local franchising authorities or other interested parties disagree with Time Warner's interpretation of any provision of the Social Contract, perceive a lack of enforcement of its terms: and conditions, or disagree with the remedies we may prescribe, they may seek redress at the Commission. Further, the Social Contract is not intended to resolve every conceivable issue raised with respect to Time Warner's service and operations. There are other avenues available to address concerns regarding such matters as scrambling, alleged discriminatory treatment by Time Warner of its competitors, poor service, billing problems and other disputes with complainants. IV. CONCLUSION 92. The Social Contract negotiated with Time Warner fulfills the objectives of the incentive Upgrade Plans which were established in the Cost Order. The Social Contract ensures that customers will have reasonable, stable rates for existing services. Additionally, Time Warner will obtain pricing flexibility to upgrade its system in cost effective ways in order to provide customers with increased programming choices and improved quality of service. Furthermore, the Social Contract will reduce the regulatory burdens associated with rate regulation on local franchising authorities, Time Warner, and the Commission. 93. It is our belief that by approving the Upgrade Incentive Plan we encourage • upgrades that provide services that are economically justified and that best meet customers' needs. Therefore, we find this plan, to the extend modified above, to be in the public interest and approve the agreement. 94. Accordingly, IT 1S ORDERED that the Social Contract between Time Warner and the Commission as modified above IS APPROVED. 95. IT IS FURTHER ORDERED that there is a general waiver of any Commission rule that is necessary to effectuate the terms of this Social Contract including, but are not limited, to the following rules: 47 C.F.R. ^U 76.923; 47 C.F.R. ^U 76.987; 47 C.F.R. ^U 76.961(e); 47 C.F.R. ^U^U 76.309(c)(i)(8),76.964; 47 C.F.R. ^U 76.960; 47 C.F.R. ^U 76.933; 47 C.F.R. ^U 76.922; 47 C.F.R. "U 76.956. %. IT IS FURTHER ORDERED that waiver of any Commission rule or modifications to the Commission's forms necessary to effectuate the terms of the Social Contract IS GRANTED. 97. IT IS FURTHER ORDERED that the Cable Services Bureau is given delegated authority to oversee implementation of the Social Contract, including authority to resolve all pending complaints covered by the Social Contract and to make adjustments in the amount of Time Warner's upgrade commitment on additions or deletions of systems subject to the Social Contract. 98. IT IS FURTHER ORDERED that preemption of any Local franchise agreement or any state or local rule or regulation that requires Time Warner to give more than 30 days' notice of rate and service changes to subscribers for the period prior to January 1, 1996, IS GRANTED. 99. IT IS FURTHER ORDERED that the Secretary is instructed to sign the Social Contract, attached as Appendix B, on behalf of the Commission. 100. IT IS FURTHER ORDERED that this Order is effective upon adoption. FEDERAL COMMUNICATIONS COMMISSION William F. Caton Acting Secretary • 0 APPENDIX A: Comments Expressing Unqualified Support of Time Warner Social Contract Alabama City of Irondale Birmingham Public Schools City of Brighton City of Bessemer Alabama Public Service Commission City of Birmingham California Cathedral City Coronado High School San Bernardino Councilmember Barbara Warden, San Diego Assemblywoman Dede Alpert San Diego County Office of Education International Center for Communications, San Diego San Diego Business Roundtable for Education City of Barstow Congressman Brian R. Bilbray Poway Unified School District San Diego City Schools City of Palm Springs Assemblywoman Susan A. Davis City of Coronado Coronado Unified School District Jean Farb Middle School, San Diego Kern County San Diego State University Councilmember Randy Rowles, Bakersfield Steve A. Perez, Bakersfield Dianne Jacob, Chairwomen, San Diego County Board of Supervisors San Diego Councilmember Harry Mathis James W. Silva, Supervisor, Second District, Orange County Connecticut Cable Television Advisory Council Florida National Development Properties of Florida-Bay, Inc. Representative John Morroni Town of Melbourne Beach Representative R.Z. Safley School Board of Polk County Manatee County Jaymie G. Carter City of Belleair Bluffs City of Temple Terrace Polk Education Foundation & Business Partnership, Inc. Brevard County Town of Indian Shores Town of Lake Hamilton School District of Hillsborough County City of Auburndale School Board of Manatee County Representative Dennis L. Jones City of Treasure Island City of Palm Bay Pittsburgh Baseball Club, Florida Baseball Operations Barnett Bank of Manatee County Hillsborough Education Foundation, Inc City of St. Pete Beach City of Crystal River City of Bradenton City of Largo Town of Malabar School Board of Manatee County City of Bradenton Beach Lake County Information Services City of Cocoa Beach County Commissioner Joe McClash City of Melbourne City of Maitland State Senator David G. Kelley City of Rockledge City of Edgewood State Senator Donald C. Sullivan Dave & Lynn McDaniel Eastside Elementary School, Haines City Osceola High School, Seminole Tamara L. Hager Oak Grove Middle School City of Lakeland School Board of Brevard County Hillsboro Public Schools City of Winter Park Orange County Public Schools Faye C. Roberts, Columbia County Public Library Polk County Richard Fawley Georgia The Travel Channel Illinois City of Berwyn Ronald F. Crick Village of Tinley Park Village of Stickney Indiana HOLA, Indianapolis Indianapolis Chamber of Commerce Indianapolis Urban League William G. Mays, Mays Chemical Company Kinder Vision, Peru Congressmen Dan Burton Indianapolis Public Schools Kentucky Tammy Sanders Dr. Robert H. McGaughey, Murray State University Louisiana Caddo Parish School Board Caddo Parish Commission St. John the Baptist Parish Ouachita Parish School System Monroe City Schools Maine Congressman John E. Baldacci- 0 Suzan Nelson, Librarian, Portland High School Dome Crook, Computer Technology Steering Committee, Portland High School Maryland Discovery Communications, Inc. Massachusetts City of Melrose City of Medford Lynn Business/Education Foundation Swampscott Public Schools Lynn Business Partnership Salem Public Schools Lynn Public Schools Melrose Chamber of Commerce Central Berkshire Regional School District Patrick J. Markham, Pittsfield Public Schools City of Pittsfield Minnesota City of Shakopee City of Chaska City of New Ulm Bloomington Chamber of Commerce Richfield Chamber of Commerce Edina Public Schools Eden Prairie Chamber of Commerce Eden Prairie Schools Minneapolis Public Schools Minnesota Public Utilities Commission Jackie Cherryhomes, President, City Council, Minneapolis Richfield Public Schools Edina Chamber of Commerce Greater Minneapolis Chamber of Commerce State Senator Steve Novak Susan Ray Euler, Fire Department Hot Spots City of Ranlo State Senator Carl W. Kroening Mississippi Mississippi Economic Council Jackson Public School District Town of Coldwater- Supports Contract, especially rate stability, reduced basic rates, and upgrades. City of Ridgeland City of Raymond Hinds County City of Senatobia Madison County Town of Edwards Missouri Ferguson-Berkeley Chamber of Commerce City of Belton City of Parkville Village of Calverton Park City of Lee's Summit Nebraska City of Auburn City of Lincoln City of York City of Nebraska City City of Superior Lancaster County City of Fairbury New Jersey Assemblyman Patrick J. Roma New York East Syracuse-Mina Schools Village of Malone Village of North Syracuse Village of Painted Post Fayetteville-Manlius Schools Town of Catlin Town of Camillus John P. Almonte and Edgar F. Ames, East Syracuse-Mina Central Schools A & E Television Networks Peyton C. Watkins, Penfield Town of Chili Town of East Rochester Town of Ogden Town of Gates Village of Endicott Town of Perinton Town of Marcellus Rome City School District Town of Newark Valley Town of Kirkwood ESPN, Inc. Town of Richmond Town of Clarendon City of Corning City of Port Dickinson Village of Johnson City Joni Lincoln, Port Byron Central School District Town of Parma d f Pitt f or Town o s Jamesville-DeWitt Central School District Town of Kirkwood Town of Conklin Town of Clifton Park Board of Cooperative Educational Services of Cattaraugus, Alleghany, Erie and Wyoming Counties City of Rochester Town of Stillwater Town of Fenton City of Elmira Village of Horseheads Town of Webster- North Carolina City of Lexington Town of Waddington FTCC Foundation, Inc., Fayettevi lle University of North Carolina at Wilmington Pembroke State University Cumberland County Schools of Emerald Isl T own e Moore County Schools City of Hamlet. Guilford County City of High Point Instructional Technology, Charlotte-Mecklenburg Schools Centralina Council of Governments- County of Moore, Department of Social Services Town of Haw River Town of Landis Cleveland County Carteret County Board of Education Lumberton Area Chamber of Commerce and Visitors Bureau Town of Southern Pines Southeastern University Town of Rockwell Public Schools of Robeson County State Senator Luther H. Jordan, Jr. Town of Chapel Hill Shelby City Schools Asheboro/Randolph Chamber of Commerce 8 Tourism Bureau Guilford County Schools City of Thomasville City of Winston-Salem Cleveland County Schools Town of Cramerton City of Kings Mountain City of Burlington City of Albemarle Gaston County Schools Town of Matthews County of Jones Cabarrus County City of Asheboro 40 Charles F. McCraw, Guilford County Schools Charles M. Lineberry, Jr. Town of Ramseur City of Randleman John G. Redmond, North Carolina Council on Economic Education Archdale-Trinity Chamber of Commerce- City of Shelby J. Parks Todd, Jr., North Carolina State Board of Community Colleges Fayetteville Chamber of Commerce City of Bessemer City Grennsboro Chamber of Commerce Ohio Village of Marble Cliff Norwood City Schools WCET, Cincinnati Museum Center, Cincinnati Marguerite Shurte City of Piqua Municipality of West Milton Immaculate Heart of Mary School, Cincinnati Gahanna-Jefferson Public Schools Rudy Forsberg Marian A. Spencer Staff of Canton City School District Elida Local Schools Thomas Worthington High School, Worthington Dick Lehmann, Westerville South High School, Westerville Learning Materials Center, Rutherford B. Hayes High School, Delaware Lara Gianessi, Fort Hayes Metropolitan Education Center, Columbus Village of Obetz S. Julia Deiters City of Grandview Heights Elide Senior High School City of Akron City of Columbus Brenda Jackson, William Henry Harrison Junior School, Harrison Terrace Guild, Cincinnati Literacy Network of Greater Cincinnati Wellness Community, Cincinnati East End Adult Education Center, Cincinnati Camilla S. Huff, St. Veronica School, Cincinnati Green Township Ansonia Local School District Newton Local School District John E. Miller, The Troy Schools Milton-Union Exempted Village Schools Covington Exempted Village Schools City of Bexley Lime/Allen County Chamber of Commerce Wendy E. Webb, Youngstown City School District Eldon na H. Ashley, North Union School District Miami East Junior High School City of Akron West Liberty-Salem Schools John G. Olds, Northwestern College Carrie Clark, Playhouse in the Park, Cincinnati Kids Voting, Cincinnati All About Kids, Cincinnati Arts Consortium of Cincinnati Oregon Kathy Allen-Kirsch, Gregory Heights Middle School, Portland Karen Gaddis-Philips, Sam Barlow High School, Gresham Portland Public Schools Pennsytvani a City of Reading Tim Smith, Reading Reading Area Community College Alvernia College, Reading Reading School District Pottsville Area School District Blue Mountain School District Berks County Intermediate Unit Beltwood-Antis School Board Moon Community Access Television Greater Johnstown Committee BT Financial Corporation Moon Area School District Representative Jim Lynch Representative Richard A. Geist Richland Senior High School, Johnstown David Popp, Westmont Hilltop School District, Johnstown Altoona Area School District Bradford Cable Commission United Way of Barks County Representative Sheila Kilter Pennsylvania State University Greater Johnstown/Cambria County Chamber of Commerce, Inc. City of Altoona Greater Johnstown School District Franklin Area Chamber of Commerce Franklin Area School District Dattey Grove School District Richland School District Representative Samuel E. Rohrer Sugarcreek Borough Valley Grove School District Berks Community Television West Lebanon Township South Carolina Town of Pinewood Sumter School District No. 17 City of Darlington Town of Clover Sumter County Administrator City of Florence Tennessee Memphis City Schools Germantown Area Chamber of Commerce Collierville Area Chamber of Commerce Randy Houston, First Tennessee Bank, Collierville Beverly A. Holmgren, First Tennessee Bank, Bartlett City of Bartlett City of Lakeland Bartlett Kiwanis Club Texas City of Hunters Creek Village City of San Antonio Fort Bend Independent School District T.H. Rogers School, Houston Luting independent School District City of Elgin Robinson independent school District Houston Councilman John W. Peavy, Jr. City of Piney Point Village Missouri City City of McGregor City of Round Rock Cypress-Fairbanks Independent School District City of Luting Round Rock Chamber of Commerce El Paso Independent School District Greater Austin Chamber of Commerce City of Meadows FOX 18, Wichita Falls Ysteta Independent School District, El Paso City of Bastrop Hill Country Village Town of Hollywood Park- City of Castle Hills Greater Houston Partnership Congressman Bill Archer City of Selma City of Helotes City of Bellmead St. Paul's Episcopal Day School, Waco Eanes Independent School District City of Balcones Heights • City of Kirby City of Olmos Park Greater Irving Chamber of Commerce Councilwoman Cynthia White, Lewisville City of Cibolo City of Shaven Park Spring Independent School District City of West University Place Helen S. Handler, Paul Revere Middle School Elgin Independent School District City of Converse- Late Filing Lewisville Chamber of Commerce Representative Peggy Hamric City of Waco Virginia Greater Irving Chamber of Commerce Poquoson City Public Schools. Smithville Independent School District West Virginia West Virginia Cable Advisory Board Wisconsin Green Bay Area Chamber of Commerce Action, Menasha Joseph A. Rice, Milwaukee Newtec Studio, Green Bay Whitnall Middle School, Hales Corners Oshkosh Area School District Greater Milwaukee Education Trust School District of Beloit Marquette University High School Kaukana, Wisconsin 9 0 • r1 ?J APPENDIX B is 0 TABLE OF CONTENTS Page 1. BACKGROUND AMD SUMMARY. . . . . . . . . . . . . . . . . . . . . 1 11. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 111. TERMS AND CONDITIONS OF THE SOCIAL CONTRACT . . . . . . . . . . . . 4 A. Basic Service Tier Rate Relief . . . . . . . . . . . . . . . . . . . 4 1. Creation of a Low-Cost, Lifeline Basic Service Tier. . . . . . . 4 2. BST Price Cap . . . . . . . . . . . . . . . . . . . . . . . . . . 5 3. Additions To Basic Service Tier . . . . . . . . . . . . . . . . . 6 B.Equipment Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 C.Resolution Of Existing CPST Rate Cases . . . . . . . . . . . . . . . . 8 D.Migrated Product Tiers . . . . . . . . . . . . . . . . . . . . . . . 9 E.Customer Refunds and CPST Rate Reductions . . . . . . . . . . . . . . . 11 F.Infrastructure Upgrade Requirement . . . . . . . . . . . . . . . . . . 12 1. Upgrade Requirement. . . . . . . . . . . . . . . . . . . . 12 2. No Impairment Of Local Authority . . . . . . . . . . . . . . . . 13 3. Reporting Requirements . . . . . . . . . . . . . . . . . . . . . 13 4. CPST Rates Subject To Price Cap: 5 il 14 ure To Meet Target . . Fa 15 6. Adjustments To Systems Subject To Contract . . . . . . . . . . . 15 G.BST And CPST Rate Stability . . . . . . . . . . . . . . . . . . . . . . 16 H.Additional Consumer Benefits . . . . . . . . . . . . . . . . . . . . . 17 1. Service To Public Schools . . . . . . . . . . . . . . . . . . . . 17 2. Home Wiring . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 I.Miscellaneous Provisions . . . . . . . . . . . . . . . . . . . . . . . 20 1. Modification And Termination . . . . . . . . . . . . . . . . . . 20 2. Authority To Enforce Contract . . . . . . . . . . . . . . . . . . 21 3. All Necessary Waivers And Preemptions Deemed Granted . . . . . . 23 4. Effect On Other Proceedings . . . . . . . . . . . . . . . . . . . 24 5. No Admission Of Wrongdoing . . . . . . . . . . . . . . . . . . . 25 6. Contract In Public Interest . . . . . . . . . . . . . . . . . . . 25 7. Legal Challenges . . . . . . . . . . . . . . . . . . . . . . . . 25 8. Effective Date And Term . . . . . . . . . . . . . . ... . . . . . 26 9. Public Notice . . . . . . . . . . . . . . . . . . . . . . . . . . 28 10. Force Majeure. 28 11. Severability . - - 28 12. Entire Understanding . . . . . . . . . . . . . . . . . . . . . 29 • • n w SOCIAL CONTRACT FOR TIME WARNER CABLE 1. BACKGROUND AND SUMMARY. The "Social Contract" set out in this document (the "Contract") relates to certain services and equipment offered by Time Warner Cable ("TWC") actually or potentially subject to regulation under the terms of the applicable provisions of Title VI of the Communications Act of 1934, as amended ("Act"). The Federal Communications Commission ("FCC" or "Commission") finds that this Contract will advance the public interest by: (i) assuring fair and reasonable rates for TWC's cable service customers; (ii) facilitating the creation of a low-cost, lifeline basic service level; (iii) improving TWC's cable service by substantially upgrading the channel capacity and technical reliability of its cable systems; and (iv) reducing the administrative burden and cost of regulation for local governments, the FCC and TWC. The Contract has been negotiated between TWC and the FCC in accordance with the FCC's authority to consider and adopt "social contracts" as an alternative to other regulatory approaches applicable to cable television rates, as modified and amplified in the order adopting the Continental Social Contract, and its authority to regulate TWC's cable services under the Act, particularly in light of the Statement of Policy set forth in Section 2(b) of the Cable Television Consumer Protection and Competition Act of 1992, Pub. L. No. 102-385, 106 Stet. 1460 (111992 Cable Act"). Except as otherwise provided for herein, this Contract covers all of TWC's cable systems as of the Publication Date (as hereinafter defined). Until such time as there is a final decision permitting the transfer of the Laredo, Texas cable television franchise to TWC, this Contract shall not apply to the affected cable system serving Laredo, Texas. II. DEFINITIONS. The following terms shall have the meanings set forth below. Certain other terms are defined elsewhere herein. A. "Basic Service Tier" or "BST" means the cable service level which includes the signals of any local television broadcast stations and any public, educational or governmental access channel required by the relevant franchise to be carried on the BST. B. "Cable Programming Service Tier" or "CPST" means any tier of video programming service, but shell not include (i) video programming carried on BST; (ii) video programming when offered on a per channel, multiplexed, a la carte or per program basis; (iii) any Migrated Product Tier; or (iv) any New Product Tier ("NPT") as defined by the Going Forward Rules and 47 C.F.R. ^U 76.987. C. "Cost" means that the prices so designated have been designed to recover actual costs, including a reasoneble rate of return as defined in the FCC Cost of Service Order, supra, at ^T 207. D. "Current Rates" means those TWC system rates that are in effect as of the Publication Date, or rates that will became effective after the Publication Date and for which notice was given to subscribers on or before the Publication Date. E. "CVI" means Ceblevision Industries Inc., its subsidiaries and affiliates. 0 F. "Effective Date" means the date on which the FCC releases an order approving this Contract. G. "Eligible Subscribers" means those CPST subscribers to any of TWCIs cable systems listed on Appendix A to this Contract at the time Refunds are issued. H. "Going Forward Rules" means the FCC's rules adopted in the Sixth Order on Reconsideration, 76 RR 2d 859 (1994), including all subsequent clarifications and amendments. 1. "Migrated Product Tier" or "MPT" means (a) a tier consisting of up to four services moved from a system's existing BST or CPST(s) as described in Section III.D.S. or (b) any Superstation Tier or any tier consisting of those services remaining on a Preferred Tier, as defined in Section III.D.1., after any excess channels have been shifted to CPST as described in Section III.D.3. J. "Publication Date" means the date on which the Commission releases its initial Public Notice relating to this Contract. K. "Refund" means a prospective bill credit issued to Eligible Subscribers. L. "Time Warner Cable" or NTWC" means the collective reference to Time Warner Entertainment Company, L.P. ("TWE"), TWI Cable Inc. ("TWI Cable") and Time Warner Entertainment-Advance/Newhouse Partnership ("TWE-A/N"), or any subsidiary, division or affiliate thereof, or, where consistent with the context, any cable system owned or managed by TWE, TWI Cable or TWE-A/N, except where particular provisions of this Contract specify a more limited scope. ?.J u 111. TERMS AND CONDITIONS OF THE SOCIAL CONTRACT. A. Basic Service Tier Rate Relief. 1. Creation of a Low-Cost, Lifeline Basic Service Tier. a. In order to provide its subscribers with the option to purchase a low-cost BST, no later than six months after the Effective Date, TWC will reduce its BST rates on systems serving at least 85% of TWC's total subscribers to a level 10% below the Current Rates. In any system where the BST rates are initially reduced by 10% as described above, but where BST rates are pending review on the Publication Date, TWC will reduce its BST rates further by 10% from the level ultimately determined to be reasonable, after such determination is no longer subject to review or appeal. TWC may increase its CPST rate(s) in any system by an amount necessary to recoup the reduction in revenues due to the 10% adjustment in the BST rate in that system. Such adjustment to CPST rates shall be submitted to the FCC for review. A local franchising authority ("LFA") my elect not to have TWC implement the BST rate reduction and corresponding CPST adjustment described in this paragraph in its franchise area by providing notice to TWC and the Commission no later than 45 days following the Effective Date. Such notice shell (a) be in writing, (b) be addressed to the Office of the Secretary, Federal Communications Commission, 1919 M Street, N.W., Washington, D.C. 20554, with a copy to Time Warner Cable, 300 First Stamford Place, Stamford, CT 06902-6732, attention: General Counsel, (c) identify the local franchising authority, the community unit identification number for the franchise area, and (d) reflect the clear intent to not have TWC implement the BST rate reduction described in Section III.A.I.a of this Contract. However, such notice need not meet any other requirements and may be in letter form. An election by a LFA to opt out of the provisions • 0 of this paragraph shall not otherwise affect the applicability of the remaining provisions of this Contract in such community. b. In order to achieve its goal of creating low-cost BSTs, TWC wilt restructure the BST on the remaining systems where the BST has not been reduced by 10% as described above so as to create a lifeline-type service. Such restructuring wilt involve shifting channels from the BST to an existing or newly created CPST (or MPT as permitted by Section III.D.5.) and not to any service level which would not be subject to rate review upon the receipt of a valid complaint under current FCC rules. Such restructuring will not be deemed by the FCC to be a "fundamental change" of any affected service tier. At the time of such restructuring, the BST rate wilt be reduced by an amount equal to the percentage of the BST channels shifted to CPST. Where the BST channels are shifted to a newly created CPST, the rate for the CPST will be equal to the amount of the reduction in the BST rate. Where the BST channels are shifted to an existing CPST, the rate of the existing CPST wilt be increased by an amount necessary to recoup the reduction in revenues resulting from the reduction in the BST rate as described above. The 10% BST rate reduction, with CPST offset, will be implemented upon restructuring of such remaining systems. Nothing herein shall be deemed to affect any otherwise enforceable franchise provision relating to programming services to be provided by TWC. 2. BST Price Cap. After implementation of the 10% BST rate reduction described above, all such reduced BST rates wilt be subject to a price cap, even in currently unregulated TWC systems. TWC wilt continue to be permitted to adjust BST rates for changes in external costs and inflation, subject to any necessary LFA approval. The BST rate reduction referred 0 to above will have no adverse effect on any Form 1210 BST rate adjustment request which may be pending before an LFA as of the Publication Date or thereafter. Nothing herein shall authorize review of the reasonableness of any BST rate adjustments in communities where the LFA has not elected to certify in accordance with Section 76.910 of the Commission's rules. 3. Additions To Basic Service Tier. TWC shall not add any additional channels to any BST for the term of this Contract, except where required by applicable law, regulation or contract lawfully entered into pursuant to such law or regulation, or to provide additional local origination channels or other non-satettite delivered channels. In the event that the FCC's ant-carry rules are repeated or rendered invalid or inapplicable to TWC by a court of competent jurisdiction, TWC will have the right to substitute any programming service not then carried by such system for up to an average (weighted by BST subscribers) of three local television broadcast stations deleted from carriage per system covered by this Contract, but no more than five such substitutions on any given system, even if more than five television broadcast stations are deleted. Such substitutions shalt have no impact on BST rates other than due to the net change in programming costs. In the absence of must-carry requirements, however, any local television broadcast stations which TWC continues to carry will be carried on the BST. Any such changes to BST will be made only upon provision of thirty days advance notice to the Commission and to affected LFAs and subscribers. Upon receipt of any necessary LFA approval, TWC wilt be permitted to implement appropriate BST rate adjustments to reflect any such added or substituted channels. Such adjustments (other than adjustments to BST E required by any retransmission consent agreement) shall not be subject to the annual BST adjustment limitation set forth in Section III.G:1. B. Equipment Rates. TWC will be permitted to establish a blended rate, averaged for each of the following equipment basket categories: Cl) hourly service charge, (2) installations, (3) remote control devices, (4) non-addressable converters, (5) addressable converters, (6) other leased equipment, and (7) customer tier changes, by geographic region as reflected on Appendix B to this Contract (and any reasonable modifications to such regions). Equipment rates will be adjusted annually to reflect changes in regional equipment Costs in each category. At least thirty days prior to implementation of the first CPST adjustment authorized pursuant to Section III.F.4., but not sooner than December 1, 1995, TWC will submit a single Forma 1205, or equivalent reasonably acceptable to the Commission, for each region to the FCC, and will submit annual updates to such filings thereafter for Commission review. Any data required to support such annual equipment rate adjustments may be based on the four most recent available quarterly financial figures. TWC may begin charging revised equipment and installation rates to customers based upon the updated filing upon thirty days' notice. These revised equipment and installation rates will be subject to refund if the Commission later concludes that lower region-wide rates are called for by such filings and applicable rules. Such region-wide equipment and installation charges as TWC establishes and the Commission approves pursuant to this Contract shall be subject to enforcement by local franchising authorities. Should any LFA find that TWC's equipment and installation rates charged exceed those permitted by the Commission, the LFA may order TWC to make refunds of any excess charges as necessary to comply with the equipment and installation charges permitted by the Commission. C. Resolution Of Existing CPST Rate Cases. 1. All CPST cases or complaints currently pending before the Commission are resolved pursuant to and as a result of the adoption of this Contract, as set forth in Appendix A to this Contract. 2. The Commission has reviewed TWC's pending CPST filings. In tight of its review, the covenants and representations contained in this contract, and in express reliance thereon, and in order to conserve Commission resources, avoid litigation costs, and achieve the other benefits to the public contained in this Contract, the Commission agrees to resolve ail CPST cases and complaints involving TWC currently pending before it. 3. In addition to those CPST rates which are subject to proceedings that are being settled as set forth in Appendix A to this Contract, alt other Current Rates, as adjusted for inflation and changes in external costs as of the Publication Date, charged by TWC for CPSTs are deemed reasonable under the Act and the Commission's rules. 4. At such time as TWC makes its first CPST rate adjustment authorized by this Contract, such increase shalt be netted against any Current Rate which requires reduction in accordance with the CPST settlements approved by this Contract, provided, however, all such required reductions to Current Rates shall be implemented no later than the final date for issuance of Refunds pursuant to Section III.I.B.d of this Contract. 5. BST rate disputes will continue to be resolved in the ordinary course, pursuant to applicable FCC rules. • D. Migrated Product Tiers. 1. The Commission and TWC acknowledge (i) that certain TWE-A/N systems (the "Migration Systems") have been providing collective offerings of a la carte channels which were created between April 1, 1993 and September 30, 1994 and which consist of one or more (a) low-priced collective offerings, containing primarily superstations, at an average price of less than $0.29 per channel, excluding copyright fees (a "Superstation Tier"), and (b) low-penetrated collective offerings predominantly containing channels which had been affirmatively marketed as a separate tier before being offered on an a la carte basis (a'"Preferred Tier") and (ii) that such offerings provided by such Migration Systems cumulatively contain in excess of six channels migrated from BST and/or CPST. 2. Any Superstation Tier offered by a Migration System shall be treated as a separate MPT. The initial price of such MPT will be based on the Current Rate of the Superstation Tier. Where neighboring TWC systems each offer an NPT or MPT consisting primarily of superstations and such NPT or MPT would be priced differently under the Commission's regulations and this Contract, an adjustment may be made between or among such Current Rates on a revenue neutral basis so that a uniform rate for such NPTs/MPTs may be established. in selecting services to be returned to a CPST in accordance with paragraph 3 below, the Migration System serving Charlotte, North Carolina and surrounding areas my move services from a Superstation Tier in an effort to achieve a more uniform line-up among such adjacent NPTs and MPTs. All such uniformly priced NPTs/MPTs shall be subject to the price cap set forth in paragraph 7 below. 3. Any Migration System shall select services from the Preferred Tier(s) to return to a CPST so that the cumulative number of migrated services remaining on any Preferred Tier(s) and any Superstation Tier is no greater than six. The subscriber's bill shall be adjusted by no more than 25 cents per such channel returned to the CPST. The services not returned to a CPST from the Preferred Tier(s) shall be offered as a single MPT, separate from any Superstation Tier. The initial price of any such MPT will be based on the Current Rate of the Preferred Tier(s), reduced by an amount equal to the percentage of channels shifted to a CPST. Eligible Subscribers shall be issued a CPST Refund as reflected in Appendix A. 4. On its own motion, the Cable Services Bureau, consistent with the terms set forth herein, hereby reconsiders any Letter of Inquiry ("L01") rulings involving any Migration System (LOI-93-24; LOI-93-32; LOI-93-47; LOI-93-48), and TWE-A/W hereby petitions to withdraw its Applications for Review of such LOI rulings and such petitions are hereby granted by the Commission. The principles in this Section III.D. relating to the unregulated treatment, for benchmark calculation purposes, of up to six migrated channels, as incorporated in such reconsidered LOI rulings, shall be binding on any LFA decision relating to BST rates charged by any Migration System. 5. on each of its systems which does not, as of the Publication Date, offer a collective offering of a la carte channels created between April 1, 1993 and September 30, 1994, TWC may nave a maximum of four existing BST or CPST services to a single MPT per system. TWC will set the initial rate for any new MPT created pursuant to this paragraph at the same level, on a per channel basis, that is set for that franchise's CPSTs under the Contract. The rates for any BST or CPST from which such channels are moved shall be reduced on a per channel basis so that the initial creation of any such MPT shall be revenue neutral. 6. TWC may not require the subscription,to any tier, other than the BST, as a condition for subscribing to an MPT, and may not require subscription to an MPT as a condition for subscribing to a CPST. Because the restructuring involved in the creation of MPT(s) as described herein does not fundamentally change the service provided to subscribers, TWC will not be required to re-market any of the affected services to existing subscribers. Any services migrated may be offered on an a la carte basis as well as in a package. 7. For the period prior to April 1, 1997, the price of any MPT established pursuant to this Section III.D. may be adjusted solely to reflect unrecovered inflation and external cost increases, including that currently accrued but uncharged, in the mariner permitted by the Commission's rules for CPSTs. There will be no limitation on the number of new services TWC may add to an MPT. The price of any such MPT may be increased to reflect new services added to the MPT by an amount not to exceed S.20 per added clarinet, plus the actual license fee(s) for the added channel(s). 8. on or after April 1, 1997, TWC may convert any MPT into an NPT, as defined in 47 C.F.R. ^U 76.987, including subsequent clarifications or amendments. Because customers will be able to subscribe to CPST(s) and an MPT on a stand-alone basis, as of April 1, 1997 the Commission will regulate MPT rates in the same manner in which the Commission currently regulates MPT prices. Such NPTs will be treated as all other NPTs under the Commission's rules, provided such MPT is offered without a buy-through requirement of any tier other than the BST. E. Customer Refunds and CPST Rate Reductions. Pursuant to the settlement of TWC's existing CPST rate cases as described in this section, TWC will provide Refunds, • • which in the aggregate total in excess of S4.7 Million, plus interest computed in accordance with FCC requirements for subscriber refunds, and shalt implement CPST rate reductions, on the terms and conditions, and in the manner, set forth below. 1. In settlement of all CPST complaints involving the review of an FCC Form 393 and/or FCC Form 1200 submitted by TWC which are pending as of the Publication Date, TWC will provide a Refund to each Eligible Subscriber as set forth in Appendix A to this Contract. 2. TWC agrees to waive its right to a credit for the franchise fee paid to the LFA on the CPST Refund amount. 3. Communities which receive CPST reductions to Current Rates, in accordance with Section III.C.4. of this Contract, are set forth in Appendix A to this Contract. F. Infrastructure Upgrade Requirement. 1. Upgrade Requirement. TWC will upgrade all its cable systems so as to meet the following technical standards: each TWC cable system with a present capacity of at least 550 MHz will have a bandwidth capacity of at least 750 MHz within five years after the Effective Date; all other TWC cable systems wilt have a bandwidth capacity of at least 550 MHz within five years after the Effective Date. At least 50% of all TWC subscribers will be served by a system with a capacity of at least 750 MHz, of which at least 200 MHz is expected to be allocated to digital distribution. Fiber-to-the-node architecture will be deployed to improve signal quality and reliability of such systems. At least 60% of the new analog services added • during the term of the Contract will be added to the CPST and not to BST, NPT or MPT. On average (weighted by CPST subscribers), CPST service offered on the upgraded systems wilt contain at least 15 additional channels by the end of the Contract. TWC agrees to invest S4 Billion in capital costs in connection with the upgrade of its cable systems. At least 60% of all capital expended in connection with the upgrade commitment described herein shall be applied for the benefit of BST and CPST subscribers. TWC has selected, and will select, its systems to be upgraded without discrimination based on socio-economic status. 2. No Impairment Of Local Authority. Nothing herein shall restrict the legal authority of LFAs to negotiate upgrades for their particular franchise areas which exceed the scope of this Contract. 3. Reporting Requirements. No later than 90 days following the end of each calendar year during all of which the Contract is in effect, and within 90 days following the end of the last month following expiration of this Contract other than calendar year end, TWC will provide a progress report to the FCC, for the year or such shorter period then ended during which this Contract was in effect, setting forth the extent of progress TWC has made to upgrade systems in compliance with Section III.F.1.; the number of BST and CPST subscribers benefitting from such upgrades;. system reliability and service improvements resulting from such upgrades completed during the previous calendar year; and TWC's projected system upgrade activities during the following year of the Contract. Such report will be served on each LFA. The FCC reserves the right to inspect the books and records of TWC and interview corporate employees for the purpose of determining compliance with this Contract. is 4. CPST Rates Subject To Price Cap. a. Beginning January 1, 1996, TWC will be permitted to increase the monthly rates for the most highly penetrated CPST on each of its systems by 51.00 during each year of this Contract. These rate increases have been established at a level designed to recover solely those costs allocable to BST and CPST subscribers. b. During the life of this Contract, the only other permitted increases to CPST rates will be for inflation and increases in external costs. In particular, during the term of this Contract, TWC will not avail itself of any additional per-channel adjustment permitted by the Going Forward Rules for any programming services added to the CPST after the Effective Date hereof. Except as to TWC systems which had already commenced a roll out of the addition of channels to CPST and associated per channel adjustments pursuant to the Going Forward Rules prior to the Publication Date, any per channel adjustments implemented pursuant to the Going Forward Rules by any TWC 'systems for services added by such systems after the Publication Date, but prior to the Effective Date, shall be netted against the initial CPST adjustment authorized by Section I-II.F.4.0. above. Upon implementation of any such initial CPST adjustment, net of any per channel adjustment taken by such TWC systems which have added services after the Publication Date, such TWC systems will be allowed to concurrently adjust CPST rates to reflect any license fees not already passed through to subscribers associated with any such services added to such systems after the Publication Date. TWC will not seek to pass through to subscribers any additional capital costs relating to the upgrade requirement in this Contract pursuant to any provision of the Commission's rules, including, but not limited to, any rules or policies adopted by the Commission relating to the pass through of external costs, upgrade • r incentives, or cost-of-service. TWC reserves, the right to seek to pass through additional capital costs associated with any upgrades specified by any franchise agreement, local law, regulation or ordinance which exceed the requirements of this Contract. Nothing herein shall affect the ability of TWC to implement any New Product Tier ("NPT"), add channels to any such NPT, or establish rates for any such NPT, subject to the FCC Going Forward Rules, or to implement any MPT permitted by the terms of this Contract. 5. Failure To Meet Target. If TWC fails to meet the upgrade requirement so as to provide the bandwidth capacities described in Section III.F.1. of this Contract within the term provided for therein, the then existing CPST subscribers to the cable systems as to which such commitment has not been met will be entitled to refunds (in the form of prospective bill credits) of the increases (net of inflation and external cost adjustments) in CPST rates taken under Section III.F.4.a. of this Contract, plus interest computed in accordance with FCC requirements for subscriber refunds, and a liquidated damages penalty of 15X of such refund amount. 6. Adjustments To Systems Subject To Contract. a. TWC shall include any cable systems acquired from CVI within the provisions of this Contract, provided that the CPST settlement provisions of this Contract shall not apply until any applicable settlements are mutually agreed upon between TWC and the Commission. Addition of any other TWC systems within the provisions of this Contract shall be subject to FCC approval, which will be expeditiously decided and not be unreasonably withheld. Each LFA representing any such system to be added to the provisions of this Contract shall be served with a copy of the Contract and shall be afforded a 45-day opportunity to opt out of the lifeline BST provisions in accordance with Section • • III.A.1.a. of this Contract. The provisions of this Contract will become effective as to any such additional system upon such notification to affected LFAs, which date shall become the Publication Date as to such system, and the provisions of this Contract shall extend for a period of five years from that date. b. In the event of a sale of any system during the period of applicability of this Contract, the purchaser may elect, with the concurrence of the FCC, for the provisions of this Contract to continue to apply to such system. Such FCC concurrence shall be expeditiously decided and not be unreasonably withheld. In the event the purchaser elects not to have the provisions of this Contract apply to any such system, the CPST subscribers to such system shall be eligible for the refunds calculated pursuant to Section III.F.5. in the event the upgrade commitment described in Section III.F.1. has not been completed prior to the consummation of such sale. C. The upgrade capital costs set forth in Section III.F.1. of this Contract shall be adjusted, as mutually agreed to by TWC and the Commission, to reflect any addition or deletion of systems subject to this Contract. The approval from the Commission of such adjustment shall be expeditiously decided and not be unreasonably withheld. G. BST And CPST Rate Stability. 1. In the event the FCC establishes regulations allowing annual adjustments to BST and CPST rates, with procedures designed to reduce regulatory lag, TWC agrees to be bound by such regulations and to elect to adjust BST and CPST rates on an annual basis pursuant to such regulations, provided, however, TWC shall not be delayed in implementing its annual adjustments to CPST rates as set forth in Section III.F.4. due to regulatory lag related to the BST rate approval process. 2. TWC will not elect to file cost-of-service showings to justify BST or CPST rate levels above the level authorized by this Contract for any system subject to this Contract for the term hereof. H. Additional Consumer Benefits. 1. Service To Public Schools. a. TWC shall offer service connections at one outlet in 100% of the public schools (Grades K-12) located within 200 feet from the activated plant of its cable systems. Such connections will be made free of charge and as promptly as possible to all such schools requesting connections. TWC will offer such service connections to any other such public schools located within its franchised service areas at Cost. If any internal wiring installation is requested to serve additional outlets in such schools, it will be provided at TWC's Cost of materials and labor at the applicable Hourly Service Charge; provided, however, that such internal wiring will be provided without charge if TWC is able to coordinate with other comparable electrical wiring installation in cases of new construction or substantial rehabilitation of existing schools. Any such public school may elect to install its own internal wiring and to bear the cost thereof. BST and CPST service will be provided to each outlet in such schools free of any charges. b. TWC shall offer service connections, including any requested internal wiring for additional outlets, at Cost to env private Secondary School, as defined by and which r Title I of the Elementary and Stco-odary Education A t of 1965, 20 U S C ^U 241a a seq andlw ich is located within 200 feet from the activated plant of its cable systems. BST and CPST service will be provided to each outlet in such schools free of any charges. TWC will offer such service connections to any other such private Secondary Schools located within its franchised service areas at Cost. Any such private Secondary School may elect to install its own internal wiring and to bear the cost thereof. C. TWC will provide a free monthly educational program listing to each corrected school. Additional copies of such program listings will be provided, if requested by a school, at Cost. Such educational program listing will identify and describe programming on the TWC system that is appropriate for use in the classroom and will provide suggested curriculum support ideas. d. TWC will develop and provide to connected schools materials for teachers that explain the educational applications of TWC's broadband cable systems. The materials will include a self-explanatory notebook and video. one copy of such materials will be provided at no charge to all school districts with connected schools in franchise areas served by TWC. Additional copies of such materials will be provided, upon request, at Cost. e. Upon successful development by.TWC and Time Inc. of an on- line service for personal computers, TWC will provide each connected school with a free connection to this on-line service to the extent it is available on the local TWC cable system. Upon request, each connected school will receive one free modem and free access to the TWC/Time Inc. on-line service for use during the school year. Additional modems will be made available, upon request, at Cost. Free access to the TWC/Time Inc. on-line service will be provided through each such modem for use during the school year. In addition, TWC will sponsor a workshop in each franchise area to educate teachers about the TWC/Time Inc. on-line service and to provide them with an opportunity for hands-on training. f. To the extent a local franchise agreement contains an obligation to provide connections to schools as agreed, to herein, TWC agrees not to seek to recover any such costs for these connections as externals other costs; 2. Nome Wiring. a. Prior to a customer's termination of cable service, TWC will not restrict the ability of a customer to remove, replace, rearrange or maintain any cable wiring located within the interior space of the customer's dwelling unit, so long as such actions do not interfere with the ability of such TWC system to meet FCC technical standards or to provide services to, and collect associated revenues from, that customer or any neighboring customer in a multiple dwelling context. b. TWC will provide customers with a notification upon commencement of service, and annually thereafter, advising them of their rights relating to home wiring. Such notice will advise customers that they may either (i) remove, replace, rearrange or maintain the home wiring themselves, (ii) select a qualified third party contractor, or (iii) request the TWC system provide such service at standard hourly installation rates, plus materials at Cost. C. Such notice will inform customers that if any home wiring is improperly installed or rearranged by anyone other than TWC, and any harmful or improper signal leakage occurs as a result, the customer may be held responsible for the Cost of rectifying the problem. Pursuant to FCC rules, TWC recognizes that it is required to terminate service to any location where signal leakage problems are not corrected. d. TWC customers will be encouraged to use high quality home wiring materials to avoid signal leakage and to maintain signal quality. Such notice will offer to supply such materials to subscribers at Cost. e. TWC will provide a model of this notice to the FCC for approval prior to its dissemination to its customers, such approval not to be unreasonably withheld. 1. Miscellaneous Provisions. 1. Modification And Termination. a. Except as otherwise provided herein, this Contract may not be terminated or modified without the mutual agreement of TWC and the Commission. b. TWC may petition the Commission to modify or terminate this Contract based on any relevant change in applicable laws, regulations or circumstances. TWC will serve a copy of any such modification or termination petition, and the FCC Public Notice relating thereto, on the LFAs for the affected systems. In no event shalt TWC be required to make more than one mailing to each LFA for any given modification or termination request. Interested persons will have 30 days after the FCC releases an appropriate Public Notice to comment and 15 days for reply comments before the FCC acts on any such TWC petition. The FCC's consent to any such termination or modification petition shall be demonstrated by an order issued by the FCC's Cable Services Bureau or at the FCC's option by the Commission itself. The FCC shall act expeditiously on such petition and grant of the petition shall not be unreasonably withheld. C. In the event of any changes to the provisions of the Act or any material changes to the FCC rules thereunder relating to rates (BST, CPST or equipment) that are favorable to TWC, any TWC system may elect to be relieved from the relevant rate provisions (Sections III.A.2., III.A.3., III.B., III.D., III.F.4. and III.G.) of this Contract accordingly, but shall remain bound by all other provisions of this Contract. In the event any such system elects to be relieved from such contract provisions in favor of such favorable regulatory provisions such system will only be allowed to recover any incremental amount that results under such favorable regulatory provisions in excess of any amount already recovered pursuant to Section III.F.4.a. of this Contract. Nothing herein shall restrict the ability of any TWC system to adjust CPST rates in the event CPST rates are not regulated based upon changes to the Act or FCC regulations. d. The Commission expressly recognizes that TWC has relied on the current federal law and FCC regulations governing cable television programming and rates in entering into this Contract, and that the Contract represents an accommodation between the FCC and TWC that generates substantial public interest benefits. Consequently, the Commission agrees not to find any CPST or equipment rate adjustments implemented in accordance with this Contract to be "unreasonable" under any subsequently-modified FCC regulations or under any subsequently-modified applicable statute, to the extent the Commission has discretion under such statute in determining whether any such rate adjustments are unreasonable. 2. Authority To Enforce Contract. a. Nothing in this Contract shalt restrict the ability of LFAs to enforce the provisions of otherwise valid local franchise agreements, local laws,' regulations and ordinances that are not the subject of or affected by the terms of this Contract, except that LFAs may not regulate rates or order refunds for the services and equipment subject to this Contract except in accordance with the terms of this Contract. Nothing herein shalt affect the enforceability of any otherwise valid preexisting local franchise agreement, ordinance, local law or regulation which provides benefits which exceed those provided in this Contract relating to system upgrades or the wiring of schools, nor shall LFAs be restricted in their authority to negotiate for such additional benefits after the Effective Date of this Contract. It is not the intent of either the FCC or TWC that this Contract create any judicially enforceable rights in any other parties. This Contract shall be enforceable against TWC by the FCC exclusively and no other party may seek to enforce this Contract as a third party beneficiary or otherwise, except that subscribers to TWC system which increase their CPST rates will still have the right to file complaints with the FCC to the extent permitted under applicable FCC rules. b., For purposes of the Commission's authority to enforce any provision of this Contract against TWC, including enforcement actions brought in U.S. District Court, TWC agrees that any breach of this Contract by TWC shall be considered the equivalent of a violation of an order of the FCC, entitling the Commission to exercise any rights and remedies attendant to the enforcement of a Commission order. However, aside from this limited purpose, TWC and the FCC agree that a breach of this Contract by TWC is not to be considered by any other party as the equivalent of a violation of an otherwise-valid FCC regulation or FCC order. In particular, any failure to comply with this Contract shall not be a basis for any denial of a franchise renewal by, or other enforcement action of, any LFA. • 0 3. All Necessary Waivers And Preemptions Deemed Granted. a. in addition to the specific waivers of the Commission's rules identified in the Contract, the Commission order adopting this Contract shall affirmatively state that any and all waivers of the Commission's rules, and any and all modifications to Commission forms, necessary to effectuate the terms of this Contract are deemed to be granted thereby. The Commission finds that the concurrent exercise of non-federal regulatory authority over the subject matter of this Contract is an impermissible interference with the FCC's regulatory authority and with its ability to accomplish its objectives in entering into this Contract. Accordingly, the Commission hereby expressly preempts any state or local law, regulation, ordinance or franchise that is inconsistent or conflicts with this Contract. The Commission will not assert in any proceeding that TWC's compliance with the terms of the Contract violates any Commission rule or order and, in any proceeding before the Commission brought by a third party, a showing by TWC that it has complied with the terms of the Contract shall constitute a defense to any claim that TWC's actions in meeting the terms of the Contract constitute a violation of any applicable Commission rule or order. b. CPST rate increases referenced in Section III.F.4. of this Contract will not be subject to prior FCC approval pursuant to Section 76.960 of the FCC rules or otherwise, even if an adverse decision has been issued by the FCC as to any TWC CPST rate in the year prior to the Publication Date. Subscribers to TWC systems which increase their CPST rates still have the right to file complaints with the FCC to the extent permitted under applicable FCC rules. • • 4. Effect On Other Proceedings. a. The Commission agrees that it will not institute, on its own emotion, any proceedings against TWC based upon the information obtained during the consideration of the Contract. In addition, in the absence of additional facts, the Commission agrees that any allegations and other circumstances involved in consideration of this Contract or settlement of the pending rate cases will not be used against TWC with respect to any future proceedings at the Commission. Nor may they be used against TWC as evidence of any refund Liability due subscribers in any proceeding conducted by any LFA. b. This Contract is intended to resolve the CPST complaints being settled in accordance with Section III.C.; to provide certainty regarding the CPST rate adjustments determined to be reasonable in accordance with Section III.F.4., and to otherwise cover those matters expressly set forth herein. The Commission and TWC acknowledge the existence of various lawsuits to which they are both parties. The Commission and TWC agree that this Contract shall have no effect on any pending lawsuit to which TWC is a party or, subject to Section III.I.7., on any future challenges to the Commission's regulatory authority that TWC my elect to initiate, other than a challenge to the Commission's regulatory authority to enter into and enforce this Contract. C. The Commission expressly recognizes that this Contract is of limited duration and scope, and my be modified or terminated before its term has ended as provided for in Section III.I.1. of this Contract. Accordingly, the Commission and TWC agree that this Contract does not moot any legal challenge or defense relating to any provision of the Act or to the Commission's regulatory authority that TWC has brought or may bring in the future, other than a challenge to the Commission's regulatory authority to r? \_J 0 enter into and enforce this Contract. The Commission will not seek to dismiss any such legal challenge on grounds that this Contract residers such challenge moot and will actively oppose any assertion in court that this Contract moots any such challenge. 5. No Admission Of Wrongdoing. This settlement is without a finding by the Commission of any wrongdoing by TWC or any of its systems, subsidiaries or affiliates. Neither this Contract nor any aspect of the settlement contained herein constitutes an admission by TWC of any violation of, or failure to conform to or comply with, any law, rule or policy applicable to TWC or any of its systems, subsidiaries or affiliates. 6. Contract In Public Interest. In consideration of the Commission entering into this Contract, and resolving and terminating pending CPST cases and complaints in accordance with the terms of this Contract, TWC hereby agrees to the terms, conditions and procedures contained in this Contract. TWC and the Commission each acknowledge that it believes this Contract, and the terms, conditions and procedures hereof, provide for and wilt facilitate a fair and expeditious resolution of the cases and complaints that are the subject hereof in a manner that serves the public interest. 7. Legal Challenges. a. TWC waives any right it may have to any judicial review or appeal, or any other right to otherwise challenge or contest the validity of any order by the Commission adopting this Contract, or to use'this Contract as evidence in any such proceeding. TWC agrees that the provisions of this Contract shall be incorporated by reference in the Commission's order formally approving this Contract. TWC and the 0 Commission agree that they will each actively defend, before any forum, any Commission order adopting the provisions of this Contract against any appeal of or other legal challenge by any third party to any such order. TWC and the Commission each agree that they will reasonably cooperate with the other in any such defense of the Contract and any such order. b. If the Commission, or the United States on behalf of the commission, brings an action in any United States District Court to enforce the terms of any Commission order adopting this Contract, TWC agrees, subject to the terms of the immediately preceding paragraph, that it will not contest the validity of such Commission order, or the Commission's authority to enter into the Contract. TWC reserves the right, in defense of such an enforcement action, to demonstrate that it has complied with the provisions of the Contract or to assert its own interpretation regarding any performance obligations imposed by the Contract which may be subject to dispute. 8. Effective Date And Term. a. The term of this Contract shall commence on the Effective Date and, subject to Section 111.1.1. above regarding modification and termination and Section III.P.6. above regarding adjustments to systems covered, shall continue in effect for five (5) years. b. TWC and the Commission agree to execute this Contract as of the Effective Date promptly upon issuance by the Commission of an order approving this Contract. C. The Commission and TWC expressly acknowledge and agree that the effectiveness of this Contract is contingent upon resolution and termination of TWC's CPST proceedings; issuance by the Commission of an order approving the Contract, and 0 0 TWC's compliance with the terms, conditions, and procedures set forth in the Contract. If this Contract is not approved by Commission order and accepted by TWC, or if the Contract is otherwise rendered invalid, in whole or in part, by final order of any court of competent jurisdiction, the Contract or such part my not be used in any fashion by the FCC in any legal proceeding. d. TWC may commence any necessary or appropriate actions to initiate the rate adjustment processes embodied in this Contract at any time after the Effective Date, provided, however, as to any system listed on Appendix A, TWC shall not implement any rate adjustment pursuant to Section III.F.4.a. of this Contract unless the Refund provided for in Section III.E. has been issued as to such system, or the issuance of such Refund begins simultaneously with such rate adjustment. All Refunds will be issued within six months of the first rate adjustment implemented pursuant to Section III.F.4.a. To facilitate prompt initiation of the refunds and rate adjustments authorized by this Contract, any local franchise agreement or any state or local law or regulation is preempted on a one-time basis to the extent that it requires TWC to give advance notice of rate and service changes to subscribers. Such notice shall be provided by the best means practicable, such as newspaper announcements and/or on-screen messages. Such preemption shall be limited to the period prior to February 1, 1996. If TWC is unable to commence implementation of such refunds and rate adjustments by January 1, 1996, but commences such implementation on or before February 1, 1996, it shall provide at least thirty days notice to LFAs and subscribers. If any subscribers cancels his or her subscription to the relevant CPST within thirty days after the date of the first bill reflecting the CPST adjustment authorized by this Contract, TWC will refund to that subscriber the incremental amount attributable to such increase. • • Public Notice. The Commission will issue promptly a Public Notice in which the Commission proposes to adopt the Contract as a final order, and shalt provide interested parties with thirty (30),days to comment on the Contract and an additional fifteen (15) days in which to file reply comments. 10. Force Majeure. TWC shall not be deemed in breach of its commitments under this Contract in the event of any delay or failure in performance by any TWC system from any cause beyond its reasonable control and without its fault or negligence, including, but not limited to, acts of God, acts of civil or military authority, government regulations, embargoes, epidemics, war, terrorist acts, riots, insurrections, fires, explosions, earthquakes, nuclear accidents, floods, strikes, power blackouts, unusually severe weather conditions, or inability to secure local permits after all diligent efforts by TWC to secure such permits. 11. Severability. If any provision, clause or part of this Contract is invalidated by order of any court having proper jurisdiction over the subject matter of this Contract, the remainder of this Contract shall not be affected thereby and shall remain in full force and effect; provided, however, that, if either party reasonably determines that such invalidation is material to this Contract, the parties shall negotiate in good faith to reconstitute the Contract in a form that is, to the maximum extent possible, consistent with both the original intent of both parties in entering into this Contract and the rationale of such invalidation order. • 0 12. Entire Understanding. • This Contract and its appendices, as either or both may be amended in accordance with the terms herein, constitute the entire agreement between TWC and the Commission with respect to the subject matter of this Contract and supersede all prior agreements and understandings, whether oral or written, between TWC and the Commission with respect to the subject matter of this Contract. No representation, warranty, promise, inducement, or statement of intention has been made by TWC or the Commission which is not embodied in this Contract, and neither party shall be bound by, or be liable for, any alleged representation, warranty, promise, inducement, or statement of intention not embodied in this Contract or its appendices. • 11 a IN WITNESS WHEREOF, this Social Contract has been duly executed and delivered by or on behalf of the parties hereto as of the Effective Date as defined herein. TIME WARNER ENTERTAINMENT COMPANY, L.P. FEDERAL COMMUNICATIONS COMMISSION By: ' By: Name: Name: Title: Title: TWI CABLE INC. By: Name: Title: TIME WARNER ENTERTAINMENT- ADVANCE/NEWHOUSE PARTNERSHIP By: Time Warner Entertainment Company, L.P. Managing Partner By: Name: Title:2838 1.51 0 APPENDIX A COMMUNITY CUID REFUND Rockledge. . . . . . . . .FL0007 . . . . . . . . . $5,171 Indian Harbor Beach. . . . . . . .FL0009 . . . . . . . . . .2,384 Mel bourne . . . . . . . . . . . . . FLOO13 . . . . . . . . . 14,362 Mel bourne. . . . . . . . . . . FLOO14 . . . . . . . . . 30,759 Volusia County . . . . . . . . . .FLOO15 . . . . . . . . . 12,505 Palm- Bay* . . . . . . . . . . . . .FLOO17 . . . . . . . . . 89,135 West Melbourne . . . . . . . . . .FL0021 . . . . . . . . . .2,198 Cape Canaveral . . . . . . . . . .FLO163 . . . . . . . .1,557 Melbourne . . . . . . . . . . . . . FLO165 . . . . . . . . 717 Orlando. . . . . . . . . . . . FLO181 . . . . . . . . . 18,770 St. Petersburg . . . . . . .FLO196 . . . . . . . . . 63,508 Brooksville. . . . . . . . . . . . FL0240 . . . . . . . . . .3, 3,270 Orlando . . . . . . . . . . . . . . F L0252 . . . . . . . . . 34,089 Lakeland . . . . . . . . . . . . .FL0290 . . . . . . . . . .6,200 Brooksvi I l e . . . . . . . . . . . .FLO312 . . . . . . . . . .6,500 Brooksville. . . . . . . . . . . .FL0314 . . . . . . . . . .8,217 Sandford . . . . . . . . . . . . .FLO322 . . . . . . . . . 14,787 Brooksville. . . . . . . . . . . .FL0597 . . . . . .3,107 Be l l evi ew . . . . . . . . . . . . . FLO622 . . .... . . . . . .7, 7,763 Sa t em . . . . . . . . . . . . . . .MA0063 . . . . . . . . . 11,274 Melrose . . . . . . . . . . . . MA0097 . . . . . . . . . .5 , 080 Stoneham . . . . . . . . . . . . .MA0101 . . . . . . . . . . 322 Kansas City. . . . . . . . . .M00198 . . . . . . . . . 78,801 Jackson* . . . . . . . . . . .MS0080 . . . . . . . . .164,400 Clinton* . ': . . . . . .MS0128 . . . . . . . . . 54,208 Salisbury, including:. . . . . . .M00015 . . . . . . . . . 22,981 East Spencer. . . . . . . . . .NC0285 Spencer . . . . . . . . . . . .MC0158 Granite Quarry. . . . . .NCO407 Rowan County (central). . . . .NC0385 Rockwell. . . . . . . . . . . .MC0677 Faith .NCO676 Cleveland . . . . . . . .NC0574 Wilmington, including: . . . . . .N00016 . . . . . . . . .106,115 Wrightsville Beach. . . . . . .N00041 New Hanover County. . . . . . .NCO140 Le l and . . . . . . . . . . . . . NCO695 Navasa. .NC0692 Shelby, including: . . . . . . . .NCC0027 . . . . . . . . . 20,516 Cleveland County. . . . .NC0279 Polkville . . . . . . . . . . .NC0521 *CPST rate reduction required. 11 Patterson Springs . . . . . . .NC0522 Lawndale. . . . . . . . . . . .MC0523 fallston. . . . . . . . . .MC0524 Boiling Springs . . . . . . . .MC0529 Grover . . . . . . . . . . . . .NCO694 Earl . . . . . . . . . . . . . . MC0693 Waco . . . . . . . . . . . . . . MC0756 Lattimore . . . . . . . . . . .NCO757 Mooresboro. . . . . . . . . . .MC0816 Betwood . . . . . . . . . . . .MC0839 Casar . . . .MC0843 Wilmington-Southport, including: .NC0167 . . . . . . . . . 29,732 Caswell Beach . . . . . . .NC0228 Holden Beach. . . . . . . . . .MC0294 Long Beach. . . . . . . .MC0227 Ocean Isle Beach. . . . . . . .NC0270 Yaupon Beach. . . . . . .MC0172 Boiling Springs Lakes . . . . .MC0862 Brunswick County. . . . . . . .NC0229 Morehead City, including:. . . . .MC0168 . . . . . . . . . 39,706 Atlantic Beach. . . . . . . . .MC0197 Beaufort. . . . . . . . . . . .MC0196 Cape Carteret . . . . . . . . .MC0200 Cedar Point . . . . . . . . . .MC0815 Carteret County . . . . . . . .MC0202 Emerald Iste. . . . . . . . . .MC0199 Newport .NCO201 • Shores .NC0198 Pine Knott Swansboro . . . . . . . . .MC0203 Indian Beach. . . . . . . . . .MC0282 Onslow County . . . . . . . . .MC0384 Craven County . . . . . . . . .NC0205 Havelock. . . . . . . . . . . .NCO170 Maysville . . . . . . . . . .MC0585 Potlocksville . . . . . . . . .MC0583 Jones County. . . . . . . . . .NCO584 Kamapolis, including: . . . .NCO193 . . . . . . . 41,358 Cabarrus County . . . . . . . .MC0174 China Grove . . . . . . . . . .MC0284 Concord . . . . . . . . . . . .MC0173 Harrisburg. . . . . . . . . . .NC0287 Landis. . . . . . . . . .MC0288 Rowan County. . . . . . . . . .MC0194 Mt. Pleasant. . . . . . . . . .MC0455 C • 0 Albemarle, including:. . . . . . .NC0286 . . . . . . . . . 15,990 Stanty County . . . . . . . . .NC0515 Norwood . .NCO519 Mt. Gilead. . . . . . . . . . .NC0530 Locust. . . . . . . . . . . .NC0518 Richfield . . . . . . . . . . .NCO508 Oakboro . . . . . . . . . . . .NCO517 New London. . . . . . . . . . .NC0507 Stanfield . . . . . . .NC0520 Mecklenburg, including:. . . . . .NCO405 . . . . . . . . .121,204 Charlotte . . . . . . . . . . .NCO755 Mint Hitt . . . . . . . . . . .MC0504 Pineville . . . . . . . . . . .NC0505 Matthews. . . . . . . . . . . .NCO691 Waddiington. . . . . . . . .NCO720 Lancaster County. . . . . . .SCO372 Cabarrus County . . . . .NCO174 Wilmington-Burgaw, including:. . .NCO408 . . . . . . . . . .8,719 Pander County . . . . . . .NCO409 Weddington . . . . . . . . . . . .MC0720 . . . . . . . .3,042 Lincoln . . . . . . . . . . . . . . NE0032 . . . . . . . . .233, 233,263 Nashua . . . . . . . . .NH0034 . . . . . . . . . 60,935 Fort Lee, including: . . . . . . .NJO082 . . . . . . . . .129,719 Cliffside Park. . . . . . . . .NJ0232 Edgewater . . . . . . . . . . .NJO092 Englewood . . . . . . . .NJ0251 Englewood Cliffs. . . . . . . .NJ0208 Fairview. . . . . . . . . . . .NJ0253 Guttenberg. . . . . . . . . . .NJ0338 Leonia. . . . . . . . . . . .NJO431 Little Ferry. . . . . . . . . .NJ0339 Moonachie . . . . . . . .NJO427 Palisades Park. . . . . . . . .NJ0252 Ridgefield. . . . . . .NJ0203 Ridgefield Park . . . . . . . .NJ0254 Teterboro . . . . . . . . NJO484 Upper Manhattan* .NT0104 104 . . . . . . .599,837 Binghamton, including: . . . . . .NY0133 . . . . . . . . .219,198 Town of Binghamton. . . . . . .NY0132 Chenango. . . . . . . . . . . .NY0134 Conklin . . . . . . . . . . . .NY0135 Dickinson . . . . . . . . . . .NY0136 Fenton. . . . . . . . . . . .NY0137 Kirkwood. . . . . . . . . . . .NY0139 *CPST rate reduction required. 0 Maine . . . . . . . . . . .NY0251 Nanticoke . . . . . . . . . . .NY0983 Owego . . . . . . . . . . . . .NY0403 Union . . . . . . . . . . . . .NY0402 Vestal. . . . . . . . . . . .NY0260 Newark Vly. . . . . . . . . . .NY1650 Endicott. . . . . . . . . . .NY0249 Johnson City. . . . . . . . . .NY0138 Port Dickinson. . . . . . . . .MY0140 Lower Manhattan. . . . .NY0234 . . . . . . . . .180,360 Co l oni e . . . . . . . . . . . . . . MY0336 . . . . . . . . . .4, 4,219 Albany . . . . . . . . .MY0338 . . . . . . . .6,141 E. Syracuse, including:. . . . . .NY0329 . . . . . . . . .300,822 Brutus. .NY0955 Town of Camillus. .NY0333 Town of Cato. . . . . . . . . .NY1501 Cicero . . . . . . . . . . . . . NY0372 Clay . . . . . . . . . . . . . . NY0373 De Witt .NY0328 Town of Elbridge. .NY0883 Geddes . . . . . . . . . . . . . NY0327 Ira . . . . . . . . . . . . . .NY1504 LaFayette . . . . . . . . . . .NY0881 Lysander. . . . . . . . . .NY1367 Town of Manlius . . . . . . . .NY0330 Town of Marcellus . . . . .NY0847 Mentz . . . . . . . . . . . . .NY1366 Onondaga . . . . . . . . . . . . NY0707 Ot i sco . . . . . . . . . . . . . NY1533 Pompey . . . . . . . . . . . . . NY 1057 Salina. . . . . . . . . . . .NY0346 Skaneateles . . . . . . . . .MY1211 Town of Tully . . . . . . . . .MY1368 Van Burken. . . . . . . .NY0715 Village of Camillus . . . . . .NY0334 Village of Cato . . . . . . . .NY1503 Village of Elbridge . . . . . .MY0884 Fayetteville. . . . . . . . . .NY0332 Jordan. . . . . . . . . . . .NY0882 Liverpool . . . . . . . .NY0326 Village ofManlius . . . . . . .NY0369 Village of Marcellus. . . . . .NY0848 Meridian. . . . . . . . . . . .MY1502 Minoa . . . . . . . . . . . . .MY0331 N. Syracuse . . . . . . . . . .NY0546 Phoenix . . . . . . . . . . . .NY0720 • • Port Byron. . . . . . . . . . . MY0981 Solvay. . . . . . . . NY0671 Village ofTully . • . . , . . NY1194 Weedsport . . . . . . . . . . NY0915 Troy, including: . . . . . . . . . MY0352 . . . . . . . . .182,844 Cohoes. . . . . . . . . . . . MY0582 Mechanicvitle . . . . . . . . . NY0643 Brunswick . . . . . . . . . . NY0509 Clifton Park. . . . . . . . . NY0668 E. Greenbush. . . . . . . . . . NY0596 Ha t fixoon. . . . . . . . . . . . NY0742 Pittstown . . . . . . NY1534 Town of Schaghticoke. . . . . . NY0796 Town of Stillwater. . . . . . . NY0836 Town of Waterford . . . . NY0589 Village of Schaghticoke . . . . NY0996 Village of Stillwater . . . . . NY0837 Valley Falls. . . . . . NY1167 Village of Waterford. . . . . . MY0588 Penfield . . . . . . . . . . . . . MY0414 . . . . . . . . . .6,662 Gates . . . . . . . . . . . . . . . MY0415 . . . . . . . . . .5, 5,089 Greece . . . . . . . . . . . . . . MY0416 . . . . . . . . . 21,079 Rochester . . . . . . . . . . . . . MY0769 . . . . . . . . . 42,908 Ogden. . . . . . . . . . NY1062 . . . . . .2,704 Brooklyn/Gueens* . . . . . . . . . NY1340, 1280, 1281, 14021,210,552 Irondequoit. . . . . . . . . . . . NY0751 . . . . . . . . 13,789 Perinton . . . . . . . . . . . . . MY0413 . . . . . . . . . .9,787 Brighton . . . . . . . . . . . . . MY0764 . . . . . . . . . .8,071 Columbus . . . . . . . . . . . . OH0239 . . . . . . . . . 32,330 Westervi t te. . . . . . . . . . . . ON0517 . . . . . . . . . .3,727 Columbus . . . . . . . . . . . . . OH0532 . . . . . . . . . .1,703 Reading . . . . . . . . . . . . . . PA0006 . . . . . . . . . 34,753 Shillington. . . . . . . . . . . . PA0011 . . . . . . . .1,821 Monroeville* . . . . . . . . PA1775 . . . . . . . . . 25,324 Florence, including: . . . . . . . S00015 . . . . . . . . . 97,072 Darlington. . . . . . . . . . . Darlington County . . S00014 SCO115 Florence County . . . . . . . . S00057 Ouinby. . . . . . . . . . . SCO191 Timr4mvilte. . . . . . . . . . SCO192 Sumter, including: . . . . . . . . S00017 . . . . . . . . . 58,020 Shaw AFB. . . . . . . . . . . . SCO102 Sumter County . . . . . . . . . SCO116 *CPST rate reduction required. • Pinewood. . . . . . . . . .SC0390 Mayesville. . . . . . . . . . .SCO431 Austin . .TX0029 . . . . . . . . .111,633 Wichita Falls. .TX0483 . . . . . . . . . 16,033 Leander . . . . . . . . . . . . . . TX1422 . . . . . . . . . .7, 7,533 Reston . . . . . . . . . .VA0046 . . . . . 17,421 Williamsburg*. . . . . . . . . . .VA0074 . . . . . 23,940 Green Bay . . . . . . . . . . . . .WI0234 . . . . . . . . . 37,857 Greenfield . . . . . . . . . . . .W10323 . . . . . . . . . .4,903 Hate's Corner. . . . . . . . . . .W10420 . . . . . . . . . .1,823 Charleston . . . . . . . . . . . .W0104 . . . . . . . 5,762 $4,768,081 *CPST rate reduction required. 28381.51 C 0 11 • APPENDIX B REGIONAL EQUIPMENT AREAS Appleton/Green Bay, WI Bakersfield, CA Birmingham, AL Boston, MA Eastern Pennsylvania Division PLorida Divisions Hawaii Division Illinois/Indiana Division Indianapolis, IN Jackson/Monroe, MS Kansas City, MO Lincoln, WE Los Angeles, CA Memphis, TN Milwaukee, WI Minneapolis, MN National Division - East National Division - West Maine Division New York City Division New York State Divisions North Carolina Divisions Ohio Divisions Portland, OR San Diego, CA Shreveport, LA Texas Divisions Western Pennsylvania Division to ? ]l • 0 588638 Franchise Agreement Ordinance October 16, 1996 - Page 23 EXHIBIT C PARAGON CABLE INITIAL PROGRAMNMG CITY OF RICHFIELD, MINNESOTA Council Letter No. 326 Agenda October 28, 1996 Issue Statement: The first reading of an ordinance to regulate the granting of franchises to operate and maintain a cable system in this city; setting forth conditions for franchise and providing for regulation and use of system; and prescribing penalties for violations of provisions. Background: The`City of Richfield is currently a member of the five-city Southwest Suburban Cable Commission (SWSCC) which administers the current provisions of the cable franchise ordinance with Paragon Cable. The SWSCC includes the cities of Richfield, Eden Prairie, Hopkins, Edina and Minnetonka. The franchise ordinance currently in effect will expire December 31, 1999. Paragon and members of the Commission have determined that it was in both the SWSCC's and Paragon's best interest to consider early refranchising of the franchise ordinance in order to allow Paragon to upgrade the cable system in the southwest area. Basically, this upgrade would provide for an .increase in channel capacity from 58 to 79 channels and an improved picture quality. In undertaking this process, the SWSCC elected to proceed in fashioning two model • ordinances that will ultimately be,considered for adoption by each of the five cities. The ordinances provide a framework for dealing with any cable television operators that may provide service within the cities of the SWSCC; and second, establish a franchise agreement ordinance that would provide a cable franchise agreement between Paragon Cable and each of the respective cities of the SWSCC. The first ordinance under consideration is the Master Regulatory Ordinance that would govern any operator that would come within the City of Richfield providing cable television services. The ordinance, in essence, updates the regulatory requirements that have been in place with the City since the City of Richfield initially dealt with the cable television issue in about 1980 and includes modifications and additions that reflect the Minnesota Cable Act, The Federal Cable Act of 1984, The Federal Cable Act of 1992 and the Federal Telecommunications Act of 1996. In summary, this regulatory ordinance gives the City the authority to grant franchises to qualified operators; to establish technical standards directed by the Federal Communications Commission; details customer service standards for all operators; sets construction standards; governs what occurs in city right-of-ways; and allows the City to review transfers of ownership and related authority. The regulatory ordinance has been carefully reviewed by both legal council for the SWSCC, Adrian Herbst and Terry Harris with input from Jim Strommen of the City Attorney's office. In addition, the SWSCC has considered and approved the language contained in the regulatory ordinance and has forwarded the ordinance language onto member cities for their individual approval. A representative from legal council to the SWSCC will be in attendance at the October 28 meeting to answer any specific questions that members of the City Council may have regarding the proposed regulatory ordinance. Recommended Motion: Give first reading consideration of the ordinance to regulate the granting of franchises to operate and maintain a cable system in the City; setting forth conditions accompanying the granting of a franchise; providing for use of the system; and prescribing penalties for the violation of its provision; and set public hearing and second reading for November 25, 1996. Basis of Recommendation: 1. The draft ordinance has been carefully fashioned by legal council to the SWSCC with input from individual members of the SWSCC. 2. The regulatory ordinance forms the basis from which the City may deal with any potential cable operator in the City of Richfield, incorporating current Minnesota cable law, the Federal Cable Act as amended and the Telecommunications Act of 1996. 3. The regulatory ordinance is necessary as a basis to move forward with granting a franchise ordinance to Paragon Cable as part of the early renewal process. • 4. The ordinance has been approved by the SWSCC and recommended for approval to each city. Alternative Recommendation: 1. The City Council could decide to delay consideration of this regulatory ordinance. City Manager JDP:cak 2. The City Council could decide not to approve this ordinance. Discussion/Decision Mode: Consideration of this ordinance for first reading is recommended for October 28, 1996 in order to provide adequate time for the notice of public hearing and consideration of second reading to be completed by the end of November. It is anticipated that each of the five cities of the SWSCC will have considered and voted on this ordinance by the end of November. Respectful) ubmitted, Jame . rosser • CABLE TELEVISION REGULATORY ORDINANCE CITY of MINNESOTA • Prepared by: Adrian E. Herbst, Esq. Theresa M. Harris, Esq. Fredrikson & Byron, P.A. 1100 International Centre 900 Second Avenue South Minneapolis, MN 55402 Telephone: (612) 347-7000 Fax: (612) 347-7077 With the assistance of: The Southwest Suburban Cable Commission TABLE OF CONTENTS 0 STATEMENT OF INTENT AND PURPOSE ........................... 1 Sec. 1. Title ............................................... 2 Sec. 2. Definitions ........................................... 2 Sec. 3. Authority to Grant Franchises ............................... 4 Sec. 4. Application for Franchise ............ .................... 5 Sec. 5. Acceptance and Duration of Franchise .......................... 7 Sec. 6. Franchise Territory ...................................... 7 Sec. 7. Franchise Administration .................................. 7 Sec. 8. Construction of System ................................... 9 Sec. 9. Work Performed by Others ................................. 11 Sec. 10. Conditions on Use ...................................... 11 Sec. 11. Use of Grantee's Facilities ................................ 12 Sec. 12. Failure to Complete Work ................................. 12 Sec. 13. Technical Standards ....................... ............. 12 Sec. 14. Interconnection ........................................ 13 Sec. 15. Removal or Abandonment of A System ......................... 13 Sec. 16. Customer Service Standards ................................ 14 Sec. 17. Programming Provisions .................................. 15 Sec. 18. Subscriber Practices ..................................... 15 Sec. 19. Local Office ......................................... 16 588627 Franchise Ordinance October 16, 1996 - Page i U EXHIBITS Exhibit A - Federal Communications Commission Customer Service Obligations ................................ 32 Exhibit B - Annual Performance Review .............................. 33 0 588627 Franchise Ordinance October 16, 1996 - Page iii • ORDINANCE NO. AN ORDINANCE TO REGULATE THE GRANTING OF FRANCHISES TO OPERATE AND MAINTAIN A CABLE SYSTEM IN THE CITY; SETTING FORTH CONDITIONS ACCOMPANYING THE GRANT OF FRANCHISE; PROVIDING FOR REGULATION AND USE OF THE SYSTEM; AND PRESCRIBING PENALTIES FOR THE VIOLATION OF ITS PROVISION. The City Council of , Minnesota ordains: STATEMENT OF INTENT AND PURPOSE The City of , pursuant to applicable federal and state law, is authorized to grant one or more nonexclusive cable television franchises to construct, operate, maintain and reconstruct Cable Television Systems within the City limits. The City Council finds that the development of Cable Television Systems has the S potential of having great benefit and impact upon the residents of . Because of the complex and rapidly changing technology associated with cable television, the City Council further finds that the public convenience, safety and general welfare can best be served by establishing regulatory powers which should be vested in the City or such Persons as the City shall designate. It is the intent of this Ordinance and subsequent amendments to establish minimum requirements regarding the granting of cable television franchises consistent with Minnesota and federal law recognizing that these laws and the requirements of local government are continuously changing, and to provide for and specify the means to attain the best possible cable television service to the public. Any franchises issued pursuant to this Ordinance shall be deemed to include this intent as an integral part thereof. 588627 Franchise Ordinance October 16, 1996 - Page 1 Sec. 1. Title. This Ordinance shall be entitled, "Cable Regulatory Ordinance." Sec. 2. Definitions. For the purpose of this Ordinance, the following, terms, phrases, words, derivations and their derivations shall have the meanings given herein. When not inconsistent with the context, words used in the present tense include the future tense, words in the plural number include the singular number and words in the singular number include the plural number. A. "Access Channels" shall mean those Channels which, by the terms of this Ordinance or the Franchise Agreement, are required to be kept available by the Minnesota Cable Communications Act for partial or total dedication to public access, educational access, or local government access. B. "Affiliate" shall mean any person controlling, controlled by or under common control of a Grantee of a franchise issued pursuant to this Ordinance. C. "Applicant" means any person that applies for a Franchise under this Ordinance. D. "Application" or "Proposal" are synonymous for the purposes of this Ordinance. An Application or Proposal means the process by which the Applicant submits a request and indicates a desire to be granted a franchise for all, or a part, of the City. An Application or Proposal includes all written documentation, including official city council minutes concerning the construction, detailed description of services to be provided, the area to be served within the City, the portion of Street to be used, rendering of services and the manner thereof, rates and charges, maintenance, or any other matter pertaining to the proposed Cable Communications System. E. "Basic Cable Service" means any service tier which includes the retransmission of local television broadcast signals. This definition shall be deemed to change pursuant to any changes in applicable federal law and shall be interpreted in a manner consistent with the rules of the Federal Communications Commission. F. "Cable Communications System," "Cable Television System," "Cable System," " CATV" or "System", shall mean a System of coaxial cables or other electrical conductors and equipment used or to be used to originate or receive television or radio signals directly or indirectly off the air and to transmit them via cable or fiber optics to Subscribers for a fixed or variable fee, including the origination, receipt, transmission, and distribution of voices, sound signals, pictures, visual images, digital signals, telemetry, or any other type of closed circuit transmission by means of electrical impulses, whether or not directed to originating signals or receiving signals off the air. 588627 Franchise Ordinance October 16, 1996 - Page 2 G. "Cable Service" shall mean (a) the one-way transmission to subscribers of (i) Video Programming or (ii) Other Programming Service, and (b) subscriber interaction, if any, which is required for the selection or use of such video programming or other programming service. For the purposes of this definition, "video programming" is programming provided by, or generally considered comparable to programming provided by a television broadcast station; and, "other programming service" is information that a cable operator makes available to all subscribers generally. H. "City" shall mean the City of , a municipal corporation in the State of Minnesota. I. "Connection" means the attachment of the drop to the first radio or television set of the subscriber. J. "Converter" means an electronic device, which converts signals to a frequency not susceptible to interference within the television receiver of a subscriber, and by an appropriate channel selector also permits a subscriber to view all signals included in the basic service delivered at designated converter dial locations. K. "Council" shall mean the governing body of the City. L. "Drop" shall mean the cable that connects the subscriber terminal to the • nearest feeder cable of the cable. M. "FCC" means the Federal Communications Commission, or a designated representative. N. "Franchise" means the non-exclusive right and authority granted to an Applicant by a Franchise Agreement Ordinance to construct, maintain and operate any part of a Cable Communications System described in the Application, through use of the public Streets, public utility easements or other public rights-of-way or public places in the City. The Franchise shall describe in detail all requirements applicable to the Franchise including all applicable requirements of federal, state and local laws. 0. "Franchise Agreement Ordinance" or "Franchise Agreement" means the ordinance adopted by City granting a Franchise to an Applicant. P. "Grantee" shall mean any Person to whom a Franchise is granted pursuant to this Ordinance and any lawful successor or assignee of the original Grantee. Q. "Gross Revenues" shall mean all revenues received directly or indirectly by the Grantee, arising from or in connection with the provision of Cable Service in the City and consistent with local, state and federal law, including, but not limited to, Subscriber revenues (including Pay TV), advertising income, home shopping programs, rentals of 18 588627 Franchise Ordinance October 16, 1996 - Page 3 equipment, antenna or signal space, and any and all other Gross Revenues received by the Grantee from the provision of Cable Service in the area under the jurisdiction of the City. Grantee is not required to include revenues recorded as received but which are "bad debt," but it must include any recoveries of bad debt. This definition of gross revenues also does not include any sales, excise or other taxes collected by Grantee on behalf of federal, state, county, city or other governmental unit. Funds collected by Grantee to support public, educational and governmental access programming are also excluded from the definition of Gross Revenues. R. "Minnesota Cable Communications Act" means the provisions of Minnesota law governing the requirements for a cable television franchise as set forth in Minn. Stat. § 238, et. seq., as amended. S. "Ordinance" means this Ordinance concerning the granting of Franchises in and by the City for Cable Communications Systems. T. "Person" means any natural person and all domestic and foreign corporations, closely-held corporations, associations, syndicates, joint stock corporations, partnerships of every kind, clubs, businesses, common,law trusts, societies and/or any other legal entity. U. "Street" shall mean the surface of and the space above and below any public Street, road, highway, freeway, lane, path, public way, alley, court, sidewalk, boulevard, parkway, drive or any easement or right-of-way now or hereafter held by City which shall, within its proper use and meaning in the sole opinion of City, entitle Grantee to the use thereof for the purpose of installing or transmitting over poles, wires, cables, conductors, ducts, conduits, vaults, man-holes, amplifiers, appliances, attachments and other property as may be ordinarily necessary and pertinent to a System. V. "Subscriber" shall mean any person or entity receiving service provided by a Grantee pursuant to the authority of a Franchise. W. In the event the meaning of any word or phrase not defined herein is uncertain, the definitions contained in applicable State or Federal law shall apply. Sec. 3. Authority to Grant Franchises. A. The Council is empowered and authorized to issue, in accordance with the City Charter, non-exclusive Franchises to install, construct, operate and maintain Cable Communications Systems in the City's Streets, as well as to regulate these activities. B. The Council has determined that the granting of Franchises for Cable Communications Systems in the City will promote the public interest, enhance the health & welfare and safety of the public and stimulate commerce by assuring that: (1) Cable Communications Systems are responsive to the needs and interests of the City and its 588627 Franchise Ordinance October 16, 1996 - Page 4 residents; (2) Cable Communications, Systems provide, and are encouraged to provide the widest diversity of information and service to the public; and (3) there is an orderly process for the granting or renewal of Franchises, and oversight of the services provided pursuant to Franchises. C. No person shall construct, operate, maintain, or continue to operate or maintain a Cable Communications System which occupies any part of the City's Streets, without the authority of a Franchise granted by the City pursuant to this Ordinance. D. No provision of this Ordinance shall be deemed or construed to require the granting of a Franchise by the City. E. Any Franchise granted must comply with the Minnesota Cable Communications Act standards. F. Grantee's rights are subject to the police power of City to adopt and enforce ordinances necessary to the health, safety and welfare of the public of general applicability. . G. Both the City and the Grantee expressly reserve any and all rights that either may have under applicable state and federal law including but not necessarily limited to, the Cable Communications Policy Act of 1984, as amended, and the rules and regulations of the FCC. Neither adoption of this Franchise by the City nor acceptance by the Grantee shall be construed as a waiver, modification, termination or discharge of any right that either the city or the Grantee may now or hereafter have. H. Except as may be based upon public health, safety and welfare requirements of general applicability or where required by federal or state law or rules, no modification or amendment to the Regulatory Ordinance or the franchise agreement ordinance shall be effective unless in writing and signed by both the City and Grantee. Sec. 4. Application for Franchise. A. Each Applicant for a Franchise, including the renewal of a Franchise consistent with state and federal law, requesting permission to construct, operate or maintain any Cable Communications System in the City shall file an Application with the City in a form and containing such information as is requested by the City. The contents of such Application may vary, according to the nature of the proposed Cable Communications Systems. However, an Initial Application shall contain, at a minimum, the following information. (1) The name, address and telephone number of the Applicant. If the Applicant is a partnership, the home and business address of each partner shall also be set forth. If the Applicant is a corporation, the Application shall state the names 588627 Franchise Ordinance October 16, 1996 - Page 5 and addresses of its directors, main officers, major stockholders and associates and the names and addresses of parent or subsidiary companies. 0 (2) A statement setting forth in its entirety any and all agreements and understandings, whether formal or informal, written, oral or implied, existing or proposed to exist between the Applicant and any Person who proposes to have an ownership interest with respect to the proposed Franchise or to the proposed Cable Communications System. If a Franchise is granted to a Person acting as a representative of another Person and such information is not disclosed in the original Application, the Franchise shall be deemed void and of no force and effect. (3) Financial statements, as determined by the Council, prepared by a certified public accountant, or person otherwise satisfactory to the Council, showing Applicant's financial status and financial ability to complete the construction and installation of the proposed Cable Communications System and/or continue the operation of the existing Cable Communications System. (4) A statement describing the Cable Communications System and specifying the type and capacity of the Cable Communications System proposed to be construed, installed, maintained or operated by the Applicant and the proposed or existing location of the Cable Communications System. (5) A description of all previous experience of the Applicant in providing Cable Communications System service and in related or similar fields. 40 (6) Any other details, statements, information or references pertinent to the subject matter of such Application which shall be required or requested by the Council, or by any provision of any other ordinance of the City. The City reserves the right to modify the Application in a renewal process to accommodate information regarding the Applicant that is already in the possession of the City. Any renewal of a Franchise shall comply with applicable federal, state or local law. B. Prior to the issuance of a Franchise, the City shall hold a public hearing, following reasonable notice to the public, at which Applicant and its Application shall be examined and the public and all interested parties afforded a reasonable opportunity to be heard. The City reserves the right to seek reimbursement of its costs to the extent permitted by applicable state and federal law. The preceding statement does not constitute an agreement by any Applicant to reimburse the City for the cost of the Application process. C. In making any determination hereunder as to any Application, the City shall consider the impact on the Streets with the addition of the proposed Cable Communications System, the needs of the City and the legal, technical and financial qualifications of the Applicant. For initial franchises, the City shall give due consideration to the quality of the 588627 Franchise Ordinance October 16, 1996 - Page 6 service proposed; experience, character, background and the financial responsibility of any Applicant and its management and owners; willingness and ability to abide by policy conditions; Franchise limitations and requirements; and any other considerations deemed pertinent to the Council for safeguarding the interest of the City and the public. For a renewal of a Franchise, the City shall also consider the factors identified in the Cable Communications Policy Act of 1984, as amended. D. The City may require the Applicant for an initial franchise to reimburse the City for its reasonable costs to review the Application including costs for technical assistance to aid the City in understanding the nature and effect of the Application. Sec. 5. Acceptance and Duration of Franchise. A. Any Franchise granted pursuant to this Ordinance shall be in the form of a Franchise Agreement Ordinance between the City and the Grantee which shall comply with all specifications of this Ordinance. B. Any Franchise granted pursuant to this Ordinance shall become effective in accordance with the terms and conditions approved by the Council, provided that a Grantee has filed with the City Clerk a written instrument addressed to the Council accepting the Franchise, within the time specified by the City Council, and agreeing to comply with all provisions of this Ordinance and the Franchise. C. The term of a Franchise shall be stated in the Franchise Agreement Ordinance, but shall in no event exceed 15 years. Sec. 6. Franchise Territory. Any Franchise shall be valid within all territorial limits of the City, and within any area added to City during the term of a Franchise, unless otherwise specified in the Franchise Agreement Ordinance. Sec. 7. Franchise Administration. A. Administrator. The City Manager or the City Manager's designee shall be responsible for the continuing administration of a Franchise. The administrator may be changed by City from time to time by written notice given to a Grantee. B. Advisory body. The City may appoint an advisory body to monitor the performance of a Grantee in executing the provisions of a Franchise. The advisory body shall perform all functions required of it by the City and applicable laws, ordinances, rules and regulations. 588627 Franchise Ordinance October 16, 1996 - Page 7 C. Delegation of Authority by the City 0 (1) The City reserves the right to delegate and redelegate from time to time any of its rights or obligations under a Franchise to any body or organization. (2) Any delegation by City shall be effective upon written notice by City to a Grantee of such delegation. (3) Upon receipt of notice by a Grantee of City's delegation, a Grantee shall be bound by all terms and conditions of the delegation not in conflict with a Franchise. (4) Any such delegation, revocation or redelegation, no matter how often made, shall not be deemed an amendment to a Franchise or require any consent of a Grantee. D. Nonenforcement by City. A Grantee shall not be relieved of its obligation to comply with any of the provisions of a Franchise by reason of any failure of the City or to enforce prompt compliance. E. Administration of Franchise. (1) The City shall have continuing regulatory jurisdiction and supervision over the System and a Grantee's operation under a Franchise. The City may issue such reasonable rules and regulations concerning the construction, operation and maintenance of a System as are consistent with the provisions of a Franchise. (2) A Grantee shall construct, operate and maintain a System subject to the supervision of all the authorities of the City who have jurisdiction in such matters and in strict compliance with all laws, ordinances, departmental rules and regulations affecting the System. (3) A System and all parts thereof shall be subject to the right of periodic inspection by the City where reasonably necessary to the enforcement of a Franchise and provided that such inspection shall not interfere with the operation of a System and such inspections take place during normal business hours. F. Emergency Use. In the case of any emergency or disaster, a Grantee shall, upon request of the City or emergency management personnel, make available to the City its emergency alert system and related facilities for use during an emergency or disaster period in accordance with Section 47 C.F.R. § 11. 588627 Franchise Ordinance October 16, 1996 - Page 8 . G. Controlling Law. A Franchise shall be construed and enforced in accordance with the substantive laws of the State of Minnesota except to the extent the Supremacy Clause of the United States Constitution requires application of federal law. H. Captions. The paragraph captions and headings in a Franchise are for convenience and reference purposes only and shall not affect in, any way the meaning of interpretation of a Franchise. Calculation of Time. Where the performance or doing of any act, duty, matter, payment or thing is required hereunder and the period of time or duration for the performance is prescribed and fixed herein, the time shall be computed so as to exclude the first and include the last day of the prescribed or fixed period or duration of time. When the last day of the period falls on Saturday, Sunday or a legal holiday, that day shall be omitted from the computation and the next business day shall be the last day of the period. Sec. 8. Construction of System. A. A Grantee shall, at least 60 days prior to any construction regarding the System in the City, provide notice to representatives of the City of the following: (1) The nature of the work to be undertaken; (2) the estimated schedule for said work; (3) steps to be • taken to minimize disruption to public; and (4) steps to be taken to notify the residents and others of said work. B. A Grantee shall not open or disturb the surface of any Streets without first obtaining a permit from City for which permit City may impose a reasonable fee to be paid by a Grantee. The lines, conduits, cables and other property placed in the Streets shall be located in such part of the Street as shall be reasonably determined by the City. In so determining the location in such part of the Street, the parties shall take into account the health, safety and welfare considerations together with the technical parameters of the System design. A Grantee shall, upon completion of any work requiring the opening of any Streets, restore the same, including the pavement and its grounds to as good a condition as formerly and in a manner and quality approved by City, and shall exercise reasonable care to maintain the same thereafter in good condition. Such work shall be performed with diligence and due care, and if Grantee shall fail to perform the work promptly, to remove all dirt and rubbish and to put the Street back into the condition required hereby, City shall have the right to give written notice to Grantee regarding the condition of the Street. Grantee shall have 30 days from the receipt of written notice from the City to put the Street into the condition required hereby or reach an agreement with the City. Such work shall be performed with diligence and due care, and if Grantee shall fail to perform the work promptly, to remove all dirt and rubbish and to put the Street back into the condition required hereby, the City shall have the right following 30 days written notice to a Grantee to put the Street back into good condition at the expense of the Grantee. A Grantee, upon demand, shall pay to the City the cost of • 588627 Franchise Ordinance October 16, 1996 - Page 9 such work done or performed including its administrative and overhead plus an additional ten percent as liquidated damages. • C. All wires, conduits, cable and other property and facilities of a Grantee shall be so located, constructed, installed and maintained as not to endanger or unnecessarily interfere with the usual and customary trade, traffic and travel upon, or other use of, the Streets of City. A Grantee shall keep and maintain all of its property in good condition, order and repair so that the same shall not menace or endanger the life or property of any person. A Grantee shall keep accurate maps and records of all of its wires, conduits, cables and other property and facilities located, constructed and maintained in the City. D. All wires, conduits, cables and other property and facilities of a Grantee, shall be constructed and installed in an orderly and workmanlike manner. All wires, conduits and cables shall be installed, where possible, parallel with electric and telephone lines. Multiple cable configurations shall be arranged in parallel and bundled with due respect for engineering considerations. E. A Grantee shall at all times comply with all applicable laws, ordinances, rules, regulations and codes, federal, state and local. In any event, the installation, operation or maintenance of System shall not endanger or interfere with the safety of persons or property in the City. F. Whenever City shall undertake any public improvement which affects a Grantee's equipment or facilities, City shall, with due regard to reasonable working • conditions and with reasonable notice, direct a Grantee to remove its wires, conduits, cables and other property located in Streets. A Grantee shall relocate or protect its wires, conduits, cables and other property at its own expense. If the City, from its own funds, reimburses any non-municipally owned utility for relocating its property at the City's request, the City shall reimburse Grantee in a substantially similar manner. G. To the extent a Grantee plans to construct or rebuild its System, it shall comply with the following minimum requirements: (1) A Grantee shall construct underground in any area where both electrical and telephone has been installed underground. (2) A Grantee shall change from aerial to underground, at its own expense, in any area where both electrical and telephone are hereafter changed from aerial to underground. If the City, from its own funds, reimburses any non-municipally owned utility for relocating its property at the City's request, the City shall reimburse Grantee in a substantially similar manner. F588627 Frarancchhise Ordinance October 16, 1996 - Page 10 (3) A Grantee shall change from aerial to underground, when both • electrical and telephone are similarly required, without cost to City, whenever requested by City, which request can be made for a certain area or areas or for the entire System. If the City, from its own funds, reimburses any non-municipally owned utility for relocating its property at the City's request, the City shall reimburse Grantee in a substantially similar manner. (4) To enable a Grantee reasonable opportunity to change its wiring from aerial to underground, and also to allow it to pre-wire all new subdivisions or new development areas, City shall arrange for the Grantee to receive timely notice of a new Franchise granted for Cable Services, but in no event shall City have any liability for failure to arrange for notice of the following: (a) Any changes of which City has knowledge of, or which City may order, regarding a change from aerial to underground of any line (telephone or electrical) within its boundaries. (b) Any underground trenching that may be pending. (c) New subdivisions and development. All of such subdividers or developers shall be notified of a Franchise and a System. Sec. 9. Work Performed by Others. A. A Grantee shall give notice to City specifying the names and addresses of any entity, other than a Grantee, which performs construction services pursuant to a Franchise, provided, however, that all provisions of a Franchise remain the responsibility of a Grantee. B. All provisions of a Franchise shall apply to any subcontractor or others performing any work or services pursuant to the provisions of a Franchise. Sec. 10. Conditions on Use. A. A Grantee shall not place poles or other fixtures where the same will interfere with any gas, electric or telephone fixture, water hydrant or main. B. A Grantee, at the request of any person holding a building moving permit and with not less than five business days advance notice, shall temporarily remove, raise or lower its wires, conduits and cables. The expense of such temporary removal, raising or lowering of wires, conduits and cables shall be paid by person requesting the same, and Grantee shall have the authority to require such payment in advance of any required work taking place. 588627 Franchise Ordinance October 16, 1996 - Page 11 C. A Grantee shall have the authority, to the extent the City has authority to grant the same, to trim trees upon or overhanging any Street so as to prevent the branches of such trees from coming in contact with the wires, conduits and cables of a Grantee. All trimming shall be done under the supervision and direction of City and at the expense of a Grantee. D. Nothing contained in a Franchise shall relieve any Person from liability arising out of the failure to exercise reasonable care to avoid injuring a Grantee's facilities while performing any work connected with grading, regrading or changing the line of any Street or public place or with the construction or reconstruction of any sewer or water system. Sec. 11. Use of Grantee's Facilities. A Grantee is authorized to use Streets to construct, operate and maintain a Cable Television System and to provide Cable Services in the City. All uses by Grantee or others authorized by Grantee shall be subject to applicable permits, licenses, certificates or franchises as may be required by the City, state or federal law or rules. Sec. 12. Failure to Complete Work. Upon the failure, refusal or neglect of a Grantee to cause any work or other act required by law, this Ordinance or a Franchise to be properly completed or performed, after notice to a Grantee the City may cause work or other activity to be completed or performed, in whole or in part, to the satisfaction of the City. Upon so doing, the City shall submit to a Grantee an itemized statement of the cost thereof. A Grantee shall, within 30 days after i receipt of the statement, pay to the City the entire amount thereof. Sec. 13. Technical Standards. A. A Cable System shall be designed, constructed and operated so as to meet those technical standards promulgated by the Federal Communications Commission relating to Cable Television Systems contained in part 76 of the Federal Communications Commission's rules and regulations relating to Cable Television Systems and found in Code of Federal Regulations, Title 47, Sections 76.601 to 76.630. The City shall be able to enforce these standards to the extent allowable under local, state or federal law. Any tests required by the Federal Communications Commission pursuant to these rules must be filed with the City upon request. B. A Grantee shall perform additional tests if requested by City. The tests may be done at such times as is determined by City, with notice to a Grantee. All expenses for all such tests shall be paid by City, unless otherwise agreed upon. 588627 Franchise Ordinance October 16, 1996 - Page 12 • Sec. 14. Interconnection. A. A System shall be designed to be interconnected with other adjacent Systems. At a minimum, a System shall be capable of interconnecting the access channel programming to other adjacent systems. Grantee shall not be required to provide more access channels as a result of interconnecting with another system than the number of channels required by the franchise agreement ordinance. B. The City may request a Grantee to negotiate interconnecting the Subscriber Network with other adjacent Systems in the general area. A Grantee shall use its good faith to negotiate such interconnection and shall keep the City informed of the progress of any negotiations. Sec. 15. Removal or Abandonment of A System. A. In the event that: (1) the use of any System is discontinued for any reason for a continuous period of 12 months; or (2) any System has been installed in a Street without complying with the requirements off this Ordinance and a Franchise, a Grantee, at its expense shall, at the demand of the City remove promptly from the Streets all of a System other than any which the City may permit to be abandoned in place. In the event of any such removal Grantee shall promptly restore to a condition as nearly as possible to its prior condition the Street or other public places in the City from which a System has been removed. B. A System to be abandoned in place shall be abandoned in the manner prescribed by the City. A Grantee may not abandon any portion of a System without having first given three months written notice to the City. A Grantee may not abandon any portion of a System without compensating the City for damages resulting from the abandonment. C. At the termination or expiration of the term for which a Franchise is granted and following a denial of renewal, or upon its revocation, as provided for, the City shall have the right to require a Grantee to remove within two years, at a Grantee's expense, all or any portion of a System from all Streets within the City. In so removing a System, a Grantee shall refill and compact at its own expense, any excavation that shall be made and shall leave all Streets and private property in as good a condition as that prevailing prior to a Grantee's removal of a System, and without affecting, altering or disturbing in any way electric, telephone or utility, cables wires or attachments. The City, or its delegation, shall have the right to inspect and approve the condition of such Streets after removal. The security fund, insurance, indemnity and penalty provision of a Franchise shall remain in full force and effect during the entire term of removal. The insurance and indemnity provisions of this Ordinance in Sections 32 and 34 shall survive any termination or revocation. 588627 Franchise Ordinance October 16, 1996 - Page 13 D. If a Grantee has failed to complete such removal within the time given after written notice of the City's demand for removal is given, the City shall have the right to exercise one of the following options: 10 (1) Declare all right, title and interest to a System to be in the City or its designee with all rights of ownership including, but not limited to, the right to operate a System or transfer a System to another for operation by it; or (2) Declare a System abandoned and cause a System, or such part thereof as the City shall designate, to be removed at no cost to the City. The cost of said removal shall be recoverable from the security fund, indemnity and penalty section provided for in the Franchise, or from a Grantee directly. E. Upon termination of service to any Subscriber, a Grantee shall promptly remove all its facilities and equipment from a dwelling of a Subscriber who owns such dwelling upon his or her written request, except as provided by applicable state and federal law. Such Subscribers shall be responsible for any costs incurred by a Grantee in removing the facilities and equipment. Sec. 16. Customer Service Standards. A. At all times, a Grantee shall meet the requirements of the Federal Communications Commission regulations on Consumer Service Obligations. A Grantee shall comply with the Customer Service Obligations of the Federal Communications Commission as such standards may from time to time be amended. A copy of the Consumer Service Obligations is attached hereto as Exhibit A. B. A Grantee shall begin actions to correct service or maintenance problems no later than 24 hours after it is notified of a System outage for 95 % of Subscribers. A Grantee shall bear the costs of making any repairs, adjustments, or installations, unless the Subscriber caused the damage necessitating the repairs or maintenance. A Grantee may charge for service. C. Subscriber Complaints to the City. (1) Subscribers shall direct all complaints regarding service to a Grantee. (2) If such complaints are not rectified within seven days from the date the complaint is made, the Subscriber may file a complaint with the City. (3) The City shall maintain a record of all complaints it receives. 588627 Franchise Ordinance October 16, 1996 - Page 14 (4) If, at any time after receipt of a complaint, the City believes that the complaint may constitute a violation of a Franchise, or local, state or federal law, the City may notify a Grantee regarding the complaint. (5) If the City and a Grantee cannot resolve the complaint within seven days after the date that the Subscriber files a complaint with the City, the City may issue a written notice specifying the nature of the complaint and ordering a Grantee to appear at the next regularly scheduled meeting or other appropriate public forum, as determined by City. (6) If the City and Grantee fail to rectify the complaint, the City may begin default procedures as specified in Section 34. Sec. 17. Programming Provisions. A Grantee shall identify its initial services in an Exhibit attached to a franchise agreement ordinance. Sec. 18. Subscriber Practices. A. There shall be no charge for disconnection of any installation or outlet. If any subscriber fails to pay a properly due monthly subscriber fee, or any other properly due fee . or charge, a Grantee may disconnect the subscriber's service outlet, provided, however, that such disconnection shall not be effected until after the later of: (i) 45 days after the original due date of said delinquent fee or charge; or (ii) ten days after delivery to subscriber of written notice of the intent to disconnect. If a subscriber pays before expiration of the later of (i) or (ii), a Grantee shall not disconnect. After disconnection, upon payment in full of the delinquent fee or charge and the payment of a reconnection charge, a Grantee shall promptly reinstate the subscriber's cable service. B. Refunds to subscribers shall be made or determined in the following manner: (1) If a Grantee fails, upon request by a subscriber, to provide any service then being offered, a Grantee shall promptly refund all deposits or advance charges paid for the service in question by said subscriber. This provision does not alter a Grantee's responsibility to subscribers under any separate contractual agreement or relieve a Grantee of any .other liability. (2) If any subscriber terminates any monthly service because of failure of a -Grantee to render the service in accordance with a Franchise, a Grantee shall refund to such subscriber the proportionate share of the charges paid by the subscriber for the services not received. This provision 588627 Franchise Ordinance October 16, 1996 - Page 15 does not relieve a Grantee of liability established in other provisions of a Franchise. C. If any subscriber terminates any monthly service prior to the end of a prepaid period, a proportionate amount of any prepaid subscriber service fee, using the number of days as a basis, shall be refunded to the subscriber by a Grantee. D. Continued failure by a Grantee to provide services required by a Franchise may, in the discretion of City, be cause for imposition of a penalty or termination of a Franchise. Sec. 19. Local Office. Each Franchise shall require that a Grantee maintain a local business office, as described in a Franchise, or agent, which subscribers may access by telephone 24 hours a day, seven days a week, without incurring long distance toll charges, so that complaints, questions or requests regarding the service provided pursuant to a Franchise may be promptly reported to a Grantee. Sec. 20. Subscriber Charges. Current subscriber charges, the length and terms of residential subscriber contracts, and the procedure by which subscriber charges are established shall be available during normal business hours for public inspection. 0 Sec. 21. Rate Regulation. The City reserves the right to regulate rates for services offered over the Cable System, to the extent not expressly preempted by federal and state law. A Grantee shall be subject to the rate regulation provisions provided for herein, and those of the FCC at 47 C.F.R., Part 76.900, Subpart N. Sec. 22. Rights of Individuals. A. Discriminatory Practices Prohibited. In the performance of a Franchise, a Grantee shall not discriminate against any person on the ground of or because of race, creed, color, national origin or ancestry, sex, religion, sexual preference, or political opinion or affiliation or age. A Grantee shall comply at all times with all other applicable federal, state and City laws, and all executive and administrative orders relating to non-discrimination. B. Subscriber Privacy. (1) No signals, including signals of a Class IV Channel, shall be transmitted from a subscriber terminal except as required to provide a 588627 Franchise Ordinance October 16, 1996 - Page 16 service authorized by a Franchise and the Subscriber. A Grantee and any other Person shall neither initiate nor use any procedure or device for procuring or storing information or data from a subscriber's terminals or terminal by any means, without the prior authorization of the affected Subscriber which shall not have been obtained from the Subscriber as a condition of service. The request for such authorization shall be contained in a separate document and identify the purpose for which the data or information is being gathered or stored. After the first year of the authorization's initial signing, a Grantee shall, for each year said authorization is in effect without revocation, mail a notice to each authorizing Subscriber informing him or her of the right to revoke said authorization. The authorization shall be revocable at any time by the Subscriber without penalty of any kind whatsoever. A separate authorization shall be required for each type or classification of data or information sought from a Subscriber terminal. (2) A Grantee shall not, without the written authorization of the affected Subscriber, provide to anyone data identifying or designating any Subscriber other than where that third-party is performing a service or task in furtherance of the Grantee's business including, but not necessarily limited to, billing or telemarketing functions. Any data authorized shall be made available upon request by and without charge to the authorizing subscriber in understandable fashion, including specification of the purpose for which the information is being gathered and to whom and for what fee the information is to be sold. C. A Grantee shall not tap or monitor, arrange for the tapping or monitoring, or permit any other person to tap or monitor, any cable, line, signal input device, or Subscriber outlet or receiver for any purpose whatsoever, without the prior written authorization of the affected Subscriber as required by paragraph B of this section. D. Nothing herein contained shall prohibit a Grantee from verifying System operation and the transmission of signals to an affected subscriber or from monitoring for the purpose of billing. Sec. 23. Public, Educational and Governmental Access. Each Franchise shall include a requirement for public, educational and governmental access programming and facilities consistent with state and federal law. 588627 Franchise Ordinance October 16, 1996 - Page 17 Sec. 24. Grantee Records and Books. . A. Throughout the term of a Franchise, a Grantee shall maintain books and records in accordance with normal and accepted bookkeeping and accounting practices for the Cable Communications industry, and allow for inspection of them at reasonable times at its designated office where necessary to enforcement of a Franchise. The books and records to be maintained by a Grantee shall include the following: (1) A record of all requests for service; (2) A record of all subscriber or other complaints, and the action taken; (3) A file of all subscriber contracts; (4) Grantee policies, procedures and company rules; and (5) Financial records. B. A Grantee shall file with City, at the time of its annual payment of a Franchise Fee, as described in a Franchise, the following: (1) A copy of the most recent performance review for a Grantee utilizing the Annual Performance Review Form attached hereto as Exhibit B. (2) A statement certified by an officer of Grantee showing, in such detail as acceptable to City, the gross revenues of a Grantee for the preceding fiscal year. (3) Current list of names and addresses of each officer and director and other management personnel, and if a corporation, each shareholder having stock ownership of three percent or more, and if a partnership, all general partners, and if a general partner is a corporation, the foregoing information shall be given as to the corporate general partner. (4) If requested by City, a copy of each document filed with all federal, state and local agencies during the preceding fiscal year not previously filed with City. (5) A statement of its current billing practices. (6) A current copy of its rules governing use of equipment and facilities and public, educational and government access and leased access programming. (7) A current copy of its subscriber service contract. • 588627 Franchise Ordinance October 16, 1996 - Page 18 (8) A copy of any subscriber surveys conducted during the last calendar year. C. City, its agents and representatives shall have authority where necessary to enforcement of a Franchise to arrange for and conduct an inspection or audit of the books and records of a Grantee. A Grantee shall first be given five days notice of the inspection or audit request, the description of and purpose for the inspection or audit, and description, to the best of City's ability, of the books, records and documents it wants to review. Sec. 25. Transfer of Ownership. A. A Franchise shall not be assigned or transferred, either in whole or in part, or leased, sublet or mortgaged in any manner, nor shall title thereto, either legal or equitable or any right, interest or property therein, pass to or vest in any person other than an Affiliate of Grantee without the prior written consent of City, which consent shall not be unreasonably withheld. Further, Grantee shall not sell or transfer any stock or ownership interest so as to create a new controlling interest except with the consent of City, which consent shall not be unreasonably withheld. B. Any sale or transfer of Franchise, including a sale or transfer by means of a fundamental corporate change, requires the written approval of City. The parties to the sale or transfer of Franchise shall make a written request to City for its consent. City shall reply in writing within 30 days of actual receipt of the request and shall indicate its approval of the request or its determination that a public hearing is necessary. City shall conduct a public hearing on the request within 30 days of such determination if it determines that a sale or transfer of Franchise may adversely affect the Grantee's subscribers. C. Unless otherwise already provided for by local law, notice of any such hearing shall be given 14 days prior to the hearing by publishing notice thereof once in a newspaper of general circulation in the City. The notice shall contain the date, time and place of the hearing and shall briefly state the substance of the action to be considered by City. Within 30 days after the public hearing, City shall approve or deny in writing the sale or transfer request. D. In a sale or transfer of only a Franchise, without the inclusion of the System in which at least substantial initial construction has commenced, a Grantee shall be required to establish to the sole satisfaction of City that the sale or transfer of a Franchise is in the public interest. E. For purposes of this section, fundamental corporate change means the sale or transfer of a controlling interest in the stock of a corporation or the sale or transfer of all or a majority of a corporation's assets, merger (including a 588627 Franchise Ordinance October 16, 1996 - Page 19 parent and its subsidiary corporation), consolidation or creation of a subsidiary corporation. For the purposes of this Section, fundamental partnership change means the sale or transfer of all or a majority of a partnership's assets, change of a general partner in a limited partnership, change from a limited to a general partnership, incorporation of a partnership, or change in the control of a partnership. F. The word "control", as used herein, shall apply to the sale or transfer of all or a majority of Grantee's assets or shares of stock, merger (including any parent and its subsidiary corporation), consolidation, creation of a subsidiary corporation of the parent company, or sale or transfer of stock in Grantee so as to create a new controlling interest. The term "controlling interest" as used herein is not limited to majority stock ownership, but includes actual working control in whatever manner exercised, including the creation or transfer of decision-making authority to a new or different board of directors. Every change, transfer or acquisition of control of a Grantee shall make the Franchise subject to cancellation unless and until City shall have consented in writing thereto, which consent shall not be unreasonably withheld. For the purpose of determining whether it shall consent to such change, transfer or acquisition of control, City may inquire into the qualifications of the prospective controlling party. The City reserves the right to seek reimbursement of its costs for conducting an inquiry to the extent permitted by applicable state and federal law. The preceding statement does not constitute an agreement by any party to reimburse the City. G. In no event shall a transfer or assignment of ownership or control be approved without transferee becoming a signatory to a Franchise. H. Any transferee of a Franchise shall be subordinate to any right, title or interest of City. For information on the right of the City to purchase the cable system during a transfer of ownership, see Section 27. 7. Notwithstanding anything to the contrary, no such consent or approval shall be required for a transfer or assignment to any Person controlling, controlled by or under the same common control as the Grantee. Sec. 26. Right to Purchase. A. Transfer of Ownership. If at any time a Grantee receives a bona fide purchase offer for an asset sale of a System which a Grantee is willing to accept, a complete copy of such offer 588627 Franchise Ordinance October 16, 1996 - Page 20 shall promptly be given to City and City shall have the right to purchase a 40 System according to the terms of that offer. City shall exercise such right by submitting to a Grantee, within 60 days after City's actual receipt of the bona fide offer, notice that City desires to purchase a System pursuant to said offer. If City does not exercise such right a System may be sold, but only on terms substantially similar to those terms submitted to City. If any substantive changes are made in the purchase offer given to City, such purchase offer, as so changed, shall again be given to City and City shall have 60 days from actual receipt by City of the offer, as changed, within which to exercise its right to purchase a System pursuant to the offer, as changed, all as above provided. If City does not exercise its right to purchase a System pursuant to any offer given to City pursuant to this paragraph, and a System is not sold to the buyer and on the terms set out in the offer given to City, then the right of City to purchase a System shall continue, and all subsequent purchase offers shall be given to City pursuant to this paragraph. Also, the City's right to purchase pursuant to this paragraph shall survive every sale to a buyer and shall continue and be binding upon every buyer of the System. B. Upon Forfeiture, Revocation or Expiration (1) Upon forfeiture, revocation or termination of a Franchise, or at the normal expiration and denial of any renewal of a Franchise term, City shall have the right to purchase the System. Such right shall be exercised upon written notice to Grantee given within 120 days after the occurrence of any such event. (2) In the event City elects to exercise its right to purchase the System as provided in this Paragraph B, the following shall then apply: (a) If a Franchise expires and the renewal of the Franchise is denied and the City acquires ownership of the Cable System or effects a transfer of ownership of the System to another Person, any such acquisition or transfer shall be at fair market value, determined on the basis of the Cable System valued as a going concern but with no value allocated to the Franchise itself, or (b) If a Franchise held by a Grantee is revoked for cause and the City acquires ownership of the Cable System or effects a transfer of ownership of the System to another Person, any such acquisition or transfer shall be at an equitable price. (c) A Grantee expressly waives its rights, if any, to relocation costs that might otherwise be provided by law. 588627 Franchise Ordinance October 16, 1996 - Page 21 (d) The date of valuation shall be no earlier than the day following the date of revocation, forfeiture, expiration or termination of a Franchise and no later than the date City makes a written offer for a System. Sec. 27. Mediation. It either a Grantee or City asserts that the other is in default in the performance of any obligation of a Franchise or in the event of a dispute relating to a right to purchase or terms and conditions of it as described in Section 27 of this Ordinance, the complaining party shall notify the other of the default or claim and the desired remedy. The notification shall be written. Representatives of City and a Grantee must promptly meet and attempt in good faith to negotiate a resolution. If the dispute is not resolved within 30 days of the written notice, the City and a Grantee may jointly select a mediator to facilitate further discussion. The City and a Grantee will equally share the fees and expenses of this mediator. If a mediator is not used, or if the City and a Grantee are unable to resolve the matter within 30 days after first meeting with the selected mediator, either may commence an action in any court of competent jurisdiction in Minnesota to interpret and enforce a Franchise or for such other relief as may be permitted by law or equity, or either Grantee or City may take any other action permitted by law. Sec. 28. Special Provisions. A. As permitted by state and federal law, and specified in a Franchise Agreement Ordinance, each Franchise may require a Grantee to provide facilities and services to public schools and community colleges within the City, and to fire and police stations and other buildings owned and controlled by the City used for public non-residential purposes. B. System Maps and Layout - A Grantee shall have, at all times, up-to-date route maps showing the location of the Cable Communications System adjacent to the Streets. A Grantee shall make all maps available for review by the appropriate City personnel. C. System Construction and Equipment Standards - The Cable Communications System shall be installed and maintained in accordance with standard good engineering practices and shall conform, when applicable, with the National Electrical Safety Code and the FCC's Rules and Regulations. Sec. 29. Franchise Fee. A. As permitted by state and federal law, a Grantee may be required to pay to the City a Franchise Fee as set forth in a Franchise, in compensation for the use of the City's Streets pursuant to a Franchise. 588627 Franchise Ordinance October 16, 1996 - Page 22 B. If a Franchise requires payment of a Franchise Fee, each such Franchise shall authorize the City to audit a Grantee's financial records and accountings relating to a Franchise Fee. A Grantee shall make available at its local business office, upon reasonable request, such data as needed to conduct such audit in accordance with generally accepted accounting principles. C. The City and its representatives shall have the right to inspect a Grantee's financial records during normal business hours to determine whether a Grantee has properly paid all sums due to the City pursuant to the terms of a Franchise. D. Any neglect, omission or refusal of a Grantee to cooperate with the City in reviewing its financial information for the purpose of auditing payment of a Franchise Fee, or to pay a Grantee fee in full, at the time and in the manner provided in the Franchise, which neglect, omission or refusal shall continue for more than 30 days following written notice thereof to a Grantee from the City, shall be grounds for default of a Franchise as provided for in Section 35 hereof. Sec. 30. Liability. A. A Grantee shall pay all damages and penalties which the City may legally be required to pay as a result of granting a Grantee's Franchise. B. A Grantee shall pay all expenses incurred by the City in defending itself with regard to all damages and penalties mentioned above. The expenses shall include all costs, such as attorney's fees. Sec. 31. Indemnification. A. Grantee shall indemnify, defend, and hold harmless the City for all damages and penalties, at all times during the term of this Franchise, as a result of the procedures for granting this Franchise, the granting of this Franchise, or Grantee's conduct or performance under this Franchise. These damages and penalties shall include, but shall not be limited to, damages arising out of Personal injury, property damage, copyright infringement, defamation, antitrust, errors and omission, theft, fire, and all other damages arising out of Grantee's exercise of this Franchise, whether or not any act or omission complained of is authorized, allowed or prohibited by this Franchise. B. In order for the City to assert its rights to be indemnified, defended, or held harmless, the City must: such right; (1) Notify Grantee of any claim or legal proceeding which gives rise to 588627 ranchise Ordinance is F October 16, 1996 - Page 23 (2) Afford Grantee the opportunity to participate in and fully control any compromise, settlement or other resolution or disposition of such claim or proceeding, unless, however, the City, in its sole discretion, determines that its interests. cannot be represented in good faith by Grantee; and (3) Fully cooperate with the reasonable requests of Grantee in its participation in, and control, compromise, settlement or resolution or other disposition of such claim or proceeding subject to paragraph (2) above. (4) Act reasonably under all circumstances so as to protect the indemnitor against liability and refrain from compromising any of indemnitor's rights. . C. In the event the City, in its sole discretion, determines that its interests cannot be represented in good faith by Grantee, Grantee shall pay, upon receipt of written demand from City, all reasonable expenses incurred by the City in defending itself with regard to all damages and penalties mentioned in paragraph A above. These expenses shall include, but not be limited to, all out-of-pocket expenses, such as attorney's fees and costs and the reasonable value of services (as determined by City, rendered by City or any employees, agents or representatives of City; provided, however, the attorney fees shall not exceed (on an hourly basis) those customarily charged for similar work in the Twin Cities Metropolitan area of Minnesota. City reserves the right to cooperate with a Grantee and participate in the defense of any litigation either through intervention or otherwise. Sec. 32. Security Funds. A. The City may require a Grantee to file with the City Clerk, concurrently with its acceptance of a Franchise and at a Grantee's sole expense, a corporate surety bond, construction bond or letter of credit. Such bond or letter of credit shall be in an amount specified in the Franchise Agreement Ordinance, issued by a responsible company licensed to do business in Minnesota and conditioned upon the faithful performance of the Grantee to meet its obligations under this Ordinance and the Franchise Agreement Ordinance. The bond or letter of credit may be reduced at the sole discretion of the franchising authority. B. The provisions of this Section shall not be construed to excuse unfaithful performance by a Grantee or limit the liability of a Franchise under this Ordinance or a Franchise for damages. Sec. 33. Insurance. A. A Grantee shall maintain liability insurance covering its obligations of indemnification provided for in or as a result of the exercise of a Franchise covering both the City and a Grantee (and shall maintain said insurance during the entire term of a Franchise) in the minimum amount of: 588627 Franchise Ordinance is October 16, 1996 - Page 24 (1) $500,000 for property damage to any one person; (2) $2,000,000 for property damage in any one act or occurrence; (3) $1,000,000 for personal injury to any one person; and (4) $2,000,000 for personal injury in any one act or occurrence. B. During the term of this Franchise, the Grantee shall maintain insurance, as required by paragraph (A) above, issued by a carrier or carriers with an A.M. Best rating of "A-" or better. The Grantee shall maintain on file with the City certificates of insurance together with written evidence of payment of required premiums throughout the term of this Franchise. The above minimum amounts may be changed from time to time by Grantee as requested by the City; provided, however, the Grantee shall not be required to provide insurance in excess of what is customarily provided by other cable television operators in the Twin Cities Metropolitan area. C. A Grantee shall immediately give notice to City of any threatened or pending litigation likely to affect this insurance. D. Neither the provisions of this section nor any damages recovered by City shall be construed to, or shall, excuse unfaithful performance by a Grantee or limit the liability of a Grantee. E. No recovery by City of any sum by reason of the Letter of Credit or Bond required in a Franchise shall be any limitation upon the liability of a Grantee to City under the terms of this section, except that the sum so received by City from such Letter of Credit or Bond shall be deducted from a recovery under this section, if for the same act or occurrence. F. All insurance policies maintained pursuant to a Franchise shall contain the following endorsement: It is hereby understood and agreed that this insurance policy may not be cancelled nor the intention not to renew be stated until 30 days after receipt by the City, by registered mail, of written notice of such intention to cancel or not to renew. G. A Grantee shall provide worker's compensation insurance as required by state law. H. All such insurance coverage shall provide a 30 day notice to the City Manager in the event of material alteration or cancellation of any coverage afforded in said policies prior to the date said material alteration or cancellation shall become effective. 588627 Franchise Ordinance October 16, 19% - Page 25 Sec. 34. Default. A. City shall give written notice of default to a Grantee if City, in its sole discretion, determines that a Grantee has: (1) . Violated any provision of a Franchise or the acceptance hereof, or any rule, order, regulation or determination of the City, state or federal government, not in conflict with a Franchise; (2) Attempted to evade any provision of a Franchise or the acceptance hereof; (3) Practiced any fraud or deceit upon City or subscribers; (4) Made a material misrepresentation of fact in the application for or negotiation of a Franchise; or (5) Incurred a 12 month or more delay in the construction schedule. B. If a Grantee fails to cure such default within 30 days after the giving of such notice (or if such default is of such a character as to require more than 30 days within which to cure the same, and a Grantee fails to commence to cure the same within said 30 day period and thereafter fails to use reasonable diligence, in City's sole opinion, to cure such default as soon as possible), then, and in any event, such default shall be a substantial breach and City may elect to terminate the Franchise. The City may place the issue of revocation and termination of a Franchise before the governing body of City at a regular meeting. If City decides there is cause or reason to terminate, the following procedure shall be followed: (1) City shall provide a Grantee with a written notice of the reason or cause for proposed termination and shall allow a Grantee a minimum of 30 days subsequent to receipt of the notice in which to correct the default. (2) A Grantee shall be provided with an opportunity to be heard at a public hearing prior to any decision to terminate a Franchise. (3) If, after notice is given and an opportunity to cure, at a Grantee's option, a public hearing is held, and the City determines there was a violation, breach, failure, refusal or neglect, the City may declare by resolution the franchise revoked and of no further force and effect unless there is compliance within such period as the City may fix, such period may not be less than 30 days provided no opportunity for compliance need be granted for fraud or misrepresentation. 588627 Franchise Ordinance October 16, 1996 - Page 26 Sec. 35. Continuity of Service. A. It shall be the right of all Subscribers to continue receiving services insofar as their financial and other obligations to a Grantee are honored. In the event that a Grantee elects to rebuild, modify or sell the System, or the City gives notice of intent to terminate or fails to renew a Franchise, a Grantee shall act so as to insure that all Subscribers receive reliable service. B. In the event of a change of a Grantee, or in the event a new operator acquires a System, a Grantee shall cooperate with the City's new Grantee or operator in maintaining continuity of service to all Subscribers. During such period, a Grantee shall be entitled to the revenues for any period during which it operates a System and shall be entitled to reasonable cost for its services when it no longer operates the System. C. In the event a Grantee fails to operate the System for three consecutive days without approval of the City or without just cause, the City may, at its option, operate the System or designate an operator until such time as a Grantee restores service under conditions acceptable to the City or a permanent operator is selected. This section shall not apply if the cable operator is unable to operate the system due to Force Majeure as defined in Section 38. If the City is required to fulfill this obligation for a Grantee, a Grantee shall reimburse the City for all reasonable cost or damages in excess of revenue from the System received by the City that are a result of a Grantee's failure to perform. D. A Grantee shall not allow its cable or other operations to interfere with the television reception of Persons not served by a Grantee, nor shall a System interfere with, obstruct or hinder in any manner, the operation of the various utilities serving the residents of the City, as the facilities of such utilities exist at the time of construction or extension of a Grantee's System. Sec. 36. Foreclosure and Receivership. A. Foreclosure. Upon the foreclosure or other judicial sale of a System, a Grantee shall notify the City of such fact and such notification shall be treated as a notification that a change in control of a Grantee has taken place, and the provisions of a Franchise governing the consent to transfer or change in ownership shall apply without regard to how such transfer or change in ownership occurred. B. Receivership. The City shall have the right to cancel a Franchise subject to any applicable provisions of state law, including the Bankruptcy Act, 120 days after the appointment of a receiver or trustee to take over and conduct the business of a Grantee, whether in receivership, reorganization, bankruptcy or other action or proceeding, unless such receivership or trusteeship shall have been vacated prior to the expiration of said 120 days, or unless: 588627 Franchise Ordinance October 16, 1996 - Page 27 (1) Within 120 days after his election or appointment, such receiver or trustee shall have fully complied with all the provisions of a Franchise and remedied all defaults thereunder; and, (2) Such receiver or trustee, within said 120 days, shall have executed an agreement, duly approved by the Court having jurisdiction in the premises, whereby such receiver or trustee assumes and agrees to be bound by each and every provision of a Franchise. Sec. 37. Compliance with Laws, Rules and Regulations. Any of the provisions or terms of this Ordinance may be amended by the City in order to be made consistent with any new or amended local, state or federal law, rule, or regulation of governmental authorities with jurisdiction to regulate Cable Communications Systems. The City and a Grantee shall conform to federal and state laws and regulations as soon as they become effective. Where amendment to laws, rules or other regulatory standards requires modification of any Franchise granted pursuant to this Ordinance, the modifications necessary to effect compliance with such laws, rules or regulations shall be made within one year of the effective date of such change, or at the time of renewal of a Franchise, whichever occurs first. Sec. 38. Force Majeure. A. In the event a Grantee's performance of any of the terms, conditions or obligations required by this Ordinance or a Franchise granted hereunder is prevented by a cause or event not within a Grantee's control, such inability to perform shall be deemed excused and no penalties or sanctions shall be imposed as a result thereof. B. For the purpose of this section, causes or events not within the control of a Grantee shall include but not be limited to acts of God, strikes, sabotage, riots or civil disturbances, restraints imposed by order of a governmental agency or court, failure or loss of utilities, explosions, acts of public enemies and natural disasters such as floods, earthquakes, storms, landslides, and fires. Sec. 39. Severability. A. This Ordinance shall be construed in a manner consistent with all applicable federal and Minnesota laws. B. If any section, subsection, sentence, clause, phrase or portion of this Ordinance or any Franchise granted hereunder is for any reason held illegal, invalid or unconstitutional by the decision of any court of competent jurisdiction, such portion shall be deemed a separate, distinct and independent provision, and such holding shall not affect the validity of the remaining portions hereof or thereof. 588627 Franchise Ordinance October 16, 1996 - Page 29 Sec. 40. Effective Date. 0 This Cable Regulatory Ordinance shall become effective on January 1, 1997 and simultaneously Ordinance No. , also known as the Cable Communications Ordinance, shall be repealed, provided that the current Grantee under the Cable Communications Ordinance has executed a Franchise Agreement Ordinance in compliance with this Ordinance before . If the current Grantee under the Cable Communications Ordinance has not executed a Franchise Agreement Ordinance pursuant to this Ordinance by , this Cable Regulatory Ordinance becomes null and void, and the existing Cable Communications Ordinance remains in force. Sec. 41. Certification and Publication. The City Clerk shall certify to the passage of this Ordinance and shall cause the same to be printed in accordance with the requirements of the City and state law. Thirty days from and after its final passage, it shall take effect and be in full force. PASSED, ADOPTED AND APPROVED by the Mayor and Council of the City of , Minnesota, this day of , 1996. Mayor 9 ATTEST: City Clerk 588627 Franchise Ordinance October 16, 1996 - Page 29 EXHIBIT A .J FEDERAL COMMUNICATIONS COMMISSION CUSTOMER SERVICE OBLIGATIONS • 588627 Franchise Ordinance October 16, 1996 - Page 30 Federal Communications Commission within 30 days of receipt of such re- quest. [58 FR 17364, Apr. 2, 1993] §76.305 Records to be maintained lo- cally by cable system operators for public inspection. (a) Records to be maintained. The oper- ator of every cable television system having 1,000 or more subscribers shall maintain for public inspection a file containing a copy of all records which are required to be kept by § 76.207 (po- litical file); 76.221(f) (sponsorship iden- tifications); 76.79 (EEO records avail- able for public inspection); 76.225(c) (commerical records for children's pro- gramming); 76.601(c) (proof-of-perform- &nce test data); 76.601(e) (signal leak- age logs and repair records) and § 76.701(h)(records for leased access). (1) A record shall be kept of each test and activation of the Emergency Alert System (EAS) procedures pursuant to the requirement of part 11 of this chap- ter and the EAS Operating Handbook. These records shall be kept for three years. (2) [Reserved] (b) Location of records. The public in- spection file shall be maintained at the office which the system operator main- tains for the ordinary collection of sub- scriber charges, resolution of sub- scriber complaints, and other business or at any accessible place in the com- munity served by the system unit(s) (such as a public registry for docu- ments or an attorney's office). The public inspection file shall be available for public inspection at any time dur- ing regular business hours. (c) The records specified in paragraph (a) of this section shall be retained for the period specified in §§76.207, 76.221(f), 76.79, 76.225(c), 76.601(c), and 76.601(e), respectively. (d) Reproduction of records. Copies of any material in the public inspection file shall be available for machine re- production upon request made in per- son, provided the requesting party shall pay the reasonable cost of repro- duction. Requests for machine copies shall be fulfilled at a location specified by the system operator, within a rea- sonable period of time, which in no event shall be longer than seven days. The system operator is not required to § 76.309 honor requests made by mail but may do so if it chooses. (Secs. 2, 3, 4, 5, 301, 303, 307, 308, 309, 315, 317, 48 Stat., as amended, 1064, 1065, 1066, 1068, 1081, 1082, 1083, 1084, 1085, 1088, 1089; (47 U.S.C. 152, 153, 154, 155, 301, 303, 307, 308, 309, 315, 317)) [39 FR 29186, Aug. 14, 1974, as amended at 40 FR 25024, June 12, 1975; 42 FR 19349, Apr. 13, 1977; 51 FR 26251, July 22, 1986; 56 FR 19617, Apr. 29, 1991; 57 FR 11001, Apr. 1, 1992; 58 FR 7993, Feb. 11, 1993; 59 FR 67103, Dec. 28, 1994] § 76.307 System inspection. The operator of a cable television system shall make the system, its pub- lic inspection file (if required by §76.305), and its records of subscribers available for inspection upon request by any authorized representative of the Commission at any reasonable hour. [42 FR 19349, Apr. 13, 1977] § 76.309 Customer service obligations. (a) A cable franchise authority may enforce the customer service standards set forth in paragraph (c) of this sec- tion against cable operators. The fran- chise authority must provide affected cable operators ninety (90) days writ- ten notice of its intent to enforce the standards. (b) Nothing in this rule should be construed to prevent or prohibit: (1) A franchising authority and a cable operator from agreeing to cus- tomer service requirements that ex- ceed the standards set forth in para- graph (c) of this section; (2) A franchising authority from en- forcing, through the end of the fran- chise term, pre-existing customer serv- ice requirements that exceed the stand- ards set forth in paragraph (c) of this section and are contained in current franchise agreements; (3) Any State or any franchising au- thority from enacting or enforcing any consumer protection law, to the extent not specifically preempted herein; or (4) The establishment or enforcement of any State or municipal law or regu- lation concerning customer service that imposes customer service require- ments that exceed, or address matters not addressed by the standards set forth in paragraph (c) of this section. (c) Effective July 1, 1993, a cable op- erator shall be subject to the following customer service standards: 507 § 76.309 (1) Cable system office hours and telephone availability- (1) The cable operator will maintain a local, toll-free or collect call telephone access line which will be available to its subscribers 24 hours a day, seven days a week. (A) Trained company representatives will be available to respond to cus- tomer telephone inquiries during nor- mal business hours. (B) After normal business hours, the access line may be answered by a serv- ice or an automated response system, including an answering machine. In- quiries received after normal business hours must be responded to by a trained company representative on the next business day. (ii) Under normal operating condi- tions, telephone answer time by a cus- tomer representative, including wait time, shall not exceed thirty (30) sec- onds when the connection is made. If the call needs to be transferred, trans- fer time shall not exceed thirty (30) seconds. These standards shall be met no less than ninety (90) percent of the time under normal operating condi- tions, measured on a quarterly basis. (iii) The operator will not be required to acquire equipment or perform sur- veys to measure compliance with the telephone answering standards above unless an historical record of com- plaints indicates a clear failure to com- ply. (iv) Under normal operating condi- tions, the customer will receive a busy signal less than three (3) percent of the time. (v) Customer service center and bill payment locations will be open at least during normal business hours and will be conveniently located. (2) Installations, outages and service calls. Under normal operating condi- tions, each of the following four stand- ards will be met no less than ninety five (95) percent of the time measured on a quarterly basis: (i) Standard installations will be per- formed within seven (7) business days after an order has been placed. "Stand- ard" installations are those that are located up to 125 feet from the existing distribution system. (ii) Excluding conditions beyond the control of the operator, the cable oper- 47 CFR Ch. I (10-1-95 Edition) ator will begin working on "service interruptions" promptly and in rim event later than 24 hours after tY interruption becomes known. The cable operator must begin actions to correct other service problems the next busi- ness day after notification of the serv- ice problem. (iii) The "appointment window" al- ternatives for installations, service calls, and other installation activities will be either a specific time or, at maximum, a four-hour time block dur- ing normal business hours. (The opera- tor may schedule service calls and other installation activities outside of normal business hours for the express convenience of the customer.) (iv) An operator may not cancel an appointment with a customer after, the close of business on the business day prior to the scheduled appointment. (v) If a cable operator representative is running late for an appointment with a customer and will not be able to keep the appointment as scheduled, the customer will be contacted. The ap- pointment will be rescheduled, as nec- essary, at a time which is convenient for the customer. (3) Communications between cab* operators and cable subscribers- (i) Notifications to subscribers- (A) The cable operator shall provide written information on each of the fol- lowing areas at the time of installation of service, at least annually to all sub- scribers, and at any time upon request: (1) Products and services offered; (2) Prices and options for program- ming services and conditions of sub- scription to programming and other services; (3) Installation and service mainte- nance policies; (4) Instructions on how to use the cable service; (5) Channel positions programming carried on the system; and, (6) Billing and complaint procedures, including the address and telephone number of the local franchise authority's cable office. (B) Customers will be notified of any changes in rates, programming services or channel positions as soon as possible through announcements on the cable system and in writing. Notice must be given to subscribers a minimum 0 508 • Federal Communications Commission thirty (30) days in advance of such changes if the change is within :the.. control of the cable operator. In addi tion, the cable operator shall notify subscribers thirty (30) days in advance of any significant changes in the other information required by the preceding paragraph. (ii) Billing- (A) Bills will be clear, concise and understandable. Bills must be fully itemized, with itemizations including, but not limited to, basic and premium service charges and equipment charges. Bills will also clearly delineate all ac- tivity during the billing period, includ- ing optional charges, rebates and cred- its. (B) In case of a billing dispute, the cable operator must respond to a writ- ten complaint from a subscriber within 30 days. (iii) Refunds-Refund checks will be issued promptly, but no later than ei- ther- (A) The customer's next billing cycle following resolution of the request or thirty (30) days, whichever is earlier, or (B) The return of the equipment sup- plied by the cable operator if service is terminated. (iv) Credits--Credits for service will be issued no later than the customer's next billing cycle following the deter- mination that a credit is warranted. (4) Definitions- (i) Normal business hours-The term "normal business hours" means those hours during which most similar busi- nesses in the community are open to serve customers. In all cases, "normal business hours" must include some evening hours at least one night per week and/or some weekend hours. (ii) Normal operating conditions-The term "normal operating conditions" means those service conditions which are within the control of the cable op- erator. Those conditions which are not within the control of the cable opera- tor include, but are not limited to, nat- ural disasters, civil disturbances, power outages, telephone network ou,. ages, and severe or unusual weather conditions. Those conditions which are ordinarily within the control of the cable operator include, but are not lim- ited to, special promotions, pay-per- view events, rate increases, regular § 76.400 peak or seasonal demand periods, and maintenance or upgrade of the cable system. (iii) Service interruption-The term "service interruption" means the loss of picture or sound on one or more cable channels. (58 FR 21109, Apr. 19. 19931 Subpart I-Forms and Reports § 76.400 Operator, mail address, and operational status changes. Within 30 days following a change of Cable Television System Operator, and/ or change of the operator's mail ad- dress, and/or change in the operational status of a cable television system, the Operator shall inform the Commission in writing of the following, as appro- priate; (a) The legal name of the operator and whether the operator is an individ- ual, private association, partnership or corporation. See § 76.5(cc). If the opera- tor is a partnership, the legal name of the partner responsible for communica- tions with the Commisson shall be sup- plied; (b) The assumed name (if any) used for doing business in each community; (c) The new mail address, including zip code, to which all communications are to be directed; (d) The nature of the operational sta- tus change (e.g., became operational on (year) (month), exceeded 49 subscribers, exceeded 499 subscribers, operation ter- minated temporarily, operation termi- nated permanently); (e) The names and FCC identifiers (e.g., CA0001) of the system commu- nities affected. NOTE: FCC system community identifiers are routinely assigned upon registration. They have been assigned to all reported sys- tem communities based on previous Form 325 data. If a system community in operation nr!cr to r$arch 31, 1972, has not previously been assigned a system community identi- fier, the operator shall provide the following information in lieu of the identifier: Commu- nity Name, Community Type (i.e., incor- porated town, unincorporated settlement, etc.) County Name, State, Operator Legal Name, Operator Assumed Name for Doing Business in the community, Operator Mail 509 §76.403 Address, and Year and Month service was first provided by the physical system. (42 FR 20134, Apr. 18, 1977, as amended at 43 FR 49009, Oct. 20, 1978; 54 FR 41843, Oct. 12, 1989] § 76.403 Cable television system re- ports., ' The operator of every operational cable television system shall correct and/or furnish information in response to forms, encompassing each commu- nity unit, mailed to said operator by the Commission. These include: Community unit data-"Annual Report of Cable Television System," Form 325, Schedule 1 Physical system data-"Annual Report of Cable Television System," Form 325, Schedule 2 Operator ownership data-"Annual Report of Cable Television," Form 325, Schedules 3 and 4 These forms shall be completed and returned.to the Commission within 60 days after the date of mailing by the Commission. NOTE: The operator of a cable television system having fewer than 1000 subscribers shall only be required to file Schedules 1 and 2 of Form 325 for each community unit. (50 FR 40857, Oct. 7, 19851 Subpart J-Ownership of Cable Systems § 76.501 Cross-ownership. (a) No cable television system (in- cluding all parties under common con- trol) shall carry the signal of any tele- vision broadcast station if such system directly or indirectly owns, operates, controls, or has an interest in a TV broadcast station whose predicted Grade B contour, computed in accord- ance with §73.684 of part 73 of this chapter, overlaps in whole or in part the service area of such system (i.e., the area within which the system is serving subscribers). (b) (1) A cable television system (in- cluding all parties under common con- trol) may directly or indirectly own, operate, control, or have an interest in a national television network (such as ABC, CBS, or NBC) only if such a sys- tem does not pass more than: (1) 10 percent of homes passed on a nationwide basis when aggregated with 510 47 CFR Ch. I (10-1-95 Edition) all other cable systems in which the network holds such a cognizable inter- est. and (ii) 50 percent of homes passed within any one ADI, except that a cable tele- vision system facing a competing sys- tem will not be counted toward this 50- percent limit. (2) The requirements of paragraph (b)(1) of this section are applied at the acquisition date, except that a party with no prior attributable interests in a broadcast network or cable systems may exceed these limits in connection with a purchase of these operations from a party with such existing net- work-cable interests. Paragraph (b) of this section will not be applied so as to require divestiture of existing facili- ties. (3) For purposes of paragraph (b) of this section: (i) Homes passed is defined as the number of homes to which cable serv- ice is currently available whether or not a given household subscribes to the service. (ii) ADI is defined as the Arbitron Area of Dominant Influence. (iii) A competing system is faced by a network-owned cable system where th cable system provides service in tho same area as another independently owned, multichannel video delivery system, as specified in §76.33(a)(2)(ii). In order to be counted, such multi- channel competitor must be capable of providing a package of local broadcast signals integrated within the service. (c) Effective date. The provisions of paragraph (a) of this section are not ef- fective until November 8, 1987, as to ownership interests proscribed herein if such interests were in existence on or before July 1, 1970 (e.g., if franchise were in existence on or before July 1970), and will be applied to cause di- vestiture as to ownership interests pro- scribed herein only where the cable system is directly or indirectly, owned, operated, controlled by, or has an in- terest in a non-satellite television broadcast station which places a prin- cipal community contour encompass- ing the entire community and there is no other commercial non-satellite tele- vision broadcast station placing a prin- cipal community contour encompass- ing the entire community. 4 i i ERIiI 1IT B ANNUAL PERFORMANCE REVIEW Check Where ApRli able 1. RATES AND CHARGES No change Changed Notices sent to City and subscriber Changes in rates and costs identified by attachment Change "reasonable" and consistent with the standards prescribed by the FCC Other (describe in attachment) • 2. PROGRAMS AND SERVICES No change in programs and services New programs and services added Identify new programs and services Other (describe in attachment) 3. CUSTOMER SERVICE Customer service requirements complied with Periodic subscriber satisfaction survey performed Results of subscriber satisfaction survey with comment on meeting needs identified (attached) 588627 Franchise Ordinance October 16, 1996 - Page 31 I_ 4. FILINGS WrM FCC Summary of all filings with FCC described in attachment 5. PERFORMANCE TEST IN FRANCHISE COMPLETED Summary of performance test results (attached) 6. FRANCHISE FEE PAYMENTS MADE WITH REVENUE SOURCES IDENTIFIED (SUMMARY ATTACHED) 7. COMPLETION OF CONSTRUCTION Upgrade/rebuild (summary attached) New technologies incorporated into system Channel capacity increased Service extended to new areas Other 8. NEW SERVICES No Changes Services other than programming made available in the subscriber network (summary attached) 9. TERMS AND CONDITIONS IN THE FRANCHISE HAVE BEEN COMPLIED WITH Summary attached of outlining incomplete matters requiring action by Company Company participated in planning studied and Cable Advisory, Committee activities (summary attached) 588627 Franchise Ordinance October 16, 1996 - Page 32 • • • All insurance, bonds and deposits are updated and filed with City Duplication of materials already filed with the City is not required with this filing. Dated this day of , 19 by Officer of Cable Company 0 City of Verification: The above Annual Performance Review has been filed by as required. The Office of Administrative Services for the City of has reviewed the information and finds that the filing is complete is not complete The following matters are deemed incomplete and require, further information and/of compliance by THE CITY OF By: Dated this day of , 19-- 588627 Fnmcbisc Ordmmce October 16, 1996 - Page 33 ITEM #5. REVISED RECOMMENDED MOTION, STIPULATION #1 CITY OF RICHFIELD, MINNESOTA Council Letter No.325 Agenda October 28, 1996 Issue Statement: Consideration of a request for a conditional use permit to allow construction of a 100,000 square foot retail store and up to 20,000 square feet of additional retail space at 1700 West 78th Street. (Tabled from September 23, 1996.) Background: The City Council held a public hearing on September 23, 1996 to consider a conditional use permit request submitted by Galyan's Trading Company (please refer to attached Council Letter No. 302 for further background). The public hearing was closed, but the Council tabled action on the request until the October 28 Council meeting so that neighborhood traffic issues could be addressed. The presence of commercial traffic using the residential streets in the area is an existing and long-standing issue. The Galyan's proposal will exacerbate the current situation. In an effort to address the traffic issues, an open house was held on October 15, 1996 to discuss traffic calming in the neighborhood just west of the proposed Galyan's site. Over 900 notices were mailed, and approximately 25 residents and business people • attended. From comments received (see attached) there was general support for a temporary diverter at the intersection of 77th Street and Morgan Avenue. The diverter was installed the week of October 21. Residents and businesses will be polled next spring to evaluate the effectiveness of the diverter. If results are not satisfactory, other traffic calming measures can be considered. Eventually, the traffic calming measures will become permanent. Recommended Motion: Approve a conditional use permit to allow construction of a 100,000 square foot retail store and up to 20,000 square feet of additional retail space at 1700 West 78th Street with the following stipulations: 1. A plan for implementing traffic calming measures within the area bounded by Penn Avenue, 76th Street, Knox Avenue and 77th Street be prepared in conjunction with City staff and with input from area residents. 2. Parking for bicycles be provided for on the site. 3. A sidewalk be installed along Knox Avenue connecting the site to the existing sidewalk. 0 • CITY OF RICHFIELD, MINNESOTA Council Letter No. 325 Agenda October 28, 1996 Issue Statement: Consideration of a request for a conditional use permit to allow construction of a 100,000 square foot retail store and up to 20,000 square feet of additional retail space at 1700 West 78th Street. (Tabled from September 23, 1996.) Background: The City Council held a public hearing on September 23, 1996 to consider a conditional use permit request submitted by Galyan's Trading Company (please refer to attached Council Letter No. 302 for further background). The public hearing was closed, but the Council tabled action on the request until the October 28 Council meeting so that neighborhood traffic issues could be addressed. The presence of commercial traffic using the residential streets in the area is an existing and long-standing issue. The Galyan's proposal will exacerbate the current situation. In an effort to address the traffic issues, an open house was held on October 15, 1996 to discuss traffic calming in the neighborhood just west of the proposed Galyan's site. Over 900 notices were mailed, and approximately 25 residents and business people 40 attended. From comments received (see attached) there was general support for a temporary diverter at the intersection of 77th Street and Morgan Avenue. The diverter was installed the week of October 21. Residents and businesses will be polled next spring to evaluate the effectiveness of the diverter. If results are not satisfactory, other traffic calming measures can be considered. Eventually, the traffic calming measures will become permanent. Recommended Motion: Approve a conditional use permit to allow construction of a 100,000 square foot retail store and up to 20,000 square feet of additional retail space at 1700 West 78th Street with the following stipulations: 1. A plan for preventing commercial traffic from using the residential streets in the area bounded by Penn Avenue, 76th Street, Knox Avenue and 77th Street be prepared by the developer in conjunction with staff, and with input from area residents, and approved by the Community Development Director. 2. Parking for bicycles be provided for on the site. 3. A sidewalk be installed along Knox Avenue connecting the site to the existing sidewalk. s 4. A sediment and erosion control plan be submitted to and approved by the City Engineer. 5. A storm water management plan be approved by the City Engineer. 6. The final landscape plan be approved by the Community Development Director. 7. Landscaping along the freeway portion of the site be coordinated with the Community Development Director and the Minnesota Department of Transportation. 8. A lighting plan be approved by the Community Development Director. 9. A signage plan be approved by the Community Development Director. 10. The conditional use permit not be issued until application is made for a building permit. Basis of Recommendation: 1. On October 15, 1996 an open house was held with area residents and business people to obtain their feedback on possible traffic calming strategies. The meeting identified responses that will be acted on quickly. 2. The existing street infrastructure has adequate capacity to handle the traffic generated by the site. 3. The proposed commercial use is consistent with the Comprehensive Plan designation of the site as "freeway strip." 4. The proposed development is consistent with the draft Comprehensive Plan of 1996 which encourages better utilization of the City's freeway exposure. 5. The site is currently underutilized and the existing building is deteriorating, warranting redevelopment of the site. 6. Landscaping is provided along the north property line to provide a buffer betty the development and the adjacent apartment complex. 7. Adequate parking is provided at a ratio that exceeds City requirements. 8. Notice of the hearing was published in the Sun-Current and mailed to prope owners within 350 feet of the subject property. 9. On September 17, 1996 the Planning Commission voted unanimously to recommend approval of the conditional use permit. is Update een rty s-a • Alternative Recommendation: Since calming measures have been implemented as discussed herein, the Council may wish to eliminate stipulation #1. Deny the request with a finding that the proposal would have an adverse impact on adjacent properties or the City as a whole. Discussion/Decision Mode: A public hearing was. held at 7:00 p.m. on Monday, September 23, 1996. The public hearing was closed and the item was tabled. Consideration of the item will continue on October 28, 1996 in the City Council Chambers of Richfield City Hall, 6700 Portland Avenue. Respectfully submitted, James . Prosser City Manager JDP:ds Attachment 11 s3 GALYAN'S TRAFFIC CALMING MEETING Tuesday, October 15, 1996 4:30 - 6:30 p.m. Woodlake Lutheran Church Names of People Attending:. Terry and Debbie Ahlstrom 7600 Morgan Avenue South Todd Anondson 7600 Newton Avenue South Cathy and Jim Bergin 7627 Oliver Avenue South Elaine Brown 1912 W. 76th Street Sandra Engen 7621 Morgan Avenue South John and Sharon Glennon 2000 West 76th Street Barbara Gresbrink 7609 Oliver Avenue South Robert E. Guthe 7634 Oliver Avenue South Thomas Haley 7620 Oliver Avenue South Paul Kachelmeier 7610 Logan Avenue South Dick Kinsey 1900 W. 78th Street (Wally McCarthy's) Donna Kupfer-Mead 7620 Morgan Avenue South David and Karen Pettit 7526 Logan Avenue South LaVerne Smith 7639 Oliver Avenue South Mary and Bill Topero 7645 Oliver Avenue South Mike Triggs 7639 Penn Avenue South Rev. Mark Wegginor 7521 Oliver Avenue South Robert Wood 7538 Upton Avenue South Mike Eastling City Engineer Jack Erskine Public Safety Director Tom Foley Traffic Engineer Mark Jepson SEH Dan Linnihan Planning Commissioner John Melin Community Development Manager Bruce Palmborg Community Development Director Susan Rosenberg Council Member Glen Van Wormer SEH <calminpattgalyn 0 E • Memorandum DATE: TO: FROM: SUBJECT: Luella Loos 7601 Knox #220 861-7905 October 21, 1996 File Thomas Foley, Transportation Engineer Citizens' Log on Galyan's Traffic Calming Paul Kachelmeier 7610 Logan Avenue Marly Whiting Canine Academy 7713 Morgan Avenue Mike Triggs 7639 Penn Avenue 861-2070 Todd Anondson 7600 Newton Avenue 866-1277 10/8/96 She can no longer drive. It is difficult to cross 76th Street to take the bus or for people living at Colony Apts. to cross the street to go grocery shopping at Tom Thumb. Wants a traffic signal at 76th/Knox or some protection for pedestrians. 10/14/96 Owns a duplex on Logan. He believes access to the Galyan's site is poor. Customers will drive through the neighborhood trying to find the store. The proposed diverter will not help residents on Logan. If traffic is backed up on Knox, cars from Galyan's will try to exit via Logan onto 76th Street. He proposes abandoning 77th Street between Knox and Logan Avenues and closing access to Morgan Avenue to the south. 10/15/96 Owns a business. Opposes diverter at 77th/Morgan. Residents must realize that if they live next to a commercial area they will have some commercial traffic. Wants to be kept informed especially if the City asks residents for an evaluation of any traffic calming measures. Thinks her comments don't count. Attended 10/15/96 Open House. More concern should be shown for the aesthetic value of the neighborhood and not just over how many cars we can rush through the neighborhood. Attended 10/15/96 Open House. Supports the divider on Morgan and 77th plan. Let's give it a try and see if it succeeds. The City needs Galyan's. Let's find a way to make it work. 0 October 21, 1996 Page 2 • H D h t / Cathy Bergin e stree s 15/96 Open ouse oes not want t Attended 10 7627 Oliver Avenue turned into one-ways and have her access restricted. 861-6421 348-7689 Does not want the auto dealers parking on 78th Street restricted because they will just end up on our residential streets. Ken Tracy Attended10/15/96 Open House 1. It is my observation that 7633 Oliver Avenue we do get cars using residential streets as a shortcut 861-6373 around Penn & 76th. 2. 1 like this diverter on 77th & Morgan. 3. Be sure that no cars other than current residents will be parking on our streets. 4. 1 know that Galyan's store is nice and I will use it. Just be sure we as residents won't be sorry for accepting this new business. Terry Ahlstrom Attended10/15/96 Open House. Like the idea of a traffic 7600 Morgan Avenue diverter on Morgan. Need to have a big sign on corner of 866-7924 829-9119 Penn and 78th Street to bring traffic down 78th Street. But what about 76th Street? Will people from business'(car lots...) be parking on streets such as Morgan if traffic is heavy on 78th? Bill and Mary Topero 10/15/96 Diverters look like the way to go. Good work 7645 Oliver Avenue 866-6533 ups! Jim Bergin Attended 10/15/96 Open House. Traffic diverter crossing 7627 Oliver Avenue 77th Street NE to SW across Morgan looks like it would 861-6421 348-4016 work. Parking should continue on the south side of 78th Street to keep these cars off Oliver and Morgan. Vuthy Kour Attended 10/15/96 Open House. I think this traffic plan is a 7644 Oliver Avenue good one. Thanks! 861-2734 Dick Kinsey Attended 10/15/96 Open House. Proposals that were C/O Wally McCarthy Olds offered all seem reasonable to assist in resolving traffic 1900 W. 78th Street concerns. Diagonal diverter located at 77th and Morgan 869-1414 appears reasonable as long as the one way restriction is lifted. Donna Kupfer-Mean Attended 10/15/96 Open House. Fully support the calming 7620 Morgan Avenue measures. Please put a diverter on Morgan. We have 869-4968 348-9511 way too much traffic and more would be unacceptable. We get many cars from the dealers racing down the street. There are many children on our street. Would rather have the inconvenience of not being able to turn at every street in order to stop some of the traffic with diverters. • TFF:ttf CITY OF RICHFIELD, MINNESOTA Council Letter No. 302 Agenda September 23, 1996 Issue Statement: Public hearing to consider a request for a conditional use permit to allow construction of a 100,000 square foot retail store and up to 20,000 square feet of additional retail space at 1700 West 78th Street. Background: Galyan's Trading Company is proposing to demolish the existing Naegele building at 1700 West 78th Street and construct a two-story, 100,000 square foot retail store on the site. Galyan's is an interactive sporting goods company on the scale of a department store, where customers are invited to try out the merchandise. Galyan's is currently building similar stores in Minnetonka and Woodbury. The property is zoned industrial, which allows for retail use over 80,000 square feet by conditional use permit. The building will be situated on the site in the same fashion as the Naegele building, with the main entrance facing southeast toward the 1-35W/1-494 interchange. The primary exterior material will be brick along with a glass curtain wall at the main entrance. The plans reflect construction of the project in at least two phases. The first phase involves construction of the 100,000 square feet, two story Galyan's store. Future phases could involve construction of up to 20,000 square feet of additional retail space either for Galyan's or some other retailers. The additional square footage would be located on either side of the Galyan's building and would be single story. There are 525 parking spaces provided in the first phase, at a ratio of 5.25 spaces per 1,000 square feet of floor area. In the second phase, 584 parking spaces are provided at a ratio of 4.8 spaces per 1,000 square feet of floor area. The City requires a minimum of 4 spaces per 1,000 square feet of floor area. A consultant's analysis of the projected traffic indicates that Galyan's and the adjacent retail space will generate approximately 4,800 vehicle trips throughout the day. The analysis indicates that existing roadways and intersections can accommodate the additional traffic (see attached traffic analysis). Primary access to the site would be from 78th Street. Potential actions that may be taken to discourage access to the site from other routes include, but are not limited to, the following: • place directional signage on Penn Avenue at 78th Street; 16 0 prohibit on-street parking on 78th Street; 5-7 • install a traffic diverter at 77th Street and Knox Avenue to prohibit left turn movements from northbound Knox Avenue to westbound 77th Street. At the Planning Commission meeting traffic issues were the primary concern of area residents. Five residents addressed the Commission; four of them were concerned about traffic. The concerns were as follows: • Too much development in a residential area and too much traffic already. • The amount of traffic on 76th is too heavy already -- especially from the west. • Car dealer traffic already cuts through the neighborhood and speeds create a safety hazard to children. This project will make it worse. • 76th Street should be posted as a "school zone". Staff and the developer are clearly aware of the traffic issues and respect the concerns of the neighbors. As the first stipulation of approval indicates, a plan for keeping the commercial traffic off the residential streets will be developed with input from the neighbors. The applicant has already started reviewing possible solutions and will be prepared to discuss them with the Council for informational purposes. They must yet be reviewed and evaluated with the neighborhood. Additional possible solutions may be forthcoming as a result of meeting with neighbors. Also, the Planning Commission added an 11th stipulation to their approval stating that: A study be made of the possibility of Galyan's providing off-street parking for the adjacent car dealership on a short term lease basis. This stipulation was not included in the staff recommendation to the Council because car dealers, like any other business, should have to comply with City requirements and provide their own parking on site. A small pond in the northeast corner of the site will be used for stormwater retention. The pond will also serve as an amenity for the site and will be used by customers to try out merchandise such as boats, fishing equipment and other water-related items. The pond will be expanded to accommodate the increased storm water run off. The existing sidewalk on the east side of Knox Avenue would be extended south to Galyan's main driveway. An east-west sidewalk would then bring pedestrians from Knox Avenue to the main store entrance and across the parking lot to the ponding area at the northeast corner of the site. Parking facilities for bicycles will also be provided. Galyan's held a neighborhood meeting on Thursday, September 5 to present their plans. While over 900 notices were mailed, there were only ten residents and three representatives from Wally McCarthy's in attendance. As was the case at the Planning Commission meeting, the main concern was traffic. a Recommended Motion: Conduct the public hearing and approve the conditional use permit to allow construction of a 100,000 square feet retail store and up to 20,000 square feet of additional retail space at 1700 West 78th Street with the following stipulations: 1. That a plan for preventing commercial traffic from using the residentail streets in the area bounded by Penn Avenue, 76th Street, Knox Aveune and 77th Street be prepared by the developer in conjunction with staff, and with input from area residents, and approved by the Community Development Director. 2. That parking for bicycles be provided for on the site. 3. That a sidewalk be installed along Knox Avenue connecting the site to the existing sidewalk. 4. That a sediment and erosion control plan be submitted to and approved by the City Engineer. 5. That a storm water management plan be approved by the City Engineer. 6. That the final landscape plan be approved by the Community Development Director. • 7. That landscaping along the freeway portion of the site be coordinated with the Community Development Director and the Minnesota Department of Transportation. 8. That a lighting plan be approved by the Community Development Director. 9. That a signage plan be approved by the Community Development Director. 10. That the conditional use permit not be issued until a building permit is applied for. Basis of Recommendation: 1. The proposed commercial use is consistent with the Comprehensive Plan designation of the site as "freeway strip". 2. The proposed development is consistent with the draft Comprehensive Plan Update of 1996 which encourages better utilization of the City's freeway exposure. 3. The site is currently underutilized and the existing building is deteriorating, warranting redevelopment of the site. 4. Landscaping is provided along the north property line to provide a buffer between the development and the adjacent apartment complex. 5. Adequate parking is provided at a ratio that exceeds City requirements. 5"q 6. The existing street infrastructure has adequate capacity to handle the traffic generated by the site. 7. Notice of the hearing was published in- the Sun-Current and mailed to property owners east of Penn Avenue, south of 76th Street and west of Girard Avenue. 8. On September 17, 1996 the Planning Commission voted unanimously to recommend approval of the conditional use permit. Alternative Recommendation: Deny the request with a finding that the proposal would have an adverse impact on adjacent properties or the City as a whole. Discussion/Decision Mode: A public hearing is scheduled for 7:00 p.m. on Monday, September 23, 1996. The hearing will be held in the City Council Chambers of Richfield City Hall, 6700 Portland Avenue. Respectf y submitted, James Prosser City Manager JDP:cak L1 n 51-)D 3535 VADNAIS CENTER DRIVE 200 SEH CENTER. ST. PAUL. MN 55110 612490-2000 800325-2055 ARCHITECTURE ENGINEERING ENVIRONMENTAL TRANSPORTATION September 13, 1996 RE: Tushie Montgomery Associates Galyan's Trading Company Traffic Study SEH No. A-TUSHI9701.00 Mr. Gary Tushie, President Tushie Montgomery Associates 3300 Edinborough Way, #601 Minneapolis, MN 55435 Dear Mr. Tushie: Galyan's Trading Company Traffic Study As requested, we have analyzed the potential traffic impact of the Galyan's Trading Company Sporting Goods retail store. The Galyan's store is proposed for the site currently occupied by the Naegele office building, located on the northeast quadrant of the I-35W and I-494 interchange. • The Galyan's Trading Company sporting goods store is proposed as a 100,000 square foot retail facility. This analysis also includes an additional 20,000 square foot attached retail space along the southwest side of the Galyan's facility. The existing Naegele building is a 100,000 square foot office building, and for purposes of this analysis is considered an office-warehouse. Three levels of analysis were performed for this study: Analysis of existing conditions, including the existing Naegele building and the associated traffic. Estimation of the traffic demand associated with the proposed Galyan's facility and the adjacent retail activity. Evaluation of the incremental impact of the Galyan's facility, reflecting the "replacement" of traffic demand related to the existing Naegele site. Trip Generation Estimates The Galyan's facility and adjacent retail space represent a specialized retail activity. Rather than applying a standard trip generation rate for general retail activities, a comparison of a variety of IS specialized retail sites was performed. Based upon the characteristics of these comparative SHORT ELLIOTT HENDRICKSON INC. MINNEAPOLIS, MN ST. CLOUD, MN CHIPPEWA FALLS. WI MADISON, WI LAKE COUNTY, IN EQUAL OPPORTUNITY EMPLOYER r 5-11 Mr. Gary Tushie September 13, 1996 Page 2 studies, the proposed Galyan's facility (including adjacent retail) is estimated to generate approximately 4,800 vehicle trips per day. While average daily trip information is of interest, the greatest potential impact is in the p.m. peak hour, which generally occurs between over a portion of the 4:00 p.m. to 6:00 p.m. time period. For the streets adjacent to this site, the p.m. peak hour occurs from 5:00 p.m. to 6:00 p.m. The Galyan's Trading Company facility and the attached retail will generate an estimated 564 p.m. peak trips. Of this, 287 (53%) are inbound in the p.m. peak, and 277 (47%) are outbound. For purposes of comparison and determination of incremental changes in traffic, the Naegele site is estimated to generate 173 p.m. peak trips. As an office facility, the proportion of outbound trips in the p.m. peak is much higher for the existing site traffic. Of the p.m. peak trip total, 35 (20%) are inbound, and 138 (80%) are outbound. Trip Distribution Assumptions Assumptions for the directional distribution of project-related trips are based upon the directional variation in accessibility of the site, as well as the surrounding land-use characteristics and established traffic patterns in the area. A greater portion of the Galyan's traffic (55%-60%) is estimated to access the site via Penn Avenue and I-494. The remaining site traffic is distributed • via Knox Avenue and 76th Street West, and I -35W. The resulting estimated traffic volumes are shown in Figure 1. The existing Naegele site traffic is also distributed primarily via access using Penn Avenue (75%) and the balance using Knox Avenue and 76th Street West. The difference reflects the variation due to a greater proportion of employee generated trips for the Naegele site. These estimated volumes are shown in Figure 2. The resulting total p.m. peak volumes, including the net increases due to the Galyan's project, are summarized in Figure 3. Traffic Issues and Intersection Operation 78th Street West and Penn Avenue Interstate 35W ramps provide access only to and from the north, limiting access to the site via this corridor. As a result, we estimate that the intersection of Penn Avenue and 78th Street West will serve the majority of project-related traffic. 78th Street West is a frontage road along I-494, with activities such as auto dealerships, service facilities, etc. adjacent to the north. In the critical p.m. peak period, approximately 93 additional northbound right turns will occur with the Galyan's project. This represents less than two vehicles per minute, and the existing roadway configuration should adequately absorb the additional volume. However, parked cars are typically present along both sides of 78th Street West, which together with the curved alignment, r- LA 0 Mr. Gary Tushie September 13, 1996 Page 3 creates a potential safety issue. Possible mitigation: Parking restrictions along 78th Street West should be carefully considered, with the recognition that a total restriction may displace parking demand into the adjacent residential area. The outbound left turn movement off of 78th Street West onto Penn Avenue would be the most critical movement in the p.m. peak hour. The estimated net traffic increase for this movement is 27 vehicles in the p.m. peak. This represents approximately one additional left turn every two minutes. As such, the additional demand would not typically represent a significant problem. 76th Street West and Knox Avenue South The intersection of 76th Street West and Knox Avenue South is the other primary intersection serving project-related traffic. The net increase in p.m. peak traffic due to the Galyan's project is an estimated additional 77 right turns from Knox Avenue onto eastbound 76th Street West. This represents approximately one additional right turn every 45 seconds. The recently improved existing configuration of 76th Street West can adequately absorb these additional volumes, although slight delays may occur waiting for gaps in the cross traffic on 76th Street eastbound. The estimate for left turns onto westbound 76th Street West is 26 in the p.m. peak hour (a net increase of 16 vehicles). The inbound left turn off of 76th Street West onto southbound Knox Avenue is estimated to increase by 95 vehicles in the p.m. peak hour. This intersection is currently unsignalized, requiring these left turns to wait for a gap in the opposing eastbound traffic flow. This volume represents approximately one left turn every 30 to 35 seconds, and as such may result in queuing of vehicles, causing some delays. The left turn movement from northbound Knox Avenue onto westbound 76th Street is estimated at 26 vehicles in the p.m. peak hour. This movement would also be affected by the queuing delay of the inbound left turns onto Knox Avenue, since the initial gaps in eastbound 76th Street traffic would be absorbed by the inbound left turns first. The estimated p.m. peak volumes at this intersection represent a worst case analysis. It is likely that 10% of the site trips (and nearly 25% of the trips at this intersection) would instead access the site via 78th Street and Penn Avenue. Signalization of this location may adversely affect the 76th Street traffic flow, due to the proximity of the signals at the 1-35W ramps on 76th Street. 76th Street West and Penn Avenue The intersection of 76th Street West and Penn Avenue is estimated to carry a net increase of 28 p.m. peak vehicles (an additional 10 left turn vehicles, and an additional 16 thru vehicles) on the southbound approach. Similarly, the eastbound approach is estimated to carry eight additional right turns and 20 additional thru vehicles in the p.m. peak. The northbound approach is estimated to carry 10 additional left turns and 10 additional thru vehicles in the p.m. peak. The increase on the westbound approach is estimated at less than four vehicles per movement. These .5-0 Mr. Gary Tushie September 13, 1996 Page 4 increases are relatively minor, representing less than one additional thru vehicle every three to four minutes, and one additional left turning vehicle every five to six minutes in the p.m. peak period. No significant impacts are anticipated at this intersection. I-35W Ramps at 76th Street West The freeway ramps at I-35W, serving traffic to and from the north, are estimated to cant' an additional 82 project trips off of southbound I-35W, and additional 64 project related trips onto northbound I-35W. These increases represent approximately one vehicle per 45 seconds in the p.m. peak hour, and should be adequately absorbed by the existing configuration. 1494 Ramps at Penn Avenue The freeway ramps at I-494 are estimated to carry an additional 54 project trips off of eastbound I-494 onto northbound Penn Avenue. This represents approximately one additional left turning vehicle per minute. An additional 10 project related trips are estimated from southbound Penn Avenue turning left onto the I-494 eastbound ramp. This represents approximately one vehicle every five minutes in the p.m. peak hour, and should be adequately absorbed by the existing configuration. The remaining ramps represent right turn movements for project related-traffic. An additional 46 vehicles are estimated to exit from westbound I-494 onto Penn Avenue northbound, and an additional 19 vehicles from southbound Penn Avenue onto I-494. The existing ramp and intersection configuration can accommodate these increases. 77th Street West; Knox Avenue South to Penn Avenue 77th Street West is a local street, with light industrial and commercial activities immediately opposite the project site. The local streets intersecting with 77th Street West would not offer any advantage to the majority of vehicles related to the Galyan's site. Unrestricted access from the north site driveway entrance to 77th Street West may generate some level of project-related traffic through the residential areas adjacent to 77th Street West. There may also be some new traffic generated by residents shopping at the proposed Galyan's facility. However, this would not result in significant new traffic through the neighborhood. Possible mitigation: Access/turning restrictions onto 77th Avenue West to discourage site-related traffic traveling through the residential areas west of Knox Avenue. Internal Traffic Circulation and Parking Capacity The proposed internal circulation as indicated in the site plan can accommodate the projected traffic volumes for the Galyan's site. Connection to the adjacent street system should function Mr. Gary Tushie September 13, 1996 Page 5 without excessive queuing or delay. Access to the loading dock and customer pick up areas is well separated from the primary site access driveways. The proposed provision of approximately 600 parking spaces is adequate in view of the projected p.m. peak hour total of 287 inbound trips. Assuming an average of 45 to 60 minutes per trip maker, an adequate reserve capacity exists during periods of maximum usage. Summary In summary, the Galyan's Trading Company will generate approximately 4,800 vehicle trips per day. The net increase in traffic is a small percentage of the existing flows along Penn Avenue and 76th Street West, and can be absorbed with little noticeable impact. The net additional trips due to the Galyan's store, though not a large proportion of the critical movement volumes, will incrementally absorb a portion of the reserve capacity at this intersection. Sincerely, Short Elliott Hendrickson Inc. i Mark A. Jepsen Senior Transportation Planner tlo Enclosures c: Tom Foley, City of Richfield is /57 • 0 4 0 a f a 0 E a m W ?e ?g 8 I pg? P 9 I I W i ? O I> w a 2 a E? ffil J it J Oa d > ? o W 4 art a W W m W a W IVIa?I m G ? Y cc a a 2 CL c O a a r N m m d z 0) C K W • i ffi his 5 /? off a? W W 2 IL 9) W J O 2 O ?m Y E m j z2 a E U u1 W O CL CL 90 2 Q } J 4 C7 I 3 Egg ?a j 0 Z aCL L a C 'V GALYAN'S - 1700 WEST 78TH ST. PHASE I SITE PLAP* rAl 2 CE 12 oil W Z ?4: e M 0!20.0 M it ' r I Y Z t?l 3^eiNOM! GdC?ye. ?y a si Cry ss Q ZQ) • • 9-17-96 - j.. __-- -__.___.. _.- ....... ?I GALYAN'S - 1700 WEST 78TH ST. 5--Il PHASE LANDSCAPE PLAN • .OC.tOA N NRi ti z W Z m H U A? t z(D i • Y` 9-17-96 ------------------ t I 1 1 1 I 1 1 I 1 ,? I I ? ?! 1 1 ' GALYAN'S - 1700 WEST 78TH ST. FRONT AND REAR ELEVATIONS E s. n 9-13-96 GALYAN'S - 1700 WEST 78TH ST. SIDE ELEVATION • • • 0 5-C2 T/1 F ? W F a? 9-13-96 - GALYAN'S - 1700 WEST 78TH ST. PHASE I AND PHASE II SITE PLAN W a •Z' E- A y a ?? a ? ? ? r .aeso.o w ? ?vz A, Z9 • I •• - -fir arc. -jov of a - ---- ------- ---- ----------- 1 1 _ ? i \ ?\ ?? i i ? \? 1 1 1 ? 1w?w1? -W- 1 l j ? t ? t ; g t i ? U a 1 i n 1 .I \ `Y4 \ Y \ i \. • 9-13-96 i j 1 ....i -.........._...._ ._ __ ..--- - ? 9 r? S - .a. ;ir i ?l.. ? tel. ?aR t y 4 - y i? tiCiZz :: . y. 70"3.`• x'. 1 ? ff a? C 4 CITY OF RICHFIELD, MINNESOTA Council Letter No. 324 Agenda October 28, 1996 Issue Statement: Public hearing and consideration of resolution regarding approval of modification to the Richfield Redevelopment Project Area Redevelopment Plan (Redevelopment Plan); establishment of the Interchange Tax Increment Financing District; and adoption of the Interchange Tax Increment Financing Plan (Tax Increment Plan). Background: The Limited, Inc. (Developer) is proposing new commercial redevelopment on the former Naegele site at the northwest quadrant of interstate highways 1-35W and 1-494. Phase I of the project proposes the construction of a 100,000 square foot Galyan's Trading Company store, a retailer of sporting goods and wearing apparel. Phase II would incorporate another 25,000 square foot retail use. The Galyan's store will be similar in character to the one initially proposed in Phase II of CSM's Shops at Lyndale with an internal rock climbing wall, waterfall, and interactive sport features both inside the store and on-site, outside the store. The Developer is actively negotiating purchase of the subject property and is requesting • assistance to help offset the costs of asbestos abatement, land acquisition, demolition, etc. A "pay-as-you-go" tax increment project is being proposed with a 25 year duration (assistance is provided to the developer only if the taxes are paid on the development). The basis for making payments would be a Note (similar to CSM and Meridian Crossings) in the approximate amount of $3.3 million. The first payment would be made in 1999 and the last payment would be in 2024 based on a construction start of 1996. The estimated value of the development is $9.6 million.. With the current value of the property at $3.9 million, the projected gross annual increment would begin at an estimated $250,000 and increase due to a projected increase of three percent per year in the market value. The Note will be a part of the Contract for Private Development between the HRA and the Developer. One of the recent legislative changes in TIF is that of a five percent local match. There must be a contribution by the local community of an amount of funds equivalent to five percent of the tax increment. Sources of potential contributions may include public improvements and consultant expenditures, for example. See Cash Flow Exhibit B, page B-1, near the end of the attached Redevelopment and TIF plans. In addition to Exhibit B contained in the attached plan document, there are several other points addressed by the plans. Behind the title page is the Table of Contents and page II-1 contains a Statement of the Objectives. q_J • Recommended Motion: Adopt the resolution which: • approves a modification to the Richfield Redevelopment Project Area Redevelopment Plan; establishes the Interchange Tax Increment Financing District; and approves the Interchange Tax Increment Financing Plan. Basis of Recommendation: 1. The Naegele building appears to be an attractive and, therefore, desirable structure from the exterior especially from the freeway system. However, a review of the building permit files and an on-site inspection by Dennis Neudecker, Building Official, reveals lack of maintenance and significant code violations in virtually every area of the structure. For real estate tax purposes the structure of some 60,000 square feet is valued at $48,000. 2. While the current Comprehensive Plan identifies the site as "Freeway Strip," the revised Comprehensive Plan identifies commercial or office use for the site of approximately nine acres. The office market is not strong enough to generate demand for the site for the foreseeable future. A retail use especially a "signature" • retail use would be appropriate at this location and in today's market. 3. Two outside experts have evaluated this site for possible hotel development. Both state that this site is not likely to be developed as a full. service hotel for the foreseeable future. 4. "Pay-as-you-go" tax increment provides an opportunity to make the redevelopment of this site financially feasible with relatively low risk. 5. Legal counsel reviewed the Redevelopment and Tax Increment Plans and related documents and found them to be in compliance with existing law. 6. The Hennepin County Board member representing the affected area of the project was notified of the project and proposed public hearing by letter as required by law on September 9, 1996. 7. Hennepin County and the Richfield School Districts were notified of the impacts to taxing jurisdictions and the public hearing by letter as required by law on September 19, 1996. 8. The HRA on September 16, 1996 approved the Redevelopment and Tax Increment Plans. • 4-a 9. The Planning Commission on September 17, 1996 found that the Redevelopment and Tax Increment Plans are consistent with the general plans for the development and redevelopment of the City of Richfield. 10. The legal notice of the public hearing was published on October 15, 1996. Alternative Recommendation: 1. Do not approve the modification, establishment of the new tax increment district, and related plans. 2. Delay approval of the modification and establishment of the new tax increment district, and related plans. Discussion/Decision Mode: This proposal is presented for consideration in response to the action taken by the HRA in September and subsequently on other related development issues in October. Approval on October 28, 1996 would permit implementation of the project and allow Galyan's to open for business in 1997. Respectfully submitted, James . Prosser City Manager JDP:ds 0 U-3 RESOLUTION NO. RESOLUTION APPROVING THE MODIFICATION TO THE REDEVELOPMENT PLAN FOR THE RICHFIELD REDEVELOPMENT PROJECT AREA AND ESTABLISHING THE INTERCHANGE TAX INCREMENT FINANCING DISTRICT AND APPROVING AND ADOPTING THE TAX INCREMENT FINANCING PLAN RELATED THERETO, WITHIN THE RICHFIELD REDEVELOPMENT PROJECT AREA. BE IT RESOLVED by the City Council (the "Council") of the City of Richfield, Minnesota (the "City"), as follows: Section 1. Recitals. 1.01. The Richfield Housing and Redevelopment Authority (the "Authority") has heretofore established the Richfield Redevelopment Project Area (the "Redevelopment Project") and adopted the Redevelopment Plan with respect thereto and it has been proposed that the Authority establish within the Redevelopment Project the Interchange Tax Increment Financing District and approve and adopt the related Tax Increment Financing Plan therefor (the "TIF Plan") and the modification to the existing Redevelopment Plan therefor (the "Modification"); all pursuant to and in conformity with applicable law, including Minnesota Statutes, Sections 469.001 through 469.047 and 469.174 through 469.179, inclusive, as amended; all as reflected in the TIF Plan, and presented for the Council's consideration. 1.02. The Council has investigated the facts relating to the TIF Plan. 1.03. The City has performed all actions required by law to be performed prior to the establishment of the Interchange Tax Increment Financing District and the adoption and approval of the proposed Modification and TIF Plan relating thereto, including, but not limited to, notification of Hennepin County and School District No. 280 and Intermediate School District No. 287 having taxing jurisdiction over the property to be included in the Interchange Tax Increment Financing District, a review of and written comment on the TIF Plan by the City Planning Commission, and the holding of a public hearing upon published notice as required by law. 1.04. Certain written reports (the'Reports") relating to the TIF Plan and to the activities contemplated therein have heretofore been prepared by staff and submitted to the Council and/or made a part of the City or Authority files and proceedings on the TIF Plan. The Reports include data, information and/or substantiation constituting or relating to (1) the "studies and analyses" on why the new Tax Increment District meets the so-called "but for" test; and (2) the bases for the other findings and determinations made in this resolution. The Council hereby confirms, ratifies and adopts the Reports, which are hereby incorporated into and made as fully a part of this resolution to the same extent as if set forth in full herein. 0 q_q Section 2. Findings for the Approval of the Modification and the TIF Plan. 2.01. The Council hereby finds that the Modification and the establishment of the Interchange Tax Increment Financing District and the TIF Plan, are intended and, in the judgement of this Council, the effect of such actions will be, to provide an impetus for redevelopment in the public purpose and accomplish certain objectives as specified in the TIF Plan, which are hereby incorporated herein. Section 3. Findings for the Establishment of Tax Increment Financing District No. 1-3. 3.01. The Council hereby finds that the Interchange Tax Increment Financing District is a redevelopment district under Minnesota Statutes, Section 469.174, subd. 10 (a)(1). 3.02. The Council further finds that the proposed redevelopment, in the opinion of the Council, would not occur solely through private investment within the reasonably foreseeable future and that the increased market value on the site that could reasonably be expected to occur without the use of tax increment financing would be less than the increase in the market value estimated to result from the proposed development after subtracting the present value of the projected tax increments for the maximum duration of the district permitted by the TIF Plan, that the TIF Plan conforms to the general plan for the development or redevelopment of the City as a whole; and that the TIF Plan will afford maximum opportunity consistent with the sound needs of the City as a whole, for the development of the Interchange Tax Increment Financing District by private enterprise. 3.03. The City elects to make a qualifying local contribution in accordance with Minnesota Statutes, • Section 273.1399, subd. 6(d), in order to qualify the Interchange Tax Increment Financing District for exemption from state aid losses set forth in Section 273.1399. 3.04. The Council further finds, declares and determines that the City made the above findings stated in this Section and has set forth the reasons and supporting facts for each determination in writing, attached hereto as Exhibit A. 3.05. The City of Richfield elects to calculate fiscal disparities for this District in accordance with Minnesota Statutes, Section 469.177, subdivision 3, clause a, which means the fiscal disparities contribution would not be taken from within the District. Section 4. Approval of the Modification and TIF Plan. 4.01. The Modification and the TIF Plan, as presented to the Council on this date, including without limitation the findings and statements of objectives contained therein, is hereby approved, ratified, established, and adopted and shall be placed on file in the office of the City Clerk. 4.02. The staff of the City, the City's advisors and legal counsel are authorized and directed to proceed with the implementation of the TIF Plan and to negotiate, draft, prepare and present to this Council for its consideration all further plans, resolutions, documents and contracts necessary for this purpose. 4.03 The Auditor of Hennepin County is requested to certify the original net tax capacity of the Interchange Tax Increment Financing District, as described in the TIF Plan, and to certify in each year 0 4-5- thereafter the amount by which the original net tax capacity has increased or decreased; and the City of Richfield is authorized and directed to forthwith transmit this request to the County Auditor in such form and content as the Auditor may specify, together with a list of all properties within the Interchange Tax Increment Financing District, for which building permits have been issued during the 18 months immediately preceding the adoption of this resolution. Dated: October _, 1996 Mayor (Seal) ?J ATTEST: City Manager C 4-60 EXHIBIT A RESOLUTION # The reasons and facts supporting the findings for the adoption of the Tax Increment Financing Plan for the Interchange Tax Increment Financing District as required pursuant to Minnesota Statutes, Section 469.175, Subdivision 3 are as follows: Finding that the Interchange Tax Increment Financing District is a redevelopment district as defined in Minnesota Statutes, Section 469.174, Subdivision 10 (a) (1). The Interchange Tax Increment Financing District consists of 1 parcel of property, with development plans for retail facilities. An inventory of the parcel shows that at least 15 percent of the parcel is occupied as defined in the Act. An inspection of the buildings located within the Interchange Tax Increment Financing District finds that at least 50 percent of the buildings, not including outbuildings, are structurally substandard to a degree requiring substantial renovation or clearance are structurally substandard as defined in the Act. 2. Finding that the proposed development, in the opinion of the Council, would not occur solely through private investment within the reasonably foreseeable future and that the increased market value of the site that could reasonably be expected to occur without the use of tax increment financing would be less than the increase in the market value estimated to result from the proposed development after subtracting the present value of the projected tax increments for the maximum duration of the district permitted by the plan. Due to the high cost of redevelopment on the parcels currently occupied by substandard buildings, the limited amount of commercial/industrial property for expansion adjacent to the existing project, the incompatible land uses at close proximity, and the cost of financing the proposed improvements, this project is feasible only through assistance, in part, from tax increment financing. A comparative analysis of estimated market values both with and without establishment of the Interchange Tax Increment Financing District and the use of tax increments has been performed as described above. Such analysis is included in the TIF Plan and shows that the estimated market value of the proposed development (less the indicated subtractions) after discounting by the present value of the tax increment is significantly greater than the increase in the market value estimated to result from any other development that could be expected to occur without the use of tax increment after subtracting the present value of the projected tax increments for the maximum duration of the district permitted by the TIF Plan. (See Cashflow in Appendix B in the Tax Increment Financing Plan for the Interchange Tax Increment Financing District). 3. Finding that the Interchange Tax Increment Financing District conforms to the general plan for the development or redevelopment of the municipality as a whole. The site is appropriately zoned. The TIF Plan has been reviewed by the Planning Commission and been found to conform to the general development plan of the City. 4. Finding that the Interchange Tax Increment Financing District will afford maximum opportunity, consistent with the sound needs of the City as a whole, for the development of Richfield Redevelopment Project Area by private enterprise. The commercial development to be assisted by the Interchange Tax Increment Financing District will result in increased employment in the City and the State of Minnesota, eliminate a blighting influence, and add a high quality development to the City. • 9 9 ?-8 TABLE OF CONTENTS (for reference purposes only) SECTION I. MODIFIED REDEVELOPMENT PLAN FOR THE RICHFIELD REDEVELOPMENT PROJECT AREA ...................... Page I-1 F. BOUNDARY OF THE RICHFIELD REDEVELOPMENT PROJECT AREA ..... Page I-1 J. DEVELOPMENT ACTIVITY IN RICHFIELD PROJECT AREA ............... Page I-1 SECTION H TAX INCREMENT FINANCING PLAN FOR THE INTERCHANGE TAX INCREMENT FINANCING DISTRICT ................. Page H-1 A. STATUTORY AUTHORITY .......................................... Page II-1 B. STATEMENT OF OBJECTIVES ....................................... Page U-1 C. REDEVELOPMENT PLAN OVERVIEW ................................ Page H-2 D. DESCRIPTION OF PROPERTY IN ..................................... Page H-2 E. CLASSIFICATION OF THE TAX INCREMENT FINANCING DISTRICT ..... Page II-2 F. PROPERTY TO BE ACQUIRED ....................................... Page H-3 G. ESTIMATE OF COSTS .............................................. Page H-3 H. SOURCES OF REVENUE/BONDED INDEBTEDNESS .................... Page 11-4 1. ORIGINAL TAX CAPACITY .......................................... Page U-4 J. AMOUNT OF CAPTURED TAX CAPACITY ............................ Page H-5 K. DURATION OF THE DISTRICT ....................................... Page H-5 L. ESTIMATED IMPACT ON OTHER TAXING JURISDICTIONS ............. Page H-5 • M. N. MODIFICATIONS OF THE TAX INCREMENT FINANCING DISTRICT ...... LIMITATION ON ADMINISTRATIVE EXPENSES .......... .. Page H-6 Page 11-7 0. LIMITATION OF INCREMENT ........................................ Page H-7 P. USE OF TAX INCREMENT .......................................... Page H-8 Q. NOTIFICATION OF PRIOR PLANNED IMPROVEMENTS ................. Page H-9 R. EXCESS TAX INCREMENTS ......................................... Page II-9 S. REQUIREMENT FOR AGREEMENTS WITH THE DEVELOPER ............ Page II-9 T. ASSESSMENT AGREEMENTS ....................................... Page U-10 U. ADMINISTRATION OF DISTRICT AND MAINTENANCE OF THE TAX INCREMENT ACCOUNT ....................................... Page U-1.0 V. FINANCIAL REPORTING REQUIREMENTS ........................... Page II-10 W. MUNICIPAL APPROVAL AND PUBLIC PURPOSE ...................... Page II-1'- X. COUNTY ROAD COSTS ............................................ 1',wc II-l3 Y. FISCAL DISPARITIES ELECTION .................................... P<<at II-13 Z. OTHER LIMITATIONS ON THE USE OF TAX INCREMENT .............. Page II-14 AA. STATE TAX INCREMENT FINANCING AID ........................... Pa?c II-15 AB. ECONOMIC DEVELOPMENT AND JOB CREATION .................... Page II-16 AC. SUMMARY ....................................................... Page 11-16 EXHIBIT A - Boundary Maps of the Richfield Redevelopment Project Arca and The Interchange Tax Increment Financing District ..................................... A-1 EXHIBIT B - Cashflow Analysis and Base Value Analysis B-1 EXHIBIT C - Redevelopment Qualifications ......................................... C-1 EXHIBIT D - Minnesota Business Assistance Form .................................... D-1 q-q SECTION I. MODIFIED REDEVELOPMENT PLAN FOR THE RICHFIELD REDEVELOPMENT PROJECT AREA F. BOUNDARY OF THE RICHFIELD REDEVELOPMENT PROJECT AREA The Richfield Redevelopment Project Area is hereby modified, and the revised boundaries of the Richfield Redevelopment Project Area are as follows: Starting at the intersection of the Richfield west city line and 66th Street, following east on 66th Street to Queen Avenue, thence north to 65th Street, thence west to the rear lot lines of the properties on the east side of Russell Avenue, thence north on said rear property lines to the north city line, thence east to Lyndale Avenue, thence south to 63rd Street, thence east to Harriet Avenue, thence south to 64 f/2 Street, thence continuing south on the property line between Lots 4 and 5, Block 6, Lyndale Oaks Subdivision to the south line of said subdivision, which is also the north line of Hauser's Second Addition. Thence continuing east on said line and as extended to Pillsbury Avenue, thence north on Pillsbury Avenue to the south line of Block 6, Rearrangement of Nicollet Homes Second Addition, thence east on said line to the rear lot line of the lots in Block 8 of said addition, between Blaisdell and Nicollet Avenues, thence north on said line to 64th Street, thence east on 64th Street to the rear lot line of the lots in Block 8, Town's Edge Subdivision, thence south to 65th Street, following the east edge of First Federal Richfield Addition. Thence continuing east on 65th Street to First Avenue, thence south to 66th Street, thence east to 11th Avenue, thence north to the north city line, thence east to Bloomington Avenue, thence south to 63rd Street, thence east to 16th Avenue, thence south to the south border of Taft Park, thence east to 18th Avenue, thence south to the intersection of the northerly lot line of Lot 10, Block 1, Wexler's Addition and 18th Avenue South, thence in a line along said northerly lot line as extended to the west right-of-way line of Cedar Avenue, thence north to a point 55 feet south of the centerline of 66th Street, thence east to a point 110 feet east of the centerline of Cedar Avenue, thence south to the easterly extension of the south line of Lot 1, Block 4, Wexler's Addition, thence west along said line to the west line of said lot, thence north to the south right-of-way line of vacated 67th Street. Thence west to 18th Avenue, thence south to Diagonal Boulevard, thence east along the centerline of said boulevard, extended to T.H. 77, thence south to the south city line, thence west to Knox Avenue, thence north to the north line of Registered Land Survey #1037, thence east to Interstate 35W, thence north to 73rd Street, thence west to Penn Avenue, thence south to 74th Street, thence west to Sheridan Avenue, thence south to 76th Street, thence east to Penn Avenue, thence south to the north Fronta`,e Road of Interstate I-494, thence west to Thomas Avenue, thence north to 77th Street, theme east to the west right of way line of Sheridan Avenue, thence north to 76th street, thence west to the ?? rst city line. thence north to the point of beginning at 66th Street. A map outlining the boundary of the Project Area is found on the following page. DEVELOPMENT ACTIVITY IN RICHFIELD PROJECT AREA Current plans for the project call for the redevelopment of the Naegle Buildin.- at the northwest corner of Interstate Highway 35W and Interstate Highway 494 in the City of Richfield (lnterchanaz TIF District). The redevelopment plans currently call for a 2-story retail building. The 1-hiailci iL of the 518,300,000 project will consist, in part, of Tax Increment Financing. The estimated public cosh for the Interchange TIF District are outlined in the Tax Increment Financing Plan for the Interchange TIF District. • Modified Redevelopment Plan for the Richfield Redevelopment Project Area Page I-1 1-?-1D SECTION II TAX INCREMENT FINANCING PLAN FOR THE INTERCHANGE TAX INCREMENT FINANCING DISTRICT A. STATUTORY AUTHORITY Within the City of Richfield (the "City") there exist areas where public involvement is necessary to cause development or redevelopment to occur. To this end, the City Council established the Richfield Housing and Redevelopment Authority (the "Authority"). The City faces various existing land use problems that require corrective action by the City or Authority before development by private enterprise becomes financially feasible or desirable. The Authority and City are authorized to establish a tax increment district pursuant to Minnesota Statutes, Section 469.174 to 469.179, inclusive, as amended, and Section 469.001 to 469.047, inclusive, as amended, to assist in financing public costs related to this project. Tax increments are derived only from the increased amount of taxes which are paid on a parcel of property after the construction of a new structure on the parcel. Tax increment districts encompass the parcel from which tax increments are paid for a period of time. Below is the Tax Increment Financing Plan (the "Plan") for the Interchange Tax Increment Financing District ("the Interchange TIF District"). Other relevant information is contained in the Redevelopment Plan for the Richfield Redevelopment Project Area, originally adopted on June 14, 1993 and subsequently modified. A modification of the Redevelopment Plan is contemplated in the Tax Increment Plan. The Authority or the City reserves the right to approve all or a portion of the property proposed to be included in the Interchange TIF District on the date of the first public hearing, October 28, 1996. • B. STATEMENT OF OBJECTIVES The Interchange TIF District consists of 1 parcel of land and adjacent and internal rights-of-way. The current plans for the new development on the site include the construction of a 2-story retail building on the site of the Naegle Building at the northwest corner of Interstate Highway 35W and Interstate Highway 494 in the City of Richfield. The Interchange TIF District is expected to achieve many of the objectives set forth in the Redevelopment Plan in regard to land use. These objectives include: To provide increased employment opportunities. 2. Secure the increase of property subject to taxation by the City, county, school district, and other taxing jurisdictions in order to better enable such entities to pa? for public improvements and governmental services and programs required to he provided b them; 3. To provide maximum opportunity, consistent with the needs of the City for development by private enterprise. 4. Provide a retail service level required by the residents of the community. 5. To achieve a balanced variety of commercial businc1,,es and services appropriate to the market area. Tax Increment Financing Plan for the Interchange Tax Increment Financing District Page II-1 4,11 • See Exhibit C for the data on the qualifications of the redevelopment tax increment financing district. C. REDEVELOPMENT PLAN OVERVIEW Property to be Acquired - The City contemplates ownership at this time. 2. Relocation - Complete relocation services are available pursuant to Minnesota Statutes, Chapter 117 and other relevant state and federal laws. 3. The City or the Authority may perform or provide for some or all necessary relocation, demolition, and required utilities and public streets work within the Interchange TIF District. 4. The Interchange TIF District contains property that is appropriately zoned for the anticipated use of the project. All development in the area conforms to applicable state and local codes and ordinances. D. DESCRIPTION OF PROPERTY IN THE INTERCHANGE TIF District The Interchange TIF District encompasses the parcel and all adjacent and interior right-of-ways as identified below: 33-028-24-34-0012 The City or the Authority reserves a right to approve all or a portion of the area of the parcel listed as designation for the Interchange TIF District. 0 See the map in Exhibit A for further information on the location of the Interchange TIF District. E. CLASSIFICATION OF THE TAX INCREMENT FINANCING DISTRICT The City and the Authority, in determining the need to create a tax increment financing district in accordance with Minnesota Statutes, Section 469.174 to 469.179, as amended, inclusive, find that the Interchange TIF District to be established is a redevelopment district pursuant to Minnesota Statutes, Section 469.174, Subdivision 10 as defined below: (a) "Redevelopment district" means a type of tax increment financing district consistin,, of a project, or portions of a project, within which the authority finds by resolution that uuc of the following conditions, reasonably distributed throughout the district, exists: (1) parcels consisting of 70 percent of the area in the district are occupied by buildillys, streets, utilities, or other improvements and more than 50 percent of the brrii&17 Y. not including outbuildings, are structurally substandard to a degree requiriin` substantial renovation or clearance; or (2) The property consists of vacant, unused, underused, inappw/,riatch, yr C 1, or infrequently used railyards, rail storage facilities or exceszi, c 01 rucured railroad rights-of-way. (b) Forpurposes of this subdivision, "structurally substandard" shall me,m containing defects in structural elements or a combination of deficiencies in r?sc f?uul wiliaies and facilities, light and ventilation, fire protection including adequaie r,rr s. / nnut and condition of interior Tax Increment Financing Plan for the Interchange Tax Increment Financing District Page II-2 y,l a • partitions, or similar factors; which defects or deftciencies are of sufficient total significance to justify substantial renovation or clearance. A building is not structurally substandard if it is in compliance with the building code applicable to new buildings or could be modified to satisfy the building code at a cost of less than 15 percent of the cost of constructing a new structure of the same square footage and type on the site. The municipality may find that a building is not disqualified as structurally substandard under the preceding sentence on the basis of reasonably available evidence, such as the size, type, and age of the building, the average cost of plumbing, electrical, or structural repairs or other similar reliable evidence. If the evidence supports a reasonable conclusion that the building is not disqualified as structurally substandard, the municipality may make such a determination without an interior inspection or an independent, expert appraisal of the cost of repair and rehabilitation of the building... (c) For purposes of this subdivision, a parcel is not occupied by buildings, streets, utilities or other improvements until 15 percent of the area of the parcel contains improvements. The 1 parcel has been investigated by City and Authority staff and the Interchange TIF District has been found to meet all requirements of a redevelopment district. Please see the redevelopment qualification findings in Appendix C. 1. The Interchange TIF District consists of 1 parcel. 2. An inventory of the parcel shows that at least 15 percent of the parcel is occupied as defined in the Act. 3. An inspection of the buildings located within the Interchange TIF District finds that at least 50 percent of the buildings are structurally substandard as defined in the Act. • See specific findings in Appendix C. F. PROPERTY TO BE ACQUIRED The Authority may acquire any parcel within the Interchange TIF District, including interior and adjacent street rights of way. 1. Any properties identified for acquisition will be acquired by the City only in order to accomplish one or more of the following: storm sewer improvements; provide land for needed public streets, utilities and facilities; carry out land acquisition, site improvements, clearance and/or development to ac coi np l i s h t h e uses and objectives set forth in this plan. 2. The following are conditions under which properties not designated to be acquired maS he acquired: The City may acquire property by gift, dedication, condemnation or direct purchn,e from \? i I I in -, sellers in order to achieve the objectives of this tax increment financing plan. Such acquisitioas will be undertaken only when there is assurance of funding to finance the acquisition and Frlated costs. G. ESTIMATE OF COSTS The estimate of public costs associated with the Interchange TIF District are out kneel in the following line item budget: • Tax Increment Financing Plan for the Interchange Tax Increment Financing District Page II-3 q-13 0 Estimate of Public Costs Qualified Costs Land Acquisition, Site Work, Public Improvements, Asbestos Abatement, Demolition and Removal $6,300,000 Administration (10%) 700,000 Total Estimated Public Costs: Interest payments on tax increment bonds and obligations are also considered to be public costs in addition to the above referenced estimate of public costs. Interest payments will be determined at the time of issuance of the bonds and obligations and are dependent on interest rates in effect at such time. In addition, administration costs to cover city staff and overhead and various consulting fees in an amount not to exceed 10% of total tax increment will be funded with tax increments from the Interchange TIF District in addition to above mentioned costs. Any funds to be expended outside the boundaries of the Interchange TIF District, but within the boundaries of Richfield Redevelopment Project Area, will be less than 25 percent of total tax increment generated by the Interchange TIF District, including administrative costs. Subject to that limitation, and the limitations as described in Section P, the tax increment from the Interchange TIF District may be used to pay for public costs within the Richfield Redevelopment Project Area. • H. SOURCES OF REVENUE/BONDED INDEBTEDNESS Public improvements costs, acquisition, relocation, and site preparation costs and other costs outlined in the Uses of Funds will be financed primarily through the annual collection of tax increments. The HRA or City reserve the right to use other sources of revenue legally applicable to the Redevelopment Plan and the Tax Increment Financing Plan, including, but not limited to, special assessments, general property taxes, state aid for road maintenance and construction, proceeds from the sale of land, other contributions from the Developer and investment income, to pay for the Estimated Public Costs. The HRA or City reserve the right to incur bonded indebtedness as a result of the Tax Increment Financing Plan. Additional indebtedness may be required to finance other authorized activities. This provision does not obligate the HRA or City to incur debt. The HRA or City will issue bun is un I y ui)on the determination that such action is in the best interest of the HRA or City. The HRA may also ti nonce the activities to be undertaken pursuant to the Tax Increment Financing Plan through loans from fuwl? of i he HRA or to reimburse the Developer on a "pay-as-you-go" basis for eligible activities paid for by the 1)c\ (A)pcr. The total principal amount of bonded indebtedness related to the use of tax increment fiimiicinv \` i11 nut exceed $7,000,000 including pay-as-you-go obligations without an amendment to the TaN Increlriznt Financing Plan pursuant to applicable statutory requirements. 1. ORIGINAL TAX CAPACITY Pursuant to Minnesota Statutes Section 469.174, Subdivision 7 and Section 409.177, Subdivision 1, the Original Net Tax Capacity (OTC) for the Interchange TIF District f,) bascd (m thu value placed on the property by the assessor in 1996 for taxes payable 1997. The tax capacity x, ccrti hed is estimated to be $180,100 for taxes payable in 1997. Tax Increment Financing Plan for the Interchange Tax Increment Financing District Page II-4 q_j? The original local tax rate for the Interchange TIF District will be the tax rate for taxes payable in 1997 of 140.707%. Each year, the Hennepin County Department of Property Tax and Public Records will measure the amount of increase or decrease in the total tax capacity of the Interchange TIF District to calculate the tax increment payable to the City and the Authority. In any year in which there is an increase in total tax capacity in the tax increment financing district, a tax increment will be payable. In any year in which the total tax capacity in the Interchange TIF District declines below the original tax capacity, no additional valuation will be captured and no tax increment will be payable. The County Auditor shall certify in each year after the date the OTC was certified, the amount the OTC has increased or decreased as a result of: 1. change in tax exempt status of property; 2. reduction or enlargement of the geographic boundaries of the district; 3. change due to stipulations, adjustments, negotiated or court-ordered abatements; 4. change in the use of the property and classification; or 5. change in state law governing class rates. AMOUNT OF CAPTURED TAX CAPACITY Pursuant to Minnesota Statutes, Section 469.174 Subdivision 4 and Minnesota Statutes, Section 469.177, Subdivision 2, the estimated Captured Net Tax Capacity (CTC) of the Interchange TIF District, upon completion of all phases of the project, will annually approximate $175,248. The City requests 100 percent of the available increase in tax capacity for repayment of debt and current expenditures. The original tax capacity and project tax capacity are estimated at current market values and class rates to be the total amount when all development is in place and uses of the property have changed. Estimated Project Tax Capacity $355,348 less Original Tax Capacity 180,100 Estimated Captured Tax Capacity $175,248 The Authority elects the calculation of tax increment under Section 469.177, subd. 3(a), which means that fiscal disparities contribution will be made from inside the District. K. DURATION OF THE DISTRICT Pursuant to Minnesota Statutes, Section 469.175, Subdivision 1, the duration of the Interchan e T I r D1 ,trict must be indicated within the Plan. The duration of the Interchange TIF District will be 25 years 1`rom payment of the first tax increment expected in 1999. Thus, it is estimated that the Interchange TT- Di s u i c t _ i n c luding any modifications of the Plan for subsequent phases or other changes, would terminate at the end of the year 2023. The City and the Authority reserve the right to decertify the Interchange TIF 1ll1,4rict prior to the legally required date, but not before all obligations are met. L. ESTIMATED IMPACT ON OTHER TAXING JURISDICTIONS The estimated impact on other taxing jurisdictions assumes construction would have occurred without the creation of the Interchange TIF District. If the construction is a rc,ult ol'tax increment financing, the impact is $0 to other entities. Notwithstanding the fact that the fiscal impact cui the other taxing jurisdictions is $0 Tax Increment Financing Plan for the Interchange Tax Increment Financing District Page II-5 q,15 due to the fact that the construction would not have occurred without the assistance of the city, the following estimated impact of the Interchange TIF District would be as follows if the "but for" test was not met: IMPACT ON TAX WkSF, TAXING JURISDICTION ENTITY'S 1995/96 TOTAL NET TAX CAPACITY CAPTURED TAX CAPACITY (CTC) PERCENT OF CTC TO ENTITY TOTAL Hennepin County 1,006,485,910 175,248 0.02% ISD No. 280 31,537,789 175,248 0.56% Intern. S.D. No. 287 672,580,484 175,248 0.03% City of Richfield 22,075,804 175,248 0.79% Other N/A N/A • IMPACT ON TAX RATES ENTITY 1995/96 TAX RATE PERCENT OF TOTAL CTC POTENTIAL TAXES Hennepin County .37270 26.49% 175,248 65,315 ISD No. 280 .69076 49.09% 175,248 121,054 Interm. S.D. No. 287 .00000 0.00% 175,248 0 City of Richfield .26336 18.72% 175,248 46,153 Other .08025 5.70% 175,248 14,064 TOTAL 1.40707 100.00% 246.586 The estimates listed above display captured tax capacity when all construction is completed. The tax ratc,; and tax capacities are the payable 1996 figures for all jurisdictions. The Interchange TIF District wf l l he ccrtiticd under rates for tax year payable 1997. In addition, the impacts on School District No. 280 and Intermediate District No. 287 do not includc the effect of state aids for education upon school district funding. M. MODIFICATIONS OF THE TAX INCREMENT FINANCING DISTRICT In accordance with Minnesota Statutes, Section 469.175, Subdivisiun 4, any reduction or enlargement of the geographic area of the project or tax increment financing district, iWIVC LSC in ? llullut of bonded indebtedness to be incurred, including a determination to capitalize interest on debt if that determination was not a part of the original plan, or to increase or decrease the amount of interest can the dcht to be capitalized, increase in the portion of the captured tax capacity to be retained by the City or a u t hors ty, increase in total estimated tax Tax Increment Financing Plan for the Interchange Tax Increment Financing District Page II-6 4-1 (0 increment expenditures or designation of additional property to be acquired by the City or Authority shall be approved upon the notice and after the discussion, public hearing and findings required for approval of the original plan. The geographic area of a tax increment financing district may be reduced, but not to impair the ability of the District to meet existing obligations, and, shall not be enlarged after five years following the date of certification of the original tax capacity by the county auditor or by approximately November, 2001. Modifications to the Interchange TIF District, in the form of a budget modification or an expansion of the boundaries, will be recorded in this Plan. N. LIMITATION ON ADMINISTRATIVE EXPENSES In accordance with Minnesota Statutes, Section 469.174, Subdivision 14 and Minnesota Statutes, Section 469.176, Subdivision 3, administrative expenses means all expenditures of an authority other than amounts paid for the purchase of land or amounts paid to contractors or others providing materials and services, including architectural and engineering services, directly connected with the physical development of the real property in the district, relocation benefits paid to or services provided for persons residing or businesses located in the district or amounts used to pay interest on, fund a reserve for, or sell at a discount bonds issued pursuant to Section 469.178. Administrative expenses include amounts paid for services provided by bond counsel, fiscal consultants, and planning or economic development consultants. No tax increment shall be used to pay any administrative expenses for a project which exceed ten percent of the total tax increment expenditures authorized by the tax increment financing plan or the total tax increment expenditures for the project, whichever is less. Pursuant to Minnesota Statutes, Section 469.176, Subdivision 4h, tax increments may be used to pay for the county's actual administrative expenses incurred in connection with the Interchange TIF District. The county may require payment of those expenses by February 15 of the year following the year the expenses were incurred. Pursuant to Minnesota Statutes, Section 469. 177, Subdivision 11, the county treasurer shall deduct an amount equal to 0.1 percent of any increment distributed to an authority or municipality and the county treasurer shall pay the amount deducted to the state treasurer for deposit in the state general fund. 0. LIMITATION OF INCREMENT Pursuant to Section 469.176, Subd. 1, of the Tax Increment Financing Act, no tax increment shall be paid to the City for the Tax Increment Financing District after three (3) years from the date of certification of the Original Net Tax Capacity value of the taxable property in the Tax Increment Financing District by the County Auditor unless within the three (3) years period: (a) bonds have been issued pursuant to Section 469.178, or in aid of a project pursuant to any other law, except revenue bonds issued pursuant to Section 409.152 to 469.165, or (b) the City has acquired property within the Tax Increment Finnnc in,_ DiStrlCt, or (c) the City has constructed or caused to be constructed public ilrlprovoments within the Tax Increment Financing District. The bonds must be issued, or the City must acquire property or con`truet 01 'cause public improvements to be constructed by approximately November 1999. Tax Increment Financing Plan for the Interchange Tax Increment Financing District Page II-7 4-1 ? • The tax increment pledged to the payment of bonds and interest thereon may be discharged and the Tax Increment Financing District may be terminated if sufficient funds have been irrevocably deposited in the debt service fund or other escrow account held in trust for all outstanding bonds to provide for the payment of the bonds at maturity or redemption date. Pursuant to Minnesota Statutes, Section 469.176, Subdivision 6: if, after four years from the date of certification of the original tax capacity of the tax increment financing district pursuant to Minnesota Statutes, Section 469.177, no demolition, rehabilitation or renovation of property or other site preparation, including qualified improvement of a street adjacent to a parcel but not installation of utility service including sewer or water systems, has been commenced on a parcel located within a tax increment financing district by the authority or by the owner of the parcel in accordance with the tax increment financing plan, no additional tax increment may be taken from that parcel and the original tax capacity of that parcel shall be excluded from the original tax capacity of the tax increment financing district. If the authority or the owner of the parcel subsequently commences demolition, rehabilitation or renovation or other site preparation on that parcel including improvement of a street adjacent to that parcel, in accordance with the tax increment financing plan, the authority shall certify to the county auditor in the annual disclosure report that the activity has commenced. The county auditor shall certify the tax capacity thereof as most recently certified by the commissioner of revenue and add it to the original tax capacity of the tax increment financing district. The county auditor must enforce the provisions of this subdivision... For purposes of this subdivision, qualified improvements are limited to (1) construction or opening of a new street, (2) relocation of a street, and (3) substantial reconstruction or rebuilding of an existing street. • The City or a property owner must improve parcel within the Interchange TIF District by approximately November 2000. P. USE OF TAX INCREMENT The Authority hereby determines that it will use 100 percent of the captured net tax capacity of taxable property located in The Interchange TIF District for the following purposes: 1. to pay the principal of and interest on bonds used to finance a project; 2. to finance, or otherwise pay the capital and administration costs of the Redevelopmc ut ProljcOt pursuant to the HRA Act; 3. to pay for project costs as identified in the budget; 4. to finance, or otherwise pay for other purposes as provided in Section 46Y.176, SO)& 4, of the Tax Increment Act; 5. To pay principal and interest on any loans, advances or other payments made t(I thr. Authority or for the benefit of the Redevelopment Project by the Developer; 6. To finance or otherwise pay premiums and other costs for insurance, crcdit enhancement, or other security guaranteeing the payment when due of principal and Wterest on the Tax Increment Bonds or bonds issued pursuant to the Tai lncrement F1 mincing Plan or pursuant to Minnesota Statutes, Chapter 462C and Minnesota Statutes. Section, 469.152 to 469.165, or both; and 7. To accumulate or maintain a reserve securing the pavrneut %? hen due of the principal and interest on the tax increment bonds or bonds issued pursuant to Minnesota Statutes, Chapter 462C and Minnesota Statutes, Sections 469.132 r? 401).16, or both. Tax Increment Financing Plan for the Interchange Tax Increment Financing District Page II-8 4-1 g These revenues shall not be used to circumvent any levy limitations applicable to the Authority nor for other purposes prohibited by Section 469.176, subd. 4, of the TIF Act. Tax increments generated in the Interchange TIF District will be paid by Hennepin County to the Authority for the tax increment fund of said District. The Authority will pay to the developers annually an amount not to exceed an amount as specified in a developer's agreement to reimburse the costs of land acquisition, public improvements, demolition and relocation, site preparation, and administration. Remaining increment funds will be used for City administration (10%) and the costs of public improvement activities outside The Interchange TIF District. Q. NOTIFICATION OF PRIOR PLANNED IMPROVEMENTS The Authority shall, after due and diligent search, accompany its request for certification to the County Auditor or its notice of Tax Increment Financing District enlargement with a listing of all properties within the Tax Increment Financing District or area of enlargement for which building permits have been issued during the eighteen (18) months immediately preceding approval of the tax increment financing plan by the municipality pursuant to Section 469.175, Subd. 3, of the Tax Increment Financing Act. The County Auditor shall increase the original value of the Tax Increment Financing District by the value of improvements for which a building permit was issued. Pursuant to Minnesota Statutes, Section 469.177, Subdivision 4, the Authority has reviewed the area to be included in the Interchange TIF District and found no parcel for which building permits have been issued during the 18 months immediately preceding approval of the Plan by the City. If the building permit had been issued within the 18 month period preceding approval of the plan by the City, the county auditor shall increase the original tax capacity of the district by the valuation of the improvements for which the building permit was • issued. R. EXCESS TAX INCREMENTS Pursuant to Minnesota Statutes, Section 469.176, Subdivision 2, in any year in which the tax increment exceeds the amount necessary to pay the costs authorized by the tax increment plan, including the amount necessary to cancel any tax levy as provided in Minnesota Statutes, Section 475.61, Subdivision 3, the authority shall use the excess amount to do any of the following: 1. prepay the outstanding bonds; 2. discharge the pledge of tax increment therefore; 3. pay into an escrow account dedicated to the payment of such bond; or 4. return the excess to the County Auditor for redistribution to the respective t uin juri dictions in proportion to their tax capacity rate. The Authority may also modify this Plan to authorize additional costs. S. REQUIREMENT FOR AGREEMENTS WITH THE DEVELOPER The City or Authority will review any Developer's proposal to determine its contorinance with the Redevelopment Plan and with applicable municipal ordinance;, mid rode.. To taclllLate this effort, the following documents may be requested for review and approval: site plan, construction, mechanical, and electrical system drawings, landscaping plan, grading and storm drainage plan, "i T1 age system plan, and any other drawings or narrative deemed necessary by the City or Authority to (Jemoi)saute the conformance of the 0 development with city plans and ordinances. Land acquired by the Cite or Authority may be subject to a Tax Increment Financing Plan for the Interchange Tax Increment Financing District Page II-9 4-19 Contract for Sale upon disposition to the Developer. The general requirements to be imposed upon the developer by the Contract for Sale are: To redevelop the land purchased in accordance with this development plan. 2. To commence and complete the building of improvements on the land within a reasonable period of time as determined by the City or Authority. Not to resell the land before improvements are made without the prior consent of the City or Authority. 4. Not to discriminate on the basis of race, color, sex, creed or national origin on the sale, lease, transfer or occupancy of the land purchased from the City or Authority. The requirements to be imposed upon the Developer and the City's or Authority's exact participation in the project will be negotiated as part of the Development Agreement between the City or the Authority and the Developer. T. ASSESSMENT AGREEMENTS Pursuant to Minnesota Statutes, Section 469.177, Subdivision 8, the City or Authority may enter into an agreement in recordable form with the owner of property within the tax increment financing district which establishes a minimum market value of the land and improvements for the duration of the tax increment district. The assessment agreement shall be presented to the county assessor who shall review the plans and specifications for the improvements constructed, review the market value assigned to the land upon which the improvements have been or will be constructed and, so long as the minimum market value contained in the assessment agreement appear, in the judgment of the assessor, to be a reasonable estimate, the assessor may certify the minimum market value agreement. U. ADMINISTRATION OF DISTRICT AND MAINTENANCE OF THE TAX INCREMENT ACCOUNT Administration of the Interchange TIF District will be handled by the Executive Director of the Authority. V. FINANCIAL REPORTING REQUIREMENTS Pursuant to Minnesota Statutes, Section 469.175, Subdivisions 5, 6, and 6(a); a Authority must File aii annual disclosure report for all tax increment financing districts with the State Auditor, the County Board, Schuol Board, and County Auditor. Pursuant to Section 469.175, Subd. 5, of the Tax Increment Financing Act, the Authnrit} must Iile an annual disclosure report for the Tax Increment Financing District. The report shall be filed «ith the County Board, County Auditor, School Board, and the State Auditor on or before July 1 of each yc a . The report to be filed by the Authority shall include the following information: 1. the amount and source of revenue in the tax increment accertlnt: 2. the amount and purpose of expenditures from the nccourlt. Tax Increment Financing Plan for the Interchange Tax Increment Financing District Page II-10 4-do • 3. the amount of any pledge of revenues, including principal and interest, on any outstanding bond indebtedness; 4. the original net tax capacity of the Tax Increment Financing District; 5. the captured net tax capacity retained by the Authority; 6. the captured net tax capacity shared with other taxing districts; 7. the tax increment received; and 8. any additional information necessary to demonstrate compliance with the tax increment financing plan. Section 469.175, Subd. 5, of the Tax Increment Financing Act also provides that an annual statement showing the tax increment received an expended in that year, the original value, captured net tax capacity, amount of outstanding bonded indebtedness, the amount of the district's increment paid to other governmental bodies, the amount paid for administrative costs, the sum of increments paid, directly or indirectly, for activities and improvements located outside of the district, and any additional information the Authority deems necessary shall be published in a newspaper of general circulation in the City. Pursuant to Minnesota Statutes, Section 469.175, Subd. 6, of the Tax Increment Financing Act, the Authority must annually submit to the State Auditor, on or before July 1, a financial report which shall: 1. provide for full disclosure of the sources and uses of the public funds in the district; 2. permit comparison and reconciliation with the Authority's accounts and financial reports; 3. permit auditing of the funds expended on behalf of the tax increment district or that is funded in part or whole through the use of a development account funded with tax increment from other tax increment districts or with public money; and 4. be consistent with generally accepted accounting principles. The financial report must also include the following: 1. the original net tax capacity of the district; 2. the captured net tax capacity of the district, including the amount of any captured net tax capacity shared with other taxing districts; 3. for the reporting period and for the duration of the district, the amount budgeted under the tax increment financing plan, and the actual amount expended for, at lest, the following categories: a. acquisition of land and buildings through condemnation nr purchase: b. site improvements or preparation costs; c. installation of public utilities, parking facilities, streets, r()ad,, side albs. or other similar public improvements; d. administrative costs, including the allocated cost of the ci tv: e. public park facilities, facilities for social, recreational. ur conference purposes, or other similar public improvements: and 4. for properties sold to developers, the total costs of the property to t h c a u t h o n t} and the price paid the developers; 5. the amount of increments rebated or paid to developers or propcrty ov,;ncrs for privately financed improvements or other qualifying costs, other than those reported under clause (3), that were issued on behalf of private entities for facilities located in the Interchange TIF District. • Tax Increment Financing Plan for the Interchange Tax Increment Financing District Page II-11 Pursuant to Minnesota Statutes, Section 469.175, subdivision ba, the Authority must also annually report to the State Auditor before or on July 1 of each year the following amounts for the entire City: 1. the total principal amount of nondefeased bonds that are outstanding at the end of the previous calendar year; and 2. the total annual amount of principal and interest payments that are due for the current calendar year on (I) general obligation tax increment financing bonds and (ii) other tax increment financing bonds. and for each tax increment financing district within the City: 1. the type of tax increment financing district; 2. date on which the district is required to be decertified; 3. amount of any payments and the value of in-kind benefits, such as physical improvements and the used of building space, that are financed with revenues derived from increments and are provided to another governmental unit (other than the municipality) during the preceding calendar year; 4. the tax increment revenues for taxes payable in the current calendar year; 5. whether the tax increment financing plan or other governing document permits increment revenues to be expended outside of the tax increment financing district; 6. any additional information that the State Auditor may require. Copies of this report must also be provided to the county and school district boards. 0 W. MUNICIPAL APPROVAL AND PUBLIC PURPOSE Pursuant to Minnesota Statutes, Section 469.175, Subdivision 3, before or at the time of approval of the tax increment financing plan, the municipality shall make the following findings and shall set forth in writing the reasons and supporting facts for each determination. Finding that the Interchange Tax Increment Financing District is a redevelopment district as defined in Minnesota Statutes, Section 469.175, Subd. 10. The Interchange TIF District consists of 1 parcel of property. The District qualifies as a rede%do[)nicat district as defined in Minnesota Statutes, Section 469.174, subd. 10. 2. Finding that the proposed development, in the opinion of the City Council and the -Awhoi it Y. would not occur solely through private investment within the reasonably foreseeable fittru C wO that the increased market value of the site that could reasonably be expected to occur 11 alwilt 1/1', Ivs,, of tax incrementfinancing would be less than the increase in the market value esti7?101,"110 r(I.Mli from the proposed development after subtracting the present value of the projert,,d tu.t itit renwnts for the maximum duration of the district permitted by the plan. Due to the high cost of redevelopment on the parcel currently occupied b} a substandard building and the cost of financing the proposed improvements, this project i,, fea`ihle only through assistance, in part, from tax increment financing. • Tax Increment Financing Plan for the Interchange Tax Increment Financing District Page II-12 q-Da A comparative analysis of estimated market values both with and without establishment of the Interchange Tax Increment Financing District and the use of tax increments has been performed as described above. Such analysis is contained in Appendix B of the Tax Increment Financing Plan for the Interchange Tax Increment Financing District and indicates that the increase in estimated market value of the proposed development (less the indicated subtractions) exceeds the estimated market value of the site absent the establishment of the Interchange Tax Increment Financing District and the use of tax increments (See Appendix B). Finding that the Tax Increment Financing Plan conforms to the general plan for the development or redevelopment of the municipality as a whole. The site is appropriately zoned. The Tax Increment Financing Plan has been reviewed by the Planning Commission and been found to confirm to the general development plan of the City. 4. Finding that the Tax Increment Financing Plan for the Interchange Tax Increment Financing District will afford maximum opportunity, consistent with the sound needs of the City as a whole, for the development of Richfield Redevelopment Project Area by private enterprise. The establishment of the Interchange Tax Increment Financing District will result in increased employment for the City and will eliminate a blighting influence. X. COUNTY ROAD COSTS Pursuant to Minnesota Statutes, Section 469.175, Subdivision 1 a, the county board may require the authority to pay for all or part of the cost of county road improvements if the proposed development to be assisted by tax increment will, in the judgement of the county, substantially increase the use of county roads requiring construction of road improvements or other road costs and if the road improvements are not scheduled within the next five years under a capital improvement plan or other county plan. The improvements outlined in the Plan serve as notice to the county that the development of the commercial retail facility will be assisted with tax increment. In the opinion of the City, the Authority, and consultants, the proposed development will have little or no impact upon county roads. If the county elects to use increments to improve county roads, it must notify the City within thirty days of receipt of this plan. Y. FISCAL DISPARITIES ELECTION Pursuant to Minnesota Statutes, Section 469.177, Subdivision 3, the governing body mad, elect one of two methods to calculate fiscal disparities. It the calculations pursuant to Minnesota Statutes, Section 409.177, subdivision 3, clause a, are followed the following method of computation shall apply: (1) The original tax capacity and the current tax capacity shall be determined before the al)l?l i(atiwr ' )t the fiscal disparity provisions of Chapter 473F. Where the original tax capacity is equal to or n ur?r tluuz the current tax capacity, there is no captured tax capacity and no tax increment determ;maion. Wh, re the original tax capacity is less than the current tax capacity, the difference between the ori,-,iiial t r_k rul <ic ity and the current tax capacity is the captured tax capacity. This amount less <m.v hr,itiem ilucrrof wim.-h the authority has designated, in its tax incrementfinancing plan, to share with the /OfUl hr_ring distric .r is the retained captured tax capacity of the authority. • Tax Increment Financing Plan for the Interchange Tax Increment Financing District Page II-13 (2) The county auditor shall exclude the retained captured tax capacity of the authority from the taxable value of the local taxing districts in determining local taxing district tax capacity rates. The tax capacity rates so determined are to be extended against the retained captured tax capacity of the authority as well as the taxable value of the local taxing districts. The tax generated by the extension of the lesser of (A) the local taxing district tax capacity rates or (B) the original tax capacity rate to the retained captured tax capacity of the authority is the tax increment of the authority. If the calculations pursuant to Minnesota Statutes, Section 469.177, subdivision 3, clause b, are followed, the following method of computation shall apply: (1) The original tax capacity shall be determined before the application of the fiscal disparity provisions of chapter 473F. The current tax capacity shall exclude any fiscal disparity commercial-industrial tax capacity increase between the original year and the current year multiplied by the fiscal disparity ratio determined pursuant to Section 473F.08, subdivision 6. Where the original tax capacity is equal to or greater than the current tax capacity, there is no captured tax capacity and no tax increment determination. Where the original tax capacity is less than the current tax capacity, the difference between the original tax capacity and the current tax capacity is the captured tax capacity. This amount less any portion thereof which the authority has designated, in its tax increment financing plan, to share with the local taxing districts is the retained captured tax capacity of the authority. (2) The county auditor shall exclude the retained captured tax capacity of the authority from the taxable value of the local taxing districts in determining local taxing district tax capacity rates. The tax capacity rates so determined are to be extended against the retained captured tax capacity of the authority as well as the taxable value of the local taxing districts. The tax generated by the extension of the less of (A) the local taxing district tax capacity rates or (B) the original tax capacity rate to the retained captured tax capacity of the authority is the tax increment of the authority. The Authority shall submit to the County Auditor at the time of the request for certification which method of computation of fiscal disparities the authority elected. The City of Richfield will choose to calculate fiscal disparities by clause a. According to Minnesota Statutes, Section 469.177, Subdivision 3: (c) The method of computation of tax increment applied to a district pursuant to paragraph (a) or (b) shall remain the same for the duration of the district, except that the governing body may elect to change its election from the method of computation in paragraph (a) to the method in paragraph (b). Z. OTHER LIMITATIONS ON THE USE OF TAX INCREMENT General Limitations. All revenue derived from tax increment shall be used in accordance with the tax increment financing plan. The revenues shall be used to finance or otherwise pay puhl is capital and administration costs pursuant to Minnesota Statues, Section 469.124 through 469.134. These revenues shall not be used to circumvent existing levy limit law. No revenues derived from tax increment shall be used for the construction, renovation, operation or malntenaricc of a building to be used primarily and regularly for conducting the business of a municipality, county, school district, or any other local unit of government or the state or federal government: this provision shall not prohibit the use of revenues derived from tax increments for the construction or renovation of a parking structure, a commons area used as a public park or a facility used f o r soci4 rc. reational or conference purposes and not primarily for conducting the business of tllc municipaihty. Tax Increment Financing Plan for the Interchange Tax Increment Financing District Page 11-14 q--Q4 2. Pooling Limitations. At least 75 percent of tax increments from the Interchange TIF District must be expended on activities in the Interchange TIF District or to pay bonds, to the extent that the proceeds of the bonds were used to finance activities within said district or to pay, or secure payment of, debt service on credit enhanced bonds. Not more than 25 percent of said tax increments may be expended, through a development fund or otherwise, on activities outside of the Interchange TIF District except to pay, or secure payment of, debt service on credit enhanced bonds. For purposes of applying this restriction, all administrative expenses must be treated as if they were solely for activities outside of the Interchange TIF District. Five Year Limitation on Commitment of Tax Increments. Tax Increments derived from the Interchange TIF District shall be deemed to have satisfied the 75 percent test set forth in paragraph (2) above only if the five year rule set forth in Minnesota Statutes, Section 469.1763, subdivision 3, has been satisfied; and beginning with the sixth year following certification of the Interchange TIF District, 75 percent of said tax increments that remain after expenditures permitted under said five year rule must be used only to pay previously commitment expenditures or credit enhanced bonds as more fully set forth in Minnesota Statutes, Section 469.1763, subdivision 4. 4. Redevelopment District. At least 90 percent of the revenues derived from tax increment from a redevelopment district must be used to finance the cost of correcting conditions that allow designation of redevelopment and renewal and renovation districts under Section 469.174. These costs include acquiring properties containing structurally substandard buildings or improvements, acquiring adjacent parcels necessary to provide a site of sufficient size to permit development, demolition of structures, clearing of the land, and installation of utilities, roads, sidewalks, and parking facilities for the site. The allocated administrative expenses of the authority may be included in the qualifying costs. 0 AA. STATE TAX INCREMENT FINANCING AID Pursuant to Minnesota Statues, Section 273.1399, for tax increment financing districts for which certification was requested after April 30, 1990, a municipality incurs a reduction in state tax increment financing aid (RISTIFA) applied to the municipality's Local Government Aids (LGA) first and, Homestead and Agricultural Aid (HACA) second, in an amount equal to a formula based upon the equalized qualifying captured tax capacity (QCTC) of the tax increment financing district. Pursuant to Minnesota Statutes, Section 273.1399, Subdivision 6, for tax increment financing district certii is d after June 30, 1994, the Authority may choose an option to the LGA-HACA penalty. A tax irlcrcmcllt financing district is exempt if the Authority elects at the time of approving the tax increment fin mcing plan to make a qualifying local contribution. To qualify for the exemption in each year, the Authorit} mu>t make a qualifying local contribution to the project of a certain percentage. The local cuntributicm I'm a redevelopment district is 5 percent. The maximum local contribution for all districts in the Authority is limited to two percent of the City's net tax capacity. The amount of the local contribution must be made out of unrestricted money of the authorih or municipality, such as the general fund, a property tax levy, or a federal or a state grand-in-aid which nla? bL? spent for general government purposes. The local contribution may not be made, directly or indirect l-, with tax increments or developer payments. The local contribution must be used to pay project costs an(l cannot be used for general government purposes. C7 Tax Increment Financing Plan for the Interchange Tax Increment Financing District Page II-15 4'Q! • The Authority elects to make the annual 5% local contribution to the project to exempt itself from the LGA- HACA penalty. AB. ECONOMIC DEVELOPMENT AND JOB CREATION To the extent applicable, the Authority agrees to comply with Minnesota Statutes, Section 116J.991, which states that a business receiving state or local government assistance for economic development or job growth purposes, including tax increment financing, must create a net increase in jobs and meet wage level goals in Minnesota within two years of receiving assistance (See Appendix D). AC. SUMMARY The HRA of the City of Richfield is establishing the Interchange Tax Increment Financing District to preserve and enhance the tax base, redevelopment substandard areas, and increase employment of the City. The Tax Increment Financing Plan for the Interchange Tax Increment Financing District was prepared by Ehlers and Associates, Inc., 2950 Norwest Center, 90 South Seventh Street, Minneapolis, Minnesota 55402-4100, telephone (612) 339-8291. • Tax Increment Financing Plan for the Interchange Tax Increment Financing District Page II-16 4 -C) (0 EXHIBIT A Boundary Maps of the Richfield Redevelopment Project Area and The Interchange Tax Increment Financing District • The Interchange Tax Increment Financing District A-1 • W Q U LLI 11 w r W 2 ?I ,o V w r N A % YI V YI b ? YI •?F•?Y?1 ? >' LJz MSION.IS ?? % Y V Y 22 Y161 1?J6 ?1. ?J I? I. n + w rw- I. mw /Q/??? A A ?• • ?Yf I \ M01,3lON01 _? .?--_-- M0T3l9N01 3At Wr032 '3A. 1n030 l I?? -- UU Vl tl A o i l MOLD N1«YOQ1t M"? ? No19111«0019 d 91 91 E Vl fl ?I????IJ???jjjU?'`?''I' VI ZI ?O?O?O`J Yi 11' Mill *&Ol I? .d ?. _pr=r?==I IU it VI OI 101"3 'i C m CULLL.?I1! 101113 13 OOtO1NO 1 0 ?uuL?:??Ol_JO? 09.OINO SAtNn,001I '' J CCiO?C??OCOO ?I; snt«A,0, XYq O 'ON.1N.0 I :1!n ON.1X1'0 E V I" ON.,lYO/ '3AI ONY11YOd Wf NO1NIro CU?COU?OCG YI, ?., o NOA N113 r,f V ,Y2 D C??u'?^?ODCO PV2 SN3A31f r•-. SN3A315 C ltl IY' m ?Y 3" 13T03IN +`__• ?l.__C':_?C???OC?L?. G' C O C 3A.13110OIN „3asn,t I i; ?? '!'._J? `? i??O?C 11305it1t ? ii. N1aOM1N3M ,II ^ C, N1tOM1N3M Q AYMSTId 11 ?? C?? •d.r.:+.J---? ?????' AaA6STld 4.0 1N.S.314 z ?? ?? iMrS.31d ON.YO ONTUO 41. 177; LO. a- a C '3A. 31VONA1 '3A• 31VONAl r NOIY01? II ??? Q?OC? 6031110,1F /0/? 1NtAat +1. y i a y 1N.Aat ii xlri100 •I - ` ???? Xti107 C 1N04410 . i I o NOSM3 > C NOSa3«3 0 co NOSa3«3 U??00 `` ? e c_Jr. ? ?' aatrl9 ? C? lO, 10106«AN V 9NIAMIAYI 9NIAY1 C s3«lrr XONY ????-?---- 1 -.^I1-?11?1??•el?? I .I i'. .? S3«tlr .LC N.901 N.901 2 1'- M.9YO« ?CO?CI??u?DU_ IUO Mo?M31 NOlA13N ???^I?Or^??? I 1 Ill ^?? 103A110 .3A110 '3AV MM34 N33n0 '3At NM34 - Q???; !Q 1 II N33no ,135fAY ?' O inssnY U Ntow3Ms ? ?,•,??-- ?;= ? ? ?? 1,1901113Ns L_ _l- ??0 stwoNl Noun 0-?"-Eli -jiF t F_', -IF- 7 '•?-' I 1N32MIA C- NYAYMftM ? -'r•.? ??-?^J) '? 7.J 3Ar S3Xa3X 3A. S3Xa3X ¦ N M N N N N M N M N N N N M M y1 N N N p N N g Y gag Te???<< N N ? N YI r• V Yl ? W •• r•?1 ? } 7, S2 L-- _ O m m Nf10Xr15 CC - i } ?' V i- ? .Y 22 Lj?? ? • ° Ua I. 12 l_ J?? I N N •N N W Yl fl I?JL?? JJ o r M1 r ,•1? h w F i` N T -? --_ - IA0113JON01 '3A1, 91,030 '3Ar NW030 FTI IF Y191 i _(_'_?/\/??C?Q -• 1,191 If- Y/Lt QQ ??ICoI../ o?oU -•- V191 wOLON111YOQ1991 00 0ooo?CJ -• oo roi;NIN00K rift CoC?Cj __ C o0o 1,151 ooool._J oCi o0 X1.1 00??oooCi o?? Coo Yl 1l ;; i; 00000000000000 ? 4, 21 Q ??!-ooo oooioioo will 4111 ?w Yl.Ot I I .? `.- 000 o[.=]oL?JOCI ,I 1,/ 01 1i. 101113 ?I C'CI?C^ 'DOCl?C7o ??: 101113 Q 0OV31N0 I i CuL-Joao^00000 09r01N0 $091611100 II J CCCC? ?CCCCC ?I snomm00 V X9vd CioCiooooCioo ;? W 9161,1X1,0 I i .,,fin r .Coo 0000000 i! ONY,Xvo r Co?ooCC-,ooo I: '3Ar ONr11Y0d '3Ar ONV119pd Yl f •1 '' '?oCf Doo 1' YIS /? Y/1, ooC?i°'?' Boo C YI. IL NO1N110 I oooooo?oo[ I- ,.E Rio 00000000 -` 160116110 z ON? 0 0? o?BOC?oC? o?Z = W SN3A31s OC C-- -°oCiOO ° _ C? Cu?oOOO S " 13T001N o????~?oDOO L` Sill 3" '3Ar 131103IN 1,30SIr,9 1130SI1,,9 of moo ?oCiooo' J N190M1N3M N1110M1143M O W A9Mmq ?? ¦C ??ojC ?++^ ©ooF A9n95l11d GC 1wr51,31d 130'?•^?' +-•-•i•-1 1NrS11,31d 9161,99 I I? ? `J?•???-?1. ^ I` CJ r ?l?l----?: awruo ° 131991,16 ll ?o ? ??? ?'; 131tl91,N W 013iJYM Ill II /Q o==EE?0 0 ,Q '3Ar 31rONA, '3A1, 31rONA1 e ICI ?^ N011071r -' 160116911, W LN1,A99 Ili y i \I CCQ C? r 1NtAM9 xrJ100 .I - ' ? ?aoooo Xrilm `. ?J 1NOJn0 i O Y LN0dn0 2 NOS93113 O N L?Jooo? ° 160593113 1NOe139Y _ --_?•-- , ?'t! i 1110/13LLJ 09r91O ??ooo ` ` ! ?CO ?' 09v91O icloontim ONlA9l oF-7== _71L-.11_i'?=J oEOO C-- C7oooi I 3NTII XO5 N1 ?- oooC o I , \ ,S3wr? _ oUo ? ? ? x0169 xowN .° 161,901 NtOol IL Nv:vo" O?CCC?g?CCCC CC 161,990/l .i NO MIN 1C?i000I ??Ioo? ' ICCIr NO1M3N 93A110 GG??o?Jo?l_f ?oo? III JJJ CCf V3AII0 '3A1, NN3d 3AVNN3d 1633110 'O??L:?t?" ???? '?"JI 1I 113Sfn9 "112ss 1 L ???? IQ 1 1 1135409 N1,0t93Nf C ?•? ??????? ?? 'l?J N1,01Y3Nf srtloNS -J'Q? ,? Noun r-?C' i o- LL. 40un1 LN30NIA I^^L LN30NIA XVnYXSrM '3A1, S3X93X ?N M N N N M yl N N M N N N M N y, N N Nq leg . . = 6 = = = ` c g • = = = - o "vf r ? ? ? r m $. ? I°. ? :. ?. '- .•. 1,.N. ? w ?°. N N g _ ?a ° E e ° L Q V d .O CL P r L d .Q a as ai 0 4-d9 • C EXHIBIT B Cashflow Analysis and Base Value Analysis for The Interchange Tax Increment Financing District B-I 0 The Interchange Tax Increment Financing District 10/18/96 City of Richfield - Naegle Project Page 1 T.I.F. CASH FLOW ASSUMPTIONS - 3% Inflation & Fiscal Disparities at Current Rate Inflation Rata: 3.0000% PROJECT INFORMATION Type of Tax Increment District: New Redevelopment District Type of Total Taxes Per Total Taxes Tax Tax Market Data Date Use Sq. FL Sq. FL Capacity Rate Value Assessable Payable Retell -1 100,000 5.00 500,000 355,348 4.60% 7,724,964 1998 1999 Retail - It 25,000 5.00 125,000 88,837 4.60% 1,931,241 1999 2000 Total 125,000 625,000 444,185 9,656,205 TAX 1NCRF.MF.NT CACH Fl.nW PERIOD BEGINNING Yrs. Mth. Yr. Base Tax Capacity Project Tax Capacity Captured Tax capacity Semi-Annual Gross Tax Increment Admin. at 10.00% Fisical Disparties 15.8922% Future Value Net Tax Increment Present Value Net Tax Increment Local Match 5.00% PERIOD ENDING Yrs. Mth. Yr. 0.0 08-01 1996 180,100 180,100 0 0 0 0 0 0 0 0.0 02-01 1997 0.0 02-01 1997 180,100 180,100 0 0 0 0 0 0 0 0.0 08-01 1997 0.0 08.01 1997 180.100 180,100 0 0 0 0 0 0 0 0.0 02-01 1998 0.0 02-01 1998 180,100 180,100 0 0 0 0 0 0 0 0.0 08.01 1998 0.0 08-01 1998 180,100 180,100 0 0 0 0 0 0 0 0.0 02-01 1999 0.0 02-01 1999 180,100 355,348 175,248 123,293 (12,329) (19,594) 91,370 71,178 6,165 0.5 08-01 1999 0.5 08-01 1999 180,100 355,348 175,248 123,293 (12,329) (19,594) 182,740 139,455 6,165 1.0 02-01 2000 1.0 02-01 2000 180,100 454,846 274,746 193,293 (19,329) (30,719) 325,985 242,132 9,665 1.5 08-01 2000 1.5 0801 2000 180,100 454,846 274,746 193,293 (19,329) (30,719) 469,231 340,622 9,665 2.0 02-01 2001 2.0 02-01 2001 180,100 468,491 288,391 202,893 (20,289) (32,244) 619,591 439,790 10,145 2.5 08-01 2001 2.5 08-01 2001 180,100 468,491 288,391 202,893 (20,289) (32,244) 769,950 534,915 10,145 3.0 02-01 2002 3.0 02-01 2002 180,100 482,546 302,446 212,781 (21,278) (33,816) 927,638 630,609 10,639 3.5 08-01 2002 3.5 08-01 2002 180,100 482,546 302,446 212,781 (21,278) (33,816) 1,085,326 722,402 10,639 4.0 02-01 2003 4.0 02-01 2003 180,100 497,022 316,922 222,966 (22,297) (35,434) 1,250,561 814,667 11,148 4.5 08-01 2003 4.5 08-01 2003 180,100 497,022 316,922 222,966 (22,297) (35,434) 1,415,796 903,171 11,148 5.0 02-01 2004 5.0 02-01 2004 180,100 511,933 331,833 233,456 (23,346) (37,101) 1,588,805 992,061 11,673 5.5 08-01 2004 5.5 08-01 2004 180,100 511,933 331,833 233,456 (23,346) (37,101) 1,761,814 1,077,327 11,673 6.0 02-01 2005 02-01 2005 180,100 527,291 347,191 244,261 (24,426) (38,818) 1,942,831 1,162,902 12,213 6.5 08-01 2005 08-01 2005 180,100 527,291 347,191 244,261 (24,426) (38,818) 2,123,847 1,244,989 12,213 7.0 02-01 2006 02-01 2006 180,100 543,110 363,010 255,390 (25,539) (40,587) 2,313,111 1,327,317 12,770 7.5 08-01 2006 7.5 08-01 2006 180,100 543,110 363,010 255,390 (25,539) (40,587) 2,502,375 1,406,289 12,770 8.0 02-01 2007 8.0 02-01 2007 180,100 559,403 379,303 266,853 (26,685) (42,409) 2,700,134 1,485,441 13,343 8.5 08-01 2007 8.5 08-01 2007 180,100 559,403 379,303 266,853 (26,685) (42,409) 2,897,893 1,561,366 13,343 9.0 02-01 2008 9.0 02-01 2008 180,100 576,185 396,085 278,660 (27,866) (44,285) 3,104,402 1,637,418 13,933 9.5 08-01 2008 9.5 08-01 2008 180,100 576,185 396,085 278,660 (27,866) (44,285) 3,310,910 1,710,370 13,933 10.0 02-01 2009 10.0 02-01 2009 180,100 593,471 413,371 290,821 (29,082) (46,218) 3,526,431 1,783,402 14,541 10.5 08-01 2009 10.5 08.01 2009 180,100 593,471 413,371 290,821 (29,082) (46,218) 3,741,952 1,853,456 14,541 11.0 02-01 2010 11.0 02-01 2010 180,100 611,275 431,175 303,347 (30,335) (48,208) 3,966,756 1,923,549 15,167 11.5 08.01 2010 11.5 08-01 2010 180,100 611,275 431,175 303,347 (30,335) (48,208) 4,191,559 1,990,784 15,167 12.0 02-01 2011 12.0 02-01 2011 180,100 629,613 449,513 316,248 (31,625) (50,259) 4,425,924 2,058,022 15,812 12.5 08-01 2011 12.5 08-01 2011 180,100 629,613 449,513 316,248 (31,625) (50,259) 4,660,288 2,122,518 15,812 13.0 02-01 2012 13.0 02-01 2012 180,100 648,501 468,401 329,537 (32,954) (52,371) 4,904,501 2,186,984 16,477 13.5 08-01 2012 13.5 08.01 2012 180,100 648,501 468,401 329,537 (32,954) (52,371) 5,148,713 2,248,823 16,477 14.0 02-01 2013 14.0 02-01 2013 180,100 667,957 487,857 343,224 (34,322) (54,546) 5,403,069 2,310,604 17,161 14.5 08-01 2013 14.5 08.01 2013 180,100 667,957 487,857 343,224 (34,322) (54,546) 5,657,425 2,369,866 17,161 15.0 02-01 2014 15.0 02-01 2014 180,100 687,995 507,895 357,322 - (35,732) (56,786) 5,922,228 2,429,048 17,866 15.5 08.01 2014 15.5 08-01 2014 180,100 687,995 507,895 357,322 (35,732) (56,786) 6,187,032 2,485,816 17,866 16.0 02-01 2015 16.0 02-01 2015 180,100 708,635 528,535 371,843 (37,184) (59,094) 6,462,597 2,542,484 18,592 16.5 08-01 2015 16.5 08-01 2015 180,100 706,635 528,535 371,843 (37,184) (59,094) 6,738,161 2,596,841 18,592 17.0 02-01 2016 17.0 02-01 2016 180,100 729,894 549,794 386,799 (38,680) (61,471) 7,024,810 2,651,079 19,340 17.5 08.01 2016 17.5 08-01 2016 180,100 729,894 549,794 386,799 (38,680) (61,471) 7,311,458 2,703,107 19,340 18.0 02-01 2017 18.0 02-01 2017 180,100 751,791 571,691 402,205 (40,220) (63,919) 7,609,523 2,755,001 20,110 18.5 08.01 2017 18.5 08-01 2017 180,100 751,791 571,691 402,205 (40,220) (63,919) 7,907,588 2,804,779 20,110 19.0 02.01 2018 19.0 02-01 2018 180,100 774,345 594,245 418,072 (41,807) (66,441) 8,217,412 2,854,412 20,904 19.5 08-01 2018 19.5 08-01 2018 180,100 774,345 594,245 418,072 (41,807) (66,441) 8,527,236 2,902,021 20,904 20.0 02-01 2019 20.0 02-01 2019 1801100 797,575 617,475 434,415 (43,442) (69,038) 8,849,172 2,949,475 21,721 20.5 08-01 2019 20.5 08-01 2019 180,100 797,575 617,475 434,415 (43,442) (69,038) 9,171,107 2,994,994 21,721 21.0 02-01 2020 21.0 02-01 2020 180,100 821,502 641,402 451,249 (45,125) (71,713) 9,505,518 3,040,349 22,562 21.5 08-01 2020 21.5 0801 2020 180,100 821,502 641,402 451,249 (45,125) (71,713) 9,839,929 3,083,856 22,562 22.0 02-01 2021 22.0 02-01 2021 180,100 846,147 666,047 468,588 (46,859) (74,469) 10,187,189 3,127,192 23,429 22.5 0801 2021 22.5 08-01 2021 180,100 846,147 666,047 468,588 (46,859) (74,469) 10,534,448 3,168,761 23,429 23.0 02-01 2022 23.0 02-01 2022 180,100 871,532 691,432 486,446 (48,645) (77,307) 10,894,943 3,210,156 24,322 23.5 0801 2022 23.5 08-01 2022 180,100 871,532 691,432 486,446 (48,645) (77,307) 11,255,438 3,249,863 24,322 24.0 02-01 2023 24.0 02-01 2023 180,100 897,678 717,578 504,841 (50,484) (80,230) 11,629,565 3,289,392 25,242 24.5 08-01 2023 24.5 08-01 2023 180,100 897,678 717,578 504,841 50,484 80,230 12,003,691 3,327,309 25,242 25.0 02-01 2024 Totals 16,197,608 1,619,761 (2,574,156) 12,003,691 809,880 Present values 4,42f AZU (446,982) (713,532) 3,327,3091 I But For Analysis Current Market Value - Est 3,950,000 New Market Value -Est 9,656,205 Difference 5,706,205 Present Value Of Tax Increment 4,489 823 Difference 1,216,383 Value Likely to Occur Without TIF 0 Difference 1,216,383 R1100.27 Prepared by Ehiers/Pubiicorp Inc. NEG-1 Pay-As-You-Go Interest Rate: 8.500% Tax Extension Rate: 1.407070 Fisical Disparties Rate: 15.8922% 10/18M q-31 City of Richfield - Naegle Project Page 1 T.I.F. CASH FLOW ASSUMPTIONS - 0% Inflation & Fiscal Disparities at Current Rate Irritation Rate: 0.0000% • PROJECT INFORMATION Type of Tax Increment District: New Redevelopment District Type of Total Taxes Per Total Taxes Tax Tax Market Data Data Use Sq. Ft Sq. Ft Capacity Rate Value Assessable Payable Retail -1 100,000 5.00 500,000 355,348 4.60% 7,724,964 1998 1999 Retail - II 25,000 5.00 125,000 88,837 4.60% 1,931,241 1999 2000 Total 125,000 625.000 444,185 9,656,205 TAX TNrRF.MF.NT CAW FT.111W PERIOD BEGINNING Yrs. Mth. Yr. Base Tax Capacity Project Tax Capacity Captured Tax a Semi-Annual Gross Tax Increment Admin. at 10.00% Fisicai Disparties 15.8922% Future Value Net Tax Increment Present Value Net Tax Irnxernent Local Match 5.00% PERIOD ENDING Yrs. Mth. Yr. 0.0 08-01 1996 180,100 180,100 0 0 0 0 0 0 0 0.0 02-01 1997 0.0 02-01 1997 180,100 180,100 0 0 0 0 0 0 0 0.0 0"1 1997 0.0 08-01 1997 180,100 180,100 0 0 0 0 0 0 0 0.0 02-01 1998 0.0 02-01 1998 180,100 180,100 0 0 0 0 0 0 0 0.0 08-01 1998 0.0 0801 1998 180,100 180,100 0 0 0 0 0 0 0 0.0 02-01 1999 0.0 02-01 1999 180,100 355,348 175,248 123,293 (12,329) (19,594) 91,370 71,178 6,165 0.5 08-01 1999 0.5 08-01 1999 180,100 355,348 175,248 123,293 (12,329) (19,594) 182,740 139,455 6,165 1.0 02-01 2000 1.0 02-01 2000 180,100 444,185 264,085 185,793 (18,579) (29,527) 320,427 238,148 9,290 1.5 06.01 2000 1.5 08-01 2000 180,100 444,185 264,085 185,793 (18,579) (29,527) 458,115 332,817 9,290 2.0 02-01 2001 2.0 02-01 2001 180,100 444,185 264,085 185,793 (18,579) (29,527) 595,802 423,627 9,290 2.5 08-01 2001 2.5 08-01 2001 180,100 444,185 264,085 185,793 (18,579) (29,527) 733,489 510,735 9,290 3.0 02-01 2002 3.0 02-01 2002 180,100 444,185 264,085 185,793 (18,579) (29,527) 871,177 594,291 9,290 3.5 08-01 2002 3.5 08-01 2002 180,100 444,185 264,085 185,793 (18,579) (29,527) 1,008,864 674,442 9,290 4.0 02-01 2003 4.0 02-01 2003 180,100 444,185 264,085 185,793 (18,579) (29,527) 1,146,552 751,325 9,290 4.5 08-01 2003 4.5 08-01 2003 180,100 444,185 264,085 185,793 (18,579) (29,527) 1,284,239 825,073 9,290 5.0 02-01 2004 5.0 02-01 2004 180,100 444,185 264,085 185,793 (18,579) (29,527) 1,421,926 895,815 9,290 5.5 08-01 2004 5.5 0801 2004 180,100 444,185 264,085 185,793 (18,579) (29,527) 1,559,614 963,673 9,290 6.0 02-01 2005 02-01 2005 180,100 444,185 264,085 185,793 (18,579) (29,527) 1,697,301 1,028,765 9,290 6.5 08-01 2005 08.01 2005 180,100 444,185 264,085 185,793 (18,579) (29,527) 1,834,988 1,091,203 9,290 7.0 02-01 2006 02-01 2006 180,100 444,185 264,085 185,793 (18,579) (29,527) 1,972,676 1,151,095 9,290 7.5 08-01 2006 .5 08-01 2006 180,100 444,185 264,085 185,793 (18,579) (29,527) 2,110,363 1,206,546 9,290 8.0 02-01 2007 8.0 02-01 2007 180,100 444,185 264,085 185,793 (18,579) (29,527) 2,248,050 1,263,655 9,290 8.5 08-01 2007 8.5 08-01 2007 180,100 444,185 264,085 185,793 (18,579) (29,527) 2,365,738 1,316,517 9,290 9.0 02-01 2008 9.0 02-01 2008 180,100 444,185 264,085 185,793 (18,579) (29,527) 2,523,425 1,367,224 9,290 9.5 0801 2008 9.5 08-01 2008 180,100 444,185 264,085 185,793 (18,579) (29,527) 2,661,112 1,415,864 9,290 10.0 02-01 2009 10.0 02-01 2009 180,100 444,185 264,085 185,793 (18,579) (29,527) 2,798,800 1,462,521 9,290 10.5 08-01 2009 10.5 08-01 2009 180,100 444,185 264,085 185,793 (18,579) (29,527) 2,936,487 1,507,276 9,290 11.0 02-01 2010 11.0 02-01 2010 180,100 444,185 264,085 185,793 (18,579) (29,527) 3,074,175 1,550,206 9,290 11.5 08-01 2010 11.5 08-01 2010 180,100 444,185 264,085 185,793 (18,579) (29,527) 3,211,862 1,591,386 9,290 12.0 02-01 2011 12.0 02-01 2011 180,100 444,185 264,085 185,793 (18,579) (29,527) 3,349,549 1,630,888 9,290 12.5 0801 2011 12.5 0801 2011 180,100 444,185 264,085 185,793 (18,579) (29,527) 3,487,237 1,668,779 9,290 13.0 02-01 2012 13.0 02-01 2012 180,100 444,185 264,085 185,793 (18,579) (29,527) 3,624,924 1,705,125 9,290 13.5 08-01 2012 13.5 08-01 2012 180,100 444,185 264,085 185,793 (18,579) (29,527) 3,762,611 1,739,989 9,290 14.0 02-01 2013 14.0 02-01 2013 180,100 444,185 264,085 185,793 (18,579) (29,527) 3,900,299 1,773,433 9,290 14.5 08-01 2013 14.5 08-01 2013 180,100 444,185 264,085 185,793 (18,579) (29,527) 4,037,986 1,805,512 9,290 15.0 02-01 2014 15.0 02-01 2014 180,100 444,185 264,085 185,793 (18,579) (29,527) 4,175,673 1,836,284 9,290 15.5 08-01 2014 15.5 08-01 2014 180,100 444,185 264,085 185,793 (18,579) (29,527) 4,313,361 1,865,802 9,290 16.0 02-01 2015 16.0 02-01 2015 180,100 444,185 264,085 185,793 (18,579) (29,527) 4,451,048 1,894,116 9,290 16.5 08-01 2015 16.5 0801 2015 180,100 444,185 264,085 185,793 (18,579) (29,527) 4,588,736 1,921,276 9,290 17.0 02-01 2016 17.0 02-01 2016 180,100 444,185 264,085 185,793 (18,579) (29,527) 4,726,423 1,947,329 9,290 17.5 0801 2016 17.5 08-01 2016 180,100 444,185 264,085 185,793 (18,579) (29,527) 4,864,110 1,972,319 9,290 18.0 02-01 2017 18.0 02-01 2017 180,100 444,185 264,085 185,793 (18,579) (29,527) 5,001,798 1,996,291 9,290 18.5 08-01 2017 18.5 08-01 2017 180,100 444,185 264,085 185,793 (18,579) (29,527) 5,139,485 2,019,285 9,290 19.0 02-01 2018 19.0 02-01 2018 180,100 444,185 264,085 185,793 (18,579) (29,527) 5,277,172 2,041,342 9,290 19.5 08-01 2018 19.5 08.01 2018 180,100 444,185 264,085 185,793 (18,579) (29,527) 5,414,860 2,062,500 9,290 20.0 02-01 2019 20.0 02-01 2019 180,100 444,185 264,085 185,793 (18,579) (29,527) 5,552,547 2,082,795 9,290 20.5 0801 2019 20.5 08-01 2019 180,100 444,185 264,085 185,793 (18,579) (29,527) 5,690,234 2,102,263 9,290 21.0 02-01 2020 21.0 02-01 2020 180,100 444,185 264,085 185,793 (18,579) (29,527) 5,827,922 2,120,938 9,290 21.5 08-01 2020 21.5 08-01 2020 180,100 444,1&5 264,085 185,793 (18,579) (29,527) 5,965,609 2,138,851 9,290 22.0 02-01 2021 22.0 02-01 2021 180,100 444,185 264,085 185,793 (18,579) (29,527) 6,103,297 2,156,033 9,290 22.5 08-01 2021 22.5 0801 2021 180,100 444,185 264,085 185,793 (18,579) (29,527) 6,240,984 2,172,515 9,290 23.0 02-01 2022 23.0 02-01 2022 180,100 444,185 264,085 185,793 (18,579) (29,527) 6,378,671 2,186,326 9,290 23.5 08-01 2022 23.5 08-01 2022 180,100 444,185 264,085 185,793 (18,579) (29,527) 6,516,359 2,203,491 9,290 24.0 02-01 2023 24.0 02-01 2023 180,100 444,185 264,085 185,793 (18,579) (29,527) 6,654,046 2,218,039 9,290 24.5 08-01 2023 24.5 08-01 2023 180,100 444,185 264,085 185,793 18,579 29,52 6,791,733 2,231,993 9290 25.0 02-01 2024 Totals 9,164,667 916,46 1,456, 6,791,733 458,233 irresent vames J,u] 1,euu (:877,18Y) (418,544) 2,231,9931 1 But For Analysis Current Market Value - Est 3,950,000 New Market Value -Est 9,656,205 Difference 5,706,205 Present Value Of Tax Increment 3,011,820 Difference 2,694,386 Value Likely to Occur Without TIF 0 Difference 2,694,386 81100.27 Prepared by Ehlers/Publicorp Inc. NEG-1 Pay-As-You-Go Interest Rate: 8.500% Tax Extension Rate: 1.407070 Fisical Disparties Rate: 15.8922% 4 3a EXHIBIT C Redevelopment Qualifications for The Interchange Tax Increment Financing District Please refer to a report entitled "Inspection of Naegele Outdoor Advertising" written by the City of Richfield Public Safety Office and on file with the HRA of the City of Richfield and a report entitled "Phase I Environmental Assessment, Former Naegle Building," also on file with the HRA of the City of Richfield. • C-1 0 The Interchange Tax Increment Financing District q 33 EXHIBIT D Minnesota Business Assistance Form (Minnesota Department of Trade and Economic Development) • D-1 The Interchange Tax Increment Financing District MINNESOTA DEPARTMENT OF TRADE AND ECONOMIC DEVELOPMENT 500 Metro Square 1217th Place East Saint Paul, Minnesota 55101-2146 USA •. ??onomicpe '. qua °PO V . q ry ? 0 :? iiedaQe?o?;•l To all Minnesota government agencies: Minnesota Laws 1995 Chapter 224, Section 58 (authored by Representative Karen Clark and Senator John Hottinger) requires a business receiving state or local government assistance as of July 1, 1995 to create a net increase in jobs in Minnesota within two years of receiving assistance and meet wage level and job creation goals established by the funding agency. Businesses not meeting these conditions must repay the assistance at the terms negotiated by the business and the government agency administering the assistance. Each govemrrlent agency is mandated to annually report wage and job goals and actual progress toward those goals for each business receiving assistance to the Minnesota Department of Trade and Economic Development (DTED). The law does not stipulate what those goals should be, but does require goals to be established by the government agency for each individual project. `Business assistance" refers to any business activity within a tax increment financing district and any business grant or business loan using state or local dollars in excess of $25,000. While not defined in the legislation, our assumption is that this would include grants, loans, interest subsidies, tax increment financing (Tip, or any public monies directly benefiting a business and given for economic development or job growth purposes. In order to simplify data collection, please use the Minnesota Business Assistance Form (reverse side). The form should be completed by each government entity administering the assistance for each business receiving assistance. All financial assistance provided to business after July 1, 1995 must be reported These forms must be submitted to DTED by March 1 of each year for the previous calendar year. Wage level and job creation goals must be documented until project goals are achieved K,- 0 -4 1 d Commissioner Minnesota Laws 1995 Chapter 224, Section 58 (M.S.116J.991): A business that receives state or local government assistance for economic development or iob growth purposes must create a net increase in iobs in Minnesota within two years of receiving the assistance. The government agency providing the assistance must establish wage level and iob creation goals to be met by the business receiving the assistance. A business that fails to meet the goals must repay the assistance to the government agency. Each government agency must report the wage and iob goals and the results for each project in achieving those goals to the department of trade and economic development. The department shall compile and publish the results of the worts for the previous calendar year by June I of each Year. The reports of the agencies to the department and the compilation report of the department shall be made available to the public. For the purposes of this section. "assistance" means a grant or loan in excess of $25,000, or tax increment financing. • (612) 297-1291 (800) 657-3858 TTY/TDD (612) 282.6142 An Equal Opportunity Employer FAX (612) 296-1290 q-3?D • 0E?ade and •? RD 0 V "'44 Minnesota. Business Assistance Form* Minnesota Department of Trade and Economic Development Please type or print in dark init. • 1. Funding government agency name 2. Agency street address 3. City 4. Zip Code 5. Phone number (area code) 6. Fax number (area code) 7. Contact name 8. Type of government agency -City -County -Regional -State - Other (Please indicate) 9. Name of TIF district (if applicable) 10. Name of business receiving assistance 11. Date business received assistance 12. Job creation goals for business receiving assistance 13. Hourly wage level goals for business receiving assistance 14. Actual jobs created since business received assistance 15. Actual average hourly wage paid to employees hired since business received assistance 16. Last date actual wage and job creation levels documented *Please complete one form for each business project your agency assisted with .25,000 or more in public funds. Please send completed form annually by March 1 to: Minnesota Business Assistance Form Minnesota Department of Trade and Economic Development 500 Metro Square 121 East 7th Place St. Paul, Minnesota 55101 or fax report to: (612) 296-1290 For information, call: (612) 297-1291 or 1-800-657-3858 3F CITY OF RICHFIELD, MINNESOTA Council Letter No. 323 Agenda October 28, 1996 Issue Statement: Request for a public dance license for El Pulso De La Vida, 1145 Lilac Circle, Victoria, Minnesota to be located at St. Peter's Catholic Church, 6730 Nicollet Avenue, for three selected evenings in November 1996. Background: The applicant, Thomas William Bright, submitted an application on October 22, 1996 for a public dance license. These dances are scheduled for November 2, 9 and 23, 1996. They are scheduled to begin on 8 p.m. and end promptly at 1 a.m. A disc jockey provides the dancing music and is the only activity taking place. The applicant has a signed lease agreement with St. Peter's Catholic Church for the dances to take place at their location. Staff has had several conversations with the owner of the establishment and has reviewed all requirements thoroughly. There will be no alcohol of any kind served to anyone or available during these dances. The owner has contacted Public Safety and made arrangements for a police officer to be present at all public dances with that cost being incurred by the owner. Arrangements will be made for an officer to be present for each evening's activities. Recommended Motion: Staff recommends approval of a public dance license for El Pulso De La Vida, 1145 Lilac Circle, Victoria, Minnesota, to be located at St. Peter's Catholic Church, 6730 Nicollet Avenue, for three evening dances, November 2, 9 and 23, 1996. Basis of Recommendation: 1. The owner has submitted the required information and paid the fees. 2. The owner has had several discussions with Public Safety staff and has agreed to . all the requirements of the public dance ordinance. Alternative Recommendation: 1. The Council could decide not to approve the public dance license which would mean that no dancing could take place on the premises. Discussion/Decision Mode: The request for a public dance license is presented to Council for their consideration at this time. Respectfulh submitted, James P.I)Prc City Malnygger JDP:cak 3E- CITY OF RICHFIELD, MINNESOTA Council Letter No. 322 Agenda October 28, 1996 Issue Statement: Purchase of a new asphalt roller in excess of $25,000. Background: The City Council policy resolution on purchasing provides that when the purchase of merchandise, materials, equipment or construction exceeds the amount of $25,000, authority to purchase shall be submitted to the City Council for consideration. Unit No. 205, a Western Model R-2000 roller, is fully depreciated and due to be replaced in 1996. Staff wrote specifications for a new, larger asphalt roller, including a trade-in price for the old unit. Staff believes a larger unit will be more efficient for the accelerated street maintenance program. A formal bid opening was held on October 16, 1996 with the following results: Total with Trade-In Hayden-Murphy Equipment Company $33,015.00 St. Joseph Equipment Company 33,020.33 Sweeney Bros. Tractor, Inc. 33,744.52 Aspen Equipment Company 34,037.40 Ziegler 37,367.66 • Recommended Motion: Approve the purchase of one new asphalt roller from the Hayden-Murphy Equipment Company in the amount of $31,500 minus $500 in trade-in plus sales tax of $2,015 for a grand total of $33,015. Basis of Recommendation: 1. Hayden-Murphy Equipment Company submitted the low bid with one minor exception to the specifications (a four gallon less capacity in the water tank) which staff believes is acceptable. 2. There are adequate funds available in the 1996 motor pool and street maintenance budgets for this purchase. Alternative Recommendation: 1. Council could reject all of the bids and instruct staff to obtain new ones; however, staff does not believe better prices could be obtained for the type of roller desired from a reputable manufacturer. Discussion/Decision Mode: Staff is requesting approval of this purchase at the October 28, 1996 regular Council meeting. Respectfully submitted, Jam D. Prosser Ci ` anager JDP:cak CITY OF RICHFIELD, MINNESOTA ' Bid Opening October 16, 1996 11:15 a.m. Purchase of Asphalt Roller Bid No. 96-21 Pursuant to requirements of Resolution No. 1015, a meeting of the Administrative Staff was called by Thomas P. Ferber, City Clerk, who announced that the purpose of the meeting was to receive, open and read aloud, bids for purchase of asphalt roller, Bid No. 96-21, as advertised in the official newspaper on October 9, 1996. Present: Thomas Ferber, City Clerk Steve Devich, Administrative Services Director Cheryl Krumholz, City Manager Representative Roxi Braa, Administrative Aide Rick Beane, Mechanic Supervisor • • The following bids were submitted and read aloud: VENDOR Bid Security Bid Amount Total with Trade-in Aspen Equipment Co. Cashier's check $ 34,037.40 Hayden-Murphy Equipment Co. Cashier's check $ 33,015.00 Sweeney Bros. Tractor Inc. 5% Bid Bond $ 33,744.52 Ziegler 5% Bid Bond $ 37,367.66 St. Joseph Equipment Co. 5% Bid Bond $ 33,020.33 The City Clerk announced that the bids would be tabulated and considered at the October 28, 1996 City Council Meeting. Thomas P. Ferber City Clerk isb CITY OF RICHFIELD, MINNESOTA Council Letter No. 321 Agenda October 28, 1996 Issue Statement: Master purchase order for salt to be used in ice control during the 1996/97 winter season. Background: The City Council policy resolution on purchasing provides that when the purchase of merchandise, materials, equipment or construction exceeds the amount of $25,000, authority to purchase shall be submitted to the City Council for consideration. Each year, the City purchases rock salt, which is usually mixed with sand, to control ice on road surfaces during the winter season. A recent history of prices for this product is: Year Unit Price Delivery Total 89/90 26.48/ton 1.85/ton 28.33/ton 90/91 26.27/ton 1.50/ton 27.77/ton 91/92 26.27/ton 1.50/ton 27.77/ton 92/93 25.66/ton Included 25.66/ton (500 ton) 92/93 93/94 36.92/ton 25.66/ton Included Included 36.92/ton (500 ton) 25.66/ton 94/95 27.46/ton Included 27.46/ton 95/96 28.21 /ton Included 28.21/ton Funding for this purchase is included in the 1996 and 1997 operating budgets for street maintenance. Recommended Motion: Approve the purchase of an estimated 1,400 ton of rock salt for the 1996/97 winter season from Cargill Incorporated; Salt Division, Lansing, New York, at a unit price of $27.81/ton/delivered for an estimated total purchase price of $38,934. Basis of Recommendation: 1. The City participates in a joint purchasing agreement with the State of Minnesota. 2. The State of Minnesota solicited bids for all the participants in the joint purchase agreement. 3. Under this particular joint purchase agreement, the City of Richfield has an obligation to purchase from the low bidder. 0 4. Cargill, Inc.; Salt Division was the lowest responsible bidder for rock salt. gyp- i Alternative Recommendation: None. Discussion/Decision Mode: Staff is asking approval at the October 28, 1996.Council meeting in order to facilitate timely delivery. Respectfully submitted, James D. rosser City Manager JDP:cak • 0 ,3C • CITY OF RICHFIELD, MINNESOTA Council Letter No. 320 Agenda October 28, 1996 .Issue Statement: Council authorization to extend Contract No. A01384 with Hennepin County to allow continued access to the property information system. Background: Since September 19, 1978 Hennepin County and the City have had a contractual agreement which provides the City with access to the County's real estate tax information. From 1978 through October 1989, the City had access to the County's real estate data via a leased Hennepin County data terminal and printer. In November 1990, the City Council approved the purchase of the Hennepin County data terminal, software and printer when the County announced that it was getting out of the leasing business. After purchase of the equipment, the City entered into a contract with Hennepin County to provide continued access to the County data with the City's owned equipment. The current contract has provided the City with an extremely economical way to access Hennepin County real estate data. The contract is not automatically renewable and must be renewed each year by the City and County. The City has now received information from Hennepin County announcing the fees for the contract year 1997 and is asking if the City is interested in renewing this contractual agreement. The Council action here would be to take advantage of the renewal. Recommended Motion: Authorize the City Manager to extend Contract No. A01384 with Hennepin County for access to the property information system for the period beginning January 1, 1996 and ending December 31, 1997. Basis of Recommendation: 1. The current contract with Hennepin County expires as of December 31, 1996. 2. The contract is a necessary part of the City of Richfield's ability to deliver property data to the public through the on-line connection to Hennepin County records. 3. The County has announced that inquiry fees will be charged at the rate of $.0201 per transaction, which is a slight increase from the fee charged in 1996 ($.0194). 4. The network support charge will be $27 per month per workstation. This is no change from 1996. The telephone line charge will remain at $74.60 (plus appropriate tax) per month, subject to rate increases/decreases in phone line S charges. 3C-I 5. The contract with Hennepin County is a very economical way for the City to provide this data to the public. The annual cost for these services is approximately $1,541 in Assessing and $801 in Public Safety. Alternative Recommendation: 1. The City could elect not to renew this contract with Hennepin County. However, if this contract is not renewed, the City would lose its on-line access to County property tax records, leaving the City's Assessing Division a very ineffective function. Discussion/Decision Mode: Action on this item needs to be taken sometime prior to the end of 1996. However, since City staff finds no problem with the arrangement proposed by Hennepin County, it is preferred that the agreement be signed and returned to Hennepin County as soon as possible. Respectfully submitted, James . Prosser • City Manager JDP:cak ICJ 38 • CITY OF RICHFIELD, MINNESOTA Council Letter No. 319 Agenda October 28, 1996 Issue Statement: Consideration of a resolution authorizing continued participation in the Livable Communities Act programs which are administered by the Metropolitan Council. Background: The Livable Communities Program (also known as "The Local Housing Incentive Account Program") is a 15 year strategy for 90 communities in the region to develop a more diverse housing stock. The legislature requires communities to annually renew their resolution to participate through the Metropolitan Council administered program. Participation keeps Richfield competitive in securing state and regionally distributed funds as made available. The goals of a more diverse housing stock for Richfield remain unchanged: • more market rate new construction and remodeled homes • development of low density attached single family homes • a greater variety of apartment choices • affordable housing opportunities such as Vo-Tech or Habitat for Humanity A copy of the approved City Council and HRA goals which were developed in 1996 is attached. Recommended Motion: Adopt the resolution electing Richfield to continue participating in 1997 in the Local Housing Incentives Account Program under the Metropolitan Livable Communities Act. Basis of Recommendation: 1. Program participation and established goals for Richfield remain consistent with community goals. The Metropolitan Council supports the goals. 2. Participation keeps Richfield competitive in securing state and regional community development resources Alternative Recommendation: 1. Withdraw from participation. 2. Modify the goals. Discussion/Decision Mode: The Metropolitan Council must be informed of Richfield's plans to participate prior to November 15, 1996. Respectf ly submitted, James . rosser city M n ger JDP:ds 0 RESOLUTION NO. RESOLUTION ELECTING TO CONTINUE PARTICIPATING IN THE LOCAL HOUSING INCENTIVES ACCOUNT PROGRAM UNDER THE METROPOLITAN LIVABLE COMMUNITIES ACT CALENDAR YEAR 1997 WHEREAS, the Metropolitan Livable Communities Act (Minnesota Statutes Section 473.25 to 473.254) establishes a Metropolitan Livable Communities Fund which is intended to address housing and other development issues facing the Metropolitan Area defined by Minnesota Statutes Section 473.121; and WHEREAS, the Metropolitan Livable Communities Fund, comprising the Tax Base Revitalization Account, the Livable Communities Demonstration Account and the Local Housing Incentive Account, is intended to provide certain funding and other assistant to metropolitan area municipalities; and WHEREAS, a metropolitan area municipality is not eligible to receive grants or loans under the Metropolitan Livable Communities Fund or eligible to receive certain polluted sites cleanup funding from the Minnesota Department of Trade and Economic Development unless the municipality is participating in the Local Housing Incentives Account Program under the Minnesota Statutes Section 473.254; and WHEREAS, the Metropolitan Livable Communities Act requires the Metropolitan Council to negotiate with each municipality to establish affordable and life-cycle housing goals for that municipality that are consistent with and promote the policies of the Metropolitan Council as provided in the adopted Metropolitan Development Guide; and WHEREAS, each municipality must identify to the Metropolitan Council the actions the municipality plans to take to meet the established housing goals through preparation of the Housing Action Plan; and WHEREAS, the Metropolitan Council adopted, by resolution after a public hearing, negotiated affordable and life-cycle housing goals for each participating municipality; and WHEREAS, a metropolitan area municipality which elects to participate in the Local Housing Incentives Account Program must do so by November 15 of each year; and WHEREAS, for calendar year 1997, a metropolitan area municipality that did not participate in the Local Housing Incentive Account Program during the calendar year 1996, can participate under Minnesota Statutes Section 473.254 only if: (a) the municipality elects to participate in the Local Housing Incentives Account Program by 38-? November 15, 1996; and (b) the Metropolitan Council and the municipality have successfully negotiated affordable and life-cycle housing goals for the municipality. NOW, THEREFORE, BE IT RESOLVED that the City of Richfield hereby elects to participate in the Local Housing Incentives Program under the Metropolitan Livable Communities Act during the calendar year 1997. Adopted by the City Council of the City of Richfield, Minnesota this 28th day of October, 1996. Martin J. Kirsch, Mayor l.J ATTEST: Thomas P. Ferber, City Clerk 0 E 0 Housing Goals Agreement Metropolitan Livable Communities Act PRINCIPLES The City ofRichfield supports: O A balanced housing supply, with housing available for people at all income levels. © The accommodation of all racial and ethnic groups in the purchase, sale, rental and location of housing within the community. ® A variety of housing types for people in all stages of the life-cycle. ® A community of well-maintained housing and neighborhoods, including ownership and rental housing. O Housing development that respects the natural environment of the community while striving to accommodate the need for a variety of housing types and costs. ® The availability of a full range of services and facilities for its residents, and the improvement of access to and linkage between housing and employment. GOALS To carry out the above housing principles, the City ofRichfield agrees to : ¦ Use benchmark indicators for communities of similar location and stage of development as affordable and life-cycle housing goals for the specified periods. ¦ Make its best efforts, given market conditions and resource availability, to remain within or make progress toward these benchmarks. ¦ These goals will be reviewed by the Richfield Housing and Redevelopment Authority (HRA) in 2001 and 2006. CITY INDEX BENCHMARK RICHFIELD GOAL FORRICHFIEI (1996 to 2010) (1996 to 2001) • Affordability Ownership 97% 64-77% 92% Rental 64% 32-45% 59% Life-Cycle Type (Non-single family detached) 36% 38-41% 36-41% Owner/RenterMix 65/35% 64-70 / 30-35% 65-70 / 30-35% Density Single-Family Detached 3.6/acre 2.3-2.9/acre 2.9-3.6/acre Multifamily 21/acre 11-15/acre 15-21/acre Int-r CITY OF RICHFIELD, MINNESOTA Council Letter No. 318 Agenda October 28, 1996 Issue Statement: Consideration of a resolution authorizing a subdivision waiver for the Shops at Lyndale, 700-1150 West 78th Street. Background: CSM Corporation is requesting a subdivision waiver to divide a portion of the property occupied by the Shops at Lyndale into separate parcels. The two phases of the shopping center are financed separately. The entrance to the center, located at the former Colfax Avenue, serves both phases and needs to be treated separately in the financing package. A subdivision waiver is needed to split some parcels that are part of the Phase II property and part of the entrance drive. Recommended Motion: Adopt a resolution authorizing the subdivision waiver for the Shops at Lyndale, 700- 1150 West 78th Street. Basis of Recommendation: 1. Approval of the subdivision waiver would not interfere with the purposes of platting regulations, Section 500.05. 2. Compliance with the regular platting requirements of Section 500.05, Subd. 1 of the City Code would result in an unnecessary hardship. 3. The split of the parcels is necessary to separate the financing for the entrance drive from the financing for the second phase. Alternative Recommendation: The City Council may deny this subdivision waiver if a finding of fact determines that the proposal would have an adverse impact on adjacent properties. Discussion/Decision Mode: This item is scheduled on the City Council agenda at 7:00 p.m. on Monday, October 28, 1996. The financing is arranged for closing by October 31, 1996. Respectfullu submitted, James rosser City Manager JDP:ds ,3A- l 0 RESOLUTION NO. RESOLUTION AUTHORIZING A SUBDIVISION WAIVER 77TH STREET AND VACATED COLFAX AVENUE WHEREAS, an application has been filed with the City of Richfield which requests approval of a subdivision waiver for the division of certain parcels of land generally located at 77th Street and vacated Colfax Avenue, legally described as: Lots 8 through 11, Block 2, STRAND-BOWEN SECOND ADDITION, Hennepin County, Minnesota (the "Subject Property"); and WHEREAS, the proposed division of land for which the subdivision waiver is sought is as legally described as: Parcel A: Lots 1 through 11 inclusive, Block 2, STRAND-BOWEN SECOND ADDITION, Hennepin County, Minnesota. EXCEPT the northerly 48.0 feet of Lot 8, except the easterly 4.5 feet thereof; and except the northerly 48.0 feet of Lots 9 to 11 inclusive, Block 2, STRAND-BOWEN SECOND ADDITION, Hennepin County, Minnesota Parcel B: The northerly 48.0 feet of Lot 8, except the easterly 4.5 feet thereof; and the northerly 48.0 feet of Lots 9 to 11 inclusive, Block 2, STRAND-BOWEN SECOND ADDITION, Hennepin County, Minnesota; and WHEREAS, the Subject Property is part of a two-phase retail development owned by CSM Corporation, a Minnesota corporation ("CSM"); and WHEREAS, the division of the Subject Property will facilitate the separation of an entrance drive which affords access to both phases of the development; and WHEREAS, the City has fully considered the request for approval of the subdivision waiver; and WHEREAS, the City Council finds that compliance with the City Code Section 500.05, Subdivision 1 would result in unnecessary hardship and that failure to comply therewith will not interfere with the purposes of the platting regulations of Section 500.01. NOW, THEREFORE, BE IT RESOLVED, by the City Council of the City of Richfield, Minnesota, as follows: 1. A waiver for the subdivision of the Subject Property legally described is above. '3/4- 0 2. Future transfers of any of the Subject Property may be by parcel or parcels as described above as Parcel A and Parcel B. 3. City staff is authorized and directed to take any action necessary to effectuate this resolution and to authorize the recording of conveyances complying with the terms of this resolution. Adopted by the City Council of the City of Richfield, Minnesota this 28th day of October, 1996. Martin J. Kirsch, Mayor ATTEST: Thomas P. Ferber, City Clerk • 0 3nN3AV 31VONAI f SHOPS AT LYNDALE - PHASE II SUBDIVISION WAIVER 3q 3 . 1 i 0 " I m ? o 22 J ? f cc J N , c f h h O ~ I N i a UA i ?i co ; i ?-- - - - -g- - - - - - - a 1 a. o i 3nN3Ad. MI-100 DATE: 10-22-9$