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HomeMy WebLinkAbout86-026 't ~. .. . . STATE OF MINNESOTA COUNTY OF RAMSEY CITY OF ^KUtN HILLS RESOLUTION NO. 86-26DENYING THE REQUEST TO -TRANSFER OWNERSHIP AND CONTROL OF GROUP W CABLE OF THE NORTH SUBURBS, INC. AND TRANSFER OF THE CABLE COMMUNICATIONS FRANCHISE ORDINANCE TO NORTH CENTRAL CABLE COMMUNICATIONS, L.P. WHEREAS, Group W Cable,Inc., a New York -Corporation, by and through Group W Cable of the.North Suburbs, Inc., a wholly-owned subsidiary, (hereinafter collectively "Group W Cable") owns, operates and maintains a cable television system in the City pursuant to the terms and conditions of City Ordinance No. 226 (hereinafter "Cable Communications Franchise Ordinance"); and WHEREAS, Group W Cable has requested the consent from the City to a transfer of ownership and control of Group W Cable and transfer of the Cable Communications Franchise Ordinance as amended to North Central Cable Communications, L.P., (hereinafter "North Central"); and WHEREAS, the North Suburban Cable Commission (hereinafter "Commission") has been delegated the authority and responsibility to coordinate, administer and enforce the Cable Communications Franchise Ordinance on behalf of City pursuant to the terms of a Joint and Cooperative Agreement for the Administration of a Cable Television Franchise; and WHEREAS, the Commission has held a public hearing on behalf of City and has reviewed the legal, technical, and financial qualifications of North Central; and WHEREAS, the Commission has recommended to City denial of the transfer of ownership and control of Group W Cable and 1", '. . . trans[er of the Cable Communications Franchise Ordinance to North Central. NOW THEREFORE, BE IT RESOLVED by the City Council of the City of Arden HilI s : 1. Based upon the Findings of Fact and Conclusions of the North Suburban Cable Commission (at~ached hereto and made a part hereof) the City deni~s the request to approve the transfer of ownership and control of Group W Cable of the North Suburbs, Inc. and transfer of the Cable Communications Franchise Ordinance to North Central Cable Communications, L.P. The above listed resolution was moved by Council Member Hicks , and duly seconded by Council Member Hansen The following Council Members voted in the affirmative: Mayor Robert Woodburn, Counci1members Dale Hicks, Nancy Hansen, Thomas Sather, Gary Peck The following Council Members voted in the negative: None Passed and adopted this 12th day of May , 1986. &2:: -- ~8kL ~ Clerk Admlnls rator f~~.~- Mayor Robert "L. Woodburn ~v City ficia1 - 2 - I. , " . . CERTIFICATION The undersigned, the Clerk Admlnlstrlltor of the City of Arden Hills , Minnesota, does hereby certify that attached hereto is a true and correct copy of Resolution NO.~-~h , which Resolution was duly adopted by the City Council on May 12, , 1986 and is in full rorce and effect on the date hereof. . (lJ;~.ti/l~ Name: Chllrlotte MeN lesh Title: Clerk Administrator ~ " ~-r'- G. 7-~ RESOLUTION NO. ADOPTING FINDINGS OF FACT, CONCLUSIONS, AND RECOMMENDED RESOLUTION REGARDING THE TRANSFER OF OWNERSHIP AND CONTROL OF GROUP W CABLE, INC. AND THE TRANSFER OF THE FRANCHISE ORDINANCE TO NORTH CENTRAL CABLE COMMUNI- CATIONS, L.P. . INTRODUCTION . The North Suburban Cable Commission (hereinafter "Com- mission") is organized pursuant to the terms of a Joint and Cooperative Agreement for the Administration of a Cable Television Franchise (hereinafter "Agreement"), as autho- rized by Minnesota Statutes Section 471.59, as amended. The Member Cities of the Commission include Arden Hills, Falcon Heights, Lauderdale, Little Canada, Mounds View, New Brighton, North Oaks, Roseville, St. Anthony, and Shoreview, Minnesota (hereinafter "Member Cities"). This proceeding involves the Commission's review, on behalf of the Member Cities, of a request by Group W Cable, Inc. and Group W Cable of the North Suburbs, Inc. (herein- after collectively "Group W") to approve the transfer of ownership and control of Group Wand transfer of the Cable Communications Franchise Ordinance to North Central Cable Communications, L.P. (hereinafter "North Central"). Notice is hereby given that the Member Cities will make the final determination of this matter. Further, notice is hereby given that the Member Cities, may at their own dis- cretion, accept or reject the Commission's recommendation and that said recommendation has no legal effect unless ex- pressly adopted by the Member Cities as their final deci- sion. STATEMENT OF ISSUE The purpose of this proceeding is to determine whether the Member Cities of the Commission should consent to the transfer of ownership and control of Group Wand the trans- fer of the Cable Communications Franchise Ordinance (herein- after "Franchise") to North Central. Based upon all the proceedings herein, the Commission makes the following: . FINDINGS OF FACT 1. On February 10, 1986, the Commission and its Member Cities received an official notice from Group W Cable, ~ Inc., by and on behalf of its wholly-owned subsidiary Group W Cable of the North Suburbs, Inc., requesting two forms of approval: a)_ Consent to a change in control and transfer of ownership in Group W to a group of five Buyers (transaction one)~ and . b) Consent to a change in control and transfer of ownership in Group wand transfer of the Cable Communications Franchise Grdinance to North Central Cable Communications, L.P. (trans- action two). . 2. On February 25, 1986, the Commission sent to Group Wand North Central a Municipal Request for Information Re- garding Request For Approval and Transfer for the pur- pose of inquiring into the legal, technical, financial, and other qualifications of North Central, as authorized and required by state law and the Franchise. 3. The Commission requested the return of the Municipal Request For Information from Group Wand North Central by March 11, 1986 so that it would have sufficient time to review the information. North Central filed its response to the Municipal Request For Information on March 24, 1986. 4. The Commission received on April 14, 15, and 17 a request from Group W, North Central, and the Buyers, respectively to bifurcate its consideration of the two transactions. Group W, North Central, and the Buyers stated in effect that consent to the first transaction would in no way be construed or viewed as consideration or consent to the second transaction. 5. The Commission gave notice and held a public hearing on April 3, 1986 for the purpose of providing the public with an opportunity to comment on the two transactions. 6. On April 3, 1986 the Commission reviewed and discussed the information it had received from Group Wand North Central. The Commission determined it necessary to continue the public hearing with respect to "transaction two because of incomplete responses to requests for information from North Central. . 7. The proposed transaction two involves Daniels & Associ- ates, Inc., a Delaware Corporation; Daniels-Hauser Hold- ing Company, a Colorado general partnership; North Central Cable Communications L.P., a Minnesota limited partnership~ and Hauser Cable Communications, Inc., a Delaware Corporation. - 2 - . . 8. The Commission has reviewed the necessary documentation of each of the entities identified in Finding No. 7 to conclude that each of the entities is duly organized and authorized to own and operate a cable system. 9. The Commission has reviewed the character qualifications of North Central and its principals and found them to be satisfactory. 10. The Commission has reviewed the technical ability of North Central for the purpose of establishing its tech- nical expertise and experience in operating and main- taining a cable system. Since North Central is a new . organization created for the purpose of accomplishing the transaction, the Commission inquired into the tech- nical ability of its managing principals. 11. The information provided shows that Mr. Gustave Hauser, Mr. John D. Evans, and Hauser Communications, Inc. have extensive cable management experience. Mr. Hauser has been involved in cable television and other electronic communications since the early 1960's. Mr. Evans has 13 years of management experience in the cable television industry, including Arlington, Virginia, Columbus, Ohio, and Brooklyn Center, Minnesota. Hauser Communications, as a manager of cable systems, has experience in Arlington and Brooklyn Center. 12. The technical ability of the individuals and other en- tities related to North Central in owning, operating, and managing cable systems is satisfactory. 13. The Commission has attempted to review the financial capability of North Central for the purpose of determin- ing whether it has the financial resources available or committed to not only acquire the cable system, but also to meet the franchise commitments to operate the cable system. The Commission engaged an independent financial communications consultant to assist in this analysis. 14. North Central has not provided sufficient information regarding closing costs and working capital to determine whether the' amounts are reasonable or whether such funds are available to North Central and if available, are adequate. North Central estimates $1 million for this factor, but has failed to provide sufficient detailed information of the specific amounts. 15. North Central has not documented their analysis or assumptions to support a projected household growth of 2 percent in the franchise area. The Commission deter- - 3 - . mines this projection is unreasonable in light of the actual household growth experienced by some of the Member Cities in 1984-85. Future expansion of the sys- tem is therefore undercapitalized. 16. North Central has not provided its assumptions regarding the percentage price increases for basic and pay ser- vices. The Commission is unable to determine the rea- sonableness of this projection. 17. North Central has not provided sufflcient detailed in- formation at this time to enable the Commission to de- termine the reasonableness of its operating expense assumptions, including but not limited to repairs and maintenance, system maintenance,. postage and billing, converter maintenance, vehicle operation, light, heat, power, and pole rental. 18. North Central has not provided sufficient detailed in- formation at this time to enable the Commission to de- termine the reasonableness of its administrative expense assumptions, including but not limited to telephone, insurance, rent, legal fees, repairs and maintenance, consulting services, and employee benefits. 19. North Central has not provided sufficient detailed in- formation at this time to enable the Commission to de- termine the reasonableness of its marketing expense assumptions, including but not limited to telephone marketing, data processing, contract sales, direct sales override, direct mail promotions, mass media promotions, and subscriber maintenance. 20. For all expenses, North Central has not documented its assumptions for general inflation on a line-by-line basis. 21. North Central has not provided sufficient detailed in- formation at this time to enable the Commission to de- termine the reasonableness of its capital expenditure assumptions, including but not limited to office elec- tronics, billing computer, telephone installation and future construction. . 22. The Commission has requested from North Central the financial information and operational assumptions to review the items listed above for the purpose of analyz- ing its overall financial plan and financial ability. However, despite the request, North Central has not adequately provided the information. - 4 - . 23. North Central has not provided supporting documentation showing the terms and conditions ,of itsfinancin~ avail- able to meet the franchise requirements and operational plans. For the purpose of reviewing its overall finan- cial plan, confirmation of the terms and conditions of financing are necessary. Moreover, North Central has not provided supporting documentation of the terms and conditions of its financing for the purpose of reviewing its impact on the operational plans of the system. 24. The cablesystem has experienced sho~t-term operating expense shortfalls in the recent preceding years. While it is assumed by the Commission that any transferee of the system would attempt to'remediate such shortfalls, North Central has failed to demonstrate that it could financially withstand such short-term deficits. 25. The information which has been supplied by North Central represents in large part financial information for six cable systems in Minnesota. The Commission represents one of those six systems. The Commission finds it impossible to analyze the financial ability of North Central relative to this system without system specific financial information. 26. North Central has established as its financial goals a minimum operating margin of 40%, subscriber penetrations from 43% to 55%, and a minimum rate of return on invest- ment of 15%. North Central has not supplied sufficient financial information and documentation for the Commis- sion to determine whether its financial plans will achieve the aforementioned goals. As a result of exist- ing experience in the system, the Commission determines these goals and projections are unreasonable. 27. Absent sufficient financial information from North Central, the Commission determines that the financial ability of North Central to meet existing and future obligations is inadequate. The Commission also notes for the record that the existence of sufficient finan- cial information would not in and of itself have led to a finding of adequate financial ability. The existence of such information would have served only as a basis for the COmmission to perform a complete financial analysis which mayor may not have resulted in a deter- mination that North Central was financially able to fulfill existing and future obligations. . 28. The Commission deter~ines the financial qualifications of North Central are unsatisfactory and unacceptable. - 5 - Pertinent Franchise provision . The standard of review in this matter is the relevant portion of Article XII, Section 1 of Cable Communications Franchise Ordinance, which provides in part as follows: A. This Franchise shall not be assigned or trans- ferred, either in whole or in part, or leased, sublet or mortgaged in any manner, not shall title thereto, either leg~l or equitable or any right, interest or property therein, pass to or vest in any person without the prior written consent of City, which consent shall not be unreasonably withheld. Further Grantee shall not sell or transfer any stock or owner- ship interest so as to create a new controll- ing interest except with the consent of City, which consent shall not be unreasonably with- held. The transfers described in this para- graph shall, in the sole discretion of City, be considered a sale or transfer of Franchise within the meaning and intent in the following paragraph. Similarly, Minnesota Statutes Section 238.083, subdivi- sion 4 provides: Within 30 days after the public hearing, the fran- chising authority shall approve or deny in writing the sale or transfer request. The approval must not be unreasonably withheld. Based upon the foregoing Findings of Fact, the North Suburban Cable Commission makes the following: CONCLUSIONS 1. The Commission, on behalf its Member Cities, gave proper notice of the public hearing in this matter, has ful- filled all relevant substantive and procedural require- ments of law or rules and has the authority to make a determination as to Transaction No. 2 and to recommend that determination to its Member cities. 2. North Central has met the legal and character qualifica- tions. . 3. North Central has met the technical qualifications. . . - 6 - 4. North Central has not met the financial qualifications nor has North Central demonstrated it has the financial qualifications sufficient to own and operate the cable system. . s. Any of the foregoing Findings of Fact which might be properly termed Conclusions are hereby adopted as such. THIS REPORT IS NOT AN ORDER AND NO AUTHORITY IS GRANTED HEREIN. THE MEMBER CITIES OF THE COMMISSION MUST ISSUE A FINAL DETERMINATION WHICH MAY ADO~T OR DIFFER FROM THE FOLLOWING RECOMMENDATION. ' It is the recommendatiOn of ~he North Suburban Cable Commission to its Member Cities that it .adopt the following: RESOLUTION IT IS HEREBY RESOLVED and based upon the Findings of Fact and Conclusions of the North Suburban Cable Commission (attached hereto and made a part hereof) that the City denies the request to transfer the ownership of and control of Group W Cable of the North Suburbs, Inc. and transfer of the Cable Communications Franchise Ordinance to North Central Cable Communications L.P. The above listed Findings of Fact, Conclusions and recommended. resolution was moved by Commission Director To...."".W's k, and duly seconded by Commission Director G,,"~T The following Commission Directors voted in the affirma- tive: T4lnotowsKi J 8"..,.e.r~ E"" e...t J k...e.cli "',) Sc:.~"",:,~+.J n'l.. +so..,.... w'- Y fA....-t , 1-0 ley) V', II e.11 ~ The following Commission Directors voted in the nega- tive: tV On e. . - 7 - . . . . The above resolution was duly adopted this ~day of m..y , 19.6. ~ . _~t.Hx:~~..~ t' ortAo-l?_ fl - . . e,-l: ~III''''' Sec.roe ~r'f . . - 8 -