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as part of the formal renewal process. The financial statements sent to the IRS reflecting the NSAC as a non-profit organization is not relevant to the financial qualifications of Comcast to hold a franchise in the member cities. Comcast's proposal also relies on an assertion by Mr. Elson on page 22 of his report that the NSCC and NSAC held $2.1 million in cash and cash equivalents in reserves and demands that half of this "reserve fund" be distributed to the member cities and counted toward the capital grants to the cities proposed by Comcast. Mr. Elson and Comcast apparently fail to recognize that the various NSCC and NSAC checking and money market accounts are not static. While there may have been $2.1 million collectively at one point in time in these accounts, that is not the case at this point in time. Two of the accounts, one for NSCC and one for NSAC, were checking accounts used for daily operations. They will ebb and flow as funds go in and funds are expended. One of the money market accounts is a$250,000 letter of credit required by our lease because of the uncertainties of the franchise renewal process. Another account included in the "reserves" is a deferred revenue account that holds the PEG funds to be used in the next calendar quarter. In addition, Comcast and Mr. Elson fail to consider the value of having reserves available to cover large capital expenses that are not annual, such as the over $500,000 in capital improvements required when CTV North Suburbs had to move out of its former location and lease space in a new office building, or when it has to replace 10 cameras in two mobile production trucks and five cameras in the studio, or purchase new servers for video and office storage. In short, having financial reserves to cover extraordinary or unexpected expenses is, in fact, a good thing, and it is inappropriate for Comcast to suggest how much those reserves should be and how the funds should be distributed. Those are NSCC and NSAC board decisions. The proposal is for future cable related needs and interests. The use of the current PEG obligations is under the current franchise agreement, and they are not required to be used to offset any future cable related needs and interests. This is a practice that is entirely reasonable and under the control of the Board of Directors. Recommendation The NSCC/NSAC recommends that the NSCC Renewal Committee and the NSCC Board recommend to the Member Cities that the Member Cities make a preliminary assessment that the Comcast Franchises should not be renewed based on this supplemental staff report including the additional consultant's reports, because the Comcast proposal does not meet the future cable-related community needs and interests, taking into account the cost of ineeting such needs and interests. Further, staff is very concerned that, by adopting the Comcast Proposal, the NSCC and the member cities will be under franchise terms that will unfairly benefit Comcast. Many of the Comcast proposed franchise terms will limit enforcement by the NSCC and the member cities or will reduce the financial penalties for Comcast's failure to E3