Loading...
HomeMy WebLinkAbout01/29/1986 - Special Minutes City Council MINUTES CITY COUNCIL SPECIAL MEETING WEDNESDAY, JANUARY 29, 1986 5:00 P.M. COUNCIL MEMBERS PRESENT: COUNCIL MEMBERS ABSENT: STAFF PRESENT: STUDENT GOV'T LIAISON: VISITORS PRESENT: Mayor Halter, Councilmen Bond, Tongco, Brown, McIlhaney, Runnels, Boughton None City Manager Cole, City Attorney Locke, Director of Capital Improvements Ash, City Secretary Jones, Utilities Office Manager Piwonka, Assistant City Manager VanDever, City Engineer Pullen, Deputy Finance Director Schroeder, Assistant Personnel Director Lucas, Administra- tive Assistant Magoon, Council Coordi- nator Garrett Mike Hachtman See guest register. Agenda Item No. 1 - Council concerns. Student Gov't Liason Mike Hachtman mentioned the annual occasion "The Big Event" which will be held on March 8. He expressed the need for the public to find jobs for the many volunteers available to work. Mayor Halter reminded council of the retreat on February 1-2, 1986. A~enda Item No. 2 - EMERGENCY ITEM: Closed session. [6252-17 (2)(g)]. A. Discussion of Personnel. Councilman Runnels moved to approve the emergency item. Councilman Boughton seconded the motion which was approved unanimously, 7-0. The council moved to closed session and later reopened to the public. SPECIAL CITY COUNCIL MEETING WEDNESDAY, JANUARY 29, 1986 PAGE 2 Agenda Item No. 3 - Consideration of the rate increase proposal submitted by McCaw BCS Communications, Inc. King Cole, City Manager, displayed tables and charts pertinent to the McCaw rate increase proposal, and reviewed the conclusions made by Jack Hopper, Rate Consultant. Mr. Cole noted that the city staff and Jack Hopper worked very closely with the City of Bryan. Four members of the Bryan and College Station city staffs traveled to Belvieu, Washington to the McCaw Communications home office and were able to review confidential documents which Jack Hopper felt were essential to his study. Mr. Cole stated that Dr. Hopper had difficulty in making his recommendation because very little historical data was received from McCaw BCS Con~unications. Also, he noted that Dr. Hopper was very reluctant to make any decisions based on projections and proforma; and this information is all the Council and staff has, to base their decisions. Mr. Cole explained the book value analysis which states McCaw purchased Community Cable and Midwest Video in 1984 for $23,200,000.00 with 13% cash and 87% debt. In 1983, these companies were appraised at a market value of $23,992,870.00. He also explained the cable industry indicators which are the rate of return and the operating expense to revenue. The rate of return (net profit to investment) minimum of expectation in 5-7 years will equal 23%. McCaw BCS Proforma indicates that at 5 years the rate of return will be 4%, and in 7 years, 36%. Mr. Cole noted that the projection made by McCaw on the return of investment in later years is quite good. Mr. Cole explained the ratio of the operating expenses to revenue. He noted the desirable range ratio is 50% to 60%. He further noted McCaw BCS performance in 1985 was 60%. McCaw's projection in 1986 with the $12.50 rate is 55% and, the projection at the $15.00 rate is 60%. Mr. Cole commented McCaw will be working favorably in the range ratio which they desire. Mr. Cole stated there is another item to consider which is the performance level . He noted that Mr. Dibacco is required to maintain a record of service calls. Mr. Cole referred to a graph which demonstrates a favorable trend on service calls. SPECIAL MEETING OF THE CITY COUNCIL WEDNESDAY, JANUARY 29, 1986 PAGE 3 The staffs of the City of Bryan and the City of College Station prepared a rate analysis report covering the period from 1985 to 1986. Mr. Cole referred to the 1985 original proforma column which lists the net cash flow as $72,854.00. He noted the net cash flow in 1986 @ $12.50 would be ($126,569.00). He also noted that if the rates were $13.87, the net cash flow would be $249,998.00; and, if the rates were $15.00, the net cash flow would be $702,497.00. Mr. Cole stated that McCaw has not performed financially as they had anticipated in 1984. He noted that when McCaw purchased the system they thought there were more subscribers; secondly, the projected growth of subscribers has not been realized; and thirdly, McCaw will be required to put a new amount of capital into the system to maintain the demands of the customers and rebuild portions of the system. He noted McCaw will need $2,000,000.00 more in new capital than they originally anticipated. Councilman Bond referred to the rate analysis and noted that McCaw's net cash flow in the 1985 actual column was better than the original proforma. Mr. Cole responded by saying the revenue was less because McCaw overestimated what the subscriber count was. He noted the net cash flow in 1985 proved better than the projected net cash flow in the original proforma. Councilman Tongco asked what changes are going to occur in 1986 to result in a negative cash flow. Mr. Cole responded by saying the interest expense will go up because of the new capital McCaw will borrow. Councilman Brown asked about the revenue and what this included such as second and third hook-ups and the remote controls. Mr. Cole replied this includes all revenue from basic subscriber service, all multiple outlets, converter boxes, service fees, etc. Mr. Cole also stated that the operating expenses include all expenses for providing these services. Mr. Cole asked the Council to review the following options: (1) The option to pass an ordinance allowing a set increase to the monthly basic subscriber rate. (2) Take no action, which would allow McCaw BCS a $15.00 monthly basic subscriber rate, effective Feb. 1, 1986. Councilman Bond stated that he felt there was not a need for further justification from McCaw and he would like to hear from the public. Mayor Halter asked for public comment. SPECIAL MEETING OF THE CITY COUNCIL WEDNESDAY, JANUARY 29, 1986 PAGE 4 Steve Parker, 1105 San Saba Ct., a member of the Franchise Advisory Committee, stated there are approximately 33,000 subscribers in the B-CS area. He noted the annual monthly revenue received would approximately be $16.00 per paying subscriber. He expressed his opinion that the revenue shown on the rate analysis report did not appear to be accurate. He discussed the concepts of return on investment and the return on exposure; he commented he is not opposed to a rate of $14.00. Lois Schroeder, 505 Harvey Road #3, spoke in opposition to a $2.50 increase, and commented on the monopoly controlled by McCaw Cablevision. Mayor Halter commented he would support a better base package with more channels and something different than the package McCaw proposed before. Mayor Halter asked McCaw if there could be an understanding that McCaw would provide a better package. Mr. Dibacco said they have not had good response with the package because the public previously used the full 30 stations. He also stated that the change from channel 5 to channel 3 will permit an extra space to provide an ABC affiliate. Councilman Runnels stated he believed the analysis prepared by the Staff and felt that if the council did not grant the rate increase, there would be a deterioration in service. Councilman Tongco moved approval of Ordinance No. 1631 granting the $2.50 rate increase to McCaw BCS Communications with the condition McCaw will present a better base package. Councilman Boughton seconded the motion which was approved unanimously, 7-0. Mayor Halter asked for a second motion that McCaw Cablevision shall present to the city council within the next ninety days a proposal for an economy cable channel package which shall include CBS, ABC, NBC, and PBS affiliates. Councilman Brown moved approval of the stipulation that McCaw will present an economy cable channel package within 90 days. Councilman McIlhaney seconded the motion which was approved unanimously, 7-0. SPECIAL MEETING OF THE CITY COUNCIL WEDNESDAY, JANUARY 29, 1986 PAGE 5 Mayor Halter referred to a letter from Fouts and Moore, Attorneys-at Law, regarding the Post Oak Square Shopping Center. Mayor Halter asked staff to put on the agenda for the 02/27/86 regular council meeting. Agenda Item No. 3 - Adjourn. Mayor Halter adjourned the meeting at 6:45 p.m. ATTEST: D-lan Jone~i~ Secretary GUEST REGISTER Special City Council Meeting January 29, .1986 5=00 P.M. 2, 18. 19. 12. 20. 2'l. 22. 23. 24. 25. 26. 2*7. 28. 29. 13. 30. 14. 31. 15. .16. 32. 33. 17. 34. "- 0',055'26