1998 AGN JAN 13 I30 - Laserfiche WebLink

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CITY OF COLTON AGENDA REPORT Council Meeting of January 13, 1998 TO: Honorable Mayor and Council Members APPROVAL: Len Wood, Interim City Manager FROM: Daryl J. Parrish SUBJECT: Fifth Circuit Court Decision Regarding Cable Television Franchise Fees DATE: Januay 6, 1998 BACKGROUND: Several years ago the Federal Communications Commission (" FCC') issued a decision clarifying its interpretation of federal law - that franchise fees collected from cable customers are not gross revenues subject to franchise fees. Subsequent to that decision. the Cities of Dallas and Laredo, Texas appealed the FCC decision to the United States Court of Appeals for the Fifth Circuit. The Court reversed the FCC decision on July 31, 1997, and the decision became effective on September 22, 1997. DISCUSSION/ANALYSIS: As a result of the reversal of the FCC decision, franchise fees collected from cable customers are gross revenues subject to franchise fees. This new interpretation from the Courts provides for a higher calculation of the franchise fees cable television subscribers are assessed. Simply stated, as a result of the Court's decision, franchise fees themselves may be included as gross revenues when franchise fees are calculated and the net effect of this methodology is a higher franchise fee. 'Franchise fees are passed on to cable television subscribers and they are itemized on the customer bill. Numerical Analysis: The current franchise fee for cable television in the City of Colton is five percent (5%). The revised methodology for the calculation of franchise fees is described by the formula _05 (5%) / (1-.05 (5%)) = 5.26%. Thus, the application of the revised methodology for calculating franchise fees has a net effect of increasing the franchise fee percentage from 5 % to 5.26%. Sample Consumer Bill Analysis: A fairly typical monthly bill for a TCI customer is $37.45. This includes basic cable service, extended basic service, one pay service (such as HBO) and the converter box. The impact to a customer's bill with the above service matrix as a result of the revised methodology for calculating franchise fees would be as follows: Itmn# 30