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DISCUSSION <br /> The attached proposed ordinance would allow the City of Pleasanton to exercise the <br /> limited authority granted to it by DIVCA. <br /> The following outlines the provisions included in the ordinance: <br /> 1. Franchise Fee of 5 %. Franchise fees are generally considered rental payments <br /> for use of the public right -of -way. DIVCA allows the City to impose on state video <br /> franchise holders a franchise fee equal to the lower of: (i) 5% of gross revenues; <br /> (ii) any rate established by ordinance that is less than 5 %; or (iii) amount being <br /> paid by incumbent franchisee. In Pleasanton, our current franchise fee is 5% of <br /> gross revenues, so that is the amount proposed for new state franchise holders. <br /> See Section 6.54.040.A of the attached proposed ordinance. <br /> 2. Public, Educational, and Government Access (PEG) Fee of 1 %. The proposed <br /> ordinance establishes a public, educational, and governmental (PEG) channel <br /> support fee of one percent (1 %) of any state franchise holder's gross revenues to <br /> support PEG channel facilities. See Section 6.54.060.B of the attached proposed <br /> ordinance. This fee will replace the existing $0.50 per subscriber fee that is set <br /> forth in the Comcast franchise agreement, once that existing franchise <br /> agreement expires in June 2011. See Section 6.54.060.A. <br /> When the existing franchise agreement expires, so too will the City's ability to <br /> require PEG studios, cable service to community buildings and similar non -cash <br /> benefits from state franchise holders. DIVCA does not provide for such non -cash <br /> benefits, and DIVCA specifically preempts local authority to impose such <br /> additional requirements. The 1% PEG fee allowed by DIVCA was intended to <br /> replace prior PEG fees and non -cash benefits. <br /> The proposed ordinance does require, as allowed by DIVCA, public, educational <br /> and governmental (PEG) access channel capacity and interconnection. See <br /> Section 6.54.050 of the proposed ordinance. <br /> 3. Authority to Examine and Audit Business Records. The proposed ordinance <br /> authorizes the City to exercise its right under DIVCA to examine and audit the <br /> business records of any state franchise holder. See Section 6.54.040.0 of the <br /> attached proposed ordinance. Under DIVCA, whether the City or state franchise <br /> holder pays for the "reasonable and actual costs" of the audit depends on the <br /> amount of the underpayment, as follows: <br /> More than 5% underpayment Franchise holder <br /> Zero underpayment City <br /> Between 5% and zero Each bears own costs <br /> See Public Utilities Code §5860(i). <br /> Page 3 of 5 <br />