SAN RAFAEL CITY COUNCIL AGENDA REPORT. City Manager Approval)7~

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1 Agenda tem No: 6.b Meeting Date: February 8204 SAN RAFAEL CTY COUNCL AGENDA REPORT Department: FNANCE DEPARTMENT Prepared by: Mark Moses Finance Director City Manager Approval)7~ SUBJECT: PROPOSAL TO SUPPORT COMMUNTY MEDA CENTER OF MARN VA CONTRACT WTH MARN TELECOMMUNCATONS AGENCY DURNG PEROD RECOMMENDATON: PROVDE DRECTON TO CTY OF SAN RAFAEL APPONTEE TO THE MARN TELECOMMUNCATONS AGENCY BOARD BACKGROUND: n June 2008 Marin Telecommunications Agency (MTA) and the Community Media Center of Marin (CMCM) approved a Dedicated Access Provider (DAP) Agreement in which the MTA designated the CMCM to be a designated access provider to establish operate and manage a Media Center and the PEG (public education and government) access channels pursuant to the written agreement. During the past five years the CMCM has established a Media Center in downtown San Rafael and has expanded PEG programming and training within MTA'sjurisdiction in Marin. This agreement would have expired on June however the Board approved amendments that extended the agreement through April During this period the CMCM a 50(c)3 has been funded with upfront monies MTA received from Comcast PEG fees MTA receives quarterly from Comcast and AT&T and revenue CMCM generates from memberships training course fees contributions/grants fees for video services and investment income. At MTA's June 203 Board meeting the CMCM presented its draft five-year budget projections and five-year capital plan for the period July 203 through June 208. The budget reflected deficits of approximately $ per year. n addition the capital plan estimated over $ in capital expenditures would be necessary during this period in order to replace and upgrade equipment at the media center and install video equipment in three locations. The capital reserves were $ at the beginning of the five-year plan in FY 203/4. The PEG funds and projected CMCM revenues identified by CMCM were insufficient to meet its financial needs during the period prior to MTA receiving % PEG fees from Comcast anticipated during the first half of calendar year 207. FOR CTY CLERK ONLY File No.: Council Meeting: Disposition:

2 SAN RAFAEL CTY COUNCL AGENDA REPORT / Page: 2 The Cable TV providers in Marin Comcast AT&T and Horizon operate under a state franchise. This franchise requires the companies to pay MTA franchise fees equivalent to 5% of their gross revenues. The franchise fees are paid to local jurisdictions for the cable company's use of the public right of way for their cable facilities and are unrestricted with regard to their use by MTA's members. The companies are also required to pay MTA PEG (public education & government) fees which are an additional % of each company's gross revenues. The PEG fees by law are to be used for video services. MTA currently pays the Comcast and AT&T PEG fees to the CMCM as funding for the media center and operation of the channels. From July 202 through June MTA paid the CMCM $ in PEG fees received from the cable companies. Some PEG fees from Comcast and Horizon are retained by MT A to fund video installations for the cities such as the Fairfax video installation which facilitates video recording cable TV broadcast and web streaming of public meetings and events. MTA currently receives 0.5% rather than % PEG fees from Comcast based on a settlement agreement. n 20 when Comcast converted from the local franchise agreement to the state franchise agreement it had not fully recovered the upfront monies it had provided MTA which MT A provided to the CMCM to establish a media center and PEG channel operations. The Comcast 0.5% PEG fee payments to MTA will remain in effect until Comcast recovers the full upfront monies. t is estimated that Comcast PEG fees will return to % by January 207. MT A and CMCM are referring to the period between now and January 207 as a "bridge" period until MTA receives % PEG fees from Comcast which will then provide necessary CMCM funding. The PEG channels in Marin are cable cast on Comcast channels 26 (Public) 27 (Government) and 30 (Education) and on AT&T U-verse on Channel 99. The Public channel provides a variety of programming submitted by the community and represents free speech. The Government channel programming includes various government meetings forums and events. The Education channel provides education related programming including programming produced by local schools speaker/lecture series such as Dominican University's University of California TV (UCTV) NASA programming and others. ANALYSS: A key item for consideration in the proposed MTA-CMCM Agreement is the proposed use of franchise fees to provide additional funding to the CMCM during the bridge period from July 204 to June 207 by which time Comcast PEG fees are expected to increase to %. The bridge period may end sooner if Comcast begins paying % fees prior to June 207. To date the MTA has provided PEG fees the CMCM which can only be used for video services. Franchise fees have been passed on to the MT A member agencies. These fees are unrestricted revenues for the agencies and they have not been used to fund the CMCM. At MTA's August 203 meeting the Board considered the proposal to provide franchise fee funding to the CMCM. Since using franchise fees as funding for the CMCM is a change in MTA's current direction and impacts its members' franchise fee revenues the Board agreed that they would not fund any sums to the CMCM out of franchise fees without first checking in with the governing boards of each member agency. The MTA Board agreed to support the CMCM in approaching the Councils/Board of Supervisors for a discussion on bridging a $ threeyear funding gap using franchise fees with some caveats including: - No MTA decision will be valid unless 75% of the franchise dollars vote in favor; - CMCM will explore reducing its reserves even further during the bridge period; - CMCM and MTA will each explore loan possibilities.

3 SAN RAFAEL CTY COUNCL AGENDA REPORT / Page: 3 The CMCM presented to the City Council in study session on October The Council desired to consider this request in conjunction with the mid-year FY34 budget review. The budget review took place at the February 3 Council meeting and therefore the item is being brought before the Council for consideration. The MTA board is planning to consider its agreement with CMCM and the proposal to use franchise fees at its meeting in March 204. t is important that the City Council consider the funding needs of the CMCM and provide input and/or direction ahead of that meeting to its designee to the MTA Board (Councilmember McCullough). FSCAL MP ACT: f approved MTA members would share up to $ based on each member's percent of total franchise fees. San Rafael's percent share is approximately 26.3% resulting in an estimated maximum contribution of $72443 over three years with this allocation approach. This contribution would reduce the City's related franchise fee revenues by approximately six percent. RECOMMENDATON: Staff recommends that City Council provide direction by motion to the City'S appointee to the MTA Board to support the CMCM proposal with any conditions that the City Council believes are appropriate. Options include (but are not limited to): () Approve the request up to the full amount; or (2) Support funding the amount requested with the condition that CMCM will commit to using more of its reserves than proposed and thereby reduce the amount it needs during the bridge period; or (3) Support a reduced funding amount that would ensure the continuation of the CMCM's governmental programming leaving CMCM to raise those amounts necessary to support its public and educational programming during the bridge period; or (4) Deny the funding request. ATTACHMENTS Summary of Key nformation Regarding Community Center of Marin's Request Member Payments Associated with MTA $ payment to CMCM CMCM Five Year Budget Projections W:\Management Services- WorkFile\Finance- WorkFie\Councii Material\Staff Reports\20 4\CMMC-v.doc

4 Summary of Key nformation Regarding Community Media Center of Marin's Request for MTA Franchise Fee Funding during "Bridge" Period MTA's jurisdiction includes Video Service Provider Franchises with Comcast AT&T and Horizon Cable. They provide Franchise and PEG fee revenues to MTA.. Franchise Fees - Providers pay Franchise Fees (5% of Gross Revenues) to MTA for use of the public right of way. Providers collect these fees from CATV subscribers. - MTA pays members their share of franchise fees based on provider revenue reports. - Franchise fees are unrestricted revenues for the Town/City/County. - San Rafael's FY franchise fee revenues were $03000 and estimated to be approximately $ in FY Public Education & Government (PEG) Fees - AT&T Comcast in unincorporated Novato and Horizon franchises pay PEG fees to MT A ( % of Gross Revenues). - Comcast - MTA Franchise pays PEG fees to MTA (.5% of Gross Revenues until approximately January 207 and % thereafter). - PEG fees restricted to use for video services/peg. - MTA pays PEG fees to CMCM for Media Center and PEG channel operation. MTA Community Media Center of Marin (CMCM) Agreement. MTA contracts with the CMCM to manage and operate the Media Center and the 3 PEG channels which are broadcast on Comcast channels 26/27/30 and AT&T channel MTA provided the CMCM $3 million in upfront monies received from Comcast to build and operate a media center and PEG channels. Quarterly PEG fees received from the video service providers are also provided to the CMCM. 3. nitial 5 year MTA-CMCM Agreement with Amendments expires April New Agreement is being negotiated. CMCM funding is a key item in the negotiations. CMCM is requesting additional funding for during a "bridge" period until MTA receives % PEG fees from Comcast.. Current CMCM funding - PEG fees from MTA membership/course fees fees for services donations/grants investment income use of reserve funds. 2. CMCM's 5 year budget projections include: - Capital expenditures of $75000 given equipment is reaching end of service lives. - Annual operating deficits assuming no use of current reserves for operating expense. To date reserves have been used to fund annual budget deficits. - Retains $ as minimum reserves level. Reserves July 203 were $ Requests franchise fee funding from MTA during five year budget period. 3. MTA's proposal considers providing CMCM up to $ from franchise fees during a "bridge" period until Comcast pays % PEG fees and spread over the years This will reduce franchise fee revenues to MTA members. 4. San Rafael's estimated total share of $ spread over is: - San Rafael's 26.3% share of total franchise fees method - $ Hybrid calculation method - $53703 (Option not likely due to lack of MTA support). San Rafael's MTA-CMCM Funding Pager_ /0/204

5 Member Pa~ments Associated with MTA ~ ~a~ment to CMCM - This chart reflects MTA's member payments based on the Board's 8/4 recommendation that each member pay $0000 plus their share ofthe.. remaining $ ba~~_d on % of franchise fees for a total payment to CMCM of $ This chart also reflects MTA's member shares of $ based on % of franchise fees and without the one time payment of $0000. Jurisdiction H~brid Model for Mbr Pa~ments 2g3-94 Est. Mbr % of Total MbrShare of One-Time Mbr Combined Member Franchsie MTA Franchise $ Based Pa~mentof P~mnt ~0000 Fees (Comcast Fees on Mbr % Share ~0000 Per Plus Mbr% AT&T Horizon) of Total Member Share of Total Franchise Fees Franchise Fees Mbr Share of ~ Based on Mbr % Share oftotal Franchise Fees Difference btw. MTA Pro~osed Pa~ment Distribution vs. Mbr % Share of ~ Belvedere $ % $ 8742 Corte Madera $ % $ 2706 County & Unincorp Novato) $ % $ Fairfax $ % $ 9/773 Larkspur $ % $ 4296 Mill Valley $ % $ Ross $ % $ 8070 San Anselmo $ % $ San Rafael $ % $ Sausalito $ % $ Tiburon $ % $ Total $ 37/ % $ $ 0000 $ 8742 $ 0000 $ $ 0000 $ 74/097 $ 0/000 $ $ 0/000 $ 52/96 $ 0000 $ $ 0000 $ 8070 $ 0000 $ $ 0000 $ $ 0000 $ 37/002 $ 0000 $ $ 0000 $ $ 0490 $ 3249 $ 96/97 $ $ $ 5353 $ 9684 $ $ $ $ $ $ 8252 $ 4597 $ (22/89) $ 6045 $ 56 $ 08 $ 8386 $ 2830 $ (874) $ 4600 $ 4208 $ (0) Notes: - MTA recommended Approval Level is 75% of $ = $ ~. - --=--.?. OOOO minus $22OOO (San Rafael's share) = $ $ if paid equally over 3 years is $ ee.'"..year. f---. i MTA Member share of $ $ pymnt w 2Q3 FF base 9/20/203 3:57 PM

6 --".~. 8-AU -~--~-- ~_M~~_ i MTA Scenario CMCM Five Year Budget Projections PEG ncome growth 3% per year. : DAP Budget ssue Modeling Tool Delay payments to years 6 thru 8 Payments. " -~.---~~~--. ". ---"- -- g - 3 Reserves not less than $ ~f--' $660~OOO Total MTA Franchise Fee Payments. Year 3 Year4 YearS Year 6 Year7 Year.8 Year 9 20/2 202/3 203/4 204/5 205/6 '206/7 207/8 -- _. _.. - _. -- '" NCOME i Total PEG Fees $352848: $ $40000 $ MTA Retained PEG fees paid $90000 T ~3~':6: T$62~'0] - -$ CMCM ncome $75272 $056 $90000 $89620 $93289 $93007 $90777 MTA Direct Support $ $ $90000 Total ncome $52820 $48456 $ $79920 $88258 $8025 $ Total Expenses $ $ $ $ $73428 $73483 $ _ i -$558 ~---- Operating Surplus/(Deficit) Before -$ $77507 $95388 $04829 $7694 $66469 Required Capital Purchases -$ $ $ $8000 -$30000 " Balance after Capital+Operating -$ $558 -$ $4552 -$727 -$4806 $36469 $ Reserve nvestment Portfolio $78293 ' $67278 $ i $ End of CMCM Fiscal Year Reserve $ $ $78293 $67278 $50060 $ $ i f----- Note: - - ncome ncrease Assumption 0.03 Expense ncrease Assumption 0.03 PEG Fee Revenue Notes: -- Year 5 - Actual 202/3 PEG fees Years 6-9 PEG increase 3% per year J.. Year 8-206/ $65000 for 6 months Comcast % PEG f--- - Year 9-207/ $ Full yr Comcast % PEG ~-T.- i $ Total MTA FF Payments Required assuming PEG fee revenue 3% annual growth. MTA FF Payment Scenario for mbrs_ /0/204 4:03 PM