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CC - 04-23-86 - Adjourned MeetingI APPROVED CITY OF ROSE ;BEAD nATC_ P, MINUTES OF THE ADJOURNED MEETING ROSEMEAD CITY COUNCIL APRIL 23, 1986 AT 8:00 P. M. The Adjourned Meeting of the Rosemead City Council was called to order by Mayor Imperial at 8:05 p. m., in the Con- ference Room of City Hall, 8838 E. Valley Boulevard, Rosemead, California. Pledge to the Flag was led by Councilman Taylor. The Invocation was delivered by Mayor Pro Tem Cleveland. ROLL CALL OF OFFICERS: Present: Councilmen Bruesch, Cleveland, Taylor, Tury and Mayor Imperial Absent: None I. FALCON CABLE T. V. (Verbatim) Tripepi: Mr. Mayor at it's regular meeting of March 25th this Council requested some information regarding the construction or I should say the.lack of construction of the Cable System in the City of Rosemead. Subsequent to that particular meeting, the then Mayor, Lou Tury and myself, met with Mr. Tom LaFourcade of Falcon and discussed this particular matter and in a fair amount of detail I should say. They have agreed,.Mr. LaFourcade and Mr. Craig Watson, correct, are with us this evening and hopefully they can give us a status report and.perhaps, give us a....I guess what we are talking about is a revised construction schedule so that we may see exactly where we stand relative to the cable system and also they are here to answer any questions Council has relative to this particular subject. Gentlemen, why don't you come up and'.use these chairs so that we can pick you up on the microphone. When they.sit here, I guess we will have them identify themselves and they can give their positions and we can have that in the record, Mr. Mayor. Tom,.why don't you just identify yourself and your title and... Tom LaFourcade: Tom LaFourcade, I am a consultant, a Governmental Relations Consultant to Falcon, I am no longer employed by Falcon. Craig Watson: And I am Craig Watson, I'm Manager of Government and Public Affairs, for Falcon Communications. Tripepi: 0. K. You can start it off, you know what's gone on. LaFourcade: Alright. Let me start by going in back a little ways in history if I could.because I.think it is meaningful to put our present position into perspective, and by our present position I mean the City and Falcon. As you are well aware the Franchise was granted on May 28, 1985, and the construction schedule was a 12 month schedule at that point. And Falcon began to do the things that it had done in other cities at that point. The banks were a major factor in our ability to build the City of Rosemead as it was to build the City of San Gabriel. We had...we were in at that time in negotiations with the banks, and we were going to have to raise our line of credit from what it currently was to include Rosemead, and San Gabriel and possibly some others, one being the City of Artesia, that comes to mind. That we knew about at that particular time. We finished up our negotiations in late 1985 with the banks raising the line of credit to in fact include all three of those cities mentioned. In January the agreement had not yet been signed, and Falcon and the banks got into a dispute and the banks stopped funding Falcon for any thing at that particu- lar time. And I think you know that I had written letters saying that we were going to begin construction in May. And I fully intended for that to happen. Imperial: Wasn't that, Tom, wasn't this suppose to be a one year period with the first section operational within six months? Adj.CM 4-23-86 Page #1 LaFourcade: I don't believe it was six months. I believe that the one year build was after the poles were released. It was supposed to be 12 months from that time, and I can get into that also if you like. Bruesch: Mr. LaFourcade, I seem to remember receiving a memo from our City Attorney dealing with a letter of credit, I believe from Chicago. LaFourcade: That is correct. That was First of Chicago. Bruesch: And we had some problem with the terminology at that time, but it is my recollection that that letter stated that line of credit was already there. That was back in November. LaFourcade: That is true. It was. That's true. Bruesch: Then, what was the trouble after that point with the banks. LaFourcade: The problem was strictly between the banks and Falcon, not between the City of Rosemead at all. Imperial: I am sorry, why don't we let him finish whatever he is going to say and then we can field whatever questions we want to ask. LaFourcade: That problem, I am told,.has now been worked out, and the original agreement has been signed and I understand that is to include money to build the City of Rosemead, build the Cable T. V. System. Now, if we could go back in time. We had, again, we Falcon had a major dispute with Pacific Bell. That started in 1983 and lasted thru almost all of 1984. During that time, people from Falcon and from the Telephone Company negotiated long and hard to come to an equitable decision. And basically, what that was, was we were being charged rates that were 8, 10, 12 times what they had estimated their pole make ready rates to be. We could not stand that because you can't build and even break even, if you have those kinds of costs up-front. We got that problem worked out. We signed very lengthy,large agreement and part of that was to go back and finish up the clean-up work that we had not yet completed. What has happened since then is that due to our bank agreement problems, we began to slow that down and in addition the telephone company has added new rules and regulations. So we had a small problem with telephone company and I do not look at that as major at this point. And I believe that Falcon and Pacific Bell can and will work those problems out so that we can go on. The number of poles that they would take at any given time was imposed after the agreement,was done with Falcon.. And-that is why we were unable to get poles cleared. Those are basically the reasons behind the delay and as late as today, Mark Nathanson has, who is the President of Falcon, has talked to the partners and has agreed that construction will begin in the City of Rosemead,no later than September lst,-1986, and will continue on until completed. And I would suggest that the build rate will be something that will be, make it less than a 12 month construc- tion schedule. Craig, did you have anything to add to that? Watson: No, my comments would just echo yours, Tom, and I think we can answer questions or talk through.... Taylor: Mr. Mayor. Imperial: Councilman Taylor. Taylor: What authority... who is speaking.with the authority for Falcon? Is it Mr. Watson? Or Mr. LaFourcade? LaFourcade: I think both, and that is why Mr. Watson is here. Taylor: You are no longer an employee of Falcon. That is my concern. We don't let somebody not in the company speak for a company. Adj.CM 4-23-86 .Page-#2 • r~ LaFourcade: That is exactly,why I brought Mr. Watson here; however, I would suggest that you put aside any fears that you have of some- one not speaking for the company, that this committment can be followed up by Mr. Nathanson in writing. Taylor: I think that this is what we are looking for. The official company committment. Not down-grading your position as a consultant but it is not what I would call an official document from the com- pany. LaFourcade: I agree with that. Watson: Just to back that up, Councilman, that is the reason,I am here. I am a current employee of the Company and represent the President and so we are here in concert. Because Tom, obviously, knows your community intimately, was involved in the whole process, he can speak articulately about the issues. I am here to back it up. LaFourcade: Let me say that I asked to be involved in the City of Rosemead. That was not something that was just given to me. Taylor: Uh, huh. Bruesch: Mr. Mayor. Imperial: Councilman.Bruesch. Bruesch: We...I remember one exchange at the meeting where the other company presented us with the letter from Pac Bell stating that the pole rights were already awarded to them and at that time, your presenters told us, well, we could also do that within a matter of two weeks and get a similar letter. But now we are told that you don't have that right. Why was that told to us in that meeting at that time? LaFourcade: Mr. Bruesch let me... Taylor: Wasn't that.... LaFourcade: It is the other way around. Tury: Isn't that backwards? LaFourcade: Yes. Tury: It is the other way around, Bob, they are the ones that had the make-ready agreement and Group W said that they could have one in two weeks. Bruesch: O.K. Well, that's o.k. Imperial: Mr. LaFourcade did just say that the telephone company did renig as I can recall after the agreement was made with the City of Rosemead. LaFourcade: The letter that was written from Pacific Bell to Lisa Donnell, City of Rosemead, stated that here that Falcon had not complied.even though it gave them applications timely.. In fact, 60 days after the Franchise was effective, Falcon gave them applications. What this letter doesn't tell you, is that once those applications were delivered, then I talked.to our head of construction, and said that even though we have specifically named.the City of Rosemead in our agreement with Pacific Bell, I- don't believe. that they can go just on that alone. This refers to the fact that it doesn't say that I was right in assuming that, it just says that we didn't comply. And the fact is that we had to call it to their attention. But we had the agreement with them long before we had the Franchise. Taylor: Mr. Mayor. Imperial: Councilman Taylor. Adj.CM 4-23-86 Page N3 Taylor: I would like a clarification on the job clean-up that is referred to by the phone company. I feel that the Council was misled in a certain sense that we had received a letter from Falcon that the phone company was holding up the approval of the poles, and contacting the phone company we got the other side of the story. We have a letter dated February 5th. I would like to read a paragraph out of this letter. "I have been advised...I believe this is to you Mr. La Fourcade, I have been advised by our Foothill District that despite repeated efforts on our part to make dedicated inspectors available, Falcon has not completed cleaning up the deviations. In fact, our records indicate that in the areas involved, Alhambra, Altadena, Old Capitol District, Chapman Woods, East Pasadena, Huntington Park, La Canada, Longden County, Montebello, Monterey Park, South San Gabriel.and Temple City, only 35 percent of the applications,:: with deviations have been cleaned up. The following is a more specific summary of our records for each area." And then it breaks down all of the Cities on page N2, and out of a total of 306 jobs to clean up, the number completed is 107, or roughly 35%. So we were being told that the phone company was holding up approval to Falcon Cable T.V. and yet, we get back from the phone company that they were holding it up because Falcon wasn't completing their work. LaFourcade: Falcon was completing this work, even though it wasn't being done as fast as the telephone company wanted. Taylor: O. K.,this is as of February 5th of this year. LaFourcade: Right. But at no time, was this work to be tied to the City of Rosemead telephone poles. It was not to be tied at all. Taylor: Well, I could understand their hesitation. I think you would probably feel the same way and any business or corporation would think twice about continuing with the clean-up operation. In other words, if you go into San Gabriel and Rosemead and you add another 30 or 40 to this list, it is compounding. So I could see where the phone company would say, "Wait a minute, let's clean up these other 10 or 15 other cities first." LaFourcade: If that were the position of the telephone company all along, that would have been o.k., but please understand that 306 could change in a day, because they always find other things for us to do, and they add it to the list. So it is not a matter that Fa1'con~ just did;;:not'<gor..iw.!and jdoi_.their -cleanup work. This was part of a major dispute, that we settled. We were, in fact, doing the cleanup work and we still are. Bruesch: Mr. Mayor. Imperial: Are you through, Mr. Taylor? Taylor: Where does this leave us now, as far as the phone company giving approval to Rosemead and San Gabriel? LaFourcade: I think where that leaves us is this. We are committed, we Falcon, as a company, to working with the telephone company to either one, cleanup enough so that they do release the poles for the City of Rosemead, or two, to get them to release it without the total cleanup here. And as I said I believe that's a doable thing. I don't think.that it is a major problem now. And please bear in mind that we have been constructing in San Gabriel under the same terms and conditions. And they didn't throw this at us. Taylor: How much has been constructed in the City of San Gabriel? LaFourcade: About 60% of the system. Watson: 55% to 60%. Taylor: Has actually been constructed? LaFourcade: Yes. Adj.CM 4-23-86 Page N4 Bruesch: Mr. Mayor. Imperial: Councilman Bruesch. Bruesch: What in terms, Mr. LaFourcade, do you think that Pacific Bell is trying to get out of it? More money? LaFourcade: No, I don't think so. I think Pacific Bell unlike Pacific Telephone Company was, is now an entity that must produce a profit and they have people, and they have to do things with those people, they want them to go out and inspect so that they can keep them on the payroll. We built the portion, the major portion of the City of Pasadena, having their inspectors on the job with us.' Which was brand new to us. We never had that before. Bruesch: The reason that I asked that question, is that as.progress in the build commences, what I am worred about is if you have this problem with Pacific Bell is it going to be a recurring one that crops up all the time and are they going to renig again on granting pole rights? LaFourcade: No, I don't see that. First of all, part of the dispute... the things here are part of the dispute that was settled in 1984 actually, and we are doing cleanup based upon that agreement. The way construction is being done going forward, and as it is being done in the City of San Gabriel and as it was done in Pasadena, is that we no longer have the telephone company go in and do all the make- ready for us, and then build the plant, and then they come back and give us a list of everything that has to be cleaned up. That is what this represents. What happens now is that the telephone company allows a contractor, that they approve,to do the make-ready on their plant. And that is the way it is being done in San Gabriel. So that they have inspectors that come out and inspect on a continual basis and once the plant is constructed then everything is fine. You don't have all this massive cleanup that the telephone company comes back and gives you saying clean it up. Bruesch: Again, I go back...You say that your ...you felt that your dispute with them was settled in 1984 and then they came out with more regs for you to comply with and therefore the list. LaFourcade: Right. Well, not just the list. They also said that we will only accept only 1500 poles in the district. Imperial: I am not trying to go to Mr. LaFourcade's defense, but I think when you are dealing with the telephone company you are dealing with an entity that is totally independent, they could give a damn less. It is not just Cable T.V. It is just about everything that: we try-ao~:do with-''them: -.They have held up some of our jobs, haven't they, Frank? Bruesch: I agree. This is the point that I am trying to bring out, Mr. Mayor. Imperial: So you are not dealing with an entity, that I feel unless you get them to sign a piece of paper and make it.very firm that you can count on them, and I wonder even after you get them to sign a- piece of paper. Go ahead. Bruesch: Well, that is my major point. If we are going to have every six:,mon'ths,another problem with Pacific Bell, maybe we need to do some pushing in that direction, also. Tury: Bell-is not:very pushable:,-_and we have:found:.that out........ Imperial: Yes, that's right, when it comes to Pacific Bell, your a newby and those people don't want to push, they don't want to move. They just want to do exactly what they want to do, and they have given us problems in other areas and not just Cable T.V. Bruesch: Let me put it another-if you were to put down a five dollar bet that they would or they would not give you more problems. Where would your money go? Adj.CM 4-23-86 Page #5 0 • LaFourcade: Oh, I would put it on more problems, but not major problems. They don't want these problems publicized any more than the Cable Company does. They want to work with the cable operator, but they are a money making entity. They want to make as much money as they can. Imperial: One thing you can count on them doing Bob, that's raising the rates. Otherwise, you can't count on anything. It is a wait and see type of thing. Bruesch: Well, it is the old thing. Where do we put the...when the people come knocking on our doors and saying "Where's our cable?'.' Where do we put the blame? This is what I am looking for. LaFourcade: I think that what you should do is to work with Falcon, and if Falcon has a problem with Pacific Bell, they should come and tell you. They should tell you what is going on. But I don't see it as an unsurmountable problem at this point. Imperial: I don't see where it is our problem to resolve with Pacific Bell. It is Falcon's. Falcon is supposed to get it done, and build us a system. Tripepi: I don't think you can resolve it. LaFourcade: We have had our history of tensions. It is not a secret that cable and the phone companies have had tensions all over the country. So it is a traditional problem, and one that we don't necessarily want to point fingers at them and they don't necessarily want to point fingers at us because ultimately we do have to work together. To serve you and get this thing built we are going to have work together. That's kind of the bottom line. We will have to confront it almost case by case as we hit any problems in the future. Tury: Is there any question that the agreement will not be avail- able. LaFourcade: I was told today that there is no question about that. I was going to try in fact, to bring a copy of the agreement which I understand is not in hand, and I also understand that it does not specifically relate to Rosemead and San Gabriel. So it wouldn't do any good to do that. I might also tell you that about two weeks ago, Falcon had not accepted the City of Artesia Franchise and they gave it back.because the plate was full. Tripepi: O.K. I think the question came up at the previous meeting, but I will ask you again, for the record, does Falcon want to give back the Franchise in the City of Rosemead? LaFourcade: No, they do not. Watson: I would echo that. Tripepi: The second question, Mr. Taylor has brought up the fact of a letter or some kind of a committment. Can we in fact, count on a letter from Mr. Nathanson forthcoming in the very near future which is going to basically state within that letter that we have a guarantee of a start-up construction date of September lst. LaFourcade: Yes, we can do that. Watson: Yes. Tripepi: 1986. Watson: Right. Put the year. Bruesch: You foresee no more problems with your line of credit either? Watson: At this point I don't. Everything has been.resolved, and I understand that the agreement has been signed, and the money is being appropriated. Adj.CM 4-23-86 Page N6 Bruesch: There was a small dispute on language in the letter I remember. Watson: The letter of credit? Bruesch: Yeh. Watson: Yes. Tripepi: It has been resolved, and the Performance Bond. Watson: Yes. I think that was handled by the respective attorneys. Tripepi: Yes, it was. That is correct. Perhaps, are there additional questions.from the Council before I say anything? Imperial: Gentlemen? Taylor: Not at this time, Mr. Mayor. Tripepi: Mr. Mayor, I'would recommend, inasmuch as this is an adjourned meeting, you can take an action. I would recommend to the Council, and I want it well understood by you two gentlemen this not that we disputed anything you have said evening or any thing like that, but we have to, I think, this Council owes it to the residents to pursue every avenue available to them to ensure that cable gets built. The committed date, that has been stated isSeptember 1st, 1986, should there be no reasonable and acceptable explanation prior to that date, as to why the construction doesn't commence on that date, we would recommend that this council make a motion tonight, and go on record as stating to Falcon that they will move against the Bond and the Letter of Credit and begin con- struction on their own. Tury: So move. Bruesch: Second. Tripepi: We have a cable consultant who is familiar with Falcon's systems. She has worked in many of your other communities and I think that would solve the problem. She is well capable of knowing what you people need up there in order to pickup and then later transmit signals. So we would make that recommendation that we move on the Performance Bond and the letter of credit, if this date falls through without a reasonable explanation that is accept- able to this Council. Imperial: We have a motion and a second. Tury: Shortly, before I spilled my coffee, I made the motion. Bruesch: And I seconded it. Now, call for the question. Taylor: Mr. Mayor, before he calls for the question, I would like a clarification that we will ...the comment was made that we the City Council will move to start construction on our own, is that correct? Clerk:. Move on the Performance Bond and the Letter of Credit. Tripepi: We will not be building it, Mr. Taylor, in fact, probably it will be the same contractor that Falcon will end up using in the long run. If that has to come to be. Hopefully, it doesn't. Taylor: We would contract directly with Falcon's subcontractors in other words? Tripepi: Well, we would probably use a contractor that a...I guess that there is just a few of them out there that build these systems, Councilman Taylor. Taylor: Then who operates the system? Tripepi: I don't have any intention... all we are doing is trying to get construction underway. I... Adj.CM 4-23-86 Page H7 Taylor: Excuse me, I have tried to make that point in the past, that it is like building a bridge and getting half-way across and expecting someone to build the other half. We get it built, who is going to operate it. In other words, if you divide and conquer. If you start building systems, and it happens many times, contractors get a job and they live off the extras because then the price is double.' And this happens in almost 80% of the jobs. It is unbelievable because people are over the barrel and they pay sometimes double the price because they are not going to go any- place else. So I am very concerned about it. If we go out and get subcontractors to build the system, who is going to operate and manage it? Tripepi: Falcon would end up owning and operating that system. All we are doing, Councilman Taylor, is...it is not the City's money, it is not the taxpayer's money, it is Falcon's money. Taylor: If somebody came to me and said you are not building the system, we are going to take it over and build it, and then when we are done building it, we are going to make you operate it and manage it. That is just what you told me, Falcon would manage it and operate it, and yet we have taken the contract away from them. To me, that is null and void, they no longer have a contract. If you take it away from them and then say, now, you are going to operate it. Tripepi: No, sir, we are not taking the Franchise away from Falcon. Taylor: You are taking away the construction rights of it, and the control and the management of it. Tripepi: No, sir, we are not doing that either. All we are doing is starting the construction, due to the fact that they have been unable to get the construction started on their own. Tury: Mr. Mayor. Imperial: Councilman Tury Tury: That is what the Bond and the Letter of Credit is for. If you are not going to use that as a tool, you might as well not ask for it in the first place. Bruesch: It isn',t punitive then. Well, in a way it is then, it is but it is more..... Tripepi: You don't have to use it to construct. Bruesch: You don't have to, but you can. Taylor: Mr. Mayor, question directed to Mr. Watson with Falcon Cable. If the City was to call in the Bond and build that system, would the Falcon Cable take over the management and operation of that system? Watson: Assuming that happened, obviously, I don't want even have to come close to even having to think of that, because I am sure it is not going to happen. But assuming that something like that model that I have for thinking along that line is, that we are managing a system for the City of Commerce that they are leasing to us. That is just an example of something where that is actually the situation. Taylor: How was their system built? Who built their system? Watson: They subcontracted. They went to a well-known cable contractor. Taylor: Did you have a contract with them prior to them building the system? Watson: A contract with who? Taylor: With this Adj.CM 4-23-86 Page N8 • • Taylor: Who was your contract with as far as taking over the contract? Tripepi: City of Commerce. Watson: The City of Commerce. Taylor: When did you enter into the contract, before or after the system was built? Watson: Before. You are right it isn't ...You are trying to ask me is it comparable, it is not. Taylor: I don't think it is. Because when you get into litigation in an adversary position and such ...we are going through a Bonding Company hassle right now. And Bonding Companies are not amenable with people. Watson: Obviously, you are saying if you had to call on the Bond, it would be punitive, in a sense, it is our money that then goes to the City and if you use it to construct the system, we are out $300,000 and doesn't set up a good relationship for us to presumably manage a system. If that is what you are asking. Taylor: Exactly, it is nothing against Falcon. Nobody in their right mind would take over that type of a burden. Watson: But that isn't going to happen. Taylor: I think that the fact that what we were told February a year ago, almost 14 months, it was within 90 days, this system could be started from the time that the poles were as far as make-ready and such. Well, here it is 14 months later, instead of three months later, and six months from now is not very long. So I am not that sure that everything will be worked out by September 1st. Bruesch: Mr. Mayor. Imperial: Councilman Bruesch. Bruesch: One of my worries is that worked out verbal agreements like this, and six, ten, twelve months down the line, due to the vigors of business, we are not dealing with the same people or maybe not even dealing with the same corporation. I know well, that the movement within the cable industry, absorbtions of other smaller entities by larger entities, and buy-outs and mergers, makes for kind of a policy in upper management and what I am worried about is if we are hashing out something here and six months later somebody comes with a buy-out offer and we are dealing with Falcon anymore, we are dealing with.CBS maybe, whatever. Verbal committments mean very little. Even written committments mean very little. Watson: I think, Mr. Bruesch, I think that, first of all, you have a contractural ability to approve any,sale, as I recall. Secondly, you do have the contract whether you are dealing with Falcon or you are dealing with someone else, if you would approve that transfer of the Franchise. I think, I am not sure of the wording in this one, but... Tripepi: Council has approval on a change. Bruesch: But again, if that something would occur like that, then we would go back to what Gary is referring to. We would have money to build a system, but we wouldn't have anybody to contract with. Tury: I find it hard to believe that if we had a system built in this town, that somebody would not want to plug in their extension cord and operate the system. The money is not made in building the system,*ekcept for tax write-offs which is diminishing anyway. The money is made in-the operation of.the system. I£ they can get a guaran- teed, locked in, fixed rate for operation that system, there isn't a: businessman in his right mind wo wouldn't swallow hisAdj. CM 4-23-86 pride and jump at it. Page #9 • Imperial: You hit the key, Mr. Tury, as far as I am concerned, and that is guarantee. That is a whole new world. Taylor: Mr. Mayor: Imperial: Councilman Taylor. Taylor: The question as far as if Falcon cannot perform, what other alternatives would we have. It was Group W. I understand that they sold to someone else. Who did they sell to? LaFourcade: They sold to a consortium. Watson: They ended up dividing up. Taylor: They are still in operation. What name do they..... Watson: Group W is still transferring it out right now. Is really what is happening. LaFourcade: They won't be in operation after Imperial: They are out of the business as far as I understand. Am I correct? Watson: It is still in transition. Taylor: Yes, but who is going to be operating it. Watson:. Each of the systems of Group W, you have to kind of look at individually to see which company they ended up with. Taylor: E1 Monte is the closest one that I know of with Group W. Watson: Do you know who took El Monte. LaFourcade: I think Com-Cast. Taylor: Who has...is Arcadia, who are they... LaFourcade: The same. Taylor: They are under Group W or the new company that has.... LaFourcade: But Danielson & Associates slide in there some place also. Taylor: I really don't know who the companies are or how they split up, but.... Watson: The two that we mentioned are both major cable companies that have extensive operations throughout the United States. Taylor: I know that Group W was one of the larger ones at the time, but how they split up I don't know. But that's as far as the question, what other alternatives do we have, that is only one. When we went out to bid, there was, I believe, just Falcon and Group W that actually bid on it. I don't know who else is available in the San Gabriel Valley that is interested. But in my mind that is one of the alternatives, to find out what other company would be available. Tury: I don't particularly want to go back to the bidding pro- cedure. We have been through that once.. I think it would take a long, laborious time. I personally have confidence that Falcon will build the system. Taylor: Well, time will tell. That's all we're down to now. Tury: We are all sitting here tonight Tripepi: Clarification to Councilman Taylor. The options, Gary, are available.to this Council at a time and place when you decide to either move on the Bond or the letter of credit. I am not sug- gesting that the approval of that particular motion or the support of that motion indicates that the City is going to build it's own Cable Svstem. Page #10 Tripepi Continues: All I am suggesting is that apparently is one of the tools available to us now to at least let Falcon know that we are serious about the date that has been proposed this evening. You may go out, if that is not constructed by September 1st, and say you do have to move, you don't have to spend that money and build a cable system. You may go right back out there and find yourself another cable company and see if they are interested. Is that correct, Mr. Watson? Watson: Yes, that's right. You can take that $300,000 and put it in the General Fund....... Tripepi: You can put it in the General Fund and use it for Sheriff's costs if we want to. Gary, that's kind of what I am referring to, and I didn't mean to mislead anyone. This is not my version of trying to get back into the City owning and operating or building its own cable system. All I am saying is, that is a financial tool that the City has available to it. We have never had to talk about using it, but this thing has dragged on and on, and I think now that we are at the point, where they are willing to make a written committment with a fixed date of September 1st. All I am suggesting is that this Council has the option on or by September '1st, if that system is not started, we can take the money out of that for all of time and trouble and the inconvenience to these residents. If you want to put that in the General Fund and pay for Law Enforcement, you can do so and go right back out and start the process over again. Taylor: Mr. Mayor Imperial: Councilman Taylor. Taylor: Question to Mr. Tripepi. Frank, how many times has the City had to actually go after aBond, a major Bond, I am not talking about a $500 or $1000. How many times have we had to act on a Bond? Tripepi: I think once in the 14 years that I have been here. I don't recall the name that it was on. I believe that it was on one construction project where we changed contractors. But I can't recall who it was and I really don't remember the size of.the project. But I will tell you the reason that you have never had to do that is because, and we are being honest this evening, the gentlemen will agree, and I know that you are in that kind of business. Contractors hate to have those things moved against because,it generally, it creates monumental problems for them on any future jobs. It creates problems for them in the financial community and their ability to go out and lay their re- putation on the line stating that we are a good solid company. Somebody has moved against your Bond. You've got a record on that. LaFourcade: Mr. Taylor, let me also state, that an important issue, an.important question to ask is how many times has Falcon had a Bond moved on them. Never. Taylor: Well, I am getting to a point Mr. LaFourcade, that you may not be aware of. Frank, as far as moving on one Bond, is that other than Zapopan Center? Is that another Bond that you are talk- ing about? Tripepi: Yes, sir. I wasn't really referring to that one because I think everybody-that is the Bevan thing. Taylor: O.K. My point is that even when we were talking about the Bonding Company for the Zapopan Center, Bonding Companies are not good buddies down the street. They are protecting their money and they are going to do it. Come September 1st we are not going to walk into the Bonding Company and say here, we are filing, take it Tripepi: Not at all. Taylor: By no means, we are going to go through the same thing that we are going through with Bevan. Adj.CM 4-23-86 Page #11 0 Tripepi: And we will have to basically prove our case that we are entitled to that money and that will take upwards of at least 90 days. That will be the minimum period of time that you could move on that. But all I am stating is that it is a process that is available and it is perhaps, something that can show that the Council is serious about what you heard here this evening. That is all I am saying. Tury: Mr. Mayor. Imperial: Councilman Tury. Tury: One reason that I am not too concerned about moving against that Bond, is that if Falcon were sitting here and they had made a couple of drops out of Temple City and said,"Well, Hell, we started your system already. We are already underway. If they were trying to pull that on us, then I would think we had a serious problem. They have been honest enough not to try to mislead us. They have laid their cards on the table. They have given us a committment. I don't want to threaten them with this, but I think under the circumstances, I think they can understand that. I think that their company will do the job and will be an asset to the City. And, this is strictly, a way of saying, hey, guys, we are running out of patience too. I think we have been reasonably patient. We have applied some pressure, but I think that we have been reasonably patient given all the circumstances. They haven't tried to pull the wool over our eyes, by dropping,a couple of extension cords in from Temple City. If they had done that, then that would have really upset us. In that way, they would be trying to be fraudulant. They are being up-front, and I think,:open::;with::us. I think that we don't have great big, large amounts of choices. It might be that this is the only hammer that we have at this time to watch out for the interests of the residents. If the whole thing falls apart, we can get back $300,000. We can surely, find something to do with it, and start the process over again. Imperial:. Do you have any other comments? My concerns are basically of those of Mr. Taylor's. In refe,r.ence to the Bevan Corporation, they can care less, what are problem was. They have given us nothing but a hassle. It is not an easy process to go in and take that money as far as I am concerned. But as I see it. unless I am wrong, Cable T.V..is no longer the lucrative'` bus nessJ,1 ke it was `.in-.the .past. The government is getting involved in the operation. The big bucks so to speak are no longer there. So consequently, we have to look at what our options are, and at this point, if we told them to for- get it, and we went out and looked for another Cable T.V. Company, we might have problems getting one. I feel that we would have pro- blems getting one. Taylor: Mr. Mayor. Imperial: Councilman Taylor. -Taylor: Your comments about the industry no longer being a lucrative business, you are absolutely right in the sense that many of the Cities, E1 Monte as an example, and it is in our local paper, is the reason that I bring that up, they are finding that the subscription rate is not as high as was projected. And Mr. Watson is shaking his head. It not just Falcon it is everyone. So the subscription rate and the promotion isn't what it is supposed to be and I don't envy and I don't blame the cable industry and such, in the fact, we were told in the very beginning that it was going to be hard to penetrate these cities because there is so much to do in Southern California. This was two or two and half years ago that we.were told this. And it is being born out in other cities that the subscription rate isn't there, and I can see where the revenues are not coming in. If I pulled back my horns too, and say wait a minute, let's get these others under control first I am not saying that against Falcon, it is just a fact that it is all over. Imperial: That is why when Mr. Tury made a comment about the guarantee that somebody could come in and operate it. Guarantee is a key word. Because there is no way you can guarantee subscriptions. Adj.CM 4-23-86 Page #12 E Taylor: Once that system is built and we are in that predicament. Then we are over a barrel. A very embarrassing situation. We have got a system built and o. k. who wants to take it. Then we almost have to give it away to get somebody to take it. Whether it be Falcon to come back or whoever Group W is. You are really over a barrel. And that does happen. Bruesch: Mr. Mayor. Imperial: Councilman Bruesch. Bruesch: To reiterate what Mr. Taylor said, the industry really as you all know is a competitive industry not only amongst itself, but with other media. I think one of the things that communities are finding out that cable is one of the many.options for home entertainment that is available to them with video cassettes, and all like that. And also I think a lot of communities are finding out that after the first rush of enthusiasm for public access, that too, is becoming a tarnished image. I was talking to some people up North and they have cut-back from a full blown operation to about an hour anda half a night on their s.............. Turned Tape Over.... Imperial: You can rent what you want for 99 cents for a movie or what have you, and you know you can fulfill your needs that way. Consequently, the only thing that you are going to have to depend on a cable for if you want to get down to it is sports. Watson: Well, its just a maybe, put a postscript on all this, the cable industry has good news and has bad news. The bad news is exactly what you have said. And that is that the competition in the urban markets, which this certainly is, to have the influence of the Los Angeles media market, which is the most penetrated market in terms of broadcast signals. Just the competition from free T.V. is tremendous. It is the worst market in the, United States. In terms of just that type of competition. A video store that has cropped up, the satelite dishes that ...the entertainment just from the lifestyle in Southern California. There is no question that is being born out in Southern California. That is the bad news. The good news is that Tom and I and others who have chosen this in- dustry believe that there is still a future there, and that the future may take longer to get there, even though people are not as wild as we thought they would be about the movie channels, for instance, be- cause they feel that there is repeats or they feel that they can it cheaper at the local store, there still is a real information hungry public whether they like news and they want to be able.to turn it on 24 hours a day and they can only do that if they have cable. Or if they are a real sports fan, and they want to get Dodger home games or if they want to get Laker home games. Again, the only place they can do that is either from cable or maybe from Select or On. So we are going to continue to have some good hooks for people to sign-up, and that is certainly the case in our other systems,.but they haven't come on in quite the numbers that we have projected 'and also it's,just:.taking a longer period of time. Taylor: Do you recall what the basic rate was when the contract was negotiated? I don't know if it was $9.95 or $11.95. Watson: Yes. LaFourcade: It was $9.95 plus a converter fee and.what Falcon has done now, is gone to a flat $14.95 for basic service which is called bonus cable plus, and that $14.95 includes prime ticket network, which is Laker home games'and S.C. and UCLA games, and various sporting events from the Forum. And a discovery channel which is like a National Geographic. It is an extremely good channel. Taylor: But what you are saying was $9.95? LaFourcade: Yes. Taylor: Is $14.95. LaFourcade: Right. Adj.CM 4-23-86 Page #/13 0 Taylor: And that is part of the deregulations supposedly. LaFourcade: No, No. That has nothing to do with it. Taylor: The point that you have.an option ...there is a lot of control that Cities no longer have over Cable T.V. LaFourcade: That is correct, but it is not just yet. That takes effect in December of this year were Federal Deregulations. Kress: Federal Law. Taylor: But the rates are set by the companies. No longer the city's rates are thrown out basically. LaFourcade: Yes, that's true. Taylor: That is not just Falcon. That is industry-wide. Watson: Industry-wide. Taylor: That is going to be another problem as far as I think, people subscribing. Subscription rates are down now. They started going down, but when the rates go up 30% or 40%, I can see where the subscription would start to drop. LaFourcade: Mr. Taylor, let me explain what really happened here. Because it is not just a matter of rates going up. Taylor: Uh, huh LaFourcade: It is a matter of value received for the money they paid. The average rate per household did not go up hardly at all. It stayed almost exactly the same. It was just a reapportionment of where the money was going for wYiat service they were buying. The reason for that, is the pay services in the beginning, they made their own contract with various studios and they had product that was differentiated product. Well, you only have a few services now that end up being that kind of service. Disney, Playboy, which most people don't subscribe to, and then the HBO and Showtime and all of the others tend to look almost alike. And they program, un- fortunately for them, they started programming the same blockbuster movies the same, month, and nbt only that, the same time and the same day of the week. Well, people say I don't need three movie services any more. I need one. So down come the numbers, and we had some research done as we saw those numbers coming down.. They went out in- to the markets that we were already in and what we found out was that people.really didn't care so much about those because they could get the movies at the video store. They could get their movies at other places so they really didn't need that much in their mind. What they wanted, they haver-all of these things on basic cable, that they really wanted and they wanted more of that. So what we did,.was:, come in and buy more product, put it on the basic,, expand the basic as broad as we could make it at that point. And then, we were able to put on things like prime ticket network that we would have had to charge a lot if we were just selling individually. Taylor: Did your basic rate go up though, across the board to all subscribers? LaFourcade: Yes. Yes. Tripepi: Can I ask, Tom, only because we have Falcon is in Walnut, where I live. When you had the $9.95 rate, as I recall, there were no-there was absolutely no movie channel whatsoever in that basic rate. LaFourcade: That's correct. Tripepi: When you raised that to $14.95, I don't recall exactly the number of that channel, but you guys.put on your own movie every night, without having to purchase the movie channel. Right? Watson: Coumercial free movie is now on the basic service at $14.95. There is a movie each night, a sports channel and also a discovery channel. Adj.CM 4-26-86 Page #14 LaFourcade: And all of the other basics. Tripepi: Seven days a week. Bruesch: What are the types of news services? Do you,have.the weather channel? LaFourcade: No. Watson: The weather channel is the one thing that we don',t have. We have C-Span. We have C & N headline news which repeats every 20 minutes. Kind of the best hits of the news at that moment, and then C & N regular news which is more the standard round-the-clock news coverage. Bruesch: Ted Turner is making money off you. Watson: Ted Turner has two... we have two of his channels, plus WTBS, which is a super station. So, in the terms of news we have about everything that you could possibly want. Bruesch: What have you done in your approach toward public access to make it more sellable. LaFourcade: Public Access,in my opinion, will never be sellable. We talked to several cities where public access was an on-going committment. The City of Norwalk being a prime example. We said look it isn't working and they said right, it isn't working. What shall we do? My proposal is that we-give you the equipment and you do-whatever you want with it:. We will support your studio. And that:=:s what we did. And they turned it into a community channel, not just a public ac- cess channel. And I think it is really a prime example of what a City's committment can do. That also has been done in the City of Monterey Park where I guess they are just now getting that off the ground. But by and large public access has not worked, and it has meant something different as time has gone on. Bruesch: Oh, yeah. La Fourcade: So.... Watson: The City of Pasadena has its own non-profit corporation. That is just kind of getting off the ground. It is an experiment and we will have to see how that goes. Bruesch: I think that the public's perception of public access has changed over the years, also. Watson: There has been a learning curve, to say, maybe it isn't as easy as we thought it was, or maybe it is not as great as it should be, but it still has, a small, but I think, I legitimate place. We are trying to allow it to happen. Bruesch: In the early days, a lot of people viewed it as a place for fringe groups to get their word across, but nowadays, I see it as a lot of people coming together and looking it as more of an art form,almost. Watson: We have in fact, it is interesting that you mention that because there are a small but significant percent of artists who make use of video and who look for that kind of access to a cable system'. In each of our communities there is generally some way to gain access. LaFourcade: What typically happens though, as soon as they get good at what they are doing, is that they want to sell it and put it on commercial spot, so it is no longer public access. Watson: They are all looking to be discovered. Tury: Well, Mr. Mayor, I think we have sort of bantered things around. I.think that.the prices is a commodity and it will find its own level, or it will go out of business. I think our main concern is building the system, if we, indeed want a system, and if Falcon still wants to build a system. I think they have made us a fair, honest offer with September 1st as the starting time. Adj. CM 4-23-86 Page #15 Tury continues: I think the reassurance to Falcon that this City is prepared to move against the Bond if we don't get some action, I think is necessary. I think everyone agrees with that. I hope we can start September 1st and we won't have any more problems and as I say I appreciate their honesty. They haven't tried to pull the wool over our eyes I don't think. I think we will get a system built. I think we have done what we had to do tonight. Bruesch: Mr. Mayor. Imperial: Councilman Bruesch. Bruesch: There is a motion on the floor, but we haven't voted on it yet, though. Tury: Would you restate the motion, Ellen. Ellen: Yes. It says that ...Motion by Councilman Tury, Seconded by Councilman Bruesch that the Council will move on the Performance Bonds and the Letter of Credit if construction has not started by September 1st, 1986. Tury: Or a good explanation, I think we had in there. Ellen: Or with a good explanation? Bruesch: Without. Tury: Without a reasonable explanation. Imperial: Without an explanation cause anybody can give what they consider is a good explanation. Ellen: Without a reasonable... Tury: Without a reasonable explanation as to the time delay. Imperial: I have a little trouble with that wording-reasonable explanation. Watson: Can I make one suggestion. Your current language in the agreement, I think, says something like circumstances reasonably beyond the control or foreseeable control, I think. I don't know what that would mean literally, in this situation, but that is the language that you used and maybe that is a reasonable suggestion. Tury: I wonder:if wei.reworded the statement, reworded the motion to say as of September 1st, let's say as of.September 15th if con- struction is not started, the Council reserves a right to invoke all penalty clauses in the contract. Bruesch: Punitive. Taylor: Including voiding the Contract with Falcon T.V? Tury: Yes, we reserve that option. Imperial: I could go for something like that, but when you talk about explanations, I could tell you all day why I can't do any- thing. Taylor: You are right, Mr. Mayor, absolutely right. Imperial: So, I really have problems with that. Tury: Why don't we change that motion? Ellen: O.K. Tury: To say as of September 15,if construction is not underway the Council reserves the right to take all punitive action in the contract. (penal) Taylor: Again, clarification, if.construction is not underway, with these ...we have discussed it in the past few months, as far as getting up-front approval on the entire project, whatever it Adj. CM 4-23-86 Page #16 Taylor continues: is going to be in the City rather than start and do two months work and then slow-down because we don't have this, we haven't got these poles approved and such. That is another draw back in construction. Once you are started and you are obligated,the negligent party_is usually;the.one thats_held liable. Falcon could be entitled to profits, and whatever,depending on the reason for delay. If the phone company is holding them up, then we are over a barrel. I think that this pole situation has got to be totally resolved before the construction starts, and from what you are saying it may well be, but as of today, it is not. And that is part of the reservation that I have. Con- struction starts and then shut it down. Tury: I doubt if the banks that are financing that will allow that to happen. That is the quickest way not to make payments LaFourcade: I think that Mr. Imperial said it right, it is Falcon's responsibility to resolve those problems and comply with the September 15th date. Imperial: I could care, being very honest with you, I could care less what your problems are because they are not mine. My problem is that I have to justify to the people of this City that we are going to cable t.v. And we are going to have it at a cer- tain time because they have been run over the barrel time and time again. So if they are your problems, then my advice to you is fix them. O.K. Taylor: Mr. Mayor. I'm sorry., Go ahead. Imperial: And I would like,if the maker of the motion would agree, I would like the motion also to say, that Falcon will have at least a monthly communication, with the City, or sooner when needed, because I take offense to the fact that we had to go after you folks, you did not come to us, because nothing was happening. Taylor: Mr. Mayor, you are saying that from now until September 1st, a monthly communication? Imperial: I am saying from now until the time the system is completed. Tury: I don't see a problem. Watson: That is not a problem, in fact..... Imperial: It has been a problem, and that's.what I'm concerned with. Watson: I am saying add it to your motion, and. it is certainly going to happen and I think it is a reasonable request, and com- pletely appropriate. Taylor: Mr. Mayor. Imperial: Councilman Taylor. Taylor: Clarification.as far as the problem with the phone company, and Falcon T.V. There was a problem that went on for over the past year and a half, and I will be honest with you, I didn't know it, and I am not sure that this Council knew what that problem was until February when we got a letter, Mr. Tripepi checked into something to find out what was going on, and it was stated that the phone company. was delaying the application approvals for the poles and I had asked, get a clarification on what this means, and,now, we have got informa- tion that it has been going on for two years. And yet, we were not informed of that. And this is why I am saying that down the road,it has become our problem now. That is one of the reasons that it has been delayed. Imperial: That was the reason for my wanting communication Mr. Taylor, because in my opinion, speaking professionally, we shouldn't have had to chase Falcon, they should have come to us. Taylor: Agreed. Adj. CM 4-25-86 Page #17 Imperial: And this should have been done on a problem by problem basis so that we would know what is happening, and I just don't want to go through that again. So based on that..... Taylor: Can we get that motion clarified again now? Imperial: Can we clarify the motion? Ellen: Gary, did you add something else at the very end? This is what I've got that Lou said. Taylor: Go ahead with what you have. Read it off. Ellen: Alright. That the Council reserves the right to take all (penal) punitive action if construction hasn't started by September 15th', with monthly communication with the City until the system is completed. Imperial: Monthly communication or sooner if needed. Bruesch: or more frequent. Imperial: That was my request. Bruesch: Monthly or more frequent. Ellen: Monthly or more frequent. Imperial: When needed. Tury: Call for the question. Imperial: Question has been called for. MOTION BY COUNCILMAN TURY, SECONDED BY COUNCILMAN BRUESCH that the Council reserves the right to take all punitive action if construction hasn't started by September 15, 1986 with monthly communication,or more frequent if needed, with the City until the system is completed. Vote resulted: UPON ROLL CALL ALL COUNCILMEMBERS PRESENT VOTED AYE. The Mayor declared said motion duly carried and so ordered. Taylor: Mr. Mayor. Imperial: Councilman Taylor. Taylor: It has only been an hour meeting and I'd ask that come September 1st, that we have these minutes verbatim so that there is no misunderstanding of the committments made on both sides. Tury: And the letter from Mr. Nathanson. Tripepi: We need that letter. That is a good point. Imperial: So directed, Councilman Taylor. Now, how soon can we have this letter? Watson: From Mark Nathanson? Imperial: Yes. You said this week? LaFourcade: Is is he in town? Watson: That is the only problem. How about if we say in the middle of next week? Imperial: O.K. I think we can agree with that. Taylor: No problem, Mr. Mayor. Imperial: Anything else, gentlemen? Taylor: Move that we adjourn to May 13th. Tripepi: You have got a school board meeting tomorrow night. Adj. CM 4-23-86 Page #18 Tripepi: Isn't tomorrow night the Rosemead School District? Taylor: Is that tomorrow night? Bruesch: Rosemead is Monday. Tripepi: No, No. I'm sorry it is Monday night so you have to adjourn to that night and then that. night you have to adjourn to Alhambra and that is the next night. So we don't have to call a Special Meeting. Imperial: What date is that? Tripepi: 28th. We are adjourning to April 28th, 1986. Imperial: This Meeting is adjourned to April 28, 1986 at 7:30 p.m., at T. & J. Restaurant..with the Rosemead School Board. Sincerely, APPROVED:: u~ City C"Terk ✓r ' MA Adj.CM 4-23-86 Page #19