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HomeMy WebLinkAbout14.D. Cable Franchise Fee Review /1.0. City of Shakopee CONSEf~T Memorandum TO: Mayor, City Council Mark McNeill, City Administrator FROM: Tracy Schaefer, Bradley & Guzzetta, LLC SUBJECT: Cable Franchise Fee Review MEETING DATE: June 21, 2005 Introduction At its June 15th meeting, the Shakopee Telecommunications Commission recommended hiring Front Range Consulting, Inc. to conduct a Time Warner Cable (TWC) cable franchise fee review. Background Due to the upcoming Comcast cable franchise transfer (394 transfer application paperwork was just dropped off on June 15,2005 and the City only has 120 days to respond to any issues and/or violations), the City of Shakopee wanted to offer the opportunity for other TWC communities to participate in Shakopee's cable franchise review, With that in mind, I developed a Statement of Qualifications (SOQ) for a cable franchise fee review, so that up to five (5) other communities could participate, The SOQ is attached. Three (3) consulting firms submitted proposals, but at its June 15th meeting, the Telecommunications Commission recommended hiring Front Range Consulting, Inc, based on the lowest price, services provided, ability to complete project before the transfer and experience. Bradley & Guzzetta, LLC has contacted several TWC communities to share in the franchise fee review costs. Currently, the cities of Minneapolis, St. Louis Park, Chaska and Bloomington have shown interest in participating in Shakopee's review and are bringing forth information to their City Councils. Due to the limited timeframe of the transfer window, 120 days, the Commission wanted to bring Council the recommendation so that the consultant could be hired and add additional cities in the next week or two, If other cities "join" the City of Shakopee in conducting the franchise fee review, an appropriate formula based on population, subscribers, etc. will be developed to share in the cost savings. I recommended to the Telecommunications Commission that after the Comcast transfer occurs that other cities should be contacted to develop a relationship to conduct such a franchise fee review whereby up to 15+ Twin Cities communities could / split the cost of the review, Since the consultant needs to gather specific information, regardless of the number of communities involved, it will result in cost savings for all cities involved, 1 If Council concurs with the Telecommunications Commission's recommendation, the cable franchise fee review conducted by Front Range Consulting, Inc. will address at least the following general areas for the past three (3) calendar years: . Evaluate the current gross revenues and franchise fee payment language in each city's current franchise agreement; . Determine if each city has received full payment of franchise fees based on the specific gross revenues definition in each franchise agreement. . Determination of Bad Debt expense; . Programming Launch Support payments; . Advertising Sales and Home Shopping Commission allocations; . Advertising Sales Commissions; . Lease and Rental payments received by Time Warner; . FCC Regulatory Fee collections; and . Based on the findings of the review, Front Range Consulting, Inc. will prepare a detailed report for each participating city setting forth the amount of any franchise fee underpayment for each city. The report will include support for the consultant's calculations and fully explain the basis therefore. Franchise Fee Review Benefits . Review of potential underpayment; . The cable franchise fee review is planned to be completed before the 120 day 394 application transfer period expires; . Determine if any franchise fee payment violations exist before the transfer period expires. The City can only deny the franchise on certain issues, evidence and findings. Such evidence/findings must be properly documented or the transfer can't be denied. Simply informing the cable operator that the City hasn't been "paid on time from City records;" . Although the City has the right to audit TWC records after the transfer occurs, it becomes much more difficult and expensive to conduct a review of a previous company's records; . Split cable franchise fee review fees with up to four (4) other Twin Cities communities; . Cost will be under $6,000/participating city (as low as under $4,000/city); . A review is cheaper and quicker than conducting a full cable audit. This allows the City to determine ifthere are any red flags before spending over $20,000 to conduct a full audit; . If major violations or issues exist, each individual city will determine if it chooses to conduct any follow-up review; . If violations do exist, there is an opportunity for the City to get TWC to pay for any additional consulting work; . It is prudent to conduct a franchise fee review/audit every few years to "keep" the cable operator honest; . Shakopee has been operating under new franchise terms and conditions for one year, but we are unsure if TWC has followed the new provisions for areas like bundling of video, voice and data services; and 2 . Written report findings will be specific to each participating city. Budget All funds will come from the budgeted professional services account from the Telecommunications Fund. If no other cities choose to participate, the cable franchise fee review will cost $6,000; however, depending on the number of other cities that chose to participate the cost could be under $4,000 for the City of Shakopee. Action Requested Direct the appropriate staff to enter into an agreement with Front Range Consulting, Inc. to conduct a Time Warner Cable cable franchise fee review not to exceed $6,000 for the City of Shakopee. 3 I CITY OF SHAKOPEE, MINNESOTA . REQUEST FOR STATEMENT OF QUALIFICATIONS (SOQ) TO PROVIDE CONSULTING SERVICES TO REVIEW CABLE OPERA TOR FRANCHISE FEE PAYMENTS Bradleyd~ SUMMARY Guzzetta, LtC This document is a request for statement of qualifications (SOQ) to provide consulting services to the City of Shakopee, Minnesota and potentially other 950 Piper Jaffray Plaza Time Warner Cable operator communities located within the Twin Cities to 444 Cedar Street evaluate the current gross revenue and franchise fee payment language in each Saint Paul, MN 55101 of the participating cities' current franchise agreements and to determine if each P/(651)379-0900 City has received full payment of franchise fees based on the specific gross FI (651) 379-0999 revenue definition in each franchise agreement. Based on the findings of this Attorneys at Law review, the consultant will prepare a detailed report for each participating City Michael R. Bradleyt setting forth the amount of the underpayment of franchise fees, if any, for each Stephen J. Guzzetta* city. Each report must support and fully explain the basis for any franchise fee Of Counsel underpayments that are identified. Thomas C. Plunkett Greg S. Uhl RFO Issue Date: Tuesday, June 7, 2005 Senior Project Manager Statement ofOualifications (SOO) Due Date: Monday, June 13,2005,10:00 Tracy J. Schaefer A.M. Central Daylight Time Legal Assistants Emily Faye Jewett BACKGROUND Elise R. Kahl The City of Shakopee, Minnesota (a Minneapolis suburb) (the "City") and its consultant, Bradley & Guzzetta, LLC, wish to perform a review of the franchise fee payments made by Time Warner Cable to the City over the past three (3) calendar years. The City will engage an outside consultant to perform this review and the results of this review will be presented to Time Warner Cable for comment. The City has contacted other Twin Cities communities served by Time Warner Cable to determine if they would be interested in reviewing Time Warner Cable franchise fee payments in conjunction with the City's review. Many of these communities have expressed a desire to participate in the review of the franchise fee payments made by Time Warner Cable pursuant to their respective franchises. Depending on the nature of responses received from financial consultants, as few as one community or as many as five other communities may wish to participate with the City of Shakopee. The participating cities will want any consultant selected to evaluate the current gross revenues and franchise fee payment language in each city's current franchise agreement and determine if each city has received full payment of franchise fees based on the specific gross revenues definition in each franchise agreement. Based on the findings of this review, the consultant will prepare a I detailed report for each participating city setting forth the amount of any franchise fee underpayment for each city. The report must include support for the consultant's calculations and fully explain the basis therefore. The franchise fee review conducted by the consultant must address at least the following general areas for the past three (3) calendar years: . Determination of Bad Debt expense; . Programming Launch Support payments; . Advertising Sales and Home Shopping Commission allocations; . Advertising Sales Commissions; . Lease and Rental payments received by Time Warner; and . FCC Regulatory Fee collections. The participating cities will each require a separate report identifying the potential under-collections calculated by the consultant. STATEMENT OF QUALIFICATIONS At this time, the City of Shakopee wishes to identify qualified businesses that have the technical and financial capacity and expertise to conduct this cable franchise review within guidelines set by the City. Qualified businesses wishing to be considered for this review should submit a Letter of Interest and Statement of Qualifications (SOQ's) in accordance with the requirements set forth in this solicitation. The consultant's response to the Scope of Services must include: . A general description of the methodology the consultant will use in performing this Franchise Fee Review; . The estimated cost of the review for each City. Please break out the estimated cost for service based on the City of Shakopee participating and then the cost to add one (1) additional city, two (2) additional cities, three (3) additional cities, four (4) additional cities and five (5) additional cities. The size of the communities may vary, but all are located in the Twin Cities region and all are served by Time Warner Cable. . The consultant's hourly rate for all persons involved with conducting the franchise fee review; . Consultant's qualifications & firm history; and . Three (3) references (that have used the consultant in the past two years to perform franchise fee reviews). The participating cities are not desirous of long and complicated responses including excessive graphics, but rather a specific on-point description of the proposed methodology for conducting the franchise fee review and the expected outcomes from this review. The participating cities wish to begin the franchise fee review immediately and to have it completed as soon as possible, but no later than two months from the date a consultant is selected. 2 Responses to this SOQ are therefore due no later than Monday, June 13,2005 10:00 A.M. Central Daylight Time. EVALUATION The City of Shakopee and any participating cities will evaluate responses to the SOQ to: 1. Determine whether there are qualified businesses that are actively interested in providing the services described in the SUMMARY and BACKGROUND above; and 2. Determine whether there are qualified businesses that can provide the specific deliverables requested in the timeframe required. FORMAT AND CONTENT OF SUBMITTALS Respondents must submit one (1) hard copy and one (1) electronic copy of a cover letter of interest and provide the SOQ information requested. Submittals may be as long as you wish, but must be submitted on 8 Y2 "x 11" sized paper and be written in 12-point font text. Submittals may include resumes or other pertinent information. E-mail proposals will also be accepted as the electronic copy, but the hard copy must follow in the mail. No fax proposals will be accepted. Submittals must be received bv Mondav June 13.2005.10:00 AM Central Davli2ht Time at the following address: Tracy 1. Schaefer Senior Project Manager Bradley & Guzzetta, LLC 444 Cedar Street, Suite 950 St. Paul, MN 55101 sc hae fer((l), bradleyguzzetta. com A proposal which is in any way incomplete or irregular is subject to rejection. Timely delivery of proposals at the designated location is the responsibility of the consultant. Proposals shall be deposited at the designated location prior to the time and date for receipt of proposals. If you have any questions related to the Statement of Qualifications, please email or FAX them to the attention of Tracy J. Schaefer, schaefer@bradleyguzzetta.com or 651-379-0999 ext. 4, no later than Friday June 10,2005 at 3:00 P.M. Central Daylight Time. The City of Shakopee reserves the right to ask additional questions, request additional information, or otherwise conduct follow-up investigations to the information provided in the initial SOQ. 3 CITY OF SHAKOPEE. MN RIGHTS This SOQ and/or the selection process do not obligate the City of Shakopee or other interested Twin Cities communities to enter into any agreements. The City reserves the following rights, in addition to those accorded by law: I. The right to reject any and all submittals, to waive irregularities, and to re- solicit proposals. 2. The right to use and disclose information included in all submittals as the City deems necessary. 3. Please note that this SOQ is being issued outside the Minnesota competitive bidding statute and is not subject to that statute, except as provided by law. 4