HomeMy WebLinkAbout2.b. P.E.G. fee level for cable programming4W)SEMOUNT EXECUTIVE SUMMARY
CITY COUNCIL
City Counci' Work Session: July 14, 2010
AGENDA ITEM: P.E.G fee level for cable programming
AGENDA SECTION:
PREPARED BY: Alan Cox, Communications Coordinator
AGENDA NO.
ATTACHMENTS: Cable Commission packet excerpts; PEG
fee trend and what -if analysis
APPROVED BY:
RECOMMII,NDED ACTION: Council guidance
Under federal and state law, the City directs cable television franchises operating in Rosemount to charge
customers a monthly fee for the production and distribution of public, educational, and government access
programming through what is known as the "PEG fee." The fee covers most but not all of the expenses
to produce the programming that is seen on the government and public access channels. The Apple
Valley, Farmington, and Rosemount Cable Commission has asked the three members' City Councils to
discuss whether the fee should be increased to lessen the dependence on funding from property tax
sources.
Under the franchise agreements for cable operators, customers must have access to five channels of
programming provided by local government. On the Charter Communications system serving
Rosemount, the channels are:
Ch. 6
Regional channel of government and community programming produced by Metro
Cable Network; carriage required by state law
Ch. 10
Channel given to ISD 196 for programming prepared and funded by the school
district
Ch. 12
Bulletin board channel operated by the Cable Commission for text messages
provided by non - profits, churches, civic groups, and other non - governmental and
non - commercial entities.
Ch. 16
Channel focused on Apple Valley and Farmington, carrying Council and Planning
meetings live and on tape, along with occasional special events and two series about
Apple Valley activities and public safety funded by that city; localized bulletin board
.messages
Ch. 22
Channel focused on Rosemount, carrying Council and Planning regular meetings
live and on tape, along with occasional special events and some programming
provided by Dakota County; localized bulletin board messages
The FTTH Communications system in Rosemount currently provides one channel (Ch. 7) that shows
Council and Planning meetings live and on tape, along with recordings of occasional special events as
provided by the Cable Commission.
Customers of the cable systems serving the three cities pay a PEG fee of 50 cents each month. The
amount has remained unchanged since it was created in 1999. A survey by the Cable Coordinator in 2008
(included in this packet) indicates that the Apple Valley - Farmington- Rosemount fee was one of the lowest
in the metro area. The projected revenue raised by the fee this year from subscribers to Charter
Communications in Rosemount is $24,239.84.
Under the terms of the joint powers agreement governing the Cable Commission, Rosemount is
responsible for 25% of the Commission's expenses. Rosemount's share in 2010 is budgeted for
$42,823.50. Rosemount is therefore responsible this year for funding $18,583.66 beyond what will be
covered by the PEG fee. The funding comes from the City's general fund, and thus has an impact
property taxes, including those collected in part from residents and businesses that choose not to subscribe
to cable or are unable to do so because of their location outside the service area. One of the revenue
sources for the general fund is the franchise fee charged to cable operators.
At the Cable Commission meeting on June 22, the Cable Coordinator asked the Commission to endorse a
proposal to be carried back to each City Council for an increase in the 2011 PEG fee from 50 cents to 60
cents a month, or by $1.20 a year, for each cable customer. (The Cable Coordinator's supporting memo is
included in this packet.)
An analysis provided by the Cable Coordinator in preparation for the Rosemount City Council discussion
shows the projected impact of various levels of the fee.
PEG fee level for 2011
Projected PEG fee
Amount needed
revenue from
from other
Rosemount in 2011
Rosemount sources
Unchanged at 50
$24,239.84
$18,583.66
cents /month
Increased by 10 cents to
$29,087.81
$13,735.69
60 cents /month
Increased by 25 cents to
$36,359.76
$6,463.74
75 cents /month
The full spreadsheet showing the impact on each city and the ten -year trend is included with this packet.
The Cable Coordinator also proposed that each city approve an automatic increase in the PEG fee to
adjust for inflation. As indicated in the Cable Coordinator's memo to the Commission, these increases
would be designed to maintain services at their current level. Any expansion of services would require
additional increases in the PEG fee or allocation of other funds.
The three Cable Commissioners voted unanimously to forward the proposal without recommendation to
the City Councils.
To implement a change at the start of a new year, the cities are required to send notification to the cable
companies by September 30. The same fee must apply in Rosemount to both Charter and FTTH. Cities
could choose to act independently on the increase.
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Apple Valley, Farmington, & Rosemount Cable Commission
710 ;) West 147th Street
Apple Valley, MN 55124
Phor e: (952) 953 -2502
Fax: (952) 953 -2515
TDD: (952) 953 -2533
view this as a waste of their time but as a way to run a tighter ship, especially
since that ship may be on the water for some time to come. If at some point
in the future the Commission decides to move to that next level of service the
more comprehensive policies can be reconsidered, modified if necessary, and
reapproved.
Staff requests that the Commission review the Revised Administration
and Operations Policies for Channel 12, modify them if needed, and
approve what is determined to be the final form of them.
b. PEG Fee Adjustment Proposal (15 min.)
DISCUSSION & POSSIBLE ACTION ITEM
As the Commission saw in the proposed 2011 budget options the Cable
Department is reaching a critical juncture with its revenue stream. Our
primary source of revenue is the monthly PEG Fees collected from cable
customers. With the exception of one other community, our PEG Fee is the
lowest in the entire metro area at $0.50 per customer (see attached PEG Fee
Comparison). Most other communities charge anywhere from two to six times
that amount.
Since the Member's respective City Councils must approve a PEG Fee increase
there has been understandable reluctance to bring this before them in the past
because of the "a fee is just another tax" opinion held by some
Councilmembers. However, I believe that the following arguments can be
made to effectively present a recommendation to increase the fee.
• The PEG Fee is paid only by the users that receive the service it supports,
and I believe that this service is valued by the users and Councilmembers.
• Before we got into the business of programming, the PEG fee was
adequate to fund operations. It was only once we expanded our operation
into programming that we really had to subsidize through the general
fund.
• The current PEG Fee amount was imposed in 1999 and has not changed
since. The financial support it provides for the Cable Department has not
kept pace with rising costs of salary and benefits, material support, capital
requirements, and inflation.
• The current PEG Fee is miniscule in relation to the overall amount of the
average cable bill. For example, I feel that my monthly bill is probably
average and the amount I pay for Basic /Expanded Basic Television and
LOMB internet service is $138.15. $0.50 is a mere 0.36% of that total. A
customer who buys only Basic /Expanded Basic service pays approximately
$58.15 per month and their PEG Fee is 0.86% of the total bill.
• Our PEG Fee has never been increased but, by comparison, cable rates
have been rising by twice the rate of inflation since the 1990s (source:
Philadelphia Inquirer). Even if the Peg Fee is ultimately increased to the
maximum allowable amount of $1.25 it is highly unlikely that it will ever
even rise to 1% of a customer's bill based on the trends of cable rate
increases.
• Because of how the rate increase process is structured for the PEG Fee in
the Franchise Agreement, the amount is likely not going to be noticeable
to the vast majority of cable customers. The process is laid out in the
Agreement as follows: "The City may require increases in the PEG Fee up
to a limit of $1.25 increased annually by the Consumer Price Index (CPI)
or three percent (3 %), whichever is less. The City may not increase the
9of10
Summary for March 4, 2010 Cable Commission Meeting Agenda
Apple Valley, Farmington, & Rosemount Cable Commission
710:) West 147t' Street
App e Valley, MN 55124
Phase: (952) 953 -2502
Fax: (952) 953 -2515
TDD: (952) 953 -2533
PEG Fee by more than twenty -five cents ($.25) in any given year. The
City shall notify Grantee of any such increase on or before September 30,
assuming a January 1 implementation. Should Grantee change the date of
any annual rate change from January 1, and so notify the City, then the
City shall notify Grantee of any PEG increase at least ninety (90) days
prior to the new Grantee rate change date."
I don't believe that the General Fund can be counted on to continue
subsidize the Cable Department budget. Without a plan to increase PEG
Fee revenue the Department will continue to lose ground to inflation and
other rising costs of doing business.
Based on the 2011 proposed budget the Cable Department is going to have to
reduce service levels to the Cities. I also understand that the situation may be
worse in 2012. I firmly believe that increasing the PEG Fee is the only
palatable way to continue providing the minimal level of service needed for the
Cities to televise city meetings and produce certain informational
programming. The ultimate goal of this request is to establish a stable funding
mechanism that allows the Member Cities to continue providing the minimal
level of service needed to televise city meetings and producing certain
informational programming.
Staff requests that the Commission recommend increasing the PEG
Fee by $0.10 to their respective City Councils. Staff also recommends
that a plan or schedule be established that allows the Fee to increase
annually based on inflation. If the City Councils agree to raise the Fee,
Staff additionally recommends that the resolutions be approved in
time to meet the September 30 notification deadline in order to
implement the increase on January 1, 2011.
8, Other Business
a. Uvcominq MACTA and NATOA Events (1 min.)
INFORMATIONAL ITEM
• MACTA will hold its 2010 Annual Conference on November 9, 2010 at the
Wildwood Lodge in Lake Elmo, Minnesota.
• NATOA will hold its 2010 Annual Conference from September 29 through
October 1, 2010 in Washington, DC.
b. Set Date of next Regular Cable Commission Meeting (2 min.)
ACTION ITEM
Staff requests that the Commission set the date for a Special Meeting prior to
September 15, 2010 to consider final approval of the 2011 Proposed Budget.
10 of 10
Summary for March 4, 2010 Cable Commission Meeting Agenda
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