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HomeMy WebLinkAbout3.a. Update on FTTH (fiber to the home) projectAGENDA ITEM: Update on FTTH (fiber to the home) project C��ND S CT�ON: A u it P PREPARED BY: Dwight Johnson, City Administrator AGENDA NO. 5A ATTACHMENTS: Council Report from January 2, 2008 APPROVED BY: rvli RECOMMENDED ACTION: Update Item Only 4 ROSEMOUNT CITY COUNCIL City Council Work Session: January 14, 2009 EXECUTIVE SUMMARY The City entered into a franchise agreement with FTTH Communication, LLC in 2002 to provide high speed fiber optic cable throughout the City. In January, 2008 the City Council agreed to a revision in the franchise agreement that changed several provisions including the schedule for the required build out of the City. The build out schedule requires a phase to be completed each year with the fourth and last phase to be completed by December 31, 2011. Phase 1 build out required that "energized trunk cable must be extended substantially throughout Area 1 depicted on Exhibit C, and all associated system construction must be completed by December 31, 2008..." The revised franchise agreement was made with Rudder Capital Corporation which bought out FTTH with the approval of the City. City engineering staff has been monitoring the construction. Our inspector indicates that the conduit was placed in the southern portion of Phase 1 (known to us as area B) a few months ago, but the only conduit in the northern portion of phase 1 (area A) is along Connemara Trail, a major collector street. Further, he reports that there is no cable actually pulled through the conduit at this time, even though that could be done during winter conditions. He does not believe any work has been done anywhere since late October. Staff has not received any reports or communication from the company on their progress or intentions. There is substantial reason to believe that they are not in compliance with the revised franchise agreement. Mr. Robert Vose, the attorney at Kennedy and Graven who specializes in franchise matters, indicates that the next step, if we wish to pursue the matter at this time, is to draft a formal letter to Rudder outlining the violations of the franchise agreement and requesting a response. After considering any response that we get, the council's subsequent actions could include either invoking penalties against their $60,000 letter of credit or completing the work ourselves by using their $250,000 performance bond. AGENDA ITEM: Resolution Approving Transfer of Control over FTTH Communications, LLC AGENDA SECTION: Consent PREPARED BY: Jamie Verbrugge, City Administrator AGENDA NO. I h ATTACHMENTS: Resolution APPROVED BY: RECOMMENDED ACTION: Motion to adopt a resolution approving transfer of intro) over FTTH Communications, LLC, and its cable franchise and system, to Rudder C -pital Corporation ROSEMOUNT CITY COUNCIL City Council Regular Meeting: January 2, 2008 EXECUTIVE SUMMARY BACKGROUND Rudder Capital Corporation has entered into an agreement with Contractor Property Developers Company to acquire all membership interests in FTTH Communications, LLC and effective control over the FTTH franchise and system. ISSUE Pursuant to Ordinance No. X1.23, the FTTH Cable Franchise, the City of Rosemount must consent to the transfer of control prior to completion of the transaction. In 2006, the City formally waived its right of first refusal to acquire the system. The application of transfer includes requested modifications to the Franchise which have been negotiated by Rudder and the City of Rosemount, and are reflected within the resolution and a subsequent agenda item amending the FTTH Cable Franchise Ordinance. SUMMARY Staff recommends a motion to adopt the resolution approving the transfer of control over FTTH Communications to Rudder Capital Corporation. RJV 266063v1 VS105 -3 CITY OF ROSEMOUNT, MINNESOTA RESOLUTION APPROVING TRANSFER OF CONTROL OVER FTTH COMMUNICATIONS, LLC, AND ITS CABLE FRANCHISE AND SYSTEM, TO RUDDER CAPITAL CORPORATION WHEREAS, the City of Rosemount "City granted a cable franchise to FTTH Communications, LLC "FTTH") pursuant to Ordinance No. X1.23 ("Franchisel and WHEREAS, FTTH currently operates a cable communications system "System in the City pursuant to the Franchise; and WHEREAS, Contractor Property Developers Company, a Minnesota corporation "CPDC and Rudder Capital Corporation, a Minnesota corporation "Rudder") have entered into an Amended and Restated Securities Purchase Agreement dated September 30, 2006, and as subsequently amended "Agreement WHEREAS, CPDC currently holds 100% of all issued and outstanding membership interests in FTTH; and WHEREAS, pursuant to the Agreement, Rudder will acquire all membership interests in FTTH from CPDC, and effective control over FTTH, the Franchise and System and WHEREAS, pursuant to the Franchise, FTTH and Rudder cannot complete the transaction contemplated by the Agreementwithout the City's prior consent and WHEREAS, FTTH and Rudder filed a Federal CommunicationsCommission Form 394 dated October 31, 2007 with the City, together with certain attachments (collectively "Transfer Application and WHEREAS, prior to filing the Transfer Application, FTTH and Rudder requested that the City waive its rights under the Franchise to acquire the System; and WHEREAS, by Resolution 2006 126, dated December 19, 2006, the City waived its right of first refusal to purchase FTTH and/or the System arising as a result of the proposed transaction; and WHEREAS, prior to filing the Transfer Application, the parties also advised the City thatthey intended to seek certain modifications or amendments to the Franchise including specifically modification of the required build -out schedule; and WHEREAS, such requests for amendment of the Franchise are detailed in the Transfer Application; and WHEREAS, the City has reviewed the TransferApplication and the request to modify the Franchise is reflected thereiq and WHEREAS, FTTH provides telephone and other telecommunications services under the regulatory jurisdiction of the Minnesota Public Utilities Commission "MPUC and WHEREAS, on or about September 12, 2007, the MPUC approved the proposed transaction with respect to services under its jurisdiction; and WHEREAS, in review of such transactions, the MPUC and City are charged with review of the same or similar considerations, to wit: whether the applicant has the financial, technical and legal/managerial capacity to operate; and WHEREAS, in reliance upon the Transfer Application and MPUC approval noted above, the City will consent to the Franchise transfer upon the conditions set forth in this Resolution. NOW, THEREFORE, BE IT RESOLVED THAT the City consents to the transaction described in the Transfer Application, subject to the following conditions: 1. FTTH and Rudder shall be bound by therepresentations and understandings reflected in the Transfer Application; 2. The City will accept and enact certainof the Franchise amendmentsrequested by FTTH and Rudder, and certain additional amendments to the Franchise, allas indicated in Attachment 1 hereto; BE IT RESOLVED FURTHER THAT by consenting herein, the City does not waive, and expressly reserves, consistent with applicable limitations periods,its rights regarding any and all compliance matters involving the Franchise including the right toenforce the Franchise Further, the City's consent shall not affect or impact on the parties' rights and obligations concerning renewal of the Franchise BE IT RESOLVED FURTHER THAT the City's consent shall continue for a period of six (6) months during which time the transaction contemplated by the Tansfer Application must close. Within ten (10) days of closing Rudder shall providewritten notice to the City. BE IT RESOLVED FURTHER THAT if any of the foregoing conditions are not met or satisfied, the City's consent is void and the City shallbeen deemed to have denied the Transfer Application. RJV- 218139v1 VS 105-4 3. Rudder shall be bound by allapplicable laws, codes and regulations and the Franchise for the term thereof. 2 BE IT RESOLVED FURTHER THAT Rudder and FTTH will reimburse the City for its actual legal fees incurred in review of the transfer, and related matters, in an amount not to exceed $10,000.00. BE IT RESOLVED FURTHER THAT Rudder shall accept this Resolution, effective upon closing, as provided below. Adopted by the City Council of the City of Rosemount this day of 2007. ATTEST: City Administrator ACCEPTANCE This Resolution, the Franchise and all terms and conditions therein and the amendments to the Franchise noted, are expressly accepted and agreed to. RUDDER CAPITAL CORPORATION By: Its: RJV 218139v1 VS 105-4 Mayor STATE OF MINNESOTA ss. COUNTY OF The foregoing instrument was acknowledged before me this day of 2007 by the for 3 Notary Public THE CITY follows: Section 1. RJV 218139v1 VS 105-4 ATTACHMENT 1 CITY OF ROSEMOUNT COUNTY OF DAKOTA STATE OF MINNESOTA ORDINANCE NO. AN ORDINANCE AMENDING THE FTTH CABLE FRANCHISE, ORDINANCE NO. COUNCIL OF THE CITY OF ROSEMOUNT, MINNESOTA, ORDAINS as Rosemount Ordinance No. X1.23, Section 2, paragraph 8 is amended as follows (deletions shown as strikeouts, additions shown in bold/underline): Written Notice. All notices, reports, or demands required to be given in writing under this Franchise shall be deemed to be given when delivered personally to any officer of Grantee or City's Administrator of this Franchise or forty -eight (48) hours after it is deposited in the United States mail in a sealed envelope, with registered or certified mail postage prepaid thereon, addressed to the party to whom notice is being given, follows: If to City: With copies to: If to Grantee: City of Rosemount c/o City Administrator 2875 145 Street West Rosemount, MN 55068 -4997 Robert J. V. Vose, Esq. 470 Pillsbury Pilisbufy-GentefU.S. Bank Plaza 0O 200 South 6 Street Minneapolis, MN 55402 FTTH Communications, L.L.C. Attn: Kevin Kawell 4483 r Pa kway 14745 South Roberts Trail Rosemount, MN 55068 With copies to: Suitc 2200 1 O! 1 zvv- -00 Ave ue S out 4 RJV 218139v1 VS105 -4 Clyde C. Ahlquist, Esq. Ahlquist Law Office 2334 Wilson Street NE Minneapolis, MN 55418 Such addresses may be changed by either party upon notice to the other party given as provided in this Section. Section 2. Rosemount Ordinance No. X1.23, Section 6, paragraph 1 is amended as follows (deletions shown as strikeouts, additions shown in bold /underline): Public, Educational and Government Access a. The City is hereby designated to operate, administer, promote, and manage community programming (public, education, and government programming) (hereinafter "PEG access in the Cable System. b. Grantee shall dedicate five (5) channel(s), with channel defined as a six (6) MHz spectrum allocation, for PEG access and community programming use. All residential Subscribers who receive all or any part of the total services offered on the System shall be eligible to receive such channels at no additional charge. The channel(s) shall be activated upon the effective date of this Franchise and thereafter maintained. The City may rename, reprogram, or otherwise change the use of these channels in its sole discretion, provided such use is non commercial and retains the general purpose of the provision of community programming. Nothing herein shall diminish the City's rights to secure additional channels pursuant to Minn. Stat. 238.084, which is expressly incorporated herein by reference. The City shall provide ninety (90) days prior written notice to Grantee of City's intent to activate access channels and shall allow Grantee reasonable time to vacate said channel(s). c. The VHF spectrum must be used for the PEG access channel(s) required in this Section. Grantee shall designate the channel locations of any other access channel(s) but may not move or otherwise change the channel number or location of any PEG access or community program channel without the written approval of the City. d. Grantee will cable cast all video taped-PEG access programming provided produced by the City or City's designee. Within one year of the Effective Date of this Franchise, the Grantee will provide live video feed from City Hall. In addition, on or before October 1, 2008, Grantee will begin cable casting ISD 196 5 Any PEG programming originated from FTTH facilities will be provided to all public buildings Section 3. Rosemount Ordinance No. X1.23, Section 8, paragraph 1 is deleted in its entirety. Section 4. Rosemount Ordinance No. X1.23, Section 8, paragraph 2 is amended as follows (deletions shown as strikeouts, additions shown in bold /underline): Letter of Credit. RN-218139v1 VS105 -4 Channel 10 and will provide or obtain a live video feed or connection from Apple Valley City Hall and cable cast PEG access programming produced by the Apple Valley, Farmington Rosemount Cable Commission including Rosemount/Dakota County Channel 12 and Apple Valley/Farmington Channel 16. On or before January 1, 2009, Grantee shall present a plan and timetable for obtaining and cable casting Regional Channel 6 and, to the extent commercial feasible and permitted by the content owner(s), Public Access Channel 12. Grantee shall be responsible for the cost of obtaining the foregoing program feeds or connections, and the cost of any equipment necessary to cable cast such programming. a. At the time of acceptance of this Franchise, Grantee shall deliver to the City an irrevocable and unconditional Letter of Credit, in form and substance acceptable to the City, from a National or State bank approved by the City, in the amount of Ten Sixty Thousand Dollars ($1- 60,000.00). b. The Letter of Credit shall provide that funds will be paid to the City, upon written demand of the City, and in an amount solely determined by the City in payment for penalties charged pursuant to this section, in payment for any monies owed by Grantee pursuant to its obligations under this Franchise, or in payment for any damage incurred as a result of any acts or omissions by Grantee pursuant to this Franchise. c. In addition to recovery of any monies owed by Grantee to the City or damages to the City as a result of any acts or omissions by Grantee pursuant to the Franchise, the City, in its sole discretion, may charge to and collect from the Letter of Credit the following penalties: For failure to complete system upgrade --as construction and extension in accordance with the schedule provided herein, unless the City approves the delay, the penalty shall be Two Hundred Dollars ($200.00) per day for each day, or part thereof, such failure occurs or continues. 6 RJV 218139v1 VS105 -4 ii. For failure to provide data, documents, reports or information required herein or for failure to cooperate with the City during an application process or system review or as otherwise provided herein, the penalty shall be Fifty Dollars ($50.00) per day for each day, or part thereof, such failure occurs or continues. iii. For failure to comply with construction, operation or customer service, or maintenance and technical standards, including the customer service requirements herein, the penalty shall be One Hundred Dollars ($100.00) per day for each day, or part thereof, such failure occurs or continues. iv. For failure to provide the services Grantee has proposed, including, but not limited to, the implementation and the utilization of the PEG access channels and the maintenance and /or replacement of the PEG access equipment and other facilities, the penalty shall be One Hundred Dollars ($100.00) per day for each day, or part thereof, such failure occurs or continues. v. For violation of any other provision of this Franchise or applicable federal, state, or local law or regulation, the penalty shall be Fifty Dollars ($50.00) per day for each day, or part thereof, such violation continues. d. Each violation of any provision of this Franchise shall be considered a separate violation for which a separate penalty can be imposed. e. Whenever the City finds that Grantee has violated one or more terms, conditions or provisions of this Franchise, a written notice shall be given to Grantee informing it of such violation. At any time after thirty (30) days following receipt of notice, provided Grantee remains in violation of one or more terms, conditions or provisions of this Franchise, in the sole opinion of the City, the City may draw from the Letter of Credit all penalties or monies due the City from the date of the local receipt of notice. The City may grant additional time beyond the initial thirty (30) days in the event the City determines such additional time is necessary to cure the alleged violation. f. Grantee may, within fifteen (15) days of receipt of such notice, notify the City in writing that there is a dispute as to whether a violation or failure has in fact occurred. Such written notice by Grantee to the City shall specify with particularity the matters disputed by Grantee. All penalties shall continue to accrue and the City may draw from the Letter of Credit at the end of the thirty (30) day cure period notwithstanding Grantee's dispute regarding the violation. g. i. The City shall hear Grantee's dispute at the next regularly scheduled meeting or within sixty (60) days, whichever period is longer. ii. Upon determination by the City that no violation has taken place, the City shall rescind the notice of violation and refund to Grantee, without interest, all monies drawn from the Letter of Credit by reason of the alleged violation. If said Letter of Credit or any subsequent Letter of Credit delivered pursuant thereto expires prior to five (5) months after the expiration of the term of this Franchise, it shall be renewed or replaced during the term of this Franchise to provide that it will not expire earlier than five (5) months after the expiration of this Franchise. The renewed or replaced Letter of Credit shall be of the same form and amount and with a bank authorized herein. h. If the City draws upon the Letter of Credit or any subsequent Letter of Credit delivered pursuant hereto, in whole or in part, Grantee shall replace the same within ten (10) days and shall deliver to the City a_ -like proof of replacement of the Letter of Credit for the full amount required herein as a substitution of the previous Letter of Credit. If any Letter of Credit is not so replaced, the City may draw on said Letter of Credit for the whole amount thereof and use the proceeds as the City determines in its sole discretion. The failure to promptly replace any Letter of Credit may also, at the option of the City, be deemed a default by Grantee under this Franchise. The drawing on the Letter of Credit by the City, and use of the money so obtained for payment or performance of the obligations, duties and responsibilitiesof Grantee which are in default, shall not be a waiver or release of such default. j. The collection by the City of any damages, monies or penalties from the Letter of Credit shall not be deemed an exclusive remedy and shall not affect any other right or remedy available to the City, nor shall any act, or failure to act, by the City pursuant to the Letter of Credit, be deemed a waiver of any right of the City pursuant to this Franchise or otherwise. Section 5. Rosemount Ordinance No. X1.23, Exhibit B is amended as follows (deletions shown as strikeouts, additions shown in bold/underline): RJV 218139v1 VS 105 -4 EXHIBIT B Attached Exhibit C is a map showing the location of Grantee's system as currently 8 RJV 218139v1 VS105 -4 constructed, along with a schedule for completion of construction of the Grantee's initial service areas. Grantee shall extend its system and offer service to all homes or dwelling units in Areas 1 an 2 ,2 and 3, and those portions of Area 4 meeting the density requirement in the Franchise, all as depicted on the attached map. in Exhibit C. The City and Grantee acknowledge that the Grantee has applied for necessary governmental permits, licenses, certificates, and authorizations in order to construct a system serving the City and that such system construction is underway as of the date of the granting of this franchise. Grantee shall continue to apply for permits associated with work in specific portions of the right -of -way as construction proceeds. Energized trunk cable must be extended substantially throughout Area 1 depicted on the Exhibit C, and all associated system construction must be completed by December 31, 2008; energized trunk cable must be extended substantially throughout Area 2, and all associated system construction must be completed by December 31, 2009; energized trunk cable must be extended substantially throughout Area 3, and all associated system construction must be completed December 31, 2010; energized trunk cable must be extended substantially throughout those portions of Area 4 meeting the density requirements in this Franchise, and all associated system construction must be completed by December 31, 2011. Construction based on this build -out schedule will proceed at a reasonable rate of not less than 50 plant miles per year. Persons along the route of the energized cable will must have individual drops as desired during the same period of time. ghout Arca 2 within one year thereof. Upon completion of system construction in Grantee's initial service areas, Grantee will extend its system and services in accordance with Section 2.7 of the Franchise. The requirements herein may be waived by the City upon occurrence of unforeseen events or acts of God. The City may only agree to such modifications by amendment to this Franchise. Section 6. Rosemount Ordinance No. X1.23, Exhibit C is deleted and replaced with the following: [Insert new service area /phase map' Section 7. This Ordinance shall be in effectfollowing its passage and publication. ADOPTED this day of 2007, by the City Council of the City of Rosemount. ATTEST: City Clerk 111V-218139v1 VS 105-4 10 CITY OF ROSEMOUNT William H. Droste, Mayor