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Home My WebLink About7.a. Utilities Commission Report`fewn 7 a DATE: MAY 12, 1988 TO: MAYCR & CDUNCILMEMBERS C/O ADMINISTRATM JILK FROM: CITY ENGINEER/PUBLIC Wa2K.S DIRBCI(R HEFTI RE: rIEMS FOR MAY 17, 1988 COUNCIL MM=NG NEW BUSINESS Utilities Cmmission Report Peoples Natural Gas Franchise At the May 9, 1988 Utilities C.amiission meeting the Ccmmi.ssion reviewed the franchise agreement proposed by Peoples Natural Gas. The Utilities Ckammissicn had no concerns regarding this agreement. Because Staff and the City Attorneys office reviewed this agreement without any objections the Commission is recommending approval of this franchise agreement to Council. Metro Cable/Star Sub, Inc., Ownership Transfer The Metro Cable Cmpany is selling out its majority stock to Star Sub, Inc. out of Fond du Lac, Wisconsin. Attached is some information regarding this proposed sale. The Cmmissions main o mcern regarding this matter was if there was a possibility of renegotiating the public access portion of the franchise agreement. Our City Attorney indicates that unless there is evidence that the proposed buyer is in poor financial condition the City cannot renegotiate any portion of the franchise agreement because of ownership transfer. The Commission did recommend approval of the ownership transfer. ►7 LAW OFFICES GRANNIS, GRANNIS, FARRELL & KNUTSON DAVID L. GRANNIS - 1874-1961 PROFESSIONAL ASSOCIATION TELECO@IER: DAVID L. GRANNIS, JR. - 1910-1980 POST OFFICE Bax 57 (612) 455-2359 VANCE B. GRANNIS 403 NORWEST BANK BUILDING DAVID L. HARMEYER VANCE B. GRANNIS, JR. 161 NORTH CONCORD EXCHANGE ELLIOTT B. KNETSCH PATRICK A. FARRELL MICHAEL J J. MAYER DAVID L. GRANNIS, III SOUTH ST. PAUL, MINNESOTA 55075 TIMOTHY J. BERG ROGER N. KNUTSON IELEPHONE (k 12) 455-1601 May. 10, 1988 Mr. James Robinette _ fS ��' Lakeville City Hall °/DN r9�R�Ad 8747 - 208th Street West �E Lakeville, Minnesota 55044 /yfl� RE: Sale of Metro CATV tt o Dear Mr. Robinette:y <=. Enclosed please find data that I have obtained concerning whether or not the City of Lakeville should approve the transfer of the cable system in Lakeville from Metro Cable, Inc. to Star MidAmerica IV, Inc., a subsidiary of the Star Cablevision Group. Please review all of these materials. I had a very limited time to review these things. I contacted the buyer, a number of financial references, and cities where the buyer offers its services. The overall impression of the company is positive. They are strong financially.. They have had experience in cable systems for over ten years. They have become a large operator in cable television. Comments I heard were that they provide satisfactory service and have a good reputation. They do a good job with local access and they obtain cities' and customers' input as to what their services should be. The only changes they intend on making would be those to enhance service and quality, and they would only do this after they got the input both from the City and the customers in Lakeville. They have submitted a proposed resolution and acceptance of resolution and franchise, which are in order. Very truly yours, TJB:srn Enclosures GRANNIS, GRANNIS, FARRELL & KNUTSON, P.A. BY: ! Z Timothy/JT. Berg 0 STAR COMPANY HISTORY Star Cablevision Group, formerly, Wisconsin Cablevision & Radio Co. has a long tradition of excellence in communications. Founded in 1968 by President Donald G. Jones, the company, then known as Public Service Broadcasters, Inc., was involved in small market radio station ownership in Illinois. During the early years, the radio firm developed rapidly, acquiring radio stations in five mid -western states. At the peak of the radio station ownership, the PSB Radio Group, as it came to be known, operated 14 radio stations. Company headquarters was moved from Taylorville, Illinois to Fond du Lac, Wisconsin in 1971 with the purchase of KFIZ radio, Wisconsin's oldest commercial radio station and KFIZ TV, a UHF station that was discontinued. Always on the cutting edge of communications technology, the firm jumped into the exploding cable television industry in 1979 when it won its first franchise in Fond du Lac and became a 50% partner with American Television and Communications of Denver, then the largest cable company in the USA. As more cable franchises were awarded, the company name was changed to Wisconsin Cablevision. Star built cable systems serving nearly 20 cities. The ATC partnership systems brought the total to over 30 communities. In 1984 Star purchased the ATC interests in the three remaining partnership systems and brought Lakeside Cablevision into the Star operating family. In the Spring of 1986 Star grew into Michigan's upper peninsula when it bought the Manistique cable system. In October of 1986 the company entered into an agreement to purchase the 35 Wisconsin cable TV franchises owned by Norcom Video. 1987 was a year of growth. The company expanded into Michigan's Lower Peninsula with the purchase of Benton Harbor and St. Joseph. It acquired 18,000 customers in Indiana and purchased three cable companies in Arizona. During 1987, fourteen independent companies were acquired. In late 1987, an affiliate company Star Midwest, Inc. was formed to acquire Columbia Cablevision, Indiana Combined Cable - Illinois and North American Cable Communications,- Minnesota. These purchases were completed in early 1988. In a major commitment to the cable television industry, the company divested it's radio stations in January 1988 so it could more efficiently concentrate on cable. In 1988 pians have been made to expand the company to 250,000 customers by adding more cable systems in Wisconsin, Minnesota and Illinois. There will be 600 employees served by the Fond du Lac Home Office. 4-28-88 STAR CABLEVISION GROl' A current list of franchise communities follows: WISCONSIN Abbotsford Friendship Adams Garnavillo Addison Gays Mills Algoma Green Lake Antigo Hazel Green Arbor Vitae Hustler Athens Jackson Barton Kewaskum Belmont Kewaunee Benton Kiel Berlin Kohler Black Earth La Farge Boscobel Lincoln Boyd Lodi Brandon Lohrville Brillion Lomira Brodhead Loyal Brookview Marathon City Burlington Town of Marion` Butte des Morts Markesan Cadott Mauston Campbellsport Mazomanie Camp Douglas Medford Cashton Menomonie Chaseburg Town of Menomonie Colby Mnocqua Coloma Monroe Coon Montello Coon Valley Mt. Horeb Cuba City Muscoda Cumberland Necedah Town of Dakota Neillsville Dane New Glarus Darlington New Holstein Decora New Lisbon Delavan Neshkoro Denmark North Fond du Lac DeSoto Norwalk Dorchester Oakfield Dresser Osceola Eagle River Town of Oshkosh Edgar Omro Elkhorn Ontario Town of Empire Owen Fennimore Palmyra Ferryville Park Falls Fond du Lac Plainfield Town of Fond du Lac Town of Polk Town of Friendship Potosi WISCONSIN (Continued) ILLINOIS Poynette Abingdon Prairie du Chien Albion Prairie du Sac Alpha Princeton Athens Readstown Bayles Lake Town of Red Cedar Bayview Gardens Redgranite Beckmeyer Rochester Belmont Town of Rolling Benson Rosendale Bone Gap Roxbury Breese St. Croix Falls Browns Schullsbur9 Bushnell Sheboygan Calhoun Sheboygan Falls Cambridge Town of Sheboygan Carmi Town of Sheboygan Falls Carrollton Shelby Champaign County Shell Lake Cherry Soldiers Grove Claremont Spencer Crescent City Stratford Crossville Town of Tainter Dalzel Town of Taycheedah Depue Tennyson El Paso Town of Trenton Elmwood Town of Two Rivers Enfield Two Rivers Eureka Union Grove Farmington Unity Fisher Verona Galva Viola Genoa Viroqua Germantown Waterford Germantown Hills Waunakee Granville Wautoma Harristown Town of Wautoma Hennipen West Bend Illiopolis Town of West Bend Keensburg West Point Lacon WestbY Ladd Westfield Loda Westport Mahomet Whitewater Marengo Wild Rose Mark Wilson Mason City Wilton Menard County Withee Metamora Town of Wilson Mill Shoals Winneconne Minonk Town of Winneconne Momence Woodruff Mt. Pulaski Niantic Norris City A CITY OF ROSEMOUNT ORDINANCE XI.13 AN ORDINANCE OF THE CITY OF ROSEMOUNT$ MINNESOTA GRANTING TO PEOPLES NATURAL GAS COMPANY, DIVISION OF UTILICORP UNITED, INC,, ITS LESSEES, SUCCESSORS AND ASSIGNS A NON-EXCLUSIVE AUTHORITY FOR A PERIOD OF TWENTY-FIVE (25) YEARS TO ERECT, MAINTAIN AND OPERATE, A GAS DISTRIBUTION SYSTEM AND ANY AND ALL NECESSARY MAINS, PIPES, SERVICES AND OTHER APPURTENANCES THEREUNTO APPERTAINING IN, UPON, OVER, ACROSS AND ALONG THE STREETS, ALLSYS, BRIDGES, AND PUBLIC PLACES OF THE SAID CITY, AND FOR THE TRANSMISSION, DISTRIBUTION AND SALE OF NATURAL AND/ OR MIXED GAS FOR LIGHTING, HEATING, INDUSTRIAL AND ALL OTHER USES AND PURPOSES IN SAID CITY AND FOR THE PURPOSE OF TRANSMITTING AND CONVEYING SUCH GAS INTO, THROUGH OR BEYOND THE IMMEDIATE LIMITS OF SAID CITY TO OTHER CITIES, TOWNS AND CUSTOMERS, AND PRESCRIBING THE TERMS AND CONDITIONS UNDER WHICH THE SAID COMPANY IS TO OPERATE, AND REPEALING ORDINANCE NO. %I.k OF SAID CITY THE CITY COUNCIL OF ROSEMOUNT, MINNESOTA ORDAINS: SECTION I. That Peoples Natural Gas Company, Division of UtiliCorp United Inc., its lessees, successors and assigns* hereinafter referred to as Grantee, be and are hereby granted a non-exclusive authority for a period of twenty- five (25) years, to erect, construct, maintain and operate, a gas distribution system and any and all necessary mains, pipes, services and other appurtenances and equipment thereunto appertaining in, upon, over, across and along the streets, alleys, bridges and public places in the City of Rosemount, Minnesota for the transmission, distribution and sale of natural and/or mixed gas for lighting, heating, industrial and all other uses and purposes in said City and for the purpose of transmitting, transporting and conveying such gas into, through or beyond the immediate limits of said City to other cities, towns and customers. SECTION II. Whenever the Grantee, in the construction or maintenance of its system or in the installation of any extension thereto, shall cut into or take up any pavement or shall make any excavation in any street, avenue,alley or public place, within the corporate limits of the City of Rosemount, Minnesota the same shall be done in a manner so as not to unreasonably interfere with the use of such thoroughfares by the public. The Grantee shall use such safeguards as may be necessary to prevent injury to persons or property during such construction work and upon its completion all pavement shall be replaced in as good condition as it was before taken up. All excavations shall be refilled and all obstructions shall be removed at the expense of the Grantee and to the satisfaction of the Grantor. In the event that the Grantee shall fail to comply with the provisions of this Section after having been given .reasonable notice, the Grantor may do such work as may be needed to properly repair said thoroughfare and the cost thereof shall be repaid to the Grantor by the Grantee. 0 SECTION II. The Grantee in constructing and maintaining said gas distribution system, and in entering and using said streets, highways, avenues, alleys and public places in the City of Rosemount, Minnesota and in laying and installing its mains, services, piping, and related appurtenances and equipment, shall not in any manner interfere with or injure any improvement which said City now has or may hereafter have upon any of its streets, alleys, highways or public places. SECTION IV. Grantee agrees for and in behalf of itself, its lessees, successors and assigns, that for and during the term and period of this grant, it will maintain in the City an adequate, modern, standard and sufficient gas system and equipment and to maintain and operate the same in a modern and adequate fashion. Grantee will from time to time during the term of this ordinance make such enlargements and extensions of its distribution system as the business of the Grantee and the growth of said City justify, in accordance with its Rules and Regulations relating to customer connections and main and service line extensions currently in effect and on file from time to time with the Minnesota Public Utilities Commission or other competent authority having jurisdiction in the premises: provided, however, that no obligation shall extend to or be binding upon the Grantee, to construct or extend its mains or furnish natural_gas or natural gas service within said City if Grantee is, for any reason, unable to obtain delivery of natural gas at or near the corporate limits of said city or an adequate supply thereof to warrant the construction or extension of its ,mains for the furnishing of such natural gas or gas service: provided, further, that when the amount of natural gas supplied to Grantee at or near the City limits of said City is insufficient to meet the additional firm requirements of connected or new consumers, Grantee shall have the right to prescribe reasonable rules and regulations for allocating the available supply of natural gas for such additional firm requirements to residential, commercial and industrial consumers in that order of priority. SECTION V. Grantee agrees for and in behalf of itself, its lessees, successors and assigns, that all authority and rights in this Ordinance contained shall at all times be subject to all rights, power and authority now or hereafter possessed by the City of Rosemount, Minnesota, to regulate the manner in which grantee shall use the streets, alleys, bridges and public places of said City and concerning the manner in which Grantee shall use and enjoy the franchise herein granted. SECTION VI. Grantee shall, at all times, maintain an adequate pressure and adequate supply of clean, standard gas of the British Thermal Unit heating value of not less than that prescribed in its Rules and Regulations relating thereto in effect and on file from time to time with the Minnesota Public 2 Utilities Commission or other competent authority having jurisdiction in the premises.. Should the British Thermal Units fall below the limitation set forth in its appropriate Rules and Regulations, the rate then in effect shall be automatically and correspondingly lowered and reduced during any period or periods of time in which such lower British Thermal Unit value shall be furnished. The City shall have the privilege of requesting Grantee to furnish satisfactory proof of British Thermal Unit content of the gas. SECTION VII.The Grantee shall hold the Grantor harmless ,from any and all claims and actions, litigation or damage, arising out of the passage of this Ordinance or of the construction, erection, installation, maintenance or operation of its properties operated by authority of this Ordinance within the corporate limits of the City of Rosemount, Minnesota or the negligence of its employees in the operation thereof, including the Court costs and reasonable attorney fees in making defense against such claims. A copy of the process served by the Grantor upon the Grantee. The Grantee shall be served by the Grantor upon the Grantee. The Grantee shall have the right to defend in the name of the Grantor and to employ counsel for such purpose, SECTION VIII.If the Grantee shall be in default in the performance of any of the terms and conditions of the Ordinance and shall continue in default for more than thirty (30) days after receiving notice from the City of Rosemount, Minnesota of such default, the said City may, be ordinance duly passed and adopted, terminate all rights granted under this Ordinance to the Grantee. The said notice of default shall specify the provision or provision in the performance of which it is claimed the Grantee is in default. Said notice shall be in writing and served in the manner provided by the laws of the State of Minnesota for the service of original notices in civil actions. SECTION IX. The right and authority herein granted shall be non-exclusive and shall be and continue for a period of twenty-five (25) years from and after the effective date of the Ordinance. SECTION X. Ordinance No. XI.4 of the City of Rosemount, Minnesota is hereby repealed as of the effective date hereof. SECTION XI. This Ordinance shall be in full force and effect from and after its passage and publication as required by law, and the acceptance thereof by the Grantee. If the Grantee does not within sixty (60) days following passage of this Ordinance express in writing its objections to any terms or provisions contained therein, or reject this Ordinance in its entirety, the Grantee shall be deemed to have accepted this Ordinance and the terms and conditions of the franchise contained therein. 3 A ' ADOPTED this 17th day of May, 1988. Rolla.n Hoke, Mayor ATTEST: i Stephan Jilk, Administrator/Clerk i j 4 0 ILLINOIS (continued) INDIANA Oak Park Estate Amo Parkersburg Belleville Paxton Blairsville Petersburg Bringhurst Riverton Brookston Roanoke Burlington Roodhouse dhouse Burnettsville Secor Camden Sherman Carroll County Spring Bay Cartersburg St. Francisville Centerton Standard Clayton Sumner Coatesville County Toluca Chalmers Washburn Delphi Watseka Edinburg Wenona Flora White County Greenwood White Hall Hendricks County Williamsville Idaville Windsor Lake Schaefer - Woodhill Monon Yates City Monticello Montipelier Morgan County Morgantown IOWA Mt. Vernon New Harmony Anamosa Nineveh Blue Grass Patton Buffalo Pittsburg Clayton Posey County Elkader Prince's Lake Garnavillo Remington Guttenburg Reynolds Harpers Ferry Rossville Lansing St. Wendell Manchester Stilesville Marquette Vanderburgh County Monticello Wadesville New Albin White County Tipton Wolcott Walcott Yoeman Waterville Waukon MINNESOTA Appleton Aurora Kasota Town of Bassbrook Keewatin Beaver Bay Kenyon Belview Kinney Bird Island Lafayette Biwabik Lake Brownsville Lake Township Buffalo Lake Lake Benton Buhl Lake Benton Township Caledonia Lake City Cannon Falls Lake Crystal Canton Lanesboro Carlton LaPrairie Chaseburg Mabel Chatfield Madison Chisholm Maynard Chokio Midway Clara City hose Lake Cleveland Moose Lake Township Clinton Morris Cloquet Morton Cosmos Mount Iron Credit River Mount Pleasant Township Credit River Township Mountain Iron Dakota Nashwauk Danube North Redwood Dawson Olivia Dover Peterson Dresbach Pine Island Eisentein Preston Esko Prior Lake Eveleth Proctor Fairfax Redwood Falls Fayal Township Rushford Florence Township Savage Franklin Scanlon Fulda Silver Bay Gilbert Silver Creek Township Graceville Slayton Grand Marais Sleepy Eye Grand Prairie Spring Grove Grand Rapids Spring take Town of Grand Rapids Spring Lake Township Granite Falls Spring Valley Hancock Springfield Harris Township Starbuck Hector St. Charles Hermantown St. Peter Hokah Stoddard Hope Township Two Harbors Houston Tyler Hoyt Lakes Virginia Hutchinson Wheaton Ivanhoe Windermere Township ARIZONA Bear Flats Springerville Christopher Creek St. John's Concho Star Valley Eager Strawberry Kohls Ranch Thompson Draw Mesa Del Tonto Village Payson Williams Pine KENTUCKY Sebree MICHIGAN Benton Harbor Manistique Benton Township Town of Manistique Hiawatha Township St. Joseph Inwood Township Thompson Township OHIO Ross Morgan THE OFFICERS OF THE CORPORATION ARE: Donald G. Jones President Steve Peterson Senior Vice President General Manager Michael J. Fredrich Senior Vice President Corporate Finance Michael Turk Treasurer Robert Schaeffer Vice President -Engineering MEMORANDUM TO: FILE (LAKEVILLE - STAR CABLEVISION) FROM: TIMOTHY J. BERG DATE: MAY 10, 1988 I talked with Michael J. Fredrich, senior vice president, and Steve Peterson, general manager, of Star Cablevision, 254 Winnebago Drive, P.O. Box 1167, Fon du Lac, Wisconsin 54935 (414/923-6335). They indicated that they are operating under Star Cablevision. Ownership for the cable system in Lakeville, Minnesota will be under Star MidAmerica IV, Inc. They indicated that it is a private company, there is one owner. It is owned by Donald G. Jones, who lives in Fon du Lac, Wisconsin. There are no other shareholders or owners. They will send a 1987 audit and prospectus for Star Cablevision. They said, concerning public access or local origination, they have no plans to change that. They will, however, do a survey of the potential customers and current customers and then they would make changes that are requested, if they are reasonable. Also, they would talk to city government about this and attempt to follow their wishes. They would not anticipate changes except possible enhancement of the local origination. They said they recently purchased systems in Prior Lake, Minnesota, and Savage, Minnesota, and they will send an analysis that was done by Attorney Tom Creighton of Minneapolis. They have recently purchased systems in sixty communities in Minnesota. They have been in business for a total of twenty years. They originated in owning radio stations and sold all of these a couple of years ago. For ten years they have been in cable television, which is now their sole interest. They are one of the largest cable television companies in the midwest. They goal is to do what customers want, within reason. They indicated that one thing that is different about them from a lot of other companies is that they show significant losses because ninety percent of their assets is in plant and equipment, and so there is much depreciation and the like. They indicated that there is really no state or federal commission that regulates them because of deregulation. MEMORANDUM TO: FILE (LAKEVILLE - STAR CABLEVISION) FROM: TIMOTHY J. BERG DATE: MAY 100 1988 I talked to Richard Zerkel, whose name was given to me by the Star Cablevision people. He is a vice president of the First Wisconsin National Bank in Milwaukee, Wisconsin. His phone number is 414/765-4445. He indicates that he has known them for ten years in the banking capacity. Their business, both with the bank and in general, is mushrooming. They have strong management and a well run system. He feels that they have improved customer service when they have taken over cable systems. He says that they as agent bank and five participant banks have over a one hundred million dollars in financing where they have borrowed money to Star Cablevision. He feels they are in a strong financial position. They show a tax loss, but they have a strong operating cash flow. He feels the company is operated well. He indicates that they are exclusively in cable television now. At one time they were in radio stations. He feels that, from their past performance, you could look for a large improvement in the services given by the cable system in the local community. MEMORANDUM TO: FILE (LAKEVILLE - STAR CABLEVISION) FROM: TIMOTHY J. BERG DATE: MAY 10, 1988 I talked to Dennis Melvin, the City Manager for West Bend, Wisconsin (414/338-5103), whose name was given to me by the Star Cablevision people. He said that Star Cablevision has provided cable services to their community since the late 1970's. He feels that there has been a good overall relationship. There have been some rate increases by the company, but he indicated that he did not think it was more than what other companies were doing, and also that it was somewhat outside the scope of the City to control these increases. He feels that they are good at public access and that they haven't had problems concerning that. He knows of them having no financial problems. There have been some complaints, but he does not know of many complaints against the company. He said that they are fairly,satisfied with the company. MEMORANDUM TO: FILE (LAKEVILLE - STAR CABLEVISION) FROM: TIMOTHY J. BERG DATE: MAY 10, 1988 I talked to Greg Mulligan, banker with. Fleet Bank in Providence, Rhode Island (401/278-6296). He said they are Star Cablevision's main senior lender for bank financing. Their relationship goes bank about six years. He said they are in a very strong financial position. They have lent them in the high eight figures and they are open to lending them more. They are an extremely good operator, they are good people. They are growing both through expanding their existing system and through acquisitions and they have the capacity to get more financing so that they can expand even more. He said generally it is his experience that they provide better service to the community than the existing cable company did. They tend to be an original operator. % 0 0 MEMORANDUM TO: FILE (LAKEVILLE - STAR CABLEVISION) FROM: TIMOTHY J. BERG DATE: MAY 10, 1988 I talked to Dan Thompson, the City Manager of the City of Fon du Lac, Wisconsin (414/929-3320). He said this company and its predecessors have been operating for about ten years in Fon du Lac. They were known as Lakeside Cablevision and Don Jones, the present owner, was the founder. Three or four years ago they changed their name to Star Cablevision. He said they are generally satisfied with the service. He said there are complaints about the rates, but the City can't really do anything about that. He thinks they are fairly competitive. He just got a bill for his cable at his home and it was $22.50 and he has two television sets. He thinks they are financially strong, but he doesn't really have a way of telling that. He knows the owner and founder, Don Jones, personally --a very shrewd, very able business man. He is 6 feet 8 inches tall, very imposing. He is involved in the civic projects. He said this is an economic monopoly, although not a legal one, so it is an opportunity for these people to make a lot of money. He said Mr. Jones apparently is doing very well. He just recently bought a million dollar lear jet. He has a huge mansion outside of town and raises arabian horses. He understands he is buying up a large number of cable companies. He said the company is good with service, fixing, and repairs, and so forth. He said the local access is good. He said that shouldn't really be a problem because it is in the cable company's interest to have good local access because that is something that they can uniquely offer to customers that satellite dishes and the like cannot offer. He said they do a good job with local access in Fon du Lac. MEMORANDUM TO: FILE (LAKEVILLE - STAR CABLEVISION) FROM: TIMOTHY J. BERG DATE: MAY 10, 1988 I called the Better Business Bureau of the Greater Twin City Metropolitan Area at 646-7700. They have no complaints of any kind against Star Cablevision, Star Midwest, Star MidAmerica, or Star Sub. 0 MEMORANDUM TO: FILE (LAKEVILLE - STAR CABLEVISION) FROM: TIMOTHY J. BERG DATE: MAY 10, 1988 I talked to Mr. Mike Marocco of Morgan Stanley and Co., this firm is an investment bank in New York, New York (212/703-6118). He indicated that they arrange and raise debt and equity capital for Star Cablevision along with other firms. He says as far as he can tell, the customers are satisfied with the service they are presented with. He says they have a pro -active relationship with the communities from the advertising, news releases, and so forth that he has seen. He said Star Cablevision has a lot of asset value. Their goal has been to focus in the midwest and they are mostly in Wisconsin, Minnesota, Illinois, and Iowa. He thinks this is a good idea for them because they know what the audience wants in these areas and they have not gone to areas where they are unaware of what the audience wants. He said the main operating officers of the firm are Don Jones, who is the sole owner and also the president, and also Steve Peterson, who is the general manager. He said that they are financialilstrong. He said they have had sr rapid growth and that is due to the fact that they have had a lot opportunities to buy existing small operators at the present time. He said there are a lot of opportunities at the present time. He said they were successful at raising subordinated debt in the public market from 30 or 40 large investors. Recently, he just completed financing for them from GE Credit Corporation for $200,000,000. He said they have good banking relationships with a number of very strong banks: The Fleet Bank, The Bank of New England, The Bank of Toronto. He said in their operations, when they take over, they use the Star Cablevision name. a 0 TO: CITY ADMINISTRATOR AND COUNCIL FROM: COMMUNITY DEVELOPMENT DIRECTOR DATE: APRIL 19, 1988 SUBJECT: METRO CABLE Is Mr. Frank Woytek, President of Metro Cable, Inc. was in to see me earlier today and indicated that Metro Cable has tentatively been sold to a company called Star Sub, Inc. from Fond du Lac, Wisconsin. Thev hope to have the final closing of the deal on June 1, 1988. Our cable franchise agreement gives the City some rights in case of the sale of the company. I have provided copies of all documents to the- City heCity Attorney. Roger Knutson will review the franchise agreement in detail and forward a letter to you outlining the City's rights and responsibilities in case of sale under the franchise agreement. I believe that one possible, positive advantage to this could be that one franchise agreement is negotiated between Rosemount, Apple Valley, Farmington and Lakeville dealing with our common operations. I know there has been many sales in the cable industry brought about by recent deregulation and feel that, at a very minimum, we will have to be careful that the new buyer has the funds to properly operate the system. There will be a meeting of the Cable Commission tonight and Mr. Woytek will be there to discuss the sale. Sincerely ;ours, �`'riies A. ofiiffHtte -Community Development Director JAR/mh L METRO CABLE, INCm 16900 Cedar Avenue South Rosemount, Minnesota 55068 432-2610 L� April 19,1988 The Honorable Duane Zaun Mayor of Lakeville 8747 - 208th Street West P.O. Box 957 Lakeville, MN 55044 Dear Mayor Duane Zaun: This letter is to inform you that the majority shareholders of Metro Cable, Inc. ("Metro") have signed a stock purchase agreement with Star Sub, Inc. to sell their shares per June 1, 1988. nority shareholders being asked to partes e in It is my understanding that at thetime of clos A tnU—Star Midamerica IV Inc., whi is a subsidi St r a eadquaters at: 25 `t nnebago Drive P.O. Box 1167 Fond du Lac, Wisconsin 54935 Tel: (414) 923-6335 19 Star Sub, Inc. will be m`ei� y of Star Cablevision Grou The company has its roots in the broadcast industry. As evidenced by their filings at the Federal Communications Commission they have an excellent record of public service. They are customer oriented, take part in their communities and are good corporate citizens. Attached is a brief history of the company. According to the franchise between the City and Metro it is necessary to obtain your consent to the above described transaction with Star Sub, Inc. and Star Midamerica IV, Inc.. In addition, it is possible that the buyer may be required to assign the capital stock and assets of Metro and any rights, title and interest represented by the cable franchise, as collateral for their financings. I there- fore am also respectfully requesting your consent to such an assignment. In order to assist in a timely granting of your consent, the buyer has asked me to enclose a sample ordinance with this letter. I would appreciate it if any necessary meetings regarding your consent are scheduled at the earliest possible date, and'I encourage you to call Mr. Michael J. Fredrich, Senior Vice President, at (414) 923-6335 to find out more about the Star Cablevision Group. I appreciate your prompt attention and assistance in the transfer of ownership of Metro Cable, Inc. Sincerely Frank Woytek President FW/ms Encl. COMPANY HISTORY Star Midamerica IV, Inc. a subsidiary of Star Cablevision Group, formerly, Wisconsin Cablevision & Radio Co. has a long tradition of excellence in comm- unications. Founded in 1968 by President Donald G. Jones, the company, then known as Public Service Broadcasters, Inc., was involved in small market radio station ownership in Illinois. During the early years, the radio firm developed rapidly, acquiring radio stations in five mid -western states. At the peak of the radio station ownership, the PSB Radio Group, as it came to be known, operated 14 radio stations. Company head- quaters was moved from Taylorville, Illinois to Fond du Lac, Wisconsin in 1971 with the purchase of KFIZ radio, Wisconsin's oldest commercial radio station and KFIZ TV, a UHF station that was discontinued. Always on the cutting edge of communications technology, the firm jumped into the exploding cable television industry in 1979 when it won its first franchise in Fond du Lac and became a 50% partner with American Television and Communications of Denver, then the largest cable company in the USA. As more cable franchises were awarded, the company name was changed to Wisconsin Cablevision. Star built cable systems serving nearly 20 cities. The ATC part- nership systems brought the total to over 30 communities. In 1984 Star purchased the ATC interests in the three remaining partnership systems and brought Lakeside Cablevision into the Star operating family. In the Spring of 1986 Star grew into Michigan's upper peninsula when it bought the Manistique cable system. In October of 1986 the company entered into an agreement to purchase the 35 Wisconsin cable TV franchises owned by Norcom Video. 1987 was a year of growth. The company expanded into Michigan's Lower Peninsula with the purchase of Benton Harbor and St. Joseph. It acquired 18,000 customers in Indiana and purchased three cable companies in Arizona. In late 1987 and early 1988, an affiliate company Star Midwest, Inc. was formed to acquire cable systems in Illinois, Iowa and Minnesota. The company just completed the acquisition of 56,000 subscribers through the purchase of the North American Communications systems. In a major commitment to the cable television industry, the company divested it's radio stations in January 1988 so it could more efficiently concentrate on cable. By the second quarter of 1988, Star's 500 employees will serve over 235,000 cable TV customers in nearly 400 communities. MR RESOLUTION A RESOLUTION APPROVING THE CHANGE OF CONTROL OF METRO CABLE, INC., A MINNESOTA CORPORATION, TO STAR MID AMERICA IV, INC., A WISCONSIN CORPORATION, SAID FRANCHISE HAVING BEEN ORIGINALLY GRANTED BY ORDINANCE NO. . WHEREAS, the shareholders of Metro Cable, Inc. ("Metro") have agreed to sell all of their shares of Metro to Star Mid America IV, Inc., a Wisconsin corporation ("Star"); WHEREAS, as a result of such sale Star will control Metro; and WHEREAS, at the request of Metro on behalf of Star, and in the best interests of the Municipality, it is deemed that such sale is hereby approved. THEREFORE, BE IT RESOLVED BY THE CITY/VILLAGE BOARD OF SECTION 1. That Ordinance No. (which is in full force and effect) which granted to Metro the right and franchise to erect, maintain and operate a CATV system in, under, over, along, across and upon the streets, avenues, sidewalks, alleys, bridges and highways and other public places in the Municipality for the purpose of transmission' and distribution by wire or cable CATV programs, various communications and other Alectronic services for sale to the inhabitants of the Municipality, and any and all amendments thereto, remain in full force and effect and that the transfer of stock of Metro (the current holder of the Franchise) to Star, be hereby ratified and approved in all respects. SECTION 2. That Star may assign or otherwise grant a security interest in and lien upon the capital stock and assets of Star and any of the rights, title and interest represented by the cable franchise held by Star as collateral for their financings. SECTION 3. That this Resolution shall become effective and valid between the Municipality and Star when the sale contemplated by that certain Stock Purchase Agreement dated April 1988, by and among Star, Metro and each of the shareholders of Metro is consummated• and Star files a written acceptance of this Resolution agreeing to cause it to continue to adhere to and perform all of the terms and conditions of Ordinance No. , and any and all amendments thereof. If written acceptance of this Resolution is not filed within ninety (90) days after passage of this Resolution, then this Resolution shall be void. Passed this day of , 1988, and approved this day of 1988, the ayes being and the nays being ATTEST: Clerk 2 r ACCEPTANCE OF RESOLUTION AND FRANCHISE STAR MID AMERICA IV, INC., a Wisconsin corporation ("Star"), having acquired all of the capital stock of METRO CABLE, INC., 1 Minnesota corporation, which holds the cable franchise for hereby agrees to cause Star to continue to adhere to and perform all of the terms and conditions of the franchise originally granted by __ (original franchisee) by Ordinance No. , and any and all amendments thereto. DATED: STAR MID AMERICA IV, INC. By: Its• 3 ° j�i.°.I yKMt• NU, RECT DIAL NUMBER 4 111 • [ • I;I t• O'CONNOR & NANNAN ATTORNEYS AT LAW .•K � VV :.'r`(t• I n.•t.l i.ir•t;° ,i :'�l:iii`° tNr(•.rypwwtr.• 31100 ICS CENTER 11 ° t•Cr• ' � �•.• �� -•t. 60 SOUTH EIGHTH STRICT t •tt 1. [s .►w� t•t L ♦ • .prtw .`wi'•f: Ire" :�° MINNtAPaLlB( MINNE60TA 55402-Z? S-4 Ialel aal•aaoa •.l' nwn - .v1rr 4 i.Nw %4 i i -19, TELEX 29.OJ3 1 8t• S� 4.r 0 �'y►�cg�'u. TELCCOPIER l81Zi 343.1256 11Z Hr ti�'t'ooil. �•t►t.I�.w •-► •Pr#•►1•a40'. INC:VDING THE PORMCR fIR[4 V.ACINTOSH & C010WERS ° j�i.°.I yKMt• NU, RECT DIAL NUMBER NSI•. .[ ,a,•„ a.►.p,,, pie ► t 1• Ila t q'ltc4t :lli;' A f1t.N•• t r•„W.4Y K.aFr�N I♦• �vq �i1i wµ,' i;� to t�?T .ite lf. . • . �`St"".. o['ee jy[�(rf,�o tr arr.es �[r,e �.e{(t #.� ��4 'F'�: • � D t„rC ti4 t.p 'I�t► ►,� l��1 tw.M wrCrV «�.. r.}, i►+•r �,r,�11r� f°.I'; ""�;tt:r Ina•S V•�nj{ ••f+ «tY►t. °[ waYtt-7S. M. f. t•Iattu CrCf,t. I _M.rMORRAANDUM TO: City of Prior Lake, Minnesota City of Savage, Minnesota FROM Thomas D. Creighton, Legal Counsel DATE: March 18, 1988 RE Request for Approval of Transfer of Ownership in Cable System and Transfer of Cable Franchise Please find below a sur -unary and analysis of the proposed "transaction regarding a roquest from North American Communications Corporation ("1Jor th ).merican") to tha Cities of Savage and Prior Lake. ("Cities") to approve the sale and transfer of its cable system and cable television franchise to Star Midwest, Inc. ("SMY") ► The purpose of this report is to provide the Cities with an understanding of the transaction and the standard for revitwing whether to approve it. I. INTRODU 'ION At the time of awarding the original cable communications franchise, the Cities considered and approved the technical .t NSI•. .[ ,a,•„ a.►.p,,, pie ► t 1• Ila t q'ltc4t :lli;' A f1t.N•• t r•„W.4Y K.aFr�N I♦• �vq �i1i wµ,' i;� to t�?T .ite lf. . • . �`St"".. o['ee jy[�(rf,�o tr arr.es �[r,e �.e{(t #.� ��4 'F'�: • � D t„rC ti4 t.p 'I�t► ►,� l��1 tw.M wrCrV «�.. r.}, i►+•r �,r,�11r� f°.I'; ""�;tt:r Ina•S V•�nj{ ••f+ «tY►t. °[ waYtt-7S. M. f. t•Iattu CrCf,t. I _M.rMORRAANDUM TO: City of Prior Lake, Minnesota City of Savage, Minnesota FROM Thomas D. Creighton, Legal Counsel DATE: March 18, 1988 RE Request for Approval of Transfer of Ownership in Cable System and Transfer of Cable Franchise Please find below a sur -unary and analysis of the proposed "transaction regarding a roquest from North American Communications Corporation ("1Jor th ).merican") to tha Cities of Savage and Prior Lake. ("Cities") to approve the sale and transfer of its cable system and cable television franchise to Star Midwest, Inc. ("SMY") ► The purpose of this report is to provide the Cities with an understanding of the transaction and the standard for revitwing whether to approve it. I. INTRODU 'ION At the time of awarding the original cable communications franchise, the Cities considered and approved the technical Page Two ability, financial capability, legal qualifications and character of North American, as well as other appropriate factors. These same qualifications are to be considered and reviewed as part of the transfer request as they relate to S.M.I. The sources of information used in examining these factors include information provided by Mr. Steve Peterson, Senior Vice President of Star Cablevision Group ("Star Group"), the parent Company of SMI.- II. DESCRIPTION OF TRANSACTION The stockholders of North American approved a merger of North American with SMI in which North American would become a wholly-owned subsidiary of SMI. SMI, in turn, is an affiliate of Star Cablevision Group of Fond du Lac, Wisconsin. SMI is an affiliate created in early 1988 for the purpose of acquiring cable systems in Illinois, Iowa, and Minnesota. on March 1, 1988, the verger of North American and SMI was accomplished, with SMI being the surviving Corporation:` Upon the approval of the Cities, and further upon the payment of the Cities' expenses in this transfer, SMI will execute franchise documents currently in existence with North American as Grantee, and SMI will be obligated to all terms and conditions of said existing franchises /including, but not limited to, the remaining terms thereof, ( Our review of the merger agreement shows no adverse terms or conditions as it relates to the Cities' interests. III. STANDARD OF REVIEW The Cities' task in this process is to review the information provided regarding the transaction and to decide whether to approve or deny the transfer of the franchias and system. The b Pago Three franchises provide the Cities with the express right to approve or disapprove the transfer of ownership in their franchises and systems. The standard of review is that the Cities' consent shall not be withheld without a showing of good cause. For the purpose of determining whether they will consent to the change in control and transfer of the system and franchise, the Cities have made inquiry into the legal, technical, and financial qualifications of SMI, as well as other appropriate factors. In analyzing the transaction, the Cities must Considar whether SMI meets all of the criteria originally considered in initially granting the franchise to North American, Note, however, that this analysis is no•t a comparison between North American and SMI to determine which is more qualified. Rather, the analysis is an application of the same factors to determine whether SMI satisfies the standards to the reasonable satisfaction of the Cities. The Cities should focus upon the following factors in determining whether to approve or deny the transfer to SMie 1. f.agal and character qualifications of SMI1 2. Technical ability of SMI; 3. Financial stability of SMI; and 1. Other appropriate factors. IV. ANALYSIS Each of the factors will be analyzed sapaxately, although they are not necessarily exclusive. Ll I Vzi- ;Q0 L_.1 Page Five �. Technical Ability 0 ti_ C -S _:t� _? P. 0-__ The technical ability factor relates to the technical expertise and experience of SMI in operating and maintaining a cable system. This analysis focuses upon the current and former experience of the proposed Transferee. Since SMI is a newly -created entity, it has not directly owned or operated any cable systems. Therefore, the ability of its managing principals must be reviewad. Information has been provided concerning such individuals' and entities' experience in owning, operating, and managing cable systems. SMI is a corporation wholly-owned by Star Group, The sole owner of Star Group, which will operate SMi, it Mr. Donald G. Jones. Mr. Jones began his involvement in Star Group in 1968, being involved in small market radio station ownership in Illinois. Over the years, this radio ownership has expanded as the Company diversified into cable television, receiving the franchise to build and operate the Fond du Lao, Wisconsin cable systen in 1979. Star Group has built cable systems in nearly 20 midwestern cities, in mostly arlaller, non -metropolitan area communities. Please consult the analysis of Kevin Cattoor for a more detailed analysis of the growth of Star Group as related to cable system acquisition.( ` Suffice it to note that the ownership and management of Star Gro::phas sufficient technical experience to allow you to reasonably approve the transfer based on tachnical abilities since parent corporation experience,does not always insure td� local expertise, a review of local personnel is relevant. This Office has been informed that Richard henchert, formerly of 'Y a Page Six 0 622 6-13 2,0-? P.,; North American's Minnesota operations, will head SMI, Minnesota. Additionally, existing local personnel will be retained for the foreseeable future, pending analysis of future'ataff require- ments in light of staff support and efficiencies which may be provided by the new parent Corporation. :fir: Penchert has been involved with North American since before the awarding of Wha Savage and Prior Lake franchises. `) Mr. Penchert has a long and very positive reputation of working �C�Ja with Minnesota municipalities in cable, Not onlywould d it be unreasonable to withhold approval based on Mr. Penchert's abilities, but the retention of Mr. Penchert is an extremely positive indication that S14I hac decided to staff its Minnesota operations with the beat cable personnel. Minneaora has to offer, Based upon our review of the information provided, it would appear that the Cities could not reasonably withhold approval of the transfer based upon the technical ability of SMI or its principals. C. Financial Stability The financial stability factor relates to whether SMI has the financial resources available or committed to not only acquire the system, but also whether its financial plan as presented is reasonable and economically viable. The Cities have engaged Mr. Kevin P. Cattoor, Financial Communications Consultant, to undertake a review of this factor. Mr. dattoor has reviewed the financial capability and financial resources of SMI. He v ��.1�4; :e,0 csi Page Seven 0 E12 cab 2702 P.03 has prepared an independent report of his analysis, and the Cities are reftrred thereto. D. Qther Relevant Factors Other appropriate factors which have been reviewed for the purpose of determining whether to approve or deny this trans- action wsro contained in the Request For Information. Due to the restricted time frame imposed on this analysis, the information traditionally gathered from the Request for Information had to be collected from general information provided by SMI and Star Group, and from direct car,,.munication with the principals of Star Group. y The most significant factor to be considered is whether the cable franchise will be transferrbd intact and whether SMI will agree to comply with all existing franchise requirements. The information which we have reviewed indicates that SMI is not currently requesting any franchise modifications as a condition of the transfer. In other words, the system is to be sold and the franchises transferred "as is". Consequently, SMI will agree to receive transfer of the franchisee intact. Your approval should be conditioned upon SMI's agreement to assume all existing franchise obligations. With respect to the franchise requirements regarding the existing service area and line extensions, SMI has indicated that it will comply with the existing franchise requirements and obligations. The construction practices of SMI regarding Pago Eight aerial and underground installation and standards will also conform to existing franchise requirements. SMI has not proposed any modifications to the.channel capacity or system design and it is assumad it will assume all existing franchise obligations regarding future activation of channel capacity and upstream capabilities, interconnection, performance testing and system maintenance policies. Your approval should be conditioned upon SMI's agreement to assume all existing "franchise obligttiona. S14I does not propose any addition or deletion of any programming services. in the area of community access programming (i.e., local prograra.ing and all types of access), SMI must agree to assume all existing franchise commitments, including equipment, facilities and staff. SMI has stated that it has a positive history of promoting community programming. SMI additionally does not propose any additions to the access commitments. With respect to proposed rates, SMI is not proposing any changes in the applicable franchise requirements and presumably will operate consistent with federal law in setting rates. SMI has stated that, upon acquisition of a franchise, it conducts a complete rate review to insure that all rates are fair and equitable to all SMI customers. They state an attempt to be sure that "higher value items are properly paid for and items that are not as valued by the cuetomcr are reduced in price." (Letter to David Unmacht, Prior Lake, February 5, 1909.) a CSI Page Nine 4 C12, e.-:3 P. io Every cable company has differant pricing philosophies. Additionally, the industry trend is to increase rates for basic service (higher perceived value) while lowering or*maintaining rates for premium (HBO -type) aervices. Current Star Group Affiliate rates range from $11.95 to $15.50 for basic services and from $6.95 to $15.00 for premium services, ranges consistent with industry norms. For those rates which are deregulated under federal law# SMI is permitted to charge whatever it desires. SMI must comply with all federal, state, and local laws relating to discrimination, equal opportunity e:aployment programs and affirmative action programs. Based upon our review of the information constituting other appropriate factors, and noting the uncertainty as to future Judicial interpretations of the 1984 Federal Cable Act (which substantially reduced the Cities' regulatory Authority over cable), it does not appear that there is any �ieya ly_ justifiable c{�use for the Cities to withhold approval of_thn ansfe. to SMI in the areas of legc►1or 1 que icatione. V. CONCLUSION The Cities should approve t e transfer of ownership and. transfer of the franchise to Star Midwest, Incorporated. Following the approval, the Cities will need to initiate a process to formally transfer the franchise ordinances through an ordinance amendment process. �J CITY OF ROSEMOUNT RESOLUTION 1988 - A RESOLUTION APPROVING THE CHANGE OF CONTROL OF METRO CABLE, INC., A MINNESOTA CORPORATION, TO STAR MID AMERICA IV, INC. A WISCONSIN CORPORATION, SAID FRANCHISE HAVING BEEN ORIGINALLY GRANTED BY ORDINANCE NO. XI.12 WHEREAS, the shareholders of Metro Cable, Inc. ("Metro") have agreed to sell all of their shares of Metro to Star Mid America IV, Inc., a Wisconsin corporation ("Star"); WHEREAS, as a result of such sale Star will control Metro; and WHEREAS, at the request of Metro on behalf of Star, and in the best interest of the Municipality, it is deemed that such sale is hereby approved. THEREFORE BE IT RESOLVED BY THE CITY OF ROSEMOUNT: SECTION 1. That Ordinance XI.12 (which is in full force and effect) which granted to Metro the right and franchise to erect, maintain and operate a CATV system in, under, over, along, across and upon the streets, avenues, sidewalks, alleys, bridges and highways and other public places in the Municipality for the purpose of transmission and distribution by wire or cable CATV programs, various communications and other electronic services for sale to the inhabitants of the Municipality, and any and all amendments thereto, remain in full force and effect and that the transfer of stock of Metro (the current holder of the Franchise) to Star, be hereby ratified and approved in all respects. SECTION 2. That Star may assign or otherwise grant a security interest in and lien upon the capital stock and assets of Star and any of the rights, title and interest represented by the cable franchise held by Star as collateral for their financings. SECTION 3. That this Resolution shall become effective and valid between the Municipality and Star when the sale contemplated by that certain Stock Purchase Agreement dated June , 1988, by and among Star, Metro and each of the shareholders of Metro is consummated and Star files a written acceptance of this Resolution agreeing to cause it to continue to adhere to and perform all of the terms and conditions of Ordinance No. XI.12, and any and all amendments thereof. If written acceptance of this Resolution is not filed within ninety (90) days after passage of this Resolution, then this Resolution shall be void. ADOPTED this 17th day of May, 1988. Rollan Hoke, Mayor ATTEST: Stephan Jilk, Administrator/Clerk