C. Mediacom Settlement CITY OF MEMORANDUM
CHANHASSEN
TO: Mayor and City Council
7700 Market Boulevard
PO Box 147
Chanhassen, MN 55317 FROM: Greg Sticha, Finance Director !f
DATE: March 12, 2012
Administration
Phone: 952.2271100
Fax: 952.2271110 SUBJ: Mediacom Settlement
Building Inspections
Phone: 952.2271180 BACKGROUND
Fax: 952.2271190
In 2010/2011, staff became aware of inadvertent accounting errors in Mediacom's
Engineering past calculation of PEG fees that were owed to the city. The audit found
Phone: 952.2271160
Fax: 952.2271170 discrepancies in PEG fees for years 1999 -2008. City staff negotiated a settlement
of $625,000, which was approved by city council in January of this year.
Finance
Phone: 952.2271140 What is a PEG Fee? PEG stands for Public, Educational & Government Access
Fax: 952.2271110 fee. The fee is on each individual cable subscriber's bill and, per the city's
Park & Recreation
franchise agreement (and federal requirements), it is to be used to fund capital
Phone: 952.2271120 educational access improvements in order to provide cable broadcast of public,
Fax: 952.2271110 educational or government information.
Recreation Center Due to a coding error at Mediacom, the PEG fee was collected from residents
2310 Coulter Boulevard from 1999 -2008 but not remitted to the city. Therefore, all capital and other
Phone: 952.2271400 public access and educational improvements made to either audio visual
Fax: 952.2271404 equipment or other capital improvements to city council chambers were paid for
Planning & with franchise fee revenue.
Natural Resources
Phone: 952.2271130 What is a Franchise Fee? Franchise fees are different from PEG fees and are
Fax: 952.2271110 also collected on each individual subscriber's bill. Franchise fees are collected
for use of public rights -of -way by the cable franchise and other operating costs
Public Works such as wages and items to help broadcast the public and educational information.
7901 Park Place The franchise fees do not have a restricted use like the PEG fee mentioned above.
Phone: 952.2271300
Fax: 952.2271310 The franchise fees can be used for whatever public purpose the local government
deems necessary.
Senior Center
Phone: 952.2271125 When staff negotiated the settlement with Mediacom, we felt it was important that
Fax: 952.2271110 the funds be unrestricted, because over the years of 1999 -2008 the city had to use
Web Site unrestricted franchise fee revenue to pay for PEG capital improvements. In
www.ci.chanhassen.mn.us January of this year, the city and Mediacom agreed on the settlement figure of
$625,000. The money has since been wired to the city's bank account and has
f. \gregs \council \2012 \medacom settlement discussion 3- 12- 12.docx
Chanhassen is a Community for Life - Providing for Today and Planning for Tomorrow
Mayor & City Council
March 12, 2012
Page 2
been temporarily coded for accounting purposes into the cable TV fund. Because
of the negotiated unrestricted use of the funds, the city council can use the funds
for whatever public purpose they wish. This evening we will be discussing how
to best use these funds.
Other questions about the money and how it could be used
If the city had received the money from Mediacom when it was due, it would
have come in based on the number of subscribers from 1999 -2008, or 10 years.
The range of the receipts each year could have been from as low as $10,000-
$15,000 in 1999 to up to $40,000 per year in 2008. The total amount receipted
would not have been $625,000, as the final agreement included some interest. If
the money had come in on time, it would have been spent on capital
improvements in those same years as discussed earlier in this memo.
There are no restrictions, timing or otherwise, on these funds. They can be spent
on whatever public purpose the council decides and whenever they choose to use
the money.
Attempting to return the money to the subscribers that paid the fees would prove
to be challenging and very costly. Even if Mediacom had the records back to
1999 and would be willing to share that information with the city, there are
numerous other challenges in returning that money to those subscribers. Most
likely a significant number of them may no longer live in that home or in
Chanhassen at all. Finding each subscriber and returning the funds in the form of
a check would cost thousands of dollars in staff time, supplies and postage. In
addition, the ones that could not be located would have to be remitted to the State
of Minnesota as unclaimed property.
If the council decided to lower the levy in 2013 by the $625,000, it would result in
an approximate 6% decrease in the levy. Assuming a home had a change in value
by what the average home changed in value for 2013, and assuming the home is
around $300,000 in value, it would result in approximately a $50 decrease in the
city portion of the property tax bill. However, it is important to note that the
$625,000 will only be available in 2013; and therefore this same home would see
an approximate $50 increase in the city portion of the property tax bill beginning
in 2014, unless other expenses are reduced or an alternative revenue source is
increased.
STAFF RECOMMENDATION
Staff believes that the Revolving Assessment Construction Fund would be one of
the more critical needs for these funds. In 2012, staff is projecting a shortfall in
F \GregS \Council\2012\Medacom settlement discussion 3- 12- 12.docx
Mayor & City Council
March 12, 2012
Page 3
the fund of somewhere in the $200,000 - $300,000 range. The shortfall continues
in future years thru 2022.
In addition, using the funds for the city's portion of annual street reconstruction
projects would in time benefit all residents of the city. Improving and reinvesting
in our streets, trails, sidewalks, parking lots and tennis courts adds to everyone's
quality of life. We will also see less wear and tear on our automobiles and
enhance the value of our neighborhood's livability, appearance, and property
values. Our environment will be improved through new innovations in storm
water practices. Lastly, by allocating these funds to the Revolving Assessment
Construction Fund, the city council will have the flexibility /stability to maintain
the current levy for the next 5 to 6 years.
Staff will be reviewing the revolving assessment construction spreadsheet with
council and look for direction from council on where to transfer the funds. The
transfer resolution and action will take place at a future meeting.
ATTACHMENTS
1. Revolving Assessment Construction Fund Spreadsheet
F \GregS \Council \2012 \Medacom settlement discussion 3- 12- 12.docx
Revolving Assessment Fund
2005 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Project Cost 1,700,000 950,000 1,400,000 1,200,000 1,200,000 1,300,000 1,300,000 1,300,000 1,400,000 1,400,000 1,400,000 1,500,000
Assessments 40% (680,000) (380,000) (560,000) (480,000) (480,000) (520,000) (520,000) (520,000) (560,000) (560,000) (560,000) (600,000)
City Share 1,020,000 570,000 840,000 720,000 720,000 780,000 780,000 780,000 840,000 840,000 840,000 900,000
Fund Bal - BOY Estimate for 2012**** 645,000 (117,745) (205,711) (474,584) (404,452) (487,228) (456,021) (397,984) (383,076) (462,440) (572,004) (179,761)
Levy 437,842 130,680 444,410 450,192 431,698 670,538 664,293 659,378 660,978 653,293 1,114,690 1,111,790
Repayment 627,842 737,346 775,540 831,720 699,717 673,951 705,336 666,687 673,128 653,803 682,789 682,789
Project Costs (1,825,000) (950,000) (1,475,000) (1,200,000) (1,200,000) (1,300,000) (1,300,000) (1,300,000) (1,400,000) (1,400,000) (1,400,000) (1,500,000)
Investable Balance (114,316) (199,719) (460,761) (392,672) (473,037) (442,738) (386,392) (371,919) (448,971) (555,344) (174,525) 114,818
MVHC
Street Levy & Tsf
Interest (3,429) (5,992) (13,823) (11,780) (14,191) (13,282) (11,592) (11,158) (13,469) (16,660) (5,236) 3,445
Fund Bai - EOY 645,000 (117,745) (205,711) (474,584) (404,452) (487,228) (456,021) (397,984) (383,076) (462,440) (572,004) (179,761) 118,263
Repayment Schedule
8 yr assmt @ 6%
Project Year 2005 23,000 23,000 23,000
2006 34,000 34,000 34,000 34,000
2007 209,300 209,300 209,300 209,300 209,300
2008 103,063 103,063 103,063 103,063 103,063 103,063
2009 58,795 58,795 58,795 58,795 58,795 58,795 58,795
2010 $122,387.00 122,387 122,387 122,387 122,387 122,387 122,387 122,387
2011 $77,297.00 77,297 77,297 77,297 77,297 77,297 77,297 77,297
2012 $109,504.44 109,504 109,504 109,504 109,504 109,504 109,504 109,504
2013 $61,193.66 61,194 61,194 61,194 61,194 61,194 61,194 61,194
2014 $90,180.13 90,180 90,180 90,180 90,180 90,180 90,180 90,180
2015 $77,297.25 77,297 77,297 77,297 77,297 77,297 77,297 77,297
2016 $77,297.25 83,738 83,738 83,738 83,738 83,738 83,738
2017 $83,738.69 83,738 83,738 83,738 83,738 83,738
2018 $83,738.69 83,738 83,738 83,738 83,738
2019 $83,738.69 83,738 83,738 83,738
2020 $90,180.13 90,180 90,180
2021
$90,180.13 90,180
2022
$90,180.13
2023
2024
2025
2026
2027
2028
2029
2030