HomeMy WebLinkAbout27- Telecommunications .CITY OF SAN BERNAR NO - REQUEST FOF 'COUNCIL ACTION
;=rom: Frank S. Keller, CATV Manager Subject: APPROVING THE TRANSFER OF CABLE
TELEVISION FRANCHISE FROM CHAMBERS CABLE
Dept: Telecommunications OF SOUTHERN CAL. , INC. TO THE MARKS
PARTNERS, L.P.
Date: September 30, 1993
Synopsis of Previous Council action:
At September 20, 1993 meeting, Council referred this item to San Bernardino
Community Cable Television Commission for review.
Recommended motion:
Recommend transfer of franchise from Chambers Cable of Southern Cal. , Inc.
to the Marks Partners, L.P. be approved.
Signature
Contact person: Frank S. Keller, CATV Manager Phone: 384-5147
Supporting data attached: see memo dated 9-29-93 to Ward:
Shauna Clark, City Administrator
FUNDING REQUIREMENTS: Amount:
Source: (Acct. No.)
(Acct. Description)
Finance:
Council Notes:
75-0262 Agenda Item No.
CITY OF SAN BERNARQNO - REQUEST FOOUNCIL ACTION
STAFF REPORT
In review of the existing franchise held by Chambers Cable of
Southern California, Inc . it is found that they are in compliance
with their franchise obligations .
In review of the proposed transfer of franchise to the Marks
Group, it was learned that they purchased a cable service area in
Rancho Cucamonga within the last year and most recently acquired
the same in Yucaipa in the last sixty days . Jerry Fullwood,
Deputy City Administrator for the City of Rancho Cucamonga was
contacted to ascertain the relationship between their city and
the Marks Group. Mr. Fullwood indicated that the Marks Group has
assumed full responsibility for the provision of service to their
subscribers, compliance to the franchise, and feels that the
relationship with the city is a good one .
Based on financial resource information, the above report from
Rancho Cucamonga, and personal conversations with Mr. Bill Marks,
Sr. , CEO of the Marks Group it is recommended that the transfer
of the franchise be approved.
1`,-0264
0
City of San Bernardino
Interoffice Memorandum
Telecommunications Division
To: Shauna Clark, City Administrator
From: Frank S . Kelle ble Television Manager
a Subject : Special Cable Commission Meeting
Date : September 30, 1993
Copies : Fred Wilson, Asst . City Administrator
File
--------------------------------------------------
--------------------------------------------------
On Monday, September 27, 1993 , the San Bernardino Community Cable
Television Commission held a special meeting, as per the request
of Council, to address concerns regarding the transfer of
franchise from Chambers Cable of Southern California, Inc . to the
Marks Group, LP.
Present at the meeting were Stephani Congdon, Chairperson, Robert
Senour, Russell Lackner, Jack Cone, Glen Gipson, Wallace Allen,
and John Lowe, representing the Commission. Absent, Linnie Kam.
Representing the Marks Group were Bill Marks, Sr. , CEO, Bill
Marks Jr. , President, Sean Hogue, Development and Steve Johnston,
Marketing Director.
,The commission posed a number of concerns addressing a system
upgrade to meet the channel capacity of Comcast Cable, Peg
Access, Rates, and community involvement, specifically the need
for a news program for the Inland Empire .
The Marks Group said that beginning the day they take ownership
they plan to initiate a fiber optic channel rebuild to at least
55 channels, equal to their operation in Ranch Cucamonga. In
addition to the rebuild, they will make San Bernardino their base
of operation for services to San Bernardino, Rancho Cucamonga and
Yucipia. A single program service will be delivered to these
areas, see attached list for Rancho Cucamonga cable services .
Bill Marks Jr. indicated that a rebuild would be completed within
an eighteen month window baring any major technical or permit
acquisition problems . Monthly progress reports will be made to
the cable commission. The Marks Group agrees and supports the
need for an Inland Empire news service and suggessted that all
the cable franchisees contribute dollars to the establishment of
the same .
Agreement was reached on the assignment of PEG access channels
for viewer consistency in the San Bernardino service areas . The
Marks Group stated that rates would be reviewed once they assume
ownership. The other items will be addressed during monthly
cable commission meetings . Although, the Marks Group indicated
that they are a company that believes in community support and
involvement . And that their relationship with the commission and
the city is going to be a partnership for the betterment of the
community, rather than being adversarial . Based on the above
discussions a motion was made for the unanimous approval for the
transfer of franchise from Chambers to the Marks Group accepting
the eighteen month window for a complete channel rebuild of the
system and continuing discussions on the other items . The motion
carried.
1EL Sep 24 ,96 y -Sb NO .UUJ F' .u1
Y A ,HO CUCAMONGA,CA
CHANNEL LiNIE•UP
CHANNE L
_. ... STATION ---• -- .. ..
2 KCBS(CBS)
3 DISNEY(PREMIUM)
4 KNBC(NBC)
5 KTLA -
6 HBO(PREMIUM)
C�C G�l'L 7, KABC(ABC)
J 8 M PRIME TICKET
9 -.. . KcgL. ....
10 WTBS(ATLANTA) "
KTTV
ESPN
: KCOP p Q
^AMERICAN MOVIE. CLASSICS
15 BLACK ENTERTAINMENT TV
16 TURNER NCTWORK TELEVISION 3
17 SHOWTIME(PREMIUM) n
18 KSCI _
19 _ CINEMAX(PREMIUM) N
20 THE MOVIE CHANNEL(PREMIUM)
21 _ _ CNN _
22 - PLAYBOY(PREMIUM) �
23 THE WEATHER CHANNEL
24 - KVCR(PBS)
WGN(CHICAGO)
26 NICKELODEON
27 _ QVC
28 KCET(PBS) w
29 CNBC
30 THE NASHVILLE NFTWOHK
31 KDOC
32 _ TRAVEL CHANNEL
33 ARTS&ENTERTAINMENT
KMEX
35 USA
"VH-1
37 CNN HEADLINE NEWS _
38 THE FAMILY CHANNEL
39 C-S PAN
40 - _ KTBN _.
41 LIFETIME
42 . ..._ MTV _. . .
43 _ _ E-ENTERTAINMENT
44 LOCAL ORIGINATION
4.5 KLCS(PBS)
46 HOME SHOPPING NrTWORK
47 DISGOV(-RY
48 - SCI-Fl CHANNEL
49 COUNTRY 14651C TELEVISION
50 OPEN
51 GALAVISION
52 MIND EXTENSION UNIVEn$ITY
MUST DIGfTAL MUSIC EXPRESS
0 0
1 RESOLUTION NO.
2 RESOLUTION OF THE CITY OF SAN BERNARDINO APPROVING THE
TRANSFER OF CABLE TELEVISION FRANCHISE FROM CHAMBERS CABLE OF
3 SOUTHERN CALIFORNIA, INC. , TO THE MARKS PARTNERS, L.P.
4 WHEREAS, Chambers Cable of Southern California, Inc. ,
5 [ "Seller"] is a duly authorized holder of a franchise authorizing
6 the operation and maintenance of a cable television system within
7 the City of San Bernardino, pursuant to City of San Bernardino
8 Ordinances No. MC-2395, as amended, and an assignment dated 8-30-
9 83 [ "the Franchise"] ; and,
10 WHEREAS, Seller and the Marks Group, Inc. , [ "Purchaser"] are
11 parties to that certain Asset Purchase and Sale Agreement dated
12 August 6, 1993 [ "the Agreement"] wherein Seller and Purchaser
13 agree that Purchaser will acquire all of the assets used in the
14 ownership and operation of the cable television system; and,
15 WHEREAS, the Agreement provides that Purchaser has the right
16 to assign all of its right, title and interest in the Agreement to
17 to The Marks Partners, L.P. [ "Partnership"] , a Delaware limited
18 partnership which is 79% owned by Purchaser; and,
19 WHEREAS, the Partnership desires to acquire from Seller all
20 the rights and privileges of the Franchise and assume all of the
21 obligations of Seller under the Franchise accruing from the date
22 of closing under the Agreement; and,
23 WHEREAS, the Franchise, as amended in 1968, authorizes the
24 transfer and assignment of the Franchise by Seller, provided that
25 the net worth of purchaser at the time of such transfer is not
26 less than $250, 000.00 ( adjusted to include increases in the Cost
27 of Living Index for Southern California over the then current Cost
28 of Living Index) , as shown by a statement of net worth certified
1
P'"*
1 RESOLUTION OF THE CITY OF SAN BERNARDINO APPROVING THE TRANSFER OF
CABLE TELEVISION FRANCHISE FROM CHAMBERS CABLE OF SOUTHERN
2 CALIFORNIA, INC. , TO THE MARKS PARTNERS, L.P.
3
4 to by a licensed certified publoic accountant; and,
5 WHEREAS, the City has received such evidence of financial
6 responsibility submitted by the Purchaser and its affiliates and
7 has found that Purchaser and its affiliates have the financial
8 managerial ability to operate the system in a proper manner; and,
9 WHEREAS, the Purchaser has agreed, by letter ( a copy of
10 which is attached hereto as Exhibit "A" and incorporated herein)
11 in response to the City' s request, to continue with a fiber optic
12 rebuild of half of the City which was originally commenced by
13 Seller two years ago, and thereby increase the number of channels
14 from 36 to approximately 54; and,
15 WHEREAS, the Purchaser has further agreed by letter (Exhibit
16 of A" ) to abide by any previous agreement between the City and
17 Seller, including, but not limited to, the franchise ordinances
18 and any attachments or amendments thereto, which includes the
19 Judgment and Settlement Agreement in the case of City of San
20 Bernardino v. Liberty T.V. Cable, Inc. , Case No. 82-6876 WMB(Gx) ,
21 U.S. District Court, Central District of California; and,
22 WHEREAS, Seller has requested the approval of the City for
23 the transfer and assignment of the Franchise by the Seller to the
24 Purchaser;
25 BE IT RESOLVED BY THE MAYOR AND COMMON COUNCIL OF THE CITY
26 OF SAN BERNARDINO AS FOLLOWS:
27 SECTION 1 . The Mayor and Common Council of the City of San
28 Bernardino hereby approve the assignment of the Franchise and
2
1 RESOLUTION OF THE CITY OF SAN BERNARDINO APPROVING THE TRANSFER OF
CABLE TELEVISION FRANCHISE FROM CHAMBERS CABLE OF SOUTHERN
2 CALIFORNIA, INC. , TO THE MARKS PARTNERS, L.P.
3
4 related assets of the cable televsion system by Seller to the
5 Purchaser.
6 SECTION 2. The Mayor and Common Council hereby affirm that:
7 ( a) the Franchise was properly granted; (b) the Franchise is in
8 full force and effect; (c) the Franchise is scheduled to expire on
9 December 31, 2003; and (d) to the City' s knowledge there exists no
10 fact or circumstance which constitutes or which, with the passage
11 of time or giving of notice or both, would constitute a default
12 under the Franchise or will entitle the City to cancel or
13 terminate the rights thereunder, except upon the expiration of the
14 full term thereof.
15 SECTION 3. The authorization of the transfer and assignment
16 of the franchise from Seller to the Purchaser is expressly
17 conditioned upon, and shall be deemed effective upon, the
18 consummation of the sale to the Purchaser of the Franchise and
19 related assets and the closing of the transactions under the
20 Agreement.
21
22
23
24
25
26
27
28
3
�r
1 RESOLUTION OF THE CITY OF SAN BERNARDINO APPROVING THE TRANSFER OF
CABLE TELEVISION FRANCHISE FROM CHAMBERS CABLE OF SOUTHERN
2 CALIFORNIA, INC. , TO THE MARKS PARTNERS, L.P.
3
4 I HEREBY CERTIFY that the foregoing resolution was duly
5 adopted by the Mayor and Common Council of the City of
6 San Bernardino at a meeting thereof, held on the
7 day of 1993, by the following vote, to wit:
8 Council Members: AYES NAYS ABSTAIN ABSENT
9 NEGRETE
lU CURLIN
11 HERNANDEZ
12 OBERHELMAN
13 DEVLIN
14 POPE-LUDLAM
15 MILLER
16
17 City Clerk
18 The foregoing resolution is hereby approved this day
of 1993.
19
20 Tom Minor, Mayor
21 City of San Bernardino
22 Approved as to
form and legal content:
23 JAMES F. PENMAN,
24 City Attorney
25 By:
26
27
28
4
12337 30th Avenue NE,Suite 1 1836 Union Street
Seattle,Washington 98125 HE San Francisco,CA 94133
(206)440-9030 ARKS (415)563-2288
FAX: 440-9032 FAX: 563-2351
�
1 1 ROUP
Mr. Frank Keller
CATV Manager
City of San Bernardino
300 North D Street
San Bernardino, CA 92418
Dear Mr. Keller,
It was a pleasure to meet with you last week and to hear about some of the future plans and
desires regarding telecommunications in the City of San Bernardino. Our company is
extremely excited about providing cable television service to such a progressive city.
Because of The Marks Group's commitment to civic involvement and visions of advanced
cable telecommunications for the City of San Bernardino, we strongly believe that together
we will make a good match.
I am writing this letter to confirm to you our company's desire to start on day one of our
ownership of the cable system, to progress toward the next century of communications. We
intend to continue with a fiber optic rebuild of half of the city, that was originally started by
Chambers two years ago, so that soon, we will be able to increase the number of channels on
the system. We expect that upon completion of the rebuild, we will be able to increase the
number of channels being offered from 36 to about 54.
Also, please understand that our company will abide by any previous agreement between the
City and Chambers Communications, including, but not limited to, the franchise ordinance
and any attachments thereto. We recognize that in order to grow a business we must look at
the franchising authority as a partner, as opposed to an adversary. We both know that in
order to achieve all of the great things that are possible for both of us, we must be able to at
least agree on what has already been established.
I trust by now you have had the opportunity to check references of our firm and hope that
they have been positive. The City of San Bernardino, through our joint efforts, should be
the telecommunication paradigm that many other cities strive for. We were thoroughly
impressed by your ambitions and hope that soon we can work together to make them a
reality.
Sincerely,
William M s, Jr.
President
WDM/clb
0
THL AR S GROUP
1836 UNION STREET *SAN FRANCISCO, CALIFORNIA 94123 '" (415) 563-2288, FAX (415) 563-2351
September 27, 1993
Diane C. Roth, Esquire
Deputy City Attorney
City of San Bernardino
300 North D Street
San Bernardino, CA 92418
Re; Chambers Franchise Transfer
Dear Ms. Roth.;
I am following up our phone conversation this morning with respect to the relationship
between The Marks Group and the DCA CableVision partnership,
The Marks Group, which has contracted to acquire the cable television assets of Chambers
Cable of Southern California, is owned by William J. Marks. The same William J. Marks
is the managing general partner of the DCA partnership which owns, among other systems,
the nearby Rancho Cucamonga cable television system.
The reason we provided you with the DCA financials is that DCA will be the majority
partner of The Marks Partners, L.P., the new partnership being formed to acquire the
Chambers San Bernardino system. Once we have gotten the necessary approvals to
proceed with the acquisition of the San Bernardino system, we would be in the position to
consolidate the different cable systems now controlled by Mr. Marks.
If you have any questions or comments,please don't hesitate to call me.
Sincerely yours,
R�
Albert Bracht
Vice President Finance
cc: Bill Marks
Bruce Hallett
Colin Clapton
Coo Certifi�Public Accountants'
&L rand
,
:
A.
f
R. " 4 :..: _ .. s 4 i,, t. 4 t m.i i 6 l l,A .A►s� -
}t h.
4
,
k ��" .. K.iIl�'�^rte 1 '�• _ �4� a <
4
(
SI
P A
�B
r a
"V- r
i Y4
'� - s•�ti �" t`ria4}t -� '.. i �.��'t;�siT'����ic� :,x t �'�. c : 7. - - _.:
�i rte• ` i. �"� .`t �" 4t.a,. ¢ � .S „�,�_S"dd��� s, " it �k��r �, •" � �rT�c,�f L9<'�.s- .!f.
r '
DCA CABLEVISION
(a general partnership)
FINANCIAL STATEMENTS
for the period April 30, 1992 (date of
inception) through December 31, 1992
Coo Y pers Q certified public accountants
&L brand
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners
DCA Cablevision:
We have audited the accompanying balance sheet of DCA Cablevision as of December 31, 1992,
and the related statements of operations, partners' capital and cash flows for the period April 30,
1992 (date of inception) through December 31, 1992. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the
financial position of DCA Cablevision as of December 31, 1992, and the results of its operations
and its cash flows for the period April 30, 1992 (date of inception) through December 31, 1992, in
conformity with generally accepted accounting principles.
San Jose, California
April 16, 1993
OWN
DCA CABLEVISION
BALANCE SHEET, December 31, 1992
Current assets: ASSETS
Cash
Accounts receivable, net of allowance for doubtful $ 22,848
accounts of$91,426 52,389
Inventory 90,000 Prepaid expenses and other assets
53.750
Total current assets 218,987
Property, plant and equipment, net of accumulated
depreciation 10,245,544
Franchise assets and deferred costs, net of accumulated
amortization
_ 4.751.406
Total assets
$15,215,937
Current liabilities: LIABILITIES
Long-term debt - current portion $ 386,826
Accounts payable 208,410
Accrued liabilities
Refundable deposits 178,732
Due to affiliates 93,606
310.907
Total current liabilities 1,178,481
Long-term debt
—2L44...451
Total liabilities
_11.122.932
Commitments and contingencies (Note 6).
General partners PARTNERS' CAPITAL
4.093.005
Total partners' capital
4.093.005
Total liabilities and partners' capital $15,215,937
The accompanying notes are an integral
part of these financial statements.
2
DCA CABLEVISION
STATEMENT OF OPERATIONS
for the period April 30, 1992 (date of
inception) through December 31, 1992
Revenues:
Basic $1,688,150
Premium 524,318
Other
313.960
Total revenues 2.526.428
System operating expenses:
Programming 747,842
Technical 221,034
Marketing and promotion 78,074
General and administrative _ 445.552
Total system operating expenses 1.492.503
Operating income before management fee, depreciation,
amortization and interest expense 1,033,925
Management fees 171.112
Operating income before depreciation,
amortization and interest expense 862,813
Depreciation and amortization 792,019
Interest expense, net of interest income 494.100
Net loss (423,306)
The accompanying notes are an integral
Part of these financial statements.
3
Q
DCA CABLEVISION
STATEMENT OF PARTNERS' CAPITAL
for the period April 30, 1992 (date of
inception) through December 31, 1992
Capital contributions:
Cable assets contributed $14,016,311
Cash contributed 1,000 000
Total capital contributed 15,016,311
Distributions (10,500,000)
Net loss (423.306)
Balances at December 31, 1992 14,093,005
The accompanying notes are an integral
part of these financial statements.
4
DCA CABLEVISION Q
STATEMENT OF CASH FLOWS
for the period April 30, 1992 (date of
inception) through December 31, 1992
Cash flows from operating activities:
Net loss $ (423,306)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 792,019
Provision for bad debts and discounts 91,426
Changes in operating assets and liabilities:
Increase in accounts receivable (143,815)
Increase in inventory (90>000)
Increase in prepaid expenses and other assets (53,750)
Increase in accounts payable 208,410
Increase in accrued liabilities 178,732
Increase in refundable deposits 93,606
Increase in amounts due to affiliates 310.907
Cash provided by operating activities 964.229
Cash flows from investing activities:
Additions to property, plant and equipment (981,648)
Additions to franchise assets and deferred costs (780,482)
Proceeds from sale of vehicle 1.200
Cash used in investing activities (1.760.930)
Cash flows from financing activities:
Proceeds from capital contribution 1,000,000
Proceeds from bank loan 10,250,000
Distribution to partner (10,500,000)
Proceeds from line of credit 75,000
Payments on capital leases (5.451)
Cash provided by financing activities 819,549
Increase in cash 22,848
Cash at April 30, 1992 -
Cash at December 31, 1992 22.84
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $503,339
Cable assets contributed as partners' capital $14,016,311
Capital lease liabilities assumed with asset
contribution $11,728
The accompanying notes are an integral
part of these financial statements.
5
DCA CABLEVISION
NOTES TO FINANCIAL STATEMENTS
1. Formation and Business of the Partnership:
Business Operations:
DCA Cablevision (the Partnership) is a general partnership which was organized
in California on April 30, 1992. The Partnership comprises two general
partnerships, West Coast Cable Partners, L.P. (WCCP) and Dickinson California
Arizona Associates, Ltd. (DCAA). The Partnership owns and operates cable
television franchises.
The significant terms and provisions of the Partnership Agreement are as follows:
Initial Contributions and Financing:
• DCAA contributed substantially all the assets of DCAA, Ltd., an
operating cable television partnership, to the Partnership. WCCP
contributed $1,000,000 in cash. Further at formation, the Partnership
raised debt financing of$10,250,000.
• DCAA's asset contribution was deemed to be valued at $22,900,000 and
received simultaneous with the contribution, an initial distribution of
$10,500,000 from the Partnership which resulted in a deemed equity
contribution of$12,000,000 by DCAA to the Partnership.
• For generally accepted accounting purposes, since they were acquired
through contribution rather than a sale, the assets contributed have been
valued by the Partnership on a historical cost basis as follows:
Property, plant and equipment $ 9,699,455
Franchise development 4.316.856
$14,016.311
Continued
6
�A
DCA CABLEVISION
NOTES TO FINANCIAL STATEMENTS, Continued
1. Formation and Business of the Partnership, continued:
Management:
Marks and Associates (MAI), whose principals are also partners of WCCP, has the
authority to manage the operations and affairs of the Partnership. However, MAI
may not, without the written consent of DCAA, terminate any franchises,
commence legal action, consent to unionization, or purchase, sell or hypothecate
any system assets. MAI is entitled to a management fee equal to 5% of gross
revenues collected, reimbursement of costs as defined, and 1.5% financing fee
based on the principal amount of loan debt. MAI's management agreement may
be terminated if the principal debt is accelerated after an event of default or if
William Marks, general partner of MAI, is unwilling to serve as chief executive
officer of MAI.
At December 31, 1992, $77,333 was due to MAI for services and cost
reimbursement.
Profits and Losses:
Profits are initially allocated to offset any losses allocated pursuant to the agreement
terms. Profits thereafter are allocated to DCAA and WCCP until they have
received a priority return, as defined, on their deemed initial equity contributions
of $12,000,000 and $1,000,000, respectively. Thereafter, profits are allocated
50.5% to WCCP and 49.5% to DCAA. If WCCP expands the cable operation and
finances the expansion, the Partnership agreement adjusts the profit and loss
allocations.
Losses are initially allocated to offset any profit allocations on a pro rata basis;
second, they are allocated between WCCP and DCAA in proportion to their venture
percentage; third, they are allocated to the partner with a positive equity balance;
and, thereafter, they are allocated in proportion to their respective venture
ownership percentages.
Continued
7
DCA CABLEVISION
NOTES TO FINANCIAL STATEMENTS, Continued
1. Formation and Business of the Partnership, continued:
Distributions:
With the exception of the initial$10,500,000 to DCAA, the timing and amounts of
distributions will be determined by WCCP and will be due initially to DCAA and
WCCP until they have received their defined return from their deemed equity
contributions.
DCAA will have the option to put its entire interest to WCCP or other affiliate on
the fifth anniversary of the Partnership equal to the fair market value of its interest
in the Partnership on that date. Notwithstanding the foregoing, DCAA cannot
exercise its option until the eighth anniversary if the Partnership lender so requires,
in which case WCCP will use its best efforts to obtain alternate financing after the
fifth year.
Liquidation:
Upon the occurrence of certain specified events, mutual agreement of the partners,
or the tenth anniversary of the Partnership agreement, the Partnership may be
terminated and dissolved. In the event of termination, the Partnership assets will
be applied first to the payment and discharge of all partnership creditors and then
to DCAA and WCCP in the ratio of their capital accounts to the extent of their
positive balances. Any remaining assets will be distributed to the partners in
proportion to their distribution percentages.
Restrictions:
Without the written consent of the other general partner, no partner may assign or
transfer its interest in the Partnership.
Continued
8
OWN
DCA CABLEVISION
NOTES TO FINANCIAL STATEMENTS, Continued
2. Summary of Significant Accounting Policies:
Cash and Cash Equivalents:
The Partnership considers all highly liquid investments purchased with original
maturities of three months or less to be cash equivalents. Substantially all of the
Company's cash is deposited with one financial institution.
Property, Plant and Equipment:
Property, plant and equipment are stated at cost and depreciated using the straight-
line method over estimated useful lives as follows:
Distribution systems 12 years
Vehicles 5 years
Machinery, office and data processing
equipment 5 - 6 years
Leasehold improvements Life of lease
Repair and maintenance costs are charged to operations as incurred.
Franchise Assets:
Franchise assets consist principally of franchise development costs, prematurity
costs and excess of amounts paid for cable television systems over identifiable
tangible assets and are amortized over a five- to fifteen-year period.
Revenue Recognition:
Revenue from basic and premium services are recognized in the month that services
are provided. Installation fees and other fees are recognized as services are
performed and billed.
Inventory:
Inventory, which substantially consist of converters and repair parts necessary for
the maintenance of the cable distribution system, is stated at the lower of standard
cost (which approximates actual cost on a first-in, first-out basis) or market.
Continued
9
DCA CABLEVISION
NOTES TO FINANCIAL STATEMENTS, Continued
2. Summary of Significant Accounting Policies, continued:
Taxes:
For state and federal income tax purposes, the Partnership is not a taxpaying entity.
Accordingly, the taxable income or loss of the Partnership, which may vary
substantially from income or loss reported for financial reporting purposes, is
includable in the state and federal income tax returns of the partners. The tax
returns of the Partnership are subject to examination by state and federal taxing
authorities. If such examinations result in changes to taxable income or loss, the
tax liability of the partners would be changed accordingly.
3. Prone . Plant and Eapment:
Property, plant and equipment consists of:
Distribution systems $10,199,054
Vehicles 205,598
Machinery, office and data processing
equipment 145,916
Land and buildings 118,012
Leasehold improvements 12.523
Less accumulated depreciation and 10,681,103
amortization (435559)
$10.245.544
Accumulated amortization related to assets recorded under capitalized leases is$24,624.
Continued
10
DCA CABLEVISION
NOTES TO FINANCIAL STATEMENTS, Continued
4. Franchise Assets and Deferred Costs:
Organization fees $ 216,426
Deferred financing costs 534,176
Franchise agreements 1,753,090
Subscriber contracts 2,410,898
Covenant not to compete 167,748
Other 15.000
5,097,338
Less accumulated amortization (345.932)
Franchise assets and deferred costs, net $4,751.4
5. Long-Term Debt:
Line of Credit Agreement:
The Partnership has available a line of credit of$750,000, of which $675,000 was
unused at December 31, 1992. The agreement expires on March 31, 1994 at which
time all borrowings are due. See long-term debt for further description of terms.
Long-Term Debt:
Long-term debt consists of:
Term loan $10,250,000
Advances under line of credit 75,000
Capital lease obligations, collateralized by
equipment 6,277
10,331,277
Less current portion 386.826
$ 9.944.451
Continued
11
0
DCA CABLEVISION
NOTES TO FINANCIAL STATEMENTS, Continued
5. Long-Term Debt, continued:
Both the term loan and advances under the line of credit agreements are with Fleet
National Bank and have the following provisions:
Interest:
The Partnership, for specified periods of time, has the option of electing, with
limitations, a portion of the debt outstanding to be subject to fixed interest rates and
the balance subject to floating interest rates. The Partnership can further elect, with
proportional limitations, interest rates of prime plus 1.75% or LIBOR plus 3.00%.
At December 31, 1992, $2,000,000 of the term loan had a fixed rate of 9% and the
balance, or $8,250,000, had a floating LIBOR interest rate of 6.75%. The
advances under the line of credit had an interest rate of 7.75%.
Prospective interest rates on the floating portion of the loan can be reduced by .5%
if certain operating cash flows are achieved.
Commitment Fees:
The Partnership will pay quarterly commitment fees totaling 1/2% per annum on
the average daily amount of the unused revolving credit commitment. Also, if one
is appointed, the Partnership will pay an agency fee of$15,000 to a collateral agent
annually.
Payment Terms:
Interest is payable quarterly in arrears. Principal payments under the term loan
agreement follows:
1993 $ 307,500
1994 717,500
1995 973,750
1996 1,255,625
1997 1,716,875
Thereafter 5,278,750
Continued
12
DCA CABLEVISION
NOTES TO FINANCIAL STATEMENTS, Continued
5. Long-Term Debt, continued:
Recourse and Collateral:
Both the term loan and advances under the line of credit are nonrecourse to WCCP
but are recourse to DCAA up to $5,000,000. Both the term loan and advances
under the line of credit are collateralized by substantially all the Partnership's
assets.
Covenants:
Both the term loan and advances under the line of credit are subject to loan
covenants with the principal covenants covering a minimum number of cable
subscribers, specified ratios of annualized operating cash flow to total debt service,
and pro forma debt service, as defined.
At December 31, 1992, the Partnership was not in compliance with several
quarterly loan covenants; however, the Partnership obtained waivers on these
covenants through December 31, 1992.
6. Commitments and Contingencies:�
Terms of various franchise agreements generally require that the Partnership pay
franchisors 2% to 5% of annual subscriber receipts, as described in the various
agreements. Franchises are normally granted for five to fifteen years and existing
franchises are subject to renewal at varying dates between 1997 and 2004. Franchise
fee expense for 1992 was $105,594.
The Partnership has various noncancelable operating leases for office and operating
facilities which expire during 1993 to 1994.
Continued
13
DCA CABLEVISION
NOTES TO FINANCIAL STATEMENTS, Continued
6. Commitments and Contingencies, continued:
At December 31, 1992, future minimum lease payments for noncancelable leases are as
follows:
Capital Operating
Fiscal Year —
1993 $6,244 $36,714
1994 2,661 18,109
1995 665 -
Total minimum lease payments 9,570 $54,823
Less amount representing interest 3.293
Present value of minimum lease
payments under capital leases 6,277
Less current portion 4.326
Lease obligations, less current
portion $1,951
In addition, the Partnership leases other office space, equipment and land under month-
to-month or other cancelable arrangements. Rental expense for 1992 was $30,601.
7. Related Party Transactions:
The Partnership shares its Palo Cedro facility with Norcal Cable Partners, L.P., a cable
television partnership managed by The Marks Group, Inc., which consists of the same
personnel as Marks & Associates. The two partnerships share various costs including
field and technical staff and general and administrative resources. These costs are paid
for by Norcal Cable Partners and then charged to DCA Cablevision. For the period of
these financial statements, the billings totaled $96,034, all of which is due to Norcal
Cable Partners at December 31, 1992.
In addition, the Partnership owes $137,540 to DCAA for post-closing costs related to
prepaid revenues, subscriber credits, programmer fees and other miscellaneous items.
14
i
city of San Bernardino
Interoffice Memorandum
Telecommunications Division
To: Shauna Clark, City Administrator
From: Frank S . KellerMabl/e Television Manager
Subject : Special Cable Commission Meeting
Date : September 29 , 1993
Copies : Fred Wilson, Asst . City Administrator
File
On Monday, September 27, 1993 , the San Bernardino Community Cable
Television Commission held a special meeting, as per the request
of Council, to address concerns regarding the transfer of
franchise from Chambers Cable of Southern California, Inc . to the
Marks Group, LP.
Present at the meeting were Stephani Congdon, Chairperson, Robert
Senour, Russell Lackner, Jack Cone, Glen Gipson, Wallace Allen,
and John Lowe, representing the Commission. Absent, Linnie Kam.
Representing the Marks Group were Bill Marks, Sr. , CEO, Bill
Marks Jr. , President, Sean Hogue, Development and Steve Johnston,
Marketing Director.
The commission posed a number of concerns addressing a system
upgrade to meet the channel capacity of Comcast Cable, Peg
Access, Rates, and community involvement, specifically the need
for a news program for the Inland Empire .
The Marks Group said that beginning the day they take ownership
they plan to initiate a fiber optic channel rebuild to at least
55 channels, equal to their operation in Ranch Cucamonga. In
addition to the rebuild, they will make San Bernardino their base
of operation for services to San Bernardino, Rancho Cucamonga and
Yucipia. A single program service will be delivered to these
areas, see attached list for Rancho Cucamonga cable services .
Bill Marks Jr. indicated that a rebuild would be completed within
an eighteen month window baring any major technical or permit
acquisition problems . Monthly progress reports will be made to
the cable commission. The Marks Group agrees and supports the
need for an Inland Empire news service and suggessted that all
the cable franchisees contribute dollars to the establishment of
the same .
0
Agreement was reached on the assignment of PEG access channels
for viewer consistency in the San Bernardino service areas . The
Marks Group stated that rates would be reviewed once they assume
ownership. The other items will be addressed during monthly
cable commission meetings . Although, the Marks Group indicated
that they are a company that believes in community support and
involvement . And that their relationship with the commission and
the city is going to be a partnership for the betterment of the
community, rather than being adversarial . Based on the above
discussions a motion was made for the unanimous approval for the
transfer of franchise from Chambers to the Marks Group accepting
the eighteen month window for a complete channel rebuild of the
system and continuing discussions on the other items . The motion
carried.
D 4
C I T Y O F - S A N B E R N A R D I N 0
INTEROFFICE MEMORANDUM
TO: TOM MINOR, Mayor
FROM: DIANE CATRAN ROTH, Deputy City Attorney
DATE: September 22, 1993
RE: Sale of Chambers Cable T.V. System to Marks Partners
There have been inquiries regarding whether the City has the
authority to give or withhold its consent to the transfer of
franchise from Chambers Cable of Southern California to the Marks
Partners, L.P.
Municipal Code § 14.08.460 states:
"Any franchise granted under this chapter shall be in
lieu of any and all other rights, privileges, powers,
immunities, and authorities owned, possessed, controlled,
or exercisable by the grantee, or any successor to any
interest of the grantee, of or pertaining to the
construction, operation, or maintenance of any cable
television system in the city; and the acceptance of any
franchise under this chapter shall operate, as between
the grantee and the city, as an abandonment of any and
all of such rights, privileges, powers, immunities, and
authorities within the city, to the effect that, as
between the grantee and the city, and all construction,
operation and maintenance by any grantee of any cable
television system in the city shall be, and shall be
deemed and construed in all instances and respects to be,
under and pursuant to the franchise, and not under this
chapter or pursuant to any other right, privilege, power,
immunity, or authority whatsoever. "
Chambers Cable operates in the City under a franchise initially
granted in 1961 by Ordinance No. 2395. Section 6(c) was last
amended in 1968 by Ordinance No. 2947, and now reads:
"This franchise is a privilege to be held in personal
trust by the original Grantee. It cannot in any event be
transferred in part, and it is not to be sold,
transferred, leased, assigned, or disposed of as a whole,
whether by forced sale, merger, consolidation, or
otherwise, without prior consent of the City expressed by
ordinance, and then only under such conditions as may be
therein prescribed; provided, however, that no such
consent shall be required for any transfer in trust,
TO: Tom Minor, Mayor
Re: Sale of Chambers Cable T.V. System to Marks Partners
Page 2
mortgage, or other hypothecation, as a whole, to secure
an indebtedness; provided further, however, that this
franchise may be sold, transferred or assigned by Grantee
to a person or entity whose net worth at the time of such
transfer shall be not less than $250, 000.00 (adjusted to
include increases in the Cost of Living Index for
Southern California over the current Cost of Living
Index) , as shown by a statement of net worth certified to
by a licensed Certified Public Accountant, without the
prior consent of the grantor. "
Under the 1992 Federal Cable Act, cable systems may not, except
under certain limited circumstances, be . transferred in less than
three years. Further, the City may condition the transfer upon
certain requirements if the franchise requires City approval for
transfers. Chambers' franchise only requires City approval if the
purchaser' s net worth is not shown to be more than $250,000-00,
adjusted as required by Ordinance No. 2947.
Therefore, if Marks or Chambers fails to provide such a statement,
the City may condition the transfer upon their agreement to comply
with additional reasonable _ requirements. In such case, the
transfer must be approved by ordinance. If, however, the City is
provided a certified statement of Marks' net worth which meets the
requirements of the franchise, the City has no authority to deny
approval of or to impose any further conditions on the transfer.
The Marks Partners, L.P. , has by letter agreed to complete the
system fiber optics upgrade and to comply with the terms of the
Final Judgment and Settlement Agreement in the Liberty Cable case.
Inasmuch as the Judgment and Settlement Agreement effectively amend
the franchise, Marks would be required to comply with their terms.
The City may adopt a resolution officially sanctioning the transfer
and Marks ' agreement to complete the upgrade.
'DIANE CATRAN ROTH
Deputy City Attorney
cc: Members of the Common Council
James F. Penman, City Attorney
Shauna Clark, City Administrator
Members of the Cable Television Commission
Frank Keller, CATV Manager