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TO: |
Roger L. Stancil, Town Manager |
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FROM: |
Kenneth C. Pennoyer, Business Management Director Sabrina Oliver, Communications and Public Affairs Director Catherine Lazorko, Public Information Officer |
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SUBJECT: |
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DATE: |
June 9, 2008 |
PURPOSE
We have completed negotiations with The Peoples Channel for renewal of a performance agreement as authorized by the Council on September 24, 2007. Because the revised performance agreement includes changes created by the Video Service Competition Act, we request Council authorization of the revised agreement. The attached resolution would approve The Peoples Channel Performance Agreement as amended.
The provisions of the three-year agreement include the following:
Public access television in Chapel Hill dates back to September 1997 when a Town Public Access Advisory Committee reviewed non-profit group proposals to manage public access television in Chapel Hill and recommended a proposal made by The Peoples Channel. Its mission was established to promote use of the public access channel by coordinating the use of Channel 8 and providing production facilities, and to provide technical assistance and media training to any individual, group, or organization interested in producing cultural, informational, entertainment, or educational media productions of interest to the community.
The Peoples Channel was established in 1998 with an $80,000 payment from Time Warner Cable for public access equipment and other start-up costs. The Town began charging a public access fee of 65 cents under a resolution adopted by the Council on November 11, 1996, and amended that amount each year for inflation so that the fee currently is 80 cents. This “subscriber fee” is charged to Chapel Hill cable subscribers, collected by Time Warner Cable, and passed through to the Town, which then forwards the amount to the public access station. The Peoples Channel received $121,432 in subscriber fees from the Town in 2006-07.
Performance agreements for The Peoples Channel were renewed on April 9, 2001, and again on October 5, 2004. On September 7, 2007, Chad Johnston, executive director of The Peoples Channel, requested renewal of the performance agreement with changes. We have been in discussions with our cable consultant (Attachment 1) through Triangle J Council of Governments Cable Consortium for guidance on the revised performance agreement.
While the performance agreement does not require approval by Council adoption, we believe the changes made necessary by the Video Service Competition Act of 2007 warrant Council review.
VIDEO SERVICE COMPETITION ACT
North Carolina State Session Law 2006-151 deregulated the video service provider industry in North Carolina. The law became applicable on January 1, 2007. SL2006-151 establishes the Office of the Secretary of State as the state’s sole authority to grant new video franchises to both new and current video providers. Current local franchises remain in effect until they either expire or an incumbent operator files a qualified application for and receives a state issued franchise. The Town of Chapel Hill’s franchise with Time Warner Cable remains in effect.
A state-administered sales tax replaced the majority of franchise fee payments on January 1, 2007. The revenues that are forwarded by the state to municipalities are based on the revenue pool derived from applicable sales tax receipts.
Under the Act, percentages of the sales tax collections on telecommunications, sales tax collections on cable service and sales tax collections on home satellite television service are to be distributed to North Carolina communities on a proportional basis. Cities and counties share portions of these three state taxes to replace the local cable franchise fee which expired January 1, 2007, and the public access fee which will expire concurrent with the franchise agreement.
Sales Tax on Video Programming
Due to the passage of the Video Service Competition Act, the Town of Chapel Hill no longer receives cable franchise fees from Time Warner Cable. Instead, the Town receives the Sales Tax on Video Programming distributed quarterly by the NC Department of Revenue (Attachment 2), which collects varying levels of taxes from cable, satellite, and telecommunication companies in the state and redistributes the tax. While the Town’s franchise agreement remains in place with Time Warner Cable, we continue to receive smaller payments from Time Warner for non-video service areas still covered through our franchise agreement.
Cable revenues are added directly into the Town’s general fund. When payments were made from Time Warner Cable, the Town anticipated a percentage increase from year to year. In the future, we cannot predict whether cable revenues will remain the same, increase or decrease.
The Town’s cable franchise fees from Time Warner Cable increased from $432,960 in FY 2001 to $537,507 in FY 2006. Under the new Video Programming Sales tax substitute, the Town received $263,637 from the State in FY 2007, a portion of which was for Supplemental PEG Support and PEG Subscriber Fees, as described below. Also in FY 2007, the Town received $329,111 from Time Warner Cable. Because the Video Service Competition Act became effective in January 2007, the FY 2007 revenue total includes two quarters of usual franchise fee payments from Time Warner Cable. (Attachment 2).
Funding for Public, Education and Government (PEG) Channels
The Town of Chapel Hill has three (3) Public, Education and Government (PEG) cable channels. The “P” is the public access channel managed by The Peoples Channel on Ch. 8, which features programming produced by the community. The “E” or education channel is STV on Ch. 4, the local student access channel for the University of North Carolina at Chapel Hill. The “G” or government access channel is Chapel Hill Government on Ch. 18. This channel features government meetings and public hearings, as well as candidate forums, debates and announcements to the community from various departments about services, special events and news for Chapel Hill.
The government access channel has been supported by the Town, and the education channel is supported by UNC-Chapel Hill. The Town established a separate funding mechanism for the “P” of the PEG Channels lineup or “public access television” through the creation of subscriber fees charged directly to the cable customer, collected by Time Warner Cable, and passed through directly to the public access cable provider, The Peoples Channel. This method of supporting public access programming was established by our 20-year franchise agreement with Time Warner Cable, which was granted in 1996 and continues as long as the franchise agreement remains in place. If the Town’s franchise with Time Warner Cable ends, so will the subscriber fees.
As part of its distribution of Video Programming Tax, the NC Department of Revenue identifies Supplemental PEG Channel Support that has ranged from $3,680 to $9,375 per quarter, since 2007. The state law specifies that these revenues must be used “for the operation and support of the PEG Channels.” Catharine Rice, the Town’s cable consultant through the Triangle J Council of Government Cable Consortium, recommends that the Town determine the distribution of these funds based on the financial needs of each of the three PEG channels. (Attachment 2). We believe it would be reasonable to consider this as part of the Town’s annual budget process.
Another source of new funding for Chapel Hill’s PEG channels is identified as PEG Subscriber Fee Revenue. Because Chapel Hill received PEG subscriber fees during the first six months of the 2006-07 fiscal year, it was required to certify these subscriber fees with the NC Department of Revenue. Accordingly, a percentage of the Town’s Video Programming Tax distributed by the State should be used “for the operation and support of PEG channels.” The Town’s cable consultant recommends that the Town agree to distribute these funds to the PEG channels based on the financial needs of each channel, and as best meets the community’s needs. (Attachment 1). We believe it would be reasonable to consider this as part of the Town’s annual budget process.
THE PEOPLES CHANNEL PERFORMANCE AGREEMENT
The substantive change to The Peoples Channel Performance Agreement may be noted in the “Payments from the Town” section, which reflects funding changes created by the Video Service Competition Act. We believe the Town could consider PEG funds distribution as part of the annual budget process. (Changes are noted with underlining and strike-throughs).
We believe the revised Performance Agreement (Attachment 3) of The Peoples Channel meets the interests of the Town and its desire to support public access cable programming.
RECOMMENDATION
That the Council adopt the attached resolution authorizing renewal of The Peoples Channel Performance Agreement, as revised and attached.
ATTACHMENTS