AGENDA #4i
MEMORANDUM
TO: Mayor and Town Council
FROM: W. Calvin Horton, Town Manager
Ralph D. Karpinos, Town Attorney
SUBJECT: Franchise for TelCove Operations, Inc. – Second Reading
DATE: March 7, 2005
The attached ordinance would approve, on first reading, a franchise for TelCove Operations, Inc. for provision of voice and data communications services within the Town of Chapel Hill. Under State law, adoption will require the Council to vote again at a subsequent meeting.
BACKGROUND
On October 14, 2004, Mr. Keith Pado, counsel for TelCove Operations, Inc. (TelCove), requested that TelCove be allowed to obtain a franchise to provide telecommunications service within the Town (Attachment 1). TelCove is an established telecommunications company currently offering services within North Carolina.
DISCUSSION
TelCove Operations, Inc. provides telecommunications services in North Carolina. State law allows the Town to require franchises for telephone companies that use public rights-of-way in Chapel Hill or on Town-owned property. The local franchising process for a telephone or similar communications company primarily sets forth how equipment may be located and relocated and how the Town is protected from liability related to a franchise holder’s operations. Other issues such as telephone rates are subject to federal and State regulations.
Under State law, franchise ordinances are not effective unless approved on two readings.
Proposed Franchise Ordinance
The attached ordinance, which is similar to the Madison River and BellSouth PCS franchise agreements, includes the following provisions:
· The franchise would be limited to telecommunications services, including cellular telephone services.
· The term would be 20 years with the potential for renewal.
· The company would have to relocate equipment in rights-of-way or Town-owned land at the company’s expense within 180 days after notice from the Town, if a suitable alternative site is available. If an alternative were not available, the relocation period would be extended for a time that must be legally reasonable under the circumstances. Relocation could be required in less than 180 days in emergency circumstances.
· The company would continue to pay utility franchise fees to the State, a portion of which the State transfers to the Town as for other public utilities.
· The company would provide insurance and indemnification of the Town.
· This agreement would not authorize the use of Town property, only rights-of-way. Use of Town property would be subject to a separate lease agreement negotiated under additional terms.
· This agreement would not allow the franchisee to provide services other than telecommunication services.
Next steps: If the Council approves the franchise ordinance at its March 7, 2005 meeting on second reading, the company would have 60 days to accept the terms of the franchise.
RECOMMENDATION
Manager’s Recommendation: That the Council enact the attached franchise ordinance, granting TelCove Operations, Inc. the right to provide telecommunication services in the Town of Chapel Hill.
ATTACHMENTS
1. October 14, 2004 letter from Keith Pado to the Town Attorney (p. 6).
2. October 19, 2004 letter from Town Attorney to TelCove (p. 9).
AN ORDINANCE GRANTING A FRANCHISE TO TELCOVE OPERATIONS, INC. TO PROVIDE VOICE AND DATA TELECOMMUNICATIONS SERVICES IN THE TOWN OF CHAPEL HILL (2005-03-07/O-7)
BE IT ORDAINED by the Council of the Town of Chapel Hill that the Council hereby grants a franchise to TelCove Operations, Inc. to operate a telecommunications system in the Town subject to the following conditions:
Scope of Services
The company may provide the following services:
Telephone and Data Communications Services, pursuant to authority granted by the Federal Communications Commission.
This franchise does not authorize the company to provide cable television or video services, for which a separate franchise could be requested. This franchise does not authorize placement of public use telephones on Town property or public rights-of-way.
Relocation of Equipment
Any of the company's equipment which may be located in public rights-of-way or other Town property shall be subject upon 180 days' written notice by the Town to removal or relocation at the company's sole expense to other place(s) satisfactory to the Town Manager; provided that places satisfactory to the Town Manager are available within such period and will not result in a material adverse affect on the quality of the company's telephone and data communications service provided to the Town; otherwise, such time period shall be extended as reasonably necessary for the company to find an adequate relocation site, provided, however, that the Town Council approves a separate lease agreement.
Subject to the time frames referenced in the preceding paragraph, removal or relocation may also be required by the Town due to street or utility improvements in general, due to public health and safety problems upon a determination by the Town or for other just and reasonable cause as may be determined by the Town.
Upon the Town's determination of an emergency need to remove equipment, such removal shall occur within the time period determined reasonably necessary by the Town after consultation with the company. Emergency needs are not subject to the time limits stated above.
Disturbance of Property within a Right-of-Way; Inspections
Any disturbance of property within or affecting a public right-of-way, as may be necessary for the installation and/or connection of services by the franchisee, must receive prior approval of the Town Manager or Manager's designee and shall be subject to Chapter 17, Article IV of the Town Code of Ordinances. The franchisee shall notify the Town Manager’s office 24 hours in advance of the start of any construction that will damage any existing public street or significantly obstruct the flow of traffic.
Term of Franchise
The term of the franchise shall be 20 years from acceptance by the franchisee, with the possibility of renewal subject to filing of a renewal application at least one year before the franchise expiration.
If at any time during the initial term of this franchise, or any renewal period, the franchisee sells its assets, or otherwise ceases the provision of telecommunications/data service in the area of the Town of Chapel Hill, franchisee may terminate this franchise upon sixty (60) days prior written notice.
Letter of Credit, Fees and Taxes
The company shall maintain a letter of credit or performance bond in the amount of $50,000, or a guarantee of the company's general partner, acceptable to the Town Manager, with the required amount to be replenished as necessary to maintain the required balance at all times to ensure compliance with all applicable State or local laws, ordinances and regulations and directives of the Town, with terms of the franchise and to ensure payment of any applicable fees and taxes due to the Town. So long as the company is subject to and does pay the State franchise tax imposed pursuant to N.C.G.S. §105-120, the Town shall not, and does not currently, charge a license, privilege or franchise tax on the company, which is not authorized by law and applicable to other similar businesses. Should the Town seek to impose a fee or tax on the company in the future, the company shall have not less than 120 days’ notice prior to the effective date of such fee or tax, and shall have the right to terminate the franchise provided that it shall remove its equipment from the Town property or public right-of-way within 60 days of termination.
Insurance and Indemnification of the Town
The company shall maintain general liability insurance naming the Town as an additional insured party and in a form satisfactory to the Manager. General liability coverage shall be in the amount of at least $1,000,000.
The company shall be required, by acceptance of the terms and conditions of this franchise, to indemnify the Town from all damages that may arise in connection with the company's actions and omissions and to defend the Town at the company's sole expense against any claims in connection with the company's actions and omissions.
Compliance with All Applicable Laws, Ordinances and Regulations
The company shall comply with Town ordinances, construction codes, other policies adopted by the Council, administrative regulations issued pursuant to Council action or policy, with directives of the Town that may be issued under the franchise ordinance terms or general law, provided that such policies, directives, codes, and regulations are consistent with State and federal laws and regulations, and with all applicable State and federal laws and regulations, including any requirement for State right-of-way encroachment agreements, etc. Failure to comply shall be grounds for revoking the franchise.
Acceptance of Franchise Terms
The company shall, within 60 days of adoption of this franchise ordinance on second reading, accept all terms and conditions of the franchise ordinance.
Revocation Procedure
If the franchise is revoked by the Council for failure to comply with any term or condition of this franchise after any cure period, the company shall cease utilizing its facilities located on Town property or public rights-of-way within 120 days of receiving notice of revocation and remove its equipment from public rights-of-way within 180 days. Upon the company's failure to do so, the Town shall have the right to remove the equipment and to draw funds from the letter of credit or to call upon the guarantee to cover such costs.
Before a decision to revoke the franchise, the Council shall adopt a resolution of intent to revoke the franchise with a statement of the reasons for revocation and shall cause a copy of the resolution to be delivered or mailed by first class mail to the company. Company shall have thirty (30) days from receipt of the intent to revoke to cure any breach listed in the intent to revoke, or if the cure cannot be reasonably effected within thirty (30) days such time as may be reasonably necessary to effect cure
Transfer Of Ownership
A change or changes in ownership of the franchisee cumulatively totaling a 25% or greater interest in the company shall be subject to review and reasonable approval by the Town Council within 120 days of receipt by the Town Manager of a request from the company for review of such a change(s) in ownership. In the event the Town Council reviews and, for good cause duly substantiated, objects to the change in ownership, it shall have the authority to revoke the franchise in accordance with the procedure set forth in the preceding paragraph.
This the 28th day of February, 2005. (First reading)
This the 7th day of March, 2005. (SECOND READING)