Article III — Grant of Franchise

No cable communications system shall be allowed to occupy or use the public streets or rights-of-way of the city or be allowed to operate such a system without a franchise granted in accordance with the provisions of this chapter.

(Prior code § 15003)

A.

Application. Any person seeking a franchise to operate a cable communications system within the city shall file an application for such franchise with the city. Such application shall be in the form and contain the information required by the city administrator and shall be accompanied by a nonrefundable filing fee established by the city council in an amount not to exceed the reasonable cost of processing the application.

B.

Public Hearing. When filed, the application shall be available for public inspection at places designated by the city administrator. No later than ninety (90) days after filing the application, a public hearing or hearings shall be held by the city council on the application. Notice of the initial public hearing shall be published in a newspaper of general circulation within the city on three separate days not less than five nor more than ten (10) days immediately preceding such hearing.

C.

Decision. At the conclusion of such hearing or hearings, the city council shall determine to grant the franchise subject to any appropriate terms and conditions as the council may prescribe or determine not to grant the franchise.

(Prior code § 15004)

Any franchise granted under this chapter shall authorize and permit the grantee to engage in the business of operating and providing a cable communications system in the city within the service area specified in the franchise and for that purpose to erect, install, construct, inspect, repair, replace, reconstruct, maintain

and retain in, under, on, across, along, over and above any street or right-of-way such structures and equipment as are necessary, appurtenant or useful in the operation of the cable communications system.

(Prior code § 15005(A))

In the event that the city council shall grant to the grantee a franchise to install, construct, operate and maintain a cable communications system within a service area, such franchise shall constitute both a right and an obligation to provide the services of a cable communications system as required by the provisions of this chapter and the franchise.

(Prior code § 15005(B))

Any franchise granted shall be nonexclusive. The city council specifically reserves the right to grant, at any time, such additional franchises for cable communications system as it deems appropriate.

(Prior code § 15006)

For the purpose of operating and maintaining a cable communications system in the service area, and subject to the provisions of this chapter, the grantee may erect, install, construct, inspect, repair, replace, reconstruct, maintain and retain in, under, on, across, along, over and above any street or right-of-way within the service area such wires, cables, conductors, connectors, poles, anchors, guys, pole attachments, ducts, conduits, vaults, manholes, amplifiers, transformers, appliances, pedestals, drops, attachments, and other structures and equipment as are necessary, appurtenant or useful to the operation of the cable communications system. Prior to construction or alteration of any part of the cable communications system situated in the streets or rights-of-way for which an encroachment permit or other approval is required by this code, the grantee shall in each case file plans with the appropriate city department and receive such encroachment permit or other approval before proceeding. The grantee shall comply with all applicable city requirements relating to construction performed within city streets or rights- of-way.

(Prior code § 15007)

The term of any franchise and all rights, privileges, obligations and restrictions pertaining thereto shall be as set forth in the grantee's franchise, but shall in no event be for a period of more than twenty (20) years from the effective date of the franchise. The effective date of the franchise shall be the date written acceptance thereof by the grantee is filed with the city clerk or such other date as may be specified in such franchise.

(Prior code § 15008)

The city council may grant a franchise for the construction, operation and maintenance of a cable communications system for the entire city or any defined portion of the city.

(Prior code § 15009)

A.

Amount of Franchise Fee. A grantee of a franchise granted hereunder shall pay to the city a franchise fee in the amount specified in grantee's franchise.

B.

Acceptance by City. The acceptance of a franchise fee payment by the city shall not be construed as a release or as an accord and satisfaction of any claim the city may have for further or additional sums payable as a franchise fee under this chapter or for the performance of any other obligation of the grantee.

C.

Failure to Make Required Payment. In the event that any franchise fee payment is not made on or before the date specified herein and the grantee fails to make such payment within five days after receipt of written notice from the city demanding such payment, the grantee shall pay as additional compensation:

An interest charge, computed from such due date, at the legal rate of interest under California law in effect upon the due rate;

A sum of money equal to five percent of the amount due (exclusive of interest due under subsection (C)(1) of this section) in order to defray those additional expenses and costs incurred by the city by reason of delinquent payment.

D.

Quarterly Payments. Franchise fee payments due the city under this section shall be computed quarterly, for the preceding quarter, as of March 31st, June 30th, September 30th, and December 31st. Each quarterly payment shall be due and payable no later than forty-five (45) days after the dates listed in the previous sentence. Each payment shall be accompanied by a statement of gross revenues received by the grantee for such quarterly period showing the basis for the computation of the franchise fee then due. Such statement shall be certified as accurate by an authorized representative of the grantee.

E.

Annual Certification. Within one hundred eighty (180) days after the expiration of each calendar year or portion thereof during which the franchise is in force or within such other time as may be specified in the grantee's franchise, the grantee shall file with the city finance officer a statement prepared by a certified public accountant for the grantee setting forth the gross revenues for such calendar year or portion thereof.

If the amount of the gross revenues reported by such certified public accountant exceeds the amount thereof as reported in the statements prepared by the grantee for all quarterly periods of such calendar year, the grantee shall pay to city, within fifteen (15) days after the time for filing the statement certified by such certified public accountant, the amount of the additional franchise fee due for such calendar year or portion thereof, provided that if the amount of the additional franchise fee is in excess of five percent of the gross revenues as reported by such certified public accountant, the grantee shall also pay the city interest on the amount of the additional franchise fee at the legal rate of interest under California law as in effect and computed from and after January 1st of the year in which such certified statement is furnished to the city. If the amount of the gross revenues reported by such certified public accountant is less than the amount thereof as reported in the quarterly statements prepared by the grantee, the city shall pay to the grantee, within fifteen (15) days after the time for filing the statement certified by such certified public accountant, the amount by which the franchise fee was overpaid or, at the option of the city, such overpayment shall be credited against the franchise fee next becoming due and payable to the city.

F.

Right of Inspection. At all reasonable times upon prior written notice to the grantee, the city shall have the right to inspect and audit the grantee's records showing the gross revenues from which its franchise payments are computed, provided that such inspection and audit shall extend to no other books or records of the grantee. If any independent audit of the grantee's records directed by the city evidences an underpayment of the franchise fee in excess of five percent, the grantee shall assume all reasonable costs for said audit.

(Prior code § 15010)

A.

Transfer of Franchise. Any franchise granted hereunder shall be a privilege to be held for the benefit of the public. Such franchise cannot in any event be sold, transferred, leased, assigned or disposed of by forced or voluntary sale, merger, consolidation, receivership, or other means without the prior consent of the city, which consent shall not be unreasonably withheld and then only under such conditions as the city may establish, provided that the franchise maybe transferred to any affiliate of grantee or to any entity controlled by or under common control of grantee as of the effective date of the initial franchise without such consent.

B.

Ownership or Control. The grantee shall promptly notify the city of any proposed change in, transfer of or acquisition by any other party of control of the grantee. The word "control" as used in this section is not limited to major partners or stockholders but includes actual working control in whatever manner exercised. A rebuttable presumption that a transfer of control has occurred shall arise upon the acquisition or transfer by any person or group of persons of twenty-five (25) percent of the aggregate partnership interests in or voting shares of the grantee. Every change, transfer or acquisition of control of the grantee shall make the franchise subject to cancellation unless and until the city shall have consented thereto, except as provided in subsection A of this section. For the purpose of determining whether it shall consent to such change, transfer or acquisition of control, the city may inquire into the qualifications of the prospective controlling

party, and the grantee shall assist the city in any such inquiry. In seeking the city's consent to any change in ownership or control of the grantee, the grantee shall have the responsibility to establish to the reasonable satisfaction of the city:

Whether the proposed purchaser, transferee or assignee (the "proposed transferee") which, in the case of a partnership or corporation, shall include all partners, officers, director and all persons having a legal or equitable interest in five percent or more of its partnership interests or voting stock, or any of the proposed transferee's principals:

a.

Has ever been convicted or held liable for acts involving moral turpitude or is presently under an indictment, investigation or complaint charging such acts, or

b.

Has ever had a judgment in an action for fraud, or misrepresentation entered against it, her, him or them by any court of competent jurisdiction, or

c.

Has pending against it, her, him or them any legal claim, lawsuit or administrative proceeding arising out of or involving a cable communications system; and

Whether the proposed transferee has the financial and technical capability to enable it to maintain and operate the cable communications system for the remaining term of the franchise under the existing franchise provisions.

C.

Right of Lender to Operate System. Notwithstanding anything to the contrary contained in this chapter, any financial institution having a pledge of the franchise for the advancement of money for the construction and/or operation of the cable communications system operating under authority of such franchise shall have the right to notify the city that it or its designee satisfactory to the city will take control and operate the cable communications system in the event of a grantee default in its financial obligations. Further, such financial institution shall also submit a plan for such operation that will insure continued service and compliance with all franchise requirements during the term the financial institution exercises control over the system. The financial institution shall not exercise control over the system for a period exceeding one year unless extended by the city in its discretion and during such period of time it shall have the right to petition the city to transfer the franchise to another grantee. If, after considering the legal, financial, character, technical, and other public interest qualities of the proposed transferee, the city finds that such transfer is satisfactory, the city will approve the transfer and assign the rights and obligations of such franchise to such proposed transferee.

D.

No Transfer Before Completion of Construction. In the absence of extraordinary circumstances, the city will not approve any transfer or assignment of the franchise prior to completion of construction or reconstruction of the proposed cable communications system.

E.

Transferee to Assume Grantee's Obligations Under Franchise. In no event shall a transfer of ownership or control be approved without the successor in interest to the grantee assuming all of the grantee's obligations under its franchise. Notwithstanding the requirements of the grantee's franchise, the city may require, as a condition of the transfer of such franchise, that the proposed transferee furnish either or both a security fund and a performance bond in such amount or amounts as the city shall designate.

F.

Permitted Encumbrances. Notwithstanding the provisions of this section, the grantee may pledge, assign, hypothecate or create a security interest in its franchise without the consent of the city in favor of any bank, financial institution, or other lender with respect to any indebtedness of the grantee to such person.

(Prior code § 15011)

Renewal of any franchise granted under this chapter shall be undertaken in accordance with applicable federal or state law or, in the absence of any such renewal procedures, the following provisions of this section shall apply.

A.

Application. Not later than eighteen (18) nor earlier than twenty-four (24) months prior to the expiration of any franchise granted pursuant to this chapter, a grantee may submit an application for renewal of such franchise. Such application shall be in the form and contain the information required by the city administrator and shall be accompanied by a nonrefundable application fee established by the city council in an amount not to exceed the reasonable cost of processing the application.

B.

Public Hearing. When filed, the application shall be available for public inspection at places designated by the city administrator. No later than ninety (90) days after filing the application, a public hearing or hearings shall be held by the city council on the application. Notice of the initial public hearing shall be published in a newspaper of general circulation within the city on three separate days not less than five nor more than ten (10) days immediately preceding such hearing.

C.

Decision. At the conclusion of such hearing or hearings, the city council shall determine to renew the franchise subject to any appropriate terms and conditions as the council may prescribe or determine not to renew the franchise.

D.

Nonrenewal. If the decision of the city council is not to renew the franchise, the council may initiate public solicitations for applications for a new franchise. The original grantee shall not be precluded from submitting such an application.

E.

Additional Services. In any renewal or public solicitation, the city council may require additional services, system upgrade, or any other conditions it deems feasible and appropriate in the light of the state of art of the cable communications industry at that time, taking into consideration the cost of such services, upgrades, or other conditions to both the grantee and its subscribers.

F.

Renewal of Existing Franchises. The provisions of this section relating to the time for filing a franchise renewal application and the time for holding a hearing or hearings on such application shall not be applicable to any franchise originally granted prior to January 1, 1987.

(Prior code § 15012)

For either a new franchise award, a franchise transfer or a franchise renewal, costs to be borne by the grantee, unless otherwise specified in the grantee's franchise, shall include, but shall not be limited to, all costs incurred for publication of any notice of a public hearing on the franchise award, transfer or renewal, all costs incurred in the development and publication of relevant ordinances or agreements, and any cost not covered by the application fee but reasonably incurred by the city in its study, preparation of proposal solicitation documents, and evaluation of applications, including, but not limited to, consultant and attorney fees and city staff time.

(Prior code § 15013)