1983-07-20 Public Hearings and Regular Meeting

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Page 8 • FRANCHISE FEES Limitation. A franchise fee may not exceed five percent of the gross revenues derived from the operation of a cable system (Sec. 608(b)). Current FCC regulations restricting the franchise fee to three percent (unless greater regulatory costs are shown and the FCC grants a waiver in which case the franchise fee may go up to five percent) are eliminated. According to floor debate on the franchise fee cap, the limit does not in any way restrict authority to impose utility taxes or other taxes of broad appli- cability such as sales taxes which are imposed on other taxpayers in addition to cable companies or cable subscribers. In addition, assessments which are incidental to the enforcement of a franchise agreement (e.g., bonds, security funds, penalties, insurance) are not affected by this limitation (Sec. 608(d)(2)). Grandfathering of access payments. Section 608(b)(1) specifi- cally grandfathers any contribution or similar payment which is in addition to a five percent franchise fee and is required by an existing franchise for the purpose of facilitating the use of access channels. RENEWALS • Renewal test. A franchising authority is required to renew a franchise only if the cable operator complies with section 609's procedures and the franchising authority finds compliance with each provision of a strict five part test. The franchising authority may issue a complete RFP and consider competing appli- cations during the renewal process. In other words, the reason- ableness of the incumbent's proposal may be determined by com- paring it with the applications of other potential cable opera- tors. Under section 609(a), a franchising authority may reject an incumbent's application for renewal if it finds that: (1) the incumbent has not complied with the terms of the existing franchise; (2) there has been a material change in the incum- bent's legal, technical, or financial qualifications; (3) the cable system facilities proposed in the incumbent's application are not reasonable in light of the community need (i.e., communi- ty need for an up-to-date system) for and cost of the cable sys- tem facilities; (4) the technical quality of the system's signal has not met FCC standards; or (5) the proposals are not reason- able in other areas--e.g., the particular services or the set aside of system capacity for access uses proposed by the incum- bent do not meet the community's needs. C�