They might not know too much about megahertz and fiber optics, but Asheville City Council members are starting to hit hard on the proposed cable franchise with InterMedia.
“You guys have been too tough,” Vice Mayor Ed Hay told InterMedia General Manager Joe Haight and Attorney Bruce Stewart during a Feb. 3 work session. Because of InterMedia’s firm stance, “it’s been too hard to negotiate anything. That’s why we have an agreement that has so much concern [raised about it].”
Hay apparently had decided to bite back, taking issue with InterMedia’s offer of $150,000 to settle a long-standing franchise-fee dispute.
During a four-year period between 1992 and 1995, TCI — the franchise holder before InterMedia — may have underpaid franchise fees by more than $500,000, according to an informal audit by Rice, Williams Associates, Assistant City Attorney Patsy Meldrum noted.
InterMedia, which bought TCI’s Asheville system in 1996, is aware of the discrepancy. But InterMedia has offered to pay $150,000 and call it even when the proposed new franchise agreement is signed.
Stewart claimed that if a deal is struck soon, the city will collect $230,000 more per year under the future contract than it would have under the current one. The proposed agreement broadens the definition of gross revenue, on which the payment amounts are based, effectively increasing the amount the company would pay the city each year.
But Hay had his mind set on that $500,000. He suggested renegotiating the $150,000 settlement as a separate issue from the overall franchise agreement — and then suing.
“The courts could say we get zero,” Council member Barbara Field cautioned.
Meldrum added that going to court would mean filing suit against several cable companies — TCI, United Artists, Daniels — all previous franchise holders that may have underpaid the fee. During negotiations to reach the $150,000 figure, Field said, “We had to consider how long [a lawsuit would take] and how much money a legal battle would cost.”
Mayor Leni Sitnick took up Hay’s argument, pointing out that the fee dispute has gone on for more than four years — without penalties or interest charged to the cable company. “I know it’s not all InterMedia’s doing,” Sitnick acknowledged. “But they inherited it.”
Sitnick went on the offensive, as well: Under the proposed agreement, the cost of new public-access channels and an institutional network would be passed on to subscribers. “I understand capitalism,” Sitnick told Haight and Stewart. “I just want assurances we’re not overstrapping [basic] rate-payers.”
Stewart responded, “You [say] we’ve been sort of tough. [But] we’re considering the costs.” As an example, he cited the 750-megahertz system the city requested. That system would cost about $2.5 million, he said, on top of InterMedia’s system rebuild, whose price tag already tops $14 million. The costs of the services the city has requested have to be balanced against what InterMedia can reasonably hope to recoup with subscriber fees, Stewart asserted.
Council member Chuck Cloninger joined the fray, asking why InterMedia doesn’t want the franchise agreement to stipulate that all city schools get cable and Internet connections — especially when it’s standard InterMedia policy to offer those services.
“We didn’t want to set a precedent by having the city require it,” Stewart answered. The attorney added that federal cable regulations may prohibit cities from requiring those connections.
“If it’s a matter of policy, why would you care about setting a precedent?” Cloninger asked. “You’re telling me you could change that policy.”
Stewart dodged a bit in his reply, but he acknowledged that the policy could change.
Council members also discussed the state-of-the-art clause in the franchise proposal, plus the suggested plan for funding the public-access channels, as well as a few other topics that were almost whimsical.
“What would happen if InterMedia went belly up?” Hay asked.
According to the abandonment clause in the proposed agreement, InterMedia’s cable equipment would become the city’s property — if InterMedia didn’t promptly remove it, Stewart noted.
Close-up on cable
You can’t talk strategy when the opposing team is sitting at the table.
That simple fact has Cloninger worried.
Council members have completed several work sessions on the proposed cable franchise with InterMedia. Serious concerns have been raised along the way, and two public meetings are coming up. Hinting that Council may want to renegotiate key issues in the deal, Cloninger told Council members on Feb. 3, “Surely we have some rights to go into closed session.”
City Attorney Bob Oast replied, “I’m not sure I can answer … completely today.” Council can go into closed sessions to discuss potential litigation, or to seek confidential advice from an attorney, he said.
City Manager Jim Westbrook interjected that he has “some ideas” on how the city should handle Cloninger’s concern. “But I don’t want to talk about it in public, or before the public hearings,” he said.
Council members directed Westbrook and Oast to inform them of the options by the Feb. 24 public hearing. Sitnick noted that Council members are not obligated to vote on the cable franchise proposal at that time.
Cloninger urged, “Let’s not give away our ability to negotiate the best agreement [for the city].”
An I-Net alternative
Council members aren’t likely to take the offer, but Internet of Asheville gave the city an option to consider during cable-franchise negotiations.
For $380,000, InterMedia has offered to provide fiber-optic lines for an institutional network linking key city facilities.
But Bill Fishburne, general manager at Internet of Asheville, said he could do it for less. Using existing telephone lines, the city could set up Asynchronous Digital Subscriber Lines — a new technology that could provide the same voice-, data- and video-transmission services offered by a fiber-optic I-net, Fishburne said.
Installing the system Fishburne proposed would cost just $80,000. But it would require monthly fees to Bell South (about $30 per location) and monthly Internet charges ($1,400 per location per month, to IOA or another provider), Fishburne estimated.
“DSL does provide good [bandwidth] capacity, but not as much as [InterMedia’s proposed] four fiber-optic lines,” said consultant Jean Rice. “You would save more money, have more options over time, with [InterMedia’s] I-net. [But] Fishburne’s offer is an option,” she concluded.
“It’s just an idea,” said Fishburne, adding that he hadn’t expected Council to take him up on it.
Council members thanked him for the offer.
Vanderbilt needs a fix
Heads up: The bricks may start falling off the Vanderbilt Apartments in downtown Asheville.
Vanderbilt board members raised this alarm and asked for money during the Feb. 3 work session.
Council members expressed concern for the building’s low-income, elderly residents — but made no promises.
Vanderbilt Apartments board chairman Jim Sawyer explained that it would take $2.3 million to replace the building’s brick face, which is separating from the underlying foundation because it was improperly installed in the late 1960s. Showing pictures of loose bricks and crumbling mortar, Sawyer said, “We’ve been in fear of a brick falling any day. … We’re not just talking about possibilities here. Some bricks are currently loose.”
To pay for the repairs, the nonprofit’s board has recommended raising rents for the 158 units, applying for a $2.1 million loan from the federal Department of Housing and Urban Development, and requesting $150,000 in Community Development Block Grant money and $150,000 in HOME funds — as well as $22,500 each, annually, from the city and county.
The payments by Asheville and Buncombe County would cover the rent increase for the 38 percent of Vanderbilt residents who do not receive federal Section 8 rent assistance, Sawyer explained. The other residents would not be affected, because the increase would be covered under the Section 8 program, he said.
Sawyer estimated that the Vanderbilt could generate an additional $13,307 per month with the total rent increases, then use that money to make payments on the HUD loan.
The increase would mean at least $1,000 more per year in rent for each occupant.
Without the $2.1 million loan and the city/county monies, “we would probably close down,” Sawyer said.
That would displace more than 150 residents, most more than 70 years old and with incomes of less than $9,600 per year. Current rents, based on residents’ incomes, range from $200 to $310 — amounts almost impossible to find elsewhere in Asheville.
“Every year, the Vanderbilt comes back to the [community development] committee with a different problem,” noted Hay. He and Field serve on the committee which recommends how local CDBG and HOME funds should be spent each year. Expressing concern that problems at the Vanderbilt may be compounding, Hay questioned whether the building is worth saving.
Sawyer replied that there are no other major structural problems. He added that it would cost about $8 million to completely replace the Vanderbilt.
Field noted that the Vanderbilt’s CDBG/HOME requests would be difficult to honor this spring, because $150,000 would take up most of the city’s share of available HOME monies from the federal government.
As for $22,500 from the city … “We don’t want to lose this housing [for the elderly], but I don’t want to set a precedent that every time a nonprofit has financial trouble, it comes to us,” said Field.
She suggested referring the Vanderbilt request to the Community Development Committee and asking city staff to check out the building’s safety concerns.
Sawyer noted that emergency repair work had been done at the Vanderbilt. Some 400 “helifix” anchors were installed to temporarily keep the brick from loosening any further, he said. But it won’t last long, Sawyer insisted.
“I don’t know if we can respond as fast as you need us to,” Field cautioned.
Council members agreed to refer the issue to the community development committee for a recommendation.