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HomeMy WebLinkAbout2006-0501 Study Session Packet (pdf)Barbara Christenson City Recorder Council Meeting Packet CITY OF -ASHLAND CITY COUNCIL STUDY SESSION AGENDA Monday May 1, 2006 at 5:15 p.m. Council Chambers, 1175 East Main Street 1. Railroad Property 2. Ashland Fiber Network Open. Carrier Discussion 0 In compliance with the Americans with Disabilities Act, if you need special assistance to participate in this meeting, please contact the City Administrator's office at (541) 488-6002 (TTYphone number 1-800-735-2900). Notification 72 hours prior to the meeting will enable the City to make reasonable arrangements to ensure accessibility to the meeting (28 CFR 35.102-35.104 ADA Title I). IrrJAAMA CITY OF -ASHLAND Council Communication/Study Session Railroad Property Update Meeting Date: May 1, 2005 Primary Staff Contact: Ann Seltzer Department: P istration ann@ashland.or.us Contributing Deps: Secondary Staff Contact: Gino Grimaldi Approval: grimaldig@ashland.or.us Estimated Time:1 hour Statement: The Union Pacific Railroad Company (UPRR) is planning to begin a voluntary cleanup of the railroad property in Ashland in preparation for sale of the property. Background: In 2001 the Oregon Department of Environmental Quality (DEQ) issued a Record of Decision (ROD) detailing the selected remedial actions for UPRR and the former rail yard in Ashland. The yard is located on a 20-acre parcel north of A Street. The yard operated as a locomotive maintenance, service, and railcar repair facility between 1887 and 1986. Facility operations resulted in environmental contamination at the site. Soils have been contaminated with arsenic, lead, polynuclear aromatic hydrocarbon compounds (PAHs) and total petroleum hydrocarbons (TPH). UPRR will be cleaning the site to residential standards which includes, but is not limited to, excavating soils containing contaminants and transporting these soils off site for treatment and/or disposal; removing the oil/water separator, tank saddles and contaminated soils near the separator and saddles; backfilling the two man- -made ponds after water and sediments have been sampled and/or removed and disposed of, if necessary; removing ballast and residual petroleum associated with the former drip slab and more. These actions are considered to be protective, effective, reliable, implantable and cost-effective. The selected remedy is consistent with the future anticipated use of the site as a mixed commercial/residential land use area. Staff is in regular contact with DEQ and has been working with the agency to develop the public involvement plan. The Mayor and staff met with representatives of UPRR on April 21, 2006. Assuming that the bids are within budget, UPRR will be awarding the contract for the cleanup sometime this week and anticipates work to begin in early June. They anticipate the process will be completed last for four months. Greg Aitken from DEQ will attend the study session and speak to the ROD as well as the draft Public Involvement Plan. Residents and businesses in the area immediately surrounding the railroad property were sent a letter about this study session and invited to attend to hear Greg speak about the clean up process. Attachments: • A Draft DEQ Public Involvement Plan • B Letter mailed to residents and businesses in the area surrounding the railroad property. • C Letter from the Mayor to Mike Sattler, UPPR real estate division. • C Letter from the Mayor to Greg Aitken, DEQ project manager. PUBLIC INVOLVEMENT PLAN FOR ENVIRONMENTAL CLEANUP tit� updated April 13, 2006 Greg Aitken, Project Manager Cleanup Program Oregon Department of Environmental Quality Public Involvement Plan for Environmental Cleanup Former Southern Pacific Rail Yard Ashland, Oregon Updated April 13, 2006 This plan has been developed by the Oregon Department of Environmental Quality (DEQ) for public involvement in on -going environmental clean ork at the former Southern Pacific Rail Yard (Yard) in Ashland. The Yard is c y owned by the Union Pacific Railroad Company (UPRR) and UPRR is managin site cleanup work. Since 1993, UPRR and its predecessor, the Southern Pacific a 11 pppany (SPRR), have been voluntarily investigating soil and groundwater n inatiA, the Ashland Yard and planning its cleanup under the supervision of tQ. Plans to implement the final Yard cleanup h een postp ed for several # s by UPRR until recently, when the sale of the prop was ated with a bu r. UPRR now plans to undertake the final cleanup of the -2006, after executing a Remedial Decision/Remedial Actia} Bement wit Q during the spring of 2006. DEQ believes that public involvemdn an 1 co of of a successful environmental cleanup. Public involy' nt r nsui at people who live and/or p p � � � p p work in the communiti ding cl s had portunities for participation in the environmental d n-m proce effective public involvement program should enable cor d citizens particip n the process of restoring the environment at the , and s responsi address any public concerns about threats or perceived t ' welfare. Concerns of the public must be addresse#ily, nsistently pure confidence in the process and the outco V Previ ublic involve t effo 1'elated to the Ashland Yard have included public informatt , eetings hel 1992, 1994, and 1999. DEQ hosted a formal public comment p in 2000 re deciding on the final cleanup plan for the Yard. A document repo co` ng major project reports was established at the Ashland Public Library in 041 This public involvement plan serves as a blueprint for public information and participation during the Yard's cleanup. It identifies the process for identifying the public's concerns relating to the project and site cleanup, and suggests ways that those responsible for the cleanup will respond to those concerns. It should also be considered a "work in progress;" the plan is subject to modification based on the community's needs. I.Objectives The objectives of the public involvement program for the cleanup of the Yard are to: Page 3 Public Involvement Plan for Ashland Rail Yard Cleanup April 6, 2006 1. Update information regarding community concerns, ideas, and options relevant to the cleanup; 2. Re-establish relationships with the community and provide opportunity for community involvement; 3. Provide health and safety information about environmental impacts and the cleanup work to potentially affected persons and nearby residents. II. Project Overview The Yard is located on a 27-acre parcel of land along A While a variety of historical operations were once carri 1iut at` currently vacant except for a groundwater recoveXtn( treatment s to the locomotive refueling area. Several buildiiations remain above ground structures have been remov The Yard operated between 1887 and 1986 as a repair facility. Various structures in%re ng a hot repair shed, turntable, roundhouse,q llai once present at the site. A 55,000-babN installed at the site around 1900 anved in maintenance and related to the rail active rail lines p During installation ofl encounte soi Cont ed sol 1 feet, ground su down lent direction Material fi oved from is pumpedttli bove ; constructed o an( Southern Pacific were A few acent to thtl site. vn Ashland. the yard is located adjacent e site, but all and railcar r station, freight station, car and storage buildings were N C fuel oil tank was ®Most locomotive fore 1960. All facilities ;rete foundations remain. Two ' '111 n ` Tabs in the mid-1980s, Southern Pacific allow groMS ter impacted by former fueling operations. PP Y Nilere removed to the saturated zone at a roximatel 3.5 ; sive product recovery wells were then installed in the gmov� boating product from the shallow groundwater zone. Ze wells is pumped to an oil/water separator. Recovered oil I storage tank and treated water is discharged to a pond The whole treatment area is fenced. Systems separated the site into three parcels and completed preliminary site assessment reports for each parcel in early 1991. Based on this work, DEQ issued a No Further Action finding for Parcel 1 located along the southeastern property boundary. Both Parcel 1 and Parcel 2, located along the southwestern property boundary, were subsequently sold. Phase I and Phase H Environmental Site Assessments were performed on the eastern two acres of Parcel 3, the remaining portion of the site, in 1992 for a potential purchaser of that property. While the sale was never completed, the investigation helped identify potential soil and groundwater contamination related to past locomotive refueling operations at the site. DEQ reviewed and approved a remedial investigation (RI) Report in 1999, which identified contaminant source areas and extent. Page 4 Public Involvement Plan for Ashland Rail Yard Cleanup April 6, 2006 This report included a risk assessment that evaluated the degree of risk posed by site contamination to human health and the environment. The results of this work served as the basis for UPRR's Feasibility Study report, completed by UPRR in 1999 to evaluate and recommend the best methods for Yard cleanup. DEQ selected the final cleanup recommendation in a 2001 Record of Decision after soliciting public comments on a DEQ Staff Report. III. Human Health and Environmental Concerns The human health concerns at the Yard include lead, arsem polynuclear aromatic hydrocarbons in site soils exceeding DEQ's risk -based s or possible future residential land use of the Yard. Groundwater contami� "Ibn b oleum hydrocarbons was identified, but was determined to not require cttidence txp because w groundwater onsite has no known beneficial use and there is of cont ami =€ is migrating into off -site groundwater. Long-term ecolog asks from site contamiri ` were not identified.11111, J11,1111 �� IV. Audience for Public Involve7r� Process The public involvement program for jAsh who are potentially affected, or percei ' �4at the, environmental impactsurpose d� materials (e.g., fact s� ; D ssumes included in the are=tw1 n on Fite 2 fit t !cr consult with the cii As direct mailings about V. PlaA�,Llem i ktion DEQ �tbsible respon public i lyement progr 1. Maintain project it Off for advii t Yard 68 will focus on all parties tent affected, by the Yard's p ailing list for public outreach owners and occupants of properties erion, at a minimum. DEQ will i refining these geographic limits for pert 'ing the following tasks as part of implementing the a, ,for the Ashland Yard cleanup: ect website for timely, updated, and publicly accessible ects/UPRRAshland/UPRRAshlaild.htm Key components of this website will include: project background, description of contaminant hazards, key documents,maps and photos, links to project partners and stakeholders, media coverage, and contact info. 2. Prepare and maintain a mailing list of local community members that fit the criteria outlined in Section IV above, including owners and occupants of the properties identified within the geographic area shown on Figure 2; • Amount of inte 'tion n involvement, t p, EQ To ensur ncei- follo ethoc� ece • hone calls to • In 1 meetings w • Intera . ° 9 workshops • or VI. Content;$ " with local"4§ unity residents and city erence being involved in the the gtypvo hent program to account Page 5 Public Involvement Plan for Ashland Rail Yard Cleanup April 6, 2006 2. Prepare fact sheets concerning the Yard's cleanup project status for mailing to all individuals included in the mailing list prepared in (1) above; 3. Notify all public involvement program participants of meetings, milestones, and project schedules; 4. Initiate and facilitate a public meeting; provide written information as hand-outs at these meetings; 5. Respond appropriately to any concerns or issues raised ��Otubers of the local community; and 6. Monitor the public involvement process to ens hat question concerned citizens are appropriately answered. 1 ' To determine specifically how to communica th the 1 Community, will consider the following issues in consultation wit }pjflj}�{{p land officials: Audience preferences: DEQ wills government officials regarding co Ashland Yard cleanup. DEQ will for these preference conimaj. embers wish to have increased ;ase the �1 of public interaction, as feasible. members are heard, DEQ may use the solicit feedback and provide information: community members; board to solicit input on specific issues. DEQ will provide information about the cleanup to the local community consistent with the following criteria: • Information wanted (requested) by local community and local government officials; • Information that is likely to be misunderstood if not clearly explained; • Information deemed important by DEQ, UPRR, and/or the City of Ashland. Page 6 Public Involvement Plan for Ashland Rail Yard Cleanup April 6, 2006 DEQ staff will pay particular attention to ensuring that technical information is presented in plain English, in a manner that makes it understandable and accessible to the lay public. In response to anticipated public involvement in the Ashland Yard cleanup, DEQ will be prepared in advance to address a number of common issues that typically arise during public discussions about site cleanup, including the following questions: What are the potential hazards from site contaminants?' What is being cleaned up and why?$� What regulations govern the cleanup process? How will the site be cleaned up. How will c, Linated soil be handlI i transported? 'e;'� Who will clean the site up, and how. 1 it be used �ards? When will the site be cleaned up, What opportunities are What can we do if Won't like A Are there other grou�n� and ` V5, 11 it to 11H ;ommu answers j J,, 4en through this process? What f suppv there communities in our situation? VII. ,s for Implem ing P � ; 3 3t In collabor e with the of Ashland and UPRR, DEQ staff will be responsible for preparing an 19me the public involvement plan for the final cleanup. Depending on th 'f the inquiries and issues raised by community members, representatives from Q, the City of Ashland, and UPRR will be prepared to respond directly. The roles of specific staff are identified below: Greg Aitken, DEQ: Implement and manage the public involvement plan; facilitate communication between DEQ, UPRR, and the City of Ashland regarding public involvement and the cleanup work; serve as the primary point -of -contact between DEQ and members of the local community, Accessibility will be ensured during construction work; Page 7 Public Involvement Plan for Ashland Rail Yard Cleanup April 6, 2006 Angie Obery, DEQ: Interpret and communicate toxicological information; lead role in risk communication; UP Representative: ? (e.g., daily or weekly project status reporting during construction activities, onsite point -of -contact for local government officials and media personnel during construction?) Ann Seltzer, city of Ashland: Advise on implementation of th Oic involvement plan for ensuring that community are met during cleanup planning and implementat' UPRR's representatives will be given an opporeview draw' }},all written materials used in the public involvement proces ore they are dis� q d to the local community. DEQ and UPRR will also hold a meetings (as necess or to the community meeting(s) to discuss the informa o be pr ed, meeting aNda, roles, and anticipate questions that may be asked. DE l . nd to UPRR's comments on drafts of written materials either by MRdifying these` rials as appropriate or rejecting UPRR's comments with explanation VIII. Schedule � s 'Hil 111 i ( , DEQ will proceed w' Alpl'l�elnllil� tion of $� iblic invo vement plan for the UPRR cleanup consistent the folio g tentat schedule: Apr 27, 2006: li Q post on DEQ's internet web server; Apr 27 a;" c e final pu volvement plan and post on website• f May 1 6: ma ct sheet about cleanup plans and distribute; Earl+ er, 2006: t pu formation meeting and site walk; late s er, 2006: pr dew construction status updates via ele nic newsletter to any interested party; Fall 2006: fin � fact sheet about cleanup progress and distribute; undertake lWt" 30 public comment period for DEO nronosal to issue ill of completion to UPRR. late 2006: 1��ffificate roject completed; DEQ grants certificate of completion to UPRR. If necessary, the schedule may be modified by DEQ and UPRR depending on public response or completion of key project milestones by UPRR. The public involvement program will proceed through the duration of UPRR's cleanup work, until DEQ's issuance of a Certificate of Completion to UPRR anticipated by the end of 2006. CITY OF ASHLAND April 2006 Dear Neighbor: This summer, the Union Pacific Railroad intends to begin cleaning the railroad property in Ashland in preparation for the sale of the property. On Monday, May 1, Greg Aitken from the Department of Environmental Quality (DEQ) will speak to the council about the cleanup requirements and the specific actions that UPRR will take to bring the property to residential standards. Aitken will also present to the council the draft public involvement plan developed to keep you and all Ashland citizens apprised of the activities. Since you are neighbors of this property, you are receiving this letter inviting you to attend the study session and to learn more about this project from DEQ. The meeting will occur at 5:15 p.m. in the council chambers at 1175 East Main Street on Monday, May 1. Study sessions are informal meetings and provide an opportunity for the council to learn about issues and to ask questions of staff or other presenters. Sincerely, Ann Seltzer, anagement Analyst and staff liaison to the project City of Ashland CC: Ashland City Council Gino Grimaldi, City Administrator Bill Molnar, Interim Community Development'Director CITY OF -ASHLAND December 15, 2005 Mike Sattler Union Pacific Railroad 1800 Farnum Street Omaha, NE 68102 Dear Mr. Sattler: Greg Aitken from the Department of Environmental Quality (DEQ) has notified us that Union Pacific plans to move forward with a full-scale cleanup of the Union Pacific property located in central Ashland. As you probably know, that piece of property is the last and largest piece of undeveloped land in Ashland. The city is very interested in seeing it develop in a manner that compliments and enhances the exceptional design standards of our downtown core located just a few blocks from the railroad property. Our downtown is the heart of our community and reflects the high quality of life that we enjoy. As such, we are very interested in working with the developers early in the planning process to ensure that their objectives are in tandem with the desires of our community and land use code. Please convey to interested developers that we would like to be included in any dialogues as they develop their concepts and designs for that location. I understand that Union Pacific hopes to have the property ready for sale in the fall of 2006. The City may be interested in purchasing a few acres and would like to be considered as a potential buyer as you move forward in your process. The City is eager to work closely with Union Pacific and DEQ prior to and during the cleanup. As you can imagine, the cleanup will be a dusty and noisy process and residents in the immediate area as well as those along the truck route will be directly affected. We would be happy to help get the word out to those residents and the entire community about the cleanup as the project begins to take shape and throughout the ensuing weeks. Thank you in advance for keeping the city in the loop for this very important and significant project in our community. If you have any questions, please contact me directly at 541-261-2401 or by email at mprrisoiii�et;asiiland.cr.Lis. You may also feel free to contact our staff liaison to the project, Ann Seltzer at 541-552-2106 or via e-mail at aiimd_-ashland.or.us. I believe you have previously spoken with her by phone. Sinc"ayor J CC:Gary Honeyman Environmental Site Remediation Group Union Pacific Railroad 221 Hodgeman Street Laramie, WY 82072 Greg Aitken Project Manager & Hydrogeologist Oregon Department of Environmental Quality 1102 Lincoln Street, #210 Eugene. OR 97401 Ashland City Council Bill Molnar, Interim Community Development Director OFFICE OF THE MAYOR .JOHN W. MORRISON CITY HALL • 20 EAST MAIN STREET- ASHLAND • OREGON 97520 TEL [5411 488-6002 • FAX [5411 488-531 1 • TTY 800 735-2900 MORRISOJ@ASHLAND.OR.US • WWW.ASHLAND.OR.US March 22, 2006 Greg Aitken Project Manager & Hydrologist Oregon Department of Environmental Quality 1102 Lincoln Street, #210 Eugene, OR 97401 Dear Mr Aitken: I am writing in regards to the proposed full-scale cleanup of the Union Pacific Railroad property in Ashland. I understand that you have not yet received a remedial action work plan from Union Pacific. When you do, I ask that Ashland be considered and consulted as the plan takes shape. We have a very active and involved citizenry and it is critical that our community have the opportunity to participate and weigh in on the final work plan. As you can imagine, the cleanup will be a dusty and noisy process and residents in the immediate area as well as those along the truck route will be directly affected. Further, our community swells with visitors during the summer months as do our traffic counts. As such, we will want .to work with UP to determine the most efficient routes for the trucks and which will have the least impact on the community. In addition we will want to weigh in on the proposed daily work schedules and time lines. Finally, like other communities, we have specific permit requirements for excavation; grading, tree protection; water quality, soil erosion etc. and we will want to ensure that UP is fully aware of our local requirements. We will be happy to assist UP in getting the word out to the community about the cleanup as the project begins to take shape and throughout the ensuing weeks. Thank you in advance for keeping the city in the loop for this very important and significant project in our community. If you have any question, please contact me directly at 541-261-2401 or be e-mail at morrisonj(d.-ashalnd.onus. You may also feel free to contact our staff liaison to the project, Ann Seltzer at 541-552-2106 or by e-mail at ann(ir)ashland.onus. Please keep us involved as the plan moves forward. Sincerely, L� -1 o 1 A C54` �_ orrtson, Mayo CC:Ashland City Council Gino Grimaldi, City Administrator Ann Seltzer, Management Analyst Bill Molnar Interim Community Development Director CITY OF ASHLAND INCORPORATED 1 874 CITY OF -ASHLAN D Council Communication Meeting Date: Department: Contributing Departments: Approval: AFN Decision May 1, 2006 IT Legal, Finance Gino Grimaldi Primary Staff Contact: E-mail: Secondary Staff Contact: Estimated Time: Joseph Franell franellj@ashland.or.us N/A 60 Minutes Statement: During the March 7, 2006, City Council meeting, the Council voted to pursue implementation of the Open Carrier Option and directed staff to work with the drafters of this model to refine the strategy, numbers, legalities, and to identify next steps and bring it back to Council. Background: Why the Open Carrier Model isn't viable: Staff has received the advice of outside legal council (Jim Baller of The Baller Herbst Law Group) and was strongly cautioned against implementing the Open Carrier Option model as it is currently structured. Mr. Baller indicated that attaching services to a mandatory fee (even if the services are free) could be viewed as predatory pricing and/or a barrier to entry for a competitor. As such, even if you give the residents of Ashland "free" services as a benefit, having those services attached or tied to a mandatory fee of any kind is problematic and presents significant legal risk for the City. His very strong opinion was to address the debt service as a completely separate issue from the AFN question. Staff agrees and so has taken the following approach which includes the decision to deal with the debt as a completely separate issue: Because of this new information and how it impacts the direction the City Council had indicated during the March 7th meeting, staff has revisited the AFN question as a whole. As part of this process, staff received input from; members of the community, City Councilors, internal and outside legal council, members of the Options Committee, and an outside consulting firm that specializes in telecom issues as they relate to municipalities. Staff's approach has been to start with the question of the video product as we know it today and whether or not we keep it as a service to the citizens of Ashland. Please refer to Attachment "A", the AFN Decision Matrix. As you can see, the matrix starts with this question: "Do we keep CATV (Cable TV)?" Staff believes that this is a central question that has potentially enormous impact to the community because of video's importance in maintaining a competitive marketplace in Ashland. Market research indicates that on average, residents of communities that have competing cable providers pay 15 - 23% less for their service (see Attachment B). This translates into tens of thousands of real dollars saved every month by every cable subscriber in Ashland regardless of who they get their cable from. Clearly AFN's value to the community is not just about dollars. The unique channel offerings (programming by Ashland, for Ashland) from AFN reflect Ashland's character and would be a loss to the community should that programming go away. Refer to Attachment C for a list and description of some of that unique programming. Additionally, staff experience indicates that bundling multiple products has a significant "intangible" value to the customer. Doing away with video will have the net result of reducing the perceived value of the internet product. Since approximately 6500 of Ashland's 10,000 households currently have cable TV (this number does not include satellite TV customers), it is clear that this issue is important. AFN Decision Currently, AFN's video revenue is trending at about $108,000 a month (based on fiscal year-to- date data from end -of -month March 2006). Operating expenses associated directly with the video product are at approximately $169,000 a month leaving a negative margin of $61,000 a month. In order to get closer to reduce losses on CATV, the city will need to: • Increase rates to more closely match rate averages in competitive markets. This will make up approximately $1 Ok/month. • Restructure the channel line up to minimize programming costs. This also will include removing some of the more expensive, less watched channels over time. These changes will further narrow the gap by saving perhaps an additional 10% of the programming costs (about $6,000). • Closely control programming costs going forward by setting financial boundaries on programming commitments. This will keep costs in control going forward but will have no affect on current margin problems. • Structure marketing to encourage purchase of video tiers that have a higher margin. Even with all of the changes listed above, the CATV product still will lose between $600,000 and $700,000 per year. Thus, the question really becomes; "Are the resulting losses worth maintaining competition and unique programming?" Attachment D shows us that a 15% savings per household equates to real combined savings of $433,704/year for the 6500 homes with cable TV. A 26% savings equates to $665,014 in combined annual savings for those same households. This means that even if all Ashland CATV subscribers are realizing the maximum benefit of 26% savings on their cable bill, the resulting losses make it at best a "wash" financially. Since keeping CATV will result in additional rate increases, it is unlikely that citizens will realize enough of a savings to offset the losses. Again, please refer to Attachment A, the AFN Decision Matrix. Once the initial question of whether or not to keep video is answered, the next question that must be addressed is; "Does AFN become the exclusive ISPT' This question is one of both philosophical and practical importance. AFN was started using the concept of an "open" network. That has manifested itself in our current structure where AFN simply wholesales the majority of the bandwidth to privately owned businesses who are the retail internet service providers (ISPs) in Ashland. The internet product has been very well adopted in the city with currently more than 3900 customers on our network. AFN's internet product is currently generating around $122,000 a month in revenue while operating expenses trend at around $78,000 a month. This indicates a positive margin of about $44,000 a month. The ISPs charge an average of $9.88/month/customer over the wholesale rate. This translates into an additional $38,000 + in revenue every month relating to the internet product that is not currently available to the city. Related City Policies: None. Council Options: Once the decisions have been made on whether or not to keep video and whether or not to become the exclusive ISP on AFN's network, the AFN Decision Matrix (Attachment A) will clearly lead the City Council to one. of four options. 2 50 AFN Decision Option One: CATV Goes Away and AFN Continues to Wholesale Internet to the ISPs In this option, video (along with all of its associated cost) goes away and AFN's relationship with the ISPs is maintained. The community will lose the competitive landscape that currently exists and so residents could expect to see significant rate increases by Charter on their video product equaling or perhaps exceeding rates seen elsewhere in the valley (see Attachment E). The most significant aspect of this option is that the expensive (revenue draining) video product stops being a problem. In this option, the city keeps its relationship with the current ISPs but would need to restructure the contracts and pricing, and then become an ISP as well. The phone company uses this concept in their DSL model. They are the ISP but they also offer "premium services" through other ISPs who each have their own line of offerings and features for the customer. This would allow the city to realize an additional portion of the revenue from the market and fund infrastructure maintenance and improvements as needed. This approach makes the most sense as it helps to fund AFN's needs with additional revenue while keeping the "Open Carrier" philosophy in place. This option also appears to be the most financially sound (see Attachment F). Option Two: CATV Goes Away and AFN Becomes the ISP In this option, the video product goes away along with all of the associated costs as detailed in Option One. This option also does away with the "Open Carrier" internet concept the city has embraced since AFN's inception. The advantage of this is that every internet customer on the city's network will be generating revenue that is no longer shared with other entities. This has the potential of providing another $300,000 - $400,000 a year in net revenue. The risk is that Charter (broadband internet) and the ISP's DSL offerings significantly erode the current customer base during the transition. Staff believes that there is a greater than average probability of this happening. The financial analysis detailed in Attachment F assumes a 25% loss of customer base through the transition. Clearly, if the City Council decides to become the exclusive ISP on the AFN network, there is the obvious potential for additional revenue/margin from the data/internet product. Some of that revenue will have to be applied to funding at least one additional technician to service the customer base thus reducing the incremental margin by at least 16% depending on erosion of the customer base. Consideration must be given to the impact to the current ISPs themselves. Taking this path will have a range of effect on them from small to catastrophic. Since the partnership between the City of Ashland and the ISPs is long standing, this decision must be well thought out. rpla 17JAMA AFN Decision Option Three: CATV Remains and AFN Continues to Wholesale Internet to the ISPs This option keeps video as a competitive influence in the marketplace, retains the unique programming AFN provides, and allows AFN to compete as a "bundled" service provider. It also retains the "Open Carrier" or wholesale concept that includes the city's relationship with the privately owned ISPs. The obvious question that presents its self with this option is; "Isn't this what we are doing today?" The answer is "yes" however, with this option we also would take the actions listed earlier in this document to reduce the losses experienced currently with CATV. The opportunity exists to simply run a tighter ship, leave the current ISP arrangements in place, and just strive to collectively (video and data) break even. Unfortunately, there has been little to no attention paid to AFN's aging infrastructure. This has resulted in a need to fund replacement of end - of -life (EOL) equipment in the headend. Also, the current bandwidth usage by AFN's customers has increased to the point where during peak times of the day, we are exceeding our available bandwidth. This necessitates purchasing additional bandwidth in the very near future. As a result, staff would recommend that the city become one of the ISPs as outlined in Option One in order to generate additional revenue. Option Four: CATV Remains and AFN Becomes the ISP This option keeps the CATV product as in Option Three but in this option, the city becomes the exclusive ISP. See Option Two's discussion about the implications of deciding for the City to become the exclusive ISP. Additional Options: All of the above options are variations of the original "Maintain and Enhance" option that was presented and discussed through the Options Committee work and subsequent staff and council meetings. There are two additional options that are still "on the table" from those discussions: the "Spin Off (JPRF)" option and the "Spin Off' option. Spin Off (JPRF) Option Under this option, JPR Foundation (JPRF) would assume operational control of AFN. JPRF has proposed an estimated $326,000 annual payment to the city with openness to negotiations for additional profit sharing dependant on the success of the venture. While there have been some initial discussions with JPRF, most of the details of this option would still have to be negotiated. Some specific points that would be central to these negotiations are: • Who owns the infrastructure? • Who pays for capital improvements? • How does the city guarantee that access to necessary services we currently uses to operate are available in the future including technology needs that are not currently recognized? • Are current National Cable Television Cooperative programming contracts assumable or can we structure the agreement so that JPRF could be our agent with the current contracts staying in place? rd - T- - AFN Decision Additionally, there is a concern as to (as presented by the Options Committee) the risk associated with the non-profit entity being unsuccessful and the City perhaps being forced to repossess the business with the value of the business damaged even further. Spin Off Option This option follows the model used by local hospital. AFN would be spun off as a not -for - profit entity with ownership of the infrastructure reverting back to the city if the venture failed. This model allows for closer ties to the city that a spin off under the previous model. Key points to this option follow: • As in the two "Maintain and Enhance" options discussed earlier in this document, the expense associated with CATV does not change with this option. The Options Committee stated that, "The Committee's projections suggest the new non-profit entity would operate on the slimmest of profit margins, with little margin for error." Staff s analysis of the financial viability of this option concurs with the Options Committee statement. • As presented by the Options Committee, "If the non-profit entity is unsuccessful, the City could be forced to repossess the business with the value of the business damaged even further". Staff Recommendation: Staff recommends that the Council choose to pursue Option One. Option One does away with the expensive programming costs associated with a full CATV channel offering and allows for a greater and more stable revenue stream to fund infrastructure maintenance, additional bandwidth, and eventually contributions to the debt service. This option also maintains the "Open Carrier" concept for the data side of the business and as such the relationships that have been built with the ISPs. While a spin off could work, there appears to be too much risk involved and little or no financial upside associated with those options. Potential Motions: I move that it is the intent of the City Council to implement Option One as described in the Council Communication titled "AFN Decision" dated May 1, 2006, and direct staff to proceed as is appropriate to do so. AFN Decision Attachments: Attachment A — AFN Decision Matrix Attachment B — Excerpt from the GAO Report to the FCC, dated March 2006 Attachment C — List of AFN Unique Programming Attachment D — Rate Increase Analysis Attachment E — Video Rate Analysis Attachment F — Annualized Financial Analysis 0 Attachment A .. AFN Decision Matrix NO OPTION ONE CAN Goes Away and AFN Continues to Vfttesaie Internet to the ISPs Tuesday, April 25, 2006 YES YES NO YES Page 1 OF Attachment B Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of ) Annual Assessment of the Status of ) MB Docket No. 05-255 Competition in the Market for the Delivery of Video Programming ) TWELFTH ANNUAL REPORT Adopted: February 10, 2006 Released: March 3, 2006 Comment Date: April 3, 2006 Reply Comment Date: April 18, 2006 Cable Rates. Several studies, most notably several released by the U.S. Government Accountability Office (GAO), have shown that competition constrains cable prices. For example, in 2003, GAO found that competition to an incumbent cable operator from a wireline provider resulted in cable rates that were "substantially lower (by 1.5 percent)" than in markets without this competition.'- In this study, GAO also concluded that DBS (direct broadcast satellite) competition had lowered cable rates slightly, although the more pronounced competitive effect of DBS was the addition of nonbroadcast networks to cable operators' channel line-ups.' In 2004, GAO examined six market pairs to assess the impact of a BSP (broadband service providers) overbuilder. In each market pair, one market was served by a BSP overbuilder, and the other market was not. The market pairs were chosen based on their similarities in terms of size and demographics.3 CAO found that communities with overbuild competition experience lower rates (an average of 23 percent lower for basic cable) and hij4her duality service. 1 See U.S. General Accounting Office, Issues Related to Competition and Subscriber Rates in the Cable Television Industry, GAO-04-8, Oct. 2003, at 3, 9. 2 Id. at 3, 9-10. 3 See U.S. General Accounting Office, Telecommunications: Wire -Based Competition Benefited Consumers in Selected Markets, GAO-04-241, Feb. 2004. Attachment C AFN CABLE TELEVISION EXCLUSIVE CHANNELS Programming for Ashland by Ashland* *An appointed volunteer committee of Ashland residents created AFN's Cable TV lineup expressly for our community's interests. Free Speech TV Channe136 AFN Basic Tier 2 Hard hitting investigative in-depth information and analysis programming on the most critical issues facing the world today. Icon news show, "Democracy Now bringing the voice of the marginalized to the airwaves with a commitment to truth, justice, diversity, and peace. Lime Channel 42 AFN Expanded Tier 3 Featuring entertaining and revealing programming focused on the environment and sustainability, personal growth, alternative health, healthy foods, and business ethics. LIME connects communities and offers inspiration from leading experts, authors, and pop culture icons. Ovation Channel 47 AFN Expanded Tier 3 The television network devoted exclusively to the arts, featuring programming on visual arts, theater, opera, music and dance. BET Channel 60 AFN Expanded Tier 3 Black Entertainment Television is the first and only television network primarily devoted to the African American culture and lifestyle. Featuring universally appealing music, fashion, and entertainment programming. NASA TV Channe176 AFN Expanded Tier 3 NASA TV provides real-time coverage of Agency activities and missions as well as resource video to the news media, and educational programming to teachers, students and the general public. Classic Arts Showcase Channel 77 AFN Expanded Tier 3 "Classic MTV": Bringing the classic arts experience to TV. The spectrum of classic arts disciplines aired on Classic Arts Showcase includes video samplings of animation, architectural art, ballet, chamber and choral music, dance, folk art, museum art, musical theater, opera, orchestral, recital, solo instrumental, solo vocal, and theatrical performances, as well as classic film and archival documentaries Worship Channel 80 AFN Expanded Tier 3 Christian programming. Connecting individuals everywhere to His spirit and truth, and then to each other, is truly the desire of The Worship Network. BET on Jazz Channel 221 AFN Digital Plus Tier 4 Take a musical journey around the world with full-length concerts by jazz artists and get a view from center stage to behind the scenes. Inspirational Life Channel 250 AFN Digital Plus Tier 4 A lifestyles network, fulled with practical and inspirational programs on better finances, health, families, relationships, marriages and more. Includes programming designed for children of all ages, as well as a special block for teens, plus exclusive and original music concerts, movies, sports, documentaries and exciting family entertainment. . AZN Channe1272 AFN Digital Plus Tier 4 Cable television service providing international programming to new Americans and those who wish to maintain a connection to a homeland or heritage. Featuring movies, Anime, AZN originals such as "NBA Timeout", dramas, and variety show programming. Attachment D Sub Counts AFN Current Rate Current Revenue AFN Proposed Rate Proposed Revenue Tier 1 284 $9.95 $2,825.80 $12.95 $3,677.80 Tier 2 812 $17.96 $14,583.52 $21.95 $17,823.40 Tier 3 1630 $41.95 $68,378.50 $44.95 $73,268.50 Tier 4 372 $51.95 $19,325.40 $53.95 $20,069.40 3098 $105,113.221 1 $114,839.10 Percent Increase 1.3015075 30.15% 1.2221604 22.22% 1.0715137 7.15% 1.0384986 3.85% Net Monthly Revenue $9,725.88 Net Annual Revenue Increase $116,710.56 1.0925277 9.25% $33.93 Average Price Per Household Today $37.07 Average Price Per Household After Rate Increase $42.63 Average Price Per Household X 1.15 $45.59 Average Price Per Household X 1.23 $55,417.84 Gross Monthly Savings for 6500 Households 51 $36,142.07 Gross Monthly Savings for 6500 Households Attachment E Programming Rates "Apples To Apples Comp" FINAL COST TO CUSTOMER EXPANDED EXPANDED EXPANDED EXPANDED DIGITAL DIGITAL DIGITAL DIGITAL NATIONAL AVERAGE NATIONAL AVERAGE AFN CHARTER NATIONAL AVERAGE NATIONAL AVERAGE AFN CHARTER NON COMPETITIVE COMPETITION ASHLAND RATE MEDFORD RATE NON COMPETITIVE COMPETITION ASHLAND RATE MEDFORD RATE $48.24 Incl'ds monthly fees $41.00 Incl'ds monthly fees $38.35 No Set Top Box $51.95 No Set Top Box $62.98 In_cl'ds monthly fees $53.53 Incl'ds monthly fees $51.95 Incl'ds monthly fees $60.45 Incl'ds monthly fees Incl'ds monthly fees Ind'ds month) fees $41.95 $56.95 With Set Top Box With Set Top Box Notes Notes _ _ Above calculated by $45.32 nat'I avers e _ + $2.92 estimated fees _ $48.24__ Detail of fee calculation FCC fee Above calculated_ b $48.24 x 85% __. GOA report states_ competition created___ _ 15% lower rates And up to 23% lower _ _ Based on actual Charter customers bills Rogue River and Medford area Above calculated b average of below 63.18 time warner 60.45 charter medford Above calculated b $62.98 x 85% _.. GOA report states_ competition created Above calculated b $56.96 ratecard $3.49 estimated fees = $60.45 - -- -- Detail of fee calculation April 20_06 -.. 65.31 comcast ortland �_ - 15% lower rates And up to 23% lower for Basic services for Basic services .05 FCC fee .65 .60 PEG fee Detail of fee calculation .60 PEG fee 5% Franchise fee Only 2% of the _ .05 FCC fee Only 2% of the 5% Franchise fee countn�s cable markets _ _ _- .60 PEG fee countrys cable markets __ have a wired 5% Franchise fee have a wired _ corn etitor _ competitor 4/27/200610:14 AM Attachment F Annualized Financial Anal is OPTION ONE OPTION TWO OPTION THREE OPTION FOUR SPIN OFF JPRF) SPIN OFF CAN Revenue $0.00 $0.00 $1,412,710.00 $1,412,710.00 N/A $1,412,710.00 CATV Operating Expense $0.00 $0.00 $2,028,000.00 $2,028,000.00 Unknown $2,028,000.00 DATA Revenue $1,464,000.00 $1,283,904.00 $1,464,000.00 $1,283,904.00 N/A $1,464,000.00 DATA Operating Expense $936,000.00 $1,036,000.00 $936,000.00 $1,036,000.00 N/A $936,000.00 NET $528,000.00 $247,904.00 -$87,290.00 -$367,386.001 $326,000.00 -$87,290.00 NOTES: Revenue and Operating Expense data taken from fiscal year to date actuals. CATV Revenue on Options Three and Four adjusted up by $116,710 to account for rate increase. SPIN OFF (JPRF) - CAN Operating Expense "Unknown" due to uncertainty about programming costs. ASSUMPTIONS: Options Two and Four result in a 25% erosion of the customer base. Options Two and Four Include a $3/month/residential internet customer increase. Options Two and Four include expense associated with one additional field technician DOCUMENTS SUBMITTED AT THE MAY 'I, 2006 STUDY SESSION Attachment F Annualized Financial Analysis OPTION ONE OPTION ONE -A OPTION TWO OPTION THREE OPTION THREE -A OPTION FOUR SPIN OFF JPRF SPIN OFF CATV Revenue $1,412,710.00 $1 412,710.00 $1,412,710.00 $1,412,710.00 CAN Operating Expense $2,028,000.00 $Z028 000.00 $2,028 000.00 $2 028,000.00 DATA Revenue $1,464,000.00 $1,464,000.00 $1283904.00 $1,464000.00 $1464,000.00 $1,283,904.00 $1,464,000.00 DATA Operating Expense $936,000.00 $936,000.00 $1,036,000.00 $936,000.00 $936,000.00 $1,036,000.00 -$250,000.00 $842,400.00 Other Revenue $42,000.00 $42,000.00 $326,000.00 Other Expense CAN rate increase $200,000.00 $400,000.00 $200,000.00 $200,000.00 Other Expense charter setup) 96 000.00 96,000.00 96 000.00 Competitive savings AFN subs 200,000.00 400,000.00 200 000.00 200,000.00 200,000.00 Competitive savings Charter Ashland subs 50,000.001 50,000.00 50,000.00 50,000.00 50,000.00 Annual NET 1 $232,000.001 $32 000.00 -$6,096.00 $162 710.00 $362 710 nn -$75,386.00 $626 000.00 $256 310.00 Annual NET per houshold $33.14 $4.57 -$0.87 $23.24 w51.82 -;�7 u. i i ;00y.40 %bs0.01f NOTES: Revenue and Operating Expense data taken from fiscal year to date actuals. CATV Revenue on Options Three and Four adjusted up by $116,710 to account for rate increase. SPIN OFF (JPRF) - CATV Operating Expense "Unknown" due to uncertainty about programming costs. ASSUMPTIONS: Options Two and Four result in a 25% erosion of the customer base. Options Two and Four Include a $3/month/residential internet customer increase. Options Two and Four include expense associated with one additional field technician Paul's assumptions Option One -A assumes charter rase rates 10% Option Three -A asumes charter raise rates 10% and AFN does not Options One and Two assume Charter raises Ashland rates to Medford rates and charges one-time setup for 3200 accounts converting. Options Two assumes AFN internet rate is less than current isp rate but greater than current AFN wholesale rate by $3... which rases question why 25% subscriber loss is predicted Spin Off assumes 10% reduction in Data operating expenses Competitive savings (AFN) represents the amount saved by AFN CATV subscribers due to competition Competitive savings (Charter Ashland subs) represents the amount saved by Charter CATV subscribers due to competition