HomeMy WebLinkAbout2007-0105 Study Session PACKET
CITY OF
ASHLAND
CITY COUNCIL STUDY SESSION
AGENDA
Monday, January 5, 2007 at 5:15 p.m.
Council Chambers, 1175 East Main Street
1. Look Ahead Review
2. Discussion of Ashland Fiber Network Five- Year Business Plan
3. Review of regular meeting agenda for February 6, 2007
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 (TFY phone 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).
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The Ashland Fiber Network
Five Year Business Plan
Presented: February 2007
COMMUNITY BROADBAND
1
Contents
PAGE 1
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PAGE 5
PAGE 6
PAGE 7
PAGE 8
PAGE 9
PAGE 10
PAGE 11
PAGE 12
PAGE 13
PAGE 14
PAGE 15
COVER LETTER
TABLE OF CONTENTS
A MESSAGE FROM THE DIRECTOR
OPERATIONAL NET
THE PAST THREE YEARS
CURRENT FINANCIAL SUMMARY
FIVE YEAR FORECAST
REVENUE SUMMARY BY CATEGORY
REVENUE SUMMARY FOR VOIP (TELEPHONE) & AFN INTERNET
REVENUE SUMMARY FOR WIRELESS INTERNET & HIGH SPEED DATA
REVENUE SUMMARY FOR WHOLESALE INTERNET & CABLE TELEVISION
EXPENSE DETAIL
CAPITAL
NETWORK REFRESH AND A NEW CMTS
THE FUTURE
2
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A Message From
The Director
The past ten months have been an exciting time for the Ashland Fiber Network (AFN). In May,
2006, the City Council voted unanimously to move forward with a plan to remake AFN. Since
that decision was made, the City has begun the construction of a wireless internet network;
leased the CATV video facilities to Ashland Home Net; and has launched a Voice Over Internet
Protocol (VOIP) telephone product in partnership with Rio Communications.
When I presented to the budget committee in 2006, I provided an outline of what the next few
years would look like.
FY 2006/2007
FY 2007/2008
FY 2008/2009
Restructure AFN According to May 1 Council Decision
Regain Network Health
Generate Positive Operational Cash Flow
With the restructuring of AFN well underway, it is time to better quantify the next few years.
AFN Staff, with the assistance of the finance department, have put together a plan that details
revenue, expense, and capital by product line. Since we wholesale most product lines, the City
has limited control of customer growth and the associated revenue. As such, staff has projected
conservative growth based on current run rates; however, these projections are dependent
upon the success of private enterprise. With only a month or two behind us since the spin off of
the cable television product and the launch of telephone, both expense and revenue projections
are somewhat soft. As each month's financials are released, we will receive more accurate
information and as such, a more accurate forecast.
This business plan also includes AFN becoming a retaillSP with the expressed purpose of
gaining additional collective market share. We are not interested in taking customers from our
current ISPs but instead hope to convert current Charter broadband customers, Qwest DSL
customers, miscellaneous dial-up customers, and households that do not yet have a
connection.
I am excited with the level of support experienced by the City Council, my fellow City
employees, and the community. I am convinced that support will continue to enable AFN to
grow in financial health and to provide excellence in service to Ashland.
Joseph Franell
Director of Information Technology
3
AshlCllAcI Fcbev Netwcwp
'10 NovtV'i MOVllAtClclAAve., AshlClvcvl. o,egolA '1C;CS::20
Operational Net
It is important to begin with the "bottom line". Seeing the bottom line up front allows everyone to
have a clear picture of where we project AFN's financials will go over the next five years and
helps prevent getting lost in the numbers before even getting to the "net". As you can see
below, the picture is a good one. The projections represented in this document reflect an
$800,000 positive swing over the nine years covered. FY2008 is an exception in the positive
trend of the enterprise due to the amount of capital needed that year to restore network health.
Operational NET (Including Capital)
$500,000
$400,000
$0
, .
$300,000
$200,000
$100,000
(1)'', ' .. 0
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~
-$100,000
-$200,000
-$300,000
-$400,000
-$500,000
4
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The Past Three Years
Below is a view of the past three years' financials. While FY 2005/06 was a much better year
financially, the cable television product line still lost $341,442. Spinning off cable TV was the
right decision. Revenue growth slowed down from 2005 to 2006 and cable television
programming costs continued to rise.
FY 2004 FY 2005 FY 2006
Total Personal Services $666,196 $674,108 $787,332
Total Materials and Svcs $1,730,686 $2,034,368 $1,829,570
Total Capital $154,146 $64,311 $160,000
TOTAL EXPENSE $2,551,028 $2,772,787 $2,776,902
Total Internet Revenue $950,645 $1,113,216 $1,248,262
Total Cable Revenue $931,761 $1,140,097 $1,225,884
Total Advertisinq Revenue $2,906 $7,347 $1,198
Total High Speed Data
Revenue $268,688 $217,417 $220,034
TOTAL REVENUE $2,154,000 $2,478,077 $2,695,378
Historical Summary
$3,000,000
$2,500,000
$2,000,000
$1,500,000
$1,000,000
$500,000
m TOT AL
EXPENSE
. TOTAL
REVENUE
$0
FY 2004
FY 2005
FY 2006
Note: "Cost of Service" includes Operational and Capital expenses but not Debt Service
5
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Current Financial
Summary
The year to date, July through December, 2006, financial statement for the Telecommunications
Fund showed that AFN was on track for budgetary expenses and was ahead on revenue. This
is in large part due to fewer losses in CATV subscriber counts and net gains in billable internet
accounts. Additionally, we are under-spending our marketing budget.
In summary, AFN's financial outlook is favorable. Operational losses have been stopped and
customer counts are higher than anticipated immediately following the transition of the CATV
product line. As a result, revenues are higher than were initially projected.
67.42%
53.27%
Year to Date Financial Summary
$2,000,000
$1,$00,000
$1,~OO,OOO
$1,400,000
$1,200,000
$1,000,000
$300,000
$~OO,OOO
$400,000
$200,000
$0
Revenue
Expense
6
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Five Year Forecast
The following table is a summary of revenues, expenditures, and the associated "net" for the
next five fiscal years. This includes all capital expenses for each year. Since the capital outlay
for FY 2007/08 is larger than the following years due to the need to regain network health, the
2007/08 "net" operational cash flow is lower. For subsequent years, we project annual revenue
growth of approximately 5%.
FY 07/08
FY 08/09
FY 09/10
FY 10/11
FY 11/12
Total Annual
Gross
Revenue
$1,680,874
$1,767,553
$1,856,951
$1,956,078
$2,060,917
Total Annual
Gross
Ex ense
$1,640,108
$1,558,036
$1,613,540
$1,597,767
$1,659,369
Revenue/Expense Summary
$2,500,000
$2,000,000
$1,500,000
$1 ,000,000
$500,000
$0
FY FY FY FY FY
07108 08109 0911 0 1 0111 11112
7
Total
Annualized
Net
$40,767
$209,516
$243,410
$358,311
$401,548
II Total Annual
Gross Revenue
. Total Annual
Gross Expense
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Revenue Summary by
Category
The assumptions made in projecting revenue are as follows:
1. Voice Over Internet Protocol (VOIP) and AFN Internet Service Provider (ISP) revenues
will increase quarter-to-quarter by 5%.
2. Wireless Internet revenue will increase 3% quarter-to-quarter.
3. High Speed Data revenue will increase 2% quarter-to-quarter.
4. Wholesale Internet revenue (revenue from other ISP's) will increase 1 % quarter-to-
quarter.
5. Ashland Home Net will start 1st Quarter FY 2007/08 with 2400 customers averaging
$17.00 per customer per billing month. Cable Television (CATV) revenue will increase
1 % quarter-to-quarter for FY 2007/08 and 3% quarter-to-quarter for each year following.
Monthl
TOTAL TOTAL
Fiscal AFN High Wholesale Monthly Annualized
Year VOIP ISP Wireless Seed Internet CATV Gross Gross
2007/08 $732 $2,586 $1,098 $18,239 $109,601 $7,816 $140,073 $1,680,874
2008/09 $824 $3,143 $1,236 $19,495 $114,051 $8,546 $147,296 $1,767,553
2009/10 $927 $3,821 $1,391 $20,305 $118,682 $9,619 $154,746 $1,856,951
2010/11 $1,044 $4,644 $1,566 $21,425 $123,501 $10,826 $163,006 $1,956,078
2011/12 $1,175 $5,645 $1,762 $22,460 $128,516 $12,185 $171,743 $2,060,917
8
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Revenue Summary for Voice over Internet Protocol
(Telephone)
Low Target High Target
Gross Gross Gross Gross
Monthly Monthly Monthly Annualized
Revenue Revenue Revenue Revenue
FY 2007/08 $366 $732 $1,464 $8,786
FY 2008/09 $412 $824 $1,648 $9,888
FY 2009/10 $464 $927 $1,855 $11,129
FY 2010/11 $522 $1,044 $2,088 $12,526
FY 2011/12 $587 $1,175 $2,350 $14,098
VOIP (Telephone) Revenue
$2,500
$1 ,500
-+-- Low Gro:::::::::: Monthly
R<::y<::nlJ<::
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evenue ummary or n erne
Low Target High
Gross Gross Gross Gross
Monthly Monthly Monthly Annualized
Revenue Revenue Revenue Revenue
FY 2007/08 $2,510 $2,586 $2,664 $31,033
FY 2008/09 $2,825 $3,143 $3.492 $37,721
FY 2009/10 $3,180 $3,821 $4,577 $45,850
FY 2010/11 $3,579 $4,644 $6,000 $55,731
FY 2011/12 $4,028 $5,645 $7,864 $67,741
AFN Internet Revenue
$7,000
$6,000
$5,000
$4,000
$3,000
$2,000
$1 ,ODD
$0
---t- low Gro::::::
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----T::'jrgO::I: Gro::::::::
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evenue ummary or Ire ess n erne
Low Target High
Gross Gross Gross Gross
Monthly Monthly Monthly Annualized
Revenue Revenue Revenue Revenue
FY 2007/08 $822 $1,098 $1,478 $13,178
FY 2008/09 $856 $1,236 $1,869 $14,832
FY 2009/10 $890 $1,391 $2,364 $16,694
FY 2010/11 $927 $1 ,566 $2,990 $18,789
FY 2011/12 $964 $1,762 $3,782 $21,148
R
$9,000
$8,000
$7,000
$6,000
$5,000
$4,000
$3,000
$2,000
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---+-- low Gro~;;
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evenue ummary or Igl pee aa
Low Target High
Gross Gross Gross Gross
Monthly Monthly Monthly Annualized
Revenue Revenue Revenue Revenue
FY 2007/08 $17,358 $18,239 $18,693 $218,870
FY 2008/09 $17,751 $19,495 $20,420 $233,939
FY 2009/10 $17,996 $20,305 $21,781 $243,662
FY 2010/11 $18,324 $21,425 $23,622 $257,101
FY 2011/12 $18,617 $22,460 $25,024 $269,518
$9,000
$8,000
$7,000
$6,000
$5,000
$4,000
$3,000
$2,000
$1 ,000
$0
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--+- Low Gro::;:::;:
MOMhly R(:YiC:.fIIuoC:
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et
venue ummary or o esa e n ern
Low Target High
Gross Gross Gross Gross
Monthly Monthly Monthly Annualized
Revenue Revenue Revenue Revenue
FY 2007/08 $108,249 $109,601 $109,882 $1,315,213
FY 2008/09 $110,431 $114,051 $116,625 $1,368,616
FY 2009/10 $112,656 $118,682 $123,782 $1,424,187
FY2010/11 $114,926 $123,501 $131,377 $1,482,014
FY 2011/12 $117,242 $128,516 $139,439 $1,542,190
Wholesale Internet Revenue
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--+-- Low Gro~~
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FV FY FY2QQ'/1Q FY2Q1Q/11 FY2Q11/1~
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evenue ummary or a e e eVlsl
Low Target High
Gross Gross Gross Gross
Monthly Monthly Monthly Annualized
Revenue Revenue Revenue Revenue
FY 2007/08 $7,758 $7,816 $7,934 $93,795
FY 2008/09 $8,013 $8,546 $9,245 $102,557
FY 2009/10 $8,339 $9,619 $11,237 $115,429
FY 2010/11 $8,895 $10,826 $13,659 $129,916
FY 2011/12 $9,629 $12,185 $16,603 $146,222
Cable Television Revenue
$1S,OOO
$17 ,000
$15,000
$13,000
$11,000
$S,OOO
$1,000
$5,000
---+- Low Gro::::::
Monthly R~Y~nlJ(:
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_ J _
Expense Detail
The below spreadsheet provides more detail of expense history and projections. Following City
practice, we applied an annual 7% increase to Personal Services to make sure that increases in
health insurance and other benefits were covered. We applied an annual 3% increase to
Materials and Services to account for inflation in these areas as well. Capital expenses are
based on actual projections for Capital purchases and planned replacement. More specifics for
Capital follow on the next page.
FY 2004 FY 2005 FY 2006 FY 2007
Historical Historical Historical Proiected FY 2008 FY 2009 FY 2010 FY 2011 FY 2012
Personal
Services
Salaries &
Waqes $457,270 $476,739 $537,930 $399,245 $355,479 $354,766 $384,828 $417,224 $439,806
Fringe
Benefits $208,926 $197,369 $249,402 $237,719 $177,072 $198,499 $215,209 $207,092 $236,819
Total
Personal
Services $666,196 $674,108 $787,332 $636,964 $532,551 $553,265 $600,038 $624,316 $676,625
Materials
Services
Supplies $253,533 $263,998 $133,659 $307,696 $321,252 $327,735 $329,718 $339,610 $341,714
Rental,
Repair,
Maintnce $128,887 $95,372 $109,896 $116,974 $71,023 $73,202 $73,543 $75,802 $76,168
Commo $31,478 $15,017 $6,252 $12,009 $5,126 $5,280 $5,280 $5,438 $5,438
Contract
Services $196,033 $410,368 $126,302 $44,663 $52,991 $62,009 $63,366 $65,267 $66,707
Misc.
Charges &
Fees $379,833 $417,571 $539,687 $380,138 $277 ,462 $272,617 $275,506 $283,907 $286,983
Other
Purchase
d Services $740,922 $832,042 $913,774 $216,032 $58,703 $69,653 $71,814 $74,151 $76,459
Total
Materials
and Svcs $1,730,686 $2,034,368 $1,829,570 $1,077,511 $786,556 $810,497 $819,228 $844,176 $853,469
Capital
Eouipmnt $0 $0 $120,000 $70,000 $201,000 $134,275 $134,275 $44,275 $44,275
Imprvmnts
OfT Bldqs $154,146 $64,311 $40,000 $0 $120,000 $60,000 $60,000 $85,000 $85,000
Total
Capital $154,146 $64,311 $160,000 $70,000 $321,000 $194,275 $194,275 $129,275 $129,275
TOTAL $2,551,028 $2,772,787 $2,776,902 $1,784,475 $1,640,108 $1,558,036 $1,613,540 $1,597,767 $1,659,369
12
AshlVlVCcl Fltler NetvVOrR
jO NOrtVi MOlAvctVllvc Ave., AshlVlVCcl, o~'e~'ovc '1+-5::20
Capital
The Capital projections listed in the table below are the same as included in the City's Capital
Improvement Plan. Unlike in years past, we are accounting for depreciation and planned
replacement of-equipment and network components by setting aside a percentage of the value
of an item each year in advance. For example, next year, we will replace the Cable Modem
Termination System (CMTS). Each year following, we set aside 20% of the value of a new
CMTS based on a projected five year life span. This results in the City not having to have
spikes in the Capital expense projections for AFN after next year.
Put
Reroute Fiber
Wireless Fields Maps in Network
Buildout CMTS Routers Project GIS Refresh
2007/08 $15,000 $125,000 $20,000 $40,000 $20,000 $10,000
2008/09 $0 $25,000 $4,000 $0 $0 $10,000
2009/10 $0 $25,000 $4,000 $0 $0 $10,000
2010/11 $0 $25,000 $4,000 $0 $0 $10,000
2011/12 $0 $25,000 $4,000 $0 $0 $10,000
2012/13 $0 $25,000 $4,000 $0 $0 $10,000
2013/14 $0 $25,000 $4,000 $0 $0 $10,000
Under
ground
WiMax FTTP Machine TOR OTDR Locator TOTAL
2007/08 $0 $50,000 $23,000 $2,000 $11,000 $5,000 $230,000
2008/09 $100,000 $50,000 $2,300 $400 $1,575 $1,000 $39,000
2009/10 $100,000 $50,000 $2,300 $400 $1,575 $1,000 $39,000
2010/11 $10,000 $75,000 $2,300 $400 $1,575 $1,000 $39,000
2011/12 $10,000 $75,000 $2,300 $400 $1,575 $1,000 $39,000
2012/13 $10,000 $75,000 $2,300 $400 $1,575 $1,000 $39,000
2013/14 $10,000 $75,000 $2,300 $400 $1,575 $1,000 $39,000
13
AshlClV'vc\ Flbev Netwovp.
00 Novtvc, MOL.ClAtmvc Ave., Ashl(1V'vc\, o,'eeOlA 0"'5:::20
Network Refresh
and a New CMTS
As stated during the May 1, 2006 City Council meeting and during the IT Departmental budget
briefing, there has been no planned replacement of key network components to date. As a
result, some of those components are past "end-of-life" and must be replaced immediately. The
most pressing need is the replacement of the Cable Modem Termination System (CMTS). It is
a system of devices located in the cable head-end that allows AFN to offer high-speed Internet
access to home computers. The CMTS sends and receives digital cable modem signals on our
cable network, receiving signals sent upstream from a user's cable modem, converting the
signals into IP packets and routing the signals to one of our Internet Service Providers for
connection to the Internet. The CMTS also can send signals downstream to the user's cable
modem. Cable modems cannot communicate directly with each other; they must communicate
by channeling their signals through the CMTS.
The new CMTS will allow AFN to provide the next level of internet service with significantly
faster speeds and better quality of service.
In addition to the replacement of the CMTS, the AFN staff will do planned maintenance on and
replacement of other key network components to include; optical nodes, power supplies and
batteries, and other active devices in the outside plant.
14
A:;~lCl"vc\ Fll'le, Netwo,l~
_'10 NOytv MOlAvctCllvc Ave., ASVllClVcc\, cwegovc '17");)("
T. I
The Future
With our recent restructuring of AFN so fresh in our minds, talking about the future is critical.
Since AFN has technology centric services and the one constant in technology is that it keeps
changing, the AFN team must constantly look to and plan for the future in order to ensure the
community continues to enjoy the benefits of state of the art telecommunications products and
services.
While the future of technology is rarely crystal clear, we can make educated projections of future
needs and what products will best fill those needs. This business plan allows for the continued
build-out of the wireless internet product we currently have deployed in parts of the city. It also
includes a planned migration to a WiMax solution that is the next generation of wireless internet.
We've included continued fiber to the premise installations for those with high-bandwidth
application requirements and the plan includes the purchase and installation of a new CMTS.
There are other, new technologies that are just now beginning to be seen in the market that we
will watch to see if they provide warranted benefit to Ashland. We will update the capital plan as
appropriate to make sure that the investment in the Ashland Fiber Network stays meaningful
well into the future. Finally, we will continue to fine tune this plan as we get better run rates and
are able to more accurately trend both expenses and revenues.
15
AsViL~v\,~ Fl-tlev Netwovl~
90 NortVi MOVlvet~lvc Ave., AsViL~vv~. Or-wove Cj+S::W
_ -.-J _' '
T' I
CITY OF
ASHLAND
Important: Any citizen attending council meetings may speak on any item on the agenda, unless it is the
subject of a public hearing, which has been closed. The Public Forum is the time to speak on any subject not
on the printed agenda. If you Wish to speak, please fill outthe Speaker Request form located near the
entrance to the Council Chambers. The chair will recognize you and inform you as to the amount of
time allotted to you. The time granted will be dependent to some extent on the nature of the item under
discussion, the number of people who wish to be heard, and the length of the agenda.
AGENDA FOR THE REGULAR MEETING
ASHLAND CITY COUNCIL
February 6, 2007
Civic Center Council Chambers
1175 E. Main Street
7:00 p.m. Regular Meeting
I. CALL TO ORDER
II. PLEDGE OF ALLEGIANCE
III. ROLL CALL
IV. MAYOR'S ANNOUNCEMENT OF BOARD AND COMMISSION VACANCIES
V. APPROVAL OF MINUTES [5 minutes]
1. Executive Session meeting minutes of January 16, 2007
2. Regular Council meeting minutes of January 16, 2007
VI. SPECIAL PRESENTATIONS & AWARDS
None.
VII. CONSENT AGENDA [5 minutes]
1. Minutes of Boards, Commissions, and Committees
2. Confirmation of Appointment of the Police Chief
3. Approval of Public Contract for a Term Exceeding Two Years - Multifunction
Business Machine Lease
4. Council Liaisons 2007
5. Appointment of Judge Pro Tem
6. Approval of a Common Boundary Line
7. Termination of Easement at 829 North Main Street
8. Acceptance of a Public Utility Easement at 150 Lithia Way
9. Internet Bandwidth Contract Approval
10. Mid-Year Financial Report: July- December 2006
11. Approval of Public Contract for Transformer Disposal Services
12. Acceptance of Deed of Dedication
13. Approval for Ashland to Continue in Lawsuit
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VIII. PUBLIC HEARINGS {Testimony limited to 5 minutes per speaker, unless it is the subject
of a Land Use Appeal. All hearings must conclude by 9:00 p.m., be continued to a
subsequent meeting, or be extended to 9:30 p.m. by a two-thirds vote of council {AMC
S2.04.040})
1. Request for Approval of Fee and Policy Recommendations [30 Minutes]
IX. PUBLIC FORUM Business from the audience not included on the agenda. (Total time
allowed for Public Forum is 15 minutes. Speakers are limited to 5 minutes or less,
depending on the number of individuals wishing to speak.) [15 minutes maximum]
X. UNFINISHED BUSINESS
1. Approval of City Charter Ballot Measure [15 Minutes]
2. Discussion of Transient Occupancy Tax Use [30 Minutes]
3. Discussion of Interim Library Funding Options [15 Minutes]
4. Discussion of Annual Budget Process and Calendar [30 Minutes]
XI. NEW AND MISCELLANEOUS BUSINESS
1. Federal Appropriations [5 Minutes]
2. Ashland Fiber Network Five-Year Business Plan [30 Minutes]
XII. ORDINANCES. RESOLUTIONS AND CONTRACTS
1. First Reading of a Resolution Titled "A Resolution of the City of Ashland Authorizing
an Interim Bond Financing Loan From the Special Public Works Fund By Entering
into a Loan Contract with the Oregon Economic and Community Development
Department for the Jefferson and Washington Street Improvements Project Number
B06003"
2. First Reading by title only of an Ordinance Titled "An Ordinance Amending AMC
3.08.020 To Apply Ethics Provisions to Employees, Appointed Officials and Elected
Officials"
XIII. OTHER BUSINESS FROM COUNCIL MEMBERS/REPORTS FROM COUNCIL
LIAISONS
XIV. ADJOURNMENT
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 (TTY phone 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).
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