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HomeMy WebLinkAboutAGENDA REPORT 2002 0918 CC REG ITEM 11EMOORPARK CITY COUNCIL AGENDA REPORT ITEM. I I - 001 CTTv nF mnnRPARK. C'AT,TFnR,4TA City Cmincil Meeting VIV TO: Honorable City Council FROM: Hugh Riley, Assistant City Mana e DATE: September 4, 2002 (CC Meeting of 9/18/02) SUBJECT: Consider Adoption of Policy Resolution Regarding Local Government Involvement in the Adelphia Bankruptcy Proceedings. BACKGROUND On June 6, 1984, The City Council of the City of Moorpark adopted Resolution No. 84 -99 granting a 15 -year, Non - exclusive Franchise for the operation of a cable television system to serve the Urban West Communities' Mountain Meadows Housing Development to Mountain Meadows Cable Television, L.P. This franchise was scheduled to expire on June 6, 1999. The franchise agreement for this system (`Mountain Meadows System ") was extended to December 20, 2000 by Resolution No. 98 -1550 on December 2, 1998. On November 21, 1990, the City Council adopted Ordinance No. 134 granting a ten -year renewal of a non - exclusive franchise to operate a cable television system in Moorpark to The Chronicle Publishing Co. doing business as Ventura County Cable Vision ( "the Moorpark System "). This franchise was in operation when the City incorporated in 1983. In the interim period between November 21, 1990 and 1999 a series of action control for these franc the telecommunications were completed resulting both cable franchises to s were taken to approve the hise agreements to various companies were purchased or in the transfer of operating Adelphia Communications. August 18, transfer of entities as as mergers control of Honorable City Council September 18, 2002 Page 2 On July 18, 2001 and December 19, 2001 the City Council approved the interim extensions of both Cable TV Franchise Agreements with Adelphia. The term of the latest extension expired on June 30, 2002. On June 25, 2002, Adelphia and more than 200 of its subsidiaries, including Adelphia Communications, filed for Chapter 11 bankruptcy to allow a court - supervised reorganization of the company and a restructuring of its debt. DISCUSSION The National Association of Telecommunications Officers and Advisors ( NATOA) and the States of California and Nevada chapter of NATOA (SCAN NATOA), of which the City of Moorpark is a member, is seeking the formation of a local government committee to act on behalf of the member government before the United States Trustee overseeing the Adlephia bankruptcy. Bankruptcy law provides for the formation of "committees" of parties sharing like interest in a bankruptcy proceeding. While most committees are formed to represent the interest of debtors and creditors, the bankruptcy of a cable television provider is unique in that results of its bankruptcy proceedings can have a major impact on local franchising authorities and their residents. With approximately 3,500 local governments potentially affected by the Adelphia bankruptcy, NATOA and SCAN NATOA, on behalf of its members, is coordinating an effort to gather support from local governments served by Adelphia to petition the bankruptcy court to approve a local government committee. If the bankruptcy trustee appoints an official committee of local government entities, the bankruptcy estate (Adelphia) would pay the professional fees incurred by the committee. On July 16, 2002, NATOA and SCAN NATOA sent a letter to Adelphia soliciting their support before the bankruptcy trustee to appoint a local government committee (Attached as Exhibit A. On August 15, 2002, Adelphia responded by indicating that Adelphia would remain neutral (not oppose) regarding the committee's formation (Attached as Exhibit B). As a result of a motion filed by another local government, a hearing has been scheduled on October 9, 2002, before the bankruptcy trustee regarding the formation of the local government committee. In order to Honorable City Council September 18, 2002 Page 3 demonstrate local government support for the committee's creating, the City of Moorpark and all Adelphia local franchising authorities have been requested to adopt a resolution to expressing support for the committee. All adopted resolutions will be forwarded to the United States Trustee in New York for presentation at the hearing. Because Adelphia is the only cable provider in Moorpark, serving approximately 8,600 residences, and because Adelphia's level of and quality of service may be affected by the results of its bankruptcy proceedings, it is recommended that the City Council adopt a resolution supporting the formation of a local government committee. If approved, the committee will develop and implement a strategy for protecting the interests of Moorpark, its residents and all Adelphia subscribers. This effort will be coordinated at the national level by NATOA and there will be no costs to the City. If the committee is approved to be formed, the City may be asked to participate in various activities to protect the interests of the City. STAFF RECOMMENDATION Adopt Resolution No. 2002 - Attachments: Exhibit A - Letter from SCAN NATOA Exhibit B - Letter from Adelphia Resolution No. 2002- The National Association of Telecommunications Officers and Advisors® 1595 Spring Hill Rd, Suite 330 Vienna, Virginia 22182 (703) 506 -3275 (703) 506 -3266 Fax www.natoa.org Exhibit A July 16, 2002 VIA FACSIMILE AND FIRST CLASS MAIL Randall D. Fisher Vice President, Legal Affairs General Counsel and Corporate Secretary Adelphia Communications 1 North Main Street Coudersport, PA 16915 Re: In re Adelphia Company, Inc., et. al. ( "Debtor ") Dear Mr. Fisher: 01 � � f I.I&IIL Of CA LIfolmia Qt SCAN NATOA c/o City TV 525 Broadway Suite 100 Santa Monica, CA 90401 (909) 387 -5967 (909) 387 -9613 The purpose of this letter is to solicit Debtor's support in permitting the United States Trustee to appoint a separate official Committee of governmental entities ( "Municipalities ") pursuant to the provisions of Section 1102(a)(1) of the Bankruptcy Code. The States of California and Nevada Chapter of the National Association of Telecommunications Officers and Advisors (SCAN NATOA) and the National Association of Telecommunications Officers and Advisors (NATOA), as the representatives of Municipalities, have been authorized by their respective Board of Directors to organize and recommend such a committee to represent the interests of similarly situated constituents in the Debtor's Chapter 11 Case. August 16, 2002 Page 2 The Municipalities have interests at stake, which are NOT common to all creditors of the Debtor. The appointment of an additional committee of creditors is necessary to assure adequate representation of the Municipalities. Cable access serves vital functions for numerous Municipalities and their citizens. Cable access is part of an overall local communication network, which serves very specific regulatory, economic, health and safety concerns. Any possibility of an interruption of this service could have serious effects on local communities. By the same token, cable service subject to the franchise agreements of the Municipalities throughout the United States represents the core business of the Debtor. The Debtor and the Municipalities have had a long term and mutually vital relationship. To continue that relationship and to assist the Debtor in preserving the value of Debtor's franchise assets, the Debtor needs and stands to benefit from strong and effective participation from Municipalities in the Debtor's reorganization process. Municipalities have a vested interest in the success of Debtor's reorganization. Municipalities intend to consult with the Debtor concerning the administration of its core business. Municipalities intend to participate in the formulation of a plan and lend expertise where applicable to the administration of the estate as well as the reorganization process. With your written consent, pursuant to the provisions of the Bankruptcy Code, we will request the Office of the U.S. Trustee to appoint such an additional creditor's committee. We recognize that the decision to appoint additional committees is generally made on a case -by -case basis. Considerations such as the ability of the existing committee to function, the nature of the case, and the standing and desires of the various constituencies assume significance. In cases such as this, where there are a significant number of separate debtors, a strong inference arises that additional committees may be well appropriate. At least one case in Northern District of Ohio has held that such appointment is required as a matter of law. Although, this per se rule has not been adopted in the Southern District of New York, several judges have signaled that multi - debtor, multi- business cases may be the appropriate set of circumstances to appoint additional committees. Although it is true that conflicting interests are common in any reorganization case, circumstances here make it impossible for even the most diligent committee to adequately represent the interests of the Municipalities. Another factor the courts consider is the timeliness of the request for an additional committee. Here the Municipalities are making the request within the first 120 days of the case. No plan has been proposed, in fact, it is the plan process in which the Municipalities, with the help of their counsel, wish to participate. We believe the appointment of a separate Municipalities Creditors Committee is appropriate to insure adequate representation of the Municipalities. We will be pleased to provide any additional information you require and will meet with you at your convenience. y �. A' 1 August 16, 2002 Page 3 Your courtesy and cooperation are greatly appreciated. Very truly yours, Lori Panzino President, SCAN NATOA Libby Beaty Executive Director, NATOA cc: Board of Directors Exhibit B From: Randy Fisher Sent: Thursday, August 15, 2002 3:49 PM To: Elizabeth Beaty Cc: Seth Davidson Subject: Unsecured Creditors Committee Dear Libby: Erkie Kailbourne asked me to get back to you regarding Adelphia's position on the proposal of certain local franchising authorities for the formation of a franchise committee. After further consideration, despite anything you might have heard, Adelphia has decided that it will not submit an opposition to such a request. Randall D. Fisher Vice President and General Counsel Adelphia Communications Corporation RESOLUTION NO. A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF MOORPARK, CALIFORNIA, EXPRESSING SUPPORT FOR AND PARTICIPATING IN A COALITION OF LOCAL GOVERNMENT ENTITIES THAT ARE LOCAL FRANCHISING AUTHORITIES IN COMMUNITIES WHERE ADELPHIA COMMUNICATIONS IS A CABLE TELEVISION FRANCHISEE, WHICH COALITION WILL DEVELOP AND IMPLEMENT A STRATEGY FOR PROTECTING THE INTERESTS OF LOCAL GOVERNMENT, ITS RESIDENTS, AND ALL ADELPHIA CABLE TELEVISION SUBSCRIBERS IMPACTED BY THE ADELPHIA BANKRUPTCY WHEREAS, Adelphia Communications hereinafter referred to as Adelphia, is a City of Moorpark cable television franchisee; and WHEREAS, in recent months, Adelphia has undergone well - publicized financial difficulties, including the disclosure of approximately $3.1 billion in previously undisclosed off - balance sheet obligations, the commencement of a Securities and Exchange Commission and two federal grand jury investigations, allegations of widespread corporate fraud, substantial defaults on bondholder debts, numerous shareholder lawsuits against Adelphia, and the arrest of five former Adelphia corporate executives; and WHEREAS, on June 25, 2002, Adelphia, and more than two hundred (200) of its subsidiaries, filed for bankruptcy protection; and WHEREAS, recent press reports and other information indicate that Adelphia has obtained $1.5 billion in debtor -in- possession financing to sustain its operations while the bankruptcy is proceeding; and WHEREAS, in the context of a bankruptcy, Adelphia will be required to assume, assign, or reject the current franchise agreement with the City of Moorpark, and during that process, the City of Moorpark should play an active and important role so as to ensure that all franchise obligations are satisfied and local cable television subscribers receive the highest quality, uninterrupted, cable television service; and Resolution No. 2002 Page 2 WHEREAS, Adelphia is currently in renewal negotiations with the City of Moorpark whereby it seeks to extend its contract rights, which negotiations may be complicated by the bankruptcy filing; and WHEREAS, complicated legal and practical issues will arise during the course of the bankruptcy, which will require: (i) extensive analysis of local government's rights and obligations; (ii) preparation of financial documents and correspondence explaining the practical ramifications of the various proposals, including debt and equity restructurings that may arise; and (iii) a careful attention to the protection of the public health, safety, and welfare, the quality and range of cable television services, and the financial and performance based rights of local government; and WHEREAS, the anticipated bankruptcy may result in tension between local government's authority to control its public rights -of -way and duty to protect subscribers, Adelphia's creditors' desire to obtain maximum value from the Adelphia franchises with minimum delay, potential asset purchasers' desire to pay the lowest possible price and incur the minimum possible obligation when seeking to buy cable franchises from the bankruptcy estate, and the bankruptcy court's desire to quickly administer the case and confirm a bankruptcy plan; and WHEREAS, by forming a coalition, local government can present a united front in the anticipated bankruptcy case, which will likely allow local government to assert more influence over the ultimate conditions under which Adelphia or some other cable operator will provide services to cable subscribers on a going - forward basis; and WHEREAS, bankruptcy law provides, in some circumstances, for the formation of "committees" of parties sharing like interests in a bankruptcy proceeding; and WHEREAS, press reports and Adelphia's management, as well are currently mapping out their and committee formations, which fundamental objectives of local television franchises; and other information indicate that as Adelphia's major creditors, respective bankruptcy strategies are not likely. to align with the government with respect to cable Resolution No. 2002 Page 3 WHEREAS, if an official committee of local government entities were appointed by the United States Trustee, the professional fees incurred by the committee would be paid by the bankruptcy estate; and WHEREAS, on July 12, 2002, the Executive Director of the National Association of Telecommunications Officers and Advisors (hereinafter referred to as NATOA) and the President of the States of California and Nevada Chapter of NATOA (hereinafter referred to as SCAN NATOA) , of which the City of Moorpark is a member, sent a letter to Adelphia's General Counsel soliciting Adelphia's support before the United States Trustee to appoint a local government committee; and WHEREAS, on July 31, 2002, the County of St. Port Lucie, Florida, filed a motion in the United States Bankruptcy Court for the Southern District of New York for the creation of an official committee of local franchise authorities and a hearing date has been set for September 17, 2002; and WHEREAS, on August 15, 2002, Mr. Fisher responded to the NATOA /SCAN NATOA letter (Exhibit B) and indicated that Adelphia would remain neutral (neither support nor oppose) on the formation of a local government committee. NOW, THEREFORE, CITY COUNCIL OF THE CITY OF MOORPARK DOES HEREBY RESOLVE AS FOLLOWS: SECTION 1. The Recitals above are hereby declared to be true, accurate, and correct. SECTION 2. Based upon and through the actions described in the above Recitals, as well as other written and oral evidence submitted at the Hearing, it is hereby determined that the City of Moorpark will benefit from participating in a coalition of cities, counties, and special districts that act as the local government committee, which would strive to protect local government, its residents, and all Adelphia cable television subscribers impacted by the Adelphia bankruptcy. SECTION 3. The for the entities appointment of by the United City Council hereby expresses support an official committee of local government States Trustee. Resolution No. 2002 Page 4 SECTION 4. The City Council approves participation of the City of Moorpark in the event such an official committee of local government entities is appointed by the United States Trustee. SECTION S. The City Clerk shall certify to the adoption of this resolution and shall cause a certified resolution to be filed in the book of original resolutions PASSED AND ADOPTED this 18th day of September, 2002. Patrick Hunter, Mayor ATTEST: Deborah S. Traffenstedt, City Clerk