MO: City seeking $1.3 million in unpaid franchise fees from Mediacom

Posted on October 6, 2007 - 5:40pm.

Note: In states where state video franchises have passed or are pending, many cable companies have stalled or refused to honor existing local franchise agreements. This results in access centers losing anticipated operating revenue and having to resort to court battles, a reduction in services or closure.

from: Columbian Missourian

City seeking $1.3 million in unpaid franchise fees from Mediacom

The city and the cable company disagree over a statute of limitations that could alter how much money Mediacom might have to pay

By Emilie Rusch

October 6, 2007 | 5:09 p.m. CST

COLUMBIA — The city of Columbia has filed a lawsuit against cable provider Mediacom, hoping to recover $1.34 million in unpaid cable franchise fees and support for the city’s public access channel.

City Council members and the city Law Department see the suit, now filed in the Missouri Western District Court, as the only option to recoup the money after Mediacom abandoned franchise negotiations following the passage of the statewide video-franchise law earlier this year.

“We were hoping to work out a new franchise agreement, but then the state law was passed that eliminated the city’s role in the franchise process,” Second Ward Councilman Chris Janku said. “Now we don’t have the leverage of writing a new franchise to get the money back. It’s basically a last resort.”

According to court documents, the suit requests $93,105, which excludes interest at a rate of 10 percent annually, in underpaid franchise fees dating from Jan. 1, 2001 to Sept. 30, 2004. The suit also asks for $1.25 million in support for Columbia Access Television dating from December 2001 through August 2007.

The case was filed Sept. 13 in the Western Missouri District Court by Assistant City Attorney Susan Crigler and has been assigned to District Judge Nanette Laughrey. The petition was originally filed Aug. 9 in the 13th Judicial Circuit Court but was moved to the federal level because Mediacom is based outside Missouri.

The lawsuit will be discussed during a closed meeting that the council will hold after a public work session Monday, Crigler said.

“The city has legal rights,” Crigler said. “We feel like we were underpaid. (Mediacom) did stop negotiations when they went to a state franchise, so we really had to pursue the court. At least it keeps our rights open so we’re not losing any rights by not pursuing our legal options.”

According to court documents, Mediacom has asked the court to dismiss roughly $604,000 in franchise fees and CAT support dating before Aug. 8, 2002. In Missouri, the statute of limitations for suits based on ordinances is five years.

The city’s response, filed by City Attorney Fred Boeckmann on Friday, argued that a 10-year statute of limitations applies.In Court documents, he asserted the franchise agreement with Mediacom was a “writing for the payment of money or property,” not an ordinance.

Ronald Hack, the St. Louis-based lawyer representing the Mediacom subsidiary MCC Missouri LLC, declined to comment. But in a list of “affirmative defenses” filed with the court, he states that the city has misinterpreted the franchise agreement. He also stated that it should be unable to ask for more money now for public access television, given its acceptance of earlier support, and that the city’s attempt to extract money retroactively prevents Mediacom from passing those costs onto consumers.

If the case cannot be settled out of court, the city will probably bring in special counsel for the trial, Crigler said. But it will be at least six months before the suit makes it to trial, though it could be resolved by settlement sooner.

Before the council approved an increase in the franchise fee to 5 percent in September, cable providers were required by city ordinance to pay 3 percent of their gross revenue within city limits in exchange for the use of public right of way. The city code allows the city to audit the quarterly franchise fee payments.

According to court documents, the $93,105 in underpaid franchise fees were reported in May 2005 by cable consultant Sue Buske, who had been hired to assist in the franchise renegotiations.

As part of those negotiations, Janku said, the city had looked at what was called for under the previous franchise, as well as the terms of a new franchise, for ways to recoup the money.

“We’ve been pursuing getting the money for quite awhile,” Sixth Ward Councilwoman Barbara Hoppe said. “When the state legislature passed that legislation, it gave Mediacom less incentive to cooperate with the cities. It put the cities at a disadvantage.”

According to court documents, the city estimates reasonable start-up cost for a public access channel as $429,292 — Mediacom paid $93,200. It estimates reasonable operating costs for the channel at $173,408 per year, or $982,645 for the period between December 2001, when the city was approached to enforce the franchise agreement, and August 2007, when the franchise agreement between the city and Mediacom expired.

Those numbers come from Buske’s consulting work, Crigler said.

The city estimates Mediacom has paid CAT $163,220 since August 2004, according to court documents.

( categories: MISSOURI | State Franchises )