HomeMy WebLinkAboutAssignment Agreement 4/15/04
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ASSIGNMENT AGREEMENT
by and between
TRUCKEE DONNER PUBLIC UTILITY DISTRICT FINANCING CORPORATION
and
BNY WESTERN TRUST COMPANY
as Trustee
Dated as of 1, 2004
relating to
TRUCKEE DONNER PUBLIC UTILITY DISTRICT
REVENUE CERTIFICATES OF PARTICIPATION,SERIES 2004
DOCSSFA3401 v 1 A22925.0011
ASSIGNMENT AGREEMENT
This Assignment Agreement is made and entered into as of _ 1, 2004 by and
between the Truckee Donner Public Utility District Financing Corporation, a nonprofit public benefit
corporation duly organized and existing under the laws of the State of California (the "Corporation")
and BNY Western Trust Company, a national banking association duly organized and existing under
the laws of the United States of America as trustee (the"Trustee");
NOW, THEREFORE, IN CONSIDERATION OF THE MUTUAL AGREEMENTS AND
COVENANTS CONTAINED HEREIN AND FOR OTHER VALUABLE CONSIDERATION, THE
PARTIES HERETO DO HEREBY AGREE AS FOLLOWS:
Section 1. Assignment
The Corporation, for good and valuable consideration in hand received, does hereby sell,
assign and transfer to the Trustee without recourse, for the benefit of the owners of the Revenue
Certificates of Participation, Series 2004 (the "Certificates"), to be executed and delivered by the
Trustee pursuant to the Trust Agreement, dated as of 1, 2004 (the"Trust Agreement'),by
and among the Truckee Donner Public Utility District (the "District'), the Corporation and the
Trustee, all of its rights, title, and interest in the Installment Purchase Agreement, dated as of
1, 2004 (the "Installment Purchase Agreement'), by and between the District and the
Corporation including the right to receive all Installment Payments from the District under the
Installment Purchase Agreement (but not including the right to be indemnified and the right to
receive notices pursuant to the Installment Purchase Agreement), together with any and all of the
other rights of the Corporation under the Installment Purchase Agreement as may be necessary to
enforce payment of such Installment Payments when due or otherwise to protect the interests of the
owners of the Certificates. The assignment herein is absolute and presently effective.
Section 2. Acceptance,
The Trustee hereby accepts the foregoing assignment for the purpose of securing the right
assigned to it to receive all such installment payments from the District under the Installment
Purchase Agreement and the other rights assigned to it, subject to the terms and provisions of the
Trust Agreement, and all such installment payments shall be applied and the rights so assigned shall
be exercised by the Trustee as provided in the Trust Agreement.
Section 3. Conditions.
This Assignment Agreement shall confer no rights or impose no obligations upon the Trustee
beyond those expressly provided in the Trust Agreement. This Assignment Agreement shall
constitute a complete assignment by the Corporation of all of its rights under and pursuant to the
Installment Purchase Agreement, except as otherwise provided herein.
DOCSSR4340]v 1\22925.0011
IN WITNESS WHEREOF, the parties hereto have executed this Assignment Agreement by
their officers thereunto duly authorized as of the day and year first written above.
TRUCKEE DONNER PUBLIC UTILITY DISTRICT
FINANCING CORPORATION
By:
Its: President
By:
Its: Clerk
BNY WESTERN TRUST COMPANY,
as Trustee
By:
Its: Authorized Officer
-2-
DOC3SF143401v1A2292s.00n
DRAFT 4/15/04
$171000,000*
Revenue Certificates of Participation
Series 2004
Representing Undivided and Proportionate Installment Payments to be made by
Truckee Donner Public Utility District
(California)
PRELIMINARY TERM SHEET
NOTE: THIS TERM SHEET IS PRELIMINARY AND SUBJECT TO CHANGE AND IS
INTENDED ONLY AS A BRIEF SUMMARY OF CERTAIN TERMS OF THE
PROPOSED TRANSACTION AND IS NOT TO BE RELIED UPON IN CONNECTION
WITH ANY INVESTMENT IN THE COPS. POTENTIAL INVESTORS IN THE COPS
MUST REVIEW THE DISCLOSURE DOCUMENTS RELATING TO THE COPS AND
ALL RELATED DOCUMENTS, CERTIFICATES AND OPINIONS.
Introduction:
The Revenue Certificates of Participation (the "COPS") will be executed and delivered to finance
the construction of a "Fiber-to-the Home" broadband telecommunications network (the "FTTH
Network") within the service territory of the Truckee Donner Public Utility District (the
"District"). The FTTH Network will be used for various public purposes, including government
and community connectivity for education and other governmental services. In addition, the
network will be used to provide business and residential consumers with multi-channel video
program service packages (cable TV), including basic and extended packages, premium services,
pay-per-view and video on demand services; high speed Internet access services, as well as
Voice over the Internet Protocol services. The FTTH Network also will be used by the District
for remote meter reading and electric/water SCADA in connection with its utility services.
The District is a public utility district providing electric and water service in eastern California
north of Lake Tahoe (w��.td ud�.or ) in and around the Town of Truckee, California
("Truckee") and within Nevada and Placer Counties. The District is governed by a locally
elected board of directors, comprised of local business people. The District is already serving
nearly all resident, businesses and government offices in the area with water and electricity
(approximately 12,000 subscribers) and has an excellent reputation for integrity, customer
service and reliability.
Truckee is a booming resort town, located 12 miles north of Lake Tahoe on Interstate 80, 35
minutes from Reno, and 90 minutes from Sacramento. Truckee has experienced a very
significant increase in the number of vacation and second homes from residents of the San
Francisco Bay area and other urban areas within a three-hour drive of Truckee. Its proximity to
Lake Tahoe, and a dozen ski resorts around Lake Tahoe, make it an excellent year round
destination for enjoying the Sierra Nevada Mountains.
Truckee currently has over 4,000 new housing units approved and/or under construction. The
vacationing population of roughly three times the normal 12,000 residents, is sophisticated and is
accustomed to top-notch utility, government, video and broadband services to stay in touch with
their businesses and families.
Principal Amount of COPS:
$1 /,000,000*
Closing Date:
June , 2004
Issuer:
Truckee Donner Public Utility District
Trustee:
BNY Western Trust Company(the"Trustee")
Financing Structure(COPS):
Pursuant to an installment purchase agreement (the "Installment Purchase Agreement"), the
District will purchase the FTTH Network from the District's financing corporation (the
"Financing Corporation"). In consideration for such purchase, the District will make installment
payments ("Installment Payments") to the Financing Corporation, which will be assigned to the
Trustee. Under a Trust Agreement among the District, the Financing Corporation and the
Trustee (the "Trust Agreement"), the COPS (representing undivided interests in the Installment
Payments) will be delivered to investors. It is expected that the portion of each Installment
Payment constituting interest (and original issue discount) will be excluded from gross income
for federal income tax purposes and will not be an item of tax preference for purposes of
calculating the federal alternative minimum tax imposed on individuals and corporations.
The proceeds of the COPS, after funding the amounts described in the next paragraph, will be
deposited in the Construction Fund. Amounts in the Construction Fund will be drawn down over
a two-year construction period to pay costs of the Project.
COP proceeds will be used to fund (i) costs of issuing the COPS and (ii) a Capitalized Interest
Fund for covering principal and interest during the approximately 2-year construction period.
Rating Status: UNRATED
Interest Rate Pricing:
It is expected that the COP interest rate will be based on the interpolated 8.5 year Treasury swap
curve the day of the pricing plus approximately 1.65% (165 basis points). The COPS are
expected to be priced with original issue discount (e.g., 98% of par).
Payment of Interest and Principal:
Interest on the COPS will be paid on a semiannual basis.
Principal will be paid on a sinking fund basis from year 3 through year 12 (10-year amortization,
no balloon payment) on an annual basis.
Optional Prepayment/Surplus Revenue Redemption Provisions:
None
Tax-Exempt Status:
' Preliminary; subject to change
2
Upon delivery of the COPs, it is expected that Stradling Yocca Carlson & Rauth, San Francisco,
California, special counsel, will opine that, under existing statues, regulations, rulings and
judicial decisions, and assuming certain representations and compliance with certain covenants
and requirements, the portion of each Installment Payment constituting interest (and original
issue discount) is excluded from gross income for federal income tax purposes and is not an item
of tax preference for purposes of calculating the federal alternative minimum tax imposed on
individuals and corporations, and that the portion of each Installment Payment constituting
interest(and original issue discount) is exempt from State of California income tax.
Sources of Payment:
INSTALLMENT PAYMENTS WILL BE PAYABLE BY THE DISTRICT SOLELY FROM
REVENUES OF THE FTTH NETWORK, AFTER PAYMENT OF OPERATIONS AND
MAINTENANCE COSTS. REVENUES OF THE DISTRICT'S ELECTRIC AND WATER
UTILITIES ARE NOT AVAILABLE TO MAKE INSTALLMENT PAYMENTS. PURSUANT
TO SECTION 16467 OF THE PUBLIC UTILITIES CODE OF THE STATE OF
CALIFORNIA, THE DISTRICT IS NOT AUTHORIZED TO USE REVENUES DERIVED
FROM ELECTRIC OR WATER OPERATIONS TO MAKE INSTALLMENT PAYMENTS.
The Installment Purchase Agreement and Trust Agreement are anticipated to have covenants
addressing debt service coverage and timely payment of Installment Payments with acceleration
of principal, to the extent available, in the event of a breach.
Security for the COPS:
The COPs represent proportionate and undivided interest in the Installment Payments to
be made by the District. The Installment Payments are special limited obligations of the
District and are payable solely from the revenues derived from the FTTH Network of the
payment of operations and maintenance costs. The Installment Payments are not payable
from any other assets of the District or any political subdivision. Pursuant to the
Installment Purchase Agreement, the District expects to pledge, as security for its
obligation to make Installment Payments, all revenues of the FTTH Network.
Restrictions:
Section 16467 as the Public Utilities Code of the State of California requires all public utility
districts, including the District, to operate each utility such that it is financially self-sustaining.
The Nevada County Local Area Formation Commission (LAFCO), which has the authority to
authorize the District to provide the new broadband services, has required the District to
establish a risk mitigation plan to ensure that the District's broadband utility will not place the
District's water or electric assets, revenues or ratepayers at risk.
Based on these restrictions, the District will establish a separate division for the construction of
the FTTH network and provision of services using that network.
Projections:
The District has generated significant commitments from businesses and residents in the form of
3
"Charter Memberships" which indicate both a very strong interest in upgraded services to be
provided by the District. 10% of the 10,000 charter membership forms sent to the District's
residential electric/water customers have been filled out and sent in to the District requesting one
or more services to be provided.
100% of the homes connected will be required to utilize electronic meter reading (SCADA &
AMR) services in the future,reducing the cost of meter reading by 75%, or roughly S 122,000 per
year: It is also anticipated that over 50% of the businesses and homes serviced will subscribe to
some service provided (video, voice and/or data) as evidenced by several other successful
deployments of fiber infrastructure by municipalities or public utility districts.
Management:
The manager of the Project is Mr. Alan Harry. Mr. Harry was hired in 1999 by the District to
plan, design and finance the Project for the District. Alan's extensive local government
experience in the San Francisco Bay area , in addition to his experience with the local incumbent
cable providers in Truckee since the early 1990's, gives the District a skilled and seasoned
manager for this undertaking.
4
Competition:
The community is currently served by one existing franchised cable television system operator,
USA Media. That system has an approximate market share of 80% of the consumers of multi-
channel video programming service in the community. Approximately 18% of the residents of
the community which subscribe to multi-channel video programming services utilize satellite-
based service provided by the Dish Network. It is expected that the FTTH network will be
capable of providing a higher level of video programming service than those alternatives as well
as a higher speed Internet access than that available via the incumbent cable system. The Dish
Network does not offer high speed Internet access.
Type of Securities Distribution:
Private Placement
Placement Agent:
RiviereJenison Securities, Ltd. (successor to Barton Creek Ltd.)
Bond Counsel:
Stradling Yocca Carlson & Rauth
Placement Agent's Counsel:
Greenberg Traurig, LLP
5
Risk Mitigation Plan
Prepared for:
Nevada County
Local Agency Formation Commission
By:
Truckee Donner
Public Utilities District
April 14, 2004
. .... .... ... .... .. . ............. .._._.. . _
Introduction:
On January 18`r, 2001, the Nevada County Local Agency Formation Commission,
LAFCo, adopted Resolution 01-0 1 granting the Truckee Donner Public Utility District,
District, conditional approval to provide telephone service or other means of
communication, as authorized by the Public Utility District Act(Public Utilities Code
Section 16461).
Condition "b" of LAFCo Resolution 01-01 states that"The District shall adopt a risk
mitigation plan adequate to ensure its water and electrical service ratepayers will not be
required to subsidize the new services or support the repayment of debt incurred for the
new services. This risk mitigation plan must contain a fully articulated legally
enforceable risk mitigation agreement with an experienced and credible underwriter and
such other provisions as may be necessary to achieve the objective."
The Project:
The District intends to construct a "Fiber-to-the Home" broadband telecommunications
network, the "FTTH Network", within the service territory of the District. The FTTH
Network will be used for various public purposes, including government and community
connectivity for education and other governmental services. In addition, the network will
be used to provide business and residential consumers with multi-channel video program
service packages (cable TV), including basic and extended packages, premium services,
pay-per-view and video on demand services; high speed Internet access services, as well
as Voice over the Internet Protocol services and Security services. The FTTH Network
also will be used by the District for remote meter reading in connection with its utility
services.
Financing Structure (COPS):
Pursuant to an installment purchase agreement (the "Installment Purchase Agreement"),
the District will purchase the FTTH Network from the District's financing corporation
(the "Financing Corporation"). In consideration for such purchase, the District will make
installment payments ("Installment Payments") to the Financing Corporation, which will
be assigned to the Trustee. Under a Trust Agreement among the District, the Financing
Corporation and the Trustee (the "Trust Agreement'), the COPS (representing undivided
interests in the Installment Payments) will be delivered to investors. It is expected that
the portion of each Installment Payment constituting interest(and original issue discount)
will be excluded from gross income for federal income tax purposes and will not be an
item of tax preference for purposes of calculating the federal alternative minimum tax
imposed on individuals and corporations.
Sources of Payment:
INSTALLMENT PAYMENTS WILL BE PAYABLE BY THE DISTRICT SOLELY
FROM REVENUES OF THE FTTH NETWORK, AFTER PAYMENT OF
OPERATIONS AND MAINTENANCE COSTS. REVENUES OF THE DISTRICT'S
ELECTRIC AND WATER UTILITIES ARE NOT AVAILABLE TO MAKE
INSTALLMENT PAYMENTS. PURSUANT TO SECTION 16467 OF THE PUBLIC
UTILITIES CODE OF THE STATE OF CALIFORNIA, THE DISTRICT IS NOT
AUTHORIZED TO USE REVENUES DERIVED FROM ELECTRIC OR WATER
OPERATIONS TO MAKE INSTALLMENT PAYMENTS.
Security for the COPs:
The COPS represent proportionate and undivided interest in the Installment
Payments to be made by the District. The Installment Payments are special limited
obligations of the District and are payable solely from the revenues derived from the
FTTH Network after payment of operations and maintenance costs. The
Installment Payments are not payable from any other assets of the District or any
political subdivision. Pursuant to the Installment Purchase Agreement, the District
expects to pledge, as security for its obligation to make Installment Payments, all
revenues of the FTTH Network.
Governing Law - California Public Utilities Code:
Section 16461. A district may acquire, construct, own, operate, control, or use,
within or without or partly within and partly without the district, works for
supplying its inhabitants with light, water,power, heat, transportation, telephone
service, or other means of communication, or means for the disposition of garbage,
sewage, or refuse matter, and may do all things necessary or convenient to the full
exercise of the powers granted in this article.
Section 16467 - Only revenue producing utilities shall be acquired, owned, or
operated by a district. So far as possible the board shall fix such charges for
commodities or service furnished by any revenue producing utility as will pay all of the
expenses of the government of the district, or such portion as the board determines justly
apportionable to such utility. The expenses to be paid include:
(a) Salaries, office expenses, and other necessary disbursements.
(b) The operating expenses of the utility.
(c) The interest on any indebtedness incurred for the acquisition,
construction, and completion of the utility.
(d) Provisions for a sinking or other appropriate fund for the
payment of the principal of such debt as it becomes due.
(e) Provisions for an appropriate fund for repairs, replacements,
and betterments.
It is the intention of this section that a district pay all of such charges and
expenditures and the interest and principal of its debt from the revenues derived by
the district from the operation of its public utilities, and that each public utility
owned and operated by a district shall be self-sustaining.
Finance Documents:
Attached are the various documents required to utilize Certificates of Participation as the
finding mechanism for a project of this type.
Please note that is each document specific language is included to emphasize that the
financing is a Revenue Bond with sole security for the Fiber-to-the Home's COPS being
the revenues generated by the project.
Conclusion:
In that 1) Section 16467 of the Public Utilities Code of the State of California specifically
states that the District is not authorized to use revenues derived from its Electric and
Water operations as payment of debt incurred through the issuing of COPs to finance the
construction of the FTTH Network; 2) that the sole source of satisfying the COPs is
specified in all financing documents as the revenues derived from the FTTH Network
after payment of operations and maintenance costs; and 3) that the District has enlisted
the services of qualified Bond Counsel, Financial Consultants, and Underwriters/
Placement Agents to prepare all legal documents associated with the financing of the
FTTH Network, it is concluded that the District has met the Risk Mitigation condition set
by LAFCo "to ensure its water and electrical service ratepayers will not be required to
subsidize the new services or support the repayment of debt incurred for the new
services".
Attachments:
- Resolution 01-01 of the Local Agency Formation Commission of Nevada County
- California Public Utilities Code Sections) 16461 and 16467
- Legal Opinion - Authority of District to Provide Cable Television Service
- Preliminary Term Sheet - $17,000,000 Certificates of Participation Series 2004
Representing Undivided and Proportionate Installment Payments to be made by
Truckee Donner Public Utility District
- Corporation Authorizing Resolution
- District Authorizing Resolution
- Installment Purchase Agreement
- Trust Agreement
- Assignment Agreement
STRADLING YOCCA CARLSON & RAUTH
A PROFESSIONAL CORPORATION NEWPORT BEACH OFFICE
ATTORNEYS AT LAW 660 NEWPORT CENTER DRIVE,SUITE 1600
NEWPORT BEACH,CALIFORNIA 92660-6441
DAvo G.CASNoCHA 44 MONTGOMERY STREET,SUITE 4200 TELEPHONE (949)225-4000
FACSIMILE (949)725-4100
DIRECT DIAL:(415)283-2241 SAN FRANCISCO,CALIFORNIA 94104
DCASNOCHA@SYCR.COM TELEPHONE 415 283-2240 SANTA BARBARA OFFICE
302 OLIVE STREET
FACSIMILE 283-2255 415 SANTA BARBARA,CALIFORNIA 93101
( ) TELEPHONE (805)564-0065
FACSIMILE(SPPS64-] C
April 15, 2004
Peter Holzmeister
Truckee Donner Public Utility District
11570 Donner Pass Road
Truckee, CA 96160
Re: Revenues Available for Broadband Project
Dear Mr. Holzmeister:
In order to finance the costs associated with constructing and acquiring a broadband system
(the"Project") by Truckee Donner Public Utility District (the"District"),the District plans to cause
the execution and delivery of certificates of participation(the "COPS"). The District has determined
that the COPs are to be payable solely from revenues of the Project. You have asked us to confirm
that revenues of the District's electric and water utilities (the "Non-Broadband Revenues") are not
available to make payments on the COPS.
The District is organized under the Public Utility District Act of the State of California(the
"Act"). Section 16467 of the Act requires that any debt incurred to finance a utility be repaid from
revenues of such utility and that each utility of the District be financially self-sustaining. The District
is therefore prohibited from using Non-Broadband Revenues to make payments on the COPS.
Additionally, to ensure that the District uses only Project revenues to make payments on the COPS,
the financing documents will contain provisions requiring such a result. For example,pursuant to the
Installment Purchase Agreement, under which the District will obligate itself to pay the COPS, the
District will be required to make payments exclusively from"Revenues." "Revenues"will be
defined to include only Project revenues and will specifically exclude Non-Broadband Revenues.
The financing documents will also contain specific prohibitions against using Non-Broadband
Revenues to make payments on the COPs.
DOCSSF143822v 1\22925,0011
....................... .. ....... . . ...... ... ... .
Peter Holzmeister
April 15,2004
Page Two
Both the Act and the financing documents will prohibit the District from using Non-
Broadband Revenues to make payments on the COPS. If you have any questions or desire any
additional clarification,please contact me.
Very truly yours,
David G. Casnocha
DGC:mlc:
DOCSSF\43822v1\22925.0011
Resolution 01 -01
of the
Local Agency Formation Commission
Of
Nevada County, California
WHEREAS, the Truckee Donner Public Utility District has applied to the Local
Agency Formation Commission of Nevada County, California, for authorization
to provide a new class of service, specifically telephone service and other
means of communication, as allowed under the Public Utilities District Act; and,
WHEREAS, the District's application and supplemental materials were received
by LAFCo prior to January 1, 2001, and therefore the proceedings for this
application are governed in general by the Cortese-Knox Local Government
Reorganization Act, Section 56000 et seq. of the Government Code as it read
prior to the passage and effective date of Assembly Bill 2838; and,
WHEREAS, in 1979 the Commission and the Special Districts of Nevada County
adopted Rules and Regulations Affecting the Functions and Services of Special
Districts and Independent Special District Representation on the Commission
(hereinafter "Rules and Regulations"); and,
WHEREAS, the Rules and Regulations specify that no special district shall provide
or engage in a new or different function or class of service in an area where
such function or class of service is already being provided, unless authorized to
do so by the Local Agency Formation Commission, and further specify a proce-
dure for making application to the Local Agency Formation Commission for
authorization to provide a new or different function or class of service; and,
WHEREAS, the class of service the Truckee Donner Public Utility District has re-
quested authorization to provide is currently provided in the subject territory by
several non-governmental entities; and,
WHEREAS, the Truckee Donner Public Utility District has prepared an application
to LAFCo requesting authorization to expand its services by providing telephone
service and other means of communication, as authorized by Public Utilities
District Act (Public Utilities Code Section 16461), and the District has also pre-
pared a preliminary plan for services and conducted environmental review of
this plan; and,
WHEREAS, the Truckee Donner Public Utility District has identified the specific
functions of communication service it requests authorization to provide as cable
television, data transport, internet service provision, and telephone service; and,
WHEREAS, the Nevada County Local Agency Formation Commission adopted a
Sphere of Influence Plan for the Truckee Donner Public Utility District in 1998, in-
Resolution 01-01 • •
Nevada LAFCo
cluding a Master Service Element for the provision of water and electrical
power; and,
WHEREAS, Nevada County Local Agency Formation Commission policy requires
the District's Sphere of Influence Plan be updated to include a Master Service
Element for a new function or class of service; and,
WHEREAS, the Executive Officer has reviewed the application materials and has
prepared a report including,staff recommendations thereon and has furnished
copies of said report to the Commission and to all other persons required by law
to receive it; and
WHEREAS, at the time and in the manner provided by law, the Executive Officer
gave notice of the date, time, and place of a public hearing by the Commis-
sion upon said application, and,
WHEREAS, the Commission has heard all interested parties desiring to be heard
and has considered the application and the report by the Executive Officer and
all other relevant evidence and information presented at said hearing;
NOW, THEREFORE, the Nevada County Local Agency Formation Commission
hereby determines the following:
1 . The subject territory includes the entire jurisdiction of the Truckee Donner
Public Utility District and is found to be inhabited.
2. The Commission, as a responsible agency, has considered and concurs
with the Truckee Donner Public Utility District's finding of September 3, 1999,
that the District's plan to provide service will not have a significant adverse
effect on the environment.
3. The Commission has determined that it is in the interest of the public that
the District be permitted to provide the service to the community in com-
pliance with the conditions imposed herein.
NOW, THEREFORE, the Commission resolves and orders the following:
1) Subject to the terms and conditions stated herein, the Truckee Donner Public
Utility District's proposal is approved, and the District is hereby authorized to
provide the new class of services throughout its jurisdiction, as shown in Exhibit
A, attached hereto and by this reference incorporated herein. The new
class of services is communications (including those transmitted via optical
fiber, co-axial cable, and intra-system wireless links), and the specific func-
tions the District is hereby authorized to provide are limited to the following:
cable television, Internet access, data transfer, and telephone service.
2) Prior to assuming additional debt to finance the initiation of the new class of
service, and before initiating the service, the District must comply with the
following:
2
'Resolution 01-01 • •
Nevada LAFCo
a) The District shall prepare and submit to LAFCo, pursuant to LAFCo Policies
and Procedures, a draft Master Service Element for the communications
services it intends to provide. This document will be reviewed and revised
as necessary by the Commission and if approved,will be incorporated
into the District's Sphere of Influence Plan after a public hearing.'
b) The District shall adopt-a risk mitigation plan adequate to ensure its water
and electrical service Fatepayers will not be required to subsidize the new
services or support the repayment of debt incurred for the new services.
This risk mitigation plan must contain a fully articulated legally enforceable
risk mitigation agreement with an experienced and credible underwriter
and such other provisions as may be necessary to achieve the objective.
The plan shall be submitted to LAFCo for its review and approval. This
review will be conducted by an independent and qualified consultant or
consultants selected by LAFCo and working under LAFCo's direction with
full participation by the District. The expense of such review will be inclu-
ded in proposal processing costs charged to the District.
c) The District must apply for and obtain franchise agreements with all appli-
cable jurisdictions, including the Town of Truckee, County of Placer and
the County of Nevada, or reach alternative agreements satisfactory to
those agencies.
d) Upon completion of all of the above, LAFCo shall issue a "Certificate of
Compliance" acknowledging that the District has complied with the
terms and conditions of this resolution. The Commission's review at the
time of issuance shall be limited to the terms and conditions of this
Resolution. The Commission will adopt this Certificate after a public
hearing. Only upon issuance of the Certificate of Compliance shall
LAFCo approval to provide the additional class of service be effective.
3) If the District fails to comply with the terms and conditions of this resolution
sufficiently to allow the Commission to issue the Certificate of Compliance
within two years of the adoption of this resolution, this approval will expire.
Upon a request of the District made at least 90 days prior to the expiration
date and in consideration of the District's showing of good faith effort to
satisfy the requirements of this resolution, the Commission may extend the
expiration date following a public hearing on the matter.
4) If the District has obtained the Certificate of Compliance but has failed to
provide one or more of the service functions identified in this resolution by
January 1, 2005, LAFCo's approval of those unprovided service functions shall
automatically expire. Upon a request by the District made no later than Oc-
tober 1, 2004, the Commission may, after a hearing, extend the expiration
3
_... ........... . .--- _ -
' Resolution 0 1-01 • •
NevadaLAFCo
date for initiation of one or more services, upon the District's showing of good
faith effort to provide the service., .
The foregoing resolution was duly passed by the Local Agency Formation
Commission of Nevada County at a special meeting held ondnr T
2001, by the following roll call voter
Ayes: I cl� Crc�n ✓ e Ec rsrn� �wezf Vail �wi VveS
Noes: $
Abstains: -�-
Absent:
Signed and approved by me after its passage this day of 2DO1
Ron Sweet, Chair
Nevada County LAFCo
4Jn
Executive Officer
Exhibit A
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Created by Nevada Co.GIS Div. 1/31/2001 '
STATE OF CALIFORNIA
PUBLIC UTILITIES CODE
SECTION 16461 & 16467
16461. A district may acquire, construct, own, operate, control, or
use, within or without or partly within and partly without the
district, works for supplying its inhabitants with light, water,
power, heat, transportation, telephone service, or other means of
communication, or means for the disposition of garbage, sewage, or
refuse matter, and may do all things necessary or convenient to the
full exercise of the powers granted in this article.
16467. Only revenue producing utilities shall be acquired, owned,
or operated by a district. So far as possible the board shall fix
such charges for commodities or service furnished by any revenue
producing utility as will pay all of the expenses of the government
of the district, or such portion as the board determines justly
apportionable to such utility. The expenses to be paid include:
(a) Salaries, office expenses, and other necessary disbursements.
(b) The operating expenses of the utility.
(c) The interest on any indebtedness incurred for the acquisition,
construction, and completion of the utility.
(d) Provisions for a sinking or other appropriate fund for the
payment of the principal of such debt as it becomes due.
(a) Provisions for an appropriate fund for repairs, replacements,
and betterments.
It is the intention of this section that a district pay all of
such charges and expenditures and the interest and principal of its
debt from the revenues derived by the district from the operation of
its public utilities, and that each public utility owned and operated
by a district shall be self-sustaining.
r
DUM DATE: April 18, 2000Peter L. Holzmeister
Steven C. Gross and M. Steven Wang
Truckee Donner Public Utility District
RE: Authority Of District To Provide Cable Television Service
We prepared this memorandum at your request to address the issues raised in the legal
opinion letter prepared by counsel to USA Media Group concerning the District's authority to
provide cable television service. We will be available to answer any follow-up questions.
OUSTrON PRESENTED:
Is the District authorized to provide cable television service?
CONCLUSION:
Yes. The District may provide cable television service under California law.
DISCUSSION AND ANALYSIS:
We are in receipt of an advisory opinion from Mr. Richard Harmon on behalf of USA Media
Group,LLC addressing the authority of the Truckee Donner Public Utility District(the"District")
to provide cable television service. Our research of various applicable state and federal laws and
legislative history concerning this issue lead to the formation of our legal opinion that the District
is,beyond a shadow of a doubt,authorized under the law and in fact encouraged as a matter of public
policy, to provide cable television service within its authorized service boundaries. Our opinion is
based on statutory and legislative support from well-respected authorities. We believe that this
opinion should lay to rest any concern about the District's ability to provide cable television service.
I.
INTRODUCTION
The Truckee Donner Public Utility District is duly organized and existing under the
TO: PETER L.HOLZMEISTER
FROM: STEVEN C.GROSS and M.STEVEN WANG
DATE: March 16,2001 PAGE-2-
RE: Authority of District To Provide Cable Television Service
California Public Utility District Act (the "Act'), see Public Utilities Code §15501 et segl. Since
its inception in 1927, the District, with the support of the local residents, has acquired and built
numerous infrastructure to provide water and electricity to businesses and residents within its service
area. The District provides critical backbone infrastructure for the Truckee-Donner geographical
area and is proud to have served the local community for more than 73 years. The District is now
considering providing additional infrastructure in the form of fiber optic cable and cable television
service to benefit the local community.
IL
THE DISTRICT IS AUTHORIZED TO PROVIDE
CABLE TELEVISION SERVICE UNDER CALIFORNIA LAW
Under the Act, the District is empowered to acquire, construct, own, operate and control
works for supplying its inhabitants with, among numerous other services, other means of
communication. See §16461. The term "communication" has been defined as meaning
"intelligence, news, that is communicated or imparted, a written or verbal message, and is not
restricted to mere words but includes acts as well, embracing every variety of affairs that can form
the subject of negotiation,interviews, or actions between two persons, and every method by which
one person can contrive impressions or information from the conduct, condition, or language or
another..." 40 Ops. Cal. Arty. Gen. 25, quoting In re Cattalini, 72 Ca1.App.2d 662, 667.
The issue of whether a public utility district can provide communication services under
"other means of communication"authorized by the Act has been examined in California. The Office
of the Attorney General of the State of California first faced this issue in 1962, and that is,whether
an existing Public Utility District may acquire, construct, own and operate a translator television
installation to serve the residents of the district. 40 Ops. Cal. Atty. Gen. 25. The issue arose because
the Act does not specifically address the district's authority to acquire, construct, own and operate
a translator television installation.
Then Attorney General Stanley Mosk,who later sat on the California Supreme Court as the
highly respected Chief Justice Mosk, concluded that a public utility district organized and existing
under the Act may indeed acquire, construct, own and operate a translator television installation to
1 All further statutory references are to the Public Utilities Code, unless otherwise indicated.
TO; PETER L.HOLZMEISTER
FROM: STEVEN C.GROSS and M.STEVEN WANG
DATE: March 16,2001 PAGE-3-
RE: Authority of District To Provide Cable Television Service
........................................................................................
serve the residents of the district. Id, at 29. Most importantly,Mr.Mosk analyzed the phrase"other
means of communication" and concluded that the term"communication" as used in the Act is not
limited to those means of communication which are similar to telephone service, and"[the fact that]
television is a means of mass communication [falling] within this broad definition can hardly be
controverted. Nor does it seem disputable that a translator television installation,which receives and
re-broadcasts a television signal, is a work for supplying the inhabitants of the district with such a
means of mass communication within the meaning of§16461." Id, at 28, 29.
Cable television, like other types of television, also supplies mass communication to the
recipients. There is a long history of cable television serving as a conduit for broadcast signals.
Turner Broadcasting System, Inc. v. FCC(1994) 512 U.S. 622, 654, 114 S.Ct. 2445;Hurley v. Irish-
American Gay, Lesbian and Bisexual Group of Boston (1995) 515 U.S. 557, 576, 132 L.Ed.2d 487.
Furthermore,cable is a conduit for speech,Hurley, 515 U.S. at 577, and speech, as we know, is the
basic form of communication. Mr. Hannon seems to agree to this point by writing"cable television
operators are First Amendment disseminators with First Amendment rights."Letter of Harmon,page
6,citing City of Los Angeles v. Preferred Communications, Inc. (1986)476 U.S. 488,494-495. The
First Amendment, as we all know, guarantees and protects our freedom of speech.
The right to engage in the cable television business is protected by the First Amendment free
speech guarantee. County of Stanislaus v. Post-Newsweek Cable, Inc. (1989) 213 Cal.App.3d 1445,
1454, 262 Ca1.Rptr. 439. It is also undisputed that California courts have long held that
"communication through television"falls within the constitutional protection. County of stanislaus,
supra, at 1454; Weaver v. Jordan (1966) 64 Ca1.2d 235, 241-242, 49 Ca1.Rptr. 537; Schad v. Mount
Ephraim (1981)452 U.S. 61, 65, 101 S.Ct. 2176, 2181; Group W Cable, Inc. v. City of Santa Cruz
(N.D.Cal. 1987)669 F.Supp.954,959-961. Cable television permits a great number of simultaneous
signals and has a variety of uses such as data transmission,processing burglar and fire alarm signals,
meter reading, and the placing of buy and sell orders, high speed facsimile reproduction of
publications, computerized inventory control, and "at home" shopping. TV Signal Company of
Aberdeen v. AT&T(1972)462 F.2d 1256, 1258-1259. The point is that the characteristic of cable
television is its ability to transmit and communicate massive amounts of information simultaneously
at the same time to an audience, thus is a means of communication within the meaning of§16461.
Although Mr. Mosk's opinion addresses a question involving translator television
installation,the essence of the opinion and the analysis which the affirmative conclusion was based
TO: PETER L.HOLZMEISTER
FROM: STEVEN C.GROSS and M.STEVEN WANG
DATE: March 16,2001 PAGE 4-
RE: Authority of District To Provide Cable Television Servi.ce............
................................................................
upon address the meaning of"other means of communication"and a public utility district's authority
to provide communication services under such express language in §16461. Mr. Mosk's opinion
that the phrase "other means of communication" includes communications involving television
signals supports our conclusion that cable television, as a natural evolution of communications
technology, falls within the meaning of"communication"under the Act. Mr. Mosk's opinion is
also a direct contradiction to USA Media's position that the term "communication" is limited to
technology existing in the 1920s, and that a public utility district cannot provide services not
specifically authorized under Section 16486 of the Public Utilities Code. Letter of Harmon, page
5. This issue is addressed in greater detail in Section III below.
The issue of"other means of communication" was revisited by the Office of the Attorney
General of the State of California in 1971. 54 Gps. Cal. Arty. Gen. 135. The question in this
opinion is whether a general law city could construct,own,and operate a corn in cable television
system. Under Article XI, Section 9 of the California Constitution, a muni m cipality may establish,
purchase, and operate public works to furnish its inhabitants with, among other services, means of
communication. See Const. Art. XI, §9. The issue arose because the California Constitution does
not expressly authorize a city to construct a"community antenna television system". Id, at 137.
Then Attorney General Evelle J. Younger concluded that a general law city organized and
existing under the California Constitution may indeed construct, own, and operate a community
cable television system under Article XI, Section 9 of the California Constitution even though the
language of the Constitution does not expressly provide for cable television service. Id. Attorney
General Younger wrote,"[i]n our opinion, a community cable television system is a public work to
furnish inhabitants "means of communication"...Because CATV systems are clearly designed to
improve communications, such projects are a "means of communication" within the meaning of
article XI, section 9." Id, at 137.
Even more expressly, Attorney General Younger wrote, "For the reasons previously stated,
a[community cable television] system is a means of communication and therefore falls within the
statutory definition of public utility in Public Utilit[ier the reasons section
10 discussed we are of the
Attorney General concluded the opinion by stating` [f]o
opinion that a city may construct and operate a community cable television system without
additional legislative authorization." Id, at 139.
TO; PETER L.HOLZMEISTER
FROM: STEVEN C.GROSS and M.STEVEN WANG
DATE: March 16,2001 PAGE-5-
RE: Authority of District To Provide Cable Television Service
............................................................I....................
The language in Article Xl, §9 of the California Constitution is very similar to §16461 of the
Public Utilities Code. In fact,both laws use the exact same language of"means of communication"
in the context of being provided as a service by a public entity. The importance of Attorney General
Younger's opinion is that it expressly states that cable television is a"means of communication"and
falls within the statutory definition of"public utility"under the Public Utilities Code. Furthermore,
because it was concluded that cable television is a"means of communication,"the Attorney General
recommended no additional legislation to confer the authority upon the city to provide such service
even though the Constitution, like §16461, does not expressly address cable television service,
because the Constitution already authorizes a municipality to provide means of communication to
its inhabitants. Id, at 139.
There being no California cases construing the meaning of"other means of communication,"
the un-controverted opinions of Attorney Generals Mosk and Younger are highly persuasive. Mr.
Mask's opinion that the phrase`other means of communication"includes communications involving
television signals, together with Mr. Younger's opinion that the phrase includes cable television,
support our conclusion that cable television, as a natural evolution of communications technology,
falls within the meaning of`communication"under the Act. Therefore, authorities unquestionably
exist in California to support the proposition that a public utility district may provide modern
communication services, such as cable television,within its authorized service boundaries.
Because the plain language of §16461 expressly authorizes the District to provide
communication services, and the fact that cable television is a means of mass communication can
hardly be controverted, it is clear from the plain language of the law that the District may provide
cable television service to the residents without additional legislative authorization.
III.
THE TERM "COMMUNICATION" IN THE ACT IS NOT LIMITED TO
TECHNOLOGY EXISTING AT THE TIME OF THE ACT
As stated previously, the District is empowered to acquire, construct, own, operate and
control works for supplying its inhabitants with, among numerous services, other means of
communication. See §16461. The legal opinion provided by Mr. Harmon essentially based his
conclusion upon the proposition that because the term"cable television" is not expressly stated in
the Act as a form of communication,the District is not authorized to provide cable television service
TO: PETER L.HOLZMEISTER
FROM: STEVEN C.GROSS and M.STEVEN WANG
DATE: March 16,2001 PAGE-6-
RE: Authority of District To Provide Cable Television Service
.................................................................................
to the residents of the District.
Although the Act was originally enacted in 1921,prior to the conception and existence of
television,there is no statutory language or other authority indicating or suggesting that the meaning
of"communication" is strictly limited to the technology existing in that era, as suggested by USA
Media such as non-content oriented, common-carrier utility services such as telegraph service.
Letter of Harmon, page 4, footnote I. Mr. Harmon helpfully pointed out that telegraph is a
widespread utility service in 1921 when the Act was adopted. Id.
We are unpersuaded by USA Media's proposition that a law, once created, is frozen in time
and has no application to subsequent changes in time and technology. In the contrary, cable
television is but an evolutionary progression in communication. Salvaty v. Falcon Cable Television
(1985) 165 Cal.App.3d 798, 803, 212 Cal.Rptr. 31 (although the cable television industry did not
exist [in 1930] at the time the easement was granted, it is part of the natural evolution of
communications technology).
Again, this position is supported by the 1962 Attorney General opinion by Stanley Mosk.
While television and translator television installations were not in existence when §16461 was
enacted, Attorney General Mosk concluded that "other means of communication", as used in
§16461, includes such communications technology.
Despite the unavoidable change in time and technology, numerous laws that were enacted
hundreds of years ago still govern our everyday lives without going through constant updates to
reflect changes in time and/or technology. One example is our nation's Constitution, which was
adopted in 1787 and ratified in 1788 and which guarantees our freedom of speech through an
instrument commonly known as the First Amendment. It is illogical to assert that because telephone,
television,cable TV and other modem modes of communication did not exist in 1788, and because
there are no legislation authorizing the application of the First Amendment to modern modes of
communication, that only person-to-person conversations are protected by the First Amendment.
A more logical approach is to conclude that a subsequent change in technology in the same
field does not restrict an entity's ability to perform its functions as expressly authorized under the
law. Therefore, given the fact that §16461 expressly authorizes the District to provide
communication services, it is clear from the plain language of the law that the District may provide
TO: PETER L.HOLZMEISTER
FROM: STEVEN C.GROSS and M.STEVEN WANG
DATE: March 16,2001 PAGE-7-
REi: Authority of District To Provide Cable Television Service
...................................................................................................
modern communication services, such as cable television, within its authorized service boundaries.
IV.
KIRKWOOD MEADOWS PUBLIC UTILITY DISTRICT
LEGISLATION FACILITATES FORMATION OF THE DISTRICT
AND CLARIFYING SERVICES AUTHORIZED UNDER THE LAW
Public Utilities Code Section 16486, enacted in 1981 and amended in 1994, authorizes the
Kirkwood Meadows Public Utility District to provide, among other services, cable television
facilities. Public Utilities Code Section 16487 also was enacted for the Kirkwood Meadows Public
Utility District and, together with §16486, comprises the entire legislation concerning the formation
of Kirkwood Meadows Public Utility District (the"Kirkwood Meadows Legislation").
Prior to the formation of Kirkwood Meadows Public Utility District, electricity to the
residents in the Kirkwood Meadows area was provided by privately-owned diesel generators because
Pacific Gas and Electric Company determined that it was not economically feasible to provide power
to the residents in the Kirkwood Meadows area. The owner of the private generators was not in the
power business and,more importantly,not authorized to supply electricity to the residents on a long-
term basis. The Kirkwood Meadows Legislation was introduced and sponsored by Assemblyman
Norman S. Waters (AB1092, N. Waters, 1981) and enacted for the purpose of facilitating the
formation of the Kirkwood Meadows Public Utility District to provide electricity and other services.
See Assembly Report, April 21, 1981; Ways and Means Staff Analysis, June 9, 1981; Legislative
Analyst's Report, June 17, 1981; Senate Republican Caucus Digest, June 30, 1981; Senate
Democratic Caucus Report, June 30, 1981; Letter of Norman Waters to the Governor, September
17, 1981; Enrolled Bill Memorandum to Governor, September 23, 1981.
Normally, the formation of a new public utility district requires the following of specific and
complex procedures by the Board of Supervisors in the county where the district is sought to be
formed (e.g., petition, hearings, findings, election, verification and approval). Such requirement
would render the formation of a public utility district in the Kirkwood Meadows area nearly
impossible. The geographical area of Kirkwood Meadows is located in a mountainous region
covering the territories of three different rural counties: Alpine,Amador and El Dorado. Under the
normal procedure,the proposal to form a public utility district in the Kirkwood Meadows area would
require the same process to be carried out in three different counties,perhaps at three different times,
TO: PETER L.HOLZMEISTER
FROM: STEVEN C.GROSS and M.STEVEN WANG
DATE: March 16,2001 PAGE-8-
RE: Authority of District To Provide Cable Television Service
.........................................................................................
all at the tremendous expense to the residents of the proposed district. Such procedure is highly
inefficient and unpredictable, since the Board of Supervisors in all three counties would have to
unanimously approve the formation of the district.
The Kirkwood Meadows Legislation is, therefore, an enabling legislation tailored to meet
the service needs and unique geographic and demographic problems of the Kirkwood Meadows area.
It was enacted to simplify the district formation process by designating one county as the principal
county for purposes of district formation, and to provide much needed energy services to the
Kirkwood Meadows area.
The Kirkwood Meadows Legislation also granted special regulatory and alternative financing
authority to the newly created district to issue bonds and incur indebtedness to finance electricity or
gas projects for public or private uses. §16487. The Assembly Committee Report on AB1092
provides, in pertinent part, as follows:
"AB1092 would authorize the proposed Kirkwood Meadows Public Utility District to
undertake projects for the generation,production,transmission, or distribution of electricity
or gas for light, heat, or power pursuant to the Improvement Act of 1911, the Municipal
Improvement Act of 1913,the Improvement Bond Act of 1915, and the Revenue Bond Law
of 1941. However,with the exception of the Improvement Act of 1913, such activities are
not currently authorized to be financed pursuant to these statutes." Assembly Committee
Report, April 21, 1981,pages 3-4.
Furthermore, according to the official record in the California State Archives,the legislative
intent behind the Kirkwood Meadows Legislation concerning the provision of cable television, as
stated by the original drafters of the legislation, was to merely clarify the authority of a public utility
district to provide cable television service as a means of communication under §16461, and not to
expand existing law. The Analysis of Proposed Legislation for Kirkwood Meadows Public Utility
District provides, in pertinent part, as follows:
"Second, while existing law appears to give a Public Utility District somewhat broad
authority to provide, inter alia, for `...transportation, phone service or other means of
communication..." it does not specify whether this would include facilities or services for
snow removal and road maintenance, cable television, and public parking. (Pub. Util. Code
TO: PETER L.HOLZMEISTER
FROM: STEVEN C.GROSS and M.STEVEN WANG
DATE: March 16,2001 PAGE-9-
RE; Authority of District To Provide Cable Television Service
.........................................................................................."I.....................
§ 16461.) Attorney General [Mosk]'s Opinion No. 62-100 (July, 1962) opines that a Public
Utility District may, under existing law, own, operate, construct and so forth, a translator
television installation and that such facility `need not be operated on a self-sustaining
revenue-producing basis'. (Opinion,p.29.) While the Attorney General's reasoning in this
opinion suggests that existing law would probably apply to the facilities and services
proposed by this bill, it is desirable that there is certainty regarding these specified powers
so as to ensure that the district would not later be challenged for operating or financing
services and facilities beyond the scope of its legal authority." Analysis of Proposed
Legislation for Kirkwood Meadows Public Utility District,page 8.
Moreover, as discussed in Part Il of this opinion,Attorney General Younger also pointed out
that because a city may construct and operate a community cable television system as "means of
communication" authorized under Article XI, Section 9 of the California Constitution,no additional
legislative authorization is required. 54 Ops. Cal. Arty. Gen.,supra, at 139. Therefore, in light of
the opinions of Attorney Generals Mosk and Younger that a public utility district is authorized to
provide television service as "means of communication"under §16461 of the Public Utilities Code,
there is no need to enact additional legislation for the specific purpose of authorizing cable television
services. The legislative intent of AB1092 mirrors that of the Attorney Generals' opinions, and the
language for the provision of cable television service is not an "additional" legislation sought to
authorize what was previously prohibited, but merely to clarify the existing authority of a public
utility district to provide cable television services under existing law (i.e. §16461).
Thus, contrary to Mr. Harmon's opinion that the Kirkwood Meadows Public Utility District
needed a special authorization to provide cable television service,see Letter of Harmon, page 5, the
express languages in the legislative intent and the controlling authorities in California affirmatively
support the view that such is not the case. There are special purposes for enacting the Kirkwood
Meadows Legislation, and those are: (1)to facilitate the formation of the Kirkwood Meadows Public
Utility District under a special procedure bypassing the required elections and votes of the Board of
Supervisors in three different counties; and (2) to grant alternative financing mechanisms for the
issuance of bonds and incur indebtedness to finance electricity or gas projects. Additionally, it is
an enabling legislation that merely clarifies existing law authorizing a public utility district to
provide cable television service and did not expand the law. Clearly, §16486 was not enacted to
authorize what is already authorized under the law, which, as pointed out by Attorney General
Younger, is neither necessary nor required.
TO: PETER L.HOLZMEISTER
FROM: STEVEN C.GROSS and M.STEVEN WANG
DATE: March 16,2001 PAGE-10-
RE: Authority of District To Provide Cable Television Service
V.
THE DISTRICT IS ENCOURAGED TO COMPETE IN THE
CABLE TELEVISION INDUSTRY UNDER FEDERAL LAW
The Telecommunications Act of 1996 (the "Telecommunications Act") is one of the most
de-regulatory telecommunications legislation enacted with a goal to encourage competition that will
produce innovative technologies for every American household and provide benefits to the American
consumer in the form of lower prices and enhanced services. The House Conference Report on S.
652, February 1, 1996, page H1145. The public policy of encouraging competition in order to
provide more efficient service and superior products to the American consumer is squarely behind
the Telecommunications Act, as the Act is intended to create more choices and lower prices for
consumers and enable companies to compete in the new marketplace. Id.
In support of the enactment of the Telecommunications Act, House Representative Dingell
addressed the issue of open-competition as follows:
"This telecommunications bill certainly will change the way Americans get their information
and entertainment. No longer will consumers have just one company to choose from for the
provision of local telephone or cable television service. Companies will be able to offer any
or all of these services, giving consumers for the first time the ability to buy packages of
telecommunications services that provide them with the best value at the lowest price."
House Conference Report,supra, at H1156.
Representative Markey made the following comments concerning the efforts and progress
made in competing against incumbent cable companies:
"I am encouraged by the progress that direct broadcast satellite companies and wireless cable
companies are making in signing up customers and competing against incumbent cable
operators. It is my hope that robust competition will develop between these industries by
1999 to an extent that sufficiently avails consumers of affordable marketplace choices for
multichannel video programming." House Conference Report, supra, at H1169.
Finally,Representative Buyer provided perhaps the most important legislative intent behind
the Telecommunications Act concerning competition in the cable television industry:
TO: PETER L.HOLZMEISTER
FROM: STEVEN C.GROSS and M.STEVEN WANG
DATE: March 16,2001 PAGE-11-
RE: Authority of District To Provide Cable Television Service
............................................................................................................
"This landmark legislation is predicated upon two things: competition and the consumer.
Our society is founded on the belief that competition produces new technologies, new
applications for those technologies, and new services, all at a lower cost to the
consumer...Cable companies,local telephone companies,long-distance companies,broadcast
stations,wireless providers, utility companies, among many others,will all be competing for
the consumer's business, offering new technologies,better services, and more choices at a
lower cost." House Conference Report,supra, at HI 174.
It can be seen that numerous respected Congressional legislators share similar opinions and
support for competition in the cable television industry as well as other forms of
telecommunications. It is clear from the legislative intent that any barriers prohibiting entry into the
cable television industry is disfavored as anti-competitive. The District is, therefore, encouraged
under the public policy and legislative intent behind the Telecommunications Act of 1996 to engage
in competition and provide cable television service.
VI.
USA MEDIA MISINTERPRETS COURT OPINIONS
Mr.Harmon's opinion also suggests that courts have declared cable television not a"utility",
and because the District can only acquire, construct, own, operate and control projects that are
considered a public utility under the Act, it would be illegal for the District to provide cable
television service. Such proposition misreads and misconstrues the court decisions concerning cable
television as not being an "utility". More importantly, Mr. Harmon's opinion ignores the fact that
the cases he cites describe "utility" as defined by laws related to the California Public Utility
Commission, while the District is authorized to construct, own and operate "utilities" as that term
is defined by the Public Utility District Act (Pub. Util. Code §15501 et seq.), the law applicable to
the District.
Contrary to that proposed by Mr. Harmon, the 1956 California Supreme Court case of
Television Transmission does not stand for the proposition that "cable television is not a utility
service"or that"cable television is not within any class of utility as the term "utility" applies to the
District. Letter of Hannon,page 5. Instead,the case of Television Transmission involves an attempt
by the Public Utilities Commission ('TUC") to regulate a private community television antenna
company that captures television signals from available sources and re-broadcasts them through
TO: PETER L.HOLZMEISTER
FROM: STEVEN C.GROSS and M.STEVEN WANG
DATE: March 16,2001 PAGE-12-
RE: Authority or District To Provide Cable Television Service
...........................................................1..........I......
coaxial cable to the subscribers. Television Transmission v. PUC (1956) 47 Cal.2d 82, 301 P.2d
862. The community television antenna company contends that it is not a "public utility" and
therefore the PUC lacks jurisdiction to regulate its activities. The Court agreed, stating that Pub.
Util. Code §216(a)provides a specific list of entities qualifying to be a"public utility", and that the
private community television antenna company is not included on such list and therefore is not a
"public utility" subject to regulation by the PUC. Id., at 85, 88, 89.
Television Transmission is distinguishable from our situation,where the District is already
a"public utility" and is not seeking disqualification from the list of"utility" under §216(a). This
case focuses entirely on the list of entities qualified as"public utilities"under §216(a), and does not
invalidate the authority of a public utility such as the District to provide communication service, as
authorized under §16461.
Furthermore, the case of Greening v. Johnson, cited and relied upon in Mr. Harmon's
opinion, also does not stand for the proposition that cable television is not a "utility" under
California law. Greening v. Johnson (1997) 53 Cal.App.4th 1223, 62 Ca1.Rptr.2d 214. The case
of Greening involves a mobile home park suing owners of the mobile homes on the park for unpaid
monthly charges for cable television, claiming that cable television charges are permissible as a
"Utility' charge under the Mobilehome Residency Law ("MRL"), codified under Civil Code §798
et seq. The court disagreed that the cable television charges are permissible"utility" charges under
the MRL, stating that the Legislature did not intend Civ. Code §798.31 to authorize cable television
charges.
In making the proposition that the court's opinion in Greening supports the position that
cable television is not a"utility" under California law,Mr. Harmon quoted the following language
from the court's opinion:
"Utilities in fact, are most commonly thought of as charges for essential services provided
by government regulated and sanctioned monopolies...In this sense, cable television cannot
be considered a `utility.'...Nor is it `essential' in the way that such services as water and
electricity are."
What was left out of this quote is important because it changes the entire meaning of the
quote. The entire paragraph where this quote came from is as follows, in verbatim:
TO: PETER L.HOLZMEISTER
FROM: STEVEN C.GROSS and M.STEVEN WANG
DATE: March 16,2001 PAGE-13-
RE: Authority of District To Provide Cable Television Service
...............................................................I....................
"Utilities," in fact, are most commonly thought of as charges for essential services provided
by government regulated and sanctioned monopolies. As the Supreme Court has noted, the
Public Utilities Commission "deals with services that are essential" (Citation omitted.)
Similarly,Welfare and Institutions Code section 11452 designates "[ultilities" as one of the
"[miinmmum basic standards of adequate care"for purposes ofpublic assistance. (Emphasis
added.) In this sense, cable television cannot be considered a "utility." It is not included
within the definition of"utility" in the Public Utilities Code (Pub.Util.Code, § 216; other
citation omitted), and it is not subject to regulation as a common carrier or utility. (47 U.S.C.
§ 541(c).) Nor can cable television reasonably be considered"essential"in the way that such
services as water and electricity are." Greening,supra, 53 Cal.App.4th at 1228.
It is clear that Mr.Hannon's selective use of the court's writing distorts the court's opinion
and misrepresents what the court really said. As stated above, in verbatim, the Greening court
addressed the meaning of"essential"services as those services regulated by the PUC. As previously
established in Television Transmission, PUC lacks jurisdiction to regulate cable television
companies because cable television companies are not listed as one of the entities that qualify as a
"public utility" under §216(a). Television Transmission, supra, 47 Cal.2d at 89. Therefore, the
Greening court is correct in stating that cable television cannot be considered a "utility" for the
purpose of PUC regulation.
Furthermore, the Greening court cited the Welfare and Institutions Code §11452, and it is
only in this context the court stated that "[i]n this sense, cable television cannot be considered a
`utility."'As stated in the court's unabridged opinion,the term"utilities" as defined in the Welfare
and Institutions Code means "minimum basic standard of adequate care for purposes of public
assistance." Greening,supra, 53 Cal.AppAth at 1228. Cable television is,of course,not an"utility"
as the term "utility" is defined in the Welfare and Institutions Code, and the government is
absolutely not required to provide cable television as a form of welfare and public assistance.
Obviously, the Welfare and Institutions Code does not remotely apply to matters involving cable
television or to the District.
Greening, therefore,is entirely distinguishable from our situation. The issue in Greening is
whether cable television charges are authorized utility charges under the Mobilhome Residency Law,
Civ. Code §798 et seq. It does not address whether a public utility company such as the District can
provide cable television service to residents of the District. The one-line sentence in the opinion
t z
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r
TO:
PETER L.HOLZMEISTER
FROM: STEVEN C.GROSS and M.STEVEN WANG f
DATE: March 16,2001 PAGE-14- t
RE: Authority of District To Provide Cable Television Service
..................................
within the definition of"utility" in the Public Utilities
stating that cable television is not included
Code, citing §216, also does not invalidate the District's authority to provide communication
services under §16461 and is entirely dicta.
VII.
CONCLUSION
It is our unequivocal opinion that the District is expressly authorized under§16461 to provide
communication service, and communication encompasses cable television, which is a natural
evolution of communications technology. The District is further encouraged to compete in the cable
television industry under federal policies favoring competition and disfavoring monopoly. Our
opinion is supported by un-controverted and well-respected authorities, and we know of no law that
expressly prohibits the District from furnishing such service. It is, therefore, our opinion that the
District may lawfully provide cable television service within its authorized service territory.
C:\W INDO W S\TEMP\USAMED—1.W PD
EXTENSION AND AMENDMENT TO THE CONSULTING AGREEMENT BY
AND BETWEEN AGGREGATE NETWORKS AND T.D.P.U.D.
This Extension and Amendment ("Amendment') dated this_day of
2004, shall extend the existing Consulting Agreement("Agreement') as previously
amended, by and between Aggregate Networks ("Consultant') and Truckee Donner
Public Utility District ("T.D.P.U.D.") dated May 11, 2003 and which ran through
September 10`h, 2003, per Section 3 of the Agreement.
NOW THEREFORE, the Agreement is amended as follows:
The Agreement shall be extended for nineteen (19) months from October 10'', 2003 until
April loth, 2005. The monthly fee from October 2003 through May 2004 shall be ten
thousand dollars ($10,000). Following the close of financing, estimated to be May 2004
through April 10th,2005, the fee shall be $5,000, All other terms and conditions of the
Agreement shall remain in full force and effect.
Furthermore, this Addendum redefines the schedule of"deliverables" to T.D.P.U.D. as
originally contained in the Agreement as Exhibit"A" and Exhibit`B". The Exhibits are
updated and redefined to correspond to the next phase of effort to identify and place
financing for T.D.P.U.D.
IN WITNESS WHEREOF, the parties hereto have executed this Extension and
Amendment of the Consulting Agreement as of the date first written above.
Truckee Donner P.U.D.
By:
Name:
Title:
AGGREGATE NETWORKS, LLC
By:
Name:
Title:
1
EXHIBIT "A"
The scope of services set forth in this Exhibit A is intended to complete the financing of
the broadband system. These tasks will be completed by May of 2004. Aggregate
Networks will act as financial advisor to the District providing advice with regard to final
terms of financing and review of financing documentation. Aggregate Networks will
coordinate the work of other finance team members, arrange for and participate in
planning meetings and routine conference calls, generate to do lists and timelines,
facilitate resolution of problems. Aggregate Networks will be expected to deal with
unanticipated situations that cannot be spelled out in advance.
2
EXHIBIT `B"
Following the placement of securities Aggregate Networks will focus on the items below:
Strategic
- High level monitoring and review of the direction of the broadband business unit
Tactical
- Monitor start-up operations in relation to overall strategic and financial plan
- Monitor the economic and operating performance of the broadband business unit.
Legal & Regulatory Compliance
- Assist TDPUD with LAFCo presentation and approval
- Assist in the application for all necessary and proper Federal licenses, permits and
approvals for broadband services
- Create abstracts of all relevant contracts and notice dates (renewal,termination &
notice dates)
Financial
- Monitor continuing status of required financial reporting
Aggregate Networks will facilitate and assist with any of the above action items. However,
Aggregate Networks is not obligated to deliver all of the enumerated services. Only those
services deemed necessary or desirable for the project will be performed.
TDPUD shall indemnify Aggregate Networks for all acts in furtherance of the project, except gross
negligence.
3
t
CONSULTANT AGREEMENT
THIS AGREEMENT, made this day of , 20051 by and between
AGGREGATE NETWORKS ("Consultant") and TRUCKEE DONNER PUBLIC UTILITY
DISTRICT ("District").
WITNESSETH:
WHEREAS, District wishes to retain Consultant as an independent contractor to perform certain
consulting services, and Consultant wishes to perform the services requested by District pursuant
to this Agreement, with all work to be performed and the parties' agreement to be governed by
the following terms and conditions.
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties
agree as follows:
1. Scope of Work. Consultant agrees to perform the services listed in Schedule A
hereto (the Services).
2. Billing Rates. Work performed by Consultant tinder this Agreement will be
billed as set forth in Schedule B hereto. Except as otherwise provided under this
Agreement, including but not limited to Schedule B, Consultant shall bear all
costs incurred in performing work under this Agreement.
3. Access. District shall grant Consultant access to its facilities and employees as
necessary for conducting the Services.
4. Term/Termination. This Agreement shall continue in effect for one hundred(100)
days after the execution of this Agreement or until terminated by either party upon thirty
days (30)written notice to the other parry. This Agreement may be extended or renewed
upon mutual agreement of the parties. Any obligations accruing pursuant to Section 2
above shall survive any such termination.
5. Relationship of Parties. The parties understand that Consultant is an independent
contractor with respect to District and not an employee of District. District will not
provide fringe benefits, including health insurance benefits,paid vacation, or any other
employee benefit, for the benefit of Consultant or any employee of Consultant.
6. Ownership of Property. District owns and will own certain inventions(patentable or
unpatentable), ideas,confidential information,trade secrets,know-how,trademarks,
copyrights and mask works relating to its business and operations(collectively,the
"Property"). Consultant acknowledges that District is the sole owner of the Property and that
Consultant will acquire no rights in the Property by virtue of the Agreement or otherwise.
Consultant agrees not to take any action challenging or opposing, on any ground
whatsoever,the ownership or validity of the Property or District's rights therein.
T Consultant's Duties in the Event of Termination. In the event of the termination of
this Agreement, Consultant shall immediately deliver to District. all prototypes,
notebooks, documents, memoranda,reports, files, books,keys, correspondence, lists,
disks, and other written graphic or computer records relating to the Property or to
District's business and operations, as well as any Property belonging to District which are
in the Consultant's possession or control, in good condition. In addition, Consultant shall
deliver to District any and all work product that Consultant produced for District and for
which DISTRICT has paid Consultant to develop.
8. Confidentiality. District hereby authorizes and consents to Consultant sharing
any and all relevant information required to procure financing on behalf of
District Except for the above stated reason, Consultant agrees that Consultant and
its employees, representatives, or partners will not at any time or in any manner,
either directly or indirectly, use any information for Consultant's own benefit, or
divulge, disclose, or communicate in any manner any information to any third
party without the prior written consent of District
a. District agrees that its employees,representatives, or partners will not at
any time or in any manner, either directly or indirectly,use any proprietary information
of Consultant's for its benefit, or divulge, disclose,or communicate in any manner any
information to any third party without the prior written consent of Consultant. In order
for any information to be deemed confidential or proprietary under this Agreement, either
party must stamp or mark"Confidential" or"Proprietary"on the actual document.
9. Indemnification. Consultant and District agree to indemnify and hold each other
harmless from all claims, losses,expenses,fees including attorney fees, costs,and
judgments that may be asserted against the other that result from the acts or omissions of
their employees, if any, and agents. Notwithstanding the foregoing, neither party shall be
obligated to indemnify the other party for that party's sole negligence.
10. Assignment. Consultant 's obligations under this Agreement may not be assigned or
transferred to any other person, firm, or corporation without the prior written consent of
DISTRICT
11. Confidentiality After Termination. The confidentiality provisions of this Agreement
shall remain in full force and effect after the termination of this Agreement for a period of
three(3)years.
12. Non Exclusivity. Nothing in this agreement limits or prohibits Consultants from
marketing to, engaging,consulting to, or working on a similar basis with any other entity.
13. Right to Publicize. Consultant shall have the right to name DISTRICT as a client of
Consultant for marketing and promotional purposes limited to the confidentiality terms of
this agreement
14. Notices. All notices required or permitted under this Agreement shall be in writing and
shall be deemed delivered when delivered in person or deposited in the United States
mail, postage prepaid, addressed as follows:
IF for DISTRICT :
PO Box 34019
Truckee, CA 96160
Attention: Mr. Alan Harry
IF for Consultant:
Aggregate Networks
1801 N. Mill St.
Suite D
Naperville, Illinois 60563
Attention: Mr. Laurance P. Lewis
Such address may be changed from time to time by either party by providing written
notice to the other in the manner set forth above.
15. Entire Agreement. This Agreement contains the entire agreement of the parties and
there are no other promises or conditions in any other agreement whether oral or written.
This Agreement supersedes any prior written or oral agreements between the parties.
I& Amendment. This Agreement may be modified or amended if the amendment is made
in writing and is signed by both parties.
17. Seyerability. If any provision of this Agreement shall be held to be invalid or
unenforceable for any reason, the remaining provisions shall continue to be valid and
enforceable. If a court finds that any provision of this Agreement is invalid or
unenforceable, but that by limiting such provision it would become valid and enforceable,
then such provision shall be deemed to be written, construed, and enforced as so limited.
18. Waiver of Contractual Right. The failure of either party to enforce any provision of
this Agreement shall not be construed as a waiver or limitation of that party's right to
subsequently enforce and compel strict compliance with every provision of this
Agreement.
19. Venue. It is understood by both parties to this Agreement that the venue for resolving
any disputes which arise under this Agreement shall be Nevada County, California. The
Parties agree to mediate any dispute or claim arising between them out of this
Agreement or any resulting transaction before resorting to court action. Mediation
fees, if any, shall be divided equally between the Parties. If either Party
commences a court action based on a dispute or claim to which this paragraph
applies without first attempting to resolve the matter through mediation, then that
Parry shall not be entitled to recover attorney's fees, even if it would otherwise be
available to that Party in any such court action.
20. Insurance. Consultant is responsible for carrying the appropriate and necessary levels of
Errors & Omissions insurance, commercial general liability insurance and auto insurance.
Consultant shall submit certificates of insurance or a reasonable facsimile thereof to
District within fifteen (15)days of their request.
21. Applicable Law. The laws of the State of California shall govern this Agreement.
22. Attorney's Fees. In the event of any litigation by either party to enforce or defend
its rights under this Agreement, the prevailing party, in addition to all other relief
awarded by the court, shall be entitled to reasonable attorneys'fees.
Agreed to as of the date first written above:
Truckee Donner P.U.D.
By:
Name:
Title:
AGGREGATE NETWORKS,INC.
By:
Name:
Title:
23.
SCHEDULE "A"
SCOPE OF SERVICES
Financial Analysis
Consultant will provide a financial analysis that includes (1)base, worst and best case
scenarios; (2) twenty-four month and twelve year projections; (3) annual net incomes and
cash flows; (4) estimated capital costs and sources; (5) estimated operating costs and
sources; and (6) estimated revenues and sources.
The financial model includes information on a specific proposed project as well as basic
financial parameters from the District, which produces cost and revenue forecasts and
cost-to-benefit ratios from a number of different perspectives. The model computes the
cash flows from each aspect of the project over a twelve-year time span. Bottom-up
estimates of operation and maintenance and incremental investment costs are computed
as well as staffing and overhead factors.
Deliverables
Economic Analysis
Risk Analysis
Debt Service Coverage Analysis
Portfolio Analysis
Statement of Cash Flow
Balance Sheet Statement
SCHEDULE "B"
BILLING RATES
The consulting fee for Services as set forth in Schedule A shall be $150,000
payable on the Placement Date out of proceeds of the Securities. It is understood and
agreed that no additional compensation shall be payable by District to Consultant as
provided in this Agreement.