MINUTES FOR THE STUDY SESSION
ASHLAND CITY COUNCIL
Monday, May 1, 2006 at 5:15 p.m.
Civic Center Council Chambers
1175 East Main Street
Mayor Morrison called the meeting to order at 5:15 p.m.
Councilors Hardesty, Amarotico, Silbiger and Chapman were present. Councilor Jackson arrived at 5:20 p.m. Councilor Hartzell was absent.
I. Railroad Property Discussion
Management Analyst Ann Seltzer explained the Union Pacific Railroad Company is planning to begin the cleanup of the railroad property in Ashland. The yard was operated as a locomotive maintenance, service, and railcar repair facility between 1887 and 1986 which resulted in contamination of the site. Ms. Seltzer explained that the cleanup will be done to the residential standards and staff is working with DEQ to develop the public involvement plan.
Ms. Seltzer introduced Greg Aitken with the DEQ, who explained the history of this project. He noted that this would be a highly visible project with over 100,000 cubic yards of soil needing to be removed. Mr. Aitken stated that the cleanup would be done to the highest possible standards and there would be no restrictions on the site after the cleanup is complete. Construction is likely to start in mid-July and will proceed for up to three months. It was noted that a specific work plan from the railroad has not yet been approved; however DEQ has approved the clean-up decision and approach.
Mr. Aitken clarified that DEQ will be the main implementer of the public improvement plan; however they will be working closely with city staff. He also clarified that the concentrations of the contaminated materials exceed safe levels and dust and particulate matter is going to be a concern. He added that they will be looking very closely at Union Pacific's plans to monitor for exposure.
Ms. Seltzer noted that staff stressed to Union Pacific that they remove the contaminated material by rail; however this method is significantly more expensive and will likely be done by trucks.
Councilor Hardesty expressed his concern regarding the damage the trucks will cause to the city streets. Councilor Chapman agreed with Hardesty and expressed his preference for the railroad to use the tracks for both the removal of the contaminated soil and the delivery of the new soil. Mr. Aitken stated he would take another look at DEQ's decision to see how detailed it is regarding how the waste will be removed and discuss this further with Union Pacific.
It was clarified that the public information meeting will be held in June and a fact sheet will be distributed to the residents at the end of May.
II. Ashland Fiber Network Open Carrier Discussion
IT Director Joe Franell addressed the Council and distributed Attachment F. He requested that the Council come to agreement on the following items: 1) that the debt service needs to be treated as a separate issue, 2) that the City cannot break-even on the video as a stand alone product, and 3) that any decision to stop operating video needs to include a transition plan for the residents.
Mr. Franell requested a correction to the Council Communication. The first sentence under Background should read "Why certain aspects of the Open Carrier Model are not viable". He explained that tying a mandatory fee to a service is problematic and could be perceived as illegal. As a result, staff had to take another look at the Council's recommendation. He stated the first question the Council must address is whether they want to keep video, the second is whether they want to continue to wholesale the internet product or become the sole provider. He noted the attachments included in the packet materials and pointed out that the Council Communication outlines the four options.
Mr. Franell commented on the two Spin-Off Options. He stated spinning-off AFN to JPRF would provide advantages to them that the City does not have, however programming costs would continue to be an issue and he expressed his concern with some of the language contained in the proposed contract. Mr. Franell commented on the pure Spin-Off option, which would involve the City seeking out an entrepreneurial board and finding the right person to run it. He stated that the risk involved with this option is high and if it didn't work or something unforeseen happened, it would be difficult for the City to repossess AFN and start over again.
Mr. Franell explained his reasoning for suggesting that the video product be removed. He stated that this was not his original stance and he would have been content with just breaking even on the video. But as he started evaluating the operational expense, he found that the programming costs are costing the City $900,000 a year and have been steadily increasing. He explained that the actual physical expense, even with a rate increase, could not get the video anywhere close to breaking even as a stand alone product.
Council questioned whether Option 1 would enable the City to make the needed investments into the internet product. Mr. Franell stated that this option would allow the City to get where they want to go with the internet and noted that the Finance Department spent time with him validating the numbers. He explained that there are some immediate needs that need to be addressed, such as the bandwidth; however the investment in routers and CMTS's could be done in a year or so after the internet product has proven it can stand on its own.
Comment was made that market pressure seems to be driving the internet prices down. Mr. Franell explained he would address this with a tiered approach. He stated that having an inexpensive option is important, and the City could offer different download speeds to best meet the customers' needs.
Mr. Franell discussed the issue of whether AFN should become the sole ISP. He stated that the ISPs have been good partners with the city and this internet concept has been embraced by the city since AFN's inception. He noted that if AFN become the sole ISP, AFN would gain more margin per customer; however he noted the 25% erosion of customer base and stated that AFN might lose too many customers to make this option worthwhile. Mr. Franell explained that if the City retained the internet product and ISP relationships and became an ISP, the City could offer basic support and if a customer wanted more they could go through a different ISP.
Mr. Franell briefly addressed the "two wire" issue and stated that it is common in this business to run separate wires for video and internet to a house.
Mr. Franell commented on the idea of providing limited video and stated that the concept of a community antenna has a lot of appeal. He noted that he is still actively pursuing this option with outside legal counsel and commented on the litigation going on in other communities and an upcoming decision from the FCC
Council questioned whether the City could lease to a community antenna group to broadcast over the city's wire. Mr. Franell stated that partnering with a satellite provider would be a great solution if it were structured so there was a clean break. He added that at this point he does not believe the city could do this without significant risk.
Council questioned how long the transition period would be. Mr. Franell stated that it depends on whether they have something else to offer. The quickest would be 6 months, but if they are just getting out of the business it would take longer.
Council requested that Paul Mace come forward and explain Attachment F. Mr. Mace commented on possible scenarios if AFN abandons its cable television service. He stated that Charter Communications would raise rates, have a sole monopoly, and would likely engage in an aggressive customer acquisition during the transition period. He stated that by AFN saving money, it is immediately transferring an expense to the bottom line of citizens. He commented on the JPRF Spin-Off Option and stated that this was the best case scenario; it had the least risk, provided the City with income, and retained competition in the valley. Mr. Mace briefly commented on Attachment F and stated that this spreadsheet provides a breakdown of the annual net per household for each of the options, and stated that the JPRF Spin-Off option was the best.
Councilor Chapman suggested the following actions to resolve this situation: 1) affirm that funding for the obligation of the AFN debt be separated from the continuing operation of AFN, 2) work with the IT Director to write and adopt a set of department goals to guide the operation of the AFN department, 3) adopt the staff recommendation Option 1, and 4) suggest that the IT Director work with Paul Mace and Councilor Silbiger to identify conditions within the city organization that hinder the effective management of this enterprise and propose possible remedies for adoption by the Council.
Council questioned whether JPRF's offer is firm or if they could do better than what is being offered. Mr. Franell stated that he has not had the opportunity to meet with JPRF. In order to answer this question he would need to open back up negotiations with JPRF and stated that this could not be completed in time for Council's decision at tomorrow nights council meeting.
Meeting was adjourned at 7:10 p.m.
April Lucas, Assistant to City Recorder