Council Communication

AFN Quarterly Report
Meeting Date:	November 16, 2004		Primary Staff Contact:	Dick Wanderscheid, 552-2061 wandersd@ashland.or.us
Department:	Electric & Telecommunication		Secondary Staff Contact:	Lee Tuneberg, 552-2003 tuneberl@ashland.or.us
Contributing Departments:	Finance, Administration
Approval:	Gino Grimaldi

Statement: This is the AFN Quarterly Report covering the period July 1 to September 30, 2004
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Background: As a part of the work done by the AFN Advisory Committee in Fall 2001, a quarterly report format was developed. The last report was submitted to the Mayor and Council on September 7, 2004. This covered the period of April 1 to June 30, 2004. This report covers the period July 1 to September 30, 2004. Staff has revised the current report format to better provide the Council and Mayor with more and improved information. The new report contains targets from the revised business plan that was completed as a result of the work done by Navigant Consulting last spring. The report shows that we are ahead of schedule to achieve the revised targets for both residential cable modems and cable television. Staff has been very active in implementing many of the Navigant suggested recommendations and other revenue enhancement activities. Already, staff has made the following changes: 1. Increased rates 2. Began an active TV promotion designed to migrate users to higher tiers of service and to promote pay per view offerings 3. Mailed out coupons for free movies in exchange for customers enabling their pay per view features 4. Added an intermediate cable modem product 5. Enhanced ISP contracts 6. Promoted a customer service guarantee 7. Bundled our CATV product and cable modem product for the return of SOU students 8. Staffed a booth at the SOU Student Orientation Event 9. Worked with SOU and RVTV to provide an AFN exclusive SOU Homecoming Game Broadcast 10. Participated in the Buy in for Books Program in conjunction with the Ashland Schools Foundation 11. Revised the quarterly report format for this report. Also, we have added a new staff person in AFN to help with technical issues and to provide more support for the programming and marketing functions of AFN. In addition, a new Network Administrator has been added as per the budget and the revised AFN Business Plan. Of the above mentioned initiatives, some were recommended as a part of the Navigant report and these items had actual performance numbers associated with their implementation. We are listing those items along with actual and predicted performance. • Increased Rates - Predicted $170,000/Yr; Actual $330,000 • Customer Upgrade to Tier 4 - Predicted - 91/Yr; Actual -24/ 1 Qtr. new Tier 4 customers • Movie Coupons For Pay per View Enabling - Predicted -170; Actual - 37 • Intermediate Cable Modem Product - Predicted - 62; Actual - 8 • Enhanced ISP Standards - Predicted 56; Actual - Unknown, but 140 new customers total during the quarter • Customer Service Guarantee Promotion - No prediction • Bundled CATV and Cable Modem Product - Prediction - 52; Actual - 79 The previous Quarterly Report tracked both bulk CATV accounts and High Speed Data equivalents but these are not included anymore. This is because the revised plan relies on no significant future growth in either of these product lines. The plan calls for 140 bulk TV accounts for the remainder of the planning period. We currently have 143.3. High Speed data equivalents are shown in the plan remaining at 35 and we currently have 32.88. While we won't be reporting these numbers as a part of the report, we will provide updates if these numbers change in the future. The AFN Business Plan and Budget both call for a rate increase in AFN products during this fiscal year. In reviewing the cash flow and revenue numbers for the first quarter, we are a little below projections. This is not unusual because history has shown us that the first quarter of the year is the weakest quarter of the fiscal year. However, we are watching these numbers carefully and are preparing to implement a rate increase early in 2005 to make sure that we attain our financial goals for FY 04-05.
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AFN Financial Narrative: AFN's cash position is the most important financial comparison that we have. During FY 2004-05 the goal is to closely adhere to projections included within the pro forma and budget, employing most, if not all of the initiatives proposed in the study. The four charts in the report provide performance by month with targets where appropriate. The reader should remember the following points while reviewing changes over the year: 1. Late Fall, Winter and early Spring are the "growth" months for customer connections and increased revenue generation. 2. The City refinanced all debt in August 2004 causing a $600,000 "spike" in cash flow. 3. Some annual and promotional expenses are made in July and August skewing the revenues to expenses comparison. 4. The budget and pro forma anticipate rate increases in the last half of the fiscal year. 5. Next debt service is $802,021 due in July 2005. The refinancing included enough cash to pay all issuance costs and get AFN into the higher revenue season to avoid cash flow problems early in the year. A supplemental budget will need to be done to recognize the additional bond proceeds and related expenses. The ratio of revenues to expenses is used to help identify the additional amount that AFN needs to set aside to make the debt service payment next July. The target is shown as a sloping line with an average ratio of 1.15 for the year, meaning a $1.15 needs to be generated for every dollar spent. This roughly translates to approximately $400,000 more cash be set aside in FY 2004-05 and an average of $90,000 per month (a ratio of 1.25) in FY 2005-06, increasing each year and leveling off at $125,000 per month in FY 2009-10.
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Related City Policies: The City's current Council Goal document points to improving the performance of AFN and this quarterly report is specifically devoted to keeping the Council current on AFN's status.
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Council Options: Not applicable.
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Staff Recommendation: No recommendation, this communication is for informational purposes only.
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Potential Motions: Not applicable.
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Attachments: •   AFN Quarterly Report

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