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HomeMy WebLinkAbout1975-08-19 Minutes340 MINUTES OF A REGULAR MEETING OF THE BOARD OF DIRECTORS August 19, 1975 The Board of Directors of the City of Fayetteville, Arkansas met in a regular session on August 19, 1975 at 7:30 p.m. in the Director's Room of the City Administration Building. PRESENT: City Manager Donald L. Grimes; Administrative Assistant David McWethy; City Attorney Jim McCord; City Clerk Darlene Westbrook; and Directors Marion R. Orton, Ernest Lancaster, John Todd, Paul Noland, Russell Purdy, and Morris Collier ABSENT: Director Al Hughes OTHERS PRESENT: Members of the audience and representatives of the news media CALL TO ORDER AND APPROVAL OF MINUTES 340.1 The meeting was called to order by Mayor Orton. Following a brief moment of respectful silence, the Mayor asked if there be any amendments to the minutes of the August 5, 1975 meeting. 340.2 Director Todd requested that the word "not" be inserted in the first sentence of paragraph 333.5 to cause it to read: "...that a surplus might not be realized..." Mayor Orton requested amendment to the third sentence of paragraph 333.6 to cause it to read. "...so as not to raise Fayetteville's fire rating..." The Mayor also requested the addition of the word "advised" to cause the third sentence of paragraph 334.6 to read: "...the City Attorney advised..." There being no further corrections, the minutes were declared approved as amended. WARNER CABLE RATE INCREASE 340.3 At the August 5, 1975 meeting, Doctors William Hardin and Kenneth Cook presented results of their study of the Warner Cable rate increase at which time Warner Cable had deferred formal reply until this meeting. Mssrs. Brian Knight, representing Warner Cable; Lynn Wade, legal counsel for Warner Cable; and Rip Lindsey,local Warner Cable manager; were present in the audience to offer Warner Cable's response and rebuttal to the consultant's recommendations and study results. 340.4 Mr. Wade reminded the Board that Warner Cable is a private corpora- tion and should not be confused with a monopoly or utility, and that the company, under the franchise, is entitled to a fair rate of return for the services it provides. Mr. Wade assured the Board that the proposed rebuild of the Fayetteville system would not be undertaken if the Board accepted the recommendation to increase rates by 15 cents; and, if the Board decided to grant no increase, the company would have to reduce services. 340 1 1 Mr. Wade refuted allegations made by the consultants concerning the company's failure to comply with FCC regulations. In regard to addition of Little Rock stations, Mr. Wade told the Board that an opinion of counsel was that current FCC regulations prohibit the additions and that the stations could not be added to the old system even if such additions were legal and economical. He suggested that a compromise be reached that would allow the rebuild. Such a rebuild, he said, would increase channel capacity from nine to 21 stations, improve reception, permit addition of two Spring- field stations and the addition of an educational channel when available, avoid deterioration of the system, and would avoid litigation. Mr. Brian Knight, representing Warner's New York Office, ops present in the audience and presented a lengthy statement to the Board. He stated that his company rejected the study completely and absolutely and termed the study inaccurate, misleading, and inflammatory in many instances. He questioned the consultant's qualifications for conducting a study of cable television rates and enumerated areas of the report which his company felt to be inaccurate or misleading. In regard to complaints from the consul- tants that the company had not made available necessary information, Mr. Knight stated that only confidential information concerning individual salaries was withheld. Mr. Knight stated that the company would not re- build the Fayetteville system for a 15 cent increase and, as a compromise, amended Warner's original rate increase request. Mr. Knight proposed that the rates be increased to $5.75 for one outlet and $6.25 for two outlets effective immediately with another $1.00 and 25 cent increase respectively after rebuild. He proposed that an installation fee of $10.00 be approved by the Board. In discussion of the possibility of adding Little Rock stations, Mr. Lindsey stated that he would commit the company to try to work towards obtaining estimates of cost for adding Little Rock stations. He asked that the City give full support in requests to the FCC for permission to carry the -stations and Mr. Knight added that citizens should contact their repre- sentatives in Washington expressing their desire for Little Rock stations. Director Todd stated that he would like the City Manager to initiate action in the near future to express the City's support of addition of Little Rock stations to the:cabl:e system. in Fayetteville. Director Collier stated that he would not be willing to support any rate increase other than one which would allow a rebuild of the system. Upon completion of the rebuild, Director Collier felt the rates should be re-evaluated. After slight further discussion, Director Collier motioned to grant a rate increase of 75 cents per month upon beginning of the rebuild and that the installation fee be raised to a maximum of $10.00 with no in- creases for additional outlets. Also included in Collier's motion was the provision that the Board grant Warner Cable a hearing following the rebuild at which time rates would be re-evaluated. The City Attorney advised that the motion should be incorporated in a resolution. Members of the Board concurred. Director Noland seconded Director Collier's motion and the following vote was recorded: "Ayes": Purdy, Collier, Todd, Noland, Orton "Nays": None Abstain: Lancaster Absent: 'Hughes RESOLUTION NO. 61-75 APPEARS ON PAGE 180 OF ORDINANCE & RESOLUTION BOOK IV **Made a supplement to these minutes pages 350.1-350.6. 341 341 341.1 341.2 341.3 341.4 342 ORDINANCE REZONING PROPERTY - R75-14/Deryle Easterling 342.1 The ordinance would rezone a 4.91 acre tract of land located on the north side of Highway 62 West immediately west of the Westgate Shopping Center from A-1 Agricultural to C-2 Thoroughfare Commercial and R-0 Residential Office. 342.2 The City Attorney read the ordinance the first time after which Director Collier motioned to suspend rules and place the ordinance on second reading. In roll call vote of the Board the motion passed unani- mously and the ordinance was read the second time. Director Purdy, seconded by Director Collier, motioned to further suspend rules and place the ordinance on third and final reading. In roll call vote of the Board the motion passed unanimously and the ordinance was read the final time. 342.3 Mr. Easterling was present in the audience to speak in behalf of his request saying that he wanted all of the land to be zoned C-2. He believed C-2 zoning to be justifiable since the land was the same dimensions as that of the shopping center adjacent to his property and zoned C-2. He stated that he had two prospective purchasers of the property that would like the property to be zoned C-2. The Board indicated its support of the Planning Commission recommendation to zone the front 350 feet C-2 with the remaining property being zoned R-0 to serve as a buffer to present and future residential development. 342.4 Director Todd motioned to amend the ordinance to rezone the entire tract C-2 but the motion died for lack of a second. Mayor Orton then asked if the ordinance should pass. The recorded roll call vote was: "Ayes": Purdy, Collier, Lancaster, Todd, Noland, Orton "Nays": None Absent: Hughes The ordinance was declared passed. 342.5 Following passage of the ordinance, Mr. Easterling expressed his confu- sion as to what action had been taken. When told by the Board that his property was no longer A-1 and that the ordinance rezoned the property C-2 and R-0, Mr. Easterling stated that if the Board could not rezone the entire tract C-2, he wanted it to remain A-1. Director Purdy mentioned the possi- bility of rescinding the action; however, the Board let its action stand and Mr. Easterling was advised of possible action he could take should he not want to accept the Board's decision. ORDINANCE NO. 2134 APPEARS ON PAGE 326 OF ORDINANCE & RESOLUTION BOOK IV ORDINANCE REZONING PROPERTY - R75-15/Jeremy Hess for Earvel Fraley 342.6 The ordinance would rezone a 1.09 acre tract of land located at 1035 Cato Springs Road from R-1 Low Density Residential to R-2 Medium Density Residential. 342.7 The C ty Attorney read the ordinance for the first time after which Director Purdy, seconded by Director Noland, motioned to suspend rules and place the ordinance on second reading. In roll call vote of the Board the motion carried unanimously and the ordinance was read the second time. Director Noland, seconded by Director Purdy, motioned tofurther suspend rules and place the ordinance on third and final reading. In roll call vote of the Board the motion carried unanimously and the ordinance was read the final time. 342 1 1 There being no discussion, Mayor Orton asked if the ordinance should 343.1 pass. The recorded vote of the Board was: "Ayes": Purdy, Collier, Lancaster, Todd, Noland, Orton "Nays": None Absent: Hughes The ordinance was declared passed. ORDINANCE NO. 2135 APPEARS ON PAGE 327 OF ORDINANCE & RESOLUTION BOOK IV ORDINANCE REZONING PROPERTY - R75-17/Cy Carney, Jr. The ordinance would rezone a 1.5 acre tract of land located at 2944 South School Avenue from R-1 Low Density Residential to C-2 Thoroughfare Commercial. The ordinance was read the first time after which Director Purdy, seconded by Director Collier, motioned to suspend rules and place the ordinance. on second reading. The motion carried unanimously in roll call vote of the Board and the ordinance was read the second time. Director Noland, seconded by Director Purdy, motioned to further suspend rules and place the ordinance on third and final reading. In roll call vote of the Board the motion passed unanimously and the ordinance was read the final time. Mr. Pete Estes, Jr., representing the petitioner, was present in the audience and spoke in behalf of the request. He stated that the tract was located in the Country Club Addition which had been platted in 1926 but never developed. He cited the proximity of I-1 and C-2 zoning to the property and felt the rezoning would be in keeping with the character of the area. The proposed use for the property, he said, would be for an out-patient veterinarian clinic for small domestic animals. He told the Board that large animals would not be treated at the facility and that no boarding of animals was planned. Director Noland was concerned that the facility might become a treat- ment center for larger animals. Mayor Orton felt a C-2 zone would consti- tute spot zoning in a residential area and would create precedence for future requests. Following slight further discussion, the Mayor asked if the ordinance should pass. The recorded vote of the Board was: "Ayes": Purdy, Collier, Lancaster, Todd, Noland "Nays": Orton Absent: Hughes The ordinance was declared passed. ORDINANCE NO. 2136 APPEARS ON PAGE 328.0F ORDINANCE & RESOLUTION BOOK IV ORDINANCE REZONING PROPERTY - R75-18/Fayetteville Planning Commission The ordinance would rezone a 1.35 acre tract of land located at 2100 South College from R-1 Low Density Residential to C-2 Thoroughfare Commercial. The ordinance was read the first time by the City Attorney after which Director Todd, seconded by Director Noland, motioned to suspend rules and place the ordinance on second reading. In roll call vote of the Board the motion passed unanimously and the ordinance was read the second time. Director Purdy, seconded by Director Todd, motioned to further suspend rules and place the ordinance on third and final reading. The motion carried 343 343.2 343.3 343.4 343.5 343.6 343.7 344 unanimously in roll call vote of the Board and the ordinance was read the third and final time. 344.1 There being no discussion, the Mayor asked if the ordinance should pass. The recorded roll call vote of the Board was: "Ayes": Purdy, Collier, Lancaster, Todd, Noland, Orton "Nays": None Absent: Hughes The ordinance was declared passed. ORDINANCE NO. 2137 APPEARS ON PAGE 3290F ORDINANCE & RESOLUTION BOOK IV REZONING APPEAL - R75-16/Oliver Ostmeyer 344.2 The rezoning appeal regarded a .45 acre tract of land located at 701 North College from R-0 Residential Office to C-2 Thoroughfare Commercial. An ordinance to rezone the property as requested was read by the City Attorney after which Director Todd, seconded by Director Noland, motioned to suspend rules and place the ordinance on second reading. In roll call vote of the Board the motion carried unanimously and the ordinance was read the second time. Director Purdy, seconded by Director Todd, motioned to place the ordinance on third and final reading. The motion carried unanimously in roll call vote of the Board and the ordinance was read the final time. 344.3 Mr. Ostmeyer was present in the audience and stated his disagreement with the planning consultant's recommendation to disapprove the rezoning on the basis of traffic hazards and residential character of the surround- ing neighborhood. Among exhibits he presented the Board were pictures of the thoroughfare in front of his property and letters from surrounding property owners favoring the C-2 zoning. Mayor Orton told Mr. Ostmeyer that the Board had to consider how the C-2 zoning would influence the neighborhood to which Mr. Ostmeyer replied, "My specific interest is for this piece of property and I don't think it should be denied on that basis." Both Directors Noland and Purdy expressed concern about the traffic con- gestion and Director Todd suggested that perhaps Mr. Ostmeyer's request, if granted, would have a "blockbuster" effect on the neighborhood. 344.4 Discussion completed, Mayor Orton asked if the ordinance should pass. In roll call the recorded vote was: "Ayes"- Lancaster, Collier "Nays"- Purdy, Todd, Noland, Orton Absent Hughes The ordinance was declared failed. ORDINANCE APPROVING LARGE SCALE DEVELOPMENT - Ridgefarm Stables/Parker Rushing 344.5 The ordinance would approve the large scale development plan of Ridgefarm Stables for riding stables to be located on a 60 acre tract of land located east of Crossover Road and north of Stone Bridge Road. 344.6 The City Attorney read the ordinance for the first time after which Director Purdy, seconded by Director Collier, motioned to suspend rules and place the ordinance on second reading. In roll call vote of the Board the motion carried unanimously and the ordinance was read the second time. Director Collier, seconded by Director Purdy, motioned to further suspend rules and place the ordinance on third and final reading. In roll call vote of the Board the motion passed unanimously and the ordinance was read the third and final time. 344 1 1 1 Mr. Rushing was present in the audience and answered questions con- cerning sanitation requirements and access facilities for his proposed development. He stated that he had been in contact with the County Sani- tarian and would comply with sanitation requirements. Access for the stables would be from Crossover Road which he said he would clearly mark. Mr. and Mrs Sam Taylor were present in the audience and expressed concern that truck traffic would increase on Stone Bridge Road and inquired about the possibility of placing "no trucks" signs on the road. The Taylors were informed by the Board that through truck traffic could be prohibited but not local truck traffic. Mayor Orton felt that not many motorists would be willing to use the Stone Bridge access since it is a gravel road and has a steep incline. Discussion completed, the Mayor asked if the ordinance should pass. The following vote was recorded: "Ayes": Purdy, Collier, Lancaster, Todd, Noland, Orton "Nays": None Absent: Hughes ORDINANCE NO. 2138 APPEARS ON PAGE 330 OF ORDINANCE & RESOLUTION BOOK IV ORDINANCE APPROVING FINAL PLAT - Shadow Hill Subdivision The ordinance would approve the final plat of Shadow Hill Subdivision located on Old Wire Road across from its intersection with Old Missouri Road, and would accept and confirmthe.dedication of street right-of-way and/or utility easements contained therein. The preliminary plat of this subdivision had been approved by the Board at its May 6, 1975 meeting. The City Attorney read the ordinance for the first time after which Director Noland, seconded by Director Lancaster, motioned to suspend rules and place the ordinance on second reading. In roll call vote of the Baord the motion carried unanimously and the ordinance was read the second time. Director Purdy, seconded by Director Collier, motioned to further suspend rules and place the ordinance on third and final reading. The motion carried unanimously in roll call vote of the Board and the ordinance was read the third and final time. The City Attorney advised the Board that the developer had signed a contract guaranteeing installation of sewers and streets and improvements to Collette Street. Director Todd expressed his disfavor with the number of driveways being placed at a curve in the road and felt that traffic hazards would be compounded by the drives. Following slight discussion and comment, the Mayor asked if the ordi- nance should pass. The following vote was recorded: "Ayes": Purdy, Collier, Lancaster, Noland, Orton "Nays": Todd Absent: Hughes The ordinance was declared passed. ORDINANCE NO. 2139 APPEARS ON PAGE 331 OF ORDINANCE & RESOLUTION BOOK IV 345 345.1 345.2 345.3 345.4 345.5 345.6 RESOLUTION AUTHORIZING DEVELOPER CONTRACT - Shadow Hill Subdivision The City Attorney read a resolution authorizing the Mayor and City Clerk 345.7 to execute a developer contract with Loris Stanton for improvements to the Shadow Hill Subdivision. 345 346 346.1 Director Purdy, seconded by Director Lancaster, motioned that the resolution be adopted. Upon roll call the following vote was recorded: "Ayes": Purdy, Collier, Lancaster, Noland, Orton "Nays": None "Present": Todd Absent: Hughes The resolution was declared passed. RESOLUTION NO. 62-75 APPEARS ON PAGE 181 OF ORDINANCE & RESOLUTION BOOK IV REQUEST FROM FAYETTEVILLE JAYCEES - Lake Wilson Park 346.2 Mr. Dennis Hill of the Fayetteville Jaycees, presented a proposal to the Board for the renovation of the Lake Wilson area to transform the site into a city park as a part of Fayetteville's Bicentennial celebration. The group's basic request was that jurisdiction for the project be placed with the Parks and Recreation Board in order to alleviate as many visits and requests to the City Board as possible. He stated that his group did not anticipate requesting City funding for the project and that much of the work, materials, and equipment would be donated. 346.3 Director Lancaster motioned that jurisdiction for Lake Wilson be placed with the Parks and Recreation Board. The motion was seconded by Director Todd and the following vote was recorded: "Ayes": Purdy, Collier, Lancaster, Todd, Noland, Orton "Nays": None Absent: Hughes ORDINANCE AMENDING ZONING ORDINANCE - Outdoor Advertising 346.4 The ordinance would amend Zoning Ordinance 1747 by deleting outdoor advertising as a permissable use in I-1 or I-2 Industrial zones. 346.5 The City Attorney read the ordinance for the first time after which Director Noland, seconded by Director Todd, motioned to place the ordinance on second reading. The motion carried unanimously in roll call vote of the Board and the ordinance was read the second time. Director Purdy, seconded by Director Todd, motioned to further suspend the rules and place the ordinance on third and final reading. In roll call vote of the Board the motion passed unanimously and the ordinance was read the third and final time. Following slight discussion, the Mayor asked if the ordinance should pass. The following vote was recorded: "Ayes": Purdy, Collier, Lancaster, Todd, Noland, Orton "Nays": None Absent: Hughes The ordinance was declared passed. ORDINANCE NO. 2140 APPEARS ON PAGE 332 OF ORDINANCE & RESOLUTION BOOK IV RESOLUTION AUTHORIZING CONTRACT FOR HOUSING REHABILITATION 346.6 The City Attorney read the resolution authorizing the Mayor and City Clerk to execute a contract for the rehabilitation of a structure located at 935 North Oakland under provisions of the Community Development Block Grant Program. The contract, in the amount of $4,772.50, would be with Sav-It Paint and Supply Company of Springdale. 346 During discussion, Director Todd recognized that the Board had never established a list of criteria to be used by the Housing Assistance Commit- tee as guidelines for determining rehabilitation projects. Director Todd presented the Board with the following proposed list of criteria which he had drafted and asked if the particular project in question met with the criteria: 3-"i 347.1 1. Owner -occupied 2. Owner must have lived there for at least 1 year prior to rehabilitation 3. Current standing on mortgage, if any 4. No property taxes owed 5. House must meet all minimum housing standards when rehabili- tation completed, if amount of grant exceeds $1,000 6. Rehabilitation amount should not exceed value of house prior to rehabilitation 7. Only 110 volt wiring allowed. No air conditioning permitted as part of rehabilitation project. The City Manager stated that he basically agreed with the criteria and 347.2 asked that the Housing Assistance Committee attempt to incorporate them into the program. Mayor Orton stated that she preferred that the Committee be asked to consider the criteria and felt the Board should not ask that they necessarily be incorporated by the Committee. Director Noland ex- pressed a need for the criteria as it was the Board's responsibility to answer for the program. Discussion completed, the Mayor asked if the resolution should pass. 347.3 The recorded vote was: "Ayes": Purdy, Collier, Lancaster, Todd, Noland, Orton "Nays": None Absent: Hughes The resolution was declared passed. RESOLUTION NO. 63-75 APPEARS ON PAGE 182 OF ORDINANCE & RESOLUTION BOOK IV REPORT FROM FINANCE COMMITTEE The Board Finance Committee had met August 15 to consider what General 347.4 Fund budget cuts might be made if the sales tax fails to win voter approval September 9. Director Lancaster, chairman of the committee, reported that the Committee had adopted,the•following resolution: 44. r• That all General Fund and Public Works Fund (Street) expenditures will be reduced if lost revenues are not replaced. An attempt will be made to maintain essential services as much as possible, but it is recognized that all departments will necessarily be affected by a continuing lack of revenues. A shortage of approximately $500,000 for the 1976 Budget year is anticipated. It is recommended that the shortage be borne by both the General Fund and the Public Works Fund: Within the General Fund, the Police and Fire Departments constitute approximately 56% of the expenditures. For this reason, there will be no way to avoid personnel cuts and a reduction of services in these public safety departments. 347 347.5 347.6 348 348.1 Director Purdy, seconded by Director resolution be adopted by the full Board. vote was recorded: "Ayes": Purdy, Collier, Lancaster, Todd, "Nays": None Absent: Hughes The resolution was declared passed. Collier, motioned that the In roll call the following Noland, Orton RESOLUTION NO. 64-75 APPEARS ON PAGE 183 OF ORDINANCE & RESOLUTION BOOK IV ORDINANCE TO REGULATE SALE AND USE OF FIREWORKS 348.2 In view of the late hour, Director Purdy motioned that consideration of a proposed ordinance to prohibit sale and use of fireworks be tabled. His motion was withdrawn when members of the Jaycees, present in the audience, 348.3 requested that Director Purdy express his ideas concerning the ordinance. Director Purdy stated that now is the time to adopt such an ordinance and that the City should no longer anticipate federal legislation. He felt the ordinance should be adopted before a tragic accident occurred and stated that Springdale had had such an ordinance for several years. He proposed that the ordinance be written so as to allow responsible groups to obtain permits for fireworks displays and that the ordinance have an effective date of July 5, 1976 so as not to conflict with Bicentennial celebrations. 348.4 Representatives of the Jaycees stated that annual fireworks stands which they erected in the City were their main money raising projects. 348.5 Following further discussion and comment, Director Purdy again motioned that discussion of the proposed ordinance be tabled. The motion was seconded by Director Todd and in roll call vote of the Board the following votes were recorded: "Ayes": Purdy, Collier, Lancaster, Todd, Noland, Orton "Nays": None Absent: Hughes OTHER BUSINESS RESOLUTION AUTHORIZING SALE OF SURPLUS REAL ESTATE 348.6 The City Attorney read a resolution authorizing the sale of two city -owned properties located at 115 Oklahoma Way and 332 Fletcher Avenue. Following slight discussion, Director Collier, seconded by Director Lancaster, motioned that the resolution be adopted. In roll call vote of the Board, the following vote was recorded: "Ayes": Purdy, Collier, Lancaster, Todd, Noland, Orton "Nays": None Absent: Hughes The resolution was declared passed. RESOLUTION NO. 65-75 APPEARS ON PAGE 184 OF ORDINANCE & RESOLUTION BOOK IV 348 1 1 RESOLUTION AUTHORIZING AGREEMENT FOR TRAFFIC SIGN REPLACEMENT PROGRAM The resolution would authorize the Mayor and City Clerk to execute an agreement with the Office of the Coordinator of Public Safety to enter into a program for upgrading certain traffic signs. Director Collier, seconded by Director Noland, motioned that the resolution be adopted. In roll Ball vote of the Board the following vote was recorded. "Ayes": Purdy, Collier, Lancaster, Todd, Noland, Orton "Nays": None Absent• Hughes The resolution was declared passed. RESOLUTION NO. 66-75 APPEARS ON PAGE 185 OF ORDINANCE & RESOLUTION BOOK IV 9, 349.1 349.2 RESOLUTION APPROVING CONTRACT FOR GROWTH AREA WATER SALES The resolution, read by the City Attorney, would approve a contract for 349.3 purchase of city water by.customers in the designated Growth Areas, and would authorize the City Engineer to execute the contract on behalf of the City. Director Todd..seconded by -Collier, moved adoption of the resolution. The vote was: "Ayes": Purdy, Collier, Lancaster, Todd, Noland, Orton "Nays": None Absent: Hughes The resolution was declared passed. RESOLUTION NO. 67-75 APPEARS ON PAGE 186 OF ORDINANCE & RESOLUTION BOOK IV RETAIL BEER PERMIT City Manager Grimes reported to the Board that an application for an off -premise retail beer permit had been filed with the Arkansas Alcoholic Beverage Control Commission for a location at 527 Poplar Street. The out- let in question would sell only retail beer and not liquor. The City Manager pointed out that, even though the recently adopted ordinance regulating location of liquor stores in C-2 and C-3 zones did not specifically mention retail beer stores, it was his feeling that the Board's intent haddbeen to include the sale of beer. He reported that he had requested the City Attorney to draft an ordinance to amend Appendix A of the City Code to define the term "retail liquor store". The City Attorney read the ordinance for the first time after which Director Collier, seconded by Director Noland, moved that rules be sus- pended and the ordinance placed on second reading. The motion carried in roll call vote of the Board and the ordinance was read the second time. Director Noland, seconded by Director Purdy, motioned that rules be further suspended and the ordinance read the third and final time. The motion carried unanimously in roll call vote of the Board and the ordinance was read the third and final time. The Mayor asked if the ordinance should pass. The following vote was recorded: "Ayes": Purdy, Collier, Lancaster, Todd, Noland, Orton "Nays": None Absent: Hughes ORDINANCE NO. 2141 APPEARS ON PAGE 333 OF ORDINANCE & RESOLUTION BOOK IV 349 349.4 349.5 350 350.1 In view of the fact that the proposed location of the retail beer outlet in an I-1 zone would violate Ordinance 2122, the City Manager suggested that the Board might like to oppose the application. Director Purdy, seconded by Director Noland, moved that the permit application for 527 Poplar Street be opposed. The recorded vote of the Board was: "Ayes": Purdy, Collier, Lancaster, Todd, Noland, Orton "Nays": None Absent: Hughes RESOLUTION AUTHORIZING EXECUTION OF CONTRACT FOR SERVICE ROAD - Shoney's 350.2 The City Attorney read a resolution authorizing the Mayor and City Clerk to execute a contract with General Growth Properties for the con- struction of a service road for Shoney's restaurant. Director Purdy motioned that the resolution be adopted and Director Noland seconded the motion. The recorded vote of the Board was: "Ayes": Purdy, Collier, Lancaster, Todd, Noland, Orton "Nays": None Absent: Hughes RESOLUTION NO. 68-75 APPEARS ON PAGE 187 OF ORDINANCE & RESOLUTION BOOK IV ADJOURNMENT 350.3 There being no further business for the Board's consideration, the Mayor declared the meeting adjourned. ATTEST: s t� ar ene ne WesestbrookClerk APPROVED: 350 arson R. Orton, Mayor Supplement To Minutes of August 19, 1975 Meeting of Board of Directors Warner Cable Response to Rate Study As Delivered by Mr. Brian Knight As I stated to Rip Lindsey last week and as he reported to you, our preliminary evaluation of Dr. Hardin:.and Dr. Cook's report indicated that it should be rejected completely. We could not then, and cannot today, understand the motives that would lead them to make a recommendation for an increase of 15 cents on the basis that we spend approximately $700,000 rebuilding our system in Fayetteville so that we may improve the quality of cable service to our subscribers. We have approximately 10,500 subscribers. A 15 cent increase would give us $1,575 more income per month, or $18,900 more income per year. Now we're no different than any other company, big or small. When we make an investment like $700,000, we have to borrow that money and depreciate that investment. Assuming that we were able to borrow funds at a 10% rate, the interest alone would be $70,000 in the first year. The depreciation, at a rate of 10 years, would be another $70,000. This faces us with an income gain of approximately $20,000, based on the 15 cents, and an increase in expenses based on the rebuild alone --no inflation, no salary increases, no increases in the channels we carrys nothing _-strictly depreciation and interest of $140,000. Now we would reduce our profit, or in this case our loss, by $120,000 in the desire to improve our product in Fayetteville. Rip Lindsey calculated, that with this 15 cent increase, it would take eleven months just to recover the cost of changing our coupon books so that we could bill at the new rate. Now this does not make sense, we will not do it. And who suffers? In the extent that you are cable subscribers, you do. But what about 10,500 people who might want an improved picture; who would appreciate less outages, and who would recognize that a $7.50 rate is a fair price for television service in Fayetteville? We do not understand the motives behind your consultant's recommendations. We haVe flew reviewed the report in detail, and again, I want to state emphatically, that we reject it completely and absolutely. Your recommen- dations, though perhaps acceptable to you, are not acceptable to us. The report in many instances, in my opinion, is inaccurate, misleading, and inflammatory. It is the work of two men who are not experienced in cable television. That they are qualified as university professors appears evident. I am not satisfied that they have any qualifications whatsoever to deal with a complex subject like cable television rates of return. Dr. Hardin and Dr. Cook do not have the benefit of our experience. They have made a nice recommendation. The 15 cents is certainly an acceptable increase if you consider it is tied to our spending of $700,000. So what? it will not get the job done. I would like to point out some evidence in Dr. Hardin's report that in my opinion contain inaccurate information. On page 4, Ur. Hardin discusses the fact that in 1977, the system must conduct annual performance tests in order to meet FCC compliance regulations. On page 12 he recommends 350. 1 that the City initiate action which will require Warner Cable to comply with at least the minimum standards established by the FCC rules and regulations. Dr. Hardin's point is very clear. He infers that we are not meeting the minimum standards. What he does not say is that the FCC presently has regulations; that our system does comply with these regulations, by law. We completed our most recent FCC test on the 31st of March, 1975. These were accepted by the Federal Communications Commission. We do meet their standards of adequate viewing quality. I submit that this type of statement is misleading and inflammatory. Dr. Hardin recommends that the City establish their own technical performance requirements. Were he more familiar with the cable industry, he would be aware that in the area of technical standards, the FCC has totally pre-empted, and local authorities cannot regulate to the the contrary. On page 5, Dr. Hardin recommends a franchise change so that if we do not meet specific franchise obligations, the City could require us to abandon the system, and our facilities would become the property of the City. Ladies and gentlemen, this is the United States of America. This is not Russia. We have a due process of law dealing with the matter of franchise violations. This requires due notice and full proceedings. I would hope that the City of Fayetteville is not starting out on a policy of nationalizing their industries in town if they do not do things the way they want them to. Dr. Hardin suggests that, under this process, our property belongs to the City of Fayetteville. This is clearly ridiculous, and I submit, irresponsible recommendation. On page 29, Dr. Hardin correctly points out that Warner Cable became involved in the cable TV business in Fayetteville on January 31, 1972; and that prior to this date, all accounts, records for 'IeleVision Communication Corporation were manually prepared, and apparently a formal project accounting for construction of the distribution facilities of each cable system, did not-- and he underlined not-- exist. Dr. Hardin then goes on to point out that we have since developed, and are currently using, a system that provides for a project cost accounting on asset construction or additions. Now because we purchased the system that did not have complete records, Dr. Hardin and Dr. Cook determined by their own method the value of oar system in-Fayetteville. On page:_11 of their report, your consultants nave indicated their method of doing this. They took three projects that we are contemplating in Fayetteville, including a rebuild, and determined an average cost per mile. They were advised while they were in New York that this was an incorrect evaluation and that two of the projects were for extensions of our existing system to new areas and only the third one dealt with the rebuild. They neverless, have indicated a figure of $5,003 as a cost per mile, in order to develop today's investment cost. We completely disagree with this method and reject it out of hand. The two extension projects are so small, being only one mile each, that to use them in an average is totally misleading. The major part of this figure is the rebuild What Dr. Hardin and Dr. Cook do not point out is that their figure does not include essential costs. Many costs, such as make ready, and the house doop installations--the availability of moving a cable from the street to your house--are incurred for new construction but are not necessarily incurred in total for a rebuild. Were they to have established the replacement value of the system, the replacement value, their cost would have been in the area of $7,500 per mile, not $5,000. 350.2 1 Now, we don't ask you just to believe us. We have obtained quotations from three of the major companies that are involved in the construction of cable television systems: I have these quotations with me today. They are available for you to see. Thetacom, Gerald Electronics, and Magnavox, have all submitted budgetary quotations. They were based on our request to estimate the cost of building a similar type system in Fayetteville covering the 227 miles presently in existence. The per mile figure of Thetacom is $3725; Magnavox quoted $8p15; and Gerald, $3145. This is the replacement cost of the system. This is what would be required for anyone to consider building .a cable... -c'television system in Fayetteville, and I feel it represents the proper base from which to evaluate a request for a rate increase. To consider the depreciated value in these days of rapidly increasing cost is just not realistic. Again, what is most important is a rate required to enable us to rebuild and improve the system in Fayetteville. Is this rate fair? Is this rate equitable and is it representative of the product we are delivering to the community? We believe it is. Your consultants have made unilateral decisions in respect to •reducing our operating costs. We do not agree with them. To us their calculation in respect to Star Channel is absurd and totally misleading. Star Channel is a separate operation and we treat it as such. As we have stated to you repeatedly, no direct expenses in Star Channel are existing in the figures we have presented to you.. Por your consultants to arbitrarily decide that $11,113 of Rip Lindsey's salary or $66 of our two-way radio equipment, or portions of our pole rentals be charged to Star Channel is ridiculous. The costs are there. They are not varied. If you want us to. discontinue Star Channel, we will. We are loosing money on this operation. It is a service to the community only. Of the expenses as we have submitted them to remain the same. Now, if we close down Star Channel, I would see that we could add this money back into our profit and loss statement, and by doing so, justify a greater rate increase We would be happy to do that, but I really don't think you would allow us to. To us, it is just one more indica- tion of a deliberate attempt to arbitrarily and unilateralyy reduce our expenses to a level that could not justify a rate increase as requested. Using 1976 as an example, the year the rebuild would have been completed, Dr. Hardin makes the following arbitrary downward adjustments: the allocations of certain costs of Star Channel, down $15,000; changing our established and correct accounting procedure for investment credit, down $17,000; reduction in our corporate overhead, down $35,000. Dr. Hardin with one swipe of his pen, and without a firm basis for doinvso,reduces our operating expenses by $67,000 and that is equal to 53 cents per month per subscriber on our present rate base. We do not accept this argumentative and subjective approach Simi.larily, Dr. Hardin has capriciously reduced our 1976 investment base by $77,000 by creating a deferred investment tax credit in our balance sheet as if we had deferred this tax benefit. We have not deferred this. We follow quite properly, and with strict conformance with established accounting practice, the flow-through method of accounting for this type of transaction. This method of accounting is approved by the Financial Accounting Standards Board and the Security 'Exchange Commission. The effect of this change is about 9 cents per subscriber. We reject Dr. Hardin's attempt to change our accounting methods in an endeavor to deny us the needed rate increase. Dr. Hardin's allowance of 15% as a return on equities, he would recommend allowing us, is woe.fully out of line with realities of the cable television industry. I have been told by Dennis McAlpine, a former senior security analyist „that R.' Tucker Anthony and Associates, 350.3 perhaps the country's leading analysts of venture capital investments, believed that a minimum after-tax return of 30% was necessary for a company to attract equity finance. The fact that Professor Hardin was able to corrolate a 15% return with value line beta cooefficient of Warner Communications common stock, only proves our point all the more. Cable operations account for only 5% of Warner Communications revenues and none of its profits. Clearly, investors in Warner Communications stock do not anticipate a 15% return on the cable portion of their investment. Rather, they expect the other operations of Warner Communications to do well enough to cause an overall return of 15%. The pertinent question is not what return can an investor reasonably expect from Warner Communications stock; but much more to the point, what return can Warner Communications reasonably expect on its investment in cable television. Using Professor Hardin's effective tax rate of 51.12% of before-tax return of 61.3% is needed to result in the above mentioned after-tax return of 30. Again, using Professor Hardin's figurest, table 1-2, this would result in a total cost of capital rate of 21 percent. Applying this cost of capital to Professor Hardin's computation of revenue needs, we would need an additional $103,688 in 1976 or 82 cents per month on a subscriber base of 10,500. Compared with Profes- sor Hardin's figure of 15 cents. Further, that Professor Hardin insists an using the market value of Warner Communications stock as his cost of equity determination, it is only logical that he use the debt equity ratio of Warner Communications rather than that of Warner Cable-- a wholly-owned subsidiary with no real market exposure. Warner Communication's debt equity ratio at the end of 1974 was 45.55. Using Professor Hardin's 30.69 cost of equity, this would necessitate another $102,000 of revenue. That is 81 cents a month. Using the Tucker Anthony figures, we would need $2.52 per month. Dr. Hardins' suggested rate of return is before income taxes. A paltry 7.2% after income taxes. Who in their right mind is going to invest in the Fayetteville CATV system on this basis? As of last week, the ten year treasury bond yeild curves were 7.58% and for other U. S. Government agencies it was 8.7%. This compares to a 15.8 or an 18.1 pre-tax yield respectively. I submit that Dr. Hardin's recommendation of 14.7% is irresponsible. It does not suit our industry, and most important, it does not provide an objective evaluation of our rate increase request. Another way of looking at this is to consider what it would cost to build a new system in Fayetteville. I have previously mentioned the expert budget quotations we have received from Gerald, Thetacom, and Magnovox. Using their figures, we estimate that the replacement value would be $2,000,000. This investment would require depreciation and interest charges of $400',000, and if we used Dr. Hardin's projections, an expense level of approximately another $400,000. Now, if everyone were satisfied with a 10% return on assets, we would have to have $1,000,000 of revenue and that would require a rate of $7.86. This $7.86 is a far cry from the 15 cents proposed by Dr. Hardin. And once again, we must reject his recommendations completely. Now, the working papers supporting the financial calculations just mentioned are available through Mr. Pat Dugan, our Senior Vice President of Finance, and of course are available for examination. On page 30, Dr. Hardin refers to the refusal, by corporate officials, to allow a direct evaluation of corporated overhead allocations. This is simply not a true statement. We have tried to cooperate in every way possible with Dr. Hardin's requests. Even to the extent of agreeing to pay for the trans- portation of Dr. Cook and Dr. Hardin to New Yorl;. And that is something 350.4 that we have not done for any other city. This report would infer that we did not provide information; where in fact,!the only area,)to our knowledge, where we refused to provide the information requested was in the detailed salaries of our corporate staff. As we pointed out repeatedly to Dr. Hardin, the detail in which this information was requested would have resulted in the disclosure, in certain instances, of individual salaries which we consider to be private information. Dr. Hardin did not point out that he has submitted over 100 questions to our financial department for response. I have personally reviewed this list and to the best of our knowledge, all questions, except the area of confidential salaries, have been answered. There are areas where the information requested was not available because the company we acquired did not have it. But I hardly think that this should be classified as a refusal to provide information. You will recall that two meetings ago, Dr. Hardin stated that there are only two questions remaining where he required answers and that he was satisfied we could provide them. In the matter of corporate overhead, your consultants again made unilateral decisions. They have arbitrarily determined that our corporate overhead charges are incorrect; and again, with the swipe of a pen, have reduced them by an amount sufficient to support their contention that we should get a 15 cent rate increase. They state on page 31 that our amount of total corporate overhead was never provided. Again, a statement that is misleading and untrue. Our original financial statements provided the basis for allocating our corporate overhead. On May of 75 we provided greater detail supporting these charges. Dr. Hardin was provided with our total subscriber account and by making two simple mathematical calcu- lations, would have arrived at the total corporate overhead charge. We knew this. It's an area that was discussed when the interim report was issued. Again, I simply cannot understand the motive behind his statements saying we didn't provide it. Now, as I said earlier, we can go on and on pointing out differences of opinion; but to what advantage. The consultants have set out to prove, that we don't deserve the requested rate increase. That really isn't too difficult. This is a new industry. Records are incomplete. Precedent is almost nonexistant. We had hoped that instead of trying to prove us wrong, by reducing auk figures, correcting errors, and changing assumptions, they would have directed themselves to the questions of "Is the rate we are proposing fair and equitable?" We first approached City Council, not as an adversary, but as a company that is part of the Fayetteville business community. We employ local people. We pay local taxes. And we want to provide a( responsible product for our customers. Our mayor concern, and I hope we share this with you;, is to provide the citizens of Fayetteville an improved cable TV system. We are anxious to reduce the number of outages, improve the quality of picture, and'attemptptotintrodude newrnehadnelst:.Quresystem•is old. It is wearing out. Parts that should cost $10.00 are now costing $80.00 and it is becoming increasingly difficult to find them. Our concern, and it is a real one, is how long will we be able to keep this system running. Dr. Hardin would say, "Rebuild the system. Spend $700,000 and we will give you 15 cents a subsciiber." We are simply not going to do that. It is an irresponsible recommendation. If the City accepted that recommendation, we would continue in business. We would economize by reducing our expenses to the bone and would continue to render the best possible service under the rate provided. 350.5 We can't, however, provide miracles. Our system would still be old. The picture could not improve. Outages would increase. The quality would decrease. And subcribers would rightfully leave the system and our business would deteriorate. Now this is not right. And I can't really believe that you want it to happen. The rate we have been asking is fair and reasonable. Our average rate throughout the United States will be in the breach. The rates granted by other cities are consistent with the request here. On August 5 it was recorded by Television Digest that, so far this year, rate increases have moved from the monthly rate from 5.41 to 6.56. Fayetteville, at $5.00, is lower than the average. And in none of these areas has the increase been geared to a $700,000 rebuild. Other cities have granted increases on inflationary pressure alone. We need $1.20 just to cover the cost of a rebuild and your consultants suggest 15 cents. Last week Rip surveyed some of the surrounding cities to see what they had done in the area of increases In no instance were in- creases even suggested that were as low as Dr. hardin's recommendation. And again, no one was considering a rebuild. Certainly, there are rates below the $7.50 we have request; however, it is significant that only one of the 13 contacts was below $5.15. Cities like Jonesboro , Paragould, and Crossett are at the $6.00 level right now. Many are at $5.95. And again, I must emphasize, that these $5.95 rates are in effect now. These cities are not considering rebuilds. Now we will not rebuild for the $5.15 rate. Nor will any other responsible cable manufacturer. It is not feasible, it is not practical, and it will not be done, in spite of the recommendation by your consultants to the contrary. Now, when two parties reach the position that we presently have, it would be irresponsible to make a rash decision that could so seriously effect the pleasure of 10,000 people. We believe that the time has come for a compromise, for both parties to give, so that we may start our long overdue program. Our original request was for a rate increase of $2.50 on the primary set, $1.00 on additional outlets and an installation fee of $10.00. We have reviewed the financials, recognizing certain points made by Dr. Hardin and Dr. Cook. We have re-evaluated the savings that the system could have on completion of the rebuild. We have taken a more bullish position. We have accepted, reluctantly, that the Fayetteville system will have a lower rate of return than some of our other operations. The result of this exercise is an offer tonight to compromise with a rate of $6.75 on the primary set, $.50 on the second set, and the right to charge up to $10.00 for an installation. Recognizing that our financial needs are coupled to the rebuild, we would also agree to a two-stage implementation. Being $.75 now on the primary set and $.25 on the second. At the completion of the rebuild, we would then introduce a second step of $1.25. We sincerely believe that this represents a fair compromise. More importantly, it enables us to commence the rebuild program which is so sorely needed. We would urge that we finalize tonight our very lengthy and tedious rate increase evaluation, and that you accept the compromise we have proposed that we bring to the citizens of Fayetteville a system that they deserve and that we are willing and able to provide. Thank you for your patience. 350.6 1