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SR-501-002 (10) Council Meeting: June 28, 2005 Santa Monica, CA TO: Mayor and City Council FROM: City Staff SUBJECT: Professional Services Contract with Rutan & Tucker, LLP for Outside Legal Services and Financial Analysis related to the Adelphia transfer to Time Warner for Cable Television Services Introduction This report recommends that the City Council authorize the City Manager to negotiate and execute a contract with Rutan & Tucker, LLP for outside legal services and financial analysis on behalf of the City related to the transfer application of Adelphia Cable to Time Warner to ensure the applicant company is financially, legally, and technically qualified for the provision of Cable television in the City of Santa Monica. Background Time Warner Inc. and Comcast Corporation recently announced a definitive agreement to acquire substantially the assets of Adelphia Communications Corporation. As a result Time Warner will acquire Century-TCI (ada Adelphia) in Santa Monica. Staff received the FCC form 394 transfer application to the new operator on June 14, 2005. Under applicable law, including the Cable Communications Policy Act of 1984, review of requests for franchise renewal and transfer include, among other things, consideration of the legal, technical and financial qualifications of the company. In addition, the 1 renewal and transfer process may be used to require that issues of non-compliance with the franchise be resolved. The City?s interest is to ensure the Franchisee?s ability to perform, and to guarantee the performance itself, i.e. to ensure that service is not suspended and construction in the public right-of-way is not disrupted because of financial problems. The Rutan & Tucker contract will provide specialized legal analysis and negotiation assistance in the transfer process. It will also include provision for expert services to review the financial situation of the acquiring company before and after the business combination including the cash flow, debt, ability to meet construction needs and impacts on consumer rates. The contract will not exceed $60,000. Discussion Rutan and Tucker, LLP is the City?s California outside counsel in cable, rate, antenna and FCC related matters. This contract will cover costs associated with the transfer of Adelphia to Time Warner and related cable rate matters. Budget/Financial Impact Funds of $60,000 are available in account number 01202.555060. 2 Recommendation Staff recommends that the City Council authorize the City manager to negotiate and execute a professional services contract with Rutan & Tucker in an amount not to exceed $60,000. Prepared by: Kathryn Vernez, Assistant to the City Manager for Government Relations Steve Stark, Director of Finance Joseph Lawrence, Assistant City attorney Robin Gee, Cable TV Manager (Reference Contract No. 8488 (CCS). 3