ORDINANCE No. 177014

* Authorize escrow agreement with Electric Lightwave, Inc for disputed franchise fees (Ordinance)

The City of Portland ordains:

Section 1.  The Council finds:

1.  In August, 1989, Electric Lightwave, Inc. (“ELI”) applied to the City of Portland for a franchise to build and operate a “by-pass” telecommunications system as a competitive telecommunications provider. Electric Lightwave proposed to offer telecommunications services on a dedicated basis to business and organizational customers throughout the Portland metropolitan area. In August, 1990, the City Council approved Ordinance No. 163327 granting a franchise to ELI to construct, operate and maintain a telecommunications system using the City’s streets.

2.  Under Section 3.A.1 of the 1989 franchise, ELI agreed to pay the City of Portland a franchise fee of five percent of gross revenues as compensation for ELI’s use and occupation of the City’s streets.

3.  In 1996, representatives from ELI and City staff renegotiated several terms of ELI’s franchise. On June 16, 1996 the Portland City Council passed Ordinance 170283 granting ELI”) a telecommunications franchise for 10 years. The franchise became effective on or about August 15, 1996.

4.  Under Section 3.1 of the 1996 franchise, ELI agreed to pay the City of Portland a franchise fee of five percent of gross revenues in consideration for permission to use the City’s streets.

5.  Beginning with ELI’s franchise fee payment for the first calendar quarter of 2001 and continuing to the present ELI has excluded certain revenues from its franchise fee calculations. The total amount of ELI’s withholding was unknown until ELI provided a report in August, 2002. The City disputes ELI’s calculations of its franchise fee at this reduced amount as being in violation of the franchise agreement.

6.  Under the franchise, disputed franchise fees are to be placed in an escrow account until final resolution of the issues.

7.  U.S. Bank, N.A. has agreed to act as escrow agent in this matter. ELI will pay all escrow fees.

8.  City staff, ELI and U.S. Bank, N.A. have negotiated the terms and conditions of an escrow agreement.

NOW, THEREFORE, the Council directs:

a.  The Director of the Office of Cable Communications and Franchise Management, or the Director’s designee, is authorized to enter into an escrow agreement with Electric Lightwave, Inc. and U.S. Bank, N.A., in a form substantially similar with the agreement attached as Exhibit A (attached to the original ordinance only).

Section 2. The Council declares that an emergency exists because any delay in proceeding with the execution of the escrow agreement will cause disruption and further delay in the resolution of the franchise fee dispute between the City and ELI; therefore, this Ordinance shall be in force and effect from and after its passage by the Council.

BACKING SHEET INFORMATION

AGENDA NO. 1303-2002

ORDINANCE/RESOLUTION/COUNCIL DOCUMENT NO. 177014