Audit: Tens of millions in cable fees sit unspent in L.A. city fund

Tens of millions of dollars in fees paid by L.A. cable customers remain unspent in city coffers, audit finds

Tens of millions of dollars in fees paid by Los Angeles cable customers remain unspent in city coffers, with no plan for using much of the money as it piles up, according to a new audit released Thursday by the city controller.

A portion of city fees charged to cable companies -- and ultimately passed on to customers through their bills -- flow into a special fund separate from the day-to-day city budget.

Year after year, the ending balance in the fund has swelled, growing from $3 million to nearly $29 million between 2009 and 2013. At the end of this May, the money in the Telecommunications Fund added up to $35 million, according to the controller's office.

Some of that money is being saved for future uses. An estimated $20 million is earmarked for a new studio for Channel 35, which broadcasts city council meetings and other city programming.

But the rest is just stacking up -- the unspent money could reach $25 million by 2017, City Controller Ron Galperin said in the report. Galperin argued that the city needs to reexamine the unspent money and explore new, creative ways to put it to use. 

"It doesn't do anybody good if it's sitting there," Galperin said Thursday.

Part of the problem is that the city faces legal restrictions in how it can spend some of the money. One of the cable fees, which poured more than $6 million into the fund last budget year, must be used for capital expenses tied to public, educational and government programming. Cities have typically used that money for buildings and equipment for public access channels, like Channel 35 in Los Angeles.

Galperin questioned if the city could explore new and inventive ways to spend the money that suit the changing ways Angelenos get information. If the law is too restrictive, he said, the city should work with other cities and telecommunications companies to lobby for more flexibility in spending the fees. Possible uses could include public wireless internet or websites to share city programming, his office said.

"We're in a new era," Galperin said. "The old rules that envisioned everybody getting their programming from cable are changing before our very eyes ... We need to do everything we can to reach out to people."

If the money continues to linger unspent in the city fund, L.A. cable customers will soon ask why they have to pay the fees at all, "because they're the ones that are paying it on their bills," Galperin said.

The fees are at the heart of a court battle being waged by the city. Earlier this year, the city sued Time Warner Cable over allegedly unpaid fees, claiming that nearly $10 million is still owed to the city. The company has denied the allegations.

In addition to spotlighting the unspent fees, the report also found that the city's Information Technology Agency had not done timely audits of cable television companies to make sure they had paid the right amounts to the city.

In a statement emailed to The Times on Thursday, the agency said it welcomed the report and supported its recommendations. It noted that its "cable regulatory function" had been severely reduced from 25 staffers down to a single position as a result of budget cuts.

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