A Los Angeles County Superior Court judge has ruled that Glendale is improperly using a fiber-optics network owned by Charter Communications for free, and that the city created a “smoke screen” to misuse fees paid by the cable company for purposes that violate state and federal laws.
The ruling, which the city may appeal, could be a big blow to Glendale, which had insisted that an agreement signed in 1999 between the two parties stated that the city had free use of the fiber-optics network.
Charter Communications insisted in court that no such arrangement had been made, and that the city owed it $100,000 a month for use of the network dating back to February 2008 — the month after the company claims its obligation to provide free access expired.
In her ruling, Superior Court Judge Donna Fields Goldstein determined that Charter did in fact retain full ownership of the network, but because it failed to prove Glendale was “wrongfully possessing the property and refusing to return it,” the company was not eligible for back pay from the city.
Charter released a statement saying it's pleased with the ruling.
“Charter looks forward, ultimately, to resolving this dispute and playing an important communications role for the city and its citizens,” company spokeswoman Anita Lamont said in the statement.
City Atty. Mike Garcia this week said he strongly disagreed with the ruling, adding that officials were evaluating filing an appeal to some or all of the judge's decision.
“We disagree, respectfully,” he said. “Obviously, we're disappointed.”
The city had argued in court that a transfer agreement signed in 1999 superseded state and federal cable laws and required Charter to give it free access to the fiber-optic network.
However, Goldstein countered that the provisions in the agreement did not contain words such as “permanent,” “dedicate,” “grant” or “ownership.” She also noted that the parties involved in the negotiations did not discuss a provision that would have allowed the city to buy some of the fibers.
Christina Sansone, the city's counsel who was involved in those negotiations, could only say that the city had that paragraph “in mind” when talking with Charter representatives.
Regarding the misuse of fees, Charter has been paying a franchise fee to the city that equals 5% of the company's gross revenues generated from cable-system operation in Glendale since January 2008.
In fiscal year 2010-11, Charter paid $640,000 in access fees, according to city spokesman Tom Lorenz.
It's also been paying an additional 2% from the same revenues in access fees. That revenue is supposed to be used for capital costs, but Goldstein agreed with Charter that the money had been funneled through the Glendale Financing Authority to be paid back to the city as lease payments.
The money was then put into the city's General Fund to be used for operational costs, which violates state and federal cable laws, according to the ruling.
“The city has created a lease arrangement having no real substance other [than] to create a smoke screen to allow the city to charge [access] fees for … operations,” Goldstein wrote.
She ruled that the access fee is actually a franchise fee that is unlawfully being imposed because it violates the 5% cap laid out in state and federal laws.
That's a point with which city officials most strongly disagree, Garcia said, contending that the revenues are being spent properly.