Cable TV firms to pony up on taxes
June 9, 2008 · Updated 4:03 PM
If the city of Bainbridge Island agrees that AT&T Broadband can take over the cable TV franchise, both AT&T and Northland will pay the utility tax that the city imposed in 1999.
Northland has refused to pay the tax, asserting that under terms of a 1970 franchise agreement, the franchise fee is in lieu of all other taxes.
In a letter to city administrator Lynn Nordby, AT&T agreed that it would pay both the city franchise fee and the utility tax if it takes over service to Bainbridge Island.
And Northland agreed that if we approved the franchise transfer, it would pay the tax, Nordby said Monday.
While it has resisted paying the tax, Northland has been collecting the tax money from its customers, estimated at about $100,000 per year. Northland said that if it prevailed in its arguments about the tax, it would refund those charges to its customers.
Northland never filed a lawsuit to declare the tax invalid, but was engaged in intermittent negotiations with the city.
AT&T has also agreed that it will adhere to a channel-use agreement between Northland and Bainbridge Island Broadcasting that gives the local station 12 hours per day on Channel 6, where it televises an array of civic-oriented programming, including city council meetings and public forums.
The city council tonight will hear public comment on an ordinance approving the franchise transfer. The ordinance incorporates AT&Ts commitments to the city.
AT&T Broadband, a successor to Denver cable TV giant TCI, made an unsolicited offer earlier this month to buy the Northland franchises on Bainbridge Island and in the Suquamish-Kingston area of North Kitsap County for an undisclosed sum. The Bainbridge franchise serves about 5,000 customers, while the North Kitsap franchise serves about 1,500.
AT&T is the largest cable TV provider in Western Washington, and described its purchase as a further effort to geographically consolidate its operations.
The city must approve the franchise transfer. Before doing so, it wanted to clarify certain issues, including the utility tax, the status of Bainbridge Island Broadcasting and whether AT&T would offer broad-band internet access through its cable system.
Because the terms of the AT&T/Northland deal require closing by Dec. 26, AT&T was unwilling to negotiate a new deal now, and wanted the franchise transferred as is.
In return for an as-is franchise transfer, AT&T also promised to begin discussions with the city about amendments to the franchise agreement. The AT&T letter to Nordby suggested using a 1996 draft amendment as a starting point.
The city and Northland had reached an agreement to modify the franchise in 1996, but the agreement was never adopted by the city council.
The cable TV world has changed so much since 1996 that we may want major changes from that agreement for example, the possibility of more than one channel for local-access programming, Nordby said.