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John Jermanis - 2 - December 30, 1998 Approval of Merger Between TCI and AT&T The City Attorney's office has reviewed the merger documents presented by TCI, as well as the Federal laws applicable to cable television mergers. There appear to be no grounds for the City to disapprove the merge. Also, the request for approval of the merger, which comes within the City's purview as a "Change of Control" per the City's Franchise Agreement with TCI, does not afford the City any opportunity to negotiate new terms or services from TCI. The merger can only be disapproved if the City is able to substantiate there are either legal, financial or technical grounds to indicate that AT&T is unable to continue to provide cable television services to San Leandro customers. Since TCI will continue to be maintained as a wholly owned subsidiary of AT&T and will continue to provide cable television services per the conditions of the Franchise Agreement, no grounds for disapproval could be found. The City's Finance Director asked the City Attorney's Office to examine whether future changes to "bundling" of cable services with other telecommunications services would impact the City's Franchise Fees or Utility Users Tax (UUT) as they apply to cable television. According to the Assistant City Attorney, federal regulations will determine future applications of franchise fees to bundling of telecommunications services, and the City is in the process of amending the UUT ordinance to insure that cable services, whether bundled or not, will still be subject to the UUT. In essence, the City cannot apply conditions to approval of the merger that do not directly relate to AT&T's ability to insure continued cable television services. In addition, federal regulations dictate the City cannot unreasonably withhold approval of the merger. If the City takes no action on the merger by January 15, 1999, the merger will automatically be approved. Extension of Lease at 2850 Marina Boulevard Based upon reported problems at TCI's Marina Boulevard facility, the City's Community Standards Office made a cursory exterior inspection of the facility. Zoning Code and Community Preservation Act violations, as well as violations of the terms of TCI's lease with the City, were immediately noted. Zoning Code violations include razor wire on the top of fences, elimination of all off-street parking for customers, use of on -street parking for company vehicles, and expansion of the use of the facility beyond what is permitted in the CR Zoning District. Outdoor storage of supplies at the site is in violation of the Community Preservation Act. Installation of a new fence, the addition of a new parking lot on the west side of the building and expansion of the use of the facility beyond what was agreed upon in the terms of the lease all appear to have occurred without the City's approval. The terms of the lease specifically call for written approval by the City prior to any improvements to the property or changes of use. There is no official record that TCI sought approvals for these matters from the City. 108