Present: Mayor Glen Lang, Mayor Pro Tem Jack Smith, Council Members Marla Dorrel, Jennifer Robinson, Nels Roseland, Jess Ward and Harold Weinbrecht

Mayor Lang called the meeting to order at 5:30 p.m. and dispensed with all formalities.

The proposed resolution follows. (Note: This resolution was amended prior to the meeting. The language that was deleted is marked with strikethrough marks, and the language that was added is marked in bold print.)

WHEREAS, a group of citizens of the Town of Cary plan to form the Cary Local Development Foundation, a non-profit corporation dedicated to enhancing educational opportunities available to the school students who are residents of the Town; and

WHEREAS, the Cary Local Development Foundation will collect appropriations, donations and other funds to be used to make grants to improve schools which Cary children attend; and

WHEREAS, the schools in and around the Town of Cary are overcrowded, understaffed and underfunded, and these adverse conditions have persisted for several years; and

WHEREAS, approximately one-third twenty percent of Cary children attending public schools in the Town of Cary throughout western Wake County attend classes in non-standard/sub-standard facilities including gymnasiums, storage rooms, and trailers known as mobile classroom units, while a substantially smaller percentage of public school children in the remainder of Wake County attend classes in such mobile units non-standard/sub-standard facilities; and

WHEREAS, public school children in the Town of Cary attend classes in spaces not intended to be used for instructional purposes because of overcrowding and inadequate physical plants; and

WHEREAS, the public schools in and around the Town of Cary lack resources and materials -- including computers, networking facilities, books, and basic supplies -- necessary to provide quality educational opportunities to the children of the Town; and

WHEREAS, the technological and reference opportunities in the local schools in and around the Town of Cary are not adequate to prepare the children of the Town for higher education and the modern workplace; and

WHEREAS, a primary impediment to additional economic development in the Town of Cary is the inadequacy of the educational opportunities available to the children of the Town; and

WHEREAS, businesses which are evaluating whether to move to or expand within the Town of Cary consider the quality of educational opportunities available for their employees’ school children to be a key factor in making their decisions; and

WHEREAS, grants made by the Cary Local Development Foundation will significantly improve educational opportunities for school students residing in the Town of Cary and also will enhance Cary’s reputation as a good place to live and to work; and

WHEREAS, the Town of Cary is considering an appropriation of $3,700,000 to the Cary Local Development Foundation, which appropriation equals $200 per school student residing in Cary; and

WHEREAS, Section 158-7.1 of the North Carolina General Statutes authorizes the Town of Cary, in its discretion, to make appropriations for the purposes of aiding and encouraging local development in the Town; and

WHEREAS, the Town Council of the Town of Cary is committed to fostering economic development by enhancing educational opportunities for Cary’s school students, including those who are members of families which will move to Cary because of enhanced educational opportunities; and

WHEREAS, enhanced educational opportunities will increase the likelihood of businesses moving to and expanding within the Town of Cary; and

WHEREAS, the Town Council supports the efforts of the Cary Local Development Foundation which will increase Cary’s business prospects and taxable property.

NOW, THEREFORE, BE IT RESOLVED that the Town Council of the Town of Cary exercises its discretion to aid and encourage local development in the Town of Cary by including in the budget ordinance for Fiscal Year 2000-01 an appropriation a reserve of $3,700,000 for the Cary Local Development Foundation to enhance local development by enhancing educational opportunities for school students who reside in Cary.

BE IT FURTHER RESOLVED that this Resolution shall be incorporated by reference in the Town of Cary’s budget ordinance for Fiscal Year 2000-01 as if fully set forth therein.

Adopted this the ____ day of June, 2000.

Mr. Henderson, Town Attorney, stated staff will insert this statement throughout the resolution, but it might vary slightly depending on content.

Ms. Dorrel noted some of the language in the resolution has been changed effective today (see resolution above). She stated these changes give the Town more flexibility to determine how to use funds and to work through all facets to determine that the money is effective and works for the children.

Mr. Ward stated he remains skeptical of the Council’s solution. He stated he applauds the changes made to the resolution, although he cannot support the resolution due to the approach chosen by Council.

Mr. Roseland stated this resolution is only a statement of intent to use Cary funds to help Cary schools. He added this is good for economic development. He stated there will be plenty of time in the coming months to work out the details. He added, however, that it is important to have the Council’s intent associated with the budget.

Mayor Lang stated public hearings will be held on the details of the proposal. He stated it is important to get input from the public on the specific details. He stated as many work sessions and public hearings will be conducted in order to get as much input as possible.

Ms. Dorrel stated the resolution now states that these funds will be a reserve – the resolution does not stipulate that funds will be released or that there is the ability to do that. She stated work sessions will be conducted until all questions are answered.

The final resolution follows:

WHEREAS, a group of citizens of the Town of Cary plan to form the Cary Local Development Foundation (or organization of a similar nature), a non-profit corporation dedicated to enhancing educational opportunities available to the school students who are residents of the Town; and

WHEREAS, the Cary Local Development Foundation, or organization of a similar nature, will collect appropriations, donations and other funds to be used to make grants to improve schools which Cary children attend; and

WHEREAS, the schools in and around the Town of Cary are overcrowded, understaffed and underfunded, and these adverse conditions have persisted for several years; and

WHEREAS, approximately twenty percent of Cary children attending public schools throughout western Wake County attend classes in non-standard/sub-standard facilities including gymnasiums, storage rooms, and trailers known as mobile classroom units, while a substantially smaller percentage of public school children in the remainder of Wake County attend classes in such non-standard/sub-standard facilities; and

WHEREAS, public schoolchildren in the Town of Cary attend classes in spaces not intended to be used for instructional purposes because of overcrowding and inadequate physical plants; and

WHEREAS, the public schools in and around the Town of Cary lack resources and materials -- including computers, networking facilities, books, and basic supplies -- necessary to provide quality educational opportunities to the children of the Town; and

WHEREAS, the technological and reference opportunities in the local schools in and around the Town of Cary are not adequate to prepare the children of the Town for higher education and the modern workplace; and

WHEREAS, a primary impediment to additional economic development in the Town of Cary is the inadequacy of the educational opportunities available to the children of the Town; and

WHEREAS, businesses which are evaluating whether to move to or expand within the Town of Cary consider the quality of educational opportunities available for their employees’ schoolchildren to be a key factor in making their decisions; and

WHEREAS, grants made by the Cary Local Development Foundation, or organization of a similar nature, will significantly improve educational opportunities for school students residing in the Town of Cary and also will enhance Cary’s reputation as a good place to live and to work; and

WHEREAS, the Town of Cary is considering an appropriation of $3,700,000 to the Cary Local Development Foundation, or organization of a similar nature, which appropriation equals $200 per school student residing in Cary; and

WHEREAS, Section 158-7.1 of the North Carolina General Statutes authorizes the Town of Cary, in its discretion, to make appropriations for the purposes of aiding and encouraging local development in the Town; and

WHEREAS, the Town Council of the Town of Cary is committed to fostering economic development by enhancing educational opportunities for Cary’s school students, including those who are members of families which will move to Cary because of enhanced educational opportunities; and

WHEREAS, enhanced educational opportunities will increase the likelihood of businesses moving to and expanding within the Town of Cary; and

WHEREAS, the Town Council supports the efforts of the Cary Local Development Foundation, or organization of a similar nature, which will increase Cary’s business prospects and taxable property.

NOW, THEREFORE, BE IT RESOLVED that the Town Council of the Town of Cary exercises its discretion to aid and encourage local development in the Town of Cary by including in the budget ordinance for Fiscal Year 2000-01 a reserve of $3,700,000 for local development by enhancing educational opportunities for school students who reside in Cary.

BE IT FURTHER RESOLVED that this Resolution shall be incorporated by reference in the Town of Cary’s budget ordinance for Fiscal Year 2000-01 as if fully set forth therein.

Adopted this the 21^st day of June, 2000.

(Resolution is also on file in the town clerk’s office.)

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Town Manager Bill Coleman stated the Town of Cary has met the requirements set forth by the N.C. local government control act by developing a FY 2001 budget for the Town’s operations. He stated the required public hearings have been held, work sessions have been conducted, and the changes directed by Council have been made to the originally proposed budget.

The FY 2001 budget ordinance is attached to and incorporated in these minutes as Exhibit A. The changes in the proposed budget which are reflected in the adopted budget numbers is attached to and incorporated in these minutes as Exhibit B. The final adopted FY 2001 budget is attached to and incorporated in these minutes as Exhibit C.

Mr. Ward asked to be allowed to comment, and Mr. Roseland concurred. Mr. Ward stated staff has done a good job with the budget preparation. He stated Cary has full impact fees, and he voted for this. He stated this intent was to lessen the burden on citizens by insuring that development pays for itself, and he stated this budget does not accomplish this goal. He stated the budget maintains a comparable tax rate, includes the highest impact fees in the county, and shows the Town has over $90 million in surplus. He stated the Cary citizens deserve to receive some of the Town’s surplus. He stated the Council will not be expending funds for the fiber optic project as originally thought, at an expense of $30 to $50 million. He stated the marketplace will now take care of this project. Mr. Ward stated the current Council will find new projects on which to spend the money, and he feels the money belongs to the citizens of Cary. He stated citizen input should be considered when deciding on what projects to undertake. He further stated the basis for Cary’s decision is often the biannual survey. He stated the Council should also consider that the school bond referendum failed by a 2-1 margin in Cary, although the biannual survey indicated that 70% of Cary residents would agree to additional taxes for schools. He stated it is important to return some of the money to the citizens now.

Mr. Weinbrecht stated the majority of the Council were elected to "fix the problems created by past Councils." He stated these problems will be fixed without raising taxes, and he supports the budget as presented.

Mayor Pro Tem Smith stated the proposed budget is responsible. He stated Cary has the third lowest tax rate in the County and has closed the gap between Raleigh and Cary and between Apex and Cary. He stated there is a lot of money set aside in the budget to deal with infrastructure in the older part of Cary. He stated for years, growth has occurred at the expense of existing citizens. He stated Cary is setting the example with open space with a revenue neutral budget. He stated a tax cut will realize $25 on the average home, but a fee reduction will realize approximately $45 on the average home. He stated Cary is the 7^th safest city in the U.S. and the safest city in the State. He stated Cary has the lowest possible fire premiums. He stated there is $1 billion of capital expenditures coming up in the next 10 years. He stated the Council could lower the tax rate, but this only passes the burden to the next group of Council Members. He stated Cary has a AAA bond rating, and this was achieved because Cary has invested and spent money wisely.

Mr. Roseland stated he reviewed Cary’s budget over a 3-4 year period, and the budget surplus was because of the growth. He stated the Town was unable to provide the necessary infrastructure to keep up with the growth. He stated there is a road and school shortage. He stated a premature tax cut could provide a funding shortage. He stated the proposed budget provides less crowded roads and schools and slows growth through open space acquisition.

Ms. Dorrel stated the budget process is difficult, especially while considering major policy changes (i.e., funding through impact fees, etc.). She stated the streets and sidewalk program is being accelerated substantially. She stated her preference is still the property tax cut, but this discussion has already occurred. She stated she agrees with 98% of the proposed budget, and she feels the Council is addressing the needs of the citizens.

Mrs. Robinson stated the citizen survey indicated that 69% of respondents felt the taxes were appropriate. She stated the Town is in need of road improvements, more parks, etc., and she is happy that this budget addresses many needs without raising the tax rate. She stated smaller homes realize a bigger impact by having the fees reduced.

Mr. Ward reiterated that the current Council will find a way to spend the money (i.e., bond referendum, increased taxes, etc.). He stated the citizens need the tax relief now while the surplus is available.

Mayor Lang stated he feels it is fiscally irresponsible to cut taxes further. He stated he finds it reprehensible that Mr. Ward waited until the week prior to the adoption of the budget to propose an additional tax cut. He stated if given proper notice, staff would have been happy to prepare data on the proposed tax cut to statistically support a $0.38 tax rate. He stated he personally feels is associated with Mr. Ward’s congressional election rather than the best interest of the Cary citizens.

Mr. Ward stated he resents Mayor Lang’s remarks. He stated he came out with his proposal a week in advance so the Council and staff would have the opportunity to review the information. He stated a $0.05 reduction in the tax rate (from $0.43 to $0.38) represents $5 million. He stated he would prefer that a bond referendum be used to determine open space funds.

Mr. Roseland stated for the record the budget funds "one-time cash" to fund open space. He stated Mr. Ward has proposed a recurring $0.05 to $0.10 property tax reduction. He stated open space is not being funded with property tax, rather, water and utility funds are being used.

Mr. Ward countered that the Council may decide that there is a recurring need for additional open space.

Mr. Roseland stated Mr. Ward’s proposal could lead to a budget deficit in future years, and he cannot support this proposal.

Mayor Pro Tem Smith stated Mr. Ward has no substantive data to support his feelings that the current Council will raise taxes in future years. He stated he has been on the Council for 12 years, and the Council has not raised taxes in that time period. He stated Mr. Ward has no right to project future decisions of the Town Council, since there is no data to support this statement.

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The report prepared by staff follows:

At the regular June 8^th meeting, Council and Time Warner agreed to a 30-day extension of the 120-day standard review period for FCC 394, Transfer of Control. During the extension, staff was directed to provide more information on the open access issue, specifically with regards to 1) how open access is being handled by jurisdictions throughout the nation, and 2) draft language for Cary documents that could increase Cary’s commitment to and requirements for open access by TWC and other operators.

In response, consultants with Rice, Williams, Associates have drafted a memo which follows and includes information on open access, draft language, and links to relevant articles about the proposed merger.

For Council’s consideration, staff has included both the original Resolution supporting the Transfer request as well as a Resolution denying the request.

If Council fails to take action on the Transfer—either supporting or denying it—by July 10^th, the Transfer is automatically approved by default.

BACKGROUND: In February, Time Warner filed FCC Form 394 with the Town of Cary, requesting consent to transfer control of its cable television Franchise to AOL Time Warner, Inc. FCC 394, which includes a transfer document in addition to financial information about both entities, has been reviewed by Town staff and consultants to insure that the transfer would have no adverse affect on Cary cable subscribers.

While FCC rules, as well as the Town’s own regulations, allow such a transfer with Council approval, failure of Council to take action within 120 days results in the approval of the transfer by default.

The current Franchise Agreement expires in September, 2000.

DATE: June 15, 2000

TO: Ms. Susan Moran, Public Information Officer

Town of Cary, NC

FROM: Ms. Jean Rice

RE: Open Access

As we discussed, open access to Internet ISP’s through cable modem service is a major issue being grappled with at the municipal, State, and Congressional level. Given the high-tech nature of the Cary area, it is an important policy issue. Concern regarding this issue by Congressmen, as they reviewed the potential AOL/TW merger, spurred AOL and TW to enter into a Memorandum of Understanding regarding making capacity available to competing ISP’s. AT&T made similar commitments before the FCC as AT&T moved forward with its purchase of MediaOne; with a promise to open its networks after its exclusive carriage deal with Excite @Home expires in 2002.

Portland, OR and Broward County, FL have taken the lead in this area, and many municipalities are awaiting the outcome of the court proceedings. Some municipalities such as Fairfax, VA, St Louis, MO, Cambridge, MA, and Pittsburg, PA have required open access. Time Warner, as well as other major MSO’s, have resisted and rejected requirements in transfers and renewals. The MSO viewpoint is that the marketplace will determine the introduction and extent of competition. The FCC has taken a similar point of view and has not stepped in to regulate or seek legislation in the area. MSO’s also argue that plans for open access would delay the deployment of high speed broadband services.

The major precepts for support of Open Access are:

1) Open access is necessary to preserve the Internet’s open architecture.

2) Internet transmission is defacto common carriage and third parties should, therefore, be allowed to provide service without being discriminated against.

3) ISP providers add value to consumers that is in excess of that offered by transmission providers and that the added value should be fostered.

4) Local governments should be able to open up a local transmission media to promote competition if there is a local franchise and it is in the public interest.

Cary’s Transfer Resolution relies on the TW and AOL Memorandum of Understanding which indicates that the combined company would not limit the number of ISP’s on its cable plant, or limit the amount of video streaming that can be sent or received. AOL and Time Warner indicated that ISP’s would be allowed to have direct billing relationships with consumers and that the two companies pledged to negotiate with Road Runner to open its network before its exclusivity contract ends. TW has indicated to City staff that the current approach is unacceptable. The City could choose to take a more direct approach during the transfer or renewal process. In addition, the City could choose the time frame for open access (e.g. now or after pending court cases are resolved).

AOL Merger Worry, Special Report

L.A. Council May Opt for Access

Open Access Heard Again in SF

AOL Presses Merger; Worry Shareholders

Add to "Whereas" clauses:

Whereas, The Town of Cary determines that the stock-to-stock merger, which would transfer control to AOL Time Warner, may eliminate or reduce competition in the delivery of cable service in the Town; and

Add to current language on Open Access:

The Franchisee agrees that the Town may impose an open access condition later, if such a condition could have been unilaterally imposed as a condition of the Town’s consent to the transfer, pursuant to statute or legal precedent controlling in the State of North Carolina or if such a condition can be imposed by any lawful amendment to the Cable Ordinance.

Add to Section 2 in list of paragraphs, "which if not complied with, the transfer approval is nullified."

WHEREAS, Time Warner Cable ("Franchisee"), owns, operates, and maintains a cable television system ("System") via Cablevision Industries, Inc. in the Town of Cary, North Carolina (the "Town") pursuant to the Cable Television Franchise Agreement, dated November 17, 1988, and the Cary Cable Communications Regulatory Ordinance, Chapter 6, ("Cable Ordinance") dated November 17, 1988, as may be amended; and

WHEREAS, Franchisee, as the current authorized holder of the Franchise, has advised the Franchising Authority that Time Warner, Inc. has entered into a stock for stock merger agreement with America OnLine, Inc., which would transfer control to AOL Time Warner, Inc. subject to, among other considerations, the required approval of the Town with respect thereto; and

WHEREAS, the Franchise and Cable Ordinance requires that prior to such transfer, the Town must grant its prior consent thereto; and

WHEREAS, Time Warner, Inc. and AOL Time Warner, Inc. have submitted a written Application (the "Application") requesting consent by the Town to the transfer of control of the Franchisee to AOL Time Warner, Inc.; and

WHEREAS, the Town incurred expenses by virtue of the change of control to AOL Time Warner, Inc.; and

WHEREAS, the Town has determined that it is appropriate to grant its consent to the transfer of control of the Franchisee pursuant to the transaction described in the Application and ensure that the Town's rights will be adequately protected through this Transfer Resolution.

WHEREAS, The Town of Cary determines that the stock-to-stock merger, which would transfer control to AOL Time Warner, may eliminate or reduce competition in the delivery of cable service in the Town; and

NOW THEREFORE, be it resolved by the Town Council of the Town of Cary, North Carolina that the following terms and conditions govern the transfer of control:

Section 1.

(a) The Town hereby consents to the transfer of control of the Franchisee from Time Warner, Inc. to AOL Time Warner, Inc. pursuant to the conditions described in the Application, that such consent to transfer of control is granted subject to the following conditions all of which have been agreed to by Franchisee and AOL Time Warner, Inc.

(b) That Franchisee continues to assume all obligations and liabilities of the Franchisee under the Franchise and Cable Ordinance as may be amended, this Resolution, any covenant, condition and agreement, including, without limitation, all obligations, if any, of the Franchisee as are currently required to have been performed but have not been performed.

(c) That the transfer described in paragraph (a) of this Section 1 shall not release Franchisee from any obligations or liabilities under the Franchise or the Cable Ordinance arising prior to the consummation of the transaction.

(d) Consent by the Town to the subject transfer shall not in any way waive, diminish or otherwise affect adversely any right that the Town has, may have, or may at any time or in any manner subsequently acquire, with respect to any matter, including, without limitation: the Town’s right to consider pre-transfer breaches in any renewal; the right of the Town to require compliance with the terms of the Franchise and Cable Ordinance or any other covenant, condition or agreement; the right of the Town to conduct any franchise fee audit or review and order payment of unpaid franchise fees; the right of the Town to review pre-transfer compliance with the Franchise or the Cable Ordinance by Franchisee; any right the Town had, or may have had to compensation or other remedies in respect to any pre-transfer breaches of the Franchise, the Cable Ordinance, or any other covenant, condition, or agreement, if the transfer or the Town’s consent to the transfer of control pursuant to the Application had never occurred. All such rights referenced in this paragraph (d) are expressly reserved by the Town.

(e) Franchisee agrees to provide at least the same level of public service and customer service as provided during the year prior to the effective date of this Resolution.

(f) The Franchisee represents and warrants that it is not asserting that it will be permitted to provide services in addition to cable services as a result of the approval of the transfer. The Franchisee further represents and warrants that it shall not seek modification of the Franchise based on the failure of the companies to satisfy any of the financial or technical assumptions that may underlie the transaction. The Franchisee warrants that it shall obtain any required Federal, State or local authorizations before providing any non-cable services over the cable system.

(g) Franchisee agrees to comply with all lawful Federal, State, and local requirements with respect to nondiscriminatory access to Franchisee’s cable system for providers of Internet access service. Franchisee acknowledges its commitment to the "Memorandum of Understanding" between AOL and Time Warner on Open Access dated 2/29/00. Franchisee and the Town have not waived any rights, obligations, claims, defenses or remedies regarding the Town of Cary’s authority to impose such conditions. The Franchisee agrees that the Town may impose an open access condition later, if such a condition could have been unilaterally imposed as a condition of the Town’s consent to the transfer, pursuant to statute or legal precedent controlling in the State of North Carolina or if such a condition can be imposed by any lawful amendment to the Cable Ordinance.

(h) That Franchisee, Time Warner, Inc. and AOL Time Warner, Inc. agree that the cost of compliance with this Resolution and the conditions to the Town's consent shall not constitute or be an offset to franchise fees or be passed on, directly or indirectly, to subscribers or otherwise affect subscriber rates.

(i) Franchisee agrees that in the event that a cost of service study is used to justify the rates for basic cable service at any time in the future, the purchase price of the assets in excess of the net book value of the assets at the time of acquisition shall not be included in the determination of the cost of service or recovered through rates, in the rate base or through amortization or through any other accounting method. Records shall be maintained by the Franchisee in a manner so that the value of the assets received from the transferor with and without the allocation of the purchase price above net book value can be determined.

(j) That Franchisee, Time Warner, Inc. and AOL Time Warner, Inc. have agreed to the conditions specified in this Resolution and shall, within thirty (30) days following adoption of this Resolution, execute and deliver to the Town a Transfer Agreement which enables the above conditions, in form and substance satisfactory to the Town Attorney, who shall also have the Town execute the Transfer Agreement.

(k) The Franchisee agrees that it shall provide to the Town a written statement within thirty (30) days of the actual closing of the proposed transfer confirming that the transfer has occurred.

(l) That Franchisee, Time Warner, Inc. and AOL Time Warner, Inc. shall transfer control of Franchisee as specified in the Application within six (6) months of the effective date of this Resolution.

Section 2. In the event of a breach or violation of any of the terms or conditions of this Transfer Resolution or any failure to comply with any term or condition of this Transfer Resolution, the Town shall provide written notice thereof to Franchisee. If such breach, violation, or failure to comply is not corrected or cured within 30 days, or such longer time as the Town in its sole discretion may allow, after delivery of such written notice from the Town to Franchisee, then such breach, violation, or failure shall constitute a substantial and material breach of the Franchise; and the Town, without further obligation to provide notice or opportunity to cure, shall be entitled to pursue all rights and remedies available to it under the Franchise, at law, or in equity for such a breach, violation, or failure to comply. Notwithstanding the foregoing obligations and rights, any breach, violation, or failure to timely comply with paragraphs (g), (j), and (l) of Section 1 above shall entitle the Town to revoke its consent to transfer of control and, in the event of such revocation, any transfer, or attempted transfer, of the Franchise shall be deemed null, void, and of no force or effect.

Section 3. Neither this Transfer Resolution, nor any other action or omission by the Town at or before the adoption of this Resolution, shall be construed to grant the consent of the Town to any future transfer of control or the Franchise or the cable system, or to grant the consent of the Town to any future change in ownership or control of the Franchise or of the cable system, or to mean that the consent of the Town to any such future transaction is not required. The consent given by the Town to the transfers pursuant to the Application is made without prejudice to, or waiver of, the Town's right to fully investigate and consider Franchisee's and AOL Time Warner, Inc.’s financial, technical, and legal qualifications and any other relevant considerations in relation to any future franchise renewal or transfer process.

Section 4. That the Town Manager is hereby authorized and directed to execute the Transfer Agreement incorporating the provisions of this Resolution and any and all other documents necessary or appropriate to implement this Resolution, subject to prior review and approval by the Town Attorney.

This Resolution shall take effect and be in force from and at the earliest time permitted by law.

PASSED AND ADOPTED this ________ day of ______, 2000.

WHEREAS, Time Warner Cable via Cablevision Industries, Inc. ("Franchisee"), owns, operates, and maintains a cable television system ("System") in the Town of Cary, North Carolina (the "Town") pursuant to the Cable Television Franchise Agreement, dated November 17, 1988, and the Cary Cable Communications Regulatory Ordinance, Chapter 6, ("Cable Ordinance") dated November 17, 1988, and as may be amended; and

WHEREAS, Franchisee, as the current authorized holder of the Franchise, has advised the Franchising Authority that Time Warner, Inc. has entered into a stock for stock merger agreement with America OnLine, Inc., which would transfer control to AOL Time Warner, Inc. subject to, among other considerations, the required approval of the Town with respect thereto; and

WHEREAS, the Franchise and Cable Ordinance requires that prior to such transfer, the Town must grant its prior consent thereto; and

WHEREAS, Time Warner, Inc. and AOL Time Warner, Inc. have submitted a written Application (the "Application") requesting consent by the Town to the transfer of control of the Franchisee to AOL Time Warner, Inc.; and

WHEREAS, the Town has determined that it is not appropriate to grant its consent to the transfer of control of the Franchise as: Franchisee does not guarantee open access, non-discriminatory practices, or increased competition; such transfer may eliminate or reduce competition in the delivery of cable service to the Town; and that the Transfer cannot ensure that the Town’s and subscribers rights will be adequately protected through this Transfer.

NOW THEREFORE, be it resolved by the Town Council of the Town of Cary, North Carolina, that the Town of Cary denies the requested Transfer of Control.

This Resolution shall take effect and be in force from and at the earliest time permitted by law.

Passed and approved this 21^st day of June, 2000.

Mayor Lang stated the franchise still actually resides with CVI, because the former Council denied transfer from CVI to Time Warner. He voiced his opposition to the transfer. He suggested that Council deny the transfer and change the ordinance to require open access. He stated that AOL was advocating open access prior to their purchase of Time Warner. He stated staff should draft an ordinance similar to Portland, Oregon, and Los Angeles, California.

Ms. Dorrel stated she and Mayor Lang own stock in Time Warner. She stated Town Attorney Henderson has indicated to her that based on the amount of stock she owns in the company and the specific action requested, that it is appropriate for her to vote on this issue. The Council concurred, and they allowed Ms. Dorrel to continue with discussing and voting on this item.

Ms. Dorrel stated one option is to approve the transfer with strings attached, and the other option is to say no. She stated she feels it is best to say yes with very strong strings attached. She stated she is seeking to preserve and protect the rights of Cary citizens, and she feels the best way to do this is to say yes with strings attached. She stated if the Council says yes, then there will be a proposed ordinance provision to address open access, and it would hold the cable company to their Memorandum of Understanding that has been established between AOL and Time Warner. Mayor Lang stated the Memorandum of Understanding is not a strong document, and it is virtually meaningless.

Ms. Dorrel stated the document can reflect that Cary may impose an open access provision later, and staff could propose this change at a future date based on lawsuits in other municipalities. She stated Cary may preserve the right to hold the new entity responsible for previous breaches in franchise agreements. She stated Cary may reserve the right to review compliance issues unresolved in the past. She stated there is a provision that if the cable company uses a cost of service approach to a determine rate, then they cannot consider the amount in which the purchase price exceeds the net book value (assets), which means the cable company cannot make Cary customers pay for the transaction.

Ms. Dorrel stated she supports open access being added to the franchise ordinance.

Mr. Henderson stated there is a motion to deny the transfer and the resolution includes the reasons for the denial.

(The resolution denying the transfer is incorporated within these minutes, and it is also on file in the town clerk’s office.)

Ms. Moran stated staff will bring new language back to Council as soon as possible. She added there is a public hearing scheduled for June 22, 2000, for standard, non-controversial revisions to the cable ordinance, and she asked that Council move forward with these ordinance amendments as written. Council concurred.

_________________________

Mayor Lang adjourned the meeting at 6:35 p.m.