Los Angeles officials are mulling how to collect what city auditors believe is a $3 million shortfall in the amount of franchise fees that should have been paid by three of the city's major operators.
The alleged underpayments date back to 1997 and now amount to just over $5 million, including interest, according to Patrick Collins, a senior analyst for the city. Collins conducted a routine audit of Adelphia Communications Corp.'s filings from 1998 to 2001; AT&T Broadband (now Comcast Corp.) back to July 1998; and Cox Communications Inc. back to April of 1999.
Adelphia owes the largest amount, having miscalculated its payments by $2.2 million, according to the audit.
The local system did not dispute the findings, so under city regulations the audit results are final. But Adelphia declared Chapter 11 bankruptcy before the city could compel the MSO to pay the shortfall, so Los Angeles joins the list of creditors awaiting rulings from U.S. Bankruptcy Court in New York.
Meanwhile, interest — at a rate of 2% above prime — is accruing. The debt stands at $3.8 million now, according to the city.
AT&T Broadband also underreported income from sources such as fiber lease contracts, launch fees and income from advertising on leased channels, the city auditor said. That shortfall was $839,000, but has grown to $1.2 million with interest. AT&T Broadband agreed with some of the city findings and paid part of the amount, but the dispute over the rest will send the parties to arbitration.
Assistant city attorney Ed Perez noted that the terms of the AT&T Broadband franchise transfer to Comcast Corp. set a July date to rectify the dispute, but added that the parties may mutually agree to extend past that date.