Audit finds Time Warner owes cities $450,000

By Duke Behnke 2/7/05
Post-Crescent staff writer

Time Warner Cable allegedly underpaid more than $450,000 in franchise fees to Appleton, Neenah and Menasha from 1998 to 2003, according to a recently completed audit.

When coupled with accrued interest, the underpayments total more than $630,000 — about $410,000 in Appleton, $135,000 in Neenah and $90,000 in Menasha.

Neenah City Atty. James Godlewski said Time Warner has been playing fast with the numbers in violation of its franchise agreements with the cities.

“It is very disappointing,” Godlewski said last week. “We need to be diligent about recapturing the money that we should have been paid.”

Steve Kim, vice president of government and public affairs for Time Warner’s Green Bay Division, said company officials are reviewing the findings and preparing a response to support their contention that no additional fees are owed to the cities.

“We feel there are issues that need to be discussed before any final judgment is made,” Kim said. “We do have a clear and explainable reason for those disputed aspects.”

Kim said Time Warner will meet with the cities’ consultant, attorney Anita Gallucci of Madison, to resolve the discrepancies.

The audit was conducted by Virchow, Krause & Co. of Madison at the cities’ request. An audit of 2002 records had found Time Warner underreported revenues in four categories that resulted in underpayments to the cities.

Only the two categories with the greatest potential for underpayments were examined in the most recent audit. They involved revenues from advertising, home shopping networks and franchise fees charged to subscribers, all of which were excluded from the franchise fee calculations paid to the cities.

Godlewski said the findings will become part of the negotiations for new franchise agreements with Time Warner.

“We will have to evaluate whether their position has some merit,” he said. “Our position is they owe us this money.”

Godlewski said the debt could be settled through cash payments to the cities or by a commitment from Time Warner to improve its cable system to the benefit of subscribers.

Appleton, Neenah and Menasha all are seeking new 15-year franchise agreements with Time Warner. Their existing agreements expire at the end of the year.

Franchise agreements give cable TV companies access to public rights of way to serve local customers in exchange for money and services.

The cities, in a Jan. 21 proposal to Time Warner, are seeking payments of 5 percent of gross revenues, the maximum allowed by federal law.

They also are seeking an expansion of the public, education and government (PEG) access channel and grants to purchase equipment needed to televise Common Council meetings.

Godlewski said greater PEG access programming would benefit Time Warner as much as the communities.

“It increases the sale of cable services,” he said. “People love to see local events televised.”

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