(Editor’s note: Today Newsmakers presents a special report by co-founder Hap Freund, detailing how the Board of Supervisors cooked up a backroom deal with Cox Communications to seize control of a $1 million fund legally earmarked to finance operations of TV Santa Barbara.
Hap, the first Executive Director of TVSB and a lawyer by training, goes deep in the weeds to disclose the details of a money grab that could cripple the only local non-profit dedicated to giving ordinary citizens public access and a voice via the airwaves. A court hearing is set for March 2 on the matter.)
Who doesn’t love a great magic trick- especially one where the magician makes something disappear?
Well here’s one I don’t like: The County of Santa Barbara and Cox Communication are collaborating in an attempt to take all the money in a $1 million endowment created to support the long-term needs of our public and educational access TV station. Money is disappearing from an account meant to benefit a local nonprofit and reappearing for new projects designed to benefit the County and Cox.
Is this a magic trick or just craven self-dealing?
Once upon a time… Back in 2001, the County negotiated a cable franchise agreement with Cox. Franchise agreements give cable companies the right to lay fiber along public streets. In reality, cable franchises are de facto monopolies.
It’s an expensive proposition, and once a cable company is established in a community, others rarely compete directly.
Key point: The federal cable law determined that as part of the right to use public property to make money, cable companies had to give back channels and provide a revenue stream for public, educational and governmental TV channels.
As part of the local franchise agreement with the County, Cox made a $1 million charitable gift to Santa Barbara County to benefit a new non-profit public and educational access TV corporation.
The Board of Supervisors formed a separate non-profit corporation, with themselves as trustees, to accept and manage the funds.This gift was created “to establish a capital endowment for public and educational (‘PE’) access equipment and facilities.”
The franchise agreement, signed by the County and Cox, specified that the donation was “to provide for the long-term support of PE access channels within the County and the cities of Santa Barbara, Goleta and Carpinteria.”The interest was for the long-term capital needs of the public and educational access channels.
Then everything changed… A change in cable franchising laws led to the expiration of the local franchise agreement between Cox and the County. The County then allowed its agreement with TVSB to serve as the Access Center to also expire and stopped payments to TVSB in 2017.
However, TVSB, the community and educational access station, continues to provide equipment, facilities, and programming to the entire South Coast region- to citizens and many non-profits, and is the only organization providing that service.
The City of Santa Barbara and the City of Carpinteria both contribute some of their cable-related income to TVSB; the County now provides nothing.
Instead, Cox and the County decided to grab the million-dollar endowment for themselves.
They did not involve the intended beneficiary of the endowment, TVSB, in a proposed dissolution and redistribution of the funds. Nor did they notify TVSB of their intentions until the County was required to file a petition with the probate court. That legal action requests the court's approval to dissolve the nonprofit that manages the money and asks the court to approve the redistribution of the $1 million.
Cox and the County now are asking the court to let them re-allocate the million dollars for government and emergency communications projects, making it clear that Cox will be contracted to do some of the work and that the projects will be co-branded with Cox. They propose that the funds be used as follows:
$500,000 to the County related to government and emergency communications, which includes some ‘co-branding’ with Cox;
$250,000 to the County to construct a fiber link to County facilities at La Cumbre Peak, with the work to be contracted out to Cox:
$250,000 to Cox to build a fiber-optic network to 400 homes in underserved communities adjacent to CA-154.
These may be worthwhile and necessary projects, but then why aren’t they included in the County’s current $1.14 billion budget?
And isn’t it a conflict for the Board of Supervisors to use the funds they were entrusted to manage for the long term benefit of a non-profit for their own pet projects?
All rise…The petition, now in front of Superior Court Judge Colleen Sterne, not only requests that the trust be dissolved, but asks the court to permit the endowment principal to be used for projects that specifically benefit Cox and the County.
Key point: These projects have no relation to the original intent or purpose of the charitable gift.
Because the backroom deal to terminate the trust requires court approval, TVSB was legally informed and felt compelled to intervene.
Court-mandated mediation resulted in a possible settlement agreement, but the Board of Supervisors failed to approve this proposed resolution.
The matter is now set for trial on March 2, 2020.
Point of personal privilege… As a former lawyer (back when dinosaurs roamed the earth) and having served as the first Executive Director of the access TV station when it was formed in 2003, I have strong opinions on this.
I also acknowledge that the legal issues and the documents are ambiguous, vague and subject to different interpretations, which is why it’s apparently going to be resolved in court.
To my knowledge, none of the documents (the franchise agreement, correspondence with Cox officials, etc.) specified an end date for the endowment.
Nothing said that the endowment terminated upon any condition related to the franchise term. There was ample opportunity for some specificity, but none was written by the County or Cox. My thought then, as now, is that it was intentionally vague.
The County and Cox argue that since there is no local franchise agreement and because the County has no existing contract with TVSB, they can terminate the endowment and use it for any purposes they want.
I see it differently for two main reasons:
1) The specific language of the franchise agreement states that Cox“shall make a capital grant to the County for the use of the Access Center in the amount of One Million Dollars ($1,000,000) to establish a capital endowment for public and educational (“PE”) access equipment and facilities (“PE Capital Endowment”). The interest income derived from the investment of the PE Capital Endowment may be used solely for PE capital purposes consistent with Section 622(g)(2)(c) of the Cable Act and may not be used for any purpose contrary to law. The intent of the PE Capital Endowment is to provide for the long-term capital support of PE access channels within the County and cities of Santa Barbara, Goleta and Carpinteria. The County of Santa Barbara will manage the PE Capital Endowment.”
Looking at this last phrase, which I underlined, I would argue that the County, in their capacity as the board of the nonprofit, was created to manage the $1 million not just because of the County’s franchise, but because it was accepting responsibility (fiduciary duty) to provide for long-term capital support of the Public and Educational channels within Santa Barbara, Goleta and Carpinteria.
Their responsibility was to manage the money and serve as a fiduciary for all of those utilizing access television within the South Coast area that these channels served and still serve. So even if the County franchise with Cox or contract with TVSB no longer exists, the fiduciary responsibility of the Board of Supervisors acting as the nonprofit was to make this money serve the access center’s capital needs for all residents in the Santa Barbara, Goleta and Carpinteria region.
Although the County no longer has a franchise or contract with TVSB, their responsibility is much broader than that.
2) A second major reason I think the County’s action is short-sighted and wrong is that their proposed uses of the $1 million are not aligned with the purposes for which the endowment was created. Assuming that the capital endowment is treated as a charitable trust, it should conform to requirements expected of other trusts.
The funds should be used to further its eleemosynary (a fancy lawyer word for ‘charitable’) purposes. I don’t think that the proposed use of the money conforms to the intent of the endowment or qualifies as charitable, especially when the court petition even mentions paying Cox to perform the construction and ‘co-branding’ the project.
Fake facts. Additionally, when I read the County’s initial petition to the Court, I recognized assertions that I would characterize as gross exaggerations.
The County blatantly misrepresents several key facts.
They state that funding for Public, Educational and Governmental (PEG) channels is provided by the State franchise agreement but neglect to mention that the County does not distribute any of that money to TVSB.
Contrary to another County allegation, technological changes have NOT reduced the importance of public access channels; by providing a digital on-demand platform, the access station content is arguably more accessible and relevant than ever as a media distribution vehicle.
TVSB continues to exist and plays an important part in providing support to local non-profit organizations that these organizaions could not otherwise afford.
The County’s original petition to the Court disingenuously maintains that the County’s own government TV station provides local public and educational content.
CSBTV-20, the County’s government station, does import programs from NASA, Smithsonian, National Geographic, PBS, and LACMA, among others, but that is not comparable to locally produced content, nor is it germane to our community.
Courts have the power to modify charitable trusts to achieve the original purposes; they have broad discretion to achieve a just result and to help achieve the underlying intent of the trust.
Ultimately, it does seem that this will be decided in court.
However I think it would have been better for all the parties had the County included TVSB, the intended beneficiary of the trust, in discussions at the outset, and approved a settlement beneficial to all the parties, rather than proceed on what could be seen as a self-serving and perhaps illegal path.
Please contact your supervisor and tell them to Stop the Public Access Fund Rip-off. The future of public access to the airwaves in Santa Barbara is at stake.
-- Hap Freund
Images: Woody Guthrie lyric from "Pretty Boy Floyd"; Cox company logo; TV Santa Barbara logo; Not a member of the Board of Supervisors; Consumers beware; Not a member of the Board of Supervisors; Hap as public access station executive director 2009 (Noozhawk).