By Adam Pagnucco.
Part One described a bill by Council Member Kate Stewart that would impose substantial governance requirements on the county’s main community media organization, Montgomery Community Media (MCM). Now let’s look at the decades-long funding relationship between MCM, the county government and the public.
MCM has an unusual funding relationship with the county. It does not receive tax dollars. Rather, it receives a portion of the fees that the county charges to cable companies. 47 U.S. Code § 542 of federal law allows governmental entities to charge franchise fees on cable operators of up to 5 percent of their gross revenues. The cable operators are allowed to pass these fees on to customers.
According to a 2023 report by the county’s Office of Legislative Oversight (OLO), most jurisdictions in our region direct these fees into their general funds. Montgomery County instead directs them into a Cable Television Communication Plan Special Revenue Fund, commonly called the Cable Fund. The fund is administered in accordance with a Cable Television Communications Plan which distributes money to several entities, including MCM; municipalities who allow cable companies to access their right of way; public, education and government (PEG) TV channels, including channels run by MCPS and Montgomery College; county government communication operations; and a number of other uses. You can see the newest version of the Cable Plan along with funding allocations, both present and projected, on pdf page 10 of this staff memo.
I worked at the county council during the latter half of the Great Recession, a time when the county was breaking collective bargaining agreements, doubling the energy tax, furloughing employees, cutting MCPS and doing everything in its power to preserve its bond rating. Some in the council building were interested in directing more cable fund money into the general fund to ease our financial problems. Recipients of the cable money – and not just MCM – pushed back hard, claiming they were legally obligated to receive it.
That produced a landmark legal memo, which can be viewed on pdf page 40 (circle 33) of this document laying out what the county could and could not do with that money. The cable fee money had three important restrictions on its use: money arising from municipal rights of way must be sent to participating municipalities; any money collected in excess of the 5 percent charge allowed by federal law must be used for PEG capital expenditures; and any contractual provisions negotiated with cable companies in their franchise agreements must be respected. Aside from those provisions, the memo states:
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Under federal and state law, there are no direct restrictions placed on local franchising authorities with respect to the use of franchise fee payments received from cable operators except that the payments may not exceed five percent of each cable operator’s annual gross revenues derived from the operation of its cable system within the franchised territory, 47 U.S.C. § 542(b). This is consistent with general law principles that right-of-way franchise fees are in the nature of rental payments for use of local government property and therefore are unrestricted general revenues to the local government.
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Let no one claim that this money “belongs” to any of the Cable Fund’s recipients. With the above exceptions, the council has broad appropriation authority over it. That’s important to remember as the county is running a big structural deficit and is now projected to impose substantial cuts on county agencies next year.
One more problem looms. The Cable Fund’s revenue has been plummeting for years. We will see what that means for both the county and MCM next.