§ 4.5-18. Cost accounting and cost allocation requirements

(a) Applicability. The requirements of this section are applicable for purposes of rate adjustments on account of external costs and for cost-of-service showings.

(b) Generally accepted accounting principles. Cable operators shall maintain their accounts in accordance with generally accepted accounting principles, except as otherwise directed by the city.

(c) Accounts required. Cable operators shall maintain accounts in a manner that will enable identification of appropriate costs and application of the city's cost assignment and allocation procedures, to cost categories necessary for rate adjustments due to changes in external costs and for cost-of-service showings. Such categories shall be sufficiently detailed and supported to permit verification and audit against the company's accounting records.

(d) Accounting level. Except to the extent indicated below, cable operators shall aggregate expenses and revenues at either the franchise, system, regional, or company level in a manner consistent with practices of the operator as of April 3, 1992. However, in all events, cable operators shall identify at the franchise level their costs of franchise requirements, franchise fees, local taxes, and local programming.

(e) Cost allocation requirements.

(1) For purposes of establishing expenses at the franchise level, cable operators shall allocate expenses and revenues aggregated at higher levels to the franchise level based on the ratio of the total number of subscribers served at the franchise level to the total number of subscribers served at the higher level.

(2) Except to the extent indicated below, all categories of costs allocated to, or identified at, the franchise level shall be allocated to the basic service tier based on the ratio of channels in the basic tier to the total number of channels offered in the franchise area, including nonregulated and leased commercial access channels. These costs shall be allocated to each tier of cable programming services based on the ratio of channels in that tier to the total number of channels offered in the franchise area.

(3) Costs of programming and retransmission consent fees, however, shall be allocated only to the tier on which the programming or broadcast signal at issue is offered.

(4) Costs of franchise fees shall be allocated among equipment and installations, program service tiers and subscribers in a manner that is most consistent with the methodology of assessment of franchise fees by the city.

(5) Costs of public, educational, and governmental access channels carried on the basic tier shall be directly assigned to the basic tier where possible.

(f) Common costs. Expenses which cannot be assigned to any single expense or service category shall be described as common costs. Common costs shall be allocated to expense categories as follows:

(1) Wherever possible, common costs are to be allocated to service cost categories based on direct analysis of the origin of the costs themselves.

(2) When direct analysis is not possible, common costs shall, if possible, be allocated to service cost categories based on an indirect, cost-causative linkage to other costs directly assigned or allocated to the service cost category.

(3) When neither direct nor indirect measures of cost allocation can be found, common costs shall be allocated to each service cost category based on the ratio of all costs directly assigned and attributed to a service cost category over total costs directly assignable and attributable.

(g) Unrelated expenses and revenues. Cable operators shall exclude from cost categories used to develop rates for the provision of basic service tier and equipment, any direct or indirect expenses and revenues not related to the provision of such services. Common costs of providing basic service tier and equipment, and unrelated activities shall be allocated between them in accordance with subsection (f) of this section.

(h) Parttime channels. In situations where a single channel is divided on a parttime basis and is used to deliver service associated with different tiers or with pay-per-channel or pay-per-view service, a reasonable and documented allocation of that channel between services shall be required along with the associated revenues and costs.

(Ord. No. 279, § 8, 11-1-93)