A planned 17.5 percent rate increase for Click cable customers has been put on hold until the city can have a debate about what to do with the utility.
Bosses for the city-owned utility presented the case for the increase during a Wednesday meeting of a City Council subcommittee. The increase had already been unanimously approved by the Tacoma Public Utilities Board.
But the City Council members at Wednesday’s meeting said the council needs to have a robust discussion about the future of Click before approving a rate increase. At least two companies have told the city they would like to take over the cable system.
Tenzin Gyaltsen, the general manager of Click, said if the council does not pass the rate increase, the system’s deficit will increase from $19 million to $21 million in the current biennium. Future rate increases might have to be steeper if the council delays, said incoming Tacoma Power Superintendent Chris Robinson.
Last year, utility leaders proposed a 10 percent yearly rate increase for 2015 and 2016.
But Click bosses have said they didn’t anticipate a sharp increase in fees the utility pays to television and cable stations. The contracts were signed at the end of last year.
Records obtained by The News Tribune show the price demanded by Seattle broadcast stations nearly doubled from 2014 to 2015 and will only rise from there.
Click also is losing subscribers faster than the industry as a whole, Gyaltsen said at the meeting. Projections show that Click could have 18,854 cable customers by the end of this year. In 2014, Click had 20,001 customers, Gyaltsen said. Click would need 44,000 customers to break even, he said.
TPU officials had hoped to make the rate increase effective July 1. The utility board approved the rate increase unanimously earlier this month.
The pitch fell flat, however.
“I’m not going to think about a 17.5 percent rate increase,” said Mayor Marilyn Strickland. “I would like to see us wait and decide what to do with Click in the long run.”
The process could take a couple of months, she said.
Last month, Wave of Kirkland proposed leasing Click for 40 years, with a 10-year extension. It would pay $2 million per year to the utility and make a minimum of $1.5 million in annual infrastructure improvements to the network.
Tacoma-based Rainier Connect also pitched a deal. In addition to what Wave proposed, Rainier Connect said it would donate $500,000 per year to a program with Tacoma Public Schools that connect low-income families to the Internet.
After the meeting Wednesday, Click officials would not say whether other companies have expressed an interest in operating Click.
Deciding a rate increase while weighing a 40-year lease to a private company made other council members uneasy.
“It’s not unusual to put a hold on making large decisions like this while we are evaluating (other offers),” Councilman Marty Campbell said. “Clearly Wave evaluated this before the price increase was offered and they said it was valuable to them before the rate increase.”
Councilman Robert Thoms asked Gyaltsen whether Wave or other companies who want to lease the utility had built the 17.5 percent rate increase into their model.
“I anticipate they have looked at our financials and budgeted for that,” Gyaltsen said.
What happens with Click boils down to philosophy, Strickland said. Does the city want Click to pay for itself, or are power customers OK with sharing some of the costs of providing cable and Internet service in Tacoma and beyond? Click bosses have said power customers are subsidizing Click to the tune of $9 million per year.
Tacoma Public Utilities Director Bill Gaines said last week that the utility plans to survey Tacoma Power customers and have the results ready for a May study session with the City Council.