Audit of the Telecommunications Fund – Special Revenue Fund #342

Every month, when Angelenos pay their cable bills, no doubt most don’t notice, deep in their bills’ fine print, charges for two items that typically add 6% to the cable portion of their bills–a “PEG Capital Fee” and a “Franchise Fee.” These fees are regulated by the State but paid to the City of Los Angeles. Together, the two fees brought more than $37 million into the City’s coffers last year.

The PEG Fee, by law, has to be used by the City for capital costs relating to Public, Educational and Government programming. The Franchise Fee is charged by the City to cable operators for their cabling under our streets. 60% of the Franchise Fee goes directly into the City’s General Fund; the rest of the monies are deposited into a Special Revenue Fund, known as the Telecommunications Fund (No. 342). A portion of these moneys gets further transferred to the General Fund each year, another portion is spent on Channel 35 and other City programming, and a growing balance has largely just been sitting there.

Today my office is releasing an audit of the Telecommunications Fund–one that we undertook after noting that it had accumulated a high unspent balance-$35 million as of May 31, 2014. Our goal was to determine if there were valid reasons for the accumulation of cash in the fund–and whether Angelenos’ with cable TV are getting a quality return on the fees they pay.