The firm awarded the District's cable television franchise handed over its first payment of $62,500 to the city yesterday, but company officials are still uncertain about how to raise the $85 million needed to build the system.
The payment was due April 30. District Cablevision Inc. President Robert L. Johnson, who signed the check to the city, said it was three days overdue because he had been out of town.
Although Johnson said the late payment is not a reflection on his company's financial status, he also said his firm may have to change its original plan for raising money to build the system due to questions raised by the financial community.
The firm has promised to have some homes in each of the city's eight wards wired for cable by the spring of 1986 and has been given a year to secure financing. District Cablevision shareholders pledged a total of $2.2 million before the franchise was awarded and Johnson would not say yesterday how much of that money has been paid.
District Cablevision plans to present details of its financial plans to potential investors in June, but Johnson said the financial community has concerns about the firm's management agreement.
In an effort to protect the interests of local and minority investors, Johnson said that District Cablevision's board of directors required three of its members -- Johnson, Herbert P. Wilkins and Tyrone Brown -- to form a management committee to oversee day-to-day management of the system. None of the three men has any experience in operating a cable system in a major metropolitan area.
"In the cable industry, this is revolutionary," Johnson said. "It means that the system's manager can't fire the chief financial officer or chief engineer and we have control over leasing channels and whether the programming can be changed. The investment community wants to know who is running the system."
The three-member committee is one reason, Johnson said, that District Cablevision negotiated a management agreement with Tele-Communications Inc. instead of United Cable Television Corp.
Both United and Tele-Communications are Denver-based companies that have substantial investments in District Cablevision. Management agreements with either of the large firms would call for the firms to run the system, but they would have to report to the DCI committee.
Despite the existence of a management agreement with Tele-Communications, United has the right to enter a similar agreement if it exercises an option to purchase up to 20 percent of District Cablevision's outstanding shares.
"When they tell me what the financing situation is going to be, we will decide" whether to use the option, said Fred Vierra, president of United.
The District government required District Cablevision to present a management agreement by April 1. Now, however, Johnson said his company wants the best agreement it can get even if it means switching to another company.
To build the cable system, District Cablevision officials are seeking to raise $55 million in bank financing and $30 million through limited partnerships, a method by which investors would receive tax benefits.
Johnson said yesterday that some financial consultants have warned that the limited partnership approach is tenuous because of proposed changes in federal tax laws that could substantially limit the tax benefits received from a cable investment.
"There is an overhanging degree of uncertainty because people don't know what the tax laws are going to look like," said David Croll, a partner of T.A. Associates, an investment capital firm.
Croll said cable companies that are economically viable may be successful in obtaining financing from the more conventional sources, such as investment capital firms and other financial institutions.
Johnson said that at some point the company might have to return to the city for further talks.
"If the market tells us the financial plan is weak, the city and DCI would have to do some soul-searching as to how we could make it strong," Johnson said.