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Item No. 16 Memorandum TO: Mayor, Mayor Pro -Tem & City Council Robert Vine, Interim City Manager FROM: Jon McFadden, Public Information Officer SUBJECT: CONSIDER AND PROVIDE DIRECTION ON ESTABLISHING A PEG CHANNEL ON OPTIMUM CABLE DATE: September 3, 2024 BACKGROUND: Before 2005, Texas cities could issue franchise agreements to wire -based cable television (CATV) systems. In 2005, Senate Bill 5 created Chapter 66 of the Texas Utilities Code (T.U.C.), providing a State Issued Cable and Video Franchise Agreement (SICFA) and ending local CATV franchises. In addition to CATV franchise information and franchise fees that are paid to municipalities, Ch. 66 addresses Public, Educational, and Government (PEG) channels provided on a CATV system. Municipal PEG channels are common nationwide and typically offer televised meetings, videos about services, emergency information and bulletin board content. After Ch. 66 took effect and existing local franchise agreements expired, Texas cities could choose to accept a 1% PEG fee or the PEG fee, if any, included in the expired local franchise agreement. Paris receives the 1% PEG fee. Use of PEG revenue is governed by 47 U.S. Code Sections 531 and 541 47 U.S. Code limits PEG fund expenditures to capital costs for the operation of a PEG channel. Operation costs, such as labor and expendable supplies, do not qualify. IRS benchmarks for capital expenditures describe expenditures for the acquisition, permanent improvement, or betterment of property, substantially extending its useful life beyond one year. Information gathered from some Texas cities operating PEG channels provides a general rule of thumb that PEG funds be used for any equipment or facilities with an expected life span of at least one year that are necessary for operating or producing content for a PEG channel. Chapter 66 requires that, upon request of a municipality, SICFA holders must provide up to 2 PEG channels to cities under 50,000 population. The city must utilize the channel for at least 8 hours daily, or the cable system can reclaim the channel for other programming. Setting a