Spokane seeks fees in cable franchise breach

The owner of Canyon Bluffs apartments – a large complex along Thorpe Road just west of two railroad tunnels – hooked up a private cable television system without a Spokane city franchise, records show.

When the city of Spokane learned about the private cable system in 2006, it issued a tax bill to the owner of the property, Feature Realty of San Rafael, Calif.

Nearly two years later, the city remains embroiled in a legal fight, although a settlement is being negotiated.

On Monday, the City Council authorized its staff to complete the settlement in which the city would obtain more than $22,000 for unpaid franchise fees and interest and the apartment owner would either get a franchise or stop offering non-franchised cable television.

A lawyer for the apartment owner said his client was operating under an exemption for private cable systems found in both federal and state law, and was not trying to circumvent the city’s ability to franchise and tax cable television.

Apartment owner Jack Krystal has sought to maintain private control of the cable television utility within the Canyon Bluffs complex, and entered contracts with Davis Communications, of Cheney, to provide television signals and Columbia Fiber, of Spokane, to carry the signals to the apartment complex.

Tenants would then purchase cable service from the apartment owner. He said Tuesday he is planning to install a head-end unit to receive satellite signals so he can continue to provide cable TV to tenants.

C. Blaine Morley, the Canyon Bluffs attorney, argued that because the cable system was operating on private property it was exempt from taxation. He pointed out that the city did not have a cable easement within the complex property.

In 2006, the city treasurer sent Canyon Bluffs a $34,000 tax bill. Krystal and Feature Realty appealed the assessment to the city’s hearing examiner, who dismissed the appeal because Feature had not paid the tax bill.

Feature Realty then sued in Spokane County Superior Court. The city responded by seeking and winning a review in U.S. District Court. The federal judge sent the tax issue back to Superior Court, where the city won summary judgment against Feature over the unpaid taxes.

Morley said the cost of the litigation for his client was too high to continue fighting with the city, so they have agreed to settle. The settlement is expected to give Feature Realty until November to resolve the problem and to comply with city franchising or to stop offering private cable.

The cable franchise dispute is not the first dust-up between the city and developers of the project. In 1998, the developer of an initial proposal for the sprawling property won a case before the state Supreme Court arguing the city had violated his constitutional rights by denying him permits to build what was then called Mission Springs.

That case stemmed from a City Council vote in 1995 – against the advice of its own attorney – to block initial permits for the 790-unit Mission Springs project. Council members and residents living near the site were concerned about the impact of traffic on the two narrow tunnels on Thorpe Road.

The case was finally settled in 2005 when the council agreed to grant the developer up to $250,000 worth of development permits free of charge for construction of the long-delayed project.