Cheektowaga recently came into a tidy windfall from Time Warner Cable – about $420,000.
Town officials might not have even known about the money the town was owed if – like many other Erie County municipalities – Cheektowaga had been forced to hire an auditor on a flat-fee basis, instead of on commission.
Why would that matter?
If there’s a flat fee, it’s a gamble for the town. The cost can be as much as $15,000, according to an outside auditor, and they might not find anything. That often discourages towns from pursuing an audit.
But Cheektowaga’s contract with the cable company allowed the town to pay an auditor a percentage of what the town is owed.
Last fall, the Cheektowaga Town Board hired Troy & Banks to go over Time Warner’s books from the period covering Dec. 31, 2009, to Dec. 31, 2014, and found the cable company had shorted the town by about $420,000 in franchise fees that were mistakenly diverted to neighboring municipalities.
At its first meeting of 2016, the Town Board unanimously agreed to accept a $420,956 settlement from Time Warner.
Not every town or village for which Time Warner collects franchise fees is contractually in a position to do what Cheektowaga did, said Troy & Banks president Thomas Ranallo.
“If you’re not an astute municipality, they sneak in their franchise agreement a clause that precludes municipalities from hiring a performance-based auditor,” Ranallo said.
Amherst has a dispute with the cable company over franchise fees that Time Warner says it overpaid to the town. As a result of the terms of its agreement with Time Warner, Supervisor Barry A. Weinstein said the town is limited in its recourse.
“We have a contract with Time Warner which does not allow us to do an audit on a contingency basis, and that is what held us back from investigating,” Weinstein said.
According to Ranallo, there are many local municipalities that either are or have been in a similar predicament because their cable franchise agreements explicitly disallow third-party audits of Time Warner’s books that are done on a contingency basis. Such towns, if they want to challenge Time Warner, are forced, by contract, to hire an auditor at a flat fee of between $10,000 to $15,000, Ranallo said.
“Most municipalities won’t come up with the fee to do the audit because they don’t know where to find the money (in their budgets),” he added.
Some also may be discouraged from expending the funds if there is no guarantee that an audit will yield a settlement. Weinstein said Time Warner, in a recent letter to the town, requested a refund for an alleged overpayment of between $1,000 and $2,000 in franchise fees the cable company said it paid to Amherst that should have gone to West Seneca.
“The West Seneca letter is what jolted us on this,” Weinstein said. “We can’t just give money away back to Time Warner Cable without making sure that we’re being treated fairly.”
He said the town may end up hiring an auditor on a flat-fee basis, though it has previously had audits of its various other utilities done on a contingency basis.
Cheektowaga Councilman James P. Rogowski, who also is chairman of the Town Board’s cable utilities committee, said Cheektowaga has scrupulously avoided having terms in its contracts with various utilities that restrict the town to flat-fee audits.
“We have the right to audit their books with third-party (auditors) at no cost to the taxpayer … Troy & Banks does it for free, but if they find money they get a percentage of what they find,” Rogowski said.
“That was something that was negotiated before I even got on the Town Board,” added Rogowski, who has been on the Cheektowaga Town Board for 10 years.
Troy & Banks, which specializes in auditing utilities, has performed cable franchise audits for North Tonawanda, Amherst, Lancaster, Niagara Falls, Grand Island, the Town of Tonawanda, West Seneca, Orchard Park, the Town of Niagara and Buffalo.
Ranallo said some municipalities are unaware of the restrictions against performance-based audits that are contained within their agreements with Time Warner.
“These agreements are voluminous,” he said. “Any municipality should carefully review their franchise agreement. Personally, they should not be told that they cannot use a performance-based auditor. They’re just taking away the ability for the municipality to use a guy like me on a performance basis, because we really go after everything.
“Performance-based auditors are much more aggressive, because if we don’t find anything – we could work for days and weeks and come up with zero – to take away that option for a municipality, I don’t think is fair,” Ranallo added.
Repeated attempts to reach Time Warner on Monday and Tuesday were unsuccessful.