Here’s Why Los Angeles Is Suing Time Warner

The city of Los Angeles is suing Time Warner Cable Inc. (NYSE:TWC) over unpaid franchise fees, the Los Angeles Times reported Saturday. The city claims that Time Warner owes more than $9.7 million in payments, even as the company took in approximately $500 million from the city’s customers each year. The money, city officials told the publication, could have helped the it ease its budget problems during the financial crisis.

The $9.7 million the city is seeking is comprised of four years’ worth of unpaid fees, including approximately $2.5 million in franchise fees, as well as public, education, and governmental channel fees from 2008 and 2009, in addition to approximately $7.2 million from between 2010 and 2011.

The Los Angeles Times notes that the lawsuit comes just a few weeks after the company announced it would raise prices yet again by an average of about 6 percent per month to homes that aren’t covered by a promotional package. Those higher bills are expected to affect about 30 percent of the approximately 1.5 million subscribers in the Los Angeles area.

The action against Time Warner was leveled just after a horde of recent reports regarding the company’s potential merger with Comcast (NASDAQ:CMCSA) in what would become the largest such merger since U.S. regulators banned a similar agreement between rivals AT&T and T-Mobile. If the agreement between Time Warner and Comcast proves successful, it promises to make customers with already bad experiences with services even worse.

“Time Warner owes L.A.’s taxpayers millions of dollars for the privilege of having its franchise,” city attorney Michael Feuer said during a news conference at Los Angeles’s city hall, per the Times. “This is a day where we are standing up and saying enough is enough.”

In the city’s lawsuit against the cable provider, officials claim that Time Warner Cable has “blatantly refused to live up to its obligations to the city.” Feuer added that the city has been attempting to negotiate with Time Warner for years but that “the negotiations haven’t been fruitful” he said. “Time Warner pocketed the money from its subscribers and then did not turn it over to the city of Los Angeles.”

Los Angeles charges cable companies franchise fees to the tune of 5 percent of the company’s revenues in lieu of charging rent for the public right-of-way to install and maintain the company’s wires and cable boxes.

Time Warner Cable has responded to the allegations by issuing a statement saying, ”as a major job creator, tax contributor and service provider in the city of Los Angeles, Time Warner Cable is an active and responsible corporate citizen. … We are disappointed the city has chosen to bring this action, which we strongly believe is without merit.”

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