Money Maker or Tower of Terror? The Benefits (and Burdens) of Cellular Tower Leases

Transcription

1 Money Maker or Tower of Terror? The Benefits (and Burdens) of Cellular Tower Leases Presented by Peter Martin Knutson, Flynn & Deans, P.A. Why Do School Districts Consider Tower Leases? Convert unused property into revenue generation for the school. Provides a fixed, steady stream of income for multiple years. Most cellular companies will have the financial wherewithal to pay the school district. Why Do Wireless Providers Like School Districts? Readily available property. Multiple locations in populated areas. Dealing with a single landlord for multiple sites. The potential ability of school districts to interact with local government and obtain approvals that private landowners cannot. In nearly all cases, school districts have structures which can be adapted for cellular tower use (e.g., stadiums or tall buildings). 1

2 PRE CONTRACT CONSIDERATIONS Authority to Contract General School Board Authority The board must have the general charge of the business of the district, the school houses, and of the interests of the schools thereof. The board's authority to govern, manage, and control the district; to carry out its duties and responsibilities; and to conduct the business of the district includes implied powers in addition to any specific powers granted by the legislature. Minn. Stat. 123B.02, subd. 1. Authority to Contract Lease for Non School Purposes The board may lease to any person, business, or organization real property that is not needed for school purposes, or part of the property that is not needed for school purposes if the board determines that leasing part of the property does not interfere with the educational programs taking place on the property. The board may charge and collect reasonable consideration for the lease and may determine the terms and conditions of the lease. Minn. Stat. 123B.51, subd. 4 2

3 Location of the Tower Ground vs. Rooftop The wireless provider will most likely recommend, based upon siting requirements, where it wants to place the tower to maximize its effective range. If placed on the ground, attention should be given to how the tower placement might impede school operations or otherwise affect land that the school district may need. Also remember that a ground tower may have guy wires and anchor points that span beyond the tower structure and occupy more space. If placed on a rooftop, attention must given to matters such as the condition of the roof, future plans for the building, and whether the building in question is currently bond financed. Minn. Stat. 123B.02 Members of the Public May Oppose the Placement of a Cell Tower Objections based upon aesthetics. Perceived Health Related Concerns Political Climate This is a good slide to use to add graphics or photos that could use a white background 3

4 What is the Value of the Contract? Do Some Due Diligence! Review cell tower contracts for nearby locations. Consider using a consultant. KEY CONTRACT PROVISIONS Lease vs. License Agreement School districts may be presented with a lease or a license agreement. As a general matter, wireless carriers prefer leases. Landowners (i.e. school districts) generally prefer the use of a license agreement. Why? Generally, a license agreement vests less rights in the licensee than a lease vests in the tenant, making it (at least in theory) faster and easier for the building owner to terminate the agreement and remove the occupant from the property. Leases generally grant exclusive possession of the designated space, subject to rights specifically reserved by the land owner. In contrast, a license is simply written permission to use the land. 4

5 Term (Length) of the Agreement Wireless providers typically want long term arrangements of 5 to 10 years in length, with auto renewals of similar time periods. Why? A long term contract ensures that the tower will be in the same place for an extended period of time and that the company will not incur siting, relocation and installation expenses for a number of years. A lengthy contract term locks in the rent costs for entirety of the term. Term (Length) of the Agreement Why would a school district want a shorter term? Decisions to sell or redevelop the property. The presence of a lease could be viewed as an encumbrance that could impede a sale. A shorter term gives the school district an opportunity to renegotiate rent, and address other issues of concern. Rent Escalator Clause Wireless providers may propose a fixed monthly fee, with no annual increase. Consider negotiating for annual increases. If percentage increases are used, it is advisable to develop a year byyear payment schedule to avoid confusion on the precise amount to be paid. 5

6 Access Rights Typically, tower access requires an easement from a public road to the tower location. The terms of the easement should be clearly specified, along with any applicable restrictions on hours of access or hours during which work may be performed. If the district is to undertake any maintenance obligations for any portion of the driveways utilized for access (e.g., snowplowing), those obligations should also be described. Access Rights If the tower is on a roof, the wireless provider likely will want two kinds of access: Ingress and Egress regarding parking lots and the school building. Around the clock access to its equipment. However, the school district should insist on appropriate advance notice, except in the case of an emergency. The school district may want a representative to accompany employees of the provider to assure that no other equipment is adversely impacted by any actions taken Subleasing The tower or antenna facilities, once constructed, may have the ability to house equipment from more than one cell service provider or from providers of different forms of technology (e.g., cellular, WAN, microwave, etc.). The lease agreement should clearly contemplate whether such additional services are permitted, and under what terms. For example, if the cell tower is constructed and maintained by the wireless provider(which is customary), is the provider permitted to install other services on the tower? Can the provider sublease space on its tower to other providers? Subleasing can be prohibited in the lease, or can be permitted only upon the approval of a mutually acceptable amendment to the lease (which allows the school district to hold out and evaluate if any subleasing actually occurs, and if so, at what additional cost). 6

7 Joint Use of the Tower The school district may need space on the tower for its own purposes. Two way radio communication with buses, placement of lighting, installation of weather equipment for science classes, etc., may be desired. The lease/license should clearly specify the amount of space allocated to the district and the elevation on the tower where it will be permitted, as well as the terms under which the school district can install, use, and maintain its equipment. Interference/Electronics Issues Due to FCC regulations governing bandwidth and frequency that are applicable to most communications equipment, unwanted interference between the cell tower and district communication equipment, or that of nearby property owners, should almost never be an issue. However, to guard against the potential for such claims, the lease/license agreement should require the tower to be operated without any such interference, and should include a requirement that the provider cease operation of the tower and implement any solutions required to prevent recurrence of a problem, should any interference be reported. Property Tax Issues While school districts are generally exempt from property tax for parcels utilized for school purposes, where property is diverted for non school purposes or used for revenue generation, concerns may arise whether the county assessor could deem the property to be taxable. Consequently, the lease should include a provision indicating that any property taxes coming due as a result of the lease are chargeable to the lessee as additional rent. 7

8 Environmental Concerns In addition to the standard environment and hazardous material provisions, a telecommunications lease should also contain a provision allowing the school district to terminate the lease if it can be reasonably shown that the equipment poses a health hazard. This will protect the school district in the event the impact of electrical and magnetic radiation fields upon the human body is shown to have adverse effects. Relocation Rights With respect to rooftop antennas, it is critical that the school district have the right to relocate the antenna, wires, cabling, or other equipment. It is impossible for the district to plan in advance for every potential use for a property, so flexibility is key. This provision raises important negotiating issues (e.g., paying for the cost of relocation; how much notice must be given; when the relocation will occur; and how the relocation will affect existing service). Alterations Issues concerning alterations generally arise in two situations: (1) alterations sought by the wireless carrier; and (2) alterations required by the school district. Leases will typically allow alterations to the site by the carrier. However, lease should clarify that the alterations cannot be implemented without the school district s consent, and that any damage to school district property caused by the alteration will be repaired at the carrier s sole expense. The school district should also reserve alteration rights. For instance, if the tower is located on a rooftop, the roof may need repair or replacement in the future. 8

9 End of Lease Issues At some point, the lease will likely end, and the school district will be left with an aged tower of questionable utility. Accordingly, it is wise to negotiate a provision into the lease requiring the removal of the tower and all related infrastructure. Because of the large concrete foundations required for standalone cell towers, the lease should specify a depth to which all obstructions shall be removed (e.g., all obstructions and components of the facility constructed on the site, including foundations, buildings, wiring, conduits and related objects, shall be removed to a depth of not less than 10 feet). By the use of such provisions, the tower can be removed, along with underground obstacles installed to facilitate the tower. Other Contract Terms of Concern Arbitration clauses. Forum selection clauses. Indemnification by the school district. Notice of termination provisions in autorenewed leases. Legal Review is Recommended Cell Tower Leases Can be Complex! Cell tower leases are written for the benefit of the wireless carrier. The contract can be many pages in length and have a very sophisticated structure. If unsure about the terms of the contract, consultation with legal counsel is strongly recommended! 9

10 QUESTIONS? PETER MARTIN KNUTSON, FLYNN & DEANS, P.A