School Cell Towers: Why RFP's Don't Work
Steel in the Air, Inc. regularly assists schools with cell tower leases on school district property. We represent schools and universities who see the upside of income that doesn't require a budget meeting or tax increases to procure. With the downturn in property tax valuations and increasing budgetary restraints, more and more schools are evaluating school cell towers as a source of income.
Recently, we went and spoke to a particular school board in south Florida as a member of the public in response to their consideration of the possibility of leasing school district property to cellular providers. Our particular objection to their proposed plan was that they intended to simply issue an Request for Proposals "RFP" in hopes that multiple parties would bid on the exclusive right to place towers on school district property. We objected to this option because we felt that it limits the value that the District procures from cell tower leases on school property. The District was looking to minimize the impact on its day to day operations by going with a single source vendor who would build, own, and operate the towers. They would evaluate District property and assist the District in marketing the property to wireless carriers. If they found interest, they would develop and pay for the cell tower on school land and manage it. In return, they split the revenue with the school district 50/50.
On the surface, this may seem like a good option. There are surely benefits to this type of plan.
- The District and the tower company's goals are typically aligned in that the tower company needs tenants if it intends to be profitable.
- The District gets to offload the negotiation of lease agreements to a third party vendor thereby decreasing staff time on the projects. (As anyone who regular negotiates leases on school district property knows- these are time consuming leases).
- The District gets a sizable amount of income- especially in more urban areas or in areas where
However, there are some potential issues with this type of plan for school cell towers.
- 50% of the revenue can be substantially less than the District would have received had it just negotiated the lease directly with the wireless carrier.
- In some cases, it is unlikely that more than one wireless carrier will use a particular location. As the tower company only gets 50% that may not be enough to justify building the tower. As such, the District forgoes whatever revenue it could have negotiated directly for the lease.
- The District can give up some of its control over the placement of towers on its own property.
- Some districts have experienced significant public opposition to cell towers on school property on the basis of the sometimes irrational concerns about radio frequency radiation.
- Despite some common goals, the tower company and the District will inevitably have different goals because the tower company exists solely to make money off the operation of the towers.
The biggest issue we had with this particular District is that they assumed that an RFP would effectively bring in bidders. However, what they don't know is that the way they intend to craft the RFP will limit the number of bidders. The large tower companies don't do 50% revenue sharing. There are some tower companies that would be interested in building cell towers at schools, but they aren't likely to see the RFP. The wireless carriers won't bid because they would simply prefer to let a tower company deal with the burden and cost. The District is unlikely to know how to find small tower companies who aren't likely to read or follow school district RFPs. So the District constituents get the short end of the stick because the RFP ends up being bid on by one or two companies. To make matters worse, these bidders almost always know that RFP's for school sites will only be bid on by one or two companies and therefore aren't forced to bid competitively.
Our suggestion is that school districts retain outside experts to assist them in determining the most profitable way of leasing space for school cell towers. We can review the District's goals and help guide you on the method that will maximize your revenue while minimizing the headache to the district. It might be that one vendor is suitable or perhaps multiple vendors. Alternatively, perhaps the District could consider building and owning the towers themselves. Please contact us if you are school district looking to increase its revenue while minimizing the administrative burden from dealing with the wireless providers. We can provide non-biased advice on how best to accomplish BOTH of these goals. Please also see our webpage on municipalities building their own towers.
Labels: cell towers, municipality, school cell tower
Water Tower Cell Site Lease Buyouts
We recently provided a consultation for a municipality that was pondering the sale of its cell tower leases on its water towers and electric transmission poles to a lease buyout firm. Like many municipalities, this particular city was looking at the lease buyout as a means of increasing available funds without raising taxes.
The lease buyout firm had offered approximately 9 times the annual rental income for the rights to these leases for 30 years. We advised them on what the proper amount of the lease buyout should be were they to go forward with the lease buyout
firm's offer. We also advised them that if their goal was to maximize the lump sum, that they were better off considering the sale of the "wireless asset" entirely. Since a municipality would not have an interest in selling the water tower- we suggested that they could sell the current wireless leases and the potential for future leases.
By offering the sale of the "wireless asset" (like a cell tower), the municipality could capitalize on the robust tower market and open the bidding opportunity up to 10-15 more bidders. (There are only a few lease buyout firms). By doing so, the municipality would receive higher offers- possibly ranging to as much as 15 times their annual rent.
The transaction would be structured as the purchase of a fixed term easement- say for 30 years. The municipality would sell the current and future rights to lease the water tower to wireless carriers for that period of time. In return they would receive a higher lump sum today. The easement would mirror the current leases. The purchaser would have the opportunity to market and collect income from any wireless tenant using the water tower. Given that some of the lease buyout firms request 50% of the additional revenue as part of the purchase of the site, the municipality was in essence selling the additional 50% for almost a 60% increase in the purchase price.
Clearly, the municipality gives up some rights with the sale of the easement. However, these rights should mirror those given up in the existing leases. If the leases prohibit unauthorized access to the water tower or set established times when the sites can be accessed, those can be in the easement as well.
This is not the ideal solution for all municipalities- but if the goal is to maximize the lump sum from the sale of the existing leases on the water tower, than it may be appropriate. If you are a municipality and are considering the sale of your water tower leases, please contact us for a
free valuation of your water tower cell site leases.Labels: cell phone tower lease, lease buyouts, municipality, water tower
