Good and Bad for 2025

In recent years, our clients have experienced a number of requests for modifications to existing cell sites.   Both tower owners and rooftop owners are getting these requests from the wireless carriers to upgrade their cell sites.  Typically these upgrades are for 5G or other advanced wireless services where the carrier is adding antennas and new cabinets to an existing cell site.   An upgrade might consist of adding new 3 new antennas or adding larger antennas than are currently on site.  The carrier might need to install new cabinets or replace existing cabinets.  They might need to add new coaxial cable to connect the cabinets to the antennas.   We have found on a number of occasions that the carriers tend to view this work as “maintenance” to their cell site.  We suspect that at least in a few cases, they do this because they are trying to avoid pulling a building permit.   By avoiding pulling a building permit, they don’t have to take the time to get the permit which can take a month or more and they don’t have to pay building permit fees for the modification.

The problem is that in many jurisdictions, the tower owner or building owner is the one responsible for pulling building permits.  Failure to pull a building permit can yield a fine or penalty which the landowner is responsible for paying.   It can also result in a stop work order that prevents any work from being done on the tower or the building regardless of whether that work is related to the cell site.  In one situation where a client of ours owns a building, the carrier represented that they did not need a permit even though they were using a large crane to lift equipment onto the rooftop and were boring new structural supports into the rooftop.   Upon investigation, it turns out that the proposed installation would not have been allowed under the local building code and needed to be revised anyway.   Had our client not pushed the building permit issue, the work that would have been done would have been done without a building permit and against code.  These are violations that our client, the landowner, would have been responsible for.

Thus, we recommend that you ask the carrier who is proposing to do “maintenance” whether they are actually adding equipment to the roof that isn’t there currently.   If they aren’t adding equipment or are replacing existing equipment with the exact same equipment, then let them complete their maintenance.   If they are adding equipment or antennas, ask that they provide you with either a copy of the building permit or a copy of a letter signed by the building permit office that states that the proposed work does not require a building permit.   Most cell site leases require that the carrier meet or exceed all local, state, and federal laws, codes, and ordinances.

Missing Income: Electric and tax reimbursement clauses in cell site leases.

In the standard cell tower lease, most of the compensation comes from rent, which typically increases over the course of the lease due to escalation. In a small percentage of leases, the landowner may receive a revenue share from additional sublease tenants on the tower or structure. However, we are increasingly finding out from our clients that they are not always getting reimbursed as required by their lease for utilities or taxes.

1. Utility Clauses and Reimbursement

Most cell sites these days are serviced by both an electricity provider and a fiber or telephone service provider. The typical lease provides that the wireless carrier will attempt to procure their own utilities, but if they cannot, the landowner will allow them to tie into their utilities. For fiber or telephone service (telco), we rarely see situations where the wireless service provider connects to the landowner’s telco or fiber services. Instead, they procure their own service and route it to the site through a utility easement to the tower or to the building.

However, on electricity, there are some situations where the electric company refuses to run separate power to a subtenant on the property. In these cases, the wireless provider connects to the landowner’s power and then agrees to reimburse them on an ongoing basis for utility costs. This occurs in one of two ways: submeter and actual reimbursement or based upon a flat fee per month. Some leases (which we advise against) have a flat rate per month for electricity without the ability to adjust it depending upon actual usage. The better way to do it is to require that the carrier check the submeter on a regular basis and pay for actual usage. Alternatively, the parties can agree to a flat rate per month to make it easy and then check actual usage at the end of the year or every 6 months and adjust the rate to more closely match average monthly fees.

2. Real Property and Personal Property Taxes

The other significant area of possible missed revenue on cell tower leases is tax reimbursement. Most leases provide that the tower company or lessee will reimburse the property owner for taxes attributable to the improvements added to the property. This can be demonstrated by the actual increase in taxes payable after the tower or site is erected as compared to the previous year. Sometimes the local tax assessor will agree to create a separate tax parcel just for the tower. This is not a real parcel but just a way for the tax assessor to send the tax bill for the tower or improvements directly to the party responsible for it. This type of arrangement is our preference; however, many municipalities will not break out taxes across one property.

In some states, towers are considered real property while in others, they are considered personal property. If the latter, then things are easier for the landowner because oftentimes, the personal property taxes will be billed directly to the owner of the personal property. However, in those cases where the tower is treated as real property (or the real property assessor attributes some of the value of the tower to the real property), the landowner can be on the hook for a significant increase in real property taxes. While uncommon, we have seen situations where the real property taxes for the underlying property were significantly less than that for the tower. In some cases, the assessed value of the underlying property increased by over $1,000,000 due to the tower. Thus, it is critical that all cell site leases place the burden of the taxes attributable to the equipment and the tower on the tower owner or to the wireless carriers.

3. Reimbursement Headaches

If these clauses exist already in many leases, you may be asking why landowners would not take advantage of them and seek reimbursement. In our experience, there are a number of reasons.

1. The landowner may have inherited or purchased the property with the lease and failed to read it, or they simply didn’t understand those sections of the lease.
2. The landowner does not know how to break out the value of the property from the value of the telecom equipment or the tower.
3. The landowner has never asked for reimbursement even though it is due.
4. It requires a commitment to read the electric meter or submeter regularly and prepare a bill.
5. The landowner assumes incorrectly that the electric use hasn’t increased.
6. The individual amounts seem inconsequential.

The problem is that, over time, the amounts do not stay small and they add up. So while the tax bill may only amount to $500/year, over 20 years, that is $10,000. If an average 4G cell site uses 2 kilowatts per hour of electricity over the course of a month, that means monthly electric costs would range from $150/mo. to upwards of $300/mo. depending upon what state you are in. (See this handy website for average kWh cost in each state). In one year, that means you would have paid $1,800/year to $3,600/year for your tenant’s utilities. Over 20 years: $36,000 or $72,000. These are very simplistic calculations and don’t account for the time value of money, the possibility of rate increases for utilities, and the fact that some 5G enabled cell sites will use even more power. To make matters worse, it appears that the wireless providers know that many landowners aren’t properly seeking reimbursement and are trying to cap what landowners can ask for.

4. Recent Changes in Leases Regarding Reimbursement and Why They Are Bad

In the last few years, there is an attempt by wireless carriers and tower companies to restrict the length of time under which a landowner can “look back” and seek reimbursement for any purpose under the lease. Often, they try to add language that limits reimbursement to only the past year. This restricted look-back language not only applies to utilities and tax reimbursement but also to underpaid rent. So if the tower company or wireless carrier fails to pay you the proper rent, if you fail to notice it within one year of the issue, you may be precluded from demanding the back-rent payments. To make matters worse, the tower company or wireless carrier is not subject to the same restriction, so if they overpay you, they will attempt to start abating your rent for the overpayment even if it was years ago when the overpayment occurred.

What Should Smart Landowners Do?

First and foremost, read the Utility clause and the Tax clauses of your lease. If they require reimbursement, determine whether the carrier or tower company has been reimbursing you. If not, start preparing documentation that confirms the reimbursement you are entitled to.

For electric reimbursement, look to see whether there is a submeter. Even if you haven’t been reading the submeter in the past, start reading it and comparing it to your actual meter. Then you can see what portion of the electricity is attributable to the cell site(s). If there is no submeter, you may need to have one installed by an electrician so that you can start breaking out the cell site costs. You will have to coordinate this with the wireless carrier so as not to disrupt their power usage. You may also have to pay for the submeter if the lease is not clear on that issue. Alternatively, the wireless carrier or tower company may have their own preferred way of submetering the site.

For tax reimbursement, first look at your tax bill. If the tax bill breaks out the tower as a separate improvement on the property and assigns a value to it, great. If not, you may need to reach out to the assessor to determine what portion of the real estate taxes attributable to the property are due to the tower. The tax assessor may ask you questions about the tower – in many states, you are under no obligation to answer them and probably should not, especially about any lease payments you receive. Otherwise, the tax assessor may use that to revise their valuation of the tower. You can ask the tax assessor if they can “divide” the tax bill, with part of it being apportioned to the tower, then you can share this with the wireless carrier or tower company. If none of these methods work, try looking back at previous tax bills to before the tower was installed and then immediately after the tower was installed and seeing if there was an increase in taxes. If so, you may be able to show what percent of the tax bill appears to be related to the tower improvements.

Assuming that you can document the missing reimbursement payments over time, prepare an invoice to the best of your ability and send it via certified mail (require a signature on delivery) or via Fed Ex to the notice address in your lease. Please note that some carriers or tower companies will only reimburse for three to six years or however long the statute of limitations for commercial litigation is in your state.

Going forward, we recommend rejecting any attempts to change how long you can “look back” for reimbursements, especially on utility bills. However, the tenant may be unwilling to remove the “look back” language especially as it pertains to taxes. With property taxes, there is generally a limited time to appeal the taxes, so if you fail to notify the tenant, they aren’t able to appeal.  As to a look back period for rent, we believe that you should not forfeit the right to look back for underpaid rent especially if you have a revenue share clause in your lease.  It is next to impossible for a landowner to get a copy of the sublease agreement, which means that you are at the tower company’s mercy on whether they are paying the correct revenue share.  We have seen quite a few scenarios where mistakes were made and accounted for after one year regarding revenue share.  If you do agree to look back language- it should apply equally to both parties.  The tenant should not be able to claim they overpaid you outside the look back time frame either.

“The City of Philadelphia is undergoing a total reassessment of commercial properties. Until 2017 we have not been charged, as a component of our property taxes, for the cell sites on our roof. (There are reasons for this which are not relevant to the question I have for you). Let me say that all of our leases have a clause that says the cell companies are responsible for any real estate taxes pertinent to their installation. Also if we have a increase in taxes they would be responsible for that as well. The City is assessing our Cell Installations at approximately $280,000 each. The three (rooftop sites) now account for approximately $14,000/year in real estate taxes.

My question is; how do we deal with the cell companies? Should we do this on our own, should we hire an attorney, or are there companies such as yours that are more capable of handling cell companies and getting our reimbursement for increased real estate taxes? 

Our concern is that the cell companies are difficult to deal with and if we try to handle this without professional assistance we are not going to get anywhere with our efforts.”

While this admittedly click bait title was intended to draw your attention, the story nonetheless is real. You may not know this – but Pennsylvania taxes cell towers and cell sites as real property. Pennsylvania is in the minority of states that do so – and that include cell towers by statute.

             § 8811.  Subjects of local taxation.

(a)  Subjects of taxation enumerated.– Except as provided in subsection (b), all subjects and property made taxable by the laws of this Commonwealth for county, city, borough, town, township and school district purposes shall, as provided in this chapter, be valued and assessed at the annual rates, including all:

(1)  Real estate, namely:

(viii)  telecommunication towers that have become affixed to land.

One of the nuances for PA is that the basis for the taxation is that courts have deemed towers to be closer to real property – they are bolted to a concrete pad, require a crane to remove them, and are intended to be permanent (and not be moved/reused elsewhere). I question how this type of interpretation applies to rooftop cell site leases where the equipment is not permanent, is attached to the building, and can be reused elsewhere. (Interestingly enough other states have found the opposite) Furthermore, where in the world did the City come up with a valuation of the cell sites at a rate of $280,000 each? Assuming this is based upon equipment, it would seem that the value should be variable depending upon the tenant as the equipment costs vary depending upon the carrier and specific equipment at each location. If based upon some type of income, where did they arrive at $280K? If any of you have experience with PA taxes, I would be interested to know more about how they justify this amount for a rooftop cell site. I would also be interested in knowing if there are no personal property taxes for rooftop cell sites as a result of high real property taxes.

Fortunately for this client, this isn’t really their issue. The leases have strong language that provides that the tenant (wireless carrier) is required to reimburse them for taxes. Proper notice and follow up is required but ultimately, it will be up to the tenants to contest or pay the assessment on the towers. This just goes to show how important it is to have language in your lease that requires the tenant to pay for any taxes (real or personal) that are attributable to the improvements or use of the site as a wireless facility.  

The radio part of the cell site (analog) and the smart part of the cell site (digital) won’t need to be at the same location anymore.  Historically, at every cell site, both parts have been on the ground.  Lately, with remote radio units, the two parts have been separated with part on the tower and part on the ground.  In the future, there are limited reasons why the two parts even need to be at the same site.   Put another way, the equipment that drives the site and the antennas can and will be separated often miles away from each other.

2. WIRELESS SERVICE PROVIDERS WILL PROVIDE SMART PIPES OR DIE.

The wireless service providers really need to and will get creative in how they create value for their services.  Historically, they have been a dumb pipe- agnostic to what goes over the airwaves just trying to make sure those airwaves go over their network to their devices.  They have squeezed every bit of value out of this model.  Value in the future (and shareholder return) will come from adding services and IT smarts to the airwaves in ways that make day to day life easier.   This will start at large enterprises and filter down to individuals over the next 10 years.

3. THE DISTINCTION BETWEEN WIRED AND WIRELESS IS DIMINISHING.

Wireless service providers will expand into traditional wired services like cable TV and FIOS TV.  Cable companies will add wireless services and wireless service providers will expand into over the top (think Netflix) video services.  Content owners will be king- and the pipes to get the content to the end user will be a hybrid of wired/wireless – whatever is most cost efficient to deploy that provides the minimal necessary Quality of Service (QOS) to the end user.

4. UNLICENSED AND LICENSED SPECTRUM WILL BE USED HAND IN HAND TO PROVIDE OPTIMAL SERVICE TO END USERS.

Phones and other data devices will have greater flexibility in choosing the optimal array of licensed and unlicensed spectrum for connectivity often using multiple bands of each to connect at higher and higher throughputs.

5. FIBER IS KING.

Despite the proclamations above of advances in wireless connectivity, fiber is and will be a necessary component of all wireless and wired services.  No matter what the connection type, at some point in the system, it will go over fiber.  Companies with dark fiber will be well positioned to succeed as the networks continue to densify, regardless of whether the densification is added in licensed or unlicensed spectrum or both.

6. EVERYTHING WILL BE CONNECTED.

The estimates of 200 billion (Yes billion with a B) devices added to the Internet of Things by 2020 may be conservative.  When users have connectivity and useable information from everything around them, those same users will create new use profiles for those devices and new applications and software that relies upon the feedback loops they create.

We are in for an exciting 5-10 years.   While there will be a lot of new cell site deployment and small cell deployment, we should also expect a lot of changes in our industry and be ever conscious that what we presume today may not be true in 5 years let alone 10.  For our clients, anything we can do to help protect them from change will be beneficial.  For example, we shouldn’t presume that what can’t be done today can’t be done in the future.  An example of this is we can’t presume that space limitations at a compound will prevent a tower company from subleasing.  We can’t presume that structural limitations on a tower will always prevent extra equipment from being installed.  The best things we can do are add limited termination rights to leases, restrict subleasing itself as opposed to just equipment, and advise our clients that long term, the industry will change in the next 10 years more than it has in the last 10 years.

We used the lowest lease payment average from a carrier as a baseline and determined how much more percentage wise the other carriers pay. The results are interesting but likely statistically irrelevant:

• US Cellular tends to pay a good deal less on average than the other carriers.
• Sprint tends to pay more for their average lease than the other carriers do.
• The most surprising observation is how thrifty Verizon has been compared to the other carriers on an average basis.  We are a bit baffled as to why this is.

Ideally, if a landowner or tower owner was looking to find the highest paying tenants, they would seek out AT&T, Sprint, and MetroPCS (now T-Mobile) while avoiding US Cellular.  In reality though, these carriers seek out the landowner or the tower owner and you should just consider yourself lucky that they did.

I have read articles regarding the need for legislation on the federal level calling for increased federal power to override local land use law for cell tower placement. While I fully agree that some municipal planning boards/city councils deny almost every cell site that comes before them- I don’t believe that increased federal guidance is the answer, nor do I believe that the FCC should usurp the ability of local government to guide the time place and manner in which towers/cell sites are allowed.

As an attorney/wireless consultant with hundreds of zoning hearings on towers under my belt- I recognize the significant cost in both time and resources to get new cell sites approved. Furthermore, I agree that there is a fundamental need for new sites as the average number of Minutes Of Use increases and the number of wireless users continues to increase. I further recognize that there is a need for education on behalf of local land use decision makers that “believe” that they already allowed cell sites across the city and who thought that the development of towers was done.

Nonetheless, I do need to point out that we as an industry have dug our own grave so to speak. We fail to control/guide our site acquisition agents to the best site from a zoning perspective and leasing/construction guidelines often take precendence over good siting. Then we complain when the planning board/neighborhood takes issue with the proposed site and we then make up reasons why we failed to check the property down the road. Some of the RF engineers that I have worked with put together shoddy RF maps that any expert could tear apart- but we let it occur because we need to win the site. As an industry, we have always been tremendously short sighted- looking to get our sites up damn the consequences. I have stood in hearings where the RF engineer has stated on the record that moving the tower 50′ would not work and bit my tongue while he did it. I have put forth fall zone letters for 150′ towers with 5′ fall zones- and answered questions from the board like “Do you expect us to believe that this tower will fall within 5′ of itself?” with the answer “No, I expect that you believe this engineer who is certified in this state to give this opinion” while holding back laughter.

It is partially our own fault that zoning ordinances are what they are- we built towers anywhere we pleased in the late 80s and early 90s, failed to collocate when we should have in the mid to late 90s, and then faced the repercussions years later when planning boards wised up. I writing this because I feel that our industry acts as if we have been victimized but fails to recognize our own role in this. We simply need to be responsible in our siting practices.

First off, let me start by telling you that if you are looking for news clippings about cell towers, Steel in the Air provides a newsletter that focuses on happenings within the cell tower industry that impact both developers and landowners. The newsletter comes out every Friday and can be subscribed to by emailing me at newsletter@www.steelintheair.com.

This blog is meant to be a subjective forum (we make no claims here to be unbiased, and I can assure you that I have very strong opinions on the subject matter).  In this blog, you will be privy to unsubstantiated rumors and theories. You will also be exposed to a unique perspective – I have been involved in the cell tower and wireless industry for over fifteen years – in a myriad of capacities.  The information and opinions you read here will likely be novel and provide you with a different perspective than you will see elsewhere on the web.  Enjoy and please take a moment to peruse our website: www.steelintheair.com. 

Sincerely,

Ken Schmidt

President

www.steelintheair.com