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Item 1.B.
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| City Council Regular | |
| Date: | 10/09/2023 |
| Title: | Amendment One to Two Commercial Non-Aviation Ground Leases with Gold Creek Cellular of Montana Limited Partnership DBA Verizon Wireless for Communication Sites |
| Presented by: | Jeff Roach |
| Department: | Airport |
| Presentation: | No |
| Legal Review: | Yes |
| Project Number: | N/A |
RECOMMENDATION
Staff recommends that the City Council approve Amendments One to each Lease, extending the terms for ten (10) years for the Commercial Non- Aviation Ground Leases for Communication Sites with Gold Creek Cellular of Montana Limited Partnership, DBA Verizon Wireless for terms ending in 2032. A Memorandum of Lease is also required for each Lease extension for recording purposes. ATC Sequoia DBA American Tower, as the authorized managing agent for Verizon, will execute the Amendments on Verizon's behalf.
BACKGROUND (Consistency with Adopted Plans and Policies, if applicable)
Gold Creek Cellular of Montana Limited Partnership, dba Verizon Wireless, desires to extend the term of two (2) cell tower Leases on Airport property. This first tower lease is located on the west end of the Airport near the City's water tower and is referenced as BIL-Airport. The original Lease was initially established in September 1997 for a ten (10) year term that ended on September 30, 2007. The City Council subsequently approved two renewals of this Lease, a five-year renewal on July 23, 2007, extending the term to September 30, 2012, followed by a ten-year renewal on September 10, 2012, extending the term to September 30, 2022. The second renewal term has now expired and an extension with new terms has been negotiated. Amendment One to this Lease extends the term for a ten (10) year term beginning October 1, 2022 to September 30, 2032. Due to this Lease's strategic location overlooking the City; the tower on this Lease not only has Verizon operating on it, but also has one co-located user, Sprint, now owned by T-Mobile.
The second tower is located on the east end of the Airport, referenced as BIL-Alkali, and provides coverage to the Alkali Creek residential area. The original Lease on this tower was initially established in May 2007 for a five (5) year term that ended on May 31, 2012. On September 10, 2012, the City Council approved a renewal of this Lease for ten (10) years to May 31, 2022. That renewed term has now expired and an extension with new terms has been negotiated. Amendment One to the east-end Lease extends the term for a ten (10) year term beginning June 1, 2022 to May 31, 2032. Unlike the other tower site, Gold Creek constructed a monopole tower on this site, so there is no co-located user on this tower.
During the course of the leases that expired in 2022, two events occurred that impacted finalizing the extended lease terms. First, industry changes involving spectrum licenses and the impact of the spectrum auction occurred that resulted in Verizon selling more than 11,000 of its towers nationwide in 2015 to American Tower DBA ATC Sequoia and assigning some of its leases to American Tower, while retaining some leases. The two cell tower leases at the Airport are managed leases, whereby American Tower owns the tower structures purchased from Verizon with Verizon retaining the leaseholds. American Tower manages the leases for Verizon and leases space on its tower structure back to Verizon and any co-located users.
The second event impacting finalization of the amendments involved the evolution of 5G and the new C-band spectrum, which increases data transfer speed, performance, and provides greater capacity to accommodate more customers and more robust services like virtual reality. The move to 5G and C-band service came with some complications, especially where Airports are concerned. The FAA expressed concerns that 5G service could interfere with airplane altimeters, which give data on a plane's height above the ground and are crucial for bad-weather landing. Altimeters operate in the 4.2-4.4 GHz range and the concern is that the auctioned frequencies sit too close to this range. Data from these radio altimeters informs other safety equipment on the plane, including navigation instruments, terrain awareness, and collision-avoidance systems. In the United States, after the spectrum auction in 2021, 5G services launched in nearly 50 markets on January 19, 2022, using frequencies in the C-Band radio spectrum. Because the proposed 5G deployment involves a new combination of power levels, frequencies, proximity to flight operations, and other factors, the FAA imposed restrictions on flight operations using certain types of radio altimeter equipment close to antennas in 5G networks located near or on airports. This led to disruptions at some U.S. airports last year as international carriers canceled some flights and sounded an alarm about an approaching deadline for the retrofits. Numerous delays in full spectrum 5G rollout occurred while the FAA worked with wireless carriers on determining Alternative Methods of Compliance (AMOCs) allowing airlines additional time to retrofit their equipment for compliance. Verizon and AT&T agreed to delay some C-Band and 5G usage until July 1 this year as air carriers worked to retrofit their fleets to meet FAA requirements. Air carriers are continuing to update altimeters but global supply chains lag behind current demand, impacted by a combination of the pandemic-induced production slowdown and a surge in demand. As of the July 1 deadline, more than 85% of the altimeters in the domestic commercial fleet serving US airports and about 66% of the international fleet have been updated to operate safely in the US 5G C-band environment; however there still remain a number of aircraft awaiting the retrofit, which means that bad weather, low-visibility days could increase delays and cancellations for these aircraft.
Working to ensure that radio signals from newly activated 5G systems can coexist safely with flight operations, the FAA created the 5G C-band Mitigated Airports (CMA) list of airports, which identifies airports where active 5G telecommunications companies have agreed to voluntarily limit their 5G deployment at the request of the FAA. Meeting the July 1 deadline ensures operators are prepared to fly into the CMA airports under the mitigations that wireless companies agreed to put in place. Aircraft that did not meet the July 1 deadline for meeting the new 5G tolerance requirements face restrictions at CMA airports. Due to the proximity of the cell towers at the Airport to the Airport's runway system, the Airport was included on the Department of Transportation's CMA list. The FAA website has identified the Airport as an airport where greater than 90% of aircraft models available can safely land on the airport's three runways with the low-visibility approaches and has a high volume of aircraft with systems that could be adversely affected by 5G. The FAA has set another deadline, February 1, 2024, which calls for scheduled airlines to ensure their aircraft meet the new requirements by this date, giving them a seven-month grace period to update any laggards in their fleets, while keeping them away from known C-band areas. As more wireless companies roll out 5G services around the US, the FAA intends to drop the airport-by-airport evaluation and consider all US airspace as a 5G environment.
The second tower is located on the east end of the Airport, referenced as BIL-Alkali, and provides coverage to the Alkali Creek residential area. The original Lease on this tower was initially established in May 2007 for a five (5) year term that ended on May 31, 2012. On September 10, 2012, the City Council approved a renewal of this Lease for ten (10) years to May 31, 2022. That renewed term has now expired and an extension with new terms has been negotiated. Amendment One to the east-end Lease extends the term for a ten (10) year term beginning June 1, 2022 to May 31, 2032. Unlike the other tower site, Gold Creek constructed a monopole tower on this site, so there is no co-located user on this tower.
During the course of the leases that expired in 2022, two events occurred that impacted finalizing the extended lease terms. First, industry changes involving spectrum licenses and the impact of the spectrum auction occurred that resulted in Verizon selling more than 11,000 of its towers nationwide in 2015 to American Tower DBA ATC Sequoia and assigning some of its leases to American Tower, while retaining some leases. The two cell tower leases at the Airport are managed leases, whereby American Tower owns the tower structures purchased from Verizon with Verizon retaining the leaseholds. American Tower manages the leases for Verizon and leases space on its tower structure back to Verizon and any co-located users.
The second event impacting finalization of the amendments involved the evolution of 5G and the new C-band spectrum, which increases data transfer speed, performance, and provides greater capacity to accommodate more customers and more robust services like virtual reality. The move to 5G and C-band service came with some complications, especially where Airports are concerned. The FAA expressed concerns that 5G service could interfere with airplane altimeters, which give data on a plane's height above the ground and are crucial for bad-weather landing. Altimeters operate in the 4.2-4.4 GHz range and the concern is that the auctioned frequencies sit too close to this range. Data from these radio altimeters informs other safety equipment on the plane, including navigation instruments, terrain awareness, and collision-avoidance systems. In the United States, after the spectrum auction in 2021, 5G services launched in nearly 50 markets on January 19, 2022, using frequencies in the C-Band radio spectrum. Because the proposed 5G deployment involves a new combination of power levels, frequencies, proximity to flight operations, and other factors, the FAA imposed restrictions on flight operations using certain types of radio altimeter equipment close to antennas in 5G networks located near or on airports. This led to disruptions at some U.S. airports last year as international carriers canceled some flights and sounded an alarm about an approaching deadline for the retrofits. Numerous delays in full spectrum 5G rollout occurred while the FAA worked with wireless carriers on determining Alternative Methods of Compliance (AMOCs) allowing airlines additional time to retrofit their equipment for compliance. Verizon and AT&T agreed to delay some C-Band and 5G usage until July 1 this year as air carriers worked to retrofit their fleets to meet FAA requirements. Air carriers are continuing to update altimeters but global supply chains lag behind current demand, impacted by a combination of the pandemic-induced production slowdown and a surge in demand. As of the July 1 deadline, more than 85% of the altimeters in the domestic commercial fleet serving US airports and about 66% of the international fleet have been updated to operate safely in the US 5G C-band environment; however there still remain a number of aircraft awaiting the retrofit, which means that bad weather, low-visibility days could increase delays and cancellations for these aircraft.
Working to ensure that radio signals from newly activated 5G systems can coexist safely with flight operations, the FAA created the 5G C-band Mitigated Airports (CMA) list of airports, which identifies airports where active 5G telecommunications companies have agreed to voluntarily limit their 5G deployment at the request of the FAA. Meeting the July 1 deadline ensures operators are prepared to fly into the CMA airports under the mitigations that wireless companies agreed to put in place. Aircraft that did not meet the July 1 deadline for meeting the new 5G tolerance requirements face restrictions at CMA airports. Due to the proximity of the cell towers at the Airport to the Airport's runway system, the Airport was included on the Department of Transportation's CMA list. The FAA website has identified the Airport as an airport where greater than 90% of aircraft models available can safely land on the airport's three runways with the low-visibility approaches and has a high volume of aircraft with systems that could be adversely affected by 5G. The FAA has set another deadline, February 1, 2024, which calls for scheduled airlines to ensure their aircraft meet the new requirements by this date, giving them a seven-month grace period to update any laggards in their fleets, while keeping them away from known C-band areas. As more wireless companies roll out 5G services around the US, the FAA intends to drop the airport-by-airport evaluation and consider all US airspace as a 5G environment.
ALTERNATIVES
City Council may:
- Approve Amendments One to each of two Commercial Non-Aviation Ground Leases with Gold Creek Cellular of Montana Limited Partnership DBA Version Wireless for Communication Sites; or,
- Not Approve the Amendments One to each Lease.
FISCAL EFFECTS
For the first year of each extended Lease term, the City will receive a one-time signing bonus of $5,000 for each Lease, $9,000/year for ground rent for each Lease, and $9,000/year for a use fee for each carrier that uses the tower for its operations. Both ground and use charges will be adjusted annually on their respective anniversary dates, using the average of the monthly percentage increases for the previous calendar year, as determined by the Department of Labor Consumer Price Index for All Urban Consumers (CPI-U), published by the Bureau of Labor Statistics. The starting rate was established based on the 2022 recommendations of a cell tower market rate study conducted by a hired cell tower consultant that specialized in assisting landowners and government entities with cell tower leases. The rates are in line with similar towers, and take into account factors such as location, unique site circumstances, proximity to other towers, local planning and zoning requirements, as well as other factors.
Attachments
- Amend 1 - BIL-Airport
- Memorandum of Lease - BIL-Airport
- Amend 1 - BIL-Alkali
- Memorandum of Lease - BIL-Alkali