Approval of Verizon Cell Tower Term Sheet

MD7, on behalf of Verizon Wireless, has presented the City with a proposed term sheet to identify amendments to a Cell tower Lease.  The original lese began in 2001 and is in its final years under the original terms.  The proposal largely leaves the terms unchanged except for the monthly rent rate, rent escalators, additional renewal terms and a guarantee to the rental income over the next five years.  Earlier in 2022, the proposed change would have dropped the monthly rate from its current approximately $3,303/month to $1,800/month.  MD7 has explained the proposed reduction to the rent amount directly associated with changing technology and Verizon not requiring as many sites that hold the 4G cell technology.  At the November 22, 2022 Work Session, Council directed staff to continue negotiations to establish a final offer.  Furthermore, Council supported staff preparing a minor language amendment to present to Verizon as well.  The language is related to access to the site, damage and general site clean up.

As discussions continued, MD7 has provided a final term sheet and has asked for Council to consider the offer.  If supported, MD7 would present the consideration to Verizon and at such time a formal lease amendment would be brought back for final consideration.  The final terms being offered are as follows:

• New Rent Amount: $2,000/month
• New Rent Escalator: 10 percent (10%) every term - 5 years (next increase in 2028)
• Additional Renewal Terms: Four additional five year terms
• Guaranteed rental income to the City for the next 60 months ($120,000)

Under the final proposal, the maximum length of the lease agreement would be 25 five years.  If the maximum time frame occurred and the terms were implemented under the beginning monthly rate of $2,000, the maximum revenue generated by the lease would be approximately $732,612 over the next 25 years.

For comparison, the City is leasing an area of land within a park for a cell tower.  Under this lease, the City receives land rental income and revenue sharing from the tower owner based on lease(s) they hold with carriers.  This lease currently generates approximately $1,600/month from the land lease and $900/month from the revenue share, or $2,500 in total per month.

Alternative 1: Support the proposed term sheet provided by MD7 and the amended lease language proposed by staff.
Alternative 2: Do not support the proposed term sheet.  This likely would cause the lease to terminate upon its coming end date in 2026.
Alternative 3: Propose a counter offer for Verizon to consider.  They may choose not to accept and eliminate this site from their inventory upon the current lease termination.
 

Support term sheet dated December 21, 2022 and amended lease language proposed by staff.  This would potentially provide over $700,000 is revenue over the next 25 years.  This revenue is identified in our annual budget and offsets the tax levy certified to Ramsey properties.

Motion to support term sheet dated December 21, 2022 and amended lease language proposed by staff.