04-27-2015 Council Work Session Packet

Home Browse Search

MEMORANDUM To: Mayor and City Council From: Ron Olson, Finance Director Date: April 27, 2015 Subject: Antenna Leases In February Councilmeber Walsh requested that cell tower leases be added to a work session agenda. Staff investigated the option of selling our Antenna leases to a third party. The main advantage gained by selling the tower leases would be immediate access to a lump sum of capital. Using the recent offer provided by Wireless Capital Partners as an example, if we sold the rights to our recently signed Sprint Lease we would receive $480,000. In exchange for this payment, the City would give up the cash flow from Sprint for 30 years. The current Sprint lease is for a five year period with up to three additional five year extensions for a total of 20 years. Under the terms of the lease, the City would collect $1,091,176 if the lease continues for the entire 20 year period. In order to collect $480,000 (break even) the lease needs to be in effect for 11.5 years. Based on our previous experiences with tower leases, staff expects the lease to be continued. Attachment 1 summarizes expected collections and provides a simple time value of money calculation for your review. As indicated the present value of the anticipated lease collections is $930,370. This is significantly more than the $480,000 that we would receive with the Wireless Capital Partners offer. In staff’s opinion, it makes sense to maintain the rights to collect the annual rent from Sprint for this lease. As indicated in the attached email from Wireless Capital LLC, if the City does not need the lump sum payment, it would make sense to keep the lease. The revenue from the tower leases is currently needed by the water fund to offset annual operating losses. Loss of the revenue may require an increase in water rates to keep the fund healthy. If the Council is interested in pursuing this, staff can begin working on an RFP for the sale of the tower leases. Page 17 of 49 Item 3