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HomeMy WebLinkAboutMinutes - 9/21/2015 - Finance and Personnel Committee � SPECIAL �. FINANCE AND PERSONNEL COMMITTEE MEETING Monday, September 21, 2015 Alderman Conference Room, 6:00 p.m. In Attendance: Committee Members: Chairman Alderman Wimmer, Alderman Condon and Alderman Curry. Absent: None. Also in Attendance: City Administrator Morefield, Director of Economic Development Martin, Director of Finance Lynch, City Clerk Jones. Chairman Alderman Wimmer called the meeting to arder at 6:00 p.m. Public Input There was no Public Input. Discussion Re�ardin� Consideration of a Proposed Option and Structure Lease Aareement between the City of McHenry and SprintCom for Antenna and Ground Space at 4225 Sioux Lane Chairnlan Alderman Wimmer recognized Director of Economic Development Martin who informed the Committee that over the past several years, the City of McHenry has entered into several least agreements with wireless communication providers for the purpose of \.. placing antennae and ground structures on City-owned properties, as well as a monopole tower at the Public Works Facility on Industrial Drive. Currently, the City has four existing lease agreements, two of which are for ground space and associated antennae on the Sioux Lane water tower, one for ground and antenna space at 3906 Albany in the Tonyan Industrial Park, and the fourth is for ground space at the Public Works Facility for a monopole tower and equipment building. Last year US Cellular terminated their lease and removed their equipment at 4225 Sioux Lane. Staff has been negotiating a ground space and antenna lease with SprintCom for several months and was prepared to bring the proposal to the full Council for consideration however recently Staff was informed by SprintCom's consulting attorney of the company's budgetary constraints and the financial terms previously negotiated could not be fulfilled at this time. Staff lias proposed an option and prepared a Structured Lease Agreement to allow SprintCom to place wireless communication antenna and an equipment building at 4225 Sioux Lane (City water tower). The lease area encompasses an approximately 12 x 20 square foot ground space and authorizes placement of antenna on the Sioux Lane Water Tower. The proposed Agreement includes a $42,000/year least payment, plus a 4% annual escalator. Staff was recently informed that SprintCom is unable to agree to the proposed financial terms and is proposing a $1,000/month lease payment and a 3% escalator spread over a five-year term. � , - Finance and Personnel Committee Meeting September 21, 2015 Page 2 `— Director Martin stated that Staff understands SprintCom's budgetary constraints, however, the newly proposed financial terms are substantially less than the previously agreed upon terms, as well as the current least terms the City of McHenry has with New Cingular, Verizori and T-Mobile. Staff has maintained a good working relationship with SprintCom and believes it is in the best interest of the City to wait, ascertain if SprintCom's financial position changes in the future, or alternatively hold-off for a proposal from another potential carrier with more favorable financial terms. Staff is recommending at this time that negotiations with SprintCom be terminated due to SprintCom's recent request to reduce the monthly lease payment and annual escalator. Following a brief discussion, it was the consensus of the Committee to terminate negotiations with SprintCom and wait to see what occurs. Discussion Regardin Consideration of Offers to Purchase The Telecommunications Lease and Easement Rights at 1415 Industrial Drive Between the C�tv of McHenry and Verizon (Monopole Telecommunications Tower and Ground Space) and Motion to Forward the Proposal to Full Council Director of Economic Development Martin informed the Committee that Staff has received three �vritten offers to purchase the city's lease with Verizon along with accompanying easement rights, at 1415 Industrial Drive. Crown Castle, Tower Point Capital and Unison �" have all submitted written proposals. In 2012, the City received offers to purchase the City's cellular telecommunications leases at 1415 Industrial Drive, as well as the three leases the City had for ground and space at 4225 Sioux Lane with U.S. Cellular, T-Mobile and AT&T/New Cingular. Since that time, U.S. Cellular has abandoned the Sioux Lane site and removed their antennae and associated grouncl equipment. Director Martin noted in 2012, the Financial and Personnel Committee reviewed the proposals to purchase and decided not to pursue the offers. Over the past decade, the market for internet, cellular telephone, and other wireless services has become extremely competitive due in part to mergers and acquisitions. Wireless companies are consolidating sites, terminating redundant leases, and seeking ways to reduce costs and remain competitive. Similar to the proposals in 2012, Crown Castle, Tower Point Capital and Unison are seeking to purchase the City's existing cellular least with Verizon, together with the accompanying easement rights to access the monopole tower at 1415 Industrial Drive. Director Martin reiterated that the City is the landowner of the property but has not rights to the Verizon tower. If any of the options are pursued it is only for the City's lease rights with Verizon, along with an easement or legal right to access the tower. The offers do not include selling any real or personal property owned by the City at 1415 Industrial Drive. � ' � Finance and Personnel Committee Meeting Septeml�er 21, 2015 Page 3 `-- Staff has ascertained the three companies submitting proposals are primarily looking to capture and control potential long-term revenue in the form of purchased "umbrella" easeme�lt rights and assignment of existing leases. All three companies hedge their default risk by the amount of capital and number of leases maintained in the company. Director Martin indicated that one of the concerns raised by the Finance and Personnel Committee in 2012 was the loss of continuous revenue stream the City realizes from its existing leases. Director Martin said that unlike the offers from Unison, Crown Castle and Tower Point Capital, the existing Verizon lease has a limited lease payment guarantee. The City receives $2,318.55 per month from Verizon, along with an annual 3% escalator. However, the City's lease with Verizon at 1415 Industrial Drive can be terminated by Verizon upon six month's written notice prior to the end of any five-year lease term. Director Martin provided the Committee with lump sum offers received from each of the three companies, as well as an installment payment option, which Staff ensured the Committee would be guaranteed if an agreement is pursued. Additionally, any offer sought by the City could also include a provision whereby the City would split any new revenue from a carrier that might locate on the monopole tower at 1415 Industrial Drive at any time in the iuture. �" Director Martin outlined the pros and cons to entering into an Agreement: • A lump sum payment could be utilized to assist in completing capital projects or purchasing capital equipment. • A guaranteed annual sum for the next 15 to 20 years could be used for long-term debt service payment. Conversely, entering into an agreement such as the one proposed adds a third party to a current two party agreement. Staff is seeking the following direction from the Committee: • Should Staff pursue one of the offers? • If so, does the Committee prefer a larger one-time payments or a smaller upfront sum in conjunction with a monthly or annual long-term guaranteed dollar amount? • Does the Committee prefer to maintain the existing lease with Verizon and not pursue the offers presented? Director Martin suggested it might be worthwhile to contact Verizon and ascertain their level of interest in matching any of the offers. Director Martin noted that if the Committee believes it is worthwhile to pursue a lease buyout and easement agreement, as it pertains to the Verizon lease at 1415 Industrial Drive, a similar Agreement could be pursued with the leases at 4225 Sioux Lane. � • Finance and Personnel Committee Meeting September 21, 2015 Page 4 `- Director Martin informed the Committee that he has kept all the companies informed about the ongoing negotiations so everyone had the same information. Director Martin stated exploring the offers in greater detail may be advantageous to the City. Staff would work with representatives from each of the proposing companies to draft lease agreements for presentation to the full Council in the near future. Chairman Alderman Wimmer opined that he is in favor of the lump sum payment but has concerns with a perpetual easement. Alderman Condon and Alderman Curry concurred. Chairman Alderman Wimmer recommended no offers be accepted that include an easement. Alderman Condon suggested contacting Tower and Crown to see if they were willing to move forward with the agreement without the easement and then see if Verizon is willing to match the offer. Alderman Curry stated he would also like to see figures for a perpetual lease. Alderman Curry suggested hiring someone to perform an evaluation to ascertain the value of the property. Responding to an inquiry from Alderman Curry regarding the current cost involved in maintaining the property, Director Martin replied there is some cost to the Public Works Depart�nent however it is not significant. �" City Administration Morefield inquired whether the Committee recommends bringing any of the offers back to the Finance and Personnel Committee or forward the offers to the full Council. Chairman Alderman Wimmer recommended that the best offer go directly to Council for consideration. Responding to an inquiry, Directar Martin stated some legal costs would be incurred in preparing the lease. Adiournment Motion by Curry, seconded by Condon, to adjourn the meeting at 6:30 p.m. Aye: Condon, Curry, Wimmer. Nay: None. Not Voting: None . Abstaining: None � Absent: None. Motion carried. Respectfully submitted, ��: ;�!/�a ,�,� �- Richard W. Wimmer hairman