Business (Managing K-12 Education)
Good Idea or Bad Idea?
PHOTO © DEJAN LAZAREVIC/SHUTTERSTOCK
This article explores the pros and cons of being a wireless site landlord from a school district’s point of view, and offers practical tips on how to minimize the cons while building and maintaining mutually beneficial relationships with wireless tenants. We offer solution-oriented advice regarding how to approach various key issues that arise throughout the term of a typical wireless lease, which usually ranges from 15 to 30-plus years.
The school district in this article (the “district”) entered into cell site leases with Verizon, AT&T, Sprint, T-Mobile, and MetroPCS for the placement of cell sites on stadium light poles at various schools in California. At high schools with existing stadium light poles, the wireless carriers replaced those poles with new ones also supporting their antennas. Equipment cabinets were located nearby at ground level. At new high schools, the wireless carriers designed light poles supporting their antennas while also providing stadium lighting.
Special inspection of all cell site-related construction is required by the California Department of General Services, Division of the State Architect (“DSA”) to ensure structural safety of all construction occurring on district properties. The DSA’s oversight for school facility structural safety flows from the Field Act, contained in the California Education Code.
The benefits of wireless leases
The district’s rental revenue generated by cell site leases was used to support student programs, including athletics. It was an easy decision for the district to become a wireless landlord. During a challenging financial climate, schools had limited experience with land leases or other commercial activities on school properties. The relatively passive rental income streams from these wireless leases were allocated towards supplementing school budgets; they did not replace capital or program funding.
Wireless carriers initially benefitted from the leases because at first they received an easier permitting process to construct their wireless sites. Moreover, schools are generally in or near residential areas, considered to be desirable service areas by carriers.
Common wireless lease breaches
At the direction of the District Board of Trustees in 2012, district staff evaluated each wireless site and its accompanying lease to verify compliance with federal, state and local laws, as well as to ensure that no lease breaches existed. This was an eye opening, surprising and disappointing process. The district found that various carriers at various schools were materially out of compliance with their DSA obligations and their lease terms with the district. The carriers initially assigned third-party consultants to negotiate with the district regarding the violations. These initial negotiations were largely unproductive and time-consuming, and the violations continued unabated.
The district’s Board of Trustees authorized the engagement of outside wireless legal counsel to assist district staff to resolve the identified lease breaches. The district eventually required that the carriers negotiate directly with the district. This resulted in more streamlined and productive negotiations.
Verifying compliance with federal, state and local laws
Construction on school properties in California is regulated by the DSA. This regulatory oversight includes structural, access and fire and life safety, as well as a comprehensive inspection process. All steel materials, welding and fabrication is tested and inspected. Concrete placement and compressive strength is also tested and inspected during the construction phase of work. At the completion of the construction phase the results of testing, verification of inspections and project details are submitted to the DSA for final project certification. If a project is not certified, state agencies can withhold approval and funding for future construction projects. Legal opinions also suggest that the district Board of Trustees may be found personally liable for any non-conforming construction.
Beginning in 2001, the district began to identify projects that were not certified and initiated a process of correcting deficiencies through the re-inspection or submittal of missing paperwork to the DSA. In some cases the process was relatively simple, while in other cases, some projects were never submitted to the DSA for plan approval, and no inspections of towers or buildings took place during construction despite the requirement for such inspections.
The Americans with Disabilities Act (“ADA”) applies to wireless tower projects and the district became very aware of the ADA’s path of travel requirements in relation to wireless sites. Accessibility challenges recently became more common in California — many school districts re-evaluated facilities, including stadiums, for compliance with the ADA. The most common challenge presented regarding wireless towers was changes in elevation along a path of travel. This typically involves utility vaults and settled utility trenches that contain changes in elevation greater than a quarter inch.
Identifying over occupancy of leasehold premises
One common wireless lease breach is over occupancy by the carrier of its leasehold area. As the district became aware of suspected encroachment problems with the towers, measurements of each cell site were taken to determine the carrier’s actual occupancy. Many sites had occupied more ground space than the lease allowed. This was problematic because the over occupied areas contained space the District could use for storage, athletics, and spectator areas. Sometimes the over occupied areas flat out limited the use of the land by the district. Since the schools had a need for more land than is available, uncompensated occupancy of the sites posed a problem for the district.
The district did not engage licensed land surveyors to determine over-occupancy. Rather, it simply used a tape measure to measure the perimeter of the carrier’s actual occupancy. In those cases where over occupancy existed, a detailed accounting of payments and cost per square foot was completed. Over occupancy back payments were calculated based upon these audits and presented to the carrier in the form of a “Notice of Breach” letter.
The importance of the utilities provision in the lease
At one school, it was discovered that several of the carriers had connected to the district’s electrical system but did not meter or reimburse the district for their electrical power usage despite their lease requiring them to do so. The district identified this lease breach as the review of its lease portfolio expanded over time. Historically, multiple departments and staff were involved in the wireless leasing process but lacked full awareness of the issues or responsibility required to manage the many details of such an expansive wireless portfolio.
A particular challenge resulting from the carriers’ usage of the district’s power is the utility rate schedule for peak and super peak electrical usage. As the carriers upgraded their sites over the years to meet the latest technological demands, the resulting equipment layout at each site pushed the district’s electrical usage into a higher cost structure than would have been the case without the added equipment and the need for the carriers to provide air conditioning within their equipment shelters. To resolve this issue, the district demanded reimbursement for each carriers’ usage of the district’s electricity and directed each carrier to obtain its own meter at the site. Lease amendments were prepared containing new and updated utilities lease language to protect the district.
Replacing stadium light bulbs and signing bonuses
The district discovered that the cost to replace stadium light pole bulbs was significantly greater when cell equipment was installed on that pole. Historically, the carriers had not replaced those lights or compensated the district for the added cost. With the help of its telecom counsel, the district resolved this issue by amending leases to require the carriers to either replace the bulbs themselves or reimburse the district for those replacement costs. If the district had the opportunity to change the initial site construction process, lights would be placed below the equipment on the pole so access would be less costly and problematic.
Lastly, legal and staff time spent managing the carriers’ frequent equipment upgrade requests had not been compensated either. In some cases, the carriers may employ as many as five contractors managing multiple projects on a single site. To reimburse the district for its staff time and legal expenses, carriers paid the district “signing bonuses” or “administrative fees” at negotiated-upon amounts.
In the beginning, the district was inexperienced in the world of wireless leasing and operated with the assumption that each carrier could be trusted to adhere to all terms of the lease. Furthermore, the district did not have sufficient staff to oversee the many sites while also managing other responsibilities of school construction, maintenance and operations. However, after many years of working through wireless issues, the district gained valuable experience and insight regarding the lease enforcement process and the legal strategies utilized to resolve lease breaches. The district now expects for its wireless lease portfolio to shift from being a cost to being a source of needed revenue for maintaining and improving its athletic facilities.
This article originally appeared in the September 2015 issue of School Planning & Management.