City of Gonzales
FINANCE DEPARTMENT
STAFF REPORT
TO: Honorable Mayor Rios and City Council
DATE: May 6, 2024
FROM: Mike Howard, Finance Director
THROUGH: Carmen Gil, City Manager
SUBJECT: Resolution No. 2024-13 Letter of Intent from TowerPoint Aquisitions, LLC
RECOMMENDATION
It is recommended that the City Council adopt Resolution No. 2024-13, A Resolution of the City Council of the City of Gonzales authorizing the City Manager to execute the Letter of Intent from Towerpoint Acquisitions, LLC, related to the prepayment of lease agreements with Verizon, and T-Mobile, and authorizing the City Manager to negotiate the lease prepayment and term easement agreement.
BACKGROUND
Local governments in California and throughout the United States partner with cellular companies to construct towers on government owned property. In Gonzales, the City currently has two (2) active lease agreements (“Leases”) for wireless communication facilities on City-owned property. The location of both leases is at 700 5th Street. The partnership is of mutual benefit to the parties. The cellular company has the ability to provide better service both locally and regionally for the customers it serves since this partnership offers the ability to work with one property owner rather than multiple private owners in which land may or may not be available. The benefit to the City is that each lease provides a monthly rental payment to the City in the form of additional revenue.
On rare occasions, Cities can maximize these assets with a one-time large lump sum payment rather than smaller monthly payments over time. This occasion has presented itself to the City.
AGENDA
ITEM
6 REVIEW AND ANALYSIS
On September 18, 2023, the City entered into a Professional Services Agreement with SteepSteel to complete the negotiation and sale of the Leases. SteepSteel marketed to prospective, highly-qualified bidders directly, and began negotiations based on the responses received. SteepSteel received several inquiries from interested parties, and negotiated best and final written proposals from TowerPoint, Everest Infrastructure Partners, Unison, Symphony Wireless, and Landmark Dividend.
The following table lists the best and final written proposals that represents the result of several rounds of negotiation:
Purchaser Wireless Tenants Purchase
Price
Legal Structure Term
Length
Revenue
Sharing
TowerPoint Verizon/ T-Mobile $1,500,000 Telecommunication Easement
99 40% of New
Tenant Rent
Everest Verizon/ T-Mobile $1,425,000 Telecommunication
Easement
55 None
Unison Verizon/ T-Mobile $1,400,000 Telecommunication
Easement
99 None
Unison Verizon/ T-Mobile $1,333,000 Telecommunication
Easement
50 None
Symphony Verizon/ T-Mobile $1,367,859 Telecommunication Easement
99 None
Symphony Verizon/ T-Mobile $1,262,639 Telecommunication Easement
50 None
Landmark Verizon/ T-Mobile $1,340,000 Telecommunication Easement
99 None
Current Leases
Currently the City receives approximately $6,021 per month or just under $72,300 per year in lease revenue from the two (2) leases. Since the City of Gonzales operates on a $7.6 million-dollar operating budget, monthly revenue of $6,021 is not as impactful as a onetime lump-sum payment of $1,500,000, in addition to the proposed sharing of 60% of the value of new leases that are added to the Water Tower.
The proposed onetime payment would cover the next 99 years.
Wireless
Tenants
Current Rent Rent Payment
Frequency
Escalation
(CPI, % or $)
Escalation
Frequency
Date of Next
Escalation
Verizon $3,021.69 Monthly 3% Annual 01/01/2025
T-Mobile $2,999.22 Monthly CPI Annual 05/01/2024
Based on the considerable difference in revenue to the City ’s General Fund, Staff is recommending that the City Council adopt a resolution authorizing the City Manager to execute a Letter of Intent with Towerpoint for the transfer of the Leases. The resolution also authorizes the City Manager, City Attorney, and the Consultants to negotiate the terms of the Easement Agreements, associated Rent Redirect letters, and any other documents as may be required to complete the transfer of the existing leases and facilitate prepayment of lease revenue to the City. This proposed transaction also includes an option to add 500 square feet of land area among the Sites for installation of equipment and will provide the City 60% of the revenue received from any customer who installs equipment within the additional land area. Staff will bring back the final agreement for the transfer, prepayment and easements for Council consideration at a subsequent meeting.
Explain Recommendation and How it Supports the Vision
Gonzales will continue to be a safe, clean, family-friendly community, diverse in its heritage, and committed to working collaboratively to preserve and retain its small-town charm.
Explain: Accepting pre-payment of long-term wireless communications leases will provide revenue that will enable the City to remain committed to the City’s vision.
Explain how the Recommendation Directly Implements the Mission The City Council and Staff of the City of Gonzales will realize our Vision by providing the leadership, commitment and resources necessary to provide excellent services that enhance the quality of life of our diverse community. X Yes ___No ___ NA
Explain: This is a way to bring in onetime revenue to shore up the General Fund Reserve City services will be delivered in a cost-effective, respectful and friendly manner to ensure the safety and well-being of the residents and the promotion of business, recreational, housing and employment opportunities in an environmentally sustainable manner. ___ Yes ___No X NA Explain: Please see above.
Strong fiscal reporting allows us to provide appropriate resources for:
• Public Safety X Yes No N/A
• Housing X Yes No N/A
• Recreation X Yes No N/A
• Environment X Yes No N/A
• Education X Yes No N/A
Explain: Please see above.
ALTERNATIVES
The following alternative are provided for Council Consideration.
1. Adopt the Resolution;
2. Modify and adopt the Resolution; or
3. Do not adopt the Resolution and direct staff to consider other options
BUDGET IMPACT
The fiscal year impact would be a onetime infusion of funds to the General Fund to build the City reserves to a comfortable level while the City continues to look for additional long term revenue sources to support the General Fund.
CONCLUSION
Based on the considerable difference in revenue to the City ’s General Fund, staff recommends that the City Council adopt Resolution No. 2024-13, which will authorize the City Manager to execute a Letter of Intent with TowerPoint to transfer leases for sites located at 700 5th Street in return for prepayment of rent over the term of the Leases. The Resolution will also allow the City Manager, City Attorney, and the Consultants to negotiate the terms of the Easement Agreements, associated Rent Redirect letters, and any other documents as may be required to complete the transaction. This includes an option to add 500 square feet of land area among the sites and will provide the City 60% of the revenue received from any customer who installs equipment within the additional land area.
Attachments:
1. Resolution No. 2024-13
2. Letter of Intent