Guiding a city through a cellular tower lease negotiation requires a lot of knowledge and an understanding about what companies will and will not agree to. Otherwise, cities might not realize when they are placed at a disadvantage by a lease agreement. Since GMA looks out for the best interests of cities, we work to make sure that cities get a decent price from companies and a good agreement that protects them.
So what is the city leasing, exactly? Generally, cellular companies want to put their facilities on city property because cities usually have towers in place such as a water tower or a communications tower (i.e. where a city has its public safety radio equipment). In some cases, the company may want to lease public property to build a tower. Companies find municipal locations attractive and suitable places for their cellular equipment and antennas. As a result, they will seek you out, especially if a company is expanding their coverage in a particular area. So, when they present you an offer, how does the negotiation process work?
- A designated person from the company will make you an offer. The cellular company will designate the equivalent of a real estate agent (along with some engineers who have decided where the premium sites are in your city) who will initiate a first contact with you. With the first offer, they are looking for the best financial deal that also best meets their schedule. The company will present a lease document to the city along with a price for how much they’re going to pay you in rent.
- GMA negotiates with the company. GMA reviews the documentation and applies its knowledge about what we know from other leases we’ve negotiated. Usually, we respond with a different and possibly substantially higher price to the company than they offered you originally. From there, GMA and the company will go back and forth a lot. Often, there may be times when we don’t hear from the company for periods of time while they’re considering the counteroffers. In a few cases, a negotiation may be terminated early because the company decides to choose a different site.
- The negotiation ends, and an agreement is finalized. GMA comes to an agreement when they feel the price and agreement serves the best interests of the city. At that point, the document is sent to an attorney who represents the company. Your city attorney will also get involved prior to the agreement being brought before your City Council. Sometimes, your city attorney may require changes. In those cases, we defer to the city attorney’s legal expertise.
- City Council approves (or rejects) the agreement. Once the agreement is finalized legally by both the company and the city, GMA presents the final document to your City Council for approval. In some cases, the agreement may be rejected (for example, if it’s unpopular with citizens).
- Monitor and renew your agreement on an ongoing basis. These leases are structured to usually renew every five years for a set term. For example, you may have a 20-year term with four 5-year renewals inside of it. When those renewal periods arrive, the company can back out of the lease if they desire or the city can request more money at those times. Sometimes, the agreement may include a schedule that requires the lease payment to go up at certain intervals.
While requiring a lot of expertise to do right, a cellular tower lease negotiation follows the rules of standard negotiations. Here are some other things to keep in mind while tackling these kinds of negotiations.
- Stay up on the payment terms of your agreement. If you stay in our program, GMA does its best to track when your renewal periods come up and makes sure that the company pays you properly. If you don’t follow up and enforce the payment provisions of your agreement with the company, you might not be surprised to learn that the company usually will not contact you about a payment increase! Create a system for knowing when you’re supposed to receive your payment and when the agreement term expires.
- Don’t just focus on money—pay attention to other important agreement provisions.Cities often focus only on the amount of rent they’re going to collect from a lease agreement, but they also need to remember that there are some provisions in these leases that might lead to major liability issues. That includes having the right insurance requirements and other terms and conditions that help protect you legally. For example, who has access to climb your water tower to adjust something or add a new attachment? What happens if there is an accident? What happens if you need to paint the water tower and move the antenna for a few days? You need to understand all of the things that can happen and account for them in the lease agreement.
- Beware of companies helping you negotiate agreements that are overly focused on high rent. A few vendors provide a service where they claim to put your city property into a database of potential cellular equipment locations and seek out companies to use on your property for cellular towers. They negotiate your contract for you, but those contracts are usually not advantageous to the city—and they often lack the right insurance or tower access provisions. Instead, these contracts focus on the money. That’s because the vendor gets a significant cut of the rental payment. We’ve seen cities give away as much as 30% of their revenue to a third party that isn’t acting in their best interest. Use a service like GMA’s that is not motivated by a cut of the money and has your best interests at heart.
- Apply the same negotiation process for city property where companies build their own tower. Sometimes companies will simply build a tower in your city. They’ll lease a piece of land from you, for which you’ll receive a payment. Make sure you have an agreement where you collect money every time they put an attachment on that tower, and ensure that you have the right provisions in place for the tower to protect your city’s interest (for example, in case it falls on someone or gets knocked over in a storm).
- Beware of companies trying to reduce your rent or offering the city a lump sum payment. GMA is increasingly seeing companies who have contracted with wireless service providers approach cities and request a reduction of rent, usually in conjunction with a claim that due to industry consolidation or various economic factors that they need a reduction of rent or they may be forced to exercise their termination rights in the lease agreement. In most cases, GMA would recommend that cities not agree to reduce their rent. A more recent trend is that cities may be approached with lump sum payment offers in return for a city to abate future rent. All too often, GMA generally finds that the offers made by these companies are not in the city’s best interest and are far below the value cities should receive for the use of their facilities. Companies that approach cities with these offers are usually commission-based and feature highly skilled negotiators with much more information available to them as compared to a city. Cities need specialized expertise to assist them in negotiating these types of agreements to help level the playing field. If approached by one of these companies, cities can turn to GMA for assistance. GMA brings 20 years of experience to the negotiating table and continues to stay abreast of this ever changing industry to help cities.