Although it’s not unusual for someone to buy out lease payments from a private site owner, more and more local governments are also looking at it as an option, as small cells and DAS change the dynamics. Local governments frequently see cell tower leases as reliable and steady sources of income with few disadvantages, but in a recent report from American City and County, CEO of SteepSteel James Kennedy warned that small cell technology could soon disrupt the traditional cell tower lease system, putting some cities in a financial dilemma. By selling future lease payments and supporting legislation restricting installation of wireless infrastructure in the public right-of-way, Kennedy suggested that cities may inoculate themselves against unexpected drops in revenue due to small cell technology expansion.
Kennedy endorsed the common practice of selling future lease payments for a lump sum, many of which equal to up to 160 times the amount of each monthly payment. Kennedy described this kind of sale as a “fast, politically neutral, and relatively risk-free mechanism for generating significant and instantly available revenues for the jurisdiction.” If a city receives $2,500 per month in cell tower lease revenue, it could stand to receive a lump sum between $400,000 and $475,000, protecting the city from a drop in earnings, should the carrier terminate a contract early.
In his report in American City and County, Kennedy explored the impact that small cell technology will likely have on these kinds of lease buyouts in the future. Fourteen states have already adopted legislation capping small cell node fees at $250 annually per node, which is drastically lower than most traditional cell tower leases. Experts from the Small Cell Forum predict that by 2019, small cell density will reach more than four million across the country, which Kennedy predicts will compel carriers to renegotiate their tower leases or even decommission tower sites.
To protect themselves from such an impact, Kennedy advised municipalities to explore selling their future lease payments in exchange for a lump sum and encourage legislators to support bills that would help local governments maintain control over the installation of wireless facilities.
February 27, 2018
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