A deal that will make Oxford Village’s water fund much more liquid was approved 4-1 by council last week.
Council accepted a proposal from Black Dot Capital & Real Estate Group, based in Mission Viejo, California, to buyout the village’s existing lease agreement with AT&T Wireless for the cellular service antenna it has located high atop the municipal water tower on S. Glaspie St.
‘I just think this makes good business sense to approve this,? said Councilman Tony Albensi.
Black Dot will pay the village a lump sum of $345,000 for the lease ? which is the equivalent of 10.86 years worth of AT&T rent at the current rate ? and have control of that space on the tower for 600 months, which equals 50 years.
All of the money will be placed in the village’s water fund, which definitely needs a cash infusion. In a memo to council, Manager Joe Young explained how over the last two years, the village has transferred a total of $500,000 from its sewer fund to its water fund in order to cover deficits and avoid rate increases to water customers.
‘This lease buyout could help maintain the current water customer rates or avoid significant increases,? Young wrote.
The other benefit to the village is quite clear ? cash up-front and zero risk going forward.
The village has about 14 years left on the lease. AT&T is currently paying the municipality $2,645.70 per month (or $31,748.40 for the year).
According to the lease agreement with AT&T, the rent increases annually by either 5 percent or whatever the Consumer Price Index (CPI) adjustment is, whichever is less.
If the village were to keep the AT&T lease, assuming an annual CPI increase of 3 percent, it would generate $554,670 for the municipality over the next 14 years.
Based on those calculations and assumptions, Black Dot’s $345,000 offer would seem to represent a $209,670 loss of income for the village over time.
But Davis calculated the present value of that $554,670 over 14 years is actually $233,652 in today’s dollars. So in that respect, Black Dot’s $345,000 offer is worth more today.
All these figures are assuming AT&T doesn’t terminate the lease, something it could easily do with 30-day notice and the payment of six months rent.
‘AT&T can cancel these leases at any time,? said village attorney Bob Davis, who noted he handles ‘a whole bunch? of these water tower leases for his Oakland County clients and ‘they cancel all the time.?
Black Dot’s purchase of the lease means it’s assuming all the risk and in exchange, the village is receiving a guaranteed payment for its water fund coffers.
‘You’re getting some certain money and you’re getting rid of the risk that AT&T will walk on you,? Davis said.
Councilman Elgin Nichols liked that idea.
‘A bird in the hand is worth more than what’s in the bush,? he said.
In return for assuming this risk, Black Dot would begin collecting the rent from AT&T and earn that estimated $209,670 in profit over the next 14 years. ‘That’s provided AT&T doesn’t bolt,? Davis said.
Because Black Dot would have control of that space for 50 years, when the lease with AT&T is up, they can either renegotiate for a new one or Black Dot could decide to rent it to another wireless company. The same holds true if AT&T decides to terminate the existing lease.
?(Black Dot) can try to find another tenant to take AT&T’s place and they get to collect that rent,? Davis said.
However, Black Dot would not have the power to terminate the lease with AT&T.
‘They have to live out (and) honor that lease the same way (the village) did,? Davis said. ‘Basically, they step into (the village’s) shoes under the AT&T lease (and it) really is difficult for us to kick AT&T out.?
Black Dot also cannot lease the space out to a second wireless company while AT&T is still utilizing the space. There can only be one antenna up there at any given time.
Village President Tom Benner was the only council member who opposed the purchase.
He stated that 50 years is ‘a long time to give up a space on the water tower? to an ‘outside firm.?
‘That’s a long time to have that space tied up,? Benner said.
It was noted the village has four other spaces on the tower that it could possibly lease to other wireless companies.
‘If it was the only or last spot (the village) had, I probably wouldn’t be in favor of giving it away on a deal like this,? Davis said.
Davis noted that while it’s true that ‘no one’s been banging on the village’s door to put an antenna up there,? the municipality should be actively marketing its four available spaces to potential renters.
To him, the ‘best of all worlds? consists of the village making this deal with Black Dot, then finding four new tenants for the other spaces, resulting in ?$10,000 a month in passive income.?
Oxford Township Supervisor Bill Dunn, who attended the council meeting as a village resident, noted the township has a water tower 300 feet higher than the village’s and ‘nobody’s beating down our door to put up antennas.?
‘I wouldn’t think there’s a lot of people out there right now willing to commit,? he said.
Village Planning Commissioner Dale Wolicki, who has 25 years experience as a consultant to the wireless communications industry, told council the demand for space on the village’s tower will come when the capacity (i.e. the number of wireless users) in a high-traffic area such as downtown Oxford reaches the point where wireless companies need to find another location.
‘I think eventually you will have some other carriers on there,? he said. ‘Right now, it’s just a matter of the traffic getting to the point where it starts to overwhelm the networks.?
Wolicki believes the demand for wireless access is ‘only going to get worse? as smartphones and other devices, like GPS, become more and more popular.
He explained to council that ‘water towers are favorable locations for any communications company? because choosing them as sites ‘usually . . . avoids the drag-out fight? that arises when dealing with zoning issues.
While it’s true that using a water tower to mount wireless equipment is ‘usually more expensive? and complicated than building a brand new tower, Wolicki indicated that most carriers are usually willing to overlook the cost if it ‘gets done fast? and gets them ‘on air quickly.?
As an expert in the field, Wolicki told council ‘if a client gave me a project to put a tower in downtown Oxford, I’d look at (the village’s) water tower and go, ‘Oh, goodie! It is a very, very suitable candidate.?
Wolicki said the only issue with Black Dot’s having control of this tower space for 50 years is whether or not the structure still be there so far into the future.
‘That’s their risk under the lease,? Davis replied.
Although Black Dot would control a space on the tower, it would not be responsible for any maintenance.
‘I’m reserving the (village’s) right to maintain the property and the water tower because I don’t want to give away that right,? Davis said. ‘I want to be able to paint the water tower, maintain the water tower, keep the water tower nice because (village users) need it. I don’t want to give anybody that right.?