Governor eyes cell tower leases to fund bicentennial projects

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The state is looking to raise as much as $50 million from long-term cell tower leases in order to help finance Indiana’s 2016 bicentennial plans.

According a booklet describing Gov. Mike Pence’s proposed budget, the state’s cell tower infrastructure is currently being underutilized and “is not realizing its full commercial potential.”

The state — which owns 150 cell towers — is looking to lease the excess capacity to private operators while still maintaining its critical public safety and emergency communication. State police communication is at the core of those needs.

Cost estimates for proposed bicentennial projects exceed $56 million. Pence hopes the leases could alleviate the majority of that cost.

The projects include the construction of a new state archives building ($25 million), the construction of a Bicentennial Inn at Potato Creek State Park ($25 million), the creation of an education center at the Indiana State Library ($2.5 million), the development of a commemorative Bicentennial Plaza ($2 million) in Indianapolis, and the funding of the Bicentennial torch relay initiative ($1.6 million).

“The state has never marketed their towers, so the only thing on their towers is the state equipment,” Kirke Willing, executive director of government efficiency and financial planning, said. “To go out on the open market, you really need to get some other carriers on those towers.”

The cell tower lease plan will happen in two phases. The first phase involves leasing some space to carriers, such as AT&T and Verizon, who want to participate.
The second phase starts long-term leases of the entire tower to a third party, who will market the space to other companies.

“This shows they have value because we already have people on them,” said Dan Huge, chief financial officer of the Indiana Finance Authority.

Neil Krevda, Indiana director of governmental affairs for Verizon Communications, said his company might be interested in the leases.

“If a tower is in a location where it will help our customers’ connectivity, I would say we would be in favor of this idea,” Krevda said. “The cost and time involved in building a tower could be offset by this idea.”

Fiona McKone, vice president of corporate communications for Crown Castle, the nation’s largest provider of shared wireless infrastructure, said where cell phone companies go is “all about coverage and capacity.”

“The cell phone companies determine – based on technical issues – where they need an antenna, where they have a gap, and the tower has to be within that area or its of no use to them,” said John Pestle, chair of the Telecommunications Group at Varnum LLP. “But you never know, companies are adding new antennas every day so they might find someone who will buy the rights. The question is: What’s the price?”

On average, market-level lease payments for co-location are about $1,900 monthly, according to State Budget Director Brian Bailey.

The Indiana Finance Authority is working with a field specialist to determine the exact value of Indiana’s towers.

The Integrated Public Safety Commission currently oversees the state’s cell tower leases. The state already has three such leases to third parties, to Duke Energy, Hamilton County and Education Media. All three contracts have been in place for a couple of years.

Moving forward, the Office of Management and Budget and the Indiana Finance Authority will work with the Integrated Public Safety Commission to create a master lease document.

“Leases on the towers can begin as soon as master lease agreement is in place, which we hope to be in the next month or two,” Willing said. “We’ll get it all done ideally by the end of fiscal year 2016.”

Various cities have taken advantage of similar but smaller models. In 2012, Atlanta used the same approach after facing a $20 million cut in the city’s budget. The leases gave the city $1 million annually over 20 years.

“There are not any state or city governments who have done it to this level,” Willing said of Indiana's plan.

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