7-9. Real Property and Asset Management Committee. Board of Directors. 8/21/2012 Board Meeting. Subject. Executive Summary.

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1 Board of Directors Real Property and Asset Management Committee 8/21/2012 Board Meeting Subject Authorize two long-term agreements with the City of Perris (long term license) in Riverside County and Verizon Wireless (long term lease) in San Bernardino County, pending project approvals Executive Summary Staff is seeking board approval to enter into one long-term ground license and one long-term lease with city of Perris and Verizon Wireless, respectively, on Metropolitan properties in the counties of Riverside and San Bernardino (Attachment 1). These agreements will provide initial fair market annual revenues totaling $32,800, as determined through appraisals. Both agreements comply with Metropolitan s standard leasing terms and conditions, including retaining Metropolitan s paramount right to use the properties (Attachment 2). Staff evaluations determined of these agreements will not interfere with Metropolitan s water operations. Design and construction of planned improvements for the properties are subject to Metropolitan s review and written approval. Board authorization of these agreements is required given that the real property interest grants are for more than five years. Details The city of Perris (city) is requesting a year-to-year license agreement (with a projected term exceeding 10 years) for the construction and maintenance of a linear park in connection with the May Ranch single-family residential tract. The acre (745,750 square feet) site is located on a portion of Metropolitan s Colorado River Aqueduct (CRA) right-of-way, along Rider Drive between Bradley and Evans Avenues in the city of Perris (Attachment 3). The city will be installing drought-tolerant landscaping on 12.9 acres of the site for public park uses and will maintain an additional adjacent 4.22 acres of Metropolitan s right-of-way. The annual fair market rent is $2,800 for the initial term with increases each renewal year. The license is contingent upon the City securing all required approvals. Termination is allowed with 365 days written notice by Metropolitan based on its paramount rights or by Lessee with 90 days written notice. The city of Perris will be responsible for abatement of weeds, trash, and debris at the site. Verizon Wireless (Attachment 4) is requesting a 15-year telecommunications lease (an initial 5-year term, with two 5-year extensions) located on Metropolitan s Black Metal Mountain Site #2 in San Bernardino County (Attachment 5). Verizon will construct, operate, and maintain a 12-foot by 26-foot (312 square feet) outdoor equipment building along with attaching its antennas on Metropolitan s existing lattice tower. Fair market rent for this lease is $2,500 per month with automatic annual rent increases together with a yearly road maintenance fee of $1,500. In addition, Verizon will pay a one-time reimbursement fee of $95,000 for use of Metropolitan s tower. The lease is contingent upon Verizon Wireless securing all required approvals. Termination is allowed with 365 days written notice in the event of either party s emergency, security, or operational requirements. Verizon will be responsible for abatement of weeds, trash, and debris at the site. 7-9

2 8/21/2012 Board Meeting 7-9 Page 2 Policy Metropolitan Water District Administrative Code Section 8230: Grants of Real Property Interests Metropolitan Water District Administrative Code Section 8231: Appraisals of Real Property Interests Metropolitan Water District Administrative Code Section 8232: Terms and Conditions of Management Documents Metropolitan Water District Administrative Code Division VIII, Article 4; Disposal of Real Property, Section 8240, Preliminary Requirements Metropolitan Water District Administrative Code Section 8241: Authority for General Manager to Sell or Lease Surplus Real Property; Restriction on District Directors and Employees Fair Market Value Policy These agreements are at fair market value and are consistent with the Board s policy that Metropolitan property will be leased at fair market value. California Environmental Quality Act (CEQA) CEQA determination for Option #1: The proposed action is categorically exempt under the provisions of CEQA and the State CEQA Guidelines. The proposed project involves the funding and minor alterations of existing private or public facilities, along with the construction of minor appurtenant structures, with minor modifications in the condition of land, water, and/or vegetation which do not involve removal of healthy, mature, scenic trees. These activities would result in negligible expansion of use and no possibility of significantly impacting the physical environment. Accordingly, the proposed action qualifies under Class 1, Class 3, and Class 4 Categorical Exemptions (Sections 15301, 15303, and of the State CEQA Guidelines). The CEQA determination is: Determine that pursuant to CEQA, the proposed action qualifies under three Categorical Exemptions (Class 1, Section 15301; Class 3, Section 15303; and Class 4, Section of the State CEQA Guidelines). CEQA determination for Option #2: None required Board Options Option #1 Adopt the CEQA determinations and authorize the General Manager to enter into agreements with city of Perris and Verizon Wireless. Fiscal Impact: Metropolitan will initially receive $32,800 in annual rent payments, with automatic annual rent adjustments, in addition to a one-time $95,000 capital reimbursement. Business Analysis: Allow Metropolitan to generate revenue and defray costs associated with weed abatement Option #2 Take no action. Fiscal Impact: Forgo opportunity to generate revenue Business Analysis: Land would remain vacant and would not produce revenue and/or decrease maintenance expenses for Metropolitan.

3 8/21/2012 Board Meeting 7-9 Page 3 Staff Recommendation Option #1 Ralph T. Hicks Manager, Real Property Development and Management 7/31/2012 Date Jeffrey Kightlinger General Manager 8/8/2012 Date Attachment 1 Summary of Proposed Long Term Agreements Attachment 2 Metropolitan s Standard Leasing Terms and Conditions Attachment 3 Location and Site Maps for City of Perris Attachment 4 Fact Sheet for Verizon Wireless Attachment 5 Location and Site Maps for Verizon Wireless Ref# rpdm

4 8/21/2012 Meeting 7-9 Attachment 1, Page 1 of 1 Requests for Long Term Agreements LESSEE NAME ACREAGE TERM RENT/FEE USE/COMMENTS City of Perris (RL 2686) acres Year to Year (1) $2,800/year (2) Perris Public linear park located along the Colorado River Aqueduct right of way in the City of Verizon Wireless (RL 3144) acre 15 years (3) $30,000/year (4) Plant Telecommunications lease located on Black Metal Mountain Site 2 near Gene Pumping TOTAL ANNUAL REVENUE $32,800/year (1) Projected term will exceed 10 years (2) Terms include an annual rent escalation based on Consumer Price Index (3) Initial proposed term of lease is 5 years with two 5-year renewal options (total 15 years) (4) Terms include an annual $1,500 road maintenance charge and 4 percent annual rent escalation An additional $95,000 one time capital reimbursement will be charged

5 8/21/2012 Board Meeting 7-9 Attachment 2, Page 1 of 1 Metropolitan s Standard Leasing Terms and Conditions Metropolitan retains paramount rights to use the property. Lease provides only secondary uses and is not required by Lessee for primary or regulatory conditions or permits. Metropolitan has unconditional right to enter and inspect the property. No hazardous substances allowed. Rent based on market appraisal. Cancellation clause for one year or less (except for leases with public entities or for telecommunications purposes). Lessee responsible for maintenance. Lessee pays all applicable fees, costs, and taxes, e.g., business and possessory taxes. Lease to contain insurance, indemnification, defend, and hold harmless provisions protecting Metropolitan against liability. Any improvements provided by the tenant/lessee require prior written Metropolitan approval. Compliance is required with all local, state, and federal laws. An administrative processing fee paid by the requestor/applicant is generally required.

6 8/21/2012 Board Meeting 7-9 Attachment 3, Page 1 of 1

7 8/21/2012 Board Meeting 7-9 Attachment 4, Page 1 of 1 Prospective Long-Term Lease Holder Fact Sheet Summary Verizon Wireless FACT SHEET INFORMATION SUMMARY PROSPECTIVE LONG TERM-LEASE HOLDER Verizon Wireless VISIT WEBSITE: and Company contact regarding this prospective lease: Eric Meurs (Plan Com Inc.) LEASING PROJECT: Verizon Wireless is requesting a 15 year lease (5 years with two 5-year extensions) for the installation, operation, and maintenance of 12 panel antennae and 3 microwave dishes attached to Metropolitan s existing lattice tower and miscellaneous equipment located in a proposed equipment shelter of 287 square feet. FMV for this lease is $2,500 per month with automatic annual increases, together with an annual road maintenance fee of $1,500 and a one-time capital contribution of $95,000 for the tower. Under this lease Verizon Wireless would be responsible for weed abatement and removal of trash/debris at the site. PROPERTY LOCATION DATA: The property is located on Metropolitan s Black Metal Mountain Site #2. BUSINESS SUMMARY: Verizon Wireless is a mobile network operator that offers wireless voice, messaging and data products and services to customers in the United States. Verizon Wireless is the largest wireless communications services provider in the United States with million subscribers as of the end of MARKET HISTORY: Originally founded in 2000 as a joint venture of U.S. telecommunications firm Verizon Communications and UK multinational mobile network operator Vodafone. Verizon Communications holds 55 percent ownership and Vodafone holds the remaining 45 percent ownership. Verizon Wireless has approximately 2,330 locations. MARKET PERFORMANCE: Verizon Wireless is a leader in wireless voice and data services. The company: Owns and operates the nation s largest 4G LTE network. Launched in December 2010, the Verizon Wireless 4G LTE network covers more than 200 million people in more than 230 markets across the U.S. By the end of 2012 the company s 4G LTE network will cover more than 260 million people in 400 markets across the country. Built the nation s first wide-area wireless broadband network Delivered the nation s first wireless consumer 3G multimedia service Offers global voice and data services in more than 200 destinations around the world This Fact Sheet was prepared from general information from the internet using the search term: Verizon and Verizon Wireless on 06/28/2012. COMPANY LOCATION: Headquartered in Basking Ridge, New Jersey. The company employs over 80,000 people nationwide. OWNERSHIP, GENERAL INFORMATION (06/28/2012): Verizon Communications is a publicly traded company, on the NYSE with the symbol VZ, and the company is one of 30 that makes up the Dow Jones Industrial Average. Stock prices 52 week high $44.77, 52 week low $32.28, Price as of close of market $43.97 PE ratio $48.00 Volume Million Total Revenue $70.2 Billion (2011); $28.2 Billion (Q1 2012) Net Income $1.69 Billion (Q1 2012) HEADLINES SAMPLING: (On 06/28/2012) Mobile Hotspots Can Make Summertime Travel Easier and Hassel Free (June 27, 2012) Verizon Combines Insane Internet Speeds with Sensible Value in New FIOS Bundles (June 18, 2012) Verizon Wireless Unveils New Share Everything Plans for Basic Phones, Smartphones, Tablets and More (June 12, 2012) Verizon to Acquire Hughes Telematics, Inc. (June 1, 2012) Verizon to Deploy the Industry s First Eight Terabit Platform in its Global MPLS Backbone (June 12, 2012) Verizon Communications Declares Quarterly Dividend (June 7, 2012)

8 8/21/2012 Board Meeting 7-9 Attachment 5, Page 1 of 1