About Us. Agenda 11/12/2014. Maximizing Benefits from Telephone and Cable Agreements. Municipal Association of South Carolina November 12, 2014

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1 Maximizing Benefits from Telephone and Cable Agreements Municipal Association of South Carolina November 12, 2014 About Us McLean Engineering Company Established years working to help municipals develop and maintain successful operations Traditional Power Engineering Services Full Array of Field Engineering Services Business Analytical Services Agenda Pole Attachment Overview (~15 minutes) Industry Trends (~20 minutes) The Essentials to Ensure Proper Attachments The Permit Process (~45 minutes) Make-Ready (~20 minutes) Attachment Cost Calculations (~20 minutes) Correcting Past Issues Pole Attachment Inventory Review (~10 minutes) Compliance Audit Review (~10 minutes) Recap and Review (~10 minutes) Questions (~10 minutes) 1

2 Pole Attachment Overview Pole Attachment Overview How did we get here? Independent of Current Agreement Streamline the Process to Attach Correct Past, Present and Future Issues Remove Attachment Headaches Create Business Certainty for Attachers Attachments Process Should Break Even Profit/Loss (P & L) 6 2

3 Industry Trends Recent Battleground States: OH, LA, NC, TX ~21 states have some municipal regulation Ohio and Louisiana The Finding & Order follows similar revisions made by the FCC in 2011, affecting pole rates, access timelines STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE SUPERIOR COURT DIVISION 10 CVS 1172 TIME WARNER ENTERTAINMENT ADVANCE/NEWHOUSE PARTNERSHIP, Plaintiff, v. TOWN OF LANDIS, NORTH CAROLINA VI.CONCLUSION {85} For the above stated reasons, the Court ORDERS and DECLARES as follows: a) Plaintiff s claim for violation of s nondiscrimination requirement is DISMISSED with prejudice; b) Defendant s $18.00 attachment rate is unjust and unreasonable, in violation of ; c) Defendant s proposal to charge Plaintiff separately for each cable attached to a pole is unjust and unreasonable, in violation of ; d) Defendant s proposed contract term imposing a fining mechanism for nonconforming attachments is unjust and unreasonable, in violation of ;rate just and reasonable. e) Within 90 days, the parties shall confer and adopt a new rate in accordance with the reasoning outlined in this Order and Opinion; 3

4 STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE SUPERIOR COURT DIVISION 10 CVS 1172 TIME WARNER ENTERTAINMENT ADVANCE/NEWHOUSE PARTNERSHIP, Plaintiff, v. TOWN OF LANDIS, NORTH CAROLINA Although Defendant may not have exercised these rights at the time of trial, the Agreement and Proposed Agreement still grant Defendant the power to do so at any time pursuant to express terms. These additional rights make a proportional allocation based on the attacher s use of the usable space reasonable,. Texas PUC IV. Maximum Allowable Rate A municipally owned utility is prohibited from charging any entity a poleattachment rate "greater than the fee [it] would be permitted to charge under rules adopted by the [FCC] Industry Trends Rate Pressure 4

5 Industry Trends Rate Pressure Industry Trend Summary Bottom Line: Rental Rates are Trending Down Industry Trend Summary Pressure Rates No Current Pressure Make-Ready Costs Permit Cost Accurate Billing Safety Standards 5

6 6

7 Industry Trends Questions? Essentials - Ensure Proper Attachments The Permit Process Make-Ready Attachment Cost Calculations Permitting The Permit Process Evaluating the Permit Make-Ready Process Construction Post-Construction Inspect, Inspect, Inspect Close-Out 7

8 Receiving the Permit The Attachment The Attachment 8

9 Standardized Permit Form Consider Approval by the City/Board Contact Information Date Requested Detailed Location Information Attachment Details Work Description, Field Sketch Permit Fee Enough information to evaluate the request Location Sample Map Sample Applications Sample Application Sample Application 9

10 Evaluating the Permit Assign the Responsibility Set the Expectations Time, Costs and Communication Respond in a Reasonable Time (examples below): Number of Pole(s) Less than 10 Between 11 and 100 Greater than 100 ResponseTime 10 to 20 Days 25 to 45 Days Case-by-case (discuss with applicant) Evaluating the Permit (cont d) Cost Awareness is Key I.e. Assign Work Order # to Permit(s) Additional Permitting Fees if Necessary Communication to All Parties is Important Evaluate Involvement of Other Attachers» Pole Ownership may be Unclear Communicate to All Attachers Manage Expectations Required Make-Ready Work Make-Ready Engineering Should Include All Engineering Work Make-Ready Cost Estimates Should Include ALL Labor Expenses Field Visit Engineering Design Time Time to Estimate Costs Should Include All Materials 10

11 Sample Make-Ready Invoice Attacher Wants To Proceed Make-Ready Cost Paid Before Work Takes Place Good Business Practice Awareness by All Departments Construction Process Attacher Should Initiate the Joint-User Notification Process City Should Begin the Make-Ready Work on a Timely Basis Once Complete, Update the Joint-User Notification Status Follow the Process to Completion 11

12 Joint-Use Notification Post-Construction Process Field Inspection Code Compliance Clearances Strength Requirements Compliance with Other Requirements Document Completion Attachments for Billing Map/GIS Updates Example: What to Inspect 12

13 13

14 Post-Construction Process 14

15 Up-To-Date Attachment Count Make-Ready Process 44 Make-Ready Process 45 15

16 Make-Ready Process Time and costs can vary widely Minimal interaction: Receive permit Review permit: proper execution, correct information, adequate information, etc. Determine staff involvement 46 Make-Ready Process Heavy interaction: Multiple staff: Engineering, drafting, admin, line crew, inter-agency, customer liaisons Other utilities: Attachers, joint use, nearby OH & UG (shared R/W, water & sewer) Other agencies: DOT, railroad, EPA, FAA, misc. property owners/interests 47 Make-Ready Steps Receive permit and start documentation Review permit (proper execution) Engineering and make-ready review Engineering & make-ready charges Process Make-Ready payment (continue) 48 16

17 Make-Ready Steps (cont.) Authorize make-ready work Work scheduling Review make-ready work Authorize to attach Review attachment Close out paper work 49 Make-Ready Examples Minimal Make-Ready Minimal Crew Minimal Engineering Pole Change-Out (no DOT) Pole Change-Out (DOT) Re-Build or Move Line 50 Minimal Make-Ready Minimal field work no work Required Steps: Receive permit and start documentation Review permit (proper execution) Determination of minimal staff involvement Authorize to attach Review attachment Close out paper work 51 17

18 Minimal Make-Ready Cost Parameters Pole and spacing adequate Application review & site visit Process paperwork No crew No engineering 1-2 man-hours 52 Minimal Crew Required Steps Permitting documentation as before Engineering and make-ready review Engineering and make-ready charges Process make-ready payment Authorize make-ready work (continue) 53 Minimal Crew Required Steps (cont.) Minimal dispatch burden Review make-ready work Authorize to attach Review attachment Close out paper work 54 18

19 Minimal Crew Cost Parameters Pole adequate Application review & site visit Minimal engineering Minimal crew (lift secondary, etc.) Process paperwork 3-6 man-hours 55 Minimal Engineering Required Steps Permitting documentation as before Engineering review and charges as before Processing and authorization as before More field staff = more complicated dispatch and scheduling Work review and close out as before 56 Minimal Engineering Cost Parameters Pole configuration change Application review and site visit Minimal engineering 1-2 crew hours (move transformer, etc.) Process paperwork 4-8 man-hours 57 19

20 Pole Change-Out (no DOT) Required Steps Permitting documentation as before Engineering review and charges as before Processing and authorization as before More field staff = more complicated dispatch and scheduling May involve multiple crews (continue) 58 Pole Change-Out (no DOT) Required Steps (cont.) Multiple staff involvement Engineering, drafting, admin, line crew, inter-agency, customer liaisons Interaction with other utilities/agencies Work review and close out as before 59 Pole Change-Out (no DOT) Cost Parameters Application review and site visit 2-3 engineering/drafting hours 4-6 crew hours Process paperwork man-hours $1k-$2k materials 60 20

21 Pole Change-Out (DOT) Required Steps Permitting documentation as before Engineering review and charges as before Processing and authorization as before Multiple staff involvement as before May involve multiple crews as before (continue) 61 Pole Change-Out (DOT) Required Steps (cont.) Added complication of DOT permit process Drawings, paperwork, bureaucracy, multiple meetings, submittals, delays Interaction with additional utilities/agencies Work review and close out as before 62 Pole Change-Out (DOT) Cost Parameters Pole configuration change Application review & site visit 6-11 engineering/drafting hours 4-6 crew hours Process paperwork man-hours $1k-$2k materials 63 21

22 Re-Build or Move Line Required Steps Includes same issues as before plus a complete construction project: Planning Route selection Basic design decisions Surveying: property, easements, permits (continue) 64 Re-Build or Move Line Construction Project Steps (cont.) Permitting: environmental, wetlands, wildlife, historic preservation, archeologist, DOT Property / right-of-way acquisition Environmental reports Design data / structure design Pole design Material take-off / list (continue) 65 Re-Build or Move Line Construction Project Steps (cont.) Plans & specs Pole bidding & awarding Construction contract preparation Design approval Construction bids, pre-bid meetings, awarding Staking Pre-construction meetings (continue) 66 22

23 Re-Build or Move Line Construction Project Steps (cont.) Construction management Final inventory Closeout documents So we have prior steps plus 20 construction steps 67 Re-Build or Move Line Cost Parameters Application review & site visit Engineering / drafting DOT permits Contracts / crew Process paperwork $50k-$150k per mile 68 Attachment Engineering 69 23

24 Attachment Engineering Guy Need No guy 70 Make-Ready Process Questions? 71 Pole Attachment Rental Rates: APPA and FCC Calculations 24

25 Rate Calc 73 Rate Calc 74 Rate Calc 75 25

26 Rental Rate Calculation (Example) Step 1: Estimate Attached Assets Distribution Assets that DIRECTLY Support Attachments Pole, Towers, Fixtures (FERC A/C 364); OH Cond & devices (FERC A/C 365); Services (FERC A/C 369) Estimate Bare Portion of Pole (~85%), Avg Pole Height, Support Space, Safety Space, # of Entities attached Rental Rate Calculation (Example) Step 2: Estimate Supporting Overheads Distribution Assets & Activities that INDIRECTLY support Attachments Total Plant in Services; Accumulated Depreciation; Construction in Progress; Materials & Supplies; O&M, Supervision and Engineering of OH Lines; A&G Expense; Payment in Lieu of Taxes; etc. Rental Rate Calculation (Example) Step 3: Common Calculations Age-Weighted Cost of a Bare Pole ($) Carrying Charges (%) A&G Expense % + O&M Expense % + Aged Pole Depreciation Rate(%) + Payment in Lieu of Taxes/Franchise Fee/ROI (%) Total Annual Carrying Charge Rate on Aged Pole (%) 26

27 Rental Rate Calculation (Example) Step 3: Common Calculations (cont.) Support Space Factor (%) Usable Space Factor (%) Rental Rate Calculation (Example) Step 4: Attachment Fee Support Space Factor (%) + Usable Space Factor (%) Pole Space Factor (%) Multiply by: Carrying Charge Rate (%) Cost Percentage Multiply by: Estimated Aged Cost of a Bare Pole ($) Pole Attachment Fee ($) Reminder Bottom Line: Rental Rates are Trending Down 27

28 Attachment Cost Summary Keep Good Accounting Records Bare Cost of Poles Depreciation Construction Materials and Supplies O & M Supervision and Engineering for OH Administrated and General Payment in Lieu of Taxes GIS is an Important Resource 82 Attachment Cost Calculations Questions? 83 Correcting Past Issues Pole Attachment Inventory Compliance Audit Review (Safety Audit) 28

29 Inventory Audit Typically every 5 Years Shared Cost Utilize GIS Where Possible Prorated Billing Don t Cut Corner Attachments vary by Contract Attachment Types and Sub-types CATV Mainline (through or dead-end) Service Drop Power Supply/Amplifier Cabinet Guy (Span or Guy) Pedestal Attachment Types and Sub-types TELCO Service Drop Junction Box / Terminal Block / Splice Block Guy (Span or Guy) Pedestal (Bonded vs Bolted) Mainline (through or dead-end 29

30 Attachment Types and Sub-types FIBER Mainline (through or dead-end) Splice point Amplifier Cabinet Guy (Span or Guy) Attachment Types and Sub-types DOT Traffic Signal Support Control Cabinet Guy (Span or Guy) 30

31 31

32 Joint-Use Inventory (example) Prorated Billing Prorated Billing (example) Attachments: Tele Attachments: Rate: Muni to Rate: Tele Amount: Muni Amount: Tele Co Total Invoice to Tele Billing Year Billing Date Co on Muni Muni on Tele Co Tele Co Co to Muni to Tele Co to Muni Co 71, /12/2014 2, $ $ 73, $ 1, $ $ $ 61, /5/2013 2, $ $ 65, $ 4, $ $ 59, /19/2012 2, $ $ 64, $ 4, $ $ 59, /13/2011 2, $ $ 64, $ 4, $ $ 57, /15/2010 2, $ $ 61, $ 4, $ $ 53, /7/2009 2, $ $ 57, $ 4, $ $ 50, /18/2008 2, $ $ 54, $ 3, $ $ 45, /18/2007 2, $ $ 49, $ 3, $ $ 388, Total 417, $ 29, $ Prorated Invoices ( ) (per agreement affective 1/1/2007) Attachments: Tele Attachments: Rate: Muni Rate: Tele Amount: Muni Amount: Tele Co Total Invoice to Tele Billing Year Billing Date Co on Muni Muni on Tele Co on Tele Co Co on Muni on Tele Co on Muni Co 71, /12/2014 2, $ $ 73, $ 1, $ $ $ 69, /5/2013 2, $ $ 71, $ 2, $ $ 66, /19/2012 2, $ $ 69, $ 2, $ $ 65, /13/2011 2, $ $ 68, $ 2, $ $ 61, /15/2010 2, $ $ 64, $ 3, $ $ 56, /7/2009 2, $ $ 59, $ 3, $ $ 51, /18/2008 2, $ $ 55, $ 3, $ $ 45, /18/2007 2, $ $ 49, $ 3, $ $ 415, Total 436, $ 21, $ 32

33 Emergency Repair Storms, Accidents, Other Municipal Pole Damaged Costs are Incurred to Transfer Attachments Foreign Pole Damaged Costs are Incurred to Replace the Pole Municipal Should Recover Costs Record to Recover Capture Costs Observations Attachment Inventory Typical Increases Range from 5% to 25% Factors: Time Between Inventories Customer Growth by Attacher Safety (Compliance) Audit National Electric Safety Code (NESC) Contract Provision Reserve Space Other 33

34 34

35 35

36 36

37 Observations Safety Audit Typical Pole Violations Range from 0.5% to 9.0% of Total Poles Typical Pole Replacement Range from 0.25% to 1.5% of Total Poles 37

38 Safety Violation Example Example Utility with 1,000 Poles Percent Poles to Replace % Poles to Replace Cost per Pole..... $1,000 Total Pole Change-out Cost $10,000 Percent Other Pole Violations % Other $400 Per Pole... $16,000 Total Safety Violation Expenses. $26,000 Other Agreement Provisions Other Agreement Provisions Attachment Counts Prorated Billing Safety Audits Safety Corrections Responsibilities Unauthorized Attachments Abandoned Poles Rental Fees and Escalators Bond & Security Instruments 38

39 Other Agreement Provisions Unauthorized Attachments Utilize Penalties to Distract Abandonment of Licensed Poles Utilize where Transfers are Lacking Rental Fees Cost Escalators Attachment Escalators Bond or Security Instrument Tied to Number of Attachments I.E. Greater of: $10k or $25/attachment 39

40 Summary Create Business Certainty for Attachers Enforce Existing Agreement Permitting Process is Essential Perform Inventories & Safety Inspections Recover the Cost of the Attachment Process Attachments should not be an additional cost Remove Risk and Liability Contact Walter C. West Vice President Analytical Solutions

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