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Home My WebLink AboutM-93-0541I CITY OF MIAMI. FLORIDA INTER -OFFICE MEMORANDUM ro Honorable Mayor and Members of the City Commission FROM Ce Cl Y ."0 d i o anager RECOMMENDATION: DATE AUG 2 61993 FLE SUBJECT Emergency Ordinance Establishing a Telecommunications Fee REFERENCES Schedule and Street Excavation Permit Fee ENCLOSURES 2 It is respectfully recommended that the City Commission adopt the attached Emergency Ordinance amending Chapter 54, Article VIII, Use of the Public Rights -of -Way by Private Communications Systems, Sec. 54-149 Compensation for Permit, and Sec. 54-150 Payments and Audit of Compensation and License Fees to establish a Fee Schedule and amending Art. II Section 54-27 to make the fee for all street excavation permits the same to defray the costs to the City of their regulatory activity. BACKGROUND: On May 19, 1988, Ordinance 10438 was adopted establishing a procedure and fee to permit Private Telecommunications companies to utilize the public rights -of -way for the installation of their telecommunication lines, such as cable, fiber optics or other pathways. In 1989 the State of Florida legislature adopted Section 337.401(4) of the Florida Statutes establishing standards and guidelines for the determination of fees as compensation for permission to use the public rights -of -way by telecommunication systems. Subsequently, the City`s established fee was challenged by a telecommunication company as exceeding that permitted by the State Statutes. As a result, Ordinance 10943 was adopted by the City Commission, setting the minimum fee of $500.00 per mile, indicated in the State Statutes, until the City conducted a study and established a fee schedule in accordance with standards set forth in Section 337.40(4) Florida Statutes. On May 12, 1993 the City of Miami entered into a Professional Services Agreement with Milian, Swain & Associates Inc., an engineering firm with extensive experience in the fi.nancial management of utilities, for the purpose of establishing a telecommunications permit fee schedule based on costs directly related to the use of the public rights -of -way. :- 54 1 w The fee schedule proposed in this Ordinance is based on the results of the study and equitably applies to all telecommunications permittees. In order to apply this fee uniformly to all applicants for street excavation permits Section 54-21(a) is also being amended. It is requested that this Ordinance be adopted as an emergency ordinance in order that the fee be effective prior to October 1, 1993, the date that all existing permits will be due for renewal and so that the City of Miami will be compensated as soon as possible for the costs that have been incurred and are continuing to incur far the administration and regulation of the telecommunication facilities. acCOMMUNICATIONS _113� COMPANY, INC 915 HARGER ROAD, SUITE 260 OAKBROOK, ILLINOIS60521 TEL. (708) 573-6500 FAX (708) 954-2833 - it - 9/_ _.eM �' / 3 �.LIya� Clerk September 3, 1993 Mr. Richard Strom Associate General Counsel MCI Communications Corporation 2400 North Glenville Drive Richardson, Texas 75082-4381 Re: Miami, FL Ordinance J-93-586 - right-of-way fees Dear Richard: I have had the opportunity to review proposed Miami ordinance, J-93-586, along with the consultants' reports prepared for MCI. As you are aware, MFS Communications Company, Inc. ("MFS") is the nation's largest competitive access provider, currently operating fiber optic telecommunications networks in 14 major metropolitan areas throughout the country. As a part of a major expansion effort, MFS is giving serious consideration to entering the Miami market to construct and operate a fiber optic system to serve the business community of Miami. In fact, MFS of Miami is authorized by the Florida Public Service Commission to provide dedicated intrastate point-to-point service. If MFS were subject to the recurring fees as proposed in this ordinance, MFS' ability to compete in Miami and to provide its services to Miami's businesses would be severely impacted. It is my understanding that Southern Bell ("Bell") is not subject to these per foot charges. The services MFS provides are in direct competition with those offered by Bell. Such fees would place MFS at a substantial competitive disadvantage entering into the Miami marketplace, and may deprive the business community of a state-of- the-art alternative to the phone company. The consultants' reports clearly point out the flaws in the City's review of the value of rights -of -way, and I concur in their analysis. From a legal perspective, I do not believe the proposed $1.65 per foot per year is consistent with the parameters of Florida Statutes Chapter 337.401 (4), based on this analysis. 93- 541 I would appreciate your entering this letter into the record as part of the September 7 proceedings, to demonstrate MFS' opposition to ordinance J-93-586. Very truly yours, 1 L�'rry 6uglAs Berent Counsel for Development cc: Kevin O'Hara - President, MFS Development Submitted into the public record in 9 iY!(-? 1v Hin i Citjr Clerk i �J COMMUNICATIONS .541 COMPANY, INC. GERO'ON F'RES TON CONCLUSIONS AND RECOh1MENDATIONS RESULTIN G FROM ANALYSIS OF THE PROPOSED 1993/94 TELECOMMUNICATIONS PERMIT FEE SCHEDULE FOR THE CITY OF MIAMI :t i Submi icc iten 1j. ,J, City Clerk , 93— "ti I I s t 1 GERSON, PRESTON & COMPAN , P.A. CERTIFIED PUBLIC ACCOUNTANTS GARY R. GERSON. CPA 886 SEVENTY-FIRST STREET RICHARD C. PRESTON, CPA MIAMI BEACH. FLORIDA 33141 ALAN S. ROSEN. CPA ARTHUR ( BROWN, CPA DADE: (305) 868.3800 JAMES P. ROBINSON. CPA ' BROWARD: (305) 522-3202 DONALD M. GERSON, CPA PALM BEACH: (407) 833.9573 DANIEL S. KUSHNER. CPA FACSIMILE: (305) 864,6740 STEPHEN R. sEPPER,CPA PLEASE REPLY TO: MIAMI BEACH BARRET BLECKER, CPA MANNY M. ILAGAN, CPA CALVIN DECKER, CPA STANLEY REYNOLDS. CPA ROBERT P. FEDDERMAN, CPA EDUARDO M. ZUNIGA, CPA JAMES R. WIGGINS. CPA ERIC S. RAUCHWERGER, CPA ROSE S. ROBINSON. CPA JUDD A. BERKLEY. CPA ANNA FREEDMAN, CPA STEVEN F. KLEIN. CPA ALLAN GOTTESMAN, CPA EDWARD D. DEPPMAN, CPA ROBERT J. MCCLERNON, CPA DARLENE M. GIORDANO. CPA Mr. Toby Brigham, Esq. Brigham, Moore, Gaylord, Wilson, Ulmer, Schuster & Sachs, P.A. 203 Southwest 13th Street Miami, Florida 33130 BOCA RATON OFFICE ONE BOCA PLACE • SUITE 324A 2255 GLADES ROAD BOCA RATON, FLORIDA 33431 TEL: (407) 392.9059 MEMBERS AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS FLORIDA INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS September 1, 1993 Submitted into the public record in connection wi.til item --- on _ 7 LT 3 . 1� -atty a iTa, Cis y Clerk Re: Proposed Telecommunication Permit Fee Schedule Dear Mr. Brigham: We have analyzed the proposed Telecommunication Permit Fee Schedule for the City of Miami dated July 1993 prepared by Milian, Swain and Associates, Inc. (MSA). As a part of this analysis, we interviewed representatives of MSA and the City of Miami Departments of Public Works and Finance. These interviews were conducted to gain an understanding of the assumptions underlying the Fee Schedule calculations and, when appropriate, to verify the information used in the calculation. We also discussed land value issues with Andrew McGarry of Real Estate Analysts, Inc.. Finally, we read those sections of the Florida State Statutes and City of Miami Code pertaining to Page 1 9 3_ 5 4 f , telecommunication permit fees. Based upon this analysis, we have the following observations: The largest component of the $1.65 per linear foot fee proposed by MSA is the cost of land component, which represents $1.47 per linear foot. State Statute Section 337.401(4)(c) states that the calculation of the telecommunication permit fee for the use of the right-of-way may include "the proportionate share of cost of land for such street, alley or other public way attributable to utilization of the right -of. -way..." MSA has interpreted the "cost of land" as an amount based on the fair market value of the land plus 50% of the maintenance costs of the roadway above the right -of. --way. The cost of land issue is complicated by the lack of historical cost records related to land acquisition for road systems within the City of Miami. MSA has relied upon the most recent appraised valuations as provided by the Dade County Appraiser's Office to determine an average market value for land in the City of Miami. Their estimate combines all land uses (commercial, public and residential) without any adjustment in value for land serving as roadways. It is our opinion that if the interpretation of the State Statute reading "the proportionate share of the cost of land" means the costs of the subterranean rights and not the upkeep, than surely cost does not mean fair market value. However, we have made computations based both on a fair market value and a cost approach. Submitted into the public record in connection with item _.�! I q3 Pad iiy Hirai C i erk �.• 1 i. ;T 93_. 541 In determining the market value of the land within the right-of-way, the MSA report has assumed an average right-of-way width of two feet. However, page 13 of the telecommunication permit agreement refers to the right-of-way as 16 inches in width. Any allocation of the cost of land should be based upon the legally specified width of the right-of-way. We have assumed a 16 inch wide right-of-way in calculating the value of land. Since value arises from use, one must take in consideration that 90% of the fair value of the roadway is derived from the development rights on the adjacent land parcels. Under the City Code, development rights are based upon the square footage of the land parcel, out to and including halfway across any adjacent roadway. The roadways permit a larger development adjacent to the streets and the City has collected the value of the roadway through the resulting increases in assessments and ad valorem taxes. Therefore, the only remaining sources of value of the right-of-way are as a roadway (attributable to the City) and a telecommunications conduit (attributable to MCI). We believe that the value assigned to the conduit could not reasonably be more than one-half of the remaining 10% of market value shared between the City and MCI. MSA's estimate of the carrying cost of the right-of-way (assumed by MSA to be two feet wide on average) is based upon an estimate of the land's current market value multiplied by the long-term cost of money (estimated at 8%). However, as the City of Submitted into the pclblie record i7� cam.,-, )(--,Zr;n ;J;r;.th item _Pale C1.3 93 541 Hirai ("l i-y Clerk 4 Miami's debt is tax-exempt, the City's long-term borrowing rate is significantly lower than 8%. For purposes of calculating ail appropriate permit fee, we changed the long-tenn borrowing rate from 8% to 5%. According to the audited general purpose financial statements of the City for the year ended September 30. 1992, the City issued $70.1 million of General Obligation Refunding Bonds in December 1992 at rates varying from 4% to 6%. In March 1993, the City's Department of Off Street Parking issued $15.5 million of Parking System Revenue Refunding Bonds at rates from 2.7% to 5.7%. Based upon these recent bond issues, a long-term borrowing rate of 5% appears proper. MSA has assumed that all right-of-way footage is along roadways for which the City of Miami bears responsibility for maintenance and upkeep. Of the total 733 miles of surface streets within the City of Miami limits, approximately 132 miles are maintained by Dade County or the State of Florida. It would seem unreasonable for the City of Miami to assess a "carrying cost" for a right-of-way beneath a roadway that was funded and maintained by County or State sources. It also seems unreasonable that a subterranean right-of-way should be charged with 50% of the maintenance costs for the roadway. State Statute Section 337.401(4)(a) specifies that the right-of-way holder is responsible for all road repair costs "directly related to the inconvenience or impairment solely caused by the disturbance of the Submitted into the public record in connc. c3a item �T one 3 Pa9e 4 3 _ 41 Nla,cr V Hirai municipal right-of-way..." The need for regular maintenance on a roadway results from the daily traffic voltune and weather conditions and would not be impacted by the conduits below the surface. In addition, the Telecommunication Permit Agreement of April 17, 1992 requires the permittee to be responsible for all maintenance and repairs "..attributable to utilization of the right-of-way". Any additional charge for maintenance costs through the permit fee would be a duplication, which is prohibited under State Statute 337.401(4)(c). Included within the administrative costs to be allocated according to the MSA report is an annual charge of $12,000 for the preparation of the fee structure. This fee structure preparation contributes $.0975 per linear foot to the total fee. We feel that unless regulatory or economic conditions change substantially, there is no reason to revise the fee structure on an annual basis, and therefore the $121000 should not be a continuing annual charge. State Statute Section 337.401(4)(c) provides for "the proportionate share of the cost of land attributable to utilization of the right-of-way". The City probably had little or no costs associated with acquiring the roads and the City does not have the records to reflect any of their historical cost of roads. The costs to be incurred by the City to produce such records would probably be higher than the permit fees as proposed by MSA. It is therefore our opinion, in accordance with State Statute 334.401(4)(c), in the Submitted into the public record in connection with item_ on 91:4 P-Me-5• 9 3 - 541 lWct il-' 3r Hirai C' r„ Clerk 1 f 1 1 absence of any historical roadway land cost records, the statutory minimum fee of $500 per linear mile should apply to the MCI Telecommunications Corporation and its COMPARISON OF CITY OF MIAMI PROPOSED TELECOMMUNICATION PERMIT FEE TO RECOMMENDED FEE Right -of -Way Admin. Land Total Charges Maintenance cost C9.9 pgr linear foot City of Miami's proposed permit fee based upon Milian, Swain & Associates report using assessed value $0.047 $0.1200 $1.4864 $1.6534 A. Permit fee analysis based upon value $0.000 $0.0225 $0.0620 $0.0845 B. Permit fee analysis based upon statutory cost/ $0.0947 minimum fee of $500 per linear mile The City has little or no cost for its road and furthermore cannot determine the historical cost of the roads. In our opinion, according to the state statutes, the permit fee should be the minimum fee of $500 per linear mile. The City's proposed fee schedule using value is misapplied. if the land value were properly applied, the resulting permit fee (A above) is computed at less than the statutory minimum. Submitted into the public record in co-n 1ec -J-cPn wzth item, Oil Mcitt y Hirai ►-k City Clerk Page 7 1 SCENARIO A Our Calculation of the Permit Fee based upon a 16" Right -of -Way Allocating One-half of Shared Value of the Roadway Estimated market value per square foot of land (per City of Miami permit fee schedule) 1 Average width of telecommunications right-of-way � (Per page 13 of telecommunication permit agreement) "1 Market value of 16 inch wide strip of roadway (per linear foot) As 90% of the value of the roadway is retained by adjacent property owners, the remaining 10% of value of roadway is shared by City and MCI Estimated remaining value shared by City and MCI (per linear foot) Maximum percentage of remaining value allocated to MCI Estimated remaining value allocated to MCI j Average interest rate on City of Miami Bond issues in December 1992 and March 1993 Carrying cost per linear foot of land value allocated to MCI and other telecommunication permittees $18.45 x 1.333 feet wide $24.59 x 10% $2.46 x 50% $1.23 x 5.0% $0.062 Submitted into the public record in connection with item on -GJ1 3 Yla'U l Hirai City Clerk 93-'541