AFC/T-Mobile Cell phone tower proposal questions and Answers: Thanks to our great members, the board has received quite a few emails with questions about the proposal. Below are as many as we can answer and some additional background on the negotiations that have been done so far: 1. Are we getting enough for our lease? Are we getting a fair price? AFC was approached by T-Mobile in the spring of 2008, 1 year ago, and we have been back and forth with them on the financial terms for over a year. The initial offer from T-Mobile was $1,200 per month and 3% increase every 5 years. Our initial counter proposal was $3,600 a month and we asked for $1500 for each additional carrier both of which they rejected outright and said T-Mobile would never agree to. The final terms we negotiated were $1800/month + 4% per year increase. We also talked with 2 pools that have Cell towers, one in Burke, VA is getting $1500/month 5 year term and 10% increase after 5 years. They are also getting $1500 /month for each additional carrier on their tower. The other pool in Fairfax county is $1,850/month + 3% escalation clause every year. We also talked with someone from the Wireless Landlord’s association. The average cell tower lease in Arlington leases for $1,938, the low was $874, the high was $3,350, so when we initially counterproposed to T-Mobile, we tried for the high end. T-Mobile from what I hear is tough to negotiate with and we felt like this was the best deal we could get. If we feel like we could do better, we could reject this deal and pro-actively go to Verizon, Sprint, Virgin Mobile, whoever, but in the current economy I don’t know how far we will get. 2. Can we get a “Pine Tree” type tower? We did ask about getting a tower that looks like a tree rather than the proposed “concealment pole” (antennas on the inside). Because the pole is designed to accommodate 3 carriers, each with a set of antennas on the pole, the lowest set of antennas has to be above the tree line, so the board felt that aesthetically, the pole would stand out less with the concealment version. That said, AFC does have final approval of any designs before the pole is built, so this could be modified. Note that Arlington County might try to dictate this as well, but AFC has final approval. If people feel strongly about it , we can take a poll, we will have some time during the zoning process to decide. 2. Will this income be subject to Unrelated Business Income (UBI) tax or impact our tax exempt status? Response from our tax accountant: The rental of a cell phone tower by your organization to T-Mobile would be subject to income taxes as unrelated business income . The gross rent less direct expenses would be subject to income taxes at the regular corporate tax rates, which are 15% on the first $50,000, 25% on the next $25,000 34% on the next $25,000 and 39% on amounts from $100,000 to $335,000, the rates change again for taxable income from $335,000 to $10,000,000 . I assume that the rentals would never be anywhere close to the upper limits of the tax brackets. In order to effect the tax exempt status, rental and other invest income generally cannot exceed 35% of the organizations gross income. Which for 2007 was approximately $449,000 (35% =$157,150) 3. Will we need to provide easements for electric utility supply to the site? Yes, we do need to provide easements for T-Mobile to bring power to the site from Carlin Springs. T-Mobile will be doing their own trenching in burying the electric lines, and we have specifically requested details on how deep the trenches will be dug and want to have assurances that no tree roots will be disturbed by the trenching and no additional trees will be affected by this, except for the trees identified to be removed by the 40 x 50’ space requested by T -Mobile. T-Mobile will have their own electric meter (assuming this is feasible, but very likely) – they will be responsible for paying any utilities associated with the cell phone tower. 4. Can we cancel the lease at one of the 5 year intervals at our discretion o r do we need to have due cause to cancel the lease? We asked for this right during the negotiations (no contract has been signed of course) but were rejected. T-Mobile’s argument is that they are making a major capital investment ($100K) so this is a risk for them if we have the right to cancel (or renegotiate financial terms) every 5 years. We can cancel for cause, including non-payment, or any other breach of the contract terms that is not cured within 30 days. 5. If we cancel the lease, will they be responsible for dismantling the tower? Yes, from the contract terms: “Upon termination or expiration of this Lease, the Premises shall be returned to Landlord in good, usable condition, normal wear and tear and casualty excepted.” And there is another clause that says “Tenant shall have the right and obligation to remove the Antenna Facilities at any time during and upon the expiration or termination of this Lease, including all concrete to one foot (1’) below grade. Tenant shall make all reasonable effort to ensure that any installation or removal activities cause minimal disruption to normal pool operations, and shall provide at least one week’s written notice to Landlord before such activity occurs.” 6. Do we provide unrestricted access for service trucks to work on the facility? We are required to provide 24 x 7 access to the site, however we also have in our contract that any work they do on the site cannot interfere with the normal operations of the pool. The site will be fenced off and locked, only T-Mobile will have the keys, AFC will not have access to T-Mobile’s leased portion of the property. 7. Will we have any level of liability for damages or injury caused by this facility, (blowing over, neighborhood kids climbing the fence into the facility and getting hurt?): T-Mobile is required to provide Commercial General Liability Insurance of One $1,000,000.00 per occurrence and $2,000,000.00 aggregate. We also have a mutual ―Hold Harmless‖ clause in our contract that may be invoked in the event of 3rd party lawsuits. 8. Value of our location: Can we get An upfront (Lease origination?) fee, payable upon signing of the lease—not upon completion of construction. Yes, we are getting an annual lease option fee of $2,500 upon lease signing and if the zoning takes more than one year (a possibility) we get another $2,500, after that if it drags on longer, the fee is up for negotiation. 9. Request Replanting the same number of trees that they will remove, to other areas on our property or to a location that we determine. This is a great idea, though we would have to determine where these trees might go, or maybe we could have T-Mobile donate X number of trees to the community associations, Arlington Forest Association has tree grants for homeowners for example. 11. Request that T-Mobile provide Free HotSpot service for members use on our property. AFC can ask that T-Mobile provide this for our members. 12. Zoning: T-Mobile will be responsible for applying for, paying for and obtaining all zoning variances, permits etc as required by County, State and Federal authorities. 13. What are the exposure risks from Cell Towers? Information on the FCC and the American Cancer Society websites provide that these organizations do not believe there is any evidence that Cell phone towers cause cancer, here are some web links for more information about exposure levels from cell towers: FCC web site http://www.fcc.gov/oet/rfsafety/cellpcs.html, http://www.fcc.gov/oet/rfsafety and from the American Cancer Society: http://www.cancer.org/docroot/PED/content/PED_1_3X_Cellular_Phone_Towers. asp? sitearea=WHO. ADDITIONAL INFORMATION FROM THE INFORMATIONAL MEETING HELD ON JULY 18. Below is a brief recap of the questions from the informational meeting held on July 18 at the pool. Would T-Mobile build AFC a bath house? No, T-Mobile will not build a bath house for AFC. Will the County even allow the cell towe r to be built? This question cannot be answered at this time. There is an extensive permitting/approval process, which will involve the active participation of local civic associations, environmental and engineering studies, etc. It is possible that the County will not permit the construction of the cell tower. Will be building the cell tower cause AFC to be taxed at a comme rcial rate? Would AFC be zoned comme rcial if we leased the space to T-Mobile? It is possible that the site itself (ie, the 40- by 50-foot parcel) might at some point in time be zoned as commercial, but the rest of the club (eg, the pool, the deck, playground area, tennis courts, the area by the brick wall, the parking lots, the grounds around the pool) would not be zoned as commercial. It is important to note that T-Mobile will pay all taxes related to the tower site itself; however, if T-Mobile ever left, and the site in fact is zoned as commercial (not a certainty, but it could happen), then AFC would have to request the country to return the 40- by 50- foot space to being zoned as noncommercial. How many watts will the tower put out? T-Mobile did not know; they will provide us with an answer shortly. How many customers does T-Mobile serve? T-Mobile will get back to us with a number for the Arlington area. Why did T-Mobile pick the AFC location? Is it related to the fact that we are close to Route 50? The demand for this tower comes solely from customer demand. As more and more people are abandoning land lines, working from home, etc., demand for cell service has been increasing. Is the tower self-supporting? Yes, tower is self- supporting. No cables will be required to keep the tower in place. Has T-Mobile looked at other sites? Did they approach any other sites in Arlington? This is the primary site T-Mobile is pursuing. No other pools approached. Would T-Mobile be willing to put money into escrow to pay for the re moval of the tower if T-Mobile goes out of business? No, T-Mobile would not create an escrow account; however, they would be willing put up some type of bond. There is also a clause in the lease agreement that says T-Mobile is responsible for restoring the site to good and usable condition if the lease is terminated for any reason. What is the diameter of the tower/pole? About 3 feet, tapers to 22 inches at the top. Because the tower is a concealment tower, all the antennae are located inside the pole itself—there will be no antennae sticking out from the top of the tower. Will T-Mobile provide broadband access to the neighborhood? A free hot spot? This is something that may be discussed during the permitting process; T-Mobile could not provide an answer at this time. Are radiation hazard analyses performe d? Yes, but not until after the tower is built. T-Mobile will provide us with results Will the cell tower interfere with any other electronic devices —home security systems, cordless phones, TVs? No, each carrier operates on its own frequency. Will T-Mobile compensate AFC for trees removed? T-Mobile may consider this. Is the cell tower is a lightning draw? That is, will it attract lightning? No, the tower is very well grounded. Will T-Mobile sign a contract stating that no one at AFC will get soft-tissue cancer? No, T-Mobile not sign such a contract.