OCTOBER 18, 2005 SECURITY DEPOSIT FOR BENEFIT OF VERIZON AND SPRINT PURSUANT TO POLE USE AGREEMENT TO ENABLE CONNECTION BETWEEN THE CITY HALL VOICE AND DATA NETWORK AND POINT VICENTE INTERPRETIVE CENTER OCTOBER 18, 2005 SECURITY DEPOSIT FOR BENEFIT OF VERIZON AND SPRINT PURSUANT TO POLE USE AGREEMENT TO ENABLE CONNECTION BETWEEN THE CITY HALL VOICE AND DATA NETWORK AND POINT VICENTE INTERPRETIVE CENTER OCTOBER 18, 2005 SECURITY DEPOSIT FOR BENEFIT OF VERIZON AND SPRINT PURSUANT TO POLE USE AGREEMENT TO ENABLE CONNECTION BETWEEN THE CITY HALL VOICE AND DATA NETWORK AND POINT VICENTE INTERPRETIVE CENTER

TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL

FROM: DENNIS McLEAN, DIRECTOR OF FINANCE AND INFORMATION TECHNOLOGY

DATE: OCTOBER 18, 2005

SUBJECT: SECURITY DEPOSIT FOR BENEFIT OF VERIZON AND SPRINT PURSUANT TO POLE USE AGREEMENT TO ENABLE CONNECTION BETWEEN THE CITY HALL VOICE AND DATA NETWORK AND POINT VICENTE INTERPRETIVE CENTER

RECOMMENDATION:

Authorize the payment of a cash security deposit in the amount of $10,000 to Verizon California, Inc. and $5,000 to Sprint Spectrum, L.P. pursuant to the proposed pole use agreement to enable connection of the City Hall voice and data network with the Point Vicente Interpretive Center.

BACKGROUND:

At its meeting on May 17, 2005, the City Council approved the expenditure of $80,000 in the Equipment Replacement fund for replacement of Information Technology (“IT”) equipment at Point Vicente Interpretive Center (“PVIC”) and to extend the existing City Hall data and voice network to the PVIC using fiber cable. As a part of its action, the City Council also:

- Approved a Professional Services Agreement for an IT fiber cable contractor to perform the installation of fiber cable between City Hall and PVIC; and
- Authorized the execution of the attached Pole Lease Agreement between Southern California Edison (“Edison”) and the City of Rancho Palos Verdes to run fiber cable above ground between City Hall and the PVIC by leasing utility poles owned by Edison.

Jon Arnold, Construction Manager, Prescott Communications Inc. d/b/a Cable Engineering Services, the IT fiber cable engineer retained by the City, has completed his engineering analysis and design to enable the installation of fiber cable between City Hall and PVIC. The Pole Lease Agreement between Edison and the City has been executed.

During the engineering analysis, the IT fiber cable engineer determined that Verizon California, Inc. (“Verizon”) and Sprint Spectrum L.P. (“Sprint”) own 3 of the 13 poles that the City must use to extend the existing City Hall data and voice network to the PVIC using fiber cable. Both Verizon and Sprint initially demanded the inclusion of either a security bond or an irrevocable letter of credit as security of the City’s obligations pursuant to the proposed pole use agreements. Staff has offered the payment of a security deposit in the amount of $10,000 to Verizon and $5,000 to Sprint, subject to approval by the City Council. Verizon has agreed to accept the security deposit in the amount of $10,000 in lieu of the security bond or irrevocable letter of credit. Sprint’s pole management contractor expects that Sprint’s risk management staff will agree to the $5,000 security deposit. Staff will inform the City Council in the event Sprint does not agree to use of the security deposit.

The pole use agreements include an annual lease commitment of $50 to Verizon for two poles $25 to Sprint for one pole, plus de minimus initial fees. Additionally, the pole use agreements includes the right for both Verizon and Sprint to conduct an inspection of the City fiber cabling connection on their respective poles at any time, at the City’s cost. Verizon staff has estimated that the periodic inspection fee will cost about $200-500. Sprint will charge a periodic inspection fee of $250. The right to inspection for a fee is a standard provision that is contained in any industry standard pole use agreement. The right to inspection enables Verizon and Sprint to ensure that the City has not modified the fiber cabling installation in any way that would violate the pole use agreement (i.e. additional fiber cables, attachment of antennas). Verizon and Sprint have expressed that the inclusion of the security deposit is essential to secure payment for any inspection that Verizon and /or Sprint may deem necessary, in light of the possibility that the City may disagree with the purpose and/or Verizon and Sprint’s findings resulting from such inspection.

The proposed pole use agreements with Verizon and Sprint are attached for review and approval by the City Council, subject to completion of the application by the City’s IT fiber cabling engineer, licensing and other action items contained within the agreements. They pole use agreements include the same standard industry provisions contained in the Pole Lease Agreement with Edison, approved by the City Council on May 17, 2005.

Subject to the City Council’s approval, the execution of the pole use agreements with Verizon and Sprint, contractor scheduling and weather, Staff expects that installation of the fiber cabling, PVIC computer network and Cisco voice and messaging system will be completed before the end of November 2005, or soon thereafter. If necessary, a basic 2-line analog phone system will be installed after occupancy is granted and furniture is installed in the event the Cisco voice and messaging system are not operational.

FISCAL IMPACT

The payment of the proposed security deposit will be recorded as a prepaid asset on the Statement of Net Assets (the “balance sheet”) of the City. It would not be recorded as program expenditure in the General Fund. Therefore, a budget adjust is not required. Because the prepaid asset will not be converted to cash and available to spend during the current year, the General Fund balance will be “reserved” in the amount of $15,000. General Fund Reserves will be decreased by the same amount.

Respectfully submitted,

Dennis McLean
Director of Finance and Information Technology

Reviewed:

Les Evans
City Manager

Attachments:

Pole Attachment Agreement Between Verizon California, Inc. and City of Rancho Palos Verdes
Pole License Agreement – Sprint Spectrum, L.P. and City of Rancho Palos Verdes