A. Towers are generally classified as personal property. The Supervisor determines the land value
of the site that supports the tower.
B. Towers are most often constructed on leased land.
C. Tower sites in rural areas, are often located on residential or agricultural lands, adjacent to
interstate highways. These sites will typically occupy the highest possible elevations.
A tower site developed on agricultural properties is not an agricultural use. The tower site
should be identified and valued separately as a non-agricultural use.
D. Communication towers may also be located on top of taller buildings, such as office buildings and
apartment buildings. Income questionnaires for these properties will often reflect "Other Income"
attributable to the tower site(s).
When making a physical inspection of the property, a visual check should be made. Ask questions
if you want to be sure that you have properly defined the income.
E. Communication towers that are located on exempt property and utility operating property will
require special treatment. There are three different situations examined here: 1. A tower associated
with an educational, religious, or non-profit user. 2. A tower built upon land that is owned by a
government (Federal, State, or Municipal) agency. 3. Towers constructed on Public Utility
easements or rights-of-way.
1. A tower associated with an educational, religious, or non-profit
user.
Sites located on exempt properties must be discovered, listed, and assessed. For educational,
religious, and other non-profit uses, the tower use is not consistent with the typical
qualifying exempt purpose. When discovered, it may be necessary to have a new application for
exemption completed by the property owner. The emphasis of this should be toward obtaining a
copy of the lease for the tower site. The tower site,
along with any other area of the property dedicated to a commercial use, should be made
taxable, and notices should be sent to the owner of the real estate. The taxable notice would
be directed to the owner of the land. The conditions relative to qualifying for an exemption,
and the controlling dates for the application process are found in the Maryland Assessment
Procedures Manual.
2. A tower built upon land that is owned by a government agency.
For government owned property, the tower site should be assessed to the tenant ( Lessee) in
possession of the property. The Tax Property Article, in Section 6-102(e), provides that the
"interest of a person in property owned by the federal, the State, a county, or a municipal
corporation government is subject to property taxes as though the lessee or the user of the
property were the owner of the property, if the property is leased ... in conjunction with a
business that is conducted for profit." There are certain exceptions that should be
considered in this regard, and those exceptions are discussed in Sections 7-211 and 7-501 of
the Tax Property Article. Section 7-211 allows for concessions to be operated on
public lands. It does not seem likely that a communications tower could ever be termed a
concession, since such improvements must be located in a public airport, park, market, or
fairground to qualify as a concession, and must also be available for use by the general
public. Other exceptions from this section, however, may apply. Property used in activities
associated with the national defense, property subjected to a payment in lieu of taxes, and
property used as a "port facility" are generally excluded from the provisions of 6-102(e).
Section 7-501 deals more with payments in lieu of taxes, and the authority of various counties
and municipal governments to authorize an exemption to assessments made under 6-102(e).
3. Towers constructed on Public Utility easements or rights-of-way.
Cellular transmission antennas may be found on high voltage electrical lines, that are
usually classified as utility operating property. Utility properties are classified
as Electric, Gas, Railroad, Telephone, Water, and Steam. Operating utilities are identified by
a unique BPRUC code, ranging 8100 through 8700, identifying each operating unit. Revenues
derived from ancillary uses such as cellular sites, flow to the regulated company and are
reported as Miscellaneous Service Revenue (FERC Form 1), and are included in Total Operating
Revenues. When the utility operating property is assessed, these revenues are included as part
of the basis for the assessment. Accordingly, it would be inappropriate to use an income
capitalization approach to attribute additional value to the cellular site. It is not
necessary to list and assess these properties separately. This would result in a duplication
of tax effort. When such properties are discovered, please check the operating status of the
property. If classified as an operating utility property,
please note the presence of the cell site in remarks. It is not necessary to set up a
non-operating utility account to make an assessment. No further action is required;
no separate real property assessment is needed for operating utility
property.
F. It is best to have a copy of the lease, in order to value the property. The valuation should be made
based upon the actual contract rent and the remaining term of the
lease(1). Often it will be necessary
to value the property without the benefit of the lease; in such instances it is recommended that the
valuation be entered based upon a minimum site of 10,000 square feet, at a rate of $20 per square
foot. Actual terms and conditions may vary, but these minimum perimeters should put the assessed
value in the appropriate range, especially for newer well located sites. A lesser rate of $10 per square
foot may be applied for older or more rural settings.
G. Communication tower uses are subject to change, based upon technological advancements. In
consideration of the actual terms of the lease, it will be most accurate to apply a discounted cash flow
to value the property. A spreadsheet has been developed for this purpose, and has been distributed
to the local assessment office. Since the income is expected only for the anticipated term of the lease,
there may be no reversion at the end of the lease, except the returned unencumbered use of the land.
It is anticipated that the income will cease at the end of the lease term. Normally, the lease will
provide for several renewal options. These options should be considered as part of the term of the
lease, but the rent anticipated in the renewal periods may be considered to be more at risk, and a
higher discount rate may be assigned to the rent in the renewal period, in recognition of this risk.
Since towers are usually constructed at the expense of the tenant, there is no recapture to consider.
There is no "return of" the investment to the property owner. This is very similar in nature to a
ground rent, and a low discount rate should therefore apply. The 5 year T-bill rate, plus 1 - 2%, is
recommended as a basis for the discount rate in this regard. Expenses are negligible, and the real
estate taxes are normally paid by the tenant. These assumptions however, must be tested in light of
the actual terms of the lease, representing the agreement of the parties.
1. Except for valuations made under Section 6-102(e), where the lessee
is treated as if the owner, and the land is valued as if the lessee owned it. See Tax Property
Article Section 8-113.
