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Res 17-32 Joining the McAllen lawsuit regarding Senate Bill 1004 - Chapter 284 RESOLUTION NO. 17-32 A RESOLUTION AUTHORIZING THE PARTICIPATION OF THE TOWN OF WESTLAKE WITH OTHER TEXAS CITIES IN THE LITIGATION CHALLENGING SENATE BILL 1004, ALSO KNOWN AS CHAPTER 284 OF THE LOCAL GOVERNMENT CODE,AUTHORIZING FILING OF SAID LAWSUIT,AUTHORIZING PAYMENT OF $0.15 PER RESIDENT ACCORDING TO THE 2010 CENSUS; AUTHORIZING AN AGREEMENT WITH BICKERSTAFF HEATH DELGADO ACOSTA LLP FOR REPRESENTATION IN SAID LITIGATION AND FOR OTHER REASONABLE AND NECESSARY STEPS; AND PROVIDING AN EFFECTIVE DATE WHEREAS, Texas cities are charged with managing the public rights-of-way, WHEREAS, the Town of Westlake holds its public rights-of-way in trust for the citizens of the Town of Westlake WHEREAS, the Texas Constitution Article III, Section 52 provides "Sec. 52 (a) Except as otherwise provided by this section,the Legislature shall have no power to authorize any county, Town, town or other political corporation or subdivision of the State to lend its credit or to grant public money or thing of value in aid of, or to any individual, association or corporation whatsoever, or to become a stockholder in such corporation, association or company" and WHEREAS, Senate Bill 1004 (Chapter 284 of the Local Government Code) provides a payment that is so disproportionately small for the private benefit of the use of the public rights- of-way so as to run afoul of said prohibition in the Texas Constitution; WHEREAS, the Town Council finds that the passage of this Resolution is in the best interest of the citizens of Westlake. NOW, THEREFORE, BE IT RESOLVED BY THE TOWN COUNCIL OF THE TOWN OF WESTLAKE, TEXAS: SECTION 1: That, all matters stated in the Recitals hereinabove are found to be true and correct and are incorporated herein by reference as if copied in their entirety. SECTION 2: That the Town of Westlake authorizes the participation in and the filing of a lawsuit challenging Senate Bill 1004, to be codified as Chapter 284 of the Local Government Code; authorizes payment of the fifteen cents per capita fee; authorizes the Town Manager to sign a contract with Bickerstaff Heath Delgado Acosta for representation in said lawsuit and any other reasonable and necessary steps and that this resolution shall take effect immediately from and after its passage. Resolution 17-32 Page 1 of 2 SECTION 3: If any portion of this Resolution shall, for any reason, be declared invalid by any court of competent jurisdiction, such invalidity shall not affect the remaining provisions hereof and the Council hereby determines that it would have adopted this Resolution without the invalid provision. SECTION 4: That this resolution shall become effective from and after its date of passage. PASSED AND APPROVED ON THIS 28TH DAY OF AUGUST 2017. ATTEST: Xz/ X hz Laura L. Wheat, Mayor Kell} Edwar` s, Town Secretary f Nomas E. Brymer own Manager �0� WEST4�I � APPROVED S TO F TE) P y L. Kt- on Lo own ttorney ' Resolution 17-32 Page 2 of 2 8/31/2017 3:12 PM Velva L. Price District Clerk D-1-GN-17-004766 Travis County CAUSE NO. D-1-GN-17-004766 Ruben Tamez CITY OF MCALLEN; CITY OF § IN THE DISTRICT COURT OF DALLAS; CITY OF IRVING; CITY OF § BROWNSVILLE; CITY OF SUGAR § LAND; CITY OF MISSION; CITY OF § PHARR; CITY OF COPPELL; CITY § OF WESLACO; CITY OF ALAMO; § CITY OF MIDLOTHIAN; CITY OF § HIGHLAND VILLAGE; CITY OF § SEAGOVILLE; CITY OF ALTON; § CITY OF BOERNE; CITY OF ROMA; § CITY OF ROCKPORT; CITY OF LA § FERIA; CITY OF LUCAS; CITY OF § BALCONES HEIGHTS; CITY OF § SOUTH PADRE ISLAND; CITY OF § SIMONTON; and JIM DARLING, in § both his official capacity as Mayor of the § City of McAllen and individual capacity, § Plaintiffs, TRAVIS COUNTY, TEXAS V. THE STATE OF TEXAS; GREG ABBOTT, sued in his official capacity as Governor of the State of Texas; and KEN PAXTON, sued in his official capacity as Attorney General of Texas, 353RD Defendants. JUDICIAL DISTRICT PLAINTIFFS' ORIGINAL PETITION AND APPLICATION FOR INJUNCTIVE RELIEF I. INTRODUCTION Since the time of its framing in 1876, the Texas Constitution has jealously guarded and preserved the resources and power of the government. This is demonstrated with unmistakable clarity in the Constitution's interrelated prohibitions against gifting public funds or other things of value to aid the commercial interests of a private enterprise and against the delegation of legislative power to private entities without providing for adequate standards of exercise or oversight. Notwithstanding these constitutional prohibitions, SB 1004 seeks to require Texas municipalities to forego arm's-length negotiation and instead grant private wireless providers the use of the public right-of-way for a gratuitously-small fraction of the market rate. The legislation also places legislative powers relating to zoning and the management of municipal right-of-way in the hands of private entities without providing guidelines for, or oversight over, the exercise of these essential municipal police powers. In mandating this result, the Legislature has not only violated the anti-gift and non- delegation provisions of the Texas Constitution,but would make cities and their officials complicit in these transgressions by having them administer and sanction the transfer of wealth of as much as hundreds of millions of dollars from municipal coffers to private telecommunications companies each year and by having them abandon their obligations to the public by relinquishing their responsibilities for implementing effective zoning measures and right-of-way management. Taxpayers in these municipalities have an interest in preventing the unconstitutional transfer of valuable city assets and legislative powers to private corporations. Put to the untenable choice of violating SB 1004 or the state constitution, the named plaintiffs seek a declaration that SB 1004 is unconstitutional and further seek an injunction against its implementation and enforcement because it violates article II, section 1, article III, section 1, article III, section 52, and article XI, section 3, of the Texas Constitution. II. DISCOVERY CONTROL PLAN 1. Pursuant to Rule 190.4 of the Texas Rules of Civil Procedure,Plaintiffs intend that discovery be conducted under Level 3. McAllen, et al v. State Page 2 of 26 Original Petition and Application for Injunctive Relief III. PARTIES AND SERVICE OF PROCESS 2. Plaintiff City of McAllen is a duly incorporated home-rule municipality located in Hidalgo County, Texas. 3. Plaintiff City of Dallas is a duly incorporated home-rule municipality located in Dallas, Collin, Denton, Kaufman, and Rockwall Counties, Texas. 4. Plaintiff City of Irving is a duly incorporated home-rule municipality located in Dallas County, Texas. 5. Plaintiff City of Brownsville is a duly incorporated home-rule municipality located in Cameron County, Texas. 6. Plaintiff City of Sugar Land is a duly incorporated home-rule municipality located in Fort Bend County, Texas. 7. Plaintiff City of Mission is a duly incorporated home-rule municipality located in Hidalgo County, Texas. 8. Plaintiff City of Pharr is a duly incorporated home-rule municipality located in Hidalgo County, Texas. 9. Plaintiff City of Coppell is a duly incorporated home-rule municipality located in Dallas and Denton Counties, Texas. 10. Plaintiff City of Weslaco is a duly incorporated home-rule municipality located in Hidalgo County, Texas. 11. Plaintiff City of Alamo is a duly incorporated home-rule municipality located in Hidalgo County, Texas. 12. Plaintiff City of Midlothian is a duly incorporated home-rule municipality located in Ellis County, Texas. McAllen, et al v. State Page 3 of 26 Original Petition and Application for Injunctive Relief 13. Plaintiff City of Highland Village is a duly incorporated home-rule municipality located in Denton County, Texas. 14. Plaintiff City of Seagoville is a duly incorporated home-rule municipality located in Dallas and Kaufman Counties, Texas. 15. Plaintiff City of Alton is a duly incorporated home-rule municipality located in Hidalgo County, Texas. 16. Plaintiff City of Boerne is a duly incorporated home-rule municipality located in Kendall County, Texas. 17. Plaintiff City of Roma is a duly incorporated home-rule municipality located in Starr County, Texas. 18. Plaintiff City of Rockport is a duly incorporated home-rule municipality located in Aransas County, Texas. 19. Plaintiff City of La Feria is a duly incorporated home-rule municipality located in Cameron County, Texas. 20. Plaintiff City of Lucas is a duly incorporated home-rule municipality located in Collin County, Texas. 21. Plaintiff City of Balcones Heights is a duly incorporated General Law Type A municipality located in Bexar County, Texas. 22. Plaintiff City of South Padre Island is a duly incorporated home-rule municipality located in Cameron County, Texas. 23. Plaintiff City of Simonton is a duly incorporated General Law Type A municipality located in Fort Bend County, Texas. 24. Plaintiff Jim Darling is the Mayor of McAllen, Texas. He is a party to this proceeding in his official capacity as mayor and in his individual capacity as a citizen and taxpayer. McAllen, et al v. State Page 4 of 26 Original Petition and Application for Injunctive Relief 25. Defendant State of Texas may be served with process by delivering citation and petition to the Texas Secretary of State at 1019 Brazos Street, Austin, Texas 78701. 26. Defendant Greg Abbott, Governor of the State of Texas, may be served with process by delivering citation and petition to 1100 San Jacinto Blvd., Austin, Texas 78701. 27. Defendant Ken Paxton,Attorney General of the State of Texas,may be served with process by delivering citation and petition to 209 West 10 Street, Austin, Texas 78701. IV. JURISDICTION AND VENUE 28. The subject matter in controversy is within the jurisdictional limits of this Court, and the Court has jurisdiction over this action pursuant to article V, section 8, of the Texas Constitution and section 24.007 of the Texas Government Code, as well as the Texas Uniform Declaratory Judgments Act. TEx. Civ.PRAc. &REM.CODE § 37.001, et seq. 29. This Court has jurisdiction over the parties because all Defendants reside or have their principal place of business in Texas. 30. Plaintiffs seek non-monetary relief. 31. Venue is proper in Travis County because Defendants have their principal office in Travis County. TEx. Civ.PRAc. &REM. CODE § 15.002(a)(3). V. FACTS A. The Emergence of Small-Cell and Network-Node Technology 32. Senate Bill 1004, enacted by the 85th Legislature in 2017 and to become effective on September 1,2017, enacts chapter 284 of the Texas Local Government Code. This new chapter purports to govern the deployment of network nodes in public rights-of-way. 33. A network node is defined in the bill as "equipment at a fixed location that enables wireless communications between user equipment and a communication network." A network node encompasses multiple pieces of equipment including a radio transceiver, an antenna, a McAllen, et al v. State Page 5 of 26 Original Petition and Application for Injunctive Relief battery-only backup power supply, and coaxial or fiber-optic cable. The term does not include a pole or tower to which the equipment is attached. 34. Network nodes are a component of small-cell technology, which in turn is part of the cellular network that supports smart phones, tablets, and other mobile devices. 35. Mobile data traffic, driven by increased sales of smart phones, tablets, and similar devices and by usage demanding greater bandwidth, results in significant growth in the use of mobile data networks and requires increased capacity. 36. Emerging technology will greatly accelerate the demand for increased capacity of wireless networks and for additional network nodes. While small cell technology will make possible greater uses of the internet, currently and in the foreseeable future the predominant use of the network is for streaming video. 37. Small-cell wireless networks using network nodes are a way to increase capacity and capabilities above that provided by the familiar cellular technology provided by larger cell towers, often referred to as macro sites. Rather than being located on tall macro towers, a small cell network node may be located on a street sign, on a light pole, on a traffic signal pole, on the side of a building, or on a dedicated pole. 38. Small cells complement the existing macro tower system by providing additional capacity and by increasing coverage in those areas where the signal from the macro tower is weak. B. Legislative Involvement in Telecommunications Companies' Use of Municipal Right-of-Way 1. Earlier legislation is carefully crafted to avoid being a prohibited gift or grant 39. For many years telecommunications service was provided over land lines and was typically provided in a locality by a single provider. Texas municipalities would grant franchises to that company to permit it to use city rights-of-way. Typically, this would include the right to McAllen, et al v. State Page 6 of 26 Original Petition and Application for Injunctive Relief construct poles and string wire along the rights-of-way or to bury cable beneath the right-of-way. As the cities were giving the company a valuable property right, the company was required to pay for that right just as it would if it used an easement or other property right of a private landowner. 40. In 1999, in response to the emergence of competition among companies offering local exchange telephone service, the legislature enacted chapter 283 of the Local Government Code. That chapter was designed to encourage competition in the provision of telecommunications services and to ensure that new entrants were not precluded from gaining access to the use of municipal rights-of-way due to pre-existing franchise agreements. TEx.LOCAL. Gov'T CODE, § 283.001(a). 41. Among other things, the statute set up a state system of determining the fees to be paid to a municipality for the use of rights-of-way by new entrants to the market place, but did so by basing the fee on the amount each city collected under its existing franchise fees. TEx.LOCAL, Gov'T CODE, §§ 283.053, 283.055. In apparent recognition of the constitutional prohibition on a municipality making a gift or grant to a private corporation, the legislature designed the system to provide the cities with the fees they had previously negotiated or imposed while letting new entrants come into the market on the same basis as existing companies. Essentially, the city received and the new entrants were charged what had previously been established as fair-market value for the use of the city rights-of-way. 2. SB 1004 is designed to transfer municipal property to private companies at a fraction of its fair market value 42. In 2017, the legislature enacted SB 1004 (chapter 284 of the Texas Local Government Code), which becomes effective on September 1, 2017. McAllen, et al v. State Page 7 of 26 Original Petition and Application for Injunctive Relief 43. In SB 1004 the legislature seeks to encourage and simplify the use of network nodes and small-cell technology by limiting cities' regulatory powers over the placement and design of network nodes and by below-market fees for the use of the public rights-of-way. 44. The Texas legislation is part of a multi-state push by the wireless industry in conjunction with the American Legislative Exchange Council (ALEC) to achieve a more relaxed regulatory environment and to obtain a public subsidy. 45. In sharp contrast to the approach taken in chapter 283 of the Local Government Code, which was crafted to ensure that the fee for the use of public right-of-way was set at fair market value, SB 1004(chapter 284)imposes maximum charges that are a small fraction of market value,thus, gratuitously, conveying public property to private corporations and providing a public subsidy for a private commercial enterprise. 46. SB 1004(section 284.053) sets an annual maximum fee for the use of a city's right- of-way at$250 per network node. TEx. LOCAL.Gov'T CODE, § 284.053. 47. By contrast, as reflected in the attached affidavit (Exhibit 1), the standard rate for the use of public right-of-way is between $1,500 and $2,500 per network node. 48. The fee schedule established by SB 1004 requires cities to permit use of their rights- of-way in return for only 10 to 16.7 percent of the fair market value of the property interest conveyed. 49. This amounts to a gift or grant to the companies maintaining the network of between$1,250 and $2,250 per node per year. 50. While significant numbers of small cell nodes are currently being installed, the number of cells is expected to increase by a factor of five or more as carriers convert to 5G technology. McAllen, et al v. State Page 8 of 26 Original Petition and Application for Injunctive Relief 51. At the time the SB 1004 fee structure was adopted, the legislature had before it the Legislative Budget Board fiscal note prepared for the House of Representatives noting that the bill could result in loss of right-of-way and similar fees to municipalities estimated at more than $800 million annually. 52. Nevertheless, the legislature passed the bill initiating a significant annual wealth transfer from Texas cities to private telecommunications companies of as much as hundreds of millions of dollars each year. 3. Earlier legislation is carefully crafted so that municipalities retain legislative powers relating to right-of-way management 53. Each Texas city is vested with "exclusive control over and under the public highways, streets,and alleys of the municipality."TEX.LOCAL,GoV T CODE, § 283. This exclusive authority of right-of-way management is consistent with, and an extension of, municipal land-use and zoning authority, which is exercised through a statutory framework that provides for public participation, due process, and oversight. TEX. LOCAL,GoV T CODE, Chapter 211. 54. Chapter 283 of the Local Government Code, which was designed to accommodate and integrate new entrants to the telecommunications system, expressly recognizes that the management of rights-of-way is a delegated legislative function that typically is vested in the municipalities of the state: It also declares that it is the policy of this state that municipalities: . .. retain the authority to manage a public right-of-way within the municipality to ensure the health, safety, and welfare of the public . . . TEX.LOCAL.GoV T CODE § 283.001 (b). 55. Consistent with this fundamental governmental policy, chapter 283 expressly provides that cities retain such powers in their consideration of applications for use of the right- of-way: McAllen, et al v. State Page 9 of 26 Original Petition and Application for Injunctive Relief A municipality may exercise those police power-based regulations in the management of a public right-of-way that apply to all persons within the municipality. A municipality may exercise police power-based regulations in the management of the activities of certificated telecommunications providers within a public right-of-way only to the extent that they are reasonably necessary to protect the health, safety, and welfare of the public. TEx.LOCAL,Gov'T CODE § 283.056 (c). And, In the exercise of its lawful regulatory authority, a municipality shall promptly process each valid and administratively complete application of a certificated telecommunications provider for any permit, license, or consent to excavate, set poles, locate lines, construct facilities, make repairs, affect traffic flow, obtain zoning or subdivision regulation approvals, or for other similar approvals, and shall make every reasonable effort to not delay or unduly burden that provider in the timely conduct of its business. TEx. LOCAL Gov'T CODE. § 283.056(d) (emphasis added). 56. Chapter 283 treats the legislative function of right-of-way management and related permitting processes as necessarily entailing three interrelated aspects: (1) Safety of the structure to be placed within municipal right-of-way with respect to the construction required to install the structure and its operational safety, TEx. LOCAL, Gov'T CODE. § 283.056; (2) Receipt of compensation for the use of right-of-way, TEx. LOCAL Gov'T CODE. § 283.051; and (3) Determining the suitability of sites for property in or along right-of-way in terms of the health, safety, and welfare of the public through proper land-use controls, TEx. LOCAL Gov'T CODE. § 283.056. 4. SB 1004, in contrast to past legislative practice, is drafted to transfer municipal legislative authority over right-of-way management to private companies 57. As with chapter 283 of the Texas Local Government Code, SB 1004 expressly recognizes that the management of right-of-way is a delegated legislative function concerning the health, safety, and welfare of the public that typically is vested in the municipalities of the state. TEx. LOCAL Gov'T CODE§§ 284.001(a)(2); (c)(2). McAllen, et al v. State Page 10 of 26 Original Petition and Application for Injunctive Relief 58. Like chapter 283, SB 1004 recognizes that the legislative function of right-of-way management and related permitting processes necessarily entails three interrelated aspects: (1) Safety of the structure to be placed within municipal right-of-way with respect to the construction required to install the structure and its operational safety, TEx. LOCAL,Gov'T CODE §§ 284.102, .108, .110, and 153; (2) Receipt of compensation for the use of right-of-way TEx. LOCAL,Gov'T CODE §§ 284.053, .0541; and (3) Control over zoning and land use, TEx. LOCAL,Gov'T CODE §§ 284.001(a)(2), .104, and .105. 59. In contrast with Chapter 283, however, which vests municipalities with authority to apply land-use controls as part of the permitting process, SB 1004 vests decision-making authority with respect to land-use considerations with the telecommunications provider. As shown above, SB 1004 expressly recognizes that land-use controls are an inextricable aspect of right-of- way management. In terms of promoting and preserving the health, safety and welfare of the public, a selection of a site for the placement of telecommunications equipment cannot be made properly without due consideration of the land-use aspects implicated in such site selection. SB 1004 delineates certain land-use-related limitations on site selection, i.e., relative proximity of parks and residential areas, and location within historic or design districts. TEx. LOCAL, Gov'T CODE §§ 284.104, .105. Beyond that, however, SB 1004 vests ultimate responsibility for the adequate consideration of the public health, safety, and welfare implications of site selection with the telecommunications providers rather than with the municipalities. This is seen when considering that the providers select their desired sites and that the application review cannot include municipal-zoning review or land-use approvals. TEx. LOCAL,Gov'T CODE§§ 284.101(a). 1 As discussed elsewhere,see e.g. ¶T 64,73,infra,the chapter 283 system of market-based compensation is replaced in chapter 284 with a system of merely token compensation. McAllen, et al v. State Page 11 of 26 Original Petition and Application for Injunctive Relief 60. In a word, SB 1004 expressly takes the public right and obligation to manage right- of-way with adequate consideration of zoning and land-use needs from the municipality, and vests such decision making with telecommunications providers, whose applications must be approved without analysis of land-use matters from a public perspective. TEx. LOCAL, Gov'T CODE §§ 284.101(a). 61. Accordingly, SB 1004 represents an overly broad delegation of legislative authority to private entities, in violation of article II, section 1, and article III, section 1, of the Texas Constitution. C. Constitutional Framework 1. Prohibition against gifts to private corporations 62. In the period following the Civil War many Texas cities gave financial aid to railroads in order to entice the railroad to come through their community and thus to provide those cities with a commercial advantage. The railroads were not always constructed, and, even if they were, the anticipated advantages to the cities did not always materialize. In response to this situation, and to prevent its reoccurrence,the framers of the 1876 Constitution included article XI, section 3, which provides, in part: No county, city, or other municipal corporation shall hereafter . . . make any appropriation or donation to [any private corporation or association] . .. TEx. CONST., art. XI, § 3. 63. Additionally, the framers of the 1876 Constitution adopted article III, section 52, which prohibited the legislature from approving legislation such as SB 1004 that would authorize or direct a city to make a gift or grant to a corporation. That section provides in part: (a) Except as otherwise provided by this section, the Legislature shall have no power to authorize any county, city, town or other political corporation or subdivision of the State to lend its credit or to grant public money or thing of McAllen, et al v. State Page 12 of 26 Original Petition and Application for Injunctive Relief value in aid of, or to any individual, association or corporation whatsoever, . . TEx. CONST., art. III, § 52. 64. SB 1004 not only authorizes cities to make a prohibited grant of a thing of value to a private corporation, it requires it. Specifically, the legislation requires cities to permit network providers to use public rights-of-way to locate network nodes, TEx.Loc. Gov'T CODE, § 284.151 (except as permitted by chapter 284, a city may not prohibit,regulate, or charge for the installation or location of network nodes in a public right-of-way and may not institute a moratorium on permitting such nodes), and it limits payment to the city for the use of those rights-of-way to an annual rate of not more than $250 per node when the negotiated market rate ranges from $1,500 to $2,500. In other words, SB 1004 requires Texas cities to permit private corporations to use the public right-of-way for a steeply discounted price that amounts to about between one-tenth and one-sixth of its actual value. This is a grant of public money or thing of value contemplated and prohibited by article III, section 52. Similarly, it is a prohibited donation under article XI, section 3. This amounts to a massive, multi-million-dollar gift to private corporations from the cities of Texas. With the advent of 5G technology and the increased demand for more small cells, the size of the gift may amount to hundreds of millions of dollars. And the gift continues year after year. 65. While cities are prohibited from making a gift to a private corporation, the constitution does not prohibit making purchases of goods or services where the payment from the government is based on the value received. For example, cities purchase all types of goods (e.g., automobiles, street paving material, office supplies, etc.) from vendors at market-value prices. 66. There are instances, though, where the transaction between the government and private enterprise does not clearly fit the standard mode of a purchase at a price that is recognized as reflecting value received. For those instances, Texas law has developed to recognize that some McAllen, et al v. State Page 13 of 26 Original Petition and Application for Injunctive Relief public benefits to private corporations are constitutionally permitted if they serve a legitimate public purpose and provide a clear public benefit in return. E.g., Texas Municipal League Intergovernmental Risk Pool v. Texas Workers'Compensation Comm'n, 74 S.W.3d 377,383 (Tex. 2002)("TML"). "A three-part test determines if a statute accomplishes a public purpose consistent with [article III,] section 52(a)." Id. at 384. "Specifically, the Legislature must: (1) ensure that the statute's predominant purpose is to accomplish a public purpose,not to benefit private parties; (2) retain public control over the funds to ensure that the public purpose is accomplished and to protect the public's investment, and (3) ensure that the political subdivision receives a return benefit." Id. 67. SB 1004 does not meet the three-part test that might avoid the constitutional prohibition of article III, section 52. Failure to satisfy any one of the three parts of the test is fatal. 68. SB 1004 does not meet the first prong of the three-part test,which requires that the predominant purpose is to accomplish a public purpose rather than to benefit private parties. Section 284.001, enacted by SB 1004, does contain findings that network nodes are instrumental to increasing access to advanced technology and information and that expeditious processes and reasonable terms and conditions for access to the public right-of-way further the interest in having a reliable wireless network. TEx. Loc. GOVT CODE, § 284.001(1) and (5). While carriers undoubtedly would like to have a statutorily imposed rental rate that is far below fair-market value, there is no legislative finding or evidence that carriers have been prevented from creating their wireless networks by the free-market economy. Indeed, carriers have been installing thousands of cells in cities at the upper end of market rates,which makes it difficult to contend that the necessity of paying fair value is a barrier to the development of the networks. Unless the existing system operates as a barrier, the "predominant" effect, and presumably the purpose, of the establishment of a far-below-fair-market-value is to benefit the private corporations, not the public. McAllen, et al v. State Page 14 of 26 Original Petition and Application for Injunctive Relief 69. Further, while the public right-of-way is a convenient location for network nodes, nodes can generally be placed on private property such as the side of a building located immediately adjacent to the right-of-way. Making a gift of the use of the public right-of-way frees network providers from the operation of the free market and deprives the private property owners of the opportunity to rent space to host network nodes. This public subsidy undermines the free market system and deprives the private landowners of the value of their property, which is not consistent with public policy. 70. The predominant purpose of SB 1004 is to benefit private parties, not to convey a public benefit. Thus, the statute does not meet the first prong of the three-part TML test. 71. SB 1004 also does not meet the second prong of the three-part test, which requires that the local government retain control to ensure that the public purpose is accomplished. While the statute directs maximum rates for use of the public right-of-way and specific deadlines for permitting decisions, all of which benefits the network carriers, there is nothing in the statute to mandate continued oversight to ensure that the public purpose is accomplished. The statute provides great detail on the cities' obligations to the wireless providers, but there is nothing in the Act that provides for the cities' or the state's continued oversight of the carriers' actions to ensure that they act for the public's benefit. Even if we are to assume that development of the wireless system is the predominant purpose and represents the benefit to the public, there is nothing in the Act to establish measurable benchmarks for the development of the system,nothing to ensure that underserved areas rather than simply the most profitable areas are served, nothing to ensure that the publicly subsidized nodes are available for the public rather than,in some cases,perhaps being reserved for private users, or anything else to ensure that public purpose is accomplished. In the absence of such statutorily provided oversight, the statute does not satisfy the Supreme Court's test. McAllen, et al v. State Page 15 of 26 Original Petition and Application for Injunctive Relief 72. The third part of the test is to ensure that the political subdivision receives a return benefit. This is often phrased as ensuring that there is adequate consideration. Here,the cities are limited to roughly ten to sixteen percent of market value with no additional benefit to compensate for the lost revenue. 73. SB 1004 finds that the rates imposed by the statute are "fair and reasonable" and in compliance with federal law (47 U.S.C. § 253) that prohibits rates that have the effect of prohibiting the ability of any entity to provide telecommunications service. The SB 1004 rates, though, are not only well below the rates that would be charged in a free market environment,they are also a fraction of the rates the state is free to charge for the same services. The legislature was careful to require cities to provide a major subsidy to these private enterprises, while, at the same time, leaving the state free to charge market rates for the use of its rights-of-way. Presumably, if it is fair and reasonable for the state to charge market rates,it is difficult to understand how limiting cities to a small fraction of those rates can also meet the standard of fairness and reasonableness. 74. SB 1004, so long as it is not enjoined and not declared to be unconstitutional directs city officials, such as Mayor Darling,to give away city resources and,by doing so,to violate article XI, section 3, of the Texas Constitution. 75. Similarly, until SB 1004 is enjoined and declared to be unconstitutional, city taxpayers, such as Jim Darling, in his individual capacity, are injured by the city's gift of public resources to private corporations. Even if the statute is subsequently declared to be invalid, the cities, their officials, and their taxpayers are irreparably injured. The opportunity to negotiate a market rate prior to the installation of any nodes is lost. Further, even if it is possible to recover the difference between the ultimately determined rental rate and the $250 per node authorized by SB 1004, the recovery will likely be in a subsequent fiscal year so that the opportunity to have an McAllen, et al v. State Page 16 of 26 Original Petition and Application for Injunctive Relief immediate favorable impact on the city's finances and on its taxpayers in current fiscal years is lost. 76. SB 1004 by mandating that cities make a gratuitous grant of its property to a private business enterprise violates the Texas Constitution, and, under Texas law, a violation of constitutionally guaranteed rights inflicts irreparable injury warranting injunctive relief. 2. Prohibition against certain delegations of legislative power to private corporations 77. In establishing the government of the state, the people delegated the powers of the government to the legislative, executive, and judicial departments: The powers of the Government of the State of Texas shall be divided into three distinct departments, each of which shall be confided to a separate body of magistracy, to wit: Those which are Legislative to one; those which are Executive to another, and those which are Judicial to another; and no person, or collection of persons, being of one of these departments, shall exercise any power properly attached to either of the others, except in the instances herein expressly permitted Tex. Const. art. II, § 1. 78. The Legislature is authorized to delegate legislative powers to local governments, administrative agencies, and private entities. As Texas courts have recognized, delegations of legislative power can be both necessary and proper in certain circumstances, such as, for example, with the delegation of power to private entities to promulgate certain industrial and professional standards. 79. By the same token, Texas courts have also recognized that delegations to private entities raise more troubling issues than do delegations to public bodies and that they are therefore subject to more stringent requirements and less judicial deference than public delegations. As the Supreme Court has stated: [P]rivate delegations clearly raise even more troubling constitutional issues than their public counterparts. On a practical basis, the private delegate may have a personal or pecuniary interest which is inconsistent with or repugnant to the public McAllen, et al v. State Page 17 of 26 Original Petition and Application for Injunctive Relief interest to be served. More fundamentally, the basic concept of democratic rule under a republican form of government is compromised when public powers are abandoned to those who are neither elected by the people, appointed by a public official or entity, nor employed by the government. Thus, we believe it axiomatic that courts should subject private delegations to a more searching scrutiny than their public counterparts. Texas Boll Weevil Eradication Found., Inc. v. Lewellen, 952 S.W.2d 454, 469 (Tex. 1997). 80. Texas courts have developed a balancing test containing eight factors to determine whether a particular delegation of legislative power to a private delegate is constitutional. These factors are stated as follows: 1. Are the private delegate's actions subject to meaningful review by a state agency or other branch of state government? 2. Are the persons affected by the private delegate's actions adequately represented in the decision making process? 3. Is the private delegate's power limited to making rules, or does the delegate also apply the law to particular individuals? 4. Does the private delegate have a pecuniary or other personal interest that may conflict with his or her public function? 5. Is the private delegate empowered to define criminal acts or impose criminal sanctions? 6. Is the delegation narrow in duration, extent, and subject matter? 7. Does the private delegate possess special qualifications or training for the task delegated to it? 8. Has the Legislature provided sufficient standards to guide the private delegate in its work? Texas Boll Weevil Eradication Found. 952 S.W.2d at 472. McAllen, et al v. State Page 18 of 26 Original Petition and Application for Injunctive Relief 81. SB 1004 vests the legislative power of zoning and land use as it applies to right-of- way management with private parties. When considered through the lens of the eight-part balancing test, it is abundantly clear that the delegation to private entities of the legislative authority to manage the right-of-way by making land-use decisions that typically require application of the processes set out in Local Government Code chapter 211, violates article II, section 1, and article III, section 1, of the Texas constitution. 82. Specifically, with respect to the zoning and land-use aspects of right-of-way management: (a) The actions of the telecommunications providers, as private delegates of legislative authority, are not subject to meaningful review by a state agency or other branch of government; (b) The members of the public that will be most affected by the private delegates' actions are not adequately represented in the decision-making process; (c) The private delegate is applying the law to its individual,pecuniary interest rather than making rules of general application; (d) The private delegates have a pecuniary or other personal interest that may conflict with their public functions; (e) The delegation is not narrow in duration, extent, or subject matter; (f) The private delegates do not possess special qualifications or training in municipal land planning or right-of-way management; and (g) The legislature has not provided sufficient standards to guide the private delegate in its work. 83. SB 1004, so long as it is not enjoined and not declared to be unconstitutional directs city officials, such as Mayor Darling, to relinquish properly delegated municipal authority to McAllen, et al v. State Page 19 of 26 Original Petition and Application for Injunctive Relief manage the right-of-way for the health,safety, and welfare of the public to private delegates whose pecuniary interests most likely will conflict with the public's interests, and who do not have the expertise to manage public right-of-way for the benefit of the public.As such, SB 1004 directs city officials, such as Mayor Darling, to violate their obligations to promote and preserve the safety of the public under their respective city charters, chapter 211 of the Texas Local Government Code, and chapter 311 of the Texas Transportation Code, and, by doing so, affirmatively participate in the violation of article II, section 1, and article III, section 1 of the Texas Constitution. 84. SB 1004 by mandating that municipalities cede their properly delegated authorities that are necessary for right-of-way management in the interest of public health, safety,and welfare of the public violates the Texas Constitution,and under Texas law,is a violation of constitutionally guaranteed rights that inflicts irreparable injury warranting injunctive relief. VI. CAUSES OF ACTION 84. Paragraphs 1-84 are incorporated by reference as though fully restated in support of each of the following causes of action. A. Declaratory Judgment—SB 1004 Violates the Texas Constitution 85. The Uniform Declaratory Judgments Act ("UDJA") is remedial, and intended to settle and afford relief from uncertainty and insecurity with respect to rights under a statute, and must be liberally construed to achieve that purpose. 86. The UDJA waives the sovereign immunity of the state and its officials in actions that challenge the constitutionality of a statute and that seek only equitable relief. 87. Pursuant to the UDJA, Plaintiffs request a declaratory judgment of the Court, as follows: a. That SB 1004, in its requirement set out in section 284.053 of the Texas Local Government Code that cities permit private corporations to use the public McAllen, et al v. State Page 20 of 26 Original Petition and Application for Injunctive Relief rights-of-way at significantly below market value rates, impermissibly authorizes and requires cities to make a gift or grant in violation of article III, section 52(a), of the Texas Constitution; b. Cities complying with the statutory direction will violate article XI, section 3, of the Texas Constitution as they will be making a prohibited donation to a private corporation; c. Section 284.053 of the Texas Local Government Code is unconstitutional and unenforceable; d. SB 1004, in delegating legislative powers of managing right-of-way through proper zoning and land-use controls to private corporations such that the corporations are entitled to make land-use decisions without meaningful guidance, public process, or oversight is an impermissible delegation of legislative power in violation of article II, section 1, and article III, section 1, of the Texas Constitution; e. Cities complying with the statutory direction violate article II, section 1, and article III, section 1, of the Texas Constitution as they will be affirmatively participating in an unconstitutional delegation of municipal legislative authority. f. Sections 248.101(a) and 248.154(c) are unconstitutional and unenforceable. B. Injunction 88. For the reasons set forth in paragraphs 1-84, SB 1004 violates the state constitution. 89. Plaintiffs are entitled to a temporary injunction enjoining enforcement of section 284.053 of the Texas Local Government Code pending a decision on a permanent injunction and declaratory judgment. Section 284.053 is invalid as being enacted in contravention to the express denial of authority to the legislature to permit or require cities to make gifts or grants to private corporations. Accordingly, the statute is void. The state, by enacting SB 1004 and subjecting plaintiffs to its requirements, is directing plaintiffs to violate the Texas Constitution. The forced transfer of property pursuant to an unconstitutional statute is subject to being enjoined without regard to whether there is a legal remedy. Being subjected to, and forced to administer, an unconstitutional statute is necessarily and of itself an irreparable injury.Further,there is irreparable McAllen, et al v. State Page 21 of 26 Original Petition and Application for Injunctive Relief injury to the cities and their citizens,which potentially face the grossly inadequately compensated use of their property prior to having an opportunity for a merits decision on the constitutionality of the statute. Plaintiffs are therefore entitled to a temporary and ultimately to a permanent injunction against enforcement of the unconstitutional statute. 90. Plaintiffs are entitled to a temporary injunction enjoining enforcement of sections 248.101(a) and 248.154(c) of the Texas Local Government Code pending a decision on a permanent injunction and declaratory judgment. Sections 248.101(a) and 248.154(c) are invalid as being enacted in contravention to the denial of authority to the legislature to make delegations of legislative authority to private actors such that the private delegates are neither constrained before they act by meaningful standards nor made accountable after they act by administrative, judicial, or popular review. Accordingly, the statute is void. The state, by enacting SB 1004 and subjecting plaintiffs to its requirements, is directing plaintiffs to violate the Texas Constitution. The improper delegation of legislative authority pursuant to an unconstitutional statute is subject to being enjoined without regard to whether there is a legal remedy. Being subjected to, and forced to administer, an unconstitutional statute is necessarily and of itself an irreparable injury. Further, there is irreparable injury to the cities and their citizens,which potentially face the substantial and detrimental consequences of the implementation of land-use decisions in public right-of-way which are made by actors who have pecuniary interests that often most likely will conflict with the promotion of the health, safety, and welfare of the public, and which will not be made by persons or entities with specialized knowledge of public right-of-way management, and which will not be subject to meaningful review. Plaintiffs are therefore entitled to a temporary and ultimately to a permanent injunction against enforcement of the unconstitutional statute. 91. Since any injunction will be against the state, which has no pecuniary interest in the suit and can show no monetary damages, the court should set a nominal bond of $1,000. McAllen, et al v. State Page 22 of 26 Original Petition and Application for Injunctive Relief Additionally, at least nine of the plaintiffs are home rule cities whose charters exempt them from bond requirements in injunction suits. Accordingly, nothing more than a nominal bond would be appropriate under Rule 684. 92. Plaintiffs ask the court to set its request for a temporary injunction for an expedited hearing and set its request for permanent injunction for an expedited full trial on the merits and, after said trial, issue a declaratory judgment and a permanent injunction and barring the enforcement of Sections 284.053, 248.101(a), and 248.154(c) of the Local Government Code. VII. CONDITIONS PRECEDENT 93. All conditions precedent have been performed or have occurred. VIII. ATTORNEY'S FEES 94. As a result of the actions complained of herein, Plaintiffs have had to engage qualified counsel to prosecute this action and has incurred, and will continue to incur, reasonable and necessary attorney's fees. Plaintiffs are therefore entitled to recover these fees pursuant to Chapters 37, of the Texas Civil Practice and Remedies Code. IX. REQUEST FOR DISCLOSURES 95. Pursuant to Texas Rule of Civil Procedure 194.2, Plaintiffs hereby request that Defendants make the disclosures identified in Tex. R. Civ. P. 194.2(a-i) and (1) within fifty (50) days of the service of this Petition. PRAYER FOR THESE REASONS, Plaintiffs request that Defendants be cited to appear and answer and, on final trial that Plaintiffs have judgment against Defendants for: 1. The declaratory relief requested herein; 2. A temporary and permanent injunction; 3. Attorney's fees; McAllen, et al v. State Page 23 of 26 Original Petition and Application for Injunctive Relief 4. Litigation costs; 5. Such other and further relief, at law and in equity, to which the Plaintiffs may show themselves entitled. Dated: August 31, 2017 Respectfully submitted, By: /s/C. Robert Heath C. ROBERT HEATH Texas Bar No. 09347500 bheathgbickerstaff.com GUNNAR P. SEAQUIST Texas Bar No. 24043358 gs eaquistgbickerstaff.com GREGORY D. MILLER Texas Bar No. 24046443 _mg iller(c�r�,bickerstaff.com BICKERSTAFF HEATH DELGADO ACOSTA LLP 3711 S. MoPac Expressway Building One, Suite 300 Austin, Texas 78746 Telephone: (512) 472-8021 Facsimile: (512) 320-5638 McALLEN CITY ATTORNEY'S OFFICE P.O. Box 220 1300 Houston McAllen, Texas 78505-0220 Telephone: (956) 681-1090 Facsimile: (956) 681-1099 KEVIN D. PAGAN City Attorney Texas Bar No. 15406460 kpagan(a),mcallen.net McAllen, et al v. State Page 24 of 26 Original Petition and Application for Injunctive Relief AUSTIN WADE STEVENSON Assistant City Attorney Texas Bar No. 24085961 astevenson(d)mcallen.net ISAAC J TAWIL Assistant City Attorney Texas Bar No. 24013605 itawil(d),mcallen.net LAW OFFICES OF SNAPPER L. CARR 816 Congress Avenue, Suite 370 Austin, Texas 78701 Telephone: (512) 637-6020 Facsimile: (512) 637-6021 SNAPPER L. CARR Texas Bar No. 24035433 Snapper@focusedadvocacy.com Attorneys for Plaintiffs DARLING LAW OFFICE P.O. Box 5489 McAllen, Texas 78502-5489 Telephone: (956) 681-1003 Facsimile: (956) 681-1010 JAMES E. "JIM"DARLING Texas Bar No. 05386000 jdarling&ic mcallen.net Pro Se for Plaintiff Jim Darling in His Individual Capacity McAllen, et al v. State Page 25 of 26 Original Petition and Application for Injunctive Relief VERIFICATION STATE OF TEXAS § COUNTY OF TRAVIS § BEFORE ME,a Notary Public for the State of Texas,personally appeared C. Robert Heath, who after identifying himself and being duly sworn by me deposed and said that he has read the foregoing and that the facts stated are based on personal knowledge and are true and correct. C. Robert Heath 5.1. SWORN TO AND SUBSCRIBED BEFORE ME on thisf day of August, 2017. e4ACO 0-no dtayf REBECCA ANN VRAGEL Notary Public, State of Texas ?+ 1 MY COMMISSION EXPIRES JUNE 7, 2021 NOTARYID:8326019 McAllen, et al v. State v Page 26 of 26 Original Petition and Application for Injunctive Relief AFFIDAVIT State of New York ) County of b tj R 6 4 6�- ) The undersigned affiant, Ken Schmidt,being first duly sworn,hereby deposes and says: 1. My name is Ken Schmidt. I reside in the Syracuse,New York, area. I am over the age of eighteen and capable of making this affidavit. The statements in this affidavit are true and correct and within my personal knowledge. To the extent they reflect expert opinion,they are based on facts or data that I have been made aware of,reviewed,or personally observed and reflect facts and data that would reasonably be relied on by experts in the field. 2. Attached as Exhibit A to this affidavit is a true and correct copy of my professional resume that reflects my educational and professional background. To briefly summarize material in the resume, I have worked in the wireless industry for twenty years. From 1997-2004, I worked at a small tower company, and then provided site acquisition services to wireless companies. In 2004,I started Steel in the Air,Inc. which provides wireless-infiastructure- lease-related services to landowners and small-tower owners across the United States. I am the president and owner of that company. Since 2004, we have advised over 3,500 landowners, including cities, corporations, and individuals, regarding valuation questions related to wireless-infrastructure leases. We have collected lease-rate data on approximately 10,000 wireless leases which include all types of leases in every state in the United States. Steel in the Air and I have been recognized as experts in the field of lease valuation by our peers, in national and local publications, and by courts of law. I am also a Partner in SteelTree Partners, LLC and have provided valuation services and sell-side 1 advisory service to many clients regarding over $1.5 billion dollars of communication infrastructure assets. 3. Nearly 20 years ago,I started collecting publicly and privately available tower location and lease data. When I formed Steel in the Air, I believed that strong data was paramount to our being able to advise landowners and tower owners effectively. Over that timefiame, we have collected lease data through news stories, public records requests, industry sources, and client-provided information. We maintain one of the most comprehensive wireless infrastructure databases in the United States which is not owned by a wireless company or tower company. 4. Specifically related to small-cell and Distributed-Antenna-System (DAS) leases, my company has conducted hundreds of hours of research regarding small cell and DAS-node lease agreements including making public records requests to various public entities over the last three years. 5. Earlier this year, I testified as an expert before the Florida Legislature on behalf of the Florida League of Cities and the Florida Association of Counties regarding similar small- cell legislation in Florida. In part through the Florida engagement I became aware of the effort by the industry, led by the Wireless Infrastructure Association in conjunction with the American Legislative Exchange Council(ALEC)to enact legislation in multiple states to provide relatively consistent procedures and fee structures for obtaining the use of public rights-of-way and to require local governments to permit use of their rights-of-way at far- below-market rates. 6. In preparation for making this affidavit, I have reviewed SB 1004, which enacted chapter 284 of the Texas Local Government Code. 2 7. Section 284.053 of the Texas Local Government Code sets a maximum annual rental rate of$250 per network node located in a city's right-of-way. The term "network node" is defined so that it includes both small cells and DAS but does not include macrocells or cell towers. 8. A macrocell is what most people think of when considering cellular antennas and cell service. Multiple macrocells may be placed on a single structure such as a cell tower. Cell towers are typically 50' or taller towers containing multiple antennas that have been used to provide cell phone service for more than two decades. Small cells, conversely, as their name suggests,are much smaller in size and coverage area than a macrocell or a cell macro tower, will become much more numerous, and can often be found on poles used for street lights, traffic lights, street signs, and poles of similar height. A small cell typically is utilized exclusively by one wireless company, while a distributed-antenna system or DAS can receive and transmit signals from multiple wireless service providers. As noted above, both small cells and DAS are included in the statute's definition of network node. 9. To determine a fair market value for the use of municipal right-of-way by a wireless provider to locate a small-cell or DAS network node, I looked at data from 50 cities in 25 states. The pole attachment fees went from$200 to as high as$13,200 per year. In Texas, the rates ranged from$1,000 to $2,400 per year. 10. I tried to make an apples-to-apples comparison by using rates for attachment to an existing pole. For example, in Houston, the Master License Agreement for Wireless Facilities and Poles in the Dight-of-Way provides a 2016 annual per pole fee of$2,700 if the licensee will be placing its own pole in the right-of-way and $2,000 if it is attaching to an existing utility pole. For Houston, I used the lower $2,000 fee for attaching to an existing pole. 3 Similarly, in determining average fees, I looked solely at the fees on a city-by-city basis rather than weighting the fees by the number of cells in each city. Larger cities tend to be on the higher end of the annual rental rates and generally have the highest number of node locations. If I had weighted the average by the number of locations, the average would have been higher. 11. I determined that the average annual per pole rate in the 50 cites in our small cell/DAS data base is $2,388 per pole per year. 12. The average rate for the six cities in Texas in the data base is$1,733 per pole per year. 13. Looking at the complete sample and discarding the extremes on both the high and low end, it is my opinion that fair market value for attaching a network node to a pole in a municipal right-of-way will fall within the range of$1,500 to$2,500. 14. The $250/year rate for pole attachments is substantially below fair market value. It is 10.4% of the average rate that was negotiated at arm's length between U.S. cities and counties and wireless service providers in our data,and 14%of the average of Texas public cities. 15. If one considers the $1,500-$2,500 range for fair market value, the $250 rate represents one-tenth to one-sixth of fair market value or 10%to 16.7%of fair market value. 16. Because of the statute's requirement that Texas cities make city-owned poles in their rights- of-way available to the network providers at a rate that is substantially below fair market value,there will be an obvious negative impact on municipal finances. It will also have an impact on other entities. 17. The reduced rental rate for network nodes on poles in municipal rights-of-way would have a negative effect on the ability of private property owners to rent space for small cells and 4 DAS. These nodes can be and would likely be located on building roofs, the sides of buildings and similar outdoor locations. In my experience, private small cell leases between property owners and wireless companies traditionally range from$4,200 per year to $8,400 per year. By establishing such a low and far-below market rate for small cell leases in the public right-of-way, Texas will largely eliminate the use of private property for small cells. In my experience, very few, if any, private property owners would be willing to lease their property to wireless service providers for rates anywhere near $250/year. Thus, by subsidizing the wireless service providers on public right-of-way, private landowners as a whole in Texas will see significantly less interest for small cells on their land or buildings and as a result, will realize measurably less income. 18. An effect of the requirement that Texas municipalities permit the use of poles within their rights-of-way at extremely low rental rates is likely to be that the residents of Texas cities will be subsidizing the wireless rates paid by consumers in other states that do not have artificial barriers to what can be charged wireless providers. Specifically,the large wireless companies—e.g., AT&T, Sprint, T-Mobile, and Verizon—do not charge geographically based rates. Rates are consistent throughout the United States regardless of what may be higher underlying costs of operating a network in other areas. By setting low rates in Texas that are as much as five or more times lower than what municipalities in other states without similar legislation charge, Texas consumers are fundamentally subsidizing service for customers in other states. Alternatively, Texas cities are subsidizing wireless service provider profits in an already very profitable industry. 19. While the ability to use poles within the public right-of-way at a statutorily set rate that is far below fair market value undoubtedly benefits the wireless service providers, it is 5 unlikely that the absence of a rate cap on the use of the right-of-way would materially prevent or slow down the expansion of the wireless network. Wireless providers are expanding the small cell network not just because they hope to offer advanced services, but to reduce their operating costs and to increase capacity for more profitable services like consumer video. Additionally, the cost of the use of the right-of-way is minuscule when considered in the context of the revenue currently generated by the network. The wireless industry in 2016 generated $188 billion in service revenue according to industry trade organization CTIA's 2016 Wireless Industry Survey. Paying fair market value for small cell infrastructure rights would not create a barrier to entry. Assuming $2,000 per year per pole and 100,000 poles in the State of Texas, the "burden" on the wireless industry would be $200 million per year, or one-tenth of one percent of the wireless industry's combined service revenue. This assumes that the wireless industry would not be capable of generating additional service revenue from deployment of this infrastructure, which is clearly not the case as demonstrated by numerous comments to the contrary during nearly every wireless company quarterly earnings call. To the contrary, there is every reason to believe that the wireless providers would still generate positive net revenue by paying the level of right-of-way rental rates they were paying before SB 1004. Wireless service providers have deployed over 2,000 small cells in New York City despite New York having rates that are above average at $3,000 per pole. Even at $2,000 per pole, the City of Houston still received 700 plus applications for small cells in 2016. There is no reason to believe that paying market rates for the use of public property of Texas cities will delay or hinder the development of the wireless network. 6 20. SB 1004 does not provide for cities or the state to have continuing control over the use of the subsidized nodes placed in the municipal right-of-way to ensure that the public is being served as such service is contemplated in the lengthy preamble of the legislation. For example, there is nothing in the Act to preclude dedicating some nodes to purely private use by individual customers rather than being available to the public. Similarly, there is nothing to give cities the ability to see that the subsidies to the network are used to bring "reliable wireless networks and services" to areas of greatest public need such as traditionally underserved areas. There is no assurance that the public will be provided cost effective access to "next-generation services" or that the wireless service providers won't deploy small cells solely to maintain more favorable cost structures for existing generation services. There is no methodology for either the state or cities to ensure that the wireless service providers will deploy infrastructure that will "help ensure that this state remains competitive in the global economy." Furthermore,there is no ability to confirm over time that the nodes were deployed in a method that "protect and safeguards the health, safety, and welfare of the public". As written, SB 1004 has almost no checks and balances necessary to assure that wireless service providers don't simply install network nodes where it is most economically advantageous to them while ignoring the areas where it would be most beneficial to serve the public or that would further Texas' stated policy objectives in passing this legislation. Signed this the 2Z day of l9 6 Ul Sr , 2017. KE SCHMIDT 7 Sworn to before me this day of ,2017. 7PuWIc KLIPPEL ate of New YorkCA2:-::1SgS38ndaga County otary Public Mires Dec 19,2017 My Commission expires: 8 EXHIBIT A Ken Schmidt 16001 Waterleaf Lane, Ft. Myers, FL 33908 Phone: (813) 335-4766 Email: ken(a_steelintheair.com PROFESSIONAL EXPERIENCE: Steel in the Air, Inc. Fort Myers, FL 01/2004 - Current President/Owner • Started Cell Tower Consulting Firm specialized in due diligence, cell tower tenant and ground lease negotiations • Provided fair market value analysis for cell site leases for over 2,700 clients nationwide in the course of 10 years • Created online Competitive Analysis GIS mapping service for clients to use in evaluation of potential tower sites and acquisition of cell towers and or ground leases • Established nationwide database of 250,000 cell site locations and 8,500 cell site leases • Enlisted to provide due diligence and competitive analysis services by multiple tower companies including projections of potential lease up and document review • Provide sale side advisory services as a partner in SteelTree Partners for the sale of over$800,000,000 in tower assets over 10 years • Retained regularly by Investment Analysts to review and analyze the public tower companies and the current state of the market • Formulated process for initial evaluation of any tower site in the US to determine its uniqueness/value as a wireless communication facility Cell Tower Attorney New York, NY and Fort Myers, FL 01/2007- Current Partner • Started Cell Tower Law Firm specialized in cell tower lease related legal issues. • Provided legal guidance on cell site lease related issues for over 500 clients nationwide in the course of 6 years Horizon Site Services, Inc. Tampa, FL 01/2000 to 01/2004 General Manager(01/2001) • Responsible for coordinating of due diligence, database accuracy, and general business development for due diligence, site acquisition, and zoning projects • Developed proprietary GIS (Geographical Information Systems) database of communications towers and established a clientele of tower companies and wireless carriers for custom mapping applications and lease up analysis • Performed Project Management of site acquisition and zoning for 300 site build for Nextel in Atlanta, Georgia • Established and maintained of positive working relationship with clients & contractors. Site Acquisition and Zoning Manager(01/2000) • Performed Project Management of site acquisition and zoning for 100 site build for Voicestream Wireless in St. Louis, Missouri • Managed field agents to accomplish the required tasks including preliminary site drives, zoning analysis, construction caravans, leasing and final zoning through permit Ken Schmidt 16001 Waterleaf Lane, Ft. Myers, FL 33908 Phone: (813) 335-4766 Email: ken(a_steelintheair.com Imperial Tower Leasing, Inc. Tampa, FL 06/2000-01/2003 General Manager/Part Owner • Performed project management for all development activities related to the identification and development of potential communication towers including identifying corridors for suitable for speculative development, RF design, search ring creation, site acquisition and zoning • Formulated Process for determining lease-up potential of prospective build sites • Negotiated development deal for communication towers with large private tower company Broadcast Tower Leasing, Inc. Tampa, FL 01/1998 to 01/1999 General Manager • Developed and executed strategic plan for identification and development of community broadcast towers across the US • Managed engineering, marketing, and all phases of site development for community broadcast facilities • Established strategic relationships and joint marketing agreements with national vendors and key consultants for development of towers up to 2000'tall • Created forecast models for all broadcast tower opportunities including lease-up estimates and cost projections • Managed all external contractors and marketing agents • Recruited, interviewed, hired and trained personnel. Acme Towers, Inc. Tampa, FL 01/1997 to 01/1998 Site Acquisition Manager • Managed site acquisition and zoning for Central Florida • Zoned 15 difficult sites in central Florida • Developed and maintained client relationships. EDUCATION & CERTIFICATIONS: University of Florida School of Law Gainesville, FL • Juris Doctorate 1996 Concentration in Construction Law and Bankruptcy Northeast Missouri State University Kirksville, MO • Bachelor of Science- Political Science 1992 Minor in Business Law Ken Schmidt 16001 Waterleaf Lane, Ft. Myers, FL 33908 Phone: (813) 335-4766 Email: ken(a_steelintheair.com INDUSTRY HONORS: • Spoke at the Tower Summit (Industry Conference)twice- "Broadcast Tower Opportunities" and "Cell Tower Due Diligence" • Spoke at 2005 Georgia Association of Assessing Officials Annual Conference—"Cell Tower Valuation and Assessment" • Spoke at 2006 Association of University Real Estate Officials- "State of the Wireless Industry' • Spoke at 2007 Arkansas Appraisers Association Annual Conference- "Cell Tower Valuation and Assessment" • Spoke at 2008 Inside Self Storage Association Conference on "Cell Site Leases for Self Storage: Long-Term, Reliable Income Opportunities" • Spoke at 2009 International Association of Assessing Officials Annual Conference on "Assessing the Value of Cell Towers" • Spoke at 2013 US Navy Appraisers' Annual Appraisal Conference on "Appraisal of Cell Towers" • Retained as Expert Witness in Multiple Cases Involving Cell Tower Valuation and Lease Forecasting Litigation • Regularly Quoted as Cell Tower Expert in Numerous Newspaper Articles including in the Wall Street Journal, New York Times and in Industry Trade Magazines including RCR News and AGL Magazine COMPUTER SKILLS: • Microsoft Office 2013- Powerpoint, Excel, Access, Word, Outlook, CRM Dynamics • Mapinfo, Arclnfo- Geographical Information Systems (Mapping Programs) • Google Earth, Bing Mapping • All Delorme Mapping Products Town of Westlake September 11,2017 C. Robert Heath Bickerstaff Heath Delgado Acosta LLP 3711 S. MoPac Expy., Bldg 1, Suite 300 Austin, TX 78746 Re: SB 1004 Litigation Dear Mr. Heath: The Town of Westlake has approved your firm's representation for our town, along with other Texas cities, in connection with litigation to challenge the constitutionality of SB 1004,which relates to the deployment of network nodes and that sets the fees that cities can charge for the use of their right-of-way. As part of our town's approval,I have reviewed the copy of your firm's Engagement Agreement with the City of McAllen,dated July 25,2017,and its terms are acceptable to our town. I understand that in order to facilitate the logistics of billing among what is anticipated to be a large number of cities, each city, including McAllen,will send Bickerstaff Heath Delgado Acosta LLP an amount equal to $0.15 per resident of the city as shown by the 2010 federal census. The Town of Westlake's contribution will be $148.80. Those funds along with any other funds earmarked for the prosecution of the suit will be placed in the Bickerstaff Heath Delgado Acosta LLP Trust Account and will be used to pay the law firm's fees and expenses only after those fees and expenses are incurred and billed. If the funds raised by the initial assessments are not sufficient to complete the litigation, it may be necessary for McAllen to make additional contributions and it may seek contributions from cities and other sources;however, my town will not be required to make an additional assessment to continue as a party to the litigation. At the end of the litigation any funds remaining will be returned proportionately to the participating cities, except that if the additional assessment is exhausted and additional funds are obtained above the amount of the initial assessment, any refund will go to McAllen and any other city providing funds above the amount of their initial assessment and will be computed in proportion to their contribution above the amount of their initial assessment. My town agrees to this procedure and to making its assessment. I understand that besides group emails,you will be coordinating primarily with Kevin Pagan,and that he will be responsible for coordinating the involvement of the other cities. This is acceptable. I have read,reviewed, and understand the attached Conflict of Interest Disclosure and Agreement. By my signature below, I represent that I am duly authorized to agree to its terms and conditions on behalf of our town,and thereby to bind our town to those terms and conditions. 1500 Solana Blvd.,Bldg. 7,Suite 7200•Westlake,Texas 76262 Metro:817-430-0941 •Fax:817-430-1812•www.westlake-tx.org C. Robert Heath Page 2 Please let me know if you need additional information or we can be of assistance. Sincerely, ame 7MW13 Title 1)YI ac URSURMly City/Town CERTIFICATE OF INTERESTED PARTIES FORM 1295 101`1 7-7 Complete Nos.l-4 and 6 if there are interested parties. OFFICE USE ONLY Complete Nos.1,2,3,5,and 6 if there are no interested parties. CERTIFICATION OF FILING 1 Name of business entity filing form,and the city,state and country of the business entity's place Certificate Number: of business. 2017-274218 Bickerstaff Heath Delgado Acosta LLP Austin,TX United States Date Filed: 2 Name of governmental entity or state agency that is a parry to the contract for which the form is 10/19/2017 being filed. Town of Westlake,Texas Date Acknowledged: 3 Provide the identification number used by the governmental entity or state agency to track or identify the contract,and provide a description of the services,goods,or other property to be provided under the contract. DEP01W Lawsuit challenging SB1004 4 Nature of interest Name of Interested Parry City,State,Country(place of business) (check applicable) Controlling Intermediary Maxwell, Susan M. Austin,TX United States X Willms Rogers, Emily Austin,TX United States X Mendez, David Austin,TX United States X Than,Catherine Houston,TX United States X Young, Bradley B. Austin,TX United States X Dugat III, Bill Austin,TX United States X Acosta,Jr.,Alejandro EI Paso,TX United States X 5 Check only if there is NO Interested Party. ❑ 6 AFFIDAVIT I swear,or affirm,under penalty of perjury,that the above disclosure is true and correct RAEANN MORRIS MY COMMISSION EXPIRES DECEMBER 22,2018 NOTARY ID:_130059256 Signatur of auadrized agen of contracting business entity AFFIX NOTARY STAMP/SEAL ABOVE II ' Sworn to and subscribed before me,by the said �VcQrtey this the _day of ©c.6 e,— 20, 19 ,to certify which,witness my hand and seal of office. /L�L� r ' ` T�ae-AAn fi0rr15 y P� b��� Signature of officer administering oath Printed name of officer administering oath Title of offic4 administering oath Forms provided by Texas Ethics Commission www.ethics.state.tx.us Version V1.0.3337 CERTIFICATE OF INTERESTED PARTIES FORM 1295 1 of 1 Complete Nos. 1-4 and 6 if there are interested parties. OFFICE USE ONLY Complete Nos. 1,2,3,5,and 6 if there are no interested parties. CERTIFICATION OF FILING 1 Name of business entity filing form,and the city,state and country of the business entity's place Certificate Number: of business. 2017-274218 Bickerstaff Heath Delgado Acosta LLP Austin, TX United States Date Filed: 2 Name of governmental entity or state agency that is a party to the contract for which the form is 10/19/2017 being filed. Town of Westlake,Texas Date Acknowledged: 10/20/2017 3 Provide the identification number used by the governmental entity or state agency to track or identify the contract,and provide a description of the services,goods,or other property to be provided under the contract. DEP01W Lawsuit challenging SB1004 Nature of interest 4 Name of Interested Party City,State,Country(place of business) (check applicable) Controlling Intermediary Maxwell, Susan M. Austin,TX United States X Willms Rogers, Emily Austin,TX United States X Mendez, David Austin,TX United States X Than, Catherine Houston, TX United States X Young, Bradley B. Austin,TX United States X Dugat III, Bill Austin,TX United States X Acosta, Jr.,Alejandro EI Paso, TX United States X 5 Check only if there is NO Interested Party. ❑ 6 AFFIDAVIT I swear,or affirm, under penalty of perjury,that the above disclosure is true and correct. Signature of authorized agent of contracting business entity AFFIX NOTARY STAMP/SEAL ABOVE Sworn to and subscribed before me,by the said this the day of 20 ,to certify which,witness my hand and seal of office. Signature of officer administering oath Printed name of officer administering oath Title of officer administering oath Forms provided by Texas Ethics Commission www.ethics.state.tx.us Version V1.0.3337