Recommendation
Authorize the City Manager to execute the Verizon Fiber to the Premises (FTTP) Project Agreement in a form acceptable to the City Attorney.

Change in Law or Policy
The current Department of Public Works Utility Permit fees will not apply to the Verizon FTTP Project. A separate Fee Resolution was presented immediately prior to this item for Mayor and Council adoption. The Fee Resolution contained a provision that the Mayor and Council can approve alternate fees in agreements for citywide projects, such as this Verizon FTTP Agreement. This FTTP Agreement will establish fees that apply only to this Verizon project. The new fees were developed under the same financial model as the current fees. The fees will recover City contract costs for the project, as well as City costs for project oversight and management.

Discussion
Verizon desires to install a new fiber optic cable network throughout the City of Rockville. This project, known as FTTP, will allow Verizon to offer telephone, high speed Internet, and cable television services collectively known as FiOS (Fiber Optic Service). The Verizon FTTP Project Agreement is provided
(Attachment A), which details the terms and conditions under which Verizon would complete the FTTP project within the City's rights-of-way and obtain Department of Public Works (DPW) permits, including associated fees. A cable franchise agreement will be presented in an upcoming session for Mayor and Council approval. The franchise agreement will authorize Verizon to provide cable television service over its fiber optic network.

The City has been negotiating with Verizon on the FTTP project since 2004. The negotiations reached a significant impasse initially due to the current Public Works Utility Fee structure. The current DPW Utility Fee structure is based upon recovering costs and is implemented on a per linear foot basis, with variable rates based upon the impact to the City right-of-way specifically in three areas: aerial, excavation in the street, and excavation in the grass; however, a minimum fee applies to all utility permits. Recognizing that the current fee structure does not contemplate projects on the scale of Verizon's, the City negotiators proposed an alternate fee structure that would recover City costs (the same goal of the current fee structure). Verizon responded by providing additional details about their operations, procedures, design process, and construction phasing. The continued discussions produced the FTTP Project Agreement presented tonight as summarized in the following paragraphs. Further references to the "agreement" in this agenda item will mean the FTTP Project Agreement.

There are two components to the Verizon project, the FTTP infrastructure construction and the FiOS Connections. The new fiber optic facilities (FTTP infrastructure and FiOS Connections) will be overhead, aerial, or underground corresponding to the existing Verizon copper wire (telephone) facilities. The FTTP infrastructure construction is the fiber optic facilities or network that will be constructed in the City rights-of-way and public utility easements (easements on private property for the installation of electric, gas, telephone, cable etc.). The FTTP infrastructure will be constructed out of and serviced from three Verizon Central Offices (for example, wire centers that contain operations systems and facilities): Rockville, Montrose, and Gaithersburg. The majority of the City will be serviced out of the Rockville Central Office. Some of the southern areas of the City such as North Farm, Montrose, and parts of Twinbrook will be serviced out of the Montrose Central Office. Once this agreement is approved, work is scheduled to begin in 2008 and 2009 out of the Rockville and Montrose Central Offices since the Montgomery County and State approvals are in place for its rights-of-way. The King Farm subdivision will be serviced out of the Gaithersburg Central Office. Verizon plans to obtain the necessary Gaithersburg approvals to begin construction out of that office in 2009. The FiOS Connections are the individual service connections from the FTTP infrastructure to a residence. The FiOS Connections will take place as individuals order service.

The City will issue individual Utility Permits for FTTP construction and blanket permits for the FiOS connections. There will be an estimated 86 Utility Permits for FTTP construction consisting of five feeder routes and 81 distribution routes. The feeder routes are spokes or main trunk lines from their respective Central Offices. Each distribution route will serve approximately 150 residences. The City will issue blanket permits for individual households connections (FiOS Connections) that would impact the right-of-way. The blanket permits will be renewable every six months (the current time limit authorized in the City Code) at a set rate for a term of four years. This permit would apply to all aerial or overhead installations and only those underground installations where the City rights-of-way are impacted. A majority of the underground installations to the households will occur from a public utility easement (on private property) to the house. DPW will not be issuing a permit for this work as it does not have permit authority over work in the public utility easement (PUE).

Verizon and the City developed and agreed to the following fee model:

FTTP Permit- Plan Review Costs - Estimated at $28,600
Verizon will pay for all actual permit review costs based upon a proposed unit price contract between the City and CTI Consultants of Rockville, Maryland, one of the consultants under the Engineering Services Requirements Contract #8-08. The total estimated cost for plan review is based upon the following schedule of values:

Description	Unit	Estimated Quantity	Unit Price	Total
Plan Review	Permit	86	$332.56	$28,600

CTI Consultants will complete a detailed review of the Verizon plans to ensure they are in conformance with City regulations, policies, and construction requirements. Staff will present this contract award this evening for approval following this agenda item. There are no appropriated funds in the adopted budget for these expenses. Verizon will provide funds in advance of the work in a draw down account so that the City has adequate funds to pay for this contract. The City may take action, up to and including, suspension of Verizon permits if adequate funds are not available.

FTTP Permit - Inspection costs - Estimated at $70,960
These costs will be based upon the same Engineering Services Requirement Contract used for FTTP Permit review. The City will issue a purchase order to CTI Consultants for permit review and inspection. This will provide continuity throughout the project and economy of scale. The total estimated cost for inspection services is based upon the following schedule of values:

Description	Unit	Estimated Quantity	Unit Price	Total
Inspector	Hour	1,760	$36.00	$63,360
Engineer - support	Hour	80	$95.00	$7,600

CTI Consultants will provide engineering services to provide on-site inspection of all Verizon activities in the City rights-of-way for the duration of the FTTP infrastructure construction. The inspection services will ensure compliance with City regulations, policies, and construction requirements. There are no appropriated funds in the adopted budget for these expenses. Verizon will provide funds in advance of the work in a draw down account so that the City has adequate funds to pay for this contract. The City may take action, up to and including, suspension of Verizon permits if adequate funds are not available.

Utility Locate Costs - Estimated at $51,720
Verizon will pay the actual City costs based upon a contract to provide utility locate services for City utilities. The City will issue a purchase order to Insight, LLC of Chantilly, Virginia, the apparent low bidder of IFB #73-08. The costs cover the various needed types of locate services for each possible combination of water, sewer, and storm drain. The costs also cover remarking utilities and emergency locates. A complete schedule of values is provided (Attachment B). The contract award will be presented to the City Manager for approval upon approval of this agreement by the Mayor and Council. There are no appropriated funds in the adopted budget for these expenses. Verizon will provide funds in advance of the work in the same draw down account to be used for consultant plan review and inspection.

City Oversight Costs - Estimated at $75,910
Verizon will pay a $60,000 lump sum fee and an estimated $15,910 based upon an estimated 86 permits at the $185 minimum fee for each Utility Permit for FTTP construction. The lump sum payment will be made in two equal payments of $30,000. The first payment will be made with the first permit application and the second payment will be made five months later. The $185 fee is due with each permit application. These fees will recover estimated costs for staff labor to issue permits, manage the consultant contracts, and provide general oversight of the Verizon project.

City Blanket Permit Fees for FiOS Connections - $12,000
Verizon will pay $1,500 for each six-month permit for a period of four years for a total of $12,000. The blanket permit will allow Verizon to make individual service connections to residences from their fiber optic facilities located within the City rights-of-way. These permits will not cover FiOS Connections between a public utility easement and a residence since these connections are outside of the City rights-of-way.

Verizon will be responsible for an extensive public engagement program. The program consists of notification requirements outlined in the agreement; the "Rockville FTTP Outreach" plan (Attachment C); and the "FTTP Damage Prevention and Complaint Resolution Initiatives" (Attachment D). Verizon will offer to speak with any homeowners association, civic association, or neighborhood associated prior to the start of construction in their respective area. Verizon also will place door hangers for affected residences prior to and upon completion of all underground construction. All contractor vehicles will be identified as Verizon contractors with telephone contact information. Verizon and its contractors will maintain a database of all complaints and their resolution.

The agreement contains typical requirements for the protection of the City's infrastructure and liability. Verizon is required to maintain commercial liability insurance in the amount of $2,000,000. Verizon is required to repair, at their expense, any damage to the City's infrastructure or rights-of-way. Verizon will relocate or adjust their facility, at their expense, if there is ever a conflict with existing or proposed City infrastructure. Additionally, Verizon will post financial security to the City as required in Chapter 21 of Rockville City Code (Road Code) in the amount of $250,000 during the FTTP infrastructure construction and remain in effect for ten years after completion of FTTP project. There also is standard indemnification and hold harmless provisions to protect the City. Verizon will utilize the services of a Certified Arborist and a Maryland Licensed Tree Expert, as monitored by the Department of Public Works and the City Forester, for excavation near street trees.

The agreement contains provisions to protect Verizon information that may be considered trade secrets, confidential commercial information, or confidential financial information according to Maryland State law.

Mayor and Council History
This is the first time this FTTP Project Agreement has been brought before the Mayor and Council for approval.

City staff presented the cable franchise agreement to the Mayor and Council on December 11, 2006. The Mayor and Council took no action since the Right-of-Way Use Agreement (now titled Verizon FTTP Project Agreement) was not completed. At that time, the Mayor and Council directed staff to complete the agreement prior to presentation of the cable franchise agreement.

Resolution 4-06 was approved by the Mayor and Council on April 10, 2006. The resolution encouraged Verizon to continue negotiations and requested the agreement recover City costs associated with the project. The Mayor and Council also encouraged Verizon to install the FTTP facilities as soon as possible to make available competitive high speed Internet service for its residents.

The Verizon negotiations was also the subject of Executive Sessions on September 19, 2006 and April 21, 2008.

Fiscal Impact
The City anticipates permit revenue estimated at $87,910 to cover City costs associated with City oversight and blanket permits for this agreement. These funds will be processed in the same manner as other permit revenue. The contract costs for plan review, inspection, and utility locate marking will be funded completely by Verizon through a draw down (liability) account. The City will establish a draw down account to manage these funds and ensure adequate funds are available.

Next Steps
The City Manager will execute the Verizon FTTP Project Agreement.

Accompanying this agenda item, staff will present two additional items, a Fee Resolution and Contract Award for FTTP Plan Review and Inspection. Staff will present a contract award to the City Manager for approval of the contract to the apparent low bidder of IFB #73-08 for Utility Locate Services.

Attachments

Department Head:



Craig Simoneau, P.E.; , Director of Public Works
Approved on: 06/04/2008

City Manager:

Scott Ullery, City Manager
Approved on: 06/04/2008