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HomeMy WebLinkAboutPW Transit Shelter Advertising AgreementSAN RAFAEL Agenda Item No: 44. THE CITY WITH A MISSION Meeting Date: May 1, 2017 SAN RAFAEL CITY COUNCIL AGENDA REPORT Department: Public Works Prepared by: Bill Guerin City Manager Approval: Director of Public Works File No.: 18.10.08 TOPIC: ADVERTISING TRANSIT SHELTER AGREEMENT SUBJECT: ADOPT A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN RAFAEL AUTHORIZING THE CITY MANAGER TO EXECUTE AN AMENDMENT TO THE ADVERTISING TRANSIT SHELTER AGREEMENT WITH OUTFRONT MEDIA LLC EXTENDING THE TERM BY FIVE YEARS AND MODIFYING PAYMENT TERMS RECOMMENDATION: Staff recommends that the City Council adopt the resolution authorizing the City Manager to amend the existing contract for transit shelter advertising and maintenance services with Outfront Media, Inc. and extend the term by five years. BACKGROUND: On September 7, 1993, the City entered into an Advertising Transit Shelter Agreement with Gannett Outdoor Co. for a term of 15 years, commencing on the date the first shelter was put into operation. In the original agreement, in exchange for "the exclusive right to erect and maintain advertising transit shelters on City property" the Contractor agreed to pay a portion of its advertising revenue to the City of San Rafael. This amount was originally specified in 1993 as the greater of $90 per shelter per month or 18% of advertising revenue. Since then, Gannett was succeeded by Outdoor Systems then by CBS Outdoor, and now by Outfront Media, the current contractor. The original 15 -year agreement expired in 2008; however, the City and the Contractor continued to operate under the terms of the original 1993 agreement until the agreement was formally amended and approved by City Council on November 21, 2011; raising the payment to the City to $150 per shelter per month. Six months later, on May 7, 2012, Public Works returned to Council to reduce the payment terms in the 2011 agreement from $150 to $126 per shelter (or 25% of gross revenues, whichever was greater), citing the recession and resulting financial hardship impeding the company's ability to make the higher payments. This last amendment to the agreement is set to expire on May 7, 2017. FOR CITY CLERK ONLY File No.: 4-10-271 Council Meeting: 05/01/2017 Disposition: Resolution 14317 SAN RAFAEL CITY COUNCIL AGENDA REPORT / Page: 2 While the 2012 agreement has stated that Outfront Media shall make payments to the City equal to the greater of $126 per shelter per month (adjusted annually for inflation based on CPI) or 25% of advertising revenue, historically, Outfront Media and its predecessors have always employed the former method in annual compensation paid to the City. Since 2012, the City has collected $46,872 (31 shelters x $126 x 12 months) in revenue from the agreement on an annual basis, with an adjustment to the $126 rate based on inflation. It is important to note that in addition to managing advertising services on San Rafael's bus shelters, Outfront Media also incurs the cost of erecting and maintaining the bus shelters. Under the current terms of the agreement, Outfront Media maintains the shelters on a weekly basis, or more often if necessary to keep shelters and the surrounding area free of litter, graffiti, posters and debris. Shelters are high pressure washed once a month. Importantly, Outfront Media is also responsible for the cost of repair to any damages to the shelters, including responding to any dangerous conditions within 24 hours of notice. There is a telephone contact number posted in all City bus shelters for purposes of notification. Public Works staff have reported that Outfront Media and its predecessors have consistently maintained bus shelters in a highly satisfactory manner as described above. The City has received minimal complaints, and Outfront Media has responded to damages and hazards reported in shelters within 24 hours. Bus shelters have been an important and enhanced service the City has been able to provide to transit riders, and one that the City likely would not be able to afford to maintain were it not for the partnership with Outfront Media. Additionally, under the current agreement, the City is allowed use of unsold bus shelter advertising space, at no charge to the City. The agreement outlines that Outfront Media shall give the City 30 days' notice when unsold space becomes available, and will post City messages at no cost. This is an enhanced and free service for the City to utilize in communicating with the public. ANALYSIS: Due to the upcoming expiration date of the agreement of May 7, 2017, the City Council is being asked to extend and amend the current agreement with Outfront Media for another 5 year term, with the option to extend for another 5 year period on the same terms by written agreement of the parties. Outfront Media has reported that advertisement business within the entire advertising industry has declined significantly since the agreement with City was last amended, and they cannot afford to continue to provide maintenance services at the existing level while making a guaranteed annual minimum payment to the City at the existing rate. For the last several years, Outfront Media has experienced financial loss maintaining San Rafael's shelters, as maintenance costs and the payment to the City have outpaced advertising revenues. Therefore, in renewal of the contract for another 5 year term, and to ensure we can continue to provide transit riders with well-maintained bus shelters, City staff and Outfront media propose to eliminate the provision which provides that the City will be paid the greater of the monthly payment of $126 per shelter or 25% of gross advertising revenue received; and replace it with a provision which states solely that the City will receive 25% of gross revenue received. SAN RAFAEL CITY COUNCIL AGENDA REPORT / Page: 3 Under a 25% of revenue payment model, the City anticipates that it will receive payments totaling between $25,000 and $35,000 annually. Outfront Media has reported that gross revenues from 2014- 2016 have ranged from $89,060 to $134,332. Changing over to a solely percentage -based model would likely mean a $10,000-$25,000 decrease in revenues to the City. However, other cities throughout the region which partner with Outfront Media for their bus shelter maintenance services, including most recently the City of Concord, have shifted over to the percentage -based model; acknowledging that the cost and duty to maintain the shelters, in addition to committing to a minimum annual payment of $46,872, can cause the contractor financial loss. The maintenance costs for the advertising bus shelters in San Rafael is estimated at $90,000 per year, and as described above, are fully incurred by Outfront Media under the current agreement. Were it not for the current agreement, the Department of Public Works would have to incur the costs of cleaning and maintaining the existing shelters, including maintaining a 24 hour response to unsafe conditions and graffiti removal. Additionally, since Outfront Media owns the transit shelters for the term of the current agreement; were the City to end the current agreement, San Rafael transit riders may be left without bus shelters if the City cannot afford to take ownership of and maintain the shelters. FISCAL IMPACT: Revenues will likely decrease $10,000-$25,000 per year under the amended agreement. OPTIONS: 1. Approve the resolution authorizing the City Manager to execute an amendment to the Agreement with Outfront Media Inc. to eliminate the minimum monthly payment of $126 per shelter per month, and establish the new monthly payment as 25% of gross advertising revenues. The new agreement will be set for a 5 year term, with the option to extend for another 5 year period on the same terms by the written agreement of the parties, subject to the written approval of the City Manager. 2. Direct the Department of Public Works to develop an RFP and request proposals from operators to provide new, or purchase the existing bus shelters and operate and maintain the shelters for the City through revenue generated from advertising. Outfront Media would likely be the successful offeror because they own the existing shelters but their proposal may not match the existing negotiated agreement recommended in 1 above. 3. Do not authorize the amendment described above. Direct the Department of Public Works to take possession of the shelters from Outfront Media and provide maintenance of the existing bus shelters, as well as manage the advertising on the shelters (should Council pursue additional revenues from that service). This option will place a burden on the Department of Public Works and cause the City to incur shelter maintenance costs. ACTION REQUIRED: Adopt Resolution and authorize the City Manager to execute an amendment to the Agreement. ATTACHMENTS: 1. Resolution 2. Exhibit A to Resolution —Amendment to Agreement 3. Letter from Outfront Media LLC RESOLUTION NO. 14317 RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN RAFAEL APPROVING AND AUTHORIZING THE CITY MANAGER TO EXECUTE AN AMENDMENT TO THE ADVERTISING TRANSIT SHELTER AGREEMENT WITH SUCCESSOR IN INTEREST OUTFRONT MEDIA LLC. WHEREAS, the parties entered into an Advertising Transit Shelter Agreement, dated September 7, 1993 ("Agreement"), under which CONTRACTOR assumed the obligation to install and maintain transit shelters in the CITY's right-of-way, on which CONTRACTOR could place advertising in exchange for compensation paid to the CITY; and WHEREAS, Outfront Media LLC, the CONTRACTOR, is the successor in interest to CBS Outdoor, Inc, which was previously the successor to Outdoor Systems, Inc, which was the successor in interest to the original contractor, Combined Communications Corp. dba Gannett Outdoor Co. of Northern California; and WHEREAS, on May 7, 2012, the parties agreed to an Amendment of the Agreement to amend Paragraph II (Duration of the Contract) to provide for an extension of the term of the Agreement for an additional period of 5 years through May 6, 2017, with an option for renewal for another 5 years, under the terms of the original 1993 Agreement, except for a revision to Paragraph V (Payment) to provide for the payment of $126 per shelter per month (adjusted annually by CPI change) or 25% of gross advertising revenues, whichever was greater; and WHEREAS, the parties wish to amend Paragraph II (Duration of Contract) of the Agreement to extend the term for an additional period of 5 years, May 7, 2017 through May 6, 2022 and, by written agreement of both parties, for another 5 year period on the same terms, subject to the written approval of the City Manager; and WHEREAS, the CONTRACTOR has demonstrated to the City that the guaranteed payment to the CITY of $126 per shelter per month, along with the costs of maintaining the shelters, has resulted in financial hardship for the CONTRACTOR; and WHEREAS, the CONTRACTOR has performed regular and satisfactory maintenance and upkeep to transit shelters located within the City Right of Way, providing enhanced service for San Rafael transit riders; and WHEREAS, the parties wish to amend Paragraph V (Payment) of the Agreement to change the amount paid to the CITY by the CONTRACTOR to be Twenty Five (25) percent of the gross advertising revenue; and WHEREAS, the parties wish to amend Paragraph XII (Notice) of the Agreement to revise the recipients of notices as follows: CITY: City Manager City of San Rafael 14005 th Street San Rafael, CA 94901 CONTRACTOR: Outfront Media LLC 450 Lexington Ave. New York, NY 10174 WHEREAS, all other terms and conditions of the Agreement shall remain unchanged and in full force and effect for the term of this Agreement, as amended. NOW THEREFORE, THE CITY COUNCIL OF THE CITY OF SAN RAFAEL resolves that it approves and authorizes the City Manager to execute the Amendment to the Advertising Transit Shelter Agreement, attached hereto as Exhibit A, and by this reference made a part hereof, subject to approval as to form by the City Attorney . I, ESTHER BEIRNE, Clerk of the City of San Rafael, hereby certify that the foregoing Resolution was duly and regularly introduced and adopted at a regular meeting of the City Council of said City held on Monday, the 1St day of May, 2017 by the following vote, to wit: AYES: COUNCILMEMBERS: Bushey, Colin, Gamblin, McCullough & Mayor Phillips NOES: COUNCILMEMBERS: None ABSENT: COUNCILMEMBERS: None - 'e- 'C&w - ESTHER BEIRNE, City Clerk SECOND AMENDMENT TO ADVERTISING TRANSIT SHELTER AGREEMENT This Second Ame dment to Advertising Transit Shelter Agreement (the "Amendment") is made and entered into this 291ay of May, 2017, by and between the CITY OF SAN RAFAEL ("CITY") and Outfront Media LLC, f/k/a CBS Outdoor, Inc, f/k/a Outdoor Systems, Inc., which was successor in interest to the original contractor, Combined Communications Corp. dba Gannett Outdoor Co. of Northern California ("CONTRACTOR"). RECITALS WHEREAS, CONTRACTOR and the CITY are parties to that certain Advertising Transit Shelter Agreement, dated September 7, 1993 under which CONTRACTOR assumed the obligation to install and maintain transit shelters in the CITY's right-of-way, on which CONTRACTOR could place advertising in exchange for compensation paid to the CITY, ; and WHEREAS, Outfront Media LLC the CONTRACTOR, is the successor in interest to CBS Outdoor, Inc, which was the successor to Outdoor Systems, Inc, which was the successor in interest to the original contractor, Combined Communications Corp. dba Gannett Outdoor Co. of Northern California; and WHEREAS, the parties agreed to an amendment dated May 7, 2012 extending the Term for an additional period of 5 years through May 7, 2017, with an option for renewal for another five (5) years (together, the "Agreement"); and WHEREAS, the parties now wish to amend Paragraph II (Duration of Contract) of the Agreement to extend the Term for an additional period of five (5) years from May 7, 2017 through May 6, 2022 and to permit, by written agreement of both parties, a renewal of the Agreement for another subsequent five (5) year period on the same terms as set forth herein, subject to the written approval of the City Manager; and WHEREAS, the CONTRACTOR has demonstrated to the City that the guaranteed payment to the CI'T'Y of $126 per shelter per month, along with the costs of maintaining the shelters, has resulted in financial hardship for the CONTRACTOR; and WHEREAS, the CONTRACTOR has performed regular and satisfactory maintenance and upkeep to transit shelters located within the City Right of Way, providing enhanced service for San Rafael transit riders; and WHEREAS, the parties wish to amend Paragraph V (Payment) of the Agreement to change the amount paid to the CITY by the CONTRACTOR to be Twenty Five (25) percent of the gross advertising revenue; and WHEREAS, the parties wish to amend Paragraph XII (Notice) of the original Agreement to revise the recipients of notices as follows: CITY: City Manager City of San Rafael 1400 5`h Avenue San Rafael, CA 94901 1 CONTRACTOR: Outfront Media LLC 450 Lexington Ave. New York, NY 10174 WHEREAS, all other terms and conditions of the Agreement shall remain unchanged and in full force and effect for the term of this Agreement, as amended. AMENDMENT TO AGREEMENT NOW THEREFORE, the parties agree as follows: Paragraph II (Duration of the Contract) of the Agreement is amended to read: "This Agreement will be extended for a five (5) year period commencing May 7, 2017 through May 6, 2022, and may be extended for another subsequent five (5) year period on the same terms and conditions set forth herein by the written agreement of the parties, subject to the written approval of the City Manager." 2. Paragraph V (Payment) of the Agreement is hereby deleted in its entirety and replaced with the following: "CONTRACTOR will pay CITY twenty-five percent (25%) of the gross advertising revenue (gross sales minus agency commission) received by CONTRACTOR from the sale of advertising on the advertising transit shelters per month. CONTRACTOR will provide CITY with a written monthly accounting of the gross advertising revenue received from the sale of advertising on the advertising transit shelters and the payment owed to CITY. CONTRACTOR will submit the required payment to CITY within thirty (30) days following the conclusion of each month. No minimum flat fee or other amount shall be payable by CONTRACTOR in connection with the advertising transit shelters." 3. Paragraph XII (Notice) of the Agreement is amended to revise the recipients of notices as follows: CITY: City Manager City of San Rafael 1400 5t' Avenue San Rafael, CA 94901 Contractor: Outfront Media LLC 450 Lexington Ave. New York, NY 10174 4. All other terms and conditions of the Agreement shall remain unchanged and in full force and effect for the term of this Agreement as amended. 17 IN WITNESS WHEREOF, the parties have executed this Amendment as of the day, month and year first hereinabove written. � CITY OF SAN RAFAEL: Jim SchutCit Manager ATTEST: f2 eg+ G - Esther C. Beirne, City Clerk APPROVED AS TO FORM: C - lei Robert F. Epstein, City Att ey 3 LLC: Printed Officel Name: Richard Ament Title: SVP Business Development and, Pripted(0 icer Name: drew R. Sriubas J Title: E `Strategi lanning & Development CONTRACT ROUTING FORM INSTRUCTIONS: Use this cover sheet to circulate all contracts for review and approval in the order shown below. TO BE COMPLETED BY INITIATING DEPARTMENT PROJECT MANAGER: Contracting Department: Public Works Project Manager: Talia Smith Extension: 3354 Contractor Name: Outfront Media Contractor's Contact: Frank Sandusky Contact's Email: frank.sandusky@outfrontmedia.com ❑ FPPC: Check if Contractor/Consultant must file Form 700 Step RESPONSIBLE DESCRIPTION COMPLETED REVIEWER Date of Council approval DEPARTMENT DATE Check/Initial 1 Project Manager a. Email PINS Introductory Notice to Contractor 5/1/2017 NLG TS Attorney with printed copy of this routing form 4/18/2017 b. Email contract (in Word) & attachments to City 6 City Attorney Review and approve hard copy of signed S�221 �I Atty c/o Laraine.Gittens@cityofsanrafael.org NTS 2 City Attorney a. Review, revise, and comment on draft agreement Click here to and return to Project Manager enter a date. ® TS 8 City Manager/ Mayor Agreement executed by Council authorized official b. Confirm insurance requirements, create Job on Click here to 9 City Clerk Attest signatures, retains original agreement and PINS, send PINS insurance notice to contractor enter a date. M _LG_ 3 Project Manager Forward three (3) originals of final agreement to 5/1/2017 NTS contractor for their signature 4 Project Manager When necessary, * contractor -signed agreement ❑ N/A agendized for Council approval *PSA > $20,000; or Purchase > $35,000; or Or NTS Public Works Contract > $125,000 5/1/2017 Date of Council approval PRINT CONTINUE ROUTING PROCESS WITH HARD COPY 5 Project Manager Forward signed original agreements to City 5/15/17 TS Attorney with printed copy of this routing form Hard copy sent 5/22/17 6 City Attorney Review and approve hard copy of signed S�221 �I agreement 7 City Attorney Review and approve insurance in PINS, and bonds (for Public Works Contracts) 8 City Manager/ Mayor Agreement executed by Council authorized official L 71_l/> 17AV 9 City Clerk Attest signatures, retains original agreement and forwards copies to Project Manager ,A as 0UTFR0NT-1w*%-b media Talia Smith Senior Management Analyst City of San Rafael Department of Public Works April 18, 2017 Dear Talia: Outfront Media Group LLC. Is pleased to advise you that all of necessary approvals are in place in order to move forward with our agreement based on the following criteria: 1. Effective Date of May 1, 2017 or as soon as practical after approval by the City of San Rafael 2. Five (5) year term 3. Revenue of 25% of net revenue collected will be paid to the City of San Rafael. All of the other terms from the original agreement will remain in effect. Sincerely, Frank Sandusky VP Business Development Western US Direct: 657.221.2762 Cell 714.325.5679 2100 W.Orangewood Ave. Suite 160 Orange, CA 92868 OUTFRONTmedia.com ROUTING SLIP / APPROVAL FORM INSTRUCTIONS: Use this cover sheet with each submittal of a staff report before approval by the City Council. Save staff report (including this cover sheet) along with all related attachments in the Team Drive (T:) --> CITY COUNCIL AGENDA ITEMS 4 AGENDA ITEM APPROVAL PROCESS 4 [DEPT - AGENDA TOPIC] Agenda Item # Date of Meeting: 5/1/2017 From: Bill Guerin Department: Public Works Date: 4/21/2017 Topic: ADVERTISING TRANSIT SHELTER AGREEMENT Subject: ADOPT A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN RAFAEL AUTHORIZING THE CITY MANAGER TO EXECUTE AN AMENDMENT TO THE ADVERTISING TRANSIT SHELTER AGREEMENT WITH OUTFRONT MEDIA LLC. EXTENDING THE TERM BY FIVE YEARS AND MODIFYING PAYMENT TERMS Type: ® Resolution ❑ Ordinance ❑ Professional Services Agreement ❑ Other: Staff Report APPROVALS ® Finance Director Remarks: Approved -Van Bach ® City Attorney Remarks: Approved with recommended changes to Staff Report, Resolution and Agreement. ETD. 4/24/17 ® Author, review and accept City Attorney / Finance changes Remarks: Accepted changes - TS ® City Manager Remarks: FOR CITY CLERK ONLY File No.: Council Meeting: Disposition: