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02-03-1998 - Bus Shelter Advertising Contract AgreementI TO: City Manac r and City Council City of West Covina *Memorandum FROM: Patrick J. Glover City Engineer/Public Works Director SUBJECT: BUS SHELTER ADVERTISING CONTRACT AGREEMENT AGENDA ITEM NO. C-1 DATE February 3, 1998 SUMMARY: At the October 1997 Council meeting, the City Council directed staff to work with Eller Media Company to develop a bus shelter advertising program that addressed the specific needs of the community and created a regular source of revenue for the City. Staff has prepared an agreement with Eller Media Company that will provide the City with 25 new custom bus shelters and generate minimum revenues of $28,500 annually. BACKGROUND Over the past several years, public agencies have experienced a reduction in revenue from property and sales taxes in addition to a decline in State and Federal subsidies. In response to these reductions in traditional revenue sources, staff and the City Council have been working to develop programs that will recover and generate incomes. At the suggestion of Councilmember Touhey, staff explored the possibility of developing a bus shelter advertising program as a new source of revenue for the City. Staff surveyed the following 9 public"agencies about their bus shelter advertising program. 1. County of Los Angeles 2. City of El Monte 3. City of South El Monte 4. City of Baldwin Park 5. City of Santa Fe Springs 6. City of Diamond Bar 7. City of Orange 8. City of Brea 9. City of Costa Mesa All 9 public agencies contracted with a private advertising agency to install and maintain their own shelters throughout the agencies jurisdiction. At the October 21, 1997 Council meeting, the City Council found that the City of Costa Mesa's bidding process was at least as stringent as the process held by the City of West Covina. This allowed staff to waive the bidding process per City of West Covina Municipal Code Section 2-330 and accept Costa Mesa Bid 948 for bus shelter advertising with Eller Media an advertising company based in Phoenix, Arizona. The City Council directed staff to negotiate a final agreement for a bus shelter advertising program in West Covina with Eller Media. Staff has prepared the final agreement for Council approval. DISCUSSION An agreement to construct and maintain bus shelters within the City has been negotiated with Eller Media Company and contains the following key elements: ` • The length of this agreement is 5 years with the option to extend for 5 years at 1- year increments annually approved by the City Council. • There will be two phases of installation. of bus shelters; with the first being 25 bus shelters at locations occupied by City owned and maintained shelters, and the second phase being 25 bus shelters at locations approved by the City within 12 to 18 months of phase one (see attached locations). All locations will be mutually agreed upon with the City having sole discretion as to the location and acceptability of all bus shelters installed by the contractor. .a City Manager and City Council February 3, 1998 Page Two • The Contractor will agree to provide custom made shelters with design and specifications required for all units. • Advertising displays shall not display material which the City in its sole discretion determines is offensive to community standards of good taste. Advertising of tobacco products. or use, is prohibited on all bus shelters in both phases, however, alcoholic beverage related advertisements will be allowed at predetermined locations. Restricted locations were found through referencing the City's, "Safe Route To School", program and for locations within 1,000 ft. from any school, church, or public facility. • The contractor shall make available to the City 10% of the total advertising space. Eller Media can design, produce, and install the City panel advertisements for a fee of $750 for a 5 panel set or the City can use other print vendors. • Each shelter shall be illuminated from dusk to dawn by an overhead light fixture and illuminated advertising box. The cost for electrical work including power will be paid by the contractor. • Contractor shall install, at his own expense, the initial 25 shelters within 3 months of the execution of this agreement. . • Contractor shall pay to the City for said contract granted herein, the sum of $95.00 per month per shelter or 18% of the gross. advertising revenues less agency commission, whichever is greater. In addition, the contractor shall pay to the City $14,220 annually in lieu of cleaning and maintaining the City's owned 79 shelters or will be required to clean all 79 City's owned shelters. • Contractor is to obtain and pay for all required permits for each shelter including building, electrical, and construction along with fees, taxes, business license, and charges assessed by any and all government entities. Contractor is also responsible, prior to commencing work, to post and maintain a bond in the amount of $25,0.00. The contractor shall not commence work under this agreement until it has obtained all insurance required thereunder from a company or companies acceptable to the City nor shall the contractor allow any subcontractor to commence work on its subcontract until all insurance required of the subcontractor has been obtained. • The contractor shall, at his own expense, maintain, repair, and clean each of the 25 advertisement bus shelters 2 times per week. • The agreement includes a termination clause stating that either party can terminate the contract with a 60-day notice of termination with reasonable cause. It is also important to note that the City of West Covina Municipal Code has provisions that regulate all signage throughout the City on both private and public lands. Section 26-312(e) of the Municipal Code gives the City Council authority to grant an encroachment permit that will allow the placement of signs within the public right-of- way. There is, therefore, no need to provide an amendment to the Municipal code to allow for the bus shelters advertising. ANALYSIS The bus shelter agreement with Eller Media Company establishes a 5-year contract for bus shelter advertising. It is mutually agreed by the City and Eller Media Company (contractor), that the contract may be renewed in 1-year increments for up to 5 additional years. The contract provides the City with a guaranteed minimum compensation per shelter per month or a percentage for gross advertising revenue less the contractor's commission, whichever is greater during each year of the contract, the guaranteed minimum compensation per shelter will be increased after the first 5-years in accordance withthe published Consumer Price Index for all Urban Consumers for the Los Angeles, Anaheim, and Riverside area for the year ending in August. i, L City Manager and City Ouncil • February 3, 1998 Page Three The minimum compensation requirement is $95 per month .per shelter or 18% of the gross advertising revenue less contractor's commission, which ever is greater. Based on Eller Media Company's submittal, the City of West Covina shall receive $142,500 guaranteed minimum compensation during..the 5-year contract for a minimum of 25 new shelter installations with advertising panels. In addition, the City is to receive $14,220 annually credit from the contractor to maintain the City's 79 non -advertisement shelters or at the City's option Eller will clean and maintain the 79 non -advertisement shelters. Eller Media Company's records of payment to the other cities (as for example 'Costa Mesa) show that in 1996 the compensation exceeded the 18% in third and forth quarters over the guaranteed minimum of $95 per month per shelter. In addition, the agreement includes a requirement for Eller Media Company to install an additional 25 advertising shelters at mutually agreed upon locations within 12 to 18 months of the approval of this agreement. The City currently spends approximately $28,000 annually ($6.65 per shelter per week) to maintain its. 79 shelters using Proposition "C" funds. Eller Media Company will maintain these 79 non -advertising shelters along with its 25 new advertising shelters or will give the City $14,220 annually ($3.46 per shelter per week) as a credit if the City wishes to continue maintaining the non -advertising shelters. For the past 10 years, the City of West Covina has used the services of Valley Light Industries to maintain bus shelters. Valley Light Industries employees developmentally disabled adults to do the maintenance work. While their fee to clean each shelter is about twice that of Eller Media, the quality of their work is excellent and there is a social benefit to contracting with this type of non-profit group. At any time the'City can change the maintenance to Eller Media and give Valley Light a 60-day termination notice. The $28,000 current cost for bus shelter maintenance is funded from Proposition "C" and the credit of $14,220 from Eller will be used to decrease our use of Proposition "C" funds for shelter maintenance. FISCAL IMPACT As a result of this agreement, there will be a positive impact on the General Fund. Under Phase I, the installation of 25 new bus shelters by Eller Media Company, will generate a minimum revenue of $28,500 annually for 5-years. In addition, Eller Media Company, after 18 months of the installation of Phase I bus shelters, will install an additional 25 new shelters under Phase II which will also generate a minimum revenue of $28,500 annually for 5-years. Both Phase I and II would run individually for a 5-year term. ALTERNATIVE Not to execute an agreement with Eller Media Company and proceed with a formal bidding process. This step would delay the implementation of the busshelter advertising program and would not necessarily guarantee the City a better compensation offer from a different contractor. RECOMMENDATION. It is recommended that the City Council approve the agreement and authorize the City Mayor and City Clerk to execute the said agreement. P rick J. 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