TO: AC Transit Board of Directors
FROM: Michael A. Hursh, General Manager/Chief Executive Officer
SUBJECT: Contract Award: Transit Shelter Advertising
ACTION ITEM
AGENDA PLANNING REQUEST: ☐
RECOMMENDED ACTION(S):
Title
Consider awarding and authorizing the General Manager to execute a revenue-generating transit shelter advertising contract with Lamar Transit, LLC for a base period of two years with three one-year options to extend with a cumulative Minimum Annual Guarantee of $1,050,000 in revenue for all five years.
Staff Contact:
Ramakrishna Pochiraju, Executive Director of Planning & Engineering
Body
STRATEGIC IMPORTANCE:
Goal - Convenient and Reliable Service
Initiative - Service Quality
This contract’s advertising revenue would help offset the costs of owning and maintaining bus shelters following the expiration of previous advertising contracts.
BUDGETARY/FISCAL IMPACT:
The proposed award to Lamar Transit, LLC will result in a revenue-generating contract with a base period of two years with the option to extend the term for three additional one-year options for a maximum term of up to five) years. Revenue generated under contract, which can be used to offset transit shelter operating and maintenance costs, would include:
• The greater of the Minimum Annual Guarantee (MAG) or a Revenue Share.
o The MAG is $1,050,000 over five years, with $150,000 in Year 1 and escalating revenues each subsequent year as shown in Table 1, below.
o The Revenue Share equals 55% revenue share if sales revenue generated is $0 - $500,000 OR a 65% revenue share if sales revenue generated are above $500,000.
• A production credit of $25,000 over five years for the District’s promotional or community messaging.
These revenues are based on the District’s current inventory of 241 transit shelters that currently include static advertising space. The MAG does not assume additional digital inventory. There is an opportunity to add digital advertising. This contract does not cover the cities of Alameda, Emeryville, Oakland, or Piedmont, which have their own transit shelter programs independent of the District’s shelter program.
The advertising revenues in this contract would cover a portion of the expenses in the District’s transit shelter maintenance contract. For example, the advertising contract’s year-one MAG is approximately 17.75% of the year-one cost for maintenance (estimated at $845,000).
Table 1: Transit Shelter Advertising Minimum Annual Guarantee
|
|
Revenue Share Percentage to the District |
|
The District will receive the greater of: |
|
|
Sales Revenue Generated $0 - $500,000 |
Sales Revenue Generated ABOVE $500,000 |
Estimated Annual Sale Revenue Generated |
Est. Payment to District based on Revenue Share |
OR |
Minimum Annual Guarantee (MAG) |
|
Year 1 |
55% |
65% |
$300,000 |
$165,000 |
|
$150,000 |
|
Year 2 |
55% |
65% |
$550,000 |
$307,500 |
|
$210,000 |
|
Year 3 |
55% |
65% |
$575,000 |
$323,750 |
|
$220,000 |
|
Year 4 |
55% |
65% |
$575,000 |
$323,750 |
|
$230,000 |
|
Year 5 |
55% |
65% |
$600,000 |
$340,000 |
|
$240,000 |
|
Five-Year Total: |
$1,460,000 |
|
$1,050,000 |
CONTRACT AWARD SUMMARY:
|
Vendor Outreach Summary: |
|
|
No. DBE/SBEs: |
10 |
|
No. Registered Vendors: |
403 |
|
|
|
|
Contract Summary: |
|
|
# Proposals/Bids Received: |
1 |
|
Award Type: |
Best Value |
|
Independent Cost Estimate Range: |
$ 1,307,395.74 (total revenue share) |
|
Recommended for Award: |
Lamar Transit, LLC |
|
Small Business Type: |
Not Applicable* |
|
DBE/SBE Utilization %:** |
N/A |
* Neither SBE, nor DBE
** The District sets Small Business Enterprise (SBE) goals on contracting opportunities. The Federal Transit Administration (FTA) may authorize a Disadvantaged Business Enterprise (DBE) goal; however, SBE goals may result in DBE awards and utilization.
Levine Act Disclosure
California Government Code § 84308, commonly referred to as the “Levine Act,” precludes an Officer of a local government agency from participating in the award of a contract if he or she receives any political contributions totaling more than $250 in the 12 months preceding the pendency of the contract award, and for three months following the final decision, from the person or company awarded the contract. This prohibition applies to contributions to the Officer, or received by the Officer on behalf of any other Officer, or on behalf of any candidate for office or on behalf of any committee. The Levine Act also requires disclosure of such contributions by a party to be awarded a specified contract. Disclosure is not required for contracts that are competitively bid.
BACKGROUND/RATIONALE:
On August 10, 2022, the Board of Directors approved the solicitation of three separate Requests for Proposals (RFPs) for transit shelter maintenance, capital work, and advertising.
On December 23, 2022, the District issued an initial RFP for Transit Shelter Advertising Services and on February 22, 2023, the Board of Directors approved contract award to Intersection Media, LLC. After the contract was awarded, Intersection Media, LLC requested to renegotiate the terms of their proposal. The solicitation was subsequently cancelled. The Clear Channel Outdoors (CCO) contract expired on March 31, 2023. Since then, there have been no new advertisements or advertising revenue from the District’s transit shelters.
On February 1, 2024, the District issued a second RFP for Transit Shelter Advertising Services, soliciting proposals from 402 vendors. This procurement was advertised in the East Bay Times family of newspapers, on AC Transit’s website, through Gov Delivery, and through the new Bonfire procurement platform.
A total of one (1) responsive and responsible proposal was received. During the evaluation of this solicitation, the panel found that Lamar Transit LLC demonstrated the ability to provide the best value over the life of the contract.
The vendor is responsible for:
• The sale and management of advertising campaigns.
• Installation and removal of advertising in transit shelters.
• Maintenance, damages, inspection, and reporting of advertisements and replacement materials.
• Administration of the District’s transit shelter advertising program.
• An option for digital advertising in transit shelters and kiosks.
ADVANTAGES/DISADVANTAGES:
In addition to the advantages shared above, awarding the contract ensures continued management of AC Transit’s advertising services in transit shelters. This contract separates advertising, maintenance, and capital work, allowing the District to have better control and oversight of advertising revenue than if all services were combined. Finally, the advertising revenues in this contract would cover a portion of the expenses in the District’s transit shelter maintenance contract.
Staff did not identify any disadvantages to awarding this revenue-generating contact other than the staff time required to manage the contract itself.
ALTERNATIVES ANALYSIS:
The District could reject the single proposal and re-issue the RFP for a third time. This is not recommended because there will continue to be no mechanism for advertising in transit shelters, a potential revenue source that would help fund the District’s bus stop amenity maintenance and capital work. Once funding and a plan are developed, staff intends to replace the District’s existing shelters with new advertising shelters, commensurate with the advertising contract.
PRIOR RELEVANT BOARD ACTION/POLICIES:
SR18-211k - Transit Shelter Maintenance Contract
SR18-211j - Transit Shelter Advertising Contract
SR18-211i - Transit Shelter Contract Update
SR18-211h - Transit Shelter Contract Update
SR18-211g - Transit Shelter Contract Update
SR18-211f - Transit Shelter Contract Update
SR18-211e - Transit Shelter Contract Update
SR18-211d - Transit Shelter Contract Update
SR18-211c - Transit Shelter Contract Update - 2021 Bridge Contract
SR18-211b - Transit Shelter Contract Update
SR18-211a - 2020 Transit Shelter Advertising Contract
ATTACHMENTS:
None
Prepared by:
Carissa Lee, Senior Transportation Planner
In Collaboration with:
Nichele Laynes, Marketing and Communications Director
Approved/Reviewed by:
Phillip Halley, Program Manager, Compliance & Diversity-Contracts
Fred Walls, Director of Procurement & Materials Management
Shayna van Hoften, Interim General Counsel/Chief Legal Officer
Chris Andrichak, Chief Financial Officer
Ramakrishna Pochiraju, Executive Director of Planning & Engineering
Robert del Rosario, Director of Services Development and Planning
Beverly Greene, Executive Director of External Affairs, Marketing & Communications