TO: AC Transit Board of Directors
FROM: Michael A. Hursh, General Manager/Chief Executive Officer
SUBJECT: Transit Shelter Advertising Contract
ACTION ITEM
AGENDA PLANNING REQUEST: ☐
RECOMMENDED ACTION(S):
Title
Consider approving the award of a transit shelter advertising contract to Intersection Media, LLC for a base period of two (2) years with three (3) one-year options for a minimum annual guarantee of $4.3 million in total advertising revenue for the five year period.
Staff Contact:
Ramakrishna Pochiraju, Executive Director of Planning & Engineering
Body
STRATEGIC IMPORTANCE:
Goal - Convenient and Reliable Service
Initiative - Financial Efficiency and Revenue Maximization
This contract’s advertising revenue would help offset the costs of owning and maintain bus shelters following the expiration of the Clear Channel Outdoor Advertising contract on March 31, 2023.
BUDGETARY/FISCAL IMPACT:
The proposed award to Intersection Media, LLC will be a revenue generating contract with a base period of two (2) years with three (3), one-year options to extend for a total of up to five (5) years. Revenue generated by awarding this contract can be used to offset transit shelter operating and maintenance costs:
• An estimated Minimum Annual Guarantee (MAG) of $700,000 in advertising revenue for year one (1); and $825,000 for year two (2) for the District.
• An estimated $4.3 million total for all five years of the contract for the District.
• A 65% monthly advertising revenue share for the District.
• Every year, the District will receive greater of the MAG or a Revenue Share.
These revenues are based on the 232 transit shelters that currently have static advertising in them. The MAG does not assume additional digital inventory, but there is an opportunity to add digital advertising through this contract.
The advertising revenues in this contract would cover a portion of the expenses in the District’s transit shelter maintenance contract. For example, this advertising contract’s year-one Minimum Annual Guarantee is estimated at $700,000 and the year-one cost for maintenance is estimated at $844,560.
Table 1: Transit Shelter Advertising Minimum Annual Guarantee and Revenue Share
|
Contract Year |
Monthly Revenue % Share for District |
Est. Payment to District through Monthly Revenue Share |
Minimum Annual Guarantee (MAG) for the District |
|
Year 1 |
65% |
$109,480.80 |
$700,000 |
|
Year 2 |
65% |
$118,239.26 |
$825,000 |
|
Option Year 1 |
65% |
$124,151.23 |
$900,000 |
|
Option Year 2 |
65% |
$127,875.76 |
$925,000 |
|
Option Year 3 |
65% |
$131,712.04 |
$950,000 |
BACKGROUND/RATIONALE:
Under the existing Clear Channel Outdoors (CCO) contract, set to expire in March 31, 2023, CCO does all the capital and maintenance work and offsets those costs using advertising revenue in shelters. Today, advertising revenue in transit shelters has gone down and moved online and costs to maintaining infrastructure has gone up. Thus, this contract separates out advertising, maintenance, and capital work, allowing the District to receive higher advertising revenue payments than current contract with CCO. 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.
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 a Request for Proposal for Transit Shelter Advertising Services soliciting proposals from 357 vendors, 228 of which were Small and Small Local Business Enterprises (SBEs, SLBEs) and Disadvantaged Business Enterprises (DBEs). This procurement was advertised in the East Bay Times family of newspapers, AC Transit’s website, Gov Delivery, Unity Counsel, and direct emails.
A total of 2 responsive and responsible bid proposals were received from this solicitation. During the evaluation of this solicitation, the panel found that Intersection, LLC demonstrated a superior ability to provide the best value over the life of the contract.
The vendor is responsible for:
• The sale and management of advertising campaigns on a local and national level.
• Installation and removal of advertising in transit shelters
• Maintenance, damages, inspection, and reporting of advertisements and replacement materials.
• A service desk to report any issues, available to AC Transit 24 hours per day/7 days per week
• An option for digital advertising in transit shelters and kiosks, including digitizing, operating, and maintaining digital street furniture assets.
ADVANTAGES/DISADVANTAGES:
In addition to the advantages shared above, awarding the contract ensures continued seamless management of AC Transit’s advertising services in transit shelters. This contract separates out advertising, maintenance, and capital work, allowing the District to receive higher payments from advertising revenue then in its contract with Clear Channel. Finally, the advertising revenues in this contract would cover a significant portion of the expenses in the District’s transit shelter maintenance contract.
Considering the agreement with CCO is coming to a close, staff did not identify any disadvantages to awarding this revenue-generating contact.
ALTERNATIVES ANALYSIS:
The District could reject all the proposals and re-issue the Request for Proposals. This is not recommended because there will be no mechanism for advertising in transit shelters in the field, forgoing a potential revenue source that would help fund the District’s bus stop amenity maintenance and capital work.
PRIOR RELEVANT BOARD ACTION/POLICIES:
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, Acting Senior Transportation Planner
In Collaboration with:
Nichele Laynes, Marketing and Communications Director
Approved/Reviewed by:
Robert del Rosario, Director of Service Development and Planning
Beverly Greene, Executive Director of External Affairs, Marketing & Communications
Ramakrishna Pochiraju, Executive Director of Planning & Engineering
Jill A. Sprague, General Counsel/Chief Legal Officer
Chris Andrichak, Chief Financial Officer