City Council
Report
City Council Meeting: October 25, 2022
Agenda Item: 14.A
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To: Mayor and City Council
From: David White, City Manager, City Manager's Office
Subject: Adoption of a Resolution Declaring Intention to Award a Franchise Agreement for RFP 300: Digital Wayfinding and Out-of-Home Advertising Kiosk Program Recommended Action
Staff recommends that the City Council adopt the attached Resolution of Intent declaring the Council’s intent to hold a public hearing on November 15, 2022 to award a franchise to BIG Outdoor for the installation, operation, and maintenance of a digital wayfinding and out-of-home advertising kiosk network for a 20-year term, per the terms and conditions stated in the resolution.
Executive Summary
The City initiated the Digital Wayfinding and Out-of-Home Advertising Kiosk Program to provide interactive information to residents and visitors, enhance public safety via emergency capabilities, deliver community messaging, and generate revenues through advertising sales. Deployment of the kiosk network would be structured as a franchise agreement with an exclusive vendor that would require no direct costs incurred or investment made by the City, with the franchisee required to install, operate, and maintain the kiosks. Compensation for the City and the franchisee would be realized through profit-share of advertising revenues.
After an extensive evaluation process, finalist interviews, and reference checks, an internal evaluation team selected BIG Outdoor as the best bidder. BIG Outdoor offered a financial package that was significantly higher than all other bidders (including a $4 million signing bonus and a 50% revenue share offer to the City, with a $5 million minimum annual guarantee), the greatest community benefits, and kiosk technology 2 of 10
and design most appropriate for the culture and aesthetic of Santa Monica, and would bring a well-qualified, sophisticated, and experienced team to deploy, operate, and maintain the kiosk network.
Background
In response to a recommendation from the Budget Task Force in February 2020, the City of Santa Monica is in the early stages of building a Community Partnerships (i.e., public-private partnerships) program to take a more innovative and entrepreneurial approach to address community priorities and further diversify the City’s revenue streams. This would support the City’s financial stability and its ability to continue providing robust community programs and services, particularly during times of economic volatility or unpredictable events, like the COVID-19 pandemic that decimated many of the City’s revenue sources.
An equally important goal of the Community Partnerships program is to provide new opportunities for relationship-building and collaboration between the City, residents, and businesses. The creation of the philanthropic donor-advised fund We Are Santa Monica in April 2020 was the first component of this program. Since its inception, the Fund has raised more than $1.6 million in donations and granted nearly $1 million to local nonprofit organizations, including a $400,000 grant to Local Initiatives Support Corporation to facilitate a small business grants program that exclusively supported Santa Monica businesses impacted by the pandemic.
The next Community Partnerships initiative began in June 2020 when Council directed staff to work with The Superlative Group, Inc. (Superlative) to complete a valuation study to look at several viable public-private partnership opportunities, including a digital wayfinding and out-of-home advertising program, as well as potential sponsorship and naming rights opportunities. To complete this work, Superlative conducted site visits, extensive information gathering, comprehensive quantitative and qualitative valuation analyses, development of an asset database, policy and contract analysis, and industry benchmarking.
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In January 2021, as part of the City’s midyear budget update, staff presented the results of Superlative’s valuation study to Council. Following that presentation, Council directed staff to issue a Request for Proposals (RFP) to identify a franchise partner to establish a Digital Wayfinding and Out-of-Home (OOH) Advertising Kiosk Program to provide interactive information to residents and visitors, enhance public safety with emergency capabilities, deliver community messaging, and generate new revenues through advertising sales.
Past Council Actions
Meeting Date Description
06/09/2020
(Attachment A)
Council directed staff to work with Superlative to complete a valuation study to look at all viable public-private partnership opportunities including sponsorships, naming rights, and digital wayfinding and out-of-home advertising.
01/26/2021
(Attachment B)
Council directed staff to move forward with an RFP process to identify a franchise partner to implement a Digital Wayfinding and Out-of-Home Advertising Program.
Discussion
Per Council’s direction, RFP #300 was published in December 2021 for a franchisee to manage a comprehensive advertising program to procure a partner that has successfully deployed, operated, and maintained kiosk programs in a minimum of three other similar markets, has a demonstrated history of producing strong advertising revenues, and is committed to actively managing the program to meet the needs of the City of Santa Monica and the community.
This would be a zero-dollar contract with the franchisee responsible for deploying, operating, and maintaining the kiosks at no cost to the City, with compensation realized through a percentage of advertising revenues. To ensure the franchisee has sufficient time to recover the significant initial capital investment required to launch the program, the term of the agreement would be 20 years.
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The RFP closed in January 2022 and six proposals were received. Staff conducted a comprehensive evaluation of all proposals and short-listed three finalists based on their ability to achieve the stated objectives with emphases on community benefits and profit sharing. Superlative then performed an in-depth analysis of the finalists’ proposals and advised staff on the appropriateness of the technical specifications, feasibility of revenue projections, and adequacy of community benefits included in each.
Staff interviewed three finalists and then invited the top two to submit Best and Final Offers. After significant consideration, the internal evaluation team determined BIG Outdoor would be the best franchise partner for the City. BIG Outdoor has successfully launched similar digital kiosk networks in partnership with business improvement districts (BIDs) and retail centers in cities such as Miami, New York, Dallas, and Austin, and references attested to BIG Outdoor’s qualifications, responsiveness to community concerns, and the overall success of their digital wayfinding and OOH advertising networks.
Given that Santa Monica’s digital kiosks would largely be installed in commercial/retail corridors and in consultation with our BIDs, BIG Outdoor’s reputation for cultivating positive relationships with local businesses would be invaluable to the success of our kiosk network. Further, BIG Outdoor has extensive experience working with municipalities on various other advertising projects, including the City of West Hollywood.
The RFP required bidders to provide estimated revenue projections for the 20-year franchise term, as well as a minimum annual guarantee of revenues the City would receive if projected revenues are not achieved. BIG Outdoor’s proposal offered significantly higher financial benefits to the City than any other bidder.
Projected Revenues
BIG Outdoor offered the City a 50% share of adjusted gross revenues, which it estimates would be an approximate average of more than $14 million annually over the franchise term, assuming a total of 50 kiosks are installed. City staff inquired into the 5 of 10
viability of BIG Outdoor’s revenue projections, given that they were considerably higher than all other bidders. Staff learned BIG Outdoor has existing relationships with many notable high-profile companies that heavily invest in advertising to grow and maintain their market share, including American Express, Apple, Facebook, and Uber, among others. BIG Outdoor has been active in Santa Monica since 2013 with its digital signage network at Santa Monica Place, and its RFP revenue projections were informed by current rates in the local OOH market.
Minimum Annual Guarantee
BIG Outdoor offered a minimum annual guarantee of $5 million commencing upon full deployment and completion of Phase 1, with 3% escalation every three years for the duration of the franchise term. Effectively, the City would receive either 50% of adjusted gross revenues or $5 million per year, whichever is higher.
Signing Bonus
In addition to the 50% revenue share and minimum annual guarantee offers, BIG Outdoor also committed to paying the City a $4 million signing bonus prior to the effectiveness of the franchise agreement. A signing bonus was not requested in the RFP and the offer demonstrates BIG Outdoor’s stable financial position and confidence in its success in the Santa Monica market.
Additional Community Benefits
BIG Outdoor committed to contribute 2% of its net media revenues from the Santa Monica kiosk network towards community programs and services at the City’s discretion. This type of benefit was not requested in the RFP, was not offered by any other bidder, and validates BIG Outdoor’s commitment to being an engaged community partner.
To ensure success of the program, BIG Outdoor has also committed to hiring a full-time community ambassador to interface directly with the City and community for all communications. This would be a community member who is intimately familiar with Santa Monica’s neighborhoods, residents, culture, and local businesses. 6 of 10
Furthermore, the City of Santa Monica would receive 10% free screen time dedicated to promoting City programs, services, initiatives, and announcements. In addition, any unsold time could be utilized for City messaging.
Maintenance and Repair
BIG Outdoor would be responsible for all maintenance and repair expenses, including graffiti removal, and would have a full-time team deployed seven days per week dedicated to maintaining the kiosk network. BIG Outdoor would also proactively monitor kiosks for software and network issues 24 hours per day.
Kiosk Design
The kiosks proposed by BIG Outdoor are designed for functionality and ease of use, and would include a variety of public benefits and smart technologies such as:
• Wayfinding information highlighting local businesses and attractions; • Public safety alerts;
• Emergency blue phone capability;
• Optional public safety surveillance;
• Public Wi-fi;
• Access to the City’s 3-1-1 customer service portal;
• Real-time transportation information, including arrival/departure data (e.g., bus, train, shared mobility devices, etc.);
• Pedestrian counting data;
• Photo booth with customizable Santa Monica digital frames and filters; • Multilingual display; and
• City and community messaging/advertising space.
In addition to these features, BIG Outdoor would retain a local architect to design the exterior of Santa Monica’s kiosks to ensure they are fully customized for our community and aesthetically suitable for the areas in which they would be installed. (Example kiosk designs are available in Attachment C for conceptual purposes only.) 7 of 10
Vendor Selection
Bidder Recommendation
Best Qualified Person/Firm BIG Outdoor
Evaluation Criteria Training/credentials/experience, competence/skill, capacity/ability to perform services promptly, sufficiency of financial/other resources, character/reputation, ability to provide future services as needed and price.
Municipal Code SMMC 2.24.190
RFPs Received
BIG Outdoor IKE Smart City Smart City Media
Jolt Charge Inc. iKahan Media Tranzito-Vector
RFP Data
Posted On Posted On
Advertised In
(City Charter & SMMC)
Vendors
Downloaded
Date Publicly
Opened
12/01/2021 City's Online
Bidding Site Santa Monica Daily Press 8 01/22/2022
Justification to Award
Based on these criteria and criteria in SMMC 2.24.190, staff recommends BIG Outdoor as the best qualified firm to install, operate, and maintain the Digital Wayfinding and OOH Kiosk Program based on the firm’s expertise, experience with similar projects, the positive feedback received during reference checks, kiosk technology and user interface, community benefits, and significant financial commitments.
Project Plan
Once the franchise has been awarded and the agreement executed, BIG Outdoor would present and collaborate with the City and community (including residents, neighborhood organizations, and BIDs) to determine final kiosk designs and user interface/applications, as well as finalize permanent locations for the kiosks, based on locations previously approved by Council, and identify alternate sites should issues arise at any location. BIG Outdoor’s internal construction team, along with local subcontractors, would identify utility infrastructure relative to kiosk locations, create utility drawings and work plan for connectivity, coordinate with utility companies for approvals, and would compile and apply for all necessary building permits and entitlements.
The project team would provide a detailed implementation schedule and prepare sites for installation, including notifications to community members within the vicinity of 8 of 10
construction. In addition to installation of the displays, BIG Outdoor would provide comprehensive staff training on operating services and procedures. Upon launch of the wayfinding and OOH kiosk network, BIG Outdoor would immediately implement a comprehensive daily maintenance plan.
Phase 1 would include hardware design and procurement, software and user interface design, kiosk installation and staff training, and ongoing network management, and would be deployed within 12 months. Phase 2 deployment would follow within 12 to 24 months of Phase 1.
Environmental Review
The project would install and operate up to 50 digital wayfinding/advertising kiosks in various locations throughout the city in the public right of way and other City-owned property. The kiosks would vary in size depending on space and other site specific locations; however, most would be on average 87-100" in height, 40-46" in width, and 10-12” in depth. The kiosks would provide interactive information and enhance public safety, and would be maintained by the franchisee.
The project is categorically exempt from CEQA pursuant to Sections 15303 and 15311 of the CEQA Guidelines. Section 15303 provides exemption for a class of projects (Class 3) consisting of the construction of limited numbers of new, small facilities or structures. Section 15311 provides exemption for a class of projects (Class 11) consisting of the construction of minor structures accessory to existing commercial, industrial, or institutional facilities, including small parking lots. In addition, none of the exceptions specified in Section 15300.2 of CEQA Guidelines would apply that would preclude the use of this CEQA exemption - the project site is not located in a sensitive environment, the project would not have a significant effect on the environment, the project would not damage scenic resources, the project would not be located on a hazardous waste site; and the project would not cause a change to a historical resource.
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Minor excavation would be required to construct the kiosks, and therefore no significant construction impacts would occur. Furthermore, the kiosks would not be large enough to obstruct views of scenic resources, the installation of kiosks would not occur on hazardous or sensitive properties, and the kiosks would not damage historic or scenic resources. Therefore, this project is a Class 3 and 11 project that is categorically exempt per Section 15303 and 15311 of the CEQA Guidelines.
Next Steps
Upon adoption of the Resolution of Intent to Hold a Public Hearing, the RFP protest period would begin. The public hearing and first reading of the ordinance to award the franchise agreement would take place at the City Council’s November 15, 2022 special meeting and any protests would be heard at that time. The second reading, adoption of the ordinance, and official award of the franchise would follow at Council’s regular meeting on December 13, 2022.
Financial Impacts and Budget Actions
There is no immediate financial impact or budget action necessary as a result of the recommended action. The program would be structured as a franchise agreement that would require no direct costs incurred or investment made by the City, with the franchisee required to install, operate, and maintain the kiosks. Staff will return to Council for the public hearing to award the franchise to BIG Outdoor to install and for approval of corresponding budget actions to facilitate the forthcoming revenues.
Prepared By: Melissa Spagnuolo, Community Partnerships Manager Approved Forwarded to Council
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Attachments:
A. June 9, 2020 Staff Report (Web Link)
B. January 26, 2021 Staff Report (Web Link)
C. Kiosk Design Concepts
D. Resolution of Intent to Hold Public Hearing to Award Franchise Agreement