City Council
Report
City Council Meeting: December 13, 2022
Agenda Item: 12.A
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To: Mayor and City Council
From: David White, City Manager, City Manager's Office
Subject: Public Hearing and Introduction for First Reading of an Ordinance 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:
1. Adopt a finding of Categorical Exemption pursuant to Sections 15303 (New Construction or Conversion of Small Structures) and 15311 (Accessory Structures) of the California Environmental Quality Act (CEQA) Guidelines in accordance with the Environmental Review section of this report;
2. Hold a public hearing, receive public comment, and hear protests, if any, for the award of RFP 300: Digital Wayfinding and Out-of-Home Advertising Kiosk Program;
3. Introduce for first reading the attached ordinance 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 ordinance (Attachment A);
4. Authorize the City Manager to negotiate and execute a franchise agreement with BIG Outdoor for a total of 20 years, per the terms and conditions stated in the ordinance; and
5. Authorize budget changes as outlined in the Financial Impacts & Budget Actions section of this report in the event that the franchise is awarded.
Summary
The City initiated the Digital Wayfinding and Out-of-Home (OOH) 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 2 of 10
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 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.
On November 15, 2022, Council unanimously adopted a resolution declaring its intent to hold a public hearing on December 13, 2022, to award the Digital Wayfinding and Outof-Home Advertising Kiosk Program franchise to BIG Outdoor for a 20-year term.
Past Council Actions
Meeting Date Description
06/09/2020
(Attachment B)
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 C)
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.
10/25/2022
(Attachment D)
Council directed staff to ask BIG Outdoor to install a demonstration kiosk in Santa Monica and continued the hearing to November 15, 2022.
11/15/2022
(Attachment E)
Council unanimously adopted a resolution declaring its intent to hold a public hearing on December 13, 2022 to award a franchise to BIG Outdoor for a 20-year term to install, operate, and maintain a digital wayfinding and out-of-home advertising kiosk program. 3 of 10
Discussion
Per Council’s direction, RFP #300 was published in December 2021 for a franchisee to manage a comprehensive advertising program 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.
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 short-listed firms’ proposals and advised staff on the appropriateness of the technical specifications, feasibility of revenue projections, and adequacy of community benefits included in each (Attachment F).
Staff interviewed three finalists and then invited two finalists 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 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 Santa Monica’s BIDs, BIG Outdoor’s reputation for 4 of 10
cultivating positive relationships with local businesses would be invaluable to the success of the 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 initial proposal and final offer provided 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 viability of BIG Outdoor’s revenue projections, given that they were considerably higher than all other bidders in both the initial proposal and best and final offer phases of the RFP process. Staff learned BIG Outdoor has existing relationships with many notable high-profile, blue-chip companies that heavily invest in advertising to grow and maintain their market share, including American Express, Apple, Meta, 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 digital OOH market.
Minimum Annual Guarantee
The City would begin receiving a 50% share of adjusted gross revenues upon installation of the first kiosk. Upon full deployment and completion of Phase I, BIG Outdoor offered a minimum annual guarantee of $5 million, 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
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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 effective date 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.
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; 6 of 10
• 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.
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, demonstrated professional integrity, experience with similar projects, the 7 of 10
overwhelmingly 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 a Coastal Development Permit for the kiosks located in the Coastal Zone.
The project team would provide a detailed implementation schedule and prepare sites for installation, including notifications to community members within the vicinity of 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, installation of the first 25 kiosks, staff training, and ongoing network management, and the goal is to have them deployed within 12 months. Should Phase 1 be successful and well-received by the community, the subsequent deployment of Phase 2 would occur 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 8 of 10
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 (BIG Outdoor).
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.
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.
Public Hearing
The purpose of the public hearing is to allow any persons having any interest in or objection to the proposed grant of the franchise to appear before Council and be heard.
At the time set for the hearing, the City Council shall proceed to hear and pass upon all protests, and its decision shall be final and conclusive. Thereafter, it may grant, or deny the franchise, subject to the right of referendum of the people. 9 of 10
Protests may be submitted in writing or orally at the public hearing, duly noticed by the City Clerk in the Santa Monica Daily Press on November 23, 2022, when Council considers the ordinance for award of the exclusive franchise. Protests received after the close of the public hearing will not be accepted. By submitting a response to this RFP, prospective franchisees waived the right to protest after award or seek any legal remedies regarding any aspect of this RFP.
Financial Impacts and Budget Actions
Staff seeks authority to establish a revenue budget in the General Fund to accept a $4 million signing bonus from BIG Outdoor for the Digital Wayfinding and Out-of-Home Advertising Kiosk Program. 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. The budget for the City’s share of adjusted gross revenues, including a pro rata share for the Beach and Pier Funds, would be included in the FY 2023-25 Biennial Budget.
FY 2022-23 Revenue Budget Changes
Account Number Amount
01200001.410820 $4,000,000
Total $4,000,000
Prepared By: Melissa Spagnuolo, Community Partnerships Manager Approved Forwarded to Council
Attachments:
A. June 9, 2020 Staff Report
B. Ordinance to Award Digital Kiosk Franchise
C. January 26, 2021 Staff Report
D. October 25, 2022 Staff Report
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E. November 15, 2022 Staff Report
F. City of Santa Monica - Digital Wayfinding & OOH Advertising Kiosk Program Final Report 12.07.2022
G. Oaks Initiative Disclosure