City Council
Report
City Council Meeting: October 22, 2024
Agenda Item: 5.E
1 of 6
To: Mayor and City Council
From: David White, City Manager, City Manager's Office
Subject: Approval of Implementation of Phase 2 of the Digital Wayfinding and Out-ofHome 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; and
2. Authorize deployment of Phase 2 of the digital wayfinding and out-of-home advertising kiosk network.
Summary
The City launched the Digital Wayfinding and Out-of-Home Advertising Kiosk Program to provide interactive information, enhance public safety, share community messages, and generate revenue through advertising. The program operates under a franchise agreement with BIG Outdoor, selected in February 2023 as the exclusive media partner.
The agreement, which incurs no direct cost to the City, includes a $4 million signing bonus and a 50% revenue share model. The first 25 kiosks, known as Phase 1, were approved for deployment following community outreach and approval from the California Coastal Commission in February 2024. Installation began in April 2024 and is nearly complete.
BIG Outdoor is scheduled to make the first revenue share payment in November 2024, with a guaranteed minimum of $5 million annually effective after the installation of the 25th kiosk. This revenue has already been factored into the General Fund five-year 2 of 6
forecast to support existing City operations. The kiosks have been well-received by the public, with strong advertising demand and impressive initial sales. Timely approval of Phase 2 is essential for a seamless project continuation.
Staff recommends the City Council approve Phase 2, which involves installing an additional 25 kiosks. Location and final placement of the kiosks in Phase 2 will be informed by community engagement and determined by safety assessments conducted by subject matter experts in the Transportation, Public Works, and Community Development departments. California Coastal Commission approval would be required for any kiosks within the Coastal Zone.
The financial benefits to the City associated with the Phase 2 expansion of the kiosk network is contingent on the City maintaining its current advertising restrictions, as additional offsite advertising could dilute the market and impact revenues. Given the success of Phase 1 and the importance of continuing the project to potentially generate additional revenues for the City, staff recommends that the City Council authorize Phase 2.
Background
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 is structured as a franchise agreement with an exclusive media partner that requires 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 is realized through profit-share of advertising revenues.
In February 2023, the Santa Monica City Council awarded the exclusive franchise agreement to BIG Outdoor. Under the agreement, BIG Outdoor agreed to cover all expenses, ensuring no upfront investment from the City. BIG Outdoor offered the City a $4 million signing bonus, which it paid to the City in March 2023, and a 50% share of 3 of 6
adjusted gross revenues. Once all 25 kiosks in the first phase are fully operational, a minimum annual guarantee of $5 million becomes effective and will be paid to the City in quarterly payments. It is worth noting that this minimum guaranteed annual revenue has already been factored into the General Fund five-year forecast to support existing City operations.
Following the franchise award, City staff and BIG Outdoor conducted extensive community outreach to finalize the locations of the Phase 1 kiosks. In February 2024, the California Coastal Commission approved a waiver for the kiosks in the Coastal Zone. Installation of Phase 1 kiosks commenced in April 2024, and the final few kiosks are now being installed, with all 25 kiosks anticipated to be installed by November 2024.
BIG Outdoor has proven to be a valuable franchise partner by meeting all its current obligations to the City, forging positive relationships with community stakeholders, and being responsive to community concerns. To date, the kiosks have been well-received by both residents and businesses, with no safety incidents reported. Additionally, advertising demand has been robust, with sales meeting expectations thus far.
Discussion
With Phase 1 nearing completion, staff recommends the Council authorize the deployment of Phase 2, which provides for the installation of an additional 25 kiosks.
While Phase 1 deployment was primarily concentrated in the downtown, Pier, and Beach, the rollout of Phase 2 would feature more comprehensive coverage of the City, with final locations to be determined based on community input, power availability, and a safety assessment from Public Works engineering staff and the City Traffic Engineer.
An evaluation of the appropriateness of these locations would also be conducted in consultation with the City’s urban planner.
Council approval of Phase 2 is crucial to ensuring the seamless continuation of the project. Approval would enable City staff and BIG Outdoor to finalize Phase 2 kiosk locations, complete design, and submit construction plans, thereby ensuring that installation can begin promptly within a year of Phase 1’s completion. This timeline 4 of 6
aligns with commitments made by staff and BIG Outdoor to Council when the franchise was awarded.
As mentioned earlier, BIG Outdoor provides the City a 50% share of adjusted gross revenues, with a minimum annual guarantee of $5 million paid in quarterly payments once the first 25 kiosks in Phase 1 are fully deployed. Assuming a total of 50 kiosks are installed, it is possible that the City’s 50% revenue share could be significantly higher than the $5 million minimum annual guarantee.
It is important to note, however, the potential for kiosk revenues to significantly exceed the minimum annual guarantee is contingent on the City maintaining its current advertising restrictions. If the City were to allow additional offsite advertising in Santa Monica, it would compete with the digital kiosks and dilute the advertising market to the detriment of the City's kiosk revenue share. By maintaining the current restrictions on offsite advertising, the City would ensure that kiosk sales remain robust, which also secures the City’s financial benefits from the franchise agreement.
Given the initial success of Phase 1 and the critical importance of Phase 2 to enhance the profitability and continued success of the kiosk network, staff recommends that the City Council proceed with the authorization of Phase 2 deployment.
Environmental Review
Phase 2 of this project would install and operate up to 25 digital wayfinding/advertising kiosks in various locations throughout the city in the public right of way and other Cityowned property. Phase 1 is nearing completion and also consisted of 25 kiosks, for a project total of up to 50 kiosks to be installed. The kiosks are 108" in height, 51.25" in width, and 13.5” in depth. The kiosks 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 5 of 6
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.
Past Council Actions
Meeting Date Description
01/10/2023
(Attachment A)
Council conducted a second reading and adopted an 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.
12/13/2022
(Attachment B)
Council held a public hearing and introduced for first reading an ordinance to award a franchise to BIG Outdoor for the installation, operation, and maintenance of a digital wayfinding and out-ofhome advertising kiosk network for a 20-year term.
Financial Impacts and Budget Actions
There is no immediate financial impact or budget action necessary as a result of the recommended action. Installing the additional 25 kiosks under Phase 2 would require no direct costs on the part of the City since the franchisee is required to install, operate, 6 of 6
and maintain the kiosks, but could result in revenues exceeding the $5 million annual guarantee. It should be noted that this is not new revenue. The annual guarantee revenue from this program has already been factored into the General Fund five-year forecast to support existing City operations.
Prepared By: Melissa Spagnuolo, Community Partnerships Manager Approved Forwarded to Council