City Council
Report
City Council Meeting: December 12, 2023
Agenda Item: 5.I
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To: Mayor and City Council
From: Anuj Gupta, Director of Transportation, Parking Operations (DOT) Subject: Award Contract for Managing Advertising Program in City Owned Parking Structures
Recommended Action
Staff recommends that the City Council:
1. Adopt a finding of categorical exemption pursuant to Section 15301 and Section 15311 of the California Environmental Quality Act (CEQA) Guidelines;
2. Award RFP# 375 to BIG Outdoor, for sales, administration, and installation and maintenance of advertising in City-owned parking structures for the Department of Transportation; and
3. Authorize the City Manager to negotiate and execute an agreement with BIG Outdoor for sales, administration, and installation and maintenance of advertising in City-owned parking structures over a five-year period, with two one-year renewal options, with guaranteed minimum revenue of $90,000 dollars in year one, and an increase of 2% per year thereafter.
Summary
The City of Santa Monica owns and operates 12 parking structures consisting of roughly 6,900 parking spaces in and around the downtown area. Approximately 3.9 million people park in these downtown structures per year, making the interior surfaces of these structures attractive spaces for advertising. In 2012, Downtown Santa Monica, Inc. (DTSM) managed an advertising program through Van Wagner Communications, LLC, but that program expired several years ago. The Santa Monica Department of Transportation (DOT) Parking Division plans to reinstate an advertising program in these structures and create a new revenue source for the City. Staff advertised a Request for Proposals (RFP) for a turnkey advertising program including not only 2 of 7
posting services but also sales and program coordination provided to generate advertising revenue. A turnkey parking structure advertising program would be efficient, cost-effective, and generate significant revenue for the City. After reviewing the proposal, the evaluation team recommends BIG Outdoor to administer this parking structure advertising program.
Discussion
For more than 20 years, DOT’s Big Blue Bus (BBB) has overseen a revenue-generating advertising program selling commercial advertising space on the exterior and interior of Big Blue Bus fixed route vehicles. BBB is currently using a turnkey advertising program whereby the vendor Vector Media manages the program and the City takes a percentage of advertising revenue. This has proven to be a reliable and significant source of income for the City’s Big Blue Bus Fund. The proposed parking structure advertising program is being modeled after this program.
The parking structure advertising program would generate a guaranteed minimum revenue to the City of $90,000 for the first year (with an increase of 2% per year for the following five years). It is estimated to bring in $450,000 for the first year (with an increase of 2% per year for the following 5 years). The first-year revenues would be reduced on a one-time basis by $50,625 to fund the capital costs to install the initial advertisements, resulting in a net estimated first-year revenue of $241,875 (Attachment A). Each year’s revenue would go to a newly created general revenue account.
In addition to generating revenue for the City, the advertising program would enhance the appearance of the parking structures by having several interior advertising spaces maintained by an outside vendor. This vendor would be responsible for posting advertisements and maintaining them, including graffiti removal and repairs due to vandalism. This would assist the Parking Division’s effort to maintain the appearance of the parking structures and make repairs and enhancements as needed. 3 of 7
All advertisements displayed in the parking structure will comply with the City’s advertisement policy (Attachment B). These guidelines restrict advertisements containing political, adult-related products, sexual subject matter, subject matter infringing on copyright data, profanity, violence, and other subject matters deemed inappropriate by the City per the policy.
In July 2023, staff issued a Request for Proposals (RFP) to sell and display advertising at 57 designated locations in Parking Structures 1, 2, 4, 5, 6, 7, and 8. The RFP contained two options: Option 1 – Guaranteed Fixed Revenue, and Option 2 – Revenue Share with Minimum Guarantee. The City received one proposal from BIG Outdoor with cost proposals for Options 1 and 2 which are as follows:
• Option 1 -Minimum of $200,000 in year 1 (with a 2% increase for the next 5 years).
• Option 2 -Minimum guarantee of $150,000 in year 1 (with a 2% increase for the next 5 years).
-65% of gross revenue minus initial capital expenses with an estimated yearly revenue of $487,500 (minus initial capital expenses) in year 1 (with a 2% increase for the next 5 years).
Parking Structures 7 and 8, adjacent to Santa Monica Place mall, are owned by the City but operated by Macerich. Macerich and the City have a contract that establishes a partnership between the City and Macerich wherein Macerich shares in the operating expenses of these structures and also shares in the revenue for these structures. In the previous advertising program (administered by DTSM), Macerich received a percentage of the revenues received for advertisements in structures 7 and 8. Following the receipt of BIG Outdoor’s proposal, City staff inquired with Macerich regarding their interest in participating in this advertising program, and Macerich staff indicated that they would not like to participate initially but would support possible inclusion of structures 7 and 8 at a future date.
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After informing BIG Outdoor of this change (removing structures 7 and 8 and reducing the number of advertising locations from 57 to 44), Parking staff received an updated proposal from BIG Outdoor. BIG Outdoor indicated that the change would reduce projected gross revenues by 40% given that structures 7 and 8 were the largest in their original proposal, resulting in the following updated figures for Options 1 and 2:
• Option 1 -Minimum of $120,000 in year 1 (with a 2% increase for the next 5 years).
• Option 2 -Minimum guarantee of $90,000 in year 1 (with a 2% increase for the next 5 years).
-65% of revenue share (minus initial capital costs) with an estimated yearly revenue of $241,875 ($292,500-$50,625) in year 1, $302,737.50 in year 2, then a 2% increase for each year afterwards.
• Capital expenses required to complete the initial install of advertisements to be subtracted from the City’s revenues reducing the City’s first year revenues by an estimated $50,625.
The contract (per the proposal) gives the City 65% of gross revenue after the initial capital expenses are deducted. This gives the City the ability to add structures 7 and 8 in the future without needing a contract modification. It also gives the City the option to add other City-owned parking structures beyond those currently contemplated if the City and BIG Outdoor agree.
The BIG Outdoor proposal was evaluated by a cross-functional team of DOT staff based on criteria established in the RFP. Additionally, BIG Outdoor was interviewed by the evaluation team during the evaluation process, performing well and receiving an acceptable score.
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Staff recommends that the contract be awarded to BIG Outdoor as the best bidder. Staff recommends Approach 2 (Including Structures 1, 2, 4, 5, and 6) with all revenues (including the $90,000 minimum guarantee and estimated $241,875 in year one) to be deposited to the general fund revenue budget. These revenues would be directed towards the City’s top priority needs, which include deferred maintenance and improvements at City-owned parking facilities.
Best and Only
Proposer
BIG Outdoor
Submittals Received Selection Criteria
Bidder BIG
Outdoor Municipal Code SMMC 2.24.190
Evaluation Criteria Price and revenue generated by sales; the quality of the material or services offered;
the ability, capacity and skill of the bidder to
perform or provide the materials or services;
the capacity of the bidder to perform the
contract or provide the service promptly,
within the time specified, and without delay
or interference; the sufficiency of the
bidder’s financial resources; the character,
and integrity, reputation, judgment, training,
experience and efficiency of the bidder.
Bid Data
Date Posted Posted On Advertise In
(City Charter &
SMMC)
Vendors
Downloaded
Date Publicly
Opened
August 31,
2023
City’s Online
Bidding Site
Santa Monica
Daily Press
19 October 12, 2023
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Additional Vendor Outreach & Justification to Award
Procurement conducted additional outreach to vendors who downloaded the bid to see why they did not submit a bid but did not receive a response.
Based on the evaluation criteria and criteria in SMMC 2.24.190, staff recommends BIG Outdoor (the only bidder) as the best bidder for the selling and posting of advertising for City owned parking structures. The recommendation is based on the firm’s guaranteed revenue proposal of 65% of gross revenues minus initial capital expenses, their previous experience working with other agencies creating similar advertisements in public spaces, positive references from numerous BIG Outdoor clients including Macerich, Asana Group, and Atlanta Downtown Improvement District, and its relevant staff experience.
Additionally, the Big Outdoor team is technically skilled, which is highlighted by their proven track record growing advertising revenue in their partnerships with numerous other agencies. In addition, BIG Outdoor is the City selected vendor moving forward with the digital out-of-home kiosk program, so they are already a vetted City partner for a major advertising initiative.
Environmental Review
The advertising program is exempt from CEQA pursuant to Sections 15301 (Class 1 Existing Facilities), and Section 15311 (Accessory Structures) of the CEQA Guidelines.
Section 15301 of CEQA Guidelines provides exemption for the minor alteration of existing public or private facilities involving negligible or no expansion of use. Section 15311 provides for the construction of minor accessory structures that are accessory to existing commercial, industrial, or institutional facilities including on-premise signs. The project will include advertising signage and postings on the interior surfaces of various locations in existing City owned parking structures. Therefore, the project qualifies for exemption under Sections 15301 and 15311. In addition, none of the exceptions specified in Section 15300.2 of CEQA Guidelines would apply that preclude the use of this CEQA exemption. The project site is not located in a sensitive environment, would not have a significant effect on the environment, would not damage scenic resources, would not be located on a hazardous waste site, and would not cause a change to historic resources. Therefore, this project is categorically exempt from CEQA. 7 of 7
Financial Impacts and Budget Actions
If approved, a new revenue account will be created to capture all parking advertising revenue, including the minimum guarantee of $90,000 per year. The revenues will be deposited in the General Fund in account 01600004.4XXXXX. Budget adjustments would be incorporated in the year-end budget and/or FY 2024-25 exception-based budget, as needed.
Prepared By: Zach Pollard, Parking Manager
Approved Forwarded to Council
Attachments:
A. Attachment B -City Parking Structure Ad Policy -Updated B. Attachment A - Cost and Pro Forma Data -Updated
C. 23-1012_Oaks_Initiative -Signed