EDMONTON TRANSIT ADVERTISING CONTRACT – PATTISON TRANSIT GROUP RECOMMENDATION

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Report for Transportation and Public Works Committee October 26, 1999 meeting.

Edmonton Transit Advertising Contract – Pattison Transit Group

Recommendation:

That the City of Edmonton enter into a 10 year agreement with Pattison Transit Group for the exclusive right to sell bench, vehicle and shelter advertising.
That the agreement be acceptable in form to Corporate Services – Law and in content to the General Manager of Transportation and Streets Department.

Report Summary

Approval of the Transportation and Public Works Committee is required for the City of Edmonton to enter into an agreement with the Pattison Transit Group. The contract increases minimum revenues, provides for new shelters, benches and advertising posters, which become the property of the City at the end of the agreement.

Report

As of December 31, 1999 the Transit Bench, Vehicle and Shelter contracts will expire.
Current agreements are held by:

Bench Advertisers Ltd., who provide and maintain 2000 benches at bus stops throughout the City.
Pattison Transit Group, who manage bus and LRT advertising.
Mediacom Inc., who provide and sell advertising on 280 bus shelters.

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A tendering process was conducted in September 1999 and this resulted in bids being received from across Canada and the United States. Vendors could bid on one, two or all three contracts for a five-year period.
Based on the highest minimum guaranteed annual revenue and a strong supporting business case, Pattison Transit Group offered the best proposal. Pattison Transit Group submitted the strongest bid, for 5 years and offered an even stronger alternative bid for a 10 year period.
The ten year contract has the added benefits of increased minimum revenues as well as providing for up to 700 new shelters, 2000 new benches and up to 66 new advertising posters. At the end of this agreement, this inventory becomes the property of the City.

Budget / Financial Implications

The contract provides minimum guaranteed revenue payments that escalate over a 10-year period.
Net revenues include the cost to the City of cleaning, installation, repair and maintenance of all shelters; electrical connections; and insurance.
Title to the shelters, benches and posters will revert to the City at the end of the contract.
Revenues on this contract are protected with a performance bond of $680,000.
To protect Pattison’s competitive position revenues can be provided in camera.

Legal Implications

Proposals have been reviewed by the Law Branch – Corporate Services.
Approval by the Transportation and Public Works Committee is required as per Section 12 (a)(ii) of the Civic Administration Bylaw.

Justification of Recommendation

Based on a 1999 Transit Advertising Revenue Report, the costs to set-up, administer and sell advertising by City staff would limit and reduce the return in revenues to Edmonton Transit.
Based on the results of other Municipalities tendering their Transit advertising, it was felt the City may be able to improve its service and revenue position by tendering rather than renewing the existing agreements.

Background Information Attached

Executive Summary of Agreement

Background Information Available on Request

Request for Proposal
Ten year Net Revenue Financial Forecast
Transit Advertising Study, Infact Research & Consulting (June 4, 1999)

BACKGROUND

Pattison Outdoor Group, Prairie Region has over 85 years of experience in the advertising industry, financial stability and the substantial resources of their parent company Jim Pattison Industries Ltd. At no time have they had to request or been required to re-negotiate a contract with any municipal or government authority they have contracted with.

TERM

The vendor will provide Transit Advertising for the City of Edmonton on vehicles, shelters and benches for a term of 10 years with an option for renewal of the Agreement for an additional period of 5 years with Terms and Conditions mutually agreed to by the City Of Edmonton and the Pattison Outdoor Group.

PAYMENTS

Pattison Outdoor will pay a minimum guarantee revenue payment to the City Of Edmonton, for all products, over the 10 year term of not less than an agreed to total amount and 50% of cumulative revenues that exceed 32% of the minimum guarantee. Escalating guaranteed minimum payments are made on a monthly basis as defined in a payment schedule for each of the 10 years.

LOCAL OFFICE AND STAFF

Under this Agreement, Pattison would maintain an Edmonton sales office with a minimum of four Account Executives, a Sales Coordinator, and a Regional Sales Manager, in addition to Pattison’s Edmonton in-house Creative Services and Production Coordination resources.

PRODUCTS

Pattison’s capital commitment includes construction of over 750 new transit shelters; 2000 new benches; 66 new LRT Station Posters and new Transit Center Posters; and new downtown street furniture for a total value of $4,100,000. This is in addition to the minimum guaranteed revenues.
New transit shelters and benches would be in place within the first 18 months of the contract and before the Track and Field Games in August of 2001.
All new products become the property of The City of Edmonton at the end of the Agreement.
Edmonton Transit has the right to 10% of all advertising space for use by ETS and its business related activities. Pattison will not charge for the installation or removal of advertising (an additional value of up to $250,000 based on current charges we incur).

Bench Advertising

Three new account executives would be employed focused solely on selling.
New benches would be made of recycled plastic lumber product for seats and new cast concrete bases

Shelter Advertising

New transit shelters would replace existing older style non-advertising transit shelters and add new transit shelters to communities based on needs of transit ridership.
Shelters would be ‘Daytech Mfg.’ glass and steel and handicap accessible.
Two new account executives would be employed dedicated to the sale of shelter advertising.

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EDMONTON TRANSIT ADVERTISING CONTRACT – PATTISON TRANSIT GROUP RECOMMENDATION
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