Council Agenda - City of Burbank

Tuesday, February 11, 2003

Agenda Item - 10

 

CITY OF BURBANK

PUBLIC WORKS DEPARTMENT

MEMORANDUM

 

DATE: February 11, 2003
TO: Robert R. Ovrom, City Manager
FROM:

Bruce S. Feng, Public Works Director

By: Marisa Garcia, Administrative Analyst

SUBJECT: TEN-YEAR EXTENSION OF BUS SHELTER LICENSE AGREEMENT WITH VIACOM OUTDOOR, INC.

PURPOSE:

The purpose of this report is to request City Council approval for a ten-year extension of the bus shelter license agreement with Viacom Outdoor, Inc. for the construction, installation, maintenance, repair and management of bus shelters, and maintenance of concrete bus benches.

BACKGROUND:

On March 19, 1993, the City entered into a ten (10) year agreement with Gannett Outdoor Company of Southern California (Gannett) to construct, maintain, operate, and manage advertising bus shelters and non-advertising bus benches at various locations throughout the City. In July of 1996, Outdoor Systems, Inc. acquired Gannett. However due to an exclusivity clause in the agreement, reassigning the bus shelter agreement to Outdoor Systems for the remainder time of the contract required Council approval.

On December 17, 1996, the City Council approved a non-exclusive agreement with Outdoor Systems, now known as Viacom Outdoor, Inc. (VO), for the construction, installation, maintenance, repair and management of 82 advertising bus shelters, and maintenance of 180 concrete bus benches within the City. The agreement was signed on December 24, 1996, and expires on March 18, 2003. The terms of the agreement allow for an extension for up to 10 years.

ANALYSIS:

In 2002, staff retained the accounting services of Vavrinek, Trine, Day & Co., LLP (VTD) to audit VO�s records for the calendar years ending December 31, 2000 and 2001. VTD�s analysis consisted of verifying the mathematical accuracy of the fee remittances, advertising contracts, allocations of advertising revenue and tracing such amounts to the company�s monthly revenue summaries. VTD did not find any inconsistencies with the contract, billing invoices or postings recorded by VO. VTD�s overall findings resulted in recommendations to clarify language and include provisions to the agreement.

The terms and conditions of the current agreement with VO remain essentially the same with the following exceptions:

  1. Staff re-negotiated the rental fees due to the City under this license. VO will pay the City 20% of net revenue for each shelter, less a guaranteed base amount of $100 per shelter for the first two years. The base amount will increase $10 per month per shelter every two years. The final increase in 2011 will bring the base amount to $140 per month per shelter. The compensation under the current agreement is 12.5% of net revenue for each shelter, less a guaranteed fixed base fee of $75 per shelter per month.
  2. A provision was added to address the issue of late payments made to the City. Late payments will result in a fee of five dollars ($5.00) per day for the first fifteen (15) days after the date upon which the payments are due. The late charges will increase to twenty dollars ($20) a day for each day after the first fifteen (15) days past the due date. It should be noted that VO was not delinquent with any payments to the City.
  3. The current agreement is silent as to the treatment of "trade-outs." Trade-outs are when VO�s customers remit payments in a form other than cash, such as studio tickets. Under the new agreement, VO will notify the City in writing when trade-outs are received. The value of such trade-outs will be considered revenue and treated as such.
  4. The interpretation of the current payment structure was clarified in the new agreement. This will assure the City is not under paid.

Terms and Conditions

Old Agreement

New Agreement

  • Guaranteed monthly base of $75 per shelter
  • Guaranteed monthly base of $100 per shelter. Base amount will increase $10 per shelter every two years.
  • 12.5% of net revenue
  • 20% of net revenue
  • No late payment fee
  • Late payment fee:

$5/day for first fifteen days past due

$20/day for each day after first fifteen
  • No mention of trade-outs
  • Trade-outs will be considered and treated as revenue

VO has provided high level and quality services to the City. Renewing this license agreement will insure continuity in the level and quality of services. The proposed agreement will also increase the minimum guaranteed revenue, over the ten-year term, by $484,170, from $792,00 to $1,276,170.

10-Year Revenue

Year

Old Agreement

New Agreement

$ Increase

% Increase

1

$ 79,200

$ 105,600

$ 26,400

33%

2

$ 79,200

$ 107,842

$ 28,642

36%

3

$ 79,200

$ 116,160

$ 36,960

47%

4

$ 79,200

$ 118,403

$ 39,203

49%

5

$ 79,200

$ 126,720

$ 47,520

60%

6

$ 79,200

$ 128,963

$ 49,763

63%

7

$ 79,200

$ 137,280

$ 58,080

73%

8

$ 79,200

$ 139,522

$ 60,322

76%

9

$ 79,200

$ 147,840

$ 68,640

87%

10

$ 79,200

$ 147,840

$ 68,640

87%

TOTAL

$ 792,000

$ 1,276,170

$ 484,170

61%

Staff surveyed the cities of Alhambra, Anaheim, Baldwin Park, El Segundo, Inglewood and Pasadena, all of which have bus shelter license agreements. The City�s re-negotiated rental fees are competitive with today�s market rates.

FISCAL IMPACT:

The proposed License Agreement with Viacom will provide a revenue source for the City and will not have a negative fiscal impact. The minimum guaranteed revenue, over the 10-year term, is $1,276,170.

RECOMMENDATION:

It is recommended that the City Council adopt the resolution approving a ten-year extension of the Bus Shelter License Agreement with Viacom Outdoor, Inc. for the construction, maintenance, and operation of the City�s bus shelters and concrete bus benches.

 

 

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