Meeting_Body
PLANNING AND PROGRAMMING COMMITTEE
JANUARY 20, 2016
Subject/Action
SUBJECT: BILLBOARD LICENSE AGREEMENT
ACTION: AUTHORIZE EXECUTION OF A BILLBOARD LICENSE AGREEMENT WITH CLEAR CHANNEL OUTDOOR
Heading
RECOMMENDATION
Title
CONSIDER authorizing the Chief Executive Officer to execute a thirty year (30-year) License Agreement with Clear Channel Outdoor (“CCO”) for the installation and operation of a digital outdoor advertising structure at Division 11 located at 1011 Carson Street in Long Beach at a minimum annual lease rate of $120,000.
Issue
ISSUE
Allvision LLC (Allvision) and Metro staffs have negotiated a License Agreement with CCO to provide for the construction and operation of a digital billboard on Metro property at Division 11.
Approval of the License Agreement requires board approval.
Discussion
DISCUSSION
On March 31, 1980, the Los Angeles County Transportation Commission, predecessor in interest to Metro, entered into a lease agreement with Patrick Media, Group, Inc., predecessor in interest to Clear Channel Outdoor (CCO), to provide for the construction, maintenance and operation of eight (8) billboard structures at Division 11 in Long Beach as shown on Attachment “A”. Because of the existence of high voltage catenary lines in the area where the billboards are physically located, CCO is only permitted access to the billboards to change ad copies and perform maintenance of the structures when power to the maintenance yard is turned off. This has resulted in disruptions to on-going rail operations at the maintenance facility.
The construction and operation of the proposed digital billboard will resolve the operational issues once the digital billboard has been installed and the eight existing structures are removed. Access to service the digital billboard area will be needed infrequently for maintenance and repairs since changes to ad copy are performed remotely. The new License provides for removal of the eight billboard structures within sixty days (60) of final execution of the License.
The proposed digital sign will be installed on a structure in the northern area of the 20-acre Project site adjacent to Interstate 710 as shown on Attachment “B”. The proposed sign includes two 48 feet wide by 14 feet tall displays mounted on a 48 foot tall pole with the overall height being 55 feet-above the adjacent grade. Operations staff has approved the location.
The City of Long Beach (City) has granted CCO a Conditional Use Permit for the billboard on the Project site in return for CCO agreeing to remove eleven (11) billboard structures throughout the City of Long Beach, containing 5,376 square feet of billboard panels. This includes the removal of six (6) of the eight (8) structures on Metro property containing 3,288 sq. ft. of billboard area and five (5) structures on private properties that were designated by the City containing 2,088 sq. ft. of billboard faces. The two remaining static panels will be converted into a two-sided digital structure.
Revenue Proposal
The term of the proposed License is thirty years. CCO will pay Metro twenty-two percent (22%) of the gross revenue that it receives from the sale of media on the digital billboard for the first year of the License term graduating to thirty-percent (30%) of the gross revenues by the beginning of the eleventh (11th) year. CCO will pay a minimum annual rental of One Hundred Twenty Thousand ($120,000) Dollars, payable at $10,000 per month. Under the existing license agreement, CCO pays Metro a fixed annual rent of Seventy-One Thousand Two Hundred Sixty-Eight ($71,268) Dollars.
CCO has agreed to remove existing signs from both Metro and private property as part of their entitlement with the City and will be giving up existing revenue in order to make this program achievable. The proposed 30-year term is an industry standard and the proposed 22% revenue share for this transaction, which grows to 30% by the eleventh year, is considered market rent for similar digital billboard transactions on public property.
The License Agreement is expected to generate a minimum of $4 million in new general fund revenue to Metro over the thirty-year term of the License Agreement. A summary of the proposed terms of the License Agreement is included in Attachment “C.”
Determination_Of_Safety_Impact
DETERMINATION OF SAFETY IMPACT
This Project will improve safety because after the digital billboard has been installed, access to the area will only be needed infrequently for maintenance and repairs. The Billboard will be used to enhance safety by displaying Metro transit messages and emergency alerts.
Financial_Impact
FINANCIAL IMPACT
The License Agreement is expected to generate a minimum of $4 million in new general fund revenue over the thirty-year term of the License Agreement.
Metro Board approved Board Motion 48.1 on September 26, 2013 (Attachment D), directing the CEO to preserve all revenues generated by digital billboard contracts for use by Metro Operations. As a first priority, this revenue is to be used for service improvements and enhancements within the corridor (sub region) where the billboard is located.
Alternatives_Considered
ALTERNATIVES CONSIDERED
The alternative is to not approve the License Agreement. This alternative is not recommended because the placement of the digital billboard will improve safety and eliminate disruptions to operations at the maintenance yard. The digital sign will be used to display Metro transit messages and safety alerts in addition to commercial advertising. The digital sign is also expected to produce a minimum of $4 million in additional revenues over the term of the License Agreement.
Next_Steps
NEXT STEPS
Finalize and execute a License with CCO, subject to County Counsel approval as to form. CCO constructs the billboards and begins advertising sales. The remaining process is expected to take approximately six (6) months.
Attachments
ATTACHMENTS
Attachment A - Location of Existing Clear Channel Billboards
Attachment B - Location of New Digital Billboard Structure
Attachment C - Summary of License Agreement Key Terms
Attachment D - Board Motion 48.1
Prepared_by
Prepared by: Thurman Hodges, Director, Real Property Management (213) 922-2435
Velma C. Marshall, Deputy Executive Officer Real Estate, (213) 922-2415
Reviewed_By
Reviewed by: Calvin E. Hollis, Interim Chief Planning Officer, (213) 922-7319
