Staff Report #2
September 29, 2021
To All Commissioners
Re: Contract Amendment – Lamar Transit Advertising
Recommendation
That the Commission APPROVE an amendment to the contract with Lamar Transit Advertising, reducing the minimum annual guarantee payment for 2022 by 20% from $480,000 to $384,000 as the result of continued negative impacts the COVID-19 pandemic has had on the bus advertising market.
Background
London Transit and Lamar Transit Advertising have enjoyed a more than 20-year relationship which has been mutually beneficial to the parties. The current contract with Lamar Transit Advertising is set to provide a minimum annual guarantee of $480,000 for 2022 in return for the exclusive rights to place advertising on London Transit’s fleet of buses.
For the first time in the 20 plus year history of working together, Lamar Transit Advertising requested relief from the minimum guarantee payment for 2021 given the COVID-19 pandemic impacts on their business. In response to Provincial orders for all nonessential businesses to close on March 26, 2020, Lamar was forced to suspend billing to annual customers, and also experienced major cancellations from both local and national advertisers. In November 2020, the Commission approved a contract amendment reducing the minimum guarantee payment from $470,000 to $305,000 for a 35% reduction.
As set out in the report recommendation, administration is recommending an additional contract amendment for the 2022 payment, noting in this case the reduction is significantly less at 20%. The request for a reduction in the minimum annual guarantee payment is the result of Lamar’s continued difficulties in placing bus advertising through the ongoing pandemic, noting that much of the advertising sold in this space is to local businesses, many of whom have continued to struggle through the pandemic period, and have, in many cases reduced their advertising spending. The 20% reduction versus the previous year’s 35% reduction recognizes that some of the business has started to come back, but is still nowhere near where it was pre-pandemic. The experience in London with respect to lower advertising revenues is consistent with other transit systems across the country.
While this reduction was not incorporated in the 2022 Operating Budget approved by the Commission at the August 25, 2021 meeting, it will be included as part the annual operating budget recosting exercise. This reduction is considered an eligible expense under the Safe Restart funding program, and consistent with the approach utilized for 2021, Safe Restart funding will be used to offset the revenue shortfall.
Recommended by:
Mike Gregor, Director of Finance
Concurred in by:
Kelly S. Paleczny, General Manager