Staff Report #5 – Transit Advertising Shelter Contract

Staff Report #5

August 30, 2023

To All Commissioners

Re: Transit Advertising Shelter Contract

Recommendation

That the Commission:

i.   APPROVE the renewal of the existing advertising shelter contract with OUTFRONT Media with modified terms as follows:

• Extend the contract to cover the period of January 1, 2024 through December 31, 2028;
• Implement a cap of 120 glass panels per year that OUTFRONT Media will be responsible for replacing (LTC would be required to pay for any additional replacements); and
• Decrease the annual revenue guarantees for the five year period from $175,000 to $122,500

ii.   DIRECT administration finalize the contract with OUTFRONT Media based on the above;

iii.  DIRECT administration to include $107,900 in annual operating costs associated with the enhanced cleaning of shelters in the growth budget submission for 2024 for Municipal Council consideration noting should this request be approved, administration will arrange for the appropriate contract amendment.

Background

The current contract with OUTFRONT Media relating to transit shelter advertising is set to expire on December 31, 2023. The contract includes the provision for a five year renewal at the mutual agreement of the parties.

The current contract provides OUTFRONT Media with the exclusive rights to place advertising in LTC shelters, and in return, LTC receives an annual guaranteed share of the revenue generated from the advertising ($175,000 in 2023). In addition to the revenue share provided to London Transit, OUTFRONT Media is also responsible for the repair of all damage to shelters as well as bi-weekly cleaning of all shelters under this contract.

As expected, during discussions with OUTFRONT Media on the contract renewal, concerns were raised with regard to the increased shelter damage being experienced here in London, resulting in increased costs to the contractor relating to the required replacement and repair of the glass panels. Over the past number of months, administration has worked with the shelter contractor to identify options to replace the glass with another product that would be less susceptible to breakage. While work continues on this initiative, no solutions have been identified to date that would address the breakage issue while at that same time meeting the safety requirements for the shelters.

Between 2020 and 2022 the number of panels that have been broken have doubled. As set out in the table below, the number of panels broken in a given year continue to increase and are currently on track to see 300 broken panes in 2023.

With the increasing instances of shelter damage and the associated costs for clean-up and replacement, OUTFRONT has proposed a cap of 120 panes annually that they will be responsible for cleaning up and supplying new glass panels under the extended contract. After the 120 cap is met, OUTFRONT will continue to clean-up the broken glass at their cost; however, London Transit will be responsible for the cost of procuring and installing the replacement glass. Additionally, given increased overhead costs and declining ad revenue from the shelters, the guaranteed revenue provided to London Transit will be adjusted down to $122,500 per annum for the next five years. At this rate, OUTFRONT would continue to provide the typical bi-weekly cleanings and routine maintenance/repair services. All other terms and conditions of the current agreement will remain in force. The anticipated decrease in annual revenue and the additional costs associated with the cap on shelter repair have been included in the 2024 status quo operating budget.

London Transit has enjoyed a long history of shelter advertising with OUTFRONT Media. The business relationship with OUTFRONT Media has been excellent with no contract performance issues. Administration is recommending the 5 year renewal with the amended terms as set out above.

Optional Considerations

The City of London’s Strategic Plan includes consideration for increased frequency of cleaning at bus stops/shelters beyond the current bi-weekly cleaning schedule as well as the installation of garbage receptacles in shelters. As part of the contract renewal discussion, OUTFRONT Media was asked to provide options associated with incorporating each of the elements into the contract extension. OUTFRONT does not offer garbage receptacle installations or maintenance at this time. They did however provide costing on increasing the shelter cleaning frequency to weekly. This adjustment would result in a decrease in the annual guaranteed revenue from $122,500 to $14,600 per annum to offset the additional services provided. Given this item is included in the City’s Strategic Plan, administration is recommending this be included in the growth budget request, essentially looking to the City of London provide an additional $107,900 per year in operating funding to cover the shortfall that will result from the decline in guaranteed revenue. Should this request be approved by Municipal Council during the multi-year budget deliberations, administration will work with the contractor to amend the contract accordingly.

Recommended by:

Katie Burns, Director of Planning

Concurred in by:

Kelly S. Paleczny, General Manager