December 1, 1999
WORKS COMMITTEE:
The Works Committee on December 1, 1999, had before it a report (November 29, 1999) from the Commissioner of
Works and Emergency Services recommending that:
(1) it be the goal of the City over time to have a single agreement for advertising on transit shelters;
(2) in order to move towards a single agreement and open the process to public tendering within a reasonable time frame,
staff be directed to negotiate with Mediacom Inc. to extend the existing Metro and North York agreements to 2005 (the
year the Toronto agreement expires) in return for additional benefits to the City including but not limited to elimination of
existing District 3 costs; and
(3) staff report back on the results of the negotiations.
The Committee also had before it a communication (November 30, 1999) from Mr. John Jory, President, Eller Canada,
requesting a deferral of the recommendations contained in the report (November 29, 1999) from the Commissioner of
Works and Emergency Services, and further, requesting a recommendation for an RFP or tender for such agreements.
The following persons appeared before the Committee in connection with the foregoing matter:
- Mr. John Jory, President, Eller Canada;
- Mr. Ron Barr, Executive Director of Community/Government Relations, Pattison Outdoor; and
- Mr. Blair Murdoch, Vice-President, Real Estate, Mediacom Inc.
The Committee deferred consideration of the aforementioned report and the following motion until its next meeting,
scheduled to be held on January 12, 2000, as a deputation item:
Moved by Councillor Fotinos:
"That the report be adopted, and further that the Commissioner of Works and Emergency Services be requested to:
(1) consider the results of the Request for Proposals process in Mississauga as part of the negotiations;
(2) consult with the Toronto Transit Commission on the contract recently awarded by the TTC;
(3) also revisit the option of harmonization of all of the agreements; and
(4) report back to the Committee in three months' time on the results of these negotiations".
City Clerk
Trudy Perrin/es.45
c: Councillor Dennis Fotinos
General Manager, Transportation Services
Mr. John Rory
Mr. Ron Barr
Mr. Blair Murdoch
November 29, 1999
To: Works Committee
From: Barry H. Gutteridge, Commissioner, Works and Emergency Services
Subject: Harmonization of Transit Shelter Agreements
(All Wards)
Purpose:
To seek the direction of Council with respect to the approach to be employed in the harmonization of the current
agreements authorizing advertising on transit shelters, in order to maximize the City's revenue potential now and in the
future.
Financial Implications and Impact Statement:
Any action taken to deal with the current agreements, which generates direct revenues and/or services to the City will have
a bearing on the City's revenues. The extent and time frame will depend on the course of action selected as set out in this
report and subsequent negotiations with the supplier.
Recommendations:
It is recommended that:
(1) it be the goal of the City over time to have a single agreement for advertising on transit shelters;
(2) in order to move towards a single agreement and open the process to public tendering within a reasonable time frame,
staff be directed to negotiate with Mediacom Inc. to extend the existing Metro and North York agreements to 2005 (the
year the Toronto agreement expires) in return for additional benefits to the City including but not limited to elimination of
existing District 3 costs; and
(3) staff report back on the results of the negotiations.
Comments:
At the present time, seven separate agreements are in effect authorizing advertising in transit shelters in the City of
Toronto. These contracts were negotiated individually by the former municipalities and contain a variety of terms and
conditions with varying expiry dates. All of these contracts happen to be with the same supplier, Mediacom Inc.
The attached table provides a summary of the key terms of the existing agreements. As can be seen, the expiry dates extend
between December 31, 2000 (former Metro roads within former City of Toronto), 2001 (North York), 2005 (Toronto),
2006 (East York), 2007 (Scarborough), 2010 (York) and 2012 (Etobicoke).
Each agreement could continue to its expiry (generally this is an option available to the contractor and the City) and be
dealt with individually at that time. However, given the current circumstances, there does not seem to be much sense in
continuing with this number of separate agreements under these particular geographic bounds. It would not be desirable
from an administrative perspective, nor from a revenue perspective as some of the smaller contracts may not achieve
optimum value in terms of the ability to attract media buyers.
Staff have had preliminary discussions with Mediacom and explored potential options for extending and harmonizing
current agreements to achieve added value to the City, as well as rationalizing the expiry dates. As well, discussions have
been held with other potential suppliers who have expressed strong interest in an opportunity to bid on the transit shelter
contracts sooner rather than later. These activities have led to a scoping of various approaches for proceeding with the
harmonization of the current agreements. It should be noted that each of the directions are dependent in varying degrees on
negotiation with the current supplier.
Staff have also sought input on the market that this advertising medium serves and the optimal approach in harmonizing
the agreements from this perspective. From an advertiser's perspective, Toronto is seen as one market. The transit shelters
tend to attract national retailers or products with multi-outlets. It must be recognized that this medium is in competition
with other outdoor advertising options. If the City's contract is ultimately split, we are concerned that the overall asset
would be devalued. Some of the areas of the City would be less attractive than the others. Media buyers would have to deal
with more than one contact and may be less inclined to do so. Small retail outlets, real estate agencies and the like tend to
use more local, less expensive advertising media such as the new multi-bin waste receptacles or benches (where permitted).
Finally, there would be concerns about different levels of service in upkeep of the shelters and service to advertisers.
Therefore, from an asset value perspective, it appears that the transit shelter agreement has more value to the City as a
single, consolidated package, and efforts should be made to ultimately achieve one contract with a supplier capable of
managing a programme on this scale.
Option One - Buy out all current agreements and retender in 2000:
At one end of the spectrum, would be the winding down of all current agreements. Some of the agreements have provisions
for early termination, others do not. Therefore, this option would require considerable negotiation with the current supplier
and may entail substantial costs to the City. We, therefore, do not feel this is a viable approach.
Option Two - Extending agreements to a limited time frame:
In 1994, the former City of Toronto Council agreed to extend its existing agreement with Mediacom for a 5-year period to
the year 2005. Based on detailed net present value and rate of return assessments, substantial financial consideration was
achieved for this extension (a $1 million up front payment and stepped annual increases to 20 percent in the City's share of
gross advertising revenue). The underlying agreement was a tri-party contract that also included the former Metropolitan
Toronto. Metro, however, elected not to sign on to the extension, and as a result, the agreement pertaining to transit
shelters on former Metro roads within the former City of Toronto only extends to the end of the year 2000. (About 63
percent of the shelters are on local streets while 37 percent are on former Metro arterials). It would be difficult to
administer, and confusing to buyers if two separate agreements are in effect in the same geographic area. Accordingly, it is
recommended that as a minimum, staff negotiate with Mediacom to extend the Metro agreement to coincide with expiry of
the Toronto portion.
Under the current North York agreement, the City does not receive any revenues from advertising and Mediacom is
responsible for maintaining only the ad caissons. The agreement also has the shortest expiry next to the Metro agreement,
namely November 2001. The City, therefore, has the option of tendering the contract for this area at that time or extending
the agreement for some limited time to coincide with the expiry date of the other agreements.
There are many possible combinations under this approach. By setting a date of 2005, the Metro, North York and Toronto
agreements would expire and could form a viable package, leaving Scarborough, York, East York and Etobicoke to run. By
2007, Scarborough and East York would be available, and so on. One variation of this approach is extending some of the
agreements and bringing others back to a common expiry.
Option Three - Extend the agreements to the latest expiry date (2012):
This approach is not recommended. Extending all of the agreements to the latest expiry date (Etobicoke in 2012) would not
permit a competitive process for an extended period.
Assessment:
The key concern about extending one or more of the existing agreements is that it would prolong the time until other
suppliers are given an opportunity to bid on the contract. However, through years of experience, staff have a clear
understanding of all costs and revenues associated with the transit shelter programme. If, on the other hand, existing
contracts were tendered as they expire, the market would be fragmented and the City would not achieve the best value from
this asset. The extension of any one or a number of the existing agreements would be accompanied by additional benefits
to the City. We feel the best balance at this time is to extend the Metro component of the Toronto agreement, and the North
York agreement to 2005, to coincide with the expiry of the Toronto agreement. At this point, a new tender would be
developed and bids sought from the marketplace. A supplementary option could be that the successful bidder would pick
up the other agreements as they become due. That contract may have a 5-year term.
In the event Council wishes to immediately harmonize all of the agreements (i.e. extend the near term expiries and bring
back the longer expiries) Mediacom, in initial discussions indicated that it may be willing to shorten the term of the later
agreements (York in 2010 and Etobicoke in 2012), however, it would seek a longer extension; to the area of 2009. While
this would certainly simplify the process in the short term and we are satisfied that appropriate value in favour of the City
could be captured, we are concerned that other suppliers would not be entitled to bid on the contract for an extended
period.
Conclusions:
Agreements authorizing advertising on transit shelters are currently in effect with Mediacom Inc. covering the 7 former
municipal jurisdictions now comprising the City of Toronto. These agreements operate under a variety of terms and
conditions with expiry dates ranging from the year 2000 to 2012.
There is merit, from administrative and revenue generating viewpoints to ultimately rationalize and harmonize the current
diverse arrangements. The rate and extent to which this is accomplished will depend on a number of factors discussed in
this report and negotiations with Mediacom.
This report sets out a number of options for consideration. It is recommended that the former Metro agreement, which
covers the area only within the former City of Toronto and expires in 2000, be extended until 2005, consistent with the
Toronto agreement. The North York agreement which expires in 2001 should also be extended to this date to create a
viable package.
Contact:
Andrew Koropeski,
Director, Transportation Services District 1
Phone: 416-392-7711, Fax: 416-392-1920
David C. Kaufman
General Manager
Transportation Services Division
Barry H. Gutteridge
Commissioner
Works and Emergency Services
AK/ah
Attachment (1) - Summary of Transit Shelter Agreements
Attachment (1)
Summary of Transit Shelter Agreements
