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HomeMy WebLinkAboutCORRESPONDENCE- 25AMitre -Ramirez, Norma From: Huizar, Maria Sent: Tuesday, December 16, 2014 12:08 PM To: Mitre -Ramirez, Norma Cc: Orozco, Norma Subject: FW: CSOAA responses to Councilmember Sarmiento's questions Attachments: CSOAA Letter to the Councilmember Sarmiento.pdf; Breakdown of the All Vision's Proposal & Analysis.pdf; CSOAA Counsel Ltr to City.pdf; TRA Letter - Santa Ana - City Clerk Protest Letter.pdf; Santa Ana Boydston.pdf Please print and include in the Agenda Packet (even if matter continued). Thank you. From: Mark K[mailto:mark. k@bulletindisplays.com] Sent: Tuesday, December 16, 2014 9:33 AM To: Sarmiento, Vince Cc: Pulido, Miguel; Martinez, Michele; Amezcua, Angelica; Benavides, David; Reyna, Roman; Tinajero, Sal; Cavazos, David; Huizar, Maria Subject: CSOAA responses to Councilmember Sarmiento's questions Councilmember Sarmiento, Thank you again for meeting with our CSOAA members. Please find attached documents that respond to your questions. Please let me know if you need anything else. Thank You, Mark A. Kudler President r "CREATIVE Ot,7 RMrBrtrismw" 3127 E. South Street, Ste. B Long Beach, CA 90805 (310) BULLETIN [285-53841 (562) 470-6680 * Fax (562) 470-6686 www.BuiletinDisnlays.com Mark.Ka,B ulletinDisolays.com Notice: Please take notice that the information contained in this email is intended only for the persons or entities named above. This message may contain confidential and legally privileged communications. If you are not the intended recipient, please be notified that you have this document in error and that any review, dissemination, distribution, or copying of this message is strictly prohibited. If you have received this communication in error, please notify us immediately by e-mail and delete the original email. Thank you. CCM 12/16/2014 Item 25A C —1 SOAA CALIFORNIA STATE OUTDOOR ADVERTISING ASSOCIATION 1215 K Street, Suite 1500 Sacramento, CA 95814 (916) 446-7843 Fax (916) 442-5961 www.CSOAA.com December 16, 2014 Via Email The Honorable Councilmember Vincent Sarmiento Esq. City of Santa Ana 20 Civic Center Plaza, 8th Floor Santa Ana, CA 92702 Dear Councilmember Sarmiento, Thank you for providing us with some of your valuable time to discuss the Outdoor Advertising RFP. We truly believe that the idea to analyze this opportunity is a wise one, but that the consultant that the City of Santa Ana chooses should not have a conflict of interest or any interest in any future outdoor advertising projects that the City may choose to consummate with an outdoor advertising company. Per your request, we have attached an outline of the issues within Allvision's proposed outdoor advertising service agreement. I have also enclosed for your review, the letters from TRA and from Steptoe & Johnson, LLP. These letters contain legal issues that were not mentioned in our outline, but since you are an attorney, you might appreciate their analysis. I also enclosed a letter from City of Santa Clarita Councilmember TimBen Boydston. I found his courage and direction during the Santa Clarita process very uplifting. I was proud to have been of service to him and to the good residents of Santa Clarita. If you have any questions at any time, please feel free to call me or any of our CSOAA members. Sincerelv. Mark A. Kudlerr CSOAII President CC. The Honorable Mayor and City Council City Manager David Cavazos City Clerk Maria D. Huizar Mr. Dennis Loper CSOAA Executive Director Breakdown of the All Vision's Proposed Outdoor Advertising Services Agreement: • The RFP and the staff report calls the agreement a "consulting and management services" agreement. • The title of the agreement document is actually "Outdoor Advertising Services Agreement. • The "service" portion of the agreement comes at no charge to the city during the 1 -year evaluation period. (But there is a catch — all costs will be charged back to the city later.) • AV's service to the city includes providing a Strategic Plan covering the following: 1. An analysis of sign development opportunities based on development feasibility and revenue potential (to the city) 2. Evaluation of current and potential value of signs located on City property best (suited) for revenue generation; 3. Current market research and competitive analysis; 4. Analysis of a potential new overlay zone and ordinance for private development of digital billboards; 5. Analysis and recommendations for the strategic placement of new transit shelter furniture w/ advertising components and incorporate unique designs for place - making and community -oriented design; and, 6. Evaluation of bundling opportunities for development of different types of outdoor advertising. • AV to build, license, and cover all costs —all AV costs will then be reimbursed to AV within first 5 years of the agreement for city -controlled properties. (In other words, AV will be first in line to recover its costs and to receive its shares before the city does. Why would the City be interested in taking on the risk and absorbing or financing a consultant's costs?) • AV to pay city $100K/year/digital sign (2 displays) for the first 5 years while AV recovers all of its costs, increased to $200K/year after 5 years. • Section 3.5. AV to be paid 30% of revenues above the rate of $95/shelter/month for transit shelter agreement secured as part of this service or "bundled" service. • Sections 2.4 & 3.3. AV gets exclusivity as part of this agreement. City can't permit anyone else for off-site sign uses. • Section 4.3 & 4.4. City to pay AV 30% of revenues through other forms of approvals (e.g. development agreements done as part of private property). 30% payment runs the entire course of such DA term, extended term, etc ... or for 30 years) l • Section 4.5 —AV can be a developer of digital signs. In such case, the revenue share will be negotiated with the City. (This provision along with the entire agreement conflicts with the RFP. The RFP's preamble states that only non -operators are qualified to bid. However, this entire agreement contemplates terms for 30 -year agreements with All Vision. Clearly, conflicts with the term of the RFP.) • Section 5.1 (Key Provision) — If City approves of AV's Strategic Plan, and such plans contains identified one or more sign locations, then the City SHALL enter into a Site Agreement for each site. (This is the Trojan horse in the agreement.) • Section 5.2(a) —Term for each Site Agreement per 5.1 will be 30 years. (Why would a consulting agreement pre -contemplate terms for separate agreements that pre -commit and binds the city for the next 30 years? Why wouldn't it allow the City the chance to negotiate each agreement? Additionally, the 30 -year agreement(s) is in violation of the City's own Charter that calls for agreements to be no more than 25 years at a time.) • Sections 5.2(b) to (f) — AV's clever ways to say they will deduct each and every costs out of the Site Agreement(s) that the City enters into. • Section 5.2(g) — AV to pay City $50K/digital sign face/year during first 5 years; thereafter increases to $100K/face/year vs. 60% of net Site Agreement revenue (less AV's costs) for city's properties. (This is cleverly written... city's properties can also mean private properties leased by the city. Doesn't have to be actual city's right of ways or city -owned parcels. This is clearly what the city and AV want to do.) Analysis: • The concepts of this proposal are exactly like those that were defeated in Buena Park, Pomona and Fullerton. In each of these cities, staff recommended full approvals for the All Vision agreements, however the city councils at each city upon learning of the overwhelming benefits to All Vision and little to the city, the each council turned down the staff recommendation and rejected the All Vision business model. Buena Park Councilman Fred Smith said from the dais that the AV looks like and smells like a "Don King" contract. • This is a development agreement disguised as a consultant or service agreement. The terms in Section 5 of the agreement pre -commits the city to future "Site Agreement(s)," that has the feel of a development agreement. The agreement terms are like wolves in sheep's clothing! • Is AV a "consultant" or a sign operator? As written, the agreement allows AV to do both! The initial phase is the evaluation period, then it goes to permitting and eventual operation period. The consultant period is only step 1. • Section 5 suggests that AV can/will be the sign developer/operator... therefore is this a conflict of interest? They get to develop the program and then take advantage of the rules they wrote for their advantage. If they want to be a consultant, they should stay a consultant and not be in competition for the same projects they set up. The preamble of the City's RFP specifically disqualifies sign operators to be part of the RFP. • Important to re-emphasize that this is not a 1 -year agreement. Within 1 year, if AV brings back a "Strategic Plan" and the city council approves it ... then AV will get a minimum of 30 -year term for each site identified in the Strategic Plan. The term of the site agreement would have already been negotiated in this agreement... so, if the city council approves this proposal, AV will have the city locked up for at least 30+ years. (See Section 5.) One other note, the RFP for "outdoor advertising management services" was issued on May 30, 2014, and closed on June 12, 2014 for a period of 13 days ... of which, 4 days were weekends. Questions the City should consider: 1) The City is encouraged to seek an experienced consultant to provide them technical knowledge regarding sign ordinance, etc. However, such consultant should wind up competing to operate the signs too. That's a conflict of interest as the "consultant" will only look out for his/her interest, and not the City's interests. 2) Typical practice from the outdoor industry is that the participating firm will cover the City's out of pocket costs. No deduction will be made prior to any payments to the City. 3) By going with the All Vision path as proposed, the city will then be making a policy decision to enter into the sign business. Not only is the city now be competing in the sign business, it along with All Vision will be monopolizing the sign industry. Is this the intention of the City? 4) Political considerations: Santa Clarita Case Study. All Vision represented the Los Angeles MTA, whereby All Vision proposed to remove over 100 billboard displays on MTA's right of way. A problem stood out that neither the City of Santa Clarita, MTA nor All Vision were the owners of those billboards. Nonetheless, city staff and the majority city council voted to approve the MTA/All Vision agreement (similar terms/concepts as one proposed in Santa Ana). In the process, All Vision convinced the City of Santa Clarita to buy out a small local billboard firm called Edwards Outdoor for roughly $1.3M. Upon city council's approval of the MTA/All Vision, residents of Santa Clarita gathered over 18,000 signatures to put the project on the November (2014) ballot. (Note that a typical city council seat only requires between 5,000 and 6,000 votes.) All Vision spent a considerable amount of money to campaign for the approval of the project. However, over 16,000 residents voted to reject the All Vision proposal during this past November election. (See the money sources from All Vision to this "Yes on S" campaign here: http://www.santaclarita.com/blog/view.php?blog entry id=31345&em=x) Dylan Ruga 310 734 3228 drugs@steptce.com 2121 Avenue of the Stars Suite 2800 Los Angeles, CA 80067 310 734 3200 main www.steptoe.com November 18, 2014 Via HAND DELIVERY Steptoe STEPTOE s JOHNSON LLP Sonia R. Carvalho The Honorable City Council Members City Attorney 20 Civic Center Plaza 20 Civic Center Plaza Santa Ana, California 92701 Santa Ana, California 92701 Re: City Council Agenda for November 18, 2014 Consent Agenda Item No. 25F Dear Ms. Carvalho and Hon. City Council Members, We write on behalf of the California State Outdoor Advertising Association to urge City Council to reject the proposed Outdoor Advertising Service Agreement (the "Agreement") with All Vision, LLC ("AV"), which is on the City Council's Consent Agenda for November 18, 2014 as Item No. 25F. Simply put, the Agreement is a bad deal for the City and will expose it to significant litigation risk, given the myriad procedural and substantive shortcomings in the procurement process and the Agreement itself. First, the Agreement was the result of an unusually—and unnecessarily—short RFP process. The RFP was issued on May 30, 2014 and the submittal deadline was on June 12, 2014, a mere 9 business days later. As you know, Section 2-806 of the Santa Ana Municipal Code requires RFPs to be issued "a reasonable time prior to the date set forth therein for the opening of bids ...." The extremely short timeframe here was not reasonable, particularly given the lack of an emergency or other exigency requiring a shortened bidding process. Second, the Agreement allows AV to deduct all "Direct Expenses" and "Costs of Construction and Maintenance" before the City sees a dime from revenue generated by billboards on City property. The definitions of these terms are purposefully vague and provide AV with every incentive to run up the costs of the projects rather than minimize them. For this Ms. Carvalho and Hon. City Council Members November 18, 2014 Page 2 Steptoe STEPPOE 6 JOHNSON LLP reason, other cities—including Buena Park, Pomona and Fullerton—have rejected similar proposals by AV. Third, the Agreement reveals that AV will control all billboards on City property for 30 years. This lengthy encumbrance of City property is unnecessary and a bad deal for City taxpayers. Indeed, the length of the Agreement's term itself violates Section 1301 of the Santa Ana Charter, which states that franchises granted by the City "shall not exceed twenty-five (25) years." Accordingly, there is no good reason to have such a long term in the contemplated Site Agreements. Fourth, the Agreement impermissibly delegates the City's authority to AV by failing to provide adequate safeguards to prevent abuse of third -parties' free speech rights. Specifically, the Agreement contemplates that AV "will be responsible for the construction, operation and maintenance of the City Property Sign, including the sign operation activities of sales agents engaged by All Vision." See Ag'mt at § 5.2(e). This delegation of authority flies in the face of the RFP, which specifically states that the successful proposer "may not be directly affiliated with any company whose primary business is the construction or operation of outdoor advertising products." Signing the Agreement would allow AV—a Caltrans -licensed sign operator—to stifle competition by designing a Strategic Plan that heavily regulates or prohibits altogether competing billboards on private property. The City has no safeguards in place—much less adequate ones—to prevent this potential misconduct. Kugler v. Yocum, 69 Cal. 2d 371, 381 (1968) (explaining that any delegation of authority must be accompanied by "safeguards adequate to prevent its abuse."). Fifth, the Agreement invites future litigation regarding the constitutionality of the City's regulation of billboards and its potential monopoly over any off-site billboard advertising. According to the Agreement, if the City adopts AV's proposed Strategic Plan, then all new billboards on City property will be constructed by AV and belong to the City. Unless the City changes current law to similarly and liberally allow off-site billboards on private property, the City will have established itself and AV as monopolists over, and censors of, an entire medium of commercial advertising. Simply put, the City cannot decide that off-site commercial signs are permissible on City property and then forbid anyone else from speaking unless they pay the City. If free speech in the form of advertising on billboards is allowed, then all persons (not just the City) must have an opportunity to participate in the dialogue. Finally, the City should not be fooled into believing that AV merely is a consultant that wishes to assist the City with creating a well thought-out, balanced outdoor advertising strategic plan. To the contrary, as noted above, AV is a Caltrans -licensed sign operator that is offering its "consulting" services grads so that it can generate massive revenues in the construction and operation of City -owned signs. Said another way, AV's economic interest presents a clear conflict of interest with respect to its consulting services. The City should unbundle these services so that the outdoor advertising strategic plan is balanced and not infected by a private corporation's economic motive. Ms. Carvalho and Hon. City Council Members November 18, 2014 Page 3 Steptoe STSPTOS IJOHNSON LLr For each of these reasons, we urge City Council to reject the Agreement altogether. At a minimum, City Council should remove the Agreement from the Consent List and put the matter over to another time when the issues addressed in this letter can be debated and analyzed. It almost goes without saying that City Council cannot responsibly bind its citizens to an agreement governing free expression for the next third of a century without an open hearing and vigorous debate. Should City Council choose to ignore this letter and approve the Agreement without revision, the California State Outdoor Advertising Association reserves all of its rights, remedies and claims with respect to a legal challenge of the Agreement and the associated procurement process. Dylan Ruga TRA - November 18, 2014 Maria Huizar Clerk of the Council City of Santa Ana ("City") 20 Civic Center Plaza, 8`h Floor Santa Ana, CA 92702 Re: City Council Agenda Item No. 25F Agreement with All Vision, LLC for Outdoor Advertising Management Services Dear Ms. Huizar, The purpose of this letter is to express our concerns with the staff recommendation and the proposed agreement for the above referenced item. As noted in the staff report, the City received two proposals in response to the Request for Proposal (RFP) for Outdoor Advertising Management Services issued on May 30, 2014. 1 am the Managing Director for TR Advisors, LLC, who submitted the other proposal in response to the RFP. We have a number of issues with the proposed agreement: The proposed agreement provides that All Vision may develop, construct and maintain signs on City property. This right to be granted to All Vision directly contradicts the RFP. The RFP states in the Introduction that the successful proposer "may not be directly affiliated with any company whose primary business is the construction or operation of outdoor advertising products." The proposed agreement, with an expanded scope now allowing this dual role of independent consultant and interested developer, cannot be the product of this solicitation. The RFP, as issued, seeks an independent consultant to advise the City and work solely on its behalf in the policies, plans and management for its outdoor advertising program. TRA proposed to fill only that advisory role and was deemed qualified. We stand ready and able to negotiate a contract based on our response to this RFP. If the City, despite the potential conflicts, now wants both an advisor and developer, a new RFP must be issued to open the development piece to the competitive process. To now allow the proposer to develop sites not only flies in the face of the independent advisory role but also introduces an opportunity specifically excluded from the RFP and never opened to full competition. The dual role presents a potential conflict of interest which the RFP, as issued, sought to avoid. The City is allowing All Vision to provide consulting services which gives it a significant role in setting policy for an Outdoor Advertising Strategic Plan, while at the same time granting All Vision the right to develop sites per its own recommendations. o This would violate Section 10365.5 of the California Public Contract Code which states: "No contractor who has been awarded a consulting services agreement may submit a bid for, nor be awarded a contract for the provision of services, procurement of goods or supplies or any other related action which is required, suggested or otherwise deemed appropriate in the end product of the original consulting services contract." Although this code is applicable to State agencies, the wisdom of this good government policy should be followed. www.tradvisors.com The type of conflict-of-interest code required for all public agencies under the California Political Reform Act appears to require that All Vision, because it will participate in making governmental decisions, must submit a disclosure Form 700 Statement of Economic Interests that may give rise to any conflict of interest in performing the full scope of this proposed contract. To our knowledge, no such disclosure has been made. For the above stated reasons, the City should: (a) reject the proposed agreement with All Vision as contrary to the RFP and negotiate a contract with TRA consistent with its response; (b) reject the proposed contract with All Vision on the basis that it presents a potential conflict of interest; or (c) issue a new RFP to reflect the desired dual role and to open both opportunities to the competitive process. Thank you for your consideration. Sincergly, e Shinn Managing Director CC: City Council Members Ryan 0. Hodge, Assistant City Attorney Karen Haluza, Interim Executive Director Planning and Building Manager All Pezeshkpour, Assistant Planner I November 15, 2014 Mayor Miguel Pulido and Councilmembers Santa Ana City Council 20 Civic Center Plaza P.O. Box 1988, M31 Santa Ana, CA 92701 Sent via email: citycouncil@santa-ana.org Dear Honorable Mayor Pulido & Councilmembers, I understand that you are considering creating a revenue stream for your city using outdoor advertising. As a Santa Clarita City Councihnember who has recently gone through a contentious ordinance adoption, referendum process and ballot measure that was ultimately defeated by our residents, I wish to share my experience with you about one of your potential consultants, Allvision. The proposal before our Council was brought by the Metropolitan Transportation Agency, which uses Allvision to handle its outdoor advertising. MTA/Allvision would take down a significant number of billboards along the railroad right-of-way in exchange for building three digital billboards along the I-5 and CA -14 freeways and a 50 -year exclusivity on the operation of those boards. Highlighted in their presentation was the possibility that the city could make millions of dollars from ad revenue, which would have been split between Metro, Allvision and the City, with the City responsible for the lion's share of expenses. The Allvision company hired lobbyists who harassed me and my supporters, in an aggressive and unnecessary manner. They also falsified documents given to the State saying that a billboard site was zoned as commercial when in reality it was actually open space. After a majority of the Council approved the proposal, a referendum process began, which successfully gathered 18,000 signatures, forcing the council to either retract the ordinance or put it to a vote of the people. That election took place Nov. 4 and Measure S, as it was named, was defeated by a majority vote of 56 percent to 44 percent of the voters. While this may sound like a perfect example of democracy at work, the process was fraught with conflict, deception and violence, all of which was traced back to Allvision through their expenditures, acting as an agent of Metro. The Council was informed by Allvision that MTA could rebuild billboards on its property, even though this is against California law (5405.6 Business and Professional Code, enacted Oct. 2001). When this was brought to their attention, Allvision insisted that the signs could be rebuilt. It wasn't until the California State Outdoor Advertising Association provided a letter from Senator Richard Polanco, (who wrote SB 919 that resulted in the law), as well as an analysis from the Legislative Council informing the City that Allvision finally agreed their assertion was wrong. Repeated attempts by the public to examine and have input on the proposal were rejected out of hand. "Public" input was only solicited at private, membership -based meetings, such as the Chamber of Commerce. No public town hall forums were ever held. Representatives of the billboard companies asked to have the process slowed down so that they could bring in competing offers for our City, but the offers were ignored. When the referendum process started, Allvision sent "blockers" to try and stop signature gatherers from talking to people. Blockers followed and harassed both petitioners and signers with loud verbal confrontations or placed themselves between the petitioner and signers. Some physical altercations occurred, resulting in arrests and more than one petitioner sought medical attention for injuries. In the 30 -day petition period, Allvision spent $120,000 to pay the blockers to take away the Constitutional right of voters to petition their government. I was outraged that a company that we might be doing business with would act in such a manner. The Inspector General of Metro investigated the claims of abuse by the blockers and on April 24, the blockers were told to stop interfering with the signature -gathering process. They ignored the order, and the abuse continued into May, when the petitions were turned in. The City incurred additional sheriff's expenses of time responding to these incidents and for additional patrols to ward off potential confrontations. When the issue was placed on the ballot, Allvision completely financed the "Yes on S" campaign, for an amount of $164,000, producing mailers and ads that were placed on radio, newspapers, and various websites in Santa Clarita. The mailers were misleading and sometimes patently false. On November 4, the people spoke and the Allvision deal was killed. This issue turned neighbor against neighbor and destroyed the trust many people had in their government. I hope that Santa Ana does not invite this predatory group into their community, and that you benefit from our experience. I encourage you look carefully at all possible partners, and if you choose to move forward with an outdoor advertising contract, let competition work to give your citizens the best deal which they have had input on. If you have any questions, please feel free to contact me. In the Peoples Service, TimBen Boydston Councilman (not writing on behalf of the Council as a whole)