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news

How The Street Furniture Bids Stacked Up

2008_4_30Scores.jpg
One year ago today, City Council’s Executive Committee approved [PDF] the awarding of the street furniture contract—for the purposes of designing, building, owning, and maintaining bus shelters, garbage bins, ad pillars, and more for a period of twenty years in exchange for advertising rights—to Astral Media Outdoor, despite the fact that the company had absolutely no experience with “street furniture” and maintains dozens of illegal billboards in defiance of City Council.


Here’s what the public portion of the staff report [PDF] said: “It is noted that [Astral's] proposal scored highest in all four evaluation categories. For the information of Committee and Council, the scores ranged from 47.75 to 85.54. In accordance with Council approved policy, proponents’ scores, financial comparison and staff analysis of the evaluation results can be provided to Councillors in an in-camera presentation if requested by Committee members.”
The Toronto Public Space Committee filed an Access to Information request for the scoring and, after an appeal to the Information and Privacy Commissioner of Ontario, just this week obtained the above document, being published in its full version for the first time. (The heavily-redacted, pre-appeal version previously appeared in mid-January on IllegalSigns.ca [PDF].)
Most interesting is the evaluation of the Financial Element, based entirely on the “Net Present Value of the Financial Proposal to the City.” Astral offered an NPV of $252.2 million (meaning that’s how much the money is worth in terms of 2007 dollars), earning itself a perfect 30 out of 30. CBS Outdoor, the incumbent for the bus shelters (which provide the bulk of the ad revenue) scored a paltry 3.50 out of 30.
2008_4_30FuckParksGetThin.jpgThis confirms what had been whispered around the outdoor advertising industry and what had been implied by Clear Channel Outdoor’s deputation to the Executive: Astral won the contract, in large part, by wildly outbidding its competitors. Perhaps because they’d never done this before and overestimated how much the contract would be worth, they seem to have outbid CBS (experienced in the Toronto shelter market) by a factor of almost ten.
Some will certainly argue that this means the City got a great deal, and that may be true to a point: that point being the assumption that Astral will actually be able to pay what it’s promised. There is a good chance that sometime within the first ten years of the contract, Astral will attempt to renegotiate for more advertising or less money; it’s unlikely that the financial model with which they obtained the contract is a sustainable one.
That’s exactly what happened with the OMG/Eucan/EcoMedia garbage bin contract. When Eucan found they couldn’t pay the City what they owed, they tried to foist on us the MegaBins—seven-and-a-half-foot tall illuminated street-level billboards with trash receptacles on the sides. When Council eventually rejected those, the company was forced to admit that they couldn’t pay the $2 million they were supposed to have given the City each year from 1999–2009. According to John Spears in the Star, the total amount paid to the City from 1999–2006 was $3.218 million, or about a half a million a year.
The City had no choice but to agree to the renegotiated amount; it had absolutely no leverage in the deal. From that same Star article:

“We’re being held over a garbage bin,” [Councillor Minnan-Wong] said. Because the city no longer owns its street bins, it couldn’t afford to have EcoMedia walk away with them.
The street furniture deal’s winning bidder will have to provide more than $100 million worth of items, but that means financial risk to the city, he said.
“Companies can make all sorts of promises, and if they fall short of those promises the city can lose millions of dollars.”

Jonathan Goldsbie is a campaigner with the Toronto Public Space Committee. Photo courtesy of Astral Media Outdoor.

Comments

  • David Newland

    Kudos again to Goldsbie for using this space to highlight issues that genuinely effect the livability of this city.
    Keep up the good work.

  • Marc Lostracco

    I don’t get why the information in the original version was redacted. Who is that information sensitive to that it’s so important to keep from the public?
    It makes me crazy that the City of Toronto only received $3 million from the OMG/Eucan/EcoMedia deal between 1999–2006, considering the hundreds of millions spent on advertising each year in Toronto.

  • x_the_x

    Your conclusion doesn’t make any sense, specifically, the implication that if the counterparty can’t pay the city has no recourse. It has the recourse that any party has when its counterparty fails to perform its contractual obligations. Here it would be the unpaid NPV plus whatever damages the city suffered as a result of non-performance.
    And since your whole point – that the deal is a bad one because the counterparty can’t or won’t pay – rests on this conclusion, you don’t have much of one.
    (As an aside, your argument taken to its logical conclusion is that any contract the city enters into is a bad one, because the other party might breach the agreement. I realize that this conclusion suits your ideological crusade just perfectly, but it is quite dim in light of the centuries old law of private obligations).

  • Jonathan Goldsbie

    Marc:
    Here’s what the City said in its original decision letter to me: “Section 10(1) has been relied upon to deny access to a record that contains commercial, financial, and technical information, supplied to the City in confidence or would reveal such information, the disclosure of which could reasonably be expected to prejudice the competitive position or interfere significantly with the contractual or any other negotiations of a person, group of persons or organization, or result in undue loss or gain to any person or group.”
    X:
    It’s not that the City would have no recourse, just that it would be in a weak position. The fact that the City did not in fact seek damages from Eucan/EcoMedia but rather renegotiated for less money is a sign that it was worried the company could have pulled all of the bins and left the City without basic pieces of infrastructure. All of the Council items about the company’s inability to pay were marked confidential due to “security of the property of the municipality” rather than “litigation or potential litigation,” meaning City staff were necessarily more concerned about keeping the garbage bins on the streets than they were about recovering damages.

  • Marc Lostracco

    But what’s the competitive/commercial problem after the deal has been awarded? It just sounds like the companies don’t want the other companies know they’re under-cutting/lying/fudging numbers.
    I walk to work along a main downtown thoroughfare every day, and for a stretch of three whole blocks, there isn’t one trash can—presumably because OMG/Eucan/EcoMedia are the only ones allowed to put one up. So, when I have to carry a plastic bag of dog shit for three blocks, it’s because it wasn’t an important enough stretch of street to advertise on.

  • RealityCheck

    Idiocy on idiocy – leftist hipsters believing politicians.
    The city could easily have just sued eucan for non-performance and get an injunction preventing it’s removal.
    As to the city missing out on the ad revenue – you get a small rent and the free street furniture and maintenance. That’s worth a great deal of money for little financial risk to the city.
    What the city needs is to eliminate the sign bylaws and vigourously prosecute vandals and those who encourage them (Torontoist, Spacing). Cities should have no power to limit the speech of citizens or property owners, but Torontoist writers want to be little Ches striking blows against consumerism and the bourgeoisie.

  • Damon Kemp

    Reality, did you forget to take your meds today? You obviously fail to see that one of the points, Jonathan was talking about, was that the companies who go into these deals often end up trying to re-negotiate contracts to pay what they ultimately knew they couldn’t afford.
    Also since when did believing politicians become a leftist trait? Obviously you haven’t paid much attention to the right-wingers in the States.

  • Jonathan Goldsbie

    Marc: Actually, the City is allowed to put out their own garbage bins to supplement the EcoMedia ones, provided that they don’t have advertising. There could be any number of reasons that stretch doesn’t have a bin (perhaps a SilverBox became damaged and was removed, or maybe there was never one at all), but you should place a call to Solid Waste Management. Last I heard, they still had a hundred of those brand-new, blue plastic “Phoenix” receptacles just sitting in storage.

  • dowlingm

    I broadly agree with Reality. The contract could and should read “in the event of shortfalls in payments the City reserves the right to assume ownership of Astral equipment and to transfer the right to operate it to another vendor”.
    This would however assumes that the City learns from its mistakes – which it have a very poor history of doing. This is why the “hipsters” sometimes get proved right – look at how Council kowtowed to staff by declining to insist that all Astral billboards be legal prior to award of the contract.
    If airports can force payment of landing fees by preventing aircraft from leaving (using baggage trucks to block its exit) then a method of preventing Astral from removing their shelters etc. should be doable from a legal standpoint.

  • AR

    “What the city needs is to eliminate the sign bylaws and vigourously prosecute vandals and those who encourage them (Torontoist, Spacing). Cities should have no power to limit the speech of citizens or property owners”
    I agree that they need to tackle the graffiti issue, but those sign bylaws protect free speech. Without them, those with the most money could talk the loudest, by dominating public space with their advertisements. That’s unacceptable and hardly promotes freedom. You’re out of touch with the nuances of the issue.