TO: Honorable Members of the Board of Supervisors

FROM: Office of the Legislative Analyst

SUBJECT: Employee Suggestion No. 108: Sell Advertising Rights on City-owned Vehicles

The employee suggests selling advertising rights on City-owned vehicles.

Preliminary research suggests that selling advertising rights on City-owned vehicles is not viable. However, there are other venues for advertising that could prove lucrative for the City. The Board may want to consider these options.

The OLA questions the prudence of selling advertising rights to City-owned vehicles. The purpose of a City-owned fleet should be to support the functions of the City. Placing advertisements on City vehicles could be construed by members of the public as an official endorsement of certain businesses or products. Such endorsements could present a clear conflict of interest. For example, it would not be appropriate to place liquor or cigarette ads on vehicles conducting Department of Public Health business. Similarly, placing advertisements on safety related vehicles, such as police cars, risks undermining the authority of those operating the vehicles and obscuring important identifying decals.

If the Board eliminated safety-related vehicles as options for advertising, it could still consider selling advertising space on the City’s general fleet. The general fleet is comprised of around 3,000 passenger cars, small pickups, small passenger vans, and SUVs. Though the general fleet would be more appropriate for advertising than would be safety related fleets, there are reasons why the general fleet is not suitable for advertising:

1. Conflict of Interest: Placing ads on this fleet may still create a conflict between public and private sector interests, especially considering that some departments may use cars from the general fleet rather maintaining their own fleets.
2. Exposure: Advertisers buy advertising space in order to reach the largest number of potential consumers. Unlike MUNI operated buses, most City fleet cars have no set routes. Therefore, there is no way to quantify the amount of exposure an advertisement placed on a general fleet car would receive or which sectors of the population would be exposed to the message. Without this information it would be difficult to market advertising rights on general fleet cars to an advertising agency.
3. Size: There is minimal space for advertisements on City fleet cars. The advertisement itself would most likely be too small to be effective. The City could consider installing tents on the tops of its general fleet, as do taxis. A general fleet car could also be shrink-wrapped. However, a shrink-wrap ad might make it difficult to identify the car as a City vehicle. There was also a concern in the field that employees might abuse shrink-wrapped City vehicles since they would not be easily identifiable as City property.

The City has sold advertising rights on MUNI buses, shelters, and benches and through the Department of Public Works (DPW) to private vendors such as JC Decaux for public restrooms and Clear Channel Adshel, Inc. for sidewalk news racks. However, these revenues are either already fixed in longer-term contracts or were originally negotiated as permit fees that may not accrue to the City’s General Fund.

There exist, however, any number of options for increasing advertising and concession fees in future fiscal years. Some examples could include:

1. Allowing advertising, such as the construction of billboards, on City-owned lots. Certain lots are adjacent to freeways and would offer advertisers prime air space.
2. Selling vending or pouring rights for designated City property. A contract of this nature could take various forms. The Department of Administrative Services currently has an RFP out for vending machine contractors. Their goal is to contract with one vendor for the majority of City buildings. Advertising rights for the vending machines are not part of this RFP. Administrative Services is seeking a five-year contract that they anticipate will provide data on volume and usage. The hope is that with this information they can eventually market advertising as part of the vending RFP thereby sharply increasing its value.

On a larger scale, selling vending or pouring rights could take the form of a recent deal made by New York City. New York City recently sold pouring rights for all City and school district properties to Snapple Beverage Co. Though the deal was contested by the city controller, it promised New York City a combined $166 million for school and public building distribution rights over a five year period. As part of the contract, Snapple was to support the educational system through commissions on sales from vending and through sponsorship of sports and physical education programs. On a smaller scale, the City of Eugene, Oregon is about to enter into a three and a half year beverage vending, beverage pouring, and advertising rights contract in specified recreation centers, public pools, and performance venues.

3. As permitted and as acceptable, entering into advertising rights or co-sponsorship agreements with SFGTV, on inserts in PUC water bills or on designated City property;
4. Selling advertising space on the back of MUNI Fast Passes and transfers or within MUNI busses in the form of advertising brochures along major transit lines.

Of course, implementing any of these revenue-generating measures is a policy matter for the Board of Supervisors.