A proposed advertising contract with Clear Channel and the San Francisco International Airport was grounded Wednesday amid concerns about the terms of the deal and allegations of an unfair process.
Under the proposed contract, Clear Channel would continue advertising at the airport for the next eight years and pay $10 million a year, after beating out two other competitors during the bidding process.
But Harvey Rose, San Francisco’s budget analyst, said Wednesday that the contract is unusual and a break from not only the existing deal with Clear Channel, but also hundreds of other airport and city advertising contracts.
In those contracts, a provision says The City receives either a minimum annual guaranteed payment or a percentage of the gross receipts, whichever is higher.
However, the proposed eight-year deal with Clear Channel, contains only a minimum guaranteed payment. That payment begins at $10 million and increases with cost-of-living adjustments.
“We are talking about big bucks here, supervisors,” Rose said during a Board of Supervisors Budget and Finance Committee meeting Wednesday. Since 2001, Clear Channel has paid the gross-receipts percentage in five of the contract years, totaling an additional $5.6 million. It grossed $103 million in revenue during that 12-year contract and paid the airport $72.2 million, according to a report from Rose.
Meanwhile, one of the losing bidders, JCDecaux North America, which also does business with The City, is crying foul over the bidding process.
“This is business; you lose some, you win some. And we are fine with that,” said Bernard Parisot, president of the company. “But in this instance, we feel really the process was unfair.”
Among its contentions is that based on the request for proposals, Clear Channel’s minimum guarantee was unfairly weighted and also “commercially unreasonable.”
Amid the concerns, the budget committee postponed a vote Wednesday on the deal, and it’s unclear when the matter will be reconsidered.
SFO official Cathy Wagner defended the bidding process, noting that the Airport Commission, in consultation with the City Attorney’s Office, rejected JCDecaux’s official protest. Wagner said the airport will discuss reinstating the dual-payment provision, but added, “I just want to be clear: The airport made a business and policy decision to go with the [minimum guaranteed payment] only.”
Wagner said that resulted in a higher annual payment. She also said a percentage of the gross receipts creates an incentive for more ad space, which city policy opposes. The proposed contract reduces ad sites from the current 286 to 179, Wagner said.