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SR-10-13-2015-3P City Council Report City Council Regular Meeting: October 13, 2015 Agenda Item: 3.P 1 of 4 To: Mayor and City Council From: David Martin, Director, Planning and Community Development, Strategic Planning (PCD) Subject: Contract with Hulu, LLC, to establish Hulu as the Presenting Sponsor for the Breeze Bike Share system Recommended Action Staff recommends that City Council: 1. Authorize the City Manager to execute an agreement with Hulu, LLC for the sponsorship of the Breeze Bike Share system for five years at the level of $675,000 annually. 2. Authorize budget changes as outlined in the Financial Impacts & Budget Action section of the staff report. Executive Summary Following Council’s direction on November 11, 2014, staff undertook a process to obtain a sponsor for the City’s Breeze Bike Share system, which has culminated in the proposed five-year Presenting Sponsorship agreement with Hulu, LLC, to sponsor Breeze for $675,000 annually. The Hulu agreement was the result of the marketing efforts of the Superlative Group, Inc., with which the City contracted following a competitive selection process advertised through an RFP that was issued in December 2014. The proposed contract exceeds the sponsorship parameters set by Council, which aspired to find a minimum sponsorship level of $250,000/year for three years. Once approved, the City Manager will e xecute the contract and staff will work with Hulu on the system launch, scheduled for next month. 2 of 4 Background Council authorized staff to seek a bikeshare system sponsor as one of a series of steps to implement and fund a citywide bikeshare program. Through an AQMD grant for system development, the City contracted with Global Green USA, which reached out to explore the market and determine general level of interest and feasibility. The conclusion was that Santa Monica is a strong and attractive market fo r sponsors, with sufficient potential even if advertisement is limited to bicycles only, avoiding stationary fixtures in compliance with the Municipal Code. On November 11, 2014, Council directed the City Manager to pursue corporate sponsorship funding fo r its new bikeshare program, either directly or through an agency, that would provide a minimum of $250,000 per year and to return to Council with a sponsorship proposal. (See Attachment A). Based on Global Green’s research and information provided to t he City, staff initially pursued some leads to secure a sponsor directly prior to selection of an agency through the RFP process. However, no sponsorship developed based on this effort. Sponsorship Selection Process On December 3, 2014, the City issued a Request for Proposals seeking a third-party broker to secure bikeshare system sponsors at the highest support levels to supplement user fees and underwrite operational expenses. Three proposals were received and evaluated by a staff team with representatives from Planning & Community Development and the City Manager’s Office based on the criteria in SMMC Section 2.24.072, including price, previous experience, capacity and skill, ability to deliver and provide future service, and compliance with the RFP -defined scope of work. The Superlative Group was selected based on these criteria, their superior valuation methodology, and their strong track record with public agency programs. As bike share is a new system in Los Angeles, their market evaluation to determine the right level for sponsorship afforded by placement of the company name and logo on the bicycles was particularly important. The negotiated commission -based agreement required Superlative to obtain a minimum of $250,000 annually for the City with a bonus if the contract exceeded a three year goal of $1,500,000 ($500,000 for three years) after 3 of 4 commission. Superlative does not receive other reimbursements or direct payments from the City. All artwork and materials are to be provided by the sponsor and placed on the bicycles by the system operator. Discussion In late August, Superlative informed staff of a potential offer from Hulu, and over the months of August and September, City staff and Hulu negotiated agreement details for Hulu’s five-year sponsorship of Breeze (Attachment B). The agreement provides $675,000 annually ($3,375,000 total), which includes a commission to Superlative and well exceeds the $1,500,000 total amount targeted by the City to subsidize bike share operations. Santa Monica-based Hulu is an on-line, ad-supported streaming service, which has grown substantially and recently expanded its office space in Colorado Center. With more than 500 employees in the Santa Monica workforce, Hulu represents the innovative companies that have earned Santa Monica its “Silicon Beach” moniker. As such, Hulu’s profile allies with the City’s 21st century objectives for the City’s bike share enterprise, which will introduce technologically superior “smart bikes” into the Los Angeles region. The Hulu logo, which is the same green color as the Breeze bikes, would be placed on the baskets and skirt guards of the Breeze bicycles, the locations that were approved by Council. As required by the City’s Municipal Code, no advertisement, including logo placement, may be placed on the bike share stations racks or signs. Hulu staff has preliminarily begun coordination with City staff and other partners in the planning of launch events, now tentatively scheduled to take place in early-mid November. Hulu’s sponsorship of Breeze bike share is the first time that a corporation has sponsored a specific, ongoing program in the City of Santa Monica, and the proposed contract exceeds the support levels established by the Council. Hulu is a Santa Monica-based, expanding internet streaming company, which also produces some original content and employs more than 500 employees in the city. The sponsorship ensures that the City’s bike share system, under operational contract with CycleHop, LLC and featuring Social Bicycles’ “smart bikes,” will be self-supporting between sponsorship income and anticipated user fee revenue. 4 of 4 Financial Impacts and Budget Actions Award of the agreement with Hulu, LLC for the sponsorship of the Breeze Bike Share system will generate an estimated net annual revenue amount of $540,000 and requires the following budget changes to the FY 2015-16 Adopted Budget and FY 2016-17 Budget Plan: 1. Establish revenue budget at account 01267.409330 in the amount of $675,000. 2. Appropriate $135,000 to reflect the payment of commission fees at account 01267.522580. Prepared By: Liz Bar-El, Senior Planner Approved Forwarded to Council Attachments: A. November 11, 2014 Staff Report (web link) B. Hulu Agreement Terms 1 ATTACHMENT A: Hulu Contract Terms Term detail  Five-year term beginning from launch date. Hulu may terminate agreement after third contract year with 6 month notice  Exclusive presenting sponsor; City may procure secondary sponsorships from any local or national commercial interest(s) as long as such interest(s) do not qualify as an online company or ad-supported streaming service. Such sponsorships may be recognized in materials and digital media (not on bikes).  Agreement contains terms within which both sides may promote the sponsorship SIGNAGE & ANCILLARY SPONSORSHIP BENEFITS Signage Exposure • Five prominent Sponsor ID’s (sponsor logo only) on 500 Breeze bicycles introduced into circulation as part of the launch of Bike Share and all additional bicycles added to the initial inventory of Breeze bicycles during the Term, up to 1,000 total bicycles. - Rear fender cover – 2 sides - Front basket signage – 3 sides Designation/Exclusivity • Presenting sponsor of the Breeze Bike Share program • Sole and Exclusive commercial sponsor signage on all bicycles • All signage and placement subject to agreement with City of Santa Monica, not to be unreasonably withheld Online Exposure • Logo/link on Bike Share website • Logo/link on Bike Share mobile app • Logo/link on Bike Share interactive maps and collateral materials • Logo/link on Bike Share social media • Logo/link on City of Santa Monica website Additional Exposure • Recognition as Presenting Sponsor at kickoff event and related materials • Recognition as Presenting Sponsor on all bike share collateral materials • City will give strong consideration to place select Bike Share stations at feasible location(s) of Sponsor’s choice • Exposure on additional bikes if program grows over the term, up to 1,000 bikes total • City will make best efforts to include Sponsor exposure through additional partnerships for launch including Global Green USA blog and other social media outlets, and bicycle coalitions.     Reference:    Agreement No. 10202   (CCS)