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RFD- 3013 Business Items   Item #   11. c.    
Regular Council Meeting Agenda
Meeting Date: 05/23/2017  
Title:    Big Sky Media - Licence of Occupation - Walker
Department: Economic & Business Development  
Strategic Vision Element: Where People Choose to Grow a Business - A strong, diversified regional business centre Related Goal: Spruce Grove has a business environment that encourages and supports new business start-ups, helps ensure existing businesses are competitive, successful and profitable, and attracts new businesses to the City.

Information
Request for Decision Summary
 
Approve the request by Big Sky Media Inc. to install and operate a single-display, east-facing digital billboard in the City road right-of-way located at the East Access Road to Century Crossing and Highway 16A.  
Proposed Motion
That a License of Occupation Agreement be approved between the City of Spruce Grove and Big Sky Media Inc. for the lease of a City road right-of-way at the northwest corner of Highway 16A and the East Access Road to Century Crossing for the purpose of allowing Big Sky to install and operate an single-display, east-facing digital billboard for a term of ten years.  
Background/Analysis
In 2010, Big Sky was the successful proponent of a Request for Proposals (RFP) issued by the City. Subsequently, in February 2011 the City entered into a License Agreement with Big Sky for the installation and operation of a double-display LED digital billboard in the City Right of Way (ROW) at the corner of Highway 16A and Calahoo Road. The intent of the RFP was to secure a reasonable financial return to the City and provide free advertising time on the billboard for community not-for-profit organizations. The commitment to secure dedicated advertising time on the billboard for not-for-profit organizations was deemed important because of the absence of media options able to broadcast their messages in a timely manner.

The License Agreement states that the City has agreed to not enter into an agreement with any other party allowing that party to place digital billboards in any Highway 16A ROW throughout the duration of the 10 year term (2011 - 2021). In return, Big Sky agreed to install, maintain, and operate the double-faced billboard at its own expense, pay the City an annual quarterly license fee equal to 15% of the gross advertising sales (starting September 2015), and provide at no cost to the City a minimum of two 10-second commercial positions on the billboard which shall air at minimum every 120 seconds for use by the City or any not-for-profit third party group designated by the City. Big Sky also agreed to design and produce all of the City's and third party advertisements on the billboard at the sole expense of Big Sky. At the request of Council, deferral of the license fee for 3 years was negotiated with Big Sky in return for installation of a second digital display on the sign at that site.

In 2015 Big Sky was granted approval by the City to occupy a second City ROW located on the east side of Campsite Road and Highway 16A in which to install a single-display, west-facing digital billboard readable for those travelling eastward on Highway 16A and southward on Jennifer Heil Way.  This new billboard has a higher resolution and more advanced dimming features than the existing Calahoo Road billboard and also has a time and temperature function along the bottom of the display area.  The terms and conditions of the License Agreement for this second location are the same as the first Calahoo Road location other than there being no deferral on the license fee payments and the 10-year period of exclusivity applies only to the Campsite Road/Highway 16A road ROW. At the end of each 10-year term, at the sole discretion of the City, the following options can be considered:  the billboards become the property of the City with Big Sky granted right of first refusal if the billboards continue to be used for commercial advertising; the agreements may be extended upon mutual agreement; or Big Sky will remove the billboards and restore premises to their original state at the expense of Big Sky.

The two existing License Agreements with Big Sky have gone very well and Big Sky has fulfilled its obligations.  As per the agreements, Big Sky has been issuing annual quarterly license fee payments to the City, equaling approximately $50,000/year for both locations (3 faces).  The value of free advertising time on the existing billboards for not-for-profit organizations is estimated at $78,000/year plus $41,600/year for creative and production services.

By comparison, current fair market rent values for digital billboards in the Edmonton Census Metropolitan Area marketplace are $15,000 to $20,000 annually for AA locations and $25,000 annually for AAA locations.  Spruce Grove sites on Highway 16A with their traffic counts and size of the market are considered AA to AA+, falling into the $20,000 to $25,000 annual range.  It is important to note that standard lease agreements for City ROW sites typically do not require the owner of the sign to provide free, dedicated time on the billboard for community service advertisements.

Big Sky has approached the City about licensing a third billboard site to be located in the City ROW at the northwest corner of Highway 16A and the East Access Road to Century Crossing. This billboard would have a single east-facing digital display readable by those travelling from Edmonton westward on Highway 16A and will have the same design and features as the digital billboard at Campsite Road. The terms and conditions of the License Agreement for this third location will be the same as the Campsite Road location other than the license fee will equal 15% of the annual gross advertising sales or $20,000/year whichever is greater, and the 10-year period of exclusivity applies only to the East Access Road to Century Crossing/Highway 16A road ROW.

The potential third billboard location is anticipated to generate at minimum an additional $20,000 in quarterly license fee payments and the value of free advertising time for the City and not-for-profit organizations is estimated to be an additional $26,000. The proposed site plan and renderings of the billboard are attached as Schedule A & B.
Options/Alternatives
The City could opt for a higher license fee in exchange for reduced time on the digital billboard for not-for-profit organizations at this third location (East Access Road to Century Crossing and Highway 16A).  
Consultation/Engagement
Recreation Services Department will continue to be responsible for administration of the advertisement positions on the digital billboard for not-for-profit organizations; the City receives positive feedback from these not-for profit organizations about the value the billboard advertising offers them.  Not-for-profit organizations pay a $35 fee per week to the City to advertise on the electronic billboards which includes all locations.  
Implementation/Communication
If approved, a License of Occupation Agreement between the City and Big Sky will be entered into for a term of 10 years. 
Impacts
Access to the digital billboards provides valuable, high-visibility minimal-cost advertising to not-for-profit groups, which in turn creates awareness of their programs and supports their viability.  This is particularly important given the very limited media opportunities available to these groups.   

The potential third billboard location is anticipated to generate, at minimum, an additional $20,000 in annual quarterly license fee payments.  The value of free advertising time for the City and not-for-profit organizations is estimated to be an additional $26,000. 
Attachments
Big Sky - Schedules A & B

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