Santa Monica is ready to ink an advertising deal that would bring more revenue to its city bus system.
But plans to switch advertising companies has hit a stumbling block because the current agency, Gateway Outdoor Advertising, filed Chapter 11 bankruptcy.
The city’s contract is being held as collateral by courts in New Jersey, where Gateway is headquartered.
Meanwhile, the publicly-owned bus company has received a bid from Viacom Outdoor for a five-year contract that would generate about $6 million for the city. Because Viacom has agreed to pay the contract rate up front every year instead of making monthly payments, city officials believe they can make another $180,000 in interest.
Deputy city attorneys have to travel to New Jersey to free the contract with Gateway. The contract with the financially troubled agency was up for renewal when Viacom made its bid.
This isn’t the first time Santa Monica has had trouble with Gateway. In 2001, the company failed to make payments on five outstanding invoices. The company failed to make the payments, even when the city offered it a payment schedule. Gateway has not made any further payments though it still uses the buses for advertising.
The city has seized $1.2 million put up in collateral by Gateway when the contract was initially executed.
City staff and the city attorney’s office are currently working on recovering any unpaid funds.
Big Blue Bus officials said the increase in advertising revenue from Viacom will help offset additional operating costs since signing the original contract with Gateway.
“This would go toward (offsetting) increasing operating costs from the increased services we are providing and from the general overall increase in operating costs,” said Big Blue Bus spokesman Dan Dawson, a company spokesman.
Viacom will treat Santa Monica as a premium market for advertisers, instead of playing second fiddle to larger mass transit agencies like The Los Angeles County Metropolitan Transportation Authority or the Orange County Transportation Authority — which both use Viacom for their bus advertising.
City officials also were pleased that Viacom, a Fortune 100 company located on the East Coast, maintained offices and staff in Los Angeles.
Big Blue counts on at least $1 million in revenue annually from advertising sales for its total operating budget.
Earlier this month, the city council enacted a rate hike, allowing the basic adult local fare to increase from 50 to 75 cents. The fare increase, the first of its kind since the 1980’s, will allow the bus company to continue expanding the number of buses on its routes and continue upgrading its fleet to more environmentally friendly vehicles.
Originally published in the Santa Monica Daily Press print edition on May 28, 2002. Read the original PDF.