Alderman wants to review city’s ad contracts with JC Decaux
Ald. Brendan Reilly said one reason for hearings on all deals with the French advertising giant is it’s “virtually impossible to move” bus shelters and ad panels installed by the firm without paying a “relocation fee” of up to $100,000 — terms he called “insane.”
Downtown Ald. Brendan Reilly (42nd) is demanding a review of the city’s advertising contracts with JC Decaux — including bus shelters, electronic billboards and myriad ads at O’Hare and Midway airports — to improve the logistical and financial terms for Chicago taxpayers.
Reilly said the “unprecedented financial crisis” triggered by the coronavirus is one reason for City Council hearings on all three long-term contracts with the French advertising giant.
Another: It’s “virtually impossible to move” bus shelters and advertising panels installed by JC Decaux without paying a “relocation fee” of up to $100,000. He called those terms “insane.”
“We’re facing an enormous fiscal challenge next year. … We need to re-examine contracts like these to make sure they are truly serving the public interest and Chicago taxpayers,” Reilly wrote in an email to the Sun-Times.
“The City Council must leave no stone unturned in an effort to shield city taxpayers from additional pain at a time when our local economy has been crippled by the pandemic. The Department of Finance and company representatives should … update us on the terms of their contract, discuss operational failures and challenges and ... allow aldermen the opportunity to ask questions about the contract and suggest improvements.”
Reilly said it’s a conversation that “should’ve happened some time ago” but is particularly timely now, just a year before the 20-year bus shelter contract expires.
JC Decaux could not be reached for comment. The office of the the city’s chief financial officer, Jennie Huang Bennett, issued a statement: “The City remains committed to finding efficiencies that will generate savings for our residents and taxpayers, including through review of our existing contracts.”
The company’s advertising contracts with the city have been shrouded in controversy from the outset.
It started in 2001, when JC Decaux was chosen to install and sell advertising on 2,200 bus shelters across the city despite a rival bidder’s offer to guarantee Chicago taxpayers $39 million more over the 20-year life of the contract.
JC Decaux won the coveted bus shelter contract with a guaranteed payment of $275 million over 20 years. Although the city was strapped for cash in 2001, the Daley administration agreed to defer $215 million of the Decaux money until the second half of the contract, 2011-2021. And $135 million of that deferred money came in the final five years of the contract.
In 2005, City Hall borrowed against a $200 million line of credit to finance operations and maintenance at Millennium Park. The surprise arrangement continued until the bus shelter contract was expected to start generating excess revenue to finance park operations.
Park loans weren’t paid off until 2018. By then, Chicago taxpayers hadspent $8.5 million on interest, at a rate of 4%.
In 2012, Decaux dramatically expanded its advertising reach in Chicago with a 20-year deal authorizing the company and its partner, Interstate Outdoor Advertising, to install 34 electronic billboards along Chicago-area expressways.
In exchange, the joint venture guaranteed Chicago taxpayers $15 million in 2013 and $154 million over the 20-year life of the contract.
The city hoped to generate up to $270 million over 20 years through a revenue-sharing arrangement that started with 50% of the first $25 million in advertising revenue raised.
A handful of aldermen tried to stop the deal on both aesthetic and financial grounds, only to be steamrolled by allies of then-Mayor Rahm Emanuel.
Four years later, Emanuel was accused of “making a bad deal worse” by extending for four years a digital billboard agreement that left Chicago taxpayers on the short end of the stick.
At the time, then-Chief Financial Officer Carole Brown justified the extension by citing “unforeseen delays” with installing the digital billboards, a process still not complete four years after Council approval.
Ald. Scott Waguespack (32nd) didn’t buy it.
“They ran into an inability to follow through on what they said they could do,” Waguespack said then.
“On one location, the mayor’s office was prepared to drill, and they almost drilled into the MWRD [Metropolitan Water Reclamation District]. Luckily, we were able to hold that one up before they destroyed the system. That’s not a weather delay. That’s an abominable mistake. We should not allow another four years because of their incompetence.”
In 2013, the City Council approved a pair of five-year airport advertising deals with Clear Channel Airports and JC Decaux — with five more years of renewal options for each, and the potential to enrich both companies while transforming the look and feel of O’Hare and Midway.
It included a minimum annual guarantee of $8.6 million or 71% of sales, whichever is greater.
Former Aviation Commissioner Ginger Evans subsequently accused indicted Ald. Edward Burke (14th) of “aggressively attacking” the O’Hare concessions manager while demanding the city resolve an internal dispute between the partners in Clear Channel’s favor.
At the time, Clear Channel was upset the airport had allowed JC Decaux to install advertising on the exterior of the pedestrian walkways, Evans has said.