AGENDA #13
MEMORANDUM
TO: Mayor and Town Council
FROM: W. Calvin Horton, Town Manager
SUBJECT: Report on Exterior Bus Advertising
DATE: November 12, 2001
This report responds to a petition from a Council member requesting that the Council reconsider the idea of external advertisements on Town buses. The petition also requests that the Council consider using any revenue from this source as a means of funding alternative fueled buses and other vehicles.
The sale of exterior advertising on buses to generate income for the transit system was previously considered by Town Council in May 1995 and again in May 1998. We have attached a copy of the 1998 budget working paper for review. Please see Attachment 1. In the past, the Council chose not to implement an exterior advertising program on Town buses.
In exploring the issue of external bus advertisements, the staff met with a representative from Keystone Media Inc. to discuss the revenue potential of external advertising on the buses. Keystone is currently the Advertising Agency under contract with the Winston-Salem, Greensboro, and High Point transit systems. Keystone recommends a mixture of advertising that includes a fully wrapped bus, a half wrapped bus (one side), a rear only wrapped bus, and placards installed in frames attached to the sides of the buses. They sell their advertising in segments that are for a 4-week period of time. A typical contract with Keystone would split the revenue with 55% going to Chapel Hill Transit. Keystone would guarantee a minimum revenue amount for the contract period if the Town chose to negotiate a contract with the agency. Keystone’s advertisers include telephone directory services, cell phone companies, fast food chains, and other advertisers. They do not advertise tobacco or alcohol products.
This is a form of exterior advertising that consists of a vinyl material that is applied to the outside of the bus. Although it appears opaque from the outside, it does not obstruct a passenger’s view from the interior of the bus.
The wrapped bus advertising is more expensive to create than the more traditional exterior placards, and has limited revenue potential because it is difficult to sell this type of advertising. Please see Attachment 2.
The Capital Area Transit (CAT) in Raleigh started their bus wrap program in 1997. In the first year they sold all of their advertising to Channel 17. Since then, they have not been able to sell all of their available bus wrap opportunities. CAT now handles the program in-house with their marketing person, and is authorized to have 10 buses wrapped. They average 6 to 7 buses under wrap at any given time. The revenue per bus per year is typically $15,000, and CAT nets $60,000 to $70,000 annually from the bus wrap program.
Advantages: The revenue for the wrapped buses is considerably higher than for a bus with placard advertising.
Disadvantages: The wrapped bus advertising would not be aesthetically pleasing to all members of the community. Sometimes the adhesive used to apply the vinyl will pull the paint off the bus when the wrap is removed. It is likely that few bus wraps would be sold.
This type of external advertising has been a source of revenue for transit systems for decades. The advertising agency would be responsible for selling, installing in frames, and removing all advertising displayed on frames on the exterior of the buses. There are 3 placard locations available on each bus; a large placard on the drivers’ side, a medium placard on the curbside, and a placard on the rear of the bus. Please see Attachment 3.
Advantages: The revenue from the placard advertising would be a source of revenue that should increase throughout the life of the contract. The agency would provide the services (the sale, installation, maintenance, and removal) necessary to maintain the program.
Disadvantages: The placard advertising would not be aesthetically pleasing to all members of the community.
Keystone Media Inc. submitted a preliminary proposal for a five-year contract period. Keystone would pay the Transit system 55% of actual revenues with a guarantee of $148,500 over the five-year period for the use of the 54 transit buses in the fleet. This amount would translate into an average of $27,000 annually. Of this amount roughly 46% or $12,700 would be credited to the Town of Chapel Hill, 16% or $4,400 to the Town of Carrboro, and 38% or $10,500 to the University when Transportation Fund revenues in excess of costs are distributed at the end of the operating year.
In order to utilize this money for the purchase of alternative fueled vehicles, the transit partners would have to agree to set this money aside in the capital reserve fund as a local match for purchase of such vehicles.
Advantages: Chapel Hill Transit would receive 55% of the revenue from the sale of the advertising or a guarantee of $148,500 over a 5-year period.
Disadvantages: In order to achieve the maximum amount of revenue, the entire fleet of buses would be part of the advertising program. This could detract from the appearance and look of the fleet.
Chapel Hill Transit hosted a demonstration of an alternative fueled bus built by TransTeq in June 2001. The bus technology utilized was a hybrid electric design similar to the vehicle at the International Council for Local Environmental Initiatives in Ann Arbor, Michigan. This is an emerging technology that utilizes electric motors to drive the wheels and on-board generator sets to charge and re-charge the batteries. The hybrid buses require more maintenance and the addition of equipment to remove, move, and charge the 56-battery set. New York City is the first transit operator to order a large number (325) of hybrid electric buses and will help to develop the technology that will make this choice more practical for smaller transit operators.
The cost of the TransTeq hybrid electric bus is about $450,000. The buses purchased by the Town this year cost $265,000. There has been some discussion of an increase in the federal share of the cost of buses that use alternative fuel technology but no change has been made in the funding level at this time. The federal share of a bus purchase has recently changed and now is 83%, the state share is 8%, and the local share is 9%.
The first step in the process for purchasing buses is to put the request on the local and state transportation improvement programs list as desired projects. The project would need to be detailed to include the number of buses, the service they would provide, and the anticipated year of purchase. The request would be unfunded until a source of funds is identified. This type of project could likely get some funding through the Congestion Mitigation Air Quality (CMAQ) program. Currently, Orange County is not eligible to participate in this program. In 2003, there will be a redefinition of CMAQ approved areas based on air quality measurements. It is possible that Orange County will be included in the CMAQ eligible areas after the redesignation in 2003.
We have attached a copy of a report prepared for the Council in April 2001 on Cost-Benefit Comparison for Alternative Fueled Vehicles. Please see Attachment 4.
We would recommend that the Council take no action at this time. We will continue to monitor the availability of federal funds for alternative fueled buses.