Webinar: https://connectdot.connectsolutions.com/pancfc9i6o5u/
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Ladies and gentlemen, thank you for standing by. Welcome to the U.S. Department of Transportation Value Capture Strategies Advertising, Naming Rights, and Sponsorships conference call. All participants are in listen only mode. After the call we will conduct question and answer sessions. Instructions will be given at those times. If you require assistance during the call, please press *0. I will now turn it over to your host, Charity Coleman. Please go ahead.
Thank you, good afternoon. On behalf of the Federal Highway Administration, I would like to welcome everyone to today's virtual peer exchange on Value Capture Strategies Advertising, Naming Rights, and Sponsorships. My name is Charity Coleman. I am with the U.S. Department of Transportation and it will be Value Capture Strategies Advertising, Naming Rights, and Sponsorships. My name is Charity Coleman. I am with the U.S. Department of Transportation and I will be facilitating today's webinar and helping address any technical problems that you may address any technical problems that you may have. As you can see on the screen, we have a great set of presenters for you today and they will share their experiences and expertise on the topic of Advertising, Naming Rights, and Sponsorships. We will introduce you to them in more detail before each of them make their presentation. In the top left corner of the screen, you will find the audio call-in information. In the lower left corner is a chat box that you can use to submit questions to our presenters during the webinar. You can also ask questions by pressing *1 on your telephone. You will receive more instructions about this later. If you have any technical difficulties, please use the chat pod door window to send a private message to me and you can start a private conversation with me by clicking on the button in the upper right corner of the chat pod and selecting, start chat with host. Our webinar will run until 3:00 p.m. Eastern time. We will field questions at the end of each presentation and we will also have time at the end of the webinar for additional Q&A. The speakers’ presentation slides will be available for download at the end of the webinar. The slides and a recording of today's event will also be posted to the FHWA website. If you are interested in applying for professional development hours or credits or your participation in today's webinar, we will provide you with information at the end of the webinar on how to obtain confirmation on your participation. Before we begin, we have a couple of poll questions for you. If you can take a moment you can take a moment or two to respond to each poll question, that would be great. The first question is, what type of organization do you represent. You have several options. U.S. D.O.T., state D.O.T., local government, transit agency, economic development, Chamber of Commerce, or other. The second question is what is your current level of knowledge and experience. The second question is what is your current level of knowledge and experience with advertising, sponsorships, and naming rights? Very knowledgeable, somewhat knowledgeable, have heard of them but do not know very much, or no prior knowledge. I will give you a moment or two to respond to those questions. We really appreciate you taking time to respond to those questions. This will definitely help us understand your affiliation and also your level of knowledge about advertising sponsorships and naming rights. So, thank you for responding. Right now I would like to introduce you to our moderator for today's would like to introduce you to our moderator for today's virtual peer exchange, Mister Sasha Page. Sasha is a principal at IMG Rebel, I financial advisory firm based in Washington, D.C. He has over two decades of experience advising on infrastructure, finance, project development, public/private partnerships. He has focused on how value capture tools can fund new and existing infrastructure with the FHWA EDC-5 program and in Washington, D.C. He has over two decades of experience advising on infrastructure, finance, project development, public/private partnerships. He has focused on how value capture tools can fund new and existing infrastructure with the FHWA EDC-5 program and public agencies in Boston, Chicago, Dallas, and Raleigh/Durham.
Before I introduce our first presenter, what is your reaction to the poll results? First of all it is great to see so many people participating. It looks like we have a majority of folks or the largest group from state D.O.T., but also U.S. D.O.T., local governments and other transit and Raleigh/Durham. Before you introduce our first presenter, what is your reaction to the poll results? First of all it is great to see so many people participating. It looks like we have a majority of folks or the largest group from state D.O.T., but also U.S. D.O.T., local governments and other transit agencies. It looks like many people are somewhat knowledgeable, and maybe heard about this topic, but probably most people are not very knowledgeable. Hopefully we can meet those educational needs.
I will go ahead and introduce the first speaker. His name is Kirk Fauver, a 32-year veteran of the Federal Highway Administration and currently serves as a planning and research engineer with oversight of the SPR part two program and Texas local assistance program. He has held better areas various assignments and also served as a member of the office of environment and planning in the air-quality policy team in Washington, D.C. Kirk, I am looking forward to hearing your thoughts.
Thank you, can you hear me okay?
Yes we can .
Okay, good morning to those of you on the West Coast. Good afternoon to those of you on the East Coast. Today I would like to give a short presentation on value capture. Next slide .
What is every day counts? Every day counts have been around for roughly 10 years. It is a state-based model to rapidly deploy proven but underutilized innovations. They shorten project delivery process. Enhanced roadway safety. Reduced congestion. And improved environmental sustainability. This is the fifth round and value capture is part of the fifth round. There are 10 innovations in EDC-5 and value capture is capitalizing on the value created by transportation. There is a diagram to show you how it works. The value results in developments or economic activity, which improves value of the property surrounding that area and that is value capture. The property taxes are a small amount sent into the value capture and is then turned around into improvements and the cycle continues.
Capacity, conditions, and safety across the United States is a situation where we are wasting $160 billion in wasted time and fuel. One out of every five miles of highway pavement is in poor condition. $836 billion backlog of highway and bridge capital needs. Since 2018, we have had 36,560 highway fatalities. Including 6283 pedestrian deaths. FHWA estimates that every dollar spent on road, highway, and bridge improvements results in lower vehicle costs, reduced delays, reduced fuel consumption, improved safety, lower road and bridge maintenance cost, and reduced emissions as a result of the improved traffic flow. The Highway trust fund is currently unsustainable and that is why we need value capture. The federal highway program focuses on highway construction and planning, but does not support operations or routine maintenance. The federal share of project costs is generally 80%, but 90% for interstate projects. In general, projects are limited to systems that include roughly 25% of all public road mileage. The Congressional Budget Office projects that from 2021 two 2026, the gap will continue to grow, spending an average of $19 billion annually. According to a five-year projection by the CBO, the five-year reauthorization in FY 21 shows a projected gap of roughly $94 billion. The six-year reauthorization faces a gap of almost $116 billion.
What is value capture? Value capture refers to a toolbox of strategies used by public agencies, including cities and counties, to share a portion of increased property value, resulting in public infrastructure investments. As shown earlier, the government invests in transportation services, which thereby increases property values. The property values increase in value and a fraction is paid in taxes. Property value return fees are paid back to the government for reinvestment in future transportation investment opportunities.
The importance of value capture. It provides alternatives to supplement traditional sources. Helps fund 3.2 million miles of non-federal-aid public improvements. It achieves value capture of transportation benefits. The beneficiaries of transportation infrastructure contribute to its cost. Local sharing, match sharing and state and federal grants. Access to low interest rate loan programs. Section 129 loans. State infrastructure banks. Private activity bonds. It attracts private capital and enhances and speeds up project delivery. So a greater need for other alternate local funding sources in value capture.
This is a summary of value capture techniques across the board. In our toolbox, advertising and naming rights as shown on the far right. It is the sale of advertising space or naming rights on a transportation facility. Note, commercial uses within the interstate highway system right-of-way, including rest areas, is prohibited by law. However, they may be allowed for toll facilities and transit stations.
Advertising and naming rights include financial transactions in the form of advertising, where a corporation or other institute purchases the naming right for defined period of time. Advertising refers to revenue derived from inside and outside transit stations, bus stops and railroad and roadway billboards. In Texas, the advertising and naming rights -- advertising for example in Austin Metro is one example. The naming rights, Southern Methodist University paid $463,000 for a 10-year naming rights. However, it is not used for road or highway infrastructure in the state of Texas.
Improvements that create value include roads and bridges, transit improvements and expansion, complete Street improvements, bicycle and pedestrian connections, and street trees and landscaping .
Value capture is a set of funding tools that can help address funding gaps. Part of the mix of funding sources for transportation improvement solutions. Techniques used to accelerate project delivery, enhance safety, and save time and money when done properly. So, U.S. D.O.T. and the Federal Highway Administration supports value capture.
As shown on the screen, the Federal Highway Administration has a policy order on sponsorships. It is order 5160.1 A, issued April 2014. The money must be used only for highway purposes. For non-federal-aid facilities, the sponsorship money must be used in accordance with applicable state law. Eligible sponsoring organizations must comply with federal and state laws prohibiting discrimination. It includes limits on the operations or maintenance of physical elements during the contractual term and removal after the agreement expires. The agreements will include termination clauses based on safety concerns, interference with the free and safe flow of traffic, or a determination that the sponsorship agreement or acknowledgment is not in the state or public interest.
This concludes my presentation to provide you a brief overview of value capture and naming rights and advertising. I think we have a few minutes for questions and answers before we move on to the next speaker.
Thank you, if you would like to ask questions
Yes, thank you, Kirk. Please go ahead, operator.
Thank you, if you would like to ask a question on today's call, please press *1 on your telephone keypad to ask a question over this call. We will pause for just a moment .
Also, if there are any questions in the chat pod, please let us know. Any questions?
We have no questions at this time over the phone.
Okay, great. I am going to introduce the next speaker then. Mark Zabaneh. He is an experienced leader with more than 32 years in professional engineering experience. He is currently the Executive Director for the Transbay Joint Powers Authority. Which is responsible for the implementation of the Transbay transit center program. A very interesting example of value capture, in several ways. Obviously, we're talking about advertising, naming rights and sponsorships in this session, but I believe and I hope you will, Mark, say a couple words about Value Capture being used to help realize this project through other Value Capture mechanisms. Mark please go ahead.
Thank you, Sasha. Can you hear me clearly?
Yes, we can.
Okay, thank you. Good morning. If you are on the West Coast. Good afternoon on the East Coast. This is Mark Zabaneh, executive director of the Transbay Joint Powers Authority. I would like to thank the United States Department of Transportation, as well as the program Center of Innovative Finance Support for providing the Transbay Joint Powers Authority and myself an opportunity to present you the program and the value capture success from the program.
The Transbay Joint Powers Authority (TJPA) was created in 2001 for the purpose of driving, designing, construction and operating the transit center. The TJPA is composed of members from the city and County of San Francisco. And the transit district, which provides bus service across the county. California high-speed rail. California Department of Transportation. And the operator of the commuter rail along the peninsula. It also includes Santa Clara Valley County. The transit program is composed of three interconnected elements. First is the construction of the transit center, which was completed in 2018 and is currently in operation. A $2 billion program. It is a state-of-the-art facility and a transportation hub for the Bay Area region. It also serves as a connection for high-speed rail in California. Replaces the old terminal that was built in 1939. It became inefficient after the 1989 earthquake. The second element of the program is to bring Caltran and future high-speed rail from the current station, which is about a mile and a half from the downtown area in San Francisco, to downtown San Francisco. It is currently in the development phase and we hope to be able to capture the funding in the near future. The third element is the transformation of the neighborhoods through value capture. From underutilized neighborhoods to development with new homes, office buildings, and office space. And more poorly, open space .
This is a photo of before we started construction. I would like to spend a couple of minutes on the history to give you some context and how the program was developed. As we mentioned, the transit center or transit terminal was built in 1939. [ Indiscernible ] it is financed and operated as part of the Bay Bridge program and was paid for with bay bridge tolls. When it was opened, the total was $.50 per automobile, which is approximately $10 in today's money. At that time, trucks and trains used the lower bridge and other vehicles operated in both directions on the upper deck of the Bay Bridge. After the war ended the terminal use began four trains in a steady decline, as automobiles became more permanent. In 1958 the lower deck of the Bay Bridge was converted to automobile use and trains were no longer using the Bay Bridge. So there was no train connection between the East Bay and San Francisco. Now, 80 years later, the transit program is poised to reconnect the region and the transit system with the completion of the transit center and with the downtown extension and future high-speed rail in San Francisco .
This is what the area looks like right now. [ Indiscernible ] as you will see in the upcoming slides, this was done largely by value capture. The neighborhood was transformed from low-rise warehouses to a bustling neighborhood that houses new offices, new businesses, and open space. As a result of the construction, we have 15 buildings. Three are hotel and office combination. One office building. [ Indiscernible ]
The most notable features of the transit center is the rooftop park. The 5.5-acre open space Park more than doubled the available open space in the transit center district. It has an amphitheater that can hold 800 people. A rooftop restaurant. Space for a future Cafe and plenty of room for programming that can generate revenue and attract traffic to the ground level retail, so we can capture that value to offset our needs for operations. Also, you see the bridge on the right-hand side. That is a direct connection to the Bay Bridge. For buses that come from the East Bay .
The transit center is basically a five-story structure. I talked about the park. Beneath the park is what we call the bus deck. Below the park itself. It holds 37 bays and connects San Francisco to the East Bay. So buses don't have to navigate through the streets coming off the Bay Bridge and come into the transit center. We have the ground level, which has a retail area. I will show you in the following slides. Belowground we have rail levels that will service Caltrans and future California High Speed Rail after phase 2 is completed [ Indiscernible ] and that will be utilized in the next phase of the program. You will see there is the lower concourse level and the level below it will be the train platform .
A major element, the third element is the transformation of the neighborhood. So, as a result of the transit center construction, we were able to provide plenty of housing. Plenty of space for businesses, for offices. Open space. And also, a big part of it was the land transfer that took place that I would like to talk about. That is on the first bullet. After the 1989 earthquake, the city of San Francisco had asked the California Department of Transportation to give the old terminal to San Francisco, along with the infrastructure connecting the terminal to the Bay Bridge. So that we could rebuild [ Indiscernible ] and we were able to utilize the initial license and sell them to the private sector to generate money through land sales. As well as value capture through other tax mechanisms. The two essential elements that allowed us to do that was the Transbay redevelopment plan .
Let me give a little bit more on the second phase of the program. You see the station. On the right-hand side. And the salesforce transit center on the left-hand side. The project was basically an extension of 1.3 miles underground from the Caltrain station to the salesforce transit center, to the box I showed you. The estimate was [ Indiscernible ] in the early development phases for the design. The 1.3-mile underground rail extension, the cost is indicative of the risk associated with building and a highly congested area such as San Francisco. Of the $4 billion cost estimate, approximately $1 billion [ Indiscernible ] as part of our risk management plan .
Moving onto operations. The salesforce transit center houses eight bus lines currently. Once Caltrain has the rail come in, we will have other districts being served. We serve Contra Costa County through transit. We have Amtrak. We have Greyhound. And we have the local transit for San Francisco. We also have a connection for Bart, so the addition of the connection will be an extension of the Caltrain commuter rail and high-speed rail. [ Indiscernible ] current ridership right now [ Indiscernible ] I must emphasize this is pre-COVID. We estimate that once Caltrain high-speed rail comes to the transit center and the ridership it creates is approximately 100,000 per day. Currently the partnership is expected to increase by 20% once the program under design currently is completed in the next couple of years. We also expect ridership to increase once they are extended into the Southwest territory. Again, of course, I am ignoring COVID for the time being .
This is a plan view of the salesforce transit center. It talks about the park and beneath the park is the bus deck that is connected to the Bay Bridge. Then you see the ground level. And the interior level. The orange areas are areas for retail spaces, like I mentioned. We have approximately 100,000 square feet of retail. The park was designed with activities in mind. This is done to provide robust service to the community and the region and also to value capture operations and reduce reliance on public assistance. Before COVID, we have yoga classes. [ Indiscernible ] we were also showing movies at the amphitheater .
Retail wise, we are currently 80% used. We have 40% opened before COVID. We are renegotiating -- [ Indiscernible ] with a projected yearly annual revenue of approximately $5.4 million .
So we were projected to be above [ Indiscernible ]
Moving on to value capture itself. I mentioned the Transbay development area that was done in 2004. The purpose was to allow us to be 25% affordable. Also, it allows us to create the open space. And it allows us to use tax increments as a mechanism to fund the program. [ Indiscernible ] and it was sold to private developers. We used that value to finance the program. But also, the tax increment and the land also goes to finance the program. So, the Transbay development area plan gives the ability to use the tax increments to capture that value. And the tax increment, as you know, the state is not paying property taxes when they had the freeways. [ Indiscernible ] now that it was transferred to private developers, -- [ Indiscernible ]
The second instrument that was used for the value capture was the transit center district plan. That allowed developers [ Indiscernible ] they have to put it in the facility district plan, depending on how much square footage. That also went into the development of the program and financing the program .
This is a plan showing the various parcels. Shown in green is the parcel we were able to capture when the state transferred the old terminal and the infrastructure connecting the Bay bridge to the old terminal. As you see, we used some to build the transit center and the rest was sold to developers .
The success of the Transbay programs is dependent on the innovative financing and the value capture. That is what really made the program a success. You will see here, from the land sales, the portion we sold to developers, we generated about $700 million. $669 million is already in the bank and has been generated and we have one more parcel that we estimate to generate between $45 million and $60 million. The second element of the funding was the tax increment. As I mentioned, that is the increase in property tax as a result of selling the land to developers. We expect to generate $1.2 billion in net property tax increment. We use the tax increment also to finance the loan. It was recently paid off. Again, we use that for the program. The community facilities district (Mello-Roos) is the money generated as a result of developers taking advantage of the higher heights that they can build. That is expected to generate between $537 million and $816 million. Then we talked about the naming rights. We have a 25 year $110 million naming rights agreement with salesforce.com. We asked that the first three years be a lump sum and then the full payments will happen years later. And then we have also a community benefit district, this is like a homeowner’s association. They collect fees from the businesses and residents to provide services over and above what they provide. 80% of the park costs goes towards the maintenance of the park .
This is a breakdown of funding for the transit program. You can see 14 funding sources. Many are state and local funds, we have $400 million ARRA funding in the program .
In terms of operations, operations are budgeted between $28 million and $30 million. The park is a big part at $3 million per year. Retail is expected to generate between $5 million-$6 million, as I mentioned, 80% of the retail is least. Projected revenue right now is $5.4 million. We have a platform for advertising and sponsorships. We expect to capture between $4 million and $5 million for operations from that. And we have regional funds. Transit agencies also pay for the delta between operations costs and revenues. And we talked about the community benefit district as well .
Job creation was a big part of the program. We generated approximately 24,000 jobs in the U.S. In 47 states. And 5.7 million craft hours .
We did track where the jobs were created. We created jobs in every state except Hawaii, Vermont, and Alaska .
This concludes my presentation. Thank you very much.
Thank you very much, Mark. Appreciate that. A very interesting project. I want to apologize for some of the audio issues that people have mentioned. As I put in the chat pod, the presentation will be available afterward. The presentation will be available at the end of the peer exchange and you can look at some of the dialogue through the closed captioning. I would like to address a couple of questions that have come up from Sky Tallman. I will read his question. The question is, what is the ownership structure for the housing retail projects built as part of the project? Was the land sold to developers or is it held in trust?
Mark? Think you for the question.
The land was sold to developers and developers worked with the planning department to build their developments. Abide by the required development of below-market housing and so forth. The program made sure that all the parcels in the district as a whole, we have to generate 35% of that for affordable housing. So, working with the planning department, some parcels were sold with less than 35% requirement for affordable housing. Others were sold with much higher. Some parcels were set aside by the planning department and other agencies to build on their own to provide 100% affordable housing .
Okay, so this is property that was sold to private developers, right? With that requirement .
Yes .
Okay .
They have to abide by the --
Thank you. So again, you can press *1 if you want to ask a question or put a question in the chat pod. I will ask one or two more questions and then moved to the next presenter .
Was there an issue with the contracts providers or the facility might have or any other interesting advertising agreements the public agents may have, in comparison with the salesforce naming rights?
We had the existing advertising policy. That was developed. So, when we drafted the agreement it was within the parameters of our existing advertising policy. So, in general, when you enter into sponsorship or advertising contracts, there is communication on who can advertise. If you look at like a sports stadium, there are limits on who can advertise. Because the naming rights sponsor does not want any competition. In our case, we made sure that does not exist. Anybody can advertise per our advertising policy, whether they are part of Salesforce or not. So we made sure that that restriction is not there, because that would deplete the capacity for advertising .
Okay. Okay, thanks. One more question. What happens at the end of the 20-year agreement with the name of the center?
We would go out with another proposal for a naming rights agreement where we could negotiate an extension of the agreement with salesforce.com .
Okay, so than the name would change like any other stadium or other facility .
So, or the board may choose not to exercise the naming rights for the center.
Okay. Thank you, Mark. I think we want to move on, given our time. We may, of course, come back if there are more questions for Mark. Please put them in the pod or ask them at the end. I will turn now to Sam McClain. Sam is the vice president of sponsorship for Travelers Marketing LLC. He currently manages safety service control sponsorships in 22 states and the rest area safe phone zone sponsorships in seven states, while leading consulting efforts for sponsorship opportunities. Prior to joining Travelers Marketing, Sam was the zone marketing manager for State Farm, where he launched the first State Farm sponsorship of an SST in 2004. So, we're moving a bit from transits and buses, to roads. Sam.
Thank you, Sasha, for that well-written introduction. I definitely want to thank FHWA for addressing this topic today and for including Travelers Marketing. As Sasha said, my name is Sam McClain. Feel free to jot down my phone number or email if you have questions after this. I would be happy to work with you. That is a current photo of me. That is how I am dressed today for this important webinar. You can't see it in this photo, but I am wearing pants. I am going to assume that all of you are, as well. As you mentioned, my career has been entirely in marketing. I have worked with some nationally known brands and a small startup. An ad agency, as well. For the past 12 years I have been in this field that we are talking about today, transportation based marketing and sponsorship. So, to briefly give you an overview of Travelers Marketing, I will start with a story really in 1998. A gentleman who owned a newspaper, a newspaper publisher in Boston. Driving to and from work, back then you actually got a ticket or a receipt every time you went through the transponders. He noticed there was nothing on the back. So, having a newspaper full of advertisers, he approached mass highway with the idea to put advertising on the back of those slips. Figuring that McDonald's would love to put coupons on those things. That is really how Travelers Marketing was born. From that start, 22 years later, two things have really been consistent in our success. One is it is turnkey. We develop the assay with the story we created and then we procure the sponsors for advertisers. That is why we work on a revenue share model. Unlike a consultant where we come in and charge a fee and say here are the assets, here is what they are worth, and someone else has to go generate that. We only get paid when we procure a sponsor. So, like here in Pennsylvania, where I am today, we only get paid when we get money for you. So, it is a model built along those lines .
Here is a quick look at some of the programs we have running. I am going to touch on these. The first two today, the safety service patrol and the rest area sponsorship. The third one is a sponsored high web and Josh will cover that today, so I will leave that one. And 511 sponsorships. The other things you see on here, O'Hare oasis represents the service plaza. Most of the advertising we do there, you can see ads on the front doors and we also have banners and kiosks and things inside the service plazas and rest areas. The next one over is basically a billboard. It cannot face the interstate, but we have been able to find a few locations in other cities and counties in locations that may generate revenue. Using existing building space. So, off the highway. The last one is a bit unique from things I showed you. Our model is we take an asset that the state or Port Authority owns and generate revenue from that. The last one is called the parents supervised driving program. In this one, we actually created the app, got sponsors and got an independent safety Association to help us draft a guide for parents who are teaching their teens how to drive for the first time. So, we created that, separately, then we give it to DMVs, primarily. It is all paid for through sponsorships. So, when they get their permit, and also in the standings, there is an app that will track their driving and such. A little different twist on what we normally do, but I wanted to give you some idea of Travelers Marketing and how we operate .
So, what I want to share today is basically transportation sponsorships overall. We will start with a look at the entities involved. These are three that have a say in this business. FHWA, of course. It is the governing authority that makes the rules for what can and cannot be done on the highways. But perhaps there is a city or county asset manager. There might also be other guidelines that you have to follow, as well. Transportation agency, I think most of you are represented in that category. Basically, the asset owner or provider of the asset. Transportation agencies provide all the value, provide all the valve eyeballs on the highway. That is where the value comes from. There is a lot of dollars and effort that go in, listening on this call, to keep us all safe on the highway. Then billboard companies and the like come along and basically take the revenue from that and don't share any with the D.O.T. Other than tax revenue. So, it is really where our company was born, to change that and get some of that revenue back to transportation agencies. The third sector here, of course, is the private sector sponsors. This is where the revenue is generated from. We are really turning, I would say, traditional P threes on their head a bit, because instead of the public sector paying the private sector to perform a service, this is the private sector paying the public sector to do basically what you are charged to do. So, that is what the model is and the authorities over that .
Let's start with FHWA and look a bit at what their priorities and objectives are. It is inside the circle. So, as we heard at the outset of today's webinar, innovative funding. We are all in need, maybe more so this year than ever. With travel, down and text down and such. So FHWA is in support of finding innovative funding solutions. That is why they're holding this call. But the overarching priority is always safety first. That makes good sense, but that equates to basically no clutter on the highways. No distractions or slogans from advertisers or sponsors. They can't put their characters or anything really but their verified company logo. No product information. No phone numbers and no URLs. This keeps safety is a clear priority, as you might imagine. It limits the potential revenue, as well as the potential sponsors .
As a transportation agency, I think safety first is obviously also the priority there, as well as finding things that are FHWA compliant. Transportation agencies also have to have significant revenue. With my feelings around the country, it is not worth the effort if we are not talking hundreds of thousands of dollars for a program. And then the prominence of the agency. They don't want to lose their own identity. So, generating revenue or giving the sponsor too much recognition for things can also create an issue for an agency that feels like they are doing all the work and losing their identity. And then their credibility. So, we have to prepare for who the sponsors are, what types of organizations are involved. Agencies that will be identified, somewhat, with that sponsor. So, they don't want any negative press. Transportation agencies are also not able to be seen as giving an endorsement for promoting the brand. You definitely don't want oversaturation or a NASCAR look. And no negative press. That goes back to the agency credibility piece .
Looking at the private sector, this is really where I hail from. Marketing value. They can use their marketing dollars, in thousands of ways today. When we approach them with an idea for a transportation sponsorship, it has to be a better value than what they could get by putting billboards on the same highways, for example. That is what they will compare it to. There are other ways to achieve value for them. The uniqueness of it. The exposure that they get. The association with the state or with the asset being sponsored. And brands, more and more today are looking for engagement with anything online. With social media, you can address right back. That makes conversation with consumers and they have come to value that. That is obviously challenging to do when the consumer is driving. So we are always looking for ways to add engagement or activation, we call it, to any of our sponsorship assets. Measurable return on investment. Again, anything online canal pretty much track click send viewers and how long someone stays on that ad. Obviously, that is a challenge, as well, to do on the highway. Brands do like the fact that we offer exclusivity. To be seen as naming an asset. We stayed away from the NASCAR approach. A lot of agencies might think, gee, if one sponsor is good, five would be better. But we have not found that to be the case. More is not better in this instance. If they are sharing an asset with four or five others, then you have the issue of competition. So, we found that exclusivity is worth more to the agency and to the brand. And the last thing I think the private sector is primarily looking for is they do like the Association with the cause. Being associated with the state is good, but specifically what that asset is doing and how it is helping their consumers. Either avoid traffic, avoid accidents, get to work faster, things like that. So, I guess my message to agencies as you are developing your assets, offer more than just an unknown opportunity where you can. Give the brands a chance to engage. Brands don't want the unknowns. Unfortunately, our business sometimes offers that. We don't know if it will go up. They don't like variable expenses. So, charging them for vehicle wrecks and they have to redo the logo, that has been a bit of a challenge. Long-term commitments, basically putting signs up on a highway. We don't do that for a month or two, we are looking at two years or more. These are some of the things the private sector is trying to talk us out of, if you will, before they get involved in transportation sponsorship .
So, the guidance, when all three of these parties align, a successful transportation program is formed. The three circles are supposed to come together there to form the sweet spot, but no matter, I have it here .
I will give some examples of programs that do hit the sweet spot. FHWA approved, but also the brand can have some engagement. That usually means off the highway we have to have other assets. The state wants significant revenue, the brand wants marketing value. The agency doesn't want to lose their prominence in the brand wants to have enough recognition that they will get some return on all this. The one place everybody alliances around safety. So, we find brands that are interested in promoting highway safety and that is obviously what everybody on this call is interested in, as well .
Let's get into some of the specific examples. Some of the models we have had success with. The most successful has been the safety service patrol sponsorship. You can see the numbers we have there. Basically, the elements of the sponsorship, obviously, logos on the vehicles themselves. Adding highway signs. In Jersey, we have 100 signs. You see on the back of the vest, you see a logo. Also on the hats they are holding there is a small logo. We do provide handouts describing the patrol services offered, the coverage area. Things like the move over law. It is really designed as a safety feature to keep the motorist in their car. Read this handout while we fix your tire or battery. It is safer for everyone involved. Then we generate comments from others electronically, through a website that is sponsor-based. In that way, everybody gets real-time information and it gives motorists an opportunity to share this great experience on social media. The signs, I think, really help the motorists. These are acknowledgment signs. Basically, it can really help the motorist as well to know they are on a covered patrol area. They shouldn't get out of their car and walk if they have a problem. They should know that that means the safety service patrol is patrolling that area and is going to find them and come help them. It adds a lot of value to a sponsorship, as well. You see the fees there. It is all based on impressions. Not at all based on operating costs. I get that a lot from states. It will cost us 1 million to put the patrol out there. Sponsorship is not based on that. It is based on how many people will see that sponsorship. The number of trucks. The acknowledgment signs. The number of assists. Things like that is what generates the value from a marketing standpoint. Again, we are competing with billboards and other sponsorships, as well. Brands could be sponsoring a stadium or something on this route. We have to compete with those sorts of values .
Another program that we have had success with, back in 2010, actually. Since states were forced to close their rest areas, they came to us, asking us to generate some needed revenue to help keep rest areas open to cover maintenance and operations costs. Quite frankly, we had zero interest when we were offered just naming rights of arrest area or even sponsorship of a rest area. It didn't seem to connect. There was no really cause or safety association with a rest area. We all know it is safer to stop, et cetera, but this didn't register with brands. Rest areas didn't all have good reputations or were clean, so we met some challenges there. We had a breakthrough, I guess, of sorts, when states started saying that rest areas are also good opportunities to safely use your phones. You can see on this slide, say phone zone. The tagline or slogan that the state adopted. At that point we got interest from telecoms. GEICO, Verizon, et cetera. Those highway signs can only be one per direction per rest area. Then, as I talked about earlier, for more engagement and interaction, we are adding posters on site. Anything we can do to give that brand a chance to tell their story, more than just a logo. And of course, media events to announce the sponsorship and how it is helping the state and helping the motorists. That sponsorship, sometimes it is worth the cost of a year sponsorship for sponsors. They get value out of the media coverage and it doesn't cost the agency anything for that. So, it is just another way to add value and activation. To your asset .
The last one I am going to cover here is the 511 sponsorship. Some of you may have heard of when the 511 sponsorship first came around. There were companies offering to pay for the service, just through sponsorship. It didn't really work that way. As I said earlier, it is all based on the value the marketer will see. So, we are having success in two states with 511 sponsorship, basically by adding that panel you see below existing 511 signs and offering at to local businesses. So, it is not a nationally known brand. Maybe buying an asset for the entire state. The 511 model works in the opposite way. Over 500 brands on the signs and they are generally the sign that is closest to their business that they are interested in sponsoring. Two states are generating somewhere between $300,000 and $400,000 per year. Not enough to cover the cost of their program, 511, but it certainly goes a long way to help keep the 511 program up and running .
So those are the programs that I intended to cover today. I am briefly going to cover some things we hear from some devotees and toll roads we work with about why can't we get revenue from this or that. We will go through them quickly, but if anyone wants to talk about them further I am glad to do that. Highway naming sponsorships and bridge sponsorships. There are approved naming rights, but only for known celebrities or Ronald Reagan or things of that nature, so it doesn't generate revenue. It is more of an honorary thing. Waystation sponsorship is approved, but only for on-site advertising. So, only trucks that actually go into the waystation will see that sponsor message, so it is not significant revenue. A great chance for the brand to engage with truckers. Not necessarily with the waystation, but just keeping truckers safe. Scenic Highway is an ironic one. It is something we could do sponsorship on, but it is a scenic highway. You don't want to put signs up along the scenic highway, changes the point. So, the revenue is small, but it is certainly a good cause. There would be some interest from brands in supporting, when they're dealing with travelers, like RV companies and things like that. Naming of a traffic operations center is something that could happen. Unfortunately, like naming a stadium, nobody really talks about them much. So, that sponsorship is not going to get a lot of airplay, so there is not a lot of revenue or brand engagement there. Traffic camera feed, a couple of agencies have said we have all these cameras, how do we generate revenue? We have a lot of news programs using the D.O.T. traffic feeds. There is definite value and significant revenue. The FHWA hasn't really weighed on that, because it is not on the highway. Not a lot of brand engagement. The problem we have run into is that television stations don't want to receive that footage with the brand already in it, because they are trying to sell sponsorships on that same signal. This traffic report brought to you by -- so we ran into a hurdle there. If you are a.gov you cannot have advertising on your website. If you are not, then it is possible. Then, DMS and AES signage sponsorship. Those are going up more and more everyday all over the highway. There is definitely some significant revenue. Brands would love it, but FHWA has not allowed any advertising on those .
So, that is my recap. My presentation. I will be glad, as I said, to talk to any of you if you have questions now or afterwards if you want to reach out to me about your particular asset. We can talk about that. I have not been able to read the questions, so if someone has asked the question, I would be glad to address that. Sasha.
Sure. Sam, thank you very much. Very interesting. We have one question so far from Jill. She asks, how do these sponsorship ads fit under the highway beautification act? I think that should be in the context of Joi Singh's message, but I think it is relevant to all speakers .
Was that Joe Biden that asked for clarification? I don't think so .
Everything I showed you is FHWA approved. The highway beautification act they think goes more towards billboards and other things. Certainly, I would think it plays into what FHWA approves or not. There may be others on this call that want to speak more on the beautification act.
I am one of the co-leads on the value capture innovation on the agency side. I am far from an expert in highway beautification, but I will say generally it is in part to raise revenue for highway improvements and other things. However, federal statutes and regulations [Indiscernible - low volume] provide that they must promote safety and efficient highways. And advertising in the right-of-way just creates a distraction. For safety and operations and it is generally prohibited. You know, it is very context specific. If there is the ability to advertise within federal right-of-way. I would say that if you had a specific question you could reach out to one of our experts [Indiscernible - low volume] might be able to help you out. I will put their names and email in the chat box and you will have them. But Joi is absolutely correct. The highway beautification act is a significant piece that affects the ability to advertise in highway right-of-way .
Thank you. Great, any other questions, please put them in the chat. I will ask one more question of Sam and then we have to move on. I think it is very interesting that you point out, if I understand correctly, that for the general corporate sponsorships, they tend to be nationally known companies. GEICO and State Farm. But for the 511, you are able to leverage local companies. I think that is an interesting contrast. The naming rights, my impression is that is really local companies, like salesforce, in that city or region. Is that a fair way to characterize this or are there exceptions to that?
I would think Salesforce is doing that for national attention, as well. Or statewide attention. I will let Mark speak more on that, but they are choosing to do that in that location. Generally, I guess the point on many of the models that I have shown, they are interested in taking the asset for the whole state. They're not looking geographically. They sell their products to most anybody in the state, generally. So, they like the fact they can own it and be known for it. 511 is a little different. That is almost all about proximity. Where is the sign in relation to my business? So, it is a little bit different aspect. The larger and first programs I covered, the brands want to be associated directly with that service. Safety service patrols, rest areas. 511, it seems they want to remind people we are just up ahead. There is a Starbucks, a Wendy's. A reminder. I think that is how they are using it. Oftentimes small businesses taking advantage. It is affordable to them. That is the only way a small business can afford to be right on the highway. All of what I have shown you are right on the shoulder. Billboards are hundreds of yards away. The signs can be right there. So for a small business, $1800 a year, they can have their logo a mile or half a mile from the business that has pretty good value opportunity.
Great, thank you. Thank you. Okay, we may get some more questions and we can ask them after the last presenter. I am going to move now to Joshua Gensicke. He will be talking about a related topic. Adopt a highway. Joshua worked in the public sponsorship arena with Adopt a Highway Maintenance Corporation. For over 20 years. He has consulted on numerous sponsorship projects, developed and implemented most existing sponsored highway programs that are currently in place. He was recently awarded a patent for a new beach trash barrel he designed to address litter issues on public beaches. Not the same thing as highways, but related infrastructure improvement. Thank you for that patent, hopefully that is effective. Joshua, please start.
Thank you, thank you very much for allowing me to participate in this presentation. And I think everybody for attendance. I work for a company, Adopt a Highway Maintenance Corporation. We founded the concept of the sponsor a highway program. We like to think of ourselves as one of the early, small P3 programs. Sam was talking about the desire for advertisers to participate within the public arena. We kind of approached this from a different angle, which was about the environmental impact that exists on roads. Specifically, litter. We actually worked with FHWA, way back when, to help define what is advertising and what is recognition? One of our founders, as well as our president, were actually invited to many meetings to sit down and find out what that regulation looks like and it is still in place today. We are still a small business. Our headquarters is in California, but we have offices in Texas, Colorado, Pennsylvania, and New York. Throughout the country. We really focus on the aspect of creating sustainable programs. So, a lot of focus is built on thinking about how do we build a program that can provide funding for agencies over their lifetime? You know, not in a short burst of funding, but a sustainable program for that .
There are some sponsorship programs that we kind of focus on. Obviously, sponsor a highway is the most successful. We are also involved in rest area sponsorship. Usually we go at it from an angle of service providers providing services to help maintain these rest areas. We do programs like adopt a beach. This is a program where local beaches were getting funding cut, so therefore they were not given money to buy trash cans. No trash cans mean more trash, so we get involved. Okay, let's get those trash cans back out and find ways to fund that. We are involved in adopt a park. Sam was referring to safety patrol sponsorship. That's another one out there. Tolling sponsorship and event sponsorship are all aspects that exist within the arena. Mark kind of listed that they have the park on the rooftop and there are events going on there. That is a great way to bring sponsorship into that arena and generate more money as well .
Sam kind of laid out some of the details of some of the individual programs. I want to talk about my history and success with implementation of these types of programs. So, as you do this presentation, you may say to yourself, hey, I want to get a program going. I want to figure out a way to do this. I want to tell you some things that in my experience of been characteristic of successful programs. So, Sam alluded to this and I will add to it. Clearly defined rules and regulations. You really want to make sure that you really understand what you can and can't do. What you are willing to do. What are the trade-offs that you are willing to allow to happen within your program? And then be clear about what the expectations are for the sponsors. Whether that be if you are trying to do a rest area sponsorship. As Sam alluded to. We have also done rest area sponsorships. He's right, it is very limited interest when it is a single sign in front of a rest area. So, my state agency, saying, look, if we have nontravel facing services, we can put up other messaging. That allows for more value for a sponsor. Sponsors are beginning to show more interest. That aspect of the definition of regulations, my advice would be to talk to somebody who is doing sponsorship for help with that. I could be other agencies that have successful programs. That could be Sam or myself, as a way of helping understand important aspects of the definition of the program. The second thing is commitment. When you're going down this timeline, it's not enough just to have one manager interested in this program. We really need to get the agency behind the program and you will need that, because you will need to internally get buy-in from them. You will have to get buy-in from other people that might be involved in the implementation of signs or implementation of other sources of logo recognition. Agency commitment is key to that. Then realistic expectations and timeline. In Sam's presentation, he mentioned that private sector is not used to private sector delays. Not because public sector is not moving quickly, but that the public sector has multiple approvals they have to go through and multiple people that have to sign off on something. In the private sector, many of them are used to, we sign a contract today and tomorrow something is out there. So, you really want to make sure that you, internally, set the expectation of what is possible within your own infrastructure to do something and then make sure that is communicated to sponsors, so the sponsor has realistic expectation of how long that program will take to implement and design. The next one is for the setup of long-term growth and development. This is more for recognizing, most of our programs or sponsors have a two-year commitment. Part of that is how funding has been treated within the transportation sector. Funding insecurity is a common aspect of all of your budgets, so we like to build programs that are sustainable and that is not going to be an issue that comes up down the road. We want to build a program that you can get started, have it developed, provide value, services, or revenue to you, and you can just sit back and collect the benefits, as opposed to being worried whether year-over-year you will still have that funding set for you. Reasonable cost structure and value proposition. This is a really important aspect. I am sure you have all heard about the huge deals. Salesforce is a really great one. I agree with Sam. Part of that is because there is almost $1 trillion worth of money being developed in that area, bringing a lot of value to Salesforce as a participant of that. Some of the assets we deal with in the transportation sector, because of the limitation, will be extremely amended on the value aspect. So, it is important we create realistic value proposition and realistic expectations of what these revenues, funding services can provide, in line with that. Lastly, you need to build metrics. So, in agencies, metrics are key. It is key for these programs to have metrics, as well. Talking about sponsorship. You need to understand where that money is going. How is it being spent? Is it providing additional value back to the agency? If you have a transportation budget or service budget of $10 million and you are getting $10,000, you should do an evaluation of whether or not that is reasonable for you to be involved in. I think Sam laid that out as well. Where to start. When you're starting to think about these programs, we talked about some of the characteristics. You also want to know, what you have to put together first? The first one is, can you participate? Some states have internal regulations that don't allow sponsorships. The state of Oregon is one that I am aware of. There are other states that have regulations tied to emergency service responses. They are not allowed to have any type of sponsorship or naming rights for those services. So, that area is a great way to start find out what your flexibility is. Then if the decision to move forward is decided as an agency, then work with regulators to try to figure out a way to make that possible. Sometimes that might be a rule change. Sometimes that might be passing legislation to allow that to happen. Many states have gone down that path in the last 15 years, of freeing themselves up to allow that type of sponsorship program to exist. Step two, you have to evaluate your assets. Not all assets are created equal. I think Sam did a great job laying out some of the assets that are out there and some of the limitations and things tied to them. So, truck way stations is a good example of this. Lots of truckers have to stop at the waystation. The visibility for the people that is there is very niche. You will have folks involved in the trucking industry stopping at these way stations. That has value to different sponsors, right? Sam alluded to that. Companies that focus on that area. The amount of money that can generate or the amount of services that can come is limited, because the audience is limited. So, when you determine that value, you want to make sure that is a piece of the decision process of what you want to do with it. You have to decide on the level of commitment. How involved is the agency want to be? Is this a program you want to farm out? You want to bring in a contractor or consultant to do the work for you as experts? Do you want to internally participate in all aspects of it? My experience, most states prefer to either have someone be involved or farm it out to a consultant. From an involvement standpoint. The scope of the program. Sponsorship, as you can imagine, the bigger the sponsor, the more that the sponsor is going to ask. The bigger the ask for revenue or funding, the more they will ask in return. You need to define, before you go out, some of the ideas and limits you will be comfortable with before securing that sponsor. And be ready for the sponsor to ask for stuff. I've never worked with a large sponsor yet that hasn't asked for something outside the original scope, so having an understanding of what will happen when that happens and how you, as an agency, will handle that is a key aspect. Timeline of implementation is also important. A six-month project, a year project. The longer the timeline of implementation, the less interest you will have from sponsors. They want immediacy, not long-term. Most sponsors are looking at their budgets on an annual basis, so they want to be able to see some results within the same year and so timelines that are longer than a year typically have less success in my experience. And last comment defines what your metrics are. How much revenue are you looking to generate? How much service are you looking to generate? Those are also key aspects of beginning to start up a program .
There are a couple different funding approaches that are out there. One is to have a single sponsor. And a program with State Farm is a good example of this. State Farm sponsors a number of safety patrol sponsorships throughout the country. So, they spent a significant portion of revenue in exchange for that. So typically, in a single sponsor, you are going to ask for more of a commitment. Higher revenue amounts. Potentially more service amounts. They will typically ask for specific rights. The bigger the ask, the more they will ask for exclusivity. So, you will see things like, I am the only sponsor for this program if I pay X amount of dollars. Some of the concerns are a little hard to secure. Like anything, the more money you ask, the harder it is to get people. In this scenario, you are looking at a much smaller pool of potential sponsors. In the transportation area, we have seen success with insurance companies. We have seen success with cell phone companies, on occasion. Outside of those two areas, outside that, larger sponsors are limited. As you can imagine, auto insurance companies have a natural correlation to highways. State Farm has a slogan. Like a good neighbor, State Farm is there. So, participating within a safety patrol makes a lot of synergy sense in that aspect. The key to understanding your thinking about how big of a sponsorship or sponsor you can get is to remember that they are going to ask for more. They will always be pushing for more. So they will ask for more time from you. They will ask for more concessions on what they can do. And there is a little bit of potential risk, when you go down that path, with a large sponsor. Which is, a large sponsor may change their budget. So, you know, the bigger the spend, the more likely that spines could end. If the sponsor is committing to you 0.001% of the revenue, that is a lot different than if they are providing 1% or 10% or something like that. The multiple sponsorship approaches a little different. In this scenario, you are really looking for spreading that sponsorship funding source over many companies. In that scenario, because there are multiple companies providing funding, the demand from the agency is significantly less. No one sponsor has a lot of power in that scenario. Because your funding is diversified. Concerns with multiple sponsors is it can typically be slower growing. Administratively it can be more complex. You are now managing multiple sponsors, or if working with a contractor, they are managing multiple sponsors in that scenario. Beyond the single or multi, there is also hybrid. There are programs where there are large sponsors. Sponsored highway is a good example of this. We have programs where there may be one sponsor who is committed 100 miles and another who is committed to one. So, you can find a hybrid within those models, but those two models are pretty well defined in that scenario. As far as resources, one aspect is cash. Cash is king. Everyone prefers cash. The major benefit of that is flexibility. So, cash allows a lot more options on what you can spend it on and where you can spend it. One of the concerns with cash can be that it can be polled. We have seen that before with different agencies, where there is a budget crisis or something or it is redistributed from where you intended it to be and put somewhere else. There is also, potentially, some regulation within the agencies about if they can even accept cash and if they can, many times, there are regulations on how that is distributed and whatnot. So, while cash is king for everyone and gives you the most flexibility, sometimes it has a downside to it. Another way of doing sponsorship's products or services. In that scenario, you have a lot more control over where the funding was going to go. So, an example for us was the sponsored highway. So the funding is directed toward litter removal within that specific mile. So, you are really not able to pull that away necessarily with a budget issue. There are also a lot more visible sometimes to the traffic public. They see it out there. They see the area looked dirty one day and clean the next. Sometimes it is a little bit of an easier PR move to explain to the traveling public the visibility of it. Concerns with it is, you don't have that flexibility. You don't have the flexibility from one spot to another. That sometimes creates concerns, as well. I hope that this kind of gives you guys some information about what we see for good characteristics and also some of the funding aspects of it and if you have any questions, I would be happy to answer them.
Thank you very much, Josh. I really appreciate that. Also, very interesting. I am curious. You mentioned here, other types of infrastructure. Other facilities where you are active, without the beach. Is the valuation you apply there the same that you apply on sponsoring a highway and if so, what is the valuation approach?
That is a great question. I think one of the aspects that we have to think about when we're talking about sponsorship within the public arena, Sam alluded to earlier, which is impressions. How many people are going to see it. There is also a movement in the private sector about the idea of social consciousness or corporate social responsibility. Sometimes the value is not tied directly to the impressions, but also to the asset and, for lack of a better term, the popularity of the asset. Everybody loves the beach, so the valuation of a beach sponsorship is significantly higher. Not just based on the impressions, also the type of people who go to the beach. Families and whatnot. That brings additional values. When you're talking about transportation assets, for the most part you are tying it directly to eyeballs on the road. But you can also tie in some corporate social responsibility. In our programs, because the companies are funding directly, litter removal, there is an aspect sometimes were sponsors are involved truly because they want it to be clean. They care less about what goes on a sign, but they care about the area near the business, where they live, where the customers and employees live, is clean. So the valuation can range and any agency thinking about an evaluation of an asset should really take it from multiple angles, including impressions. Including the intrinsic value of what you're talking about and also tied into any social aspects, as well. I hope that answers your question.
I appreciate that. Again, I invite people to ask questions through the chat or press *1 if they have questions. I will go ahead and ask you a question, Joshua, but I think this is also directed toward Sam, as well. So where is the money going to that is raised if it goes to the state D.O.T.? Is it going to maintenance or a general budget? You alluded to that already.
Sam, do you want to go first or do you want me to go first?
I will go ahead. You've been talking. I will let you get a drink. They require with sponsored assets, the funding should go back to support that asset. So, safety patrol revenue should go back to the guy in the truck or overage hours to the program, things like that.
Yeah, I echo Sam's feedback. There are other programs that exist within the transportation arena that don't have some of the FHWA guidelines, like the transfer transit sponsorship and whatnot. But any transportation sponsorship that is funded by federal money must provide services, must be tied directly back to the services that are sponsored.
Okay, great, thank you. I am going to move to a question in the chat. I will read it. The presentation mentioned that a common type of sponsor are cell phone companies. Wondering if someone could speak to whether there's an ethics or conflict of interest issue when a transportation agency works with telecommunications companies, while those companies might also be regulated for right-of-way occupancy. I think the question is, you know, if there is another relationship with the transportation company, is that a problem if there is a sponsorship also with that company? Sam, do you have thoughts on that? And then Joshua.
Sam, you may be muted .
Sam? Or Joshua. Okay .
I am happy to jump in .
Sure.
I think if I understand the question, correctly, telecommunications involvement in this type of sponsorship is usually tied to some sort of socially responsible messaging. For example, don't text and drive, or something like that. So, I think the involvement in that respect, you don't want to disavow sponsors from participating that potentially have a positive message. If I understand the question, that is how I would respond.
Okay. That is fair. Okay. Let me turn to another one. Louise Peter. What kind of naming rights sponsorship policies do you suggest agencies adopt to ensure inappropriate companies could not be a sponsor? Let me ask Mark if he can jump on this. It may have come up with the naming rights with salesforce.com.
Thank you for the question. I think our approach was that we would develop an advertising policy and then the naming rights and the sponsorship would be based on the advertising policy that the board approved. So, you've got to be fair with everybody. And get your agency to adopt an advertising policy that would apply to both naming rights and sponsorship. If I could clarify, there is a distinction between naming rights, advertising, and sponsorship. You know, naming rights, you're naming a facility for an extended period of time and that particular agreement would have provisions in it on where the money goes, but more importantly, in our case we are required to keep the facility to a certain standard and also required to keep security to a certain standard. As part of our agreement with salesforce.com. But you can also have sponsorship. You can also have like Netflix come sponsor an event at the amphitheater. You can also have advertisements. You can have someone else advertise throughout the transit center. Basically, to generate revenue. Again, to make sure you have a level playing field, you need to start there. We started with an advertising policy that affects everybody. From there we broke up everything else. Hopefully that gives you a good response.
Yeah, thank you. Sam, do you want to jump in here? And then Joshua .
Sorry, I fell off the call totally a question or two ago, so I apologize for that. Sponsorship policy, FHWA has a good guideline for what should be included in your policy and that is a great way to solve the concern. In that policy, you can clearly state that you are not able or available to take sponsorship from these categories. It is usually categories, not specific companies or brands. That protects the state when one of those companies or brands, not that you are rejecting them, that the policy that was approved doesn't allow for that category. Alcohol is a great example. It is an obvious example that states are not really going to be promoting on their holiday highways. I can send you some examples of sponsorship policies if that is helpful. Most states, I think, are taking the existing policies out there and customizing for their state.
Thank you. Go ahead.
I would echo Mark and Sam, definitely one of the steps of starting up a successful program is to define who and what can be part of those programs. The FHWA has written some very good regulations in reference to that and I think states also have to write these regulations in the sense of what level of controversy are you willing to accept? There are some obvious products they really should not be involved and really don't serve the public interest or the states interest to get involved. We typically advise most states to work with a third-party to manage their program. As a third party, for example my company, as a private company we can add further protection to the states to prevent that from happening. We can decide who and what we want to work with.
Thank you. Let me ask a related question or maybe you already answered that. How would sponsorships, et cetera, be governed by First Amendment rights? Joshua, can you address that?
Sure, I will take a stab at it. So, you know, the Supreme Court ruled in a fit case that state run programs like volunteer adopt a highway program are allowed to require anyone who wants to participate to participate. We have seen the ramifications in the state of Georgia, after they lost an appeals court case, they close down their program in response. Going back to the idea of a third-party company, because our company can have defined rules and regulations tied to it on who and what can participate, and we are a private entity, we can have a different approach and we are not bound by the same regulations. We have had a lot of success with denying hate groups and other controversial sponsors from participating in any of our programs. That has worked very well.
Okay, thank you. Again, please send your questions in the chat pod or dial *1. Have a slightly different set of questions. I will start with Mark. Talking about private companies providing sponsorship. Providing funding. Of course, we know that the fortunes of those companies go up and down with the economy, among other things. So, how have you, salesforce.com, help with the risk issue, if you're sponsors, in this case salesforce.com, or in general, when there is a recession or when those companies, Salesforce or others, have economic challenges and how do you think about that? And I will ask the other two participants the same question.
We have an agreement that allows us to terminate the agreement. There is a clause for them. If I remember correctly, they have to pay for two or three years to terminate it, to allow us time to go out there and get a different sponsor. So, there is that part in the agreement that allows you to do that, but you also have to be mindful that we, also, as an entity, can terminate the agreement for other reasons. We have seen companies that became unpopular or did things that are not proper. I could mention in Ron. If Enron had a sponsorship, you know, and what happened, we would have an agreement to be able to terminate the agreements.
Great. Okay, good. Again, Sam, what are your thoughts? In a recession or having a downturn now, how has that affected the business you're in and how have you mitigated that?
Fortunately, most of those sponsorships are long-term sponsorship terms, at least one year or two years. Generally, we have sponsors locked in, but we understand that they have bought something they are not really getting. A lot of space on impressions. It has dropped by as much as half. We have been working with sponsors to offer extended time periods for example. If it is up in August or September, at this point we're giving them a few extra months for the impressions they have lost .
Okay. Thank you. So, another question. What would you advise a smaller transportation agency, maybe a small state D.O.T. or small regional agency, that deals with highways or one bridge. If they are thinking about engaging in naming rights or sponsorships or advertising -- maybe Sam, would you start?
I'm sorry, Sasha, you are saying a smaller asset? I'm sorry, I missed that part of that .
Yeah, a smaller agency, that maybe doesn't have the internal capabilities or has one or two assets, how should they think about approaching sponsorships? And naming rights. Obviously, generic .
Certainly, they have a specific asset, they could market for a sponsor for that asset if they wanted to put it together, with one specific thing. It would be easier for a small agency, with what you have seen here for examples. Give me a call, we can talk through how to build a package, but basically, I recommend that they put elements together, more than just saying we have the sign for you. They can do media events. Other cases, et cetera. And try to develop a value for it. They need to have, obviously, a fair procurement process. A lot of times that means an RFP. I don't know how small we are talking, but generally these assets are procured via RFP. That can go a couple of ways, if I can go down that path a little bit. Some agencies will have the individual assets and then agencies like Josh or I will respond with a sponsor in hand or the sponsor will respond directly. The other option is, seek an agency. There are agencies that will figure out what assets. A small entity may have one that they know of. There may be a couple others they are not thinking of and an agency can come in and help them develop and generate more revenue. So, I think those are the primary ways, if I were a small agency. Package up one of them, put it out myself, or seek an agency to help pull it all together. And find a sponsor.
Okay, thank you. I will ask that question of Mark and then I will turn to Louise Peter's question .
I agree with Sam. A couple things. First you need outreach through an RFP to the industry and you need to have the private sector help you put the RFP together. We can do an inventory of your infrastructure and determine which ones can be sponsored or not. Quite a bit of outreach to get ideas. Before you do that, I think some of the speakers mentioned, you need to have a champion within your agency that really has the appetite for helping you with the sponsorship program. When I started looking at naming rights, you know, we quickly realized that there is quite a bit of potential for naming rights, given the facility. At the same time, we started hearing from policymakers and the public about, you know, their point of view was, there is a public, $2.2 billion facility. And you have a private entity, in our case Salesforce, paying only $110 million over 25 years to put their name on the facility. So, there was quite a bit of discussion with policymakers to convince them that we needed the naming rights agreement to guarantee that we are able to upkeep the facility and keep them operating and meet the needs of the public. So, we need to take them into account, because we did receive some pushback from the public and policymakers .
If I could jump in, as well, on this one.
Sure.
I think there is a natural tendency for smaller agencies to think that is great for New York City and great for such and such, but we don't have that business volume and impressions and whatnot. One of the things that my company has worked on for many years is we work on building the solutions with the agency. So, if I only have limited assets, there is always an opportunity to find revenue or funding sources to support those assets. They just have to be scalable. You have to think in the context of all right, how do we evaluate that? Sometimes it is beneficial to go to folks that are doing this, so they can give you realistic numbers. Okay, for this asset in this other market that is similar in size, this is the possibility. I think the other component is, don't be afraid of this. If you are a small agency, I have seen small agencies be successful. There is a program in Wyoming, a sponsored highway program in Wyoming. There is a sponsor a highway program, I don't know if it is that small, but in Utah. There are programs that exist all over the country and it different agencies, with different geographic and business climates. So, if you're interested in that area, I would welcome a call to help you with that, but I think there is still the ability to build programs. Don't be afraid to explore this is what I would say.
Okay, great, thank you. We have time for probably two more questions. Stay there, Joshua, I want to have you look at Louise Peter's question and then Sam after that. COVID-19 has reduced the number of people on the road and therefore impressions used to value existing or potential sponsorships. Is this a good time to consider selling naming rights and sponsorships or should one wait for a better economic condition and greater impressions?
A phenomenal question. It depends. It depends on what your funding looks like and it also depends on what goes on with COVID. As you know, as all of you know, traffic is down across the board. In the evaluation model that Sam was talking about earlier, obviously, that would decrease the value of potential sponsors. If you are looking at a program that has other corporate responsibility aspects, that might help balance some of the value. If you are asking me today to start a program, I would probably say let's play out what will happen in the next few months and go from there. If you're going to do a program, you would need a few months to get things set up to prepare this to be ready to go when hopefully there is a vaccine or something, at the end of the year, hopefully.
Okay, great.
I agree.
Sorry, go ahead.
I agree 100% with what he said that it takes a while to build these programs and get interest from sponsors. Transportation sponsorship, unfortunately, is something that is sold, not bought. What I mean is there are not a lot of brands out there looking to be on these sorts of programs we have talked about. Compared to a billboard or a TV program. Here, somebody has to reach out to these brands and convince them that this is a great opportunity. That takes time. Finding the right brand at the right price on the right elements. They're going to want changes to it or customization. I would say definitely get your program together, get your elements together. Do some valuation comparison. But I have to agree that right now we have seen a significant decrease in interest from brands in the things that we are offering, because they know traffic is down. But I think everyone on this call knows it is going to come back. So, use the time now to develop programs so that when you do start out, you can make a good offer. You might even be able to use this situation to get an initial sponsor. Maybe a discount in year one. Get a two-year sponsorship, but discount year one. That is a way to get them in on a little bit of a discount or value for them and then you have locked in a sponsor for a couple of years .
That is a great point .
I can jump in .
Sure, go ahead.
I agree with Sam. It is going to take a long time. If you haven't started the process, this is a good 12 to 25-month process, just to do your planning, do your inventory. Get people on board. So, I would not let COVID slow you down. I think you can take time developing the program and I would definitely, if you have a desire to have a program, I would initiate it right now and start moving forward with it, because it will take a long time by the time you get a sponsor on board.
Okay, thank you. I think we are coming close to the end of our session. I will turn it over to charity in one second. I do want to point out previously that John wrote in the chat pod, regarding Highway sponsor programs. It is important that the sponsor require that states have an established, published, sponsorship program that is evenhanded. I think that is important for all these programs. I will turn it over to Charity Coleman.
Thank you, Sasha. A great presentation. It was a good exchange of questions and answers at the end. I just wanted to remind everyone about our upcoming webinar. We have to that will be taking place. We have one that is on September 24 and that will be 1:00 to 3:00 p.m. Eastern. The topic will be value capture strategies, tax incremental finance districts and transportation reinvestment zones. Before we wrap up today, we were hoping you could complete the evaluation form. The evaluation form is on your screen and you can submit your responses to each question and hit the submit button to move forward to the next question. Again, that helps us evaluate our webinar. You will also see that today's presentation slides are available for download. Also, available for download is the value capture implementation manual. A resource published by FHWA last year, so it covers special assessments, as well as a wide range of other value capture techniques. If you are interested in applying for professional development hours or any professional credits for today's webinar, you can request a confirmation of your participation today and to do so you can send an email or request. This email address is provided in the pod, in the upper left corner of the screen, labeled evaluation instructions. So again, if you could complete the evaluation, that would be great. We would like to thank all of the presenters today for their presentations and acknowledge the ongoing support of the web conferencing office. That concludes today's webinar and we thank you all for attending. Speakers, if you could stay on the line. Karina, if you could put us in the conference line, that will in today's conference, thank you.
Certainly, thank you. That concludes our conference for today. Thank you for your participation. You may now disconnect.
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