April 18th, 2009
Ad Deals Sought by City
By Anthony Schoettle
Indianapolis Business Journal
Mayor hopes to fix budget by offering naming rights to city-owned properties
City officials want to raise money by selling sponsorships, advertising and possibly even naming-rights deals for city-owned properties as they attempt to chip away at a projected $23 million deficit in the municipal budget.
Mayor Greg Ballard is reaching out to ad agencies and marketing firms to help direct the effort. He wants to strike a deal with one of them by this summer and launch the program this fall.
“These programs can be successful if they’re implemented correctly,” said William Chipps, senior editor of IEG Sponsorship Report, a Chicago-based trade publication following the sponsorship industry. “But you have to be careful about the appearance of over-commercialization. If it looks like you’re just trying to sell out, and stick a sign on City Hall, the public outcry will be considerable.”
In some circles, the outcry has already begun.
“My stomach is tightening up this is bothering me so badly,” said Pat Andrews, Marion County Alliance of Neighborhood Associations vice president. “Prostituting is the right analogy here.”
Andrews said the city should continue its tradition of naming parks and other landmarks after civic-minded people rather than selling to the highest bidder.
“It would have been appropriate to discuss this with the public before talking to ad agencies,” she said. “The public owns those buildings and those parks, not this administration.”
City officials hope to raise as much as $500,000 through the new program beginning next year, and ramp it up from there. Some think those estimates are conservative.
“I think the numbers could be fairly high, when you look at all the properties the city has to sell,” said Jim Walton, CEO of Brand Acceleration, a locally based marketing firm. “I think a half a million dollars is on the low end.”
Mayor Ballard so far has put few limits on the program, which, according to a city request for information, could include sponsorship and naming-rights deals for city-owned buildings, parks and even streets. Things like bus shelters, city-run events, Web sites and electronic databases also could be part of the plan, said Michael Huber, the mayor’s director of enterprise development.
“We are looking at any revenue-generation solution that will help without placing an increased burden on city taxpayers,” Huber said.
One thing that won’t be on the table is a naming-rights deal for Victory Field, the city-owned home of the Indianapolis Indians. The AAA minor-league baseball franchise has control of that, according to its lease with the city, and Indians Chairman Max Schumacher said he has no interest in such a deal for the 13-year-old downtown ballpark.
Since launching the request for information April 7 on the city’s Web site, officials have gotten a strong response from local and out-of-state marketing firms, Huber said. The city is asking ad firms interested in being part of the solution to submit proposals by April 24.
San Diego, which began selling naming rights in 1999, has used its program to stuff city coffers. It took in $16 million—or about $2 million annually—over the first eight years. San Diego has signed a range of sponsors, from Pepsi to local firms such as San Diego Metropolitan Credit Union.
Pepsi agreed to pay San Diego $1.5 million plus 40 percent of all Pepsi sales at city properties for the right to be the exclusive soft-drink seller at city-owned venues. The deal, which includes some Pepsi signage on city beaches, is projected to generate $23.6 million over 12 years for the city.
The San Diego Credit Union paid $500,000 for permission to market its services directly to city employees for a five-year period.
“The city of Indianapolis isn’t San Diego, but it has a thriving convention business and draws a fair amount of visitors,” Chipps said. “That could make some sponsorship deals there very attractive.”
In Carmel, where the city launched an aggressive campaign in 2006 to sign naming-rights and sponsorship deals for the new Monon Center at Central Park, officials are still trying to get to the $100,000-per-year mark. A $75,000 sponsorship deal with St. Vincent Carmel Hospital has helped. The original plan called for raising about $875,000 annually—or one-fourth of the park’s annual budget.
St. Vincent can market at special events and place some signage on parks properties, but Carmel parks leaders have stopped short of allowing naming rights on individual park attractions or the park itself, as the plan originally called for.
“We’re still refining and developing our plan,” said Michael Klitzing, Carmel Clay Parks and Recreation assistant director. “We don’t want to sell out everything to the highest bidder.”
The idea of selling advertising on municipal property isn’t entirely new to Indianapolis. IndyGo, the city’s bus service, for example, brought in $345,974 in 2008 from ads placed on the outside and inside of its buses. The bus system has been selling advertisements in and on its buses for more than 25 years.
IndyGo has a deal with Clear Channel Outdoor to handle sales and production. Clear Channel pays IndyGo a guaranteed fee—about $220,000 in 2008—plus a percentage of sales.
The city would be fortunate to strike such a deal. The city might have to offer an agency some money upfront. But because of the economy, Huber said, the city has little startup cash for its program.
“That’s part of our challenge, and the reason we’re looking for a firm who will take this with minimal upfront payment,” he said. “We’re hoping to formulate a deal based on a commission of sales.”
The timing of the city’s effort isn’t ideal. IEG projects North American sponsorship sales growth this year at just 2.2 percent, the smallest rate in more than two decades.