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HomeMy WebLinkAbout1992-05-12 - AGENDA REPORTS - BUS STOP SHELTERS CONTRACT (2)CONSENT CALENDAR DATE: SUBJECT: DEPARTMENT: May 12, 1992 AGENDA REPORT City Manager Approval Item to be presented. by: Jeff Kolin De ut C' , Mana er ai* BUS STOP SHELTERS CONTRACT Public Works At their October 22, 1991 Council meeting, the City Council directed staff to enter into an agreement with Bustop Shelters of Southern California. The ten year agreement stipulated that Bustop Shelters would provide 40 advertising shelters and 20 benches with trash cans in various locations throughout the City. Additionally, the City would receive 10% of the gross revenues that the advertisement on the shelters generated. Shortly after executing the agreement, City staff became aware that Bustop Shelters was about to file Chapter 11 in the United States Bankruptcy Court due to an action by the Securities Exchange Commission (see Attachment I). City staff received a letter from Bustop Shelters dated March 2, 1992 requesting the City to make modifications to the existing agreement in order toassist them in cash flow and reorganization problems caused by the filing of Chapter 11 (see Attachment II). Bustop Shelters requested the following modifications, waiving a $25,000 bond and guaranteeing 10% advertisement payment on only 15 shelters. They continued to assure the City that they would be able to provide as many shelters as the City needed. City staff raised other concerns including Bustop Shelters' ability to maintain and repair damaged shelters to the City's satisfaction. City staff has been working closely with the City Attorney's office on options that are available to the City regarding its agreement with Bustop Shelters and the possibility of terminating this agreement. It was concluded that the City has essentially three options: 1. Terminate the agreement and secure other services, 2. Continue its relationship with Bustop Shelters, or. 3. Allow limited services by Bustop Shelters and contract with another company for expanded services. APPROWED Agend,l„m-9 Bus Stop Shelter Contract May 12, 1992 Page 2 Option 1, to terminate the agreement, was recommended by the City Attorney and staff concurs that this is the most prudent option due to the City's lack of confidence that the . shelters will be maintained and/or repaired for the next 10 years. Additionally, this would avoid the City becoming entangled in bankruptcy issues and possibly preventing the City from maintaining or repairing the shelters. In the interim, staff is purchasing bus benches out of budgeted funds for the Transit Transfer Station. Moreover, the City Attorney recommends that rather than forfeit the signing bonus fee of $23,000 paid to the City, the City should negotiate with Bustop Shelters to compensate for its inconvenience plus administrative costs to select another contractor. It is staff s recommendation to terminate the contract, readvertise the project and select a new contractor. Pending the time it takes to sever the agreement, staff believes it could have bus shelters installed by the beginning of August 1992 (see Attachment II). Upon the City Attorney's approval of a stipulated final settlement of all bankruptcy issues, direct the City Manager to terminate the City's contract with Bustop Shelters of Southern California and.direct staff to solicit bids for advertising bus shelters. 1. Interoffice memorandum 2. March 2, 1992 letter from Bustop Shelters 3. Proposed time line to rebid project DEL:gmm bustop.agn ATTACHMENT Page 1 of 3 CITY OF SANTA CLARITA INTEROFFICE MEMORANDUM TO: George A. Caravalho, City Manag r FROM: John E. Medina, Director of Pub ' o DATE: February 4, 1992 SUBJECT: BUS SHELTER INSTALLATION On January 21, 1992, the City received a letter from.Bustop Shelters of California, Inc. indicating that the company is having financial difficulties. Temporarily, they are unable to fulfill their contract with the City (see attached letter). After receipt of the letter, Bustop . Shelter was contacted for an explanation of their financial difficulties. Mr. Tony Ingegneri, representative of Bustop Shelter, stated that the Securities Exchange Commission had tried to liquidate the company. The company was able to resist the liquidation through the courts and file Chapter 11. You may recall the September 24, 1991 City. Council meeting, whereby an anonymous letter was presented to the Council to discredit Bustop Shelters. Staff was directed to investigate the allegations. The following muncipalities were contacted: ■ County of Orange ■ City of Diamond Bar ■ City of San Bernardino ■ City of Hesperia ■ City of Lakewood ■ City of Corona The responses received from the cities were all positive. Thus, the City entered into a contract with Bustop Shelters of California, Inc. To date, no advertising bus shelters have been installed. In light of the information received from the SEC and Bustop Shelters of California, Inc., the City Attorney was contacted to determine whether or not there was a breach of the contract and if the City could terminate the contract and readvertise for a new contractor. The City Attorney indicated the following: ■ The docket sheet needed to be obtained in order to acquire more information about the bankruptcy case. ■ The City needs to be named as a creditor. ATTACHMENT I Page 2 of 3 0 Since Bustop Shelters filed for Chapter 11, an automatic stay of the contract was enforce. The City cannot terminate the contract unless the automatic stay is removed by the court. The City Attorney indicated it would take approximately 30 days before a determination can be made regarding the course of action to be taken by the City; two weeks to obtain the information from the courts regarding .the bankruptcy and approximately two weeks to analyze the facts of the case. As more information becomes available, either by the City Attorney, Bustop Shelters or both, I will continue to keep you updated. I know the City's transit users will be disappointed by the delay of the installation of the bus shelters and benches throughout the City. Hopefully, this matter can be resolved in a timely manner and the City can proceed with the bus shelter programs. JEM:MS:rd SHELTER.BUS cc: Councilmembers Ken Pulskamp ATTACHMENT 7' Page 3 of 3 <FU BUSTOP SHELTERS OF CALIFORNIA, INC. January 21, 1992 Mr. George Caravalho City Manager City of Santa Clarita 23920 Valencia Blvd. #300 Santa Clarita, CA 91355 Dear Mr. Caravalho: We formally request a six-month deferral of our revenue obligations due your city, as stated in our contract. The current recession has caused Metro Display Advertising, D.B.A. Bustop Shelters Of California, to experience cash flow problems. Please be assured that this unexpected change in our business .has our full attention. Active steps in all aspects of our operations are being implemented'to resolve these problems in the next few months. We have instituted an across-the-board reduction in ov;zrhead and operating costs not considered critical to the operation of our business. Nevertheless, we intend to honor our contract with your - city. We greatly value ourrelationshipwith your city and will continue to provide the exceptional service we have maintained in the,past. Fortunately, we still intend to install the shelters we offered. Tony Zngegneri, Vice President of. Government Relations, will contact you within the week to set up an appointment to discuss this further. We appreciate your patience and understanding in this matter, and hope it causes no undue hardship. We are making every effort to overcome our present difficulties and to meet our- financial commitments to your city. Thank -you for your consideration. ncerely, i`V Jean Clau43e Chairman bbf JT;: bk LeRoyer- the Board of Directors 2692 Dow Avenue 0 Tustin, CA 92680 (714) $443232 FAX (714) 544.1188 ORANGE COUNTY • LOS ANGELES • INLAND EMPIRE • LAS VEGAS ATTACHMENT II BUSTOP SHEL'T'ERS OF CALIFORNIA, INC, March 2, 1992 Mr. Dennis Luppens City of Santa Clarita 25663 Avenue Stanford Santa Clarita, CA 91355 Dear Mr. Luppens: Due to the current economic slowdown, the drain on our cash flow caused by the investigation of the Securities and Exchange Commission and our subsequent financial restructuring under Chapter 11 of the Federal Bankruptcy Law, Metro Display Advertising, d.b.a. Bustop Shelters of California, is requesting modifications to our agreement in order to provide the product and service outlined in our proposal to the City of Santa Clarita. These modifications are as follows: • Waive the bond of $25,000. Santa Clarita has received $22,950 to date. • Bustop will provide as many bus shelters as the City needs, but will only guarantee payment on 15. All other shelters will display public service unless paid advertising is available, in which Bustop will provide a percent of the advertising revenue as stated in the proposal. • All other provisions of our agreement will be adhered to. Under the current economic situation and our own financial restructuring, we need to maximize the profitability of each city in order to provide the product and service we've offered in the past. Your support in this matter will help to ensure your community gets the best bus shelter program available. Thank you for your patience, understanding and consideration through these trying times. . We look forward to continuing our relationship with the City of Santa Clarita. Sincerely, Tny geg nVice Presi nt/Government Relations TI:bk 2692 Dow Avenue Tustin, CA 92680 (714) 544.3232 FAX (714) 544-1188 ORANGE COUNTY 9 LOS ANGELES 9 INLAND EMPIRE • LAS VEGAS May 15, 1992 May 22, 1992 June 12, 1992 June 26, 1992 July 14, 1992 August 14, 1992 bustop.aga ATTACEMENT III Proposed Time Line to Rebid Advertising Bus Shelters 30 -day Notice to terminate contract Review specifications (5 working days) Advertise project (14. calendar days) Open bid, background check on contractor (10 working days) Award contract - City Council meeting Shelters installed (30 days)