The following article was published in The Star-Ledger on Tuesday, 6/7/11.
NJ Transit is taking bids for naming, product-advertising rights to its facilities, locomotives
By Mike Frassinelli
In the not-too-distant future, a commuter going from Newark to Hamilton might board a Minute Maid express train and take it to Sprite Platform at Coca-Cola Transit Center.
Such an itinerary could result from NJ Transit’s intention to sell advertising rights to its stations, terminal facilities and locomotives.
This planned sale of naming and product-advertising rights has set off a frenzy among companies trying to pay NJ Transit tens of millions of dollars to broker the potentially lucrative sales.
It also has led to a formal protest from one bidder, who contends the transit agency would leave almost $12 million on the table by renewing with the advertising company that now holds the contract.
Craig Heard, president and CEO of Gateway Outdoor Advertising in Hackettstown, said NJ Transit did not allow his company into the final round of bidding even though Gateway's $65 million offer of guaranteed revenue was nearly 20 percent more than the $53.3 million guaranteed by the current contractor, the Titan Outdoor advertising agency.
Gateway filed a protest that prompted NJ Transit to pull an agenda item — awarding Titan a five-year contract — from Wednesday’s NJ Transit board meeting. NJ Transit spokeswoman Penny Bassett Hackett said Monday the agenda item has been removed while the formal protest proceedings take place.
“The companies have a right to protest,” she said.
Under NJ Transit’s guidelines for the five-year contract, the “advertising revenue contractor" would pay the transit agency a designated share of its net billings — or the guaranteed amount — whichever is greater. The exact percentages vary from bidder to bidder, but both Titan and Gateway would guarantee NJ Transit at least a 60 percent cut of the billings.
Selling advertising space on bus, rail and light-rail equipment, stations, platforms, terminals and trestles decreases reliance on subsidies and fares, said the agency, which last year imposed a record-tying average fare hike of 22 percent.
The naming of transit stations after corporations and selling space on the outside of trains for sponsors was once unthinkable, but challenging financial times call for creative measures.
Mets fans no longer attend games at Shea Stadium; they see baseball at Citi Field. Travelers on the Garden State Parkway could soon see advertising on toll booths.
Heard estimated the naming of a major transit station, like Newark Penn Station, could bring in $2 to $3 million per year.
Heard said Gateway made it to the final four of bids, but despite making the highest offer, was not one of the two finalists, nor was final four contender CBS Outdoor Advertising.
He said the final two were Titan and Interstate, which mainly do billboard advertising.
Proposals from potential bidders were weighted, with 60 percent of the final score to be awarded for "financial return to NJ Transit," leaving Heard perplexed over how Gateway didn't make the final round.
“Why wouldn't you invite four good and strong companies, let them all fight it out and get the most for taxpayers?" asked Heard, who in the '80s was CFO and president of a company that persuaded NJ Transit to put ads on its buses.
Representatives for Titan, which has an office in Fairfield, didn't respond for comment. The website for Titan, the largest transit advertising company in North America, shows examples of its work, including an ad with a giant screw on the side of a bus and a hanging banner ad outside the Guggenheim Museum in Manhattan.
The Metropolitan Transportation Authority in New York last year terminated its advertising contract with Titan Outdoor Holdings. It replaced Titan with CBS Outdoor after Titan defaulted on its contract by failing to pay about $20 million due to MTA for 2009-10, according to the authority.
Gateway, which has 30 years experience in transit advertising and handles contracts in New York, Tennessee, North Carolina, California and West Virginia, used MTA as a reference.
Among its ideas, Gateway wanted to open four offices in New Jersey, creating 35 new jobs, and give frequent NJ Transit customers reward points that could be used for gifts or discounted rides.