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Toronto Star - January 28, 2007
www.thestar.com/News/article/175672
TheStar.com - News - Jitters in the streetscape biz
As deadline nears for bids on city's ambitious bin-and-bench vision, two key players bail, Jennifer Wells reports
January 28, 2007
Jennifer Wells
"My bosses like it when I make decisions that make money for the company," says a guy named Nick Arakgi. "They're funny that way."
Arakgi is vice-president and general manager for CBS Outdoor Canada, which means that his bosses currently hold the contract for the city's multitude of transit shelters, which means that Arakgi, at this very minute, is deciding whether to bid on Toronto's "street furniture" contract.
Does he not know that the deadline for proposals to remake the city's streetscape is Wednesday? As in this Wednesday?
Yes ,he does.
"I don't blame you for being surprised," says Arakgi.
But consider this: the city is looking to replace not only its transit shelters, but also those hideous garbage bins, as well as to add benches and newsracks and other street furniture elements. The objective: to beautify, as they say at City Hall, the "public realm." Total number of pieces: 25,640, making the Toronto contract one of the largest in the world. As Arakgi says, "This is no small undertaking."
When it issued its request for proposal in September, the city placed restrictions on the amount of advertising the furniture pieces may bear. Benches, for example, are to be ad free. Advertisements may not be clustered across pieces in close proximity. Of total advertising revenue, $6 million annually was to go to the city. That has since been waived. Under the current proposal, the city will get 27 per cent of gross revenue.
It is on this revenue model that companies such as CBS Outdoor are crunching and re-crunching numbers to test the economic viability of what will be a 20-year contract to install and – this is key – maintain all those furniture elements.
On Friday, one of the biggest players in the street furniture game sent a non-submission document to the city, its formal notification that it will not be making a bid. "It's a depressing situation," says Toulla Constantinou, chief executive of the North American arm of Cemusa. "We can't make any money. We won't make any money. We can't provide great design, install and maintain and generate enough revenue to pay for the investment."
Of all the potential players, Cemusa, which is in the throes of rolling out street furniture in New York City designed by the renowned Nicholas Grimshaw architectural group, had attained the highest profile around town. Of note: the party thrown at Thuet on King St. to announce an alliance with architect Jack Diamond, who was to design the full furniture line.
Diamond was quite looking forward to creating an iconic street furniture design – Toronto's own street furniture marque, if you will. "The sidewalks in Toronto are really our most important public spaces," he says. "The greatest visual cacophony is on the streets."
Our streets are relatively narrow, Diamond points out, and we do not have great avenues of trees. All the more reason to get this furniture business right. "If we develop a language of our street furniture," he says, "then people will understand the grammar." Diamond envisioned something elegant, cohesive, even delicate, a new signature that would say "Toronto" to residents and visitors alike.
Alas, it is not to be. "We're willing to take risks," says Cemusa's Constantinou. "That's what this business is all about. But if you know from day one your base case doesn't make sense, then how can you accept the risk?"
Also on Friday, François Nion, executive vice-president for JCDecaux North America, confirmed that it too has decided not to bid. "This is our core business," says Nion. "We invented (the street furniture) model. We developed it worldwide." Decaux has street furniture contracts in 45 cities. Paris. Shanghai. Chicago. Toronto is now off the list.
"The capital investment is tremendous," continues Nion, who puts the cost to the successful bidder at "well over" $100 million. "It just doesn't make any sense from a financial point of view ... The risks are way too high."
Consider, says Nion, the maintenance challenge. "On any given day, how often are you going to get a call about vandalism, graffiti. Someone drives a car into a shelter." The revenue drawn from advertising on select structures has to cover the maintenance of the entire suite of furniture, including dealing with such irritations as weeds, stickers, snow, ice, garbage and "scratchiti." The embedded labour costs are enormous. "You'll need an army," says Nion, "an entire division."
This week, Cemusa intends to commence lobbying City Hall to bust up the contract. The company proposes that the transit shelters form the core of the contract, with guaranteed minimum revenue, and that the city then use that revenue to purchase the additional pieces – the litter bins and such. "We have no complaints about the vision," says Constantinou. "I think where the city of Toronto staff has failed is that they failed to do their own quantitative analysis as to the cost and benefits of running the business for 20 years."
With two of the most prominent players out of the picture, the question arises: will the street furniture competition be robust enough to satisfy the city's objective, as it states in its Request For Proposals (RFP), to "dramatically improve and celebrate the quality of our public spaces through exceptional design"?
There is no need to drown our sorrows, at least not just yet.
Paul Seaman is the top man on the street furniture file for Clear Channel Outdoor Canada in Toronto. "I can't tell you how many spreadsheets I've worked on this every day since September," says Seaman. "It's all I've been living for the past six months."
Is he in? "Absolutely," is Seaman's refreshing response.
Seaman has heard the gathering industry talk. That the business case cannot be made. That only via increased opportunities for advertising revenue can the contract meet the design, quality and maintenance requirements the city demands.
Seaman doesn't buy it. "There's no question that one has to have a very sharp pencil on this project," he says. The sheer scope of the demands does "weigh heavily," not to mention the expectation of truly distinctive design. "We really had to start from scratch," he says. "It's like someone saying to you, `Build a car.'"
At Astral Media Inc. in Montreal, Alain Bergeron, vice-president of brand management, says he too will submit a bid by the Wednesday deadline.
Asked about the concerns that the proposed arrangement will not be viable in the long term, Bergeron declined to comment.
But he did add that Kramer Design Associates has been busily designing Astral's street furniture vision. "We have developed a complete line of products," says Jeremy Kramer. Not only those elements requested by the RFP, "but additional things we think Toronto should have." It was Kramer's group that designed the Astral Info-To-Go pillars that have been piloted around town. Perhaps more recognizably, it was Kramer Design that came up with those sleek glass-and-steel transit shelters that currently grace the streetscape, designed for a predecessor company to CBS Outdoor. The company has latterly built an international portfolio – projects in Las Vegas and Saudi Arabia to name two – while remaining rooted in Toronto.
That at least presents the prospect of a happy outcome to what Paul Seaman calls "the most ambitious street furniture undertaking in the world."
On that one point, there appears to be no argument.
www.thestar.com/News/article/175672
TheStar.com - News - Jitters in the streetscape biz
As deadline nears for bids on city's ambitious bin-and-bench vision, two key players bail, Jennifer Wells reports
January 28, 2007
Jennifer Wells
"My bosses like it when I make decisions that make money for the company," says a guy named Nick Arakgi. "They're funny that way."
Arakgi is vice-president and general manager for CBS Outdoor Canada, which means that his bosses currently hold the contract for the city's multitude of transit shelters, which means that Arakgi, at this very minute, is deciding whether to bid on Toronto's "street furniture" contract.
Does he not know that the deadline for proposals to remake the city's streetscape is Wednesday? As in this Wednesday?
Yes ,he does.
"I don't blame you for being surprised," says Arakgi.
But consider this: the city is looking to replace not only its transit shelters, but also those hideous garbage bins, as well as to add benches and newsracks and other street furniture elements. The objective: to beautify, as they say at City Hall, the "public realm." Total number of pieces: 25,640, making the Toronto contract one of the largest in the world. As Arakgi says, "This is no small undertaking."
When it issued its request for proposal in September, the city placed restrictions on the amount of advertising the furniture pieces may bear. Benches, for example, are to be ad free. Advertisements may not be clustered across pieces in close proximity. Of total advertising revenue, $6 million annually was to go to the city. That has since been waived. Under the current proposal, the city will get 27 per cent of gross revenue.
It is on this revenue model that companies such as CBS Outdoor are crunching and re-crunching numbers to test the economic viability of what will be a 20-year contract to install and – this is key – maintain all those furniture elements.
On Friday, one of the biggest players in the street furniture game sent a non-submission document to the city, its formal notification that it will not be making a bid. "It's a depressing situation," says Toulla Constantinou, chief executive of the North American arm of Cemusa. "We can't make any money. We won't make any money. We can't provide great design, install and maintain and generate enough revenue to pay for the investment."
Of all the potential players, Cemusa, which is in the throes of rolling out street furniture in New York City designed by the renowned Nicholas Grimshaw architectural group, had attained the highest profile around town. Of note: the party thrown at Thuet on King St. to announce an alliance with architect Jack Diamond, who was to design the full furniture line.
Diamond was quite looking forward to creating an iconic street furniture design – Toronto's own street furniture marque, if you will. "The sidewalks in Toronto are really our most important public spaces," he says. "The greatest visual cacophony is on the streets."
Our streets are relatively narrow, Diamond points out, and we do not have great avenues of trees. All the more reason to get this furniture business right. "If we develop a language of our street furniture," he says, "then people will understand the grammar." Diamond envisioned something elegant, cohesive, even delicate, a new signature that would say "Toronto" to residents and visitors alike.
Alas, it is not to be. "We're willing to take risks," says Cemusa's Constantinou. "That's what this business is all about. But if you know from day one your base case doesn't make sense, then how can you accept the risk?"
Also on Friday, François Nion, executive vice-president for JCDecaux North America, confirmed that it too has decided not to bid. "This is our core business," says Nion. "We invented (the street furniture) model. We developed it worldwide." Decaux has street furniture contracts in 45 cities. Paris. Shanghai. Chicago. Toronto is now off the list.
"The capital investment is tremendous," continues Nion, who puts the cost to the successful bidder at "well over" $100 million. "It just doesn't make any sense from a financial point of view ... The risks are way too high."
Consider, says Nion, the maintenance challenge. "On any given day, how often are you going to get a call about vandalism, graffiti. Someone drives a car into a shelter." The revenue drawn from advertising on select structures has to cover the maintenance of the entire suite of furniture, including dealing with such irritations as weeds, stickers, snow, ice, garbage and "scratchiti." The embedded labour costs are enormous. "You'll need an army," says Nion, "an entire division."
This week, Cemusa intends to commence lobbying City Hall to bust up the contract. The company proposes that the transit shelters form the core of the contract, with guaranteed minimum revenue, and that the city then use that revenue to purchase the additional pieces – the litter bins and such. "We have no complaints about the vision," says Constantinou. "I think where the city of Toronto staff has failed is that they failed to do their own quantitative analysis as to the cost and benefits of running the business for 20 years."
With two of the most prominent players out of the picture, the question arises: will the street furniture competition be robust enough to satisfy the city's objective, as it states in its Request For Proposals (RFP), to "dramatically improve and celebrate the quality of our public spaces through exceptional design"?
There is no need to drown our sorrows, at least not just yet.
Paul Seaman is the top man on the street furniture file for Clear Channel Outdoor Canada in Toronto. "I can't tell you how many spreadsheets I've worked on this every day since September," says Seaman. "It's all I've been living for the past six months."
Is he in? "Absolutely," is Seaman's refreshing response.
Seaman has heard the gathering industry talk. That the business case cannot be made. That only via increased opportunities for advertising revenue can the contract meet the design, quality and maintenance requirements the city demands.
Seaman doesn't buy it. "There's no question that one has to have a very sharp pencil on this project," he says. The sheer scope of the demands does "weigh heavily," not to mention the expectation of truly distinctive design. "We really had to start from scratch," he says. "It's like someone saying to you, `Build a car.'"
At Astral Media Inc. in Montreal, Alain Bergeron, vice-president of brand management, says he too will submit a bid by the Wednesday deadline.
Asked about the concerns that the proposed arrangement will not be viable in the long term, Bergeron declined to comment.
But he did add that Kramer Design Associates has been busily designing Astral's street furniture vision. "We have developed a complete line of products," says Jeremy Kramer. Not only those elements requested by the RFP, "but additional things we think Toronto should have." It was Kramer's group that designed the Astral Info-To-Go pillars that have been piloted around town. Perhaps more recognizably, it was Kramer Design that came up with those sleek glass-and-steel transit shelters that currently grace the streetscape, designed for a predecessor company to CBS Outdoor. The company has latterly built an international portfolio – projects in Las Vegas and Saudi Arabia to name two – while remaining rooted in Toronto.
That at least presents the prospect of a happy outcome to what Paul Seaman calls "the most ambitious street furniture undertaking in the world."
On that one point, there appears to be no argument.