POLICY REPORT

CORPORATE SPONSORSHIPS

Date: November 7, 1997

CC File No. 1008

TO:Vancouver City Council

FROM:General Manager of Corporate Services

SUBJECT:Sponsorship Program

RECOMMENDATION

A.THAT Council approve the guiding principles for a City sponsorship program set out in this report in the form of Definition, Purpose and Policy statements, noting that outright gifts/donations to the City, whether from corporations or individuals, fall outside of the sponsorship program proposed in this report.

B.THAT Council approve the implementation of a basic sponsorship program for the acquisition of goods and services with the assistance of a broker/consultant, and the exploration of opportunities to increase the revenue generation capabilities of other City programs by staff without the assistance of a broker/consultant, both as discussed in this report.

Further that staff be instructed to report back on the details of each sponsorship/revenue initiative for approval to proceed, noting that any expansion of the basic sponsorship program to encompass naming facilities or equipment, event sponsorships or capital works will be based on the specifics of the proposal, and any experience gained under the basic program, and reported to Council for approval as a separate initiative.

C.THAT Council approve the appointment of the Spectrum Marketing Corporation as the City's sponsorship broker for a three year term, subject to a contract satisfactory to the Director of Legal Services, to work closely with staff within existing purchasing policies to prepare and negotiate a number of the sponsorship initiatives from those identified in this report at a cost of a $3,000 per month plus applicable GST over the initial 12 month period or until execution of the first sponsorship agreement, whichever event occurs first.

The interim source of funds, which could reach $40,000 in the first year, including annual out-of-pocket expenses estimated at $4,000, would be the Strategic Initiatives Fund.

COUNCIL POLICY

There is no Council policy directly attributable to corporate sponsorships. Council has directed staff to investigate new revenue sources in order to ease the burden of City services that are supported by property taxes.

PURPOSE

The purpose of this report is to propose a basic sponsorship program for the acquisition of certain goods and services used in the course of the City's business activities, subject to expansion to other areas at a later date based on experience, and to initiate an internal program to explore new revenue generation. These programs would act as a vehicles to test the additional revenue generating capabilities of sponsorships, while keeping the City's normal purchasing policies and practices intact. Program guidelines are also presented for Council consideration and approval, as is a recommendation on a sponsorship broker.

BACKGROUND

On May 7, 1996, City Council discussed a policy report on sponsorship activities and approved the following staff recommendations.

·110·that Council defer entering into a major City sponsorship program, pending more experience with the sponsorship initiatives currently being directed by the Park Board and the Library Board.·110

·110·that the City Manager report back in one year on the Park Board and Library Board experience, on the advisability of a City sponsorship program, and on recommended program guidelines.·110

·110·that, in the interim, the City not actively seek sponsorship arrangements, but that any sponsorship opportunities presented to it be evaluated on an ad hoc basis against the policy considerations identified in this report and be reported individually to Council for decision. ·110

In terms of the work leading up to the aforementioned policy report on sponsorships, the City employed Spectrum Marketing Corporation to conduct an inventory of sponsorship opportunities available to the City. Additionally, the City commissioned an Angus Reid poll to gauge public opinion on the sponsorship issue, and employed the services of Paul Audleyand Associates and C.J. Becker and Associates with Yates, Thorne and Associates to explore the policy implications of sponsorship. Copies of these major reports are on file with the City Clerk's Office.

Staff research on municipal sponsorship activities indicated that there was little experience in the Vancouver area and elsewhere to draw upon. Spectrum was therefore asked to use its market expertise to produce a list of potential sponsorship relationships that might be applicable to a City of Vancouver setting. A table of sponsorship gross revenue potential was developed (both in dollars and in-kind contributions) which pointed to a five-year total of over $10 million in new revenues.

Upon analysis of the revenue components, a conservative estimate of annual realizable sponsorship revenues of about $500,000 was thought to be a reasonable expectation after consideration of potential policy limitations and existing business relationships.

The Angus Reid survey of public opinion on sponsorships indicated that Vancouverites generally supported the concept of sponsorship as highlighted below.

·110·Sponsorship to fund new facilities, services, events and improvements was preferred to using it to maintain existing services.·110

·110·The City should not become financially dependent on the proceeds of sponsorship as these contributions may not be stable from year to year.·110

·110·Sponsoring firms should not receive preferential treatment in areas of city business outside of their sponsorship activities.·110

·110·Sponsorship arrangements with the City should not reduce the ability of not-for-profit societies to raise money through sponsorship arrangements.·110

·110·The City should refuse sponsorship from a company or an individual if there are legal, moral or ethical concerns about the arrangement or the goods or services under consideration.·110

·110·Sponsorship signage and promotion could be an issue if not handled in an acceptable manner. Sponsorship identification on Police and Fire vehicles was not acceptable under any circumstances.·110

·110·Sponsor influence in planning or decision making about a program being sponsored was generally unacceptable, except for special events.·110

·110·Vancouverites were generally confident that City government can set acceptable limits on sponsorship activities.·110

The Audley and Becker report recommended a number of sponsorship policy guidelines as noted below for consideration in the development of a sponsorship program for the City.

·110·The City of Vancouver should use both an internal Sponsorship Coordinator and a broker or brokers to raise sponsorship funds. The responsibilities of the Sponsorship Coordinator would include communicating the City's objectives to the broker and potential sponsors and administering the sponsorship approval process.·110

·110·The City's guidelines for sponsorship should ensure that it does not become involved in situations in which sponsors would be given, or be perceived to be given, preferential treatment. Guidelines should consider the following:·110

- a firm whose product or service presents an obvious conflict of interest with the mandate and/or objectives of the City;

- a firm which is under investigation for or has been charged with the violation of any law;

- a firm awaiting approval from City Council on a business project; or

- a firm which operates in a municipally regulated industry (e.g. cab companies).

·110·The City of Vancouver should recognize that the motivations of sponsors in entering into sponsorship arrangements with the City may be primarily philanthropic, or primarily marketing oriented, with varying combinations of the two. If the City actively seeks private sponsorship of municipal services, it should establish a set of guidelines and a process of evaluating sponsorships which will ensure that the public interest is protected.·110

·110·The City of Vancouver should limit acceptance of sponsorship to capital projects and to special projects and events.·110

·110·The City of Vancouver should establish guidelines to ensure the integrity of municipal programs and services is protected. Program planning and delivery should remain in the control of the City, and decisions should continue to be made exclusively on public service objectives. Responsibility for ensuring compliance with the guidelines for municipal sponsorship and coordination of sponsorship activity should be assigned to a Sponsorship Coordinator. The Coordinator should consult with appropriate department heads and other municipal staff to ensure that sponsorship activity is consistent with and complementary to the objectives of theCity.·110

·110·Signs for recognition of sponsors should be designed so that they will not detract from the physical attributes of a location. The City should evaluate on a case-by-case basis situations which involve naming a public building after a private corporation or individual. Decisions regarding the naming of a public building after a private corporation or individual in return for a capital contribution should require the approval of City Council.·110

·110·The City should include provisions stating that the agreement does not imply endorsement of the company or its products and services and should prohibit sponsors from making statements which suggest that the corporation or its products and services are endorsed by the City.·110

·110·The City should not enter into sponsorship agreements with a firm whose products or activities have been deemed hazardous to individual health or to the environment.·110

·110·The City should consider the effect on the not-for-profit sector and in particular those organizations which the City funds.·110

While, in the main, the Corporate Management Team found these recommendations to be comprehensive, there was a general feeling that their thrust was conservative and, if adopted, would preclude exclusive supplier relationships with the City which form a major part of the Spectrum opportunity analysis.

The policy recommendations of this present report are therefore somewhat less conservative in nature.

DISCUSSION

1. Sponsorship Experience of Outside Boards

Both the Library and Park Boards have embarked on sponsorship initiatives and have and are soliciting sponsorship arrangements which fall outside of the Audley and Becker guidelines outlined earlier in this report.

The Library Board has only one corporate arrangement in place at the time of writing this report. This arrangement (a Library Capital Fundraising contribution) is with Concord Pacific and involves having their corporate name on the library membership cards. Concord supplies the library cards and additionally pays the Library a sum of $60,700 annually over a seven-year period. These funds are being directed to service the outstanding Capital Campaign loan arranged with the City. The Library Board's corporate sponsorship guidelines are attached as Appendix A to this report.

The Park Board have already approved agreements with Coca Cola, Kodak and Blenz, having a total net revenue to the Board over a ten year period of about $1,325,000. It is important to note that the City will receive one-third of this new net revenue under the provisions of the Global Budget arrangement. The Park Board's corporate sponsorship guidelines are attached as Appendix B to this report.

2. Sponsorship Program for the City

Guiding Principles

The following definition, purpose and policy statements are recommended as guiding principles for a City sponsorship program. They are less conservative than those recommended by Audley and Becker and provide a broader scope of sponsorship opportunity to explore. They compare favourably with the guidelines established by the Outside Boards.

Sponsorship Definition

Sponsorship is the payment of money or the provision of goods and services by a business to assist in the provision of City of Vancouver services or the development of facilities in return for the promotion of the name, products or services of the sponsor.

Sponsorship Purpose

The purpose of the corporate sponsorship program of the City of Vancouver is to generate revenue-producing and cost-saving agreements and contributions from the private sector which would supplement or improve the City's services to the public.

Sponsorship Policy

a.The City will ensure that it does not become involved in situations in which sponsors would be given, or be perceived to be given, preferential treatment outside of the sponsorship agreement.

b.The City will not enter into sponsorship agreements with a firm whose product or service presents an obvious conflict of interest with the mandate, policies or objectives of the City.

c.The City will solicit and evaluate sponsorship arrangements following its normal purchasing practices and policies to ensure that the public interest is protected at all times.

d.The City will maintain control over the planning and delivery of sponsorship activities, and decisions around such will be made exclusively on public service objectives.

e.The City will ensure that recognition of sponsors is designed so that it will not detract from the physical attributes of a location, event, or facility and service delivery. Decisions regarding the naming of a public building/facility after a private corporation or individual in return for a capital contribution will require the approval of City Council and be influenced by the amount of contribution.

f.The City will consider the effect of its sponsorship initiatives on the not-for-profit sector and in particular those organizations which the City funds or have their own sponsors, and manage any conflicts to the extent practicable.

g.The City will maintain a file in the office of the City Clerk in the form of a publicly available list which outlines all sponsorship agreements in force. The terms and conditions of each specific agreement will be made available on request.

h.The City will conduct periodic reviews of its sponsorship initiatives to examine revenues raised, impacts on municipal services, the attitudes of the public and impacts on non-governmental organizations for public report back to Council.

i.All sponsorship proposals will be brought to City Council for discussion and approval.

Basic Program - Consultant Assisted

We propose that the City initially launch its sponsorship program around the acquisition of goods and services used in City operations, in order to gain working knowledge and experience before expanding the program systematically to include other opportunities (facility or equipment naming, capital works). By way of example, a number of consumer products and services have already been identified to target, as follows:

Vehicles (purchases)	Airlines (corporate travel)
Vehicles (rentals)	Telecommunications
Fax/Copiers	Film/Camera
Financial Services	Computer Equipment
Lighting	Paper Products
Insurance

We would use the guiding principles enumerated above to develop sponsorship proposals which would be reported to Council for approval. We would then solicit bids under the City's normal purchasing practices and policies (best value based on price, quality and service) from the corporate players in the appropriate segments of the industry. After evaluation and negotiation, a sponsorship agreement would be recommended to Council under which the City would acquire the goods or services at the tendered price, the supplier would be given opportunities to promote its product over a number of years and the City would receive a compensation package of cash and/or in-kind consideration, resulting in a win-win situation for both parties.

Council will note that the Audley and Becker report recommended that the City establish an internal position to act as a coordinator of the sponsorship program. Initially, at least, we are recommending that existing internal resources be used to develop the first few sponsorship initiatives, with the assistance of an outside sponsorship broker and guidance of the General Manager of Corporate Services. Should additional internal assistance be necessary, we will report back to Council with details, noting that the new revenues from the sponsorship program would be used to fund the support costs.

Basic Program - Staff

During the investigation of corporate sponsorships, we identified opportunities within existing City programs to increase revenues/lower costs by selling advertising space on City assets. Examples include street banners, bus shelters, blue boxes and a number of others, but not buildings or other major facilities, noting that present space use agreements with not-for-profit and other public service organizations would continue.

These opportunities are relatively straight-forward and could be managed by staff, without the assistance of a sponsorship broker, following a standard tender process taking the form of a stepped-up advertising opportunity for corporate name recognition. We therefore propose that the basic sponsorship program accommodate these internally-generated initiatives alongside the consultant-assisted initiatives. The adoption of the sponsorship guidelines outlined in this report would put the appropriate safeguards in place for a successful roll out of this advertising opportunity, and others of similar nature. Each initiative would be advanced and reported to Council for approval before and after tendering.

3. Sponsorship Broker

The Audley and Becker report also recommended that the City engage a commissioned sponsorship broker to assist the City with its sponsorship program. A sponsorship broker is experienced in preparing solicitation documents and arranging sponsorship agreements between buyer and seller, earning a commission as deals are struck.

In terms of the City's sponsorship program, we are recommending that the City engage the services of the Spectrum Marketing Corporation, one of the very few Canadian firms in this business. Spectrum, as mentioned above, conducted the initial survey work on

sponsorship opportunities for the City, leading to the sponsorship policy report in February of 1996. Spectrum is also the sponsorship broker hired by the Park Board for its program.

The engagement would be for a three year term with options to extend the term based on experience and success rate. Spectrum's fee structure would take the form of a monthly draw of $3,000 against commissions over the initial 12 month period or until the first sponsorship agreement is executed, whichever event occurs first. Should it take longer than 12 months to conclude the first sponsorship agreement, the monthly draw would terminate after the twelfth payment. All sponsorship revenues would accrue to the City’s account and then be paid proportionately to Spectrum in accordance with the commission structure, after earned commissions exceed the full amount of the monthly draws paid in advance.

The standard commission structure (and GST as applicable) would be as follows:

·110·17.5% on net new revenues received through advertising and/or sponsorship agreements negotiated or introduced by Spectrum; and·110

·110·15% on the net new cash value of in-kind products and/or services received.·110

Additionally, annual out-of-pocket expenses, estimated at $4,000, would be charged to the City. The monthly draws (commissions) and other expenses would be funded from the Strategic Initiatives Fund on an interim basis and thereafter from revenues/cost savings arising from the sponsorship agreements. The net benefit would flow directly to the Operating Budget or elsewhere as decided by Council.

Ongoing support of established agreements would be provided at no additional cost to the City.

The broker/consultant would typically follow a three-stage process for each sponsorship initiative.

Stage 1 - Assessment/Research (60 to 90 days)

The activities would include assessment of existing purchasing profiles, review of existing agreements, meeting and negotiation with internal stakeholders, identification of potential growth and calculation of future purchases, identification of issues, identification of available marketing/promotional opportunities for the supplier/provider, and preparation of a final assessment report with recommendations for evaluation by staff, and approval of Council.

Stages 2 and 3 - RFP/Contract Negotiation (90 to 120 days)

The activities would include preparation of the RFP, presentation to the appropriate market players, selection of supplier/provider, preparation of the contract document, preparation of a recommendation report to Council, and communication to stakeholders.

CONCLUSION

The search for new revenue opportunities is challenging, and as budgets get tighter and demands for services grow, City Council is often in a position of having to adjust spending priorities and service growth to accommodate affordable tax increases, especially in the face of recent senior government cutbacks in revenue sharing.

Corporate sponsorship is a potential new revenue source for the City which remains unexplored at the moment. Moreover, there are good indications that the City should enjoy reasonable success in this area based on marketplace experience.

Given the recent initiatives of the Library and Park Board in securing acceptable corporate participation, there is no reason for the City to continue to wait-it-out on the sidelines. This report therefore advances a proposal to launch a corporate sponsorship program, initially starting small in the area of acquiring goods and services and new program/advertising revenues, and perhaps growing to a larger initiative based on experience and results.

City Council will have complete control and step-by-step oversight of each sponsorship initiative as it is submitted for consideration and approval, and may terminate the program at any time.

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(c) 1997 City of Vancouver