SR - AGR-6557 - REPLACEMENT OF TRADITIONAL BILLBOARD TO DIGITAL LED BILLBOARD AT SR 55 FREEWAY AND KATELLA AVENUE1. SUBJECT
Relocation Agreement with Outfront Media, LLC for the replacement of a traditional billboard to
a digital LED billboard located at the SR 55 Freeway and Katella Avenue
2. SUMMARY
The City has received a request from Outfront Media, LLC ( "Outfront "), the owner of a billboard
located at 1936 E. Katella Avenue, to convert the billboard at that location to a digital LED
billboard. The City's current zoning code does not allow for the construction of billboards.
However, a 1995 Settlement Agreement with a predecessor of Outfront allows for the existing
billboard to remain in place. In order for the conversion to take place, the City Council is being
requested to consider a Relocation Agreement, which would: 1) allow for the conversion of the
existing billboard to digital; and 2) require the demolition of three billboard structures in other
parts of the City. As a condition of approval of the Agreement, a change to the City's zoning
code would be required, which will be considered at a later date.
3. RECOMMENDED ACTION
Approve a Relocation Agreement with Outfront Media, LLC. If the City Council approves the
Agreement, staff will move forward with preparing changes to the City's zoning code to allow
for the conversion of traditional billboards to digital for Planning Commission and City Council
approvals.
4. FISCAL IMPACT
The Relocation Agreement includes a provision for Outfront to compensate for staff time and
costs for preparation of the Agreement and zoning code changes up to $20,000. In addition, the
Agreement includes compensation in the form of an annual mitigation fee, which would increase
General Fund revenue by $1.9 million over the 25 -year initial term, and $2.8 million over 35
years if extensions are exercised.
5. STRATEGIC PLAN GOAL(
2b. Analyze future fiscal needs and potential revenue opportunities.
4a. Obtain, implement and evaluate public input into our services and programs.
6. GENERAL PLAN IMPLEMENTATION
Not applicable.
7. DISCUSSION and BACKGROUND
Recently, the City was contacted by Outfront, owner of several billboards throughout Orange, to
propose a conversion of an existing traditional billboard located at 1936 E. Katella Ave. to digital
copy. Over the years, proposals have been made for similar conversions with no action taken
because of the potential adverse impacts. However, staff now believes the technology of digital
billboards has come to a point where they are no more intrusive than traditional billboards.
The billboard being considered for conversion is located near the Shiki Restaurant, along the
west side of the SR 55 Freeway. There are two posters on the structure (one facing each
direction of the 55). The current billboards are 20' x 60' (1,200 square feet) in size.
Background
The City's current zoning code does not allow for the construction of billboards. A series of
various ordinances, such as prohibiting off - premise advertising, limitations on size and height of
freestanding signs, and illumination restrictions, effectively ban billboards.
Nevertheless, there are currently eleven traditional billboards in an array of sizes, ranging from
12' x 25' (300 square feet) to 20' x 60' (1,200 square feet) in the City. Four of the eleven
billboards were permitted via a 1995 Settlement Agreement with National Advertising, all of
which front freeways. The other seven were built in the 1970s and where already in place when
the City annexed the land upon which they were built. Additionally, there are three billboards
that are located in County islands and are, therefore, not subject to the City's ordinances.
Through a series of acquisitions over the years, Outfront now owns the billboards that are subject
to the 1995 Settlement Agreement.
Conversions to Digital Billboard
There has been a trend in the billboard industry to convert traditional billboards to digital
billboards. Many cities in Orange County, and throughout Southern California, have permitted
digital billboards. The vast majority of these digital billboards have been installed subject to
relocation agreements. This occurs either when a billboard company agrees to convert an
existing traditional billboard to digital or construct a new digital billboard in exchange for
removing another. Some of these constructions have been made on city -owned land (such as in
Placentia and La Palma, for example). In the case of locating the digital billboard on city
property, the revenues are much higher since the billboard company is paying the city rent. For
those that are not on city -owned property, cities have negotiated relocation agreements with
mitigation fees attached.
All nearby cities in central Orange County, including Santa Ana, Anaheim, Garden Grove,
Tustin, Fullerton, and Placentia, have some kind of digital billboard or digital signage
arrangement. These uses include billboards and on premise signs, such as auto centers and
shopping malls.
Proposal from Outfront Media
Earlier this year, Outfront proposed to convert the existing traditional double -sided billboard
located at the SR 55 Freeway and Katella Ave to digital billboards of the same size. In exchange,
Outfront proposed the removal of five 12' x 25' billboards, located on three structures. They are
as follows:
Billboard Location
Type
140 N. Prospect Ave. Oust north of Chapman Ave.
Double -sided poster
2760 N. Orange-Olive Road Oust south of Lincoln
Single-sided poster
Main & Orange-Olive (unincorporated Olive
Double -sided poster
While the billboard located at Main and Orange -Olive is not within the City's jurisdiction, we do
receive complaints about that particular location from Orange residents.
After several meetings with staff, Outfront proposed financial terms for a Relocation Agreement
as follows:
1. Up to $20,000 for processing the Agreement and changes to the Orange Municipal Code
(OMC),
2. Mitigation fees as follows:
Year
Annual Payment
1
$100,000
2 -5
$65,000
6 -10
$70,000
11 -15
$75,000
16 -20
$80,000
21 -25
$85,000
The Agreement also allows for two 5 -year options. The first 5 -year option would generate
$90,000 per year, and the second 5 -year option would garner $95,000. At the end of the
Agreement, the City and Outfront may negotiate a new agreement to allow for continued
operation of the billboard. If the parties cannot come to terms, the billboard will be removed.
These terms would generate just over $1.9 million over the initial 25 -year term of the agreement,
and up to $2.8 million if both extensions are exercised. Based on our research, this would be the
most revenue generated out of any relocation agreement executed in Orange County to -date.
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Additionally, the Agreement includes provisions to allow for free advertising of City events and
for emergency information (such as evacuation notices or Amber alerts, for example).
As stated previously, the OMC does not allow for these types of signs to be constructed. A
clause in the Agreement is that, in order for the Agreement to be fully effective and allow the
conversion to commence, the necessary changes must be made to the OMC. As such, if the City
Council approves the Agreement but does not adopt an ordinance to make the necessary changes
to the OMC, the Agreement is null and void and conversion will not move forward. If the City
Council does approve the Agreement, staff will commence working on changes to the OMC,
which will be presented to the Planning Commission and City Council for approval and adoption
at a later date. The OMC changes would contemplate restrictions on illumination and refresh
rates to ensure the safety of motorists and to minimize the impact on surrounding neighborhoods.
The Outdoor Advertising Act (Business and Professions Code Section 5200) also places similar
restrictions on digital signs that front State highways.
Noticing
The current billboard can be seen from nearby commercial and residential properties on both
sides of the SR 55 Freeway. However, the closest single family residences are over 400 feet
away east of the SR 55 Freeway. In consideration of that, the City sent a total of 346 notices to
property owners and tenants in the area adjacent to the billboard site. Note that the proposed
Relocation Agreement is not a land use determination. As such, noticing is not required but was
still done by the City. A copy of the notice and a map of the properties that received the notice
are attached. As of the preparation of this report, we have not received any communication from
nearby residents or businesses in relation to this proposal.
8. ATTACHMENTS
Relocation Agreement with Outfront Media, LLC
Image of Proposed Upgraded Billboard
Map of Billboards to be Removed
Public Notice to area residents
Notice Map
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