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Board committee approves SFO advertising lease with Clear Channel after heated MAG vs. percentage debate
Summary
The committee approved an eight-year SFO advertising lease awarding Clear Channel a $10 million minimum annual guarantee; the Budget Analyst recommended against the MAG-only structure and the committee recorded a roll-call with two ayes and one no among participating supervisors.
The Budget & Finance Subcommittee on May 1 approved an advertising lease between the Airport Commission and Clear Channel Airports for an eight‑year term with a stated minimum annual guarantee (MAG) of $10,000,000.
Airport Director Mike Martin presented the procurement rationale: the new contract reduces total advertising locations from 286 to 179, bans jumbo billboards and certain ad types, and — in his judgment — locks in a high MAG that protects the airport in a period of limited passenger growth. He said SFO’s passenger traffic is approximately 44 million and that the contract would secure $80 million in MAG payments over eight years. Martin said a MAG-only structure limited the number of advertising locations and protected the airport from downside risk.
Budget and Legislative Analyst Harvey Rose and Deborah Newman summarized the analyst’s independent review and recommended disapproval of a MAG-only contract. The analysts’ report found that the vast majority of other U.S. airport advertising contracts use a dual structure (MAG plus a percentage of gross revenue, whichever is higher) and in past years San Francisco sometimes received more revenue under a percentage-rent calculation. The analysts also flagged that digital displays can increase the capacity to sell ads, which could make a MAG-only structure leave upside revenue on the table.
The hearing included robust public comment from Clear Channel representatives emphasizing local-hire practices, trade-union and community speakers supporting Clear Channel because of local subcontracting and bilingual outreach, and representatives of competing bidders urging the combined MAG-plus-percentage approach. JCDecaux’s representative and the analyst’s office warned that future digital conversions could significantly increase ad revenues and that the city should not forgo its share of upside.
Supervisor Eric Marr moved approval of the contract; the committee recorded a roll call: Marr — Aye; Avalos — No; Farrell — Aye. The motion passed. The Budget Analyst’s office recorded its formal recommendation to disapprove in the record; the committee nonetheless voted to approve the airport director’s recommended contract arrangement.
