AGENDA ITEM
TO: HONORABLE MAYOR
AND MEMBERS OF THE CITY COUNCIL
FROM: CARLO TOMAINO
CITY MANAGER
SUBJECT: PROPOSED DIGITAL BILLBOARD SITE LEASE AGREEMENT WITH CLEAR CHANNEL OUTDOOR LIMITED LIABILITYCOMPANY
Summary:
The proposed agreement authorizes the City to enter into a 20-year lease with Clear Channel Outdoor, LLC (“Clear Channel”) to remove the existing City-owned billboard at 3100 California Avenue and replace it with a modern, industry-standard digital display. The lease provides a stable and predictable revenue source through a 20-year initial term, including a Minimum Annual Guarantee in base rent beginning at $150,000 in Year 1 and $225,000 annually in Years 2-5, with scheduled escalations every five years. The agreement also provides for a 35% revenue sharing component that enables the City to receive a higher amount when net advertising revenue exceeds the minimum annual guarantee. The agreement transfers operational and market risk to Clear Channel while helping offset ongoing increases in City operations and maintenance costs. By modernizing an existing economic development tool without requiring additional municipal capital or staffing, the proposed lease agreement strengthens long-term fiscal stability and supports continued promotion of the Auto Center and local businesses.
Strategic Plan Goal(s):
Goal No. 1 Financial Stability: Ensure the City’s long-term financial stability and resilience.
Goal No. 3 Economic & Downtown Development: Improve the local economy, support local businesses, and create a vibrant downtown core.
Goal No. 4 Infrastructure: Maintain and Improve the City’s physical infrastructure, waste system, and recreational spaces.
Recommendation(s):
Approve the proposed Digital Billboard Site Lease Agreement between the City of Signal Hill and Clear Channel Outdoor, LLC for the removal of the existing City-owned billboard and installation, operation, and maintenance of a new digital billboard at 3100 California Avenue.
Fiscal Impact:
The proposed lease agreement establishes a stable and predictable positive revenue stream for the City over a 20-year initial term. The agreement provides one 10-year term extension. The agreement includes a Minimum Annual Guarantee in base rent beginning at $150,000 in Year 1 and $225,000 annually in Years 2 through 5, with scheduled ten percent escalations every five years thereafter. Based on the Minimum Annual Guarantee schedule, the City would receive more than $5 million in guaranteed payments over the initial 20-year term, not including a potential term extension of 10 years. If 35 percent of net advertising revenue exceeds the annual minimum guarantee in any year, the City will receive the higher amount.
Clear Channel would fund all demolition, permitting, construction, utilities, maintenance, and capital upgrades associated with the billboard. The City would not incur capital expenditures or operational staffing costs related to billboard operations. Over the life of the agreement, the guaranteed payments provide a dependable and escalating revenue source that supports long-term fiscal stability and helps offset rising operational and maintenance costs, while transferring operational and market risk to the private sector.
Background:
The City-owned digital billboard at 3100 California Avenue, adjacent to the I-405 Freeway, was constructed in 1993 as part of the Signal Hill Auto Center redevelopment efforts. The Auto Center Association originally owned and operated the structure. In 2011, the City acquired the underlying property. In 2020, during the COVID-19 pandemic, the City acquired the billboard itself to ensure continued promotion of the Auto Center and other local businesses.
Since acquiring the billboard, the City has utilized the structure to promote Auto Center dealerships, support other Signal Hill businesses, and display public service announcements and City programs. The sign serves as a primary marketing tool for the Auto Center, which generates a significant portion of the City’s sales tax revenue. Given Signal Hill’s limited geographic size of approximately 2.2 square miles and limited opportunities for new large-scale commercial development, the City must preserve and strengthen existing revenue-generating commercial districts. The freeway-oriented billboard plays an important role in supporting this economic base.
In recent years, the regulatory framework governing freeway-adjacent signage has changed. The California Outdoor Advertising Act and related federal-state agreements restrict new off-premises advertising displays adjacent to landscaped freeways and impose height and location limitations. The Signal Hill billboard historically operated under redevelopment-related statutory provisions. When redevelopment agency authority expired and related statutory exemptions sunset, those protections no longer applied. In response, the City evaluated long-term options to preserve freeway-oriented advertising at this location while maintaining legal compliance and fiscal responsibility.
The City negotiated a long-term lease agreement with Clear Channel to replace the existing structure with a modern digital display operated by an experienced outdoor advertising company. Approval of the lease agreement does not grant development entitlements. Clear Channel must obtain all required municipal, state, and federal approvals before constructing and operating the new billboard. This action replaces an existing billboard at the same location and does not introduce new signage within the City.
Analysis:
As staff explored options related to the billboard, it became apparent that the existing billboard no longer reflects current industry standards. The billboard’s size, cabinet configuration, and display format limit its appeal to regional and national advertisers and restrict revenue potential. Modern advertisers seek standardized digital display dimensions, updated LED technology, and professional sales networks that the current City-operated structure does not provide. Given the functional limitations of the existing billboard, staff began considering options that would leverage this asset and discussed the possibility of entering into an agreement with a private operator.
To address these limitations, the City evaluated options to modernize the structure while maintaining regulatory compliance and securing long-term fiscal stability. Staff reviewed how similarly situated cities structure digital billboard agreements and examined arrangements with established outdoor advertising operators active in the Southern California market. Rather than continue operating the billboard internally or removing it entirely, the City pursued a lease structure that would transfer operational responsibility to a qualified outdoor advertising company with demonstrated expertise in this specialized market.
After considering options for potential billboard operators, staff began discussions with Clear Channel is one of the nation’s largest and most established outdoor advertising companies. The company operates thousands of digital and static displays across major metropolitan markets and maintains extensive experience in permitting, constructing, marketing, and maintaining freeway-oriented digital signage. Clear Channel brings established advertiser relationships, professional sales capacity, digital content management systems, and technical expertise that the City does not maintain internally.
Proposed Lease Agreement
The proposed agreement allows the City to modernize an ageing structure without committing municipal capital funds. The proposed replacement billboard would include two digital display faces designed to meet current industry standards, improving visibility, advertiser demand, and long-term competitiveness. Clear Channel would remove the existing structure at its sole cost and will fund all permitting, construction, utilities, maintenance, and ongoing operational expenses. The agreement requires Clear Channel to maintain the digital display in full operating condition and to install capital improvements or upgraded digital components as necessary to ensure the billboard remains consistent with industry best practices throughout the lease term. These lease provisions prevent technological obsolescence and ensure that the asset continues to perform as a modern revenue-producing structure over time.
The agreement also preserves important operational safeguards. The company must comply with detailed advertising industry standards and remove non-compliant advertisements. The agreement also includes remedies if needed. To protect the City’s financial interests, the agreement grants audit rights that allow the City to review advertising revenue records and verify compliance with the Minimum Annual Guarantee and revenue-sharing provisions. If an audit reveals material underpayment, Clear Channel must reimburse the City and, in certain circumstances, pay the City’s audit costs.
The agreement further requires Clear Channel to carry insurance coverage and to indemnify the City against claims arising from operation of the billboard. At the conclusion of the lease term, Clear Channel must remove its improvements and restore the site in accordance with the agreement, ensuring that the City retains long-term control of the property.
Long-Term Revenue Stabilization
The City continues to experience ongoing increases in operations and maintenance costs, including utilities, infrastructure maintenance, contractual services, and personnel-related expenses. These structural cost pressures require the City to secure stable and diversified revenue sources to sustain existing service levels. Given Signal Hill’s limited land area and constrained opportunities for immediate significant commercial development, the City must manage and modernize existing revenue-producing assets to maintain fiscal stability.
The proposed lease establishes a stable and predictable revenue source for the City through a 20-year initial term, with one optional 10-year extension subject to City approval. The agreement provides a Minimum Annual Guarantee beginning at $150,000 in Year 1; $225,000 annually in Years 2 through 5; and a ten percent escalation every five years thereafter. Over the 20-year initial term, these guaranteed payments create a dependable and escalating revenue stream. Should the 35 percent of net advertising revenue exceed the annual minimum guarantee in any year, Clear Channel must pay the higher amount.
Under the proposed lease, Clear Channel would also assume all operational and financial risks. The City would not incur capital expenditures or staffing increases associated with billboard operations.
Additional Public Benefits and Community Protections
The agreement preserves important public benefits and community safeguards. Clear Channel will provide advertising time during a lease year for City public service messaging at no cost on a space available basis, and will commit to at least five two-week periods to display the City’s chosen announcements. Clear Channel will also display emergency and public safety alerts as needed. The agreement also prohibits advertising related to tobacco products, illegal drugs, obscene material, and certain adult-oriented content. If Clear Channel fails to remove noncompliant advertising within the required timeframe, the agreement authorizes monetary penalties. Lastly, the agreement also requires Clear Channel to offer a minimum ten percent advertising discount to Signal Hill businesses and to enter into a companion agreement that provides 50/50 revenue sharing for transit shelters. Staff will present the Transit Shelter Management Agreement for consideration at a future meeting.
Next Steps
Clear Channel must obtain all required permits and approvals associated with demolition for removal of the existing billboard structure, construction and operation of the replacement digital billboard, including building and electrical permits and any applicable state or federal approvals. The City would process these permits through its standard review procedures and coordinate closely with Clear Channel to ensure compliance with all applicable municipal, state, and federal requirements. Any potentially required environmental review would occur as part of the development entitlement and permitting process. Clear Channel has extensive experience working with the State on the required approvals and estimates that process could take an additional six months or more.
Environmental Assessment:
The requested City Council action is not a commitment or approval of any development plan at this time. (See State CEQA Guidelines, § 15352(a).) Approval of the replacement digital billboard may occur only upon satisfactory completion of environmental review in compliance with the California Environmental Quality Act (CEQA). This lease agreement does not bind any party, or commit to any definite course of action, prior to CEQA compliance. Further, this action shall not restrict the lead agency for the replacement digital billboard from considering any feasible mitigation measures and alternatives, including the “no project” alternative. (State CEQA Guidelines, § 15004(b)(2)(B).) The proposed lease agreement shall also not restrict the lead agency for CEQA review of the replacement digital billboard project from denying the approval of such project.
Conclusion
The proposed lease agreement represents a strategic modernization of an existing City asset. By replacing an outdated billboard structure with a modern, industry-standard digital display operated by an experienced outdoor advertising company, the City strengthens a long-standing economic development tool while maintaining regulatory compliance and operational safeguards. The agreement secures a predictable and escalating revenue stream over a 20-year term, transfers operational and financial risk to the private sector, and preserves meaningful City oversight, content controls, and financial transparency. At a time when the City continues to experience rising operational and maintenance costs, this structured revenue arrangement supports long-term fiscal stability without requiring additional municipal capital investment or staffing resources.
Reviewed for Fiscal Impact:
_________________________
Siamlu Cox
Administrative Services Officer/Finance Director
Attachment:
A. Digital Billboard Site Lease Agreement