Details of billboard deal raise questions

John Arena, left, and Scott Waguespack were among the six Chicago aldermen who last year voted against the city's no-bid billboard deal. "We are getting totally ripped off," Waguespack says of the 20-year contract. (Nancy Stone, Chicago Tribune)

In a summary of the deal handed out to aldermen, the city stated that, "Interstate, at no cost to the city, will install, maintain and operate the network" adding later that "initial installation costs are approximately $30 million, all of which will be paid by Interstate."

Although Interstate-JCDecaux will spend the money initially, the contract shows that beginning in 2014, the joint venture begins collecting more than $3.4 million a year for eight years to regain its capital investment. A few years later, according to the contract, the firm begins collecting more than $2 million a year to recoup the costs of replacing the signs, which it must do every nine years.

In all, the firm stands to collect $41.8 million in "capitalized cost recovery," which also will be taken off the top by the firm before the city sees any share of gross revenues.

Scott said there is no contradiction because "there are no dollars coming out of the city's pocket, there is no cash."

As with other parts of the agreement, the city's $25 million in upfront cash and the guaranteed $155 million spread over 20 years are based on how many signs the company is allowed to put up.

But so far, the city doesn't have final approval for its program from Illinois officials who enforce both the state's regulations on highway advertising as well as the sign restrictions under the federal Highway Beautification Act. The various regulations govern everything from the type of property that signs can be placed upon to their size and how far apart they have to be from each other and from roadways.

Late last month, officials with the state Department of Transportation and the city reached an agreement under which the state would approve placement of 25 of the 34 billboards, though neither side has explained which sign locations would get the go-ahead. City officials have said they expect to ultimately get approval for all the signs.

However the deal is contingent on Quinn signing legislation that waives the state's billboard regulations for Chicago's program, as long as there is no conflict with the federal law. The state's billboard trade group opposed the special legislation for Chicago because it would create an unlevel playing field for everyone else, said Rose Trader, executive director of the Outdoor Advertising Association of Illinois.

Some Emanuel supporters have contended that opposition to the deal is being stoked by competing billboard operators. And the administration has pushed back hard at criticism from some aldermen who compared the deal with the notorious agreement Daley reached in 2008 with a private firm to lease the city's parking meters, which was rushed through City Council with little time for examination.

Emanuel officials say the billboard deal was more transparent in part because it came out of the city's 2011 open invitation to about 6,000 city vendors to pitch any ideas they had for marketing on city property.

Interstate-JCDecaux was one of five companies that came up with a digital billboard plan in response to that request, and their proposal was selected as the best one, Emanuel spokeswoman Kathleen Strand has said. But that invitation bypassed the city's competitive bidding process. The administration rejected the Tribune's public records request for communications between the potential vendors and the city.

The newspaper has previously reported that executives with Interstate donated $10,000 to Emanuel's campaign for mayor, half coming from CEO Drew Katz, a frequent donor to Democrats, according to state and federal records.

Interstate's Chicago lobbyist is Neal & Leroy, the firm headed by Langdon Neal, who is chairman of the Chicago Board of Election Commissioners. Neal was an attorney representing JCDecaux when it won a much-criticized contract from the Daley administration in 2001 to put up bus shelters around the city.

Tribune reporter John Byrne contributed.

jchase@tribune.com