Thursday, October 3, 2013

UPDATE: Arizona's Privies Privatized; Companies Receive $18.3M+, Return At Least $365,000 For Advertising Rights; Questions Remain About Contributions To Governor's Super PAC

The agreement between the State of Arizona and a Tennessee-based company to privatize control of Arizona's 25 highway rest areas is now finalized, and details of the arrangement are beginning to emerge.

Arizona's Politics has reported extensively on the five-year agreement between the Arizona Department of Transportation and the Infrastructure Corporation of America ("ICA"), and the unusual timing of ICA's contributions to Arizona Governor Jan Brewer's personal Super PAC ("Jan PAC").

What was not known until Tuesday's announcement that the contract was finalized and moving forward were the details.  ADOT provided Arizona's Politics with a full copy of the contract, the price form, and other documents.

Along with the advertised 5-year term of the contract, the agreement also has a renewal option for another five years.  The news announcement from ADOT acknowledges this, but uses the 10-year figure to boast that "ADOT is guaranteed at least $1 million over the next 10 years from revenues generated from advertising and sponsorships."

However, over the five year of the initial contract, the state is only guaranteed only $365,000, while paying out more than $18.3 million to ICA for maintenance and operations.  And, years 6-10 only guarantee another $610,000, leaving the number shy (by $25,000) of the $1 million mentioned in the news release.

The guaranteed minimum from advertising is based upon a split of gross advertising revenue with ICA/ITSAA.  For "advertising", the state's portion starts at 10%, and climbs to 15% in year 5 (up to 22.5% in "year 10));  for "sponsorship", the state's portion starts at 10%, and climbs to 40% in year 4 (where it stays through "year 10").

It is difficult to establish whether the $39.5 million paid by ADOT to ICA for maintenance and operations over the 10-year period is less than, equal to, or greater than what would be paid out to the company(ies) currently providing similar services to the state.  (Arizona's Politics has asked ADOT for that information.)

ICA and its advertising partner (ITSAA) will be able to sell both advertising at the rest areas and - more importantly - "sponsorships" of the rest areas that will be promoted along the interstates and the state highways themselves (subject to approval).

As noted previously, the contract incorporates a number of guidelines on what may or may not be advertised.  There will be no ads for products or services with sexual overtones, concerning abortion or euthanasia, alcohol, tobacco, firearms, political candidates or ballot measures, nor ads that denigrate other groups (on basis of gender, religion, race, ethnicity or political affiliation).

Not all 25 (ADOT sometimes counts a pair of rest areas as being one unit, sometimes as two) rest areas have been turned over to ICA control just yet; some have existing contracts that will be turned over as those expire during the next few months.

After reviewing Arizona Govenor Jan Brewer's Super PAC's FEC (Federal Election Commission) filings, Arizona's Politics raised questions about ICA's apparent Tennessee fundraiser for Brewer (who appointed the ADOT Director) this past February, the very week that ADOT put out the Request For Proposals.  (Even the RFP was prompted by ICA's "unsolicited proposal" in 2011 for a public-private partership on operating the rest areas.)  ICA was the only company to submit a bid for the full contract.

ICA made a $10,000 contribution to Jan PAC and made matching $6,435 in-kind contributions (marked "transportation") for Jan PAC and the Republican Governors' Association ("RGA").  In addition, Jan PAC received some $60,000 in additional contributions from Tennesseans and Tennessee-based companies that same week.  (Brewer traveled from Phoenix to Washington for an RGA conference that week, and apparently stopped in Tennessee.)

We welcome your comments about this post. Or, if you have something unrelated on your mind, please e-mail to info-at-arizonaspolitics-dot-com or call 602-799-7025. Thanks.

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