January 18, 2005 Tuesday
SECTION: NATIONAL; Pg. 1
LENGTH: 2204 words
HEADLINE: City's trash bin contract called wasteful;
Other firms say they can do more for less
BYLINE: By Gordon Russell, Staff writer
As part of a no-bid deal with a local advertising company that enjoys close ties to the Nagin administration, the city of New Orleans paid $450,000 for garbage cans similar to those that competing businesses routinely provide for free.
Representatives of at least three companies that sell advertising on trash cans like those now dotting the streets of New Orleans say they would have been eager to provide the cans at no cost in exchange for the right to sell the ads that go in panels on the four-sided bins. To boot, two of the three said they also would have given the city a bigger piece of the ad revenue than the 15 percent the city is getting from the company that got the deal, Niche Marketing USA.
Nagin's chief administrative officer, Charles Rice, defended the city's decision to buy the cans, saying among other things that bidding would have been unfair to Niche, which he said submitted to the city the idea of advertising on cans.
But one of the three companies that said it would have provided the cans for free, Verres Media, submitted a proposal about two years ago that mentioned its ability to provide cans with advertising. At the time, however, the city was looking for a wide-ranging branding and marketing strategy, not trash cans, and the bid was overlooked.
Had the city gone out to bid on the trash cans, Verres officials said they would have resubmitted their previous offer, which would have saved the city $450,000 up front, and likely generated more money down the road.
And had the city entertained bids other than the one from Niche Marketing, it also would have heard from Eyeball Media, based in Atlanta, according to that firm's president, Richard Mashburn, who called Niche's contract "a sweetheart deal."
Eyeball provides similar cans with advertising to the city of Atlanta as well as private businesses. The company pays for the cans, maintains them and shares anywhere from 15 percent to 25 percent of the ad revenue with the client. Typically, cities get 25 percent, Mashburn said.
Mashburn, who checked out Niche's cans on a recent trip to New Orleans, said he intends to send a letter to city officials offering to help sell ads and giving the city a 25 percent cut.
"The way I look at it, the more the merrier," Mashburn said. "We would love the opportunity to come down there and sell."
City Media Concepts, a firm based in New York City that makes advertising cans similar to those the city bought from Niche, also provides and maintains similar receptacles at no cost. The firm typically shares 10 percent of its revenue.
Better terms from other vendors isn't the only problem rivals are finding with the Niche deal. City Media filed a federal lawsuit against Niche in October alleging that Niche's cans parroted City Media's design and concept. The suit says City Media's "trade dress" and trademark have been violated -- in essence, that Niche appropriated a trash can with a certain look and features that were pioneered by City Media.
The suit asks the court to seize all litter cans provided by Niche and to order the company to change its design.
City Media officials have said they would allow Niche to keep its cans on the street if the company paid an unspecified licensing fee. Niche officials have countered that the case has no merit. No trial date has been set.
Instead of conducting a bid process, the city opted to deal exclusively with Niche, which has ties to the brother of Chief Administrative Officer Charles Rice as well as to a lawyer who worked for Rice when he was city attorney.
Not only has the city paid for the cans -- which, at $750 a pop, have cost a total of $450,000 -- but Niche is forking over only 15 percent of the revenue from its sales, which so far have been less than brisk.
The city recently received the first of the royalty checks that are supposed to arrive twice a year. The total: $5,969. At the current pace, it will take the city 38 years to recoup its investment.
It is unknown how many ads the company sold to make that figure. Niche Chief Executive Officer Rodney Whitney refused to answer questions, but sales appear very slow: It is difficult to find any ads that are not "house ads": those that promote cleanliness, a donor to the "Imagine It Clean" campaign or Niche itself.
In Atlanta, Mashburn said he has been able to fill 63 percent of his ad space in nine months. If his company had access to the 600 cans in New Orleans and was able to sell ads at similar rates and at a similar pace, New Orleans would receive a check totaling almost $100,000 every six months.
Mashburn also noted that the city's decision to finance the purchase of the cans may have contributed to the slow pace of sales because Niche isn't on the hook for any real costs.
"If everything's coming out of your own pocket, you've got a real incentive to sell," Mashburn said. "Otherwise, you die."
When Christian Nardi of Verres Media saw the new trash cans popping up all over downtown New Orleans, he got a queasy feeling. That was my idea, he thought. When he learned about the terms the city had settled on, the queasiness turned to anger.
"I thought I got the shaft," Nardi said. "I felt like all the work I did on the proposal was for the city to take my idea and give it to someone else."
Verres' proposal, presented in early 2003 in response to a call by the Nagin administration for marketing ideas, centered on "traffic channelers," barricades with advertising used in airports and on outdoor walkways to steer pedestrians.
The process drew five responses, none of which the city pursued.
Verres' proposal also featured a picture of a trash can with four ad panels similar to those the city began buying from Niche last summer, and noted that the company could provide them as well.
Nardi said he made clear to city officials that the cans would be made available to the city under the same terms he offered for the traffic channelers. His terms: Give the cans to the city for free, maintain them and give the city 40 percent of the revenue from ad sales.
Nardi said he and an uncle who is his business partner "were both in awe of the idea that teachers are buying their own paper and books for students, and meanwhile the city is spending $750 apiece on trash cans that we offered the city for free."
But officials in the Nagin administration vigorously dispute elements of Nardi's account. In particular, they say, Nardi emphasized channelers, not trash cans, and that he never explained in writing the terms under which he could provide the cans.
"I read through every one of those proposals in exhaustive detail, and I would never remember he presented trash cans," said marketing director Matt Konigsmark, who coordinated the request for proposals for branding ideas. Konigsmark was not involved in last year's procurement of the trash cans.
"It is clearly an afterthought," Konigsmark added. "This whole proposal is focused on channelers, and then there's one page that said, 'Oh, by the way, we can do this.' There are 20 pages in the book, and 19 of them were on the channelers."
A review of the document shows that the garbage cans are indeed mentioned only in passing. The proposal also does not state that the financial terms would be the same as for the channelers.
But Nardi said he mentioned the garbage cans when he delivered the document to Konigsmark and made clear that the same terms would apply. Konigsmark said he does not recall such a conversation, and that even if it occurred, the members of the evaluation committee, which included Rice, would have relied on the written proposal to make its decisions.
"I certainly wasn't aware of the financial aspects of it," Konigsmark said. "He may have been willing to do it on those terms, but he didn't make that clear."
Konigsmark added that he read certain aspects of Nardi's proposal to mean that the city would have to help the company sell ads. "We're not really staffed to do that," he said.
Nardi said he was never expecting that kind of help. Rather, he wanted the city to assist in smaller ways, such as giving the company a letter it could use when soliciting potential customers.
"We wanted an endorsement," Nardi said. "We wanted their contacts, not for them to help us sell."
Rice has publicly defended the decision not to seek a better deal for the city through competitive bidding. After all, he said, the idea of trash cans with advertising on them occurred to him only because Niche representatives gave him and other city officials a demonstration of the cans, purported to be "bombproof."
In fact, that anti-terrorism feature makes the cans different from the cans that Niche's competitors offer for free, Rice said through a spokeswoman. But even if Niche's cans cost more than others, many of which claim only to be "bomb-
resistant," Niche's deal is unusual in that the company was not required to spend any money up front.
Rice said he was impressed with the cans and decided to have the city's trash collector, Waste Management, buy 600 of them, to be reimbursed by the city.
The pass-through arrangement freed Rice from having to follow public bid laws. Though he could have conducted one anyway, he said a bid process would have been unfair to Niche.
"Look at this realistically," Rice said in a November interview. "If you brought me an idea, would it be fair for me to steal it and profit from it? This was their idea."
Last week, Rice took a slightly different tack, saying his decision to deal with Niche -- which is owned by an African-American, Whitney -- stemmed from a desire to fulfill the mayor's goal of nurturing minority-owned businesses.
"The mayor stated he wanted to increase and build the African-American middle class and to increase African-American entrepreneurship," Rice said. "This was a young, energetic African-American company, and in keeping with the mayor's vision, we decided to work with them."
But though Rice said the city's dealings with Niche are purely about promoting black business development, there are close connections between Rice and people affiliated with the company.
Terrence Rice, Charles Rice's brother, was working for the firm when the deal was announced, the company president said at the time. The company's chief executive later denied that Terrence Rice had worked with Niche.
Terrence Rice has not responded to questions about his relationship with the company. Charles Rice, meanwhile, refused to take questions on the matter, referring them to his brother and company officials.
In addition, Bobby Smith, whom Charles Rice hired as an assistant city attorney shortly after his own installation as city attorney in 2002, left City Hall in March 2004 and now works for Niche Marketing.
Smith's departure from City Hall, where he was earning $61,000, came about three weeks after Niche Marketing was incorporated, according to state records.
Nagin spokeswoman Tami Frazier said Rice was unaware of Smith's relationship with Niche. She also noted that Rice was not city attorney at the time of Smith's departure and said Rice had not kept track of him.
Asked whether he thought the purchase was a good one, Nagin said: "When I reviewed this transaction many months ago it looked like a good deal to me. I also recall this program being funded by private dollars. I have no other comments since I have not looked into the specifics in quite some time."
In fact, half the money spent on the cans came directly from the city's coffers. The other half came from the "Imagine It Clean" fund, which received large contributions from city contractors Waste Management, Browning-Ferris Industries and Harrah's New Orleans. The money was spent at the city's discretion.
The controversy about the cans goes beyond whether the deal was a cozy one. Some New Orleanians also are offended by the cans themselves.
City Councilwoman Jacquelyn Brechtel Clarkson, who represents the French Quarter and is generally a staunch ally of Nagin, wrote Sanitation Director Veronica White a letter in November asking that the so-
called "Jazzy Cans" be removed from the Quarter. Clarkson said she had received several complaints about the commercial cans.
White responded that the cans "represent part of the Mayor's 'Imagine it Clean' campaign and as such it is not at my discretion to remove them without his authority." White said she would forward Clarkson's request to the mayor.
Clarkson said she had not heard back from the mayor and doesn't expect to. "He has more important things to do," she said.
Clarkson's efforts were cheered by some Quarter activists who said the cans are out of place, only more so since they are often placed near ad-free trash cans that were hailed at the time of their installation, just a few years ago, for being good-looking receptacles adorned only with a fleur-de-lis.
Nathan Chapman, president of the French Quarter neighborhood group Vieux Carre Property Owners, Residents and Associates, lauded Clarkson for her efforts to rid the area of the newer, more commercial cans.
"We do feel they're not fitting within the historic ambiance of our city's most historic district," he said. "I just think the French Quarter is our showcase for the world, and it cheapens our image. Advertising on trash cans is not the symbol of the city that we ought to be putting out there."
Licensing contract awarded: An article in Tuesday's editions about a contract for downtown trash cans that display advertising erred in saying that the city of New Orleans had not picked a contractor to develop a separate sponsoring and licensing program for products and events bearing the city's imprimatur. In fact, the city last year awarded such a contract to a joint venture comprised of three firms: DD Marketing Inc. of Pueblo, Colo.; Trumpet LLC, a New Orleans advertising agency; and Rehage Entertainment Inc., a promotions company with offices in New Orleans and New York. (1/20/2005)
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