BILL ANALYSIS                                                                                                                                                                                                    Ó



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          SENATE THIRD READING
          SB 31 (Padilla)
          As Amended  June 6, 2013
          Majority vote 

           SENATE VOTE  :37-0  
           
           GOVERNMENTAL ORGANIZATION  16-0    APPROPRIATIONS   17-0        
           
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          |Ayes:|Hall, Nestande, Bigelow,  |Ayes:|Gatto, Harkey, Bigelow,   |
          |     |Campos, Chesbro, Cooley,  |     |Bocanegra, Bradford, Ian  |
          |     |Gray, Hagman, Roger       |     |Calderon, Campos,         |
          |     |Hernández, Jones,         |     |Donnelly, Eggman, Gomez,  |
          |     |Jones-Sawyer, Levine,     |     |Hall, Holden, Linder,     |
          |     |Medina, Perea, V. Manuel  |     |Pan, Quirk, Wagner, Weber |
          |     |Pérez, Salas              |     |                          |
          |     |                          |     |                          |
           ----------------------------------------------------------------- 
           SUMMARY  :  Clarifies aspects of the arena exemption to the  
          Outdoor Advertising Act (OAA). Specifically,  this bill  :   

          1)Recasts the arena advertising exception to exempt from the OAA  
            specified advertising displays authorized before January 1,  
            2019, by local ordinance, at a venue with a capacity of 15,000  
            seats or more that is capable of providing a permanent venue  
            for professional sports.

          2)Requires the local government to adopt an ordinance  
            authorizing the advertising displays on the premise of the  
            arena with specific regulations including:

             a)   Number of signs and total signage area allowed.

             b)   Maximum individual signage area.

             c)   Minimum sign separation.

             d)   Illumination restrictions and regulations, including  
               signage refresh rate, scrolling, and brightness.

             e)   Illuminated sign hours of operation.

          3)Defines the premise of the arena to potentially include a  








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            district encompassing the arena but not extending more than  
            1,000 feet beyond the arena.

          4)Authorizes advertising displays to advertise any products,  
            goods, or services sold within that area on a regular basis,  
            or marketed or promoted in that area pursuant to a sponsorship  
            marketing plan, except distilled spirits, tobacco, firearms,  
            or sexually explicit material.

          5)Defines a "sponsorship marketing plan" as an agreement between  
            the property owner, facility owner, facility operator, or  
            occupant of the premises of an arena and a sponsor pursuant to  
            which the sponsor is allowed to include its logo, slogan, or  
            advertising displays and that meets both of the following  
            conditions:

             a)   The sponsorship marketing plan is for a period of not  
               less than one year.

             b)   The sponsorship marketing plan grants the sponsor the  
               opportunity to display its logo, slogan, or advertising in  
               the interior of structures on the premises of an arena, or  
               conduct promotions, public relations, or marketing  
               activities on the premises of an arena.

          6)Allows a qualifying arena to place up to two displays at  
            approaching highway off ramps and treat them as though they  
            are arena displays as long as the displays are authorized by a  
            local ordinance as of January 1, 2019.

          7)Requires the California Department of Transportation  
            (Caltrans) to review and certify that the proposed displays  
            and sign ordinance meet the minimum statutory requirements.

          8)Requires the owner of these displays either to provide or fund  
            the installation of one changeable message sign to accommodate  
            public service messages such as "Amber Alerts" and emergency  
            disaster communications.

          9)Specifies that if an advertising display is subject to a  
            notice from the United States Secretary of Transportation that  
            the operation of that display will result in the reduction of  
            federal funds, as provided, authorization of the display would  
            cease 60 days after the owner of the display receives the  








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            notice.

          10) Prohibits, among other things, Caltrans from assuming any  
            liability in connection with cessation of operation or removal  
            of an advertising display.

          11) Specifies that an advertising display that was lawfully  
            erected on or before December 31, 2013, in conformity with the  
            law relating to the exemption for advertising displays on  
            arenas, to remain authorized.

           FISCAL EFFECT  :  According to the Assembly Appropriations  
          Committee:

          1)Initial Caltrans costs of approximately $75,000 to conduct any  
            up-front coordination activities, revise existing regulations  
            regarding outdoor advertising, and inspect newly erected signs  
            (State Highway Account).  

          2)Ongoing Caltrans staff costs of approximately $35,000 annually  
            to consult with the Secretary of Transportation in reviewing  
            any proposed displays and ordinances, and to annually inspect  
            existing signs (State Highway Account).

          3)Minor costs to the Secretary of Transportation to review local  
            ordinances.

           COMMENTS  :   

           Purpose of the bill  :  According to the author, this bill would  
          provide local control and would establish statewide guidelines  
          for on-premise advertising displays at professional sports  
          facilities. The author further states that professional sports  
          teams and facilities are important components of California's  
          economy at the local level and statewide.  From San Francisco to  
          San Diego, there are 18 professional sports teams that play in  
          over 15 different professional sports facilities.  Additional  
          professional sports facilities are planned.

          The cost of building, operating, and maintaining professional  
          sports facilities is rising and while public funding was  
          traditionally a large portion of the necessary financing, today  
          funding comes from many different sources such as naming rights,  
          ticket sales, and concessions.  A growing revenue source funding  








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          professional sports arenas is advertising, both inside and  
          outside the arena.

          This bill is important to enable current and future arenas to  
          tap into this increasingly critical financing source to backfill  
          the decrease in public funding available for such purposes. 

           Background  :  The current arena exemption contains some  
          ambiguities which, if left unaddressed, appeared headed to  
          litigation.  For example, the current language allows arena  
          displays to advertise products, goods, or services sold on the  
          premises of an arena.  Some have argued that this can include  
          any products or services that are described in a sponsorship  
          marketing plan agreed to on the arena premises.  Caltrans  
          interprets current law as only allowing the advertisement of  
          products or services actually sold on premises, such as those  
          products sold at refreshment bars within the arena.  In this  
          example, it seems responsible to clarify statute and avoid  
          costly legal costs for the state, because if the intent of the  
          exemption is to help arena developers fund arena construction,  
          then existing law should make available to these developers the  
          most effective tools possible.

          In addition, some argue that further clarification regarding the  
          state's role in permitting these signs is necessary.  Because  
          the OAA in many ways mirrors federal law, exemptions from the  
          OAA can jeopardize the state's receipt of federal highway  
          funding.  While the regulation of on-premise displays is  
          generally a local matter, some argue that review at the state  
          level is necessary due to the fact that these signs can possibly  
          have statewide implications such as a reduction in federal aid  
          highway funds.  This bill addresses this concern by requiring  
          Caltrans to review the locally-adopted ordinance permitting the  
          signs.
                                                                
           Arguments in Support  :  Supporters argue that this measure will  
          provide much needed clarity and flexibility in connection with  
          the construction and operation of stadiums and arenas throughout  
          California which serves as a major catalyst for economic  
          activity.  

          AEG argues that signage opportunities in and around stadiums,  
          arenas and sports and entertainment districts are an important  
          component of the integrated marketing packages that are offered  








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          to corporate sponsors.  Most specifically, freeway visible  
          signage has become a standard part of the business plan for any  
          new stadium or arena project.  The OAA imposes significant  
          constraints on signage displays that are typically part of the  
          bundle of rights offered to sports facility sponsors.  

          In response to the legal uncertainty posed by these  
          restrictions, the state adopted an "arena exception" to help  
          create flexibility for arenas to advertise more broadly under  
          the OAA.  It has become clear, however, that this legislation,  
          although well intended, is not sufficiently clear and does not  
          allow the breadth of advertising that in practice is necessary  
          given the realities of building, operating and updating these  
          facilities around the state.  Without the relief offered by this  
          bill, the current provisions of the OAA are likely to stifle  
          future construction and renovation projects and to hamper the  
          continued success of facilities already in operation.

          The Greater Los Angeles African American Chamber of Commerce  
          further argues that to fund the construction and marketing of  
          new sports venues and districts, many sports franchises and  
          sports arena and stadium developers are turning to sponsors and  
          "sponsorship marketing agreements."  Long-term agreements with  
          commercial sponsors are a critical component of project funding  
          to build and operate arenas and stadiums.  Advertising near  
          arenas and stadiums, including at the highways exits fans use to  
          get to the arenas and stadiums, is a major component of these  
          agreements. 

          Some arenas and stadiums are also developed as part of  
          integrated sports and entertainment districts, which support the  
          financial viability of a project.  These sports arenas, stadiums  
          and sports and entertainment districts provide much needed tax  
          revenue and economic activity to cities and counties throughout  
          California. 

           Arguments in Opposition  : The California State Outdoor  
          Advertising Association (CSOAA) argues that this bill would  
          violate Federal Regulations adopted under the Highway  
          Beautification Act, 23 United States Code (U.S.C.) Section 131  
          ("HBA"), which in turn would jeopardize 10% of California's  
          federal highway funding.  This bill permits signs that  
          advertise, "any products, goods, or services marketed or  
          promoted on the premises" of a professional sports arenas that  








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          seats 15,000 or more spectators.  Any company whose "logo,  
          slogan, or advertising" is displayed at the arena thus is  
          allowed to engage in what would otherwise be offsite  
          advertising.  More specifically, this bill would permit signs  
          that advertise the products of a sportswear company, car  
          manufacturer or an airline whose logo is displayed inside the  
          arena.  The bill therefore would permit signs advertising such  
          sponsors as Adidas, Mercedes, or Virgin Atlantic.  Such signs  
          are clearly offsite signs. 


           Analysis Prepared by  :    Felipe Lopez / G. O. / (916) 319-2531 


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