Transit Agencies Can Generate Revenue By Selling Naming Rights
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Commentary

Transit Agencies Can Generate Revenue By Selling Naming Rights

A city looking to sell transit naming rights can include lawful stipulations preventing companies from certain types of industries from engaging in the bidding process, but may run into free speech concerns.

In late 2016, the Los Angeles County Metropolitan Transportation Authority (Metro) approved a policy to sell naming rights for rail, bus lines, and transit stations. The move, described in a Metro staff report as a “prudent means of maximizing the value of the agency’s capital investments and assets” was prompted by the need to generate additional revenue.

In his 2016 State of the Agency Report, Metro CEO Philip Washington urged the Board of Directors to find ways to decrease spending and increase revenue. “As the county grows over the next 10 years, now is the time to plan for future growth and now is the time to position ourselves to invest in transportation needs for decades to come,” Washington said.

The policy contained provisions preventing tobacco, alcohol, weapons, and adult entertainment companies from buying naming rights to transit lines or stations. But, as Los Angeles County Supervisor Sheila Kuehl warned, “If the board turns down somebody, you might violate the First Amendment.” A few months later, in early 2017, Metro abandoned the plan.

Selling naming rights to transit lines and stations can garner much-needed revenue, but it can also raise specific freedom of speech concerns. In addition, even if the chosen company initially seems innocuous, a later scandal might prompt the disbandment of the partnership. While Metro was right to be cautious before entering such a partnership, it could stand to learn from successful naming rights agreements in other U.S. cities.

San Diego and Philadelphia have both successfully sold naming rights to transit lines and stations. In 2015, UC San Diego Health and the San Diego Metropolitan Transit System (MTS) reached a 30-year, $30 million agreement giving UC San Diego Health the naming rights to the Blue Line (renamed “UC San Diego Blue Line”) and three stations on the line.

In 2017, based on its previous success with the Blue Line, MTS reached a 30-year, $25.5 million agreement with Sycuan Casinos. MTS gave Sycuan the naming rights to the Green Line (renamed “Sycuan Green Line”) and three stations on the line.

Similarly, the Southeastern Pennsylvania Transportation Authority (SEPTA) approved a five-year, $5 million naming rights agreement with AT&T in 2010. SEPTA netted $3.4 million for renaming Pattison Station, “AT&T Station.” Per the agreement, AT&T also agreed to support “station beautification efforts and improved communications tools such as new digital displays and signage.” The ideal location of AT&T Station, located within walking distance of the South Philadelphia Sports Complex and the Wells Fargo Center, allowed for a favorable deal for the transportation authority.

Of course, the willingness to sell naming rights is not enough to guarantee bidders. Over the years, the Massachusetts Bay Transportation Authority (MBTA) has attempted to sell the naming rights to Boston train stations and rapid transit lines but has not had any success. In 2014, the MBTA put out a call to businesses interested in purchasing the naming rights to nine stations and three lines. It was the second time in a few short years that it had attempted to entice bidders—it’s 2010 call received little interest. Only Jet Blue applied, and it failed to meet the minimum  $1.2 million asking price for the Blue Line. Perhaps the prices were too much, but MBTA spokesperson Joe Pesaturo denied that the prices were unfair, “The prices had to include the significant costs associated with replacing the transit system’s signs to reflect any name changes and comply with the requirements of the Americans with Disabilities Act.”

Before opening up for bidders, a city looking to sell transit naming rights can include lawful stipulations preventing companies from certain types of industries (alcohol, tobacco, etc.) from engaging in the bidding process. Courts have previously ruled that public agencies can make advertising policies excluding industries that pose health risks. In Los Angeles, Metro has its own strict guidelines. No political or religious groups can bid. Companies with a history of fraudulent, unethical or prejudicial behavior are also excluded from bidding. That takes out the most overtly objectionable choices, but what’s left may still be contested. Perhaps this can be mediated through the lessons of other cities.

In 2015, Washington Metropolitan Area Transit Authority (WMATA) came out with new, strict advertising guidelines to prohibit “issue-oriented advertising, including political, religious and advocacy advertising.” In late 2017, the WMATA banned a Christmas advertisement from the Catholic Church because of its religious imagery. The Archdiocese of Washington sued, claiming “WMATA’s ban on advertisements that promote or oppose any religion, religious practice, or belief has established a regime that is hostile to religion.” In January 2018, the U.S. Department of Justice (DOJ) came out in support of the Archdiocese of Washington. In an amicus brief to the D.C. Circuit Court of Appeals, the DOJ argued that WMATA had engaged in “unconstitutional viewpoint discrimination.” The case is pending now. Additional groups including the American Civil Liberties Union (ACLU), a women’s health clinic, People for the Ethical Treatment of Animals (PETA), and Milo Yiannopoulos also filed suit.

As Kuehl had warned, turning down proposals strictly based on content does bring up constitutional questions. While there is a precedent for turning down proposals for public health reasons, viewpoints cannot be discriminated against once advertisement is opened.

San Diego and Philadelphia achieved success in their naming agreements, in part, due to the location of these lines and stations. Companies are willing to pay more for naming rights of lines or stations near important sites, such as universities and sports centers. And as Boston discovered, having a high starting price ensures that only serious companies willing to pay for the exposure will even apply. Selecting a well-placed, busy transit line or station for a naming agreement creates a mutually beneficial partnership. Since this can be a lucrative deal for the company, many businesses may be tempted to apply. The steep competition may help mediate a city’s concerns with being stuck with an unsavory name. In this case, perhaps it will be market competition, not a committee rejecting a name—potentially breaching First Amendment rights in the process—that will enable naming rights success in Los Angeles. 

Rebeca Castaneda is a transportation policy intern.