Finding the money: Ad agency owes MTA $18M

Titan Outdoor Holdings oversees ad space on the city’s buses and commuter rail trains. (Photo via Titan Outdoor)

As the MTA looks for ways to shore up its leaking budget, the agency is going to have to pursue every available revenue avenue. From service cuts to the unthinkable fare hike, nothing is off the table, and that includes milking every last dollar out of its available advertising surface. What happens, though, if the companies contracted to manage and sell the authority’s ad space can’t pay up?

Today, the Daily News asks just that question in highlighting an internal audit that shows how one of the MTA’s advertising contractors owes the authority $18 million. Titan Outdoor Holdings, the company that sells ad space on city buses and the MTA’s commuter rail system, has not been fulfilling its contractual obligations to the MTA. Pete Donohue has more:

Titan Outdoor Holdings has stiffed the MTA out of about $18 million, coming in short with its monthly payments for nearly a year and engaging in some questionable accounting, an internal Metropolitan Transportation Authority audit revealed. The MTA could recoup the money by cashing a multimillion-dollar letter of credit Titan posted. But officials fear the move would bankrupt the company – meaning even less ad revenue for the authority, according to the audit. “We’re exploring all of our options,” MTA spokesman Jeremy Soffin said.

Titan sells and manages ad space in buses and commuter trains. To win the decade-long contract, Titan promised the MTA 72% of gross revenues – the highest in the industry – or $5.4million a month, whichever is greater. Meeting the high bar wasn’t a problem in 2007 – when the contract started – and 2008 but apparently became tougher early last year as companies trying to survive the recession cut back on advertising. Since February 2009, Titan has paid the MTA about $4 million a month, about $1.4 million short of its monthly minimum, the audit states.

According to the audit, Titan has not been forthcoming with its revenue statements and has been filing some financial reports 18 months late. Yet, as Donohue points out, the MTA is not ready to cut ties with Titan. The agency may lower the required monthly payment, but authority officials do not believe they can secure as good a rate as 72 percent from any other media sales company right now.

As Donohue notes in his article, the money owed to the MTA by Titan would be enough to cover the estimated $17.5 million in subway service cuts the agency plans to initiate later this spring. That is, however, something of a false dichotomy because the MTA has to balance its need for this revenue now against the long-term financial health of its advertising partners. Pushing Titan toward bankruptcy by cashing the letter of credit would solve one problem and create another. Still, with money tight, the authority will be looking to draw in as much revenue as it can and as it should.