Washington, DC Bike Share Program

Washington, DC became the first city in the nation to launch a technologically advanced public bike share program. I actually saw one of these things in action last week, and in general I think this is a very good idea.

However, I think the official launch is was small, and it is ridiculous that tax dollars are paying for it.

SmartBike DC will rent 120 bikes at 10 self-service racks mostly in the downtown area, including near the Gallery Place, Shaw and Judiciary Square Metrorail stations.

“We want to start small and start slow,” Sebastian said. “We don’t want the first-time people . . . we’re trying to keep this simple at first.”

Many of the kiosks are near streets that host some of the city’s 34 miles of bike lanes. Thirty-one miles’ worth have been added in the past seven years.

Why? If this is a good idea, and for once I actually think that it is, why start small? Starting small only makes it difficult to attract people – you’re naturally catering to a much smaller audience. If you want this to have mass appeal, make it available for the masses.

In my opinion this is minor compared to a larger problem:

In most cities, bike sharing is a public-private partnership between city governments and outdoor advertising companies. The District’s program will be maintained by Clear Channel Outdoor and is part of a 20-year bus shelter contract.

To help cut through the crap – this means that Clear Channel Outdoor has either been given free ad space, or deeply discounted ad space, on city bus shelters. Clear Channel Outdoor then sells this ad space and that’s how they make money off of this scheme. In return, they provide the bikes to the city free of charge and maintain them, plus the city gets to keep all of the revenues from the $40 annual subscription fee.

This sounds like a good deal for the city, but it’s not. Clear Channel Outdoor is a business that exists to make money. They are making more in profit off of the ad space than it costs to run the bike service – that’s why they’re doing it.

So DC is giving up lucrative ad revenue from its bus shelters, in order to not pay for a bike program that doesn’t cost as much. This leads to a net loss for DC.

Look at it with basic math – the subscription is $40, and let’s make some assumptions about the cost of the bikes and the ad revenues. Let’s say there is a one-to-one ratio of bikes to ad spaces, the bikes each cost $99 to buy, maintain, etc.., and each ad can bring in $100 (remember, since Clear Channel Outdoor needs to cover their costs and make a profit they have to be making more than the bikes cost). Under the current arrangement, for each bike, Clear Channel Outdoor will bring in $1 in profit, and DC will bring in $40.

But if the city did the whole thing, they would bring in $41 (they’ll pay $99 for the bikes, and make $100 from ad revenue + $40 from subscriptions, so $140 – $99 = $41) – so they’re not getting a good deal under the current arrangement – they’re losing $1.  In actuallity, the loss is assuredly much larger – Clear Channel Outdoor wouldn’t sign on without being able to make a decent profit.

 

There’s only one reason you would do this – it’s not financially feasible to do it as a private company. You would have to charge so much for the bike subscriptions that it would be prohibitively expensive and no one would sign up. So DC has decided to keep the cost for users low while masking the true cost of the program under the free ad space.

Now you can argue the merits of the benefits to society of having these bikes on the roads, and thus the need to subsidize them, but even that doesn’t explain the current fee structure.

If you want to make the judgment that these things should be subsidized and the cost kept low, you still need to understand that the city pays the cost of these bikes either way. Either they’re going to absorb all of the costs themselves up front, or they’re going to lose them indirectly through the ad revenues.

The argument that Clear Channel Outdoor doesn’t need as much infrastructure is bunk – they are an advertising sales firm – they have to create the same infrastructure that the city does. The revenue from the ads is obviously enough to cover these costs and then some. DC is on the losing end of a bargain. They are eating the whole costs either way, but they are getting less revenue under the current scheme.

In my opinion, this program should be completely privately operated, and the revenues should be derived from user fees, just like Zipcar. That is certainly more expensive, but it also has benefits that currently don’t exist. For instance, I can guarantee that service would be better under a totally private structure – right now, any increase in service starts to cut into the profit Clear Channel Outdoor makes off of ad revenue. So at some point, the service will start to suck because it isn’t profitable for Clear Channel Outdoor. If we forced this to be an entirely private enterprise, there is an incentive for the company to provide good service, and expand the availability – otherwise they won’t be in business. It may be more expensive to the users for it to be private, but it’s never going to be as expensive as driving or riding mass transit, so it’s still a bargain.

There is some more idiocy surrounding this though:

In the United States, cities including Portland, Ore., and Austin have experimented with more low-tech versions, in which “beater bikes” were painted one color and made available for use. Most were vandalized or stolen after a short time.

Guess what DC’s bikes don’t have? Bike locks. Guess how much you get fined for losing a bike? $550. It’s not very convenient to have to carry a bike lock around all day on the off chance I might need it. Inconveniences like this are the kinds of things that turn off potential riders. Get some locks on these bikes, get more of them on the streets, and do it without using tax dollars.