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10 key details from Portland's bike share proposal and contract

Posted by Michael Andersen (News Editor) on September 4th, 2013 at 10:12 am

A rendering by Alta Bicycle Share of a future Portland
bike share station at downtown's Director Park.

As public bike share systems continue to become standard public services in cities around the country, we figured it was time to learn more about what's in store for Portland.

In June, the Portland Mercury devoted part of its annual bike issue to a system that remains in its fundraising stage. Last month, Willamette Week breathlessly reported that the city is considering greasing the wheels of sponsorship by offering to cover the up-front cost as a loan.

Before anyone decides to turn the planned Portland Bike Share into a public dartboard by exploiting public confusion about it, Jonathan and I decided it was high time to look at the documents behind Portland's bike share plan and air them in full with our own honest analysis. So we requested copies of two public documents: Alta Bicycle Share's 97-page proposal to the City of Portland, which came in first place after a competitive bid process, and the contract both parties subsequently signed to provide the service.

Here's the most interesting stuff we found.

1) Bike share memberships will probably cost about $75 a year.

Here's what Alta was expecting to charge for bike share in Portland as of early 2012:

Click to enlarge.

The price structure on the left, which Alta estimates would result in 67% higher ridership than the one on the right, sets a somewhat higher entrance fee ($75 per year or $5 per day) but a lower per-ride fee (free for the first half-hour and less than $6 for up to 90 minutes). "Pricing Model 1" is the same price structure being used in almost all new U.S. bike share systems.

One thing to keep in mind, though: Annual memberships aren't the most important factor in the system's success. That's because...

2) Bike share would be used mostly by Portlanders, but paid for largely by visitors.

Though people with annual memberships — almost entirely locals — would account for 80 percent of trips in year 2, Alta estimates they'd account for less than half the system's revenue. "Casual" 1-day and 3-day subscriptions — mostly tourists and other visitors — would cover 70 percent of user revenue, largely because they tend to take more trips that last longer than 30 minutes.

Click to enlarge.

Alta bases all the above projections on "a bike share demand model from empirical data collected in other cities operating bike share including Montreal, Washington DC, and Boston." They're also consistent with trends non-Alta experts have described to me over the last two years — though I wonder if, as more travelers get savvy about how bike share works, they'll also become less lucrative.

3) Each bike would cost $1,103.

A Capital Bikeshare bike, which would be similar to what Alta provides for our system.
(Photo © J. Maus/BikePortland)

That's a lot of money for a 50-pound three-speed. But these are durable bikes with built-in electronic components. Sometimes you'll hear people overstate the cost of shared bikes by dividing the full cost of the system launch by the number of bikes provided; this would be a little bit like estimating the cost of a new TriMet bus by dividing TriMet's annual budget by 650. Here are Alta's actual hardware costs:

4) Bike share doesn't look like a high-profit business.

How, exactly, does Alta make money? It's hard to find much fat in this contract.

Out of a total $1.9 million expenditure in year 2, Portland Bike Share would only send $124,800 to Alta for "corporate support," a figure that presumably includes profits for the company's owners. Even if all of that went to profits (as opposed to paying the wages of Alta's corporate employees, rent, and so forth), that's just 6.5 percent of expenditures, a pretty low profit margin for such a new industry. Alta may be counting on profit to arrive over time, once its systems are in place and operating smoothly — but this would seem to explain why other companies aren't jostling to compete with Alta.

Click to enlarge.

Since Alta was a bike planning and design firm (one of the country's first) before its owners decided to start a bike share company on the side, it's possible that the firm started thinking about bike share as a way to generate work for their planners, to which Alta Bicycle Share seems to hand its station siting subcontracts. If so, the rapid growth of Alta's bike share business may have taken the company by surprise, especially considering that...

5) Alta Bicycle Share has probably outgrown Alta Planning + Design in revenue by now.

From Alta's proposal: "Alta Planning + Design had gross revenues of $10.7 million in 2011. ... Alta Bicycle Share had gross revenues of $9.6 million in 2011." That's from before Alta launched bike share in New York City, Chicago and the San Francisco Bay area.

6) Bike share would employ about as many Portlanders as a big bike shop.

Alta will hire a general manager ("we have already identified a number of suitable candidates for this role," Alta wrote in early 2012), a marketing manager, an administrative manager, an operations manager, shift managers, a head bike mechanic, a head station technician, and several part-time "street team" members and in-shop bicycle mechanics. All except the last are listed as "local hires."

7) Alta promised to try to make bike share work for low-income people.

"Historically underrepresented and economically disadvantaged people will make up not less than 50% of total employment hours."
— Alta Bicycle Share proposal to City of Portland

In its contract, Alta promises to provide "up to 500 discounted memberships to be purchased by the City and/or other organizations for low income residents or individuals from traditionally underserved communities for $35 or lower." That'd be a tiny dent in Portland's low-income population, but it's also 10 percent of the system's total users in year 2.

Alta has also agreed that "historically underrepresented and economically disadvantaged people will make up not less than 50% of total employment hours." (This promise, though worth noting, won't require as much effort as it might seem: the contract specifies that "historically underrepresented" includes women, and "economically disadvantaged" includes "low-income Portlanders.") This effort will be overseen in Portland by a "High Roads Committee" with members drawn from the Coalition of Communities of Color and other groups such as "the Coalition for a Livable Future, Worksystems Inc., Oregon Tradeswomen Inc and New Avenues for Youth."

There's been a lot of discussion of whether bike share, which in Portland is being funded by a federal grant intended to promote "equity," will actually be used much by people most in need of low-cost transportation. I loved this set of practical ideas from BikePortland reader Alex Reed for how to actually make bike share relevant to poorer people.

8) If the system is actually going to launch in "spring 2014," it had better get a sponsor right away.

From Alta's proposal: "In our experience, a full launch takes approximately six months from the time funding is secured and contracts are signed."

9) Portland is asking corporate sponsors to cover more of bike share's cost than similar cities have.

In its first year, Denver B-Cycle brought in $2500 per shared bike from lead sponsor Kaiser Permanente; Minneapolis' Nice Ride brought in $1400 per bike from Blue Cross-Blue Shield of MN. For its "launch" period, Portland is hoping to bring in $3700 per bike from sponsorship.

Click to enlarge.

This isn't necessarily unreasonable for a system that, unlike those two peers, is expected to operate year-round and attract about three times as many trips in its first year as Nice Ride did. But it's a lot of money. In all, 60 percent of the startup cost of Portland Bike Share — $2.8 million out of $4.6 million — is supposed to come from from private sponsors, compared to about 33 percent in Denver and 33 percent in Minneapolis. (To be fair, Denver B-Cycle scored another one-third of its startup costs from $1 million left over from the 2008 Democratic National Convention, whose organizers were eager to make friends in a swing state.) To share the burden, Alta has suggested that not all the money has to come from the same company.

It'd be silly to claim that high sponsorship targets make Portland bike share a bad investment, because it's hard to put a price on such a unique service. In the month after New York's bike share system launched, public opinion of its title sponsor CitiBank improved rapidly. Also, public bike share is a far less risky investment than it was in 2010. But bike share has struggled to materialize in Portland, and it's hard to imagine that the high sponsorship expectations are unrelated.

How did this happen? Well, bike share was sold to Portland City Council by backers, including former Mayor Sam Adams and numerous others, who said it could be paid for without any local money. A representative of Regence Health Services testified in favor of the deal; it was easy for bystanders to assume that the major health insurer had all but signed on as lead sponsor. But it hadn't. Moreover...

10) Alta and the city don't really have a deadline to roll this out.

We're sure they're as eager as anyone to get this system running already. That said, the only reference to a solid deadline anywhere in the bike share deal is a requirement in the contract that Alta "negotiate" with the city to provide "a desired minimum" of 50 bike share stations "in a timely manner":

"If the agreed-upon System Financing Agreement does not provide sufficient revenues for launching a system with 750 bicycle and 75 stations for five years, the City and [Alta] shall negotiate a scaled approach to launching bike share in Portland in a timely manner that still achieves the targets set. ... The desired minimum system size is a minimum of 50 stations and 500 bicycles. The Financing Report, at a minimum, must secure the monies for five years of system operation."

According to Metro, the agency that oversees the federal money behind Portland bike share, there's no firm deadline for the city to spend its grant, either.

"We do have a schedule for the bike share project, but we've gone into this understanding that some flexibility on this was going to be necessary," Metro grant manager Ted Leybold told us Wednesday. "There's no looming deadline that the project needs to meet, but we're trying to make sure the project moves along."

Is this good for bike share? Maybe not, actually. When it comes to fundraising, urgency can be the key to a deal.

Biking in Portland is so pleasant, and bike share in other cities is so obviously popular and successful, that it seems likely to be an asset to whoever is behind it: city leaders, Alta, whatever private sponsors end up being involved. But it's possible that some sort of a deadline — with or without a bigger contribution from the public — would be required before our city can join Boston, Charlotte, Chicago, Columbus, Fort Worth, Houston, Kansas City, Long Beach, Louisville, Madison, Miami Beach, Minneapolis, Nashville, New York City, Oklahoma City, Omaha, Salt Lake City, San Antonio, San Francisco and Washington DC to take this seemingly sensible leap.

Correction 9/4: An earlier version of this post said both documents were previously unpublished. In fact, the Mercury published Alta's contract in March.

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Comments
  • dan September 4, 2013 at 10:47 am

    Thanks for doing this, this is interesting information. Is it possible to get the proposals from other companies as well?

    Recommended Thumb up 3

  • Nate Young September 4, 2013 at 10:50 am

    If Alta believes so strongly in this product, why don't THEY sign on as the first sponsor? In their home town, I think it might be a fine idea.

    While I doubt they have ~$800k / year on hand, I do bet they have a portion of that, and they could also offer some donations 'in kind' in the form of ongoing planning costs, as you note, to soften the up-front costs and get the system on the road.

    They've been looking for a headline sponsor for how long now? Almost a year?

    Recommended Thumb up 3

    • Indy September 4, 2013 at 10:59 am

      Probably because they don't sell directly to the market the ads would be peddling to. That was a pun, kinda.

      Recommended Thumb up 4

    • Spiffy September 4, 2013 at 11:42 am

      you don't make a lot of money selling ad space to yourself...

      Recommended Thumb up 2

    • Andrew K September 4, 2013 at 11:42 am

      Ok, to be fair that is not a very good idea. The fact that bike share even exists is a living advertisement for them. Your suggestion would be like if the Portland Timbers sponsored their own team jerseys instead of Alaska Airlines.

      Recommended Thumb up 4

      • Nate Young September 4, 2013 at 1:16 pm

        Given that planning is still somewhere near half their business, and planning bike friendly development specifically, I'd argue that it wouldn't be quite the waste you (three) suggest.
        Second, the fact that bike share is stymied in their hometown might just be a worse ad than them sponsoring it themselves.
        However, the 'wrong target' point is somewhat valid. While I think they'd be well served touring potential planning and/or bikeshare customers around PDX on ALTA bikes, that's a small number of actual buyers.

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    • Bjorn September 4, 2013 at 1:23 pm

      It is unlikely that any company will want to invest nearly 10% of their gross revenue on a single advertising campaign. For comparison Citibank just reported quarterly revenue of over 20 billion dollars, compared to annual revenues for Alta of around 10 million...

      Recommended Thumb up 2

  • Gerik September 4, 2013 at 10:52 am

    Fantastic journalism, Michael. Thank you.

    Recommended Thumb up 7

  • Allan September 4, 2013 at 11:13 am

    Thank you for continued reporting on this. Is there any politician in particular that we should put pressure on to get this thing going?

    Recommended Thumb up 1

    • Michael Andersen (News Editor) September 4, 2013 at 11:25 am

      Right now the direct obstacle is private, not public: Everything's ready to go as soon as Alta finds enough corporate sponsors to pay the bills. As you might have gathered from the last two items, though, it's possible that there just isn't enough sponsorship money available. In that case, the question is where other public money might come from. I've heard it suggested that Connect Oregon V, a state funding package, might be used for this purpose, but I'm not sure who the deciders are on that.

      Recommended Thumb up 2

    • Andrew K September 4, 2013 at 11:47 am

      So I guess the response to this would be write letters to large local businesses (Nike, Intel, OHSU, Etc.) and tell them they should advertise on bike share. Public pressure can work on private enterprise as well.

      Recommended Thumb up 1

  • Steve B September 4, 2013 at 11:25 am

    Thank you Bike Portland for doing some truly vital reporting on this. It's tremendously helpful to have this kind of information available to the public.

    I sincerely hope to see more transparency and public involvement in Portland's Bike Share process going forward.

    Recommended Thumb up 3

  • Spiffy September 4, 2013 at 11:43 am

    I thought the cost per day would come in below TriMet...

    Recommended Thumb up 1

    • Elliot September 4, 2013 at 12:10 pm

      Am I missing something? By my math, $75/year for bike share membership ($0.20/day) is definitely less than $1,100/year for TriMet ($3/day).

      http://trimet.org/fares/1yearpass.htm

      Recommended Thumb up 1

    • davemess September 4, 2013 at 1:10 pm

      And even to the casual user it is about a wash ($5 vs. $5), with advantage to bikeshare if you need more than 2 transit rides in a day.

      Recommended Thumb up 1

  • Terry D September 4, 2013 at 12:05 pm

    This is not the only issue that has been stymied by lack of corperate buy in. Remember the quick reversal of PBOT when it came to the 8 blocks of green bike lane road diet on SW 12th connecting to SW Stark.

    When the west end businesses said no, Pbot backed down.

    This is an opportunity for the "business community" to step up and move forward.

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  • Babygorilla September 4, 2013 at 12:23 pm

    I don't think point 4 is very clear or I may be missing something. The $124,800 expenditure seems to be some sort of annual fee and then there are line items for things like labor costs and all other expenses Alta will incur that don't then get deducted from this amount.

    And additional sums to Alta owners / managers can easily get captured in the $375,000 in indirect labor costs or $650,000 in direct labor costs.

    Recommended Thumb up 0

    • Michael Andersen (News Editor) September 4, 2013 at 12:54 pm

      Yes, it's possible that those sums are fully loaded with management expenses that include profit, and it's not clear to me what the difference is between "direct" and "indirect" labor. (Maybe "indirect labor" covers the labor of Alta's corporate employees?) From the staffing description, though, it looks like we're talking about 15 FTEs or so, including benefits for almost all the part-timers. $1.1 million per year for a staff that size, with some passed on to the corporate office, would be healthy but not exactly scandalous.

      This would be a good area for further inquiry. And of course it'd be great if someone from Alta or the city wants to step in to clarify what these figures mean.

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  • NoPo'in September 4, 2013 at 1:25 pm

    This whole bike share arrangement just seems like bad business all around. Bad and risky for the city and bad and risky for Alta. Way too many assumptions being made. It's pretty obvious that as the financials stand now it will be a loser for probably atleast 3 years.

    Recommended Thumb up 2

  • Chris I September 4, 2013 at 1:49 pm

    Nike Bike? (nike-y bike-y)

    Precision Castbikes?

    Recommended Thumb up 2

    • GlowBoy September 4, 2013 at 2:51 pm

      Phred Meyer? Siltronbike? US Crank?

      Recommended Thumb up 1

      • dan September 4, 2013 at 3:30 pm

        Columbike? spIntel? Adibike? (that would chap Nike's hide, I bet) Voodoo Bike? (possible trademark infringement) Powell's City of Bikes?

        Recommended Thumb up 4

  • John Liu September 4, 2013 at 4:43 pm

    The price per bike is not crazy. If they are like the other bikeshare bikes I have ridden, they are very rugged machines, built to survive years of continuous service at up to a dozen rides per day, with front and rear drum brakes, generator hub, internal GPS locator, internal gear hub, full chain guard, all cables internally routed, automatically operated LED taillights and running lights integrated into the frame and front rack, full fenders with skirting. If something like this was sold in a bike shop, it would cost more than the price quoted.

    Recommended Thumb up 4

    • davemess September 5, 2013 at 12:28 pm

      Yes, I don't understand why people are always busting on the bike share bikes. They're GREAT at what they are intended to do. Be durable and get people around. They're never going to be svelte, light racing bikes. But they shouldn't be!

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  • John Liu September 4, 2013 at 4:55 pm

    In other bikeshare systems, a major part of the operating expenses are rebalancing personnel. Stations in some areas fill up, other stations get empty, if the imbalance doesn't naturally self-correct, workers have to load bikes in a truck and rebalance the inventory. For example, see Citibikes' ongoing efforts to provide enough rebalancing to keep up with demand. Perhaps Alta can model travel patterns and geography in each city and predict how much rebalancing will be needed, but it seems unlikely that Portland will be the unique city that doesn't need any. I imagine they will need more than just a few part time field workers.

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  • resopmok September 5, 2013 at 11:16 am

    Maybe I missed it in the article, but I didn't see how these price models compare to other cities which have employed bikeshare systems, with adjustments made for cost of living and other alternatives including public transit and carpool. I'm curious to know how Portland's projected system stacks up in this regard. As far as I can tell right now, for anyone who would use the system regularly, it would be more cost effective to just buy your own bike and ride that.

    I understand the idea that visitors would help support the system, but I'm not sure if the extended rainy season that Portland offers has been taken into account. This could certainly discourage out-of-towners from using the system, and at least affect the income level the system produces during that time. And if not enough corporate sponsors are confirmed, will Alta proceed at some point, and simply increase the cost of use to compensate?

    I like the idea of bikeshare, but we need to make sure we're not just doing it to do it; it should make sense financially so the city doesn't end up hemorrhaging funds to make sure it stays afloat.

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    • Michael Andersen (News Editor) September 5, 2013 at 11:30 am

      It was easy to miss above, but I did link to a BP post I wrote in 2011 that looked into the cost of bikesharing in other cities. http://bikeportland.org/2011/09/13/how-much-to-use-bike-sharing-in-portland-about-60-95-per-year-58820

      Bikesharing is just a different thing than bike ownership, just like car2go is different than car ownership. Car2go isn't very popular with people who typically drive everywhere, but because (unlike with your own car) you can use it for a one-way trip, it lets even car owners take trips that they wouldn't have otherwise.

      Recommended Thumb up 1

    • davemess September 5, 2013 at 12:42 pm

      I hear the "why don't people just buy a bike" argument a lot and I have to answer with. Have you ever been without your bike (whether here in Portland or in another city) and wished you had one right there and then? I know I have and that's the niche that bikeshare fills. I took the bus downtown and I want to go somewhere that's 2 miles away so i take bikeshare. I drove to work downtown, but now I want to meet someone for a lunch a mile or two away so.

      Recommended Thumb up 1

      • dan September 5, 2013 at 2:28 pm

        Yep, even if you own a bike, bikeshare can still offer more convenience. For instance, I bike to work and keep my bike (unlocked) in a basement accessed by an elevator. If I wanted to head over to PSU at lunchtime to explore that cart pod, I would have to go to the basement, put my bike in the elevator, bike over to PSU, then find somewhere to lock up at the other side.

        It sounds lazy, but just walking outside, grabbing a bikeshare bike, and returning it to a rack on arrival at PSU (no need to lock up) lowers the "friction" of the trip enough that I might just buy into bikeshare even though I have my personal (much nicer) bike available to me almost every day. If I had to lock up my bike at work, I would be even more likely to use bikeshare for this trip.

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      • anon1q2w3e4r5t September 6, 2013 at 10:47 am

        You and all the early adopters/supporters of bike sharing care about your own convenience rather than the safety of ALL bicyclists on the streets.

        NO TO BIKE SHARING! YEST FOR REAL BICYLISTS!

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        • anon1q2w3e4r5t September 6, 2013 at 10:51 am

          ........ rather than the safety of ALL bicyclists on the streets.

          OR

          ........ rather than the safety of pedestrians who DO NOT have adequate sidewalks to walk on.

          ETC.

          Recommended Thumb up 0

  • GlowBoy September 5, 2013 at 12:48 pm

    I used Minneapolis' system back in June, and their pricing is very close to Model I above.

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  • John Liu September 5, 2013 at 2:30 pm

    The pricing model #1 is similar to Boston's Hubway and New York's Citibike, the two bikeshare systems I use semi-regularly.

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  • Oregon Mamacita September 6, 2013 at 9:33 am

    I am opposed to public funding because it continues a toxic pattern of neglecting poorer neighborhoods in order to lavish attention on downtown, inner SE and gentrifying NE. SE PDX gets one empty promise after another. I have zero faith that the bike share system will stretch to Lents or Gateway. How about Sackoff, Urban Design Group, United Streetcar giving back to the community?

    Sorry, but any promises that bikeshare will someday make it out to Powellhurst will have to be backed up by a fact, any fact, that shows that the neglected neighborhoods are currently being treated fairly.

    Decades of broken promises have me calling BS on the idea of "equity" and the idea that the cycling community is anything but a bunch of able-bodied, educated, entitled whites. Oh yeah, I am educated and white and I have gotten tons of lucky breaks. But I am honest about them. I don't pretend that my cycling and hiking helps the working poor. I don't pretend that the improvements in my life will somehow trickle down to the regular folks in Lents.

    The one thing I see that is good for the non-rich in outer SE is the Springwater Corridor past SE 82nd. I see all income levels out there,
    and I am starting to see some groups out exercising that I didn't see
    five years ago. Protected, safe bike trails for working class families is what we need.

    Recommended Thumb up 3

    • anon1q2w3e4r5t September 6, 2013 at 11:05 am

      I salute you! Well said.

      Recommended Thumb up 1

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