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Portland’s bike share plan gives major leeway to private operator

Posted by on March 23rd, 2016 at 10:06 am

Day on a bike in DC-41
A victim of success: A major challenge bike-sharing systems face is refilling stations when they run out of bikes. Portland will leave it up to its contractor to decide how often this happens.
(Photo: J. Maus/BikePortland)

Chalk up another way Portland is thinking outside the box on bike sharing, for better or worse: it’s giving an unusual amount of independence to its system’s operator.

This post came out of a three-month effort to vet Portland’s bike sharing plan with experts around the country.

For example, if Motivate (the private company that will operate the Biketown system) decides to leave a little-used bike share station empty for hours at a time after the system’s July launch, there’s nothing to say they can’t.

Instead, the city’s unusual bike share deal will encourage Motivate to operate very much like a private business, focusing most of its resources on the most-used (and therefore most profitable) stations.

That’s one insight gleaned from a BikePortland review of Biketown’s early operating documents. Over the last three months — as we’ve watched Seattle’s underperforming bike share system barely survive a public bailout — BikePortland has shared and discussed the system’s contract with independent bike-sharing experts around the country to anticipate anything that might go wrong here.

On the issue of the empty stations, the city’s reasoning stems from one of the unusual terms in Portland’s deal with its contractor, Motivate: if the first three years go badly, Motivate will have to cover the losses. And if those years go well, Motivate will get 60 percent of any annual profits over $1 million, and the city will get the other 40 percent.

“Motivate is intrinsically motivated by the structure of our contract to provide a high level of service to all customers,” said Steve Hoyt-McBeth, the bike share project manager for the Portland Bureau of Transportation. “If people are happy, they’re going to be using Motivate.”

Contract will reward Motivate for focusing service on its most profitable stations

citi bike truck
Like New York’s Citi Bike and most such systems, Portland’s Biketown will use trucks to keep bike share stations relatively balanced through the day.
(Photo: Juan Monroy)

Portland’s bike sharing system already operates very much like a private business: Aside from $2 million of federal money used for its startup cost and the permission to store its bikes on public space, its ongoing operation will be unsubsidized by taxpayers.

So in some sense, it might be unreasonable to expect the system to operate much differently than a private business would. The terms of Portland’s deal with Motivate reflect that.

In many North American bike sharing systems, it’s governments (and by extension, taxpayers) that take on the financial risk (and, theoretically, the reward) of a bike sharing system. In the hopes of ensuring that money is being well spent by the private companies they hire to operate their bike sharing systems, cities often insert “service level agreements” (known in the industry as SLAs) into their contracts.

The operators of Capital Bikeshare are only allowed to let any bike share station be 100 percent full or 100 percent empty for up to three hours, maximum.

In Washington D.C., for example, the operators of Capital Bikeshare are only allowed to let any bike share station be 100 percent full or 100 percent empty for up to three hours, maximum.

Portland’s contract with Motivate doesn’t include any such minimum requirements for most stations.

City staff say they aren’t necessary. If Motivate can’t figure out how to make bike sharing work for users, then it’ll suffer the losses itself, so there’s no need for the city to micromanage operations. Indeed, by giving Motivate leeway to run its own system and set its own internal standards, the entire system will be able to operate more efficiently and potentially keep its prices lower.

“Just because you have these service level agreements doesn’t translate into better service,” said Hoyt-McBeth. “As opposed to sitting down with your checklist and going through 10 or 20 of these checks every day, let’s make sure we have a system that operates well for the consumer.”

Paul DeMaio, a bikesharing consultant based in Washington, D.C., said Tuesday that “efficient” operation of a bike sharing system means sometimes letting the least-used stations sit empty.

“The busiest stations, that are the most profitable, will get the best service, and those that are the least well-used stations will get the least service,” DeMaio said. “It’s not just profit-driven; it’s customer-driven.”

DeMaio said he knows and respects the City of Portland’s bike sharing staff and that he is “not necessarily against what they’re doing.” But “I think you can draw a conclusion about what that will mean if you live in a neighborhood that has the least well-used stations,” he said.


Minnesota bike sharing executive: Focusing on busiest stations creates an equitable system

Nice Ride MN-13
A user of Nice Ride, the seven-year-old bike sharing system in the Twin Cities.
(Photo: Chris)

Bill Dossett, executive director of the Nice Ride bike sharing system in Minneapolis-St. Paul and the former president of the North American Bicycle Sharing Association, said most of North America’s nonprofit bike share systems (like his) have contracts similar to Biketown’s. Their only penalty for leaving stations empty is that if they lose customers, they lose money.

He thinks this system works well.

“We won’t get sponsorship if we’re not making a positive impact,” Dossett said.

But Dossett said these incentives lead to less rebalancing efforts on stations that are used less.

“If the typical number of rentals from that very-low-use station is 10 and the typical number of rentals from the busy station is 500 … if I let them go for an hour, the chances that somebody is disappointed at the busy station is much much higher,” Dossett said.

But Dossett said he thinks there are more important values to operating an equitable system than making sure there is always a bike at stations in lower-usage neighborhoods — even if one of those neighborhoods is North Minneapolis, a historically black and lower-income part of town on one edge of the Nice Ride service area.

“If you want to look at equity, you want to do the best job for your system that you can across the board.”
— Bill Dossett, Nice Ride MN

“Anybody who says that people who live in North Minneapolis are only riding bicycles around North Minneapolis is wrong,” Dossett said. “If you want to look at equity, you want to do the best job for your system that you can across the board, based on great customer service.”

Hoyt-McBeth, himself a longtime NABSA board member, said Portland doesn’t have any closer-in neighborhoods where most residents are poor. The parts of the Biketown service area with the most low-income residents are in and around downtown, which also has many wealthier residents.

That means that less service to less-used bike sharing stations isn’t the same as less service for poorer neighborhoods.

“That may be the geography in other cities where there’s large areas with concentrations of poverty,” Hoyt-McBeth said. “In our case, in our service area that we’re starting with here, our lowest-income Census tracts are in areas of projected high demand for bike share.”

City can issue financial penalties if Motivate misses other targets

empty bike share
An empty bike sharing kiosk in Washington, D.C.
(Photo: Amara U)

Motivate, for its part, says the profit/loss motive will reward it for keeping Biketown stations balanced.

“Our incentive is to provide great service all-around since we want to grow membership and make the program successful across the board,” spokeswoman Dani Simons said in an email Tuesday.

And the city will have some measures for direct oversight. For example, Biketown stations that have “kiosks” — towers with maps, screens and credit-card readers — will all guarantee bikes available during the morning and evening rush hours. In a sense, these heavily used stations will resemble TriMet’s “frequent service” bus lines.

Another standard: Motivate’s contract requires it to have no fewer than 10 percent of its 1,000 bikes in each “quadrant” of the system at any given time.

Finally, the contract requires Motivate to “increase the probability” that stations never sit empty, but doesn’t set hard targets.

If Motivate fails to meet any of these standards, it’s required to prepare a “mutually-agreed upon corrective action plan within” to improve. But there’s no requirement in the contract that the plan lead to actual improvement.

City spokesman Dylan Rivera said the city and Motivate will find a way to provide quality service throughout their service area.

“The city strongly believes in providing high-quality, accessible service throughout the service area,” he said. “We’re committed to that; we believe Motivate is committed to that.”

Motivate’s business projections, originally due this week, won’t be done for a month

Portland bike share launch-8.jpg
Portland Transportation Director Leah Treat and other officials at Nike’s sponsorship announcement of Biketown Jan. 7.
(Photo: J.Maus/BikePortland)

In the end, Motivate’s motivation will mostly come down to one number: $187 per bike per month.

That’s how much money it’ll get paid for operating the system, according to the city contract. If the Biketown system can’t generate that much money — it’s about $2.2 million a year — Motivate will have to eat the difference.

We were curious about exactly how Motivate plans to bring that money in, so we asked for a copy of Biketown’s internal business projections. After charging us a $60 fee for the public record request — something the city has never done before in BikePortland’s 10 years of publication — the city sent us the only such record they had: a rough, out-of-date estimate that Motivate prepared for the city’s earlier plan for a 600-bike system. The city hastened to add that those figures had never been approved by city staff, and that under the terms of their contract, Motivate would be providing a fuller, up-to-date business plan before launch.

So we checked the contract to see when that business plan would be due. As it happened, the business plan was due 180 days after council approval — in other words, Monday.

On Monday, city spokesman Rivera said Motivate’s business plan won’t be done for a while yet, “potentially the end of April.”

“The past few months the team has been very focused on our public outreach process,” Rivera explained.

Hoyt-McBeth said Motivate isn’t in violation of its contract because (using other terms of the contract) the city has excused them from the original deadline. He said the additional delay was due to the increased complication of launching a larger, better system thanks to the Nike sponsorship announced in January. He added that this delay will have “no impact on when we launch the system.”

The launch is currently set for July.

Essentially, city doesn’t have a problem with the delay in getting a detailed business plan for the same reason it doesn’t have a problem with the lack of explicit rules about empty stations: if Motivate makes a mistake, Motivate will be financially punished for it.

“Because of the city’s protections in our contract, the operational risk is mainly a concern for Motivate, not the city,” Rivera said.

— Michael Andersen, (503) 333-7824 – michael@bikeportland.org

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21 Comments
  • Rob March 23, 2016 at 10:18 am

    My gut feeling is that this whole bike share project won’t be a positive action for biking in Portland (well, maybe for tourists and hotels, but not for Portland’s cyclists…).

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    • Champs March 23, 2016 at 11:26 am

      I cannot deny having visions of an unholy union between them and the boardwalk bikes on the waterfront. Slower active transportation and higher central city rents, ipso facto livability somehow.

      The cautious optimism, however is that the Orange Zone might come to define a frontier. Inside, a place for those who wish to spend considerably for housing in a 134% sustainable mixed-income Utopia. Outside, “weird” Portland may once again flourish at a sane market rate.

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    • GlowBoy March 23, 2016 at 8:29 pm

      “My gut feeling …”

      Why not? It’s worked out pretty well in most other cities that have it. Portland is not exactly first out of the gate here, and there are plenty of success stories.

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    • wsbob March 24, 2016 at 10:50 am

      Living nearby in Beaverton, I’m definitely interesting in seeing how BikeTown bikes will be used by people in Portland. It could be a great experiment in addressing congestion issues.

      Anyone that’s been to Beaverton, likely has some sense of the congestion issues this town has, that are different, compared to those that Portland has: basically, a fairly close, but spread out central downtown bisected by several major highways.

      I’ve given some thought to whether a bike share system here in Beaverton could provide practical transportation between Downtown and surrounding neighborhoods. Might, but it seems as though the major employers, likely are further away from these neighborhoods. If I’m right, that just leaves shopping and maybe some recreational riding as the potential for a bike share system here.

      Hopefully the potential for practical use of bike share for people in Portland, is much greater. Travel from close in neighborhoods to the city’s downtown, where there’s lots of employment, sounds practical. We’ll see. Too bad the launch wasn’t a little earlier, like May or June, instead of July.

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  • Bjorn March 23, 2016 at 10:49 am

    I like the idea that they don’t necessarily have to keep everything super balanced. My experience with car share was that we used it quite a bit before they removed our house from the coverage area, we have not used it once since. In the past we did sometimes have to walk 5-7 blocks to get to a car out near our house, but that was much better than now when we can’t even get within a half mile of our house in either direction. A system that allows a few bikes in areas where usage is a little lower is better than a system that excludes those areas. I think the approach taken by the city here will help expand coverage sooner.

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  • Go By Bike
    Go By Bike March 23, 2016 at 10:50 am

    I am less concerned about the balancing and more concerned about access and outreach of memberships for low-incomers. When I set up my trial bike share at the low-income building in South Waterfront people really could not get past even a $15 deposit for a light set. Hopefully, Motivate coordinates with the large number of already existing groups and provides a ton of free memberships. I wonder what the membership rates are like in those areas in Minneapolis that are getting left behind? Would seem strange to me if memberships were high and bikes were not getting rebalanced.

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    • Michael Andersen (News Editor) March 23, 2016 at 11:28 am

      I didn’t get into this in the post because it doesn’t really apply to Portland’s smart-bike system, but Nice Ride offsets its lower rebalancing efforts at lower-usage stations by putting larger docks at them — so they can hold more bikes. This requires a larger capital investment in low-demand areas but it means that the stations have more wiggle room … they’re less frequently 100% full and less frequently 100% empty.

      Portland’s smart-bike system and abundant on-street bike parking will mean that there’ll basically be no such thing as a 100% full dock. That’s going to make rebalancing less of a problem, hopefully.

      In future years, Portland’s system may also give you an account credit for parking your bike at an empty dock, or other such measures that cut rebalancing costs.

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    • Cyclekrieg March 23, 2016 at 12:07 pm

      To your question, a lot of existing systems are moving to a flat-rate system, like Nice Ride. The yearly flat rate is $75.

      http://www.startribune.com/nice-ride-will-offer-new-flat-fee-option-when-season-starts-in-early-april/368158761/

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  • John Liu
    John Liu March 23, 2016 at 12:15 pm

    A few points:

    1. Imbalance (some stations full, others empty) results when there are more users riding bikes from point A to point B than from point B to point A.

    One example is the commute effect in Manhattan, in the morning stations in the residential areas empty out while stations in mid-town fill up, and the reverse happens in the afternoon. Another example reflects topography, a station at the top of a big hill will tend to be empty since many more want to ride a bike down the hill than want to ride a bike up that hill.

    The “commute effect” may not be a large factor with Biketown, if the system is used mostly by tourists or for ad hoc trips, rather than by daily commuters. Still, there will be some commute effect in the predominantly residential neighborhoods. At 8 am, not a lot of people are trying to get to Laurelhurst, but plenty of people are trying to get from there to their workplace. The “topographic effect” will surely apply, if Biketown puts a station at the Zoo or on Pill Hill that station will often be empty.

    Rebalancing bikes is very expensive. I read that at one time the majority of Citibikes labor hours were consumed with loading bikes onto trucks and driving them around Manhattan. Consider the hourly cost of a driver and truck, and how long it takes to load up twenty bikes, fight through crosstown traffic and unload.

    Crowd-sourced rebalancing seems like a potential solution. Users could earn credit for riding bikes in the “contra-flow” direction. Biketown could do this via its smartphone app. The map view could show the location of bikes that need to be moved and the credit available for doing so. Similar crowd-sourcing schemes have frequently been suggested, and I haven’t heard of bikeshare systems widely using them, but SoBi seems willing to be innovative and try new things.

    2. Low income users present a real challenge, because there must be a way to protect the bikeshare system’s bikes and compel compliance with the bikeshare system’s rules.

    Once a user gets on a bike, he has possession of a valuable bicycle with its on board electronics. If the bike is not returned, that will cost the system $1000 or more. If the bike is not returned timely, that will cost the system revenue. Typically each bike has to be used by several persons each day for the system to be profitable.

    Normally, that user is financially responsible for returning the bicycle within the permitted time. That responsibility is enforced via the user’s credit card: fail to return a bikeshare bike, and your card will be charged $1000; ride it all day, and your card will be charged a lesser but still stiff fee.

    If the user has no credit card, there is no practical enforcement mechanism. If a person can’t afford a $15 membership, it is quite possible that they have no credit card. Perhaps the sponsoring organization could agree to be financially responsible for each free membership that they facilitate.

    Anyway, I think – and I’ve said this before – that bikeshare is far from the most important transportation mode to which we’d want to help low income people have access. A bus pass is far, far more important.

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    • Chris I March 23, 2016 at 1:13 pm

      Great points. Minimizing re-balancing is very important. I would hope that with the amount of technology and flexibility these bikes have, they can work out a way to incentivize less popular rides. It’s much cheaper to pay a rider a few bucks to move a bike than it is to pay someone to collect it into a truck and drive it to the station.

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    • Beeblebrox March 23, 2016 at 2:03 pm

      This idea that it will only be used by tourists is mistaken, in my opinion. I for one plan on using this to commute every day, at least when the weather is decent. It will allow me to save my own bike for longer rides and not have so much daily wear and tear and maintenance. I think it will mainly be used by close-in commuters, as well as people who drive or take transit into the core and then want a bike to move around the central city for meetings, errands, etc. People will also be able to take the bus or MAX into the city for one way of a commute (like if it’s raining hard in the morning), and then bike back home when the sun comes out in the afternoon. Just like car2go, it really expands one’s flexibility and options moment to moment. I remember when car2go started tons of people said “who’s gonna use this weird one-way car service?”. The answer is “lots of people.”

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  • Todd Boulanger March 23, 2016 at 12:35 pm

    Michael – per the manual rebalancing of the station, has the topic of loading zones AND not blocking the adjoining bike lane been addressed in the ops contract section? (Especially since the CoP is taking a “light” approach to service requirements?

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  • Ted Timmons (Contributor) March 23, 2016 at 12:40 pm

    Balancing bikes is great, and not having arbitrary guidelines is okay, but objective measurements for LOS are important. I’m worried that the “don’t worry, our profitability will cause us to do the right thing” isn’t always true, as Seattle’s bikeshare and our car2go service area changes have shown. Not having objective measures means the contract revisit will likely never happen.

    Still, 10% in each quadrant plus guaranteed bikes at kiosks is better than nothing. And if this thing actually launches it’s more than we’ve ever had.

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    • Beeblebrox March 23, 2016 at 2:06 pm

      I sure wish Car2go had been required to maintain a certain service area and some kind of coverage goal. The lack of cars downtown at night and vice versa makes the system much less useful, and the shrinking service area was a pretty bad blow as well.

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      • GlowBoy March 23, 2016 at 8:44 pm

        Bit of an aside, but Car2go just shrank their service area in the Twin Cities last week, too. Looks like Mpls lost about 30% of its service area. Including my home, unfortunately – I’m about a Montavilla distance from downtown, and similarly just outside the service area now. St. Paul lost more than half their service area. We’ve been promised a handful of “ParkSpots” in far south and far north Minneapolis, but don’t know the locations yet. Fortunately I have very good bus service and bike infrastructure in my neighborhood, and don’t use car2go a ton, so this doesn’t hit me too hard.

        I just checked Seattle, and the service area there still appears to match the city boundaries. Anyone know if Seattle is slated for a similar shrinkdown?

        I do understand why car2go has done what they have. The areas being cut out are low density, see maybe 10% of the usage as high density areas, and cars parked there sometimes sit for a day or two instead of being driven several times a day. Makes sense to concentrate the cars in areas where they’ll get used. And to their credit, they are paying attention to equity issues: in North Minneapolis, they haven’t cut back the service area as much as low usage might warrant, and they are promising ParkSpots in high usage locations to the north of the boundary. Also, two other major areas of concentrated poverty in the Twin Cities – inner south central/southeast Minneapolis, and the I-94 corridor through St. Paul’s westside – remain solidly within the service area.

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  • JeffS March 23, 2016 at 2:40 pm

    What a collection of cringe-inducing quotes in this one.

    It sounds like 70% of the bikes could theoretically end up shuttling tourists up and down the waterfront. And if that is what turns the highest profit for Motivate we should all be happy.

    I have tried to care about this system. Even after being added to the service area, I just can’t. I wish it luck though.

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    • Andy K March 23, 2016 at 6:23 pm

      Yes, these are lofty projections. 1,800 annual members and another 3,500 buying a monthly pass during the 4-6 warmest months seems like a lot!

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    • John Liu
      John Liu March 23, 2016 at 9:06 pm

      But in that case, anyone who wants a bike can simply get it at the Waterfront and ride it to their destination in some non-touristy place, where the next user also won’t be a tourist, etc. The bikes won’t stay in the Waterfront, unless there aren’t users who want to ride them anywhere else, in which case they might as well stay where they are used.

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  • tom lawler March 24, 2016 at 8:13 am

    Living in DC and being a bikeshare member for the past three years, the following are my takeaways in hindsight.

    Bikeshare can be useful in limited circumstances, that last mile when visiting parts of town where Metro stations are further apart.

    The docks are so frequently full or empty that bikeshare cannot be relied upon as a reliable means of transportation.

    It is useful for the visitors to DC’s monuments and museums, but only adult tourists. Bikeshare does not serve families. If you have a child under the age of 16 you should leave them at home or figure out a different means of transportation. Families with young children account for 25% of DC’s population.

    This is related to the problem that the system is designed to serve young higher income professionals, leaving children out means that many low income people cannot take advantage of the system.

    Bikeshare started though a 6 million startup grant saying they would be self-sustaining thereafter; this has not proven to be the case. Soon after the initial investment was made the company (Alta/Motivate) started campaigning congress to become eligible for transportation funding.

    While I am a huge supporter of the Bikeshare concept, my worry is that by removing the element of competition (innovation and customer service), Bikeshare in the U.S. will lag far behind the European models it is attempting to emulate.

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  • Cory P March 24, 2016 at 3:53 pm

    I would like to see real incentives for people who move bikes from oversaturated docks to undersaturated docks. Why pay a guy in a truck to do what some people will do for free if they have the time?

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  • Patrick McMahon March 25, 2016 at 6:10 am

    While Motivate has had the 3 hour requirement for Capital Bikeshare, no financial penalties were assessed (at least in the first three years) against the operator despite some violations of that because the public agency staff was comfortable with the efforts that CaBi’s operator was making to keep on top of the issue. So the question is whether it’s better to have a rule that you don’t enforce (but have the ability to) or to have a more flexible arrangement. Clearly the City of Portland and Motivate agreed on a more flexible arrangement.
    Having used the D.C. system regularly, I’ve been very impressed at how much it has transformed bicycling in Washington and at how reliable it has been. Once I wasn’t able to find an available dock within reasonable walking distance of my destination (and I missed a commuter train as a result), but the density of stations has ensured that there’s almost always an available bike or dock nearby.
    I can’t wait for Baltimore’s system to start this fall and look forward to seeing how bike share influence’s Portland’s bicycle culture. Equity is still a major challenge, but I think that Philadelphia and other locations have provided some good guidance on ways to try and address that more effectively than has been done previously.

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