Posted by Michael Andersen (Contributor) on March 23rd, 2016 at 10:06 am
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
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
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
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
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.
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 – firstname.lastname@example.org
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