Bixi's broken spokes - Macleans.ca

Bixi’s broken spokes

Is the bike-sharing program a victim of its own success, or just a horribly thought-out business model?

by

Jessica Darmanin

Toronto has devised quite an ironic plan to save its cash-strapped “bike sharing” program: instead of building 11 hi-tech, self-cleaning public bathrooms—a plan originally announced in 2008—city council decided in mid-November to redirect those millions of dollars to a project that probably belongs, well, in the toilet.

The concept of bike sharing itself doesn’t necessarily stink. Municipal bike shares have exploded across the globe in recent years, with hundreds of cities—from Paris to Beijing to Mexico—unveiling shiny fleets of communal bicycles that can be borrowed with the swipe of a credit card or an annual subscription. Some bike shares are actually self-sufficient, requiring not a dime of taxpayer money. But Toronto’s program, in hindsight, was destined to fail.

The plan was approved in 2010, when sidewalks in another city—Montreal—were already filled with thousands of “Bixis,” the pride and joy of a city-owned firm known as Public Bike System Co. (PBSC). Anxious to sell their award-winning, environmentally trendy concept to other urban centres, Bixi officials pitched the idea to Toronto (which, for the record, did not yet boast a crack-smoking mayor). As long as the city agreed to guarantee a $4.8-million loan that would allow the company to deliver and install 1,000 bikes at 80 stations, Toronto’s public purse would remain closed. Sponsorships and user fees, Bixi promised, would cover operating costs and loan repayments.

Toronto eagerly signed the contract, and in May 2011 the first vending-machine-style cycles arrived downtown. Less than three years later, the city is now on the hook for nearly $4 million, trading toilets for two-wheelers in the hopes of breaking even.

For Bixi, the Toronto debacle is just the latest in a long list of well-publicized financial headaches. At home in Montreal, the bikes have become a beloved fixture, used by thousands and universally praised by urban planners and climate change activists. But as a company, Bixi’s international reputation continues to tank, plagued by embarrassing software glitches, frustrated customers and dire warnings from Montreal’s own auditor-general. In September, Jacques Bergeron went so far as to express “serious doubts about Bixi’s ability to continue operations.” His words were disturbing enough to convince Vancouver to hit the brakes on its own $20-million deal with the company.

As Bixi scrambles to stop the bleeding (the firm has hired a restructuring expert to help remedy its admitted “financial difficulties”), a much bigger debate remains. With more cities hopping on the bike-sharing bandwagon, who should pay? Are Bixi-style programs truly an extension of public transit, deserving of public subsidies? And what are the real environmental benefits, if any?

“If you say it’s helping with greenhouse gas emissions, this is bogus,” says Ahmed El-Geneidy, a transportation and planning professor at McGill University. “The type of person you’re attracting with Bixi is not leaving his car. What you’re doing is you’re relieving your congested transit system.”

In fact, a 2010 study co-authored by El-Geneidy found that only two per cent of Bixi riders would have driven a car otherwise—a negligible reduction in carbon emissions. Another one-third would have taken public transit instead, which means their shift to Bixi did nothing to offset emissions. Still, El-Geneidy says he supports a subsidized bike-share program, not because it’s green, but because it provides residents more transit options and improves personal health. “I’m not an economist, but I can tell you for sure that a bike-sharing system can be run efficiently,” he says. “Forget about the one being run by the Bixi people here, because they don’t know how to run it efficiently.”

A pet project of former mayor Gérald Tremblay (who resigned amid Quebec’s war on corruption), the Bixi share program was officially unveiled in May 2009, the first of its kind in North America. All along, the master plan was to aggressively sell the made-in-Montreal concept to other cities, turning a profit that, in theory, would fund its system. London, England, was among the first to bite, buying its own Bixi fleet in the summer of 2010.

But the founding business model was severely flawed. Just 18 months after launch, Bixi was in such financial distress that Montreal had to approve a $108-million bailout (a $37-million loan, plus $71 million in further guarantees). Despite promising taxpayers Bixi would never cost them a penny, the city is on the hook if the firm ever collapses.

In June 2011, the city’s auditor-general delivered his own scathing assessment. Citing a disturbing lack of administrative oversight, Bergeron said Bixi was essentially conceived on a whim: “No one interviewed could provide any feasibility studies, business plans, risk analysis or cost-advantage studies. Nevertheless, everyone was in favour of launching this project without any of the necessary information to make a proper decision.” By then, Toronto was already under contract. So were numerous other customers, including Minnesota and Boston.

Bixi’s troubles continued to mount in 2012, when 8D Technologies—the firm that provided the original software for the bike’s solar-powered docking stations—filed a $26-million lawsuit, claiming improper use of the technology. Bixi countersued, but in the short term the company faced a far more pressing challenge: replacing 8D’s software. Not surprisingly, the result was hardly inspiring.

In Chattanooga, Tenn., technical problems delayed its Bixi launch for months, triggering one local newspaper to dub the program a “bicycle boondoggle” financed by $2 million in U.S. federal cash. “Could someone pinpoint the precise moment when it became the responsibility of non-bicycle-riding Americans to foot the bill for others to ride?” one editorial asked. Software hiccups also forced New York to push back the Big Apple’s much-hyped Bixi debut by almost a year.

New York’s Bixi network did eventually go live in May, fully funded by corporate sponsors, including Citibank. (Which explains the catchy name: “Citi Bike.”) But for Bixi, the bad news continued. The National Capital Commission in Ottawa is trying to sell its system, citing continued losses. In Minnesota, the non-profit that runs the city’s bike share filed a “notice of material breach” in its contract with Bixi, the first step toward potential litigation. And with deals in Toronto and Vancouver on life support, Montreal officials have had to reassure the public that Bixi is not going bankrupt.

In an email to staff (and leaked to a local paper), the CEO of the Public Bike System Co. insisted Bixi is a victim of its own success. Cash-flow problems are temporary, wrote Michel Philibert, because of “large deliveries concentrated in a short period.” Despite the “rumour mill, our level of confidence in the future of the company remains steadfast.”

Vancouver does not seem so confident. It wants to see a sound business plan and proof of sponsorship contracts before handing over a cheque. Asked about those developments, a Bixi spokesman referred Maclean’s to its Portland-based partner, Alta Bicycle Share, which is supposed to oversee the Vancouver project. (By press time, Alta had yet to respond.) “As for Toronto, unfortunately the negotiations are ongoing and so for that purpose I cannot comment on what is going on,” said the spokesman, Fabrice Giguere. “What I can say is if you want to call us in the spring, when everything will be settled down, we’ll be more than happy to give you an interview.”

By then, who knows what else may be in the toilet.