New York City's 10-month-old bikeshare system – first heckled by skeptical New Yorkers, then embraced by tens of thousands of them; variously the subject of lawsuits and aesthetic critiques and conspiracy theories – recently entered a new chapter in its high-drama first year: Citi Bike, media and city officials have concluded, is in a financial tailspin.
The Wall Street Journal reported last month that the system was in need of "rescue" in the form of tens of millions of dollars. New York's new transportation commissioner has conceded "financial and operational challenges." Last week the program's general manager resigned. All this amid headlines demanding "tough love" and dramatic change.
And yet, by another metric, Citi Bike looks like a considerable success: Just a few days ago, the system topped 7 million trips, and more than 100,000 people have now signed up for annual memberships. By contrast, the three-year-old Capital Bikeshare system in Washington has about 24,000 annual and monthly members.
These two assessments from New York seem incongruous: How can Citi Bike be both wildly popular and financially troubled? Washington's Capital Bikeshare system, the first of its kind in the U.S., has never struggled with the kind of financial woes currently dogging Citi Bike. So what's so different about what happened there?
To be sure, Citi Bike has had some freak misfortunes. Hurricane Sandy damaged equipment before the system ever launched. And thanks to delays, Citi Bike's first year turned out to include a particularly un-bike-able winter. Other problems, involving glitchy software, were self-inflicted.
But setting all of those circumstances aside, Citi Bike differs from Capital Bikeshare, and from many bikeshare systems around the world, in one big philosophical way – with important financial implications.
But first, a brief primer: The Wall Street Journal reported that Citi Bike's popularity with New Yorkers has actually been part of the problem. Many bikeshare systems are built around a tiered membership structure: Casual one-day or one-week users – typically tourists – pay the most per ride, while annual members pay a low, flat rate for unlimited short-distance trips. To maximize revenue, a system needs the right balance of annual members (who may pay pennies per trip) and casual ones (who subsidize them).
In Washington, annual members pay $75 for a year's worth of access, and any trip under 30 minutes is free. Regular users are savvy about this threshold: About 98 percent of all trips taken by annual members last less than 30 minutes. Daily and weekly users far outnumber monthly and annual members in the system. But while that casual rider group claims a disproportionately small share of all of the total trips taken, it's responsible for a vast majority of the most lucrative long trips that bring in rapidly escalating overage fees:
Citi Bike has signed up what looks like a massive number of annual members. But that obscures some more important patterns among casual users, who make up a smaller share of all memberships, trips and overage revenue than in Washington:
These pictures aren't perfectly comparable. Washington's data covers a full year (with a few extra warm months thrown in there), while New York's spans only nine months (the trip data also covers only July through February, because the early software glitches have kept Citi Bike from releasing June 2013 trip data). But it's clear why financial concerns are arising now, at the end of a bitter winter: Lucrative casual users took more than 202,000 trips in New York last August. In February, they took just 7,979.
Critics should probably give Citi Bike a full year to assess its finances, given the dramatic seasonal changes in revenue. The warm months invariably subsidize the cold ones in any city. But even if Citi Bike had a more profitable split between casual and long-term users, if it had no software glitches, no snowstorms, it would still be hamstrung in a significant way.
Citi Bike was launched to great fanfare last May as a for-profit system that intended to survive without public money – an unusual proposition for a system that effectively functions as part of the city's public transportation network.
Capital Bikeshare, in contrast, funded the original bikes and the docking stations with federal grants earmarked for local programs that mitigate congestion and improve air quality. User fees cover a large share of the operating costs (repairing broken bikes, "rebalancing" bikes from full stations to empty ones, running the customer call center). But they don't cover everything.
The District had an operating loss of about $392,000 for fiscal year 2013. Arlington County (which pays separately for its local stations) was short about $440,000.
Capital Bikeshare, in other words, has a pretty efficient system, and the District expects to generate net profit this year and going forward on its portion of the system. But regionally, bikeshare isn't totally self-sustaining in Washington, either. A difference here is that officials – and perhaps, by extension, the public – don't expect it to be. Local governments explicitly view bikeshare as a form of public transportation, requiring the kind of public support that buses and trains receive.
"It’s great if we can cover some of the costs, and we do," says Jim Sebastian, the manager of the Active Transportation Branch with the District Department of Transportation. "In terms of transit systems, we have good cost recovery, good farebox recovery. But it’s an important transit asset for the the city, and I think we’d be willing to operate it at a subsidy if we had to."
The Arlington portion of Capital Bikeshare, for example, recovered 74 percent of its operating expenses last fiscal year with user fees, or 59 percent if you include the marketing and management. Metrorail's cost recovery ratio over the same period was 80 percent. Metrobus: 27 percent. Those numbers make bikeshare's finances look entirely successful, even as the system technically requires public money to subsidize its operations.
"It’s about economic development and transportation and providing people options, and so cities have to invest in something like this," says Chris Hamilton, the transportation bureau chief for commuter services in Arlington County. "They can’t go into starting bikeshare thinking that it’s going to pay for itself. It should be treated like any other part of the transportation system: like the buses, the bikeways, the rail, the sidewalks."
If a city declines to view bikeshare this way, making the public investment that entails, Hamilton says, "I think you set it up to fail."
Citi Bike, which turns out not to be sustainable on its own, will now have to consider raising fees or finding new sponsors (a task that will be hard to do given that the system is already plastered in Citibank branding). New mayor Bill de Blasio is so far refusing what's been framed as a "bailout" with public money.
"From a policy standpoint, nobody wants to call it 'public transportation' and something that needs a subsidy," says Sarah Kaufman, an assistant adjunct professor of planning at the NYU Rudin Center for Transportation. "We already have our mass transit system that already is strained and needs heavy subsidies, and it’s already a battle in Albany and federally to get the appropriate amount of subsidies for these systems."
But clearly riders in both New York and Washington use bikeshare as a complement to existing transit, to navigate corridors without bus service, or to make the "last-mile" connection from a subway stop to the office or home. New York deliberately planned the locations of its bike docks to leverage the subway system.
This graph, released Monday by the Rudin Center, makes the most compelling case yet that Citi Bike functions as public transit:
It shows a striking correlation in data from last September between the New York subway system and Citi Bike: As train delays increased, so did bike ridership among people who may have been looking for an immediate alternative.
That picture underscores that a successful bikeshare system may not necessarily be measured in profit. Maybe it's a system – with the best cost recovery possible – that helps ease rider frustration with subway delays. Or it's a system that extends commuting options well beyond the reach of the bus network, better serving residents for less money than new bus service would cost. Or it's a system that can address health disparities. Those other public goals may not even be compatible with the best bottom line.
In Washington, Capital Bikeshare is eyeing expansion into new neighborhoods in the region that are less densely populated and farther removed from commercial hubs. New York theoretically intends to do the same, expanding into boroughs well beyond Manhattan. But as Arlington has expanded, already its cost-recovery ratio has gotten worse, not better.
"We knew that this would happen," says Paul DeMaio, Capital Bikeshare's program manager in Arlington. Bikeshare systems typically launch in the most profitable parts of town, where would-be riders are common and tightly clustered together. By definition, expansion means serving the people who are harder to get, who live beyond the tourist centers. "But, again, we’re transit," DeMaio says, "so you can’t serve only part of the population. With transit, you need to serve everyone."
(For more context on Capital Bikeshare's growth over the last three years, see this great earlier graphic from The Post.)