In this three part series, BikeShare.com contributors take a closer look at how cities and bike share programs are taking advantage of different funding opportunities. In Part 1, Adam Cohen provides an overview of the various opportunities programs are using to generate revenue.
Bike sharing can be a risky financial proposition. Though many bike sharing operators have succeeded in attracting large customer bases in many large metropolitan regions, these capital-intensive programs face a number of hurdles in mid-sized and smaller regions, ranging from sponsorship availability; cost and availability of insurance; transit infrastructure and land-use suitability conducive to cycling. Bike sharing is generally most suitable to walkable, high-density, and mixed-use urban areas with close accessibility to transit.
In recent years, a number of public bike sharing business models have evolved: 1) non-profit; 2) privately owned and operated; 3) publicly owned and operated; 4) publicly owned/contractor operated; 5) advertising model; 6) third-party operated; and 7) vendor operated. Because of the benefits and financial risks to bikesharing programs, public entities may opt to support bikesharing, either through monetary or non-monetary support. The type and level of support for bikesharing is deeply impacted by the business model of the program and the goals of the public agencies supporting bikesharing.
Public transit operators and local governments may consider one of three approaches when evaluating monetary and non-monetary support and formulating public policies for the allocation of public resources (financial support, right-of-way, etc.) to shared-use providers. This framework reflects varying degrees of public support and is primarily designed to assist transit operators and local governments in new policy development. (Footnote: Experience in shared-use systems has shown that public agencies which are early adopters of bikesharing tend to develop policies that emphasize environmental sustainability.)
Three planned programs in New York City, Baltimore and Chicago demonstrate the vast differences in public support and bike sharing funding. New York’s ‘CitiBike’ program is entirely privately funded through a partnership with CitiBank and MasterCard, representing nearly $50 million in private funding. In sharp contrast, $18 million in federal Congestion Mitigation and Air Quality (CMAQ) funds and $3 million from the city to launch the first phase of Chicago’s bikeshare program. In Baltimore, the launch of Charm City Bikeshare, which was first planned to launch in Spring of 2012, has been suspended indefinitely because of an inability to raise monetary support from both the private and public sectors.
Some suggest the federal perspective on bikeshare funding should be re-evaluated and be based on a combination of private equity availability for bikesharing and the impacts from their proposed systems. In other words, prospective bikesharing programs with less availability to private equity and higher program impact (on air quality and modal shift) would be given higher priority for federal funding. Two principal ways to measure funding eligibility for prospective bikeshare startups is to examine the availability of sponsorship revenue (primarily advertising) and through modeling anticipated system impacts on modal shift and air quality.
Advertising and Sponsorship Availability
Although the ‘advertising model’ of bikesharing (establishing bikesharing in exchange for advertising rights as part of a street-furniture contract) is rare in North America; advertising still represents an important revenue source for bikesharing operators across all business models. As of April 2012, 13 of 19 North American operators sold advertising, representing the third largest revenue source followed by user fees and sponsorships. As such, one method of measuring private equity availability is to examine the size of the advertising market from the city requesting funding support. This would typically indicate the small to medium-sized cities might be suited better for public assistance due to limited availability of private equity such as advertising and corporate sponsorships.
Air Quality Impacts and Modal Shift
Another way to appropriately establish the need for federal funding is to examine potential program impact on air quality and modal shift. Air quality is an important metric because even if bikesharing may draw some riders from rail and bus transit onto bicycles, there are still air quality benefits shifting users from one transit mode to a cleaner mode. In a recent study on North American bikesharing I co-authored, we found that on average, 9% of respondents increased and 43% decreased rail use while 7% increased and 38% decreased bus use. However, a more detailed analysis found that modal shift away from public transit generally occurred in higher density more congested cities. In the Twin Cities, which has lower density and more limited public transit, 15% increased rail use compared to only 3% who decreased rail use after joining bikesharing. The Twin Cities were very different from the other cities in the study that showed a shift away from transit. The Twin Cities were lower density, with a relatively linear rail line, and lower transit connectivity compared to the other three cities (Montreal, Toronto and Washington D.C.). Due to these differences, it’s probable that users in the Twin Cities were enticed to bikesharing to connect to a singular rail line. Conversely, in the larger metropolitan regions, it’s also possible that the shift away from public transit was two-fold. Users trying to find a more direct connection offered by bikesharing instead of by rail or bus and users also shifting out of congested trains and buses during peak transit periods. Although more study is needed, these early findings could suggest that public funding for bikesharing may be well suited for medium-sized metropolitan regions with more limited transit alternatives.
Aside from grants and sponsorships, another way public agencies can support bikesharing is through risk-sharing partnerships. Using the ‘subtraction model’, a bikesharing operator can value the monthly operational cost of a kiosk and subtract monthly revenue and bill the shortfall partner.
Under this model, the risk-sharing partner only pays the cost needed to maintain service availability. This can also be an excellent model to encourage service into new locations (low-income, lower-density etc.) that may be economically feasible for the bikesharing operator.
Non-Monetary Support of Bikesharing
Regardless of city-size, it is important to remember that public support for bikesharing does not have to be limited to financial assistance. A few of the ways your community or public agency can support bikesharing include:
- Becoming an advocate and partner for bikesharing;
- Become a bikesharing sponsor;
- Including bikesharing in applications for grants, loans and other incentives;
- Providing public space for bikesharing kiosks;
- Issue a request for proposal (RFPs) to bring bikesharing to a community;
- Become bikesharing customers, as an employer;
- Encourage bikesharing in development projects through building codes; and
- Address tax issues related bikesharing.
About the Author
Adam Cohen is a research associate with Innovative Mobility Research at the Transportation Sustainability Research Center (TSRC) at the University of California, Berkeley. He has a master’s degree in city and regional planning from the Georgia Institute of Technology. The views expressed here reflect the views of the author alone, and do not necessarily reflect the views of the Transportation Sustainability Research Center, or the University of California, Berkeley.