Bike Nation enjoys high-level support in the City of Los Angeles. Image via Bike Nation
On the morning of April 15th, Mayor Villaraigosa walked up to the press conference kicking off CicLAvia and announced that Bike Nation, a new bike share company, would invest $16 million in creating a bike share program for Los Angeles. Bike Nation would bring 4,000 bikes, 400 kiosks to communities in Downtown Los Angeles, Hollywood, Westwood and Venice Beach. Of that $16 million, 70% is for capital (kiosks, bikes, etc…) and 30% is for bike share operations.
The announcement caught nearly everyone off guard. Outside of a small group of CicLAvia Board Members and media members the city had kept a tight lid on the announcement.
While the secrecy helped make a big splash at L.A.’s biggest Livable Streets event, it also led to confusion and criticism from some quarters that one would expect to be sympathetic. Rumors swirled, including one that Bike Nation was an AEG front group (it’s not). Others attacked Bike Nation for exaggerating the uniqueness of their patented chain free bicycles or for biting off more than they can chew by promising the nation’s second largest bike share program.
Further complicating things, Bike Nation’s relationship with Los Angeles is different than the model used in most cities.
In the year before Bike Nation announced it was coming to Los Angeles, Metro was working with a handful of bike share vendors to bring bike sharing to Los Angeles County including Bike Nation, B-Cycles and Alta Bike Share, a partner with Alta Planning and Design. At the time, many assumed that when bike share did come to Los Angeles, it would be a subsidized program similar to the ones in Washington D.C. and the one coming to New York this year. When a bike share program is subsidized, a formal Request for Proposals (RFP) is released where vendors compete for the contract and funding. Their proposals show where they will place bikes, how many they can place in certain locations and what the other revenue streams to support the system are.
But Bike Nation’s business model doesn’t require a subsidization which frees them from some of the commitments required by an RFP. Between what it charges users, and what it will sell in advertising, Bike Nation expects to make a large profit over the next decade in Los Angeles. A rival company estimated that the advertising that could come from a functioning bike share system with 4,000 bikes could be $40 million over the next decade or 250% of Bike Nation’s initial investment.
As Lisa Sarno, with the Mayor’s office put it, Bike Nation’s offer “Allowed the city to leverage and speed up the process for bike share.”
Seeing the opportunity, Bike Nation came to the city of Los Angeles not with a proposal but with a request. “Create a system to permit bike share installation and we’ll make the investment to make that system work.” Bike Nation has repeatedly said it didn’t have an exclusive deal with the city, and they’re right. They have a commitment to apply for permits to put in kiosks and bikes. In this way, Bike Nation skipped the RFP and went straight to permitting and soon thereafter installation.
“To date, bike sharing systems have been reliant on government funding and ongoing operational subsidies,” explains Derek Fretheim, the Chief Operating Officer for Bike Nation. “We saw a way to create a bike share program without using those subsidies and began promoting a private venture strategy earlier this year.”
City staff believe they can have the permitting system created by the fall so installation can begin before the end of the year. “Quite frankly, this is the first time we’ve done this in the City of Los Angeles,” Sarno says of creating the bike share permitting process.
Such an arrangement has one obvious benefit for the city: it will have a bike share system it couldn’t afford to pay for. But there are drawbacks. If one considers bike sharing as a form of public transit, a system where the local government has less say on placement, upkeep, bicycle conditions and other safety issues is just that: a system where the government has less say on placement, upkeep, bicycle conditions and other safety issues. Read more…