With successful launches and operations in over 30 U.S. cities, bike sharing has become a mainstream feature of progressive cities. Its rapid adoption is shown in the infographic featured below designed by the leading national biking organization PeopleForBikes.
"Bike-sharing systems and better bike lanes are dramatically improving the U.S. bicycling experience, coast to coast," said PeopleForBikes president Tim Blumenthal. "Bicycling nearly doubled during the last decade in our 100 largest cities, and we expect that growth to continue for years to come." The figures shared in the infographic, current as of summer 2013, report over 17,000 total bikes in sharing programs in the U.S. offered in more than 1,700 stations based in 31 cities.
Source: PeopleForBikes, Infographic: Bikesharing sweeps the U.S.
The three phases of bike share program adoption
To help municipalities considering adoption and help vendors pursuing contracting opportunities, we examined Onvia’s comprehensive database of bid, RFP and award procurement documents to discover how these bike share programs were being implemented and provide the typical phases of adoption.
Our data revealed recent projects using key words related to “bike share” programs. We also reviewed Onvia’s Spending Forecast Center database of upcoming agency projects and found 8 major cities that have written new bike share initiatives into their 1-5 year budget forecasts or capital improvement plans. This preliminary research confirmed the continued interest and investment in these innovative programs.
In reviewing the bike share project specifications in our data, we were able to identify three key elements of the implementation lifecycle for a typical bike share initiative: building the business case, making the up-front investment and securing the ongoing sponsorship revenue.
Phase 1 – Building the Business Case
Particularly for larger cities and regions, implementing a new bike share program is more than a brief conversation among city or county decision-makers. There typically will be some level of urban planning and feasibility analysis involved to answer various questions around how many riders might participate, how it would affect existing businesses, what the ideal station locations are, how the bikes should be rented, what are the security and maintenance issues, how it is aligned with existing public transit routes, etc. While agencies often have experienced planners on staff who can ask good questions and put together general forecasts, consultants can often offer additional or deeper expertise based on a team of specialists, a proven template and more sophisticated methods for estimating demand and costs.
One of the two largest bike sharing providers nationally, Alta Bicycle Share, Inc., has a sister company that provides feasibility studies for proposed bike share systems called Alta Planning + Design. According to their website they have provided feasibility/planning/system design bike share studies for 25 cities in North America.
An example of a feasibility study award from Onvia’s project database, given by the Transportation Agency of Monterey County, CA, is featured below:
|Demand Analysis and Implementation Consulting for a Bike Sharing System|
Transportation Agency of Monterey County
|Location: Monterey County, CA|
|Vendor: Fehr & Peers|
|Project Description: Agency requests vendor to provide a feasibility and implementation study that included a demand analysis for a bike sharing system and outlined steps needed to deploy the program and the projected costs. Bid was awarded to consulting firm Fehr & Peers for $57,000.|
A local media source in the Monterey County area reported that estimated capital costs to build the network would be $1.1 million and annual operating costs would total $180,000. Kera Abraham of the Monterey County Weekly reports that not all of those ongoing costs would be covered by the users themselves. Abraham says, "Membership and user fees would generate 18 to 70 percent of the annual operating costs, depending on how many people sign up; the rest would come from sources like grants and advertising." In feasibility studies, a very low to very high range like this can be the result of the consideration of a number of possible scenarios. This prevents relying on a single mid-level estimate that will only happen if certain assumptions are met. The awarded consultant, Fehr & Peers, proposed an initial phase of 24 stations, each with five bikes and 10 bike docks.
Besides evaluating overall feasibility, Fehr & Peers used modern geodemographic analysis techniques; rather than work with broad assumptions about demand and locations, the consultant used a tested statistical predictive model that incorporated information on a number of potential sites for stations using variables such as population and job density, land use status, nearby attractions and topography. According to the vendor’s summary of the project on their website:
The resulting model forecasted ridership at the station level, allowing us to determine the appropriate size of each station and select an appropriate number of bikes and stations for the network as a whole. These estimates supported the analysis of potential membership size, capital and operating costs, and revenue levels.Source: Fehr & Peers website
One alternate approach recently used was to have students and faculty at a university prepare a feasibility analysis for the city, saving the cost of consultant fees. In the case of the City of Seattle, this apparently worked very well at the University of Washington. The study done by graduate students in urban design performed so well that their final report won a national award and was accepted as a foundation of further planning and decisions by the city:
The UW Bike Share Studio work involved demand analysis, policy considerations, and suggestions for implementing a phased system. This study received recognition at the American Planning Association’s 2011 National Planning Awards in the category of "Contribution of Planning to Contemporary Issues".
Source: City of Seattle
Phase 2 – Making the Up-Front Investment
Retrieved from www.facebook.com/CapitalBikeshare
Once the decision is made by agency leaders to proceed based on the initial assessment or favorable market data, a single vendor is typically selected to not only install the equipment but to maintain the system over time. A very large recent example of this phase is the City of Chicago, which awarded a contract to Alta Bicycle Share, Inc. The initial bid document prepared by the city included highly detailed requirements and specifications. For example, bicycles were "designed to be inviting to novice riders. Key features will include one-size-fits-all design, protection from dirt and grease, ease of pedaling and shifting, and high durability." The agency planners had apparently developed these details through previous research – either through a consultant/vendor feasibility study, free contribution by a helpful potential bidder with national expertise, or internal study conducted by government staff.
|Purchase, Installation, and Operation of a Bicycle Sharing System|
City of Chicago
|Location: Chicago, IL|
|Vendor: Alta Bicycle Share, Inc.|
|Project Description: Agency requests vendor to establish and operate a large bicycle sharing system with more than 300 stations that is owned by the City. This system will enable users within a designated area to rent bicycles from one location and return them to another. Rentals are intended for short trips, under five miles in length. Bid was awarded to Alta Bicycle Share, Inc. for up to $65 million.|
The agency’s committee report estimated that the installation alone would cost $17.0 million for bicycles and stations and another $1.6 million for “installation and start-up costs” for a total of $18.6 million. The much larger listed amount on the award of “up to” $65 million includes total potential revenues available to the vendor over an initial five year period. A primary source of funding was an $18 million federal grant “to pay for the purchase and installation of the system’s infrastructure.” The large scale of the project was evident by the initial purchase of 3,000 bicycles with 301 bike sharing stations and included the docking stations and the technical software platform to manage the network. As an interesting side note, if you took the initial implementation costs of $18.6 million for the Chicago project and divided it by 3,000 bicycles the overall cost per bicycle would be $6,200. Annual maintenance and operating expenses were originally estimated at $7.8 million – which are expected to be funded based on daily rental and annual membership fees paid by the bicyclists. With 3,000 bicycles this would work out to around $2,600 annually per bike. To the extent rental revenues exceed the annual maintenance costs, the operator would be paid a performance incentive and the operator would absorb any losses up to a specified “annual loss cap.” The vendor’s website indicates the city total now stands at 4,000 bicycles and 400 stations.
As a smaller city example, the City of Mesa, AZ recently awarded a five year term contract for $200,000 for bike sharing installation and operation to CycleHop, LLC. Mesa used an existing cooperative contract that had been negotiated with this vendor by the City of Phoenix, AZ. Recently launching its larger bike sharing program with 500 bikes in 50 stations, Phoenix was a model for the smaller community of Mesa. In this case, Mesa used the Phoenix contract and reduced the scope exactly in half to 250 bikes and 25 stations. As their website stated:
This contract will establish a bike share network that will include up to 250 bicycles and 25 hub stations with payment kiosks throughout Downtown Mesa and/or within three miles of existing/future light rail/bus service. First-year funds will be for the use of the bicycles and all equipment, in addition to services related to implementation of the bike share system.Source: City of Mesa website
Phase 3 – Sponsorship. Secure corporate sponsorships and advertising to drive additional revenues
Retrieved from www.facebook.com/CapitalBikeshare
Since user fees alone may not be sufficient to meet annual budget needs for bike sharing programs, agencies have turned to corporate sponsorships and advertising to generate additional revenue. According to MediaLife Magazine, "Current or recent brands that have used bike share advertising include Target, Citi, KLM, Blue Cross Blue Shield, New Balance, Harvard University, Gillette, MasterCard and Google."
In the case of Chicago, Onvia’s contracting database reported a "sponsorship" award in 2013 to Van Wagner Communications that was competitively bid. As part of the award documentation the City Council explained that a bike sharing system can provide "revenue-generating opportunities for the City through advertisements and sponsorships of corporate advertising." Rather than relying on internal agency staff to design a sponsorship program and find interested parties, the City Council authorized selecting a qualified broker or consultant with expertise in this area who can develop business partnerships with the local community.
In early 2014, the City of Philadelphia collected submittals to an RFP for obtaining a "sponsorship broker" to help set up advertising for its upcoming bike share program and secure major sponsors. The services required would include "valuing, packaging and selling the sponsorship and advertising opportunities inherent in its upcoming bicycle sharing system (System Assets)." There would be essentially three levels of sales involved:
- Finding a single "title sponsor" or underwriting sponsor for a major advertising commitment
- Selling "advertising panels that will be featured at each of the bike sharing stations"
- Identifying "other advertising or sponsorship opportunities, partnerships and one-time promotions which may generate revenue for the system"
Cities that do not leave all of the sponsor-selection and sales work to an outside broker have the option of contacting potential sponsors directly through a formal bid request. One example is the City of Boston. City staff apparently went out for bids to attract major "title sponsors" for their 2011 launch of a regional bike share system. The bid announced that the city was looking for sponsors for the initial three-year term of the new bike sharing system operator specifically for the central Boston city section of the regional system. Each sponsor would have their name included as part of the official name of the system. The bid language noted that, "Title sponsors will also receive additional sponsorship benefits."
Beyond a title sponsorship, significant revenue opportunities are possible from station panel sponsors. A recent City Council report from Santa Monica, CA listed examples of how cities across the country are finding part of their annual operating expenses covered by this option:
The City of Boston is currently raising approximately $50,000 in revenue per station panel (3 feet x 4 feet) for sponsorship messaging on one station panel and 10 bicycles. Denver raises approximately $30,000 per station panel (2 feet x 2 feet) and Boulder raises $10,000 per station panel. Revenue at this level is expected to be sufficient to cover operating deficits in Santa Monica. If the City were able to procure $30,000 per station for 20 stations, it would raise $600,000 annually.
Bike sharing systems are not like parks or sidewalks that are provided free-of-charge for everyone’s benefit but are instead niche, market-driven public-private enterprises. While first year deficits or revenue gaps from operations may be understandable, these systems will ideally be self-sustaining over the long-term either from the growing base of income from rental/user fees or from corporate sponsorship/advertising revenue at the system or station level.
The 1st phase of the implementation process determines whether or not a given community has the built-in demand and interest to support this system at a particular recommended scale so that it will not become a financial burden for the hosting/approving city or county agency. As with any new business, there is the element of risk. Feasibility analysis may not be able to perfectly estimate the number of users or total costs. Still, government agencies need all the information they can collect to make informed investment decisions and size the system appropriately. The final and somewhat unique phase of implementation generates additional revenue in areas such as title sponsorship, individual station-level panel sponsorships and other advertising. Sponsorships and advertising can help mitigate the initial risk, acting as levers to pull that are more controllable by the agency than user behavior.
Bike share initiatives – started by more than 30 cities across the nation – are no longer viewed as fringe or experimental. The cities that successfully complete the implementation process and manage the risks involved stand to be rewarded with enhanced quality of life and improved perceptions as progressive, "livable" and environmentally-friendly communities.