NYC Citi Bike Financial Woes: Who Will Pay?

March 26, 2014 Updated: March 26, 2014

NEW YORK—The success and popularity of Citi Bike’s bike sharing among New Yorkers has only added to Alta Bike Share’s financial woes.

The program works so well, according to a New York University study, because Citi Bike stations have been integrated into the city’s transportation network.

The average distance of a docking station from a subway station is less than 1,000 feet, and there are nearly 20 stations per square mile in areas served by Citi Bike, which includes Manhattan, below Central Park, and parts of Brooklyn.

Celebrity spotting and the early promise of the service being of no cost at all to taxpayers raised its profile, but bad luck and concentrated ridership caused Alta—the managing company—financial and operational problems.

Early this month Department of Transportation Commissioner Polly Trottenberg said all options were on the table to help the struggling program, including rental rate hikes, which then sparked a conversation about whether the city should step in with funding to protect the popular program.

At a City Council preliminary budget hearing Trottenberg said that the program was not ready for expansion, which many communities desire, as there are still a number of financial and operational challenges.

Public or Private

Other bike share programs across the nation—San Francisco, Washington, Chicago, Boston, and Houston—share the operating costs with local or federal governments.

Portland-based Alta has not indicated an interest in obtaining public funding, but said in a recent statement it is looking for new private investors in order to expand. According to the Wall Street Journal, the company needs to raise tens of millions of dollars.

If public dollars were to be used, Alta would need to make its financial information public, something many City Council members have been interested in. Alta currently does not, and is not obligated to, open its books to the public.

Transportation economist Charles Komanoff said it’s unclear whether public funding would benefit the program, because the details are unknown.

“Citi Bike’s books need to be opened so the public can know what it will get, in terms of better maintenance, more geographical coverage, and affordable pricing, in return for any public expenditures,” Komanoff said.

Responders were split on either providing subsidies or implementing a price hike, according to a small poll of online respondents by Crain’s New York Business.

The mayor has said the city budget is not on the table for helping Citi Bike, but that it is interested in working with Alta to make its operation more efficient.

Alta said many of the program’s problems are, in fact, seasonal—first Sandy, then the snowy winter—contributing to damaged equipment and low ridership.

With warmer days approaching, Alta has a sunny outlook.

Bad Luck 

Months after the program’s inception, and before its launch, Superstorm Sandy hit and damaged millions in equipment.

Next, software problems abounded and contributed to many people not being able to make payments to use Citi Bikes early on.

Nearly 100,000 New Yorkers have annual passes ($95), but the program isn’t selling enough weekly ($25) and daily passes ($9.95). Early software glitches contributed to this, as tourists weren’t able to access the bikes.

The manual redistribution of bikes from station to station in the city was also more costly than expected.

For example, if many people are riding from the Lower East Side to Midtown, two problems quickly emerge: the LES stations run out of bikes, and docking space in Midtown is hard to find. But with the data collected from the past year, Alta expects to better redistribute bikes this summer.

“The Citi Bike system has some of the highest usage in the country, which means Citi Bikes are ridden more often than bikes in other systems, and thus need more frequent maintenance. All these things are fixable and we are working diligently to fix them,” Alta stated recently.

According to monthly operations reports, inspection rates have been less than half of targeted monthly inspections in the period from December 2013 to February 2014, possibly due to the near-constant snow conditions. Alta is also required to fix broken docks within 48-hours, which was met only about half the time in the past few months.
Also, not everyone is a fan of the bike share program.

Multiple lawsuits have been filed by groups who want Citi Bike stations moved, but they have largely been dismissed.

To make matters worse for the company, Alta’s partner Montreal-based Bixi declared bankruptcy—though Alta assured users the company was financially sound. Alta soon dropped Bixi for 8D Technologies, which originally provided Bixi with its bike share technology, but it was still forced to lay off workers due to financial strain.

Bixi’s bankruptcy caused an Alta-scare not just in New York. San Francisco officials recently said their expansion may be delayed, and the program launch in College Park, Md., is on hold indefinitely. Portland officials have stated they will watch Alta closely, but are confident because their situation is nothing like New York City’s.