Divvy costing taxpayers big...
... according to this item from the Illinois Policy Institute:
http://illinoispolicy.org/blog/blog.asp?ArticleSource=6230
I have real basis on which to form an opinion. I have yet to try Divvy (I have plenty of my own bikes) and don't live in Chicago. A friend at work passed the link along.
Views: 3194
Replies to This Discussion
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Permalink Reply by Bez on
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These 2 posts fit together perfectly, and illustrate a major issue with the way taxes are presented to the people.
Anti-tax folks, currently mostly represented by Republicans masquerading as Libertarians, have the mistaken idea that the taxes that the government collects are "theirs". While public spending should be transparent, none of that money belongs to anyone except the government from the moment it is taken. Think of it as a fee for being able to use clean air, water, etc while you work. It's called contribution to the public good and is a much longer conversation than is needed here.
Exacerbating the issue, think tanks such as this specifically hire high level private business professionals to treat everything as if it exists in the "free-market" (which, incidentally, they do not actually believe in nor want). As such, they issue plenty of press releases talking about how things are running at a deficit or are not profitable. Since the average person has little understanding of the underlying issues, the soundbites get passed around and rhetoric gains traction. In reality, all businesses run at a deficit for a percentage of each operating year, hence why many companies shift their fiscal calendar around to represent profitability. Public, or tax supported, businesses run at a near constant deficit by design. It's a balancing act, as they need to run at just enough deficit to keep from having to shut down or taking more in taxes.
*note - this only applies to businesses such as Divvy, not services/departments such as the EPA.
Daniel G said:
Conservative group hates liberal shit. Especially hates it when liberal shit gets public support in a place liberals live.
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[Ultra-conservatives] believe that all money is borrowed and the 3 trillion the US takes in in taxes just gets dumped in a hole and lit on fire. What actually happens is that money gets spent on important and unimportant things. People whose pet projects didn't get funded become conservative and shut the entire government down.
Michael Hulburt said:Also, since when does a government-supported project have to turn a profit? Isn't the goal of Divvy to increase bicycling in Chicago, and therefore, the myriad benefits that go along with decreased pollution, healthier people, and safety in numbers with more bikes on the road? (And the positive feedback loop of more cycling infrastructure furthering all the other benefits.) If Alta never turns a profit but ends up doing all that, I'm sure I wouldn't be the only person happy to see my tax dollars at work. So far it seems that Divvy is doing just that and will likely continue to grow.
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Uh oh, someone mentioned the word socialism (erroneously)!
Quick, to the torch-and-pitchfork dispensary!
bk (aka: Dr. Mambohead) said:y'know?...
you give these homeowners a free sidewalk?...
pretty soon they want fresh water to their houses.... and then?
oh!! oh!!!! sewage is nasty! please have a socialist utopia deal with my dooty! i need government intervention!
lurking socialism is everywhere, comrades
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Permalink Reply by Anne Alt on
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That's pretty much how I'm feeling about it.
Michael Hulburt said:
Also, since when does a government-supported project have to turn a profit? Isn't the goal of Divvy to increase bicycling in Chicago, and therefore, the myriad benefits that go along with decreased pollution, healthier people, and safety in numbers with more bikes on the road? (And the positive feedback loop of more cycling infrastructure furthering all the other benefits.) If Alta never turns a profit but ends up doing all that, I'm sure I wouldn't be the only person happy to see my tax dollars at work. So far it seems that Divvy is doing just that and will likely continue to grow.
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Permalink Reply by Reboot Oxnard on
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Of course the award was crooked. This is Chicago, the contracts here are always crooked; it's just how the City does business. We all understand this and pretending otherwise doesn't make it stink less. But, so what? In the long run, Divvy will cost more than it should but that extra money is the cost of getting things done in Chicago and crying about it won't accomplish anything except mean you can't get a garbage can or a permit to finish your basement, right?
So, how much will Divvy actually cost? Because revenues will be used to offset costs, it's impossible to say precisely how much the City will end up paying but that doesn't mean that the gross costs aren't known. From the contract, here are the first year numbers:
- $17,027,714 for the purchase of 3000 bikes and 301 stations
- $2,454,755 for start up services and costs, including initial marketing, a website and a warehouse
- $1,588,700 for installation and service
- $7,837,356 for first-year operations and maintenance
Most of the detailed charges are redacted in the contract posted online. You aren't allowed to see what the City is being charged per bike (or per tire, as in maintenance) but each additional station will cost $5,200. If you do the math, it's possible to figure out the rough costs per bike, however:
- To buy each bike: ($17,027,714 - ($5200 x 301)) / 3000 = $5154 per bike.
- Annual operations and service costs: $7,837,356 / 3000 = $2612 per bike, per year.
- Total system cost over five years: $18,214 per bike
Yoikes! For those craptastic tanks bikes? Somebody is getting rich.
It's a five year contract, so the annual operations and maintenance costs will probably increase significantly as the bikes are bludgeoned into submission by the hoped for thousands of users.
Divvy is a good thing but it's an expensive thing. Very expensive. Let's also hope that it's popular so the users pay for it, not the taxpayers.
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Permalink Reply by Skip Montanaro 0mi on
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How much of the various costs you identified were offset by grants of one sort or another? You don't mention that.
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Permalink Reply by Tom Dworzanski on
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A government-sponsored project shouldn't turn a profit or have a deficit. It should be correctly budgeted and should come in at that budget. The problem is with the original setting of the budget and what checks exist to make sure it's reasonable. Are these checks as strong as say the average person considering whether or not to spend his or her money in the open market? Or are they as strong as the average person trying to help out a good friend with a new business knowing he or she will get something in return? Of course the points you make about the additional benefits of cycling are very well taken and important but they are not an excuse for a politically connected private company to reap a windfall -- these thing should come at no monetary cost with bike sharing.
I have absolutely no concern for Alta or any of the other private contractors involved in this project. Believe me, they will turn a good profit. The question is about the City of Chicago only (and to a lesser extent the federal government that gave a grant) and whether or not they act prudently with the our money.
Just to be clear, my position is to be 100% for bike sharing. I also don't pretend to know Alta's profit margin or whether or not it's reasonable. I'm just speaking from gut instinct that the number sounds through the roof. My concerns are with the ability of the city negotiate sagaciously.
Michael Hulburt said:Also, since when does a government-supported project have to turn a profit? Isn't the goal of Divvy to increase bicycling in Chicago, and therefore, the myriad benefits that go along with decreased pollution, healthier people, and safety in numbers with more bikes on the road? (And the positive feedback loop of more cycling infrastructure furthering all the other benefits.) If Alta never turns a profit but ends up doing all that, I'm sure I wouldn't be the only person happy to see my tax dollars at work. So far it seems that Divvy is doing just that and will likely continue to grow.
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There is a very substantial grant, from the USDOT, that was used to fund the purchase of the bikes - essentially 100% of that purchase. That doesn't change the fact that each bike costs a little over $5100 to buy and $2600 per year to operate and maintain.
Skip Montanaro 12mi said:How much of the various costs you identified were offset by grants of one sort or another? You don't mention that.
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The five year figure is the term of the contract. I don't know how long the bikes are expected to last and neither said nor implied that they have a five year lifespan.
As to how much the bikes should cost, who knows? Do you? The three bikes I own (none of them recumbent, thank you snarky much) may not be the best examples for a comparison but let's look for some examples that might be relevant. How about a Trek Police Bike, like those used in many cities. These bikes get a lot of use and abuse in essentially the same environment that the Divvy bikes will and can be purchased individually for about $1200 at your local bike shop. Ordered in lots of 3000 I suspect you might get a bit of a discount.
Contracts like the one in question aren't hard to read even if sometimes they can be a little hard to understand. The $5100 cost per bike and the $2600 annual cost to maintain and operate it don't change based upon what business experience I might have and my personal business experience isn't particularly relevant here. Nonetheless, since you asked, I have owned a medium-sized service business and have first-hand experience working with dozens of government purchasing offices at the federal, state and local level- including Chicago.
Jeff Schneider said:Is it predicted that the bikes will have an average life of 5 years, or is that just your assumption? Has that been the experience of more mature systems, such as Velib and Bixi?
Do you think the bikes, with their special robustness and features to deter theft and vandalism, should have a cost similar to the bikes consumers buy that do not have these festures?
How much do you spend per mile ridden (parts, your time or labor costs) to maintain your suburban-garaged recumbent bike? Should bikes stored outdoors, whose riders don't lavish the love on them that you do on your bent, cost more or less to maintain?
Have you ever run a manufacturing or equipment service business?
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The $65 million is the five year contract commitment for the 3000 bikes and 301 stations. If the city decides to add additional bikes, the $5100 cost to purchase them and the $2600 annual cost to maintain and operate them will be in addition to the $65 million.
You're correct that there are additional expenses beyond the cost of the bikes and the parts to service them. Those costs are broken out separately in the contract and I didn't lump them into the $5100 cost to buy and the $2600 cost to operate and maintain the bikes. For instance, in addition to the acquisition costs and the operating and maintenance costs, the first year of the contract breaks out these separate costs:
- $2,454,755 for start up services and costs, including initial marketing, a website and a warehouse
- $1,588,700 for installation and service
I don't think anyone has argued that this program should turn a profit for the City - though there are provisions in the contract for the City and Alta to split the money, should that happen. If there is an argument, it isn't that the City is making money from this, it's that $5100 to buy the bike and another $2600 per year to operate and maintain it means that someone else is making an unconscionable amount of money from it - profiteering, as it were.
I'm a fan of the idea behind Divvy. I'm also a fan of not paying more than necessary - as Tom said, the City is supposed to spend our money prudently. If, because this is the Chicago way, it has to cost extra then I still think it's a worthwhile experiment, because of the numerous ancillary benefits that might accrue. It is a shame if it has to be this way, however.
Michael Hulburt said:It seems like that number is the $65 million divided by 3800 bikes. Obviously, the bikes aren't the only thing that has to be paid for to get the program running and to maintain it—ental stations, payment software, the bikes, bike and station maintenance, the blue vans that redistribute the bikes, and their drivers, to name a few.
Also, since when does a government-supported project have to turn a profit? Isn't the goal of Divvy to increase bicycling in Chicago, and therefore, the myriad benefits that go along with decreased pollution, healthier people, and safety in numbers with more bikes on the road? (And the positive feedback loop of more cycling infrastructure furthering all the other benefits.) If Alta never turns a profit but ends up doing all that, I'm sure I wouldn't be the only person happy to see my tax dollars at work. So far it seems that Divvy is doing just that and will likely continue to grow.
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The cost to acquire the bikes is $5100 per, that is not an amortized amount but a first year sunk cost and I didn't say otherwise. If the cost is amortized over five years, it still costs $5100 to purchase each one of them: the bikes cost what they cost. If you have experience in manufacturing that leads you to believe that this is a reasonable cost, show us how. Otherwise the examples set by other vendors, including vendors that make hard use bikes for police departments throughout the country, deserve considerable weight.
Your incredulous and you haven't provided any information in rebuttal so there's no point to arguing.
Jeff Schneider said:In your calculation you amortized the cost of the bikes over 5 years, which amounts to an assumption that 5 years is their avg. service life.
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Permalink Reply by h' Zerocats on
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If the cost of these bikes really is $5100 each, it would be great if one of our esteemed investigative journalists could do some work to find out why that is (and why the nominal replacement value is only $1200...)
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