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: 3250
Replies to This Discussion
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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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Permalink Reply by Reboot Oxnard on
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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 globalguy on
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+1: Of course that would require one of our "esteemed investigative journalists" to actually investigate ...
h' 1.0 said: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 ...
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Permalink Reply by Thunder Snow on
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A fair per-bike comparison would be to the New York, Washington DC, Montreal, London or Paris bike-share systems. Is Chicago really that much more expensive than these other systems? (I truly don't know.) If push came to shove, I'd be willing to sacrifice the "Halsted Flyover" at the Circle Interchange, plus the "Illiana Expressway" planned for Peoria, to make up any Divvy shortfall.
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Each Divvy bike clearly states on the handlebars that there is a $1,200 charge for a bike that is not returned. Based on the costs of steel bikes most of us know well, I'd say that sounds about right.
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Are you involved in bicycle manufacturing or something close? If so, please share your insights into the costs of these bicycles and explain why they seem to be so high.
Jeff Schneider said:
As for how much the bikes should cost, being in manufacturing I might know better than you.
There are A LOT of this same style of bike-share bicycle going into use around the country and adding them all up would probably equal upwards of 10,000 units. That seems like a pretty significant run.
Jeff Schneider said:I don't agree that police bikes are a good comparison. They are just slightly modified very high production run hybrids.
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Permalink Reply by Drewbacca on
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Yeah, I was thinking along these lines... and wondering how much of that cost-per-bike actually gets canceled out in the long run. I'm certainly not playing fiscal-conservative here, I'm just questioning if the number was inflated worst-case-scenario stuff and by how much.
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.
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