City Council makes Lyft exclusive operator of Divvy bike-sharing for nine years
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Lyft will be the exclusive operator of Chicago’s Divvy bike-sharing system — at least for the next nine years — under a revenue-sharing agreement approved by the City Council Wednesday over the strenuous objections of arch-rival Uber.
Mayor-elect Lori Lightfoot has expressed reservations about the agreement and the process by which retiring Mayor Rahm Emanuel negotiated a deal that “seemingly came out of nowhere without proper vetting and transparency.”
Lightfoot has called the deal “precisely the style of governance that we have to move away from.” That’s even though Emanuel has rejected comparisons to the widely-despised parking meter deal.
That didn’t stop the City Council from approving the exclusive arrangement, ignoring Uber’s plea.
“We offered a $450 million investment package over five years. We were willing to operate alongside Divvy during the entirety of that,” said Bobby Kellman, head of bike and scooter policy for Uber-owned bike-sharing company Jump, said earlier this week.
“We just believe that the contract should be made not exclusive. That any company that wants to invest in Chicago should be allowed to do so. If Divvy wants to expand and operate in the city, that’s great. We’d welcome them. We would just like to compete alongside them like we do in every other city in America.”
Prior to the final vote, Traffic Committee Chairman Walter Burnett (27th) acknowledged he was not satisfied with Lyft’s minority participation, which is confined primarily to deliveries and bike maintenance. Burnett promised to hold Lyft’s feet to the fire to improve minority participation and said the ride-and-bike sharing giant has “promised to do better.”
At a committee hearing earlier this week, Ald. Roderick Sawyer (6th), chairman of the City Council’s Black Caucus, argued that the agreement “changes the whole dynamic” of the city’s relationship with Lyft.
“My concern still grows back to giving exclusivity to an agreement like this. I’ve always felt that competition ends up lowering prices, increases competition, increases service,” Sawyer said.
Transportation Commissioner Rebekah Scheinfeld responded to Sawyer’s concerns by ticking off the benefits of the revenue-sharing agreement to Chicago taxpayers.
It calls for Chicago’s wildly-popular but still money-losing bike-sharing program to go citywide by 2021 — increasing to 16,500 bikes docked at 800 stations.
In exchange for a $50 million investment in new bikes, stations and hardware, Lyft would become the exclusive sponsor and operator of the system that now loses up to $700,000 a year. Lyft already owns Motivate, the company that operates the Divvy bike-sharing system.
The city would get $77 million over nine years earmarked exclusively for transportation projects. Lyft would keep all bike-sharing revenues up to $20 million annually, with the city sharing 5% of everything over that.
Chicago taxpayers would also receive $1.5 million a year in minimum guaranteed revenue from advertising and promotions.
Lyft would be free to raise bike-sharing rates, but only up to 10% per year. Anything above that must be approved by the Chicago Department of Transportation. City Council approval is required for the contract, but not for future fare hikes, under the deal.
All new bikes would be “electric pedal-assist” bikes with “hybrid-locking” mechanisms allowing them to be locked at Divvy stations or regular bike racks.
Uber and Jump offered the city 20,000 bikes in all 50 wards by May.
“All told, it’s a minimum average $14 million-a-year in direct benefit for the city. On top of that, you get the assumption of liability and the addition of programming. That far exceeds that $14 million number,” Scheinfeld said.
“When you look nationwide, this blows away any other deal that any other city has. … No other city is getting this type of cash revenue out of their system. No other cities are getting these types of guaranteed payments. This is really putting Chicago first in this market and re-asserting the point that Divvy is a fantastic system and we are in an enviable position for having such a successful system that we are deriving revenues on for the benefit of Chicagoans.”
Ald. Jason Ervin (28th) was not impressed.
“The only thing that enters my mind when people tell me that we’re not gonna share in any losses means that they don’t anticipate any losses, number one. Number two then becomes, what is the other side gonna bank out of the deal?” Ervin said.
“I’m just wondering, is this the best deal per se?”
Scheinfeld insisted that it was, in fact, the best possible deal. She has further argued that the exclusive arrangement with Lyft would not cover scooters, either electric or otherwise. That, she said, was yet another strike against Uber. It’s proposal included both scooters and dockless bikes, exacerbating “sidewalk clutter,” the commissioner said.