Emanuel pushes Lyft sponsorship and takeover of bike-sharing system for 9 years
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Chicago’s wildly-popular but still money-losing bike-sharing program would go citywide by 2021 — increasing to 16,500 bikes docked at 800 stations — under a proposed revenue-sharing agreement with Lyft that, Mayor Rahm Emanuel insists, bears no resemblance to the widely-despised parking meter deal.
In exchange for a $50 million investment in new bikes, stations and hardware, Lyft will 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.
In exchange for $77 million over nine years earmarked exclusively for transportation projects, Lyft will receive all bike-sharing revenues up to $20 million annually. The city gets 5 percent 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 percent 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 will be “electric pedal-assist” bikes with “hybrid-locking” mechanisms allowing them to be locked at Divvy stations or regular bike racks.
Emanuel said there is no comparison between the plan to turn over management of Divvy for nine years and the 75-year, $1.15 billion parking meter deal that Chicagoans love to hate.
“Big difference . . . Nine years is not close to 75 years . . . I know you can do that math. Don’t play alderman. Play journalist . . . Nine years is not 75 and it immediately comes back to us — and we get all the capital investment they make,” Emanuel said.
“While meters were throughout the city, bike sharing is not throughout the city. And aldermen on the South Side and the West Side and the Southwest Side have been asking for bike share. … In 2021, this will be in every part of the city. And we can’t [afford to] do that. … That gets it there in two to three years. If we were doing it on our own, it would [take] seven to nine years.”
Chicago’s parking meter system raked in $134.2 million last year, putting private investors on pace to recoup their entire $1.16 billion investment by 2021 with 62 years to go in the lease. Former Mayor Richard M. Daley spent the proceeds from that deal in just a few years to avoid raising property taxes.
“They did a one-time payment. Here, it’s every year for the nine years, plus you participate in the upside of the sponsorship and the advertising, which we did not get in the other deal,” the mayor said.
“When the parking meter [deal] was done before my tenure, it was used for three consecutive years to fill budget holes. You can’t do that here. … You can’t spend it on anything and everything. It must go to transportation: Paving roads, fixing sidewalks, fixing street lights as it relates to synchronizing `em for public transportation.”
The Active Transportation Alliance said it’s “excited” about the proposal to “nearly triple” the number of bikes in the Divvy system and extend bike sharing to all 50 wards.
But spokesman Kyle Whitehead said the expansion process “must be inclusive and equitable so it results in better bike access for all Chicagoans — not just residents in the most profitable areas.”
City Hall should also “pair bike share expansion with sustainable investments in safe biking and walking infrastructure, “ especially in the city’s “highest crash corridors in historically disinvested communities on the South and West sides,” Whitehead said.
Emanuel said Lyft approached Transportation Commissioner Rebekah Scheinfeld with the offer to improve the system in exchange for taking it over for the next nine years.
The ride-hailing giant has hammered out similar deals in New York, Washington D.C. and the San Francisco Bay area. But they “never gave anybody … hard cold cash upfront” with a cut of advertising and sponsorship revenues.
“They kept saying to us, `We’ve never done this before.’ That’s what makes this uniquely different and why we think it’s, market-wise, very competitive, if not better,” the mayor said.
The Divvy bike-sharing system currently has 6,000 bikes at 600 stations, located in roughly two-thirds of Chicago’s 50 wards.
The city owns the equipment, having purchased it over time, largely through federal and state grants and contributions from city coffers.
The amendment to the city’s existing agreement with Motivate must be approved by the City Council.
“We’re in a unique position to leverage, for the benefit of Chicagoans, Lyft’s movement into this larger, multi-modal space,” Scheinfeld said.
“After the Lyft acquisition [of Motivate], Lyft approached us to propose a unique combination of roles where they would become the new title sponsor for the system and take on additional responsibilities for the system, taking off the city’s plate financial liabilities for operating losses in the system while continuing to share revenues and increasing those revenues dramatically from what the city gets today.”
Current revenues stand at $9 million a year. Though the new deal has the city sharing revenue only on the amount over $20 million, “we’re talking about doubling the system,” Scheinfeld said.”We think that $20 million is a realistic target.”