With bike share near the forefront of the public’s attention (thanks, Dorothy Rabinowitz), we‘d like to shift focus onto something not often talked about in the industry: the  permits and contracts that make bike share programs possible. Since we’re based near Los Angeles and the bike share permit negotiations were approved by the City Council last month, we thought LA would be a fantastic place to start.

The City of Los Angeles created its bike sharing permit process and agreement after bike sharing vendor Bike Nation made an unsolicited offer to provide 400 stations and 4,000 bikes to establish a citywide bike share system. The permit, which was ratified on April 17th, 2013 by the Los Angeles City Council, establishes the ground-rules for the bike share system and includes a number of measures which essentially indemnify the City  of any risk and liability.

In exchange for use of space within the public right of way (the space between private property lines, including a portion of the sidewalk and the street), the “Bike Share Vendor” has to provide the system at no cost to the City while also taking the liability for anything that could possibly go wrong with the system. On top of that, the City holds the authority to break the contract with the Bike Share Vendor at any time for any reason.

For clarity, we’ve broken down the recently ratified agreement into sections. If you’d like to do your own dissecting, you can find the original documents here. After sifting through the jargon, it was determined that this is what the Bike Share Vendor is responsible for:

  • Repair and maintenance of the Bicycles and Kiosks with a 24/7/365 customer service staff. The equipment must be free of graffiti or other vandalism and the area around the stations must be free from debris.
  • Rebalancing of Bicycles: kiosks must have no fewer than 15% empty and no greater than 85% ful. (For the record, CitiBike is already having trouble keeping stations full.)
  • Remove any damaged equipment within 24 hours without notification from the city. In order to reinstall the equipment, a new permit must be issued.
  • Emergency Response Team: Vendor must have a 24/7/365 staff to respond to emergencies. This is in addition to the phone-based customer service.
  • Kiosk’s must be self-powered via solar panels or batteries, and additional utility services must be permitted.
  • After two years, the Bike Share Vendor must share a minimum of 10% of all revenue for the system with the City.

The City also places a number of restrictions on the bike share stations including:

  • No excavation or damage to the Public Right of Way and no permanent structures are allowed to be installed.
  • No advertising is allowed on non-moving property in the Public Right of Way. This means no street furniture-like advertising is allowed on the kiosks.
  • Advertising on bikes is required to be painted or decaled on the body of the bike.

Unknown-1And, as outlined in the proceeding bullets, the City of Los Angeles completely absolves itself from any liability concerning the bike share system and can revoke the agreement at any time. It also requires the Bike Share Vendor to provide insurance that will cover the City.

  • The contract terms last for two years or upon written notice from the City revoking the permit. If the Bike Share Vendor wishes to exit the agreement, it must provide 60 days notice to the City of Los Angeles.
  • The Vendor may renew the contract on a biannual basis with a new Agreement applied for each year.
  • The City can revoke the agreement anytime without cause or liability and the Vendor is required to restore the Public Right of Way back to its original condition to the satisfaction of the LADOT.
  • The City must be insured by the Vendor and submit certificates of insurance to the City for approval.
  • The Bike Share Vendor must bear all the costs of the management, operation and maintenance of the system.
  • The City is not liable for any damage to property or personal injury resulting from the Bike Share Vendor’s operation of the system and must assume all risk.
  • Failure to respond to complaints or repair/maintain a bike share kiosk within 30 days results in a default of contract and a revocation of the permit.
  • Any accidents, injuries, deaths, property damage, or theft must be reported to the LADOT.
  • The City may request the Vendor to provide a performance bond, security, or other appropriate financial assistance acceptable in amount and form to the City providing to fund the removal of the system if the agreement is revoked.

So, what’s next?

The implications of this agreement are significant. Most notably, because financial responsibility is wholly on the Vendor, establishing a bike share program in Los Angeles will be an extremely expensive and risky undertaking for one company. Couple that with the City eliminating the ability for a vendor to advertise on its kiosks, bike baskets, and wheel skirts (options available to many other cities’ systems) and one can see that this is a fairly unforgiving arrangement.

Sponsors-01It seems that a vendor’s only option to make the project financially viable is to follow in Citi Bike‘s or Barclays Cycle Hire’s tire marks and land a big-time title sponsorship. According to Annie Karni at Crain’s, CitiBank sponsored New York’s program because it wanted to clean up its image in New York after the financial crisis. With the Bank of Moscow becoming the major sponsor of Moscow’s new bike share program last week, the trend of big banks providing big sponsorships for bike share seems to be continuing. But is Los Angeles a strong enough market to justify the steep price tag of a title sponsorship? And is there a company–bank or otherwise–that is willing to put its name on Bike Nation’s unproven bike share product? Wells Far-Go Bikeshare, anyone?

Outside of New York and Los Angeles, several cities have taken a financial stake in their bike share programs. And, as a form of public transit, it seems intuitive that a city would. In DC, where three municipalities share ownership of Capital Bikeshare and contract the operations and equipment out to a third party, the operator, Alta Bicycle Share, is faced with significantly less risk. Of course, this means that Alta also isn’t able to rake in big profits from the system either. But LA seems to have no interest in paying for a system or pursuing federal grant dollars like DC and other cities, and, thus, all the bulleted stipulations above are more-or-less needed to protect the City’s interest in remaining “hands-off.”

There’s also the question of enforcement: how strictly will the LADOT and the City of LA enforce all these stipulations? If the City of LA can’t even maintain it’s streets, how will they enforce graffiti violations, or penalize the Vendor for violating the 15%/85% bike rebalancing requirement? If a station is wrecked by a drunk driver, who’s to say the Vendor will even replace the station if they’re on the hook for all the costs? Given the accident that occurred at the Sunset Triangle a few months ago, this is a reasonable incident to plan for. If the Vendor doesn’t strictly adhere to the guidelines above, is the City prepared to force a free public transit system to withdraw? While we can’t draw any conclusions until official contracts are signed, the previous questions have unsettling answers for a prospective bike share vendor.

Being that BikeShare.com is based in the Los Angeles area, we believe that LA deserves a world-class system and we are sincerely hoping for the best. But given the reality of the City of LA’s agreement combined with the inability of Bike Nation to deliver a high-quality product in a timely manner, the future of bike share in LA seems uncertain.