Deal takes shape to bolster Citi Bike
A deal that would both stabilize Citi Bike and create the opportunity to expand the popular New York City bikeshare program is taking shape.
About three weeks ago, Mayor Bill de Blasio's administration, a company called REQX Ventures and Alta Bicycle Share, the system's troubled operator, agreed on the broad outlines of an agreement, according to two knowledgeable sources.
According to the terms of that still-tentative agreement, REQX Ventures, a company run by individuals affiliated with Equinox and Related Companies (the real estate company that owns Equinox) would buy at least 51-percent of the Portland-based company.
That would effectively give REQX control over bike-share operations not only in New York City, but also in Toronto, Chicago, Columbus, Chattanooga, Boston, the Bay Area, Washington and Melbourne, Australia.
It would also help resurrect a system that has lost millions of dollars over the course of its short existence, thanks to bad software, Hurricane Sandy and the sheer scope of running the largest bike-share system in the country, one with more than 100,000 annual members and more than 14 million miles on its odometer.
In New York City, where bike-share users now pay $95 for an annual membership and $9.95 for a day pass, REQX would have the freedom to raise rates without city approval, though the contract might include some sort of percent-per-year cap on the size of those hikes.
Public housing residents and some credit union members would retain access to a discounted rate of $60 per year.
REQX would install new software and use the money derived from rate hikes to stabilize the system's finances, and also perhaps expand it, said the sources.
At the moment, New York City's bike share relies on private funding, via sponsorships from Citi, MasterCard and Goldman Sachs, as well as user fees.
De Blasio has said he wants to expand the program, but he has also ruled out investing additional public resources in a bike-share program that, while wildly popular with New Yorkers, has been troubled from the start.
When the city rolled out its long-anticipated, long-delayed, 6,000-bike Citi Bike program Memorial Day weekend last year, it soon became clear that the software was not up to snuff.
In the early weeks, about 10 percent of the system's 330 stations failed every day, according to one analysis. Some riders couldn't return their bikes to solar-powered stations on rainy days. Docking stations had trouble processing credit cards. When riders called Citi Bike's help line, they experienced inordinate wait times.
Part of the problem was that Alta Bicycle Share's Montreal-based equipment provider, Bixi, had cut ties with its old software supplier and decided to develop another (ultimately glitch-ridden) version of the software instead.
Bixi has since declared bankruptcy.
Thanks in large part to that bad software and the hurricane, which damaged bike-share equipment stored in the Brooklyn Navy Yard, start-up and operating costs exceeded expectations by about $9 million through last September, according to a confidential report acquired by Capital.
The report indicated that the system might otherwise have turned a small profit. For while tourist ridership fell below expectations, New York-based ridership more than made up for it.
Since the tentative terms of a deal were agreed upon, the city has been moving slowly to seal it, according to those two sources.
It's not clear why.
A transportation department spokesman had no comment. Nor did REQX. Alta referred questions to Citi Bike, which referred questions about a potential deal to the transportation department.
Annual membership sign-ups for Citi Bike peaked around this time last year, according to Dani Simons, a Citi Bike spokeswoman. Which means that if REQX wants to capture revenue from rate hikes on annual membership renewals, time is of the essence.
Paul Steely White, executive director of Transportation Alternatives, said the prospective contours of the deal conformed with what he'd been hearing, but cautioned that he had yet to see the "fine print" of the deal.
He did say that the sooner a deal gets done, the better.
"The system needs to be better capitalized and it does need an infusion of capital to replace the software system, bring their operations to an acceptable state and restore confidence in the system," he said.