Tuesday, August 7, 2012

The Cost of Public Bike Sharing Systems

The latest status symbol of major cities of the world is the creation of "bike-sharing" systems, which allow the public to rent a bike at one docking station and dropping it off at another, for a small fee paid with a credit card.  The system is hailed as another major step towards a greener world, healthier citizens and more efficient public transportation.  The frequency of bike rentals is used in support of these claims. 

My short article below discusses the results of the few studies that have examined the validity of these claims and raised the forbidden question:  What do these wonderful systems cost?  The article was published in the Vancouver Sun on June 27, 2012 and aimed at the city's taxpayers who will soon be forced to pay for a service 99 percent of them never will use.

What about the Cost of Bike-Sharing?

The High Priests of the Green Religion in Vancouver City Hall are about to please their supporters with another innovation that will save Mother Earth from the users of automobiles who poison the atmosphere with carbon emissions and cause traffic congestion and deaths. 

To minimize opposition to this program the High Priests will launch a carefully designed propaganda campaign pointing to the success of such bike-share programs in the most sophisticated cities of the world, like Paris, London, San Francisco, Montreal and Toronto.  Success indicators will be the number of daily users and glowing testimonials from co-Religionists. 

The supporters of the Religion among lawyers will push for a way out of the conflict between the existing law requiring bicyclists to wear helmets and the absence of a technically feasible and affordable solution to the provision of helmets of the right size and guaranteed free from head-lice.  The solution already floated publicly is to allow cyclists on short trips to go without helmets. 

This propaganda from the High Priests needs to be treated with skepticism and considered in the light of much inconvenient evidence on the true benefits and costs of creating and operating the system.

Benefit sin terms of reduced pollution and congestion cannot be measured by the number of shared bike rides but needs to consider what other means of transport are replaced.  A study by McGill University researchers shows that in Montreal of 100 shared bike users, only ten would otherwise have used their own cars or taxis.  The other 90 would have used public transit, walked or used their own bikes. Not much greenhouse gas reduction here.

Unfortunately,this small gain comes at a high cost to taxpayers, much of it due to the theft of bikes and damages needing repair, in spite of efforts to make them as sturdy as possible.  Such bikes cost Paris$1,050 each. 

The numbers of lost and damaged bikes are staggering.  In Paris, 80 percent of the bikes have either been stolen or had to be replaced for other reasons.  Every day 1,500 bicycles out of 20,600 have to be repaired.  A regular user of the Paris system states: “Finding a decent one is now something of an urban treasure hunt.”  In London, 30 bikes out of 5,400 have to be repaired every day.

There are additional costs associated with the expensive docking stations. In London during the first six months of operation, replacement was needed for three damaged beyond repair and for ten that were stolen.  Twelve needed repairs after damage by motor vehicles or vandals.

Finally,there are the high capital costs associated with the system.  The interest payments plus the normal amortization of the assets should be covered by operating profits.  The experience of Montreal is not encouraging.

Thatcity’s bike-share program in its second year of existence had a total loss of$6.7 million after an operating profit of only $1.5 million.  As a result of these financial problems, in the spring of 2011 the City of Montreal had to save the company from bankruptcy with a loan of $37 million and a $71-million credit guarantee so that the company could pay its suppliers.

It is almost certain that the proposed bike share system in Vancouver will also bring virtually no benefits tithe environment and saddle with a large bill the silent majority of Vancouver taxpayers who will never use them.  The High Priests of the Green religion are very skillful in getting their way, if their success with dedicated bike lanes is any indication.  They can count on the silent majority remaining at home during the next election while the flock of believers will outvote them en masse.

Herbert Grubel
Professor of Economics(Emeritus), Simon Fraser University
Senior Fellow, The Fraser Institute