Bike Sharing Systems Aren't Trying to Peddle for Profit

Bike sharing systems in major U.S. cities often can't cover all of their expenses. They're okay with that.

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Bike sharing programs continue to grow across the country, despite not being able to turn a profit. (AP)

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To look around Washington, D.C., you'd think that Capital Bikeshare must be making a killing. The bike sharing system's 1,200 sturdy, fire-engine-red bikes have become ubiquitous, weaving between cars at rush hour and carrying tourists up, down and around the National Mall.

It looks like a raging success, but that's not quite true.

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Despite its wild popularity, Capital Bikeshare has altogether outspent its resources. Since its start in September 2010, Capital Bikeshare has taken in $2.47 million and spent $2.54 million on operating expenses. And that doesn't even include the expensive things, like docking stations—which can cost well over $50,000 each—plus the bikes themselves. Those capital costs, at $7 million thus far, are covered by federal funds.

The question of revenue hangs over any bike sharing program. "I'm not aware of a bike sharing system that covers all of its costs simply from user membership dues and whatever fees you pay for a trip," says John Pucher, professor at the Bloustein School of Planning and Public Policy at Rutgers University.

The cost of the equipment is often the biggest burden for a new bike share program, requiring additional funding. In Minneapolis' Nice Ride system, user fees and station sponsorship go toward operating costs, and that sponsorship has helped to fill the operating cost gap.

"We don't expect to ever get to the point where we can cover all operating costs with revenue from the system alone," says Bill Dossett, executive director of Nice Ride Minnesota. However, operating expenses aside, Nice Ride also has spent $5 million on capital expenses, nearly two-thirds of which was public dollars.

Bike sharing is costly because it requires more work than simply letting people ride and changing the occasional flat tire. One of the biggest operating costs involves trucking the bikes from full docking stations to empty ones. That's why Pucher is skeptical of bike sharing's ability to make money.

"There's a significant problem with redistributing bikes, mainly in the peak direction at the peak hours, and outside of downtown in off-peak hours," he says. He also points out that in hilly cities, there can be a glut of bikes in lower-lying areas but scarcity at the tops of hills, where people are less likely to ride. Optimizing this operations aspect may be key to improving profitability. Josh Moskowitz, project manager at the D.C. Department of Transportation, says a majority of Capital Bikeshare's operations and maintenance costs go toward these rebalancing operations.

Of course, no one ever said that bike sharing had to be lucrative. In fact, most public transit systems lose money, as Moskowitz points out.

"It's not our prerogative or priority to turn a profit. It's to get people to ride bikes," he says.

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The question is whether cash-strapped cities or the federal government want to sink money into systems that can struggle to break even.

Increasingly, America's cities are saying "Yes." Chicago is launching its fleet of of 3,000 bikes this fall, and according to the Chicago Tribune, $18 million of the $19.5 million in initial capital costs will come from federal grants. Portland, Oregon, is also planning on a system to debut in 2013, using $2 million in local transportation funds for the $4 million program, according to the Portland Tribune. Los Angeles will also soon have a 4,000-bike system, and New York City is also adding 10,000 bikes to its busy streets. However, both L.A. and New York are attempting to do so without help from taxpayers.

Because it's a very young phenomenon in the U.S., in-depth analyses of bike sharing's costs and benefits in this country are hard to come by.

What experts do know is that, while bike sharing can be used as an alternative to a bus or train, it does not seem to threaten public transit ridership. That is because riders tend to use the bikes to supplement—not replace—transit trips.