Divvy Is No Cautionary Tale — It’s a Model for Other Bike-Share Systems

Yesterday, the Tribune ran an opinion piece slamming the Divvy funding model, written by Diana Sroka Rickert from the Illinois Policy Institute, a conservative think tank. Rickert argued that Milwaukee’s brand-new Bublr bike-share system, named after the local term for a water fountain, used a superior method because much of the funding came from private donors, largely corporate sponsors.

Rickert claims it was foolish of Chicago to launch Divvy solely with public money. She quotes Milwaukee developer and Bublr sponsor Gary Grunau as implying that Chicago’s method of lining up funding was fiscally irresponsible. "Milwaukee is a little more conservative… which is probably explained in the fact that Illinois and Chicago have a much more unstable financial picture,” he said.

The problem with Rickert’s thesis is that she’s making an apple-to-oranges comparison. The total startup cost for the first 475 Divvy stations and 4,750 bikes was $31.25 million, according to Divvy general manager Elliot Greenberger. $25 million came from federal grants, while local funds are covering the remaining $6.25 million.

Meanwhile, Midwest BikeShare, the nonprofit that runs Bublr, has raised about $3 million in public funds, plus roughly $1 million in private donations, which should pay for installing about 60 stations and 600 bikes, according to launch director Kevin Hardman. MWBS needs to raise another $3 million privately in the next two to three years to pay for operations for these stations, Hardman said. The system launched last week with ten stations and 100 bikes.

Obviously, it’s easier to cover the start-up cost of a small system than one that’s nearly eight times as big. To reach the same 1:3 ratio of private-to-public funding as Bublr, the city of Chicago would have had to raise almost $8 million in private donations prior to launching.

And Chicago did eventually snag a $12.5 million sponsorship deal for Divvy with Blue Cross Blue Shield of Illinois, about a year after the system launched. By that time, bike-share was already a proven success here, and the sponsor got an immediate payoff by getting its logo plastered on every Divvy bike and rebalancing van.

Rickert also writes that systems in Denver and Minnesota have a "better business model" because they're run by nonprofits and were launched with private funding. Again these are much smaller systems than Chicago’s. Denver B-cycle has only 84 stations and 700 bikes, while the Twin Cities’ Nice Ride has 170 stations and 1,550 cycles.

The only comparably sized systems to Divvy in the United States are Washington’s Capital Bikeshare, with about 300 stations and 2,500 bikes, and NYC’s Citi Bike, with about 300 stations and 6,000 bikes. D.C. paid for its system with public funds like Chicago, while NYC landed a $41 million, six-year sponsorship from Citibank to fund its launch.

Each method has its advantages and drawbacks. In NYC, where the expectation has been set that the system won’t be subsidized, expanding the system has been difficult, while the DC region was able to grow CaBi after the initial launch phase. (Both are now struggling with the same supplier issues that have delayed Chicago's expansion.) What's more, if you want a more equitable system that covers parts of your city outside the densest areas, you’ll probably need to subsidize it at some point.

Rickert also points out that Divvy posted a $148,000 operating loss in its first year, 90 percent of which was shouldered by the city of Chicago rather than concessionaire Alta Bicycle Share. As Streetsblog commenter Carl Giometti responded, this actually represents "an incredible bargain” once you factor in how much use the system is getting.

With 2.3 million rides taken since Divvy launched in June 2013, a conservative estimate of the Divvy subsidy comes out to ten cents per trip. It's safe to say this is much smaller than the per-trip subsidy for the CTA, and a truly negligible amount when compared to the hundreds of millions of public dollars spent on regional road-building boondoggles.

For his part, Bublr's Hardman told me he views Divvy as a role model: