Despite the Day Pass Hike, Divvy Is Already Making Money, Not Losing It

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The Divvy day pass hike will largely affect visitors, not locals. Photo: John Greenfield

In Friday’s Chicago Tribune article about the impending price hike for Divvy day passes, transportation reporter Jon Hilkevitch implied that the extra revenue is needed because the bike-share system has been a money loser. In doing so, he ignored a statement he received from the Chicago Department of Transportation noting that, when you factor in sponsorship and ad money, Divvy is actually generating revenue for the city.

Starting this Wednesday, the price of a 24-hour pass will increase from $7 to $9.95. CDOT and Motivate, the Divvy concessionaire, expect this will generate an additional $800,000 per year. The cost of an annual membership will remain at $75, a steal when you consider that a year of monthly CTA passes costs $1,200.

The day pass price hike will largely affect visitors to Chicago, since about two-thirds of the passes are purchased by out-of-towners, according to CDOT. 86 percent of the system’s roughly 27,400 annual members live within the city limits. The $9.95 price for a 24-hour pass also puts Divvy on par with New York City’s Citi Bike, which is also run by Motivate, while an annual membership in NYC costs almost twice as much, at $149.

Hilkevitch spun the news to suggest the higher day pass rate is a fiscal austerity measure for a bike-share system that is hemorrhaging cash. “The daily fee to rent a Divvy bike will jump by more than 40 percent next week because of a deficit and escalating costs to run the expanding bicycle-sharing system,” he wrote. “Divvy has yet to steer clear of red ink.”

The reporter notes that the program’s stated goals include financial self-sufficiency, as well as generating surplus revenue that would help fund other bike infrastructure. He points out that the system, which launched in June of 2013, posted a $171,000 operating loss for the remainder of that year, and a $500,000 operating loss in 2014.

Hilkevitch’s piece is largely based on a statement provided by CDOT Commissioner Rebekah Scheinfeld. She said the department is raising the day pass price “in order to maintain and build on Divvy’s success and maintain the high level of service that our users are accustomed to.”

Scheinfeld acknowledged that the original projections for how much revenue would come in from usage fees, and how much it would cost to run the system, were not 100-percent accurate. “Divvy was launched at a time when big cities were just beginning to launch bike share programs and many of the financial predictions we made were based on other industries, without having a direct precedent to look to in the bike share world.”

However, she also told Hilkevitch in no uncertain terms that Divvy is in the black, thanks to its $12.5 million, five-year sponsorship deal with Blue Cross Blue Shield of Illinois, plus income from advertising placards on the docking stations. “The overall system revenue… brings in income to Divvy and the city’s bike programs. Overall Divvy is not losing money. CDOT is investing the revenue from Divvy in bike infrastructure improvements such as bike lanes, bicycle safety education and other programs that benefit the entire City of Chicago, not just Divvy users.”

Another thing Hilkevitch got wrong in his piece, according to CDOT spokesman Mike Claffey, is the way a day pass discount program for Chicago residents will work. The Trib piece initially stated that residents will be able to purchase $7 passes at ward offices and libraries. Instead, these locations will distribute a limited number of coupons that will allow residents to buy a pass at a Divvy station at the $7 rate. The coupons are good through October 15.

While we’re on the subject of misinformation about Divvy in the mainstream media, WTTW recently posted the following statement about the bike-share program’s new equity initiative, Divvy for Everyone:

Chicago residents with incomes below [$35,310] (a figure that is below 300 percent of the federal poverty level) who don’t have a credit or debit card will qualify for a $5 annual membership, which regularly costs $75.

Actually, even people who make $35K and have a credit card are eligible for the program, Claffey told me.

That begs the question, is it right for a single person with a credit card who makes anywhere near $17.50 an hour to take advantage of a program designed for low-income Chicagoans, and to be exempted from the usual credit card requirement? It’s likely that thousands of existing Divvy members fit that profile. There’s a catch though – you have to be first-time member to qualify for the deep discount.

Hopefully, not too many middle-class residents who could easily afford the full membership fee will choose to game the system. That way, Divvy for Everyone can best serve its intended purpose: providing access to a convenient and healthy transportation option for the Chicagoans who need it most.

  • I am totally gaming the system.

  • It would be nice if they would pay their rebalancing and repair staff something akin to a living wage, or even enough that they don’t need to patch together several part-time jobs to survive on.

  • Single people who make less than $35,310 qualify but, IIRC, you have a family. The income thresholds for families make more sense: A family of three must make no more than $60,270, and a family of four must make no more than $72,750. More details: https://www.divvybikes.com/d4e

  • Wow. Our family of three would qualify (except that my husband signed up with a black key back as an early adopter).

  • If you aren’t a member yet, you may qualify.

  • You remember incorrectly.

  • Sorry, confused you with another reader.

  • BlueFairlane

    So the fact that Divvy is not hemorrhaging money makes the price hike even more irritating. If they’re not losing money, why raise the price?

  • Fair question. It may be something along the lines of not being able to count the sponsorship and ad revenue when determining whether or not there are operating loses. Personally, I don’t have a problem with raising our day pass rate so that they’re in line with NYC in order to raise some extra revenue, as long as visitors will continue to buy them and the price hike doesn’t have much affect on locals.

    Here’s Scheinfeld’s full response to the question “Why is the rate change necessary?”:

    The overall system revenue, including the Blue Cross Blue Shield sponsorship and advertising on kiosks, brings in income to Divvy and the city’s bike programs. Overall Divvy is not losing money. CDOT is investing the revenue from Divvy in bike infrastructure improvements such as bike lanes, bicycle safety education and other programs that benefit the entire City of Chicago, not just Divvy users.

    Our goal when launching Divvy was to ensure the program was
    financially self-sustaining and to generate incremental revenue to support future expansion and development of additional bike infrastructure in Chicago. Divvy was launched at a time when big cities were just beginning to launch bike share programs and many of the financial predictions we made were based on other industries, without having a direct precedent to look to in the bike share world. The program has been successful at generating sponsorship and
    advertising revenue and we expect that as the bike share industry matures, we will be able to attract even more revenue in this manner.

  • Michael

    Hopefully so that they can handle the cost of expansion as it will be slower to catch on further from downtown. I can’t wait until we get Divvy in the 19th Ward.

  • Velocipedian

    Not calculated above are the financial gains the city gets from the improved health of its Divvy riders, less wear and tear to roadways, and commercial networking throughout the Divvy area. I biked to a business meeting from River North to the West Loop today — these types of trips must add up.

  • Kelly Pierce

    Thanks John for calling out the assholerly of Hilkevitch again. He has been hostile about Divvy from the get go. When I read his article, I could not understand how a $12.5 million sponsorship from Blue Cross could leave Divvy with a deficit. Even if it did, so what. As Jamal Julien and Olatunji Oboi Reed have eloquently pointed out, Divvy is a public service and part of city government. It is not a private service found in a stand-alone not for profit organization that needs to break even financially every year and operate in a manner that is revenue positive. Divvy is like library services or park district fieldhouses. They are resources and services to the community, not entities intended for a positive or neutral revenue structure. Whether or not it should be a governmental service is another question entirely. Yet, it is one now and view it in this context.

  • BlueFairlane

    I guess this leads to the question of the city’s goal with Divvy. Is Divvy meant to be a fundraiser for infrastructure as a whole, or is it to provide a service that gets people on bikes? If it’s the latter, I don’t see the value of raising a price point that has proven a successful balance between covering costs and encouraging usage. Despite the dubious benefit of keeping in line with New York, it’s simply giving people another reason not to use the system.

  • Honestly, I bet they did some research into what tourists think is good value for a Divvy day pass, since overwhelmingly most of them go to non-locals.

    If the market will bear more, why not charge more? It can subsidize things like Divvy for All and the system operating and expanding for the yearly pass holders.

  • I can’t ride two-wheelers, I fall over. I own a cargo trike instead — it doesn’t wobble!

  • Ah, too bad you don’t live in Madison — their bike share system includes cargo trikes: http://momentummag.com/b-cycle-introduces-first-bike-share-tricycle/

  • Vitaliy Vladimirov

    Considering how scarce funding is for bike infrastructure despite its low cost, this is still a win-win. More people on bikes = more $$$, which = more investment to get more to ride.

  • Because the market cost is not the only consideration, if you earn more revenue by raising the cost, but force more tourists into cars, that increases other costs. I doubt the difference are that substantial, but I have no idea what rate tourists use divvy so.

  • LowSeason

    What is the business equivalent for “pics or it didn’t happen”? Because that’s what I’d like to say in response to Scheinfeld. Blindly claiming Divvy “makes money” without a shred of financial evidence (in fact the opposite since Divvy lost money in 2014 despite having the BCBS deal) is about as reliable as Donald Trump insisting he’s worth $10 billion.

  • The posted operating losses don’t take into account the BCBS sponsorship or ad revenue.

  • Jmf56

    It’s losing money. Period. Costs greater than revenue equals losing money. How hard is thAt for you to understand ?
    This is NOT a service and no one is entitled to it. Why should tax payers have to foot the bill for it? You obviously think government handouts are great. Get a job!

  • The costs are not greater than the revenue.

  • Kevin Ngo

    John, do you know if Divvy’s financial data is open to the public? I would love to get an updated status on the financial state of Divvy.

    I tell people that Divvy can sustain operations on user fees (and makes a little more too). I want to actually know if that is still true.

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