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