The City of Toronto may need to restructure its loan guarantee with the bike-sharing program, which is currently having difficulties covering its costs.
Bixi Toronto launched on May 3, 2011, to much fanfare and after much anticipation. Many residents embraced the city’s new bike-sharing program, eager to have a way to ride around without dealing with the stress of stolen wheels or finding a place to lock up.
Today, there is word coming out of City Hall that Bixi is in at least some financial trouble—though it isn’t clear yet how much, or whether this will affect the long-term viability of the program.
The details are murky right now: as is the case with all financial arrangements, many of the particulars are confidential. What we do know is that City staff issued a report today, advising that “BIXI Toronto’s current business plan is experiencing difficulty in covering its operating costs, primarily due to the cost of servicing a 100 percent debt-financed asset-base.”
This affects the municipal government because it guaranteed the loans which enabled Bixi to start up in Toronto, in the amount of $4.8 million. In order to protect the City’s financial interests, staff are outlining options for restructuring the arrangement with Bixi; those options are also confidential, however, and so we have no way of knowing just how much trouble Bixi might be in.
City staff and councillors, bound by the confidentiality of those agreements, couldn’t shed much light on the subject. “My understanding,” said Denzil Minnan-Wong (Ward 34, Don Valley East), who is chair of the City’s public works and infrastructure committee, “is we gave them a loan guarantee and they’re borrowing money but they can’t make the payments on the loan… Council’s going to have to deal with where it wants to go forward and how it wants to move forward with the future of Bixi.” And this all may, he went on, be part of a larger issue with Bixi, which is based in Montreal; as he understands it, the central organization “has been told to divest itself of Bixi Toronto.”
Bixi officials were not immediately available to comment.
City staff were careful to emphasize that, while Bixi is facing financial problems, in terms of actual uptake and use, things have been going well: “From an operational perspective the BIXI public bicycle program has been very successful. In a very short time it has become an important part of the transportation mix in the downtown area with 4,630 paid subscribers and more than 1.3 million bicycle trips generated since the program launched. BIXI is also a key component of the transportation plan being developed for the Pan Am Games.”
Mike Layton (Ward 19, Trinity-Spadina) is a big proponent of Bixi, and says that the problem may be that the system is much smaller than it needs to be in order to hit a threshold of financial viability. “The original [City staff] report suggested that we needed to get up to a certain number of bikes and stations to make it sustainable at all, so why is this a surprise that it’s not sustainable at a third of the [size]?” He remains convinced that Toronto needs a bike-sharing system, and thinks most of his colleagues on council won’t use this financial issue as an excuse to try to shut Bixi down. “I don’t suspect that will be the case—it’s been fairly successful. A lot of tourists use it, a lot of local folks use it, so if we’re talking about trying to attract tourists and make this a city that people want to come and visit, this certainly is one of those pieces.”
When City staff first set out a vision for a bike-sharing program in Toronto, they laid out something that was much more ambitious in scale than what we ended up with. That plan [PDF] called for 3,000 bikes servicing an area that stretched from High Park in the west to Broadview in the east, and from Bloor to Lake Ontario. The agreement with Bixi, when it was eventually settled on, included a plan for the 1,000 bikes we have now as an initial phase, with an eye to expanding the system as time went on. That expansion never came.
City staff’s new report on Bixi’s finances will go to the executive committee at City Hall next week for further debate; we anticipate much of that discussion will take place behind closed doors, so it may be a while yet before we know exactly what’s in store for the bike-sharing program.