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Bixi Toronto Facing Financial Trouble

The City of Toronto may need to restructure its loan guarantee with the bike-sharing program, which is currently having difficulties covering its costs.

Photo by enedkl from the Torontoist Flickr Pool

Photo by enedkl from the Torontoist Flickr Pool.

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.

Comments

  • Winkee

    It’s not sustainable because it is 100% debt financed! It could be the biggest company in the world and still not be sustainable if none of their assets are paid off.

    • HotDang

      Doesn’t that depend on the amount of profit versus the amount of the debt payments?

      • OgtheDim

        Revenue has to pay for operating costs and debt financing. Doable but you have to have a good plan to make it work.

        • Winkee

          But when that decision is made behind closed doors with no specific numbers (and we re now being told the structure is heading towards insolvency) I don’t think it’s a huge leap to think it is unsustainable. Especially when your “assets” are bikes that take a huge beating, get stolen and lose value rapidly. While interest rates are incredibly low I still think it is a completely irresponsible business model, could the parent BIXI not put any money down themselves?

    • CaligulaJones

      Shhhh. I think someone is about to say they have to make the Bixi system “too big to fail”.

  • http://www.facebook.com/KevinJohnMcDonald Kevin John McDonald

    I’m not surprised. After a year of no bikes where I wanted to pick one up, no spaces where I wanted to drop one of and several encounters with entirely disinterested and apathetic customer service reps, I did not renew my membership. There was zero follow up.

    • http://twitter.com/RonSly Ron Sly

      I’ve made over 500 trips and have been stuck with a bike or walking to the next station exactly three times (which really isn’t that much of an invoncenience compared to storing a bike in my tiny apartment and maintaining it). Where were you biking?

      Their customer service is certainly lacking though. The company seems to have no enthusiasm for itself, and leaves the campaigning up to the interest groups… ?

  • smartygirl

    I like Bixi in theory, but as long as it’s only in the deep downtown core, I’ll never use it.

  • http://twitter.com/ftefno Simon Vehicle!

    That’s too bad, I hope they pull out of it. I see people riding them all the time and I think it’s a great idea.

  • Patrick_Metzger

    If their uptake and use is according to plan and they’re experiencing financial problems, they need to reexamine their planning process.

    • Dinah Might

      I think the plan included expanding to a size that would break even, which hasn’t happened. Following through on the plan seems to be the weak point.

  • mark_dowling

    A lot of Bixi’s trouble started when the QC auditor general declared that municipalities engaging in commercial enterprise was outside their mandate. See here: http://www.cbc.ca/news/canada/montreal/story/2011/06/20/bixi-report-mtl.html, and here http://www.cbc.ca/news/canada/montreal/story/2012/09/21/svls-montreal-bixi-bike-deficit.html

  • iSkyscraper

    Bixi gave up on Toronto the moment Rob Ford, the most vehemently anti-bike mayor in North America, was elected. Things were too far along at the time of the election for them to cancel the whole affair, but they clearly never put any effort into it after the initial launch. Other Bixi cities that were smaller than Toronto at that time have since gown larger than Toronto’s system (Boston, Minneapolis, DC) and new Bixi systems are launching in places like Chicago (3,000 bikes) and New York (10,000) that are far larger. Combined with the fact that Toronto is the most expensive Bixi city (and possibly the most expensive bikeshare city period) it’s no wonder they want to cut it loose.

    What a sad tale.

  • Krupo

    Don’t know how much Rofo is to blame, but if you visited Montreal you’d notice there are 3 corporate sponsors there, and only TELUS/Desjardins here. I spoke with a Bixi guy at a summer fair last year and he mentioned that he 3rd sponsor was a crucial ingredient for them to break even. A shame they haven’t scored one in such a wealthy city full of corporate HQs!

    • Anon

      RoFo is always to blame. You know that.

  • ptanzola

    I love bixi and wil be renewing my membership. However, they need to expand their locations. Right now in the downtown core they are competing not just with taxis but with the best of the TTC subway service, or walking – one is faster and the other is cheaper.

  • andyindividual

    Admittedly I never looked into their business plan (and I suspect the city may have not, or been too optimistic), but there are some serious challenges to the bike sharing model in Toronto. Even Montreal may face this.

    First, it’s the climate, stupid! We have had a longer cold season than usual. If they are borderline viable, a month of extra cold discouraging riders and even just trips around town can hurt the bottom line.
    Then there is that part of the city north of Davenport that downtown folks don’t often visit. A natural anti-casual-cycling slope-barrier that stops membership from expanding north. Regular cyclists ready to peddle up the hill are likely bike owners. Casual rental riders are more likely to opt for transit.
    We can romanticize about Amsterdam but that has a moderate climate and is flat, or Copenhagen with a slightly tougher climate, but is still relatively flat, but we have to be realistic about cycling and related businesses in this city.

    Finally, perhaps they just run their business poorly. I can`t comment, but it does happen.

    • iSkyscraper

      Not sure weather is really an issue given they have systems in Montreal, Minneapolis and soon Chicago. Toronto does operate in the winter, maybe that is a profit killer and needs to switch to a seasonal model like Montreal?

      I hear you on the natural slope at Davenport but Bixi should have expanded much farther west and east.

    • dsmithhfx

      There’s also the whole safety issue, lack of bike lanes and helmets. You couldn’t pay me enough to ride a bike around the mean streets of Toronto.

  • torontothegreat

    It’s not unheard of that a company’s entire business model is to create need than pass the buck onto the takers…

    Well played Bixi