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Commentary By Aaron Morton

Capital Bikeshare Does Not Need Subsidies

Economics Regulatory Policy

Washington D.C.’s government recently decided to open the bike share market to dockless bike share companies through April 2018. The government wanted to see if dockless bike share could fill the gaps in Capital Bikeshare’s system, which uses docked bikes.

Dockless bike shares have since rapidly expanded from three companies with several hundred bikes altogether to five companies and over 1,500 bikes. This rapid rise of private bike share companies contrasts with the District’s already established Capital Bikeshare, which receives grants and subsidies to cover revenue shortfalls and growth, all the while giving a service that appears can be now supplied cheaper and more effectively by dockless bike share.

Started in 2010 as a public-private partnership, Capital Bikeshare has consistently had revenue shortfalls. In 2014 Capital Bikeshare earned enough revenue to cover 70 percent of its expenses, and in 2016 it covered 77 percent of its expenses. Capital Bikeshare has constantly had to rely on local governments and federal grants to cover its deficits.

New bike share systems are dockless. With no docking stations, riders do not have to walk to and from docking stations. The system is far cheaper, and apps indicate bikes’ locations. Within the brief time dockless bike shares have been in DC, they have more than half the bikes of Capital Bikeshare, with more variety and price options.

The prices of the dockless companies compare favorably to Capital Bikeshare. Mobike charges users 50 cents for every 30 minutes used. Spin charges $1 for every 30 minutes, or a $29 monthly or $99 yearly membership. Ofo’s fares are $1 for every hour. Limebike charges $1 for every 30 minutes and $29.95 for a monthly membership.

Jump has a fare of $2 dollars every 30 minutes plus 6 cents every extra minute, however Jump’s bikes are not directly comparable as they have electric assist which allows for less effort in biking. By comparison, Capital Bikeshare’s pricing system is confusing and more expensive. Trips under 30 minutes are $2, trips between 30-59 minutes are $4, with additional charges for each additional half hour over that.

Capital Bikeshare’s revenue shortfalls include operating but not capital costs. Ever since opening, Capital Bikeshare has been consistently expanding, adding dozens of new expensive docks every year. The installation costs for a 15-bike docking station is almost $61,000. In Capital Bikeshare’s first two years, the company received $7 million in federal grants just to cover initial costs. Recently, Alexandria, Virginia and Montgomery County, Maryland both applied for an order of over $600,000 for more equipment and stations. Capital Bikeshare will likely need to start replacing stations and bikes soon, which is projected to cost $1.2 million annually.

These subsidies are justified by proponents who say Capital Bikeshare provides more commuting options for lower-income households. However, according to Capital Bikeshare’s 2016 Executive Survey, 52 percent of Capital Bikeshare members are from households that made more than $100,000 annually, and 15 percent from households that made less than $50,000 annually. Instead of helping lower income households, it is subsidized biking for the upper-income individuals.

Capital Bikeshare could survive without subsidies. Many docked bike share programs run exclusively on private funding and revenue. New York City’s CitiBike, which is also run by the same company as a privately-owned bike share system, receives all its startup funds from a partnership with Citibank, and covers its costs completely on membership and advertising revenue.

Even if Capital Bikeshare were to fail, customers would not necessarily be left to walk. When Seattle’s own docked bike share failed, the city  went from a failed docked bike share with 500 bikes to a booming dockless system with 7,000 bikes.

It is time to stop subsidizing Capital Bikeshare when private bike share companies do not need government help. Bike share companies should be allowed to compete on an even playing field, reducing D.C.’s budget deficit. 

Aaron Morton is a contributor to Economics21

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