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Chicago is overpaying for Divvy

Why Bublr beats Divvy
Milwaukee's Bublr a better bike-share program than Divvy

Urban cyclists on blue bikes will soon be seen pedaling along the shores of Lake Michigan — but in another major city, and at a much lower price than in Chicago.

Recently, Milwaukee launched a public bike-sharing program called Bublr. The concept and look of the bikes are identical to Chicago's Divvy, but that's where the similarities end.

When Divvy was launched in June 2013, taxpayers funded 100 percent of startup costs. Only in May did Divvy secure private funding, from a single company. To administer the program, City Hall awarded a lucrative contract to the for-profit Alta Bicycle Share of Portland, Ore.

Bublr just launched, and already an array of Milwaukee-area businesses have pitched in to cover one-third of Bublr's startup costs. The program is run by a Wisconsin nonprofit, whose leaders plan to continue fundraising for even more private support.

"Our model was built on pragmatism more than anything," said Milwaukee Mayor Tom Barrett, a Democrat. "The ideal would be to have it funded by the private sector obviously, so we'll be looking for sponsor opportunities."

As the saying goes, all politics is local. And what might work in one city doesn't necessarily fit another.

But in the case of Divvy, the "Chicago Way" comes at a premium: If Chicago snagged the same price-per-bike for its program as Milwaukee, taxpayer savings would range between $6.7 million and $11.4 million, according to municipal financial records from Chicago and Milwaukee.

The fleet and other startup costs of Divvy bikes will cost taxpayers $30.5 million, including more bikes that are planned.

Chicago officials might argue that figure is unfair because some of that is federal money. But it's still taxpayer money. City Hall put up $6.25 million for Divvy, difficult to justify at a time when the mayor's office is struggling to put more police on the streets.

Milwaukee isn't the only city that's adopted a better business model for its public bike-sharing program. Bike programs in Denver and Minneapolis are run by nonprofits, accept donations and have private sector financial backing.

Interestingly, the ideal way to fund and operate a community bike program comes from Madison, Wis. — one of the most liberal cities in the nation. Since its launch in 2011, Madison's B-cycle program has operated without any government funding, according to B-cycle president Bob Burns.

This raises the question: If Milwaukee, Denver, Minneapolis and Madison found more cost-effective ways to run a public bike-sharing program, why couldn't Chicago?

Perhaps the problem stems from the mindset in City Hall. Chicago officials don't seem to realize we're getting bamboozled.

They refer to Divvy as a "public-private partnership." They use buzzwords and phrases that sound like Divvy will succeed or fail as any private venture would, at minimal risk to taxpayers: "We are running Divvy like a private sector operation," former Chicago Department of Transportation Commissioner Gabe Klein told the Chicago Policy Review in November 2013. "The operator is the one that is being pressured to make money." And "if the program is profitable, the city gets to share in the profits at very little risk."

The meaning of partnership is being stretched. For it to be a partnership, there must be shared risk between the private organization and the public sector. And the reason governments partner with private companies is because private companies that bear risks work harder to achieve success at the most competitive price.

But Alta was shielded from the bulk of the risk because taxpayers funded all of Divvy's startup costs. In its first year, Divvy posted an operating loss of $148,000. The contract inked with City Hall meant Chicago taxpayers were forced to pay for 90 percent of the loss.

This is why Milwaukee's model is already ahead of Chicago's. Not only are area businesses helping to lower the cost to taxpayers, they have skin in the game. Businesses there are motivated to make sure the program succeeds.

The attitude in Milwaukee is so different that when longtime Milwaukee developer Gary Grunau learned his city would be launching Bublr, he signed a five-year, $75,000 contract to get a bike station in front of the 46-acre corporate campus he co-owns.

Had Grunau waited, Milwaukee officials might have built a Bublr station outside the campus just because it's such a popular location. After all, in Chicago Divvy stations just appeared outside major employment hubs without any cost to the businesses — again, at taxpayers' expense.

But Grunau suggested why that wouldn't have worked up north: "Milwaukee is a little more conservative … which is probably explained in the fact that Illinois and Chicago have a much more unstable financial picture."

Paying your own way, he said, was the "Milwaukee Way." "It's just the way we do business up here."

Diana Sroka Rickert is a writer with the Illinois Policy Institute. The opinions in this essay are her own.

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