March 9, 2008

Transportation- Bike Share Vélib Funding


After many years of failed or only trial-scale community bicycle programs, a perfect storm is fueling their renaissance. The missing pieces that have come together are:

1 An off-the-budget advertising-subsidized funding model allowing grand scale projects to sail through city bureaucracies, bypassing the traditional “no tax” roadblocks
2 City leaders finally serious about reducing car congestion and related pollution
3 Green-aware citizens and politicians wanting to reduce greenhouse gases and to be part of the green movement
4 A subscription plan that makes the majority of the rides seem “free”
5 A commitment to implement on sufficient scale that the program is reliably convenient for short one way trips
6 A more health conscious public in search of more regular exercise


The total cost of the implementation of Velib (not maintinence) was $120 Million. Where did this come from?

Media giant JCDecaux agreed to pay all of the costs for Vélib’ in exchange for a 10-year contract to control advertising rights on 1,628 bus shelters, newsstands, public toilets, and other so called “street furniture”. In addition, JCDecaux will pay Paris €3.5M ($4.3M) per year or possibly more if ad sales surpass certain targets.

The bikes, custom-designed for durability and theft deterrence are reported to cost about $1,300 each, but it seems that JCDecaux’s announcement that their initial €90M investment to install and run a system for 14,100 bikes equates to an all-in price of nearly $9,000 per bike.

To help offset the reduction of advertising revenue, Paris will instead be receiving 100% of the Vélib’ subscription fees, which thanks to the programs popularity could bring in €30M starting next year. Add to this the indirect windfall of lower health care costs for a healthier citizenry and 400 quasi-green collar jobs that maintain and operate Vélib’, and it looks like the Parisian government struck a pretty nice deal.

Taking after this model there have been many probosals for this type of trade. For example the Spanish firm Cemusa agreed to pay New York City $1B over 20 years for a comprehensive street furniture advertising contract in 2005.

Parisians are paying more for their “free bikes” than they think. JCDecaux is telling the investment community that their Paris revenue should handily double next year to €60M. With 40+% operating margins, that’s an extra €12M annual operating profit. Note that the JCDecaux/Paris contract has already been substantially expanded in order to further increase the scale of Vélib’, and now encompasses rights to 5,900 backlit ad faces according to financial documents on the JCDecaux website.

What is the carbon footprint of a typical backlit ad display, assuming they were on dawn to dusk? Believe it or not, “each” display could generate as much CO2 as one typical European car/year. Carmanah Technologies, claims a typical ad display transit shelter generates as much as 3.5 tons of CO2/year and European cars emit an average 4 tons of CO2/year.

However in France a unique electricity mix which is nuke-heavy and ultra low carbon (95% nuclear, hydro, and conventional thermal), counters this argument, but it is something that should be taken into account possibly for other cities around the world.


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