DecoBike Is Booming, but Taxpayers Are Getting Stiffed
Deco Bike has boomed on the Beach since its launch in March 2011.
Michael E. Miller
DecoBike is booming. The Miami Beach bike-share program now boasts around 100 kiosks with 1,000 bikes. Locals and tourists used the company's cruisers more than 1.5 million times last year, earning DecoBike roughly $3 million. By most measures, it is the most successful bike-share program in the nation.
DecoBike's deal hasn't worked out nearly as well for Miami Beach, however. Last year the city made only $190,000 off the arrangement -- less than half the lowest estimates -- thanks to a quiet capitulation by commissioners.
But it gets worse across the bay. In Miami -- where DecoBike is set to expand in September -- commissioners quietly inked a deal with even less guaranteed payback for taxpayers.
New Times was a naysayer when it came to DecoBike's arrival in Miami Beach. We argued that the bikes were too expensive, would mostly benefit tourists, would cost locals their parking spots, and would quickly be vandalized.
We were wrong on some points. According to DecoBike, 70 percent of trips are made by members (the other 30 percent are local nonmembers and tourists). And although DecoBike remains pricier ($180 for a yearly membership) than its counterparts in New York ($95, longer rides allowed) and D.C. ($75), there are clearly lots of people willing to pay.
We were right about the vandalism. Last year, 143 bikes were stolen and 137 were heavily damaged or vandalized.
But our biggest worry about DecoBikes was that it was a bad deal for the City of Miami Beach. Here's what we wrote when the bike-share program debuted in March 2011:
DecoBike projects the city will make between $1.9 to 3.4 million over five years from the project. Not bad. But the city's share doesn't account for the lost parking revenue. Nor does it consider the pain of being woken up at 7 a.m. all winter long while DecoBike installed the kiosks.
DecoBike, on the other hand, will make anywhere from $836,000 to a whopping $9.6 million over that same time period, depending on the program's success.
DecoBike busted out Playboy Playmate Francesca Frigo for its unveiling in March 2011.
Michael E. Miller
We hate to say we told you so, but the numbers are even worse than we expected.
When DecoBike sold the city on the program, the lowest projected yearly revenue for Miami Beach was $380,920.
According to figures provided by the city, last year Miami Beach actually made only $190,205 -- half of the worst-case scenario. Considering that DecoBike now has 10 percent more bikes and kiosks than originally anticipated, the city should be making more -- not less -- than envisioned.
So what happened? Politics.
Under the original deal signed in July 2009, DecoBike agreed to give the city 25 percent of advertising revenue as well as a slice of "gross revenue": 12 percent of revenue up to $3 million and 15 percent of everything beyond. The only catch was that DecoBike had a one-year "grace period" in which it didn't have to pay the city anything beyond a $100,000 down payment (for parking spots). That should have been March 2011 to March 2012.
But last December, in a move unreported until now, city officials amended the concession agreement. Under the new deal -- passed by the prior commission but signed December 16 by city clerk Rafael Granado and new mayor Philip Levine -- the city would get 25 percent of ads on bike baskets but only 12 percent on kiosks.
The real change, however, was that the city agreed to limit the amount of revenue DecoBike would have to share.
Incredibly, the change was retroactive. DecoBike wouldn't be required to share any of the first $1.5 million in revenue earned from October 2012 to September 2013.
Instead of owing the city $388,687 (the revenue owed for 2012-13 under the original agreement), DecoBike now owed only $190,205.
In other words, the unpublicized changes to the concession agreement instantly cost the city $198,483.
Under the revised agreement, DecoBike also gets a similar break for the next five years. The amount of exempted revenue decreases by $250,000 each year so that DecoBike won't have to share any of the first $1.25 million for 2013-14, $1 million for 2014-15, $750,000 for 2015-15, and so on. The first year DecoBike will pay anything close to what it originally agreed will be 2019.
Over the course of six years, the backroom deal will cost the city at least $630,000.
DecoBike did not return Riptide's requests for comment on the new deal, but city documents show the company claimed it would make a "modest profit" unless Miami Beach cut it a better deal.
But if Miami Beach's deal with DecoBike sounds bad, wait until you see what the City of Miami has cooked up.
Under an agreement passed last year, DecoBike will take its talents to Miami this September. The company has agreed to install 50 kiosks with 500 bikes in Brickell, the Design District, midtown, Wynwood, Coconut Grove, and Little Havana.
The timing is unfortunate, however. The Venetian Causeway will close for repairs around that time, cutting off the only (safe) artery between the two cities and two bike-share programs. Dreams of peddling a DecoBike from South Beach to downtown will be deferred for at least a couple of months.
But while Miami cyclists will eventually enjoy the benefits of the bike-share program, the city won't.
According to an agreement passed overwhelmingly by commissioners in January 2013, DecoBike does not have to pay Miami a percentage of its revenue, as it does in Miami Beach.
Instead, the company promised to pay the city only $390,000 over ten years. (Remember, that was the minimum projected per year by DecoBike when negotiating with Miami Beach.) If DecoBike does anywhere near as well in Miami as it has in Miami Beach, Miami will miss out on several millions of dollars.
DecoBike could potentially pay Miami more than $390,000 depending upon advertising deals. But even then, the agreement is worse for the city than Miami Beach's deal.
DecoBike is completely exempt from sharing any advertising revenues with Miami during its first year of operation. For years two through ten of the agreement, the city gets 17 percent of advertisements on bikes and kiosks, but only 5 percent of bike/kiosk sponsorship deals.
To put this in context, last year DecoBike made only $40,200 from advertising in Miami Beach, according to city statistics. Seventeen percent of that is less than $7,000. Even when kiosks and bike/kiosk sponsorships are factored in, there is little chance the city's share will add up to more than $390,000 over ten years.
So it's hard to see how the City of Miami will make any real money from the deal. And if it does, it's not unlikely that DecoBike will renegotiate the contract to retroactively renege on those payments, as it did in Miami Beach.
Some people might not care whether their city makes money off its bike-share program as long as there are bikes to ride. After all, DecoBike argues its bike share is a privately funded program that doesn't cost the city anything other than a few hundred parking spaces.
But if DecoBike is booming -- and clearly it is -- shouldn't host cities share in the success?
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