Today’s read is ~5-7 minutes long
Hi friends,
San Francisco currently has a bike share program called Bay Wheels, consisting of ~7,000 bicycles (both standard and e-bike models) across 550 different stations. Bike share just means that anyone can rent the bicycles for temporary use, and then drop them off when they’re finished. Since 2018 it’s been operated by Lyft, and the company is currently under contract to run the system until 2027. However, last month San Francisco’s Board of Supervisors (basically their city council) raised the possibility of instead owning and operating the system themselves.
It got me thinking about public vs. private urban services more broadly, and the various considerations that go into who can/should control services within a city.
In today’s update I’ll break down what’s happening in SF, the pros/cons of the different possible approaches, and under what circumstances I think cities can and should run their own services. Let’s dive in.
How’d we get here
The option to run the system themselves was proposed as part of a study commissioned by District 5 Supervisor Dean Preston last month, and the debate is currently ongoing. But before we evaluate their next best steps, it’s important to look at how they got to this point.
Bike sharing first came to San Francisco in the summer of 2013 through the Bay Area Bike Share program (aka BABS). BABS was paid for and jointly operated by government agencies from San Francisco and a few other cities in the Bay Area, but eventually shut down (as planned in) in 2017. After that it relaunched on a much larger scale as a public-private partnership (PPP) with Ford, then Lyft. Lyft is the current operator, and also responsible for the not-that-creative-but-probably-appropriate name Bay Wheels.1
Now what’s interesting is, in the formal report evaluating the original BABS program, they specifically called for corporate sponsorship to offset the costs of running the program.
“Now that the funds for the pilot project are close to expiring… it is imperative to develop a mechanism and framework for engaging corporate sponsors.” (source)
So if bike share was originally run by the city, and then they found corporate partners to help pay for it, why is the city now thinking of reversing that decision?
Well, while SF’s government definitely does save money by outsourcing bike share to Lyft, those “savings” might just be instead getting offloaded onto the actual end users. Despite pushback/pleas from the San Francisco Municipal Transportation Agency (SFMTA), Lyft has been steadily raising the price to use Bay Wheel bikes, prompting quite a lot of polite-but-angry tweets, and causing even more friction between Lyft and the city’s already rocky relationship. See below from this passionate constituent:
The city is (justifiably IMO) asking itself, if they task Lyft with providing this service, but the service becomes inaccessible to people due to cost, then why would they continue to work with Lyft at all?
It’s a fair question, and it might seem that if Lyft is going to absolutely molly whop the wallets of private citizens, the government might as well cut out the middleman and run the system themselves.
However, as with all things to do with urban life, there’s a lot of factors to consider.
Considerations
At this point you should understand what bike share in SF has looked like historically, and the recent controversies around increased cost to end users. Now that we have this context, let’s look at a few key metrics to keep in mind while evaluating SF’s best course of action.
Cost
Estimates vary, but if SF were to taken ownership of Bay Wheels today it would cost them anywhere from $33.2 million just to buy the bikes and docking infrastructure, plus an additional $13.3 million to 18.2 million in annual operating expenses. SF city financials are public record so we can see that the operating budget for (FY) 2022-2023 is $12.8 billion (with a B), so that money probably exists somewhere but this is still no small chunk of change.
And not only that, but according to documents obtained by the San Franciso Examiner, the revenue-to-cost ratio appears to be ~1:3 (meaning at the moment, Lyft is spending $3 to make $1 with bike share in SF)2 so it’s probably not close to profitability anytime soon either.
Operational knowledge
Another consideration is, maybe you want to run the service, but can you? Lyft is the largest bike share operator in North America, so they probably have some subject matter expertise. Maybe the city wants to take control, but there would likely be a steep learning curve and some growing pains that would add to the cost and complexity of running the system themselves.
Synchronization/integration with other services
Bike share is a great service, but it doesn’t exist in isolation. And I’ve written before about how integrating multiple modes of transit in cities like Jakarta allows for smoother transit journeys and increased accessibility for end users. Amsterdam (and the Netherlands more broadly) is another great example, with bicycle parking at subway/bus stops and place bike share docks at inter-city train stations that allow for different modes of travel to easily coexist within an individual journey.
Greater control of services means a greater ability to integrate and coordinate them by cutting down on redundancies and ensuring systems complement, rather than conflict with one another.
Data
Another major consideration is access to user data. Now in some cases user data might be shared freely from the private company to the city. However, that isn’t the case with Lyft and SF. From District 5 Supervisor Dean Preston:
“They (Lyft) don't share any data with the city so we're left a little bit in the dark, so I think there's huge benefits in terms of transparency, accountability, affordability and access and equity to going in a direction where there's more public control." (source)
This data is potentially much more valuable/useful to the government because they also have influence over so many other aspects of life in their city and can use it to inform those decisions. For example:
If you know where people are traveling to and from, you can make policy adjustments, or service changes in buses, trams, or subways accordingly.
If you see huge jumps in cycling numbers, then you may decide to increase your planned number of bike lanes, or give more thought to improving intersections and making them safer for cycling.
If you notice more and more tourists are renting e-bikes then you might coordinate with your local tourism bureau and offer e-bike tours through the city.
I’m just making up examples here but you get my point. While Lyft can largely just use this data to improve profitability, the city has many more additional use cases (and goals!) for transit and mobility data.
Businesses vs. Bureaucrats
You can probably see where I’m going with this. It’s much easier to align policy goals with services if you control the services yourself. Now I recognize that Lyft is a business and San Francisco’s government is a government. There’s nothing wrong with either of those things, but private and public entities often have inherently different goals. And if the city’s goal for their bike share is not to make a profit, but to make their city a better place to live and visit, then they can probably better serve their citizens by running the system themselves.
Broadly speaking, I think a lot of people need to get more comfortable with the idea that good services don’t need to be good businesses.3 Trust me, I recognize the benefits of capitalism. But it’s a ruleset for one kind of competitive landscape, not all of society’s problems. I loved the days when Uber/Lyft rides cost just $5, but I also understand that VC-backed startups that can afford to hemorrhage money for more market share probably have different goals than governments do.
SFMTA Bikeshare and Bike Parking Program Manager Adrian Leung, who, in addition to having a hilariously long and complicated job title, raised a similar point when he noted that Lyft and the city didn’t exactly always see eye to eye on issues like station expansion, bike storage, pricing, etc. From the San Francisco Examiner:
Leung worried the price increase would decrease ridership, even as it improved Lyft’s financials, observing that the two sides’ incentives were “misaligned.”
I think SFMTABABPPM Adrian Leung is spot on here. There is a fundamental mismatch of priorities with public and private ownership of services, and right now, in SF, that mismatch is having a negative effect on the end users.
Of course being profitability is nice to strive for. But municipal services shouldn’t just aim to maximize profits, they should aim to maximize user satisfaction, quality of service, accessibility, etc. And as long as Bay Wheels remains a PPP where SF has limited control over it, even if that does save the city money, it’s detracting from the city’s other goals.
Conclusion
In my opinion the city should operate this system itself. San Francisco’s mobility landscape as a whole is already kind of tricky, with multiple operators and less-than-stellar integration between local and regional transit authorities4, but being able to incorporate bike share into their governance umbrella would be a huge step towards smoother, more complementary mobility.
Now. I’ll fully admit that it’s easy for me to write this out, make a few memes and basically gloss over a lot complexities that make this a difficult political issue. But that’s the beauty of having your own newsletter!
And on a more serious note, of course cost is a huge factor, and you can’t really govern on ideal situations alone. But it doesn’t mean we shouldn’t strive for them! And I don’t think advocating for safer streets, fewer cars, and more mobility access in cities is something that should be inherently politicized either. Even if they never reach them, the goals that cities have say a lot about who they are. And as long as you’re able to provide services that work towards those goals, I don’t really give a shit whether they’re private, public, or a bit of both.
I hope if you take nothing else away from today’s update, it’s that there’s a lot of different factors, but that cities also shouldn’t let that distract them from the ultimate goal of making life better for the people in them.
That’s it for today, as always thanks for reading! Tell your government to build more bike shares!
-Max
“Oh okay Max, you think Bay Wheels is a dumb name? Well then you think of a better one!” Sure how about San FranCycle, Share Francisco, Bay Bikes (alliteration baby!), Pedal Gear Solid, Dolores Park Your Bike Right Here, Bay Urban Transport Team (BUTT for short), etc.
Interestingly enough, a study of bike share in 13 European cities found that operators either saw a 21% loss or a 14% gain, so it seems like there’s a lot of variability in whether or not they’re (generally speaking) a good business.
It was so frustrating listening to people rip apart the postal service here in the US a few years ago, as if them being unprofitable was a reason to do away with the system entirely. Are there more efficient methods, processes, or technologies they could be using? Sure. Could they be better managed? Probably. But should we judge essential services primarily on their P/L? Absolutely not.
Only about 5 of you are going to understand this but the fact that Caltrain only connects to BART at the Millbrae stop is, to use the technical term, a very very bad bad bad and stupid thing.
As someone who lives in SF, I really enjoyed this piece! When I first heard about Bay Wheels previously, it took me a while to realize that people were referring to the Lyft bikes (instead of something actually branded as “Bay Wheels”). I didn’t realize these bikes were so unprofitable, but it makes sense considering how many unprofitable businesses there are and VC culture. I think this distinction between good services vs good business is really interesting - a little unintuitive for me and something that I don’t think about a lot normally given our heavily capitalist culture. Thanks for sharing!
The highlighted examples--consumer price and data sharing--are both easily contractible. The obvious alternative for San Francisco is to renegotiate its contract with Lyft.
The economic force thought to determine the social desirability of public or private provision is instead what's not easily contractible. Government cost and consumer prices are easily contractible, so Lyft as the residual claimant of profits has incentives to make the outsourced program more efficient. But if bike upkeep is not easily observable, then the government may be concerned that Lyft will cut corners. The foundational paper laying out this idea is Hart, Shleifer, and Vishny (1997). Section 3.2 of Glaeser and Poterba (2020) discusses it in the context of transportation infrastructure.
https://scholar.harvard.edu/files/shleifer/files/proper_scope.pdf
https://www.nber.org/system/files/working_papers/w28215/w28215.pdf