The following is the full text of a message sent to registered BIXI users yesterday, May 19th, in response to recent news about a $108 million ‘bailout’ recently authorized by the City of Montreal. Many thanks to The Frek for bringing this to my attention. I think I was pulled in to the outrage without knowing all the details, and for this I’m regretful. That being said, my personal position vis-a-vis BIXI is that it should continue to operate regardless of the cost, but that it’s relationship to Stationnement de Montréal may cause a conflict of interest. Ultimately, I doubt the project can survive, or even turn a profit, unless ridership is steadily increased moving forward. This will require a few key steps:
1. Building more isolated bike paths
2. Converting more streets to pedestrian/cyclist only (ie – getting more cars out of the city)
3. A massive increase to the number of available bikes and stations – Island-wide service seems to be an ideal objective worth working towards
4. Perhaps a strategic relocation of BIXI into a new umbrella group of city and region transit authorities. I’ve been arguing this point for a while, we need one transit agency for the entire region, operating a myriad of different systems. Better co-operation between BIXI and the STM and AMT may help to ‘legitimize’ BIXI in the eyes of those who still consider it somewhat of a novelty.
In any event – here’s the letter; you can compare it to my earlier article on the ‘bailout’ and the Gazette article linked therein.
Letter to members and BIXI users:
In the past days, much has been said about BIXI that does not correspond to the reality. Therefore it seems essential to restore the facts, particularly now that the plan proposed by the City was finally well-received by the Ministry of Municipal Affairs after more than five months of delay and waiting. The following serves as a clarification regarding some of the allegations which have been circulating in the media.
“BIXI is a financial disaster and is not profitable”: FALSE. BIXI experienced a liquidity problem which was the direct result of a five-month wait for the approval by the Municipal Affairs Minister of its agreement with the City of Montreal. BIXI is a company which experienced rapid growth and realized, after only 2 years, volumes of some $50 million. BIXI also posted results that were 40% greater than the projected budget, thanks in large part to the successful expansion of its system internationally. BIXI does not have a profitability problem nor is BIXI a financial disaster in any way.
“The Montreal operation of BIXI is not profitable”: TRUE. From the beginning, the business plan projected that the Montreal operation of the system would not derive profits in the first years of operation. The plan also indicated that operational costs would be covered once BIXI reached 50,000 members and with the involvement of sponsorship. Proud of the 30,000 members at the end of 2010, we have currently exceeded the level of 40,000 members after only one month of operation in our new 2011 season.
“Montreal is absorbing the BIXI debt”: FALSE. The City gives no money to BIXI. Montreal advanced a loan to BIXI. The initial loan to BIXI in the amount of $37 million is repayable with interest. This loan was accorded to cover conceptualization costs of the system, the patents, the manufacturing and delivery of the components (bikes and stations), the operation losses of the first years as well as the start up costs. This loan is presently owed to Stationnement de Montréal.
“The city is giving $108 million to BIXI”: FALSE. Let us take the time to properly understand the numbers that make up the whole. $37 million : this amount is a loan to BIXI repayable with interest. The remaining $71 million, guaranteed by the City of Montreal, is comprised of a financing package negotiated with the National Bank subsequent to a tender notice.
It consists of a revolving line of credit of $6 million, as is standard for all businesses; a letter of credit facility up to $5 million for deposit guarantees for all public offerings which is a standard practice with the guarantees rescinded after the process.
A factoring facility up to $60 million offered by the Bank to finance accounts receivable which allows for the necessary liquidity to pay our suppliers while waiting for the cities with whom we do business to effect the payment of our invoices. This facility can only be used when a contract is signed by a city in good and due form.
“Montrealers are financing the export of the BIXI system to other markets”: FALSE. It is, in fact, the contrary. Montrealers fully benefit from the export of the BIXI system to other markets. Last year, it is the successes of the sales of BIXI ($8.5 million) on the international scale that covered the operational deficit of Montreal ($7 million). In this way, we were able to achieve a surplus of $1.5 million and offer a quality system to Montrealers.
“We have a luxurious bike costing $7,400 compared to Barcelona with a bike costing $75”: FALSE. BIXI does not cost $7,000, no more than it costs $3,500, heard on television. The Barcelona bike does not cost $75. The Barcelona bike costs more than 600 €, basically the same cost of our bike. How could we sell with such success on three continents if the bike costs so much? The Montreal bike is likely the most solid and best conceived bike in the world. Its reliability is greater than the bikes currently used in other cities.
“BIXI employs 450 people”: FALSE. BIXI employs 50 people and has created more than 400 employees at different suppliers everywhere in the region for the manufacturing of the diverse components of the system. Our business plan is clear. It has been presented publically. We remain in line with the business plan and once again count on respecting these objectives again this year. The plan outlines clearly that the system will cost nothing to Montrealers. This is our commitment.