SR 11-14-2017 3C
City Council Report
City Council Meeting: November 14, 2017
Agenda Item: 3.C
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To: Mayor and City Council
From: David Martin, Director, Transportation Planning
Subject: Memorandum of Understanding with the cities of West Hollywood and Beverly
Hills and the University of California Los Angeles to integrate the agencies'
bike share systems into one sub-regional system.
Recommended Action
Authorize the City Manager to execute a five year Memorandum of Understanding
(MOU), with options to extend, with the cities of Beverly Hills and West Hollywood, and
the University of California Los Angeles, to integrate the agencies’ compatible bike
share systems into a seamless sub-regional bike share network.
Executive Summary
When Council adopted the 2011 Bike Action Plan, the Council prioritized development
of a Santa Monica bike share system with a focus on supporting a regional bike share
network. On November 12, 2015, the City launched LA County’s first bike share system,
Breeze Bike Share, which has attracted 79,000 subscribers that have taken over
630,000 trips and ridden 1,324,530 miles. After operating for two years, Breeze Bike
Share has been consistent in generating net positive revenues, both from subscription,
and its title sponsorship with hulu.
Since the launch of Breeze Bike Share, the cities of Beverly Hills, and West Hollywood,
and UCLA have taken advantage of the “regional guarantee” provision of Santa
Monica’s bike share operations contract to launch local bike share systems with the
same operator and terms and conditions. Staff has worked with these partner agencies,
the operator, and technology provider to enable the integration of the four bike share
systems into one contiguous Sub-regional Bike Share Network. A Sub-regional Bike
Share Network would connect the bike share systems into a combined service area,
give users equal access to all bikes throughout the service area, improve the user
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experience by allowing users to travel between jurisdictions without incurring additional
fees, and grow ridership and revenue by expanding the reach of bike share regionally.
The Regional Bike Share MOU would enable the operator to concurrently operate the
four systems as one larger system, while maintaining the service levels and terms of
each existing individual contract. While bikes will at times migrate between the different
jurisdictions, the operator will continue to ensure that all local system areas are
sufficiently served, and that migrated bikes are balanced back to their local system area
in a timely fashion. While there are no anticipated additional costs for Breeze Bike
Share being added to the larger Sub-regional Bike Share Network, over the first six
months the partner agencies and operator will monitor and evaluate the need for
operational adjustments in the future. After thorough review, all partner agencies have
agreed to the terms of the no-cost MOU.
This report recommends that City Council authorize the City Manager to execute the
MOU to enable the integration of the four bike share systems into one Sub-regional Bike
Share Network. The City Councils of Beverly Hills and West Hollywood, and UCLA
Board of Regents are anticipated to review and approve the MOU in October and
November of 2017.
Background
On August 23, 2011 (Attachment A) Council directed staff to pursue a regionally
coordinated bike share system as a high implementation priority. On September 24,
2013 (Attachment B), Council reviewed the bike share feasibility analysis and gave
direction to move forward on the project in Santa Monica while working with regional
partners.
On November 11, 2014 (Attachment C), Council authorized the City Manager to
execute a three-year operations contract with the operator, Cyclehop LLC, with two
additional two-year renewal options for the operations of the 500-bicycle sharing
system. The operations contract includes subcontracting to the technology provider,
Social Bicycles. The operations contract included a “regional guarantee” provision,
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which provided the same contract terms and operations fees to other municipalities that
wish to enter into an agreement with the operator to launch their bike share systems.
On November 12, 2015, Santa Monica launched Breeze Bike Share throughout the City
of Santa Monica. Over the subsequent year, the cities of Beverly Hills and West
Hollywood, and the University of California Los Angeles, entered into agreements with
Cyclehop to operate their own bike share systems under the regional guarantee. The
systems use the same bike share ‘smart bike’ technology as is used in Santa Monica,
but through individual contracts with the operator. Each partners’ individual operations
contracts defines terms for operations fees, levels of service, marketing, insurance,
indemnification, termination, etc. On February 23 2016, Council authorized the City
Manager to enter into an agreement with the City of Los Angeles to install and operate
five Breeze Bike Share stations in the Venice neighborhood, and up to 15 additional
stations in other parts of Los Angeles. The Venice Breeze stations were installed in the
Summer of 2016.
In July 2016, LA Metro launched another bike share system in Downtown Los Angeles
that utilizes a different bike share technology and is currently incompatible with the
Breeze Bike Share ‘smart bike’ system. Since the initial Downtown launch, Metro has
expanded their bike share system to other areas in the county including Pasadena, the
Port of Los Angeles, and Venice, which overlaps with the existing Breeze Bike Share
System and includes two hubs in Santa Monica at the 17th Street and 4th Street Expo
stations. Santa Monica staff has entered into conversations with partner agencies and
Metro to pursue the long-term integration of the two bike share technologies through the
TAP card fare system, however there is no clear timeline for implementation of this
integration.
Discussion
The Breeze Bike Share system has over 77,000 active subscribers that have generated
607,935 trips and ridden over 1,278,000 miles through September 2017. Santa Monica
residents account for 12 percent of the active subscribers, but take 48 percent of the
trips. By way of contrast, Los Angeles County residents (excluding Santa Monicans)
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account for 28 percent of the active subscriptions, but take only 38 percent of the trips.
The total number of trips on Breeze Bike Share in 2017 has increase 15 percent over
the same period last year.
Santa Monica is inherently connected to our neighboring communities. People riding
bikes regularly pass to and from Santa Monica, not realizing they have crossed from
one city into another. Breeze Bike Share users are no different, regularly riding well past
the system area boundaries into surrounding communities like Marina Del Rey, Mar
Vista, Palms, West LA, Beverly Hills, Manhattan Beach, and beyond.
With direction from Council to pursue regional integration, Santa Monica staff
coordinated a working group, composed of representatives from Beverly Hills, West
Hollywood, UCLA and Long Beach, to negotiate the structure and terms of a sub-
regionally integrated bike share network owned by multiple partners. Simultaneously,
the working group began to negotiate with the operator and the technology service
provider (Social Bicycles) to adjust the bike share technology to integrate their
separately owned systems, enable the free flow of bicycles from one jurisdiction to the
next, and create a seamless experience for users. The MOU between the cities of
Santa Monica, Beverly Hills, West Hollywood, and the UCLA Board of Regents, would
connect the four distinct bike share systems into a contiguous service area and enable
the operator to concurrently operate as one larger system while maintaining the service
levels and terms of each existing individual contract. Staff from Long Beach participated
in the discussions and have indicated interest in joining the MOU in the future.
Several challenges to regional integration need to be addressed concurrent with
development of the MOU to enable the connection of the systems:
restructuring the technology platform to enable all users to have equal access to
all bikes in the system
accurately accounting for revenue collection and dispersal to separate owners
based on a predetermined revenue sharing structure
determining how to split revenue equitably across the four separate owners
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working with the California Department of Taxes and Fee Administration (CDTFA
–formerly BOE) to adjust the methodology by which sales tax is collected and
remitted
deciding on the marketing of the sub-regional network
anticipating and planning for any potential challenges that arise from allowing the
free flow of bikes across jurisdictional boundaries.
The Regional System
Once integrated, the Sub-regional Bike Share Network would be comprised of all the
bike share bikes owned by the separate partners, operating in one connected regional
system area, which would include West Hollywood, Beverly Hills, UCLA, Westwood,
Santa Monica, Venice, and other parts of West Los Angeles. Bike Share users would
experience the following:
Before After
Subscriber Access Users must manually add
systems to their accounts.
Existing account number and
pin transfers.
Users will be automatically
able to use their existing
account number and pin in
each system
Member Use Members can only use their
90 minutes of daily ride time
in their home system
Members can use their 90
minutes of daily ride time on
any bike
Out of Hub/Station Fees Out of hub fees apply to
bikes locked in another
system
Out of hub fees will not apply
to bikes within the regional
system area
All bikes in the Regional Network will be subject to the same User Terms and
Conditions.
Bike ownership would remain the same, with each agency owning their own bicycles.
Each agency would also continue to pay their individually contracted operator fees.
Bicycles owned by any partner agency may migrate freely from one jurisdiction to
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another. As bikes are used they require maintenance for wear and tear, and the local
jurisdictions could become unbalanced. By way of example, bikes could migrate
between systems for periods of time until rebalanced to their origin agency by users or
operations staff. As separate owners of their bike share equipment, each partner would
still be responsible for the ongoing maintenance and re-occurring capital expenditure
required to sustain their bike share equipment per the terms of their individual contracts
with the operator. Costs resulting from damage, vandalism, or theft of
bicycles/equipment would be the sole responsibility of the owner partner regardless of
where the damages occurred in the Regional Network. System equipment including
bicycles, tools, etc., at times would be utilized across jurisdictional boundaries to help
system maintenance and operational efficiency.
The Sub-regional Bike Share Network would be overseen by the working group
comprised of representatives from each partner agency, which meets monthly with the
operator and technology provider to collectively decide matters related to marketing and
promotions, operations, revenue attribution, MOU amendments, etc. Changes to
contracts would still require the review and approval of each agency.
Branding and Sponsorship
Under the Regional Bike Share MOU, each partner would maintain the existing and
distinct branding for their individual bike share system per the terms of their individual
contract with the operator. However, the Sub-regional Bike Share Network partners
would also co-brand and market their respective systems as part of the Regional
Network, which, at minimum would include the addition of information about the
Regional Network on all websites and promotional materials, and inclusion of a—to be
determined—logo/identity in promotions, marketing, signage and equipment.
Santa Monica enjoys a partnership with Hulu as the presenting sponsor for Breeze Bike
Share. Many of the agencies in the regional network have not yet secured a financial
sponsor, and are still actively soliciting sponsorship to support system operations. The
MOU partners would agree to make a reasonable good faith effort to pursue a title
sponsorship for the Regional Network, however until a regional title sponsor would be
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procured, partners would not solicit localized sponsorships that pose direct conflicts with
other partner’s existing individual sponsorship agreements.
Revenue Attribution
The Santa Monica Breeze Bike Share program is a financial success. The program
generates revenue from subscribers and the title sponsorship from hulu, which together
pay for the program’s annual operating costs. Breeze Bike Share ended the 2016 –
2017 fiscal year with a net positive operating budget of $206,000. All bike share
revenue associated with the Sub-regional Bike Share Network would be collected into a
shared merchant services account before being split and transferred to individual
partner bank accounts on a monthly basis. Revenue would be collected and attributed
to partners’ individual bank accounts in two ways:
Ride Revenue/Fees: Each bike in the Sub-regional Bike Share Network
would be digitally marked with a flag that identifies which partner owns the
bike. Revenues from Casual User Fees, Out-of-Hub Fees, Out-of-System
Fees, and fees associated with loss recuperation are tagged with the
partner’s flag and attributed to that partner regardless of the bike’s final
location in the Regional System Area.
Memberships Fees: Membership Fees are collected into the shared
merchant services account upon subscription through any partner website,
on-street kiosk, or the mobile software application. Membership Fees would
be split based on an agreed upon Membership Fee Attribution model, which
ensures a floor percentage for each partner based on the number of trips
their bikes generated that month.
To date the Breeze Bike Share generates roughly 75 percent of its user revenue from
Ride Revenue/Fees and 25 percent from Membership Fees. Under the Regional Bike
Share MOU, Santa Monica would still collect all the Ride Revenue/Fees for Breeze
bikes regardless of their location in the Regional System. Membership Fees generated
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from subscriptions would be pooled with the Membership Fees from all jurisdictions and
split based on a Membership Fee Attribution model, which ensures each agency
receives a base percentage of 80 percent of the percent of total network trips generated
by their bikes that month, plus 5 percent. For example, Breeze Bike share currently
generates approximately 75% of the total trips across all jurisdictions. Using this current
number as an example, if Breeze Bike Share generates 75 percent of the total number
of regional trips, it would retain 65 percent (a base percentage of 60 percent, plus 5
percent) of the total regional Membership Fee revenue that month.
Partner Agency Number
of Trips
Percent
of Trips
Base Percent
(80% of Total
Trip Percentage)
Bonus
Percentage
Membership Fee
Revenue Percentage
Santa Monica 75 75% 60% 5% 65%
West Hollywood 10 10% 8% 5% 13%
Beverly Hills 5 5% 4% 5% 9%
UCLA 10 10% 8% 5% 13%
Total 100 100% 80% 20% 100%
The percentage of regional trips will fluctuate from month to month. Because it is difficult
to project, Staff anticipates growth in Membership subscriptions, but is not able to
project overall growth in user generated revenue as a result of the regional bike share
integration. The cost of operating and maintaining the Breeze Bike Share system as a
part of the larger Sub-regional Bike Share Network is included in the existing contract
with Cyclehop to operate the 500-bicycle bike share system. Under the Regional Bike
Share MOU all partners would agree to analyze the impacts of the Sub-regional Bike
Share Network after a six (6) month period and enter good faith negotiations with the
operator to address unforeseen operational impacts thereafter. The regionally
integrated system could attract new users to bike share and facilitate greater user of
bike share throughout the region.
The Regional Bike Share MOU defines the arrangement by which partner agencies
would work collectively with the operator and technology provider to fulfill the obligations
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of the existing individual contracts, manage the systems across jurisdictional
boundaries, collect and attribute revenue, and promote the systems individually and
collectively. The terms of each individual operations contract would not be altered under
the Regional Bike Share MOU.
Term
The MOU has been thoroughly reviewed by City of Santa Monica, Beverly Hills, West
Hollywood, and UCLA Staff and Attorneys’ Offices. The proposed agreement stipulates
a five-year term of service in which the aforementioned agencies would integrate their
bike share systems in accordance with the individual existing operations contracts and
the terms of the MOU. All parties indemnify and hold harmless the other parties and will
assume the liability imposed on them for any wrongful act or negligence. Any party can
terminate their participation in this agreement upon giving a thirty (30) day notice in
writing.
Beverly Hills and West Hollywood City Councils are anticipated to review and approve
the MOU in November and December of 2017. In order to implement the regional
integration of the bike share systems, the technology provider will need to finalize and
test the adjustments to the technology platform. Simultaneously, the partner agencies
will need to agree to Sub-regional Bike Share identity, prepare a promotional strategy
and marketing materials, and notify all existing users of new expanded service. The
implementation of the regional integration of the bike share systems is tentatively
scheduled for spring 2018.
Financial Impacts and Budget Actions
Staff has been evaluating with the CDTFA options to align the methodology by which
sales tax is collected and remitted to the state by partner agencies, which could include
the City to make adjusted sales tax payments. If sales tax payments by the city are
determined to be the best option, staff will return with the associated budget action.
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The terms of the Breeze Bike Share operations contract and budget would not be
altered under the Regional Bike Share MOU. Under the Regional Bike Share MOU all
partners would agree to analyze the impacts of the Sub-regional Bike Share Network
after a six (6) month period and enter good faith negotiations with the operator to
address unforeseen operational impacts thereafter. While staff anticipates that the
expanded service of Sub-regional Bike Share Network will encourage greater use of the
bike share system, staff is unable to project that the Network will result in overall
revenue growth for Breeze Bike Share. There is no immediate financial impact or
budget action necessary as a result of the recommended action. Staff would return to
Council if specific budget actions are required in the future.
Prepared By: Kyle Kozar, Bike Share Coordinator
Approved
Forwarded to Council
Attachments:
A. August 23, 2011 Staff Report
B. September 24, 2013 Staff Report
C. November 11, 2014 Staff Report
REFERENCE –
CONTRACT NO.
10575(CCS)