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SR 11-14-2017 3C City Council Report City Council Meeting: November 14, 2017 Agenda Item: 3.C 1 of 10 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 2 of 10 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, 3 of 10 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) 4 of 10 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 5 of 10  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 6 of 10 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 7 of 10 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 8 of 10 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 9 of 10 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. 10 of 10 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)