After a 2016 slump, Divvy turned a record profit in 2017 | On Transportation | Chicago Reader

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After a 2016 slump, Divvy turned a record profit in 2017

Income from ads, sponsorship, and operations was up while losses were down.

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Divvy riders took a record 3,836,905 trips in 2017, contributing to the system's turnaround. - LOWELL NELSON
  • Lowell Nelson
  • Divvy riders took a record 3,836,905 trips in 2017, contributing to the system's turnaround.

Divvy's future wasn't looking so bright a year ago, when the city of Chicago acknowledged it had seen a major drop in income from the bike-share system in 2016, after the program expanded farther into the south and west sides. But numbers I recently obtained from the Chicago Department of Transportation via a Freedom of Information Act request paint a much rosier picture, showing that 2017 was the city's most lucrative year yet for Divvy revenue. Moreover, the explanation for the turnaround bodes well for the system's long-term viability.

A little background is necessary. Chicago, which launched Divvy in 2013, owns the bikes and docking stations, but it contracts with the New York-based company Motivate—owned, as of this summer, by ride-share company Lyft—to run the system. The city makes most of its profits from Divvy via advertising revenue and a sponsorship deal with Blue Cross Blue Shield of Illinois—hence the insurance company's logo on the bikes. While the city gets to keep all of the ad and sponsorship revenue, it splits any profits or losses from running the system with Motivate.

Last December the Chicago Tribune reported that in 2016 the city's net revenue from Divvy had fallen to $1.97 million after reaching $2.86 million in 2014 and $2.84 million in 2015. That discouraging bottom line was caused by a spike in operating expenses, which went from $6,682,067 in 2015 to $9,322,881 in 2016, a 40 percent increase. CDOT officials said at the time that this was mainly due to the challenges of managing a larger service area and fleet after the system expanded from 300 stations and 3,000 bikes in 2014 to 580 stations and 5,800 bikes by late 2016.

In the early years, Divvy stations were concentrated downtown and in affluent north-side neighborhoods. To make the system more equitable, many of the new stations were installed in lower-income African-American and Latinx communities on the south and west sides. Ridership has been relatively low in these areas due to factors such as the cost of membership, the relative scarcity of bike lanes, and the greater distances between destinations and Divvy stations, which makes bike share less convenient to use.

As a result, costs grew. In 2016 Divvy saw its worst-ever operations loss (the cost of running the system subtracted from the income generated by annual memberships, day passes, and late fees): a whopping $1,756,420. Per the terms of CDOT's contract with Motivate, the city had to pay $752,011 to cover its share of that red ink.

Offsetting that, however, Chicago earned $1,146,220 in station advertising and $2,250,000 from the Blue Cross Blue Shield sponsorship in 2016, so still turned an overall profit.

The good news revealed in the recently FOIA'd numbers is that Chicago's net income from Divvy ballooned by 72 percent in 2017, to $3.37 million. So what explains that good fortune?

For starters, the city's income from ads and the Blue Cross sponsorship was higher than ever last year, $1,343,942 and $2,340,000, respectively. "2017 was really successful for us for advertising," said CDOT assistant commissioner Sean Wiedel, who oversees Divvy. "We really think the association with the Divvy brand is a positive one for advertisers." And since the sponsorship contract stipulates that Chicago gets a larger payment from Blue Cross each year, the city received an additional $90,000 from it in 2017.

Operations income (from memberships, passes, and fees) was also at its highest-ever rate in 2017, at $7,958,472. Wiedel said this was due in part to the number of trips taken last year—3,836,905, more than any previous year, and about 270,000 higher than the 2016 total. He also noted improvements in Divvy's handling of "rebalancing," the practice of redistributing bikes to parts of town where they're needed.

The combined income from ads, sponsorship, and operations revenue last year was $11,642,414.

Meanwhile, 2017 losses were less than the previous year, and due to the terms of its contract with Motivate, the city was responsible for a smaller percentage of that loss in 2017—only $311,708, or less than half as much as in 2016. Combined, these factors contributed to the city's record-breaking $3.37 million profit from the Divvy program last year.

Yet CDOT records show that Divvy ridership on the south and west sides continues to be low. The city has been trying to address the Divvy gap by offering $5 Divvy for Everyone memberships to low-income Chicagoans. Roughly 5,000 people have signed up since summer 2015, and there are currently about 2,000 active members, according to Wiedel. Divvy has also hired a handful of outreach workers to spread the word about the program.

But Active Transportation Alliance spokesman Kyle Whitehead said that in order to further boost Divvy use, CDOT should take action to calm traffic in underserved neighborhoods and build more protected bike lanes in those areas. "City leaders need to do more to address other barriers to bicycling in these communities," he said. "Adding Divvy stations by itself is not enough to get more people riding in areas that are built around cars."

And while Divvy had a good 2017, it's not clear what its bottom line will look like for 2018. After all, this was the year that the system saw a wave of bike thefts, the result of a shortsighted decision to remove a small but critical piece of security hardware from the docks. FOIA'd e-mails indicate that more than 500 cycles have gone missing. (Per the contract with Motivate, the city is only required to pay for 60 of those bikes, a $72,000 expense.) Wiedel told me the security hardware is on track to be reinstalled in all of the stations by the end of this month, which should solve the theft problem.

Wiedel noted that ridership has been solid in 2018, with 3,439,237 Divvy trips logged as of November 8. That means the system is on track to rack up roughly the same number of rides as last year—3,836,905—by New Year's Day, even when you factor in the drop-off in bike-share use as the weather grows colder, he said.

Another positive recent development from an equity standpoint is Mayor Rahm Emanuel's announcement last month that he plans to use part of a $2.5 million climate-change grant from the Michael Bloomberg Foundation to help bring bike share to the rest of the city. That may not help Divvy's bottom line, but for residents of outlying neighborhoods who've been waiting more than five years for the service, that expansion is way overdue.  v

John Greenfield edits the transportation news website Streetsblog Chicago.

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