Capital Bikeshare on the Mall, coming soon to a District near you!

@jrenaut 7933 wrote:

Not only will this be useful for people wanting to get down to the Mall, but it should also serve the high-profit tourists more than the subsidized annual members. It would be awesome for CaBi to actually make a profit one of these days . . .

The fees riders pay may or may not add to CaBi’s bottom line. For any transport system to remain financially healthy, what each user pays has to cover the marginal operating costs he/she imposes on the system. Any revenue over and above that is then considered a contribution to fixed costs. The reason why passenger rail services (and public utilities) are given monopolies (in most instances) is because of diminishing marginal costs; that is, as more users are added to the system, the average operating cost per user goes down. Therefore, it is cheaper for society overall to allow monopolies in these special circumstances. CaBi will only benefit from add’l riders (or any riders at all) if the fees they charge cover its marginal operating costs (I don’t know if that is the case).

Covering the high costs required for major transport capital investments (e.g., rail lines, runways, etc) is very difficult since most investors want to see a return on their investment within a few years. Charging today’s users the full cost of a capital project that will last hundreds of years (and benefit future generations) will doom them to fail financially; therefore, such costs are usually financed by government bonds/taxpayer assistance over many decades.

CaBi really shouldn’t be expected to turn a profit just as roadways, sidewalks, libraries, etc. do not. Keep in mind that car owners do not cover the full societal cost of driving, nor do airlines (or their passengers) fully cover the cost for maintaining the aviation system (for instance, the FAA is subsidized by Congress out of the General Fund in addition to the user fee financed Aviation Trust Fund).

Getting off my economist soap box now…

Kathy
FAA Transport Economist (and former Amtrak employee)

Two interesting points that make bike share different from transit:
– It actually can make money, and the business plan in Montreal says that once sponsors are lined up (which happened this year) and once the number of annual users gets above ~30,000 (?), the system will be able to break even.
– The operating costs are very high relative to the capital costs. Indeed, the bikes are replaced on a fairly short cycle, which makes their capital cost almost more like operating — and the kiosk hardware is almost an off-the-shelf parking meter.

Anyhow, yes, the increase in daily ridership should be a significant financial positive for CaBi. Bicycling has significant positive externalities for society, particularly for public health, so while bike sharing should be encouraged regardless of profit it would be quite nice if the system is able to financially stand on its own.