“Look, it’s the first day for me,” Jay Walder told reporters last October. “We don’t have all the answers.”
Walder, who had previously held the top jobs at New York City’s MTA and then Hong Kong’s MRA, had just announced that he would be the new CEO at the company that operates New York City’s Citi Bike system. It was the first good news the company, then called Alta Bicycle Systems, had shared in a while.
After launching in 2013, Citi Bike delivered shoddy maintenance and software (which would soon be detailed in a city audit), sustained damage to equipment during Hurricane Sandy, and, according to reports, had been scrambling for a new investor to keep it afloat. In July, REQX Ventures, an investment company formed by the principals of gym chain Equinox and its parent company, Related, bought its parent company.
And now Walder, who was standing behind a podium wearing a buttoned-up suit, had a laundry list of positive developments. Citibank, the program’s biggest advertising sponsor, had agreed to extend its licensing deal from its planned end date in 2019 to 2024, adding $70.5 million to its initial investment. The company REQX had set up to buy Alta would invest $30 million in the project, and Goldman Sachs had increased its credit line to Alta. The Partnership Fund for New York City committed to expand Citi Bike to more neighborhoods, and Citi Bike said it would add 6,000 new bikes to the system by 2017–a target that would more than double its current fleet.
For Walder, who had left his position in Hong Kong amid controversy over a delayed high-speed rail project, fixing Citi Bike’s problems and leading its expansion were relatively small-scale problems. While he was the CEO of the MTA, the subway alone had moved more than 5 million people each day. Citi Bike, the largest of Alta’s programs in nine cities, had on its busiest day that month facilitated just 38,956 rides. It was the potential impact that had made the job appealing. “I thought it would be an opportunity to shape a whole industry that was in its most nascent stage,” he says.
Instead of looking at bike sharing as “an extension of the corner bike shop,” Walder wanted to make it “a part of the transit system of major cities.” Trains and buses, with their set schedules and stops, left an unmet gap in mass transit that, he believed, bike sharing could fill. “The patterns where we’re living and working have become completely different than what was imagined 100 years ago when the subway was created,” he says. “Bike sharing is creating effectively personalized mass transit. The idea that my trip is defined by station has been removed.”
Proving that bike sharing could work well in New York City would help other cities sign on to this vision.
Throughout the next year, Walder would trade his suit for a baseball cap. He would hire 28 people to the corporate team. His team would replace Citi Bike’s buggy software, launch a new app, replace 12,000 docking points, install 134 stations, and change the name of the company from Alta Bikeshare Systems to Motivate.
Last October, though, he didn’t know how to fix Citi Bike. After the press conference, as he pedaled with his new colleagues from Long Island City to Alta’s new headquarters in Sunset Park, Brooklyn, what he did know was that he had to fix it fast. “We’re a seasonal business,” Walder says. “We were either going to start to show improvement by the summer of 2015, or we would lose another year.”
Alta Bicycle Share, the company that launched Citi Bike, began in 2009 as a spinoff from Portland-based infrastructure design firm Alta Planning + Design. Bike sharing had already taken off in European cities like Paris, but cities in the United States were just beginning to consider large-scale programs. Recently formed programs in Minnesota and Virginia hired Alta to consult on their projects, and the firm then realized there weren’t many large bike-sharing operators in the United States. “We said, this is coming to the United States, it’s clearly going to be something our communities are interested in,” remembers Mia Birk, Alta Bicycle Share’s cofounder and former CEO. “We already know more than most other companies do about this, so let’s dip our toe into this water.”
It teamed up with PBSC Urban Solutions, a bike-sharing equipment company funded by the city of Montreal, and started to bid for contracts. Its first, in the summer of 2009, was with a program in Melbourne, Australia. The second was Washington, D.C.’s Capital Bikeshare system.
Throughout the next couple of years, Alta launched similar programs in San Francisco, Boston, and other cities. But it won its highest-stakes contract in 2011, when New York City Mayor Michael Bloomberg announced that Alta would operate New York City’s first bike sharing program. It would not only be the largest bike sharing program in North America, but the first major system to be subsidized by advertising and designed to run without public dollars.
Citi Bike launched in 2013, almost a year behind schedule, with 6,000 bikes and 300 stations. By the end of its second month, 49,000 people had signed up for $95 annual memberships. By the end of the year, memberships had reached 94,125.
But the business proved more complicated than expected. Riders reported malfunctioning bike docks and empty stations, and many of them did not renew their annual passes. After the year anniversary of the program in May 2014, membership dropped from 105,355 in May to 96,318 in June. In July it fell further, to 93,501 members. An audit conducted between May 2013 and May 2014 concluded “that the bike sharing program’s spotty maintenance, poorly cleaned bikes, and substandard docking stations inconvenienced riders and discouraged growth in the system.” Even organizations that had advocated for bike sharing in New York City, like Transportation Alternatives, had grown frustrated with Alta. “The owners were out in Portland, and they didn’t really seem too motivated to bring it up to a suitable state of service,” says Paul Steely White, Transportation Alternatives’ executive director. “The customer service was dismal. The app wasn’t working.”
The price system had been set up so that one-day and seven-day passes would subsidize the relatively low $95 annual membership. While more people than expected became annual users, they struggled to sell short-term passes, so the program found itself in financial trouble. In March 2014, New York City Transportation Commissioner Polly Trottenberg said that Citi Bike faced “a number of financial and operational challenges.” Later that month, reports indicated Citi Bike had been scrambling to raise tens of millions of dollars.
Alta, meanwhile, was overwhelmed. “Everything was new,” Birk says. “It’s like doing a startup company. And then we did two of them in the first summer. We basically did nine startups in just a few years’ time.” It wasn’t only Alta that was struggling in the bike-sharing world, either. The company’s main supplier for bikes and software, PBSC, had filed for bankruptcy. “What happened to Alta and Bixi [How PBSC’s bikes are known in Montreal and Toronto] was too much growth,” says Luc Sabbatini, who bought PBSC in January. “They couldn’t manage that growth.”
By the time Walder took the helm at Alta in October 2014, membership had dropped to 89,286. Before it could start expanding, Citi Bike had to fix the problems in its existing system.
“We started with the idea that our goal was to fix Citi Bike by summer,” Walder says. The question he posed to his staff every Wednesday at 9 a.m., during the “fix Citi Bike meeting,” was exactly how they should do it.
Walder was dismayed to discover that bike repairs only happened five days each week. “I said, so what you’re telling me is that every week we accumulate a number of broken bicycles and we allow that to pile up, so that on Monday we start with really bad service because we don’t operate the shop on Saturday and Sunday?” The repairs operation added weekend shifts and did more repairs on the street without bringing bikes back to the shop.
It also began to monitor stations with low batteries so that it could replace them before a disruption in service, instead of reacting to a malfunctioning station after it had become unusable.
The technology team expanded from two to 10 people, and the company launched an app that tracked users’ trips. “It was just a new infusion of talent and resources that we noticed right away,” Transportation Alternatives’s White says. “I do think that they have fixed it,” says Veronica Vanterpool, the executive director of the Tri-State Transportation Campaign. “We’re hearing fewer complaints, fewer gripes, less dissatisfaction with Citi Bike overall.”
The press agreed: “Overall,” wrote one Wall Street Journal reporter this summer, “the new Citi Bike experience is like cruising on a different planet: A magical world where a bright blue bike waits on every third street corner to provide fun, convenient transport—assuming you don’t get clipped by a cab.”
By August, Motivate had installed a new back-end operating system, replaced its old kiosks with new kiosks, and replaced or repaired 12,000 docking points. According to internal data, time spent to fix issues at stations had decreased by 80%. Compared to the same month a year earlier, customer service calls, which is how riders typically report problems, were down from 4.3 calls per 100 rides to 2.07 calls per 100 rides. The team gathered for what Walder calls “a high-five day.” Plastic cups of champagne in hand, they huddled together in a circle and placed their other hands in the center like they were about to start a sports a game. “1, 2, 3,” they counted down, before lifting their arms into the air. “Expansion!”
Walder likes to watch a digital map of Citi Bike stations to see new locations come online, which has happened 134 times since he’s been CEO. Citi Bike completed its expansion to Williamsburg, Bedford-Stuyvesant, Greenpoint, Long Island City, the Upper West Side, and the Upper East Side up to 86th Street, and as of September there were 7,454 Citi Bikes in the fleet, about 25% toward the 2017 goal. Citi Bike designed a new, better-functioning bike that looks almost identical to the older model, and has installed 2,400 of them in New York City. Other than some concerns about the density of stations on the Upper East and West sides of Manhattan, all of this has happened without major disaster.
Now that Citi Bike is back on track, Motivate has turned its focus to expanding to other cities. Its program in Chicago grew 60% in 2015, adding more than 1,700 bikes, and the company recently won approval from five Bay Area cities to expand its program there from 700 to 7,000 bikes. This fall, its program in Washington, D.C., will grow to 50 stations, and Citi Bike Jersey City launched with 350 bikes in October.
The last New York City transportation agency that Walder worked at, the MTA, exists partly because the private companies that operated the first public transportation systems failed to make mass transit sustainable business. The city purchased two struggling private subway companies, for instance, in 1940. “The fare in 1904 was 5¢,” Walder says when I mention this. “And the fare in 1948 was 5¢, too [that year, the city raised subway fares for the first time to 10¢. Unfortunately, among the mistakes they made, one of them was not creating a sustainable financial base.”
On the day Walder announced Citi Bike’s new funding and started the job, Citi Bike, as planned, raised its annual membership fee from $95 to $149; membership expectedly decreased. That should help keep Citi Bike solvent, but bike sharing is still far from reaching the scale or stability of other types of mass transit. “What has to be figured out is a sustainable funding stream to support Citi Bike beyond the next few years,” says Tri-State Transportation Campaign’s Vanterpool.
“I don’t have any particular goals for next year,” Walder says. “If you look at this year, we increased ridership by 21%. That’s pretty darn good.”
Correction: This article originally mistated the number of annual Citi Bike members in July 2014 as 80,885. There were 93,501 members that month.