The following article was sent out in my City View Newsletter, which you can sign up to receive here.
Yesterday, the City Council voted 7-2 (Councilmember Herbold and myself voting “no”) to spend $1.4 million to rescue from insolvency the Pronto bike sharing service that has operated in Seattle for a little over one year.
While a bike sharing program has the potential to be an important, and desired, element of our transportation network, the current system is insolvent and lacks the ridership, membership and revenue to be financially viable. In essence, the Council was asked to rescue Pronto from insolvency in order for a theoretically more viable service to be developed.
Despite the passionate advocacy by some in favor of such a rescue, the risks of investing without a specific plan of action or a clear understanding of the City’s future financial exposure are exceedingly high. I believe such a rescue does not reflect the level of care the Council should exhibit as it exercises its fiduciary responsibilities to the taxpayers of Seattle.
The potential financial risk to the city is evident in the failure of Pronto to achieve its original ridership or revenue projections:
During public testimony yesterday before our vote, we heard many anecdotal stories on the value of bicycles—reduced street congestion, better for the environment, good physical exercise, and more. All true. But, this testimony didn’t justify, in my view, using limited tax revenues to rescue a failed venture. Frankly, there is a lot of “optimism bias,” the term economists use to describe judgments people make even when the facts suggest otherwise.
Instead of rescuing Pronto from insolvency, Councilmember Herbold and I urged our colleagues to take a different approach. The City should develop a public-private partnership with the clear expectation that no City funding would be required for future operating revenue; in such a model, the public and private parties would appropriately share responsibility for capital expenses giving the City an important voice at the table for system planning. This would have been a more prudent and wise course to follow.
I voted “no” for another reason, too.
The City’s transportation department knew early last year that Pronto was in financial trouble, that the system was not able to sustain itself. The Council was not informed of this material fact until months later when SDOT formally recommended the rescue. After receiving the rescue proposal, the Council considered it incomplete, lacking the kind of financial rigor we would expect. We imposed a budget restriction, called a proviso, which prohibited spending money on the rescue until a business plan was presented. One month later, in December 2015, SDOT sent $305,000 to Pronto to pay operating costs, a violation of the spirit and intent of the Council budget proviso. This payment was not disclosed to the Council until February of this year. (This December payment brings the actual rescue amount to $1,705,000, not just the $1.4 million approved yesterday.)
I take my job seriously and I expect others in City government to do the same. The lack of transparency and the violation of the Council’s budget directives we see here are significant.
On both the substance of this proposal and the process by which it was pursued, the City fell short of the standard we should set for ourselves. I am disappointed in the final outcome, but I will continue to work with my colleagues to ensure that we invest wisely in our transportation infrastructure.