Hubway a profit-maker for City, bike company

November 22, 2013
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The Hubway bike-share system is a profit-maker for the City and the Oregon company that operates it, a Gazette review of the program’s finances has found.

For the fiscal year 2012, the City collected $173,835 in profit, all of which was funneled back into expanding the system, according to Boston Bikes Director Nicole Freedman. Alta Bicycle Share, the for-profit system’s operator, put back $86,917 into the system that year.

The City is paying millions of dollars for Hubway, including a $900,000 “launch fee” and escalating annual fees of $750,000 to $820,000. But none of it is coming from City coffers.

“No City money has been spent on Hubway to date. All funding has come from sponsors, advertisers, user fees, memberships and grants,” said Freedman.

Launched in 2011, Hubway is a for-profit venture that allows people to rent bicycles from automated stations around town, with registration available through thehubway.com. It recently expanded to Jamaica Plain.

The City and Alta split Hubway profits 50-50, according to the system contract, which was provided to the Gazette by the Mayor’s Office. The three-year contract requires Alta to put at least half of its profit back into the system for expansion.

While the City is currently putting all of its profit into expansion, that won’t always be the case.

“After the system is full-size, the plan would be that money goes into the City’s general fund,” said Freedman.

She said the City currently has 88 stations and plans to expand to around 225.

Under the Hubway deal, the City owns the bicycles and stations, while Alta is responsible for operations, maintenance and insurance liability.

While sometimes described by officials and the press as a public-private “partnership,” the contract makes it clear it is not. Alta is deemed an independent contractor of the City in the contract.

Hubway’s main income comes from annual membership fees and advertising and sponsorship fees.

Sponsors often pay money to have a station on their land. Beth Israel Deaconess Medical Center in the Longwood Medical Area pays the City $50,000 for three years for a station there. Freedman said that sponsorship of all stations is the same fee.

Initial donors to the Hubway program, according to contract documents, included various colleges and universities, the Boston Red Sox, and such major developers as Boston Properties and the Fallon Company. Major grant funding came through the MBTA and other sources with the aim of connecting bikes to public transit and ultimately improving public health.

Hubway stations were installed this year in JP at the Jackson Square T Station; at the Green Street T Station; at Monument Square; in front of the post office at the corner of Centre and Myrtle Streets; in Hyde Square at the corner of Centre and Barbara Streets; and in Egleston Square at the corner of Columbus Avenue and Washington Street.

John Ruch contributed to this article.