The mayor’s office tells The Current that a $400,000 TIGER grant of federal taxpayer money from the Rhode Island Department of Transportation enabled Providence’s new bike sharing program:
JUMP, which is owned by the ride sharing company Uber, has bike-share programs in six other U.S. cities. The City of Providence, along with Lifespan, Tufts Health Plan and the Rhode Island Public Transit Authority, sponsored JUMP’s Providence launch. …
Four hundred JUMP bikes will be available throughout the city in August, said Victor Morente, spokesman for Mayor Elorza’s office. Riders will be able to park and pick up bikes at 46 stations as well as at public bike racks. …
Bikes will be available for rent at $2 for every 30 minutes of riding. Memberships will also be available for $20 per month for 60 minutes of ride time a day. JUMP will offer reduced-cost memberships to people with low incomes.
As always, with such programs, the first question is why some entrepreneur didn’t find it worth the $1,000-per-bike investment to get this project off the ground. The answer may be that, even at the highest price point ($4 per hour), every single bike will have to be ridden for more than 31 hours to pay for itself, and that’s if we assume no maintenance or replacement costs. Moreover, the business model must require that some percentage of the bikes not be used at any given time, or else nobody would be willing to rely on their availability.
In short, the use of other people’s money (taxpayers) was probably the only way to overcome doubts about the demonstrated demand. When the local Walmart will sell an adult bike for $100, most people who want them can find them. With the subsidy, most of each sale can be profit for as long as the bikes last.
Those profits come at somebody else’s expense. In San Francisco (with its better, more-predictable weather), JUMP bikes are cannibalizing Uber business. The company claims to be happy about the exchange, but each lost Uber ride is a driver with no customer. The subsidy could also block other innovations; an entrepreneur who was working on an app to allow people to share their own bikes (i.e., without the huge up-front investment for any one company) now has to compete with more-expensive, pedal-assisted bikes.
In the effort to make us behave as government wants us to be have, however, sacrificing the livelihoods and opportunities of a few unseen people is a small price to pay.
ADDENDUM (10:13 a.m., 7/21/18):
By the way, anybody who’s still having difficulty understanding how government involvement in the market produces income inequality should consider this to be an example. The bicycles used for this offering are constructed in a largely automated process (presumably) and “shared” through an app that requires minimal human involvement, so customers’ money is flowing to the top of the income ladder, probably in distant states or countries. Meanwhile, local Uber and taxi drivers lose customers, as do any small bike-rental shops or other actual Rhode Islanders who might offer some service that this tramples.