Bixi files for bankruptcy protection

Service will roll in Montreal this year, Coderre says

 

BY ANDY RIGA, GAZETTE TRANSPORTATION REPORTER JANUARY 20, 2014

http://www.montrealgazette.com/business/Bixi+files+bankruptcy+protection/9408589/story.html

MONTREAL — Bixi was not supposed to cost them a cent but Montreal taxpayers could be on the hook for tens of millions of dollars, the city admitted Monday.

The bike-sharing service's debt is almost $50 million.

Citing Bixi's "grim financial portrait," Mayor Denis Coderre announced he had forced the city-controlled non-profit company to enter bankruptcy protection.

Though he wants Bixi out of the international bike-sharing business, Coderre said he would like to see Bixi continue to roll in Montreal.

"We will have Bixi in Montreal this summer," he said, noting many users have purchased memberships. Keeping Bixi operating in the city in 2014 could cost taxpayers a further $1.5 million.

Coderre was less definitive about whether Montrealers will have access to bike-sharing beyond 2014.

Bixi is unable to neither "meet its financial obligations nor find a viable short-term solution," Coderre said. That was causing "uncertainty regarding the possible recovery of the sums injected by the city."

Bixi owes the city $31.6 million on a $37-million city loan. Montreal also guaranteed a line of credit on which Bixi owes $6.4 million.

That means Montreal taxpayers could be stuck with a $38-million bill, though the city hopes a sale of the international part of the business will cut that amount.

Bixi also owes its suppliers $9 million.

In total, then, Bixi's total debt is at least $47 million.

Bixi is also embroiled in multimillion-dollar lawsuits with a former software supplier.

Montreal's auditor general had warned the city about Bixi's precarious situation.

In September, Jacques Bergeron expressed "serious doubts about Bixi's ability to continue operations." At the time, the city denied Bixi was on the brink of bankruptcy.

Bixi has operated Montreal's popular bike-sharing service since May 2009.

Though backed by the city, the company has refused to make public basic information about its operations.

For example, Bixi's 2012 financial statements have yet to be disclosed. For 2013, all Bixi would say is that it had 41,000 Montreal members and that it operated with a deficit of about $4.5 million.

Coderre, who took power in November, promised his administration will "keep Montrealers informed about any new developments regarding Bixi."

The mayor said "if Bixi can be saved," it is through bankruptcy protection, which will allow Bixi to restructure and give it time to sell its international arm.

But Coderre admitted previous attempts to sell off that part of the business have failed. On Monday, he disclosed that for the second time, a potential buyer walked away from a deal after taking a closer look at Bixi's books.

Under former mayor Gérald Tremblay's plan, devised in 2007, the sale of the Bixi system to other cities would completely finance bike-share operations in Montreal.

It did not work out that way.

Bixi was stymied by legal disputes, software glitches, upgrade delays and, most recently, by New York City and Chicago withholding payments, claiming Bixi was not fulfilling its end of the bargain.

Since 2012, Bixi has been in a legal dispute with 8D Technologies, the Montreal firm that provided the software for initial Bixi stations. The dispute arose after 8D refused to sell all the rights to the software. Bixi hired a company to build software to replace 8D's in future systems.

That software, initially plagued with bugs, is now used by several cities.

The latest problems involve back-end software under development by Bixi.

It is used by cities to track and analyze usage, among other things. Bixi admits it has been late in providing promised updates, angering New York and Chicago.

Bixi chief executive Michel Philibert said Chicago owes Bixi $2.6 million. New York City owes $3 million. In addition, Alta Bicycle Share, the company that operates New York's service, has told Bixi it wants $11 million in damages for software delays.

Such disputes are common in business. But Coderre said a city should not be involved in commercial enterprises.

He called the international expansion "a mistake." The city "embarked on commercial operations that it should not have been involved in. ... It is not up to taxpayers to assume the financial risk involving a business plan."

The opposition at city hall backed Coderre's move.

Projet Montréal leader Richard Bergeron said when the dust settles, the system could end up costing taxpayers $25 million or more.

He blamed wrong-headed decisions by the Tremblay administration, which shovelled money into Bixi to create an innovative system that would sell internationally. Instead, it should have focused on developing a basic, inexpensive system for Montreal.

Bergeron said Montreal's transit authority, the Société de transport de Montréal, has already drawn up a contract that would see it take over Bixi's Montreal operations, though it wants nothing to do with the service's debt.

Whether the STM or a private company runs the system, "Bixi will be in the streets in 2014 and there's no reason why it shouldn't be on the streets in 2015, 2016 and so on," Bergeron said. But "it will be a public service, as it should have been from the very beginning."

That means an annual city subsidy, which Bergeron estimated would range from $1.5 million to $2 million.

"That is not too much for such a service, with more or less 2 million trips a year," he said. "If you pay $1.5 million for 2 million trips, it's 75 cents per trip. That's perfectly acceptable and affordable."

Bergeron compared Bixi to public transit: Bixi users pay a fee but not the full cost.

The bankruptcy protection process gives Bixi an initial 30 days to restructure. That period can be extended for up to six months, the city said.

Bixi employees 66 people. "No job losses are expected at this time," the city said.

BIXI BY THE NUMBERS

$31.6 million: Amount Bixi still owes the city of Montreal on $37-million loan.

$6.4 million: Bixi line of credit, guaranteed by Montreal taxpayers.

$1.5 million: Estimated amount it could cost the city to ensure Bixi service operates in Montreal this year.

$4.5 million: Bixi's estimated deficit for 2013 (financial results have not been made public).

$9 million: Amount Bixi owes to suppliers.

$3 million: Overdue amount owed by New York City to Bixi.

$11 million: Amount that Alta Bicycle Share, the company that operates New York's bike-share service, has told Bixi it wants in damages for software delays.

$2.3 million: Overdue amount owed by Chicago to Bixi. That city, too, is unhappy with software delays.

37,000: Number of Bixi bikes in operation around the world.

15: Number of cities that have adopted Bixi, including London and New York.

5,000: Number of Bixis on Montreal streets in 2013

ariga@montrealgazette.com

© Copyright (c) The Montreal Gazette