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2018 Update to Nice Ride Nonprofit Business Plan

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2018 Update to Nice Ride Nonprofit Business Plan 2018 Update to Nonprofit Business Plan This Business Plan Update has been approved by the Nice Ride Board of Directors. It is subject to approval by the City of Minneapolis and is incorporated by reference in the proposed Third Amendment to Grant Funded Agreement by and between the City of Minneapolis and Nice Ride Minnesota. EXECUTIVE SUMMARY Since its launch in 2010, Nice Ride has followed the core elements of the December 3, 2008, Nonprofit Business Plan for Twin Cities Bike Share System (“2008 Business Plan”). Core elements included: station-based bike share; capitalized through combination of public funds and title sponsorship by Blue Cross and Blue Shield of Minnesota (“Blue Cross MN”); operated by nonprofit staff with costs covered by sales revenue plus station sponsorship. In 2010, NRM and The City of Minneapolis entered into a Grant Funded Agreement (“GFA”), which expires in August of 20211. In that Agreement, Nice Ride agreed to operate “the Program” using the grant-funded equipment. “The Program” was the 2008 Business Plan. Core goals included: establishing bike sharing as a convenient and reliable form of transportation, increasing bicycle mode share, and increasing cultural acceptance of active transportation. The 2008 Business Plan was successful. NRM has achieved public goals, expanded using funds from multiple public sources, and become a model for over 50 similar nonprofits in other cities. In 2017, the market and technology assumptions underlying the 2008 Business Plan fundamentally changed. Over $3 billion in private capital flowed into the bike sharing industry worldwide. Over 20 million bikes were deployed in cities worldwide. The predominant technology platform became “dockless.” Dockless technology has great potential to further our goals for more people in more places at lower cost, but its current implementation has serious problems, particularly low-quality and disorder in the right of way. The NRM Board of Directors has adopted this Business Plan Update in response to this change (the year-long process leading to this decision is described below). The core goals of this Business Plan Update remain the same as listed above. Key elements of the Business Plan Update are: continue to operate and maintain the existing, grant-funded equipment until we are confident that the system that will replace it is sustainable; 1 The term of the GFA was extended to August 2021 in a Second Amendment related to the 2011 expansion. PAGE 2| NICERIDEMN.ORG APRIL 13, 2018 pilot a dockless bike model that will meet our goals for quality, reliability, equity, and orderliness while serving more people and expanding use; contract with Motivate International Inc. or its affiliate, Motivate Minnesota, LLC (“Motivate”) to provide these operating services and to deliver this pilot using a form of contract that will assure collaboration, innovation, transparency, and accountability in a fast-changing industry. The Mission and Board of Directors of NRM will remain in place, as will NRM’s commitment to implement “the Program,” as modified through this Business Plan Update. NRM will change from an owner/operator model to a contracting and contract oversight model. Key changes will include: The NRM Board will add directors with expertise in measurement and oversight (currently supported by the Humphrey School of Public Policy); NRM’s Twin Cities employees (with exception of its Executive Director) will become employees of Motivate; NRM will transfer spare parts, tools, trucks, trailers, and facilities to Motivate; Motivate will operate all of the existing bikes and stations in 2018; Motivate will deliver at least the following number of dockless bikes: o 1,500 in 2018 o 1,500 in 2019 o 1,500 in 2020 if usage targets are met o 1,500 in 2021 if usage targets are met In 2018, Motivate will cap its pricing for the first 30 minutes of each trip at $1.00 through the smart phone application, and $2.00 at the station and, after that, the cap will be equal to Metro Transit bus fare; Motivate may take station-based equipment out of service after 2018, provided that it replaces station-based bikes with dockless bikes on a 1:1 basis; The dockless bike pilot will include at least 150 e-bikes which will be rented and returned at centrally located charging stations; NRM will encourage its title sponsor to enter into a new sponsor relationship with Motivate. In the proposed Program Agreement between NRM and Motivate that will implement these changes, NRM is referred to as the “Manager,” because its role will be to manage the contract to achieve the goals of the public grants, compliance with obligations to right of way owners, and NRM’s nonprofit mission. All of these changes are subject to approval of a transition plan by our public grantors, which has been requested, and by approval by the City of an Amendment to the GFA, which is scheduled for vote on April 27, 2018. Central to the Business Plan Update are five strategies: (1) contracting for transparency and innovation, (2) using “virtual station” technology to create orderly, designated dockless bike parking areas, (3) equitable service, (4) robust data sharing, and (5) prioritize quality and reliability over growth. Each of these strategies are discussed more fully below. PAGE 3| NICERIDEMN.ORG APRIL 13, 2018 HISTORIC CONTEXT RELEVANT TO BUSINESS PLANNING 2008 Business Plan, Launch, and Expansion with Public Funds In 2008, with support from the Minneapolis Department of Community Planning and Economic Development, the City of Lakes Nordic Ski Foundation and a group of advocates put forward the 2008 Business Plan. The 2008 Plan called for the creation of a nonprofit that would own and operate a station-based bike share system. It called for capitalization through public funding and private sponsorship. The City of Minneapolis (“the City”) applied to the Federal Highway Administration (“FHWA”) for initial capital, agreeing to serve as “fiscal agent” for a new nonprofit. Blue Cross MN contributed capital and became the title sponsor for NRM. The initiative has been successful in many ways, including: growing from 65 stations and 700 bikes to 200 stations and 1,850 bikes; staffing thousands of local events and group rides; catalyzing a steady increase in active transportation participation in the Twin Cities; partnering with the National Park Service to enhance active transportation to parks and support “paddleshare” on the Mississippi River; sharing data and learnings through open source practices and leadership in the formation of a national industry association and creation of an international open data standard; maintaining bikes beyond their projected useful life and continuously upgrading electronic equipment, websites, and apps; being a model and resource for over 50 similar non-profit owner-operators in North America. The following describes the sources of public funds, representing roughly two-thirds of the capital cost of the current bike share system. This chart also indicates the manner in which NRM has accounted for depreciation of these assets in its audited financials. PAGE 4| NICERIDEMN.ORG APRIL 13, 2018 Nice Ride Minnesota Public Funding 12/31/2017 Bikes Stations *Bikes - 5 YR *Stations - 10 YR Ye a r Source s of Public Funds Contribution Purcha se d Purcha se d % De precia tion % De precia tion 2010 Non-Motorized Pilot FHWA $ 1,750,000 700 65 100% 75% City of Minneapolis $ 250,000 2011 Non-Motorized Pilot FHWA $ 1,043,000 500 51 100% 65% DHHS-Communities Putting Prevention to Work $ 201,090 2012 National Park Service (FHWA/FTA) $ 480,000 128 30 100% 55% MnDOT / Capital Area $ 100,000 University of Minnesota $ 150,000 2013 National Park Service (FHWA/FTA) $ 630,060 228 24 90% 45% Hennepin County $ 90,000 2014/2015 National Park Service (FHWA/FTA) $ 504,334 158 20 50% 25% Metropolitan Council-CMAQ/FHWA $ 70,988 2016 Metropolitan Council-CMAQ/FHWA $ 300,000 122 8 30% 15% 2017 National Park Service (FHWA/FTA) $ 171,554 100 3 10% 5% Total $ 5,741,026 1936 201 Aggregated Fleet Depreciation 86% Aggregated Station Depreciation 57% *Bikes/Station Depreciation percentage based on mid-year installation In the 2008 Business Plan, NRM assumed a five-year useful life for bikes and ten-year useful life for stations. We assumed a bicycle theft/vandalism loss rate of 10%. NRM currently has approximately 1,850 bikes ready for service in our Spring 2018 launch, reflecting a retention of assets far better than anticipated. NRM has operated on a “break-even” basis since 2010, and has not generated reserves. NRM published a detailed “Five Year Assessment” containing a description of experiences and lessons learned from implementation of the 2008 Business Plan. 2013 Decision to Build Capacity and Expand Program Scope with Blue Cross Support Prior to 2013, NRM focused on launching, trouble-shooting, and growing the urban bike share system. In 2013, with support from Blue Cross, Nice Ride began investing in other programs to achieve impacts similar to urban bike share for more people in more places. That led to implementation of Nice Ride Bemidji, Nice Ride Neighborhood (in North Minneapolis, Phillips, and Frogtown), Wheelbeing, and Nice Ride Rochester. A number of other program concepts were developed but have not yet been implemented. At the same time, also with the support of Blue Cross, Nice Ride increased its investment in capacity, purchasing a building and adding staffing necessary to focus on improving quality and reliability for our customers while reducing dependency on contractors for maintenance, PAGE 5| NICERIDEMN.ORG APRIL 13, 2018 repairs, and heavy equipment work. CURRENT STATE OF STAFFING AND EQUIPMENT Nice Ride typically employees approximately 40 people at peak season and approximately 16 people in the off-season. Melissa Summers, Associate Director, manages all day-to-day operations and the customer service call center.
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