Montreal, June 15, 2011 • No 290

 

Larry Deck is a librarian who lives in Montreal.
 

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The Bixi Bailout: too cool to fail
 

by Larry Deck
 

          This year, the directors of Bixi, the popular rent-a-bike service here in Montreal, decided to put advertisements on their bikes. New rear wheel-guards come adorned with ads, mostly for Bixi’s partners Desjardins, Rio Tinto Alcan, and Telus.

 

          These ads, however, are sometimes obscured by stickers that declare “Non à la marchandisation de l’espace public” and “Bixi libre” (roughly, “No ads on public property” and “Free Bixi”). When I first saw these stickers, I wondered: Since when are Bixis public property?

Setting the Record Straight

          The Bixis are operated by a private non-profit that calls itself the Public Bike System Company. It’s not “public” in the sense that the city parks are public, but its relationship to the city is closer than most, and it has recently been the recipient of taxpayer largess, so maybe the sticker-pasters aren’t that far off the mark.

          Last month it was announced that Bixi would get a “$108-million bailout” from the city of Montreal. The bailout takes the form of a complex combination of loans and lines of credit, but public reaction from people who did not read these details was predictably outraged: Why should people who never use the bike rental service pay for it?

          Roger Plamondon, Chairman of the Board of Directors of Public Bike System Company, the private non-profit that manages Bixi, hurried to clear up the confusion in a press release entitled “Bixi. Establishing the facts.”

          The city, he explained, is not giving Bixi $108 million. Good heavens no! There is a loan, yes, of $37 million, but this is will be repaid with interest, and the rest is merely lines of credit and so on. Bixi owes the bailout money to its parent company, Stationnement de Montréal, which also runs the parking meters in town.

          Far from being a failing company, Bixi is a victim of its own success, Plamondon explains. Its rapid expansion to other cities has led to a “liquidity problem” that forces it to tap the city for this loan.

          Plamondon does not bother to explain the reports that the staff of Public Bike System threatened to take the Bixis off the street and resign en masse if the city didn’t come up with the money, odd behaviour for the managers of a thriving company. Nor does he bother to explain why, if the company is such a success, it can’t get loans from private investors who at least play with their own money.
 

"Government bailouts can be tricky, as the citizens of Canada and the United States have had to learn repeatedly. Part of the trick is determining (or carefully obscuring) what, exactly, counts as 'paying off the loan'."


A Bailout by Any Other Name

          Government bailouts can be tricky, as the citizens of Canada and the United States have had to learn repeatedly. Part of the trick is determining (or carefully obscuring) what, exactly, counts as “paying off the loan.” The Bush and Obama administrations’ bailouts of Chrysler and GM have amounted to tens of billions of dollars worth of loans and, in the case of GM, the purchase of a 60.8 percent equity stake in the company. But it’s all a great success according to some people. GM’s CEO Ed Whitacre took to the pages of the Wall Street Journal in April to crow that his company had paid back its bailout loan "in full, with interest, years ahead of schedule." He was talking about the $6.7 billion GM had been given as a pure loan; of course the company has not bought back the equity stake, which counts for several times that amount of money. The day will probably never come when the US government gets back all the bailout money, with or without interest.

          Will Bixi pay back its loan in full, with interest, years ahead of schedule? Maybe it will. But why should the taxpayers of Montreal take that gamble? What is it about Bixi, unlike other companies, that makes it eligible for huge bailout loans from the city? When Uncle Sam bailed out GM, the argument was that now was not the time to send several thousand more workers to the unemployment lines. Bixi, with its 50 employees, is not “too big to fail” in that sense. But of course, for Bixi to collapse would be a public relations disaster for its partners and backers, including the city. You get the impression that for some people, Bixi is too cool to fail.

          Maybe the stickers are right. Maybe for all its “independence” Bixi is, for all intents and purposes, the public property of city taxpayers. The name “Bixi” is a portmanteau of bicycle and taxi. A friend who likes wordplay pointed out that a more apt name might be formed by combining the same two words in reverse: Taxcycle.

 

Follow up story :: Linda Gyulai, "Bixi program to lose millions for Montrealers, auditor general says," The Gazette, June 21, 2011.