R7P-Approve Amendment Self-Service Bicycle Sharing ProgramCOMMISSION ITEM SUMMARY
Condensed Title:
A RESOLUTION OF THE MAYOR AND CITY COMMISSION OF THE CITY OF MIAMI BEACH,
FLORIDA APPROVING THE SUBSTANTIVE TERMS OF THE FIRST AMENDMENT TO THE
CONCESSION AGREEMENT BETWEEN THE CITY OF MIAMI BEACH, FLORIDA AND DECO
BIKE,LLC
Key Intended Outcome Supported:
Enhance Mobility throughout the City.
Supporting Data (Surveys, Environmental Scan, etc.):
Issue:
Shall the DecoBike Agreement be amended to permit advertising on 40 kiosks?
Item Summary/Recommendation:
The objective we are trying to achieve for this contract modification is long term fiscal sustainability for
this extremely successful public amenity. To accomplish this goal on the operator's side is to recover
their $3,715,000 capital investment over the term of the contract as well as make a modest profit.
Capital investment recovery is essential because unlike a "brick and mortar business", this business is
primarily its capital equipment which depreciates each day, such that at the end of 10 years there is
little or no investment left. The City's objective is to provide a public amenity and recover the value of
revenue lost from the parking spaces where the DecoBike stations are located through the City's
revenue share of the contract. There are approximately 90 parking spaces that generate
approximately $3,000 per year each or an expected $2,700,000 over the term of the contract, (without
rate increases).
Conceptually, advertisements on 40 kiosks could be acceptable if located in strictly commercial
corridors, not facing any residential areas, with the advertising content subject to specific review and
approval by the City Manager or his designee. DecoBike advises that their advertising company
requires a minimum size of 22"x 48" to generate the revenue included in the projections.
The Administration recommends that the mayor and City Commission adopt the resolution Approving
The Substantive Terms Of The First Amendment To The Concession Agreement Between The City Of
Miami Beach, Florida And Deco Bike,Lic. For The Implementation, Management And Operation Of A
Self-Service Bicycle Sharing Program; Authorizing The City Manager And City Attorney's Office To
Negotiate And Draft The Final Amendment, Based Upon The Approved Terms ( As Further
Referenced In The Term Sheet Attached As Exhibit "A" To This Resolution); And Authorizing The
Mayor And City Clerk To Execute The Final Agreement
Advisory Board Recommendation:
Finance and Citywide Project Committee April19, 2012 and June 28, 2012
Financial Information· .
Source of Amount
Funds: 1
D .2
'3
OBPI Total
Financial Impact Summary:
. Caty Clerk's Office Legislative Tracking:
Sign-Offs: f)
Department Director As · .L. _..pity Manager
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T. \AGENDA \2012\7 -18-12\decoB•ke summary.docx
MIAMI BEACH 829
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AGENDA ITEM _R-'-'1-::-P;......__
DATE }··18-r2.--
lD MIAMI BEACH
City of Miami Beach, 1700 Convention Center Drive, Miami Beach, Florida 33139, www.miamibeachfl.gov
MEMO#
TO:
FROM:
DATE:
SUBJECT:
COMMISSION MEMORANDUM
Mayor Mattie Herrera Bower and Members of the City Commission
Kathie G. Brooks, Interim City Manager ~~ AJ-·
July 18, 2012 /
A RESOLUTION OF THE MAYOR AND CITY COMMISSION OF THE CITY OF
MIAMI BEACH, FLORIDA APPROVING THE SUBSTANTIVE TERMS OF THE FIRST
AMENDMENT TO THE CONCESSION AGREEMENT BETWEEN THE CITY OF
MIAMI BEACH, FLORIDA AND DECO BIKE,LLC. FOR THE IMPLEMENTATION,
MANAGEMENT AND OPERATION OF A SELF-SERVICE BICYCLE SHARING
PROGRAM; AUTHORIZING THE CITY MANAGER AND CITY ATTORNEY'S
OFFICE TO NEGOTIATE AND DRAFT THE FINAL AMENDMENT, BASED UPON
THE APPROVED TERMS ( AS FURTHER REFERENCED IN THE TERM SHEET
ATTACHED AS EXHIBIT "A" TO THIS RESOLUTION); AND AUTHORIZING THE
MAYOR AND CITY CLERK TO EXECUTE THE FINAL AGREEMENT
ADMINISTRATION RECOMMENDATION
Adopt the Resolution
KEY INTENDED OUTCOME SUPPORTED
Enhance Mobility throughout the City.
BACKGROUND
At the July 13, 2011 Commission meeting a discussion regarding DecoBike advertising
was held. The item was referred to the Finance and Citywide Projects Committee to
discuss a) determination of financial need to ensure program is successful; b) look at
alternatives if advertising is not an option; c) bring back first reading ordinance at the
September Commission Meeting; and d) conduct regional meetings.
DecoBike, LLC, entered into a concession agreement with the City dated July 15, 2009
in response to RFP 44-07/08 for the delivery and operation of a self-service bicycle
rental fleet for public use to be stationed in the public right of way. This agreement
required the concessionaire to implement a program which would enable the public to
self-rent bicycles from any of a number of locations and return them to another location
on a 24 hour, 365 day a year basis.
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ANALYSIS
Contract Amendment
The objective we are trying to achieve for this contract modification is long term fiscal
sustainability for this extremely successful public amenity. To accomplish this goal on
the operator's side is to recover their $3,715,000 capital investment over the term of the
contract as well as make a modest profit. Capital investment recovery is essential
because unlike a "brick and mortar business", this business is primarily its capital
equipment which depreciates each day, such that at the end of 10 years there is little or
no investment left. The City's objective is to provide a public amenity and recover the
value of revenue lost from the parking spaces where the DecoBike stations are located
through the City's revenue share of the contract. There are approximately 90 parking
spaces that generate approximately $3,000 per year each or an expected $2,700,000
over the term of the contract, (without rate increases).
It is clear that, without intervention by the City through contract term modification or an
additional revenue source, this program will not achieve a return of capital or modest
profit to the operator or recover the City's foregone parking revenues over the long term.
The Administration met with Mr. Bonifacio Diaz, Chief Operating Officer and Mr. Ricardo
Pierdant, President DecoBike, LLC. to review the contract terms of the existing
concession agreement in the context of current operations. The goal of this process was
to achieve a balance between the high quality public services provided, which continue
to be a great amenity to our residents and visitors, and financial sustainability over the
longer term.
Over the past few months, the Administration has worked with Mr. Diaz to review a
revised pro-forma using the terms of the current agreement over a prospective ten year
term. (The agreement currently is for a five year term with one five year option at the
discretion of the City.)
Concession Agreement Review
DecoBike began operation March 14, 2011, with 30 stations and 300 bicycles.
Approximately 53 stations and an additional 550 bicycles were added over the year,
increasing the total number of stations to 83 and bicycles to 850. There are still 27
stations remaining to be implemented over the next 3 months.
In the first month of operation DecoBike enrolled 250 members and has steadily
increased to a current total of 2,380 members. Monthly trips have steadily increased
from 35,332 trips during March 2011 to over 125,000 trips during March of 2012.
The DecoBike program has had a tremendously positive impact on the community. It
has logged in excess of 815,000 rides and their bike fleet journeyed more than
2,444,000 miles. By utilizing DecoBike instead of an automobile for local trips, their
members and visitors burned over 89,000,000 calories and reduced the city's C02
emissions footprint by 2,400,000 pounds.
During the initial period of operations from January 2011 through December 2011
financial statements provided by DecoBike and compiled by their accountant, Douglas
N. Rice, CPA,PA, reflected an operating loss of approximately $387,561. Their
proposed operating budget for 2012 reflects increased ridership revenue and while the
business still projects an operating loss, it has been reduced to approximately $76,500.
Revenues and ridership continue to increase; however, to maintain the equipment and
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provide the services that the public has come to expect, the business has a very high
ratio of expense to revenue.
The pro-forma was based on current level of operation and revenues for walk-ups and
memberships were projected to increase at a rate of 3.5% per year while expenditures
were estimated to increase at a rate of 3% per year. The results reflected an annual loss
between $81,000 and $125,000 and a cumulative loss over the ten year period of
approximately $1 ,000,000.
Additionally, the original projections did not provide sufficient funds for replacement and
repair of bicycles. DecoBike has invested approximately $3,715,000 into the operation
and the projections neither provided a return of invested capital nor a profit to the
operator over the ten year term.
We generated and evaluated a number of alternatives, comprised of:
• Using various rates for the City concession revenues;
• Using various rates for the City share of advertising revenues;
• Using various number of kiosks for advertising and implementing
different numbers of kiosks in different years;
• Exempting different revenues from the calculation of the City
share of revenues,
• Providing different replacement cycles for bicycles and
equipment, and
• Using different rates per hour for the Concession bicycle rentals
Following the review of these various alternatives, it was apparent that to achieve a
sustainable financial model which provided a return to the City, and return of capital
along with a modest profit to DecoBike over the ten year period the following terms are
proposed.
Proposed Contract Amendment Terms
Exhibit A delineates the proposed terms of the First Amendment to the Concession
Agreement Between The City Of Miami Beach, Florida And Deco Bike,Lic. For The
Implementation, Management And Operation Of A Self-Service Bicycle Sharing
Program. These contract terms are based on Option "J" (See attached Exhibit B) as
recommended by the Committee.
April 19, 2012 Finance and Citywide Projects Committee
The proposed contract amendment was presented to the Committee and the Committee
recommended the amendment which permits advertising on 40 kiosks in commercial
areas and further recommended limiting the rate increase to $6 for an hour and adjusting
the City's percent of revenue sharing, if possible. Additio-oally it was recommended to
base the 3% profit on revenues and expenditures subject to ordinary, normal, and
customary charges with limited discretionary items; and that the Legal Department
review the legal provisions.
June 6, 2012 City Commission Meeting
The proposed Amendment to Sec. 82-414.-Permitted signs, shelters and advertising in
public rights-of-way-was presented at the June 6, 2012 Commission Meeting and was
approved on first reading. However, a number of questions regarding the proposed
contract changes were raised by Commissioner Libbin and the item was referred back to
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the Finance and Citywide Projects Committee for a discussion of contract alternatives
that would permit the DecoBike operation to be sustainable without receiving revenues
from the proposed advertising on forty kiosks in commercial areas.
June 28, 2012 Finance and Citywide Projects Committee
The proposed contract amendment was referred back to the Finance Committee from
the June 6, 2012 Commission meeting for a discussion of alternatives to kiosk
advertising. The Contract amendment alternatives were presented to the Committee
and the Committee recommended the amendment which permits advertising on 40
kiosks in commercial areas and agreed to Option "J" (See attached Exhibit 8) which
permits the hourly rate to increase to $7 per hour Additionally it was recommended to
base the 3% profit on revenues and expenditures subject to ordinary, normal, and
customary charges with limited discretionary items.
Advertising Ordinance Committee and Public Meetings
The proposal by Deco Bike to allow advertising on the kiosks was discussed at
numerous committees and public meetings including the Miami Beach Visitor and
Convention Authority (8/22/11 ), the Transportation and Parking Committee (9/12/11 ), the
Ocean Drive Association (9/13/11 ), the Mayor's Blue Ribbon Bikeways Committee
(9/22/11), and two specially advertised community workshops, one at City Hall on 9/7/11
and another at the North Shore Park Youth Center on 9/12/11.
The Planning Department showed each group large images of the three options for size
and scale of advertising panels on the existing Deco Bike kiosks. They explained that if a
policy decision is made to permit advertising on the kiosks, it could be limited to
locations in commercial districts.
A majority of persons who spoke at these meetings were opposed to any type of
advertising on the Deco Bike kiosks. The most common reasons stated were aesthetics
and that it could open a pandora's box of advertising in other locations in Miami Beach.
Many people questioned whether it was premature to make this proposal since the bike
sharing program had only been in operation for 6 months. Some individuals stated that
the matter should be reconsidered after one year of operation and after the City audits
the books to verify whether advertising revenue is necessary to make the program
financially viable.
Advertising Ordinance Change
The Finance Committee recommended at both the April 19, 2012 meeting and the June
28, 2012 meeting that advertising be permitted for the forty (40) bicycle kiosks, the
following represents the proposed language required to effectuate the change.
Sec. 82-414.-Permitted signs, shelters and advertising in public rights-of-way.
Notwithstanding any other prohibitions in this Code to the contrary, the city may place, or
contract to place, directory signs and bus shelters in the public rights-of-way, or bicycles
and bicycle kiosks as part of a city-sponsored bicycle rental and sharing program, with
advertising thereon. Such signs, shelters, bicycles and bicycles kiosks shall be subject to
all applicable permitting requirements and design reviews as provided for in the Land
Development Regulations.
(Ord. No. 2001-3318, § 1, 9-5-01; Ord. No. 2010-3674, § 1, 3-10-10)
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Conceptually, advertisements on 40 kiosks could be acceptable if located in strictly
commercial corridors, not facing any residential areas, with the advertising content
subject to specific review and approval by the City Manager or his designee. DecoBike
advises that their advertising company requires a minimum size of 22"x 48" to generate
the revenue included in the projections.
The current agreement provides that the City reserves the right to impose such
additional requirements for the installation and display of the Advertisements, at any
time, at its sole option and discretion; provided that the City Manager or his designee
shall provide the Concessionaire with written notice of such additional requirements. The
permissible content of the advertisements shall not include firearms, alcohol or tobacco
products, or be of a sexually offensive nature. Additionally, advertisements shall not
promote unlawful or illegal goods, services or activities and shall not contain images or
information that demean an individual or group of individuals on account of race, color,
religion, national origin, ancestry, gender, age, disability or sexual orientation.
Conclusion
The Administration recommends that the mayor and City Commission adopt the
resolution Approving The Substantive Terms Of The First Amendment To The
Concession Agreement Between The City Of Miami Beach, Florida And Deco Bike,Lic.
For The Implementation, Management And Operation Of A Self-Service Bicycle Sharing
Program; Authorizing The City Manager And City Attorney's Office To Negotiate And
Draft The Final Amendment, Based Upon The Approved Terms (As Further Referenced
In The Term Sheet Attached As Exhibit "A" To This Resolution); And Authorizing The
Mayor And City Clerk To Execute The Final Agreement.
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TERM SHEET EXHIBIT A
THE FIRST AMENDMENT TO THE CONCESSION AGREEMENT BETWEEN THE CITY OF
MIAMI BEACH, FLORIDA AND DECO BIKE,LLC. FOR THE IMPLEMENTATION,
MANAGEMENT AND OPERATION OF A SELF-SERVICE BICYCLE SHARING PROGRAM
Contract term
Rate increase
City Revenue Share
Advertising
Begin a new ten year fixed term effective with the date new
contract is approved. A ten year term will allow for the
return of capital after a projected annual profit of 3%
A rate increase from $5 an hour to $7 an hour is included
in the projection. All other rates remain the same.
Continue at 12% of Walk ups and Memberships gross
revenues up to $3,000,000 of Annual Gross Revenues net
of sales tax and merchant fees.
Continue at 15% of Walk ups and Memberships gross
revenues over $3,000,000 of Annual Gross Revenues net
of sales tax and merchant fees.
Increase the "exemption from City share" calculation from
$1,000,000 to $1,500,000 during the first year of the new
term. This exemption will decline at a rate of $250,000 per
year to $0 in year seven of the revised term. This will allow
the concessionaire to recover approximately two thirds of
his initial investment.
Exempt merchant fees along with sales tax from the City
share calculation.
It is proposed to allow 40 kiosks to display advertising.
It is expected that 40 kiosks will generate annual net
revenue of $211 ,200 per to the concessionaire after
deducting City's share, $57,600 and a 50/50 split of the
balance with the advertising company. The City's shall
receive 12% of the gross revenue on kiosk advertising.
Gross kiosk advertising revenues are projected at
$480,000 annually, resulting in a net to the Concessionaire
of $422,400 after the 12% payment to the City. The
$422,400 is then split 50/50 with the advertising company.
The actual rate of return to the City is 27% of the
Concessionaire's net advertising revenues.
The City will continue to receive 25% of the advertising
revenues on basket advertising.
The amendment to the City's advertising ordinance will
permit advertising on kiosks. The standards will include
being located in strictly commercial corridors, not facing
any residential areas, with the advertising content subject
835
TERM SHEET EXHIBIT A
THE FIRST AMENDMENT TO THE CONCESSION AGREEMENT BETWEEN THE CITY OF
MIAMI BEACH, FLORIDA AND DECO BIKE,LLC. FOR THE IMPLEMENTATION,
MANAGEMENT AND OPERATION OF A SELF-SERVICE BICYCLE SHARING PROGRAM
to specific review and approval by the City Manager or his
designee.
The current agreement provides that the City reserves the
right to impose such additional requirements for the
installation and display of the Advertisements, at any time,
at its sole option and discretion; provided that the City
Manager or his designee shall provide the Concessionaire
with written notice of such additional requirements. The
permissible content of the advertisements shall not include
firearms, alcohol or tobacco products, or be of a sexually
offensive nature. Additionally, advertisements shall not
promote unlawful or illegal goods, services or activities and
shall not contain images or information that demean an
individual or group of individuals on account of race, color,
religion, national origin, ancestry, gender, age, disability or
sexual orientation.
Additionally, the City has an Exclusive Non-Alcoholic
Beverage Partnership with Coca-Cola. The Agreement
provides that third party users of city facilities, are
prohibited from advertising competitive brands of non-
alcoholic beverages. Third party users include entities
under contract with the City for management services, as
well as entities that lease, rent or otherwise have certain
rights to city-owned property/facilities, including through a
special event permit for use of public property.
DecoBike advises that their advertising company requires
a minimum size of 22" x 48" to generate the revenue
included in the projections.
Operator's Return of Capital On an annual basis, the concessionaire will be permitted a
3% profit (on initial capital investment). Any additional net
income will be considered a return of capital. ; the 3% profit
will be based on revenues and expenditures subject to
ordinary, normal, and customary charges and with limited
discretionary items.
Equipment Replacement
Windfall Provision
Any additional investment of capital by the concessionaire
will be subject to the approval of the City with capital
recovery terms to be negotiated.
Funds have been increased to provide for a 3-4 year
replacement cycle
Should the actual results of operations provide a return of
the initial capital investment to the concessionaire prior to
836
TERM SHEET EXHIBIT A
THE FIRST AMENDMENT TO THE CONCESSION AGREEMENT BETWEEN THE CITY OF
MIAMI BEACH, FLORIDA AND DECO BIKE,LLC. FOR THE IMPLEMENTATION,
MANAGEMENT AND OPERATION OF A SELF-SERVICE BICYCLE SHARING PROGRAM
year ten of the revised term, the City will receive a 50%
share of annual net income in excess of the
concessionaire's 3% profit each year until the end of the
contract.
This return to the City will be capped at the sum of all the
revenues exempted from the City share calculation which
include the sum of annual Merchant Fees and the
exempted revenues beginning in year 1 of the revised term
and declining at the rate of $250,000 per year to $0 in year
7; as well as the revenues exempted during the first year of
operation under the existing contract, calculated at the
appropriate 12 or 15% rate.
Additionally, added to the cap will be the cumulative
difference, if any, between the foregone revenue of $3000
per parking space per year (approximately 90 spaces) and
the cumulative 12%/15% City revenue share on walk-ups
and membership fees.
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KE PRO-FORMA 0.12 0.03 DecoBike Profit IT advertising rate 0.12 (27% on net) Return of Capital @$7/60 IT rebate -$1.SM declining to 0 in yr 7 DecoBike Total increase 60 min to $7 and use actual members Walk-ups 1,821,313 1,885,059 1,951,036 2,019,322 Memberships 489,144 506,264 523,983 542,323 Basket Advertising 60,000 61,800 63,654 65,564 Kiosk Advertising Gross Revenue 2,370,457 Line Expenses Merchant Fees FLSales Tax City Revenue SharE Total Top Line co Bottom Line expenses w co Labor 1,010,520 1,040,836 1,072,061 1,104,222 Leases 70,022 72,122 74,286 76,515 Utilities 22,800 23,484 24,189 24,914 Office Expenses 9,000 9,270 9,548 9,835 Supplies 24,000 24,720 25,462 26,225 Advertising 61,200 63,036 64,927 66,875 Kiosk Advertising Expense 211,200 217,536 224,062 Freight 12,000 12,360 12,731 13,113 Communication 39,564 40,751 41,973 43,233 Insurance 36,000 37,080 38,192 39,338 Sub-contractors 38,400 39,552 40,739 41,961 Vehicles 45,996 47,376 48,797 50,261 Bike Repair & Repl; · 300.000 309.000 318.270 327.818 Total Bottom Line; Expenses Net Income 3% profit 111,453 111,453 111,453 111,453 return of capital 237,367 403,010 393,203 384,326 Cumulative return of capital 640,377 1,033,580 1,417,906 2,089,999 2,163,149 561,304 580,950 67,531 69,556 1,137,349 1,171,470 78,810 81,174 25,662 26,431 10,130 10,433 27,012 27,823 68,881 70,948 230,784 237,707 13,506 13,911 44,530 45,866 40,518 41,734 43,220 44,516 51,769 53,322 337.653 347.782 111,453 111,453 376,418 369,520 1,794,324 2,163,844 advertising kiosks rev-cs/2 + expense Capital Return Bike ro.on~ir/ronbro 2,238,859 2,317,219 601,283 622,328 71,643 73,792 EXHIBITS 40 0 10 2,398,321 644,109 76,006 1,206,614 1,242,812 . 1,280,097 83,610 86,118 88,701 27,224 28,041 28,882 10,746 11,069 11,401 28,657 29,517 30,402 73,076 75,268 77,526 244,839 252,184 259,749 14,329 14,7S8 15,201 47,241 48,659 50,118 42,986 44,275 45,604 45,852 47,227 48,644 54,922 56,569 58,266 358.216 368.962 380.031 111,453 111,453 111,453 361,171 383,272 406,407 2,525,015 2,908,286 3,314,694 yr2 yr3 yr10 2,482,263 666,653 78,286 1,318,499 91,362 29,749 11,743 31,315 79,852 267,542 15,657 51,622 46,972 50,103 60,014 39 111,453 TOTAL 21,366,539 5,738,341 687,833
RESOLUTION TO BE SUBMITTED
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