Issue - items at meetings - BTN Bikeshare

Report of the Executive Director Economy, Environment & Culture

That the Environment, Transport & Sustainability Urgency Sub-Committee

1)             Approves immediate variations to the current contract to allow for the change in business model and sponsorship arrangements with effect from 31 March 2020 and to allow for the operational and additional minor amendments referred to in paragraph 3.16 below;

2)             Approves a 12 month contract extension and supporting revenue funding for the current operator from 01 September 2020;

3)             Approves the initiation of a full procurement options review to include additional support for service and redistribution and the introduction of e-bikes to the scheme, with the option of considering an in-house operation, and for including wider city region Local Authority partners;

4)             Agrees that a further report be brought to 23th June 2020 Environment, Transport & Sustainability Committee detailing the outcome of the procurement options review with recommendations for the retender of the new service or an in-house operation. 

7.1          The Urgency Sub-Committee considered a report of the Executive Director, Economy, Environment & Culture that provided an update on the current sponsorship arrangements and future procurement needs for the Brighton & Hove Bikeshare Scheme.

7.2          On behalf of the Conservative Group, Councillor Wares moved a motion to amend recommendations 2.1 and 2.2 as shown in bold italics and strikethrough below:

That the Environment, Transport & Sustainability Urgency Sub-Committee:

2.1      Subject to a revised business model being presented to this Committee on 23 April 2020, agrees in principleApproves immediate to variations to the current contract to allow for the change in business model and sponsorship arrangements with effect from 31 March 2020 and to allow for the operational and additional minor amendments referred to in paragraph 3.16 below;

2.2      Subject to a revised business model being presented to this Committee on 23 April 2020, agrees in principle to Approves a 12-month contract extension subsidising and supporting revenue funding for the current operator from 01 September 2020 with sponsorship and operating revenue with a surplus share ratio split 75% for the Council and 25% for the Operator; 

7.3          The motion was not seconded by a member of the Urgency Sub-Committee and therefore failed.

7.4          Councillor Wares noted that he had submitted a Letter to the postponed meeting of the committee that detailed five questions on the Bikeshare scheme and put those questions:

-       Tariffs to use the bikes were increased in August 2019. The Administration gave reasons such as the ability to reinvest the revenue citing that the charges were less expensive or comparable with other city’s (that it seems are now closing their bikeshare schemes). The confidential briefing dated 25th July 2019 provides entirely different reasons for the need to raise the tariffs. Will the Chair please disclose those reasons?

-       Has Hourbike paid all debts due to the council. If not, please could you provide the detail and reasons?

-       The council ordered and paid for electric ready bikes. During the contract the supplier was acquired by Uber who subsequently would not supply the electric conversion kits. The council has now received e-ready bikes that cannot be electrified but, in the process paid circa £30k more than had standard bikes been purchased.

Please could it be confirmed what action is being taken to either force Uber to supply the conversion kits the council has paid for or recover the overpaid £30k.

-       It is clear (and reinforced in the report) that the original business case was flawed. Costs were under-estimated and revenue over-stated. The scheme relies on sponsorship to supplement revenue from customers. The ability for the scheme to succeed also appears to rely on subsidies and grants to acquire capital infrastructure without borrowing costs. Any further decision should be based on a revised business case taking account of actual data established over the last two years. Please could the Chair request a revised business case to support the procurement options in item 86.

-       Please could it be explained why the council condones the use of older diesel vehicles to collect and redistribute (and service) the bikes throughout the city when the premise of the bikeshare scheme is to encourage a healthier lifestyle and tackle climate change.

7.5          The Access Fund Manager provided the following responses to the questions:

In relation to question one, this was the first tariff increase since the scheme began on 1 Sept 2017 and the changes, benchmarked against similar UK schemes including schemes that remain in operation in Edinburgh, Glasgow, Cardiff, Bournemouth and London Boroughs, were designed to improve the scheme’s viability,  The current sponsor’s commitment was due to come to an end on 31 August 2019, but this support was generously extended to cover the autumn/ winter period up until 31 March 2020 in recognition of the fact that scheme usage varies seasonally.  Revenue has increased since the tariff change but was impacted by unusually wet weather in October and November 2019, which was significantly different from the same period in 2018.  The true impact of the tariff increase will be easier to assess after a full year of operation including peak usage months from April to September 2020.

In relation to question two, this question covers issues that are commercially sensitive, relating to the current contractual arrangements.  Members have had sight of the part 2 report, which will be discussed later on the agenda and which you will be aware addresses this issue.

In relation to question three, these bikes are deployed in the fleet and are generating revenue as pedal only bikes. Pursuit of this debt via a legal route would likely cost council taxpayers more than the sum in question.

In relation to question four, a revised business case will be provided based on actual data.

In relation to question five, this question also covers issues that are commercially sensitive, relating to the current contractual arrangements.  Members have had sight of the part 2 report, which will be discussed later on the agenda and which you will be aware addresses this issue.

7.6          Councillor Wares stated that he had been raising questions on this matter for the past seven months and he found the answers to be unsatisfactory. Councillor Wares noted that recommendation 2.2 ask for funding to support the scheme and asked what the specific amount was proposed to be. In reference to paragraph 3.8, Councillor Wares asked how much the council would be contributing to the three-way sponsorship. Councillor Wares asked for clarification on the financial figures detailed at paragraph 4.1. In addition, Councillor Wares asked what the options for the scheme were if the recommendations were not agreed by the Sub-Committee.

7.7          The Access Fund Manager stated that the amount was commercially sensitive and detailed in the Part Two report. In response to question two, the Access Fund Manager stated that this was not a financial contribution but participation in the relationship between the operator and sponsor. The Access Fund Manager explained that the scheme could not expand further due to the rules around the concession contract and its viability was in question without a sponsor. There was demand for further bikes and hubs as well as e-bikes but this could not be addressed due to the concession contracts regulations.

7.8          Councillor Wares stated that it was concerning that the potential contribution from the council could not be disclosed to the public. Councillor Wares asked if the recommendations were not agreed, whether the scheme would survive.

7.9          The Assistant Director, City Transport confirmed that the scheme would survive with a restructuring of the business model. The purpose of the report recommendations was to meet demand for the scheme in the city, allow it to grow which it couldn’t under the current concession contracts regulations.

7.10      Councillor West stated that the current contract needed to be updated for the scheme to move forward and it already stood as one of the most successful schemes of its type in the country and was very important in keeping people active. Such schemes could be volatile in terms of income but the positives in areas such as health and air quality meant that the right support should be provided. Councillor West stated that e-bikes would be a step change for the scheme as it would mean users were more easily able to tackle the challenging topography of Brighton & Hove and it could expand wider in the city a be a viable form of commuter travel.

7.11      Councillor Wares stated that there was cross-party support for the scheme however, Members had an accountability to the council tax payer. Councillor Wares stated that the scheme had begun as revenue based but was now in a position of being subsidised. Whilst there was nothing wrong in that in principle, the council had not been open or transparent on that mater. Councillor Wares noted that in the original application for funding the LEP had stated that the business case for the scheme was not sufficiently robust or fit for purpose in its current form. The report also suggested that the council had over-estimated the number of daily users of the scheme and under-estimated the level of funding required, both of which had been realised. Councillor Wares stated that if the scheme was to move to a subsidised operation, then the business model needed to be revisited in an open and transparent way. Councillor Wares agreed that the scheme had been a success and brought great benefit, but he fundamentally opposed the report recommendations and the way the process had been handled.

7.12      The Committee moved to confidential session at 1.05pm and reconvened in public session at 1.20pm.

7.13      The Chair then put the recommendations to the vote that passed.

7.14      RESOLVED- That the Environment, Transport & Sustainability Urgency Sub-Committee

1)             Approves immediate variations to the current contract to allow for the change in business model and sponsorship arrangements with effect from 31 March 2020 and to allow for the operational and additional minor amendments referred to in paragraph 3.16 below;

2)             Approves a 12 month contract extension and supporting revenue funding for the current operator from 01 September 2020;

3)             Approves the initiation of a full procurement options review to include additional support for service and redistribution and the introduction of e-bikes to the scheme, with the option of considering an in-house operation, and for including wider city region Local Authority partners;

4)             Agrees that a further report be brought to 23th June 2020 Environment, Transport & Sustainability Committee detailing the outcome of the procurement options review with recommendations for the retender of the new service or an in-house operation.