Bixi files for bankruptcy protection
Published Monday, January 20, 2014 2:41PM EST
Last Updated Tuesday, January 21, 2014 8:02AM EST
Bixi's financial woes have proven to be too much for the Public Bike System Company.
Facing $47 million of debt after five years on the road, the company has filed for bankruptcy protection and asked the city of Montreal to take over the service.
Montreal Mayor Denis Coderre said Monday afternoon that the upcoming season for Bixi is not in danger, and the bike-lending service will continue for the foreseeable future.
He added, however, that it was "out of the question" for the city of Montreal to spend any more money on the bike-sharing service.
"Bixi is a good idea," but I have to protect taxpayers, said Coderre.
It was just two years ago that the city of Montreal propped up the bicycle rental system with $37 million in loans and $71 million in loan guarantees.
Coderre said the Public Bike System Co., the company that runs Bixi, still owes the city of Montreal $31.6 million, and that Montreal is covering approximately $11 million in loans for the company.
The company said it is owed $5.6 million from various clients, affecting its cash flow.
Last September Montreal's auditor general, Jacques Bergeron, reported that the company has always been faced with financial irregularities, and Projet Montreal leader Richard Bergeron predicted that Bixi would soon go bankrupt. He agreed with Coderre that the city should no longer fund the project.
“For sure, we will not pay anymore,” he said. “That's why I support the decision of Mayor Coderre. We will see what the final price tag will be.”
Critics have frequently criticized the Public Bike System for expanding too fast, with operations in 14 different municipalities, and for not having a viable business plan.
New York and Chicago are withholding payments totalling $5.6 million because of delays and glitches with Bixi software that's affecting their bike-sharing programs.
That’s just one part of the problem, said McGill Faculty of Management business analyst Karl Moore.
“It appears that the price point that people are willing to pay for a service like this is just not enough to sustain a viable business model,” said Moore.
Coderre said the bankruptcy protection will give Bixi time to restructure and try to sell off its international operations, adding that this was a tough decision, but it's the right one, repeatedly calling it “courageous.”
“This is the kind of administration that I want to put forward. Call a spade a spade. If there's a decision to be made, we're making a decision. I'm here to protect the taxpayers’ money. I'm here to represent the citizens. That's my role as a mayor. That's the kind of leadership that I want to provide,” he said.
Bergeron and others also said the bicycles used by Bixi are too expensive, with their individual cost estimated as anywhere from $830 to more than $7,000.
Over the next few days, the Public Bike System Company will be meeting with representatives from the city, to consider various scenarios and plan for the spring.