City And County Of Honolulu Resolution 19-290 State Of Hawai I

Office of the City AuditorCity and County ofHonoluluState of Hawai iAudit of the City’sBikeshare Program,Resolution 19-290Report to the Mayorand theCity Council of HonoluluReport No. 20-08December 2020

Audit of the City’s BikeshareProgram, Resolution 19-290A Report to theMayorand theCity Councilof HonoluluSubmitted byTHE CITY AUDITORCITY AND COUNTYOF HONOLULUSTATE OF HAWAI IReport No. 20-08December 2020

December 3, 2020The Honorable Ann Kobayashi, Chairand MembersHonolulu City Council530 South King Street, Room 202Honolulu, Hawai i 96813Dear Chair Kobayashi and Councilmembers:A copy of our report, Audit of the City’s Bikeshare Program, Resolution 19-290, is attached. This auditwas conducted pursuant to Resolution 19-290, requesting the city auditor to conduct an audit of thecity’s relationship with Bikeshare Hawaii. In adopting Resolution 19-290, the city council expressedconcerns about whether Bikeshare Hawaii’s use of city property for Biki docking stations and equipmentrequires a lease agreement.The audit objectives were to:1. Evaluate the City’s granting of the current contract with Bikeshare Hawaii without following thebidding requirements under the State Procurement Code;2. Evaluate the City’s granting Bikeshare Hawaii the exclusive use of City property for theBikeshare Hawaii docking stations without awarding the use of the property through the biddingprocedure required by Chapter 28 of the Revised Ordinances of Honolulu 1990;3. Review the City Administration’s conditioning of its approval of certain development projects onlandowners/developers’ commitments to place and maintain bikeshare docking stations andbicycles on their private properties;4. Determine why the City allows the placement of advertisements on Bikeshare Hawaii’s bicycles;5. Calculate the amount of revenue the City receives from Bikeshare Hawaii for BikeshareHawaii’s use of City property; and6. Assess DTS’ contract management of the Bikeshare Hawaii contract.BackgroundBikeshare Hawaii is the non-profit that was created with the purpose of bringing a public bikesharesystem to life in Honolulu. With the partnership between the State of Hawai‘i, DTS, Bikeshare Hawaii,and private interests, the Biki bikeshare program was launched on June 28, 2017 as Honolulu’s solepublic bikeshare provider. To date the system has over 130 docking stations and 1,300 bikes coveringa 6.25 mile service area around the core of Honolulu. Biki has boasted increasing ridership andmembership through the first two years of service.

Honolulu City CouncilDecember 3, 2020Page 2 of 2Audit ResultsThe structure of the Biki bikeshare program, established in part by the city’s agreement with BikeshareHawaii, lacks accountability and transparency. The agreement circumvented certain requirements fromthe Revised Ordinances of Honolulu resulting in an estimated 2019 revenue loss of 460,728 from thedisplacement of metered stalls and exemption from permit fees. Additionally, per the agreement, thecity does not share in fare or sponsorship revenue, despite similar arrangements betweenmunicipalities and bikeshare programs in other jurisdictions. We also found that DTS is not effectivelymonitor Bikeshare Hawaii because it does not sufficiently oversee the grantee or enforce seven ofeleven grant agreement controls. As a result, the department is unable to hold the grantee accountablefor its operational and fiscal performance.The audit report made nine recommendations to promote fiscal responsibility and improve theBikeshare program’s transparency and accountability.The Director of the Department of Transportation Services and Managing Director expressedagreement with most of the audit findings and recommendations, and provided clarifying information.In two instances, we address comments made by the department and amended the report accordingly.We also made technical, non-substantive changes to the report for purposes of accuracy, clarity, andstyle.We would like to express our sincere appreciation for the cooperation and assistance provided us bythe managers and staff of the Department of Transportation Services, Bikeshare Hawaii, and others wecontacted for this audit. We are available to meet with you and your staff to discuss this report and toprovide more information. If you have any questions, please call me at 768-3134.Sincerely,Troy ShimasakiActing City Auditorc:Kirk Caldwell, MayorRoy Amemiya, Jr., Managing DirectorJon Nouchi, Acting Director, Department of Transportation ServicesManuel T. Valbuena, Acting Director, Department of Budget and Fiscal Services

Table of ContentsChapter 1IntroductionBackground.2Department of Transportation Services.3Audit Objectives, Scope and Methodology.9Audit Results.10Chapter 2The Organizational Structure of Biki, Honolulu’s Bikeshare Program,Lacks Accountability and TransparencyBikeshare Hawaii Receives a Myriad of City Exemptions That Are Informal andLack Transparency to Support Its Operations.11Recommendations.29Chapter 3DTS Does Not Hold Bikeshare Hawaii Accountable for Its Operationaland Fiscal Performance as Required by AgreementContract Terms, Including Proper Monitoring, Are Not Enforced to Ensure ThatFunds Are Properly Used.31Conclusion.34Recommendations.35Management Response.36AppendicesAppendix AAppendix BAppendix CAppendix DAppendix EResolution 19-290.43Grant Agreement Monitoring Controls.47Bikeshare Hawaii Grant Agreement - Amendments and Modifications.49National Comparisons: Bikeshare Programs.51Biki Stations.53List of ExhibitsExhibit 1.1Exhibit 1.2Exhibit 1.3Exhibit 2.1Exhibit 2.2Organizational Structure of Biki.3Bikeshare Hawaii Grant Agreement Timeline (See Appendix C for detailedtimeline).5Bikeshare Hawaii Service Data.9Administrative Non-Profit Model for Biki.12City Comparisons - Structure of Bikeshare Programs.14i

Exhibit 2.3Exhibit 2.4Exhibit 2.5Exhibit 2.6Exhibit 2.7Exhibit 2.8Exhibit 2.9Exhibit 2.10Exhibit 2.11Exhibit 2.12Exhibit 2.13Exhibit 2.14Exhibit 3.1iiStreet Usage Permit Fees in CY 2019.17Metered Parking Replaced by Biki Docking Station.19Forgone Metered Parking Revenues in CY 2019.20Metered Parking Rates Are As Follows, Per the Revised Ordinances ofHonolulu .21Loss of Metered Parking Revenues Comparison.22City Contracts and Agreed Upon Fees for Lease or Rental of City Property.23Bikeshare Hawaii Revenues, CY 2017 – CY 2019.23Bikeshare Hawaii Major Sponsorships FY 2017 to FY 2020.25Sponsorship Logos on Biki Bikes.26Total TheBus Advertisement Revenues from FY 2017 toFY 2020.27Docking Stations by Owner.28Docking Stations by City Department.29Contract Terms-Internal Controls and Monitoring.33

Chapter 1: IntroductionChapter 1IntroductionOn December 4, 2019, the Honolulu City Council adoptedResolution 19-290, requesting the city auditor to conduct an auditof the City and County of Honolulu’s relationship with BikeshareHawaii. The resolution requested that the city auditor address: The city’s granting of the current contract with BikeshareHawaii without following the bidding requirements underthe State Procurement Code; Why the city allows the placement of advertisements onBikeshare Hawaii’s bicycles; The city’s granting Bikeshare Hawaii the exclusive use ofcity property for the Bikeshare Hawaii docking stationswithout awarding the use of the property through thebidding procedure required by Chapter 28 of the RevisedOrdinances of Honolulu 1990; The amount of revenue the city receives from BikeshareHawaii for Bikeshare Hawaii’s use of city property: and The city administration’s conditioning of its approval ofcertain development projects on landowners/developers’commitments to place and maintain bikeshare dockingstations and bicycles on their private properties.Key TermsBikeshare: A public transportation service that provides lowcost, flexible, on-demand access to a network of public bicycles.Bicycles are densely located across a service area at fixedstation locations. With the ability to make point-to-point trips,bikesharing systems can accommodate shorter trips that replaceless efficient auto and transit trips.Biki: Honolulu’s large-scale bikeshare system with over 1,300bikes at over 130 conveniently located self-service kiosks launchedin the summer of 2017.Bikeshare Hawaii: A not-for-profit organization established inJanuary 2014 that launched and manages the Biki bikeshareprogram in Honolulu with funding and support from public andprivate partners.1

Chapter 1: IntroductionSecure Bike Share Hawaii, LLC: The financing and operatingpartner of Bikeshare Hawaii that specializes in the managementand deployment of large scale bicycle share systems and are a partof the Secure Parking Group.Honolulu Bikeshare Organizational Study: A 2014 City andCounty of Honolulu funded study that identified the vision, goals,and objectives for bikeshare, engaged key stakeholders, proposedan organizational and governance strategy for Honolulu, andcreated a high-level business plan.Bike Parking Ordinance: City Ordinance 17-55 established bicycleparking requirements in the Land Use Ordinance. The ordinancemandates that both short and long-term bike parking mustbeprovided whenever new floor area, a new dwelling unit, or anew parking structure is proposed.Bikeshare Advisory Group: A collaborative group of private andpublic partners that initiated a planning process to coordinate thebikeshare discussion and strategize on how to best implementbikeshare in Honolulu and across Hawai‘i.BackgroundResolution 14-35 established a strong endorsement by the citycouncil for the creation of a bikeshare program partnered withthe State of Hawai‘i and private interests. The Department ofTransportation Services (DTS) and the Department of Planningand Permitting were encouraged to establish a public purposebikeshare program in the City and County of Honolulu.Bikeshare Hawaii is the non-profit that was created with thepurpose of bringing a public bikeshare system to life in Honolulu.With the partnership between the State of Hawai‘i, DTS, BikeshareHawaii, and private interests, the Biki bikeshare program waslaunched on June 28, 2017 as Honolulu’s sole public bikeshareprovider. To date the system has over 130 docking stations and1,300 bikes covering a 6.25 mile service area around the core ofHonolulu. Biki has boasted increasing ridership and membershipthrough the first two years of service.Current operations2Currently, there are three primary entities that comprise the city’sBiki program. First, the Department of Transportation Servicesis tasked with oversight of bikeshare services. Second, non-profitBikeshare Hawaii, manages the bikeshare service on behalf ofthe city. Third, Secure Bike Share Hawaii, LLC is contracted byBikeshare Hawaii to operate Biki.