Pronto buyout draws ethics investigation against SDOT Director

Was it an improper conflict of interest when SDOT Director Scott Kubly started negotiations for the city to buy Pronto from the non-profit Puget Sound Bike Share?

Did SDOT staff mislead the public and City Council by overstating annual member ranks during the buyout legislation process?

These and other questions will be part of an independent investigation the Ethics and Elections Commission has ordered. Former King County Prosecutor Marilyn Brenneman has been contracted for $20,000 to lead the investigation, which she said will take a few weeks.

King 5's Chris Daniels broke the story Tuesday evening, and focused on discrepancies between the 3,000 annual members cited repeatedly during Council deliberations and the around 1,900 annual members currently registered with the system.

The system ended its first year with more than 3,000 annual members, but many have not renewed. The non-profit that owned the system - Puget Sound Bike Share - all but disbanded shortly before the one-year mark hit, so much of the work to sell the $85 memberships to new and expiring users likely didn't happen.

And for the first few months of 2016, the future of the system was very uncertain as the Council debated whether to buy the system or let it die. So numbers likely continued going down since nobody is going to buy a year pass for a system that might close in a month or two.

I requested monthly membership information from SDOT and Pronto to get a picture of when membership declined. Below are the monthly totals from launch through January, 2016 (I have requested February and current figures and will update when I get them. UPDATE: At the end of February, the count was 1,906):

The potential problem is that SDOT quoted the 3,000-member figure over and over in presentations like this slide:

And those figures factored into the budget analysis projected for 2016 if the city were to take ownership. City Council staff ran the numbers themselves independently of SDOT assuming 2015 user fee levels:

SDOT Spokesperson Rick Sheridan said the 3,000 figure was used because it represented a full year of members and was "an easy point of comparison with other cities":

In its presentations SDOT utilized membership data based on the first full year of service, which amounted to slightly more than 3,000 active members. Using a consistent approach, we highlighted approximately 140,000 trips taken in the first year as well. On page 13 of the attached presentation [PDF], we note the membership total is a 2015 figure. One year's data was used as it provides an easy point of comparison with other cities.

So was this misleading if current annual member levels are about 1,100 below the 2015 level? Maybe not. If enough user fees are collected by the end of 2016 to make up for the current gap (a reasonable goal since the year is still young), then the budget projection was accurate. I guess we'll see what the investigation determines.

But both Council and Seattle Bike Blog clearly thought the 3,000-member figure represented current membership. Councilmembers have referred to that figure without being corrected, and I reported it several times without correction as well (though of course it isn't SDOT's job to correct my work).

I apologize for missing this piece of the story, along with Council and other media, despite covering it so closely for the past several months. While it may be technically accurate for the city to budget for 2015 user fee levels (that's a fairly low bar to reach), the reality of current membership levels certainly deserved at least a mention during Council deliberations. All they had to say was, "We believe we can reach or surpass 2015 member levels through our marketing efforts," and it would have been fine.

But this is the second major piece of SDOT's projected Pronto budget that has needed scrutiny. As we reported back in February, SDOT's initial budget showed the system in the black for 2016 under city ownership. But it later came to light that this rosy budget included a previous city payment marked under "revenue." In reality, the system was projected to run $110,000 in the red (City Council's independent analysis came to a similar figure: $115,000):

Slide from February 19 presentation to Council (PDF), red markup mine.

At that time I wrote:

These more sobering numbers don't mean bike share isn't worth saving and expanding. But we can't have an honest discussion about our options without having clear figures to work with. If we base decisions on fuzzy numbers now, then we'll just be back in front of Council in a year or so when they don't pan out.

That same paragraph applies to this latest revelation.

Josh Feit at Seattle Met outlined another element of the investigation: As Seattle Bike Blog reported, Kubly's SDOT started negotiations to buy Pronto from Puget Sound Bike Share in May of 2015, just seven months after the system launched and ten months after Kubly resigned from Alta Bicycle Share to join SDOT. Kubly and the Mayor's Office may not have gone through all the steps required to safeguard against conflicts of interest, Feit reports:

" I confirmed that Kubly never presented the required letter to the city's ethics department from the mayor to explain why putting Kubly in charge of the Pronto buyout was necessary and outlining safeguards to protect the city's interests when there are potential conflicts. Such a letter is required when a city employee is heading up city business with a company they formerly worked for within the last year.

We ethical lines crossed? Again, we'll see what the investigator determines.

In explaining his NO vote on the Pronto buyout, Councilmember Tim Burgess accused the city of "optimism bias" regarding the bike share system. Basically, he argued that the city wants bike share to work so badly that they are willing to ignore the economic reality of the system. I disagreed then and still disagree with this statement because I don't believe we have really given Pronto the kind of investment in scale it needs to succeed. It's like launching any business with only a fraction of the proper startup costs: It's doomed to underperform.

With quality leadership and proper investment, bike share can succeed in Seattle. Its problems today stem less from inherent bike share problems and more from botched leadership, as we have documented previously. With all these unforced errors in the transfer of ownership and in presenting the unnecessarily-under-the-gun plan to City Council, perhaps my real optimism bias is believing SDOT is capable of running a bike share program to success.

Both Kubly and SDOT Active Transportation Chief Nicole Freedman have experience launching successful bike share programs in other cities. Some detractors note Kubly's previous position as Alta Bicycle Share President (Alta was later bought by Motivate, Pronto's for-profit operator) as a conflict of interest, but it was publicly disclosed and even used as a reason to hire him. After all, bike share was about to launch here, wouldn't it be good to have someone in charge who is familiar with how it can work?

And before this ethics news broke, there were signs of progress. After we argued that the city and Pronto needed to get a Pronto station at Capitol Hill Station in time for Saturday's grand opening, the city and Pronto staff worked hard and pulled at least one late night shift to get it done. And the station placement is perfect right next to the Broadway Bikeway and directly in view of station entrances (though sorry First Hill on losing your only station). Pronto crews also announced a major dock repair program to fix the persistent "dead dock" problem.

Well, the pressure's on SDOT. This scrutiny is not going away. It's on you to keep delivering the kinds of system improvements needed to make it work.