In two short years, Montreal's shared bicycle, the Bixi, has risen to iconic status - a trendy symbol of a downtown taste for common experience and carefree two-wheeled commuting.
In the space of a week, it has become a symbol of something even more familiar to Montrealers: a nice idea buried in debt.
The not-for-profit, city-owned corporation that developed the Bixi bike system went cap-in-hand to city hall on Tuesday, getting approval for $108-million in loans and guarantees.
City backing for about $71-million in future financing will bolster ambitious plans to sell thousands of the bikes to cities such as Vancouver and New York, all in the hope profits will cover Montreal's annual $7-million Bixi deficit and eventually pay back a $37-million loan.
The city's arms-length Bixi company owes most of the debt to the city for initial development of the sturdy bicycle and solar-powered docking stations and for putting the first 5,000 bikes on Montreal streets, starting in 2009.
In the stream of numbers that engulfed city councillors who approved the funding Tuesday, one thing became clear: If Bixi ever climbs out of debt, it will be thanks to cities such as Toronto, Ottawa, Minneapolis, Washington and London, England, which have bought into the system.
A key part of the financial plan is to sell Bixi around the world. Last year's $42-million sale of 6,000 bikes and the docking system to London contributed to an international sales profit of about $8.5-million and covered the year's losses in Montreal.
"Is it really left to the city to turn into a business development bank?" said Louise Harel, a city council opposition leader. "The city has an $80-million hole in its budget, but we're bankrolling an export business."
For a long time, Bixi seemed to be one of the few things going right for embattled Montreal Mayor Gérald Tremblay. Bixi rolled along on a wave of popularity even as his administration was racked by allegations of corruption and collusion, particularly in city construction contracts.
Then news of Bixi's need for financing broke along with the strong-arm tactics of its managers, who, according to La Presse, threatened to pull the bikes off the streets if financing wasn't provided.
"Bixi's problem isn't one of profitability in the medium or long term, it's one of growth for a young small business," said Mr. Tremblay, who snapped at one critic during the financing debate, saying he was "demonstrating his stupidity." The mayor later withdrew the comment.
"We knew there'd be a deficit the first year, we knew there'd be a deficit the second year, but we're competing for contracts around the world now."
Bixi has five years to pay back the $37-million loan, Mr. Tremblay added.
Bixi board chair Roger Plamondon continued with a confrontational tone in city hall chambers Tuesday as he jousted with councillors over how to calculate the cost of the bikes. He said sponsorship sales on bike fenders and membership growth will bring Montreal's local service closer to profitability.
Montreal has 40,000 Bixi subscribers, who pay an annual fee of $78 for an unlimited number of 45-minute rides.
Opposition leader Richard Bergeron pointed out each bike cost $7,700 when all startup costs are calculated. Mr. Plamondon scoffed at the idea that the calculations should include research and development, saying each bike actually costs about $1,000 to produce.
Other cities defray steep research and development costs with each purchase, Mr. Plamondon said.
One persistent criticism of Bixi is that it has operated for two years with little oversight from the city. The province had to grant prior approval to the city's finance plan, and Municipal Affairs Minister Laurent Lessard insisted Bixi must operate with greater transparency.
The city auditor is preparing a report on Bixi, which won't be ready until June. Several city councillors complained that the vote should have been delayed until the report was made public.
With a report from Rhéal Séguin in Quebec CityReport Typo/Error