On The Money: Zipcar Deal Criticized

The city of Davis is generating headlines – and controversy – over a contract that critics are calling a "sweetheart deal". The deal involves something called car sharing – in which consumers pay an hourly fee to use a vehicle provided by a company called Zipcar. Today the city officially launched the business venture with Zipcar, saying the deal is an important part of the city's climate action plan.

"And the plan is to find a variety of ways to reduce our community's carbon footprint," explained Davis Mayor Don Saylor. The Mayor added, "And Zipcars fit into that perfectly." But not everyone is convinced of the perfect fit – critics say the Zipcar deal doesn't pencil out for Davis.

Zipcar says each car utilized takes 15 other vehicles off the road. But Davis officials are also making plans to loan $1 million to a local car dealership. Is the city really embracing its plan to go green when critics are seeing red?

Zipcar has signed a deal with the city of Davis that guarantees the out-of-state company $74,000 a year, if no one uses the cars.

Davis city officials are banking on higher usage – and if so – the costs could be cut in half. Council members defend the deal, saying car sharing is part of the city's plan to reduce pollution.

"It takes cars off the road and therefore it's good for the planet," said Stephen Souza, a six year veteran of the Davis city council.

Critics contend the city of Davis is trying to have it both ways.

"On the one hand we're trying to take cars off the road," explained Davis Enterprise columnist Bob Dunning. "On the other hand we're lending a million dollars to a car dealer to put more cars on the road," Dunning added.

Bob Dunning is critical of the deal, noting Davis officials are about to loan one million dollars to Hanlees – to bring a Volkswagen dealership – and more cars to Davis.

"The way that money will be paid back is through sales tax revenue," Dunning told CBS 13. "We need and are rooting for that car dealer to sell a whole bunch of cars," said the columnist.

But selling a whole bunch of cars seems to conflict with the city's goal of taking more cars off the road – by partnering with Zipcar. This reporter asked Davis city councilmember Stephen Souza to explain, "a million dollar loan to a business that's going to put more cars on the road?"

"It will sell cars," said Souza. The Davis city council member added, "Not necessarily put more cars on the road. But sell cars and sell cars that are more efficient."

The loan agreement with Hanlees is not a done deal yet. But another bone of contention is the guaranteed revenue promised by the City of Davis to Zipcar – some are calling it a subsidy for a private company. Some of the local rental car companies in Davis, including Avis, are offering a similar service – with hourly rentals for college students – and no subsidy from the city.

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