And we don't.

When they're ready to leave they come to the circ desk and we go out and unlock the bike and give them their library card back. They trade their library card for the lock when they come in, although we do check out the lock on their account so we can track "circulation" of them.

As for your other objections, we're talking kids with X-mart bikes here, not Colnagos. Duct tape would thwart most thefts. Every adult I've seen arrive by bike brings their own lock.

In the year since we instituted the program we've had exactly zero bike thefts, as compared to a couple a month before. There has also been an increase of bike rack usage. There are times there's no room on the rack and people lock to the trees instead.