While many park authorities have allowed private companies to operate gift shops or rental concessions within parks, private management of entire parks under concession agreement is relatively new but growing rapidly.  As state and local governments come under increasing budget pressures, private management of public parks can be a useful tool for public authorities trying to keep parks open for the public.  A great introduction to this model is here.  Here is an example private park operator.

Private recreation operators aren’t trying to take ownership of the land.  They aren’t trying to pave the wilderness.  They aren’t trying to build condos in front of Old Faithful.  They are in fact willing to accept whatever recreation mission or preservation mission the public owner of the park sets and manage the park to that mission. What they bring to the table is that in many cases, private companies can operate the park and keep it open with the fees paid at the gate, without big price hikes and without the need for taxpayer subsidies.

Frequently Asked Questions:

How Are Public Parks Like Universities?

Glenn Reynolds is writing about colleges, but he could just as easily be writing about public parks:

Full-time administrators now outnumber full-time faculty. And when times get tough, schools have a disturbing tendency to shrink faculty numbers while keeping administrators on the payroll. Teaching gets done by low-paid, nontenured adjuncts, but nobody ever heard of an “adjunct administrator.”

Replace “faculty” with “people actually working in a park” and administrators with “headquarters staff” and he has described the management of public parks exactly.  Most parks agencies are suffering from administrative bloat, with more people in headquarters than out in the field actually running parks.  When they have layoffs, it is always of field staff and not headquarters administrators.   In the parks world they will even ignore major maintenance needs in favor of making sure they have the funds to keep paying headquarters staff.

It is just absurd.  Of course, in our case, we make a business out of this.  We operate public parks, and have 300 field employees actually in the parks and 2 in headquarters.  It allows us to cut costs while simultaneously doing a better job.

PERC on Private Operation of Public Parks

My article on private operation of public parks has been published by PERC and is now up at their web site.  It’s called “A Tale of Two Parks” and compares the costs of private and public operation, among a number of other issues.

Government Shutdown and Privately Operated Federal Parks

The government shutdown in October was an interesting chapter in the business of private operation of public parks.

For years I have said that one of the advantages of private operation of public parks is that these parks are sheltered from budget shenanigans.  If the park  is operating with no public money, they can’t be closed when budgets are cut.  In fact, in all past Federal shutdowns, such as the two under President Clinton, private concessionaires in the US Forest Service stayed open.

Well, I guess this Administration was dead-set on making a liar out of me, because private Forest Service concessionaires were shut down in the recent budget battle.  In the early days of the government closure, we were told that we would stay open, as in the past.  Then we got the fateful call from a senior US Forest Service executive telling us that the decision had been made “above the Department of Agriculture” (ie in the White House) that we had to close.  So we did.

However, we filed suit in Federal court to block the closure, and on the last day finally had our day in court, where the Federal judge excoriated the Forest Service for closing us.

If you are interested, I documented the whole saga at my other blog, with all the articles on the shutdown collected here.

By the way, in the interest of fairness, if you want an opposing viewpoint from someone who seems thrilled that we were closed, see here (along with some of my responses in the comment section, if they have not been deleted).

Rethinking California Parks

The Little Hoover Commission, a sort of internal consulting arm attached to the California legislature, has released a report called “Beyond Crisis: Recapturing Excellence in California’s State Park System“.

I am still skimming the report.  Certainly private partnerships play a role in the recommendations, but they appear to be the more tepid “private partnerships to increase revenue” rather than the more impactful “private partnerships to reduce operating costs.”  At best, private partnerships might generate a few extra million dollars in park revenues, but private operations could cut park operations costs by half, or by over $100 million.

Using Private Operators To Short-Circuit the Sequester

Derrick Crandall has an article recently on ways the NPS can survive the sequester.  Here is a key bit:

Second, there are roles and functions that could and should be reviewed and could be transferable to private sector operations.  For example, NPS directly operates most of its campgrounds while a sister federal agency, the Forest Service, relies largely on concessioners.  NPS campgrounds are now underutilized, full only during peak seasons and some weekends.  Concessioner operation would add camper services, introduce dynamic pricing and start marketing these campgrounds.  NPS costs would drop by millions of dollars, its receipts from franchise fees would rise … and campers would have increased satisfaction levels.  Estimated net financial gain from this change is at least $25 million.

The other related advantage of private operation, particularly in a concession model where companies are paid with visitor fees, is that these fees are protected from legislative sweeps and government closures.  By contract, the user fees in concession contracts remain in the park, supporting operations and improvements.

Huff Post Live Discusses National Parks and Privatization

I was on Huffington Post Live the other day in a panel discussion on privatizing National Parks.  The link to the video and comments is here.

None of the panelists, including me, advocated for privatizing National Parks.  The whole point of public lands, as I have written on this site before, is to change the decision-making calculus around development of and access to these lands from net present value to broader access and more natural settings.  In other words, no one wants a McDonalds in front of Old Faithful.

What I did advocate for, as discussed starting around the 7 minute mark, is for privatization of certain operational tasks, from bathroom cleaning to maintenance to landscaping, in order to reduce costs.  Already, the high cost of using civil service employees to perform these tasks are crowding out things like maintenance and renovation.

Parks 2.0

A relatively new group called the Conservation Leadership Council kicked off their tenure by sponsoring six articles on the future of environment and land management.  One of those size initiatives was called Parks 2.0: Operating State Parks Through Public-Private Partnerships.

I won’t be coy — the authors interviewed me several times and I helped them find the relevant data.  But they did a great job outlining how parks agencies can reduce operating costs and thus keep their parks open using PPP’s for park operations.  A great primer for those interested in this model.

2nd Annual Park PPP National Conference

We will be holding our national conference on November 7 in Reno, Nevada.  We have an amazing slate of speakers and a great program for agencies looking to understand the public-private partnership model for keeping parks open.

All the details, speakers, and agenda are at ParkConference.com.

Essay Response: Should National Parks Be Privatized

I was asked to write a 400-word essay for an outdoor magazine on “should national parks be privatized”.  Here my response. By the way, I put the stuff about myself and my company in under duress.  It was not in the original draft and he wanted something personal.

Should National Park’s be privatized, in the sense that they are turned entirely over to private owners?  No.  Public lands are in public hands for a reason — the public wants the government, not, say, Ritz-Carlton, to decide the use and character and access to the land.  No one wants a McDonald’s in front of Old Faithful, a common fear I hear time and again when privatization is mentioned.

However, once the agency determines the character of and facilities on the land, should their operation (as opposed to their ownership) be privatized?  Sure.   The NPS faces hundreds of millions of dollars in capital needs and deferred maintenance.  It is crazy to use its limited budget to have Federal civil service employees cleaning bathrooms and manning the gatehouse, when private companies have proven they can do a quality job so much less expensively.  The US Forest Service, for example, has had private operators in over a thousand of its largest parks for nearly thirty years, and unlike state parks agencies or even the NPS, it is not considering park closures or accumulating deferred maintenance, despite having its recreation budget axed.  Why? Because its partnership program with private operators is a fundamentally sounder, lower-cost approach to park operations.

In fact, such public-private partnerships are nothing new for the NPS.  The NPS was an early innovator in this field, and currently private companies operate many of the visitor services in parks, such as lodges and gift shops.  The US Forest Service innovation, which has been copied by many agencies including most recently California State Parks, has been to turn over operations of the whole park, not just the lodge, to a private company.  These are highly structured contracts, wherein the private company cannot modify the facilities or change fees without agency approval, and must meet a range of detailed performance goals.

Most critiques of private park operations center around quality and fees.  While there certainly have been some isolated failures, in general the results have been quite good.  In Arizona, a recent poll by CampArizona.com ranked the top 10 public campgrounds in Arizona.  Of these, three of the top five were US Forest Service campgrounds run by a private operator, as was the top Arizona campground in Sunset Magazine’s “Best of the West”  (OK, I have to brag, these are all run by my company). As for fee concerns, state-run parks in California charge $30 for a no-hookup camp site.  Privately operated public campgrounds in California forests seldom charge more than $18.

My company operates over 150 state, county, and federal parks.  I encourage you to take the “Pepsi Challenge” and see some of them for yourself.  They are well-run, generally with more staff than a typical state park, and have no significant deferred maintenance backlog.  Oh, and not a single one has a McDonald’s, a billboard, or a neon sign in front of a national monument.

A Few Privatization Updates

I just wrote three new articles for the Privatization Blog.

The first looks at which types of public decisions should stay public in a privatization effort

The second looks at implementation issues and learning in privatization

The third acknowledges that privatization efforts can fall into cronyism, but points out that generally in these cases the public alternative falls into the same behaviors.  A great example is prisons, where privatization is derided by folks like Think Progress for the lobbying the prison companies do both for contracts and harsher laws, but they never acknowledge that public prison unions have demonstrated the same behaviors and for much longer.

Public Recreation Fail: Providing Customer Service with Law Enforcement

One of the issues that comes up a lot when we discuss private operation of parks is law enforcement.  For a variety of reasons, most state park rangers are also law enforcement officials.  In fact, in many state parks organizations, one could not advance far in the state parks hierarchy without a badge.

So, do state parks need to have what is essentially the highest local law enforcement officer density of any spot in the country? The answer, with a few exceptions, is generally no.  Our company operates scores of parks where sensible rules enforcement combined with backup from a local sheriff is more than sufficient to keep recreators safe.  And that is the point of public recreation — to give the public a fun, safe outdoors experience.  The point is not to concentrate the public on public lands in order for law enforcement to more carefully monitor their behavior so as to identify infractions.

One reason most park staff have law enforcement credentials is not due to demand, but due to incentives.  Law enforcement certification increases pay, opens up promotion opportunities, and in most states allows access to much more lucrative pension plans.  Some people also get psychic benefits from carrying a gun and a badge.

Though this is not the type of article I generally expect to see at The Frisky, but Julie Gerstein has a interesting piece called, “I Went Camping, And All I Got Was Harassed By The Police.” As I tell my clients all the time, providing customer service with law enforcement officials has more downsides than just cost.

Update: I edited out some details from the original post that referred to specific parks in which we operate.  While these details came from public, online review sites rather than from our insider knowledge, upon reflection I have decided it was not professional to discuss problems in the partnerships we are a part of.  The agency referenced is in many ways more advanced and innovative than most any other recreation agency we deal with.  Focusing just on this one issue, where I disagree with their approach, left an impression about that agency’s overal competance which I did not mean to convey

Private Park Operations on the Freakonomics Blog

A nice article on the private park operations contracts recently issued to keep some California State Parks open.  In particular, I cheered at this:

The experiment upon which the state is set to embark will provide an opportunity to compare the relative efficacy of resource management provided by central government control, private ownership, and local cooperation.

I welcome this comparison.  In fact, I long for it.  Beg for it.  I have always thought it was telling that for all the skepticism aimed at private operations of public facilities, the private operators in this case are the ones who have been begging for an independent comparison of costs and results, while state agencies have resisted such studies.  I wrote in the comments:

I was one of four private companies that bid on these parks. One thing that is often lost in all this is that there are over 1000 very similar public parks already under management in a USFS service program that dates back over 30 years. Three of the four bidders for the CA parks, and the winning bidder, came from this program.

I applaud your observation that a natural experiment seems to exist here. But the odd part, for me, is that such an experiment has existed for decades, and no one wants to follow up. Here in AZ, AZ state parks has 35-ish parks under its management and our company has 35-ish federal parks under private management. Many are next door to each other. But it turned out to be virtually impossible to get the faculty at Arizona State who was preparing recommendations on private management, or the press, or the agency itself to actually do the comparison. Everyone wants to hypothesize on the results based on their faith or lack thereof in private enterprise, no one wants to do a direct comparison.

This frustrated me since I knew we managed the parks at half the cost, and had better customer service (camparizona.com ranks public campgrounds. In the survey taken a year or so ago our company had 3 of the top 5 public campgrounds under our management, and the state parks agency had zero)

I tried to do one direct comparison on my own: http://parkprivatization.com/2012/01/case-study-private-vs-public-park-operations/. It would be awesome if someone in academia were to take this on. Those interested should contact me at my park blog: http://www.parkppp.com.

By the way, it is incorrect to talk about loss of control to private operators. All of our contracts are highly structured with hundreds of pages of standards and restrictions. We cannot add a new service, modify or add structures or facilities, change fees, or most anything else without seeking approval from the parks agency. The agency still establishes the character and services and facilities of the park – we just provide the customer service and cleaning much less expensively.

These contracts are almost always structured as concession agreements, meaning the private operator gets paid just with gate fees from the customer, not with appropriations. If customers hate the park or the service, no revenues. I get asked all the time, “won’t you just stop cleaning the bathrooms so you can make more money.” I answer, “Sure, same way that McDonalds and Marriott and Nordstroms make most of their money by not cleaning their bathrooms.”

California State Parks Selects Private Operator to Keep Parks Open

See the whole story in the WSJ here.  Unfortunately, it is behind a pay wall.  Here is an excerpt:

California is close to finalizing bids from private companies to take over day-to-day operations of six state parks, including Brannan Island here, in an unprecedented step by the state to prevent mass park closures after stiff budget cuts.

On Monday, the state expects to finish its first corporate agreement, under which American Land & Leisure Co. would take over operations of three state parks for five years, the California Department of Parks and Recreation said. Three other state parks also are slated for private management, which covers running all concessions, visitor services, security and parks’ legal liabilities. The state will maintain ownership of the park lands.

The corporate bids are part of California’s last-ditch effort to keep more state parks open. The nation’s second-biggest parks system by area after Alaska’s has been in a tailspin in recent years, with annual funding slashed by $23 million—or 20%—since 2009.

The Real Problem with Advertising in Parks

I am not a huge fan of advertising in public parks to increase revenues.  I don’t tend to be anti-advertising per se, but the number one reason, ahead of all others, for public lands to be public is so a public agency rather than the operation of markets can determine the use of, access to, and character of the land.  Advertising could undermine that character, though it certain can be debated.

But here is my real problem with advertising as a solution to park budget woes:  It is symptomatic of public parks agencies focus on the wrong side of the income statement.  In almost every state I have worked with, parks agency management works very hard to avoid scrutiny of its expenses, and attempts to shift the discussion to revenue enhancements as the path to budgetary salvation.

But this is a chimera.  In most cases, the revenue improvement initiatives are an order of magnitude smaller than potential expense reductions.

Let’s take one state that will remain nameless.  It rejected out of hand private concession proposals to operate whole parks and said it would focus on private concession proposals to increase revenues by paying concession fees, in this case seeking a private company to rent bicycles in the park.  So let’s look at the park:

Park gate fees:  $500,000
Park expenses  (probably missing some stuff):  $800,000
Situation:  The park requires at least $300,000 a year of general tax funds to stay open.  These are going away, so this gap must be closed or the park will close.

Proposal #1:  Revenue Enhancement.  A private company will be enticed to open an equipment rental (bicycles, etc.) in the park (there is already a store).  In the best case, this might net $100,000 a year in revenue for the private company which would pay the state 10% or $10,000 in annual concession fees.  The state’s $300,000 loss is reduced to $290,000

Proposal #2:  Expense Reduction.  A private company proposes to take over all expenses of the park in exchange for keeping the park gate fees, paying the state a 10% concession fee.  This is entirely possible in this example, as private concessionaires often have 50% or more cost reductions for the same or better service levels in operating parks  (remember, most of park operations is cleaning bathrooms and mowing the lawn).  In this example, the park’s $300,000 loss is reduced to zero, and in fact the state now receives $50,000 in concession fees from the park which can cover supervision of the concessionaire and perhaps some improvements to the park.

Hopefully, this helps explain my issue.  Focus on revenue enhancement, and taking risks with the character of the park through things like advertising, have almost trivial impact on park financial sustainability when compared to addressing the expense side of the equation.

In the News

I have an interview up in Parks and Recreation Magazine this month.  You can see it online here.  There are also several folks interviewed in opposition, which is fair enough.  As usual, those in opposition were allowed to react to my specific comments and interview notes, while I was never given a chance to respond to their comments.  Which is why I tend to give long-winded interviews addressing every possible criticism because I seldom if ever get a rebuttal.

The one comment I found both typical and odd was the one that said that private operation of parks was somehow a “failure” for state agencies.  I get variations of this all the time and to this day simply cannot understand it.  The purpose of state ownership of special lands is discussed here.  I would consider it a failure if public lands were not inexpensively accessible to the public, or if their character was not maintained, or if their facilities were allowed to deteriorate — three things that are all occurring as state parks budgets are cut.  I don’t see how having private employees clean the bathrooms is some sort of failure, particularly when this approach can head off many of the other aforementioned problems.

Privatization and Public Accounting

Dru Stevenson was nice enough to invite me to join him at the Privatization blog, which tends to address many topics in the privatization world.  The writers can be both skeptical and enthusiastic about the model, so the overall coverage is pretty balanced and it is a good resource on the topic.

Last week I introduced myself with an introduction to myself and private operation of parks.

In my second post, I addressed a topic I have been meaning to get to here for a while, which is the problem of making privatization decisions using public accounting processes that were never meant to support this kind of decision.  Here is an excerpt:

Back when I was in the corporate world, “Make-Buy” decisions — decisions as to whether the company should do some task itself or outsource it to companies with particular expertise or low costs in that area — were quite routine.  Even in the corporate world, though, where accounting systems are built to produce product line profitability statements and to do activity-based costing, this kind of analysis is easy to get wrong (in particular, practitioners frequently confuse average versus marginal costs).

But if these analyses are tricky in the private world, they are almost impossible to do well in the public sphere.  Grady Gammage, a senior and highly respected research fellow at Arizona State University’s Morrison Institute, has as much experience with public policy analysis as anyone in the state.  Several years ago, he spent months digging into the financial numbers of Arizona State Parks, with the full cooperation of that agency.  A critical question of the study was how much it actually cost to operate a park, vs. do all the other resource and grant management tasks the agency is asked to perform.  Despite a lot of effort by Gammage and his staff, he told me once that the best he could do was make an educated guess –plus or minus several million dollars — as to how much of the Agency’s budget is spent actually operating parks vs. performing other tasks.

The reasons that this is so hard is that the parks agency’s budgeting process was not set up to determine true net operating gains and losses at parks.  It was set up, like most public accounting systems, to enforce accountability to different pools of money that have been allocated by the legislature for certain tasks.  This tends to lead to three classes of problems that cause public make-buy decisions, as well as ex post facto third-party analyses, so difficult.  Since I am most familiar with the parks world, I will discuss these three issues in the context of parks:

California Issues RFP For Private Operation of Five State Parks

Via Leonard Gilroy of Reason

For years, Reason Foundation has recommended that cash-strapped states consider tapping the private sector to take over operations of state parks as a means to lower costs and rescue parks threatened with closure in a difficult budget environment. Both the U.S. Forest Service (USFS) and BC Parks (British Columbia) have long pioneered the use of public-private partnerships (PPPs) for park operations, but states have been slow to follow their lead…until now, that is.

California State Parks (CSP) has issued a new request for proposals (RFP) seeking a five-year concession contract (or contracts) to operate campground and day use recreational areas at five park units in the Central Valley (Turlock Lake SRA, McConnell SRA, George J. Hatfield SRA, Woodson Bridge SRA, and Brannan Island SRA). This is the first serious and robust parks PPP procurement of its kind at the state level. The RFP is here, and CSP’s sample contract is here. Bidder responses are due on May 1.

The contract would be structured as a concession, a commercial lease through which the state would retain ownership and control over the parks while paying the private operator nothing to operate them. Instead, the private operator would be allowed to retain the user fee revenues (e.g., gate entry fees, camping fees, etc.), in return for an obligation to pay a set percentage back to the state annually as a form of rent. CSP has set a minimum annual rent level for each park that bidders must exceed in their proposals. Bidders can submit proposals for individual parks, but the procurement is designed to give maximum weight to those proposals that cover all five parks. In fact, the parks in question appear to be a mix of revenue generating and revenue losing parks (once operating costs are factored in), so bundling all of them together is likely to be an attractive option to bidders to maximize their ability to mitigate risks.

While this sort of arrangement is quite common at the Federal and local level, state parks agencies have resisted it for a variety of reasons.  Now, however, with increasingly high user fees failing to cover the cost of expensive government operations, and with parks facing failing infrastructure and even closure, more state parks agencies are considering this approach.   California State Parks is both the largest and in many ways most respected state parks agency in the country, so this step may help give increased impetus to private operations proposals in other states.

It will be interesting to see what public reaction will be.  Traditionally, environmental groups and state workers unions have opposed this approach, often not realizing many of the parks they already use and enjoy are already privately operated.  For example, in California, over 500 Federal and local public parks and campgrounds are privately operated, including most of the recreation areas in the US Forest Service.

Update: Apparently one Canadian province is considering a similar initiative

This Sounds Like Our “Tale of Two Parks”

From the Daily via Mark Perry

“While the Senate barbershop is federally subsidized, the House barbershop is a private business. Its three employees, one of whom is part time, are independent contractors. The House barbershop was privatized in 1994, a decision that House Republicans made after they took control of the lower chamber for the first time in decades.

The dueling business models of the congressional barbershops have produced different financial results.While the Senate barbershop required a $300,000 federal bailout last year, the House barbershop turned a profit. And while Senate Hair Care Services, the formal name for the Senate barbershop, is not charged a dime for its work space, House Cuts pays the government $2,000 to $3,000 in rent each year.”

A similar side by side comparison in parks yields roughly the same results.

Customer Service Agents with Guns and Badges

I often get asked about how we handle law enforcement at privately-operated public parks.  After all, most state-employed rangers have law enforcement credentials, and our employees don’t.

But most rangers have law enforcement credentials because of the rewards for having these, not because there is so much demand in most parks for law enforcement (we run a few urban parks that are an exception to this). Park employees who obtain law enforcement credentials get monetary rewards in terms of higher pay and access to more lucrative law enforcement pension plans.  Some also get psychological rewards from being able to carry a gun and a badge.  In most cases, though, we can easily work with local law enforcement to set up procedures to handle the few law enforcement situations that arise.

The other answer I give folks is that it is a bad idea to try to provide customer service with law enforcement officers.  In many cases, the approach to problems is different.  Can you imagine McDonald’s employees who constantly wrote you citations for illegal parking?

Here is an extreme example:

A Montara man walking two lapdogs off leash was hit with an electric-shock gun by a National Park Service ranger after allegedly giving a false name and trying to walk away, authorities said Monday.

The park ranger encountered Gary Hesterberg with his two small dogs Sunday afternoon at Rancho Corral de Tierra, which was recently incorporated into the Golden Gate National Recreation Area, said Howard Levitt, a spokesman for the park service.

Hesterberg, who said he didn’t have identification with him, allegedly gave the ranger a false name, Levitt said.

The ranger, who wasn’t identified, asked Hesterberg to remain at the scene, Levitt said. He tried several times to leave, and finally the ranger “pursued him a little bit and she did deploy her” electric-shock weapon, Levitt said. “That did stop him.” …

Hesterberg, whose age was not available, was arrested on suspicion of failing to obey a lawful order, having dogs off-leash and knowingly providing false information, Levitt said.

Arresting and tasering people for off-leash dogs is absurd in the extreme.  We have this problem all the time with dogs – everyone thinks their own beloved dog deserves a special exception to the rules.  But we work hard to get compliance in a friendly way.  Some people ignore us, and when they do, we try to remember that its just a freaking off-leash dog, not a serial killer on the loose.  I could only imagine us calling out law enforcement if our employee was being ignored and the dog was being a particular nuisance or the person was known to have ignored the rule on repeated visits.

Case Study: Private vs. Public Park Operations

In private park management, the park continues to be owned by the public agency, and all decisions about the facilities, services, and character of that park remain in public hands.  The difference is in who actually does the cleaning and maintenance and operations of the park – high cost public agencies or more efficient private firms.

People love to hypothesize about the potential problems with private park operations as if there were no examples of such management to gather actual facts about performance.  But such examples do exist.  After years of such wild speculating (e.g. they will build a McDonalds in our park!) we finally took the state agency, legislators, and the media out to a pair of neighboring public parks in nature-loving, environmentally-sensitive Sedona — one publicly operated, and one operated by a private firm.

Here is the case study comparing the two