Does Privatization Just Cherry Pick the Best Parks, Leaving Agencies Worse Off

A researcher for ASU’s Morrison Institute wrote me, as part of an email exchange:

“There is a fear, which I share, that privatization will peel off those parks that are either profitable or close to profitable”

This is a criticism I hear quite a bit, though I am not sure from what experience this even originates.  Some concerns expressed to me have real origins – for example, there have been poor-quality concessionaires and there have been local politicians who gave developers sweetheart real estate deals on public parks land, against the interest of the general public.  But I am not sure I know of any cases where public procurement strategy has been so short-sighted that it made this kind of mistake  (again, we see in this challenge the now typical rhetorical error of blaming a public failure, in this case poor contracting strategy, on private actors.)  My response:

  • We and other companies operate many whole “systems” in the US Forest Service, the largest public recreation agency in the world – a system being all the campgrounds and facilities in a geographic area.  In fact, this is really the only way the USFS offers parks nowadays in concession contracts, as regional mixes embodying all the parks under their umbrella, large and small.    In these contracts, money-losing small facilities are combined with larger facilities into a contract that can be economic while not leaving any parks stranded.  I operate campgrounds as small as 6 spaces, which clearly are not profitable on their own, but I do so as part of a larger contract.
  • While I have offered on some or all of 6 Arizona State Parks (ASP) parks, I did so to get ASP’s attention.  In addition to these 6, my offer very clearly states that I could likely run many of the smaller ones as well in a package with these 6 or 7, but that I needed a bit of help from ASP with some simple due diligence (e.g. electricity bills).  The only thing stopping me from offering on a large spread of both small and large parks is the absolute resistance of ASP to even talk to me.  There are some limitations to what I can offer totally blind, but these limitations have more to do with the lack of cooperation from ASP than any inherent limitation in our or a similar company’s ability to operate a broad mix of parks.
  • I am not sure why it is somehow gutting ASP to take money losing parks off their hands, even if they are close to breakeven.  First, they are still losing money.  Second, we are proposing to pay rent to the state — it would surprise me if a multi-year competitively bid contract for Alamo Lake or Lost Dutchman went for less than 10-12% rent.  This means converting a $10-$20 thousand dollar loss to a $30-$40 thousand gain for the state at each park.  And this is bad, why?
  • Companies like mine don’t “peel off” parks.  How could we?  We bid on parks packages as offered by public agencies.  There is nothing stopping AZ State Parks from offering a package of parks with the mix they want, not what private companies might want. This is what other thoughtful public recreation agencies do.  Positing any other outcome is merely to assume ASP is not competent in their procurement strategy.
  • Frankly, I have plugged the whole ASP park system into my cost models and I could easily run the recreation operations of the entire Arizona parks system, little ones and all, within the 2009 gate fees (without subsidies and without the 2010 ASP fee increases).  I haven’t made that offer, because it would scare the bejesus out of them.  But suffice it to say that ASP could easily find homes for most all the smaller parks with a thoughtful procurement strategy that mixes small and large parks in contracts — the USFS has been doing this for years