Archive for the ‘Basics of Park PPP’s’ Category.

Conference Announced: Implementing Public-Private Partnerships in Recreation

In partnership with the National Forest Recreation Association (NFRA), we will be hosting a half-day national conference in Scottsdale, AZ on November 2, 2011 at 1:00 PM.  The conference’s full title is “Keeping State and County Parks Open — Implementing Public-Private Partnerships in Recreation.”  The conference will be at a great venue, the Hilton Scottsdale, and we have focused on keeping costs low:  registration costs just $100, which includes attendance at a joint reception with the NFRA, and rooms are available for as low as $106 per night.

I will be publishing more on the conference later, but it is aimed at elected officials and public agencies who are interested in the use of private companies to operate public parks, campgrounds, and recreation areas.  By holding this conference at the same time and locations as the NFRA conference, we are able to take advantage of the resources of the US Forest Service, which has thirty years of experience operating over a thousand parks and recreation areas nationwide using this public-private model.

Topics will include:

  • History of recreation PPP’s, including current examples you may contact or visit
  • Case studies from the US Forest Service, the world’s largest user of recreation PPP’s
  • Advantages of recreation PPP’s, and pitfalls to be avoided
  • Typical division of responsibilities between the public and private partners in these contracts
  • Best practice contract structure and contracting process
  • Supporting legislation and relationships between agencies

The schedule will be roughly as follows:

  • 1:00-2:00  Joint session with the NFRA — Introduction and keynote address
  • 2:00-5:00  Detailed discussion of PPP’s in recreation
  • 5:00-5:30  Q&A with industry leaders and experts, both public and private
  • 5:30-7:00 Joint reception with the US Forest Service recreation leaders and the NFRA

Much of the material in this conference has been presented in private sessions with state park agencies in states including California, Arizona, and Utah and with elected officials in states including Pennsylvania, New York, and New Jersey.   Co-locating this conference with the NFRA gives us the opportunity to have some of the most experienced recreation managers in the country presenting this material.

If you would like to learn more, or would like to register for the conference, you may do so here.

If you want to ask a question, email me at the contact link above or hit our Facebook page shown to the right.

Under Private Management, How Are Park Entrance Fees Utilized?

Several years ago, I did an analysis averaging the results of a lot of contracts.  Of course this varies site by site — for example, a campground with hookups obviously is going to have higher electricity costs than a campground without them.  But the numbers have held up pretty well over time.

Proposed California Park Closures

California State Parks is proposing to close 70 mostly smaller parks in an effort to make ends meet on its budget.    The press release and list of parks is here:

NEWS RELEASE – 70 Park Closures -and attachments 5-10-11

Right now, our company and others are looking through the list to see if one or more would make viable candidates for private management.  One lost opportunity here is that the best way to keep these parks open might be to group them in private management contracts with larger parks that are remaining open.  This is what the US Forest Service does at 500 locations in California alone.

Update: An editorial in the Orange County Register writes:

Last year the state closed or deeply reduced services in 150 state parks. The Legislature in March approved $11 million in cuts to state parks in the next fiscal year and $22 million in cuts in future years.

Friday, state parks officials announced the closure of 70 parks from among the 270-park unit system. The department said service reductions at the listed parks will begin this summer, with closures beginning in September and all listed parks closed by July 1, 2012.

With the state’s perpetually tight budget, funding for education, health care and the state’s powerful prison guards union usually get top priority, leaving parks typically out in the cold year after year. The state has let the parks deteriorate to the point that they now need $1 billion in repairs and maintenance, according to the California State Parks Foundation.

…There are private companies out there that will see California’s parks wasting away and envision a way to bring them back to life. Some facilities, like Tecopa Hot Springs County Park in Death Valley, operate under whole-park concession agreements, a remnant of California’s once-innovative past where the state leased some parks to private companies.

Under these lease agreements, recreation companies manage and maintain the parks. The government can set any quality and maintenance standards it desires and hold the private company accountable to them with a performance-based contract.

Press Release: A Successful Model For Keeping Arizona State Parks Open Exists … Right Here in Arizona

Download MS Word Version here

Phoenix, AZ – Adopting a public/private management strategy used successfully for decades by The U.S. Forest Service can ensure that endangered Arizona state parks remain open, are properly and professionally maintained, and are available to the public for years to come.

Due to the state budget crisis, millions of dollars allocated for parks operations were diverted to the state’s general fund. As a result, state parks are suffering, and three parks have closed, according to a member of the Arizona State Parks Board.

“We don’t have any money for fixing buildings, or fixing trails, or fixing bathrooms. We are in a desperate situation,” said Reese Wooding, of the state parks board, to the Tucson Weekly.

The fund cuts in the state budget are so drastic that the agency will have difficulty making payroll on July 1. A statement from The Arizona State Parks Foundation says the proposed 3.5 million in sweeps, “May be fatal to a system on the verge of collapse.”

It doesn’t have to be this way,” says Warren Meyer, president of Phoenix-based Recreation Resource Management (RRM), a $10M company that manages public parks and recreation areas throughout the U.S.

“With a public-private partnership model used by the US Forest Service (USFS) for thirty years and in over 40 federally-owned parks in Arizona alone, the government retains ownership of the land and control of the use and character of the park while handing over operational tasks that are time, money, and labor intensive to a more cost-effective private company.”

When operating public parks in these partnerships, private companies typically provide visitor services, routine maintenance and repairs (such as bathroom cleaning), landscaping, trash removal and payment of utilities.

“While these operational tasks by no means constitute all the work required to keep parks open, they account for the vast majority of the money spent by the state parks organization in the field,” says Meyer.

“In these contracts, private concessionaires pay for all these costs solely out of the gate fees paid by the public, without further taxpayer subsidy. We pay the public agency a concession fee of 5 percent to 25 percent of park revenues, often converting a money-loser to a moneymaker for the government.”

In these arrangements, the public agency maintains the land in the condition and character the public expects.

This USFS program is already working in over 40 locations in Arizona,” states Meyer.

“Our expertise combined with an excellent cost position allows us to make the best possible use of the gate fees paid by the public. In the 35 Arizona public parks we manage, this efficiency stretches the gate fees paid by the public so we can continue to invest in needed maintenance and repair.”

“Over the last few years, our company, guided by the Forest Service’s wish lists, have invested in improvements such as new composting rest rooms at Crescent Moon, new shower buildings at Cave Springs and Pinegrove campgrounds, renovations to the Oak Creek Visitor Center, and ADA enhancements at nearly every facility,” says Meyer.

In part because of this attention to keeping facilities clean and in good repair, the public parks RRM operates are consistently ranked among the Top 100 Family Campgrounds in America since 2003, and are recognized as among the best in the state by third-party reviewers such as Sunset Magazine and CampArizona.com.

Many public agencies considering such partnerships worry that this approach might not be applicable to their smaller parks.    Allaying this concern, the USFS in Arizona, in order to keep parks open, is successfully bundling large and small parks together in contracts for a general geographic area. The parks are kept open using economies of scale, where profits from more lucrative properties are passed on to the less profitable locations

“The goal of such concession arrangements,” said Meyer “is to keep these special pieces of land beautiful, accessible and available to the public for generations. The objective is to form a partnership combining the public oversight and unique environmental knowledge of the state parks agency with the efficiency and customer service of a private company that can clean and maintain the parks without the need for a taxpayer subsidy. In doing so, we can help achieve financial sustainability for the public parks system.

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Fact Sheet – Public-Private Partnerships for Parks

How it works

  • The public retains ownership of the land. Private companies must maintain the desired character and facilities in the park. Typical concession agreements include extremely detailed operational requirements and restrictions.
  • The Parks Agency retains responsibility for strategic planning, habitat development and restoration, facilities planning, environmental sciences, rule-making, oversight, and fee approval.
  • The private company takes on operational tasks (from maintenance to bathroom cleaning) that consume much of the state parks budgets but don’t impinge on these strategic tasks.
  • Private company’s expenses, and therefore most park operations expenses, are paid out of park visitor fees without any additional payments from the state. In return for retaining these user fees, the company pays a competitively-bid rent to the state.
  • The state may use this rent to help cover its other expenses, or may reinvest the rent, as does the US Forest Service, in catch-up maintenance and park improvements.

Advantages

  • The substantially lower cost position of private companies allows park operations as well as major maintenance to be performed using existing visitor fees without taxpayer subsidies. For example, the 35 USFS parks run by RRM in Arizona are up to date on their maintenance, while AZ state parks have years of deferred maintenance in their parks.
  • More efficient management also allows for lower use fees – for example, while Slide Rock SP summer day use rates rose to $20 last year, RRM lowered the day use rates at neighboring public parks it operates from $10 to $9.
  • Private concessionaires have incentives that are well-matched to the public – they make money only if happy and satisfied visitors come back to the park. As a result, the parks operated in AZ by RRM receive very high marks from customers and in third-party surveys such as CampArizona.com. In fact, per dollar of revenue paid by visitors, RRM typically has more people actually working in the parks to serve visitors than does most state parks agencies.
  • If the public agency wants to improve the facilities in parks, private companies can be a critical source of capital. RRM has invested in new facilities requested by the US Forest Service in a number of Arizona parks (from shower buildings near Sedona and Flagstaff to completion of the Oak Creek Visitor Center), and have invested more than $3 million across the country helping parks catch up with deferred maintenance and improve the visitor experience.

Even smaller parks can benefit from this model – the US Forest Service has learned to combine small, financially-challenged parks with larger more successful parks -creating regional bundles. There are six successful bundling areas in Arizona to ensure quality management of smaller parks. They are: Sedona/Oak Creek Canyon, Flagstaff, Payson, Mount Lemmon near Tucson, and properties around Kaibab and Show Low. Of the 35-plus sites Meyers runs, only perhaps seven could make money on their own.

“Others make money because they are grouped with other parks,” he said. “In other words, they would lose money as a stand alone but make money in a group because they benefit financially from sharing a manager, equipment, reporting, and excellent operational practices.”

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A Better Model for Keeping Parks Open

This was published today at Coyoteblog.com

Many of you may be familiar with threatened closures of state parks in many states in the country.  Due to budget issues, state parks budgets have been slashed for years, and in many cases state parks are litterally falling apart due to deferred maintenance.  Now, faced with further budget cuts, states are in the process of closing many state parks.  Arizona has already announced a closure list, and California is expected to release a closure list this week.  States including Washington, Texas, Florida, New York, and New Jersey are all actively discussing park closures.

Far larger than any state parks agency, in fact the largest public recreation agency in world (by total number of sites) is the US Forest Service, which operates campgrounds, picnic areas, hiking trails and boat launches in nearly every nook and cranny of the country.  Yesterday, in President Obama’s new budget, the President proposed drastically slashing the US Forest Service (USFS) recreation budget.  This is no surprise, as the USFS has had its recreation budget eroded for decades.

But despite these cuts, most USFS recreation sites will remain open.  There is no talk, as in the states, of wholesale closures.  There is, in most USFS recreation sites, no growing accumulation of deferred maintenance.  In fact, even if Congress and the President shut down the government (as happened under Bill Clinton and may happen this year), many USFS recreation sites, unlike nearly every other Federal facility, will remain open.

Why?  Because decades ago, the USFS was forced to find and adopt a new model for managing its recreation sites, a model that could easily keep most state parks open if states were willing to consider it.  To understand this opportunity, we first need to look at the traditional model for running public parks.

Traditional Model

The traditional model for running public parks and recreation sites has two components:

  • Use of high cost government labor to run park operations.  Beyond just being high cost (in absolute wages and benefits) this labor is generally not well-matched to the task.  For example, state employees are hired for 12-month-a-year jobs, even when park visitation is highly seasonal.  In addition, college environmental science and parks management grads are employed whose interests are not well-matched to mundane tasks that dominate park operations, such as cleaning bathrooms and picking up trash.
  • Providing free or very low cost access. Most state parks offer free or below-market public access fees for day use parks or campgrounds.  While it makes sense for agencies to offer free options for the public in their portfolio of parks, offering subsidized pricing at every park creates a huge need for appropriated funds (particularly given their high operating costs).  While this subsidized access seems to be a public benefit, it actually works against the public as general fund appropriations dry up and maintenance has to be deferred and parks have to be closed.

One step several states have taken is to abandon the second part of this model by charging market pricing, and even above-market pricing.  Arizona State Parks generally charges market-level pricing for park entry, but as budgets got tighter they actually doubled entry fees to as much as $20 per car to park  at certain popular parks.  California has done the same thing, increasing the price of no-hookup camping as high as $30 a night, when pricing of similar campsites in, say, the USFS in California typically run no higher than $18-$20 a night.  The reason for this is their very high cost operations model, and even these higher fees have not headed off park closures in these states.

A New Model

About 30 years ago, the USFS began experimenting with a new model for running its recreation sites.  I can’t say that the USFS did this willingly, and even today there are many in the agency who long for the day when they can return to the traditional model.  In fact, necessity, in the form of Congressional legislation combined with declining appropriated funds for recreation, really forced the change.  Today, over half of USFS recreation facilities are run under this new model, and if weighted by visitation, the number surely would be over 90%.

The model includes these two key elements:

  • Use of low-cost private labor for operations.  Thirty years ago the USFS began using private operators to run campgrounds and busy day use facilities under a concession arrangement, meaning the private operator collected all revenue and paid all expenses for the site, and paid the USFS a fee for the privilege of doing so.  With the stroke of a pen, sites that required appropriated money to operate suddenly were money makers for the USFS.  As a further refinement, Congress gave the USFS the authority (and the incentive) to apply the fees they earned from campground and park operators to maintenance and improvement projects in the recreation facilities themselves.
  • Charging market-based use fees.  In this program, private operators charge market-based fees (which must be approved by the USFS) that fully cover their costs AND allow for a payment back to the USFS.  Recreation sites in this program no longer require public appropriations at all — they are entirely self-sustaining.  That is why many USFS recreation sites will remain open even if the government shuts down

As both the public agency and private operators have gained knowledge about the program, this model has continued to be improved.  For example, early on the USFS merely offered the largest facilities to private managers.  However, they soon learned that if they continued to do so, they might be worse off budget-wise because they would be left with many small, expensive facilities to manage themselves.  As a result, the USFS has learned to offer private operators packages or bundles of recreation sites, that generally include all the sites in one geographic area, big and small.

It is important to understand that this is merely a lease arrangement — this is not a stealth way to dispose of public lands into private hands.  These are highly structured arrangements that require the private operator to conform to numerous restrictions.  In particular, the private operator may not change or add facilities, services, operating hours, or fees without the agency’s written permission.  No one, in other words, is out there building a McDonald’s in front of Old Faithful under this arrangement (there are several other very predictable critiques of this model, which hare answered here).

One added benefit of this arrangement is that, though there are some bad private operators, in general facilities are actually run better under this model.  One reason is that maintenance and operations are fully funded, so no skimping is required.  Another reason is that since they are paid with park revenues (rather than some flat fee), private operators benefit from, and therefore have the incentive to encourage, higher visitation.  Finally, the skills and preferences and background of most private workers are better matched to the routine operating tasks required.  As a result, most privately operated public parks get good reviews for their quality.   As just one example, this independent site ranks public campgrounds in Arizona — in this survey, three of the top five sites are run by a private concessionaire in the USFS program, while none are operated by our state parks agency.

The Future

As I mentioned earlier, there are many people both inside the USFS and in the general public that long to return the traditional model — Agency leaders would love to have the prestige that would come from larger headcounts and budgets;  public employees unions would generally rather see parks closed than have further precedents for private management established; and certain recreation user groups would prefer that taxpaying non-users pay for their recreation.

But the bankruptcy of the traditional model is likely here to stay.  Current budget problems in state parks is not simply a product of this recession — for example, here in Arizona, park maintenance was under-funded even in the good times.  The reality of government is that non-discretionary expenditures (e.g. health care, entitlement, pensions) are growing far faster than the economy and are going to totally consume government budgets.  Discretionary spending, particularly in the case of things like parks that can support themselves with fees, is going to continue to be crowded out.

If you are interested in this model, you can find out more at this site  (just scan down the page).  We are planning a national conference on private management of public parks as a way to keep parks open, and you can sign up for information on the conference here.  And, as usual, you are always welcome to email me at the link on this site.

2011 Recreation Privatization Conference

I am in the planning stages for a national conference on private operations of public parks and recreation.  The date and time have yet to be set, but it will be targeted at legislators, administrators, parks directors, and private practitioners.   If you would like to be on our mailing list to receive more information as the details are firmed up, please click the link below or in the sidebar on the right.

2011 National Conference Information Mailing List

Steadily Making Progress

Efforts to bring private management to recreation in Arizona State Parks got a pretty nice write-up by Mark Duggan, which includes supportive comments from the model from Jay Zieman of Arizona State Parks.  I have been talking to skeptical parties in and out of state parks about this idea for over a year.  I think a big part of the breakthrough in understanding has been that private companies are not trying to take ownership of the land or even control how it is used — we are merely trying to run many of the mundane park operations.

In particular, I think this chart resonates with many of the folks I present it to who are concerned about privatization:

I make the case when presenting this chart that private companies are really only aspiring to perform the duties on the right, under strict supervision and controls.  The state retains all the higher value-added duties on the left, as a minimum, and may under certain arrangements retain some roles on the right side.   The opportunity for the public is that a huge percentage of the budget in state parks is spent on the right side, and private companies typically offer a minimum of 30% lower costs on these activities.

Symposium on Private Management of Public Parks in Arizona

The Parks and Recreation Student Association at Arizona State University had me in last week to speak.  However, through some diligent efforts of their leader, the speech really turned into a symposium on the pros and cons of private recreation management.  The speakers were:

  • Grady Gammage, Jr.  from ASU’s Morrison Institute, and author of a recent report on funding Arizona parks
  • Warren Meyer, president of Recreation Resource Management, a national operator of 150 public parks
  • Sandy Bahr, head of the Grand Canyon chapter of the Sierra Club

The video is a bit more than an hour long, but should be a helpful resource for those considering ways to keep public parks open.  Careful observers will see confirmation of two of my frequent complaints about criticism of public private partnerships in recreation:

  • It is fairly clear that most vocal public critics have not even studied actual implementations of privatization models that exist right here in Arizona, and are instead working off of hypothesized approaches that bear little reality to how things actually work on the ground
  • There is actually a lot of room for agreement between myself and critics.  Many of the fears the Sierra Club representative expresses are for functions most private companies in this business do not aspire to take over.

To the latter point, my key slide was probably this one:

I emphasized that private companies had few designs on the activities on the left, and were focused on the activities on the right.  The right-hand side tends to be a huge portion of the budget, with large opportunities for cost reduction, and I find most groups skeptical of privatization are generally more comfortable with it when it is clear the state will retain control of left-side activities.

Anyway, here is the video:

ASU Symposium: Can Public-Private Recreation Partnerships Help Arizona State Parks? from Warren Meyer on Vimeo.

Documentary on Private Management of Public Parks

Check out this most recent Reason.TV video, which includes your humble correspondent.

Park Privitization Debate in New York

Len Gilroy of Reason debates in favor of park privatization in New York as an alternative to park closures in their budget crisis.

Keeping New York Parks Open

I did a video for a New York group on how public-private recreation partnerships work, and why they can help to keep state parks open.  While the presentation is nominally to a New York audience, the presentation could apply to any state.  The video is below, and also at this link.

Talking Public-Private Recreation Partnerships in Virginia

Len Gilroy of the Reason Foundation has a good overview of the benefits of using private companies to help manage public recreation.

For cash-strapped states, concessions offer the opportunity to turn money-losing parks into revenue generating assets that can be leveraged to help keep other parks open and thriving. And the idea seems right at home in Virginia, a state that has for decades embraced the concept of public-private partnerships and privatization to deliver new highway capacity, mental health facilities, prisons and other vital public infrastructure.

It’s for all of these reasons that parks concessions seem like a no-brainer to consider as a viable and positive alternative to budget cuts, park closures, tax hikes and other sub-optimal policy choices. Even if policymakers believe that it is a core function of government to provide public recreation land and facilities, it does not then follow that government has to be the one to operate those facilities. The federal public land authorities have realized this, and it’s time for states to follow suit.

Public Testimony on Private Parks Management

I will be testifying in Pennsylvania in a hearing on public-private partnerships, with my 20 minutes on private parks management:

Tuesday, April 6th, 1:00 PM

Grove City College Hall of Arts and Letters, Sticht Auditorium

100 Campus Drive, Grove City

Topic:  Public Private Partnerships

Grove City Campus:   http://www.gcc.edu/Campus_Map.php

My presentation slides are here:  Keeping Parks Open with Private Management

Editorial on Private Management of Public Recreation

Bill Schneider, who wrote an article skeptical of the role of private companies on public lands that I linked earlier, was kind enough to offer me a chance to give an opposing point of view.  My editorial is here.  Excerpt:

And this is the heart of the problem–that recreation costs money. Even a small roadside picnic area can require thousands of dollars a year to clean the bathrooms, haul the trash, and maintain the area to keep it safe. For decades, recreation costs in the Forest Service were funded by timber sales, but these have largely disappeared and Congress has not provided a funding source to replace them. Forest Service recreation budgets have, for years, been insufficient to cover recreation operations as well as necessary major maintenance and refurbishment of facilities.

The Forest Service, looking to stretch its meager recreation budget as far as possible, has turned to private companies to run many of its campgrounds and developed day use facilities. This partnership has largely worked well, with the Forest Service benefiting from the efficiency and customer service focus of private management while retaining tight control over operating standards (concessionaires can’t change a fee, or modify operating hours, or alter any number of other aspects of a park’s operations without the Forest Service’s written approval).

Private concessionaires play a critical role in keeping fees reasonable. Without private concessions, the Forest Service would be forced to raise fees substantially or to close hundreds of recreation areas, a story we unfortunately see being played out in many state parks organizations. For an illustration of this, we can look to my home state of Arizona, where the state parks organization is closing some campgrounds and day use areas and doubling entry fees in many of the others. Similarly, the proliferation of new use and access fees on Forest Service lands has nothing to do with private companies that actually serve to keep fees reasonable. The problem is not privatization; the problem is appropriations, or the lack thereof.

Great Post From Reason on Parks

Len Gilroy of the Reason Foundation links my Glenn Beck interview and then goes deep on park privatization issues.  Check it out.  Potentially the biggest benefit to the public:

Appropriation risk: State parks operating under a concession no longer bear the appropriation risk that we’re seeing play out in real life across the country, as parks get axed from state budgets amid rampant state fiscal crises (some examples include California, New York and Louisiana). Really, this is more of a risk that’s eliminated, rather than transferred to the concessionaire (see revenue risk discussion above), so revenue/demand risk and appropriations risk are really two sides of the same coin.

My Interview with Glenn Beck

We discussed my proposal to keep Arizona state parks open. Update: A transcript has been posted here.  Video moved below the fold because it was killing my page load times.

Continue reading ‘My Interview with Glenn Beck’ »

On the Air Today

I will be on the Glenn Beck Show at 5:40 EST on the Fox News Channel talking about the private management of public parks.

My Radio Interview on Arizona Parks

My radio interview with Terry Gilberg of radio 550 KFYI is not available online in mp3 here.   We discuss park privatization in general and my proposal to reopen Arizona parks.

A Proposal to Keep State Parks in Arizona Open

Due to budget cuts, Arizona State Parks is closing 13 of its 22 state parks.  This last week, I have been making the rounds of the state government, from the state legislature to the head of Arizona State Parks, with a proposal to keep the 7 largest of these closed parks open, and pay the state money for the privilege.  Unfortunately, we have had only mixed success with a proposal that seems to me to be a win-win for everyone.  Our local newspaper editorialized against my proposal, without even knowing the details  (my response here).  So in this post, I am going to give the details of our proposal, and solicit your feedback, especially those of you in Arizona.  All I ask is that you read the whole thing, and not just leap into the comments section having just read and reacted to (positive or negative) this first paragraph about private operation of public parks.

Background

Our company, Recreation Resource Management (RRM), is over 20 year old, and we operate over a hundred public parks under concession agreement for the US Forest Service, the National Park Service, the Tennessee Valley Authority, California State Parks, and many others.  Traditionally, park concessions used to be limited to private companies running the gift shop or the bike rental inside a park.  And we do some of that (for example we run the store and marina at Slide Rock and Patagonia Lake State parks).  But our preferred niche has always been to run entire parks on a turnkey basis.  We run a huge variety of facilities that largely parallel anything we might find in the Arizona State Parks system — including campgrounds, day use and picnic areas, boat ramps, hiking trails, wilderness areas and historic buildings.  The largest parks we run are twice as busy as Slide Rock or Lake Havasu and four times as busy as any of the parks we are proposing to manage.  We currently run parks today literally right beside some of these Arizona State parks.  All of this is to say that the parks in Arizona are absolutely normal and typical resources that we manage.

A concession contract works much like a commercial lease.  We sign a contract allowing us to run the park for profit, and then pay the state a rent in the form of a percentage of fee revenues.  The typical operating agreement includes over 100 pages of standards we must conform to, from fee collection to uniforms to customer service to bathroom cleaning frequency to operating hours.

We aren’t trying to take ownership of the land.  We aren’t trying to pave the wilderness.  We aren’t trying to build condos in front of Old Faithful.  We 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. If the site is to remain primitive, we keep it primitive.  If the public agency wants new facilities, we help bring capital investment in new facilities (all approved in advance by the public agency).  What we bring to the table is that in many cases, we can operate the park and keep it open with the fees paid at the gate, without big price hikes and without the need for subsidies.

Our Proposal

At all of my meetings this week I made three offers, each of which we were willing to commit to immediately  (we could actually be up and running with about 21 days notice):

  1. RRM offered to keep some or all of six parks open out of thirteen on the current closure list.  These parks are Alamo Lake, Roper Lake, Tonto Natural Bridge, Lost Dutchman, Picacho Peak and Red Rocks (park but not the environmental center).  Not only could these stay open, but we could pay rent as a percentage of fee revenues to the state, money that could be used to keep other operations open.  While these parks represent about half of the closure list by number, by visitation they represent well over 90% of the closure list.  Combined these parks had a net operating loss of $659,000 to ASP, which we propose to turn into a net gain for the parks organization.
  2. RRM offered to operate five parks that are currently slated to stay open but where we could pay rents that are higher than the net revenue figure ASP showed for FY2009.  These parks are Patagonia Lake, Buckskin Mountain, Dead Horse Ranch, Fool Hollow and Cattail Cove.  Combined, this group of parks lost money for ASP in 2009 which we propose to turn into a solid net gain.
  3. While we would need to do more study, RRM suggested it might take on some of the smaller, money-losing parks beyond those mentioned above if they were packaged in a contract with some of the other parks listed above

To avoid problems with the procurement process, we offered to take as short as a 1-year contract to give ASP time to prepare a longer-term bid process.  We also agreed to maintain all current park fees for the next year without change (in contrast to ASP current plans to raise fees), and agreed that no fee could be changed without ASP approval.  The only help we asked for was

  • We perform rules enforcement, but we need law enforcement backup form time to time
  • We perform routine maintenance and keep the park safe and attractive, but many of these parks have substantial deferred maintenance problems that we cannot take on with only a 1-year contract  (but would be willing to invest capital to repair under a longer term arrangement)

And if the ability to keep almost half the parks slated for closure open was not enough of a value proposition, we proposed one additional benefit.  Any parks that are put under private concession management immediately cease to be a political football.  For years, parks organizations have closed and opened parks in a game of chicken with legislators, with the public as the victim.  Parks under private concession management no longer are subject to such pressures, as they are off the budget.  Back in the 1990’s, when the new Republican Congress squared off with President Clinton over the budget, the government was shut down for a while, including all federal recreation facilities — EXCEPT those under private concession management.  We got calls from the media saying, why are you open?  To which we replied — hey, you have now discovered one benefit of private concession management — the parks we manage are no longer political pawns.

Reactions

So far we have had really good and positive reactions from Arizona legislators  (I have not been able to see any of the Governor’s staff).

The reaction from Arizona State Parks has been more muted.  While they are publicly open to all proposals, in reality this is the absolute last thing most of their organization wants to do  (you should see the body language in some of our meetings, it is a lot like trying to sell beer at a Baptist picnic).  They have not said so explicitly, but from long history with this and other parks organizations I can guess at some of the issues they have:

  1. Distrust of and distaste for private management runs deep in the DNA of the organization.  Many join parks with a sense of mission, seeing unique value to public ownership of parks and lands.  I attempt to explain that this value still exists, that what they are turning over is operations, not management and control, but I don’t get very far.  I try hard to give the new management of Arizona State Parks a clean slate, but I can’t help but be affected by something I saw their previous director say.  Back in about 2004 we hosted a breakfast at a convention of state parks directors up in Michigan, I believe.  Someone must have forgotten to throw us out of the room, because we witnessed the head of Arizona State Parks stand up in front of his peers and demand that they all hold the line against private management as one of their highest priorities.  It was made clear that state organizations that stepped out of line would incur the wrath of other states.  This summer we participated in a series of meetings in California called by Ruth Coleman, who is the head of the parks organization there and someone I admire.  She was trying to break the organization out of its old culture, but it was very clear in roundtable discussions that the rank and file would rather see the parks closed to the public than kept open using private concession management.
  2. I mentioned earlier that private management brings a benefit to the public of keeping the parks from being a political football.  But the parks organization feels like it needs that football.  Without the threat of park closures, it feels like its budget will be gutted like a fish.  And, now that its budget has been gutted, it still holds out hope its money will be restored and needs the park closures to keep up the pressure.  As long as there is even the slightest hope of budget restoration, a hope which I am pretty sure will “spring eternal,” my proposal, no matter how much it makes sense for the people of Arizona, will never be adopted.

Again, these are just guesses.  Renee Bahl of Arizona State Parks has told me they are open to all new ideas, and I will take her at her word.

Libertarian Concerns

Those of you who know me to be a libertarian might wonder how I function in this environment.  The answer is, “with difficulty.”  I have a strong philosophic passion to bring quality private management to public services, and this opportunity is a good one.  And I am not adverse to making money while doing so.  But I am adverse to rent-seeking, and there is admittedly a thin line between trying to make positive change and rent-seeking in this case.

I generally avoid this by insisting on short initial contracts (in this case 1 year) to prove out the concept and to allow time for the public agency to figure out how to put this beast through a procurement process that probably was not well designed for this type of thing.   This is what I did when the US Forest Service approached us with an idea to bring private management to the snow play area at Wing Mountain near Flagstaff.  We took it on a one-year contract (which grew to 2 years) and then the contract went out for public bid  – which we won – for 10 years.  We are very good at what we do and are not at all afraid to compete.  The only time I will not compete is when I perceive someone has a political connection that gives them an inside track.  After two or three losses in Florida counties to a company with no experience but a brother-in-law on the County commission, I realized it was just a waste of time to bid on these situations.

Conclusion

Please give your reactions and concerns in the comment section.  For those who disagree with private management of public resources, I will be honest and say you are unlikely to change my mind, as I have dedicated all my time and my life savings to the proposition.  But you may help me better understand and tailor our service to address public concerns.  I will try to keep the FAQ below updated based on what I am seeing in the comments.  If you are in Arizona and know someone you think I should be talking to, drop me an email at the link above.

FAQ

Does your company take ownership of the park? No.  The parks and all the facilities remain the property of Arizona State Parks.  We merely sign an operating lease, with strict rules, wherein we operate the park, keep the fees paid by the public, and pay the state a “rent” based on a percentage of the fee collections.  Even when we invest in facilities, like this store building and cabins, they become the property of the public at the end of the contract.

How can the state afford to pay you if they have no budget? We are not paid by the state, and receive no subsidy.  100% of our revenue is from fees paid by visitors to the park we operate.  If we don’t run a good operation that is attractive to visitors, we don’ t make any money.

Doesn’t the state lose out if you keep all the fees? No.  Mainly because in all the parks we have proposed to take over, the state has net operating losses of up to $200,000 or more a year.  By taking over the park, their losses go away AND they receive extra money in the form of rents we pay.  We are able to do so because we have developed efficient processes for managing campgrounds and have a flexible and dedicated work force.

Are you going to build condos and a McDonald’s? No.  The fact that this is such a common question is amazing to me, as we operate over 100 parks in this manner across the country and you would not be able to tell the difference between the facilities we manage and any other public park.  Under the terms of our operating contract, we cannot change fees, facilities, operating hours, or even cut down a tree without written approval form the parks organization.

Are you going to just jack up fees? No.  We have committed in our offers to keep fees flat for the next year.  We cannot raise fees without state approval, and we work hard to keep public recreation affordable.  Last year was a very good year for us because, in a recession, our low-cost recreation options gave many families on a budget a chance to have a quality recreation experience.

Why just a one year contract? We would actually prefer a longer contract, as this allows us to actually make approved capital improvements to parks (for example, we have installed many cabins in public parks we operate).  However, we have offered to take these under an initial contract that is just long enough to allow longer-term contracts to be fairly offered on a competitive bid basis.

Maybe no one trusts you because you are small and unproven? Well, perhaps.  But last year our total fee revenue was nearly $11 million, making us slightly larger than the Arizona State Parks system.  We have a proven record with decades of positive performance reviews from government agencies around the country.   For example, for those of you form Arizona, if you have stayed at a US Forest Service developed campground near Flagstaff, Sedona, Payson, or Tucson,  or sledded at Wing Mountain, you probably have stayed in a facility we operated.  We already operate two concessions in Arizona State Parks, and have a great record working with the organization.