Public-Private Partnerships in Recreation
Archive for the ‘Basics of Privatization’ Category.
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.
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.
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
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.
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.
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.
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 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.
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):
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
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:
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.
