How Does Private Operation of Public Parks Work?
A concession contract should be thought of as a commercial lease. The concessionaire will sign a contract allowing it to run the park for profit, and then pay the public entity a rent in the form of a percentage of fee revenues. With a few exceptions, the private company pays all the expenses associated with operating and maintaining the park and is allowed to keep the customer fees paid at the gate as revenue.
When a retailer leases a store space in a mall, it is not allowed to do anything it wants with the space. The landlord will set strict guidelines, including the hours the store must be open, standards and approval processes for signage and store fixtures, limitations on merchandise (e.g. no adult books), etc. A park concession agreement works in much the same way. A typical operating agreement between a public entity and a concessionaire can run well over 100 pages of standards and guidelines, from fee collection and refund procedures to uniforms to customer service to bathroom cleaning frequency to operating hours. Public authorities retain an immense amount of control over the appearance and service level at a privatized facility, and generally have procedures in place for terminating contracts where private companies under-perform the standards.
In crafting the lease agreement, one of the key issues that varies case by case is the division of labor for major capital maintenance. In shorter term contracts, say 1-5 years, the public authority generally retains responsibility for major maintenance, as it is nearly impossible for a private entity to get a return from large capital expenditures in such a short period of time. Longer terms of 10-30 years allow the private entity to take on more of the major maintenance and capital improvements (most ski areas are a good example).
The only responsibility private companies typically don’t take on is law enforcement. Private operators will enforce rules and try to prevent unsafe or dangerous behaviors, but actual arrests and use of force require a call to law enforcement (no different than, say, at a hotel or restaurant).