Park PPP's

From a press release last week

Adopting a public/private management strategy used successfully for decades by the U.S. Forest Service can ensure that endangered California 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, California State Parks has been forced to cut millions of dollars from its operating budgets. To make ends meet, California has proposed closing 70 state parks.

“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 in hundreds of California parks and campgrounds, 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. In addition, we pay the public agency a substantial concession fee, often converting a money-loser to a moneymaker for the government.”

In these arrangements, the public agency ensures that the private operator maintains the land in the condition and character the public expects.

“This USFS program is already working in hundreds of locations in California, and over a thousand nationwide,” states Meyer.

The fact sheet in this same release is a useful resource

How Recreation Public-Private Partnerships Work

• 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 for California

• 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. Even smaller parks can benefit when bundled together into larger contracts. The result is that more parks can be kept open to the public.
• More efficient management also allows for lower use fees — for example, while California State Parks typically charge as much as $30 for a campsite without utilities, at similar public campgrounds in California RRM charges no more than $18.
• 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 California by RRM receive very high marks from customers and in third-party surveys.
• If the public agency wants to improve the facilities in parks, private companies can be a critical source of capital. RRM has invested more than $3 million across the country helping parks catch up with deferred maintenance and improve the visitor experience. At McArthur-Burney Falls SP in California, RRM has invested nearly $1.5 million in a new store and visitor center, new cabins, and new boat docks.

From FlaglerLive.com

The  Division of Environmental Protection is proposing to partially privatize 56 parks, including Washington Oaks Garden State Park and Faver-Dykes State Park. The proposal is being submitted to the state Acquisition and Restoration Council next Friday (June 10) as an expansion of camping and RV opportunities at those sites. But the camping and RV sites would be built and operated by private companies.

The council is an 11-member panel with representatives from five state agencies who rank the state’s environmentally sensitive land-acquisition priorities through the Florida Forever program. Florida Forever has essentially lost its funding, leaving the council to focus on its other mission: reviewing management plans for state parks and conservation lands.

Opening parks up to camping and RV sites falls under park management plans, which would have to be amended to enable the change. Those plans, called the “unit management plan,” are reworked every 10 years, with public hearings and involvement. Washington Oaks’ 10-year plan is about two years away from just such a review. DEP is asking the council to accelerate the process, though it would also make provisions for a public “meeting” at each affected park. The DEP’s proposal does not specify a formal public hearing, though that may be a matter of semantics.

“The new facilities will be designed, constructed and operated by private entities selected through the department’s procedures for soliciting and contracting state park concession services,” the DEP’ssummary proposal reads. “The Department will retain full control over all aspects of planning, design, construction and operation of the new facilities to ensure consistency with the mission and quality standards of the state park system. This system-wide expansion of camping opportunities will increase the level of public benefits state parks provide, enhance the economic benefits of state parks, create jobs, and move the state park system closer to economic self-sufficiency.”

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.

I have been disappointed with quality of analysis in some of the recent consulting studies that have come out in Arizona on parks and privatization.  In particular, one study early this year interviewed something like 60 employees of various state and local government agencies on privatization — but not a single one of these 60 or their agencies had any experience with concession management of whole parks.  It still puzzles me why the US Forest Service, which is right here in the state and has concession operation of whole parks in over 40 parks in Arizona, has apparently been ignored by every Arizona study on the topic.

Anyway, that is all water under the bridge.  I recently saw a study by a group in the Utah legislature on parks and how to make their state parks more financially sustainable.  While I quibble with some of it and would have done some things differently, it is one of the best public studies I have seen to date on this topic.  It actually gets at the elephant in the room that most studies ignore (ie park employee compensation rates) and even addresses some more subtle issues that are often missed (eg. proliferation of law enforcement titles due to individual incentives to seek such titles rather than demand for law enforcement).  I have linked the study below, which is a fairly large pdf.

Utah state parks audit

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.

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.

# # #

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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As occurred in 1995, when the government shuts down, most of its recreation areas have to close, from the national parks to the Washington Monument to the Smithsonian museums.

But when most Federal recreation is closed, potentially during a busy spring break week next week, one set of government parks will be open — US Forest Service recreation areas operated by private companies under concession contract.  Because private operators collect all the gate fees and pay all the expenses themselves without any government appropriations or labor, these concession campgrounds and day use areas do not have to close when the Treasury runs out of money.

This is something to think about with state parks in nearly all 50 states facing closures during local budget battles.  Privatization of park operation shields the public from budget shenanigans and the usual game of chicken legislators play with parks during the appropriations process.

From KCRA.com

Two California lawmakers are seeking answers concerning a list of state park closures that has yet to be released. Sen. Tom Harman, R-Huntington Beach, and Assemblyman Jim Nielsen, R-Gerber, want State Parks Director Ruth Coleman to provide information on what options are being explored to avoid expected closures.

Nielsen told KCRA Thursday he believes there is a path that could avoid park closures altogether.

“Public-private partnerships are but another consideration to assure that our parks are open and well-maintained,” said Nielsen. “There are even a lot of things local governments can do, some of which might want to take over the parks themselves.”

Parks spokesman Roy Stearns said that public-private partnerships are one option being considered

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.

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

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.

The following is a guest editorial, which has appeared in a number of California newspapers, from John Koeberer, head of the California Park Hospitality Association (of which I am also a board member).

The prospect of California State Park closures is again in the news as the State of California deals with its continuing budget crisis.  There are, however, private alternatives that should be considered before closing the parks.

Increased public funding of the parks just isn’t an option.  The failure of Proposition 21 last November made that clear.  By soundly defeating the proposition, voters declared their opposition to increasing taxes to maintain state parks as they are today.  Countless surveys and actual park use demonstrate that while Californians love their state parks, they also want them managed within available resources.

The State of California has exhausted the governmental solutions to the dilemma.  And so, California State Parks have no alternatives other than to close parks or find non-governmental funding solutions to sustain them.   In the past, privately funded solutions have been dismissed out of hand.  Though today, no solution that would keep our state park system viable should be discarded.  So, let’s consider these alternatives:

Close Some State Parks. As a park professional, it is difficult for me to even mouth the obvious, but some parks don’t belong in the state park system.  Most of these are among the smallest of our parks and lack any semblance of statewide historical, natural, cultural, recreational or economic significance.  They were often added in response to political influence, when funding was more available or when state government was on an acquisition spree.  California needs an independent task force (similar to the Defense Base Closure & Realignment Commission) to assess which parks should be retained and which should be buttoned up and maintained until times are better.   The task force might also recommend which parks are likely candidates for adoption by non-profits, local park districts or other sympathetic entities that are able to operate and maintain them.  Potential savings from this assessment could be substantial.

Private Management.  Many parks could be packaged on a regional basis for private-sector management, while others have sufficient real or potential revenues to be managed on their own.   Private enterprise has shown it can accrue operating savings on an average of 30% better than government while managing park facilities comparably.  Under this scenario, supervision and protection (public safety, natural resource protection, etc.) of the parks would remain under the direction of a California State Parks superintendent.  Depending upon need and appropriateness, functions like maintenance, janitorial, fee collection, interpretation and limited and contracted security could be assumed by private contractors.  These functions represent the lion’s share of the overall costs to keep parks open.  There is significant precedent for this type of arrangement across the country.  The savings (both human and financial) could be substantial and could support and manage more effectively parks still directly operated by the California State Parks.

Innovate Revenue-generating Solutions. Many innovative, privately-managed ways to raise funds are available to state parks, including: automated fee-collection at park entrances, parking lots and showers that could collect revenue 24/7 at a fraction of the cost of manned kiosks; more privately owned and managed tent cabins, park models, yurts, and other popular new forms of alternative camping that could generate added revenue for the parks; and special events (concerts, competitions and spectator events) that could generate substantial new receipts for parks.  Programs and policies that encourage private investment could attract new types of tour, recreational and interpretive programs to parks while appealing to new audiences of park users.  To its credit, California State Parks is now surveying tour companies to investigate more profitable ways to provide tours.  A top-to-bottom review of outdated state park policies could result in substantial gains in fee collections, such as at Hearst Castle where significant revenue is lost because of current approaches.   More revenue can be generated without additional investment by state government.  In many cases, existing park concessionaires would be willing to expand their operations via amendments to their contracts, in ways that increase revenue to the state, sustain and improve upon the park experience, and preserve park values.

Challenge Concessionaires for Solutions. It is in the DNA of entrepreneurs to invent new ways to stimulate revenue.  Do that by challenging state park concessionaires to propose revenue-producing ideas and programs appropriate to the parks. Private capital can be attracted for park improvements when equitable opportunities for a return on the investment are given.  Many such investments in facilities and equipment could be left in state park ownership at the conclusion of the contracts with these private companies, allowing the state parks to attract even greater fee revenue upon the contracts’ rebid.

Employ a Management Consultant. Considering that the old approaches aren’t working, it’s time for a fresh start.  Take this opportunity to reinvent how state parks are managed and operated.  Major U.S. corporations and non-profit organizations often employ private management consultants to help them conceive new approaches.  By doing so, they stay competitive, vital and relevant.  Although private and public missions are different — innovative and effective management practices, policies and techniques are applicable to both worlds.  There are very few governmental agencies that could not benefit from an external review and analysis.

All of the preceding private-sector approaches can be accomplished at little to no cost.  They are not panaceas for the crisis facing our state parks but represent departures from past approaches.  The many private park management companies now operating in public parks across the nation demonstrate that most criticisms of private solutions are unfounded.  In the light of funding realities, past reluctance by the legislature and labor to involve the private sector must be overcome if California is to sustain its state park system.

The California State Park funding crisis has given our state the opportunity to redefine how our parks are managed in ways that will assure their quality, relevance and access for Californians now and into the future.  If we can muster the political will to welcome new ideas from the private sector, while keeping park operations overseen by California State Parks professionals, then impending closures to and the rapid deterioration of the state park system does not need to be inevitable.

By promoting efficient private management of public recreation, I am hoping to offer a third choice to these two:

This is the kind of public management of private operations contracts that really drives me crazy

Phoenix gave away more than $3 million – so far – to Veolia Transportation, a transit company that operates buses throughout the city.

It’s $3,295,573.86, to be precise.

That’s how much Phoenix would have collected in fines from the French transit company had city officials not agreed to waive four month’s worth of penalties for things like late, broken or unkempt buses.

A significant savings for the Veolia executives who have Phoenix Mayor Phil Gordon’s girlfriend on their payroll as a consultant and Gordon’s good friend Billy Shields as a paid lobbyist.

And that $3.29 million tally only covers July, August and September, according to records obtained by New Times. Given that Veolia has racked up about $1 million worth of fines each month, it is likely that Phoenix also lost out on another million bucks for October.

The parties can argue back and forth about the justification for waiving of fines in this case (it was part of a settlement on a different issue).  But the fact is that, whether the fines should have been waived or not, the contractor in this case is providing measureably inferior customer service and the city is not fulfilling its oversight function to keep things on track.

Of course, before privatization opponents fall over themselves to use this as an example of why privatization should not happen, they will need to answer the question of how the city could be expected to provide quality service operating the buses itself when it fails on the fair less complicated task of monitoring an outside agency providing the service.  If the city cannot bring itself to enforce quality standards on a third party, it is unlikely it could have enforced the same quality standards on itself.

This in a nutshell is why our company only provides third part operations under concession arrangements where our revenue is 100% paid by the end user (without any government appropriations).  This way, while the public agency still must exercise oversight, the first line of accountability is provided by our desire to keep revenues up — if we do a poor job, visitors don’t come back and we lose money.   In a fixed cost relationship, which we generally won’t accept, the private company’s incentives are 100% focused on cost reduction rather than customer service — in fact, the more customers one drives off in such a relationship, the more profitable the contract.  In these arrangements (as in the example here with Violia) 100% of the accountability for quality comes from the public agency enforcing certain metrics, and as one can see, public agencies vary greatly in their ability and will to do so.

(Note:  The kind of concession-based revenue share relationship we operate under is pretty much impossible for Phoenix to use in their bus system, at least as long as they insist on running so many empty buses around town).

Last night when I migrated servers on the site, a bunch of unmoderated comments popped up that had somehow been invisible to me. I am sorry, they have all been accepted. Hopefully whatever was causing the problem was fixed in the update.

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.

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

From the AZ Daily Star

The state should pursue more opportunities to turn parks over to private companies, or at least let them operate retail concessions, a panel appointed by Gov. Jan Brewer to study government recommended Tuesday.The initial report by the Commission on Privatization and Efficiency suggested turning more of government over to the private sector. Members also want to push Congress to repeal laws that now prohibit the state from letting private firms set up shop in rest areas along interstate highways.

But state Gaming Director Mark Brnovich, whom Brewer named to head the panel, said this is only the first step. He said the nine-member commission, all handpicked by the governor, is predisposed to believe that if a government service can be privatized, it probably should be.

“Like the governor, members of the commission are strong believers in the free-enterprise system and the free market,” Brnovich said in an interview. “History has shown that the private sector is able to come up with innovative and, very often, cost-effective solutions to problems.”

Brnovich acknowledged that private companies, unlike government, must make a profit. But he said commission members don’t see this as meaning higher costs for taxpayers.

“The free-market system, capitalism, works because folks are forced to come up with better ideas and create greater efficiencies and come up with new innovations,” Brnovich said. He calls it the “Yellow Book test.”

Arizona State Parks has actually issued a proposal for a whole-park concession.  Here is the AP story, which quotes me at the end.  Rather than run the quote they used for the article, here is my entire set of comments I sent to the reporter:

1.  Our company (and many others) operate public parks in public-private partnerships, and have been doing so for decades.  In certain agencies, such as the US Forest Service (USFS) or the Tennessee Valley Authority, this is totally accepted practice.  It is also accepted practice in any number of cities and counties.  Why state parks organizations have typically resisted this model, when so many other public recreation and conservation agencies have adopted it, is somewhat of a mystery to me.

2.  The Oracle RFP is pretty thin gruel.  When I presented to both Arizona State Parks (ASP) and the legislature some months ago (not last week as in your email), I said that there were many parks on their closure list that were standalone business opportunities but Oracle was not one of them.  I said that Oracle could probably be included packaged with another nearby park — I run many parks that lose money but are packaged with other parks that make money so the whole package is still attractive.  Also, by putting together several parks in one area, there are certain economies of scale in management and operations to be gained.  I have not been able to debrief my COO who went to the Oracle meeting, but his general sense was that the Oracle was encumbered with many restrictions that almost guaranteed it could not be a good commercial opportunity.  We are able to operate parks with much lower costs than can ASP at similar or superior quality levels, but at some point the revenue gets too small even for us to make work, and Oracle may well be such a case.  I am working from memory, but I think the state brings in about $20-$30K a year at Oracle and spend about $280,000 to operate the park.  Even if we cut the costs by 75%, it still does not come close to working.

3.  About 3 months ago, a guy named Leonard Gilroy, a local resident who works for the Reason Foundation, told me this:  He said the number one play in the anti-privatization playbook was to pick the absolute worst commercial opportunity in whatever organization that is facing privatization pressure, offer it as an RFP, and then when there are inevitably no private bids, say “see, we tried but privatization does not work — no one will bid on these parks.”  Given that I was told this months ago, I have to look on the Oracle RFP with some suspicion that it was purposely selected to be a poor opportunity in order to blunt the pressure for privatization.  However, this may be unfair as it is impossible as a third party to read motivations.  I know, however, that ASP 2nd in command Jay Ream has gone on the record at a public meeting for Lost Dutchman SP that he is in complete and total opposition to privatization or public private partnerships of any sort.  For this reason, our company has not ruled out bidding on Oracle, even if it is a money loser, merely to pre-empt this strategy

4.  I have not heard anything about Lyman Lake, so such an RFP is new information for me.  A whole-park RFP for Lyman Lake structured along the lines that the US Forest Service routinely offers these contracts might be a good opportunity for a private company.

5.  I would encourage you to visit my blog at www.parkparivatization.com.  The same exact arguments are used over and over against public-private partnerships in parks and these are addressed throughout the blog, but in a compact form right at the top in the FAQ.  ASP (and in fact most state parks organizations) acts like this is some kind of risky new rocket science.  In fact, our company does this all across the country, and runs 35 whole parks and campgrounds for the US Forest Service right here in Arizona.  Check our web site at www.camprrm.com for locations.  What has frustrated me through this debate is that nobody (including notably nobody from the Arizona Republic or Arizona State Parks) has bothered to do any basic due diligence on recreation public-private partnerships when we have numerous examples right here in the state.  Heather Procincio, district ranger for the USFS in Sedona (Red Rock District) could easily discuss the 20+ year history of the USFS having private companies manage nearly all of its recreation areas in the Coconino NF.  Brian Poturalski in the USFS Mormon Lakes / peaks ranger district in Flagstaff also knows a lot of the history.  The USFS is the largest public recreation organization in the world and has hundreds of contracts to privately operate parks and has been doing this for decades.

This episode in outlandish critique’s comes from someone who has an impressive-sounding title — Moshe Adler, who apparently teaches economics at Columbia University and at the Harry Van Arsdale Center for Labor Studies at Empire State College.

Apparently, the city of New York uses private companies to trim trees.  Which leads us to this critique:

Possible Cause of Death: Privatization

When a branch fell from a tree at the Central Park Zoo in New York City last month, killing a 6-month-old baby and severely injuring her mother, who had been holding the infant, Mayor Michael Bloomberg declared it “an act of God.” But in all likelihood it was the act of a mayor….

City officials told The New York Times that the tree in question had been pruned twice since December. But pruning requires expertise and is time-consuming. … But it is precisely because tree maintenance requires expertise and great diligence that the responsibility for it should lie within the city, and that the person responding to reporters’ questions should be a city arborist.  Initially, city officials did not even know exactly who was in charge of maintaining the tree.

As turnkey operator for over 150 parks with many trees, part of our duty is to identify “hazard trees” that present a danger to the public and prune or remove them.  We do so in close cooperation with the USFS.  I don’t know what arborists Mr. Adler talked to, but certainly they are correct that this process takes some expertise.  However, they were either incompetent, or Mr. Adler is not reporting his full discussion with them, if they said that even the best expert can reliably identify every tree or branch that is likely to fall.

We have an aggressive hazard tree program that is conducted with US Forest Service experts looking over our shoulder, and we still miss lots of trees and branches that fall.   That is because nature is complex and unpredictable and sometime inscrutable.  Whenever we have had an accident of a tree falling and damaging something, we have an expert come out and do a post-mortem, and almost every time the diagnosis is that there was no reason to believe that branch or tree was in danger.

The contractor for tree trimming therefore could be bad or could be good – this single event does not shed much light on the problem.  Since Mr. Adler is an academic at a prestigious university like Columbia, I am sure that to be so certain, he must have done a real analysis which would logically compare incident rates with falling trees either between periods in New York with both public and private operation of the tree trimming, or else compare between cities that use different methodologies.   Given this obvious analysis, it is odd that he would not share the results with us in this article – surely a professor at Columbia isn’t just trying to draw an ideological conclusion from a single data point concerning a function with which he is not very familiar.

One wonders, further, if public servants are so flawless, why someone in New York City hasn’t thought of the idea of supervising private contractors with a public expert.  This is the kind of 90/10 solution we use with the USFS, with the Forest Service getting 90% of the cost benefit of private operations while still supervising the tree trimming and removal with a tree expert from within their organization.  This strikes me as falling into the same category of many other critiques of privatization, where the failure (if there is one in this example) is one of public management of the process rather than privatization per se.

Mr. Adler is is correct, I think, to put a heavy weight on incentives.  He feels that the incentives problem makes the diligence of public employees inherently superior.  What incentive, after all, do public employees have other than to do the right thing for the public, while profit making companies will tend to cut corners to improve profits.

First, there are certainly companies that cut corners, and the great thing about a free market is that these guys tend to get weeded out through competition.  The only exception to this is in government contracting, where mindless low-bid contracting  (my private company almost never takes the low bid when we are looking for a contractor) and poor supervision give corner-cutting private companies room to thrive.  I would argue that the continued existence and use of these type companies is a government failure rather than a private one.  Incredibly, Mr. Adler seems to agree

The body that awards the contract is not a private party acting on its own behalf but officials acting on behalf of the public, and the level of vigilance is not the same as that which occurs between private parties

As to employee incentives, while in theory public employees are supposed to serve the public, in practice their incentives tend to be an awful mess.  A big part of this problem is that  they are almost impossible to fire.  Combine this with a seniority-based pay package, and there is absolutely no incentive to perform.  I laughed when Mr. Adler wrote this:

The rationale for contracting out is always the same: cost cutting. The taxpayer will save money, it is argued, because the workers of private contractors get lower wages and fewer benefits than city employees get, and because the workers of these contractors have no protections against arbitrary dismissals.

In fact, public “protections against arbitrary dismissals” in practice become public protections against any dismissals.  The difficulty, for example, in firing a NY teacher is well documented.

Further, if a tree falls and kills someone, and there is a liability claim, the taxpayer pays for it.  What do the public managers care?  In fact, you can see this in Mr. Adler’s article, the public agency’s relative indifference to this incident.  Do you really think the agency’s indifference would not translate to workers?  What super-men is Adler positing for these public tree removal jobs — their bosses are indifferent, their pay does not change if they do a good or bad job, and they can’t be fired — but they somehow have a ruthless dedication to excellence?   Has Mr. Adler never been to the DMV  (actually, if he lives in Manhattan all his life, he may not have).

If the same event were to happen in an area we manage, the claim costs me personally money.  You can bet that if we hire indifferent employees who do a bad job, they are gone, usually in weeks.  If I was stuck for years, as the public is, with every employee we made a hiring mistake on, I would have to shut down the company.