Basics of Park PPP’s

Bringing Private Capital to Refurbishment and Expansion of Public Parks: A Success Story

A while back I made a presentation at the RecX conference, held at the Department of Interior in Washington, DC.  The RecX conference is a venue for exchanging new ideas on the frontiers of public recreation.

In this brief, 13-minute presentation, I discuss our experience re-opening, refurbishing, and expanding two large TVA campgrounds.  In these examples we invested over a million dollars of private capital in exchange for a revenue-sharing operating agreement for the park.  Here is the story (You have to watch just to find out why this case study video uses the image below:)

The Unsustainability of Free Public Camping

Secretary of Interior Zincke has proposed more private operation of Department of Interior campgrounds.   As readers of this blog would expect, I think this is a good idea.  However, many critiques have been raised of late.  One example is this one from the Rebecca Moss of the New Mexican claiming that “many fear” that private operations of public campgrounds will cause their rates to “skyrocket.”  This is part of a letter I wrote her in response (my company was mentioned in the article but was not contacted by her for comment on the story).

Pretty much no one that I know of is advocating for a full privatization of public campgrounds.  It is not what we do, certainly.   We privatize the operation of public campgrounds, which is different in important ways, as described here: don’t mind folks being skeptical of things I am passionate about, but I do think this bit of your article was deceptive.  Let me quote it in full:

Private companies are contractually obligated to maintain the properties they operate in national parks. But the Center for American Progress found this doesn’t always happen. Instead, the organization said, some private companies have skirted these obligations and instead further added to the backlog of maintenance for which taxpayers are responsible.

All but one of New Mexico’s national parks had hundreds of thousands of dollars in deferred maintenance as of 2016, totaling more than $213 million, according to National Park Service documents. Carlsbad Caverns National Park has the highest backlog, with $44 million in deferred maintenance, about half for a modernized elevator system. Of the overall total, $16 million in maintenance is considered critical, according to the federal budget. The backlog at Bandelier National Monument is $23 million and it’s $17 million at Chaco Canyon National Historical Park.

The implication is that the second paragraph follows from the first, that these are examples of private companies not keeping up with regular maintenance in parks, but in fact this is untrue.  These are examples of the public agency not keeping up with deferred maintenance.  In fact, the deferred maintenance in privately-operated public facilities tends to be way lower than in publicly operated facilities

The reason the government can charge low fees for camping is in part because these fees do not cover the full costs of operating these camping areas. Oddly, in the same article you sort of brag about low public camping fees in NM while complaining about the amount of deferred maintenance, but you never connect the two.  Have you ever seen a free BLM campground after the campers leave? The cleaning and trash pick-up bill alone is enormous. That is why we get deferred maintenance in public campgrounds, because use fees do not cover the full costs or operation and maintenance while budget appropriations have fallen and the difference is made up by not fixing things. The American Society of Civil Engineers recently estimated the total deferred maintenance at state and Federal parks at $114 billion. Our company operates a number of Forest Service campgrounds in New Mexico and across the country — the total deferred maintenance for which we are responsible at these locations is essentially zero.

This deferred maintenance issue in publicly-operated parks is made worse by the administrative bloat in public agencies.  Rather than use the money they have to provide services on the ground for visitors, much of their budget goes to off-site administrative staff.  My company has 350 employees, two of which are not located in a park (one of whom is me).  Arizona State Parks, which I have studied, has about the same number of employees but over half sit in off-site offices away from parks. Even when these agencies get more appropriated money, they spend it on more administrative staff and not on working down their maintenance backlog.  Well over 90% of the money our company collects in fees gets spent right back in the park itself — no government agency can say that.  Even the concession fees we pay to the government generally go back into the park in the form of capital improvements due to the smart structure of US Forest Service concession agreements.  And when government budget crunch time hits and park funds get swept up into the general fund for other purposes, fees paid to private operators are protected and still go to the parks.

I would distrust private companies to fully control the character and access of parks.  Given a choice, if I had a really nice piece of public land, I might make more money turning it into an exclusive Ritz Carlton resort.  But that is not how these contracts work.  The government retains control of the development and character of its concession-operated parks, so Forest Service campgrounds are always going to be a lightly-developed in a natural setting with total public access for all.  Given that, what we are talking about is whether the bathrooms are cleaned by efficient private companies or by civil service employees with large expensive administrative staffs.

In California, the state parks agency operates its own campgrounds and charges $35 a night (soon to go up I hear) for a primitive campsite without any utilities.  My company operates many public campgrounds in California, many right next door to state parks, and we charge no more than $24 a night and often less for the same site.  And we receive no subsidy of any sort, while California State Parks also gets $400 million or so of taxpayer money in addition to their fees.  And we have no deferred maintenance, while California State Parks have deferred maintenance of $1.2 billion growing at $120 million a year (an older estimate but still probably close to the mark).

Our Company Has Four Campgrounds on Sunset Magazines Best of the West List

Sunset Magazine just had its annual “Best Campgrounds of the West” issue and we have four of the campgrounds we operate on the list — pretty good considering we only operate in two of the four regions they cover (we operate 4 of the 54 campgrounds they recognize in CA, AZ, and NM).

On the list were Sabrina (CA), Big Pine Creek (CA), Cave Springs (AZ) and Sleepy Grass (NM).  We always love getting positive feedback, of course, but are particularly thrilled in this case since the frequent criticism of private operation of public campgrounds is that private companies will somehow ruin the recreation areas for profit.  Exactly how we would make money by destroying the natural beauty which draws paying visitors to these parks is never explained.  But it is good to have confirmation that we private operators are doing a good job.

I have our trade group counting up the total number of privately-operated public recreation areas on the list and I will post the number here when I have it.

How Are Public Parks Like Universities?

Glenn Reynolds is writing about colleges, but he could just as easily be writing about public parks:

Full-time administrators now outnumber full-time faculty. And when times get tough, schools have a disturbing tendency to shrink faculty numbers while keeping administrators on the payroll. Teaching gets done by low-paid, nontenured adjuncts, but nobody ever heard of an “adjunct administrator.”

Replace “faculty” with “people actually working in a park” and administrators with “headquarters staff” and he has described the management of public parks exactly.  Most parks agencies are suffering from administrative bloat, with more people in headquarters than out in the field actually running parks.  When they have layoffs, it is always of field staff and not headquarters administrators.   In the parks world they will even ignore major maintenance needs in favor of making sure they have the funds to keep paying headquarters staff.

It is just absurd.  Of course, in our case, we make a business out of this.  We operate public parks, and have 300 field employees actually in the parks and 2 in headquarters.  It allows us to cut costs while simultaneously doing a better job.

PERC on Private Operation of Public Parks

My article on private operation of public parks has been published by PERC and is now up at their web site.  It’s called “A Tale of Two Parks” and compares the costs of private and public operation, among a number of other issues.

Government Shutdown and Privately Operated Federal Parks

The government shutdown in October was an interesting chapter in the business of private operation of public parks.

For years I have said that one of the advantages of private operation of public parks is that these parks are sheltered from budget shenanigans.  If the park  is operating with no public money, they can’t be closed when budgets are cut.  In fact, in all past Federal shutdowns, such as the two under President Clinton, private concessionaires in the US Forest Service stayed open.

Well, I guess this Administration was dead-set on making a liar out of me, because private Forest Service concessionaires were shut down in the recent budget battle.  In the early days of the government closure, we were told that we would stay open, as in the past.  Then we got the fateful call from a senior US Forest Service executive telling us that the decision had been made “above the Department of Agriculture” (ie in the White House) that we had to close.  So we did.

However, we filed suit in Federal court to block the closure, and on the last day finally had our day in court, where the Federal judge excoriated the Forest Service for closing us.

If you are interested, I documented the whole saga at my other blog, with all the articles on the shutdown collected here.

By the way, in the interest of fairness, if you want an opposing viewpoint from someone who seems thrilled that we were closed, see here (along with some of my responses in the comment section, if they have not been deleted).

Using Private Operators To Short-Circuit the Sequester

Derrick Crandall has an article recently on ways the NPS can survive the sequester.  Here is a key bit:

Second, there are roles and functions that could and should be reviewed and could be transferable to private sector operations.  For example, NPS directly operates most of its campgrounds while a sister federal agency, the Forest Service, relies largely on concessioners.  NPS campgrounds are now underutilized, full only during peak seasons and some weekends.  Concessioner operation would add camper services, introduce dynamic pricing and start marketing these campgrounds.  NPS costs would drop by millions of dollars, its receipts from franchise fees would rise … and campers would have increased satisfaction levels.  Estimated net financial gain from this change is at least $25 million.

The other related advantage of private operation, particularly in a concession model where companies are paid with visitor fees, is that these fees are protected from legislative sweeps and government closures.  By contract, the user fees in concession contracts remain in the park, supporting operations and improvements.

Huff Post Live Discusses National Parks and Privatization

I was on Huffington Post Live the other day in a panel discussion on privatizing National Parks.  The link to the video and comments is here.

None of the panelists, including me, advocated for privatizing National Parks.  The whole point of public lands, as I have written on this site before, is to change the decision-making calculus around development of and access to these lands from net present value to broader access and more natural settings.  In other words, no one wants a McDonalds in front of Old Faithful.

What I did advocate for, as discussed starting around the 7 minute mark, is for privatization of certain operational tasks, from bathroom cleaning to maintenance to landscaping, in order to reduce costs.  Already, the high cost of using civil service employees to perform these tasks are crowding out things like maintenance and renovation.

Parks 2.0

A relatively new group called the Conservation Leadership Council kicked off their tenure by sponsoring six articles on the future of environment and land management.  One of those size initiatives was called Parks 2.0: Operating State Parks Through Public-Private Partnerships.

I won’t be coy — the authors interviewed me several times and I helped them find the relevant data.  But they did a great job outlining how parks agencies can reduce operating costs and thus keep their parks open using PPP’s for park operations.  A great primer for those interested in this model.

2nd Annual Park PPP National Conference

We will be holding our national conference on November 7 in Reno, Nevada.  We have an amazing slate of speakers and a great program for agencies looking to understand the public-private partnership model for keeping parks open.

All the details, speakers, and agenda are at

Essay Response: Should National Parks Be Privatized

I was asked to write a 400-word essay for an outdoor magazine on “should national parks be privatized”.  Here my response. By the way, I put the stuff about myself and my company in under duress.  It was not in the original draft and he wanted something personal.

Should National Park’s be privatized, in the sense that they are turned entirely over to private owners?  No.  Public lands are in public hands for a reason — the public wants the government, not, say, Ritz-Carlton, to decide the use and character and access to the land.  No one wants a McDonald’s in front of Old Faithful, a common fear I hear time and again when privatization is mentioned.

However, once the agency determines the character of and facilities on the land, should their operation (as opposed to their ownership) be privatized?  Sure.   The NPS faces hundreds of millions of dollars in capital needs and deferred maintenance.  It is crazy to use its limited budget to have Federal civil service employees cleaning bathrooms and manning the gatehouse, when private companies have proven they can do a quality job so much less expensively.  The US Forest Service, for example, has had private operators in over a thousand of its largest parks for nearly thirty years, and unlike state parks agencies or even the NPS, it is not considering park closures or accumulating deferred maintenance, despite having its recreation budget axed.  Why? Because its partnership program with private operators is a fundamentally sounder, lower-cost approach to park operations.

In fact, such public-private partnerships are nothing new for the NPS.  The NPS was an early innovator in this field, and currently private companies operate many of the visitor services in parks, such as lodges and gift shops.  The US Forest Service innovation, which has been copied by many agencies including most recently California State Parks, has been to turn over operations of the whole park, not just the lodge, to a private company.  These are highly structured contracts, wherein the private company cannot modify the facilities or change fees without agency approval, and must meet a range of detailed performance goals.

Most critiques of private park operations center around quality and fees.  While there certainly have been some isolated failures, in general the results have been quite good.  In Arizona, a recent poll by ranked the top 10 public campgrounds in Arizona.  Of these, three of the top five were US Forest Service campgrounds run by a private operator, as was the top Arizona campground in Sunset Magazine’s “Best of the West”  (OK, I have to brag, these are all run by my company). As for fee concerns, state-run parks in California charge $30 for a no-hookup camp site.  Privately operated public campgrounds in California forests seldom charge more than $18.

My company operates over 150 state, county, and federal parks.  I encourage you to take the “Pepsi Challenge” and see some of them for yourself.  They are well-run, generally with more staff than a typical state park, and have no significant deferred maintenance backlog.  Oh, and not a single one has a McDonald’s, a billboard, or a neon sign in front of a national monument.

A Few Privatization Updates

I just wrote three new articles for the Privatization Blog.

The first looks at which types of public decisions should stay public in a privatization effort

The second looks at implementation issues and learning in privatization

The third acknowledges that privatization efforts can fall into cronyism, but points out that generally in these cases the public alternative falls into the same behaviors.  A great example is prisons, where privatization is derided by folks like Think Progress for the lobbying the prison companies do both for contracts and harsher laws, but they never acknowledge that public prison unions have demonstrated the same behaviors and for much longer.

The Real Problem with Advertising in Parks

I am not a huge fan of advertising in public parks to increase revenues.  I don’t tend to be anti-advertising per se, but the number one reason, ahead of all others, for public lands to be public is so a public agency rather than the operation of markets can determine the use of, access to, and character of the land.  Advertising could undermine that character, though it certain can be debated.

But here is my real problem with advertising as a solution to park budget woes:  It is symptomatic of public parks agencies focus on the wrong side of the income statement.  In almost every state I have worked with, parks agency management works very hard to avoid scrutiny of its expenses, and attempts to shift the discussion to revenue enhancements as the path to budgetary salvation.

But this is a chimera.  In most cases, the revenue improvement initiatives are an order of magnitude smaller than potential expense reductions.

Let’s take one state that will remain nameless.  It rejected out of hand private concession proposals to operate whole parks and said it would focus on private concession proposals to increase revenues by paying concession fees, in this case seeking a private company to rent bicycles in the park.  So let’s look at the park:

Park gate fees:  $500,000
Park expenses  (probably missing some stuff):  $800,000
Situation:  The park requires at least $300,000 a year of general tax funds to stay open.  These are going away, so this gap must be closed or the park will close.

Proposal #1:  Revenue Enhancement.  A private company will be enticed to open an equipment rental (bicycles, etc.) in the park (there is already a store).  In the best case, this might net $100,000 a year in revenue for the private company which would pay the state 10% or $10,000 in annual concession fees.  The state’s $300,000 loss is reduced to $290,000

Proposal #2:  Expense Reduction.  A private company proposes to take over all expenses of the park in exchange for keeping the park gate fees, paying the state a 10% concession fee.  This is entirely possible in this example, as private concessionaires often have 50% or more cost reductions for the same or better service levels in operating parks  (remember, most of park operations is cleaning bathrooms and mowing the lawn).  In this example, the park’s $300,000 loss is reduced to zero, and in fact the state now receives $50,000 in concession fees from the park which can cover supervision of the concessionaire and perhaps some improvements to the park.

Hopefully, this helps explain my issue.  Focus on revenue enhancement, and taking risks with the character of the park through things like advertising, have almost trivial impact on park financial sustainability when compared to addressing the expense side of the equation.

Privatization and Public Accounting

Dru Stevenson was nice enough to invite me to join him at the Privatization blog, which tends to address many topics in the privatization world.  The writers can be both skeptical and enthusiastic about the model, so the overall coverage is pretty balanced and it is a good resource on the topic.

Last week I introduced myself with an introduction to myself and private operation of parks.

In my second post, I addressed a topic I have been meaning to get to here for a while, which is the problem of making privatization decisions using public accounting processes that were never meant to support this kind of decision.  Here is an excerpt:

Back when I was in the corporate world, “Make-Buy” decisions — decisions as to whether the company should do some task itself or outsource it to companies with particular expertise or low costs in that area — were quite routine.  Even in the corporate world, though, where accounting systems are built to produce product line profitability statements and to do activity-based costing, this kind of analysis is easy to get wrong (in particular, practitioners frequently confuse average versus marginal costs).

But if these analyses are tricky in the private world, they are almost impossible to do well in the public sphere.  Grady Gammage, a senior and highly respected research fellow at Arizona State University’s Morrison Institute, has as much experience with public policy analysis as anyone in the state.  Several years ago, he spent months digging into the financial numbers of Arizona State Parks, with the full cooperation of that agency.  A critical question of the study was how much it actually cost to operate a park, vs. do all the other resource and grant management tasks the agency is asked to perform.  Despite a lot of effort by Gammage and his staff, he told me once that the best he could do was make an educated guess –plus or minus several million dollars — as to how much of the Agency’s budget is spent actually operating parks vs. performing other tasks.

The reasons that this is so hard is that the parks agency’s budgeting process was not set up to determine true net operating gains and losses at parks.  It was set up, like most public accounting systems, to enforce accountability to different pools of money that have been allocated by the legislature for certain tasks.  This tends to lead to three classes of problems that cause public make-buy decisions, as well as ex post facto third-party analyses, so difficult.  Since I am most familiar with the parks world, I will discuss these three issues in the context of parks:

Case Study: Private vs. Public Park Operations

In private park management, the park continues to be owned by the public agency, and all decisions about the facilities, services, and character of that park remain in public hands.  The difference is in who actually does the cleaning and maintenance and operations of the park – high cost public agencies or more efficient private firms.

People love to hypothesize about the potential problems with private park operations as if there were no examples of such management to gather actual facts about performance.  But such examples do exist.  After years of such wild speculating (e.g. they will build a McDonalds in our park!) we finally took the state agency, legislators, and the media out to a pair of neighboring public parks in nature-loving, environmentally-sensitive Sedona — one publicly operated, and one operated by a private firm.

Here is the case study comparing the two

Park PPP Conference Notes and Video

I have finally gotten the powerpoint slides and video from our November, 2011 national conference on Keeping Parks Open Using Public-Private Partnerships.  You can find them in the “training resources” tab above or at this 2011 Conference Recap link

Arizona Private Park Operations Case Study

Recently we held a series of fact-finding meetings for Arizona legislators and the executives of Arizona State Parks.  We held the meetings at a pair of public parks that are virtually adjacent to each other in Sedona, AZ.  Both parks are similar in size, facilities, and visitation.  The only difference is that one is operated by the state agency, and one is operated by Recreation Resource Management under concession agreement with the US Forest Service.

The key finding?  While the state-operated facility requires hundreds of thousands of dollars of appropriated money, above and beyond gate fees, to remain open, the privately-operated park actually generates positive cash flow for its agency.

See all the details in this short case study, in pdf format:  A Tale of Two Parks.

Since that meeting, Arizona legislators requested a specific proposal of what Arizona State Parks might be appropriate for private operations, and how much money the state might save.   The summary of our response is here:  Potential Test of Private Operations in Arizona State Parks.

Can Private Management Keep State Parks Open In California?

The San Francisco Chronicle addressed the issue of private management of public parks last week.  Unfortunately, despite the author’s stated goal of helping to answer questions about this approach, the article only interviewed people without any knowledge or experience with private park management and seemed to engage in some really wild speculation.  Here is the letter I wrote to the author

I was surprised at the tone of your article on December 15, titled “Private Funds or California Public Parks Questioned,” particularly the implication that private operation of public parks is somehow new and untried, thereby justifying wild speculation on its outcomes.  In fact, over 500 public parks in California are already operated privately, with examples of successful public-private partnerships that date back over 30 years.

This paragraph, which I presume is your private editorializing since it is not attributed to any source, struck me as particularly over-wrought

The question is, how will these agreements work over time? If parks remain open using donations, what is the incentive for legislators to put money for parks in the general fund budget? And who is going to stop a rich crook or pot dealer from taking a park off the closure list and using it for fiendish pursuits?\

I understand that the California State Parks system engenders deep loyalty and affection.  And if the state were proposing to entrust these vital public assets to some crazy, untried system, I suppose such hyperbolic language (“fiendish pursuits”?) might be justified.

But private management of public park operations was pioneered in California at least three decades ago by the US Forest Service.  The USFS has created a process in which the government still excercises the strictest control of park facilities, quality, fees, and access while harnessing the lower costs and innovation of private operators.  Numerous public agencies, including large park systems like the East Bay Regional Park District and the Metropolitan Water District, have used variations of this model, such that over 500 public parks are managed privately in this state alone.  You have likely been to one and never knew it.  That is because they look no different than the parks run by California State parks  — they don’t have condos or a McDonalds or billboards or anything that it is sometimes supposed private operators might build on public land.

What these parks do have is well-maintained facilities and very reasonable fees.  The facilities are well maintained because they must be by contractual obligation — they are not dependent on the vagaries of the appropriation process for their maintenance.  The reasonable fees are due to substantially lower operations costs.  Just as an example, California State Parks charges $30 a night for a no hookup camp site.  Very similar campgrounds in California in the National Forest that are operated by private companies never charge more than $22 a night for the same site, and often charge less than $20.

Our company, among many others, have operated public parks for decades.  The key is an intelligent division of responsibilities.  The public agencies we work with retain control over facility changes, conditions, fees, services offered, etc.  Companies like ours pay for all the operations, from insurance to staffing to maintenance to utilities, and pay for this solely with the gate fees already paid at the park, generally without any public subsidies.  The success of this model in keeping parks open can be seen in the US Forest Service.  The US Forest Service in California has seen its recreation budgets cut far more than have the budgets of California State parks, but in general the USFS is not talking about park closures.  They have found a more sustainable financial model for recreation operations.

Even in California State Parks, this is not a radically new idea.  While there are no California State Parks whose entire operations are managed privately today, private companies do operate large portions of a number of parks.  The conference center at Asilomar SP, the cabins at Big Redwoods Basin and Burney Falls, the stores and marinas at dozens of parks, and the tours at the Hearst Castle, are all operated privately under the close supervision of California State Parks.  And in these cases, no one expresses serious fears of Asilomar harboring drug dealers or Hearst Castle being operated for fiendish pursuits.  In fact, more than any other state in the nation, California already has the expertise and infrastructure in place to manage a private park operations program.

Remember, we are not talking about handing parks over to private entities to do with as they please  — these are highly structured relationships that substantially reduce costs because private operators can clean the bathrooms and do the landscape maintenance and staffing far less expensively than a public agency.

There are plenty of public public officials and private companies that can discuss this park operation model in more depth.  I would love the chance to discuss it with you in more depth, and there are plenty of public public officials and private companies who could demystify this for you.  And I don’t think any of us are pot dealers.

Terrific New Study on Park PPP’s

Holly Fretwell of PERC has completed a great new study of how use of private companies to handle park operations can help keep parks open and well-maintained.  The introduction to the study is here and the study itself is here.

Some state park systems rely on tax dollars provided through state general funds. When state budgets are tight, park funding is a lower priority than projects such as schools and hospitals. Hence park budgets are quick to hit the chopping block, leading to threats of park closures or reduced services.

Rather than ride the roller coaster of state budgets, some parks have leased their operational activities to private managers. These private entities have proven they can operate the parks more efficiently, and sites that were once a drain on agency funds are now generating revenue.

Private management can provide consistent, quality stewardship as well as more customer service.

She also gives a nice plug for our upcoming national conference on November 2 in Scottsdale.

2011 Keeping Public Parks Open Conference – Update

On November 2, 2011, I am hosting a conference in Scottsdale, Arizona on how public agencies can keep parks open through private recreation management partnerships.

For thirty years, the US Forest Service has seen radically declining recreation budgets, with far greater reductions than places like California is facing, but has not had to close parks and has kept most of their recreation areas well-maintained.

Their innovation was to take advantage of the substantially lower costs of private operators to run their campgrounds and picnic areas.

For the last couple of years, it has frustrated me to no end to watch states like California and Arizona — really almost every state in the country — let some parks accumulate deferred maintenance while other are closed when it simply is not necessary.

The event flyer is here, which hopefully you can also forward as an email from the link at the bottom.  If you know anyone in public recreation or in the your state’s legislature who is interested in recreation issues, please point them to this site where they can learn about and register for this conference.  We have gotten some sponsorships such that government employees can attend for free, and the rooms in the hotel, a fabulous resort in Scottsdale, can be had for just $105 per night.