Briefing Report: Should State Parks Always Be State-Run?

Wednesday, June 15, 2011

Introduction

As the Department of Parks and Recreation (DPR) begins the process of closing nearly one-quarter of all state parks, it is well past time to review the department's current day-to-day operation of state parks and consider whether it is the optimal mechanism for serving the public. Based on experience at the federal and local levels, it appears that the private contractual operation of state parks, while keeping them in public ownership, could save taxpayer funds, improve park maintenance, and keep parks open into the future.

Background

California's state parks have been on the chopping block each of the past four fiscal years, with various threats of closures that thus far have resulted only in some service reductions. This year, the department faces an $11 million reduction in its $140 million annual subsidy from the General Fund and $22 million in the following year. In May, DPR warned that in 2012 it would be closing up to 70 of the system's 278 state park units, chiefly targeting the lowest-attended parks. Those identified comprise just 8% of statewide park attendance.

Though it is a relative straw on the back of the State Budget camel, parks have become an important player in the budget debate as they are among the state's most visible and accessible resources and amenities. The threat of losing parks is used to rally public opinion for additional spending and taxes. The term "Washington Monument Strategy" was derived from the National Park Service's regular threats to close the Washington Monument during budget spats - a strategy that was employed to great effect by the Clinton Administration during the infamous 1995 budget showdown with the Republican-led Congress. In 2008, the Schwarzenegger Administration announced a plan to close 48 state parks, which the former governor quickly admitted was intended to "rattle the cage" of lawmakers. In keeping with tradition, DPR's recent press release announcing its proposed park closures took all of three paragraphs to demand Republican legislators vote for higher taxes.

Evidence shows that the tactic may have a short shelf-life or at least some limits. Despite the much-publicized condition of state parks and threats of park closures, in November 2010, voters rejected a ballot initiative to dedicate funding for state parks via a surcharge on Vehicle License Fees, by a margin of fifteen points.  For now, it appears that lawmakers must figure out how to manage the system within its existing resources.

Private Management and Operations of Public Parks

For all of the hand-wringing, current budgetary limits provide an opportunity to seek new ways of doing business that can improve public services. All levels of government - federal, state, and local - operate public parks and recreation facilities, but for some reason only federal and local entities have engaged in contractual "public-private partnerships" for management of those facilities. States have traditionally limited private-sector involvement in parks to the operation of "concessions" - amenities or services such as country stores or horseback rides. That may be starting to change. States such as Arizona, New Jersey, and Utah are investigating whether contracting park operations is feasible and would provide savings. A January 2011 study by the Utah Legislative Auditor General concludes that "successful (contracting) of some state parks is possible with careful planning and oversight" with substantial cost savings. The study recommended beginning with a pilot program to measure results.

One reason for optimism about privatizing state park operations is the potential for reductions in heavy labor costs. The Utah study found that personnel costs are 70%-79% of total operational costs. This is because parks rely heavily on law enforcement to staff their facilities when in many cases an around-the-clock law enforcement presence is not necessary. Private operators often choose establish agreements with local law enforcement agencies to handle situations at the parks requiring a law enforcement presence, and hire civilians to perform non-peace officer duties such as visitor liaisons, ticket sales, and tour guides.

Taxpayer and Visitor Benefits

Privatizing park operations can provide significant benefits to taxpayers. When a contractor agrees to run a park or group of parks on behalf of a public agency, that agency removes the subsidized units from its ledger. On top of that, the state can receive lease payments in return. It is common for contractors to pay 10% or more of gate receipts, similar to what is charged for many concessions.

Park goers also benefit from private operations, as the operators have a financial incentive to enhance the visitor experience. Though they are limited by contract parameters, contractors can create a host of added benefits for visitors such as:

Improved maintenance. Private entities, particularly profit-earning ones, have an incentive to clean and maintain their facilities to encourage visitation. By contrast, maintenance tends to be a lower priority for public managers that see no reward in higher visitor revenue because their fees are pooled within the agency budget instead of staying at the park.

Potential expanded facilities. With the assurance of a longer-term lease, private entities can be convinced to invest their own money into expanded or improved facilities. Private funding can go a long way toward addressing deferred maintenance issues, and revitalizing dormant facilities or expanding existing ones. DPR is already exploring this through its existing concessions contracts, which require an investment of tens of millions into facility renovation, construction, and maintenance.

Reduced risk of park closures or service cutbacks. Placing parks under private operation eliminates the risk of closure due to budget problems. During the 1995 shutdown of the federal government, US Forest Service (USFS) parks and campgrounds remained open because their private operators were not subject to the approval of the federal budget.

Reconciling Public Ownership with Private Management

The prospect of introducing a private operator into a publicly-owned park can raise fears-of-the-unknown, a particularly delicate matter when it comes to the management of natural resources. But in fact this sort of arrangement exists in public parks all over the country and even in California state parks, and quite successfully. The Utah study points out that the USFS has privatized nearly all operations and maintenance of its campgrounds and marinas, including many here in California. And our state park system works with a number of private companies to operate portions of state parks commonly known as "concessions," a program that in 2009-10 generated $90 million in receipts and nearly $13 million in revenue for state parks.

How does this occur without, as opponents have claimed, the construction of fast-food restaurants or amusement parks in the middle of natural treasures? For one, it would seem antithetical for any operator in need of attendance to diminish the natural or historic setting sought by their visitor base. But as we know, there are poor businessmen just as there are poorly-managed public agencies. So the public agency retains vital oversight and monitoring roles once the contract is let. According to the Utah report, "Officials from the USFS... report that the operations of private area managers are highly regulated through agreement terms and oversight by a reduced federal staff...." The Reason Foundation provides the example of a USFS park in Florida that requires contract staff to use canoes to move about the park and maintain its undisturbed character.

Resistance to Private Operations

Despite the fiscal pressures on parks, public-employee unions have made it clear they would rather see a state park closed than operated by a private entity. In 2005, public-employee union interests defeated SB 1079 (Campbell), an effort to renovate and re-open a dormant portion of Crystal Cove State Park in Orange County under the operation of a non-profit. At a hearing on the measure, a lobbyist representing those interests declared that his union would "rather see our workers working in the park system."

The reason for this opposition is clear: the core benefit of private operations in state parks is a re-focus on the needs of customers and the general public rather than the employees. According to an analysis by the Assembly Republican Caucus, since 2000 DPR's General Fund budget has been cut $50 million, yet over the same period DPR staffing has grown from 2,817 positions to 3,264 in 2011.

Employees may be largely protected but park maintenance, as usual, is taking a huge hit. With personnel costs growing at a 7% annual clip, DPR will cut 8% of its maintenance budget this year to just $57 million, out of an estimated $185 million annual need. Meantime, deferred maintenance has grown from about $600 million at the start of the decade to nearly $1.5 billion. And yet the department continues to acquire new properties that it cannot manage. According to the Sacramento Bee, since 2001 DPR has added 12 new parks and 100,000 acres of land to the system.

Conclusion

As the budget ax falls on state parks, multiple measures are making their way through the process to look at new ways of managing them. SB 356 (Blakeslee) requires DPR to allow cities and counties the first shot at operating a state park proposed for closure, while SB 386 (Harman) requires the posting of any proposed park closure, and the posting of contact information for potential vendors interested in bidding on the park. AB 42 (Huffman) authorizes the use of nonprofit entities to manage parks that would otherwise be closed.

In fact, state law already allows DPR to lease state parks and facilities to private vendors, but the department has been reluctant to use it. In a March response to a letter from Sen. Tom Harman, the department claimed it is "considering the option" of leases. Still the department has not issued any contracts for bid for an entire park, and has reported only one new concessions agreement in the past year.

Ultimately the Legislature must force the bureaucracy's hand. There may be better ways to manage our parks, and keep them open during difficult fiscal times, but it will not be charted by the current management.

 

For more information on this report or other Natural Resources & Water issues , contact Steve McCarthy, Senate Republican Office of Policy at 916/651-1501.