This relationship between public and private labor costs here is very similar to what we find in parks. Most park agencies have about 80% labor costs, while ours for running similar facilities is between 30% and 40%.
The difference mainly lies both in productivity expectations as well as escaping civil service pay and benefits scales. The difference is typically NOT about number feet on the ground — in fact, private companies tend to have more customer contact people in the park than do state agencies.
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.
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 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 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.
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.
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.
Check out this most recent Reason.TV video, which includes your humble correspondent.
Got the letter from a customer of a US Forest Service park we operate. I know the last paragraphs almost looks like a setup but we honestly got this letter out of the blue from a customer no one here knows.
Two western Kentucky lawmakers say they don’t support plans to close resort parks two days a week in the winter and privatize restaurants and golf courses.
Let’s make sure we are clear on this — They are talking about closing Tuesday and Wednesday in Kentucky in the winter time, which (if you are not from the area) is typically cold and rainy.
My company runs several enormously popular parks in Western Kentucky for the US Forest Service. They are so popular we have lines and wait lists in the summer to get in. But we don’t even try to keep the place open from November 1 to March 15, and even then the dropoff we get in the late and early season is substantial.
I am not that familiar with these parks in the article, but I would have to take a good long look at them to see if I would support keeping them open in the winter at all, much less 5 days a week. I am currently looking at a resort type public park in Georgia with a lodge, and the cost of keeping a resort and restaurant open in the winter when there is no business is simply astronomical.
But let’s consider the lawmaker’s suggestion for a moment. I am a marketing guy. You ask me to do something to fill up a cold, rainy western Kentucky resort on a Tuesday and a Wednesday during the school year. How? I am sure you could hire someone who would gladly take your money for this project, but what possible chance of success does it have? Who is going to go when their kids are in school to spend two mid-week days in a cold and rainy resort? In the Georgia example I am looking at, there is nothing one can do to reasonably get occupancy high enough even to break even — the mid-week and winter off seasons are too much of a drain if the lodge remains open during these slow times.
The only possibility is selling to the business meeting market, to try to get businesses to come in. This is a tough sell anyway, particularly in this area of the country, but it also requires some minimum facilities. Small lodges don’t work well, and there needs to be good meeting space, good A/V and internet infrastructure, and catering capability. And even if all this capability exists, there will not be meetings all the time and the rest of the time the costly capability will just sit unused, burning money.
Which leads to another inherent problem with government management of recreation — their labor force tends to be both expensive and, more importantly, inflexible. One reason they cannot just shut down for the winter is that it begs the question, what do we do with all of our salaried staff? One reason companies like mine can offer such large cost reductions without sacrificing service is that our labor force is enormously flexible. I have mobile employees (in RV’s), some of whom want year-round work and some of who only want seasonal work. This allows us to match staffing to demand better, so we don’t pay a 30 person staff in the winter to sit around looking at empty parks.
A couple of thoughts. First, of all the different kinds of public parks, is there any type with a more proven track record of successful private management than golf courses?
Second, God forbid anyone make a profit. I am sure the state is losing money on the operation, so why do they care if someone makes a profit if their loss goes away and the golf course remains open to the public?
Third, this just shows lawmakers again talking without any knowledge of the subject. All private management deals include rent payments back to the state, so whether the private entity makes money or not, the state is going to convert a current loss to a gain via rent payments. In effect, private cost reductions and performance improvements result in additional surplus, and that surplus is split with the private company retaining some as profit and paying some out to the state as rent. Win-win.
The Goldwater Institute responded to recommendations that state parks be funded through a new license plate fee with a simple suggestion of its own: instead of raising taxes for parks, keep them under state ownership but let one or more private companies manage them.
Senator Barbara Leff wrote and won approval for Senate Bill 1349, which gives the Arizona Parks Board authority to immediately contract with a private company to run state parks. Despite an offer from a Phoenix-based company, the parks agency has shown little interest and even outright hostility to the idea.
As an alternative, local communities have been making extraordinary efforts to keep open parks they deem important to their local economies.While private contracting is not always simple, its benefits in this case are clear. Parks would stay open and the state budget would face less pressure. Unfortunately, the State Parks Board has shown little willingness so far to move on this important issue.
City Controller Wendy Greuel released an audit today showing that various City departments could not locate hundreds of items purchased with taxpayer funds, and that hundreds of other items had been sitting unopened or unused for up to 7 years….
* Of 254 items that we attempted to locate, 115 were not where they should have been. While 56 items were ultimately found in the wrong location, 59 were unable to be located at a cost of $938,000.
—Some of the items that were never found included a video recorder purchased by ITA for almost $60,000.
* Departments are supposed to conduct a physical inventory of items every two years to maintain accurate physical inventories of equipment. ITA and Sanitation have not conducted a review in at least 5 years and Recreation and Parks has not conducted a review of all items in at least 7 years.
* ITA and Recreation and Parks have 138 items that were purchased at least 1 year ago, still in warehouses or staging areas. These items are worth $237,000, and some were purchased over 7 years ago.
—Some of the items not placed into service included 9 microwaves, 1 deep fryer and 2 television sets by the Recreation and Parks Department and various computer equipment by ITA.
Parks are closing around the country for lack of money.
The NY Times has a surprisingly fair article this week about the near-impossibility of firing an NYC public school teacher:[I]n the two years since the Education Department began an intensive effort to root out such teachers from the more than 55,000 who have tenure, officials have managed to fire only three for incompetence. Ten others whom the department charged with incompetence settled their cases by resigning or retiring.
It’s not as though the city hasn’t tried.
So it took 16 lawyers/administrators two years to get rid of 13 teachers. Practices that would immediately bankrupt a private company are considered normal for the public sector.