Wednesday, September 12, 2012

My Response to the Question: 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 is 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.
Yes, I know, it is over 400 words.  They cut me slack

Parks and recreation have turned out to be particularly amenable to a privatized operation model, for this reason: While our company has over 30 contracts, not a single one involves the government paying us any money.  We are paid entirely with a share of the fee revenue paid at the gate.  This takes a lot of the legislative shenanigans, lobbying, and cronyism out of the game.  My company has been in business for 25 years privately operating public parks.  Our lifetime lobbying expenditures?  Zero.

This model where we are paid by our customers rather than by the legislature has two other substantial advantages.  First, it better aligns our incentives with those of the public.  We get paid only if people show up.  I hear the concern, "won't private companies make money by not cleaning the bathrooms?"  Sure, just like McDonald's makes money by not cleaning the bathrooms and Marriott makes money by not changing the sheets.  You mean they don't do this?  We do a good job because we need people to have a good experience and come back, particularly in this age of online reviews.

The second advantage of this approach is relevant to a concern often expressed by other writers on this site: How does the public ensure it is really getting cost savings from these private contracts?  In the recreation world, this is easy to demonstrate.  Because the private company takes over all the park operations expense, and because the state doesn't pay the operator any sort of fee, red ink disappears from the government's books.

I have published a lengthy example of real-world economics from two parks here.  Bottom line, though, is that for most parks, state agencies generally spend more money to operate a park than is brought in by user fees at the gate.  This difference must be made up for from general appropriations, and in many cases the difficulty in appropriating these funds has led to park closures and deferred maintenance.  When a private company like ours takes over, the state gives up most of the user fee revenue but it also gives up the substantially higher operating expenses it once had.  In addition, it generally gets a concession fee or rent payment from the private operator, effectively converting a money-losing park to a money-maker.

1 comment:

  1. National parks and forests are the patrimony of all Amerikans. Anybody who visits any of them will note that only White Amerikans and Asian visitors ever visit them; In my recent tour of over 20 national and California parks, forests, BLM lands and beaches, I saw 4 Black faces out of 4000. Fully 80% of the visitors at Yosemite were Asian and there were no Black faces to be seen.

    The same holds of Hispanics. I saw very few Hispanic faces, though I admit they are harder to isolate, being of widely varying hues. Three I did approach who turned out to be Mexican citizens, a lawyer and his two sisters.

    While privatizing the operation of the parks and forests would go a long way in ameliorating the implicit racial and ethnic discrimination and exploitation that those public lands represent, only outright sale of those public lands will serve to return the patrimony to our disenfranchized Amerikan citizens.

    Furthermore, if they were privately owned and privately managed, they might, like Disney World, attract some non-White/Asian tourists and citizens.