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Annual Privatization Report 2013

California Pioneers Public-Private Partnerships for Private Operation of State Parks

Subsection of Annual Privatization Report 2013: State Government Privatization

Leonard Gilroy
April 22, 2013

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As reported in recent editions of Reason Foundation's Annual Privatization Report, policymakers in several states have begun to explore the expanded use of privatization and public-private partnerships (PPPs) in the operation of state parks as a means to keep parks open and thriving amid strained budgets and heightened competition for limited state funds. Though used at the federal level for decades, California broke new ground at the state level in 2012 by becoming the first state to contract with private recreation management companies to operate whole state parks.

For over 25 years, the U.S. Forest Service (USFS) has used an innovative PPP approach—a "park operation PPP" or "whole park concession" agreement—in which it enters into leases (concessions) authorizing the operation of one or more recreation areas by a private recreation management company (concessionaire) under a performance-based contract. Under a park operations PPP, a concessionaire takes most or all of a park's operations and maintenance costs off the public agency's books and pays the public agency an annual lease payment based on a percentage of the entry, camping and other user fees collected at the park (typically 5–15 percent of gross revenues). The agency retains full ownership of the land, and the concession subjects the company to strict state controls on operations, visitor fees, maintenance and other key issues.

Private, for-profit recreation management companies currently operate over half of the USFS's thousands of developed recreation areas (e.g. campgrounds, day use areas) nationwide under such "whole-park" concession agreements. For example, Colorado, California, Oregon and Washington each have over 100 USFS recreation areas and campgrounds operated by private concessionaires, with most other western states like Arizona, New Mexico and Nevada each having dozens under private operation as well. This USFS program was originally prompted by fiscal pressures on the agency in the 1980s during the Reagan administration, which led it to embrace user fees and PPPs to keep its numerous recreation areas open and self-sustaining. Other public agencies such as the Tennessee Valley Authority and the Lower Colorado River Authority have made extensive use of concessionaires to operate and maintain complete parks and campgrounds under park operations PPPs, though until 2012 this partnership model had seen limited use at the state level.

That changed in early 2012 when California State Parks (CSP)—which was seeking to avoid the closure of up to 70 state parks under severe funding pressures—issued a request for proposals (RFP) seeking a five-year concession contract (or contracts) to operate campground and day use state recreational areas (SRAs) at five park units in the Central Valley:

Two of these—the McConnell and Hatfield SRAs—were subsequently removed from the procurement after the state struck agreements with outside donors to keep them open. For the remaining three parks, CSP set a minimum annual rent level for each park that bidders had to exceed in their proposals—based either on percentage of gross revenue returned to the state or specific minimum rent payment amounts set by the state, whichever was greater—and it allowed would-be concessionaires to bid for any combination of one or more parks. The parks in question represented a mix of revenue-generating and revenue-losing parks, allowing a win-win for bidders and for the state by bundling each of the parks into one PPP vehicle. The Brannan Island SRA alone had cost the state $740,000 to operate in 2011, over twice the amount it raised through user fees and traditional concession revenue, according to The Wall Street Journal.1

According to the agency’s request for proposals, the objectives of the PPP were to:

  1. Maintain campground, day use and recreational facilities and signage;
  2. Ensure adequate staffing to maximize use and protection of facilities, including roads and trails;
  3. Collect campground and day use entrance fees;
  4. Ensure the safety and convenience of park visitors; and
  5. Protect the state’s natural and cultural resources.

In June 2012 the department selected a winning bidder—Utah-based American Land & Leisure, which operates 492 campgrounds across 12 states—for the three-park package. Some noteworthy aspects of the PPP include:

Additionally, CSP signed separate park operation PPPs with the Bodie Foundation to operate Mono Lake Tufa State Natural Resource Area and with Parks Management Company to operate Limekiln State Park on the central coast, bringing the total number of California state parks operated under park operation PPPs to five. CSP also negotiated partnership agreements with a variety of cities, counties and non-profit organizations to keep dozens of other parks from threatened closure as well.

Beyond California's groundbreaking contracts, other noteworthy developments on PPPs in parks and recreation in 2012 include:

(Editor's note: Portions of this article were derived from Reason Foundation’s January 2013 study, "Parks 2.0: Operating State Parks through Public-Private Partnerships," by Leonard Gilroy, Harris Kenny and Julian Morris.)

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1 Max Taves, “Private Fix for Public Parks,” The Wall Street Journal, June 17, 2012.

2 Niki Kelly, “Pence sees nuclear energy future,” Fort Wayne Journal Gazette, August 29, 2012.

3 Bridget Brown, “Details of Fort Knox privatization lease released,” Bangor Daily News, April 12, 2012.

4 Asher Price, “State Parks and Wildlife Department turns to corporate sponsorships to raise money,” Austin American-Statesman, July 29, 2012.

Leonard Gilroy is Senior Managing Director, Pension Integrity Project &
Director of Government Reform

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