How Will California’s Parks Do Under Private Management?

Patrick's Point State Park in Humboldt County, California. (Photo: Lee Coursey)

California embarked this week on a grand experiment in common property resource management when, in order to help close a gaping budget hole, it turns over dozens of state parks to private firms and community coalitions.

Seventy of the state’s 278 parks were set to close July 1. But a last-minute change to the state budget will keep all but five open, though many will not be managed by the state. At least six parks will remain open under corporate contracts with firms like American Land and Leisure, which operates campgrounds in 12 states. Dozens more have been rescued, at least temporarily, by local municipalities, private donors, and non-profit organizations.

Economists have long-held that the tragedy of the commons — any individual has too little incentive to protect from exploitation a non-excludable resource he holds in common with potentially countless others — could only be overcome by state intervention or private ownership.

Had Elinor Ostrom, the first woman to receive the Nobel Price in economics, not succumbed to pancreatic cancer last month, she would have no doubt watched with great interest the developments in California. After all, Ostrom was honored by the Nobel Committee in 2009 for challenging “the conventional wisdom that common property is poorly managed and should be either regulated by central authorities or privatized.” Groups of individuals could, she observed, frequently overcome the tragedy of the commons by cooperatively managing resources.

California might have been Ostrom’s next case study. The experiment upon which the state is set to embark will provide an opportunity to compare the relative efficacy of resource management provided by central government control, private ownership, and local cooperation.

American Land and Leisure, the Utah-based company soon to operate three state parks, is banking on entry, parking and camping fees to cover the costs of park operations and an undisclosed share of revenues it must pay to the state. Fees can be raised subject to approval by the state parks department.

Meanwhile Coe Park, the state’s second largest, will stay open for three years largely because of a $900,000 donation from a semiconductor tycoon in nearby San Jose. The philanthropist hopes to build an endowment from medium-sized donors with no strings attached.

In some cases, non-profit groups plan to add services and still break even at parks that have historically run in the red under state control. In the Napa Valley, two non-profits will introduce year-round operations, add pricier overnight accommodations, and rent out historic buildings. Near Benicia, north of San Francisco, maintenance at Benicia Capitol State Historic Park will be provided by the city, while 300 dues-paying members will pay for a park manager and seek to boost revenue by expanding hours of operation. Another group plans to finally introduce credit card payment kiosks in parking lots. 

The substitution of corporate and community control for state management alarms some Californians who fear diminished accessibility amid higher fees and reduced operations. Only time will tell if those fears are justified.

But the nature of the agreements and the plans of the new park managers suggest the California experiment may produce some winning results.

The state had been losing money on these parks. What if a private firm could find enough efficiencies and enjoy sufficiently lower labor costs to keep the parks running, keep fees from climbing, and still kick back a share of revenues to the state? What if innovating philanthropists who know their backyard parks like the backs of their hands develop new amenities that attract happy park-goers and additional revenues? And what if the benefit of natural resource amenities to locals—residents, hoteliers, restaurateurs, and retailers, are sufficiently great to keep parks open and protected by municipalities and local coalitions.

Elinor Ostrom taught us that the preservation of common property resources does not rely exclusively on the state. Californians are about to put that theory to the test. Here’s hoping she’s right.

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  1. J1 says:

    This is a great idea, and I hope they (particularly the private companies) succeed. I don’t get the objections – are higher fees and reduced operations worse than no access at all?

    Some aspects of park management will be interesting to watch; there are aspects of fire control in particular where proper management is in extreme conflict with the conventional wisdom of the public.

    One interesting note from the “alarmed” article:

    “They will not be allowed to introduce advertising or large commercial ventures like fast-food franchises”

    As with airports in the old days, many parks have crappy, off-brand fast food already; what’s wrong with bringing in real fast food franchises in their place? It was an immense improvement in airports and can be extremely profitable.

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    • Peter Lange says:

      I can’t say that I have been to even a decent sized fraction of the state parks that CA has to offer, but of the State, City, and County parks in Southern California that I have been to, I can say that most if not all of them were free of fast food and advertising. We have in fact had something of a recurring show down in LA County with the park supervisor who wanted to put advertising on, literally, every bench, trashcan, building, water fountain, and fence. Many of us believe that our parks would
      1) Lose their aesthetic qualities if advertisements were allowed.
      2) are refuges from the commercialism and urban life where we can at least have a semblance of natural surroundings to appreciate.

      While I personally have no more concerns with Corporations running the parks than with the state, I do share the concerns with my fellow LA County citizens about maintaining the natural resources of our parks (at least until the asteroid hits and wipes out humanity) and hope that all these corporations, communities, and local governments also understand these concerns.

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  2. coyote says:

    I was one of four private companies that bid on these parks. One thing that is often lost in all this is that there are over 1000 very similar public parks already under management in a USFS service program that dates back over 30 years. Three of the four bidders for the CA parks, and the winning bidder, came from this program.

    I applaud your observation that a natural experiment seems to exist here. But the odd part, for me, is that such an experiment has existed for decades, and no one wants to follow up. Here in AZ, AZ state parks has 35-ish parks under its management and our company has 35-ish federal parks under private management. Many are next door to each other. But it turned out to be virtually impossible to get the faculty at Arizona State who was preparing recommendations on private management, or the press, or the agency itself to actually do the comparison. Everyone wants to hypothesize on the results based on their faith or lack thereof in private enterprise, no one wants to do a direct comparison.

    This frustrated me since I knew we managed the parks at half the cost, and had better customer service (camparizona.com ranks public campgrounds. In the survey taken a year or so ago our company had 3 of the top 5 public campgrounds under our management, and the state parks agency had zero)

    I tried to do one direct comparison on my own: http://parkprivatization.com/2012/01/case-study-private-vs-public-park-operations/. It would be awesome if someone in academia were to take this on. Those interested should contact me at my park blog: http://www.parkppp.com.

    By the way, it is incorrect to talk about loss of control to private operators. All of our contracts are highly structured with hundreds of pages of standards and restrictions. We cannot add a new service, modify or add structures or facilities, change fees, or most anything else without seeking approval from the parks agency. The agency still establishes the character and services and facilities of the park – we just provide the customer service and cleaning much less expensively.

    These contracts are almost always structured as concession agreements, meaning the private operator gets paid just with gate fees from the customer, not with appropriations. If customers hate the park or the service, no revenues. I get asked all the time, “won’t you just stop cleaning the bathrooms so you can make more money.” I answer, “Sure, same way that McDonalds and Marriott and Nordstroms make most of their money by not cleaning their bathrooms.”

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    • Mike B says:

      Hidden due to low comment rating. Click here to see.

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  3. Ken says:

    Warren Meyer is a blogger who runs a business specializing in such public-private partnerships and manages over 20 locations, including several Federal parks in California. You might do well to invite Warren on the podcast or to do an email interview for the blog – he has been publishing details of the hows & whys of privatizing parks for years now, including answers to the fear-mongering about reduced access.

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  4. Bart says:

    I hope this works out as well, as I am one of those campers that uses the State park system here in Calif. I understand the objections, but let’s face it – we vote with our dollars, and if a private firm starts short changing services, raising fees, etc. it won’t be long until we vote elsewhere. Which then will cause the private firms to either get with the program or shut it down – which is where we are anyway.

    Don’t forget that this is discretionary money for us campers and I can find lots of places in our National Parks and Forests that are actually free to camp in if I want to actually, well, you know, camp.

    I tell you what I see here – it’s a great opportunity to see if private companies can run a normally stat controlled institution. And for those of you that made the leap to private military contractors in our areas of conflict – this IS different – here, we the taxpayer and the end user can use and inspect these facilities anytime we want. WE get to be the judge of the efficacy of private management.

    Who knows? If this works out, U.S. Post Office HERE WE COME!

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    • okme2 says:

      Yes, but let’s not forget that many of those establishments don’t have bathrooms at all. I’m trying to be optomistic, but money as profit seems to trump morals after a while. I hope it’s not the case here in ca.

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  5. Rick says:

    This is a good thing because it will keep the parks open. At the same time I can’t help but ask myself why the state cannot seem to do the same things that a private operator does? If a private operation can provide services and access with the income from user fees and still turn a profit why cannot the Park Service run a self sustaining operation without the overhead of having to profit?

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    • Enter your name... says:

      I think that the primary answer is “employee wages and benefits”. A private operator can pay someone minimum wage or a bit more to clean the restrooms, with no (or very poor) health insurance or pension. That person will eventually require taxpayer support in the form of Medicaid and welfare benefits, but that comes out of the taxpayer’s pocket, not the employer’s. The state employee, by contrast, although typically making the same number of dollars as an hourly wage, or even a bit less, also gets comprehensive medical insurance and a generous pension.

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      • Bart says:

        I do not agree that private companies are necessarily “cheaper” with their employees health care and pensions. I would like to see the facts on that. Having worked with state employees in several venues over the past several years I will say that the way California’s bureaucracy is set up lends itself huge inefficiencies. There is an awful lot of “blame game:, “legalese” and “it’s not my job, I am here for the paycheck” going on. In addition, communications from the front line to the “leadership” is political at all levels.

        Admittedly some of that stands true to a degree in private companies – but private companies are compelled to mange their resources better and if the state, with their better pay scales and pension and health benefits is still going broke then where does the problem really lie?

        If you read Freakonomics at all then recently you must have read their stories of Costco, Trader Joe’s, Quik Trips and others that hire more people, pay them a better wage and spend more time on training them and they all make more money. (Here’s that story – http://bit.ly/GSxrxi)

        The wage thing is always the first to be blamed by knee jerk reactions – it’s almost a corporate or labor Pavlovian response. But look at the facts. Give private industries a chance to run these things and give our government a chance to actually shrink.

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      • Enter your name... says:

        Perhaps you aren’t a regular reader of a newspaper. Or perhaps you aren’t in California, the site of this question. It might be different in another place.

        Here in California, the papers here have been running reports all year on private-public compensation schemes, and they all agree:

        Public school teachers are paid more than private school teachers, but no more than someone else with similar minimum qualifications. Non-teacher public employees are paid approximately the same wages on average as comparable private-sector employees, but get far more generous pensions. The total compensation for public-sector, non-teacher employees is far higher than the equivalent position in the private sector.

        Or, to put it another way, in my local area, a first-year, inexperienced custodian at the local community college gets paid $14.75 an hour, plus full healthcare (zero cost to the employee for himself; substantial discount on insurance for his family), a fairly generous pension (paid 50-50 by employee and employer), and an exemption from Social Security taxes (which would be higher than his current pension contribution).

        The same kind of work, but paid through the local cleaning service, gets $10 to $15 an hour (depending on the employer), with either no health insurance or limited health insurance mostly at their own cost, and no pension or retirement benefits at all (except Social Security, whose taxes he has to pay, and then has to pay income taxes on those taxes, since they’re not tax-deductible like other taxes are).

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    • Bill says:

      @Rick If a private operation can provide services and access with the income from user fees and still turn a profit why cannot the Park Service run a self sustaining operation without the overhead of having to profit?

      Aside from the excessive benefit levels for most public employees, look at the byzantine management structure that goes with government operations. Then add in generally higher productivity levels in private enterprises and look where you are.

      Have you ever seen a government operation function with greater efficiency that a corresponding private operation?

      An acquaintance who is violently opposed to California contracting for park management with any private company held up McArthur-Burney Falls State Park as an example of one that would be completely ruined if a private entity ran it. But, in fact, that is one of the few parks that are managed by private enterprise under contract. It is different from most other California parks in that the facilities are being significantly improved, and not a taxpayer expense.

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    • pawnman says:

      Unions.

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  6. Geoff Smith says:

    > The state had been losing money on these parks.

    I keep hearing people talk about the government making money or lamenting that it isn’t run more like a company, and I can’t help thinking that the debate as to the actual role of government is getting lost in the discussion. I think what people mean is that there should be less waste in Government, but even then, there doesn’t seem to be clear definition of waste.

    Let’s look at the parks here as an example. State Government pays local people for services in the park (the parks themselves have no ongoing costs, the government could simply let them sit undeveloped for no cost). Except for some federal taxes on the individuals, you can consider the rest of that money as staying local. There’s no net cost to the community as a whole, even if the costs for those services are not completely covered by park patrons. In addition, if any of the park income comes from out of state tourists (which seems very likely for many parks) the net impact on the state is only positive. The money ‘lost’ by running a park at a deficit doesn’t simply disappear.

    Even if there was money lost operating the parks, there’s no consideration given to non-monetary impacts of those parks. It could be the case that operating the parks, even at a loss, has a large net benefit to the community that would cost far more if it was paid for specifically (like cleaner air or better less floodplain impact for some large forests, or the protective effects of New Orleans if the barrier islands had been protected as a state park, for example, Katrina might not have caused anywhere near as much damage… something like that could actually safe a ton of money in the long run).

    Profit and cost should NEVER be the only drivers of government action… I think that would have very negative (and creepy) side effects.

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    • Bart says:

      Geoff;

      I don’t disagree – and neither would the authors – about things that may not have been thought of – the law of unintended consequences. (for a great Freakonomic example of that read their story here – http://bit.ly/KpXrwI)

      I do also agree that we have gotten away from the discussion about what governments role really is. I also agree that most of us do not have a clear definition of waste – and maybe if we DID have that defined we could then point to the definition whenever we communicate with our officials.

      Here is an I agree with you on but want to clarify even further – when you state

      “Profit and cost should NEVER be the only drivers of government action… I think that would have very negative (and creepy) side effects.”

      my question is then to what extent SHOULD they (profit and loss) be looked at by the government.

      My view is that they should ALWAYS be looked at by the government – funding after all, comes from our pockets as well. What govt. needs to get better at is recognizing as far down the line as is practical, the potential results that come from a decision that has to be made that might have an economic impact. As an example – did Louisiana talk to the experts about the care of the offshore islands and how they could help mitigate hurricane destruction?

      Which, by the way, is what great businesses do… Just sayin’.

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  7. T. Idol says:

    I agree with previous commenters that there are already a number of public-private partnerships when it comes to managing parks and other natural resources in the US. In Hawaii, creation and maintenance of hiking trails in state parks is run by a non-profit that receives state money to do the work (Na Ala Hele). Management of invasive species is coordinated across landowner boundaries by a statewide council with island-specific committees (Hawaii Invasive Species Council), again a non-profit funded by state monies. An analogous situation exists with watershed management (Hawaii Association of Watershed Partnerships). These are not state employees, so they don’t get the generous benefits and pension of state workers, but no one ever complains about that. Their effectiveness (cost and outcomes) speaks for itself. There are smaller examples of the same thing, such as community groups managing under-developed parks to provide specific community benefits, like therapeutic gardening and opportunities for cultural enrichment. We don’t outsource direct running of parks, but we do utilize these public-private partnerships to great benefit to the people and natural resources of the state.

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  8. Steve Bennett says:

    Saying “the state had been losing money on these parks” is like saying “the state had been losing money on these roads”. It’s pretty sad that California, one of the world’s biggest economies, can’t afford to maintain state parks as public goods.

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