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Out of Control Policy Blog Archives: 5.26.13–6.1.13

Saving California State Parks through Public-Private Partnerships

Last weekend, the Orange County Register ran an op-ed of mine making the case for more privatization in California State Parks. I say "more" because last year the state turned over the operation of dozens of its state parks to private, nonprofits—as well as another handful to private, for-profit recreation management companies—to avoid the closure of these parks, keeping them open for public enjoyment. Here's an excerpt of my column:

A recent report from the Little Hoover Commission recommends paring back the agency and devolving some of its key functions—most notably, the operation of parks themselves—to third parties. “The current model of a highly centralized state-run park system is obsolete,” the Little Hoover Commission report finds.

It calls for a new operating model that includes expanding the role of outside partners in the direct operation and management of state parks. These outside partners would include other governments, nonprofits, and for-profit companies.

Many taxpayers may be unaware that in 2012 California successfully turned over the operation of four state parks to for-profit park management companies. The state signed a five-year lease with American Land & Leisure, a Utah-based recreation company, to take over the campground and day use operations at three Central Valley recreational areas (Turlock Lake, Woodson Bridge, and Brannan Island). It also handed over operation of the Central Coast’s Limekiln State Park to the California-based Parks Management Company.

In doing so, the costs of operating and maintaining these parks was transferred from taxpayers to the private operator. The companies pay all operating costs. They also pay a pre-determined percentage of the revenues collected at those parks back to the state as rent, which is put into a park maintenance fund to cover upkeep costs.

State parks have suffered from a cycle of neglect and perennial budget games in Sacramento, but they now have a path to sustainability.

This is far from radical or unique. As I noted in the article:

Private, for-profit management of public parks isn't a new idea. In fact, it’s been happening in U.S. Forest Service (USFS) areas within California and across the country since the 1980s, when federal budget cuts threatened their closure. Private management has kept them open for decades. According to a January report released by the Conservation Leadership Council that I co-authored, recreation management companies currently operate over half of the USFS’s thousands of developed recreation areas (e.g., campgrounds, day use areas) nationwide under lease agreements, including over 100 each in California, Colorado, Oregon, and Washington. Other western states like Arizona, New Mexico, and Nevada each have dozens of parks under private operation as well.

For more on this topic, see:

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One Year of Privatized Liquor in Washington

Today Washington state celebrates one year of liquor privatization, having in 2012 become the first state since the end of prohibition to dissolve its state-run monopoly on the distribution and sale of distilled spirits.

As Tom Banse reports at OPB, this has been good for consumers and good for the state government. Liquor can now be bought at more than 1,600 retailers in Washington, compared to just 329 before privatization. This represents a huge leap forward in terms of choice, competition, and convenience. Tax revenues, meanwhile, have soared: Washington expects to collect 37 percent more from liquor taxes and fees this year than it did in the final year of the state monopoly.

The only noticeable downside of the privatization initiative was an increase in the price of distilled spirits: “Washington's Department of Revenue estimated the average price for a single bottle of spirits was 7 percent higher this March than last March.” Still, that figure represents a leveling off. Prices, which initially spiked (thanks in part to a 17 percent tax on retail sales and a 10 percent tax on wholesalers), have started to fall back as market competition has increased.

Opponents of liquor privatization often warn of the social ills that will materialize if access to distilled spirits is liberalized. But the early signs in Washington are positive: “Fatal crashes involving a drinking driver happened less often in the second half of last year—after privatization—compared to the same period in the prior two years.” It’s also worth pointing out that three-quarters of the American population live in states that do not practice alcoholic beverage control—and the sky hasn’t fallen yet.

Washington’s experience so far should encourage policymakers in other “control” states (starting with Pennsylvania) to pursue liquor privatization—it’s a win-win, for consumers and legislators alike. For more on liquor privatization, see this section of Reason’s Annual Privatization Report 2013.

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New at Reason: Savings for Fresno—The Role of Privatization

Like their peers in many municipalities across the country, policymakers in Fresno, California are currently considering what role privatization should play in addressing their current and future fiscal challenges. However, privatization is a complex subject and takes many forms, so it is helpful to have an overview of the subject in deciding how to use privatization moving forward.

To that end, Reason Foundation has released a new policy brief—which I co-authored with Reason's VP of Policy Adrian Moore—outlining the potential role for privatization of local government services in Fresno. The policy brief provides an overview of common goals and types of privatization, how local governments use privatization, recent highlights from local government privatization efforts across the country, myths and facts, and more. From the introduction:

Over the last half century, governments of all political complexions have increasingly embraced privatization—shifting some or all aspects of government service delivery to private sector provision—as a strategy to lower the costs of government and achieve higher performance and better outcomes for tax dollars spent.

Recent decades have seen privatization shift from a concept viewed as radical and ideologically based to a well-established, proven policy management tool. Indeed, local policymakers in many jurisdictions in the U.S. and around the world have used privatization to better the lives of citizens by offering them higher quality services at lower costs, delivering greater choice and more efficient, effective government.

In the 21st century, government's role is evolving from service provider to that of a broker of services, as the public sector is increasingly relying far more on networks of public, private and non-profit organizations to deliver services. Virtually every local government service—from road maintenance, fleet operations and public works to education, recreation and public health services—has been successfully privatized at some point in time somewhere around the world.

This trend is not confined to any particular region, or to governments dominated by either major political party. In fact, privatization is a bipartisan trend, embraced by pragmatic local policymakers from both sides of the aisle. The reason for the widespread appeal of privatization is straightforward: it works. Decades of successful privatization policies have proven that private sector innovation and initiative can do certain things better than the public sector. Privatization can also boost the local economy and tax base, as private companies under government contract pay taxes into government coffers and offer employment to communities. [...]

As they continue to explore ways to navigate current budget challenges and better prepare themselves for unforeseen future fiscal headwinds, Fresno policymakers should ask fundamental questions about how their city government operates and whether there is a better way.

The full policy brief is available here.

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