California Issues RFP for Private Operation of 5 State Parks

For years, Reason Foundation has recommended that cash-strapped states consider tapping the private sector to take over operations of state parks as a means to lower costs and rescue parks threatened with closure in a difficult budget environment. Both the U.S. Forest Service (USFS) and BC Parks (British Columbia) have long pioneered the use of public-private partnerships (PPPs) for park operations, but states have been slow to follow their lead…until now, that is.

California State Parks (CSP) has issued a new request for proposals (RFP) seeking a five-year concession contract (or contracts) to operate campground and day use recreational areas at five park units in the Central Valley (Turlock Lake SRA, McConnell SRA, George J. Hatfield SRA, Woodson Bridge SRA, and Brannan Island SRA). This is the first serious and robust parks PPP procurement of its kind at the state level. The RFP is here, and CSP’s sample contract is here. Bidder responses are due on May 1.

The contract would be structured as a concession, a commercial lease through which the state would retain ownership and control over the parks while paying the private operator nothing to operate them. Instead, the private operator would be allowed to retain the user fee revenues (e.g., gate entry fees, camping fees, etc.), in return for an obligation to pay a set percentage back to the state annually as a form of rent. CSP has set a minimum annual rent level for each park that bidders must exceed in their proposals. Bidders can submit proposals for individual parks, but the procurement is designed to give maximum weight to those proposals that cover all five parks. In fact, the parks in question appear to be a mix of revenue generating and revenue losing parks (once operating costs are factored in), so bundling all of them together is likely to be an attractive option to bidders to maximize their ability to mitigate risks.

Up to now, states have only tinkered with this management approach—with more talk than action, generally speaking—so California’s procurement represents a paradigm shift in state parks management, albeit a well proven one. The “whole park concession” model being pursued in California is the same PPP concession model used by the USFS for the operation of hundreds of their fee-based recreation areas across the country for more than 25 years now. I routinely visit and camp at concessionaire-operated USFS recreation areas throughout Arizona—there are dozens in that state alone—and can attest to top quality operations and service, far higher than at the state-run parks nearby. In fact, if it weren’t for a different logo on camp hosts’ shirts, one might never even realize that the parks were not operated by the USFS directly. California also has dozens of USFS “whole park concession” contracts today too, so park users can go see for themselves that there’s nothing to fear—and everything to gain—through shifting to PPPs.

See for yourself in this October 2010 video we shot at privately operated USFS recreation areas in the Sedona area. The video recommends concession management as an alternative to the misguided car tax for parks (Prop 21) that failed at the polls in California in November 2010. For more details on how the parks PPP model works, see these other Reason Foundation highlights:

And last week, the Franklin Center’s Steve Greenhut penned an excellent article on the potential for private operation of state parks in California.

But don’t just take our word for it. The California Legislative Analyst’s Office (LAO) released a report earlier this month that recommended PPPs for park operations:

Our research finds that the USFS, as well as many provinces in Canada, currently use private companies to operate and manage entire public parks and recreation areas. Outcomes for these different arrangements vary, but the reported benefits generally include the flexibility to easily reduce or increase staffing levels and lower operating costs from the introduction of competitive bidding. Lower costs were particularly noticeable if several parks in a geographic area were packaged as a single operation, allowing for economies of scale.

According to the provincial park system of British Columbia (BC Parks), bundling a mix of different parks (low—revenue—generating parks and high—revenue—generating parks) helps to attract potential bidders, since it is unlikely that bidders would otherwise elect to operate low—revenue—generating parks. The BC Parks also makes payments to most of their private operators to cover costs that are not recouped by park visitor fees. Even with these payments, BC Parks considers its operations model a success, because the payments, on balance, are less than the full cost of operating the parks.

Another advantage of using private companies to operate the parks is that they generally can procure new equipment and implement new projects more quickly than the state. In addition, privately operated parks also could assist DPR with its cash flow needs by assuming some of the risks associated with operational costs (including unpredictable user demand and fee revenue). Currently, if revenues from park fees are less than projected, the department must cut its operating costs during the fiscal year to make up for this loss in revenues. If private companies operated some of the parks, they could potentially take on this risk, as well as risks resulting from reduced visitor demand and unexpected maintenance costs.

The new RFP is an extremely positive development for park enthusiasts and users in California and elsewhere. For Californians, these parks would otherwise be slated for closure, so the PPP approach offers a lifeline to not only keep them open for public enjoyment, but to do so on a sustainable basis. By shifting revenue risk to the concessionaire, the state would take these parks out of the vicious budget loop that currently has dozens of parks slated for closure. It may even offer an opportunity to start hacking away at the whopping $1.5 billion in deferred maintenance throughout the California parks system (see Figure 5 in the LAO report).

For those outside of the Golden State, CSP is closely watched by parks administrators in other states, and innovative moves by the market leader would set a strong example likely to be replicated in many other states where parks are threatened. According to a recent Huffington Post article:

“We’ve gotten some pushback, but people are more and more coming to the realization that our budget has serious problems,” Roy Stearns, deputy director of the California Department of Parks and Recreation, told HuffPost. “There are private companies in the Parks and Rec business that do it well. People shouldn’t see private enterprise as a dirty word. Our main goal is to get though these tough times.”

Leonard Gilroy is Senior Managing Director of the Pension Integrity Project at Reason Foundation, a nonprofit think tank advancing free minds and free markets. The Pension Integrity Project assists policymakers and other stakeholders in designing, analyzing and implementing public sector pension reforms.