Summary:

Currently, Michigan’s Natural Resources Trust Fund (NRTF), which provides grants to local governments for acquiring land for various related uses, and the State Park Endowment Fund (SPEF), which provides funding for the state park system, receive revenue from mineral, oil, and gas leases and royalties. State law directs various limitations on how that money is used. Michigan’s Proposal 1 would make the following changes to how those revenues can be spent:

Changes to the Natural Resources Trust Fund:

• would allow the NRTF to give grants for renovating and improving existing recreational facilities.
• would require that a minimum of 25 percent of total grants go to improving existing or building new recreational facilities. Currently, only 25 percent of grant funding can be spent on developing current facilities.
• would remove the NRTF’s cap of $500 million in principal and allow it to grow faster and have the potential for more funding for grants.

Changes to the State Park Endowment Fund:

• would allow spending the SPEF on park operations and maintenance in addition to existing funding of land acquisitions and capital improvements.
• would require at least 20 percent of expenditures go to capital improvements.
• would allow more funds to flow to NRTF once SPEF reaches $800 million in principal.

Fiscal Impact:

Proposal 1 would not lead to any net changes in state revenues. It would, however, change the way current revenue is allocated.

Proponents’ Arguments For:

Proponents argue that Proposal 1 would give the state more flexibility to build new recreational facilities and expand, improve and run existing ones to provide more outdoor opportunities in communities statewide while also conserving and protecting important natural lands. Currently, the SPEF has no money for park operations and maintenance and the NRTF is limited in its ability to spend on capital improvements. Proposal 1 would fix both of those problems, advocates say. These programs require no taxes but put royalties from the extraction of natural resources to beneficial use.

Opponents’ Arguments Against:

Opponents argue that Proposal 1 is confusing, complex, and unnecessary. They say it would reduce the amount of money that is available every year for projects to protect parks, environmental lands, and essential wildlife habitat. The Michigan Natural Resources Trust Fund makes important land acquisitions that would be lost forever under Proposal 1, which would also remove constitutional protections that currently ensure funding for land conservation remains a top priority and prevents diversion of those funds towards development. Opponents say Proposal 1 undermines land protection and conservation of wildlife habitat and biodiversity in Michigan for future generations.

Discussion:

While Proposal 1 passed the state legislature with bipartisan support and has no formal opposition, there are some concerns about expanding the missions of these state funds.  The NRTF cap is not lifted until SPEF hits $800 million. It is currently at $237 million and grows anywhere from $15 million to $50 million in a given year. This means that the cap on NRTF will likely not be lifted for at least a decade or more. However, the changes in the use of funds go into effect immediately and could have a large impact, as there is some evidence that public park funds are in serious distress and falling far behind on maintenance and improvement. Proposal 1 would lockbox revenues for parks programs but may mean the dedicated funds never reach higher funding levels.

Voters’ Guide to Michigan’s 2020 Ballot Proposals 

Voters’ Guides to 2020 Ballot Initiatives In Other States

The post Michigan Ballot Initiative Analysis: Proposal 1 (2020) appeared first on Reason Foundation.

The rowing facility is gorgeous and hosts many wonderful events. There is no doubt it is an asset to the Sarasota area. Whether it is primarily a public or private asset and how valuable it is to area residents compared to other crucial facilities and services are the questions. Large sums of local tax revenue were spent building the park, and more flows to it each year.

To its credit, the analysis used for the economic impact of Nathan Benderson Park is more accurate than average. It employs a detailed methodology that relies as much as possible on hard information about hotel bookings and actual surveys of spectators and participants and their spending. That is good because far too many economic impact reports simply rely on estimates.

As a result, estimates of direct expenditures associated with the rowing park are as solid as they can reasonably be. But the numbers provided by Visit Sarasota don’t stop there. These numbers reflect the use of a notorious economic estimation method, developed over 20 years ago, which claims to capture “indirect” economic benefits of tourism. The idea is tourists spend money at hotels and restaurants, which take that money and employ people who spend money on other goods and services, which in turn employ other people, and so on so forth to create “indirect” economic “impact” in the region. This notorious multiplier assumes for every $1 of direct spending, there is another $0.65 in “indirect spending.”

This part is not based on actual surveys but is an estimate generated by a company called Implan and id widely used by economic development agencies who want to report large impacts. It is controversial because the whole idea of this indirect impact is contested among economists. Although there is certainly some indirect impact from outside spending, it is hard to measure and varies widely. Economists attempting to measure impact accurately tend to shy away from estimates of indirect impact.

In a specific example for the rowing park, Visit Sarasota estimates the 2017 World Rowing Championship held at the park generated $22 million in economic impact, while the official body of the world rowing championships calculated an impact of $7 million. The latter only uses the direct impact, which the official body knows can be measured accurately, and not estimates of indirect impact, and such numbers are used by agencies all over the world to report economic impact of international rowing events. Meanwhile, Visit Sarasota’s estimates are more than three times higher. It estimates direct impact at more than double the international rowing federation and then adds a whopping 65 percent bump for indirect impact. Disparities like this make economists suspicious of these impact reports.

Estimating impact this way allows Visit Sarasota to claim the $26.38 million in tax money Sarasota County gave the rowing park in 2014-2018 has generated $151.9 million in economic impact, a “600 percent return on investment.”

Well come on, if that is true, why is anyone investing in Apple and Amazon if they can get vastly higher returns investing in rowing parks? Of course, the private investors in Benderson Park are not receiving anything remotely like 600 percent returns — indeed the park still needs public (taxpayer) subsidies to cover its costs, so private investors are not likely making any rate of return. And that 600 percent leaves out that the park’s economic impact also flowed from a lot of other investments, including millions in tax money from the state and vast state and local expenditures to improve local road access to the park.

How much has Sarasota County recouped in tax revenue on its taxpayer-funded investment to build and operate the park? At best 12 percent of total spending by people who come to rowing park events. It gets 7 percent via sales tax and 5 percent via the tourist development tax on short-term rentals like hotels. That amounts to about $1.1 million dollars recovered in taxes in 2018, for example. Add to that the healthy kickback the rowing park gets from the tourist development tax to help fund the operations of the park. In 2018, records show that resulted in $851,856 of tourist tax revenue the county provided for the park, without which the park would have operated at a net loss. So in reality, the net contribution of the rowing park to the public purse in 2018 was some $150,000. At that rate, even if we grant a 65 percent indirect impact, it would take decades for the county to recoup its investment.

Again, we are not saying there are no benefits from the rowing park. What we are saying is inflating the benefits is not helpful. The fact is, the overwhelming majority of the park’s benefits accrue to private parties: hotels and other renters of homes, restaurants and the like.

That’s why county leaders should take these estimates with an appropriate grain of salt. Especially when spending taxpayers’ money always comes with tradeoffs and the county faces major needs to address, such as sewage spills, red tide causes and consequences, massive traffic congestion, better services for the homeless and mentally ill, etc. The list of things more important than subsidizing an already successful entity is long.

A version of this column originally appeared on YourObserver.com.

The post How Cities Often Overstate the Economic Impact of Events and Facilities appeared first on Reason Foundation.

Blue-green algae, or cyanobacteria, kill wildlife, poison pets, and have serious health consequences for humans. Algal blooms occur when large amounts of nutrients—originating from urban and agricultural areas—enter a body of water. Algae feed on the nutrients and grow until a slimy, green layer is formed on the water’s surface. The recent blooms originated predominately in Lake Okeechobee before spreading to the St. Lucie and Caloosahatchee estuaries.

The spread of blooms to the coasts is the result of state and federal infrastructure projects which block the natural flow of water south to the Everglades and Florida Bay. Beginning in the 1850s, wetlands in the historic Everglades region were drained and cleared for human settlement. A series of devastating hurricanes and floods in the early 1900s prompted the construction of the Herbert Hoover Dike (HHD) surrounding Lake Okeechobee and a series of canals to the east and west to divert water through the St. Lucie and Caloosahatchee rivers when water levels in the lake climbed too high.

Today, over 2,200 miles of canals and 2,100 miles of levees controlled by the South Florida Water Management District (SFWMD) regulate the flow of water in south Florida. While the HHD and other infrastructure projects provide flood protection to urban and agricultural communities in south Florida, they also alter the natural flow of water through the Everglades and contribute to the spread of algal blooms to coastal estuaries. There is wide agreement that more storage, treatment, and conveyance infrastructure in south Florida—especially surrounding Lake Okeechobee— is necessary but little progress has been made in the 20 years since the Comprehensive Everglades Restoration Plan was authorized.

U.S. Army Corps of Engineers

Among the most controversial pieces of the Everglades puzzle is the approximately 700,000 acres of agricultural land south of Lake Okeechobee (Lake 0). The area has been used for agriculture since the early 1900s and was formally designated as the Everglades Agricultural Area (EAA) in 1948. The primary crop grown in the EAA is sugarcane, accounting for nearly half the national supply of sugar.

Fertilizer runoff from agricultural areas is a major source of nutrient pollution that leads to algal blooms in Lake O. However, measures taken by producers and government authorities in the EAA to reduce nutrient pollution are highly effective at mitigating the impacts of agriculture in the area. In fact, a 2011 SFWMD report estimated that less than 10 percent of net phosphorus imports in the Okeechobee watershed originated from sugarcane production compared to 30 percent from urban areas and 60 percent from other agricultural activities mostly north of Lake O.

While sugarcane production in the EAA contributes a relatively small portion of the nutrient pollution in Lake O, agricultural lands in the area prevent more water from naturally flowing south. Environmental groups have long advocated for the state to purchase the agricultural land in the EAA and restore the natural flow of water from the lake.

In 2008, then Florida Gov. Charlie Christ planned to buy almost 200,000 acres of land from U.S. Sugar at a cost of $1.75 billion. After the recession, the deal was reduced to just 72,800 acres for $536 million before collapsing altogether in 2015.

Last month, Florida Gov. Ron DeSantis announced a new deal to pay $1,940 per acre to terminate a 1,234-acre lease of state-owned land. The land will be used to construct the EAA Storage Reservoir—the single largest water storage and treatment project under the Comprehensive Everglades Restoration Plan. Additional water storage in the EAA will allow more water to flow south thereby reducing the harmful freshwater discharges to the St. Lucie and Caloosahatchee rivers.

The buyout is expected to save the state about $16 million in construction costs by expediting the project timeline. Florida Crystals, the sugarcane producer occupying the land, enabled the deal by waiving a notice requirement which would have prevented the state from terminating the lease until at least three years after receiving a permit from the U.S. Army Corps of Engineers.

While the deal is significantly better for Florida taxpayers than previous attempts to purchase the land, buying out producers in the EAA may not be the best approach to addressing the challenges presented by the EAA in the future.

Instead, lawmakers could address the system of tariffs and subsidies that prop up the sugar industry and raise the price of land in the EAA in the first place. Federal policy effectively sets a minimum price for sugar in the US, typically well above the world market price. Moreover, the US government is required to buy excess sugar in times of surplus and resell it at a loss to ethanol producers. These backward policies cost consumers between $2.4 and $4 billion annually to the benefit of large sugar corporations. Even if sugar producers in the EAA are not the primary cause of nutrient pollution, they shouldn’t receive special treatment at the expense of taxpayers.

It is also critical that restoration efforts don’t inadvertently exacerbate the problem. Sending more water south is essential to addressing blooms in the St. Lucie and Caloosahatchee estuaries but doing so may increase the risk of spreading blooms south. Additional storage and treatment infrastructure north of Lake O to clean water before it reaches the lake could reduce this risk.

Public-private partnerships that convert privately-owned land into massive artificial wetlands, or water farms, are one possible model. Existing water farms on former agricultural land north of Lake O have led to significant nutrient reductions and are more cost-effective than other storage and treatment projects. Increased use of water farms surrounding the lake could also achieve greater storage and reduce costs while preserving the rights of property owners.

Gov. DeSantis’ actions on Everglades restoration indicate a serious commitment to cleaning up Florida’s water, but decades of neglect mean there is still much to be done. The EAA reservoir is just one of over 50 projects under the Comprehensive Everglades Restoration Plan authorized nearly 20 years ago. Massive infrastructure costs, dispersed blame, and bureaucratic red tape have largely stalled progress over that time.

Going forward, private investment, evidence-based decision making, and improved inter-governmental coordination will be key to avoiding past mistakes and achieving restoration goals in a timely manner. The future of our state depends on it.

The post How Using Public-Private Partnerships and Ending Sugar Subsidies Could Help Restore Florida’s Everglades appeared first on Reason Foundation.

The Santa Monica Mountains National Recreation Area currently covers 153,000 acres. Schiff and Feinstein want to expand it to include an additional 191,000 acres, adding the mountains from several valleys, including San Fernando, Simi, Santa Clarita, La Crescenta and Conejo. Some of these lands are already regulated by local and state agencies but Schiff and Feinstein would like them to be directly managed by the National Park Service.

Schiff’s office says that giving the National Park Service direct oversight would help “implement capital improvements (i.e. trails, roads, facilities for public enjoyment), financially contribute to projects that protect important natural resources, and acquire land through donation, exchange, or purchase from will sellers.”

Adding lands to parks increases maintenance costs and other obligations but doesn’t usually increase revenues because “most parks rely on public subsidies to cover their operating costs,” a Reason Foundation report found. And a study from the Property and Environment Research Center noted, “Typically, new parks come with little or no additional funding.”

The Santa Monica Mountains National Recreation Area draws about 900,000 recreational visitors annually who generate an estimated $39 million in regional spending. And yet, the National Park Service has already deferred $11 million worth of maintenance that the area needs. The area’s maintenance backlog has increased $2 million since 2015.

With President Donald Trump’s 2018 budget proposal calling for a nearly $400 million cut to the parks budget, and California facing more than $1 billion of deferred maintenance costs for its own park system, the solution is not to transfer liabilities to the National Park Service or expand the Santa Monica Mountains National Recreation Area. The focus should be on improving the management of existing parks and land in sustainable ways.

A better approach would be to use public-private partnerships, which have proven to be an effective conservation tool in California, transforming underfunded state parks into self-sustaining public environmental assets. For example, 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 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 Limekiln State Park in Big Sur to California-based Parks Management Company. In doing so, the costs of operating and maintaining these parks was transferred from taxpayers to the private operators, while ensuring that the land is protected and managed according to the long-term vision of voters and officials.

California faces the highest maintenance backlog at the state park level in the country, and that would only be made worse if the Rim of the Valley Corridor Preservation Act were passed.

The National Park Service celebrated its 100th-anniversary last year to great fanfare. But decades of misplaced priorities have left national parks in a state of neglect. Instead of adding land, it is time to shift the way parks are managed. A financially sustainable public-private partnership model can ensure that the beauty and splendor of state and national parks can continue to be appreciated for another 100 years and more.

This column first appeared in the Orange County Register.

The post National Park System Has a Maintenance Backlog of Over $11 Billion and Needs a New Approach appeared first on Reason Foundation.

On July 1, the National Interagency Fire Service issued a grim warning for California, cautioning that the state’s near-continuous five-year drought has weakened trees. As a consequence, “A heavy concentration of heavy, dead and highly combustible fire material now exists in the Sierras,” and there is thus a significant risk of lightning causing extreme “crown” fires.

With luck, the monsoon rains will soak the dead wood and California will be spared this year. But the longer-term problem will remain. In the past three decades, the area burned by wildfires in the U.S. each year has grown dramatically, while the number of fires has remained roughly constant. The big change has been the average size of each wildfire, which has more than doubled. The large crown fires also burn hotter, imposing a greater risk for people living near the forest and scorching the soil, which delays regeneration.

Although climate change has likely played a role, the main reason wildfires have become larger and more devastating is the way the forests have been managed — in particular, the Forest Service’s fire suppression policy. After the Big Burn of 1910, which destroyed three million acres and killed 92 people in Washington, Idaho and Montana, the Forest Service initiated a policy of putting out fires rather than letting them burn naturally. For decades, suppression appeared to be highly successful. From 1910 to the mid-1950s, the area of national forest burned fell from over 1 million acres to around 200,000 acres – and stayed more or less constant until the 1980s.

Before the suppression policy was enacted, California likely experienced frequent small fires, largely caused by lightning, which regularly cleared out the understory, creating a diverse, patchy mosaic. Suppression interfered with that process, resulting in denser stands of trees, reduced diversity and a buildup of dead wood. During dry years, lightning readily ignites the understory of dead, dry wood. The resultant fire then climbs to the crown and is spread by the wind. Under the right conditions, such fires can spread rapidly and can be difficult to stop.

From both an ecological and an economic perspective, continuing with this suppression policy is lunacy. Yet instead of ending it, the Forest Service has doubled down. Between 1986 and 1995, an average of 3 million acres of U.S. forest burned each year and the Forest Service spent an average of $311 million per year on suppression. The following decade, 5.5 million acres burned per year, and the Forest Service spent $670 million per year on suppression. Between 2006 and 2015, the numbers continued to grow – 7 million acres burned each year and the Forest Service spent $1.2 billion a year on suppression. Last year, over 10 million acres burned, and the Forest Service spent $1.7 billion on suppression.

As a proportion of the Forest Service’s total budget, wildland fire management grew from 16 percent in 1995 to 52 percent in 2015. Ironically, in a recent piece arguing for even more spending on fire suppression, the Forest Service admitted, “We urgently need to address the runaway growth of fire suppression costs, and continue funding other critical programs that protect communities and infrastructure, and increase the ability of our lands to recover from wildfire.”

If the Forest Service really wants to end the runaway growth in spending on suppression and the ecological destruction it has wrought, it could listen to its own researchers, who have argued that forest managers should be rewarded for limiting the use of suppression and undertaking more prescribed burns and mechanical thinning. The aim would be to mimic the effects of the many small fires that would occur naturally, preventing excessive fuel buildup and reducing the number of catastrophic fires.

Julian Morris is vice president of research at Reason Foundation.

The post Adding Fuel to Forest Fires appeared first on Reason Foundation.

Putting aside American Rivers’ false equivalency between PPPs and full-scale privatization, the most eye-catching anti-privatization argument in the blog post is the suggestion that privatization of locks and dams should be resisted because it would lead to a “tax on all recreational boaters-including paddlers.” This fear stems from a fall 2015 draft public-private partnership proposal for Mississippi River infrastructure that states: “All beneficial users of the locks and dams could have tariff rules and rates applied to the added value from water use.”

It is of course true that a privatized system of locks and dams would mean that river users, such as barges and other boats, would have to pay usage fees in much the same way drivers pay highway tolls. These fees, however, serve an important function. Given that there are often multiple, conflicting users of waterways, an efficient user fee system best ensures that waterways achieve their best and highest valued use. When private owners purchase infrastructure like a lock or a dam, they assume an investment risk and therefore must be allowed to recover the cost of their investment. In exchange, the private investors provide critical funding to maintain the locks and dams that they control, which in turn ensures safer and more efficient river travel for everyone.

User fees charged to commercial river users are not what concerns American Rivers, which only focuses on the perceived horror of recreational users being forced to “pay for” the “privilege” of paddling down the Mississippi. While this argument may tug at the heartstrings of kayakers and canoers everywhere, it is not well a thought-out position. In fact, there are many good reasons why all users-even recreational ones-should be expected to contribute user fees for the maintenance of our nation’s water infrastructure.

First of all, recreational users derive special benefits from locks and dams. While all Americans benefit from the enhanced river transportation that is made possible by the presence of locks and dams (in the form of better access to goods and products), recreational users derive special, particularized benefits from this infrastructure. Since locks and dams help smooth and widen uneven portions of rivers, they give recreational users the ability to easily steer clear of large barges and other fast-moving vessels. This makes for a more enjoyable river experience for all river users-especially recreational ones. The longstanding policy of the Office of Management and Budget on user fees, laid out in Circular No. A-25, states that “[a] user charge will be assessed against each identifiable recipient for special benefits derived from Federal activities beyond those received by the general public.” Based on this beneficiary-pays principle, both recreational and commercial river users should be expected to pay user fees for the special benefits they derive from the presence of locks and dams.

Furthermore, user fees for recreational activities on federal land and waterways are not unique. As anyone who has visited a national park can attest, the National Park Service charges user fees for many of the activities that take place within park boundaries. User fees are levied on nearly every pursuit one can engage in at a park, including camping, docking, parking, and even just entering the park. Similarly, hunters and fishers that wish to hunt on federal land usually are required to pay the equivalent of a user fee in the form of a permit or a license. All these fees can be justified under the same beneficiary-pays model discussed above since the users who pay the fees are deriving specialized benefits beyond those that are received by the general public.

Rather than viewing the fees as objectionable, most park-goers rightly recognize that modest user fees are used, in part, to maintain the parks, thereby ensuring that they stay open and accessible to the public for years to come.

It’s also important to note that the amount of the user fee charged to a river user will vary depending on the government’s cost of providing the identifiable recipient’s benefit. Just as semi-trucks are charged higher tolls than small cars at tollbooths, barges and large commercial vessels will face higher user fees when they traverse a lock or dam than someone floating down the river on paddleboard. This is because commercial users will derive a greater benefit from the presence of the lock or dam than mere recreational users.

Some might worry that even low user fees will create a de facto barrier of entry for lower-income Americans interested in using our nation’s rivers for recreational purposes. Such concerns ignore the fact that oftentimes travel costs are as much or more of a barrier to using public lands than user fees for the poor. Additionally, there is ample research suggesting that low-income populations overwhelmingly support the concept of recreational user fees. It may even be possible to structure a locks and dams user fee system in a way that allows those who are genuinely unable to afford the fee to apply for an exemption, although if the fee is modest it should present no more of a barrier to the use of public waters than federal fishing or hunting licenses do to the use of public lands.

It’s worth pointing that very few inland rivers in America would even be affected by lock and dam user fees since locks and dams are most often located only on large rivers used for commercial transit. The Army Corps of Engineers “operates and maintains 12,000 miles of inland and intracoastal waterway navigable channels, including 192 commercial lock and dam sites.” For comparison, American Rivers itself notes that there are 250,000 rivers in the United States, totaling 3.5 million river miles, which means that only .003% of river miles have locks and dams on them. That leaves a lot of river miles leftover for “free” paddling.

This is not to say that charging modest user fees to recreational river users that traverse locks and dams would be without challenges. One administrative concern would be enforcement-a kayaker, for example, could plan routes that avoid locks and dams, or even choose to portage around them. But these same drawbacks apply with equal force to toll roads (i.e., drivers often take back roads to avoid them), and merely underscore the importance of not setting fees so high as to incentivize users to go extreme lengths to avoid them.

Ultimately, Americans need to understand that, one way or the other, they will end up paying for the maintenance of our country’s water infrastructure system. Far from being “free,” the status quo-crumbling locks and dams-benefits neither commercial nor recreational river users. If the problem is not addressed now via solutions like privatization and user fees, Americans will face the prospect of having their taxes raised to pay for water infrastructure rehabilitation down the road. Worst of all, given persistent Congressional inaction, these tax hikes would most likely be instituted only after some event forced Congress’s hand (such as a dam bursting), meaning that the cost of rehabilitation would end up much higher than it is today. The better option is instituting a more efficient and affordable system in which all river users pay fees commensurate with the benefits they derive.

Under the current system, the Inland Waterways Trust Fund-funded by a 29-cent per-gallon diesel fuel tax-finances 50% of the costs of new dam and lock construction (as well as major rehabilitation projects), with the remaining 50% coming from general taxes paid by all Americans. But neither commercial cargo vessels nor recreational river users contribute the first nickel to lock and dam maintenance and operations, 100% of which comes from general taxpayers. Instead of this inefficient, under-funded, and costly system, a true beneficiary-pays model should be considered.

Although some form of privatization (or public-private partnership) would be the best solution for America’s crumbling water infrastructure, the Army Corps of Engineers itself can take action. In OMB’s Circular No. A-25, each agency is required to “[r]eview the user charges for agency programs biennially, to include: (1) assurance that existing charges are adjusted to reflect unanticipated changes in costs or market values; and (2) a review of all other agency programs to determine whether fees should be assessed for Government services or the user of Government goods or services.” Therefore, the Corps, in its next biennial review, should recommend that Congress implement and authorize a beneficiary-pays user fee model to help fund both the capital and operating expenses associated with the river locks and dams.

The benefits of a beneficiary-pays system would include reduced river congestion and reduced tax burdens on non-river-using general taxpayers. In the face of deteriorating river infrastructure and a $19 trillion federal deficit, the implementation of a modest user fee system is really the only option left. Rather than being a bad thing like American Rivers suggests, it could make a big difference in addressing our nation’s water infrastructure funding shortfall.

William B. Newman, Jr. (wbnewmanjr@hotmail.com) is Senior Advisor to HC Project Advisors in Washington, D.C. C. Jarrett Dieterle (jdieterle@harkinscunningham.com) is an attorney at Harkins Cunningham LLP in Washington, D.C.

The post Combatting the Recreational River “User Fees” Bogeyman appeared first on Reason Foundation.

The PERC report includes an article I penned recommending that the National Parks Service explore the use of infrastructure public-private partnerships to help tackle the maintenance backlog. Here’s an excerpt:

Roads and other transportation infrastructure make up half of the deferred maintenance backlog in national parks. With the agency’s centennial fast approaching, the National Park Service should consider creative partnerships with the private sector to address these challenges and ensure park infrastructure is sustainable in the agency’s second century, not marred by chronic deterioration.

The National Park Service can look to states and local governments for inspiration on how to deal with their infrastructure challenges. Over the past several decades, state and local governments have turned to public-private partnerships to tap into private-sector capital and expertise. This allows them to stretch limited tax dollars further, often by outsourcing maintenance activities to the private sector to lower costs.

The full article is available here, and the PERC report is available here.

The post Harness Public-Private Partnerships for National Park Infrastructure Needs appeared first on Reason Foundation.

The National Park Service can look to states and local governments for inspiration on how to deal with their infrastructure challenges. Over the past several decades, state and local governments have turned to public-private partnerships to tap into private-sector capital and expertise. This allows them to stretch limited tax dollars further, often by outsourcing maintenance activities to the private sector to lower costs.

A recent example of this approach comes from Pennsylvania’s Rapid Bridge Replacement Project, a partnership to reconstruct 558 structurally deficient bridges statewide in one fell swoop.2 A private consortium is financing the $899 million project and is managing the design, construction, and maintenance of the bridges under one comprehensive contract. The consortium will maintain each bridge for 25 years after completion and will be repaid by the state through an annual payment over that same time period to keep costs manageable for taxpayers.

The state estimates that bundling the work will cut costs by 20 percent relative to a more traditional approach. The contract model incentivizes proper maintenance, transfers major financial and long-term operational risks to the private partner, and ensures that the work is done now. 

The National Park Service should consider the potential of using similar models to address its transportation backlog across one or more parks. At the same time, the National Park Service’s authorizing legislation and policies should be modernized to give the agency maximum flexibility in crafting innovative partnerships. Though the agency can already make use of some types of infrastructure public-private partnerships, a 2013 report notes that “federal statues and NPS policies place limitations on these types of partnerships.”3

In addition, the National Park Service should explore public-private partnerships to address related infrastructure challenges such as water and wastewater system projects, which together make up $693 million in deferred maintenance.4

Public-private partnerships can provide a powerful means of stretching parks’ limited funds further. The National Park Service could begin assessing the potential for infrastructure partnerships in a low-cost, low-risk way by issuing an open-ended request for information, seeking big-picture concepts from the private sector on how to tackle the maintenance backlog. The Park Service can use the feedback to refine its thinking and develop more concrete proposals.

Although public-private partnerships cannot solve every problem, they can play an important role in improving infrastructure and reducing the backlog in our national parks. Given the National Park Service’s current state of disrepair-and the prospect that the next century could be one of decline if nothing changes-all solutions should be on the table.

Leonard Gilroy is director of government reform at Reason Foundation. This article was originally published by the Property and Environment Research Center in its February 2016 report, Breaking the Backlog: 7 Ideas to Address the National Park Deferred Maintenance Problem.

Endnotes:

1 National Park Service. “NPS Asset Inventory.” http://www.nps.gov/subjects/plandesignconstruct/upload/FY-2015-NPS-Asset-Inventory-Summary-2016-01-11.pdf.

2 Pennsylvania RBR Project. http://parapidbridges.com.

3 “NPS Transportation Innovative Finance Options.” U.S. Department of Transportation, Research and Innovative Technology Administration, prepared for U.S. Department of the Interior, National Park Service. (May 2013). http://www.nps.gov/transportation/pdfs/NPS_Innovative_Finance.pdf.

4National Park Service. “NPS Asset Inventory.” http://www.nps.gov/subjects/plandesignconstruct/upload/FY-2015-NPS-Asset-Inventory-Summary-2016-01-11.pdf.

The post Harness Public-Private Partnerships for National Park Infrastructure Needs appeared first on Reason Foundation.

State parks controlled by California need over $1 billion in maintenance that the government has delayed. And a new report from the federal National Park Service estimates that its assets in California – which include national parks, national monuments and national recreation areas – have a $1.72 billion maintenance backlog.

Yosemite National Park has already put off $553 million in maintenance needs, including $277 million in road and bridge repairs, almost $97 million in water and sewer system repairs and over $101 million to repair more than 800 park buildings.

Closer to home, Southern California’s Joshua Tree National Park needs almost $67 million to fix its roads and bridges and $3.8 million to repair trails. The Death Valley and Sequoia and Kings Canyon National Parks face approximately $343 million in combined maintenance needs. Even the Cabrillo National Monument in San Diego has $5 million in overdue maintenance.

Parks aren’t just pretty open spaces. For the public to access and use them they requires roads, bridges, water and sewer systems, buildings, trails and other infrastructure. But federal and state governments keep putting off these basic maintenance and upkeep projects. Just like not patching a hole in your roof today will lead to bigger, more costly home repairs in the future, not fixing cracked roads and broken sewer systems in parks steadily degrades the parks, the visitor experience and can ultimately harm environmental quality.

Making this situation more acute is the fact that parks have become a perennial loser in the budget game. At the state level, spending on education, health care, higher education and corrections crowds out spending on “nice to have” amenities like parks.

At the federal level, entitlements like Social Security and Medicare, and military spending take up major portions of the budget. Funding for national parks has been on the decline for the last decade, and even though the Obama administration has proposed increasing national parks spending by over $400 million in the coming year, it’s unlikely to pass the Republican-controlled House of Representatives. And even if the president’s plan passed, it would be just a drop in the bucket compared with the system’s $11.5 billion in maintenance needs.

While there are no easy solutions, three key things must happen to ensure the viability of the National Parks System for another century.

First, we need to stop waiting for more taxpayer dollars that aren’t coming and get comfortable with the idea of making park users pay more to visit them. The current efforts by the National Park Service to increase user fees across its system – the first proposed increases in almost a decade – are a good step in that direction. Experts at the Property and Environment Research Center have long noted that even if park visitor fees are increased, the parks will remain a great bargain and price increases will likely have little effect on overall visitation.

Second, the system needs to dig deeper to find more cost savings and opportunities to partner with the private sector. In some cases, this may mean outsourcing activities currently done by the government, in others it may mean bundling maintenance contracts across multiple parks to get better value, and, in others, it could mean seeking an infusion of private capital in return for long-term asset maintenance contracts.

Third, politicians need to stop irresponsibly adding parks to a system that is already overburdened. Legislation enacted by Congress last year added seven new national parks and expanded several others. Earlier this year, the Obama administration designated three new national monuments. If you can’t afford what you’ve already got, it’s folly to add even more.

With their centennial approaching, there will be much focus on the parks’ history and legacy. But let’s hope that this look back doesn’t overshadow the fact that the status quo is unsustainable. The operating model for national parks is going to have to change significantly if they’re going to survive another century.

Leonard Gilroy is director of government reform at Reason Foundation. This article originally appeared in the Orange County Register.

The post Massive Maintenance Backlog Threatens California’s National Parks appeared first on Reason Foundation.

Murray Lloyd states, “The BBCC is science-based, landowner-driven, ethically-rooted and non-regulatory,” and as a result, “The BBCC became a model for successful conservation through a public-private-partnership throughout the country.”

Now for a reality-based look at the Black Bear Conservation Coalition, the conservation of the Louisiana black bear, and Candidate Conservation Agreements.

The initial work undertaken by the Black Bear Conservation Coalition over twenty years ago represents the prototype Candidate Conservation Agreement, an initiative under the Endangered Species Act that has become increasingly popular because it’s touted as a voluntary, non-regulatory way to prevent species from being listed under the Act. In reality, Candidate Conservation Agreements rely on the threat of the Endangered Species Act’s fearsome regulations to gain “voluntary” compliance, as Murray Lloyd admitted before Congress almost twenty years ago. But first some background on the Black Bear Conservation Coalition.

After the U.S. Fish and Wildlife Service proposed to list the Louisiana black bear in 1990 under the Endangered Species Act, the Black Bear Conservation Coalition initiated their prototype Candidate Conservation Agreement to try to prevent listing. (This is the same black bear subspecies that gave rise to the term “teddy bear” because when President Teddy Roosevelt was on a hunting trip in Mississippi in 1902 he refused to shoot a bear under what he thought were unsporting conditions.) Despite that Fish and Wildlife listed the bear in 1992, the Coalition, which is still going strong, continues to garner widespread praise as an example of innovative, win-win endangered species conservation, focused on finding practical solutions to the conflict-ridden Endangered Species Act that protect landowners’ property rights.

The Black Bear Conservation Coalition promotes itself as an effort to preempt Endangered Species Act regulation by formulating a proactive habitat management plan among all “stakeholders,” especially private forest owners because they have most of the bear’s habitat. The management plan combines elements of a Candidate Conservation Agreement and an informal Habitat Conservation Plan, another so-called voluntary initiative under the Endangered Species Act in which landowners agree to put off limits some of their land in exchange for the feds giving them the green-light to use the rest of their land; thereby turning the off limits private land into a defacto federal wildlife refuge, even though if the government wants to acquire private land for any purpose it is required to compensate landowners under the Fifth Amendment of the Constitution.

The Black Bear Conservation Coalition’s main accomplishments to date have been to write the management plan, which was adopted by the Fish and Wildlife Service as the official recovery plan, educate the public, and push federal and state agencies to conserve the bear. The Coalition’s proactive, landowner-friendly image has been hailed by the Mississippi Fish and Wildlife Foundation, Sand County Foundation, Wildlife Management Institute and others as an innovative, win-win solution preferable to the usual command-and-control property restrictions imposed by the Endangered Species Act. All of which sounds great.

In reality, beneath this feel-good veneer of cooperation, the Black Bear Conservation Coalition has relied on the threat of Endangered Species Act draconian penalties–$100,000 fine and/or 1 year in jail for harming a single bear or even its habitat–to force private landowners to participate and negotiate. Murray Lloyd admitted (while testifying at an August 3, 1995 hearing before the Senate Environment and Public Works Committee, Subcommittee on Drinking Water, Fisheries and Wildlife–but unfortunately the testimony does not appear available online) the agreement reached by Coalition’s stakeholders only came about because of the threat of the Act’s punitive sanctions, which “served effectively as a cocked two-by-four to keep everyone at the table.”

Although the agreement was achieved with the threat of being whacked by the Endangered Species Act, during the same 1995 hearing at which he spilled the beans about the so-called voluntary agreement, Lloyd called the Black Bear Conservation Coalition “a model for natural resource conflict resolution.” Fast forward nineteen years and Murray Lloyd is still telling the same misleading and farcical tale. Unfortunately, others have swallowed this tale hook, line and sinker. Lloyd’s two-by-four analogy is very apt because it encapsulates how the Endangered Species Act often works; people are threatened and intimidated with getting clobbered by law in order to gain their “voluntary” compliance.

After separating myth from reality, there is one important lesson to be learned from efforts to conserve the teddy bear. The Endangered Species Act is the application of Teddy Roosevelt’s famous saying about how he conducted foreign policy–“speak softly and carry and big stick”–to conservation. Any reasonable person, upon learning of Murray Lloyd’s cocked two-by-four admission, or those knowledgeable about how the Endangered Species Act truly works, would not call this process voluntary, non-regulatory, or a model for conflict resolution and public-private partnerships to conserve endangered species.

The post Endangered Black Bear Baloney in Louisiana and the Reality of Candidate Conservation Agreements appeared first on Reason Foundation.

Annual Privatization Report 2014 details the latest on privatization and government reform initiatives at all levels of government. The individual sections include:

• Air Transportation
• Surface Transportation
• Transportation Finance
• Education (COMING SOON)
• Federal Government Privatization (COMING SOON)
• State Government Privatization (COMING SOON)
• Local Government Privatization (COMING SOON)
• Criminal Justice and Corrections (COMING SOON)

Your comments on Annual Privatization Report 2014 are important to us. Please feel free to contact us with questions, suggestions or for more information. For the most up-to-date information on the rapidly changing privatization world, please visit Reason’s privatization research archive, and sign up for our monthly Privatization & Government Reform Newsletter.

Leonard C. Gilroy, Editor
Director of Government Reform, Reason Foundation
leonard.gilroy@reason.org

The post Annual Privatization Report 2014 appeared first on Reason Foundation.

• STATES: Sampling the State of the State Speeches
• EDUCATION: Houston Reducing Achievement Gaps Under Student-Based Budgeting
• PUBLIC HEALTH: Rush to Regulate E-Cigarettes May Harm Public Health
• PENSIONS: Rhode Island Pension Reform Case Study
• SOCIAL FINANCE: New York Launches Social Impact Bond Program
• LOTTERIES: Pennsylvania Ends Procurement for Private Lottery Management
• PRISONS: The Challenge of Public/Private Cost Comparisons
• INNOVATORS IN ACTION: Pioneering Road User Charges in Oregon
• News & Notes
• Quotable Quotes

STATES: Sampling the State of the State Speeches

With President Obama’s State of the Union address getting major attention this week, it’s easy to forget that over a dozen state governors have also been busy in recent weeks giving their annual State of the State speeches. Looking across a representative sample of six recent State of the State speeches-three from “blue” states (California, New York and Colorado) and three from “red” states (Wisconsin, Indiana and Georgia)-some common policy themes emerge, including tax reform, government reform, increasing rainy day fund balances, education and infrastructure. » FULL ARTICLE

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EDUCATION: Report Ranks Houston Tops In Reducing Achievement Gaps Under Student-Based Budgeting

In the United States, state and local education funding systems are increasingly adopting a “school funding portability” framework, where funding is attached to the students and “follows the child” to the school he or she attends. While this goes by several names-including weighted student formula, results-based budgeting, student-based budgeting, “backpacking” or fair-student funding-in every case the meaning is the same: dollars rather than staffing positions follow students into schools. A new Reason Foundation report examines 14 school districts currently using portable student funding, ranking each district in 10 categories, including test scores, achievement gaps, graduation rates, and transparency. It also recommends a series of “best practices” for districts, including publishing school report cards for parents, using performance-based pay for teachers and principals, allowing students to enroll in any school in the district, and giving principals control over their hiring and budgets. » FULL REPORT

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PUBLIC HEALTH: Rush to Regulate E-Cigarettes May Harm Public Health, Anti-Smoking Efforts

Despite a recent Reason/Rupe poll that found that 62 of Americans support governments allowing the use of e-cigarettes in public places, cities like New York City and Chicago have recently enacted ordinances to include e-cigarette “vaping” in existing public smoking bans. Further, over the last year there has been a wave of local regulations enacted or proposed across the country to restrict the sale or use of e-cigarettes. In a recent Orange County Register commentary, I discuss how the misguided rush to limit the sale or use of e-cigarettes is more likely to harm public health instead of benefit it, primarily by making it more difficult for smokers to transition to safer nicotine delivery alternatives, thus keeping them smoking longer.
» FULL ARTICLE
» REASON/RUPE POLL RESULTS

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PENSIONS: Rhode Island Pension Reform Case Study

In 2011, Rhode Island enacted major pension reform legislation spearheaded by State Treasurer and current gubernatorial candidate Gina Raimondo to address an unfunded pension liability of $6.8 billion and a system less than 50 percent funded relative to its obligations. Among the changes, the reforms introduced a hybrid defined-benefit/defined-contribution funding system, suspended cost-of-living-adjustments for retirees, and increased the retirement age. A new Reason Foundation report offers a detailed case study of Rhode Island’s pension reform efforts, reviewing the challenges that prompted the reforms, the specific policies enacted, and the lessons learned for other states and municipalities facing significant unfunded pension liabilities. » FULL REPORT

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SOCIAL FINANCE: New York Launches First State-Level Social Impact Bond Program

The concept of social impact bonds-in which the private sector finances and implements new social service delivery models on behalf of governments under a pay-for-success contract model-has been advancing rapidly in the U.S. in recent months. New York State recently announced the first state-level social impact bond program, which is aimed at reducing recidivism among recently released inmates. Additionally, legislators in New Jersey and Washington State are seeking to launch social impact bond pilots. » FULL ARTICLE

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LOTTERIES: Pennsylvania Ends Procurement for Private Lottery Management

All of the 44 states that operate lotteries currently outsource certain components of their internal lottery operations, but three states-Illinois, Indiana and New Jersey-have taken privatization further in recent years by entering into private management agreements (PMAs) with private service providers designed to increase net lottery revenues to the state as a means of augmenting traditional tax revenues. Privatized lottery management took a different course in Pennsylvania, however, where last month Gov. Tom Corbett’s administration announced that it was abandoning a PMA negotiated the previous year that got stalled amid union and legislative opposition and a rejection of the contract by the state’s attorney general in early 2013. » FULL ARTICLE

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PRISONS: The Challenge of Public/Private Cost Comparisons

There is an ongoing debate over the relative cost of public and private prison operations, with some research suggesting that governments can save money through public-private partnerships and other research finding that the cost difference is negligible or that public sector delivery is cheaper. One of the primary reasons for this disparity is different budgeting and accounting practices in the public and private sectors, which make “apples-to-apples” comparisons difficult and often distort cost comparisons in favor of the public sector. A new Reason Foundation policy brief examines this issue, using a 2011 Arizona Department of Corrections report as a case study. Though the report was interpreted as showing that privately-operated prisons are costlier than public ones in Arizona, it suffers from a variety of methodological shortcomings, including deficient treatment of capital assets and liabilities, retiree healthcare and pension costs for public employees, inmate healthcare costs, transferred legal risks, and taxes paid to state and local government. The Reason brief finds that rigorous cost comparisons must be undertaken carefully, lest they muddy the debate at the expense of sound policymaking. » FULL POLICY BRIEF

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INNOVATORS IN ACTION: Pioneering Road User Charges in Oregon

The latest installment of Reason Foundation’s Innovators in Action monthly interview series-which profiles innovative policymakers in their own words, highlighting good government efforts delivering real results and value for taxpayers-examines Oregon’s work in recent years to advance the concept that may ultimately replace the beleaguered gas tax: mileage-based road user charges. I recently interviewed James Whitty, manager of the Oregon DOT’s Office of Innovative Partnerships and Alternative Funding, on what prompted Oregon policymakers to explore road user charges, the evolution of the state’s pilot programs, how Oregon has addressed the public’s concerns over protecting privacy, and much more. » FULL INTERVIEW

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NEWS & NOTES

The Economist on Divesting Government Assets: I was honored to be cited in an article in the January 11th print edition of The Economist on the topic of divesting government-owned assets. The article cited a surge in the privatization of state-owned assets in emerging economies in recent years and suggested that advanced OECD economies take another look at their asset portfolios, as “[s]elling some of these holdings could work wonders: reduce debt, finance infrastructure, boost economic efficiency.” The full article is available here.

New Reason Foundation Study Recommends Organizational Reform of Air Traffic Control System: Despite dramatic advances in technology, the basic features and procedures of the 1960s-era air traffic control (ATC) system have remained largely unchanged in the U.S. and have fallen well behind the capacity of new technologies to provide safer, faster, more reliable and more fuel-efficient air travel and to keep pace with the increasing volume of air traffic. A new report by Reason Foundation founder and transportation policy director Robert Poole published by the Hudson Institute finds that fundamental reform of the U.S. air traffic system’s funding and governance is the key to a full embrace of cutting-edge air traffic management in this country. It’s worth noting that ATC providers in many other countries have embraced the new technologies and procedures recommended by Poole much more readily than we have in the U.S.-including providers in Australia, New Zealand, Canada, Germany and the UK-and are seeing superior performance.

New Reason/Buckeye Institute Study Recommends Public-Private Partnerships to Operate State Parks: Reason Foundation and the Ohio-based Buckeye Institute released a study in December making the case that one way to keep cash-strapped state parks open without imposing additional burdens on the taxpayer is to utilize public-private partnerships. Many states already use private concessionaires to provide piecemeal services within parks (e.g., food, retail, lodging, marinas, etc.) so a shift to more extensive involvement can build on that. Whole park operation PPPs would transfer the responsibility of maintaining the park to a private operator while allowing them to collect entrance and other fees, paying the state an annual rent payment in return. The U.S. Forest Service has used this PPP model for over 25 years to operate hundreds of its developed recreation areas nationwide, and in 2012 California became the first state to turn over the operation of state parks to private recreation management companies to avoid closure. The full report is available here.

Pennsylvania Seeking Innovative Public-Private Partnership for Bridges: The Pennsylvania Department of Transportation (PennDOT) issued a request for qualifications in December 2013 seeking qualified private contractors for its Rapid Bridge Replacement Project, a public-private partnership to reconstruct at least 500 structurally deficient bridges of similar design. The selected team will manage the bridges’ design, construction and maintenance under one comprehensive contract to streamline project delivery, and it will finance the project in an availability-payment concession. The department anticipates significant cost savings since the same basic design and construction standards can be used for multiple bridges. The project will launch in 2015, and the selected team will also maintain the bridges for as much as 35 years. A Pennsylvania Department of Transportation spokesperson told the Pittsburgh Post-Gazette last week that the initiative “gives us the ability to accelerate the delivery of 550 to 650 bridge replacements that otherwise wouldn’t happen for 15 to 20 years if we were to use a traditional contracting model.”

Privatization of School Support Services on the Rise in Michigan: The Mackinac Center for Public Policy’s Michigan School Privatization Survey 2013, released last week, finds that 357 of Michigan’s 545 local school districts (65.5%) contracted out for at least one of the three main non-instructional services-custodial, food, and transportation-in 2013, a figure that has more than doubled since the Center began publishing its annual study in 2001. The survey found that 45.5% of districts contracted with private companies for facilities maintenance and other custodial work, followed by food services at 36.5% and transportation at 21%. “Every dollar saved through privatization is a dollar that can be redirected toward the classroom where it belongs,” according to the Mackinac Center’s James Hohman. The full report is available here.

Oregon Liquor Privatization Push Begins: In 2011, Washington State became the first of the 18 so-called liquor “control states”-those with state-run monopolies over the distribution and/or sale of distilled spirits-since the end of Prohibition to fully privatize its wholesale and retail monopolies, as discussed in the October edition of this newsletter. But it may not be the last. In mid-December, a Northwest Grocery Association-backed group called Oregonians for Competition filed five different initiative petitions that would end the state-run liquor monopoly and expand the sale of distilled spirits to retail outlets over 10,000 square feet. Liquor sales are currently only allowed in state-sanctioned liquor stores, which would continue to operate under the various proposed ballot measures. The five measures are variations of a proposed Oregon Liquor Control Modernization Act, and Oregonians for Competition plans to choose one version to potentially take forward to the November 2014 ballot, according to The Oregonian. The state’s Liquor Control Commission is currently pushing the legislature to consider a modernization effort that could potentially forestall privatization, but early skepticism among legislators prompted The Oregonian’s editorial board to recently suggest that they should not “be surprised in November when voters come to the sensible conclusion that government really shouldn’t be in the booze-selling business.”

Rockefeller Institute Report on Defined-Benefit Pensions: Regardless of where one stands on the issue of reforming public employee pension systems, I would commend to readers’ attention a new Rockefeller Institute of Government report by Donald Boyd and Peter Kiernan entitled, Strengthening the Security of Public Sector Defined Benefit Plans. Starting with the premise that defined-benefit pension systems “can and should be structured to fund benefits securely,” Boyd and Kiernan present a blistering critique of the “bad incentives, inadequate rules, and little transparency” that have contributed to the massive underfunding of public sector defined-benefit pensions, and they offer a series of recommendations designed to address these systemic flaws. Defenders of defined-benefit pensions and pension reform advocates alike will benefit from Boyd and Kiernan’s analysis. The full report is available here.

Privatizing Utah’s State-Owned Golf Courses: Provo’s Daily Herald recently reported that Utah State Rep. Kay Christofferson is planning to introduce a bill in the 2014 legislative session that would require the Department of Natural Resources to contract out the operations and maintenance of the four gold courses owned and operated by the state. A 2012 Utah State Parks report found that the four courses required taxpayer subsidies to cover operating and debt expenses. “Why are we competing against people that provide that service? Let’s put it out for a [proposal] and see if we can get somebody to operate this privately,” Christofferson told the Herald.

Indianapolis Seeking Private Partners for Parks: In November, Indianapolis issued a request for proposals seeking potential private for-profit or nonprofit partners to take over operations of parks, take over existing park facilities or programs, and/or propose new facilities or programs. The city is seeking opportunities to lower operating costs and potentially increase revenue through the solicitation. According to the Indianapolis Star, the city’s $3.4 million annual park capital budget is unable to cover a $46 million backlog of facility improvements, much less the $51 million in new park facilities sought by the city. Proposals are due on January 31st.

Solid Waste Privatization to Help Eliminate Deficits in Lawrence, IN: A new contract with Republic Services for residential trash and recycling collection will save Lawrence, Indiana an estimated $5 million over the 10-year contract, helping the city eliminate its budget deficit, according to an article last month in the Indianapolis Star. The company offered positions to all nine city sanitation employees and paid the city $300,000 for its trucks and waste containers, according to the article.

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QUOTABLE QUOTES

“Governments of OECD countries still oversee vast piles of assets, from banks and utilities to buildings, land and the riches beneath (see table). Selling some of these holdings could work wonders: reduce debt, finance infrastructure, boost economic efficiency. But governments often barely grasp the value locked up in them.”
-“Setting out the store,” The Economist, January 11, 2014.

“The problem [with defined benefit pensions] begins with mismeasurement of liabilities and the cost of funding them securely, for financial reporting purposes. The proper way to value future cash flows such as pension benefit payments is with discount rates that reflect the risk of the payments. This is separate from the question of the rate pension funds will earn on their investments. […] This bears repeating: The proper rate for valuing pension liabilities on financial statements is separate from the question of what pension funds will earn on their investments. Different rates may be appropriate for valuing liabilities than for assumed investment returns – and we recommend, later, that different rates be used. The major significance of valuing liabilities incorrectly is that it leads to inadequate funding policies, and encourages the mistaken belief that benefits can be greater, services can be greater, or taxes lower while still funding benefits securely.”
-Donald J. Boyd and Peter J. Kiernan, Strengthening the Security of Public Sector Defined Benefit Plans, The Nelson A. Rockefeller Institute of Government, State University of New York, January 2014, pp.vii-viii.

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Additional Resources:

• More privatization news
• More government reform news
• Annual Privatization Report 2013 homepage
• Innovators in Action 2014 homepage
• Innovators in Action 2013 homepage
• Privatization & Government Reform Newsletter archive

The post Privatization & Government Reform Newsletter #3 appeared first on Reason Foundation.

Beyond the threat of closures, the ongoing economic malaise has exacerbated a widespread, pre-existing problem of inadequate and deferred maintenance in state parks, which only serves to accelerate their decline. A 2010 report by the National Park Service found that states had identified $18.5 billion in unfunded needs for parks and recreation. The National Trust for Historic Preservation noted in 2010 that over half the state parks systems are “at-risk,” which means that state-owned and -managed parks and historic sites are facing major budget cuts. For example, the California State Parks System accumulated over $1 billion in deferred repairs and maintenance; and that’s not to mention the significant hurdles covering operational costs across the system.

Yet state parks remain popular while their maintenance needs continue to worsen; according to America’s State Parks Foundation, state parks received 725 million visitors at over 6,000 sites around the country in 2010 alone.8 Can this popularity be turned from a cost into a benefit? One way to keep state parks open without imposing additional burdens on the taxpayer is to utilize public-private partnerships (PPPs). Many states already successfully use private concessionaires to provide piecemeal services within parks-including food, retail, lodging, marinas, and other commercial activities-so a shift to more extensive involvement can build on that. Such a whole park operation PPP would transfer the responsibility of maintaining the park to a private operator, while enabling that operator to raise revenue through entrance and other fees.

The U.S. Forest Service has used this PPP model for over 25 years to operate thousands of its developed recreation areas nationwide, and in 2012 California began the first state to turn over the operation of state parks to private recreation management companies to avoid closure. This paper seeks to describe such a model and explain how it can best be applied at the state level.

A version of this study was published by the Conservation Leadership Council in January 2013.

Attachments

• Full Study: Parks 2.0

The post Parks 2.0: Operating State Parks Through Public-Private Partnerships appeared first on Reason Foundation.

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.

For those who may fear increased commercialization-or “Disneyfication”-of parks, the contracts don’t allow that. The state continues to own the parks and set the policy direction for them. The contracts hold the private companies accountable for meeting strict performance and operating standards that protect the character and mission of the parks, as established by the state. The operator cannot so much as change the design of a bathroom without state approval.

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.

Looking ahead, it’s hard to see where California is going to come up with an infusion of cash to rebuild and maintain its parks. An April 2013 Government Accountability Office report warned of a dire outlook for state and local government budgets all the way through the year 2060, with rising healthcare and pension costs contributing to growing debt as far as the eye can see.

“The results are clear. A great public institution is falling apart. Without a bold, new course equal to the vision that created the state park system, California risks a replay of closing parks that the state can no longer afford to operate,” Virginia Ellis, who chaired the Little Hoover Commission’s state parks study, said.

The old way of running the state parks doesn’t work any more. California parks need better government and management. Public-private partnerships-along with other worthy Commission recommendations like modernizing the park agency’s financial accounting systems, requiring it to prepare annual operating audits and performance reports, and giving it more hiring flexibility-can help preserve the state parks for generations to come.

Leonard Gilroy is director of government reform at Reason Foundation. This column was originally published by the Orange County Register on May 25, 2013.

The post Public-Private Partnerships Could Save State Parks appeared first on Reason Foundation.

The threat of closing five dozen state parks is yet another variation on the well-worn “Washington Monument Syndrome” tactic designed to threaten closure or disruption of popular amenities if tax increases are not approved.

Political tactics notwithstanding, Washington’s state parks system does indeed face significant funding challenges. General fund appropriations for parks have been on the decline for years, a predictable circumstance in a fiscal football game in which funding for major spending priorities like education, healthcare, public safety and public-sector retiree benefits increasingly crowds out funding for the “nice-to-have” amenities like state parks. The sooner that policymakers and citizens understand this basic trajectory is only going to intensify – and that new solutions are needed to sustain the “nice-to-have” items like state parks – the better.

Some in Washington have begun to realize this when it comes to parks. In recent years, the legislature pushed the Washington State Parks Commission to pursue financial self-sustainability, and to its credit, the agency has pursued a range of strategies that include staff reductions, an increasing reliance on user fees and non-recreational leases, and expanding revenue-generating assets within the parks themselves. While these actions have not solved the funding challenge, they have been useful steps to keep the parks system afloat.

Short-term infusions of funding along the lines proposed by the governor are not a sustainable financial strategy if the goal is to keep parks open and thriving for the long term. Washington, like many other states, is due for a major rethinking of the structure and operation of the parks system itself.

California faced a similar parks funding crisis. A report issued in March by the Little Hoover Commission (LHC) – a highly respected, independent and bipartisan state oversight agency in place for over 50 years – makes a compelling argument for top-to-bottom rethinking of how that state’s park system operates, and could offer insights for parks officials in Washington state.2

In its report prepared for California Gov. Jerry Brown and the state legislature, LHC argues that “the current model of a highly centralized state-run park system is obsolete” and that California State Parks needs a new operating model. The report offers many recommendations on ways to reinvent state park management for the 21st century. One of the most important recommendations is to significantly expand the role of outside partners, including other governments, nonprofits, and for-profit recreation management companies, in the direct operation and management of state parks. Some brief quotes from the report highlight this point:

• “Individuals, non-profits, foundations and companies scrambled to find fixes to keep the 70 [California] parks open [that had been threatened with closure in 2012], if only temporarily. The outpouring of generosity, resourcefulness and ingenuity demonstrated that California’s parks have immense support, from individuals as well as national and regional park systems…. The agreements developed to allow outsiders to run or help run state parks also demonstrated that there is a range of operating alternatives as well…. Shared management initiatives with these partners are essential to the system’s future.”
• “The Governor and the Legislature should give the department the authority to try more alternative management approaches throughout the system, to tap the expertise of these partners and to share the risk that comes with innovation.”
• “In the new model, the department’s partners will come in many forms, as will partnership agreements. Some are volunteer associations whose focus is a single park. Others are small concessionaires that specialize in one area, whether maintenance or raft trips. Others are foundations with substantial resources and corporations with experience in running large operations in different states.”
• “Based on its experience with joint operating agreements with the National Park Service and regional park services, the department, on a pilot basis, should solicit proposals for cooperative operating arrangements that bundle geographically proximate parks owned by different government entities for greater operating efficiencies. Consortiums making proposals may include as members state, national and regional park agencies, conservancies, trusts, volunteer associations and private concession companies. Consortiums may propose their own operating and staffing models, as long as they are consistent with the goals of natural and cultural resource preservation, public access and education.”3

In other words, the century-old, top-down model of state parks operated and managed by state parks agencies is not sustainable and needs to be replaced by an approach in which the parks agency sets the mission for the parks system and then serves as a coordinator to arrange the right blend of public and private sector operators on a park-by-park basis.

Though it may be anathema to the preconceived visions held by some parks advocates, there is indeed a strong role for private-sector and non-profit operators in the state parks. For example, nonprofits played a major role in taking over operations of dozens of California state parks to help avoid closure amid 2012’s budget battles, and many municipal parks, zoos and aquariums, including New York City’s famed Central Park, have long been operated by nonprofit conservancies and “friends” groups.

The for-profit parks operation is even more interesting and presents a significant opportunity for Washington state, as I detailed in a blog post at washingtonpolicy.org last August.4 Most notably:

While this may sound like a fantasy, it’s already happening all around Washington state. Private, for-profit recreation management companies currently operate over half of the U.S. Forest Service’s (USFS) thousands of developed recreation areas (e.g., campgrounds, day use areas) nationwide under “whole-park” concession agreements. Washington, California, Colorado and Oregon each already have over 100 USFS parks and campgrounds currently operated by private concessionaires, with hundreds more spread out across other Western states. This USFS program has been in place for over 25 years, prompted originally by fiscal pressures on the agency decades ago that led it to embrace user fees and “whole park” concessions to keep its numerous recreation areas open and self-sustaining. Sound familiar?

For a detailed analysis of the opportunity in the for-profit operation of state parks, as well as a debunking of common myths and misunderstandings surrounding it, readers should review the January 2013 policy study I co-authored on the subject on behalf of the Conservation Leadership Council.5

In what should serve as a model for Washington, in 2012 California became the first state to turn over the operation of multiple state parks to private recreation management companies to rescue them from closure. The LHC report describes the initiative:

During the 2012 closure crisis, the department invited new proposals and issued five-year contracts with private companies to operate entire state parks. … Under the contracts, American Land & Leisure of Orem, Utah, has begun operating three state recreation areas for the department: 336-acre Brannan Island in Sacramento County, 228-acre Turlock Lake with 26 miles of Stanislaus County shoreline, and 428-acre Woodson Bridge in Tehama County. American Land & Leisure operates 400 public and private campgrounds throughout the United States for the U.S. Forest Service, and others….

The department similarly issued a five-year contract to Templeton-based Parks Management Company to operate the 716-acre Limekiln State Park on the Big Sur coastline of Monterey County. Parks Management Company operates campgrounds, day use areas, marinas and RV resorts throughout California. Under the agreements, both companies provide minimum walk-around park security with options to call in the county sheriff’s department for assistance. Both also pay a percentage of their park revenues to the department, which uses the proceeds for maintenance and repairs of those individual parks….

Many of these agencies concluded years ago that contracting out appropriate parks to private operators is less expensive than having government provide the service. Concessionaires provide lower-cost operations models through more extensive use of seasonal staff, though the state has long relied on seasonal workers. The private firms generate revenues from gate fees and use them to make improvements that bring more visitors to parks.

Longer-term concession contracts provide longer income streams and, with them, opportunities to improve park infrastructure, expand lodging alternatives and address deferred maintenance. At Siskiyou County’s McArthur-Burney Falls Memorial State Park, for example, Arizona-based Recreation Resource Management spent nearly $2 million to install 24 cabins in 2007 under a 20-year contract with California state parks. The long contract enables RRM to recoup its investment costs and returns the cabins – maintained according to a performance contract – to state ownership at the end. These kinds of private contracts increasingly represent a management option not only for the department, but for the non-profits and cooperating associations that have rescued and begun operating state parks proposed for closure in 2012.

Public-private partnerships like these are going to be key to the future in Washington state. The problem is not that there’s not enough general tax money being spent on parks, as Gov. Inslee seems to imply in his proposal; the problem is a reliance on an antiquated, bureaucracy-centered governance and management structure, and this is a problem that one-shot infusions of tax dollars will never be able to solve.

To keep state parks open and financially sustainable for the long term, Washington policymakers need to reinvent their system to accommodate parks operation that puts the right operators in the right place at the right time, regardless of whether or not they are state employees.

Leonard Gilroy is director of government reform at Reason Foundation based in Los Angeles, and an adjunct scholar with Washington Policy Center based in Seattle. This article was originally published as a legislative memo by the Washington Policy Center on May 17, 2013.

Endnotes

1 “Working Washington” 2013-15 budget priorities, Office of Governor Jay Inslee, March 28, 2013, at www.ofm.wa.gov/budget13inslee/presspacket.pdf.

2 “Beyond Crisis: Recapturing Excellence in California’s State Park System,” Little Hoover Commission, March 2013, at www.lhc.ca.gov/studies/215/report215.html.

3 Ibid.

4 “Private Operation Could Help Keep Washington’s State Parks Moving toward Self-sufficiency,” by Leonary Gilroy, August 24, 2012, at www.washingtonpolicy.org/blog/post/private-operation-could-help-keep-washington%E2%80%99s-state-parks-moving-toward-self-sufficiency.

5 “Parks 2.0: Operating State Parks Through Public-Private Partnerships,” by Leonary Gilroy, Harris Kenny and Julian Morris, Reason Foundation; January 2013, at www.leadingwithconservation.org/wp-content/uploads/2013/01/CLC_III-Gilroy_Kenny_Morris_1.3.13.pdf.

The post Rethinking Washington State Parks: How to Avoid Governor Inslee appeared first on Reason Foundation.

Finding New Ways to Provide Parks and Recreation Amenities

Increasingly, communities are looking to public-private partnerships that go beyond traditional outsourcing to improve the operation and maintenance of amenities like zoos, theaters and farmers markets. The following series of 2012 case studies highlights discussion of this policy tool at the state and local level across the United States.

North Carolina Zoo: North Carolina lawmakers considered a bill (HB 12-958) that would turn operations of the 2,000-acre, state-owned North Carolina Zoo over to the private sector. Lawmakers are considering a partnership because the zoo has approximately $30 million in deferred maintenance, and has consistently been underfunded over the past 15-20 years.1 The bill would have also reduced public operating subsidies, allowed the zoo to generate more revenue, encouraged increased private donations and provided funding for the transition.

Specifically, HB 12-958 sought to transfer operations and maintenance duties to the North Carolina Zoological Society for 25 years in exchange for the following support:

• $10 million annual operating subsidy;
• $30 million in deferred maintenance, through six $5 million payments; and
• $3.2 million in transition costs.2

The bill ultimately failed last session, but it will be discussed again in 2013 according to Representative Tom Moffitt, an Asheville Republican. Terms similar to HB 12-958 will likely be included in the 2013 reincarnation of this bill.3

Los Angeles Zoo: After years of discussion, and outright support from Los Angeles Mayor Antonio Villaraigosa’s administration, the city abandoned plans to implement a public-private partnership for the Los Angeles Zoo. Talks broke down in September amidst questions about how much autonomy the city would grant the Greater Los Angeles Zoo Association (GLAZA). The Los Angeles Business Journal reports that GLAZA wrote a letter to City Administrative Officer Miguel Santana explaining, “existing city policies and regulations made it too difficult for a private operator to function.”4

It is unclear what the city will do with the zoo in the face of ongoing fiscal woes. Last year the 1,100-acre zoo cost Angelenos $17.5 million. City officials estimate a $216 million deficit this year, following four years of deficits adding up to over $1 billion. Meanwhile the zoo has raised ticket prices five times over the last five years.5

Dallas Farmers Market: City officials spent much of 2012 mulling over what to do with the Dallas Farmers Market, and while there have been no substantive decisions made as of press time, a likely deal is emerging. The Farmers Market Group (consisting, among many others, of a real estate developer, architectural firm and restaurateur) won a request for proposals (RFP) seeking ideas for the facility. Details of their proposal have not been publicly released because of uncertainty over how it might impact existing tenants, according to The Dallas Morning News:

All we know for now is that it will involve a $58 million mixed-use development with restaurants, retail, apartments and a parking garage-for starters. What we don’t know is how many of the sheds will remain standing once the deal’s done, who will be responsible for what and which of the tenants will remain. Well, that’s not entirely true: It’s safe to say Pecan Lodge will stay; so too Shed 2, given the city’s $3.2 million investment in the air-conditioned food court. Everything else is a bit up in the air.6

Questions about financial feasibility loom large, like clarity on support from tax increment financing and addressing lingering debt from a 2006 bond issue. Various land use processes like surveys, appraisals, deeds, zoning and construction are also in question.

Elks Opera House (Prescott, Arizona): In May 2012 city officials gave City Manager Craig McConnel approval to issue a request for proposals (RFP) for the city’s historic downtown theater, the Elks Opera House, built in 1905. “We’ve been aware of a long-standing interest in getting out of the theater business,” McConnell told the city council. Prescott Budget and Finance Director Mark Woodfill said the city spends $258,000 annually on theater operations, while collecting $105,000 in revenues; meaning the theater costs taxpayers $153,000 each year.7 City records show the theater cost taxpayers at least $100,000 each year since 2009.8 Among other things, the RFP required bidders to:

• Preserve the theater as a community venue for performing arts and related purposes;
• Maintain the historic quality and integrity of the theater;
• Reinforce and promote mutually beneficial relationships among the theater, downtown businesses, and local government, by serving as an economic generator; and,
• Achieve, maintain, restore and preserve the highest quality of historic architectural and interior design.

The Elks Theater Performing Arts Center Group, a local nonprofit organization, offered the city $500,000 to purchase the theater, which the city ultimately rejected. Even though the RFP did not include a minimum price, Prescott officials were seeking at least $1.39 million-approximately half the contested appraised value of the theater. Critics who contest the appraisal argue restrictions that come with building operations should lower the price, citing limited ability to generate revenue and persistent operational budget deficits.

City officials explained that $3.5 million has been invested in the theater over the last decade. However, these are sunk costs and only $1.38 million of that money actually came from the city; $420,000 came from public grants and $1.75 million came from philanthropic contributions to the Elks Opera House Foundation. The offer reportedly also included a “sizeable endowment” from a primary donor who has successfully completed two comparable projects elsewhere in the United States.9

In September the Elks Theater Performing Arts Center Group was able to purchase the top floor of the theater from a law firm that occupied the space; the Group now owns the upper portion of the building and much of the exterior façade. The group remains interested in purchasing the whole building eventually, but it will make use of the space it now owns for smaller performances, educational programming, instructional sessions, rehearsals and more in the meantime.10 The city of Prescott also owns a golf course and restaurant that officials have discussed divesting, but as of press time there are no substantive efforts underway.

Baltimore, Maryland: In 2011 Baltimore Mayor Stephanie Rawlings-Blake announced an ambitious plan to revamp the city’s recreational centers through public-private partnerships. In May 2012, the city signed an agreement with Parks Heights Renaissance to transfer operations of the Towanda Rec Center. The agreement provides the organization with a $100,000 seed grant from the city that will allow youth athletic, summer recreation and senior programs to continue at the facility. Four other facilities have been turned over to the private sector under Rawlings-Blake’s plan. Three of them received $50,000 in seed money from the city.11

Milpitas, California: In June 2012 the Milpitas City Council announced its first-ever public works public-private partnership. The move seeks to right size the department in light of deteriorating park conditions ranging from broken irrigation systems and dead shrubbery to graffiti and vandalism. The city awarded contracts to Colorado-based Terracare Associates for park and street landscaping and repair services.

According to a June article in the Milpitas Post, the one-year contract for parks maintenance has four one-year options for renewal that could add up to almost $7 million if every option is exercised. Terracare will maintain 24 city parks and sports fields, providing routine landscape maintenance (i.e. pruning, weed removal, turn care, plant replacements, irrigation system maintenance and fixture and equipment repair services). The streetscape maintenance and repair contract has a $125,218 annual cap for all aspects of landscape and irrigation system maintenance for the city’s landscapes, streetscapes, medians and rights of way.

Indian River County, Florida: The Indian River County Commissioners voted unanimously to contract with two firms to maintain county-owned beach parks, in a deal expected to save taxpayers $164,000 annually, effective February 2012. The first contract, for $56,642 with Clearwater-based Boro Building and Property Maintenance Inc., is for janitorial services. The second contract, for $15,120 with Okeechobee-based Integrity Lawn and Landscaping, is for outside maintenance. The deals eliminated two vacant positions and affected one maintenance worker and one foreman. Personnel decisions will be based on seniority according to the contract with Teamsters Local 769. The private contractors agreed to consider hiring the two displaced employees if they have openings for comparable positions.12

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Endnotes

1 Rosella Age, “Effort to partially privatize N.C. Zoo likely dead for the session,” The News & Observer, June 25, 2012. http://projects.newsobserver.com/under_the_dome/effort_to_partially_privatize_nc_zoo_likely_dead_for_the_session

2 Harris Kenny, Privately Operated Zoos Now Considered the Standard,” Annual Privatization Report 2011, (Los Angeles, CA: Reason Foundation), May 29, 2012. https://reason.org/news/show/1012913.html

3 Age, “Effort to partially privatize N.C. Zoo likely dead for the session.”

4 Howard Fine, “Plan to Privatize L.A. Zoo Stopped,” Los Angeles Business Journal, September 27, 2012. http://labusinessjournal.com/news/2012/sep/27/plan-privatize-l-zoo-stopped/

5 Rick Orlov, “New talks sought on Los Angeles Zoo privatization plan,” Los Angeles Daily News, October, 25, 2012. http://www.dailynews.com/ci_21856544/new-talks-sought-los-angeles-zoo-privatization-plan

6 Robert Wilonsky, “Unpacking the many reasons it’s taking the city so long to finalize deal to privatize downtown Dallas Farmers Market,” The Dallas Morning News, November 9, 2012. http://thescoopblog.dallasnews.com/2012/11/unpacking-the-many-reasons-its-taking-the-city-so-long-to-finalize-deal-to-privatize-downtown-dallas-farmers-market.html/

7 Cindy Barks, “City looks to private sector for operation of Elks Opera House,” The Prescott Daily Courier, May 17, 2012. http://www.dcourier.com/main.asp?SectionID=1&SubSectionID=1&ArticleID=106676

8 Cindy Barks, “Local group makes offer for Elks Opera House,” The Prescott Daily Courier, July 16, 2012. http://prescottdailycourier.com/main.asp?SectionID=1&subsectionID=1086&articleID=108754

9 Cindy Barks, “Elks Opera House sale negotiations end,” The Prescott Daily Courier, August 2, 2012. http://prescottdailycourier.com/main.asp?SectionID=1&subsectionID=1086&articleID=109345

10 Cindy Barks, “Nonprofit buys top floor of Opera House: Performing arts group wants to purchase entire Elks building,” The Prescott Daily Courier, September 27, 2012. http://prescottdailycourier.com/main.asp?SectionID=1&subsectionID=1086&articleID=111250

11 Mark Reutter, “Towanda Rec Center turned over to private operator,” Baltimore Brew, May 9, 2012. http://www.baltimorebrew.com/2012/05/09/towanda-rec-center-turned-over-to-private-operator/

12 Henry A. Stephens, “Indian River contracts out services, eliminates four parks maintenance positions,” TC Palm, January 10, 2012. http://www.tcpalm.com/news/2012/jan/10/indian-river-to-contract-out-services-layoff/?partner=RSS

The post Finding New Ways to Provide Parks and Recreation Amenities appeared first on Reason Foundation.

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:

• Turlock Lake SRA;
• Woodson Bridge SRA;
• Brannan Island SRA;
• McConnell SRA; and
• George J. Hatfield SRA.

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:

• The contract term lasts five years.
• The state set forth clearly delineated maintenance requirements for both itself and the concessionaire. The concessionaire is generally responsible for handling (and covering the costs of) minor improvements and day-to-day repairs. For larger maintenance jobs, all revenues paid back to the state as concession rent in these three parks will be put into a park maintenance fund from which the concessionaire can spend with state approval. Regardless, the state has removed the maintenance costs for these parks from its books and transferred them to the concessionaire.
• To protect itself against lower-than-expected concessionaire rent payments over the life of the concession, the state required American Land & Leisure to obtain a performance bond covering 100 percent of the anticipated rent payments over the next five years. This is a risk transfer mechanism to ensure that the state receives 100 percent of the rent payments originally envisioned in the procurement, regardless of whether the anticipated revenues are actually generated by the park in practice.
• Workers at the affected parks that chose not to stay on with American Land & Leisure were not fired, but transferred to other parks in the system.
• The concessionaire provides on-site, live-in staff to operate the parks, while either the California Highway Patrol or local sheriff’s offices handle law enforcement responsibilities.
• The concessionaire is required to provide commercial general liability, automobile, and worker’s compensation insurance under the contract, at levels greater than the state had previously insured itself.
• The concessionaire is required to maintain the premises, trails, roads, facilities, furnishings and equipment in good condition in accordance with agency standards and contract provisions. In fact, the concessionaire is required to implement an operations plan for each park unit (prepared by the concessionaire and approved by the state) that outlines how services will be provided and facilities maintained over the life of the concession.

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:

• Florida: In May, Florida Governor Rick Scott signed into law a bill that would authorize private for-profit and nonprofit corporate sponsorship activities in Florida state parks. Senate Bill 268 authorizes the state’s Department of Environmental Protection to enter into sponsorship agreements allowing private firms to sponsor signs with commercial displays on state-owned greenway and trail facilities, subject to prior agency approval. A total of 85 percent of the proceeds from the program are dedicated to the operation of state trails and greenways, with the remaining 15 percent allocated to the state transportation trust fund for use in the Florida Traffic and Bicycle Safety Education program and the Florida Safe Routes to School program.
• Georgia: In September 2012, the Georgia Department of Natural Resources announced plans to turn over operation of the lodges and cottages at two state parks (Unicoi and Amicalola Falls) to Coral Hospitality, a Florida-based hotel management company, before the end of the year. The agency initially planned to close the Unicoi State Park lodge for renovations until discovering that the project costs exceeded available funding. Instead, Coral will upgrade guest rooms at the facilities while keeping the lodges open, with additional renovations of the conference facilities, restaurants and cottages scheduled over the next two years. Other park campgrounds and recreational amenities will continue to be operated by the state. Coral has also operated the state-owned Brasstown Valley Resort & Spa and the Lake Blackshear Retreat and Golf Club at Georgia Veterans State Park since 2005.
• Illinois: In May 2012, the Illinois Senate unanimously passed legislation (House Bill 3611) that would transfer ownership of Wildlife Prairie State Park near Peoria from the state to the nonprofit Friends of Wildlife Prairie Park, which currently operates the park. The move comes as the state deals with ongoing fiscal pressures that have significantly reduced state parks funding in recent years. The privatization will make it easier for the nonprofit operator to attract private donations and secure financing for capital projects. At press time, the Illinois House had not taken a final vote on the legislation.
• Indiana: During the 2012 election campaign, incoming Indiana Governor Mike Pence expressed support for tapping PPPs to develop new lodging and recreational amenities in state parks, according to the Fort Wayne Journal-Sentinel.2 Pence’s campaign stopped short of calling for PPPs to take over existing park operations, instead focusing on PPPs to develop new park amenities.
• Maine: In April 2012, Maine Governor Paul LePage approved the privatization of the operations of the state-owned Fort Knox Historic Site, turning over management to the Friends of Fort Knox, a nonprofit organization that had previously provided tours and other services at the park. Friends will lease the operation of the park for four years-collecting admission revenues and paying a 15 percent portion of gross revenues back to the state as an annual lease payment-and it will take over all facility and grounds maintenance, in addition to other day-to-day operations.3 The state’s Bureau of Parks and Lands retains the authority to approve any modifications to historic facilities and any proposed entry fee changes.
• Texas: The Texas Parks and Wildlife Department issued a request for proposals in July 2012 seeking official corporate sponsors in an attempt to supplement declining state parks funding with outside revenue. Authorized in a 2011 state law, the agency solicitation envisions a range of sponsorship opportunities that include limited advertising at parks and the ability to use the official corporate partnership designation in company marketing materials. State officials anticipate the new program could generate at least $1 million in outside corporate support, according to the Austin American-Statesman.4 Bids were due in August 2012, and at press time the agency was still evaluating responses.

(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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Endnotes

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.

The post California Pioneers Public-Private Partnerships for Private Operation of State Parks appeared first on Reason Foundation.

A. State Budget Update

B. Privatization of State Lottery Management

C. The Emergence of Social Impact Bonds: Paying for Success in Social Service Innovation

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

E. Higher Education Public-Private Partnerships Update

F. State Liquor Privatization Update

G. Social Infrastructure Public-Private Partnerships Update

H. Child Welfare Privatization Update

I. State Privatization News and Notes

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The post Developments in State Government Privatization appeared first on Reason Foundation.

Annual Privatization Report 2013 (APR 2013) details the latest on privatization and government reform initiatives at all levels of government. The individual sections include:

• Air Transportation
• Surface Transportation
• Federal Government Privatization
• State Government Privatization
• Local Government Privatization
• Education
• Criminal Justice and Corrections

Your comments on Annual Privatization Report 2013 are important to us. Please feel free to contact us with questions, suggestions or for more information. For the most up-to-date information on the rapidly changing privatization world, please visit Reason’s privatization research archive and our policy blog, Out of Control.

Leonard C. Gilroy, Editor
Director of Government Reform, Reason Foundation
leonard.gilroy@reason.org

Harris Kenny, Editor
Policy Analyst, Reason Foundation
harris.kenny@reason.org

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Government-run zoos have a lot to lose in economic downturns. According to CNNMoney, government funding constitutes an average of 40 percent of public zoo budgets. Budget cuts are forcing zoos to make up for funding shortfalls by laying off workers, cutting education programs, reducing operating hours, deferring maintenance and raising ticket prices. Emergency measures like this tend to detract from core zoo functions such as educating the public, encouraging environmental awareness and promoting biodiversity.

For the ABQ BioPark Zoo, ticket prices have been a subject of ongoing debate between Mayor Richard Berry’s administration and the City Council after Mayor Berry raised fees from $7 to $10 last summer. Two weeks ago the City Council voted to lower fees to $9. Meanwhile Albuquerque’s chief operations officer John Soladay recently explained the zoo has $18 million in deferred maintenance, according to the Albuquerque Business Journal.

PPPs offer a tool to address budget woes for both zoos and governments in situations like this because they can eliminate or significantly reduce the amount of taxpayer money going to zoos and increase private support by transforming fundraising and zoo operations.

Under a PPP the government seeks a private partner, typically a nonprofit, to assume day-to-day operations and maintenance of the zoo (taking it out of the government food chain.) This promotes better or similar service while eliminating or reducing taxpayer support. PPPs depoliticize zoos and allow them to run like other mission-driven public amenities such as museums, while maintaining public oversight and ownership. Non-profit zoo advocacy groups, like the New Mexico BioPark Society, are often logical partners because they’re already fulfilling current duties such as fundraising, coordinating volunteer efforts, organizing special events and providing educational programming at the zoo.

PPPs can transform fundraising by replacing uncertain public subsidy with committed private support. Privately run zoos generally receive a higher dollar value in charitable donations than government-run zoos because donors are more confident their funding will go to its intended source. After Dallas signed a PPP for its zoo in 2009, the nonprofit operator (the Dallas Zoological Society) persuaded four donors to pledge $2.25 million to revamp the facilities.

The growth of zoo PPPs over time demonstrates how powerful of a policy tool it really is. In 1991 only 40 percent of the accredited zoos in the U.S. were privately operated. The proportion of privately run zoos has since increased to approximately 75 percent of all accredited zoos and aquariums. This includes major city zoos in Atlanta, Chicago, Denver, Phoenix, Houston, Seattle and elsewhere.

Tulsa, Oklahoma recently successfully implemented a PPP with the newly created non-profit, Tulsa Zoo Management, Inc. (TZMI), which was highlighted in Reason Foundation’s latest Annual Privatization Report. Facing $10 million in budget cuts that had to be decided upon within 45 days, and with 70.3 percent of polled citizens supporting public-private partnerships of parks and recreation, Tulsa privatized the 78-acre complex. TZMI successfully took over funding and management raising $1 million for delayed capital improvements, and cut city funding of the operating budget by nearly 60 percent. TZMI also plans to replace 12 positions that were lost in 2010 due to budget cuts, and additionally to hire another 14 positions.

Skeptics of PPPs fairly fear that the focus of the zoo may turn from education to entertainment, transforming the zoo into an amusement park. However, elected officials sign and oversee PPP contracts in which they can (and normally do) include language restricting how private partners can operate the zoo and how much they can charge. Additionally, zoo-goers expect a natural environment; so maintaining that aesthetic is essential for any new operators’ success. Many public-turned-private zoos have seen high success rates, as well as those that were traditionally private. For example the Philadelphia zoo, the oldest zoo in U.S. history, has been privately operated by the Philadelphia Zoological Society since 1859.

The benefits of a PPP could potentially outweigh the cost of maintaining the status quo. Three out of four accredited zoos and aquariums are now privately operated in the U.S., and the ABQ BioPark Zoo should consider joining their ranks. A well-structured PPP would focus scarce taxpayer dollars to fund essential city services and in the long run will leave the zoo, and the citizens of Albuquerque, better off.

Katie Furtick and Harris Kenny are policy analysts at Reason Foundation (reason.org), a Los Angeles-based think tank.

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