Boosting Public Parks through Private Parties

Springtime is underway, which means that visits to local, state and federal parks will soon increase. One way improve their condition is to make more use of the private sector, as I described in this column from last year.

Funding public parks through private incentives

August 6, 2007

It's summertime, which means that a lot of people are enjoying public lands, including state parks. The dire financial woes of national parks is well known, but state parks are not immune to trouble. The state-government-focused news service Stateline.org says, "Insufficient state funding and rising costs have left some state park systems struggling to make ends meet."

So what should park systems do? Some have responded to having less by doing less. They've cut back on maintenance and offer fewer hours of service. Some non-profit groups and legislators, meanwhile, want to promote hiking trails and other outdoor amenities by hiking sales tax rates.

But is there any other way of addressing the needs of parks? According to the folks at PERC, the Property and Environment Research Center (www.perc.org), states need to push their park systems to be entrepreneurial and self-supporting, embracing private-public partnerships, voluntarism, and differential pricing. It's an approach that has detractors. It is also one that should be used whenever possible.

A report published in October 2006, "State Parks' Progress Toward Self-Sufficiency," surveyed 30 parks systems across the country. PERC found that states are turning to "expanded user fees, concession contracts, 'friends' groups, corporate sponsorships, and endowment funds."

Raising entrance fees to parking lots, camp grounds, and other park features is one option. A variation on that model is differential pricing, just like movie theaters or restaurants. Camp on the weekend during the high season, and you pay more.

State are also turning to contracts with private vendors to run food stands, lodging and reservation services, golf courses, and other features that may have been operated in the past by government employees. The state receives a portion of the proceeds, while the vendor assumes the financial risk and burden of being the employer.

"Friends" groups, meanwhile, are useful for raising money, adding another stream of user fees. Delaware drew upon the Delaware Community Foundation to establish a trust fund to help finance state park operations.

Friends also provide labor for maintenance tasks. In New Jersey, for example, volunteer groups provide the labor equivalent of 55 full-time employees.

Some states take advantage of the natural assets of the parks to support their park systems. Maine sells drinking water to the Poland Springs Bottling Company. Drink a bottle of Poland Springs, and support Maine parks. If you're looking for a ski destination this winter, head to Vermont. Its parks are nearly entirely self-supporting, aided by the state's practice of leasing land for ski resorts.

There are several benefits of running parks more like a business. One is that it puts parks more in touch with the desires of its visitors.

In an entrepreneurial model, park revenues return to the park system, or even the individual park, rather than go into the state general fund. This way, park managers have personal incentives to listen to park users. The responsive managers have a better handle on the wants and needs of their customers than do staffers working in offices far away in the state capital.

Health care and education take up the bulk of most states' budgets, and parks can easily get crowded out. The demand for health care and education dollars isn't going to subside anytime soon, leaving parks out as a poor cousin.

User fees raise hackles, of course. One argument is that citizens should not be charged to use a public asset. That's a plausible argument. Yet in a variety of situations, "public" doesn't mean "free of charge." Think of municipal-owned golf courses, events at public arenas, and even late fees or rental fees at the public library.

Another argument is that user fees require citizens to pay again for parks already purchased. Yet that ignores the cost of ongoing maintenance. Every homeowner knows that the acquisition price is only one element of the cost of ownership.

Applying the rules of business will also offend those people who object to commerce in parks, or commerce period. For many of us, part of the enjoyment of being in a park is getting away from the world of money and commerce. Still others take it further and believe that letting someone make a buck through offering park services is offensive on its face, a near sacrilege.

Yet as economics 101 reminds us, the world is filled with scarcity: unlimited wants and limited means of fulfilling those wants. The exchange of dollars for services—in this case, access to recreational opportunities—is one way of responding to that situation. Making parks more entrepreneurial can make sure that these vital treasures aren't neglected in the circus of the budget process.

Labels: Legal-Ledger, privatization

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Do You Really Want Government to Be Reading Your E-Mail?
What following item from the vault took on greater importance last week when I listened to a panel presentation on the growth of the telecom/broadband/Internet industry. The chief speaker illustrated, using many different statistics, how important this sector is to the economy, and how rapidly it has grown. Pick any metric--user will work fine, but traffic is even better--and you'll find that is true. Observations such as "There was more traffic spent in downloading YouTube videos last month than there was for the entire Internet in 1999," or something like that.

Yes, the federal government (for military purposes, primarily) was key to getting the Internet started. But today's Internet bears as much resemblance to the early 'Net as today's new autos bear to the Model T. One important reason for the evolution: government has gotten out of the way.

There are lots of people who would like to change that, for financial, ideological, political, or other reasons. So-called net neutrality regulations are one threat. So is putting local governments, in the name of "economic competitiveness" or whatnot, into running or developing Wi-Fi networks.

The following is what I had to say on the subject in February, 2007:

February 5, 2007

Government should stay out of Wi-Fi

Local governments provide us with roads, parks, and water treatment and delivery. Should they be in the digital communications business, too?

The latest fad in government is the growth in broadband, or high-speed Internet connections that allow people to conduct e-commerce, do research, educate themselves or spend hours playing Texas Hold'em.

A number of cities across the country have gone into the communications business, sometimes going so far as to provide land lines and cable television. Others are content to deal only with broadband, often by giving a favored franchise to private companies.

According to the Web site muniwireless.com, 312 local governments had moved towards government-owned or -sponsored Wi-Fi services by the end of 2006. Roughly half of those systems are deployed; the rest are in the planning stage.

In Minnesota, the cities of Buffalo, Chaska and Moorhead made the list. Burnsville, Osseo, Minneapolis and Saint Louis Park were in various phases of planning. St. Paul is debating spending $300 million to roll out fiber-optic cable.

Why are governments acting? The most commonly offered reason is economic development. Businesses and individuals who need to be connected in a globalizing economy will shy away from regions without good service.

Others cite a need to bring the benefits of online service to low-income citizens, thereby closing the "digital divide." Still others cite cost savings of in-house systems for official business. More ambitious programs provide public service, either free or at a low monthly cost.

Governments can enter the communications business in several ways. One is the outright enterprise model: Build a system and sell the service to willing customers. Another is to partner with private corporations who will build the system.

A more government-focused approach is for the public entity to actually own and operate the system, like a public utility. In its report "Localizing the Internet," the Institute for Local Self-Reliance (http://www.ilsr.org/) says that government must own broadband equipment and see it deployed on a citywide basis.

It says that government ownership of the physical assets will promote competition. It will also ensure that price makes no difference in the development or delivery of services. (This is the "net neutrality" argument that has been favored by a strange bedfellow coalition of MoveOn.Org and some conservative groups.)

But is all this really necessary when plenty of private companies are looking for business?

The Mackinac Center for Public Policy (http://www.mackinac.org) warned Michigan lawmakers several years ago against plans to enter the Wi-Fi business, saying state provision of Internet access was "a bad idea whose time shouldn't come."

While all new technologies are concentrated in urban areas when they start out, it noted, eventually they are used throughout the country.

The Buckeye Institute (http://www.buckeyeinstitute.org), an Ohio-based and -focused organization, offers the city of Lebanon, Ohio, as a cautionary tale. The city took municipal involvement further than most. It got into the cable TV and Internet business in 1999, and added telephone service three years later.

The city spent $38 million to build its system, incurring a debt of nearly $10 million. Last year, voters approved the sale of the system to Cincinnati Bell for $8.62 million—in other words, at a loss. As the case demonstrates, government ownership puts taxpayers at risk for both capital and ongoing expenses. The risk is unnecessary in light of continued rollouts by private companies.

A more subtle risk comes from technological innovation. Remember eight-track tapes? Keeping up with changing standards and consumer tastes requires significant amounts of cash, marketing savvy, and the ability to anticipate new products and services. It's not clear that governments, with their multitude of responsibilities, are up for the task.

Where there's government, there's politics, another downside to public ownership or sponsorship of broadband service and facilities. Recently, Google, Earthlink, and the mayor of San Francisco announced an agreement whereby city residents would receive free broadband.

Two years later, the project is stalled by local politics and freeloading demands. Community activists, for example, want Google and Earthlink to supply everything from free transportation to the local zoo (I kid you not) to free electricity.

Many of the problems that allegedly call for municipal involvement are sorting themselves out. New technologies are expanding the reach of broadband, and commercialization away from the Internet as a government entity has benefited millions.

Why would we want to give up those advantages through turning broadband into something as bland and stale as a public utility? No thanks.

Labels: Legal-Ledger, privatization

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If Your City Cries Poverty, Examine the Books.
Here's something from the draft archives that's finally seeing the light of day. How appropriate to discuss snow just as we're entering the first several heat waves that will be hitting us this summer.

This blog entry was started nearly two years ago. Talk about procrastination!

Here we go with the beginning of the draft:

In the last few years, many state and local governments have blamed budgetary shortfalls on a weak economy, the growing use of internet-based sales, and policy decisions at other levels of government.

But a more fruitful place to begin is unnecessary spending.

The government of Traverse City, Michigan, is dealing with a $994,700 shortfall.

Nearly 9 percent of that money, or $84,594, can be found on the slopes of the Hickory Hills ski area.

Last season on the hill's operation--or 9 percent of the city's budgetary shortfall.

One resident's comments illustrated the folly of taking the "cool cities" fad too seriously. "We talk about wanting to be a cool city, and I just don't know what could be cooler than to have your own city ski hill." (The Traverse City Eagle-Record has details.

And that's it. I ended up turning this post into a commentary for the Mackinac Center for Public Policy.

Here's the commentary as it was published in 2004. (I'm not going to bother to re-create the links.)

Cities that Cry Poverty Should Sell Their Money-Losing Ski Areas

In the last few years, the state government, as well as local governments across Michigan, have blamed budgetary shortfalls on a weak economy, loss of sales-tax revenue to the Internet, and policy decisions at other levels of government.

Rather than point the finger elsewhere, however, government officials ought to look first at some of their own unnecessary spending.

A bad example of public priorities – and a good example of the need to reorder them – comes from the northwestern town of Traverse City. It is currently dealing with a $994,700 budget shortfall.

Nearly 9 percent of that deficit, or $84,594, can be found on the slopes of the Hickory Hills ski area, a city-owned facility. The ski area’s loss has come even with the financial help of the Grand Traverse Ski Club, a private group that has provided funds towards snowmaking and lighting equipment.

In the last few years, the state government, as well as local governments across Michigan, have blamed budgetary shortfalls on a weak economy, loss of sales-tax revenue to the Internet, and policy decisions at other levels of government.

Rather than point the finger elsewhere, however, government officials ought to look first at some of their own unnecessary spending.

A bad example of public priorities – and a good example of the need to reorder them – comes from the northwestern town of Traverse City. It is currently dealing with a $994,700 budget shortfall.

Nearly 9 percent of that deficit, or $84,594, can be found on the slopes of the Hickory Hills ski area, a city-owned facility. The ski area’s loss has come even with the financial help of the Grand Traverse Ski Club, a private group that has provided funds towards snowmaking and lighting equipment.

The city’s parks and recreation commission has explored various ways of closing the budget gap, including raising prices or cutting services, to save $20,000 a year. Even so, local officials hope to spend $3 million to purchase a 117-acre parcel next to the ski area, which might give the money-losing operation a chance to expand. Or it might be an investment in another money-losing city operation.

BELOW-MARKET RATES
One reason for the red ink is the below-market rates charged for this non-essential government service. During the 2003-2004 season, an adult season pass cost $90; city residents paid $85. The maximum daily rate was $12.

By contrast, adult daily passes at nearby private slopes bring in more money. An adult daily pass at Boyne Mountain cost $37 in the late season, when prices are already discounted. At Caberfae, the maximum daily rate for the 2003-2004 season was $38. A similar difference can be found by comparing Hickory Hills to other, privately-owned ski areas throughout northern Michigan.

Even non-profit Mt. Holiday Inc., which also operates a ski area in the Grand Traverse area, charges more than Hickory Hills. But it does not enjoy the luxury of passing along its debts to taxpayers. During the last season, a daily lift ticket for adults cost $30 at peak times. Adult season passes cost $261 to $290, depending on the date of purchase.

One reason often given by proponents of government ownership of recreational facilities is that it is needed to bring sporting opportunities to youth and as low-income people. But profit-seeking companies already have incentives to attract new customers, and non-profit Mt. Holiday offers scholarships to the financially needy. According to federal reports available through Guidestar, Mt. Holiday Inc., does this without accepting government money.

DIVEST UNNECESSARY BUSINESSES
Owning and operating recreational facilities is at best a low priority of government. This is doubly so in a region, such as northern Michigan, with a wealth of facilities already offered by private sector businesses and the civil society.

A partial but long-lasting solution to Traverse City’s budget woes – and indeed, of any government – is cease money-losing, unnecessary, and inappropriate functions. The state Department of Natural Resources last year contracted out management of a state-owned ski resort, The Porkies, to save taxpayers an estimated $200,000 this year.

The sale or privatization of the city’s Hickory Hills ski area provides a sterling opportunity for the city to begin to get its financial house back in order.

[In the time since this commentary was published, I visited Boyne Mountain. According to the staff members I talked with, people visit from Traverse City all the time.)

Labels: Cool cities fad, privatization

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