Coyote Blog

I am mostly going to leave highways out of this post.  Most evidence I have seen is that the numbers do not actually show highway infrastructure to be getting worse.  To the extent highways are underfunded, in my mind it is because gasoline taxes paid by drivers and meant for highway repair and construction have been shifted to grand projects like light rail that get politicians excited but carry at least an order of magnitude fewer passengers per dollar spent than do highways.

But in worlds I am more familiar with - government transit agencies and parks agencies - there has been a real deterioration of infrastructure.   Systems like the Washington Metro clearly are falling apart and most public parks and recreation areas have huge deferred maintenance accounts that are growing every year.  California State Parks and the National Parks Service alone have deferred maintenance tallied well into the tens of billions of dollars.

Most of these agencies will argue the problem is -- wait for it -- that they are underfunded by their legislatures.  But this is not the case in my experience.  My company routinely takes over public parks that some government agency said were too expensive to remain open and profitably reopens them to the public -- not only keeping up with the maintenance but paying to catch up on all the maintenance the agency let slide when it was operating the park.

The problem is that most agencies, whatever their stated public purpose and mission, tend to be run for the benefit of their employees.  I understand some but not all the reasons for this, but it is simply an observable fact that this happens time and time again.  This means that the priority is to build up large staffs with good pay and large benefits and retirement packages.   Worse, the preference is usually to build up headquarters and administrative staff, rather than staff that actually does stuff like serve the public or fix things.  When cutbacks need to occur, the priority order always is: cut maintenance first; cut field staff actually doing useful things second; cut administrative staff only in case of the apocalypse; cut benefits packages never.

Deferred maintenance is the way that agency's can borrow without transparency and without any outside authorization to do things like maintain staff in the face of cutbacks.  In effect, the agency is borrowing against the infrastructure the public has built to help fund staffing levels and benefits.  What is deferred maintenance?  It is all kind of things.  It is having one out of three toilets in a bathroom break and just roping it off rather than fixing it.  It is allowing potholes to multiply in the road without repair.  It is constantly chasing more and more leaks in an underground water line and not just replacing it.  It is an acknowledgement that all manmade things have a fixed life.   Take picnic tables.  Let's say a type of picnic table in a campground, of which there might be hundreds, lasts about 10 years.  That means a responsible person should budget to replace 10% every year.  But what if we skip a year?  No one will probably notice if some old tables slide from 10 to 11 years old, and we save some money.  But really we are only borrowing that money, because we will need to do twice as many next year.  But then we do it again the next year, to borrow more, and the bill just increases for the future.  Before you know it, the NPS has $12 billion in deferred maintenance, a $12 billion debt for which there is little transparency and no legislative approval -- and the interest on which all of us in the public pay when we have to live with these deteriorating public facilities.

I have written about this many times, but here is what I wrote about Arizona State Parks several years ago:

At every turn, [Former Arizona State Parks Director Ken] Travous made decisions that increased the agency's costs.  For example, park rangers were all given law enforcement certifications, substantially increasing their pay and putting them all into the much more expensive law enforcement pension fund.  There is little evidence this was necessary -- Arizona parks generally are not hotbeds of crime -- but it did infuriate many customers as some rangers focused more on citation-writing than customer service.  There is a reason McDonald's doesn't write citations in their own parking lot.

What Mr. Travous fails to mention is that the parks were falling apart on his watch - even with these huge budgets - because he tended to spend money on just about anything other than maintaining current infrastructure.  Infrastructure maintenance is not sexy, and sexy projects like the Kartchner Caverns development (it is a gorgeous park) always seem to win out in government budgeting.  You can see why in this editorial -- Kartcher is his legacy, whereas bathroom maintenance is next to invisible.  I know deferred maintenance was accumulating during his tenure because Arizona State Parks itself used to say so.  Way back in 2009 I saw a book Arizona State Parks used with legislators.  It showed pictures of deteriorating parks, with notes that many of these locations had not been properly maintained for a decade.  The current management inherited this problem from previous leaders like Travous, it did not create it.

So where were those huge budgets going, if not to maintenance?  Well, for one, Travous oversaw a crazy expansion of the state parks headquarters staff.    When he left, there were about 150 people (possibly more, it is hard to count) on the parks headquarters staff.  This is almost the same number of full-time employees that were actually in the field maintaining parks.  As a comparison, our company runs public parks and campgrounds very similar to those in Arizona State Parks and we serve about the same number of visitors -- but we have only 1.5 people in headquarters, allowing us to put our resources on the ground in parks serving customers and performing maintenance.  None of the 100+ parks we operate have the same deferred maintenance problems that Arizona State Parks have, despite operating with less than a third of the budget that Travous had in his heyday.

Arizona State Parks has a new Director, but its the same old story.  They have complained about deferred maintenance in the parks for years, but when times are good (and I can tell you all of us in public recreation are having visitation records the last few years) they use the extra money to add headquarters staff and pay headquarters staff more.

State Parks, which receives no state general-fund money, saw a record 2.78 million visitors come to its parks for the fiscal year that ended June 30. The agency generated nearly $17.9 million largely from park fees, another record.

The result: Black has been generous with pay for people she has brought on staff. Some salaries are up to 32 percent higher than what her predecessor paid for the same positions. And she has approved raises of up to 25 percent for some carry-over staff as more money rolls into the agency's coffers....

Meanwhlile, records show [former director Bryan] Martyn's top two deputies were paid $110,250, while Black pays her top assistant $142,000 — 29 percent more. Black brought in a new development chief at nearly $105,000, a 32 percent bump over what the position paid under Martyn.

Black also boosted the pay of the natural-resources chief, who also worked for Martyn, by 25 percent, to $84,000 a year.

State Parks payroll records show Martyn, around the time he left, had 41 staffers making more than $50,000 [incredibly this is apparently personal staff, not the total headquarters staff]. Black had 58 staff members in March making more than $50,000. Black also brought in staff at higher salaries than what Martyn paid, giving some holdovers significant raises.

An agency spokeswoman said Parks is increasingpay to recruit and retain talent, and staffers are dealing with more visitors.

Black said she also has increased the pay of those in the field.

So, as we see some really good years in public recreation, Arizona State Parks is using the extra money to pay staff rather than address fundamental infrastructure issues.   Anyone want to guess what will happen when the next downturn comes?  Will administrative pay be cut?  Will headquarters staff be cut?  Or will maintenance be cancelled and parks closed?  Place your bets.

When companies or other entities get into debt holes they cannot climb out of, their debt is restructured and perhaps partially forgiven or even bailed out, but rules are put in place to ensure more responsible financial behavior in the future.  The same needs to be true of infrastructure spending.  These agencies got themselves into the deferred maintenance holes they are in.  They cannot get out without a bailout, but we should understand that it is a bailout of these agencies and there need to be conditions attached to the funding tied responsible maintenance spending by the agency itself.

A lot of people have been asking me about Secretary Zinke's statements about encouraging more private operation of parks.  First the good news, its a great idea.  Here is my standard 400-word essay on why:

Should National Park’s be privatized, in the sense that they are turned entirely over to private owners?  No.  Public lands are in public hands for a reason — the public wants the government, not, say, Ritz-Carlton, to decide the use and character and access to the land.  No one wants a McDonald’s in front of Old Faithful, a common fear I hear time and again when privatization is mentioned.

However, once the agency determines the character of and facilities on the land, should their operation (as opposed to their ownership) be privatized?  Sure.   The NPS faces hundreds of millions of dollars in capital needs and deferred maintenance.  It is crazy to use its limited budget to have Federal civil service employees cleaning bathrooms and manning the gatehouse, when private companies have proven they can do a quality job so much less expensively.  The US Forest Service, for example, has had private operators in over a thousand of its largest parks for nearly thirty years, and unlike state parks agencies or even the NPS, it is not considering park closures or accumulating deferred maintenance, despite having its recreation budget axed.  Why? Because its partnership program with private operators is a fundamentally sounder, lower-cost approach to park operations.

In fact, such public-private partnerships are nothing new for the NPS.  The NPS was an early innovator in this field, and currently private companies operate many of the visitor services in parks, such as lodges and gift shops.  The US Forest Service innovation, which has been copied by many agencies including most recently California State Parks, has been to turn over operations of the whole park, not just the lodge, to a private company.  These are highly structured contracts, wherein the private company cannot modify the facilities or change fees without agency approval, and must meet a range of detailed performance goals.

Most critiques of private park operations center around quality and fees.  While there certainly have been some isolated failures, in general the results have been quite good.  In Arizona, a recent poll by CampArizona.com ranked the top 10 public campgrounds in Arizona.  Of these, three of the top five were US Forest Service campgrounds run by a private operator, as was the top Arizona campground in Sunset Magazine’s “Best of the West”  (OK, I have to brag, these are all run by my company). As for fee concerns, state-run parks in California charge $30 for a no-hookup camp site.  Privately operated public campgrounds in California forests seldom charge more than $18.

My company operates over 150 state, county, and federal parks.  I encourage you to take the “Pepsi Challenge” and see some of them for yourself.  They are well-run, generally with more staff than a typical state park, and have no significant deferred maintenance backlog.  Oh, and not a single one has a McDonald’s, a billboard, or a neon sign in front of a national monument.

Now for the bad news:  I am skeptical any progress will be made, for several reasons.

1. The rank and file of these organizations are generally against private operation of any of their functions.  For a couple of reasons.  First, people who work in government tend, through a self-selection process, to be people who are more confident in government solutions and more skeptical of private solutions.  Second, agency leaders are seldom judged on things like efficiency or customer service.  I read and act on every single negative review that comes in for our operations.  It is impossible to imagine the head of Arizona State Parks (which is about the same size as our company in terms of revenue and visitors) doing such a thing.  Agency leaders get their pay and prestige based on the size of their budget and headcount, and private outsourcing even of non-core functions works against this.
2. Overcoming this skepticism takes a lot of hard work, organizational work the Trump Administration has shown itself either unable or unwilling to undertake so far.   As a minimum, change requires messaging that engages the rank and file, not just the Republican base.   In most lands agency, it would also require that they scrap their insanely useless (but time-consuming) planning processes in favor of a real portfolio planning process that assigns recreation lands to different customer segments (e.g. wilderness experience vs. high development) and then explicitly addresses where private capital and operating efficiency could help.

The good news is that I think there is a path to success.  The privatization message should offer real benefits agency personnel care about (and I am pretty sure tax reduction is not one of these).  Privatizing things like bathroom cleaning would allow the agency to stop overpaying for routine non-core tasks and allow it to free up resources for things its employees (and the public) are passionate about, like addressing the enormous deferred maintenance account in most lands agencies and reversing crumbling infrastructure in parks.  Most agency employees joined with recreation or environmental science degrees and don't want to clean bathrooms or deal with angry customers anyway.

For the public, recreators who like a lot of infrastructure and facilities are natural supporters of private operation and bringing in private capital to public lands, but the most passionate advocates for public lands are disproportionately folks who want wilderness experiences and distrust development.  That is why having a portfolio management process for public lands is so important.  The Forest Service, for example, makes every campground they own in the west look the same.  I can close my eyes and tell you what your Forest Service campground looks like even if I have never been there.  This is crazy.   Create something like a "Wild Camping" label and attach it to a subset of the portfolio and don't allow any development.  Even remove development.  Then have other sites for more developed camping.   Maybe sites that focus on first-timers or kids.  Maybe lower-cost value sites.  (People always assume that as a private operator, I want to develop everything, but I don't.  Sure I have places where we have cabins and showers and electricity at every site.  But I also operate pure primitive sites with no power, water, or even cell service.  Hell, in some ways I like operating the latter better -- less to go wrong.)

I have sent the following question to a number of Progressives. I have yet to hear anything back.

I have been following the story about UC possibly hiding funds as a sort of rainy day fund in accounts because several years ago I worked with a lot of folks (e.g. Ruth Coleman) at California State Parks who lost their jobs when accused of the same thing.  But looking at the story, the part that really appalled me was this from the auditor's report:

​The last few years UC has been begging and pleading for $50 or $100 million extra so they could enroll more in-state students, when the office of the president, if this is presented correctly, seems to be bloated by perhaps $400 million.  God knows what the administrative staffs of the individual universities look like.It appears what we have here is a conflict between more output of government services to the public, which I might call an ideological imperative of the Progressive left, with protection of government workers and their pay and benefits, which I might call a political imperative.

I am wondering if the Left's near absolute political support for government workers is undermining what I might call the good government impulses on the Left.  My involvement with CA politics is mostly in parks, but I know that there are a number of fundamental reforms that could allow the parks agency to do a lot more with their current budget, in fact perhaps even start getting at working down deferred maintenance logs, but these were torpedoed as non-starters because they would involve job losses and changes in work rules.  I am not saying they were discussed and defeated, I am saying they were stopped immediately as pointless to even discuss.

I don't agree with Progressives on the size and scope of government, but leave that aside.  Taking the government's current size and tax base as a given, is there a segment of the progressive community that gets uncomfortable with the proportion of these resources that are channeled into government employee hands rather than into actual services for the public?  Or is there a progressive argument for larger-than-needed government staff and higher-than-necessary pay and benefits (e.g. a city on the hill argument where the government is setting a higher standard that perhaps the benighted private employers will someday more closely emulate)?

As many of you know, my company privately operates public parks and recreation areas.  With costs 50-70% lower than government management, one would think that private operation would be on the table as an option when government recreation budgets face shortfalls**.  However, this is seldom true.  The reason is that you will almost never, ever, ever hear discussion of efficiency improvements in any discussion of public park budgets.  100% of any such discussion will be "how do we find new revenue streams", even when those revenue streams are one or even two orders of magnitude smaller than potential efficiency gains.  When costs have to be cut, they are cut solely by closures and service reductions.

Which is why I smiled when I read this article about Connecticut State Parks sent by a reader:

The effects of state budget cuts will soon be felt at Connecticut’s 109 state parks, including cutbacks in lifeguard staffing and park maintenance and the closure of three state campgrounds.

The $1.8 million in reductions to park operations will take effect after the July Fourth holiday weekend, and Robert Klee, commissioner of the Department of Energy and Environmental Protection, said he expects additional cost-cutting steps next spring. DEEP faces an overall $10 million reduction in funding from the state’s general fund.

“By carefully analyzing how and when the public uses our state park system, we will achieve the savings we need while keeping much of what we offer at our 109 parks open and available to the public,’ Klee said.

But park advocates argue these reductions point to the necessity of identifying additional revenue streams to help fund the parks.

“This just underscores the need for these sustainability funds,” said state Sen. Ted Kennedy Jr., the Democratic co-chairman of the legislature’s Environment Committee. Kennedy and other lawmakers have proposed concepts over the years such as expanded park concessions, a tax on disposable plastic bags, higher park rental fees and sponsorships.

The only cost reductions discussed in the article are reductions in service days and hours.    If one were in private industry, one would approach this by identifying all the activities performed by the organization, such as bathroom cleaning and landscaping, and then look at benchmarks to see if others do it less expensively and then try to figure out how they do it less expensively and determine if those methods could be copied.  None of this ever occurs in the public sphere.  The several times I have suggested it in senior meetings, for example in California, the whole room goes quiet and looks at me like I am insane.

** In reality, every single government agency running parks has a shortfall, even when their budget is balanced.  Why?  Because virtually no agency, including the big ones like the National Park Service or California State Parks, fully cover all of their capital maintenance costs.  All these agencies have growing deferred maintenance accounts, even when they claim that budgets are nominally balanced.

Some random highlights:

• I watched a 20 minute presentation in which a woman from LA parks talked repeatedly about the urban heat island being a result of global warming
• I just saw that California State Parks, which is constantly short of money and has perhaps a billion dollars in unfunded maintenance needs, just spent millions of dollars to remove a road from a beachfront park based solely (they claimed) based on projections that 55 inches of sea level rise would cause the road to be a problem.  Sea level has been rising 3-4mm a year for over 150 years and even the IPCC, based on old much higher temperature increase forecasts, predicted about a foot of rise.
• One presenter said that a 3-5C temperature rise over the next century represent the low end of reasonable forecasts.  Most studies of later are showing a climate sensitivity of 1.5-2.0 C (I still predict 1C) with warming over the rest of the century of about 1C, or about what we saw last century
• I watched them brag for half an hour about spending tons of extra money on make LEED certified buildings.  As written here any number of times, most LEED savings come through BS gaming of the rules, like putting in dedicated electric vehicle parking sites (that do not even need a charger to get credit).  In a brief moment of honesty, the architect presenting admitted that most of the LEED score for one building came from using used rather than new furniture in the building.
• They said that LEED buildings were not any more efficient than most other commercial buildings getting built, just a matter of whether you wanted to pay for LEED certification -- it was stated that the certification was mostly for the plaque.  Which I suppose is fine for private businesses looking for PR, but why are cash-strapped public agencies doing it?

For those who may be interested, we are having a one-day conference on public-private partnerships for park operations on November 7 in Reno, Nevada.  The US Forest Service and those of us in the business have gotten a lot of inquiries from recreation agencies over the last year or so.  These folks are trying to keep parks open despite declining budgets.

The USFS figured out a way to do this over 30 years ago, and only now are other agencies starting to copy the model  (California State Parks just started using it this year, for example).  The USFS, like most agencies, charges a fee for the public to visit certain parks or to use campgrounds.  They found that they could not cover their high operating costs with just these user fees, and so had to use a lot of general fund money to keep the parks open.  Many complain that public recreation user fees are too high, but typically they cover only about half the agency's costs to run the park.  When general fund money started to go away, the USFS faced park closures, exactly the situation today in many state and local parks agencies.

The USFS found that private operators with a lower cost position and more flexibility could keep these parks open using just the user fees, and in fact actually pay the USFS some rent.  So instead of having to subsidize the park's operation with tax money, the parks began to generate funds for the USFS.

It took decades to get this right.  The USFS made mistakes in how they grouped parks into contracts, how they wrote the contracts, and how they did oversight.  The private companies made operating mistakes and some failed financially at awkward times, since when this program started there did not exist a pool of experienced operators.  But over the years, many of these problems have been worked out, and most privately-run sites operate to a standard at least as high as publicly-run parks.  Here in Arizona, three of the top five highest-rated public campgrounds are operated by private companies in the USFS program.

At this conference, both private operators and agency people experienced with this model will describe how it works as well as years of hard-won lessons learned.

The conference is free to most government agency officials, academics, and media and we have obtained a really inexpensive $49 hotel rate  (since by definition the agencies most interested in the model don't have much money).   The web site that describes the agenda and logistics is here.  Readers of this site who don't fit one of these categories but would still like to attend can email me at the link in the above site and I will get you in.

I do a lot of work with California State Parks, being a concessionaire in some of their parks, so I have been following the various scandals in that agency closely.  One part of the scandal was that CSP apparently hid something like $54 million in reserve funds from the legislature.  I wondered how it was possible for the state to not know there was $54 million lying around un-reported.

It seems like we have a partial solution to my quandary.  It is possible to misplace $54 million when you also misplace another $2 billion.

More than $2 billion in California taxpayer money has apparently been stashed in hundreds of special funds unaccounted for by the state Department of Finance, a newspaper reported on Friday.

An examination of more than 500 special fund accounts, like the $54 million discrepancy in state parks money, showed a $2.3 billion "discrepancy" between state controller and Department of Finance numbers, according to the San Jose Mercury News ( http://bit.ly/MPdkls).

No one checks the controller's figures, so the difference wasn't caught.

The analysis showed at least 17 accounts appear to have significantly more reserve cash than what was reported to the Finance Department.

The violent crime victim restitution fund, for instance, was off by $29 million, and a low-cost child health insurance fund was off by $30 million. The fund that rewards people who recycle bottles and cans was $113 million off.

State finance officials operate under a  longtime honor system. The controller's figures were never checked and oversight groups didn't catch the discrepancies even though the numbers are publicly available on two state websites.

LOL, politicians' "honor".  We can see what that is worth.

About 20 years ago I did a rail transit study for McKinsey & Company with a number of European state rail companies, like the SNCF in France.   With my American expectations, I was shocked to see how overstaffed these companies were.  At the time, the SNCF had more freight car maintenance personnel than they had freight cars.  This meant that they could assign a dedicated maintenance person to every car and still get rid of some people.

Later in my consulting career, I worked for Pemex in Mexico, where the over-staffing was even more incredible.  I realized that in countries like France and Mexico, state-run corporations were first and foremost employment vehicles run for the benefit of employees, and, as  distant second, value-delivery vehicles and productive enterprises.

Over the last 20 years, I have seen more and more of this approach to public agencies coming to the US.  If nothing else, the whole Wisconsin brouhaha hopefully opened the eyes of many Americans to the fact that public officials and heads of agencies feel a lot more loyalty to their employees than they do to taxpayers.

I see this all the time in my business, which is private operation of certain state-run activities (e.g. parks and recreation).  I constantly find myself in the midst of arguments that make no sense against privatization.   I finally realized that the reason for this is that they were reluctant to voice the real reason for opposition -- that I would get the job done paying people less money.  This is totally true -- I actually hire more people to staff the parks than the government does, but I don't pay folks $65,000 a year plus benefits and a pension to clean the bathrooms, and I don't pay them when the park is closed and there is not work to do.  I finally had one person in California State Parks be honest with me -- she said that the employees position was that they would rather see the parks close than run without government workers.

Of course, if this argument was made clear in public, that the reason for rising taxes and closing parks was to support pay and benefits of government employees, there might be a fight.  So the true facts need to be buried.  Like in this example from the Portland transit system, via the anti-planner.

In 2003, TriMet persuaded the Oregon legislature to allow it to increase the tax by 0.01 percent per year for ten years, starting in 2005. In 2009, TriMet went back and convinced the legislature to allow it to continue increasing the tax by 0.01 percent per year for another 10 years. Thus, the tax now stands at $69.18 per $10,000 in payroll, and will rise to $82.18 per $10,000 in 2025.

At the time, TriMet promised that all of this tax increase would be dedicated to increasing service, and as of 2010, TriMet CFO Beth deHamel claims this is being done. But according to John Charles of the Cascade Policy Institute, that’s not what is happening.

Poring over TriMet budgets and records, Charles found that, from 2004 (before the tax was first increased) and 2010, total payroll tax collections grew by 34 percent, more than a third of which was due to the tax increase. Thanks to fare increases, fares also grew by 68 percent, so overall operating income grew by about 50 percent, of which about 7 percent (almost $20 million) was due to the increased payroll tax.

So service must have grown by about 7 percent, right? Wrong. Due to service cuts made last September, says Charles, TriMet is now providing about 14 percent fewer vehicle miles and 12 percent fewer vehicle hours of transit service than it provided in 2004 (comparing December 2004 with December 2010). TriMet blamed the service cuts on the economy, but its 50 percent increase in revenues belie that explanation.

By 2030, according to TriMet’s financial forecast (not available on line), the agency will have collected $1.63 billion more payroll taxes thanks to the tax increase. Yet the agency itself projects that hours and miles of service in 2030 will be slightly less than in 2004.

Where did all the money go if not into service increases? Charles says some of it went into employee benefits. TriMet has the highest ratio of employee benefits to payroll of any transit agency. At latest report, it actually spends about 50 percent more on benefits than on pay, and is the only major transit agency in the country to spend more on benefits than pay. This doesn’t count the unfunded health care liabilities; by 2030, TriMet health care benefits alone are projected to be more than its payroll.

I was in discussions with California State Parks over the last few days.  Given that their new earmarked funding source was defeated in the last election, they are facing cuts next year.  A number of parks will again face closure.  As I have many times, I said that I could easily keep many of these parks open under our operations using only the gate fees and no public subsidies.

For the first time, someone explained to me why they could not entertain my proposal.  It is illegal in California to replace any function performed by a public employee with a private contractor.   The only way they could consider private operation of a park is to allow it to close, lay everyone off, let it sit closed to the public for a while, and then possibly reopen it with private management.  And even that approach will likely be challenged in the court.  The public employees unions are committed to allowing parks to permanently close rather than establish the precedent of private management.

More on public-private partnerships in recreation and how private management of public recreation works, here.

This year has been a frustrating year for my business.  As many of you know, I am in the business of privatizing public recreation.  We take over the management of public recreation facilities, and are generally able to run them to the same or better standards as the government for less money.  Whereas before we take over, the government typically loses money on a park, we often can run it at a profit AND pay the government rent for the concession rights.

This year, numerous state parks have been threatened with closure in states all across the country.  In many of these states, I have communicated with everyone I could think of, from the governor to state parks leaders, trying to say that companies like ours could probably keep many of these parks open. I told them I wasn't looking for a sweetheart deal - we weren't afraid to bid against other companies, but it was crazy to close parks that could easily remain open.   We have been told any number of times by numerous state leaders that they would prefer to close the park rather than put it under private concession management.

To some extent, this is due to the pressure of public employees unions, who have every incentive to play brinkmanship and force closure of parks rather than set the precedent of having them managed by a non-union private company.  This is unsurprising.

I also understand that there is a fear of private management of public recreation facilities.  I swear the first think I hear almost every time I present on what we do  is that they fear we would put a billboard or a McDonalds in front of Old Faithful.  I kid you not, this charge is as regular as clockwork.  Fortunately, we manage about 175 public recreation facilities to a pretty high standard, and not one billboard or McDonalds can be found at any of them.  A large part of the bid process for any facility management contract is not just the rate or the rent but also the detailed operating standards to which it will be managed.  So this is a normal, but surmountable hurdle.

But even taking into account these usual sources of resistance, I am always just amazed at how vociferous the opposition is to even experimenting with private management.  States like California are simply hell-bent on closing parks a company like ours could easily keep open for the public (to be fair, Ruth Coleman, head of California State Parks, is very open to new models but she gets absolutely no support either within her organization or in the legislature for such new ideas).

But I think I understand this phenomenon better now after reading Kevin Drum today. This is what Drum wrote in response to the DNC ad, which clearly stretched the truth, claiming that Republicans voted to end Medicare:

Why not just tell the truth: Republicans essentially voted in favor of turning Medicare over to private industry.  With only a few words of explanation, this could easily be more effective than the ad that actually ran.  Like so:

Republicans voted to turn Medicare over to private insurance companies!  You heard right: they want to hand Medicare over to the same companies that [insert two or three insurance company outrages here, maybe a Wall Street reference, something about profits over people, etc.].  Democrats will never do that.  Blah blah blah.

Would that really be any less scary than the ad that actually ran?

So for Drum, and I presume for much of the Left, the suggestion that a government service be managed privately is just as bad as the suggestion that the service be ended. In essence, Drum is saying he would almost rather have no Medicare than Medicare provided privately.

It certainly explains a lot, and puts the phenomenon I see in public recreation into a larger context.

Update: A couple of the comments hpothesize the problem is that many in government and on the left just hate profits and the profit motive in general.  One related story -- I was in a meeting with a large state parks organization where a senior person raised the idea of private park management.  Well, everyone hated the idea, but when it looked as if the leadership might still seriously consider the private option, one person in the room said "well could we at least mandate that they can't make a profit."  There was a lot of head nodding at this.

I didn't go off on this and kept a smile on my face.  But I did lose it in an earlier meeting with the head of some government parks we actually did run.  We were discussing park fee increases for the next year (the state had just raised minimum wages about 30% and we were scrambling to make ends meet).  He said he was uncomfortable with the level of profits we made.  I asked him, "Jim (not his real name) does this state pay you more than $25,000 a year to run this park?"  He nodded.  I said, "then you make more profit in this park than I do, and what is more, you didn't have to invest $100,000 in equipment to get your job, nor do you have to rebid for your job every 5 years, nor does you salary go down if for some reason park visitation decreases."

Sometimes I wish I had stood up in that state meeting and said something similar, as in "Why is the money I make in a park somehow tainted because it is the difference between my revenues and expenses and the result of substantial investments and subject to extraordinary risks, while the virtually guaranteed-for-life salary you make, paid for by the same visitors, is somehow pristine?"

Letter I sent to Governor Schwartzenegger in response to his plan to close a number of California State Parks due to budget problems:

I know many people are
probably contacting you to oppose proposed closures of state parks to help meet
budget targets. My message is a bit
different: Closing these parks is
totally unnecessary. 

I own and manage one of the
larger concessionaires in the California State Park (CSP) system. We are the concessionaire at Clear Lake and Burney Falls. At Burney Falls, for example, we have invested over a million dollars
of our money in a public-private partnership with the state to revamp to the
park. We also operate parks for the
National Park Service, the US Forest Service, Arizona State Parks, Texas State Parks, and other public authorities.

Traditionally, CSP has
engaged concessionaires to run stores and marinas within parks, but not to run
entire parks. However, in many other
states, our company runs entire parks and campgrounds for other government
authorities, and does so to the highest quality standards. 

So, I can say with confidence
that many of the California State Parks proposed for closure would be entirely
viable as private concessions. For
example, we operate the store and marina at Clear Lake State Park but
could easily run the entire park and make money doing so, while also paying
rent to the state for the privilege.

I know that there are some
employees of the CSP system that oppose such arrangements with private
companies out of fears for their job security. But it would be a shame to close parks entirely when an opportunity
exists to keep them open to the public, and improve the state budget picture in
doing so. 

Even if California decides to keep these parks open, I would encourage
you to have your staff investigate the possibility of expanding private
operation of state parks. CSP already
has one of the best and most capable concession management programs in the
country, a success you should seek to build on. The infrastructure is already there in CSP to solicit bids for these
projects and ensure that management of them meets the state's quality and
customer service standards.

Even though everything I said here is true, it probably is a non-starter because most state organizations are dead set against such private management.  They would rather close services to the public than establish the precedent of private management. 

Besides, the whole parks closure may well be a bluff.  Unlike private company budget discussions, where it is expected that managers offer up their marginal projects for cuts, the public sector works just opposite:  Politicians propose their most popular areas of spending (parks, emergency services) for cuts in a game of chicken to try to avoid budget cuts altogether.  As I wrote here:

Imagine that you are in a budget meeting at your company.  You and a
number of other department heads have been called together to make
spending cuts due to a cyclical downturn in revenue.  In your
department, you have maybe 20 projects being worked on by 10 people,
all (both people and projects) of varying quality.   So the boss says
"We have to cut 5%, what can you do?"  What do you think her reaction
would be if you said "well, the first thing I would have to cut is my
best project and I would lay off the best employee in my department". 

If this response seems nuts to you, why do we let politicians get
away with this ALL THE TIME?  Every time that politicians are fighting
against budget cuts or for a tax increase, they always threaten that
the most critical possible services will be cut.  Its always emergency
workers that are going to be cut or the Washington Monument that is
going to be closed.  Its never the egg license program that has to be cut.

Update: Here is the form letter the governor's office sent out in response to my letter:

A weakened national economy and auto-pilot state spending has created a projected budget shortfall of $14.5 billion for fiscal year 2008-09. Although state government revenues this coming year are actually forecast to hold steady, the problem is that every year automatic spending formulas increase expenditures.  Left unchecked, next year's budget would need to grow by 7.3-percent, which is $7.6 billion; even booming economies can't meet that kind of increase.  To immediately combat this crisis, the Governor has proposed a 10-percent reduction in nearly every General Fund program from their projected 2008-09 funding levels.  While these reductions are unquestionably painful and challenging, this across-the-board approach is designed to protect essential services by spreading reductions as evenly as possible.

To achieve this difficult reduction, State Parks will be reducing both its permanent and seasonal workforce.  As a result, 48 park units will be closed or partially closed to the public and placed in caretaker status.  By closing parks and eliminating positions, remaining resources can be consolidated and shifted to other parks to provide for services necessary to keep those parks open and operating.  While 48 parks are affected by closures, 230 parks-or 83% of the system-will remain open.

We must reform our state budget process.  Government cannot continue to put people through the binge and purge of our budget process that has now led to park closures.  That's why the Governor has proposed a Budget Stabilization Act.  Under the Governor's plan, when revenues grow, Sacramento would not be able to spend all the money.  Instead, we would set a portion aside in a Revenue Stabilization Fund to stabilize the budget in down years.  If a deficit develops during the year, instead of waiting to accumulate billions of dollars of debt, the Governor's plan would automatically trigger lower funding levels already agreed upon by the Legislature.  Had this system been in place the past decade, we would not be facing a $14.5 billion deficit. 

As Governor Schwarzenegger works with his partners in the Legislature, he will keep your concerns in mind.  With your help, we will turn today's temporary problem into a permanent victory for the people of California.

A bit over five years ago, I wrote an op-ed piece in our local paper calling for further privatization of public recreation.  The editorial was in response to a proposal for a large bond issue to rebuild recreation infrastructure.  I argued that the state should instead be focusing on attracting private investment.  Not only was there more money for recreation in private hands than public, but I sensed that private funds would more likely be invested in facilities the public really wanted, rather than goofy politically correct projects.  Further, private operators could operate recreation facilities much less expensively, in part because they are not tied to ridiculous public pay scales, pension plans, and job classifications.

Soon after, I had a business broker call me and ask me if I wanted to put my money (such that it was) and time where my mouth was.  After a lot of twists and turns, I ended up the owner of a recreation concession company.  In a recreation concession, a private operator pays the government rent in exchange for the ability to charge visitor fees and run the recreation facility for profit.  In most cases, our company can operate a property and make a profit on fees lower than the government must charge just to break even.

My business, Recreation Resource Management, has prospered since then.  And as I have gotten deeper into public recreation, what I have learned has only confirmed what I wrote in that editorial.  I have seen that when the government runs recreation facilities, it almost never spends enough money on capital maintenance and refurbishment.  The reason seems to be that legislators, given the choice, would much rather spend $X on a shiny new facility they can publicize to their constituents than spend $X maintaining facilities that already exist.  I laugh when I here progressives argue that private industry is too short-term focused and only the government invests for the long-term.  In practice, I find exactly the opposite is true.  Think about hotels, or gas stations, or grocery stores.  Private businesses understand that every 15-20 years, they need to practically rebuild existing infrastructure from scratch to keep them fresh for customers.  This kind of reinvestment almost never happens in public recreation.

Except this week!

After years of building up our business, we just completed a project with California State Parks that is what I have always wanted to achieve with the company.  At McArthur-Burney Falls State Park, California State Parks had an aging concession store and an outdated section of the campground that it really did not have the money to rehabilitate (by the way, this is an absolutely beautiful park -- I highly recommend it).  We crafted a two-part lease with the state which eventually led to us investing over a million dollars in the park:  In phase one, we built a new concession store (old store on left, our new store on right):

In phase two, just complete, we took an old tent-camping loop with no utilities and added 24 new cabins.  These cabins not only refurbish an aging and dated section of the campground, but they also add new amenities to the park to attract visitors who may not own an RV and who don't want to sleep in a tent.  In addition, since they are insulated and heated, these cabins will extend the camping season -- in fact, we already have a number of reservations for Thanksgiving, a time when no one would have wanted to tent camp here.

Its a  win-win-win, where  we make money, the state gets lease revenues
from us that exceed their previous camping revenues, and the public
gets new amenities without any taxes or public spending.

So, in answer to the question I so often get, "why does a libertarian run a company that works with the government?"  Now you know why.  I will admit that from time to time I find myself on the losing end of libertarian-intellectual-purity debates because I choose this path rather than, say, living in a cabin in the wilderness and manufacturing rifle barrels for a living.  *Shrug*

Postscript:  One lesson I have also learned is that state governments are not always a monolith.  Texas and Florida, for example, while being beloved of libertarians for having no state income tax, can be horribly bureaucratic in certain areas (e.g. sales tax reporting and vehicle registrations).  California, on the other hand, which in many ways is one of the worst states to do business in, actually has what is probably the most innovative and business-friendly state parks organization in the country.  Go figure.

PS#2:  By the way, the cabins shown are actually modular buildings, built here in Phoenix by Cavco, and shipped to the site.  The classy interior work was done my by maintenance supervisor.