In 2011, parks concessionaire Recreation Resource Management (RRM) prepared a case study of two publicly owned parks near Sedona, Arizona that illustrates the dramatic differences between traditional agency park operation and the PPP concession model. The case study compared Red Rock State Park, operated by Arizona State Parks (a public agency), and Crescent Moon/Red Rock Crossing Recreation area, a U.S. Forest Service (USFS) property operated under a concession by RRM.
Aside from the fact that one park is run by a public agency and the other run by a private concessionaire, these two parks are very similar in many respects. Both have public bathrooms, picnic and group shelters, parking facilities, and trails. They are adjacent to each other, with similarly sized visitor areas and staffed gatehouses to collect fees and provide visitor information. Both charge similar entry fees ($10 per vehicle at Red Rock, $9 per vehicle at the privately operated Crescent Moon). More important, the parks are also very similar in revenue and number of visitors. In 2009, revenues totaled $281,000 at Red Rock and $304,854 at Crescent Moon.
The dramatic difference comes in the parks’ financial picture, which illustrates the transformative power of park operation PPPs. In 2009, Red Rock had direct costs of $370,943, plus an estimated $24,062 share of regional agency operations office costs and an additional $120,000 in operations support costs at the state park headquarters level (e.g., IT, human resources, etc.). Hence, Red Rock cost the state $515,005 to operate but generated only $281,000 in revenue, a loss of $234,000 for Arizona taxpayers that year.
By contrast, the USFS generated revenue at Crescent Moon that year under a park operation PPP. The concessionaire paid all park operating expenses from the fees it collected, taking those off the USFS balance sheet. USFS received $54,873 in revenue from the concessionaire (18 percent of gate revenue) and only paid for contract oversight (an estimated $10,000), yielding USFS a $44,873 operating profit. The USFS often reapplies net revenue generated under concessions back to improvements and new park facilities, keeping them properly maintained and preventing the chronic deferred maintenance seen in struggling public sector park systems.
While the two parks are otherwise very similar, the park operated under PPP-generated revenue stream, while the publicly operated park lost taxpayer money. This simple example illustrates how parks can be financially sustainable under a PPP but financially unsustainable under public operation. Highlighting this point, Red Rock was ultimately included on the list of proposed state park closures in 2010 amid severe state budget pressures in Arizona.
Source: “A Tale of Two Parks: Keeping Public Parks Open Using Private Operations Management,” Recreation Resource Management.