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HOME  - Privatization Market-Based User Fees and Privatization Can Solve Budget Strains
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Market-Based User Fees and Privatization Can Solve Budget Strains |
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Written by Scott Silver
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Wednesday, 28 August 2002 |
Recently I've focused a great deal of attention upon the privatization threat to BC Parks simply because that is the privatization example making headlines today. Yet I know that Canada is "another country" and for some folks, what happens across the border seems largely irrelevant.
So, here's a fantastic paper about the privatization of Washington State Parks.
This is a most important paper for anyone wishing to understand the precise nuts and bolts involved in the privatization and commercialization of recreational opportunities on America's public lands. It is, in fact, a working blueprint for the privatization of Washington's State Parks. When you read it, you will instantly recognize what is happening and perhaps for the first time, will fully understand how what you see on the ground relates directly to the privatization of your public lands.
Scott
PS... the following is so "nuts and bolts" oriented, some people may find it boring. If you do, please jump ahead in the document. It gets more inflammatory (and more explicit) the further you get into it!!!
PPS... if this make you angry or makes you concerned about the future, then please write a letter to the editor, to your congressmen, and do anything else you personally think will help prevent the following from destroying outdoor recreation on America's public lands.
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(Source Washington Policy Center)
http://www.wips.org/ConOutPrivatization/PBHansonCOSecuringStateParks.html
Policy Brief:
Securing the Future of Washington's State Parks
Market-Based User Fees and Privatization Can Solve Budget Strains
by Jeff Hanson, Adjunct Fellow
February 2001
Executive Summary
For the third year in a row, the State Parks and Recreation Commission
(State Parks) has responded to proposed budget restraints by announcing
the possibility of closing down some of its parks. In each case, none
of the 42 parks targeted by the agency were closed.
State Parks' recurring threat to close its own parks is shortsighted.
The tactic may get the agency through one budget crunch, but the issue
is bound to resurface in following years. Constant talk about closing
parks creates a general fear that we will lose some of our most
cherished public assets: the parks that preserve some of the finest
natural beauty in the nation. Intelligent use of market-based user fees
would break this cycle and give State Parks the resources it needs to
maintain a first-class park system. Properly implemented, user fees
would:
· Keep faith with park users by ensuring that money from user fees is only used to fund the park system.
· Keep faith with taxpayers by using some user-fee revenue to reduce State Parks' reliance on the General Fund.
· Assure park users and taxpayers that State Parks is spending its
dollars efficiently by granting the agency privatization authority, so
it can improve service and save money through competitive contracting.
Washington State Parks faces serious, but solvable, budget problems. By
introducing sensible market-based user fees and by contracting out the
operation of appropriate parks, the Washington State Parks and
Recreation Commission and the legislature can secure the future of our
state's parks, while honoring their commitment to park users and other
taxpayers.
I. Introduction
For a third straight year, the Washington State Parks and Recreation
Commission (State Parks) has responded to proposals that the agency
reduce its budget by announcing that it would close a number of state
parks.[1] In summer 1998, State Parks even appointed a special
blue-ribbon panel to evaluate each of the 125 parks in the system to
identify which parks it would close under three different
budget-reduction proposals. Ultimately, none of the 42 parks targeted
by the panel were closed, nor were any closed after State Parks again
threatened park shut-downs during legislative budget negotiations in
spring 1999. As of this writing, the 2001-03 budget for State Parks is
undetermined; the prospect of park closures will remain an issue for
many more weeks.
State Parks' recurring threat to close its own parks is shortsighted.
The tactic may get the agency through one budget crunch, but the issue
is bound to resurface in following years. Constant talk about closing
parks creates a general fear that Washington citizens will lose some of
our most cherished public assets: the parks that preserve some of the
finest natural beauty in the nation.
The Parks and Recreation Commission took a step toward a meaningful
solution on December 14, 2000, when commissioners unanimously approved
a proposal to implement a day-use fee effective January 2002.
Currently, Washington is one of only ten state park systems not to
charge day-use, or entrance, fees.[2] One commissioner stated that he
wanted new day-use revenues to fund park improvements; if the
Legislature failed to provide adequate funding for existing parks, then
the commission should close some parks and use day-use revenues for
park improvements.[3] The commission directed agency staff to present
specific options for implementing a day-use parking-fee program at its
March 2001 meeting.
The introduction of day-use fees can go a long way toward erasing the
budget problems facing State Parks, but one would never know it judging
from agency statements. A day-use fee, insist State Parks personnel,
would raise about $2 million in additional revenue per year (after
deducting collection costs). Were that forecast accurate, then a
day-use fee would amount to little more than a band-aid. After all,
State Parks faces a $40 million maintenance backlog.[4]
State Parks' forecast of day-use revenues, though, is seriously flawed.
Because of calculation errors and overly pessimistic assumptions, the
agency has substantially underestimated-by about five times-the
potential revenues from its proposed $3 day-use parking fee. Further
still, State Parks would realize substantially higher revenues if the
commission implemented a more equitable day-use fee, one that reflects
actual market demand.
The value that park users attach to a park visit varies, of course,
depending on several factors. Among the most important considerations
are the quality and location of the park, the day of week and time of
year. Despite these important economic fundamentals, State Parks
currently envisions a day-use fee that ignores them all. Thus, a
carload of six persons would pay the same entrance fee for a visit to
Deception Pass on Labor Day weekend as would one person visiting Tolmie
State Park on a Tuesday in April. If designed properly, a system of
differential day-use fees that reflected true market demand would not
only be fairer, it would generate substantially more revenue, disperse
congestion at the most popular parks, and enhance visitation at
underutilized sites.
Justifiably, many taxpayers instinctively object to new or higher fees.
A day-use fee, therefore, is likely to face significant citizen
resistance. To alleviate their valid concerns, three supplemental steps
are essential. First, the Legislature must keep faith with park users
by ensuring that day-use fees support an enhanced parks budget. Park
visitors are willing to pay their way if those funds are reinvested in
the park system. Second, to keep faith with taxpayers, a substantial
increase in park revenues should also lead to a partial reduction in
State Parks' General Fund support. Once new park revenues fund a proper
budget increase, a proportion of any additional revenues should be used
to reduce State Parks' dependence on the General Fund (with a
corresponding reduction in the state's Initiative 601 expenditure
limit). Such an approach assures taxpayers that the new park fees do
not lead to a bloated parks budget and do not provide an opportunity
for the Legislature to increase spending elsewhere in the budget.
Finally, State Parks must assure park users and taxpayers that the
agency is spending its dollars efficiently. To do so, State Parks
should contract out many of its park operations to private-sector
providers. Contracting out can result in substantial savings and
improved service. State Parks should examine the comprehensive
contracting-out efforts of the provincial park systems of British
Columbia and Alberta, which we detailed in a previous Washington
Institute study, "Privatization Opportunities for Washington State
Parks."[5] By analyzing the strengths and weaknesses of British
Columbia's and Alberta's parks privatization programs, Washington
state's park planners can identify which parks are best suited for
contracting out and they can design an effective privatization strategy.
Washington State Parks faces serious, but solvable, budget problems. By
introducing sensible market-based user fees and by contracting out the
operation of appropriate parks, the Washington State Parks and
Recreation Commission and the legislature can secure the future of our
state's parks, while keeping faith with park users and other taxpayers.
II. State Parks' Budget Problems
Washington State Parks is confronted with a $40 million maintenance
backlog despite operating the fourth most popular system in the nation.
In fiscal year (FY) 1999, only the park systems of California, New York
and Ohio drew more visitors than did Washington's state parks, which
drew 48 million day-use and overnight visitors.[6] Washington State
Parks' has a comparatively small operating budget, with expenditures
totaling just 69 cents per visitor, well below the national average of
$1.81 per visitor.[7] One partial explanation for the comparatively
small budget is the small amount of revenue collected from Washington's
park visitors (21 cents per visitor, fourth lowest in the nation, which
averages 81 cents per visitor).[8] Another important part of the answer
is the composition of Washington's park visitors: 4.4 percent overnight
visitors compared to 8.1 percent among all state park systems.[9]
Not only do day-use visitors make up a large proportion of Washington's
park attendance, their visits are almost entirely subsidized by general
tax dollars because they pay no entrance fees. Revenues from park users
accounted for less than 30 percent of the agency's operating budget in
FY 2000 (All Funds), with about two-thirds of that total coming from
campers (who, recall, make up only 4.4 percent of total visitors).[10]
Given State Parks' reliance on general tax support, it is no surprise
that a $40 million maintenance backlog has accumulated. It is
difficult, after all, for a parks budget to compete each year for
scarce General Fund dollars against more popular causes such as
education. From 1989-91 to 1999-2001, State Parks' biennial operating
budget (appropriations from all funds) increased from $59.6 million to
$89.2 million. Nearly half ($13.5 million) of that $29.6 million
increase, however, went toward new responsibilities such as the
operating costs associated with new or upgraded facilities.[11] State
Parks' base budget, therefore, increased by 27 percent over that
period, just keeping pace with inflation (about 25 percent); attendance
at the state's parks has also increased by about a quarter since
1989.[12]
Although Governor Gary Locke's 2001-03 budget proposal includes a 21
percent increase for State Parks' operating budget, nearly $5 million
of the $18.6 million increase is for repair of roads in the parks.[13]
The governor's proposal does not include any additional funding to
address State Parks' heavy maintenance backlog.
III. Day-Use Fees as a Partial Solution
The Washington State Parks and Recreation Commission's recent
endorsement of day-use fees could prove an important step toward
addressing the agency's long-term budget needs. It is not the first
time, though, that the commission has approved the establishment of
day-use fees. In January 1993 the commission approved a $3 parking fee,
and agency staff carried out implementation steps over the next several
months. In June 1993, however, the Legislature passed a state operating
budget that specifically stated that day-use parking fees not be
assessed. The following year it was Governor Mike Lowry who stepped in,
vetoing a day-use vehicle fee provision in the state operating budget.
Recent day-use fee proposals have also failed. Governor Locke proposed
a day-use fee in the 1997 legislative session, but the Legislature did
not act on his request. Also failing was a 1999 pilot day-use parking
fee program included in a House Republican 1999-2001 budget
proposal.[14]
A. Advantages of User Fees
Despite this difficult history, the Parks and Recreation Commission's
decision to introduce day-use fees is proper. Obviously, day-use fees
can generate needed revenue, which is certainly the commission's
primary motivation. There are other important advantages as well.
Most fundamental, a shift in reliance from general taxes to user fees
(such as entrance fees) is a fairer way to fund the park system. Where
possible, those who benefit most from voluntarily using a government
service ought to help the most to pay for it; those who visit
Washington's state parks ought to pay substantially more to support
them than do taxpayers who choose not to attend any parks. Despite the
direct benefits they derive from, and the costs they impose on, the
state park system, Washington's day-use park visitors (96 percent of
total visitors) pay nothing extra for their enjoyment of the state's
parks.[15] Yet, since people who directly benefit from state parks are
in most cases easily identifiable, user fees offer a better and fairer
funding source than general tax dollars.
User fees can also encourage more efficient use of a good or service.
If a good or service is under priced (or not priced at all), each
consumer has incentive to use more of it than they would if required to
pay the actual market price.[16] Appropriate park user fees, then, have
the advantage of discouraging wasteful use of Washington's parks.
Another potential benefit is the increased control associated with fee
collection. When park users interact with fee collectors, the park
visitors lose some of their anonymity and parks personnel are better
able to screen out inappropriate and unsafe uses of the park.[17] The
collection of fees can also provide park employees the opportunity to
inform and educate visitors.[18]
Among the most prominent objections to user fees are the following:
collection costs are too high; fees can reduce attendance, particularly
visits by low-income users; and the public will not accept user fees.
Each of these concerns is valid. If properly designed, though, a system
of day-use fees can adequately address each of these objections.
Sufficient operational flexibility will permit individual parks to use
the most efficient fee collection methods for that park; sponsorships,
discounts and coupons can enable low-income users to continue to enjoy
Washington's parks; and legislative commitments to park users and other
taxpayers can increase public acceptance of day-use fees. Later
sections of this study address these objections in detail.
B. Differential Fees that Reflect Market Demand
User fees are more equitable and effective if they reflect the market
demand for the good or service being priced. Rather than introducing a
flat-rate day-use fee, State Parks ought to establish a system of
differential fees that captures visitor demand. The value that a park
visitor attaches to a particular park varies according to the location
and quality of the park, the time of year (e.g., weather
considerations), day of week, and so on. A flat day-use fee improperly
ignores these economic factors.
Variable pricing is routine and readily accepted in the private sector.
For example, weekday stays at a motel are typically lower-priced than
weekend stays; most cinemas offer matinee discounts; and most golf
courses charge lower greens fees on weekdays, lower yet for "twilight"
tee times. Though less common, differential fees are also used in the
public sector. The City of Bremerton, for example, owns Gold Mountain
Golf Complex, which includes two eighteen-hole courses: Cascade and
Olympic. Gold Mountain-Olympic is considered one of the best public
courses in the state. The city charges $39 to golf Olympic on a
weekend; the rate for Cascade is $28. Of course, the city also charges
lower rates for weekdays or twilight tee times.[19]
1. Advantages: Increased Revenues and Management Tool
Obviously, differential pricing can increase revenues for the park
system. With a flat fee, it is likely that some park visits would be
under priced and-this point is often overlooked-some visits would be
overpriced. In either case, revenues would be lower than they would be
under optimal pricing. Total gross revenue is a function of price and
attendance (and compliance). Since price affects attendance, park
planners must set prices strategically to maximize total revenue. If a
fee is set too high, then revenues will increase with an appropriate
price cut (until it reaches the optimal price), because increased
attendance will more than make up for the lower fee. On the other hand,
if a park's fees are too low, then an appropriately higher price will
raise additional revenue despite a resulting drop in attendance.
The prospect of declining attendance certainly raises a red flag.
Washington 's state parks are a valuable resource, and nearly every
state resident or visitor would benefit from taking advantage of the
park system's offerings. Yet, the fact is that at times certain parks
in the system attract too many visitors. Overcrowding during peak
periods places unnecessary strain on park facilities and staff.
Reducing visitation during peak periods can lower the agency's
operating costs. Lower peak-period visitation can reduce the strain on
agency staff; lessen the pressure to expand the size of facilities;
reduce the need for maintenance and capital projects; and limit the
extent of damage to agency resources.[20]
Differential pricing, therefore, would not only increase revenues, it
could also serve as an important park management tool. Each of these
functions, in turn, can assist State Parks in accomplishing two of its
fundamental objectives: 1) protecting the state's parks and resources,
and 2) providing quality user experiences in the state's parks.
Increased revenues can help protect parks by funding additional
personnel and infrastructure; additional revenues can also improve the
quality of visitor experiences by supporting the new or improved
facilities. The impact of differential fees on attendance patterns can
reduce wear on popular parks and can enhance the recreational
experiences of visitors, who can enjoy less-crowded parks.[21]
Do Washington's state parks have a problem with overcrowding? The
existence of the system's $40 million maintenance backlog is one
indication that they do. Another is the fact that on busy weekends many
parks close their gates and allow a new car to enter only when another
car exits.[22] With differential pricing, these parks would be under
less strain, users would better enjoy their visits (the queue of cars
would largely be eliminated if the price reflected market demand), and
State Parks would generate substantial revenue to improve the park
system.
It is important to recognize that while differential fees would reduce
peak-period visitation to the most popular parks, not all of those
visits are "lost." Variable pricing works to disperse congestion and
increase visitation at underutilized sites or at less popular times.
Many park users, especially senior citizens, have flexible schedules
and will have added incentive to visit parks on weekdays. Other users
will choose to visit another less-crowded park that has lower fees.
2. Differential Camping Fees
Though this discussion focuses on day-use fees, State Parks should also
dramatically restructure its camping fees. Currently, Washington State
Parks charges camping fees based simply on the type of campsite: a
standard site costs $13 and a utility site is $19. Other than this
variation and the $1(!) surcharge at popular parks from April to
September (the popular destination park fee), State Parks' camping fees
completely ignore market demand. Of course, campers highly value a
popular campsite for a summer weekend. According to a 1994 State Parks
report, "Campsites in the twelve most popular parks are reserved for
every summer weekend as early as January." [23]
Washington State Parks should restructure its camping fees to reflect
market demand. A system of differential camping fees will increase
revenues and disperse congestion. To do so, Washington would follow the
lead of several other state park systems that charge variable camping
fees. Utility campsites in Texas range from $9 to $16; in Virginia,
fees for such sites are $15-$22; Ohio State Parks charges $12-$22 for a
utility campsite.[24] Oregon State Parks is considering expanding its
use of differential pricing for campsites. Currently, Oregon simply
varies price based on time of year, offering a "Discovery Season"
discount of $2-$5 for a campsite rental from October through April.[25]
In a January 2000 report, Oregon Park's "rate team" recommended
applying camping fees on a regional basis, with higher or lower rates
based on a park's popularity compared to a regional average.[26]
3. Differential Day-Use Fees
The Washington State Parks and Recreation Commission should capitalize
on the revenue and management advantages of differential pricing by
designing a system of day-use fees that reflects market demand.
Obviously, park users find some parks more attractive than other parks.
Texas State Parks takes account of such varying demand by charging
entrance fees ranging from $1-$5 per person (aged 13 and over)
depending on a park's popularity.[27] An even better fee would also
vary by time of year to reflect peak season demand. At the 72
Washington parks previously identified by State Parks as candidates for
a day-use fee, three times as many park users visit from April through
September as during the other six months of the year.[28] Similarly,
parks ought to charge higher entrance fees on weekends to reflect
greater consumer demand. Compared to the flat $3 per-vehicle fee
proposed by State Parks in previous years, differential day-use fees
would generate substantially higher revenue and would also disperse
congestion.
In a State Parks sponsored "Year 2000 Customer Focus Survey,"
Washington state residents expressed some opposition to differential
pricing.[29] Only one-third of respondents agreed that State Parks
should charge more for busy campsites. It would be a mistake, though,
to conclude that the state's residents are firmly opposed to variable
pricing. The survey questions did not mention the potential benefits of
differential fees; the survey simply asked respondents if State Parks
should charge more for a popular campsite. If aware of the revenue and
management benefits of differential pricing, citizen support would
likely increase substantially.
4. Exemption from Initiative 601 Fee Limit
For State Parks to introduce a system of differential fees, the
Legislature must grant an exemption from Initiative 601. The initiative
famously limits the state's General Fund budget expenditures, but it
also requires prior legislative approval of any fee increases that
exceed the combined rate of inflation and population growth (the
"fiscal growth factor").[30] Though some government charges akin to
commercial transactions are not considered fees for the purposes of
Initiative 601, park visitor fees likely fall within the reach of the
initiative. According to a 1994 memorandum from the state Attorney
General's Office,
If a charge is for the provision of services which are governmental
rather than proprietary in nature, it would be a "fee" within the
meaning of Initiative 601, even if similar services are offered by
others in the marketplace. . . . Thus, even though private businesses
also offer campsites, the fees for camping in public parks would be
"fees" within the meaning of Initiative 601.[31]
To accommodate efficient price setting, a legislative exemption should
be broad enough to permit camping and day-use fees to increase and
decrease according to changing market demand.
Such an exemption from Initiative 601 is not worrisome because unlike
many other fee-supported state programs, the Washington state park
system must compete with the private sector. The marketplace,
therefore, would place an effective check on differential park fees. If
a state park's prices are set too high, many park users will choose to
visit more reasonably priced private recreation areas (or shift to
other recreation alternatives) and the park's total revenues will
decline. With incentive to increase fee revenues, park planners will
act to ensure that each fee does not exceed its optimal price-which is
itself affected by private-sector competition.
C. Revenue Potential of Day-Use Fees
Day-use fees have the potential to generate substantial new revenue for
Washington state's park system. Even the poorly-designed, flat, $3
per-vehicle entrance fee previously proposed by State Parks could raise
about $10 million in net revenue each year. Differential day-use fees
offer much greater revenue potential.
1. State Parks' Flawed Revenue Estimate
At least since February 1997, State Parks has projected that a $3
per-vehicle entrance fee would generate about $2 million annually,
after deducting collection costs.[32] The figure does not include a
projected $1.4 million for equipment- and education-related start-up
costs. The agency continues to estimate $2 million in net revenue based
on a day-use fee that would be collected at 72 parks during the peak
season, from April 1 through September 30.
State Parks' estimate, however, is deeply flawed. An improved estimate,
which corrects for calculation errors and overly pessimistic
assumptions, projects about five times as much annual net revenue.
Table 1 presents a breakdown of State Parks' estimate and compares it
with our revised estimate.[33] The following paragraphs describe those
revisions step by step.
State Parks bases its estimate on 1998 data. From April through
September, more than 24 million day-use visitors attended the 72
selected parks. To est imate the number who would be subject to a
day-use fee, State Parks first reduces that total by 50 percent to
account for several types of visitors who would be exempt from an
entrance fee: children; walk-in visitors; multiple-site visitors
(annual pass holders who visit multiple sites); visitors on free days;
low-income seniors, disabled citizens, or disabled veterans with park
passes; campers; and Environmental Learning Center visitors.
Before addressing each of these categories individually, it is
necessary to explain State Parks' method for estimating day-use
attendance. Parks rely primarily on traffic counters (strategically
placed so as not to double count vehicles). Vehicle counts, of course,
do not capture walk-in visitors, so average vehicle occupancy is not
sufficient to estimate total visitation. To compensate, the agency
multiplies vehicle counts by a "load factor" that accounts for walk-in
visitors as well as vehicle passengers. The day-use load factor is 3.5
persons per vehicle or boat.[34]
Given State Parks' method for estimating attendance, the agency
estimate should not have included children and walk-in visitors in the
initial 50 percent reduction. They are accounted for later in the
estimate through a "reverse" application of the load factor (i.e.,
converting number of individuals back to number of vehicles). Again,
walk-in visitors are included in the load factor and so too are
children-assuming children are not driving cars into the state's parks.
Another error in State Parks' estimate is its inclusion of
multiple-site visitors (annual pass holders) in the initial 50 percent
reduction. The agency accounts for these very same visitors later in
its estimate, as shown in Table 1.
State Parks' estimate also includes a reduction for fee waivers, as it
assumes that parks will waive entrance fees for one or more days a
month. For our revised estimate, we assume that agency staff
contemplated a waiver similar to the idea proposed recently by a Parks
and Recreation Commissioner: free park access the first Sunday of each
month.[35] (From a resource-management perspective, a Sunday fee waiver
presents problems because it would increase usage during what is
already a high-demand day.) We estimate a 10 percent reduction in
paying visitors based on one free Sunday per month.
Current law provides for park passes for low-income seniors, disabled
residents and disabled veterans.[36] Low-income seniors and disabled
residents are eligible for 50 percent reductions in camping fees, while
disabled veterans are eligible for free use of a State Park campsite.
The statute-anticipating day-use fees-also entitles pass holders to
free admission to any state park. It is unknown what proportion of
day-use visitors are pass holders (or what percentage would be if
entrance fees were introduced), but it is almost certainly minimal.
In its estimate, State Parks also deducts for campers and Environmental
Learning Center (ELC) visitors, who are apparently included in the
agency's day-use attendance data. At the 72 identified fee parks,
campers totaled 5.1 percent of total day-use visitors and ELC visitors
accounted for another 0.2 percent.[37]
Examination of the individual components of State Parks' initial 50
percent reduction reveals its gross overstatement. After eliminating
the double-discounting errors in State Parks' estimate (children,
walk-in visitors, annual pass holders), we estimate a reduction of
about 16 percent for the first group of categories in Table 1 (rounding
up the 15.3 percent sum of estimates).
We also reject State Parks' assumption that some of the 72 fee parks
will be taken off the day-use fee list (the agency estimate in Table 1
reduces the number of fee-paying visitors by 10 percent to reflect this
assumption). Barring inappropriate political pressure, more parks
should be added to, not subtracted from, the day-use fee list.
Table 1: A Critique of State Parks' Projection of Day-Use Fee Revenues
(DATA OMITTED --- are available online)
In its estimate, State Parks assumes 40 percent of potential visitors
faced with entrance fees will choose not to attend. This assumption,
though, is overly pessimistic. There is some uncertainty about the
impact of new recreation fees on attendance, but a 40 percent backlash
is almost certainly overstated. An analysis of the federal Recreational
Fee Demonstration Program observed mixed results for sites introducing
new fees: the largest decline, apparently, was 24 percent; visitation
at another site dropped 15 percent; other sites actually saw attendance
increase after introducing new fees.[38] Virginia State Parks also saw
attendance increase after introducing new entrance fees in 1993.[39]
Obviously, many other factors are at work (a new fee certainly does not
entice someone to visit a park who would not attend if access were
free), but it seems clear that a projected 40 percent backlash is
unwarranted. For our revised estimate, we assume a more reasonable 15
percent reduction because of the new fees.
After the above corrections and improved assumptions, the projected
number of fee-paying visitors in Table 1 increases from about 6.5
million to nearly 17.2 million. These values must be converted to
number of vehicles in order to project revenues from the parking fee.
State Parks' revenue estimate assumes four persons per vehicle, which
is too high given that the agency uses a load factor of 3.5 when
estimating attendance-and the load factor accounts for walk-in visitors
as well as vehicle passengers.[40] Applying the 3.5 person per-vehicle
load factor, the improved estimate in Table 1 projects 4.9 million
vehicles subject to a day-use parking fee, compared to 1.6 million in
State Parks' estimate.
For the rest of the calculations in Table 1, State Parks' assumptions
are applied (20 percent of vehicles have a $30 annual pass, averaging
20 visits per year; sales tax is deducted from State Parks' fee
revenues; revenues from boat launch and trailer dump fees are deducted;
ongoing collection costs total $1.7 million). The end result: State
Parks' projection of $1.9 million in annual net revenue from a $3
parking fee underestimates potential revenue by about five times. After
correcting for calculation errors and overly pessimistic assumptions in
State Parks' revenue estimate, Table 1 projects about $10 million in
annual net revenue from the proposed day-use fee.
2. Even Higher Revenue with Differential Fees
State Parks' flawed estimate of potential day-use revenues has
improperly framed past discussions of entrance fees. For a park system
confronting a $40 million maintenance backlog, a potential $2 million
infusion of new revenue is perceived as a mere band-aid. On the other
hand, a potential $10 million funding increase would represent a
substantial step toward meeting State Parks' budget needs.
An additional $10 million, however, is itself a serious understatement
of day-use fee revenue potential. Recall that Table 1 estimates revenue
from a poorly designed flat, $3 per-vehicle fee. State Parks would
substantially increase entrance fee revenues if it implemented a system
of differential day-use fees with pricing that reflects market demand.
Elsewhere I have estimated that annual gross revenues from differential
day-use fees could exceed $20 million.[41]
D. A Properly Designed System of Day-Use Fees
To take full advantage of the benefits of user fees, the Washington
State Parks and Recreation Commission must carefully design a system of
day-use fees. The following sections discuss several important
considerations.
1. Differential, Market-Based Fees
As outlined previously, variable, market-based entrance fees offer
important advantages over a uniform day-use fee. In addition to their
much greater revenue potential, differential fees can disperse
congestion, thereby increasing park managers' ability to protect parks
and enhance visitor experiences.
2. Flexible Pricing and Implementation
The State Parks and Recreation Commission should also resist the
tendency to propose a one-size-fits-all solution. For example, recent
agency proposals have focused exclusively on per-vehicle fees rather
than per-person fees that would also apply to walk-in visitors. At an
April 1999 meeting, a commissioner stated her strong preference for a
per-vehicle charge.[42] Why this insistence? After all, as Commissioner
Cecilia Vogt seemed to imply at a December 2000 meeting, a walk-in park
visitor imposes essentially the same costs on a park as does a visitor
arriving by car.[43] Even more relevant for market-based pricing, the
manner by which a person arrives at a park does not significantly
influence the benefit derived from the visit. Further, a carload of
four persons will tend to value a park visit more than would a solo
visitor. Given these considerations, a per-person fee is more equitable
than a per-vehicle fee.
Three primary explanations for the parking-fee preference suggest
themselves. Perhaps advocates seek to encourage carpooling or walk-in
visits to reduce parking lot congestion at the state's parks.
Differential pricing, though, can yield the same benefits (higher
peak-period prices will disperse congestion). Another likely
explanation is a perception that per-vehicle fees will ensure that
low-income families will continue to have access to Washington's parks
(the next section addresses this issue more fully). State Parks,
though, could structure a variable pricing system that addresses this
same concern. Several of Virginia's state parks, for example, charge
weekend entrance fees of $2 per adult and $1 per child, with a maximum
$5 per vehicle.[44]
A preference for per-vehicle fees may also derive from an assumption
that a per-person fee is either not feasible or would entail
prohibitive collection costs. An effective per-person charge would seem
to require parks to have employees collect fees at contact stations. A
per-vehicle charge, on the other hand, would also lend itself to
methods that require less staff involvement. Parks could install
automated parking ticket dispensers, and parks personnel could
periodically patrol parking areas to ensure compliance. Alternatively,
a park could use manual collection boxes ("iron rangers") and largely
rely on visitors' voluntary compliance with a parking fee.
It is certainly true that at certain parks potential revenues are too
small to justify labor-intensive collection costs. Yet, this is not
true system wide. State Parks need not-and should not-design one
uniform method to collect fees. At some parks, given their geographical
layout and other characteristics, it is not feasible to collect day-use
fees at all (except, perhaps, through voluntarily compliance methods).
For other parks, automated ticket dispensers are feasible, but staffed
collection stations are not. Still other parks can accommodate fee
collection at contact stations, and, therefore, are candidates for
per-person fees. Further yet, the most appropriate collection method
may vary within an individual park, depending on the time of year or
day of week (e.g., per-person fees collected at staffed collection
booths during peak weekends; parking permits from automated dispensers
during other times).
The question should not be whether to charge per-person or per-vehicle
fees. Instead, the question should be when and where to charge
per-person or per-vehicle fees. Similarly, State Parks should embrace a
flexible approach to fee collection methods. The most efficient pricing
structure and collection method will vary from park to park, based on
each individual park 's characteristics and attendance patterns.[45]
3. Minimizing the Impact on Low-Income Visitors
A properly designed day-use fee system must consider the impact that
such fees will have on low-income park users. When considering user
fees, however, there is a tendency to focus on this question too early
in the analysis. Rather than initially contemplating entrance fees that
have minimal impact on the poor, park planners should first conceive of
the most equitable and efficient day-use fee system and then identify
ways to reduce any negative effects on low-income visitors.
Although certainly no reason to dismiss concern for those park users
who are poor, one should recognize that park visitors tend to have
higher-than-average incomes. Data from State Parks' "Year 2000 Customer
Focus Survey" reveal that Washington residents who have visited a state
park in the last two years have higher household incomes than
non-users. The difference is statistically significant.[46] Among
survey respondents, 6.0 percent of park users stated that their
household income was less than $20,000 compared to 12.8 percent of
nonusers; 41.0 percent of park users reported household incomes greater
than $60,000 compared to 31.2 percent of nonusers.[47] These results
for Washington park visitors are consistent with a 1997 survey of
National Park Service visitors. That survey found that 73 percent of
visitors reported 1999 household incomes exceeding $40,000,
"considerably above the income distribution of the United States
population."[48]
Even if comprising a smaller number than sometimes assumed, some
low-income park users would have difficulty affording new or higher
fees. The most appropriate responses to this problem would target
low-income users as specifically as possible, though, rather than
adopting a broad solution that sacrifices the benefits of a
differential user-fee system. Potential solutions include those offered
by Richard Burke in his proposal that was a runner-up winner in Cascade
Policy Institute's 1998 Oregon Better Government Competition. In a
proposal for improving local park and recreation districts, Burke
suggests four options to mitigate the potential impact of fees on
low-income individuals: advertisements and sponsorships; coupons
sponsored by local businesses; free access for children who qualify for
free school lunches; and free and discounted days.[49]
E. Public Acceptance of Day-Use Fees
The prospect of new or higher user fees will initially generate
significant opposition from many Washington residents who will view the
fees simply as another tax. Some of the loudest protest will come from
park users, the ones who will bear the costs of the fees. The instincts
behind such protests are sound. Their concerns can be met, and their
support can be gained, however, if State Parks properly designs and
explains the new fees and if the Legislature makes important
commitments to park users and other taxpayers.
As noted previously, park day-use fees are common throughout the
country. The National Park Service relies on entrance fees, as do forty
state park systems. Most visitors at those parks have come to accept
the principle that they should pay for their enjoyment of a public
park. In a recent Oregon Parks survey, 92 percent of park visitors
found Oregon's day-use fees "reasonable."[50]
Washington residents themselves have expressed strong support for
day-use fees as an alternative to closing parks. Nearly 90 percent of
survey respondents agreed that State Parks should charge a day-use fee
at a park "if it meant the difference between keeping the park open and
having to close it[.]"[51] This result is especially relevant for the
19 state parks that the commission included on both its 1998 potential
closure list and its list of potential day-use fee parks.
1. Keeping Faith with Park Users: New Fees to Support Parks
To gain the support of park users, it is essential that revenue from
new or higher user fees support park improvements. Park visitors are
much more likely to accept fees if they can see tangible benefits at
their parks. A former director of New Hampshire State Parks insists
that "income from fees is a special kind of park revenue, paid by users
in trust, for the explicit purpose of park operations."[52] Washington
State Parks' recent survey found substantially more support for day-use
fees if revenues were used to increase maintenance, staffing and
services. While 69 percent of respondents agreed that State Parks
should charge entrance fees to support these park improvement purposes,
less than 44 percent favored day-use fees if simply a replacement for
current state funds.[53]
The State Parks and Recreation Commission, however, cannot assure park
users on its own that new fee revenue will facilitate park
improvements. Because of the state's budget process, that assurance
must come from the Legislature. Even if the commission were to
implement new fees and increase revenues, the Legislature could respond
by reducing General Fund appropriations by an equivalent amount. Such a
scenario played out in 1993, leading the commission to scrap its plans
for a day-use fee. While steps were well under way to implement the new
fee, the House Appropriations Committee approved budget language that
would have reduced General Fund support if the commission followed
through with its planned day-use fee. In response, the commission
rescinded its day-use fee plan.[54]
To keep faith with park users, the Legislature should ensure that
revenues from new day-use fees support an enhanced park budget. With
that legislative commitment, public acceptance of the new fees will
increase substantially because they can anticipate tangible benefits
for the state's parks.
2. Keeping Faith with Taxpayers: Replace Some General Fund Support
As detailed earlier, day-use fees have the potential to raise
substantial new revenue. Even State Parks' poorly designed flat $3
parking fee can generate about $10 million in net revenue. Far more
revenue is possible with variable, market-based pricing. While it is
essential that new fees enhance State Parks' budget, it is also vital
that the Legislature and State Parks respect the anti-tax sentiment
that Washington's voters have demonstrated repeatedly. Thus, the
Legislature should authorize a measured increase in State Parks'
budget, one that enables the agency to make significant, but gradual,
progress toward eliminating its maintenance backlog.
The revenue potential of day-use fees is sizable enough to accommodate
an appropriate budget increase for State Parks and a reduction in
General Fund support.[55] By dedicating a share of new revenues to a
budget increase and a share to replacing State Park's General Fund
dollars, lawmakers would show faith both to park users and other
taxpayers. As an example, lawmakers could dedicate, say, the first $5
million in new fee revenues to enhance State Parks' budget and split
all additional revenue equally between a budget increase and a General
Fund reduction. Under such a split, $15 million in day-use fee revenues
would translate into a net $10 million budget increase after a $5
million decrease in General Fund support.
It is important to devise a system-like the above-that creates
incentives for park managers to maximize fee collection even after
initial goals are met. An example of a weaker approach would be to
dedicate all of the first $10 million to an enhanced budget and all
additional revenues to General Fund reduction (because once the target
goal is reached, park managers have little incentive to continue
increasing fee revenues).[56]
Any decrease in State Parks' General Fund support should lead to a
corresponding decrease in the state's Initiative 601 expenditure limit.
The initiative requires a lowering of the limit when the costs of a
state program are shifted from the General Fund to another source of
funding.[57] In this particular case, the adjustment to the expenditure
limit would ensure that new fees from park users are not used to
support increased spending for non-park programs.
IV. Privatization as a Necessary Part of the Solution
How much of a budget increase is appropriate for State Parks? The
question is unanswerable because State Parks has not yet demonstrated
that it is spending its current dollars as efficiently as possible. As
we discuss in the Washington Institute study, "Privatization
Opportunities for Washington State Parks," the experiences of
provincial park systems in Canada suggest that Washington State Parks
could realize substantial savings by contracting out the operation of
many of its parks.[58] With a serious consideration of the benefits of
privatization and with its appropriate application (requiring a
legislative exemption), State Parks would free up additional funding to
meet its budget needs and would also strengthen its case for
introducing day-use fees.
A. Privatization Can Improve Efficiency and Service
Public officials around the country are increasingly turning to
privatization as an approach to improve the delivery of government
services. A government agency can often significantly lower its costs
by contracting out a traditional government service to a private
provider. Savings often result because private companies are
disciplined to identify and implement efficiency improvements in order
to remain competitive. Government agencies often face little or no
competition and, therefore, their incentive to improve operations is
less urgent. In a similar way, a properly designed and monitored
privatization program can improve service. A competitive private market
drives companies to identify innovations that will improve service
delivery and distinguish the company from its competitors.
B. Keeping Faith with Taxpayers and Park Users
As important as it is for the Legislature to assure park users that the
new fees they pay will support the park system, it is equally important
that the Washington State Parks and Recreation Commission commit to
spending park users' and other taxpayers' dollars as efficiently as
possible. Park visitors certainly want to see State Parks stretch its
budget to permit more park improvements.
In recent years, Washington voters have passed several tax-cut
measures, while also supporting initiatives requiring substantial
increases in education and transportation spending. Though the
initiative system does not require voter consistency across policy
areas, or even within one area, it ought to require a faithful effort
by legislators and the governor to fill in the policy gaps with
solutions respectful of voters' fundamental messages. Voters' signals
on tax restraint and spending priorities are clear enough. No
intellectual contortions are required to infer that taxpayers expect
their elected officials to take advantage of opportunities to improve
government efficiency. They expect fundamental and substantial reforms,
not the periodic dusting that characterizes current efficiency
improvement efforts. Calls for increased efficiency may become even
louder if Governor Locke proceeds with a plan to ask voters to approve
a "massive" transportation-funding package.[59]
To keep faith with park users and other taxpayers, the Legislature
should grant State Parks the authority to contract out park operations,
and State Parks should use that authority to design a comprehensive
privatization program.[60] As part of that effort, State Parks should
carefully examine parks privatization in other jurisdictions,
especially the successful reform of the provincial park systems of
British Columbia and Alberta.[61]
C. Provincial Park Systems of British Columbia and Alberta
Beginning in 1988, British Columbia Parks began using private-sector
contractors to operate its parks. Within four years, the province had
contracted out 100 percent of park maintenance and operations. In
return for operating the parks, contractors retain all camping and
firewood fees, plus receive an "efficiency payment" to cover additional
operating expenses (like Washington State Parks, BC Parks does not
currently charge day-use fees). Visitor satisfaction is high and the
department estimates that contracting out has resulted in 20 percent
annual savings.
Alberta's provincial park system also makes extensive use of private
operators, with more than 90 percent of its campsites maintained and
operated by private-sector providers. Alberta restructured its park
system in 1997 by identifying its core mission and redesigning its
operations accordingly. The department first identified its four
primary goals (preservation, heritage appreciation, outdoor recreation,
and tourism), then classified each park within the system based on its
contribution to those goals. The province focuses its resources on
those parks that contribute to its preservation and heritage
appreciation goals.
Alberta attempts to contract out recreation facilities at all of its
parks, but the procedures and terms differ according to the park's role
in the system. At its purely recreation-oriented sites, the department
has eliminated supplemental payments to operators. Completely dependent
on park revenues, private providers at recreation-oriented sites are
given greater flexibility to enhance a site's economic viability
through development upgrades. At preservation-oriented sites, private
operators receive supplemental payments from the province, but they may
propose only "low-impact" development upgrades.
Visitor satisfaction at Alberta's parks also remains high. The
department's heavy reliance on private-sector operators has helped it
withstand budget reductions, while at the same time increase the size
of its parks network.
It is important to recognize that day-use fees can increase the
effectiveness of contracting out. Neither British Columbia nor Alberta
has entrance fees. Thus, the provinces must provide a supplemental
payment to cover the costs imposed by day visitors, or, in the case of
Alberta's recreation-oriented parks, the private company itself must
cover the costs through camping or other revenues. With day-use fees, a
private operator has another revenue source, which reduces or
eliminates any need for agency supplemental payments, and the operator
has direct incentive to improve service to attract more day visitors.
D. Contract Out Park Operations, Where Appropriate
Flexibility is important when designing a comprehensive privatization
plan, just as flexibility is a virtue when establishing user-fee
pricing and collection methods. No single fee collection method is
appropriate for all parks; nor is the contracting out of operations
suitable for all parks. For some parks, because of geographic
remoteness or other characteristics, privatization may actually
increase the costs of operation. Thus, a strategy that mandates
contracting out in all instances is unwise. (This represents a
shortcoming of BC Parks' approach.)
Many parks, however, are conducive to privatization. The Washington
State Parks and Recreation Commission should evaluate each park in the
system and, where appropriate, contract out park operations. By doing
so, State Parks can realize substantial budget savings. To support this
effort, the Legislature should grant State Parks the necessary
contracting authority and establish budget incentives that reward the
commission for savings realized through privatization.
V. Conclusion
Solving the real budget problems confronting Washington's park system
will require coordinated and comprehensive efforts by the Parks and
Recreation Commission and the State Legislature. The following
recommendations consist of complementary actions, each a vital
component of a comprehensive solution to the problems facing
Washington's state parks.
· Implement Day-Use Fees. The Washington State Parks and Recreation
Commission should continue with its plans to introduce park entrance
fees.
· Acknowledge Revenue Potential of Day-Use Fees. Current discussions of
day-use fees vastly underestimate their revenue potential.
· Design Differential Fees that Reflect Market Demand. A pricing
structure (for both day-use and camping fees) in which fees vary
according to visitor demand will generate substantially more revenue
and operate as an important management tool. By dispersing congestion,
differential fees can protect park resources and improve the quality of
visitor experiences.
· Maintain Flexible Pricing and Collection Methods. State Parks should
avoid establishing one-size-fits-all pricing and collection methods. An
individual park's characteristics and attendance patterns should
determine whether or when a per-person or per-vehicle entrance fee is
appropriate and how best to collect fees.
· Ensure that New Fees Support an Enhanced Parks Budget. To keep faith
with park users, the Legislature should assure park visitors that their
new fees will support park improvements.
· Commit to an Increased Parks Budget and Reduced General Fund Support.
To keep faith with taxpayers, the substantial revenues from new fees
should fund an appropriate increase in State Parks' budget, with
additional revenues replacing some of the General Fund support for the
agency (and leading to a corresponding reduction in the Initiative 601
expenditure limit).
· Contract Out Park Operations, Where Appropriate. To assure park users
and other taxpayers that State Parks is spending its dollars as
efficiently as possible, the Legislature should grant State Parks the
authority to contract out the operation of state parks. The resulting
savings would help State Parks stretch its budget.
With these complementary actions, Parks and Recreation Commissioners
and legislators can put an end to park-closure discussions and secure
the future of Washington's state parks.
About the Author
Jeff Hanson is an Adjunct Fellow of the Washington Institute
Foundation. Currently in his first year at Cornell Law School, Jeff
previously worked for the Washington Institute as a research analyst.
Among the studies he authored are "Privatization Opportunities for
Washington State Parks" and "Comments on the Preliminary Draft of the
State of Washington Disparity Study." He previously worked for the
Evergreen Freedom Foundation and for the California Legislature. Jeff
received a master's degree in International Studies from the Claremont
Graduate University in Claremont, California. He earned a bachelor's
degree in Political Science and Mathematics from Linfield College in
Oregon.
(REFERENCES OMITTED -- are available online)
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