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The following is from today's Arizona Republic and contains interesting information about several National Park concessionaires. It makes the case that these concessionaires are ripping off the American people by not paying adequate compensation for the privilege bestowed upon them to operate private, for profit, concessions within America's Crown Jewels. More importantly, albeit somewhat hidden, this article suggest that our National Parks are threatened with privatization. The key references are:
"park leaseholders who give up their interests are paid on the full replacement costs of the facilities they build or repair in the park instead of a depreciated value of those assets. And at the same time, concessionaires are allowed to depreciate the value of facilities for tax purposes."
"[NPCA] believes the federal government should buy out Amfac's interest in park properties because its value will only increase, Simon said. Otherwise, the problems with competitive bidding would remain 10 years from now when the contract comes up for renewal."
When concessionaires are allowed to build facilities inside public parks, the AMERICAN PEOPLE must ultimately purchase those improvements from the private firms that built those facilities. If we do not, then the improvements effectively assure privatization of management control of these facilities and ultimately of the Parks themselves.
We're making a deal with the devil to cope with short term issues..... and this is a deal that will ultimately cost us the Crown Jewels.
Scott
PS... the legislation that made this boondoggle possible was Sen. Craig Thomas' 20/20 vision, a program championed by the American Recreation Coalition. To read, on ARC's web site, Senator Thomas' call to privatize National Park Services, click here.
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April 25, 2001
Seeing red on Canyon pact
Tourism deals drain parks, critics say
By Peter Corbett - The Arizona Republic
At America's national parks, private tourism businesses collect nearly
$800 million annually, while enjoying little competition and marketing
of their products by the federal government.
For decades they easily renewed long-term contracts, while paying the federal treasury a small fraction of the take.
But as one of the largest concession contracts comes up for renewal
this year at Grand Canyon National Park, some critics suggest the
parks, badly in need of improvements, are getting a raw deal.
Amfac Parks & Resorts is poised to bid on a new 10-year contract at
the Grand Canyon that would pull in close to $1 billion over the next
decade from hotels, restaurants and shops on the South Rim.In return,
the Aurora, Colo.-based firm would pay the federal government an
estimated $45 million, or less than 5 percent of receipts and less than
half the rate it pays for similar concessions in state parks.Amfac will
have to bid to renew its deal at the Canyon. But because of federal
rules governing National Park Service concessions, any other bidders
would have to pay Amfac $165 million for what it spent to build or
improve the park's facilities. That's liable to discourage potential
bidders, park officials and critics say.
"I think the taxpayers can do better than a total return of 4.7
percent," said Dave Simon, regional director of the National Parks
Conservation Association. "The Park Service is getting squeezed between
a rock and the redwall sandstone of the Grand Canyon."
Maintenance and protection of the Canyon suffers in part because
concession fees are so low, said Rosalyn Fennell, Wilderness Society
director of national park programs.
"They are cash-strapped even at a park like Grand Canyon," she said.
Amfac executives declined comment on its bid for a new contract.
However, Amfac Vice President Stephen Tedder said the federal
government already has reformed the concession system. Amfac would pay
the park at least 3.8 percent of revenue under the new contract. It
also would be required to make $8.5 million in improvements to the
property, which would increase the percentage to 4.7 percent.
In the open market, a hotel operator would have to pay anywhere from 7
percent to 10 percent in management, marketing and franchise fees to
the owner, said Francis Kercheval, a Phoenix hotel industry consultant
and former Wyndham Buttes Resort general manager.
Profitable park facilities
Amfac, a privately held company owned by Chicago-based Northbrook
Corp., is one of the country's largest national park contractors.
Besides the Grand Canyon, it operates tourist facilities at premier
national parks such as Yellowstone, Mount Rushmore, Death Valley,
Bryce, Zion, Petrified Forest and Everglades.
But Amfac is not alone. About 500 concessionaires operate in 384
national parks, monuments and historic areas. Amfac, Delaware North and
Aramark have some of the largest concession deals.
More than 286 million visit U.S. national parks each year, the equivalent of one visit for every American.
Concession operators took in $793 million and paid the Park Service
$44.2 million - about 5.6 percent - in 1999, the most recent numbers
available.
Concessionaires also pay to build and improve park lodges and other
facilities. Amfac spent millions restoring El Tovar and Hopi House at
Grand Canyon and close to $22 million to restore two lodges at
Yellowstone.
But unlike other commercial leases, park leaseholders who give up their
interests are paid on the full replacement costs of the facilities they
build or repair in the park instead of a depreciated value of those
assets. And at the same time, concessionaires are allowed to depreciate
the value of facilities for tax purposes.
Concessions reform legislation in 1998 had included language to phase
out those payments, but it was removed in a compromise to get the bill
passed, said David Brooks, Democratic counsel for the Senate Energy and
Natural Resources Committee.
"That does limit the field of who can compete," he said.
Deal's 'dampening effect'
Amfac has run the nearly 900-park hotel rooms and other visitor
services at the Grand Canyon for the past 30 years under its existing
park contract. In 1968, Amfac acquired the Fred Harvey Co., which had
run visitor facilities since the park's inception in 1919, and built
many of the facilities before that, including the historic El Tovar
Hotel in 1905.
In the 1998 reforms, Congress limited park concession contracts of at
least $500,000 to no more than 10 years. It also stopped the practice
of concessionaires' being able to renew their contracts by agreeing to
match any competitor's bid. Bids for a new 10-year contract at Grand
Canyon National Park will be taken through Aug. 2, and the new contract
would begin on Jan. 1.
Under the park's request for proposals, the successful bidder would
receive $922 million, and pay the federal government $45 million,
according to estimates by the National Parks and Conservation
Association, a non-profit park watchdog group. Those numbers are based
on current revenue streams plus increased hotel rates that are likely
over the life of the contract.
Last year, Amfac's subsidiary, Grand Canyon National Park Lodges,
collected $71.8 million last year from the Canyon's 4.8 million
visitors, while paying the park $2.5 million, or about 3.5 percent of
revenue. In contrast, Amfac paid Ohio 10.5 percent of the $30.2 million
in gross receipts last year from that state's park lodges.
Raymond Gunn, Grand Canyon National Park chief of concession
management, said any bidder for the Canyon deal would have to pay Amfac
$165 million for its financial interests in the park's historic hotels
and facilities.
"Clearly that has a dampening effect on interest in the contract," he said.
Competitors weigh bid
One potential Amfac competitor is Delaware North, which operates the
South Rim's grocery store and tourist services at Yosemite. The firm is
reviewing the Canyon contract, although it is too early to say whether
it will submit a bid, said Gary Fraker, company vice president for park
development.
He said removing the right of concession holders to renew contracts by
simply matching competitors' bids has leveled the playing field. But
competing bidders have to decide whether they can amortize over 10
years the $165 million that they would pay Amfac if they won the
contract.
The Canyon's winning bidder will be required to pay a 1 percent
maintenance fee and spend $8.5 million over 10 years to tear down and
build new facilities for tourists and employees. The winner also will
be required to convert some historic buildings now used as employee
dorms to guest lodges. However, the contract does not include tearing
down the Kachina and Thunderbird lodges, which are targeted for removal
from the South Rim in a 1995 Park Service plan.
Push for reform
"Our hope is that concession reform would lead to a better return for
taxpayers and more funds to protect and improve the parks," said Simon
of the National Parks Conservation Association.
The association believes the federal government should buy out Amfac's
interest in park properties because its value will only increase, Simon
said. Otherwise, the problems with competitive bidding would remain 10
years from now when the contract comes up for renewal.
In the meantime, the Grand Canyon and other national parks are in need of improvements.
Critics say the park concessions shortchange taxpayers and produce
little money to fund the nation's $5 billion backlog of park
maintenance, from improvements in third-world employee housing to
eliminating trail hazards.
At Grand Canyon, everything from fixing potholes to biological surveys
and resource studies don't get done because of tight budgets, said
Fennell of the Wilderness Society.
"These are America's public playgrounds and the Park Service is looking
around and realizing that it has to do something about the resource
damage," she said. "They realize that their preservation mandate is
falling a little short."
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- Privatization 
