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Outsourcing

Intertwined with any discussion of fees is the issue of outsourcing, also referred to as "privatization" and "concessions"--basically, who is it that gets to charge the fee?

A relatively new concept in the urban park business, outsourcing is now a high-growth industry thanks to the realization that it is often cheaper and more satisfactory to have private concessionaires operate specialized entities such as stadiums, marinas, golf courses, restaurants and skating rinks. Generally speaking, revenue-generating operations are most amenable to outsourcing, although some cities have outsourced items such as fleet management and janitorial services. Chicago, in particular, has taken outsourcing to the limit, reducing the number of divisions in the Park District from 13 (only one of which focused on parks and recreation) to seven (six of them dealing with the agency's core mission and the last providing central support). In commenting on the wholesale reengineering of his agency, which until 1991 had a reputation for extraordinary inefficiency, incompetence and waste, former Superintendent Forrest Claypool said, "We had to flip the entire organization on its head, directing resources, services and employees toward the parks and communities they serve and away from a centralized bureaucracy."

Not every city has embraced the privatization concept to the degree Chicago has. When San Diego Parks and Recreation Department analyzed its 1300-acres-per-week mowing operation, it concluded that "keeping it in-house was by far the best use of tax dollars," according to staff member June Dudas. (However, the department is analyzing outsourcing other functions.) Seattle has had a good experience outsourcing golf, marinas, restaurants and its zoo and aquarium shops, but ran into unions' political opposition to outsourcing park maintenance and has had to move more slowly on that front.

And then there is the converse approach, "publicization." In suburban Prince William County, Va., outside Washington, D.C., the park authority seized upon its status as the largest grounds maintenance entity in the county and won the bid to do grounds maintenance for all the lands owned by the Prince William County government.

The first city to recognize the financial benefit of outsourcing was New York, and it learned the lesson straight from the financial markets downtown: it opened some of its programs and services to competitive bidding and let the market determine the value. The first result, in the early 1980s, was spectacular: the golf program, which was losing $2 million a year under city management, became a $3-million-a-year profit center under a private operator. Thereafter, as leases on other operations came up, they weren't automatically renewed. One chagrined concessionaire turned out to be hotel mogul Donald Trump, who was outbid for the lease on the famous Wollman Skating Rink in Central Park; the city now gets $850,000 a year from the new concessionaire (who still makes money on the deal). (Aside from Wollman, however, ice skating is generally considered a difficult revenue source, and most rinks barely break even or run at a loss.)

After that, the floodgates opened: the yearly concession for a marina in Queens fetched $150,000; the National Tennis Center in Forest Hills brought $1.15 million and an indoor tennis complex in Manhattan $290,000. In the 18-year period between 1979 to 1997, NYDPR increased its annual concession and fee income from $2.5 million to $36 million.

New York, of course, is in a price league of its own. But other cities have also taken notice of the privatization concept, which is now perhaps the hottest topic at park and recreation conferences.

Indianapolis is the site of one of the most unusual concession arrangements in the country. The city's Parks and Recreation Department has signed contracts with seven churches to maintain 24 neighborhood parks. The churches, which generally hire disadvantaged and hard-to-employ individuals from within and around the neighborhood, are responsible for mowing and trash pickup, and they sponsor annual cleanup days in which neighbors and parishioners come and plant flowers, paint benches, etc. In some cases the churches have a direct monetary contract; in others they receive park services of equivalent value, such as free use of parks, summer camps or pools. "By leveraging the interest and commitment that church leaders have in their neighborhoods, the program has been very successful," said IndyParks Director Deb Norman.

While promising, privatization is not an automatic winner. In order for it to succeed, four pieces must be handled right:

• The contracts must be bid properly. Considering the risk of turning over public lands and services to a private, profit-making institution, it is crucial that all the details of the work product be meticulously spelled out in advance. Moreover, as with all market transactions, the process must be an open one. The only way quality will be kept up and costs kept down is if there are always multiple bidders competing.
• The facilities and programs must be of high quality. City parks and city recreation programs are in competition with numerous other private spaces and providers. Only by being as good as or better than competitors will a program thrive. As Wheeling Park Commission CEO Randy Worls said, "There are two important principles that apply to any system: that first-class facilities will attract paying customers and, secondly, that local park systems can entice out-of-town users if they offer a quality experience."
• Fees must be set at an appropriate level. This is probably the easiest of the four factors to get right, since pricing schemes can be tested and fine-tuned. Consultant Leon Younger uses as his rule of thumb the fact that, on average, one hour of private recreation in the U.S. in the late 1990s costs about $3.50. "A movie, for example, is 2 hours at $7 a ticket," he says. "Golf is a four- or five-hour experience which typically costs about $15-$18 to play. The skating rink or the bowling alley is usually a $3-an-hour experience." That number can be modified by location, quality, competition and other factors.
• Agency oversight must be maintained. It's not enough for the park agency to sign the contract, collect the concession fees and close the file drawer. Contract performance must be continually monitored and evaluated by the park agency. (If the agency fails at that task, the job will inevitably be assumed by the local media and/or the local citizen park-watcher organization, probably to the embarrassment of the city.)