The Lap of Luxury: Privatizing Resorts
An underlying motive for privatization and public-private partnerships is to focus government resources on services only government can provide. Resorts and upscale recreation facilities clearly do not meet this test. Consequently, a recent survey by the Council of State Governments reports that nearly 75 percent of states have increased privatization of recreation functions over the last five years, and the same percentage anticipates increasing it further in the next five years.
Two recent examples worth examining in detail took place in New Hampshire and Georgia. New Hampshire recently leased out the Mount Sunapee ski area, and Georgia its Stone Mountain Park--similar actions, but done for very different reasons.
New Hampshire chose to lease the Mount Sunapee ski area partly out of a desire to upgrade it to a first-class ski area, and partly because the legislature was threatening to discontinue funding the money-losing operation. Okemo Mountain Resort won the lease and will be managing and operating Mount Sunapee. The state will receive $150,000 annually as well as 3 percent of gross receipts. No state employees will be thrown out of work--in fact, they have been guaranteed the same salary, seniority, and a comparable benefits package. Those provisions were seen by many as crucial to the success of the arrangement and helpful in allaying public concerns over its impact.
Okemo Mountain Resort is now in the middle of a $4 million renovation program, scheduled to be completed by this season's opening. The renovation will reduce the time it takes for the ski lift to reach the summit (from 15 minutes to 6), increase snow-making capabilities, and add other improvements.
Stone Mountain Park, in Georgia, faced a somewhat different situation. Governor Miller has consistently sought to focus the state government's efforts on "primary missions" and shed operations outside its "core competency areas."
In line with this philosophy, the state contracted with Silver Dollar City to run Stone Mountain Park. Under the lease Georgia will receive $10 million annually and a percentage of receipts over $45 million. At the end of the lease the park and its assets revert back to state ownership.
A Price Waterhouse audit estimates that over the 50-year life of the lease the state will earn over one billion dollars and will receive a much-improved park at its end. Not only will the lease generate substantial income for the state--something the park had failed to do since its inception in 1958--but the state will avoid $20 million in deferred maintenance expenses that had built up over the past several years.
Since the contract went into effect earlier this year, Silver Dollar City has spent roughly $4 million on renovations and maintenance. It plans to spend substantially more.
A side effect of privatization has been a leveling of the playing field for hotels and resorts in the Atlanta region, long a point of contention for many area hotels. As a government-run facility the park and its hotel had not been required to pay taxes, which gave them an unfair competitive advantage. Now however, the park will pay taxes, as do other hotels and resort areas.
Despite their differences, New Hampshire and Georgia do have some things in common. Regardless of the initial reasons to pursue privatization, both benefitted greatly from strong gubernatorial support; Governors Zell Miller of Georgia and Jeanne Shaheen of New Hampshire were both actively involved in the final decisions to contract out. Both deals were carefully negotiated to bring not only an end to taxpayer support for the resorts, but also privately financed improvements to them.
Both states are determined to press ahead with further privatization of resort areas, with Georgia looking at the Georgia International Horse Park and New Hampshire considering the future of Mount Cannon.
Lower government spending, better service, and capital improvements: a winning combination for resort customers and for taxpayers.
Adrian Moore is director of economic studies, and Wade Hudson is a policy analyst, for the Reason Public Policy Institute.
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