Tennessee Auditors Review State Park Privatization Deal

Published May 18, 2017

Auditors for the Tennessee Comptroller of the Treasury are reviewing a contract between the state government and a private company interested in operating the state’s most-visited park, Falls Creek State Park.

About $22 million in taxpayer funds have been set aside for demolishing and rebuilding tourist lodging on the state park grounds and then getting the government out of the hotel business by turning over hospitality services to a private company, Jones Lang LaSalle (JLL), pending approval by the auditors.

As of May 10, comptroller agents were still reviewing the contract, according to John Dunn, the public information officer for the comptroller of the treasury. The Falls Creek contract between the state’s Department of General Services and JLL was signed in April. The Comptroller Office’s approval is required for the contract’s enactment.

Serving Taxpayers and Tourists

E.S. Savas, a professor at Baruch College and former assistant secretary of the U.S. Department of Housing and Urban Development, says tourists and taxpayers will both benefit from the new contract.

“Contracting it out is likely to lead to much better service,” Savas said. “If the state was losing money, it clearly ought to be privatized. If it was making money, and the state wants to make more money, then it should be privatized. But if it’s losing money, then that means taxpayers are subsidizing the users of that hotel, which is crazy, and so privatization, if done right, should eliminate that loss.”

Handling the Handoff

Savas says Falls Creek Park employees may not even notice the transition from the public to the private sector if the contract goes through.

“The common way that is handled is the following: The operator who wants to take over operating the hotel should be required to offer jobs to the existing employees, not necessarily at the current rate of pay and not necessarily for the same term,” Savas said. “If the employees are not satisfactory, then they could be sent back to the government agency.”

Less Stress for Workers

Holly Fretwell, a research fellow with the Property and Environment Research Center and an adjunct economics instructor at Montana State University, says privatization frees park employees from having to worry about government budget cuts.

“We typically see governments move toward privatizing different types of services because of budget shortfalls,” Fretwell said. “When budgets are good, parks are funded, but when they’re scarce, park budgets get cut. During shortfalls, recreation- and park-type services are the first to go. The private sector is not impacted by budget shortfalls. The privately managed parks don’t shut down.”