Thomas F. Gustafson
Gustafson is an Assistant Professor in the Department of HPER, Recreation Administration Division, at Southwest Texas State University, 601 University Drive, San Marcos, Texas, 78666. Phone:512-245-2972. E-mail email@example.com.
The Process of Privatizing Public Golf Courses
Abstract: Municipalities and recreation departments have begun to privatize specific services in response to shrinking budgets and the need to continue providing quality services to their clients. Much has been written about privatization conceptually, but few empirical studies have been done. Employing qualitative research methods, the purpose of the study was to examine the process three cities underwent to accomplish the transition from traditional service delivery, using public employees, to privatized service delivery, using private sector entrepreneurs. Administrators and employees were interviewed, concentrating on those who were employed prior to, during, and subsequent to privatization. Documentation including minutes of meetings, contracts, articles of incorporation, and by-laws were obtained to support the data from the interviews. Based on the similarities and differences in process among the cities, the following three conclusions were reached: a) the process of privatization is more successful when motivated by compelling economic rationale rather than political philosophy, b) the process of privatization is more successful when the issue of continued employment of public employees is dealt with contractually, and c) the length of time and openness of the process have little impact of the success of the process.
Keywords: privatization, contracting, golf, facilities
Facing shrinking budgets, municipalities and their recreation departments have opted for alternate means of service delivery. One of those means is privatization, the assignment or contracting of the provision of public services to private entrepreneurs. Poole (1985) stated that privatization is, "perhaps the most important single issue in advancing the cause of a limited government and of shrinking the bloated government we have at all levels, local, state, and federal" (p. 59). To become more responsive, more accountable, and less bureaucratic municipalities and recreation departments are increasingly delegating the provision of services and goods to private entrepreneurs.
The literature provides much information on the privatization of government services generally and on the procurement of government contracts on the part of private entrepreneurs. However, there is little information on the process that an individual recreation department would undertake to privatize a segment of its services. This study examined three municipal recreation departments and the process they used to privatize their golf services.
Prior to any discussion of privatization, it should be noted that privatization can take many forms including contracting, vouchers, and the sale of public assets. In the United States, the most common form of privatization is contracting. Utt (1993) defined contracting as, "the process by which government hires, under contract, a private firm, over a defined period of time, some specific service that might otherwise be performed by government employees using government equipment and facilities" (p. 80). When contracting, recreation departments hire an individual entrepreneur to produce and/or provide the service.
Privatization should accomplish certain goals for recreation departments, including service efficiency (Kikeri, Nellis, & Shirley,1993) and effectiveness (Kettl,1992). By transferring the service provision to the private sector and delegating the responsibility of service delivery to someone with expertise in that specific field, the quality of the service will improve.
Another goal of privatization is economic in nature. Privatization can turn a program that requires appropriations from the general fund into one that is either self-supporting or one that generates revenues. Dobek (1993), stated, "the privatization of money-draining enterprises was seen as a logical way of disposing of the burden of subsidizing them" (p. 14). Because the privatized service would no longer require appropriations from the general fund, money previously used to support the service could be allocated to other services that can not be self-supporting. Also, if the service becomes profitable, the additional income can be allocated to those other services or be reinvested as capital improvements to the privatized service. Seader (1994) added that, relieved of the financial burden, government and the taxpayers will benefit, regardless of who provides the service.
There are also political goals associated with privatization. Bishop and Kay (1988) noted, "the origins of privatization lie in a concern to diminish the power of public trade unions" (p. 10). Thus, there has been considerable opposition to privatization from organized labor. Public workers fear that wages will be reduced because of privatization. Yen and McKinney (1992) noted that over 50% of the operational expenditures of public leisure agencies are devoted to employee salaries and personnel benefits. However, they also cited Belcher and Atchison who stated that personnel and related expenses accounted for more than 60% of the operating expenses for privately owned service oriented businesses, indicating that private agencies spend a greater percentage of their total operating costs on personnel related expenses. In any event, public labor unions can be given the opportunity to bid on the services and compete against private providers. Thus, privatization may not necessarily affect public employees adversely.
Municipal governments engage in a certain process in order to privatize or contract services. At a superficial level, it includes it includes requests for qualification, requests for proposal, and a public bidding system, usually required by law. As previously stated, much has been written about this aspect of contracting including how entrepreneurs might better seek government contracts. Also, in a very general sense, Kolderie (1990) offered advise for the process of privatization such as: a) avoiding sole sourcing to ensure competition; b) disaggregating a service, separating the service into different parts to use different contractors; and c) divestiture, separating the roles of provider and producer.
Other than these generalizations, little is known about the process of privatization, specifically the political and operational process that a recreation agency must undergo to privatize a part of its services. The success of the privatization effort is not dependent strictly on the accomplishment of stated goals or the quality of the resulting services provided to the public. The political process itself can lend credence to the effort and pave the way for success or, conversely, detract from the effort causing great difficulty, even failure, despite the quality of the services being provided.
Case study methodology was used to examine the process by which the recreation departments of the three cities privatized their golf services. Case study methodology is recommended to study problems in which the people and the process are interrelated (Lincoln and Guba, 1985). Multiple case studies were selected because they will lead to a better understanding of the problem (Stake, 1994). Purposive sampling (Merriam, 1988) was used to select the three cities, which had used divergent approaches to privatize their golf services.
Interviews, which allowed the researcher to view the phenomena from the perspective of the administrators were the primary sources of data. To compare and contrast the three processes, certain information is desired from the participants. Thus, semi-structured interviews with open-ended questions were conducted. The interviews began with a list of proposed questions. However, answers to particular questions suggested reordering and rephrasing the questions as well as deviating from the original list of questions. With the participant’s permission, the interviews were audio-taped and the researcher took notes. The audio-tapes allowed the researcher to review the interviews and check them against notes and transcripts (Ely, 1991).
In each city were administrators and employees who had been employed in the golf operation prior to, during, and after privatization. These were the people selected for interviews. Also in each city, there was a central figure who, because of his or her position, was particularly familiar with the process. In City A, the Director of Recreation and Parks, the central figure, and five course operators were interviewed. In City B, the director of contract operations, the central figure and an attorney, was interviewed in addition to a greens superintendent, a golf operations manager, and the golf administrator from the selected company. In City C, the chair of the board of directors for the not-for-profit corporation, the executive director, the maintenance director, and the golf director were interviewed. The executive director was the central figure.
Documentation was obtained to support and supplement the data collected in the interviews. Support documents from City A include contracts, newspaper articles, and notes from presentations. Support documents from City B include contracts, minutes of park department meetings, newspaper articles, and notes from presentations. Support documents from City C include contracts, committee reports, newspaper articles, magazine articles, the articles of incorporation of the not-profit corporation, and the by-laws of the corporation. It is notable that different documents were available in each city because the cities documented the processes differently.
Data were analyzed by sentences and paragraphs to record complete ideas expressed by the participants and coded as they were collected. Axial coding was used to reorganize the data in the emerging categories (Strauss & Corbin, 1990). Data analysis was done simultaneously with data collection. After the writing of a case record to organize the data (Patton, 1980), the individual case studies were written. Following the case studies, a cross case analysis was prepared to compare and contrast the three case studies as recommended by Yin, (1984).
Case 1-City A
A newly elected mayor who favored smaller government was a driving force behind privatization in City A. He believed that municipal governments should compare the services in the private sector for cost and efficiency with those of the public sector when determining how a service should be provided. Golf course profits were declining and the condition of the golf courses was deteriorating. The existence of national golf management companies and local contractors qualified and competent to manage golf courses led the mayor to the conclusion that the golf operation was a viable candidate for privatization.
The mayor of City A began by establishing a review committee comprised of two representatives from the mayor's office, two representatives of a commission of private sector business people established to improve service and efficiency in city government, one member of the park board, the city golf administrator, the director, and a representative of the city's legal council. According to the golf director, this committee, "was asked to look at different aspects of how the government was run and it was out of this committee that the recommendation came to privatize the golf courses." They considered several different models including: a) retaining the course operators in their existing situation with expanded responsibilities, b) a not-for-profit corporation, c) contracting all of the courses to a national golf corporation, and d) allowing individuals to bid on the golf courses separately.
In the first model, the golf professionals would be salaried and serve as employees of the parks and recreation department. The maintenance staff, the pro shop staff, and all other associated with golf would be employed by the golf professional. This was rejected because it was determined that it would merely perpetuate the system as it was and fail to solve any of the problems that existed. The second alternative considered was a not-for-profit corporation. The committee elected not to institute this model because, to their knowledge, it was untested and they were unable to make comparisons. The third alternative was to hire a national golf management company. Because such companies preferred long term contracts in order to give them sufficient time to recover initial capital investments and not wanting to create a monopoly, the committee decided that model was not appropriate. The fourth alternative was to solicit bids on the courses from individual contractors. This would allow the existing golf course operators to compete for the courses at which they were presently employed. In this model, the department could retain the operators that were performing well, while requiring them to compete for the course against other bidders. Also, the course operators who were not performing would be required to improve their performance or risk being replaced.
It was the fourth model that the mayor, director, and committee ultimately selected. They wanted local people involved and local accountability. Course operator 1 stated that the mayor, director of the recreation and parks, and the golf director all had something in common: they were looking for accountability from individuals that lived in the community instead of contracting a national corporation.
The local operators who had developed reputations and clienteles were given an opportunity to continue in their positions rather than being replaced. In addition to retaining local operators, the recreation and park department preferred this arrangement because they could opt for shorter contracts more easily. The director of recreation and parks preferred short-term agreements of three to four years. The golf director added that short-term agreements were consistent with the terms of elected officials and would not require future mayors to continue a management system created by their predecessors.
This system allowed the city recreation and park department to delegate certain responsibilities while retaining controls over the operators. In other privatization models, the department would contract the operation to the golf professionals and allow them to manage all aspects of the operations, evaluating the performance of the operators and their compliance to the terms of the contract. The administration elected to retain more supervisory control over the golf professionals on a daily basis and not relinquish all control to course operators nor give them blanket authority over the administration of the golf courses. The director of recreation and parks described it as a hybrid model where the city would retain the responsibility for major capital improvements and utilities such as watering which was particularly important to maintain the condition of the courses.
The course operators, who desired more autonomy and independence from city government, agreed. Lamenting the fact that they were still dependent on the city, Operator 1 believed that the city had too much involvement in capital improvements. Operator 5 added, "it is privatized, but it isn't. In big capital things that the city has agreed to do, we're still bogged down." In addition to more autonomy and independence, the golf course operators preferred more input into major capital improvement decisions and projects. However, the operators understood the situation. Operator 4 explained, "it's like giving the keys to the car to your 16 year old. You still want to have some control." The mayor and the director of recreation and parks were reluctant to give too much autonomy to the operators and risk losing control of the golf operation.
The new system presented a unique procedural problem. Because the courses and their clienteles were different, each contract needed to be negotiated separately. The director of recreation and parks likened it to negotiating different contracts on a sports team. Although the basic structure of the contracts was the same, the specifics varied based on the quality of the facilities, the talents of the individual course operators, and the nature of the potential users of the individual courses. Course operator 4 agreed that having one standard contract was inappropriate and would result in notable successes and failures. Individual contracts improved the possibility of a high success rate.
The recreation and park department took several steps to facilitate the process. First, they notified the existing course operators that their contracts would not be renewed and that the courses would be converted to private management. At that time they also informed the operators that, if they desired, they could bid for the contracts.
The director established criteria for the selection of the course operators. In addition to demonstrating the required expertise in golf administration and maintenance, the contractors were required to have a credit line of $1,000,000. The contract was to begin in January, 1993, and the operators would be required to pay employees and perform maintenance for several months before the golf season began. They would need to finance payroll and maintenance before the courses would actually generate income. This credit line also demonstrated financial stability on the part of the operators. The director was concerned about the possibility that a contractor might default on the agreement and leave one of the courses without supervision.
City A solicited prospective operators to bid on the 12 courses individually. The particular golf courses attracted various numbers of bids. Operator 3 faced the most opposing bidders while Operator 4 was the only bidder on the course he now manages. The City originally hired 11 different operators to manage what, at the time, was 13 golf courses. Nine operators managed one golf course each and two operators managed two golf courses.
The original responsibilities of the operators were retained and those of all operators hired would be expanded to include maintenance of the courses which previously was the responsibility of unionized employees of the recreation and park department. Thus, the union maintenance workers would be removed from the golf courses. The director of recreation and parks noted, "of course, this became a very politically motivated problem."
Understandably, the prospect of losing their jobs was unsettling to those union employees. The removal of the union workers proceeded to cause political problems at every juncture. It should be noted that few workers actually lost their jobs. Most were absorbed into other city operations. Nevertheless, the union workers bitterly opposed the change and the media supported their view, giving much adverse publicity to the process, possibly because of a philosophical opposition to privatization. It caused the golf director to wonder whether it was an attack on the mayor, the director of recreation and parks, privatization, or golf. Regardless, the opposition was strong and relentless. The lack of compelling economic rationale left the recreation and park department with fewer means of defending privatization.
There were other processes that the department underwent internally to accomplish the change. The director of recreation and parks stated, "we had to move from producing a product or service like golf to managing a product or service like golf and in doing that we had to really tighten up our management process." This included the completion of insurance forms, evaluations, and weekly inspections of the golf courses. Conversations and meetings needed to be documented to protect all parties. This also required better communication with course operators and a more sophisticated system of management.
Through the results of a survey instrument developed to determine the success of the privatization effort, City A concluded that the public golfers perceived improvements in the services as well as the facilities. The director estimated that 70% of the golf in the city was played on the public courses, up from previous years. The number of rounds played on the city courses has increased by approximately 145,000 from years prior to privatization.
Nevertheless, the problems generated by the displaced union workers continued despite the fact that City A engaged in an open and lengthy public process prior to privatization. Some of the problems may be attributed to the fact that golf was one of the first services privatized by City A and others may be attributed to political and philosophical opposition to privatization in general. Regardless of the reasons, the unions and the press mounted significant opposition to privatization. In retrospect, the director admitted that offering the union the opportunity to bid on the maintenance function may have allayed some of their apprehensions. Despite the problems, the golf operations improved the physical facilities and the service provided to the customers.
Case 2-City B
City B began its process with the appointment of a committee, also. However, in City B the decision to privatize had already been made by the park department. Opting to solicit bids from national golf management companies, there was no information indicating that City B considered alternative means of privatizing. The park department issued a request for qualification (RFQ) and the commissioners appointed the committee to review them. The committee included the superintendent of special services, the superintendent of finance and administrative services, the director of purchasing, the director of general services, and the assistant director of golf (Minutes, 1993a). Five companies submitted RFQ’s and the committee determined that two of them were acceptable. The committee interviewed the two firms and determined that one was more qualified, although there was no evidence in the minutes of those specific qualifications.
However, there was evidence of the specific criteria that led them to that conclusion. The criteria for assessment included the fact that service to the local area was a high priority to the company. Also, the selected company was perceived to have unique experience in sport marketing, had demonstrated intimate knowledge of the local golf courses and their operations, and that community outreach was important to the company. The selected company was also locally based and the committee felt that, as a result, the golf operations of City B would remain high on the priority list of the company.
In other situations in City B, it would have been normal procedure to publish a request for proposal (RFP) prior to making a decision. In this situation, the committee determined that, because golf is a highly specialized service, the RFP and the particular dollar figures in a contract would not affect the decision. They were more concerned with the previously stated criteria for selection. Thus, they decided to omit that step in their usual process. A representative of a local advocacy group suggested that the department continue the process and request RFP's in order to obtain the most favorable situation for the department. She noted, "the financial packages of the interested professional management firms are not included in your packet" (Minutes, 1993a, p. 42). Since there were no proposed financial packages, there was no assurance that this contractor would be the best available. In support of her statements, a representative of the other finalist indicated that his company submitted the RFQ without the understanding that this would not be their only opportunity to present their case and also requested that an RFP be published. Despite the suggestion the park department commissioners voted to authorize the general superintendent to begin negotiating with the selected company with the understanding that, "a final deal not be consummated until it's brought back before this committee and before the public." (Minutes, 1993a, p. 63). Thus, the representative of the advocacy group succeeded in delaying the process.
In a subsequent meeting five days later, it was recommended that the board authorize the general superintendent to negotiate a contract with the company with the following directions: that special consideration be given to four areas, a) the capital contributions of the company, b) minimum guarantees to the park department, c) current park department employees, and d) programs that service the youth, senior citizens, and handicapped (Minutes, 1993b, p. 31). Apparently, no action was taken on this recommendation because the minutes of the third meeting, one week later, indicated that the matter was still being discussed.
Keeping the previously mentioned directions in mind, the matter was again proposed at the third meeting. Once again the representative of the advocacy group suggested that the RFP's be requested. While indicating support for the privatization effort, she maintained that all possibilities were not being explored. She also raised questions about the length of the contract (Minutes, 1993c). She was told that it was proposed for five years with a five year extension at the option of the park department rather than 10 years. At this meeting, authority was given to execute the contract. On March 23, 1992, final authority was given to sign the contract with the company (Minutes, 1993d).
With the meetings spanning only 21 days, the ultimate decision was made quickly and according to the greens superintendent, "to this day no one knows what the difference between the proposals was." There was a discernable process that the department undertook in order to arrive at the decision. However, it was done quickly and, in the opinion of the representative of the advocacy group, without fully considering all options.
Throughout the process, employees were not kept informed. The greens superintendent said that he heard of the decision over the radio on the way to work one morning. The operations manager added, "I think they did that on purpose. They announced it and a month later, it was done." City B avoided lengthy public debate and moved to the implementation stage without organized opposition.
One reason for the lack of opposition may have been the manner that City B dealt with existing employees. City B handled the issue contractually. Exhibit D of the agreement stipulated that the company would interview and consider current park department employees represented by the union who would be affected by the privatization of the golf courses. It further stipulated that the company hire a minimum of 35% of its initial work force from former park department employees, contingent upon a sufficient number of those employees applying for those positions. The employees not retained by the company were absorbed into other positions in the park department.
Although there was a political element to the decision to privatize, the true motivating factor behind the privatization effort was economic. Because of neglectful and wasteful management, the courses were losing money, approximately $500,000 in 1992, according to the director of contract services. In addition, no capital dollars were put into the golf courses. There were more salaried administrators and hourly laborers than the income from the courses could support. Privatizing the operations immediately turned that into a profitable situation.
Despite an initial negative reaction to the privatization, the media did not play a major role in the process. The speed with which the decision was made and carried out was a factor in this. One particular journalist, who was critical at the outset, reversed his opinion after seeing the improvements on the golf courses. The golf administrator representing the contractor, to further promote good relations with the media, played every course in the city in one day with several journalists, which received favorable publicity. Subsequently, one journalist wrote a positive article about the condition of the courses and the privatization, in general. According to the greens superintendent, the majority of complaints and negative comments in the media concerned, not the result, but the fact that the process was secretive.
There were also positive comments from newspaper articles indicating that the advocacy group was pleased with the decision to privatize some of the existing operations, including the golf courses. Although the initial reaction of the media was negative, the rapid improvements of the golf courses and some public relations efforts on the part of the company averted what is potentially a problem.
City B has not formally, through a survey instrument or other means, collected data on customer satisfaction. Using income as a tool of evaluation, the privatization can be considered successful. The recreation and park department estimated that the golf courses profited approximately $150,000. In addition, approximately $310,000 were spent on capital improvements including $80,000 for irrigation and drainage, $40,000 for bunker reconstruction, $30,000 for resodding and reseeding greens, and $50,000 to improve driving ranges (Golf presentation, 1994, p. 6)
Despite the truncated process, City B encountered few political problems. This may be attributed to the expeditious process preventing political opposition from mounting, the fact that capital improvements to the facilities were done immediately, and the fact that the administrator from the golf company took immediate steps to demonstrate to the media that those improvements were being made. Certainly, by dealing with existing employees contractually City B avoided some of the political problems. Regardless, of the reasons, City B was able to privatize with a minimum of difficulty.
Case 3-City C
City C also started the process with a committee, this time appointed by the mayor. The purpose of the committee was to examine all aspects of the golf services, consider possible alternative solutions, and recommend a course of action. It consisted of three people from the local gas and electric company, two people from the department of recreation and parks, and four people from the business community (Mayoral, 1984). The chair of the board of directors added, "the composition was some political, some people in the existing operation of the parks and recreation department, and outsiders." Representing different constituency groups on the committee allowed it to function objectively.
Upon formation, the committee was given five specific tasks regarding the golf courses,
b.) analyze the present course management structure and staffing and identify alternative forms of management and the resources required to operate the courses more efficiently and effectively.
c.) obtain information on the physical condition of the courses, determine their usage, and the types of improvements needed in order to improve the quality of play and services provided to the public.
d.) survey the golfing community to obtain their viewpoint of how the city's golf course operations and services provided to the public are handled.
e.) investigate the existing relationships, contractual and otherwise, between the city and the Professional Golf Association of America (PGA) and its members. (Mayoral, 1984, p. 5)
The committee found that in 1983 the golf courses operated at a deficit of nearly $200,000 (expenses were $1,179,545 and revenues were $997,555); salaries and related personnel expenses were 85% of total expenses; city revenues consisted mainly of green fees and cart rentals. No income was received from concessions, retail sales, lessons, or driving range. Revenues were returned to the general fund and not to golf course operations (Mayoral, 1984). This was deemed unacceptable and the committee began to examine alternative courses of action to remedy the situation.
The committee considered four options. The first was to lease the courses to a private contractor through competitive bidding. This would relieve the city of an operation that was losing money and provide dollars for capital improvements to the golf courses throughout the life of the contract. However, it would also limit the direct control that the city would have over the golf courses. In addition, profits from the courses would be distributed outside the municipality to the for-profit corporation and its stockholders.
The second option was to retain the current system and keep the golf courses under the jurisdiction of the recreation and parks department. The current system had not been successful and would not provide a vehicle for change that was needed. Also, there was shared responsibility for the operations between the golf professionals and the greens superintendents, which was confusing and ambiguous.
The third option was to use a revenue authority to manage the golf courses. This had been done for two other city functions. Whereas this may have provided the vehicle for change and improvement that was sought, its establishment required state legislation and would be lengthy and time consuming to implement.
The fourth option was to create a not-for-profit corporation to manage the golf courses. This also had been done previously for other city functions. The city could still maintain a degree of control over the corporation by the terms of the management agreement. Having already used this structure for other operations, there was a legal precedent for its creation and there was an existing operation that could be used as a model. This option had the advantage of keeping all of the revenues generated by the golf courses in the city and the tax benefits accorded to not-for-profit corporations. In addition to previous rationale for this structure, the executive director added that the mayor preferred local involvement and did not want the profits going out of state to the base of the private companies. Also, the mayor saw the benefit of the tax exempt status, that those dollars that weren't available under the presents economic conditions could be reinvested into the golf courses. The committee ultimately recommended the not-for-profit corporation, 501C3 designation, believing that this would provide the surest and quickest means of improving the courses and achieving financial self-sufficiency. The committee then presented its findings and recommendation to the mayor. According to the chair of the board, the mayor was very pleased with the report and eager to see this come to fruition.
Prior to implementation, the city needed to examine the status of contracts at the various golf courses and honor the existing contracts. They determined that one course currently had no golf professional, and that other contracts expired in January, 1984; December, 1984; March, 1985; and February, 1987. Having accomplished this, they were now able to proceed with implementation.
The executive director noted that the support of the mayor was very important. He stated, "the main thing that had to happen was the mayor had to be on board. I see that it's a top down situation. It's easier to say no to something than it is to try to make something work and our mayor was steadfastly behind this." Certainly, the influence of a prominent political official can help such a process through the problems that opposition might present. The director of maintenance added that the chair of the board of directors also needed to be strong in order to give the corporation good direction.
Final approval to privatize the golf courses required two more steps. According to the executive director, "you have to have the approval of the board of estimates to transfer the authority to manage the golf courses to some other power." With the approval of the park board, the board of estimates agreed. Then it went to the city council, which approved the measure quickly. The executive director stated, "literally, it was a paragraph... It was very simple and straight forward." Having navigated the proposal through the political system, they now needed to deal with the employees.
Understandably, the current employees were concerned about their status. As in City B, the issue of displaced workers was dealt with contractually. The management agreement read,
The media also played a role in the process of privatization. The chair of the board of directors stated, "basically, the media was not supportive... one of the sports writers in town wrote quite an article saying what a mistake it would be." The executive director felt that the basis of the media opposition was the fact that this had not been tried with golf previously.
However, as the operations began and improvements became visible the media began to support the corporation. The chair later added, "one year later, he (the reporter) and I had lunch together and he apologized for making those comments. He was very pleased with the operation of the courses and what we had done with it in a very short period of time." From that point on, the media was very supportive of the golf operations.
The executive director affirmed that the relations with the media were good, citing an article by a sportswriter that complimented the organization for nearly doubling the number of rounds of golf from approximately 195,000 in 1984 to over 358,000 in 1990 (Steadman, 1991).
City C engaged in a thorough and lengthy process considering four alternatives prior to privatizing. Through careful consideration of alternatives and handling existing employees contractually, City C avoided some the pitfalls of changing service delivery. The short length of time in which the corporation was able to achieve financial self-sufficiency was noteworthy. After receiving a $125,000 loan from the city to meet the first two payrolls and receiving a $350,000 line of credit for the purchase of equipment, the corporation was able to repay the loans in two years instead of the anticipated five. The executive director noted that the, in the succeeding years, the corporation has invested $4,000,000 in capital improvements including irrigation systems, a new clubhouse, and air conditioning, and new parking lots. The director believed that a for-profit corporation would not have been willing or able to reinvest in the properties. Thus, he concluded that selected model for privatization was the best for their situation and the privatization was successful.
Cross Case Analysis and Conclusions
Based on profitability and the number of rounds played, it could be said that the result of privatization was successful in all three cities. However, City A encountered problems in and after the process that City B and City C were able to avoid. City A encountered continual opposition from organized labor and the media. It is likely that the opposition represented apprehension about job security, as well as philosophical and political opposition to privatization. Regardless of the sources of opposition, City B and City C experienced fewer problems in the process. Factors present in those two cities and absent from City A and factors present in City A and absent from City B and City C should shed light on the reasons for their successes.
As previously stated, the three cities employed similar processes while privatizing. The mayors of City A and City C appointed committees to examine the golf operations and make recommendations on possible courses of action. In City B, the committee was appointed by the board of commissioners. Despite the possibility that the committees were predisposed toward certain conclusions, there was a defined, systematic process in which the committees engaged and the committees documented their activities.
In City A, after the decision to privatize, bids were solicited publicly and the process remained open and well defined. In City B, the process was as well defined, but shortened. City B did not solicit financial offers from more than one company and made the decision based on other criteria. In City C, although there were discussions with contractors, the committee elected to create a not-for-profit corporation to manage the golf courses, so there was no bidding process. Despite the fact that there was no bidding, the process for privatization remained open and public. To say the process was not open in City B would be unfair. Indeed, it was discussed in park department board meetings that were attended by the representative of the advocacy group. The minutes of these meetings were a matter of public record. However, the city did not solicit RFP’s according to its accepted process. Although the rationale for selecting the company in preference to the other bidders was recorded in the minutes of meetings, the actual RFQ's were not. In their haste to consummate the deal, administrators in City B did not fully examine financial offers. Assuming that the most appropriate company was selected, City B may have been able to negotiate a better contract if competition had continued into the RFP stage.
One would think that the process in City B would elicit the greatest public outcry among both political opponents of the existing government and the public golfer who was given no notice prior to the decision or opportunity for input into it. Such was not the case. City B and City C, with contracting processes experienced far less opposition to the privatization.
City B and City C were similar in that they handled the possibility of displaced public employees contractually, ensuring that thepublic workers who faced jeopardy because of the change were offered continuing employment, either with the contractor or the city. Despite the fact that few workers in City A actually lost their jobs, City A did not take steps to reassure the employees, as City B and City C did. This clearly was a source of many of the problems encountered by City A.
These three cities privatized their golf operations using different systems based on their particular needs as they perceived them. It is easy, in retrospect, to examine the processes through which they proceeded and the structure they selected. It is also easy to examine the relative strengths and weaknesses based on the difficulties they encountered and make comparisons. It should be noted that none of the cities under investigation had the luxury of hindsight. Also, City A and City C were proceeding on a course that was relatively new to their government operations and did not have the benefit of existing models. Since national golf management companies already operated public golf courses, City B had examples to follow. All three cities selected the model and process that they considered best, given existing information and circumstances.
Based on the three cities being examined, the following three conclusions are offered.
There is a relationship between the success of privatization and contractually attending to the concerns for continuing employment of existing public workers in the process of privatization.
The director of recreation and parks of City A alluded to the fact that City A would have made changes in their privatization effort if they were to start again. Most significantly, he noted that they would give the labor union an opportunity to bid on the maintenance of the golf courses. City B and City C demonstrated sensitivity to the needs of existing public employees by ensuring them continuing employment after the privatization process. That is not to say that City A did nothing to help the public employees. Very few public employees lost their positions in any of the three cities. Because the situation was dealt with contractually in City B and City C, the perception of the public employees was that the city would attend to their needs. By not dealing with the issue contractually, City A failed to demonstrate to the employees that they would be protected. When the process of privatization began, the employees on the golf courses of City A were not assured of continued employment. Such a demonstration of concern may have averted some of the political problems that they faced.
There is a relationship between the success of privatization and the existence of economic rationale rather than political philosophy as the motivating factor to privatize.
City B and City C privatized primarily for economic rationale. Their golf courses were losing money and were in notably poor condition. There was insufficient income being generated by the courses to maintain them properly or to perform capital improvements. When inquiries arose from the public or the print media, there were economic realities and facts to justify the action that was taken. City A privatized because of the political philosophy of the newly elected mayor. Although the courses were not in the condition that the director of recreation and parks expected, there was not compelling economic rationale for privatization. The lack of economic rationale caused others to believe that privatization, a solution that they deemed drastic, was not warranted. Also, those who oppose privatization philosophically were able to use the lack of economic rationale to their advantage against the privatization effort. Thus, it is important that there be sound economic reasons for privatizing to combat the political opposition that arises.
The length of time spent in open public process while privatizing had little influence on the privatization effort.
Ordinarily, the importance of the information gained is expressed in terms of those factors determined to have an impact on the result. Considering the three cities under investigation, one factor that was apparently not important is notable. One would think that the public would insist on open political processes for such decisions and that protests would arise if the processes were done in a manner something less than that. However, City B conducted the decision making and selection process quickly and somewhat out of public view. That is not to say that the public was barred from attending relevant meetings. The presence of the representative of the advocacy group supported the fact that these meetings were open. However, the progress report (1995) cited 1991 and 1993 reports that stated, "the Board of Commissioners fostered a meeting schedule and atmosphere that curtailed and/or eliminated healthy dialogue and debate of important policy issues. The Board meetings were scheduled at rush hour at a location that was difficult to access without an automobile" (p. 7). Although the meetings were technically open, citizens were discouraged from attending.
Despite the process, the privatization of the golf courses in City B had only minimal difficulties. This could be attributed to three factors. First, the public golfers were willing to defer judgment to determine if the company could improve the situation. Second, the rapid improvements to the courses and the service by the company satisfied the public golfers and, seeing improved conditions, the customers had little reason to protest. Third, the public accepted the truncated process as "business as usual". For whatever reason or combination of reasons, City B experienced little public protest over the privatization of their golf courses.
Despite the problems encountered by City A and the procedural irregularities of City B, it would be incorrect to assume that the process of privatization in City C was superior. City A may have encountered similar problems with any structure they selected and City B utilized their procedures independent of the selection of structure and contractor. Each city privatized in response to the particular set of circumstances and through a process that the administrators determined was most appropriate for their situations.
City A and City B privatized recently and were still making minor adjustments to their operations. City C had been privatized for a much longer period of time. The executive director of the not-for-profit corporation in City C stated that they would not change anything about the process or the structure. Having stood the test of time, administrators in City C are in a better position to make such a statement, whereas administrators in City A and City B are still evaluating their operations. The administrators of all three cities described the privatized operations as successful and felt that they were better able to provide maintenance to the golf courses and improved services to the golfers.
Whereas there is support for their contentions in terms of profit and utilization rates, they were reached without the benefit of rigorous study by an independent researcher. Future research on privatization should include survey instruments to determine customer satisfaction and employee satisfaction. Such research will determine if golfers who patronize the public courses and employees who work at them share those contentions.
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