[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]
THE STATUS OF THE NATIONAL PARK SERVICE CONCESSIONS MANAGEMENT PROGRAM
AND IMPLEMENTING REGULATIONS
=======================================================================
OVERSIGHT HEARING
before the
SUBCOMMITTEE ON NATIONAL PARKS, RECREATION, AND PUBLIC LANDS
of the
COMMITTEE ON RESOURCES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTH CONGRESS
FIRST SESSION
__________
Tuesday, March 25, 2003
__________
Serial No. 108-9
__________
Printed for the use of the Committee on Resources
Available via the World Wide Web: http://www.access.gpo.gov/congress/
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______
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COMMITTEE ON RESOURCES
RICHARD W. POMBO, California, Chairman
NICK J. RAHALL II, West Virginia, Ranking Democrat Member
Don Young, Alaska Dale E. Kildee, Michigan
W.J. ``Billy'' Tauzin, Louisiana Eni F.H. Faleomavaega, American
Jim Saxton, New Jersey Samoa
Elton Gallegly, California Neil Abercrombie, Hawaii
John J. Duncan, Jr., Tennessee Solomon P. Ortiz, Texas
Wayne T. Gilchrest, Maryland Frank Pallone, Jr., New Jersey
Ken Calvert, California Calvin M. Dooley, California
Scott McInnis, Colorado Donna M. Christensen, Virgin
Barbara Cubin, Wyoming Islands
George Radanovich, California Ron Kind, Wisconsin
Walter B. Jones, Jr., North Jay Inslee, Washington
Carolina Grace F. Napolitano, California
Chris Cannon, Utah Tom Udall, New Mexico
John E. Peterson, Pennsylvania Mark Udall, Colorado
Jim Gibbons, Nevada, Anibal Acevedo-Vila, Puerto Rico
Vice Chairman Brad Carson, Oklahoma
Mark E. Souder, Indiana Raul M. Grijalva, Arizona
Greg Walden, Oregon Dennis A. Cardoza, California
Thomas G. Tancredo, Colorado Madeleine Z. Bordallo, Guam
J.D. Hayworth, Arizona George Miller, California
Tom Osborne, Nebraska Edward J. Markey, Massachusetts
Jeff Flake, Arizona Ruben Hinojosa, Texas
Dennis R. Rehberg, Montana Ciro D. Rodriguez, Texas
Rick Renzi, Arizona Joe Baca, California
Tom Cole, Oklahoma Betty McCollum, Minnesota
Stevan Pearce, New Mexico
Rob Bishop, Utah
Devin Nunes, California
VACANCY
Steven J. Ding, Chief of Staff
Lisa Pittman, Chief Counsel
Michael S. Twinchek, Chief Clerk
James H. Zoia, Democrat Staff Director
Jeffrey P. Petrich, Democrat Chief Counsel
------
SUBCOMMITTEE ON NATIONAL PARKS, RECREATION, AND PUBLIC LANDS
GEORGE P. RADANOVICH, California, Chairman
DONNA M. CHRISTENSEN, Virgin Islands, Ranking Democrat Member
Elton Gallegly, California Dale E. Kildee, Michigan
John J. Duncan, Jr., Tennessee Ron Kind, Wisconsin
Wayne T. Gilchrest, Maryland Tom Udall, New Mexico
Barbara Cubin, Wyoming Mark Udall, Colorado
Walter B. Jones, Jr., North Anibal Acevedo-Vila, Puerto Rico
Carolina Raul M. Grijalva, Arizona
Chris Cannon, Utah Dennis A. Cardoza, California
John E. Peterson, Pennsylvania Madeleine Z. Bordallo, Guam
Jim Gibbons, Nevada Nick J. Rahall II, West Virginia,
Mark E. Souder, Indiana ex officio
Rob Bishop, Utah
Richard W. Pombo, California, ex
officio
C O N T E N T S
----------
Page
Hearing held on March 25, 2003................................... 1
Statement of Members:
Christensen, Hon. Donna M., a Delegate in Congress from the
Virgin Islands............................................ 3
Radanovich, Hon. George P., a Representative in Congress from
the State of California.................................... 1
Prepared statement of.................................... 2
Statement of Witnesses:
Fears, Bruce W., President, Delaware North Companies Parks
and Resorts, Inc., Buffalo, New York....................... 28
Prepared statement of.................................... 30
Jones, A. Durand, Deputy Director, National Park Service,
U.S. Department of the Interior, Washington, D.C........... 4
Prepared statement of.................................... 7
Lamb, Jennifer, Public Policy Director, National Outdoor
Leadership School, Lander, Wyoming......................... 34
Prepared statement of.................................... 36
Todd, Andrew N., Chairman, National Park Hospitality
Association, and President and CEO, Xanterra Parks &
Resorts, Aurora, Colorado.................................. 20
Prepared statement of.................................... 23
Voorhees, Philip H., Vice President, Park Funding and
Management, National Parks Conservation Association,
Washington, D.C............................................ 43
Prepared statement of.................................... 45
Woodside, David B., Vice-Chairman, National Park Hospitality
Association, and President and General Manager, The Acadia
Corporation, Bar Harbor, Maine............................. 31
Prepared statement of.................................... 33
OVERSIGHT HEARING ON THE STATUS OF THE NATIONAL PARK SERVICE
CONCESSIONS MANAGEMENT PROGRAM AND IMPLEMENTING REGULATIONS
----------
Tuesday, March 25, 2003
U.S. House of Representatives
Subcommittee on National Parks, Recreation, and Public Lands
Committee on Resources
Washington, DC
----------
The Subcommittee met, pursuant to notice, at 3 p.m., in
room 1334, Longworth House Office Building, Hon. George P.
Radanovich [Chairman of the Subcommittee] presiding.
Present: Representatives Radanovich, Cubin, Souder,
Christensen, Kildee, Grijalva and Bordallo.
STATEMENT OF THE HON. GEORGE P. RADANOVICH, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Mr. Radanovich. The hearing of the Subcommittee on National
Parks, Recreation and Public Lands oversight hearing regarding
concessions management will now come to order.
I want to apologize. I know that this hearing was to
originally start at 2 o'clock. I did have a bill to manage on
the floor and, unfortunately, things can get a little long-
winded on the floor and it took a little longer than it
probably should have, so I am very pleased now to begin the
Subcommittee hearing.
As this is the first Subcommittee hearing of the 108th
Congress, I would like to welcome back my colleague and friend,
the Ranking Member from the Virgin Islands, Mrs. Donna
Christensen, with whom we hope to build upon the bipartisan
relationship of the previous Congress.
I would also like to welcome the new members of the
Subcommittee, Mrs. Cubin of Wyoming, Mr. Peterson of
Pennsylvania, Mr. Bishop of Utah, Mr Kind from Wisconsin, Mr.
Grijalva from Arizona, Mr. Cordoza of California, and Mrs.
Bordallo of Guam.
Welcome to the Subcommittee. I think you will find this is
the Subcommittee that has almost more work than any other
Subcommittee, at least in the number of bills. There is a lot
that we deal with here on a daily basis. So I welcome you to
the Committee and look forward to the talents that you will be
bringing. Thank you very much.
Today the Subcommittee will conduct an oversight hearing on
the always complicated subject of park concessions, in
particular, the status of the National Park Service Concessions
Management Program and its implementing regulations.
At this time I would like to inform members that the
National Park Service, working through the Concessions
Management Advisory Board, formed a working group in January to
attempt to cooperatively resolve some of the more pressing
issues facing the concessionaires in light of the April, 2000
regulations, such as Leasehold Surrender Interests or cross-
collateralization. And I thought tax law was complicated.
[Laughter.]
In all seriousness, I am very confident that the working
group will resolve some of these pressing issues through
Director's orders and new regulations. I, for one, do not wish
to revisit the 1998 Act.
The intent of the hearing today is not to necessarily
attack the Park Service or increase tensions between the
National Park Service and the concessions community but,
rather, to keep the pressure on the Service and the concessions
working group to produce consensus on the most contentious
issues.
Obviously, staff and I are following the discussions
closely. Quite frankly, I expect results from the working group
and I am pleased with the progress so far. I would like to see
an environment where concessionaires believe that their
investment is recognized and valued, while at the same time the
Secretary's vision of the four C's--consultation, cooperation,
communication and conservation--is fulfilled.
As my colleagues are aware, the strong partnerships between
the Park Service and the private concessionaires have existed
since the creation of Yellowstone National Park in 1872.
Today's services provided by the concessionaires include basic
conveniences such as food and beverages, to more sophisticated
services such as lodging and transportation.
Like many of my colleagues on this Subcommittee, I believe
that the 9,000-plus concession operations on Federal lands,
including those throughout the National Park System, make it
possible for our parks to provide the public with a rich
experience that they otherwise would not have. In fact,
concessionaires help fulfill a legal mandate of the Park
Service, which is to leave the resources unimpaired, while
providing for the enjoyment of the public. Sometimes I believe
that the second component of the Park Service's mission is not
given its due deference. It is essential that we help aid the
public in enjoying these national treasures--and most of them
do that in one way or the other--through the successful
partnership of the Park Service and our concessionaires.
I look forward to the testimony of the National Park
Service and to the concessionaires, and I now yield to the
Ranking Member, Mrs. Christensen, for any opening statement
that she may have.
[The prepared statement of Mr. Radanovich follows:]
Statement of The Honorable George Radanovich, Chairman, Subcommittee on
National Parks, Recreation and Public Lands
Good afternoon. The Subcommittee on National Parks, Recreation and
Public Lands will come to order.
As this is the first Subcommittee hearing of the 108th Congress, I
would like to welcome back my colleague and friend, the Ranking Member
from the Virgin Islands, Mrs. Christensen, with whom we hope to build
upon the bipartisan relationship of the previous Congress. I would also
like to welcome the new Members of the Subcommittee: Ms. Cubin of
Wyoming, Mr. Peterson of Pennsylvania, Mr. Bishop of Utah, Mr. Kind of
Wisconsin, Mr. Grijalva of Arizona, Mr. Cardoza of California and Ms.
Bordallo of Guam.
Today, the Subcommittee will conduct an oversight hearing on the
always complicated subject of park concessions, in particular the
status of the National Park Service Concessions Management Program and
its implementing regulations. At this time, I would like to inform
Members that the National Park Service, working through the Concessions
Management Advisory Board, formed a Working Group in January to attempt
to cooperatively resolve some of the more pressing issues facing
concessioners in light of the April 2000 regulations, such as leasehold
surrender interest or cross-collateralization--and I thought tax law
was complicated. In all seriousness, I am very confident that the
Working Group will resolve some of these pressing issues through
Directors Orders and new regulations. I, for one, do not wish to
revisit the 1998 Act.
The intent of the hearing today is not to necessarily attack the
Park Service or increase tensions between the National Park Service and
the concession community, but rather to keep the pressure on the
Service and the concessions working group to produce consensus on the
most contentious issues. Obviously, staff and I are following the
discussions closely. Quite frankly, I expect results from the Working
Group. I would like to see an environment were concessioners believe
their investment is recognized and valued, while at the same time, the
Secretary's vision of the 4-C's--consultation, cooperation,
communication, and conservation--are fulfilled.
As my colleagues are aware, the strong partnerships between the
Park Service and private concessioners have existed since the creation
Yellowstone National Park in 1872. Today, services provided by
concessioners include basic conveniences such as food and beverages to
more sophisticated services such as lodging and transportation.
Like many of my colleagues on the Subcommittee, I believe that the
9,000-plus concession operations on Federal Lands, including those
throughout the National Park System, make it possible for our parks to
provide the public with a rich experience that they otherwise would not
have. In fact, concessioners help fulfill a legal mandate of the park
service which is to leave the resources unimpaired while providing for
the enjoyment for the public. Sometimes, I believe, that the second
component of the Park Service's mission is not given its due deference.
It is essential that we help aid the public in enjoying these national
treasures and most of them do that, in one way or another, through the
successful partnership of the Park Service and our concessioners.
I look forward to the testimony of the National Park Service and
the concessioners.
______
STATEMENT OF THE HON. DONNA M. CHRISTENSEN, A DELEGATE IN
CONGRESS FROM THE TERRITORY OF THE VIRGIN ISLANDS
Mrs. Christensen. Thank you, Mr. Chairman. I, too, look
forward to working with you in this Congress and doing a lot of
good things to improve our parks and public lands throughout
the Nation, as we have done in the past. And I want to join you
in welcoming our new members.
Mr. Chairman and guests, the reform of the National Park
Service concessions program was over 20 years in the making.
With the enactment of title IV of Public Law 105-391 in 1998,
significant changes were made to the National Park Service's
concession program. While far from perfect, the law did take a
very important step in beginning to correct some of the more
glaring problems of the former concessions program.
Pursuant to the detailed provisions of the new law, the
National Park Service issued concessions regulations in April
of 2000. Those regulations were developed with public review
and comment and have survived several legal challenges. It is
my understanding the National Park Service has also hosted
several meetings recently with concessionaires and others,
including congressional staff, to discuss concession
regulations and policies and promote a better understanding of
the issues by all parties. I commend the Park Service for
holding those meetings.
Mr. Chairman, I look forward to learning more about the
National Park Service's concessions program and how those
meetings are going and what is coming out of them.
We appreciate the attendance of our witnesses today and
welcome their testimony.
Mr. Radanovich. Thank you, Mrs. Christensen.
Are there any other opening statements from other
Subcommittee members? OK. Thank you very much.
We will now begin with panel No. 1. Mr. Randy Jones,
welcome. You've been a frequent visitor to this Subcommittee as
the Deputy Director of the National Park Service. I want to
welcome you again to the Committee.
I think we're giving you 5 minutes, if people would stick
as closely as you can to that 5 minutes. If I interrupt you
after that, you'll know why. Randy, we welcome your testimony.
STATEMENT OF A. DURAND JONES, DEPUTY DIRECTOR, NATIONAL PARK
SERVICE, U.S. DEPARTMENT OF THE INTERIOR
Mr. Jones. Thank you, Mr. Chairman. It's a pleasure to be
here. I look forward to many appearances before you in the next
few months.
Mr. Chairman and members of the Committee--and I do ask
that my entire statement be submitted for the record, and I
will be happy just to go through the highlights of it.
Mr. Radanovich. Very good.
Mr. Jones. Thank you for the opportunity to discuss the
ongoing efforts and accomplishments for the National Park
Service in implementing portions of the National Park Omnibus
Management Act, the Concessions Management Improvement Act,
Public Law 105-391.
We are interested in providing this update on the status of
the program, including the issues that you have expressed
interest in, the improvements we are making, the ongoing
development of working relationships with our external
partners, and seeking your input and comments on this important
program. As you indicated in your comments, it is, at best, an
incredibly complicated program.
The National Park concessions program administers 590
concessions contracts in 126 parks. These contracts currently
generate $818 million in annual gross revenues. he new statute
provided a new process for concessions contracting and the
terms and conditions of those contracts.
We particularly appreciate the ongoing help and assistance
of the Concessions Management Advisory Board working group in
our recent efforts to engage representatives of our concessions
partners, along with members of both authorizing committee
staffs, in discussions to address several key issues of common
concern. These have included management of Leasehold Surrender
Interest, cross collateralization of loans, approval of sales
and transfers, and a more simplified and flexible pricing
program.
Through all of these discussions, we're trying to learn
through the experiences we have had as we develop the new
regulations in trying to always seek new improvements to make
the system work better. Through a committee of the advisory
board, we have made substantial progress in achieving common
understanding of these issues, and framing a range of
alternatives to improve our handling of them. In particular, we
believe there are conditions under which we can favorably
consider requests for cross collateralization, and we are
working on specific criteria to accomplish this.
Similarly, there appears to be ways to simplify our review
of sales and transfers which will streamline the process for
concessioners to conduct business. The advisory board has
already endorsed and we have approved the implementation of a
core menu pricing system, which will make the approval of
pricing go much quicker.
Finally, we've had extensive discussions regarding the
application and handling of the Leasehold Surrender Interest
issue, and those discussions will continue at the June meeting.
We will be continuing our discussions on all of these topics in
the next few months. Recommendations from this Committee will
be publicly presented and discussed at future meetings of the
full advisory board, and subsequently submitted to the Director
of the National Park Service with recommendations for action.
In responses to law and recommendations of the advisory
board, the Park Service has made and will continue to make a
number of other business changes. The concessions program has
made extensive use of external firms. For example, we have over
21 different organizations as prime and sub-contractors
advising us on various elements of the concessions program and
management.
The National Park Service is following recommendations made
by the advisory board in four specific areas: initiating
professional staff development, improving external
relationships with stakeholders, business practices and open
competition, and contract progress.
Professional development guidance. Our goal for ongoing
professional development of concessions program staff is in its
initial stages. We are implementing a program to improve the
skills of our concession staff through formal training. We are
also increasing our program to hire very qualified candidates.
For example, at Grand Canyon National Park, Rocky Mountain
National Park, and the Golden Gate National Recreation Act, we
hired individuals to manage the concession programs in those
parks who have MBAs, therefore providing a rich background and
experience for us to upgrade our level of professionalism.
We have developed a strategic partnership with Northern
Arizona University School of Hospitality to conduct an
extensive training program for our employees to again improve
their skill base. The program's goal will be to ensure all
concession staff are qualified and certified to fulfill their
role in an increasingly complex business program.
The relationship we have with our external stakeholders
continues to improve. For all incumbents and potential
operators, we offer educational sessions on how to do business
with the National Park Service. These sessions are designed to
assist participants in understanding the regulations, the
prospectus, and the development process so they can submit
proposals to us.
Through outsourcing, we have developed protocols that focus
on the key business process of contracting and contract
oversight in all concessions contracts. We believe the
competition for renewal of concession contracts is a healthy
step and allows for potentially new business opportunities
which benefits the concessioner, the visitor, and the National
Park Service.
A potential issue of concern to the National Park Service
is the possibility of government debt obligation in
relationship to concessioner Possessory Interest. Possessory
Interest is guaranteed either by the newly selected
concessioner or the U.S. Government, if no successor is
identified. Possessory Interest reflects a government
obligation. However, Possessory Interest is not as readily
quantifiable as Leasehold Surrender Interest, which will
replace Possessory Interest in all new contracts. We are
aggressively evaluating the total obligation represented by PI
and prospectively by Leasehold Surrender Interest. When this
work is complete, we expect to complete a comprehensive
approach to managing these obligations.
By the end of 2002, six large contract prospectuses were
issued and five contracts were executed. over the course of the
next year, we estimate that 15 additional prospectuses will be
issued under our revised process for large contracts. We
completed a total of 100 contracts during 2002, and expect to
complete 200 additional contracts during the additional fiscal
year, putting us on course to complete our backlog and get it
behind us by the end of 2004.
The National Park Service is addressing the concerns of the
small business operator regarding the implementation of
Commercial Use Authorizations. Based upon the concerns raised
during the public review process, we intend to request the
Concessions Advisory Board to establish a multi-disciplined
work group to consider the issues raised by those comments. So
we are holding any decision as far as taking those proposed
rules to final until we've had a chance to talk further with
the advisory board.
Concerning nonprofit organizations, nonprofit organizations
range from scout troops and educational institutes to park
cooperating associations, friends groups or foundations. Each
offers support to the park in a unique way, and as a
distinctive entity. They must each have the proper permit,
authorization or agreement based on the type and level of
services they offer the park and its visitors. So they may be
in some cases concessions contracts, they may be under the old
system Commercial Use Authorizations, or they could be under
special use permits. We are managing all of these nonprofit
organizations to ensure they're meeting the applicable
requirements.
This is an issue that has currently been under review by
the General Accounting Office, and we have provided the GAO
substantial information in support of their study.
We thank you for the support and the direction that you
have provided, and look forward to a concessions program that
is successful for the National Park Service, our concessions
partners, and the general public. We have a long ways to go in
getting this program completed, implemented and managed in a
good, professional, sound way. We think we've made progress and
we will continue to strive to make it a program that this
Committee will be very proud of.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Jones follows:]
Statement of A. Durand Jones, Deputy Director, National Park Service,
U.S. Department of the Interior
Mr. Chairman, members of the Subcommittee, thank you for the
opportunity to discuss the ongoing efforts and accomplishments by the
National Park Service (NPS) in implementing Title IV of the National
Parks Omnibus Management Act of 1998, the Concessions Management
Improvement Act, Public Law 105-391.
We are interested in providing an update on the status of the NPS
concessions management program including the issues in which you have
expressed interest; the improvements we are making; the ongoing
development of working relationships with our external partners and
seeking your input and comments on the program.
The NPS concessions program administers 590 concessions contracts
in 126 parks. These contracts currently generate $818.6 million in
annual revenues. Of these 590 contracts, 52 currently gross above $3.0
million. These high-dollar contracts represent about 80% of the total
annual concessions revenues. In contrast, the more than 75% of
contracts generating less than $500,000 account for less than 6% of the
gross revenues.
Title IV of Public Law 105-391 was enacted on November 13, 1998.
This title repealed the Concessions Policy Act of 1965, Public Law 89-
249, and established a new process for concessions contracting and the
terms and conditions of those contracts. A major change was the repeal
of the preferential right of renewal for all contracts grossing over
$500,000, other than those held by outfitters and guides. The law also
established the National Park Service Concessions Management Advisory
Board (CMAB) and directed other changes in the National Park Service
Concessions Program (NPSCP). The law was the bipartisan product of over
20 years of work by legislators, including your Committee.
We are moving forward with our implementation of the law through
our concessions regulations and other actions, and we appreciate the
assistance received by the CMAB, established by Section 409 (s) of
Title IV.
Concessions Management Advisory Board Working Group
We particularly appreciate the CMAB's assistance in our recent
effort to engage representatives of our concessions partners, along
with members of both authorizing committee staffs, in discussions to
address several key issues of common concern. These have included
management of Leasehold Surrender Interest (LSI), cross
collateralization of loans, approval of sales and transfers, and more
simplified and flexible pricing approval. Through a committee of the
CMAB, we made substantial progress in achieving common understanding of
these issues and framing a range of alternatives to improve our
handling of them. In particular, we believe there are conditions under
which we can favorably consider requests for cross collateralization
and we are working on specific criteria to accomplish this. Similarly,
there appear to be ways to simplify our review of sales and transfers
which will streamline the process for concessioners to conduct
business. The CMAB has already endorsed and we have approved the
implementation of a core menu pricing system. We will implement this
system more broadly. In addition we are exploring other ideas to make
pricing approval simpler and more effective. Finally, we have had
extensive discussion regarding the application and handling of LSI. We
believe that our discussions have created a common ground of
understanding on how this concept functions in relation to standard
business practices. Further, we have identified several potential
approaches to simplify and improve the application of LSI in a fair and
equitable manner. We will be continuing our discussions on all these
topics in the coming months. Recommendations coming from this committee
will be publicly presented and discussed at future meetings of the full
CMAB and subsequently submitted to the Director of the NPS with
recommendations for action.
In response to the law and to recommendations of the CMAB, the NPS
has made and will continue to make a number of other business process
changes. In doing so, the concessions program has made extensive use of
external firms (including PricewaterhouseCoopers (PwC)) with specific
expertise in the arenas of asset management, hospitality, recreation,
tourism, engineering and finance. Our process improvements and
commitment not only responds to the intent of the Concessions
Management Improvement Act but implements the President's management
agenda as well.
To ensure proper implementation of the law, the NPS is following
recommendations made by the CMAB in four specific areas: initiating
professional staff development, improving external relationships with
stakeholders, business practices and open competition, and contract
progress.
Professional Development Guidance
Our goal for ongoing professional development of concessions
program staff is in its initial stages. The NPSCP, through the guidance
of the CMAB, is implementing a program to improve the skills of
concessions staff through formal and informal training. In addition,
through the recruitment process, we are hiring qualified business
candidates. The most recent positions filled include the Chief of
Concessions Management at Grand Canyon National Park, a Management
Assistant with concessions responsibilities at Rocky Mountain National
Park and a Concessions Management Specialist at Golden Gate National
Recreation Area. As additional concessions positions become vacant, we
will seek candidates with a business background, focusing, when
possible, on candidates with experience in the hospitality industry.
The NPS realizes that we must have the necessary business acumen,
knowledge and skills to perform our duties in a highly professional
manner. We have developed a strategic partnership with Northern Arizona
University (NAU) School of Hospitality as an opportunity for NPSCP
employees to further advance their Concessions Management skills. This
multi-year program includes 420 hours of course study that is based
upon the NAU core hospitality curriculum. The objective of this program
is to provide a hospitality management curriculum that will improve the
overall accountability and professionalism of the NPSCP. Additional
training was developed to enhance the skill set of NPSCP staff working
on concessions contracts and to lay the foundation of a NPSCP
Certification Program. The program's goal will be to ensure all
concessions staff are qualified and certified to fulfill their role in
a complex business program. The coursework was developed and is taught
collaboratively through a partnership with the American Hotel and
Lodging-Educational Institute, NPS, the Department of the Interior and
PwC.
Improving Relationships with Stakeholders
The relationship we have with our external stakeholders continues
to improve. We are working to involve all affected parties in the
concessions program. For example, the 1998 law placed an emphasis on
competition for contracts in the national parks. However, all
incumbents grossing $500,000 or less, and all outfitters and guides,
continue to enjoy a preference in the renewal of their contracts, if
the concessioner has operated satisfactorily during the term of its
contract and has submitted a responsive proposal for a proposed new
contract which satisfies the minimum requirements established by the
Secretary. For all incumbents and potential operators, we offer
educational sessions on ``How to do Business with the NPS.'' These
sessions are designed to assist participants in understanding the NPSCP
and the key components of the prospectus development process. Three
such outreach sessions were held in Fiscal Year 2002, in Napa,
California, Phoenix, Arizona, and Atlanta, Georgia, and we anticipate
holding two additional sessions in Fiscal Year 2003.
Business Practices and Open Competition
Through outsourcing, we developed protocols that focus on the key
business processes of contracting and contract oversight in all
concessions contracts. We will ensure, that the franchise fee
established by the contracts reflect the ``probable value to the
concessioner of the privileges granted by the particular contract
involved.'' The law requires that this value ``be based upon a
reasonable opportunity for net profit in relation to the capital
invested and the obligations of the contract.'' We are also outlining
how to better meet our fiduciary responsibilities through responsible
contract oversight.
We believe that competition for the renewal of concessions
contracts is a healthy step, and allows for potentially new business
opportunities, which benefit the concessioner, the visitor and the
National Park Service. We believe it is the intent of Congress for
incumbents and potential operators to have the opportunity to compete
fairly and equally for a concessions contract, so that government and
visitors receive the best services available. A potential issue of
concern to the National Park Service is the possibility of government
debt obligation in relationship to concessioner Possessory Interest
(PI). It is important to note that the compensation for concessioner PI
is guaranteed either by the newly selected concessioner or the U.S.
government (if no successor is identified). PI reflects a governmental
obligation. However, PI is not as readily quantifiable as LSI, which
will replace PI in all new contracts. As reported in the 2000 NPSCP
Annual Financial Report (AFR) database, 127 concession contracts
reported assets in which PI was claimed. This represents more than 20
percent of concessions contracts. We are aggressively evaluating the
total obligation represented by PI and prospectively by LSI. When this
work is complete we expect to present a comprehensive approach to
managing these obligations.
Contract Progress
Our backlog on concessions contracts has been a concern for all
involved. The largest 52 concessions contracts include hospitality,
retail, marina and transportation assets and operations. Recognizing
their complexity, high value, legal and financial risk, we have sought
external expertise to assist us in developing an action plan for the
development of prospectuses for these contracts. In Fiscal Year 2002,
the NPSCP with the aid of external experts, identified the 52 contracts
and the level of prospectus due diligence necessary for each. By the
end of Fiscal Year 2002, six large prospectuses were issued and five
contracts were executed. Over the course of the next year, we estimate
that fifteen additional prospectuses will be issued under our revised
process for large contracts. As we mentioned earlier, we have engaged
PwC and numerous other firms to assist parks in developing a strategy
for undertaking appropriate due diligence for these large contracts,
including real property condition assessments, real and personal
property valuations, market and financial analysis, and concessions
facility planning. We are assessing the condition of our facilities and
aligning our capital improvement programs to address deferred
maintenance. Thus far, over $13 million dollars of deferred maintenance
has been identified and will be eliminated through the maintenance
reserve and other improvement requirements in new contracts. As with
other park facilities, we will be monitoring facility conditions to
measure the performance of concessioners and park managers.
The parks, in conjunction with PwC and its subject-matter experts,
have been working together to redesign the prospectus to appropriately
reflect the needs of NPS and offerors. Currently, the regions and
individual parks are responsible for the prospectus development of
those contracts grossing less than $3 million in annual revenues, and
each region has developed a strategy for implementation. Approximately
100 of the small contracts were issued between Fiscal Year 2001 and the
end of Fiscal Year 2002, and approximately 200 will be issued in Fiscal
Year 2003.
Commercial Use Authorizations
The NPS is addressing the concerns of the small business operator
regarding the implementation of the Commercial Use Authorization (CUA)-
Proposed Rule. We received significant public comment on the proposed
rule, issued on November 27, 2002. Based upon the concerns raised, the
NPS intends to request CMAB establish a multi-disciplined work group,
to consider the issues raised by the comments. The work group will
consist of interagency personnel, representatives of private sector
interested parties and designated officials of the CMAB. This approach
will allow for consideration of the business need for a predictable,
stable platform while ensuring consistency with the preservation of
park resources. Recommendations of the work group will be transmitted
for full consideration by CMAB in a public meeting. NPS will review any
advice from CMAB on this issue in determining how best to move forward
with this rule.
Non-profit Organizations
The issue of non-profit organizations supporting our National Park
units, and the effect these non-profit organizations may have on a park
concessioner appears to be of concern to some park concessioners. Non-
profit organizations range from scout troops and educational
institutes, to park cooperating associations, friends groups or
foundations. Each offers support to the park in a unique way, and as a
distinctive entity. They must each have the proper permit,
authorization, or agreement based on the services they offer the park
or its visitors. We are managing all these non-profit organizations to
assure they are meeting applicable requirements.
This Subcommittee as asked the Government Accounting Office (GAO)
to assess NPS compliance with applicable regulations, policies, and
contracts to determine whether park subsidies are provided to non-
profit organizations, and to determine how services provided by non-
profit organizations affect concessioners. The NPS has provided GAO
substantial information in support of this study. The Division of
Interpretation, the Partnership Office and the Concessions Office will
work together to address any issues that may arise as a result of the
review. We look forward to receipt of the review.
The NPS is actively working on improving the concessions management
program. We have made many improvements since the passage of P.L. 105-
391, and anticipate continual improvements as we work with our
concessioners, private sector contractors, and this Committee. We thank
you for the support and direction you have provided and we look forward
to a concessions program that is successful for the NPS, our
concessions partners and the general public.
This concludes my testimony. I would be happy to answer any
questions you might have.
______
Mr. Radanovich. Thank you, Mr. Jones. We'll go ahead and
proceed with questions. I will go ahead and begin and then
we'll do the same thing with the next panel.
Mr. Jones, the Federal Government understands and uses the
Generally Accepted Accounting Principles, as does the private
sector. Within the GAAP, definitions can be found that clearly
identify what type of projects or expenditures qualify as
capital improvements.
With respect to Leasehold Surrender Interests, or LSI, why
has the National Park Service redefined what qualifies as a
capital improvement instead of using the same definitions and
procedures, for example, in GAAP, as the rest of the people
that deal with these types of things?
Mr. Jones. Yes, we have looked at that particular issue.
Some of it relates to the structure of the statute itself,
which says Leasehold Surrender Interest is granted for
construction. I am not--accounting is not my personal
specialty, but I would offer that it's my understanding that,
under the GAAP procedures, there is a lot of flexibility in
interpretation of what types of things you can, for accounting
purposes, put under that program which, for example, could
include things that we would consider routine maintenance. We
think the program should be limited to those items that are
construction in nature, as the statute explicitly directs us to
do.
Mr. Radanovich. What was the genesis of the 50 percent rule
and what prompted its need?
Mr. Jones. The 50 percent rule was an attempt to quantify a
mechanism, again trying to identify what constituted
construction. I think there has never been any dispute or
doubt, if a concessioner is building a new building from the
ground up, that it therefore clearly qualifies as Leasehold
Surrender Interest.
The question comes that, when you're doing a major
modification, be it a new kitchen, be it a new roof, and how
the standard should be set as to what constitutes maintenance
of a building versus what constitutes new construction that
would qualify for Leasehold Surrender Interest.
The original draft regulations actually provided that for
existing buildings, as I understand it, nothing would qualify
and it would all be considered maintenance. The public comment
period recognized that to be perhaps not the best way to go. It
was changed as an attempt to compromise it 50 percent. Based on
our continuing dialog, we recognize there are still some
ongoing problems with that, and it was based on that
understanding as to why we asked the Concessions Advisory Board
to take this issue up, working with Pricewaterhouse and some of
our other consultants, working with the concessioners and
Committee staff, to try to identify is there a simpler, better,
clearer way that all parties could agree what should qualify as
Leasehold Surrender Interest.
Mr. Radanovich. I see.
Mr. Jones, with regard to the reserve account, do you see
that account ever being used for capital items or items that
would, per the '98 Act, be accorded LSI status?
Mr. Jones. The reserve account that we're now using in the
new contracts is specifically designated as a maintenance
reserve contract; therefore, it would be our vision that they
would not qualify as Leasehold Surrender Interest, based on our
philosophy that if organizations or entities are using
government buildings, that we would expect them to do routine
maintenance.
Mr. Radanovich. One other question. A small guide and/or
outfitter has a franchise fee set at 6 percent, but when he or
she arrives at the park, there are entrance fees, boat launch
fees, back country fees, et cetera. Now his or her franchise
fee is actually up to 13 percent.
What is the National Park Service doing to prevent fee
layering, or what specifically are you doing to ensure that the
collection of these additional entrance and special use fees
are taking into consideration when setting up the original
franchise fee structure?
Mr. Jones. Mr. Chairman, I think the last part of your
question is the key element, that we need to make sure that the
other fees that are paid are taken into consideration as we
establish the franchise fee that would be the minimum
requirement in a prospectus.
As far as to the extent of the visitors who are coming in
by concessioner or paying park entrance fees, in that regard
they would be treated no differently than any other visitor
coming into the park. But we do agree that we need to take
those things into consideration in setting a franchise fee.
Mr. Radanovich. Thank you very much, Mr. Jones.
Mrs. Christensen.
Mrs. Christensen. Thank you, Mr. Chairman, and thank you,
Mr. Jones, for your testimony.
A major reason for the Concessions Reform Act of 1998 was
to foster competition. Has that happened?
Mr. Jones. Yes. Under the statute, outfitters and guides
are automatically given a preferential right to renew, and
small concession operations under gross sales of $500,000, as
you know, are also granted a preferential right to renew their
contracts.
We are seeing in the new, larger contracts that are going
out a lot of competition, a lot of bids. Most important, we
think for the visitor what we're seeing are overall more
comprehensive, more responsive bids that address a wide variety
of visitor services and environmental programs, and also, from
a financial point of view, addressing franchise fees. So we're
already seeing evidence that the increased competition, in
fact, is good for the parks and good for the public.
Mrs. Christensen. Great.
How many concession contracts have been issued in the 5
years since the Act?
Mr. Jones. When the statute was first passed, things
initially were put on hold as we developed the regulations to
implement the statute. We then found ourselves for the next few
years in court defending those regulations, in which the courts
did, in fact, uphold the regulations, with a couple of very
minor, fine-tuning exceptions.
So once the courts finished their process, we charged ahead
with the program full speed. For example, in 2002, we did award
111 contracts. During the current fiscal year, we are expecting
to award over 200 contracts. We are currently on pace to catch
up with the backlog and get it done by the end of 2004.
Mrs. Christensen. Thank you.
You mentioned the legal challenges. Could up update us on
the challenges that were made to the concession regulations?
Mr. Jones. The major issue that is still pending--
arguments, in fact, were presented to the Supreme Court just a
couple of weeks ago--is the one issue as to whether---and I'm
paraphrasing this, because I'm definitely not an attorney--is
whether they are considered procurement contracts and,
therefore, what are the rules and procedures that would govern
implementation of those contracts. That element of the case was
accepted by the Supreme Court, has been argued in front of the
Court, and we're waiting for their decision.
Mrs. Christensen. Just on the LSI for a minute, concerns
have been raised and there have been suggestions that this be
reopened for discussion and maybe some changes.
Doesn't the 1998 Act require reexamination and a possible
replacement in 2007--
Mr. Jones. Yes, it does.
Mrs. Christensen. And wouldn't it be better for us to
discontinue it?
Mr. Jones. The language of the Act specifically does
address how Leasehold Surrender Interest would be calculated.
To give it the best and fair chance to see how we should assess
that 4 years from now, we want to try to make it as workable as
possible. So in any regulatory process, once they are issued
and we go through a learning curve and we talk to the people
most affected, we're trying to be open to say OK, what changes
need to be done to make the system work better, with the
ultimate answer going to be in 4 years when we have to respond
back to these Committees as to what's working and what doesn't
work.
Mrs. Christensen. Thank you.
Mr. Chairman, I have no further questions.
Mr. Radanovich. Thank you very much, Mrs. Christensen.
Mrs. Cubin?
Mrs. Cubin. Thank you, Mr. Chairman, and thank you for
being here, Mr. Jones.
It always troubles me when the Federal Government has to go
to court. Those are costs that we don't build into any of our
programs, and those are costs that--that's money that comes
right out of the operation of the park, all the parks. That's
always distressing to me, especially when it goes all the way
to the Supreme Court, when it's over a rulemaking thing.
Who were the plaintiffs? You don't need to tell me names,
but were they possible concessionaires, were they people who
made bids, were they legislators? Who were the plaintiffs in
the suits?
Mr. Jones. It was, again, my understanding--I have not ever
read any of the documents personally, but it was the
hospitality association who brought the complaint, and I don't
know who else was involved.
Mrs. Cubin. OK, that answers my question well enough.
What other points were discussed besides whether or not the
concessionaire should be considered a procurement activity?
Mr. Jones. Again, I'm honestly not the best one to answer
that, because those were all issues that were pending on the
national scene when I was living a very happy life as the
Superintendent of Rocky Mountain National Park.
Mrs. Cubin. I understand. Believe me, I understand.
The reason I ask is because one of the parts of the rules--
and the Chairman may have already brought this up--but it
stated that the capital improvements that are made by the
concessionaires become the property of the United States,
without right of compensation. I wondered if that was one of
the points.
Mr. Jones. Going back to the original 1965 Concessions
Policy Act, the improvements made by concessioners on Federal
properties have always been the ownership of the United States.
The concessioners have always had a contractual right to be
compensated for their investment.
In the course of the last 40-plus years, there have been
several different versions and variations in all those
contracts that have been drafted and, therefore, how they get
interpreted.
Mrs. Cubin. I was aware of that. But are you telling me
then there's really not a change in that, that the
concessionaires are compensated for their--
Mr. Jones. They are. The questions that have been on the
table is what is the mechanism used to determine the dollar
amount of that compensation. The fundamental question of
entitlement is--
Mrs. Cubin. Right. It's just always up in the air, always
questionable and always open to opposition.
There was one other thing that I wanted to ask. It is my
understanding that there were four factors in the legislation,
and that when the rule came out it added another factor, one
that assesses how the proposer of the contract conducts the
concession operations in terms of environmentally healthy ways
and, among other things, requiring energy conservation, waste
reduction, and recycling.
Now, that was never in any part of the legislation. Was
that particular thing challenged in the lawsuit?
Mr. Jones. I honestly do not know. I do know that--and I
would be happy to provide that information to you.
Mrs. Cubin. Yes, I would appreciate it.
Mr. Jones. I could provide it to the Committee for the
record.
I do know that has been one of the areas--and I would just
cite one example. Forever Living Resorts, for example, who is a
major concessioner in many parks, including the Grand Tetons,
has been a real leader in solving problems from an
environmental point of view of emissions on houseboats. Those
are the kinds of leadership roles that some of our
concessioners have taken that we wanted to be able to recognize
and reward as we came to issuing contracts.
Mrs. Cubin. I absolutely agree with the practice. What I
don't necessarily agree with is rulemaking that supersedes or
that adds to legislation where it wasn't intended, although I
certainly approve of the activities and the fact that the Park
Service is taking note of those concessionaires who do a better
job.
Thank you very much. I yield back.
Mr. Radanovich. Thank you, Barbara.
Ms. Bordallo is recognized for 5 minutes.
Ms. Bordallo. Thank you. Thank you very much, Mr. Chairman,
and Ranking Member Christensen. I would like to thank you, Mr.
Chairman. I'm a new member and I'm very honored and pleased to
serve on this Committee.
Mr. Radanovich. You're very welcome.
Ms. Bordallo. Mr. Jones, how is customer satisfaction
measured by the Service or its contractors, and how are these
measures weighed into the contract bidding and the renewal
process, if they're considered at all, and in what way?
Mr. Jones. How we handle issues of customer satisfaction
beyond concessions, we actually have a program and
implementation of the Government Performance and Results Act,
doing a series of surveys of the park visitors themselves, to
ask them about how they're enjoying their experience and what
kinds of services they would like to see in the park, and how
we can do a better job and be responsive as a government
agency.
When it comes to what goes into a specific contract, every
single one of them is based on the specific needs of that
contract. As an example, what one needs to be a primary
consideration of someone who is taking mountain climbers to the
top of Denali or Mount Ranier is very different than a river
runner, which is very different than a hotel operator. So
there's really no standard answer as to exactly what criteria
are used beyond some of the basic requirements in the statute
of what has to be included in a prospectus.
Ms. Bordallo. But you do use a visitors survey of some
type, is that correct?
Mr. Jones. I need to actually consult with my staff on that
question. [Conferring.]
I am told we not doing it on specific contracts.
Ms. Bordallo. I see. All right.
The other question I wanted to ask is, I noticed in your
written testimony you talked about or placed emphasis on
improving relationships with the stakeholders. I believe this
is to become more business like and efficient. You hold these
outreach sessions.
Mr. Jones. Right. That's correct.
Ms. Bordallo. Twice a year, I think is what I read.
What are you planning to do for this next fiscal year? Do
you have sessions already planned?
Mr. Jones. I assume. I again need to refer to staff back
here. [Conferring.]
Yes. Yes, we do have two scheduled. A major purpose of what
these sessions are designed to do--and they're open to anybody
who would like to bid, either an existing concessioner or
anyone who would like to become a concessioner. There are many
things, both in the statute and the regulations--and it goes
back to the Chairman's question, on things like Leasehold
Surrender Interest--that as a concept, there really is nothing
analogous in the private sector. So providing an understanding
of how to interpret and how to work the system, so to speak, so
that everybody is on a level playing field, is the purpose of
why we've been holding these sessions. And they have been well
attended.
Ms. Bordallo. Do you feel two is enough?
Mr. Jones. Given the availability of funds, it's probably
as much as we can do at this time.
Ms. Bordallo. Thank you very much, Mr. Jones.
Mr. Radanovich. Thank you very much.
Mr. Souder.
Mr. Souder. Thank you, Mr. Chairman. Mr. Jones.
I have a question because I kind of lost track of this. It
relates to a broader question. At Minnie Glacier Lodge in
Glacier National Park, one of the challenges is the cost of
rehabing these old structure is so costly, particularly one
like that, that can only have a short season and rebuilding was
so high, that there were questions about how to tradeoff what
the concessionaires can charge in the rooms, particularly when
we have kind of a ``no new net gain of rooms'' in the park, how
to actually make this work to preserve our older structures,
which is a challenge that's going to get greater.
I wondered whether you've been giving more flexibility to
concessionaires to not have the same rate pressure on the
rooms, particularly with historic lodges, and how you see that
evolving. Since most concessionaire activity or the growth in
that is occurring in the gateway communities anyway, the net
effect is you can't make some of these things profitable unless
you have a huge concession with multiple lodges inside the
park.
Mr. Jones. Of course, Congressman, you and I have had some
of these discussions before on your visits to the parks. Minnie
Glacier Hotels is probably one of the best examples of what is,
without a doubt, a major challenge of a structure that is
without a doubt of national historic significance and,
therefore, needs to be preserved and protected. But the amount
of money that needs to be invested in the structures in Glacier
are so high that it raises a fundamental question of how you
can do that investment and still have people who would be
willing to bid on the contracts.
So what we really need to do, and what our new
superintendent at Glacier has been charged with, is to come up
with some hopefully creative, inventive solutions. We're
talking, for example, to organizations like the National Trust
for Historic Preservation, to say what is the role private
philanthropy can play in fixing up some of these historic
structures with the motive of protecting them. Then, of course,
the best way to protect them for the long term is to have a
concessioner who is willing to keep reinvesting. But getting
that initial capital is a major challenge without an easy
answer.
Mr. Souder. My understanding from the previous
concessionaire, one of the proposals was that there was this
cap because at the Minnie Curin Inn--whatever the title of the
motel is--there weren't enough rooms and there wasn't a
willingness to expand the number to just net in that zone, so
that they could raise the room rate, which might be $350 to
$450, which by the way they're getting in Waterton Park right
across the Canadian border, because at Lake Louise, Banff and
the Canadian parks they don't have the caps on the room rate.
Is the Park Service looking at that flexibility, to say
look, to preserve a structure like this, we may have to throw
off the balance and say look, the wealthiest people are going
to have to fund keeping that open.
Mr. Jones. We would like to do it through a way of working
with the concessioner on the flexibility of how a structure is
renovated, so that if what makes sense economically for that
place to go is to say renovate the interior with different
types of rooms that would be higher end and, therefore, we want
to make sure that when the public is paying a fee to use
facilities in the parks, they are actually getting what they
pay for. So I don't see a situation of where we just stop the
approval process of rates.
But how we can structure contracts, terms of contracts, how
we can do things, since a place like Glacier has several
different properties, so you can do one thing at a property
that would help offset a different property under the terms of
the same contract, we just have to be creative and innovative.
Some of them like Glacier are some of our toughest challenges.
Mr. Souder. But do you have a guideline that says ``x''
number of rooms have to be below a certain dollar, and ``x''
number in the mid range, and ``x'' number in the--
Mr. Jones. No, we do not.
Mr. Souder. So you've been flexible with that.
On the transportation plans, when a concessionaire agrees
to bid for a contract, if there is a transportation plan change
like at Bryce or Zion, does the concessionaire, if all of a
sudden people don't have the flexibility to go to the lodge or
they have to leave the park earlier and may not be able to stay
for dinner, is that calculated in their contracts, or do you
give them a waiver to change their bidding process or anything?
Mr. Jones. If there's an action that is a result--an impact
on a concession operation that is a result of an action that
we've taken, concessioners have the right to appeal franchise
fees, and in some cases they can even come back and ask to
renegotiate the term of a contract to address the issues you
just raised.
Mr. Souder. That would be a huge step. There is nothing
short of a major step like that that, when you trigger
something that logically will have maybe a three to 5 percent
impact--and that's even debatable. I know at Bryce they're
having this debate. For example, dinner reservations drop, but
who's to say exactly why that did, but the fear of being left
in the park may be one.
Mr. Jones. Well, a situation also at the various parks
depends--for example, Bryce, Zion, Grand Canyon, which are
experiencing a significant reduction in visitation that based
on our initial studies appears to be as much generated by a
reduction in the number of international tourists coming to the
park, as opposed to U.S. tourists. Part of that appears to be
as much the economy and the strength of the dollar and, of
course, in addition to some of the impacts in the aftermath of
September 11th. So a challenge we always have when there's a
downturn in any one business operation or concession is to try
to do an assessment in cooperation with the concessioner as to
what's the root cause of that.
Mr. Souder. But the burden of proof is on the
concessionaire to establish it when you make a change?
Mr. Jones. We want to work with them on that, yes.
Mr. Souder. Thanks.
Mr. Radanovich. Thank you.
Mr. Jones, I have one question. It's a long-winded
question, so if you'll bear along with me on this. I do want to
get this on the record, though.
With the exception of the Defense Department programs and
the National Park Service Concessions Program, the rest of the
Federal Government is using Federal acquisition regulations, or
FAR, which include procedures for awarding contracts and
subsequent notification to all bidders on the procedures and
methods used to select the winner, along with specific
information as to how other bidders fared in the process.
In the recent Yellowstone contract, no such information has
been forthcoming. Bidders have no clue as to why they were not
selected or why the winner was. There is on information on what
would make them a more competitive bidder on future contracts
or any discussion on how the bidding process could be made
better to benefit the government, the public, and the bid
process itself.
In most cases, the rest of the government has apparently
found that using FAR has improved their programs and contract
results. Why has not the National Park Service taken on these
Federal Acquisition Regulations in its bidding process?
Mr. Jones. If I can maybe separate my answer into two
different issues. One, to the extent that the Concessions
Policy Act is subject to the FARs, the issue currently before
the Supreme Court and the issue before the Supreme Court is
interpretation of the intent of Congress, so if I can sort of
be evasive in an answer by saying it is our intent to implement
it as the courts and the Congress tell us to.
Mr. Radanovich. See what the Court does, huh?
Mr. Jones. And then we can go from there.
As far as the fundamental policy issue of getting
information back to the concessioners on the bidding process so
that they can grow and learn is something that I would agree
with you on and is something we need to do, but I would not say
that that would be necessarily part of the FAR process. We
should just be doing it as part of the concessions program. I
am hoping that we're going to be moving in that direction.
Mr. Radanovich. To further talk about the bidding process,
I was made aware recently where some concessions operations
would bid on a particular project, the winner would be
selected, and then the project itself would be appraised, and
then the bid amount adjusted to that appraisal, sometimes even
less.
Why are not appraisals done before the bidding process, and
why are they done afterwards by the Park Service? It just makes
sense that there would be some baseline value to the project
during the bidding process when it begins.
Mr. Jones. There is the ideal scenario, and then as we're
dealing on a case-by-case basis, there are many examples--
again, if I can go back to my tenure at Rocky Mountain National
Park, where what you just raised is what I did with one of our
concessioners and we, in fact, negotiated the value of the
Possessory Interest and settled that prior to the award of the
new contract.
In other cases, that's easier when you have the natural
order of things, when you know a contract is going to expire so
many years in the future and you can start a deliberative
process. Where we are now is in a massive catch-up program of
contracts that have expired and, in many cases, several years
ago, a statutory limitation of contract extensions not to
exceed 3 years, and we want to avoid a situation of potential
chaos of people challenging whether we can do a further
extension and therefore end up with a possible interruption of
services. So we're in a mad dash to get contracts caught up and
awarded. So what the ideal scenario is versus what we're faced
with right now I think are two different circumstances.
Mr. Radanovich. Thank you.
Are there any more questions of Mr. Jones? Mr. Souder?
Mr. Souder. Thank you, Mr. Chairman.
I wanted to ask a question about visitor centers. At Rocky
Mountain you have done an innovative thing with--I don't think
it would actually be a concessionaire because it's outside the
park--but you worked with them to help pay for a visitors
center in conjunction with putting a visitors center with their
operation.
But in many parks we don't have enough funds to build
adequate visitor centers. There is a big discussion about what
size gift shops, what size book stores, what size cafeterias
should be in visitor centers because it becomes a way for us to
pay for the visitor center. Yet that obviously alters
concessionaire contracts as well as gateway communities
attitudes, Gettysburg being the classic, where we scale down,
scale down, and all of a sudden then we say at our Committee
there's not enough to pay for the visitors center. Well, if you
cut back the gift shop and the restaurant enough, there's not
enough to pay for a visitor center.
In these concessions guidelines, are the rules of what you
can do and can't do in the park negotiating visitor centers,
vis-a-vis existing concessionaires?
Mr. Jones. Those are addressed on a park-by-park specific
as it relates to the planning and environmental compliance
that's done for a proposed visitor center. A visitor center
could incorporate, for example, the need for concession
operations. We have several that are incorporated. For example,
the Carlsbad Caverns National Park concession operation
operates the same building with the visitor center. They're all
in the same open space. So each one is done based on the needs
of a local area.
Mr. Souder. Let me give an example. If Mesa Verde, to try
to fund their new visitor center--which they would need quite a
bit of capital to do it the way they want--decided to put in a
large gift operation, bookstore operation, would that be rebid
or would the concessionaire that's currently in the park,
because their business center is at the edge and isn't there--
how does the concessionaire who bid on the amount of food, the
amount of other things that were going to be calculated in the
number of visitors at the park, how do they deal with the new
prospect of a--
Mr. Jones. Again, it somewhat relates to the terms of a
specific contract at a park. Some parks have concession
contractors that give the incumbent concessioner essentially
rights for everything within the boundaries of the park, or a
geographic area within the park. Other parks--for example,
Olympic National Park may have a dozen different concessioners,
each in different geographic areas. So it depends upon each
unique circumstance of the park, the terms of the concessions
contract, and also--You mentioned the word bookstores, as to
what would be viewed as one of our cooperating associations as
opposed to food service, which would traditionally be viewed as
a concessions operation.
Mr. Souder. So there is not a park-wide standard that--
Mr. Jones. There is not a park-wide standard, no, sir.
Mr. Souder. On Leasehold Surrender, when there are
questions of whether a leaseholder is investing the way the
Park Service would like, or whether the structures are being
maintained, is there a warning process that kind of gives an
advance, or is there any way on this compensation for the
interest--In other words, yes, they don't own it, the
government owns it, but you have to repay--that presumably is
somewhat built into the bidding. But is there any kind of
``heads up'' before you just get hammered?
Mr. Jones. Well, the process that we'll go through is, when
a concessioner wants to do a major capital project that would
qualify for Leasehold Surrender Interest, that project would
have to be submitted and approved under the terms of their
concessions contract by the superintendent.
The one nice thing about Leasehold Surrender Interest is
that, once a project is identified, we think it will be a much
simpler process to calculate the values and what the
entitlements of the concessioner are compared to some of the
circumstances we've had from some of the very old contracts.
Mr. Souder. Let's say, hypothetically, at Lake Yellowstone
Hotel, there was a less than satisfactory working relationship
in how it was being developed and what the value of that was.
There would be presumably discussions with the superintendent,
but is there any official process that says, look, we've got
some concerns here, here's how it could affect your Surrender
Interest?
Mr. Jones. The right of a Leasehold Surrender Interest is a
contractual right. As far as satisfactory performance, that's
another issue in which contract implementation and oversight,
which is a responsibility we have, which is one of the reasons
we're trying to gear up and improve our training in the
education program of our people to help administer that in a
consistent and more professional way.
Mr. Souder. Thank you, Mr. Chairman.
Mr. Radanovich. Thank you, Mr. Souder. Mr. Jones, thank you
very much. I have no more questions. Thank you very much for
being here.
Mr. Jones. Thank you, Mr. Chairman.
Mr. Radanovich. With that, we'll go ahead and introduce our
next panel.
Panel 2 is Mr. Andy Todd, who is president and CEO of
Xanterra Parks and Resorts, from Aurora, CO; Mr. Bruce Fears,
president of Delaware North Parks Services from Buffalo, NY;
Mr. David Woodside, president and general manager, Acadia
Corporation, from Bar Harbor, ME; Ms. Jennifer Lamb, Public
Policy Director, the National Outdoor Leadership School,
Lander, WY; and Mr. Philip Voorhees, vice president of Park
Funding & Management, National Parks Conservation Association,
Washington, D.C. You all may come up to the table.
OK, we'll just go right down the list. Each invitee will
have 5 minutes to deliver their presentation. We will start
with you, Mr. Todd. Andy, welcome to the Committee. If you
would please begin, we would appreciate it. We will do all
these testimonies, and then, after that, we'll open up
questions for the whole panel.
Mr. Todd.
STATEMENT OF ANDREW N. TODD, CHAIRMAN, NATIONAL PARK
HOSPITALITY ASSOCIATION, AND PRESIDENT/CEO, XANTERRA PARKS AND
RESORTS
Mr. Todd. Thank you, Mr. Chairman. I appreciate the
opportunity to be here and discuss the concession policy of the
national parks.
I personally have a high degree of interest in this topic,
since the concessions policies and regulations govern how
business is conducted in our parks, as well as how
concessionaires and the NPS interact and resolve issues.
I am President of Xanterra Parks and Resorts, who has 11
national parks, including the major contracts at Grand Canyon
and Yellowstone. I am also Chairman of the National Park
Hospitality Association, which is the primary trade association
for the concessionaires at national parks whose membership is
responsible for the bulk of the services provided in the parks.
I will submit written testimony and will try to touch on
the highlights of the written testimony here in the oral
presentation.
In regards to the 1998 Act, which, of course, the
regulations were written to interpret, I have a pretty strong
history. I participated in numerous meetings with former
Congressman Hansen, as well as Senator Thomas and his staff
when the bill was being drafted. I have also testified in prior
House and Senate hearings and discussed the concession
legislation and the related regulations.
Initially, when the regulations were finalized and released
in April of 2002, obviously I was very frustrated to see that
they were written in a manner which we thought was inconsistent
with the law, especially when we, as an association, had
submitted pages of comments regarding the regulations and the
problems they were going to create with the current law prior
to them being finalized during the public comment period.
Nonetheless, the leadership of the Park Service at that time,
under the old administration, ignored the comments primarily
and issued the regulations final anyway. So, unfortunately, 4
years later we're kind of in the same boat we were in then, and
that's having regulations that, in my opinion, are unworkable
in some key areas and contradict the underlying statute.
However, there has been a recent ray of hope and, under the
new administration, Fran Mainella, the Director of the Park
Service, has been very open and very cordial and expressed a
willingness, along with her staff, Cindy Orlando in particular,
to meet with the concessionaires and other key constituents to
try to resolve the issues in a timely way.
The most pressing issues have been the following: one, the
Leasehold Surrender Interest, which I want to give you a little
bit of a background on because, to me, it's warranted. That is,
of course, the term that created the old possessory interest
term, which was simply the methodology used to award and
compensate concessionaires for private investments in the
national parks. It was created in the 1998 Act to encourage
concessionaires to invest in the parks and guarantee them a
return on their investment.
Per the '98 Act, it was supposed to be pretty simple; that
was, if you invest capital improvements in the park, you were
supposed to get a return of CPI. One of the issues in the
discussions back then was the fact that possessory interest is
very complex and a hard topic to understand per the '65 Act
contracts. So it was supposed to, by creating LSI, which was a
new terminology they gave it, that was supposed to make it
simple. You invest a capital outlay in the park and it grows by
CPI, and who could argue, you know, about the CPI being an
unreasonable return.
One of the things that has been kind of discouraging to me
is the fact that, back when the law was being discussed years
ago, the '98 Act, one of the big things the concessionaires had
was preferential right of renewal, which was the right to match
anybody else's best off, and possessory interest, which was a
way to compensate you for your investment. Through all the
hearings and conferences in the House and Senate, it was
eventually determined--and Senator Thomas agreed, as well as
former Congressman Jim Hansen--that they would no longer allow
preferential right of renewal except for the guides and
outfitters in the contracts with less than $500,000 in revenue.
But what you would be entitled to is Leasehold Surrender
Interest.
So what, I guess, was troubling to me was, once the
regulations came out, it seemed like the one thing we got was
so diluted by its definition of what qualifies for Leasehold
Surrender Interest that you felt like even the piece that you
compromised on and got somehow disappeared.
I know Mr. Jones mentioned the fact that the law indicates
you're to be awarded Leasehold Surrender on new construction.
Of course, everybody knows the national parks, at 98 percent of
construction in the parks, is not all new built. It's on
existing structures. So if it only applied to that
specifically, it wouldn't even be an issue on probably 99
percent of the cases. But, of course, the issue comes is when
you're always investing in an existing structure, so the
question becomes, when you make that investment in a structure
that is existing, which is always the case, how do you account
for it and do you get credit for it?
So when some of the rules came out, including this 50
percent rule, saying if you have a $10 million structure, you
put $2 million in the roof, well, that's not 50 percent of the
10 million so it doesn't qualify. Of course, that seemed
ludicrous to concessionaires, thinking how could that possibly
have been the intent.
At all the meetings I was at when that was discussed, it
was always assumed that some kind of private sector measure
would be the determinant in whether something qualifies for
Leasehold Surrender Interest or not. So what I thought was a
pretty simple procedure, and was meant to be simple, has now
gotten somewhat complicated because the regulations have
figured out ways to carve out what that value wound up being.
Now, if you go to invest money in a park, you end up
sending the superintendent--as Randy mentioned, you send a
submission to the superintendent for the project and hope that
they bless it, but, quite frankly, that's complicated, because
by then you're already in the contract and you should know when
you're bidding on these things whether the capital you're going
to invest in the parks is going to be deemed LSI credit. If you
have to wait until specific projects throughout the term of
your contract determine that, that's very hard to bid and
assess the risk that you're dealing with.
I guess another major issue is that it was always assumed
that some kind of measure, such as GAAP or whatever, would end
up being the measurement for determining the value and what
qualifies. I guess I never dreamed there would be, nor do I
think the other concessionaires thought there would be, some
new Park Service definition of what qualifies for treatment of
capital improvements. So I'm not sure how that was determined.
I would hope it wasn't determine just to figure out a way to
make sure that LSI doesn't get big. The whole thing was, if you
want money to be invested in the parks, the government doesn't
have it, so you better get the private sector to do it, and if
they do, you're going to have to give them at least CPI credit
in return on that investment, which like I said doesn't seem
like that's an outrageous return to expect.
I guess the other issue that becomes a big issue is how do
you fix the problem. I know there's been discussions about
we'll fix that via a Director's order, which is simply a Park
Service Director's order and it doesn't go out for public
comment or review. You just simply issue it and that's the new
policy.
To me, this falls way short of what should be done, because
the issues we're talking about, like an LSI, for example, are
so critical to the law, to simply have a Director's order that
says it will work for a while--the question is, what if they
decide to change the Director's order a year or two from now,
or under another Director of the Park Service, it seems like
the years of this battling over legislation, that would be a
very uncertain way and wouldn't give me much assurance, to
think that if I sign a 15- or 20-year contract, wondering what
happens in year three of that contract, do they change the
Director's order back to something else. So, in my opinion, you
have to fix the regulations. I'm adamant about that. You have
to fix the regulations on these things that are so different
than the actual statute. The Director's orders are too tenable
and not permanent enough to give any assurance.
The other big issue that we discussed. The advisory board
is underway, as you know, having meetings with the working
group of several constituents, and certainly the Park Service
has been open so far to hearing everyone's discussion. I'm
really not sure, to be honest, ultimately how decisions will be
made in that group. The advisory board is just as it says, an
advisory board. I know that a lot of those members don't have
the history and the experience to know how to resolve the
issues, especially if one person says fix it via a Director's
order, or the concessionaires say change the regulations, the
Park Service says Director's order, I'm not sure who's going to
make that call, quite frankly. So the advisory board is good,
but you can kind of see we're progressing along and you're
wondering how you're eventually going to reach a decision and
how is it going to be shaped when all is said and done to reach
consensus, or if there isn't a consensus, who's going to make
the final call on how it is resolved.
The other issue is cross collateralization--
Mr. Radanovich. Mr. Todd, if you could wind it down, too. I
do want to hear your other issue, we're a little over 5
minutes.
Mr. Todd. Actually, I'm fine.
Mr. Radanovich. We'll be happy to hear you. Take another
minute.
Mr. Todd. On cross collateralization, that was simply an
issue of pledging more assets or contracts as security for a
loan, for a single loan, in order that the lender would then
have a bigger diversification of risk on their portfolio and
give you a better interest rate. So I think we're very close
with the Park Service in resolving that issue.
But somehow, when the regulations came out, some of the
legal experts for the association felt like the regulations
were prohibiting you from pledging, if you're a multiple park
operator, from pledging more than one contract to a single
loan, which, of course, if you have ten contracts, for example,
or like our case, ten, and you end up having to get a loan, you
don't want to have to go get a loan for every single contract,
one by one, because, quite frankly, some of the contracts are
losers and don't make any money and no one will give you a loan
for that. So the only way for it to make any sense would be to
pledge the whole thing as a blanket loan and diversify the risk
both for ourselves and for the lender. So that's an issue that
I think we're reaching a good conclusion on that. The only
question, again, is whether you do it via Director's order or
through the regulation.
Thank you.
[The prepared statement of Mr. Todd follows:]
Statement of Andrew N. Todd, Chairman, National Park Hospitality
Association, and President/CEO, Xanterra Parks & Resorts
Mr. Chairman, I am pleased to have been invited to your important
oversight hearing on concessions policy in our National Parks. I hereby
submit my written testimony for the record. As Chairman of the Board of
Directors of the National Park Hospitality Association (``NPHA''), I
represent a membership that is responsible for most of the visitor
services provided by the private sector in our National Parks.
I am also President and CEO of Xanterra Parks & Resorts, which
operates both large and small commercial enterprises that benefit park
visitors. I also have substantial prior experience in real estate
investment and finance.
I. Introduction
The primary purpose of our participation in these hearings is to
bring the Committee up to date on efforts to reconcile problems that
have emerged in the wake of the passage of the National Parks Omnibus
Management Act of 1998 (the ``1998 Act''). Although generally these
relate to the regulations and form contracts that the National Park
Service (``NPS'') has promulgated that were supposed to be written to
interpret and implement the 1998 Act, there are other important issues
that deal with the administration of concessions contracts generally
that should be brought to your attention and that are identified below.
The regulations (the ``Regulations'') are embodied in 36 C.F.R.
Part 51, and the three separate form contracts that the NPS has drafted
(the ``Standard Contracts'') were adopted by the agency and published
in the Federal register on May 4, 2000, and July 19, 2000. To our
knowledge, one of the Standard Contract forms has formed the basis for
each prospectus issued by the NPS under the 1998 Act.
I have previously appeared before this Subcommittee on a number of
occasions. Most recently, on February 10, 2000, I appeared to protest
the published proposals of the NPS that largely resulted in the
Regulations and Standard Contracts a few months later. My written
testimony to that hearing (as well as the written testimony of another
NPHA member, Terry Povah) gives an overview of the history of
concessions, the goals and accomplishments of the 1998 Act and the
industry's primary objections to the Regulations and Standard Contracts
and the reasons for those objections. Although some of that information
concerning specific issues is repeated below, I refer any interested
members to the written testimony we provided at that previous hearing
for a more in depth treatment of the general purposes behind the 1998
Act and the historical background.
It is no secret that the debate leading up to the passage of the
1998 Act was spirited and divisive. For our industry, these debates
amounted to nothing less than a battle for the survival of a viable
concession program in the parks. Although much of the debate centered
on whether concessioners who had faithfully performed under their prior
contracts should be entitled to retain the preferential renewal rights
they enjoyed under the prior law, many other issues had a potentially
devastating impact on the ability of concessioners to earn a reasonable
profit on their operations and investments. Some, we felt, would force
many prospective bidders for contracts, including incumbents, to
examine whether they could undertake the potential risks as a result of
bidding on a concession opportunity. These risks could impair their
non-concession businesses, to the extent the NPS sought rights that
went beyond the contracts, or could simply arise from the uncertainty
associated with ambiguous regulations and contract terms. The result
was that the 1998 Act included compromises on many of these issues.
Although Senator Thomas moved a long way toward the position of the
prior administration and sponsors of competing legislation in crafting
a compromise, the prior administration was not content with the partial
victories it won on some issues and crafted the Regulations and
Standard Contracts with a view toward imposing restrictions on
concession contracts that it had fought for in the debates but had not
achieved. The most negotiated trade-off concerned Sen. Thomas' decision
to terminate the preferential right of renewal for larger contracts,
but preserve (in modified form) the right of the concessioner to
receive a modest return on its invested capital by replacing the
previous concept of possessory interest with a new valuation formula,
called leasehold surrender interest (``LSI''), that was designed to fix
the return at cost as adjusted for inflation, thereby decreasing the
uncertainty and potential for disputes concerning the valuation of
these interests.
As a consequence, there remain many provisions of these important
documents that do not honor either the explicit provisions or the
intent of the 1998 Act. The NPHA and certain of our members found it
necessary to challenge some of these provisions in court, resulting in
over 2 years of expensive litigation that culminated in a Supreme Court
argument on one issue earlier this month. Although the decisions of the
courts so far and certain representations of the NPS made during the
proceedings have clarified some of the matters challenged by the NPHA,
others matters in dispute were not decided by the courts, either
because the courts did not find them ``ripe'' for review, or because
the NPHA did not raise them in the litigation due to their sheer
number. Thus, we believe there is much remaining work to do to
normalize NPS regulations and contracting procedures with the goals
that Congress was trying to achieve in passing the 1998 Act.
That being said, I am happy to report that the NPHA and its members
enjoy a much better relationship with the NPS since Fran Mainella has
taken her place and built her staff. It has been refreshing for our
members to hear that public access to our parks and the provision of
quality services to park visitors is again a priority of the NPS and
that the NPS again considers its partnership with concessioners as
among the most important of its strategic relationships. It is also a
hopeful sign that the NPS has chosen to seek out professional
consultants (PricewaterhouseCoopers) to help in assessing its business
relationships. While the NPS has as impressive staff dedicated to the
protection of park resources, many--including members of this
Subcommittee and the NPS itself--have acknowledged that NPS employees
do not have the necessary business and financial backgrounds to
adequately deal with the agency's commercial relationships. Although
the NPS has been working toward improving its staff in this area, we
believe that outsourcing many of these functions will move the agency
more quickly along the path to fixing the problem. If we can engage in
dialogue with people who have a working understanding of return on
investment and the financial markets, and realize that reducing
financial incentives in one area necessitates a compensating
enhancement of incentives in others, the process has a better chance of
succeeding and the parks will benefit. One must remember that each
contract is the result of a solicitation process and that bids will
reflect the overall returns that the bidders require, which will to a
large extent depend on the risks that the contract and the regulations
place on the operator. Because of the hundreds of contracts that are in
the pipeline, the sooner that these matters can be resolved, the
better.
I have been assured by Director Mainella and persons at various
other levels of the NPS that they intend to address the problems
created by the Regulations and Standard Contract. In that regard,
through the auspices of a task force assembled by the National Park
Service Concessions Management Advisory Board (the ``Board''), there
have been two preliminary meetings among various constituencies to
identify some of the more-important issues and try to devise a
framework for resolving them.
However, although we have agreed to participate in these meetings,
in the final analysis, solutions need to be crafted that comply with
the law, create certainty among concessioners, reflect standard
business practices, encourage the improvement of visitor services
(including operations and facilities), increase administrative
efficiency, and reduce bureaucracy and wasteful disputes between the
government and its contractors. We believe that the top levels of the
NPS embrace each of these goals as well.
To the extent that the solutions proposed do not achieve these
goals, we will not hesitate to continue to identify failures in the
process and seek help from this Committee if needed. In that regard,
the encouragement of this Subcommittee to address these issues promptly
and to facilitate legislative fixes where the regulatory and
contracting process has failed would be most welcome.
II. Key Challenges
A. As indicated above, several of the issues that were the subject of
litigation between NPS and NPHA were not fully resolved by the courts.
Accordingly, Director Mainella is working with NPHA and other
interested parties to attempt to cooperatively resolve these issues and
others of importance. The key areas currently being discussed are: (a)
measurement and assignment of leasehold surrender interests; (b) cross-
collateralization of concessioner financing arrangements across
multiple contracts; (c) NPS oversight of transactions that affect the
ownership of a concession contract or a concessioner; (d) improvement
and simplification of the rate approval process; and (e) attempting to
devise a long-term strategy on how best to provide services in parks
where the economics don't support the existing contract structure.
B. Leasehold Surrender Interests (``LSI''):
1. LThe key element of these discussions, and that of greatest
interest to both NPS and concessioners, is how LSI will be handled
under 1998 Act contracts. As you know, LSI was developed to provide the
concessioners with investment protection in concession facilities in
order to attract bidders to National Park contract opportunities.
However, concessioners believe there are several critical areas where
changes are necessary. Because all of the provisions of the Regulations
relating to LSI are interconnected, we believe that there are edits
required to a significant number of those Regulations to conform them
to the law (including the matters resolved in the litigation) and
improve the administration of concession contracts in this area.
Conforming changes would also need to be made to the Standard Contract
forms.
The primary LSI-related issues are:
a. Definitions of Capital Improvements, including the 50% rule
1. LWhile certain sections of the Regulations correctly call
for Generally Accepted Accounting Principles (``GAAP'') to be
used as the benchmark to determine whether costs should be
accorded LSI treatment, there are provisions in Sec. 51.51 that
are contrary to GAAP, such as the rejection of building
materials for capital improvement eligibility except when
initially installed as part of a structure or where the 50%
rule is met. Thus, for example, the conversion of a dormitory
to guest lodging, though costing millions of dollars, would not
necessarily be considered a capital improvement eligible for
LSI treatment. In that case, only if the conversion cost
represented at least 50% of the pre-conversion value using a
replacement cost standard would LSI treatment be accorded to
the conversion. This limitation has been termed the ``50%
Rule''. Thus, common--and sorely needed--renovations,
rehabilitations, and other capital improvement projects in our
National Parks often would not qualify for LSI treatment.
Fortunately, the discussions of the task force convened by the
Board indicate that both NPS and the concessioners are in
agreement that the 50% Rule should be eliminated. NPHA wants to
ensure that this change and related changes to Section 51.51--
51.66 of the Regulations are made in a more permanent manner
through modification of the Regulations and Standard Contract
language, rather than through a less permanent solution such as
a Director's Order, the solution preferred by the NPS.
Employing a Director's Order in the face of published
regulations that reach an inconsistent result would at best
create ambiguity and confusion and at worst be void as being a
policy position that is inconsistent with the published
regulations. Moreover, a Director's Order can be easily
modified by the NPS without notice and comment rulemaking and
thus may only be a temporary accommodation. A temporary
solution is unacceptable to the NPHA, since our membership
could not rely upon it. Although the NPHA acknowledges that
modification of the Regulations will entail additional effort
and time, it is critical that the published Regulations in the
C.F.R. are clear, workable, well-reasoned, and in compliance
with the law. Therefore, we are against efforts to solve any of
these issues through Director's Orders where they have already
been addressed by Regulations.
b. Prevailing cost ceiling
1. LThe Regulations also purport to restrict the LSI values to
``amounts that are no higher than those prevailing in the
locality of the project'', which is not a requirement of the
1998 Act. This means the NPS could set LSI values on the basis
of lower construction costs in metropolitan communities outside
the National Parks, even though the cost of construction in
remote park areas could be much higher. The litigation
established that this limitation only pertains to a comparison
with other in-park projects, which of course are already
subject to strict regulation by the NPS. Thus the limitation in
the Regulations doesn't make sense. Since concessioners have no
incentive to ``overpay'' for a project in the hopes of
receiving LSI that will only grow by CPI, this restriction will
only serve to impose a needless bureaucratic step for each
project and create confusion and disagreement between the
parties. It should be eliminated.
c. LSI credit for amounts funded through Reserve Accounts
1. LThere has been considerable discussion about whether
capital improvements, determined in accordance with GAAP but
which are funded from reserve accounts established under new
contracts to fund key renovation projects, should be accorded
LSI treatment. The statute requires that all in-park capital
improvements funded by a concessioner be entitled to LSI. The
NPS position (evidently supported by its consultant,
PricewaterhouseCoopers (``PwC'')) is that moneys spent out of
reserve accounts should not be entitled to LSI since they
should, theoretically at least, be identified in the prospectus
as likely to occur during the contract term. We believe PwC's
position to be that any dollars invested through a reserve
account have been theoretically factored into their financial
analysis when modeling the final scenario that goes to bid. To
us, that is a different issue than whether the expenditures are
entitled to LSI. Under the 1998 Act, capital improvements made
by concessioners are entitled to LSI credit without regard to
how concessioner funds may be segregated under the contract.
Although a bidder indeed will make projections relating to all
recurring and non-recurring expenditures, whether capital in
nature or not, to the extent that a contract would attempt to
deprive capital investment of LSI credit, the result would be
lower bids (or none at all if the contract could not be
economically justified as a result). If an investment is funded
by concessioners and it qualifies under GAAP as a capital
improvement, NPHA believes it should be assigned LSI just like
any other investment. We have no objection to the NPS
establishing reasonable reserves, but they should be generally
limited to repair and maintenance expenditures that are not
capitalized under GAAP. In cases where the NPS would also
require reserves for capital items, which generally is not a
good idea because this would increase financing costs under the
contract since they would not result in collateral to the
lender, they should be separate from the repair and maintenance
reserve.
2. LIn our on-going discussions, NPS has emphasized that there
should only be occasional or isolated instances where an LSI
determination needs to occur. On the other hand, NPHA believes
these instances will occur on a more routine basis as capital
investment generally occurs throughout a contract term. Since a
consistent approach across all contracts would be desirable,
NPHA believes that a framework should be set up to resolve
these instances simply and efficiently. Possibly a recognized
accounting firm such as PwC, acting both in a dual role as NPS'
asset manager and as an independent financial expert, could
serve to confirm that the costs that are capitalized by
concessioners under GAAP are in fact entitled to LSI. This
could lead to long-term consistency and stability so that both
NPS and concessioners would benefit from having a hopefully
simple set of procedures that would be used to evaluate these
critical on-going decisions for both parties.
C. Cross-collateralization
1. LCross-collateralization means the use of multiple assets or
contracts to provide security for a single or separate loans made by a
single lender for the purchase or other investment in (or to provide
working capital for) those or other assets. It reduces a borrower's
financing costs through the more efficient use of assets by allowing a
lender to diversify its collateral and reduce its risk.
2. LNPHA, NPS, and PwC have had many discussions over the financial
benefit to the concession system of allowing concessioners with
multiple contracts to finance them through a ``bundled'' approach,
thereby lowering the cost of borrowing to the concessioners. All
parties appear to be in agreement that this is desirable. However,
although not prohibited by the 1998 Act, NPHA believes that Section
51.87 of the Regulations may prohibit this. NPS has proposed issuing a
Director's Order that would clarify that this is permissible, but since
the Regulations could override this Order if NPS changed its mind in
the future, NPHA believes this should be clarified and memorialized in
an amended Regulation.
D. Shareholder Level Transactions
1. LThis issue is also of critical importance to any concessioner
that is part of an affiliated group of companies or that engages in
businesses other than National Park concessions.
2. LAlthough, it may be understandable for the NPS to want as broad
approval rights as possible over transactions involving changes in
ownership of concessioners and their owners, Congress recognized that
regulating shareholder behavior would reduce bidding interest and
create enormous risks to affiliated organizations. NPS and NPHA have
been working to clarify under what conditions approval by NPS is
necessary. There is agreement that clarification is advisable and the
NPHA is optimistic that the NPS will ultimately agree on a solution
that complies with the law. However, NPS again prefers to issue a
Director's Order that would provide guidance, whereas the NPHA believes
that the Regulations should be amended to remove the sections that
exceed the scope of NPS authority under the 1998 Act.
E. Rate Simplification
1. The statute requires that the rate approval process ``shall be
as prompt and as unburdensome to the concessioner as possible''. Some
progress is being made in the area, most notably the food service
``core menu'' concept. This concept provides that a key list of items
should be included in a concessioner's menu and reviewed by NPS to
ensure that they are priced appropriately. For all other menu
offerings, the concessioner would have the flexibility to design the
offering and establish a reasonable price. This would allow for more
variety and innovation in menus since there would be no administrative
overhead outside the core menu requirements.
2. Very preliminary discussions have begun on how this ``core''
concept might be applied to lodging, but nothing firm has been
determined. The NPHA has long argued that the current ``comparability''
approach employed by the NPS is seriously flawed. If a ``core'' concept
can be implemented that would permit non-core lodging units to better
reflect market conditions, both the NPS and concessioners would
benefit, and bureaucracy can be virtually eliminated in this
contentious area.
3. Discussions are also underway on how retail pricing mechanisms
might be improved to streamline this process as well.
F. Unprofitable Concession Contracts and Fee Reductions
1. The NPHA is concerned about the viability of visitor services
at some of the smaller parks. Lower visitation, coupled with dramatic
increased in operating expenses such as the cost of energy,
administrative requirements under our contracts and all forms of
insurance, have made many concession operations unprofitable. Normally
a concessioner would be able to bid a lower fee upon renewal to
compensate for these problems, but this does not provide relief under
an existing contract. The contracting backlog has resulted in countless
extensions of the old contracts. For example, my company's contract at
Stovepipe Wells in Death Valley, California expired in 1985 and is
presently still operating on a year-to-year extension. Of course, a
concessioner could simply walk away from an unprofitable expired
contract, as occurred at Oregon Caves, but then that would leave the
NPS in a difficult situation to try and find a temporary operator for
an unprofitable concession contract. However, most concessioners are
not looking to dissolve the long-term relationships they've established
with visitors, their employees, and the NPS. Nonetheless, years of net
losses at operations such as Stovepipe Wells, combined with significant
Concessioner investment under the pre-1998 Act contracts, even where
the Concessioner doesn't have possessory interest in the improvements,
has created an untenable situation.
2. The NPHA understands that the contract backlog will not be
cleared for some time, and we believe the volume of open RFPs should be
maintained at a manageable level. Therefore, in the interim we think it
would be in the mutual interest of concessioners and NPS to review the
fees paid at parks such as Death Valley, Petrified Forest, Everglades,
and other unprofitable parks to determine whether fee relief would be
appropriate during the extension period. The involvement of PwC could
be very helpful in designing a streamlined process that would be
efficient, fair, and consistent.
3. In some cases fee relief alone may not be enough. Appropriated
funds are needed to address deferred maintenance at government owned
facilities such as Flamingo Lodge in the Everglades. Contractually
required concessioner capital (that would be entitled to LSI credit)
may be able to address some of the deficiencies at these parks, but the
economics of many of these properties may nevertheless produce
insufficient returns to attract an operator, even with no fee. In those
cases, government appropriations to make necessary improvements may be
the only solution, unless private donations could be found.
Thank you for the opportunity to participate in this important
hearing.
______
Mr. Radanovich. You're welcome. And we'll have a chance to
talk about other things during the Q&A, too, if there is
something that's missing there.
Mr. Fears from Delaware North. Welcome. Please begin your
testimony. You have 5 minutes.
STATEMENT OF BRUCE W. FEARS, PRESIDENT, DELAWARE NORTH
COMPANIES PARKS AND RESORTS, INC.
Mr. Fears. Mr. Chairman and members of the Subcommittee,
thank you for giving me the opportunity to testify on the
status of the National Park Concessions Management Program.
My name is Bruce Fears. I am the president of Delaware
North Companies Parks & Resorts, Inc., a subsidiary of Delaware
North Companies, Inc., a Buffalo, NY based company that
provides food service, hospitality and recreation services as
parks, attractions, professional sports facilities and
airports. As such, I oversee a $300 million operation which
includes contracts at four national parks: Yosemite, Sequoia,
Grand Canyon and Yellowstone, as well as the Kennedy Space
Center, the U.S. Mint, and various state parks throughout the
United States. Delaware North also owns and operates several
resort properties.
My experience with national parks spans more than 30 years.
I grew up near Shenandoah National Park where my mother and
father earned their livelihood working for a small company that
managed the park's concessions. When my brothers and I were old
enough, we helped them, learning the business from the ground
up. Following my graduation from college, I joined ARAMARK,
where I spent 20 years in concessions management, including
working with many National Park Service contracts. I came to
Delaware North as vice president of operations in 1996, just
several years after the company entered the parks concessions
business.
This afternoon, I would like to speak about the effect that
the National Park Service Concessions Management Improvement
Act of 1998 and the resulting increased competition for
national park contracts have had on the quality of the bids
that are being presented.
Yosemite was Delaware North's first national park contract.
Then legislation gave preferential right of renewal to
incumbent concessionaires. However, through an unusual set of
circumstances, the contract was open to bids. Delaware North
competed against four other companies, winning the bid and
entering into a partnership with the National Park Service that
became not only a model, but also the impetus for change.
Through our work at Yosemite, Delaware North demonstrated
it was possible to enhance visitor services, protect public
lands, and provide an attractive rate of return to the
government. Indeed, in less than 10 years of operation at
Yosemite, we have spent approximately $140 million on capital
improvements and buyout of the previous concessionaire's
possessory interest. In all, we have returned about 17 percent
of revenues to the National Park Service. The previous
concessionaire was returning less than 1 percent.
The story is similar at Sequoia, where in the first 4 years
of operation, Delaware North reinvested an astounding 77
percent of revenues, including a $14 million investment in the
design and construction of Wuksachi Lodge.
Our dedication to the national parks in our care transcends
our financial contributions in a most profound way. GreenPath,
our system of environmental management, is a clear indication
of the importance we place on environmental stewardship.
GreenPath has won awards and earned registration to the
rigorous standards established by the International
Organization for Standardization, a first for a U.S.
hospitality company or park concessionaire. We are proud of our
accomplishments and prouder still that we have inspired some of
our competitors to follow suit.
Using these examples and others like them to support our
claim, we lobbied for the National Park Service Concessions
Management Improvement Act of 1998. Since its passage, we have
seen many cases in which the National Park Service is being
offered stronger, more competitive bids. I might add that these
bids did not always unseat the incumbent or benefit Delaware
North, for that matter. But they did give interested parties an
opportunity to bid, and the National Park Service a choice.
For example, Delaware North and two other companies pursued
the Crater Lake contract. Delaware North did not win the bid.
Two companies bid on the Acadia contract, which the incumbent
retained. Interestingly, Delaware North was considering the
request for proposal, but after reviewing the work that was
being done at Acadia, we decided there was little we could do
to improve on the current concessionaire's performance.
Finally, there were three bids for Yellowstone's retail
contract, which Delaware North subsequently won.
I cannot speak about our competitors' bids because I am not
privy to them, but I can tell you that Delaware North won the
Yellowstone contract as a result of a fair and aggressive rate
of return to the government, our record of environmental
management, and a plan that includes extensive renovation and
restoration of the park's retail stores.
As a result of the National Park Service Concessions
Management Act of 1998, we now have better proposals, where
capital improvement funds, fair rates of return, and innovative
interpretive and environmental management programs are the
norm. Our current climate encourages qualified bidders to
invest the time and money necessary to prepare a competitive
bid, whereas the preferential right to renew proviso contained
in 16 USC was a disincentive.
Incidentally, we are comfortable with the protection given
to concessionaires with contract valued at $500,000 or less,
understanding that it helps establish a level playing field for
all. Conversely, there are many contracts valued at less than
$5 million that are controlled by large corporations and should
be put out to bid in the interest of giving the National Park
Service solid, competitive bids.
Professionally and personally, we believe strongly in the
importance of sharing National Park Service business with many
companies, large and small, and awarding contracts based on the
strength of the bids and on the ability of each concessionaire
to respond to the unique needs of each park. No National Park
Service effort, or legislation in its behalf, has brought more
to bear on the level of returns to the U.S. Government and its
taxpayers, or on the preservation and enhancement of our
national treasures.
Thank you for your time and attention. I am happy to answer
questions.
[The prepared statement of Mr. Fears follows:]
Statement of Bruce W. Fears, President,
Delaware North Companies Parks & Resorts, Inc.
Mr. Chairman and members of the Subcommittee, thank you for giving
me the opportunity to testify on the status of the National Park
Service concessions management program. My name is Bruce Fears. I am
the president of Delaware North Companies Parks & Resorts, Inc., a
subsidiary of Delaware North Companies, Inc., a Buffalo, N.Y.-based
company that provides food service, hospitality and recreation services
at parks, attractions, professional sports facilities and airports. As
such, I oversee a $300 million operation that includes contracts at
four national parks: Yosemite, Sequoia, Grand Canyon and Yellowstone,
as well as at Kennedy Space Center, the U.S. Mint and various state
parks throughout the United States. Delaware North also owns and
operates several resort properties.
My experience with national parks spans more than 30 years. I grew
up near Shenandoah National Park where my father and mother earned
their livelihood working for a small company that managed the park's
concessions. When my brothers and I were old enough, we helped them,
learning the business from the ground up. Following my graduation from
college, I joined ARAMARK where I spent 20 years in concessions
management, including working with many National Park Service
contracts. I came to Delaware North as Vice President of Operations in
1996, just several years after the company entered the parks
concessions business.
This afternoon, I would like to speak about the effect that the
National Park Service Concessions Management Improvement Act of 1998
and the resulting increased competition for national park contracts
have had on the quality of the bids that are being presented.
Yosemite was Delaware North's first national park contract. Then
legislation gave preferential right of renewal to incumbent
concessionaires. However, through an unusual set of circumstances, the
contract was open to bids. Delaware North competed against four other
companies, winning the bid and entering into a partnership with the
National Park Service that became not only a model, but also the
impetus for change.
Through our work at Yosemite, Delaware North demonstrated that it
was possible to enhance visitor services, protect public lands and
provide an attractive rate of return to the government. Indeed, in less
than 10 years of operation at Yosemite, we spent approximately $140
million on capital improvements and buyout of the previous
concessionaire's possessory interest. In all, we returned about 17
percent of revenues to the National Park Service. The previous
concessionaire was returning less than 1 percent. The story is similar
at Sequoia, where in the first four years of operation, Delaware North
reinvested an astounding 77 percent of revenues, including a $14
million investment in the design and construction of the Wuksachi
Lodge.
Our dedication to the national parks in our care transcends our
financial contributions in a most profound way. GreenPath, our system
of environmental management, is a clear indication of the importance we
place on environmental stewardship. GreenPath has won awards and earned
registration to the rigorous standards established by the International
Organization for Standardization, a first for a U.S. hospitality
company or parks concessionaire. We are proud of our accomplishments
and prouder still that we have inspired some of our competitors to
follow suit.
Using these examples and others like them to support our claim, we
lobbied for the National Park Service Concessions Management
Improvement Act of 1998. Since its passage, we've seen many cases in
which the National Park Service is being offered stronger, more
competitive bids. I might add that these bids did not always unseat the
incumbent or benefit Delaware North, for that matter. But they did give
interested parties an opportunity to bid, and the National Park
Service, a choice.
For example, Delaware North and two other companies pursued the
Crater Lake contract. Delaware North did not win the bid. Two companies
bid on the Acadia contract, which the incumbent retained.
Interestingly, Delaware North was considering the Request for Proposal,
but after reviewing the work that was being done at Acadia, we decided
there was little that we could do to improve on the current
concessionaire's performance. Finally, there were three bids for
Yellowstone's retail contract, which Delaware North subsequently won.
I cannot speak about our competitors' bids because I am not privy
to them, but I can tell you that Delaware North won the Yellowstone
contract as a result of a fair and aggressive rate of return to the
government, our record of environmental management, and a plan that
includes extensive renovation and restoration of the park's retail
stores.
As a result of the National Park Service Concessions Management Act
of 1998, we now have better proposals, where capital improvement funds,
fair rates of return, and innovative interpretive and environmental
management programs are the norm. Our current climate encourages
qualified bidders to invest the time and money necessary to prepare a
competitive bid, whereas the preferential right to renew proviso
contained in 16 USC was a disincentive. Incidentally, we are
comfortable with the protection given to concessionaires with contracts
valued at $500,000 or less, understanding that it helps establish a
level playing field for all. Conversely, there are many contracts
valued at less than $5 million that are controlled by large
corporations and should be put out to bid in the interest of giving the
National Park Service solid, competitive bids.
Professionally and personally, we believe strongly in the
importance of sharing National Park Service business with many
companies--large and small--and awarding contracts based on the
strength of the bids and on the ability of each concessionaire to
respond to the unique needs of each park. No National Park Service
effort--or legislation in its behalf--has brought more to bear on the
level of returns to the U.S. government and its taxpayers, or on the
preservation and enhancement of our national treasures.
Thank you for your time and attention. I am happy to respond to
questions.
______
Mr. Radanovich. Thank you, Mr. Fears. We'll keep questions
for the whole panel after everybody has been given a chance to
speak.
Up next is Mr. David Woodside, president and general
manager of Acadia Corporation, Bar Harbor, ME. Mr. Woodside,
welcome, and please begin.
STATEMENT OF DAVID B. WOODSIDE, VICE CHAIRMAN, NATIONAL PARK
HOSPITALITY ASSOCIATION AND PRESIDENT AND GENERAL MANAGER, THE
ACADIA CORPORATION
Mr. Woodside. Thank you.
Mr. Chairman and members of the Committee, my name is Dave
Woodside. I am the president and general manager of the Acadia
Corporation, a small, locally owned company which has operated
concessions in Acadia National Park since 1932. My company
recently received a new 10 year contract that was awarded in a
competitive bid under the new guidelines established in the
1998 Concessions Act.
As a small concessions and officer of the National Park
Association, I am here to testify on behalf of the small,
independent, locally owned concessioners. With the passage of
the new law in 1998, and the loss of preference for companies
over $500,000 in revenues, many small companies in the one to
five million dollar range question whether Congress and the
National Park Service envision any future for them in the
concessions business.
The 1998 Concessions Act has created many new challenges
for small concessioners, including competitive bidding, an
unpredictable, costly and labor-intensive contract proposal
process, and a loss of investment security.
Out of the 590 concession contracts, less than 50 exceed $5
million in gross revenues. With the granting of renewal
preference to those contracts under $500,000 in annual
revenues, a number of small, locally owned concessioners were
left in the gap between those over $5 million and those under
$500,000. Five million dollars of revenues is not a large
business by any stretch of the imagination. I would advocate
allowing the National Park Service the option of granting a
renewal preference to small, local concessioners who have
demonstrated a high degree of competency in operating their
park concession.
The current contracting process has occurred on a very
unpredictable schedule. In my own case, I received a 1-month
notice that our contract prospectus was to be released,
followed by 60 short days, in the height of our operating
season, to prepare our response. In order to provide all the
required information, our response exceeded 700 pages. The
magnitude of the response effort, coupled with the short
response time, is very daunting to any bidder, but is
especially difficult for smaller operators who have limited
managerial personnel to prepare a bid. I would advocate a more
streamlined contract response, a definitive contract
publication and release schedule giving concessioners
sufficient advance of solicitation release, and an adequate
off-season response time for smaller contracts.
New contract requirements for additional investments are
subject to the cumbersome process of the Leasehold Surrender
Interest provisions of the National Park Service regulations,
which in most cases do not reflect terms of the 1998 law.
Clearly, these regulations do not follow the guidance that
Congress set forth in the law, indicating that the National
Park Service should institute procedures that are as
unburdensome and efficient as possible.
Simply tying LSI value to those that are capitalized under
Generally Accepted Accounting Principles is consistent with the
law, consistent with a concessioner's financial reporting
procedures, and would be easily understood and administered
both by the concessioners and the National Park Service. In
order for smaller concessioners to carry on their park
operations, a fair, equitable and less complex system is needed
to secure concessioners' investments.
I firmly believe that there is a role in national park
concessions for business diversity through small, well-managed,
locally based companies. Companies whose interests reside in
the local park and communities, where decisions are made onsite
and the overall good of the park is paramount.
Thank you for the opportunity to testify before your
Committee. I will be happy to answer any questions.
[The prepared statement of Mr. Woodside follows:]
Statement of David B. Woodside, Vice-Chairman, National Park
Hospitality Association, and President and General Manager, The Acadia
Corporation
Mr. Chairman and Members of the Committee, my name is Dave
Woodside. I am the President and General Manager of the Acadia
Corporation, a small locally-owned company which has operated
concessions in Acadia National Park since 1932. My company recently
received a new ten-year contract that was awarded in a competitive bid
under the new guidelines established of the 1998 Concessions Act.
As a small concessions and officer of the National Park Hospitality
Association, I am here to testify on behalf of the small, independent,
locally-owned concessioners. With the passage of the new law in 1998
and the loss of preference for companies over $500,000 in revenues,
many small companies in the $1 to $5 million range question whether
Congress and the National Park Service envision any future for them in
the concessions business.
The 1998 Concessions Act has created many new challenges for small
concessioners including competitive bidding, an unpredictable, costly
and labor-intensive contract proposal process, and a loss of investment
security.
Out of the 590 concession contracts, less than 50 exceed $5 million
in gross revenues. With the granting of renewal preference to those
contracts under $500,000 in annual revenues, a number of small locally-
owned concessioners were left in the gap between those over $5 million
and those under $500,000.
Five million dollars of revenues is not a large business by any
stretch of the imagination. I would advocate allowing the National Park
Service the option of granting a renewal preference to small, local
concessioners who have demonstrated a high degree of competency in
operating their park concession.
The current contracting process has occurred on a very
unpredictable schedule. In my own case, I received a one month notice
that our contract prospectus was to be released followed by sixty short
days in the height of our operating season to prepare our response. In
order to provide all the required information, our response exceeded
seven hundred pages. The magnitude of the response effort coupled with
the short response time is very daunting to any bidder but is
especially difficult for smaller operators who have limited managerial
personnel to prepare a bid. I would advocate a more streamlined
contract response, a definitive contract publication and release
schedule giving concessioners sufficient advance of solicitation
release, and an adequate off-season response time for smaller
contracts.
New contract requirements for additional investments are subject to
the cumbersome process of the leasehold surrender interest (LSI)
provisions of the NPS regulations, which in most cases do not reflect
terms of the 1998 law. Clearly these regulations do not follow the
guidance that Congress set forth in the law indicating that the NPS
should institute procedures that are as un-burdensome and efficient as
possible. Simply tying LSI value to those costs that are capitalized
under Generally Accepted Accounting Principles (GAAP) is consistent
with the law, consistent with a concessioner's financial reporting
procedures and would be easily understood and administered both by
concessioners and the NPS. In order for smaller concessioners to carry
on their park operations, a fair, equitable, and less complex system is
needed to secure concessioners' investments.
I firmly believe that there is a role in national park concessions
for business diversity through small, well-managed, locally-based
companies. Companies whose interests reside in the local park and
communities, where decisions are made on site, and the overall good of
the park is paramount.
Thank you for the opportunity to testify before your Committee, I
would be happy to answer any questions.
______
Mrs. Cubin. [Presiding.] Thank you, Mr. Woodside.
It is now my pleasure to introduce a Wyoming constituent,
Jennifer Lamb, representing the National Outdoor Leadership
Schools, or NOLS as we call it, which is headquartered in
Lander, WY.
Back in 1965, the founder of NOLS, Paul Petzoldt, saw the
need for a school that specifically trained people to be
skilled outdoor leaders and educators. With hard work and great
determination, this small businessman from Wyoming built a
global network of wilderness training, growing from 100
students in 1965 to over 3,000 this past year. In the last 37
years, NOLS has become the worldwide leader in wilderness
education, as the largest back country permit holder in the
United states, running courses on five continents.
In 2001, the crew from the space shuttle Columbia spent 11
wonderful days hiking through Wyoming's Wind River Mountains,
learning the lessons of wilderness and teamwork through a
partnership between NASA and NOLS. The heroic crew left behind
a patch at the top of the Wind River Peak memorializing their
visit. They also left behind new friends at NOLS, who will
never forget them. I know Jennifer can address that experience
a lot better.
Mr. Petzoldt's vision from 1965 is still true today: take
ordinary people into the back country for a lengthy period of
time, teach them the skills that are required of a strong
leader, and when their time is over, they will take the lessons
they learned in the wilderness back to their jobs and families
and they'll be stronger and better people and leaders for that.
This is the experience that NOLS provides every day to its
students.
I really look forward to your testimony, Jennifer, and I
would now like to recognize Ms. Lamb.
STATEMENT OF JENNIFER LAMB, PUBLIC POLICY DIRECTOR, NATIONAL
OUTDOOR LEADERSHIP SCHOOL
Ms. Lamb. Mrs. Cubin, thank you very much for that kind
introduction. Mr. Souder, I thank you for allowing me the
opportunity to be here today. Good afternoon.
My name is Jennifer Lamb and I represent the National
Outdoor Leadership School, as Mrs. Cubin just described. I
appreciate the opportunity to be here. NOLS is a nonprofit,
experiential education institution, and for 38 years, as you
mentioned, we have conducted extended back country expeditions
for students of all ages, teaching outdoor leadership skills.
We have been fortunate to run almost all of our programs on
public land. Parks and forests are our classrooms.
Like our partner organizations, such as Outward Bound, NOLS
is a permitted fee-paying commercial operator, with programs in
21 national parks. We have vast experience working with a wide
array of Park Service permit systems and procedures.
I am here today to share our perspective as a smaller back
country, nonprofit operator. I will briefly highlight what we
think is working with the program, and then spend a little bit
of time talking about some of the things we would like to see
improve.
What's working well. First, the National Park Service has
demonstrated a willingness to work in partnership with
organizations like NOLS to create high quality visitor
education programs. We have supported their mission, as they
have supported ours.
Second, the agency is making progress on establishing
guidance for the authorization of small commercial operators,
(something Mr. Jones referred to in his testimony) including
nonprofit organizations. This is something we've been hoping to
see for quite some time and we're pleased that it's now moving
forward.
Third, the agency has remained committed, we believe,
through statute, policy and regulation, to protecting the
natural resources it manages. We completely respect and support
that commitment.
There are three main areas we think need improvement.
First, we would like to see contract and permit terms that
encourage a stable and viable business climate. To back country
outfitters, this means reasonable term lengths for permits that
will ensure business stability and encourage investment in a
program. It means performance-based renewal preferences for
operators that consistently comply and provide high-quality
service. It means adequate notification of contract award and
changes in procedures--something other testifiers have referred
to--and it means reasonable fees.
By way of example, late last year the agency proposed new
regulations regarding small commercial use authorizations.
These are not concessions, per se, but they are authorized
under the '98 Act. As proposed, the rule will allocate use by
selecting small commercial operators on a random basis,
assigning 2-year terms and offering no preference for renewal
to incumbents. Given the investment that organizations like
NOLS make to establish a program, this would be a nearly
impossible environment for us to work in. We wouldn't invest
resources to run a program that we weren't sure could persist
past 2 years.
We suggested an alternative to agency concession staff that
involves a performance-based renewal system. Performance-based
renewal will reward operators for the right reasons--because
they meet and maintain high service and permit standards. It
will encourage outfitters to continue to improve, to consider
the impact of their operation on the resource, and to be
accountable.
The agency has heard our concerns, as Mr. Jones referred to
earlier, and has invited us to participate in a stake-holder's
working group to reevaluate this commercial use authorization
rule. We appreciate that invitation and we look forward to
working with the agency on that.
Second on our list if things we would like to see change is
the issue of program consistency. In the 20 units in which NOLS
operates, our use is generally similar in type and scope. Even
so, from park to park we face a pretty wide variety of permit
mechanisms. Because of significant differences in individual
park procedures, our field staff manage each park separately
regarding permits, payment of fees, operating procedures, and
reporting. We think there are more efficient ways to go about
doing that.
Another consistency issue relates to how the agency
determines whether to award a concession contract or a
commercial use authorization. We have a tendency to have some
of each and the program is not always clear about when which
tool is appropriate. The statute specifies criteria, but the
regulations seem to leave the ultimate decision to the park. We
would like to better understand the basis for the decision and
we would certainly like to hold more concession agreements.
Finally, on the consistency topic is an issue that has
plagued the concessions program for some time, and that is the
treatment of nonprofit operators. Neither the '98 Act nor the
final rule on concessions address this topic in adequate
detail, but we are pleased to see that the recently proposed
commercial use authorization rule, though it has some issues,
begins to deal more directly with nonprofits. We look forward
to clarifying that.
Finally, I will speak briefly on fee structures. I want to
be clear that we do not object to reasonable fees. We have paid
fees for many years and we agree that fees should provide the
agency with a fair return for the privilege of operating in
parks. However, there are three things we would like to see
changed regarding fees.
We would like to see the agency discourage fee bidding. We
would like to see the agency minimize the layering of fees that
was referred to earlier. And we would like to see fees kept in
the field, to see that they be used to supplement rather than
supplant congressional appropriations.
We feel strongly that the agency should avoid resorting to
a system based on competitive fee bidding. While such a system
may benefit agency revenue, it is contrary, we think, to the
language in the Act and, in the end, would be harmful to the
resource and to operators.
We experience a plethora of fee structures and layers. In
some parks, we pay an application fee and an annual fee for
access. In others, we pay an application fee, a monitoring fee,
a per-person special use fee, and a park entrance fee, just to
name some of the varieties. The sum of fee layers within each
park generally amounts to about three to 6 percent of our park-
based revenue. At one park, however, I know that Outward Bound
pays roughly 12 percent of its revenue after all the layers are
consolidated. We ask that the agency to adopt a standard
approach to fees that will minimize this kind of layering and
will consider the cumulative fee burden that's associated with
each permit. Perhaps a fee cap is warranted in some cases.
I appreciate the opportunity to be here today. NOLS deeply
appreciates the partnership we have built and continue to build
with the Park Service. I look forward to answering your
questions at the end of the panel.
[The prepared statement of Ms. Lamb follows:]
Statement of Jennifer Lamb, Public Policy Director, National Outdoor
Leadership School
Mr. Chairman and members of the Committee, thank you for the
opportunity to address the Subcommittee this afternoon regarding
concessions management in the National Park Service (NPS).
The National Outdoor Leadership School (NOLS) is a non-profit
education institution that teaches outdoor skills and leadership to
more than 8,800 students each year. Founded in 1965 and headquartered
in Lander, Wyoming, NOLS employs more than 800 instructors and staff at
nine branches and two professional institutes worldwide. NOLS' mission
is to be the leading source and teacher of wilderness skills and
leadership that serve people and the environment.
I speak to you today as a wilderness educator, but also as an
outfitter--NOLS, like its partner organization, Outward Bound, is a
permitted, fee-paying, commercial operator on public lands. In
comparison to others you have heard from today, we are a smaller, non-
profit, backcountry educator. It is this perspective that I would like
to share with you. I will offer our experience with concessions
management, placing some emphasis on the aspect of the regulations that
we deal with most closely as a smaller operator, commercial use
authorizations.
For more than 35 years, NOLS has invested in a strong working
relationship and effective partnership with the NPS, and we are pleased
to have the opportunity to assist with improving and refining the
concessions program. NOLS has considerable experience working with the
agency and with its wide array of permit systems, policies and
procedures. We hold three concession agreements and 18 Incidental
Business Permits to operate in 20 parks.
Overall, we believe that there is much about the concessions
program that is working well. Other aspects need improvement. On the
positive side, we highlight the following:
The NPS has demonstrated a willingness to work in
partnership with organizations like NOLS to bring high-quality
education programs to park visitors.
The agency is making progress on establishing guidance
for the authorization of small commercial operators, including non-
profit organizations.
The agency has remained committed, through statute,
policy and regulation, to protecting the natural resources they are
charged with managing. We respect and support that commitment and
encourage the agency to continue to place the highest priority on the
health of the resource.
What needs to change? Having been involved with the evolution of
the agency's concession program for many years, NOLS has experienced
directly the effects of a system that lacks procedural consistency and
clarity and does not yet place a high enough priority on creating a
positive business climate for its commercial partners. We know that the
NPS seeks to address these concerns and hope that our comments provide
constructive feedback and suggestions for improvement of the program.
Our specific comments are summarized in the following five points:
Procedural consistency and clarity
Stewardship and partnership incentives
Viable business climate
Commercial use authorizations
Fees
1. Consistency and clarity
In the 20 units in which we operate, NOLS' use is generally similar
in type and scope. Even so, from park to park, a wide variety of permit
mechanisms and procedures are applied to our use. Because of
significant differences in individual park procedures, our field staff
monitor and manage each park separately regarding permits, payment of
fees, operating procedures and reporting. In some cases, this makes
sense; for example, it is logical that specific operating procedures
for mountaineering activity in Grand Teton National Park would differ
from those related to water travel in Dinosaur National Monument. In
other instances, it amounts to unnecessary expenditure of time for both
NOLS and the agency.
Historically, concession agreements have been granted for larger-
scale activities that occur within park boundaries, while Incidental
Business Permits (IBP) were issued on a short-term basis to smaller
operations that pass through a park. In NOLS' experience, however, and
in the language of the Concessions Contracts final rule, the
delineation remains unclear. The language in Section 51.17 of the rule,
``necessary and appropriate'', seems to be the only guidance provided
for determining, within each park, whether a concession agreement or an
IBP is the appropriate management tool. Both NOLS and Outward Bound
have held concession agreements for many years and would like to
continue to do so.
The confusion between the two permit mechanisms continues in the
recently proposed rule regarding Commercial Use Authorizations (CUA),
which is authorized by the 1998 National Parks Omnibus Management Act
and will replace the existing IBP system. The proposed CUA rule,
published in the Federal Register on November 27, 2002, states that,
``Concession contracts may be issued to authorize the provision of
services to visitors rather than a commercial use authorization even
though the proposed services may be suitable to authorization under a
commercial use authorization.'' NOLS assumes that this leaves the
discretion to the park superintendent--the park defines which permit
mechanism is appropriate given its mission. While we generally support
this kind of local decision making, in this situation, it can lead to
inconsistency in implementation across the agency and confusion for
commercial operators trying to understand and comply with the system.
An issue that has plagued the concessions program for some time is
the treatment of non-profit organizations. Neither the 1998 Act nor the
final rule on concessions addressed this topic in adequate detail. We
are pleased that the recently released proposed CUA rule begins to deal
more specifically with this issue. There remain some gaps and concerns
regarding non-profit management that we addressed in our comments on
the proposed CUA rule. These comments are included with this testimony
as Appendix A. We look forward to continuing to work with the agency on
the question of non-profit management.
2. Performance incentives
We strongly encourage the NPS not to overlook the capability of
wilderness educators and outfitters and guides to contribute to the
protection of park resources and the fulfillment of the agency's
mission. By establishing permit mechanisms that reward good performance
and encourage partnership, the agency can provide operators with the
incentive to offer programs that are compatible with park objectives.
NOLS has experienced significant positive outcomes for both our
students and the agency in parks where we have been able to engage land
managers in a partnership. For example, each year in Dinosaur National
Monument, Park Biologists meet with our students to talk about the
issue of invasive species management--a significant issue along the
Green River corridor. Students then participate in weed eradication
projects--hands-on learning about stewardship that offers them valuable
experience while providing a benefit to the resource and park
management. These relationships encourage our continued investment in
the park and offer great rewards both to our students and to other park
visitors.
We recommend that the agency identify and promote commercial
operators who demonstrate a commitment to:
Team with the agency to provide high-quality visitor
services and protect the resource.
Team with the agency to provide educational and
interpretive services.
Team with the agency to develop programs that meet park
objectives regarding visitor diversity.
Provide a reasonable return to the agency.
The concessions program should create incentives for sound resource
management and stewardship. Incorporation of resource protection and
visitor education and diversity elements in performance standards will
establish permittees as partners in ensuring the future health of the
resource.
Permitted wilderness educators such as NOLS and Outward Bound
provide a valuable service to the public. Our education programs are of
the highest quality in the country. We set the industry standard for
both Leave No Trace technique and visitor safety in the backcountry. We
raise and spend hundreds of thousands of dollars each year to expand
the cultural diversity of our student population. We work as partners
with the NPS and are committed to resource protection. We encourage the
agency to promote a culture that recognizes permittees as legitimate
partners in achieving agency objectives and providing visitors with
great opportunities to enjoy the outdoors.
3. Viable business climate
In order to promote and support healthy partnerships and good
visitor service, the concessions program must recognize the commercial
operator's need for a stable and viable business climate. Components of
a program that will support healthy operators in the parks include:
Reasonable terms for permits that will ensure business
stability and planning,
Performance-based renewal preferences for operators that
consistently provide high-quality service and are responsive to the
agency,
Adequate notification of permit award and changes in
permit procedures, and
Reasonable fees.
The concessions regulations stipulate a standard term of ten years
for concession contracts, with deviation from that term to be
determined by the Director or an authorized representative. This term
adequately acknowledges a concessionaire's need for time to make long-
term investments in a park.
Not all agreements are managed this way, however. In many cases,
this makes sense, since the vast majority of commercial operators do
not make large capital investments in parks or have significant
possessory interest. Nonetheless, an adequate term is critical. One of
NOLS' concession permits is renewed every ten years--an optimal term in
our opinion--while the others are currently reviewed on an annual
basis. All of our Incidental Business Permits are awarded for a period
of one or two years. I will address this issue, along with performance-
based renewal, in the following section regarding Commercial Use
Authorizations.
To maintain high-quality visitor programs, commercial operators
need adequate notice regarding the issuance of prospectuses and the
final decision to award an agreement. Ideally, a prospectus would be
issued at least 16 months in advance of the expected start date and
award would occur nine to 12 months in advance. In some cases, the
permit award happens only weeks or days prior to the start of an
operator's program. Adequate timing respects the need for operators to
plan, advertise, enroll courses, develop curriculum, engage instructors
and define logistics that will ensure a safe and high-quality program.
4. Commercial use authorizations
Historically, the concessions reform discussion has focused on the
large concessions contracts that provide hospitality-based services in
the parks. In reality, the vast majority of commercial operations are
small, often family-owned businesses governed by the Incidental
Business Permit system that issues short-term permits with no
Congressional authority. In previous testimony, both NOLS and Outward
Bound have expressed concern that the 1998 Act and ensuing concession
regulations do not address adequately the agency's authorization of
small commercial operators.
As a result, we are very glad to see that the agency is now making
progress on this topic through the creation of guidance for issuing
Commercial Use Authorizations (CUAs), which are designed to replace the
IBP system. On November 27, 2002, the NPS released a proposed rule
under Section 418 of the 1998 Act and requested public comment. Along
with many others, NOLS evaluated the rule and submitted written
feedback to the agency (please see Appendix A). We have since learned
that the agency will soon form a working group of stakeholders to help
shape the final regulation. We look forward to working with the NPS as
part of this group.
While it is not appropriate to repeat the detail of our comments on
the proposed CUA rule here, I will highlight two primary concerns that
relate directly to this testimony.
Permit term and the random selection of small commercial
operators
This issue relates to the question discussed earlier in this
testimony of maintaining a viable business climate for commercial
operators. The proposed CUA rule provides the Director with the
authority to limit the number of CUAs issued for a particular type of
service. As proposed, permit award will be accomplished by random
selection and incumbent holders will have no right or preference for
renewal. NOLS supports use allocation for the purpose of resource
protection and we appreciate the difficulty the agency faces in
developing a system for allocating commercial use that attains its goal
of protecting the resource while being equitable and encouraging
investment in high-quality programs. However, a system, such as the
proposed rule, that combines random selection of CUA holders with a
short, two-year term and no renewal preference will strongly discourage
smaller commercial operators or non-profit educators like NOLS.
NOLS invests a substantial amount of time developing education and
wilderness skills programs that are specific to the unique
characteristics of a park unit or geographical area. Development of a
program involves considerable research, site visits, and building
relationships with local land managers who often help us design and
implement volunteer service projects for our students inside the park.
We are reticent to go to these lengths when we are uncertain that the
program will continue for more than two years. The combination of the
three factors for managing CUAs as proposed--random selection, no right
of renewal, and a two-year term--gave us cause for great concern, which
we expressed directly to the NPS concessions program staff. They heard
our concerns and have offered us an opportunity to be involved in
discussions to re-evaluate the rule.
Performance-based incentives
As an alternative to a system that offers no renewal preference for
CUA holders, NOLS encouraged the agency to adopt a performance-based
renewal system that rewards operators who meet and maintain high
service and permit standards. We believe that such a system will
encourage outfitters to continue to learn, to consider the impact of
their operation on the resource, to be accountable, and to establish
good working relationships with park managers. It rewards commercial
operators for the right reasons. Though it would undoubtedly introduce
some additional administrative burden, we believe that a performance-
based permit renewal system, would best serve the public, the resource,
the agencies and commercial operators.
As mentioned earlier, NOLS is pleased that the NPS has begun the
process of defining guidance for the management of small commercial
operators. This development fills a critical gap in the concession
regulations. We look forward to assisting with the effort.
5. Fees
In the past, both NOLS and Outward Bound have provided testimony on
the topic of fees for concessions. Our comments today remain consistent
with past testimony and are summarized in the following four brief
statements.
Fees should provide a fair return for the privilege of
operating in the parks
NOLS does not object to paying reasonable fees for the opportunity
to teach students in the national parks. We have paid fees for more
than 35 years and support the agency's goal of earning a fair return
from commercial operators. That said, we also support the stipulation
in Section 51.17 of the concessions regulations that ``consideration of
revenue to the United States will be subordinate to the objectives of
protecting, conserving and preserving resources of the park area and of
providing necessary and appropriate visitor services to the public at
reasonable rates.''
We feel strongly that the agency should avoid resorting to a system
based on competitive fee bidding. While such a system may benefit
agency revenue, it is contrary to the regulation language above and, in
the long term, would likely be harmful to the resource and to small
commercial and non-profit educational operators.
Fees should be consistent
As mentioned earlier in this testimony, NOLS is accustomed to a
wide variety of permit terms and procedures across the 20 parks in
which we operate. Fee terms are no exception. In Dinosaur National
Monument, for example, we pay three percent of our gross revenue earned
within the park under our concession agreement each year. In Grand
Teton, we pay ten percent of gross revenue for a concession agreement.
Our IBP fees range from an annual fee of $300 in Glen Canyon National
Recreation Area to three percent of gross revenue in Olympic National
Park, which, in 2002, amounted to $6,600 for that park alone.
In addition to the variance in fee amounts, we experience a
plethora of fee structures. In some parks, we pay an application fee
and a base fee for access, while in others, our fee burden is multi-
faceted and open-ended. In Mount Rainier National Park for example, we
pay an application fee, a monitoring fee, a per-person special use fee
and a park entrance fee.
Generally the sum of fee layers within each park amounts to three
to six percent of our park-based revenue. At one park in Colorado,
however, Outward Bound pays 12 percent of its revenue after all the fee
layers are consolidated. Depending upon what happens to fees over time,
the cumulative impact of such layered fees could become substantial.
We encourage the agency to consider a standard approach to fees
that will minimize layering, consider the cumulative fee burden for
each permit, and make the system easier to understand, implement and
comply with.
Fees should be clearly defined in advance
When finalized, the CUA rule will grant the NPS full legal
authority to implement the CUA system, including greater flexibility,
more control, and the ability to collect more in fees than the current
IBP system allows.
NOLS supports the codification of the system. We also support the
agency's objective to charge a ``reasonable'' fee for commercial use.
We have asked, however, that the agency carefully consider the
potential impact of a fee increase, and that ample notification be
provided so that permittees know what kind of an increase to expect and
when to expect it. Because NOLS holds permits in so many units of the
park system, an increase in fees, depending upon its size, may have a
significant impact on our operation and its financial picture. As a
non-profit educational institution, we struggle to keep our tuition
affordable to a diverse group of students--any cost increases that we
incur must be passed on to them. We ask the agency to consider placing
a cap on the amount of fees, whether it be a set dollar amount or
percentage-based fee.
The proposed CUA rule states that the fee for a CUA ``may also
include the costs for the maintenance and repair of park area resources
impacted by the holder's activities.'' Without further definition, this
statement seems unreasonably open ended. NOLS recommends that CUA
agreements clearly define expectations and performance standards and
that any potential impacts and remediation requirements be identified
at the start of the permit term. Ideally, the NPS and the operator will
communicate with regularity to ensure that both sides are satisfied
with the expectations and performance of the operator.
Fees should supplement rather than supplant adequate
congressional appropriations for parks and should be retained in the
field
The proposed CUA rule states that all fees paid for CUAs will be
expended in the park where collected to pay for management and
administrative costs associated with CUAs. Under the premise that the
primary purpose of a fee is to generate funds for maintaining the
quality of the natural resource, NOLS supports a fee system that keeps
revenues in the units that generate them rather than returning income
to the general treasury.
In closing, we reiterate that effective and efficient concessions
management should work to strengthen relationships and partnerships by
recognizing and sustaining the highest quality visitor services while
preserving the resource for the future. We encourage the NPS to strive
for high-quality visitor services through incentives and performance-
based permit management.
The Concessions Management Act states that, ``The National Park
Service shall utilize and encourage concessions to play an essential
role to protect park resources and provide for their enjoyment.'' This
language clearly portrays the intent of Congress to include commercial
operators in fulfilling the agency mission. As an educator, commercial
operator, and agency partner, NOLS appreciates and supports this
philosophy.
Thank you for this opportunity. NOLS appreciates deeply the
partnership we have built and continue to build with the Park Service.
We look forward to working with the agency to further define and
enhance the concessions program.
______
APPENDIX A
January 22, 2003
Cynthia Orlando
Concessions Program Manager
National Park Service
1849 C Street, NW
Washington, DC 20240
Via Email: [email protected]
Dear Ms. Orlando,
I am writing on behalf of the National Outdoor Leadership School
(NOLS) in response to the National Park Service's (NPS) request for
comments on the proposed rule to establish regulations concerning
commercial use authorizations as outlined in the Federal Register (RIN
1024-AC85).
NOLS is a non-profit organization that teaches outdoor skills,
leadership and environmental ethics to 9,000 students each year.
Founded in 1965 and headquartered in Lander, Wyoming, NOLS employs more
than 800 instructors and staff at nine locations and two professional
institutes worldwide. Our annual revenues exceed $19 million. NOLS'
mission is to be the leading source and teacher of wilderness skills
and leadership that serve people and the environment. The core of our
educational programs includes extended backcountry expeditions of 28 to
93 days in length.
In the U.S., NOLS is a permitted commercial operator in 21 National
Parks and Preserves. Three of these agreements are concession contracts
(Grand Teton National Park, Denali National Park and Dinosaur National
Monument). The balance of our agreements with the agency are Incidental
Business Permits (IBPs). We have held many of these agreements for
several decades. As a result, our program management staff has
considerable experience working with NPS permitting and fee operations.
NOLS has worked closely with the agency's existing IBP system.
Apart from some inconsistencies and layering of fees that cause
periodic confusion, we believe this system has worked well for us. The
Federal Register states that the proposed rule generally codifies the
requirements of the IBP system under the Commercial Use Authorization
(CUA) title. While this is true in some ways, we believe there are
several significant changes described in the proposed rule that we
would like to clarify. They are listed below with reference to the
relevant sections of the Federal Register.
Concession agreement versus CUA
Section 52.1 states that the Director may at any time choose to
issue a concession contract, even though the proposed services may be
subject to authorization under a CUA. Under what circumstances might an
operator, whose services are appropriate for a CUA, be managed as a
concession? We find the language in the proposal, as well as the
language in the Concessions Contracts Final Rule (36 CFR Part 51),
regarding the differences between concessions and CUAs to be somewhat
confusing.
Commercial Use Authorizations for non profits
Section 52.7 of the proposed rule explains clearly that non-profit
organizations, unless otherwise authorized, must obtain a CUA in order
to conduct visitor-related activities in a park. NOLS fully supports
the agency's desire to establish agreements with all groups operating
within park areas, non-profits included. As a 501(c) 3 organization, we
have held permits for more than 35 years and we believe that permits
establish an important relationship between operators and land managers
that is critical to the stability of the operator's service and the
protection of the resource.
Within the structure of the proposed CUA system, however, it is
unclear whether an organization like NOLS would be managed with an
incidental activity CUA or a Special Park Use permit. It appears as
though the distinction is based upon whether the operator earns taxable
income. NOLS derives a very small portion of income from the sale of
gear to our students. This income is taxable. However, in several
recent conversations with NPS staff members, in the field and in the
Washington office, we have learned that this income, because it is not
pertinent to the activities covered by our permits, would not be
relevant. We would therefore fall into the Special Park Use category.
It would be helpful if the final rule could better clarify the
distinction between these two permit tools.
Permit term and the random selection of commercial operators
Section 52.13 states that if the Director chooses to limit the
number of CUAs issued for a particular type of service, the issuance
will be accomplished by random selection and incumbent holders will
have no right or preference. We appreciate the difficulty the agency
faces in developing a system for allocating commercial use that attains
its goal of protecting the resource while being equitable and
encouraging investment in high-quality programs and services. We prefer
a system based on random issuance to one that relies on a competitive
bidding process. However, a system, such as the proposed rule, that
combines random selection of CUA holders with a short two-year term and
no renewal preference will likely discourage smaller commercial or non-
profit operators like NOLS.
NOLS invests a substantial amount of time developing education and
wilderness skills programs that are specific to the unique
characteristics of a park unit or geographical area. Development of a
program involves considerable research, site visits, and building
relationships with local land managers who often help us design and
implement volunteer service projects for our students inside the park.
We are reticent to go to these lengths when we are uncertain that the
program will continue for more than two years. The combination of the
three factors for managing CUAs as proposed in this rule--random
selection, no right of renewal, and a two-year term--gives us cause for
great concern. One of the three factors would need to be modified for
us to comfortably support this rule. For example, lengthen the permit
term or offer performance-based renewal opportunities to incumbent
permittees, described in the following paragraph.
As an alternative to a system that offers no renewal preference for
CUA holders, we encourage the agency to consider a performance-based
renewal system that rewards operators that meet and maintain high
service and permit standards. Such a system will encourage outfitters
to continue to learn, to consider the impact of their operation on the
resource, to be accountable and to establish good working relationships
with land managers. It rewards commercial operators for the right
reasons. Though it would undoubtedly introduce some additional
administrative burden, we believe that a performance-based permit
renewal system, would best serve the public, the resource, the agencies
and the commercial operators.
Permit fees
a) Fee authority: This rule, when finalized, will grant the NPS
full legal authority to implement the CUA system. This authority will
give the agency greater flexibility, more control, and the ability to
collect more in fees than the IBP system currently allows.
NOLS supports the codification of the system. We also support the
agency's objective to charge a ``reasonable'' fee for commercial use.
We ask, however, that the agency carefully consider the potential
impact of a fee increase, and that ample notification be provided so
that permittees know what kind of an increase to expect and when to
expect it. Because NOLS holds permits in so many units of the park
system, an increase in fees, depending upon its size, may have a
significant impact on our operation and its financial picture. As a
non-profit educational institution, we struggle to keep our tuition
affordable to a diverse group of students--any cost increases that we
incur must be passed on to them. We ask the agency to consider placing
a cap on the amount of the fee, whether it be a set dollar amount or
percentage-based.
b) Impact fees: Section 52.16 states that the fee for a CUA ``may
also include the costs for the maintenance and repair of park area
resources impacted by the holder's activities.'' Without further
definition, this statement seems unreasonably open ended. NOLS
recommends that CUA agreements clearly define expectations and
performance standards and that any potential impacts and remediation
requirements be identified at the start of the permit term. Ideally,
the NPS and the operator will communicate with regularity to ensure
that both sides are satisfied with the expectations and performance of
the operator.
c) Fee consistency: While most parks follow the IBP structure of
charging operators an application fee, a management fee and a
monitoring fee, we hold some agreements that charge based on a
percentage of our gross earnings within the park. For example, NOLS
pays $300 each year for a permit to operate in the Glen Canyon National
Recreation Area, but at Olympic National Park, we pay three percent of
our gross operating revenue (in 2002, this amounted to $6,600). We
encourage the agency to consider a standard approach to CUA fees to
make the system easier to understand and comply with.
On the whole, the structure of fees and the efficiency and ease of
working with the system is more important than the actual amount of the
fee, assuming that the fees are reasonable and we know what to expect
in advance of the charge.
d) Fee retention: Section 52.17 states that all fees paid for CUAs
will be expended in the park where collected to pay for management and
administrative costs associated with CUAs. Under the premise that the
primary purpose of a fee is to generate funds for maintaining the
quality of the natural resource, NOLS supports a fee system that keeps
revenues in the units that generate them rather than returning income
to the general treasury.
Simplifying the system
As expressed in point number two above, we are confused about the
difference between a CUA for non-profit operators and a Special Park
Use Permit. This leads us to think that perhaps both the agency and
operators would be better served by a simpler system that involves one
type of permit rather than two. For example, could a lower-fee or non-
fee CUA for non-profit organizations take the place of the Special Park
Use permit?
Thank you very much for the opportunity to help refine the agency's
permit regulations. We hope that our input is helpful. If you have any
questions or need additional information, please contact me at the
number below.
Best regards,
Jennifer Lamb
Public Policy Director
(307) 335-2262
[email protected]
______
Mrs. Cubin. Thank you.
I would now like to recognize Mr. Philip Voorhees, vice
president, Park Funding and Management, National Parks
Conservation Association, Washington, D.C.
Mr. Voorhees.
STATEMENT OF PHILIP H. VOORHEES, VICE PRESIDENT, PARK FUNDING
AND MANAGEMENT, NATIONAL PARKS CONSERVATION ASSOCIATION
Mr. Voorhees. Thank you very much.
You have my written comments. I'll be substantially briefer
than the others today. There are only a few key points that I
think I would like to make here.
Specifically, NPCA has been involved in the issue of
concessions for more than a generation, literally since
Congress, I think, began considering problems that were
emerging in the management and operation of concessions way
back in the 1970's. I am happy to say that, although it's an
extremely complex climate to try to manage, in that concessions
operations in the parks are in many respects unique subaspects
or a subset of the hospitality industry, that an awful lot of
progress is now being made.
The first step in making the change toward good productive
progress I think was the passage of the 1998 Act, which opened
the door to competition that was referenced earlier in the
testimony.
The second step, though, is a more complex step to be able
to take, and that deals specifically with the capacity of the
Park Service to manage the program itself. Changing the law and
implementing regulations that are responsive, that I think
generally they are, in one thing. Trying to bring the
bureaucracy up to task in ably managing the program under its
responsibility is another.
I am very pleased to say, though, that although it has
taken a fair amount of time, 5 years now, to be able to bring
the program up to where it needs to be, the concessions program
of the Park Service, an awful lot of very strong progress is
being made. In the past, part of the problem in dealing with
concessions, which I think is the basis of some of the comments
earlier today, has been the ability of the Park Service to be
truly responsive to the concerns of the concessioners.
It's a very fair point. They are now in a position where
they are hiring outside counsel on a variety of different areas
that bring their level of understanding of what the real needs
of concessioners and real issues are at hand to a completely
different level than they've had before.
I sit on the National Park's Concessions Management
Advisory Board, although I'm testifying for the National Parks
Conservation Association today. I will say, though, that in
that venue, I have been extremely pleased with the level of
discussions and interchange between concessioners expressing
their concerns, the advice that's being provided in response to
those concerns to the Park Service from PricewaterhouseCoopers
and other consultants, and the general discussion in the room
about what the real issues are and how to deal with them. There
is a lot more openness, there is a lot more flexibility that's
being expressed than I think was possible more than 5 years ago
before the law passed.
My point really here to make is that I think, overall, the
law is working very well. The regulations, though cumbersome,
and subject to some further interpretation, are working well as
well. It is another 4 years, I think, before it may be time to
reconsider Leasehold Surrender Interest and a variety of other
issues that might be at hand for the regulations and for the
law, since that's the time clock that was set by Congress 5
years ago when it passed the law.
I would urge this Committee to wait until that time is up.
This is a learning process for the Park Service. I think in
large measure it's a learning process for the concessioners
involved, working their way into fairly complex new territory.
But in light of all that, there really is a spirit of
partnership that is reemerging that I haven't seen for quite a
long time. Prior to the law's passage, many parties were at
loggerheads, and many of the positions were highly political. I
don't believe that that's true at all any longer. And I'm glad
to see it. The conversations are much more substantive, they're
based on thoughtful problems and gray areas that clearly need
to be addressed.
I think with the spirit of partnership, with the kind of
structure that's provided by the advisory board and other side
conversations that are actively happening all the time, a lot
of the gray area issues can be easily resolved without
reopening the regulations, and especially reopening the law.
That's all I have to say. Thank you.
[The prepared statement of Mr. Voorhees follows:]
Statement of Philip H. Voorhees, Vice President, Park Funding &
Management, National Parks Conservation Association
Mr. Chairman, and members of the Subcommittee, my name is Phil
Voorhees. I represent the National Parks Conservation Association
(NPCA). I also serve as a member of the National Park Service
Concessions Management Advisory Board. NPCA is America's only private,
nonprofit advocacy organization dedicated solely to protecting,
preserving, and enhancing the National Park System. NPCA was founded in
1919 and today has approximately 300,000 members.
I am pleased to offer testimony today that reflects NPCA's view
that very substantial progress is being made by the National Park
Service in the area of concessions management. For many years, NPCA has
been a strong advocate of ensuring that concessioners operating within
the national park system do so in a manner that reflects standard
industry practices in state parks, local parks and within the
hospitality industry in general. The road to ensuring this has been
long and involved and the agency has not finished its work as yet, but
very substantial progress is clear. Many concessioners are welcoming
the transition from a broken system to a more normal business-like
partnership with the NPS
Points of Progress Since 1998
Five years ago, Congress passed into law the Omnibus Parks Act (PL
105-391) that encapsulated significant changes for the management of
concessions in national parks. Prior to passage, concessions were
operated on a substantially non-competitive basis. As evidence of this,
according to an analysis performed by NPS in the mid-1990s, from 1963
to 1993, only seven of the approximately 1,900 contracts executed were
awarded to businesses that competed against the incumbent concessioner.
Also, prior to 1998, the small amount of franchise fees generated by
the concessions program were deposited in the general Treasury instead
of contributing to the upkeep of the parks. Finally, the former law
provided concessioners with an opportunity to capture a significant
increase in value in the buildings and structures built by
concessioners, resulting almost entirely from Federal investments in
the parks themselves and simple increases in tourism unrelated to the
performance of the concessioners. As a result of the 1998 reforms,
parks are now able to retain concessions fees, concessions contract
opportunities are generating substantial competition, and ``blue sky
value'' once afforded concessioner-built structures is being more
closely controlled. These changes are both good for the visitor and
good for the taxpayer.
With the passage of Omnibus Parks Act, however, another problem
emerged that was hidden by the old concessions law. Passage of the new
law meant that the Park Service had to work harder to produce strong
financially feasible concessions bid proposals and manage the daily
operations of concessioners. For the past five years, the Park Service
concessions program has struggled to operate in a more effective,
professional and responsive manner. To the agency's great credit, they
have supported the goal of professionalization at all levels and have
allocated the resources to contract with PricewaterhouseCoopers to
provide generalized support, training and contract analysis. The agency
has openly explored best practice models of concessions management in
the military and the general hospitality industry, has developed a
comprehensive training program with Northern Arizona University, and
has responded to a broad variety of recommendations for improvement
made by the Concessions Management Advisory Board. Without the personal
support of former director Bob Stanton, and especially Director Fran
Mainella, the Service would not be making the strong, steady progress
that it is today.
Issues Remaining to be Addressed
Beyond the particulars of concessions reform enacted by the 105th
Congress, the law was developed with the understanding and goal that
the Park Service and the concessioners would need to operate on a level
playing field if visitors and taxpayers were to receive high quality
service at reasonable cost. The law put in place many of the critical
changes to make that possible. Unfortunately, it takes time for a
system so far out of balance to find itself again in equilibrium. And
it takes patience on the part of all parties to allow for the kind of
professional trust that is necessary for business-based partnerships to
reestablish themselves. Thus far, to its credit, Congress has been
patient. Concessioners have been generally patient with improvements
making their way through the concessions management program. And
concessions staff have been patient with complications involved in
moving change through a complex bureaucracy. Slowly, steadily, the
agency is putting in place an effective and fair concessioner
performance evaluation system, a uniform rate approval process, a core
menu concept and other improvements. Many of the changes, like the core
menu concept, are designed to reduce bureaucracy and improve
concessioners' operating flexibility. Slowly, professional trust and
the spirit of partnership is reemerging, in pace with the improvement
in the professional capacity of the concessions program itself.
Encouraging the Process of Continuous Improvement
After five years and counting, improvements in the management of
concessions in national parks are well on their way. The 1998 law is a
very significant improvement over the preceding 1965 Concessions Policy
Act. Regulations designed to realize the intent of the law were
drafted, reviewed and finalized. They are lengthy and--like nearly all
regulations--imperfect. But they are a sufficient base for steering the
concessions program in the correct direction: toward better visitor
service, fair and vigorous competition for concessions contracts,
improved ability to maintain the substantial asset base of concessions
structures, and most important, toward a kind of business equilibrium
between concessioner and concessions manager that will rebuild the
spirit of partnership and benefit all concerned.
Some concessioners have asserted that the regulations resulting
from the law are convoluted and in parts confusing. NPCA agrees. We
disagree however, on the appropriate solution. Some have argued that
the law must change to provide additional guidance or technical
correction to various points of interpretation. Some have advocated
that the regulations be reopened and amended to make more significant
changes. Both avenues carry considerable complications and are
unnecessary.
The focus of complaint, it seems, is the treatment of Leasehold
Surrender Interest, the law's replacement for Possessory Interest. In
NPCA's view, changing the regulations in any way with regard to this
structure would cause many more problems that it could solve. One
unavoidable complication of reopening the regulations is further delay.
While all parties have been patient with slow but steady progress in
contracts management, reopening the regulations would have the
inevitable result of stopping progress in its tracks while all wait for
a new final rule to emerge. The delay could last two years, burning
time that would be better spent building productive business
partnerships and improving competition for contracts that benefit the
visitor. In addition, it seems to make little sense to reopen the
regulations on this issue especially. The Omnibus parks Act provides
for reevaluation and reconsideration of the concept of Leasehold
Surrender Interest nine years after enactment, or four years from now.
If a reconsideration is to be made, it would seem prudent to wait the
full nine years for the requisite base of experience with the current
regulations to build as it pertains to Leasehold Surrender Interest.
The National Park Service has repeatedly demonstrated its
willingness to hear all points of view and consider reinterpretation of
points of law, if that reinterpretation aligns with standard business
practice outside the parks. In addition, the National Park Service
Concessions Management Advisory Board was specifically designed to
review and resolve complications and air concessioner concerns. Having
met nearly a dozen times in five years, the Board makes a special point
in each meeting to hear residual concessioner concerns and provide a
forum for balanced discussion. Concessioner concerns are being heard,
not ignored.
The most appropriate solution for continued concessioner
grievances, is continuation of the process that is already in place in
the parks. In our view, the regulations need not be reopened at this
time and the law certainly does not bear amendment. For changes in
interpretation that result from discussion and evaluation of
concessioner concerns, the agency has at its disposal Directors Orders
that provide direction to field managers on how laws, regulations and
other requirements must be followed. This is the correct venue for
delivering guidance and direction to the field, not changes in the base
law or regulation. To do otherwise would risk further upsetting the
equilibrium in concessions management that is slowly but surely
establishing itself to the benefit of the visitor, the taxpayer, the
parks and the concessioners themselves.
______
Mrs. Cubin. Thank you very much.
I will begin the questioning with Mr. Todd. In your
testimony you mentioned that you and many of your colleagues
enjoy a better relationship with the Park Service than you had
before. Could you elaborate on that? And when you said
``before'', I assume you mean from the last administration?
Mr. Todd. Correct. Actually, since the Bush administration
with the appointment of Gale Norton and subsequently Fran
Mainella. I think concessioners in general definitely see more
willingness to revitalize the old partnership that used to
exist between the two parties, the private sector and the
public, to work out issues in a manner that's beneficial to
both sides and a win-win situation. So Fran Mainella has
definitely shown a very improved atmosphere for discussing
topics and resolving problems than previously had been
happening.
Mrs. Cubin. I know the answer to this, but these are some
questions that we just want to have on the record.
Do you believe that the Park Service correctly interpreted
the intent of Congress when it published its regulations on
Leasehold Surrender Interest, and if not, why not?
Mr. Todd. I guess the answer is no. I think the intent of
Congress was to simply provide concessionaires a CPI return on
dollars invested in capital improvements, in accordance with
the same way the private sector determines capital investment
via GAAP. I feel that the Park Service drafted regulations that
dilute that intent and consequently dilute the amount of return
to concessionaires for their investing of capital in the parks.
Mrs. Cubin. Would you respond to Mr. Voorhees' proposal--
and if I word it incorrectly, please tell me--that rather than
amending the law now, that we should sit with the regulations
as they are for the next 4 years and then do a reauthorization
in regular order?
Mr. Todd. I know that if I wasn't an operator in the parks
and didn't know what you have to experience and what kind of
risk you have to take and make decisions, and if I was sitting
in his shoes as someone who is not an operator, it's easy to
say wait for 4 years. If you're the party making investments in
the parks, now and in the next 4 years, and wondering if you're
going to get a return on your investment as stipulated in the
'98 Act, it's pretty hard to sit back and hope that, you know,
you're treated fairly in the interim when, in fact, the
regulations have diluted that mechanism in the law. So, to me,
4 years is waiting way too long.
With all the contracts that come out to bid between now and
then, plus the ones that are already out, the newer contracts,
for example, like I know that my company has signed, and others
on the panel have signed, that's a lot of uncertainty during
that next 4 years, wondering when you make million dollar
investments, wondering whether you're going to get credit for
them or not. So, to me, 4 years is too long to wait in an
attempt to look at an issue that was, to me, improperly
interpreted clear back in '98. We've already had 5 years pass
since then, so I can't imagine waiting four more, a total of 9
years, to fix something.
Mrs. Cubin. Would each one of the rest of the panel respond
to that as well?
Mr. Fears. I think the process that the Director set up,
this working group--and most of the panel here have attended
the first two sessions--I think you can work through a lot of
the issues that are in question. I know the 50 percent rule for
leaseholder improvement, it is tough for private enterprise.
But I think we can work through that issue.
The reason it's tough, I can give you an example. If you
have a 10-year contract and say you're at seven, you have a
restaurant that you want to remodel--and it's more than just
putting in equipment or changing menu boards; you have to move
walls and the electrical--in year seven, if you put that
investment in, you deserve to recoup more than 50 percent of
that in the last 3 years. You definitely want to incentivize
private business to invest in a park from day one until the end
of your contract.
Mrs. Cubin. So you would like us to amend the law now?
Mr. Fears. I'm not saying amend the law. I think this
working group that we're doing--I mean, that's one of the areas
we're looking at. I think we have had a lot of great dialog to
try to come up with some sort of conclusion to that.
Mrs. Cubin. Mr. Woodside?
Mr. Woodside. Yes, I would like to see some means derived
to change the current proposal and not wait another 4 years. In
our case, we're just beginning a new contract, but we were in
the midst of a building improvement program when our last
contract ended, and the new contract does not make provisions
for continuing those building improvements. So right now it
probably would be affected by the 50 percent rule. So what will
happen is those improvements simply will not be made and I
think the visitor will suffer because of that.
Mrs. Cubin. Miss Lamb?
Ms. Lamb. As a back country operator, NOLS' programs really
don't delve into possessory interest in capital investments. As
far as we're concerned, we see some positive things happening
with the '98 Act, issuing regs, and now this development with
commercial use authorizations. We would be comfortable waiting
to see how things move.
Mrs. Cubin. Thank you.
Mr. Fears, is it your understanding from the regulations
that the ability to utilize cross collateralization is
dependent upon whether there's an associated LSI?
Mr. Fears. Could you restate the question? I'm sorry.
Mrs. Cubin. Sure. Is it your opinion that the regulations--
let me just read this. Is it your understanding from the
regulations that the ability to utilize cross collateralization
is dependent upon whether there is an associated LSI?
Mr. Fears. I'm not sure if I quite understand the question.
Mrs. Cubin. It's our understanding that they won't allow
cross collateralization if LSI is involved. Is that a correct
assumption or understanding?
Mr. Fears. I'm still not sure I can answer your question.
Mrs. Cubin. Can someone else on the panel?
Mr. Todd. I think the progress that's been made so far is
that the Park Service is willing to allow cross
collateralization. It wouldn't always entirely be if you have
LSI or not. You could have contracts that don't have LSI, but
you still want to pledge those contracts as security on a loan
to a lender.
I think what you're getting at, though, I think the Park
Service has made great strides in that, and the question now
becomes how do you fix that. Is it via Director's order saying
you can do that, or via a regulation change.
Mrs. Cubin. OK. Thank you.
Miss Lamb, do you believe the commercial use authorization
proposed rule encourages long-term development for small
commercial concerns and for nonprofits?
Ms. Lamb. There is a piece of the rule, as proposed, that
is counter to that, and that is the piece I spoke about in my
oral testimony and written which has to do with a short, 2-year
term assigned on a random basis to operators with no right of
preference for renewal, which we now have under the incidental
business permit system.
I completely understand why the Park Service is going
there, and I certainly support allocation of use, particularly
in places where it's needed to protect the resource. But I do
have some issues with no right of preference for operators who
have shown commitment to the agency's programs and mission and
who have provided high-quality service. So we have expressed
that and, hopefully, we'll have an opportunity to delve into
that when the working group is pulled together.
Mrs. Cubin. Thank you.
I would now like to recognize Mr. Souder for his
questioning.
Mr. Souder. Thank you. I wanted to make a couple of
comments first.
One, I think the biggest threat to concessionaires has been
the hostility to concessionaires, visitation in particular, and
a view that often they're the threat to the park, the visitors
themselves.
That said, as we work through this process of how to
protect the parks and how best to serve the visitors, a couple
of things jump out. I wrestle, as do Members of Congress,
anybody who has visited the park, with this tradeoff. In other
words, our responsibility isn't to benefit the concessionaires
and to preserve people who have been there for a long time, who
are from the local community. Quite frankly, our
responsibility, point blank, is to provide the best service for
the visitors.
Since it's a socialist, in a sense, situation, not a
capitalist situation, the government is now intervening to make
decisions, and making the decisions based on visitor services.
We tried to make bidding contracts more flexible and so on, but
part of when you're in that kind of decision--because I've
talked to many of the small contractors, too. The families that
have been there for a long time; the continuity of service is
of value; they're a proven performer. Part of it is their
willingness to be invested in the park long term rather than
just take the money out, and their willingness to investment
their capital.
The Delaware North Hamilton Stores type of debate at
Yellowstone is a classic example. I mean, to be real blunt, I
was there and you could see that Hamilton Stores were not
providing the same services in what gifts they were offering
and other things, and in a purely competitive environment, they
probably would have been weakened. But it wasn't a purely
competitive environment. On the other hand, they're one of the
longest serving institutions in the Park Service, so how do we
resolve those kinds of questions in this interim, as opposed to
the real small type thing.
Is it the goal here to protect the concessionaires, or is
it to make sure that some of the services are updated, whether
it be boat trips, riding, innovations, other things that are
offered to consumers? Where this becomes a question, like
everything else in society, the larger corporations are likely
to be able to offer more things at a lower cost and better
bids. Particularly with cross collateralization and other types
of things, you can spread your costs more. That's a fact of
life. We can only do so much protecting the smaller, and at the
same time say that, oh, what about Wuksachi Lodge, which needs
to stay open in the winter and you're not getting any guests
there. You have to be able to spread your losses if you're
going to do that type of thing.
I wanted to follow up particularly with Mr. Todd on some of
these difficult questions, like the Flamingo Lodge at
Everglades and Stovepipe Wells. Because this is what would
happen normally in the private sector, do you see that we may
have to get in a situation--because in these parks there's a
proliferation of providers--that I presume at Everglades, some
of the services that are offered there are making money, and
that in order to provide the lodging, if there wasn't any
lodging, they might not be able to have anybody staying there
and doing that.
Do you see that in parks which aren't losing money, which
you referred to in your written testimony, that we might be
able, rather than having the Federal Government make the
outlay, a merger of saying, OK, you're going to be the service
provider for multiple services at parks where we can't make
some money? In other words, are there some parts of Death
Valley that are making money but Stovepipe Wells isn't, or some
parts of the Everglades that are making money but not Flamingo
Lodge, and we may have to do some bundling, which would be the
normal way we would respond in a capitalist system?
Mr. Todd. Certainly, as you said, you have to value the
economics of the entire operation. Stovepipe Wells is a remote
location and there's really not much else you can bundle there.
We providing the lodging, the retail, the food and beverage--
Mr. Souder. Say if you wanted Furnace Creek, you had to
take Stovepipe Wells and they were going to be part of the same
bid, not separate.
Mr. Todd. Right. You could, although Furnace Creek is owned
in fee. It's not a park contract, so you really couldn't merge
a private deal with a public deal. But certainly, yes. They
discussed, for example, merging Stovepipe Wells and Scotty's
Castle, which are currently separate contracts, but both in
Death Valley, both of which my company operates. That's the
kind of thing they're looking at doing. But even doing that, in
some cases, if they're both losing money and you combine the
two of them, you don't solve the problem.
That's why at times many of these small contracts--I mean,
the larger ones have been under 1-year extensions for several
years, so each time we get ready to sign an extension, we ask
ourselves--of course, you know, I get critiqued by some of the
owners of the company, saying why would you sign that? You're
losing money on the deal. And then in some cases we ask for fee
relief during the extension period, saying look, we're losing
money on this. We're paying a 5-percent of revenue fee and want
to lower the fee to 2 percent so that we can at least break
even or make a minimal profit. So far there hasn't been much
receptivity toward that.
All I can think of, assuming we're the sole party putting
money in the deal, you just have to make it attractive to us.
Just like when it goes out for rebid, obviously, if they don't
change anything and offer the same fee, will we rebid again to
lose money? Not likely. I don't know of anybody else that
would, either.
Mr. Souder. Have you seen examples of this contract
bundling, where you would bundle something--obviously, not two
unprofitable things--but where you might consolidate some of
the contracts in order to take some of the losses--For example,
Everglades might be one. Could you comment at the same time on
the concept of bundling profitable parks with unprofitable
parks.
Mr. Todd. You could certainly do that. I don't know if
you're referring to different geographic regions, where you
could say OK, we're going to give you this park that's
unprofitable, versus this other park ten States over that's
profitable, you could try that. I don't know what your bidding
response would be.
Quite frankly, you might end up making it more beneficial
to the larger concessionaires, who are willing to lose money on
one park to get another one. I mean, some of the small guys, of
course, who are only going to bid on a small park to begin
with, who could do that operation and might have bid on that
park, once you throw in another one, they might say we don't
have the organizational infrastructure and corporate level
services necessary to do two big parks. We can do one, or one
small park, but you give us two of them in two different
geographic areas, you might end up eliminating some prospective
bidders.
Mr. Souder. Is that what happened--one last question for
Mr. Fears. Isn't that kind of what happened at Sequoian Kings
Canyon, that it wasn't viewed as profitable and then a small
group took over?
Mr. Fears. That's right. The decision was made to move the
operation out of the Sequoia area and to move it to a different
location. They ended up putting that contract out three times.
The first two times they didn't receive any bids, and then the
third time they received two or three bids. We decided to put
the investment in.
To be honest with you, when you talk about bundling, one of
the reasons we did that is because we operate at Yosemite
National Park and we can use the same reservation center. There
are a lot of marketing efficiencies there. So I think the idea
of bundling some of these parks--I mean, you brought up
Glacier. Glacier is a tough concession contract. You're looking
for private enterprise to fix those hotels up. I think it's a
tough deal. There has got to be some sort of government money
or something that has to come in.
You have the same problem at Crater Lake. You have a great
hotel there, but private enterprise wasn't able to come in and
put the investment. And you also have Oregon Caves, which we
operated for a year. It's a great hotel. It needs a lot of work
on it, but it's just not profitable for private enterprise. The
economic model just doesn't work. They also have short seasons.
Glacier is 100 days and Oregon Caves is 100 days.
Mr. Souder. Thank you all very much.
Mr. Radanovich. [Presiding.] Thank you, Mark.
I have a couple of questions. I think we can wrap up with a
general question. Mr. Woodside, I would like to get you to
comment on this question.
Since the passage of the 1998 Act and subsequent 2000
regulations, a number of small concessionaires have continued
to raise serious concerns about the threshold of $500,000 for
preferential right of renewal. In response, legislation was
introduced in the 107th Congress to raise the bar to $5
million, as you may know, and while no action is taken on the
legislation, interest still remains high for many
concessionaires.
As a small concessioner and a member of the National Park
Hospitality Association, if the law were to be amended, what do
you think the threshold should be, and why? Usually the
response I get is a dollar above the concessionaire's gross
revenue.
[Laughter.]
Mr. Woodside. You took away my answer.
It is very difficult to come up with a definitive dollar
amount. I definitely think $500,000 is too small. Five million
could be too big. By the way, we're about four million, so--
[Laughter.]
So five million is very self-serving.
One of the interesting things is Pricewaterhouse has
separated out the contracts as those above three million and
below and called the below three million the smaller contracts.
They don't attach any great significance to that, but I think
three million is a number that maybe should be looked at,
because roughly the top 50 contracts--I think it's actually
52--are over three million and the rest are below that. So
there are somewhere about 40 or 50 contracts that would be
between $500,000 and $3 million.
What I suggested throughout as a proposal is that perhaps
the Park Service be given the option to give some form of
preference to the smaller local companies that are continuing
on under that threshold, be it five million or three million,
just to give an opportunity for those smaller companies that
have operated for so long a chance to continue.
Mr. Radanovich. Thank you.
Mr. Voorhees, I have a question regarding the concessions
working group, and perhaps a consensus on changes to Leasehold
Surrender Interest. At this point, there seems to be two
options: one being a direct order, and the other just modifying
the 2000 regulations.
According to your testimony, you would oppose the change
through Director's order, through regulations, and yet that
would seem to be the best way of instilling predictability of
the marketplace in an era in which the service is moving toward
better business practices.
Would you not agree, should the changes be made through a
direct order, that an incoming Director could then change again
how the Leasehold Surrender Interests were to be implemented
and wouldn't a Director's order approach add regulatory
uncertainty within the industry?
Mr. Voorhees. Considering where we are in the process with
the law, and the opportunity, I guess, 9 years out from the
passage of the law, it strikes me that to take the approach at
this point to change the regulation as opposed to issuing
something which is arguably a little bit more flexible, like a
Director's order, which nonetheless provides the appropriate
guidance to be able to work your way through that time, would
do little more than put a monkey wrench in the gears of trying
to establish a level of progress in dealing with contracts, in
improving the Park Service's response to concessionaires
overall.
It just strikes me that, instead of accelerating the
process, you really would be putting a wrench in it, and it's a
wrench that I think is unnecessary, given that there has
clearly been a generous amount of conversation and
consideration to what are the options to work your way through
some of the gray areas. And there are gray areas, about how do
you identify what an improvement is, or how do you define an
improvement in this circumstance or that.
It just seems to me that to move forward with the thought
that the best answer is to reopen the regulations would, in the
end, provoke kind of a converse response that everybody wants.
Mr. Radanovich. Thank you.
To sum up, I would like to ask any of the witness who may
wish to speak regarding this, if you would like to comment on
any point that has been made by Deputy Jones in his prior
testimony that hasn't been brought out. I want to give
everybody the opportunity to do that before we close the
hearing. Is there anybody who wants to take that on?
Bruce?
Mr. Fears. I would just like to make a comment about this
$4 million threshold. There's a lot of contracts that fall in
between the $2-$5 million threshold that are controlled by big
corporations, and they're very profitable contracts. I can cite
a number of them, from Trailridge Store in Rocky Mountain
National Park to Carlsbad Caverns in New Mexico, Mirror Woods
in San Francisco, Claylock Lodge in Olympic Peninsula in
Washington State, that if you put them out to bid, you might
get a lot of small companies that would bid on these. Claylock
Lodge and Mirror Woods is operated by an $8 billion company.
This contract should come out to bid.
I guess the last point I would like to make, I agree with
Phil. I think you are too early in the process to open up the
regulations. I think it's working and I think you're getting
competitive bids. I think you're getting good bids, people that
are willing to come in and put passion and investment in these
operations, and I think you're too early in the process to open
them up.
Mr. Radanovich. Thank you, sir.
Mr. Todd. I guess, to comment in terms of the threshold, as
the Chairman of the National Park Hospitality Association, of
course, I get the same input as you. You talk to one
concessioner who is at $5 million and he'll say, gee, it should
be $5 million, and somebody else says mine is at $6 million,
why not go to $6 million. So I don't know how you win that
battle.
The other thing, quite frankly, I don't know how you can
differentiate a large family owned business, like Hamilton
Stores was, for example, why they wouldn't get the same right
as somebody who is at $4 million. They could both give you the
same theory, that it's been in the family forever, we're not a
big conglomerate, we're a family owned business, and we have so
much more at stake than the smaller guy because we have all
this infrastructure, hundreds of employees.
I just don't know how you ever get to the point where you
say that you deserve it, Mr. Two Million, but you, Mr. Six,
don't. I just don't know how you can reach a conclusion on
that, unless the objective is simply that you want to have
small guys in the parks, period. If that's the objective, then
you definitely could do it, because you will certainly
eliminate a lot of bigger guys from bidding because you don't
want to go through the whole process, only to be matched by
somebody else. But I just don't know how you can figure out
what level is fair.
In terms of the issue on the regulations, waiting for four
more years, I'm adamant that that's a mistake because, No. 1,
the provision to look at the law 9 years after 1998, the issue
was then to look at depreciation and possible amortization of
Leasehold Surrender Interest. It was not to open up the whole
regs for everything. It was simply one issue in the law that
said, if it doesn't work now, to grow it by LSI and 9 years
hence of '98 you can go back and decide--the Park Service can
look to see if they want to consider depreciating values. So to
say you're going to mix apples and oranges with some issue of
basic LSI, you know, to 4 years later, it ends up giving you an
entire period of 9 years of uncertainty.
For those who are in contracts now, like we are and others,
you're in the middle of a contract, you're still wanting to
know, as you put money in the next 4 years, are you getting
credit for it or not. It's millions of dollars. To say we'll
keep our fingers crossed and wait for something to happen a few
years from now just doesn't make any sense. Plus if you issue a
Director's order now, in essence, the Director's order is going
to contradict the existing regulation, which, to me, makes even
more ambiguity.
Mr. Radanovich. Thank you. Does anybody else wish to
comment? OK. Thank you very much for coming to Washington and
being part of this hearing. You have given us valuable
information on the record which will help us establish, we hope
through the working committees and, if not, then through the
legislation here, some answers to some of your questions. I
really appreciate it very much.
This hearing is closed.
[Whereupon, at 4:50 p.m., the Subcommittee adjourned.]