A nationwide production analysis of state park attendance in the United States

Abstract

This study examined the production of U.S. states' park visits from 1984 to 2010 by state. In specifying the production equation in terms of the influences of the states' parklands, labor, and capital investments on the annual attendances, we found that state governments will experience an ongoing need for more labor to maintain their parklands if attendance is to increase in the future. Results also indicated that more capital expenditures are not likely to increase park utilization rates. Post-estimation procedures involved the application of the response residuals to identify the capacity utilization rates of the states' park systems over the past 27 years. Past utilization rates revealed operators met or exceeded capacity utilization expectations from 1984 through 1990. However, beginning in 1991, the annual mean utilization rate for the nation's supply of states' parks signaled a trend toward excess capacity. Our forecast revealed the mean utilizations over the next three years will vary between 90% and 95%. Post-estimation procedures also examined the relationship between state park management orientations (towards either public-lands preservation or recreational development) and projected annual capacity utilization rates. Results indicate that the quantity of added facilities to broaden their appeal to the public (i.e., a recreation orientation) was not important in explaining utilization capacities. However, an orientation toward public-lands preservation related significantly to greater utilization rates. In our view, the public will continue to accept current cost structures for continued operations of the states' parks on the compelling need for access to outdoor recreation to contribute to the visitor well-being.

Introduction

This study focuses on state park systems in the United States. The states' parks are pivotal in the national effort to supply adequate outdoor recreation opportunities through their provision and administration of parklands (Landrum, 2004). The states' parks have evolved from their traditional purposes of acquiring scenic tracts of lands and opening them to public access for outdoor recreation with the primary aim of protecting natural resources and providing outdoor recreation opportunities to also providing restrooms, picnic tables, campsites, and other facilities. When we speak of providing outdoor recreation opportunities, we mean simply the consumer's access to a state park where the consumer may engage in various outdoor activities. In fact, any person can be a park consumer if that person pays all the necessary charges, if any, for park access and consumes the services. By performing their traditional roles of protecting natural resources and providing outdoor recreation opportunities, state parks contribute to public well-being by offering accessible opportunities that contribute to recreationists' physical health and mental well-being (Walls et al., 2009). During FY 2010, state parks attracted 717 million combined visits by residents and non-residents.

Despite the importance of the states' parks to the national supply of outdoor recreation opportunities, there are few published longitudinal studies about levels of consumption in terms of their production capabilities. Strauss's (1975) study of the production of recreation visits and average operating costs of the Pennsylvania park system is one. We are unaware of published research efforts that have attempted to examine the production processes and the capacity utilizations of the 50 states' park systems with cross-sectional and longitudinal data, or efforts that have applied aspects of management orientations to the consumption of services from the states' systems. Consumption refers to the quantity of annual attendance at a specific level of recreation supply and price.

Annual attendance is the technical measure of the quantity of visits to the state's parks at existing prices. We view a visit as consisting of a consumer with utility U (x, Y) where x is the single output of recreation experiences from the visit and Y is the factor inputs (e.g., capital and labor) in the production of outdoor recreation opportunities. Operating in the best welfare of the consumer in supplying recreation opportunities, the operator solves the utility problem, max U (x, Y), such that, the operator produces outdoor recreation by substituting into the consumer's utility the relationship, $x=f\left(Y\right)$. The function f is homogenous, exhibiting returns to scale and continuously declining average total costs as state park visits increase and appears as an argument in the equation because the input prices are variable. The consideration of many visits does not alter the form of this problem. The importance of the solution is that it implies an operator will employ factor inputs to produce outdoor recreation until the consumer's marginal utility equals the marginal disutility of providing additional outdoor recreation opportunities. To this end, the operator attempts to satisfy that objective by lowering the average total cost in the long-run and by appropriating more inputs until annual attendance increases to an optimum quantity at the current price that consumers are able to pay for park access and facility use. The production process therefore requires that the consumer's demand for park access equal this equilibrium price at the consumer's fixed utility and a tax subsidy, as being preferable to not having the state park at all (Grandy, 2009).

Operators attempting to manage production with efficiencies often seen in the private sector incur perpetual losses at any price above an equilibrium price because the average total cost is always greater than the marginal cost, thus requiring state appropriations (Phaneuf and Smith, 2004). A primary reason for this is that the production of outdoor recreation is beset by distributional equity issues, motivated typically by a fairness doctrine, in terms of the geographically dispersion of a state's parks and consideration of the underlying economics of localities when distributing state tax revenues for outdoor recreation to the parks (Loomis and Walsh, 1997). All this implies is that the need to break even financially is not a necessary condition of park operation because the demand will always be everywhere below the average cost of operations at any breakeven price. In adopting this perspective, there are no assurances that operators will select the least costly combinations of factor inputs for outdoor recreation as production efficiencies warrant (Newcomer, 2007). Instead, operators make do with legislative appropriations and fixed quantities of inputs for the fiscal year and, in turn, execute the necessary adjustments in the production processes, which may include deferring maintenance, reducing visitor services and enforcement, and not necessarily increasing the prices that they charge to visitors for services or the rental of facilities.

Our motivation for undertaking this production analysis of the states' parks is a societal one. We address the extent to which the operators can expand the capacity utilization of the states' parks without altering the quantity of the factor inputs. This analysis requires the estimation and prediction of both the annual attendances from the specified production model and the residual quantities, if any, of attendance. We attribute the magnitudes of the residuals to the operators' management practices that involve varying the compositions of the factor inputs and a symmetrical measurement error.

We acknowledge that the states' parks and their management systems are not autonomous entities functioning without knowledge of the resources and objectives in other states when making allocation decisions of production inputs in their attempts to maximize public utilization of parks to their capacities. We would not expect to find similar patterns of annual attendance in states with large proportions of federal lands, such as Utah, Nevada, and Idaho, as we would in states like Kentucky, Illinois, and Iowa, where state parks' services fulfill a larger proportion of the area's consumption of outdoor recreation. In this regard, Davis (2008) profiled the public land holding of states in an attempt to describe this diversity between and within the states' public land systems. Davis grouped the states' public land portfolios based on three broad objectives—preservation, resource extraction, and recreation—that appear in varying degrees in the state agencies' enabling legislation and mission statements and were reflected in policy decisions. A preservation-oriented focus is directed toward the need “to preserve and protect native ecosystems, natural landscapes, and biodiversity in general.” An extraction orientation focuses on natural resource commodities, while a recreation orientation addresses the need “to manage public lands by providing passive and active recreation opportunities to the public and to bolster tourism as a form of economic development” (Davis, 2008, p. 3). In this regard, Landrum (2004) notes increased capital investments by operators in (a) golf courses, (b) resorts, (c) upgrading campsites, (d) snowmaking machines for skiing, (e) mountain-biking trails, (f) aquatic facilities, and (g) marinas, as well as other visitor services intended to broaden public appeal. Apparently, operators are increasing the suite of outdoor recreation opportunities they provide with the aim of generating additional revenues. In fact, over the past decade in real dollars (i.e., deflated with the consumer's price index to 2009 to remove the systematic bias of inflation) the year-over-year changes in park-generated revenues from such excludable goods was 3.1% (SD = 8.4%) (Siderelis and Moore, 2009). Additionally, state tax transfers for parks have continued to decline while annual attendance remains relatively flat at 740 M (Siderelis et al., 2011). These findings have two important implications for this study's examination of capacity utilization and the nation's supply of states' parks. First, operators struggling with ever increasing operating and capital expenditures would be better off in the long-term producing additional outdoor recreation opportunities and should consider (or continue) relying on fees and charges in generating revenue in order to fund future services. Second, those systems collecting fees do so successfully, irrespective of their residual performances, apparently with minimal displacement of visitors from the states' parks at which operators collected fees.

The impetus for examining the capacity utilization of the states' park systems was the deteriorating economic outlook that began in FY 2008 coupled with that fact that the states' systems have historically been dependent on legislative appropriations and aid from nonprofit organizations. Since then, operators have been dealing with the question of how they might address the acute budgetary pressures their state governments face while attempting to assure services are in line with visitor preferences. Different examples of operator efforts to respond to the states' tax revenue shortfalls and to manage production schedules have been documented by the National Association of State Park Directors (NASPD, 2010). These include:

• imposing or increasing admission fees and charges on excludable goods and services;

• outsourcing services and facility operations to private vendors;

• limiting hours of operation and even temporarily or permanently closing parks (e.g., California officials report that a quarter, 70, of that state's parks are slated to close in 2012);

• ignoring backlogs in maintenance, thereby impacting the natural environment and possibly creating safety issues for visitors and increased liability exposure; and

• instituting hiring freezes and cuts to training budgets that inhibit leadership development and adoption of best management practices.

This nation wide production analysis relative to the factor inputs employed by operators over 27 years does not result in absolute predictions about future production capabilities. Instead, the analysis provides an understanding of the utilization of the states' parks by consumers. We assess how much variations in the factor inputs can explain past attendance to forma clearer understanding of how the inputs might influence the production of outdoor recreation in the future. We are operating on the premise that in order to describe the future state of the nation's supply of states' parks, we must know where the supply has been, having incorporated the collective choices and mandates of public officials in guiding the states' parks and not necessarily the market demand and supply conditions. Our focus on production is ultimately an examination of the conversion of the factor inputs into visits by operators. Hence, we pose the following two research questions to direct our analyses:

Question 1 Which of the factor inputs to the nation's supply of states' parks contribute significantly to the production of outdoor recreation opportunities for public consumption?

Question 2 How productive have the states' operators of parks been in utilizing the potential capacities of the nation's supply over the past 27 years and what are the near term projections?

We can trace the study of the production of outdoor recreation by land-managers to early research by Seneca and Cicchetti (1969) where annual attendance was found to be a function of the parklands' characteristics. The authors adopted the production process concept for specifying what they referred to as a “user response model” to the 154 parks in the Appalachian Region. Similarly, we conceptualize the production process for a state's park system as creating the outputs of park visits from the input requirements of parklands, labor, and investment capital needed to meet the outdoor recreational needs and wants of the public where the technological changes in production are relatively infrequent. How well organized and skilled the state operator is at undertaking this transformation of the factor inputs into output will determine the operator's success in serving the public. In the private sector, this equates to the producer wanting to be as efficient as possible in transforming the inputs into output, while using the minimum level of inputs possible to achieve a set amount of output in order to reduce the extra cost of producing an extra unit of output (Nicholson, 2008). This action allows the producer to sell the outputs at a lower price in pursuit of the rational maximization of profits.

Our production equation is not a behavioral demand function for recreation trips necessitating the collection of visitors' travel distance sand cost measures from population zones to the states' parks and their associated substitutes. The equation explains and predicts the expected annual attendances over time to each state's park system (x), a technical measure, in terms of the official reports of the quantities of factor inputs. We concisely conceptualize the production process with Equation (1),

$$x=f\left(L,S,K\right)\text{.}$$

The function f(∙) describes the relationship between annual attendances and the different mixes of the following factor inputs:

L = amount of labor required, S = acres of parkland that comprise the land and water areas under management, and K = capital expenditures and investments.

To satisfy the statistical assumptions for a normal distribution of the dependent variable and the removal of the statistical dependency in each case between the means and the variances of the factor inputs, Equation (1) takes a logarithmic form:

$$x=\alpha L^{{\beta }_1}{S}^{{\beta }_2}{K}^{{\beta }_3}\text{.}$$

The parameters β₁, β₂, and β₃ describe the contributions of the factor inputs to annual attendance. We are then able to calculate the states' utilization capacity rates with the post-estimation response residuals from Equation (2). We invoke the following assumptions in analyzing the production processes of the states' systems:

• Since any excess capacity of the recreation opportunities is lost due to their non-storability, the quantity of recreation opportunities consumed by the public is identical to the quantity of people visiting the park. A visit is the entry of any individual into a state's park for any length of time for recreation and/or education purposes consumed at the point of production (NASPD, 2010).

• The quantity of recreation visits, customarily reported as attendance by the states' parks operators, is not a behavioral measure like the quantity of trips from the estimation of recreation demand; rather attendance is a technical measure of the counts of the annual visits to a state's park system and does not imply the actual capacity of the system.

• Annual attendance has a constant average quality of services and, therefore, we do not directly consider quality differences here. We assume that the states' park operators had the authority to trade-off maintenance, enforcement, and visitor service as determined by the input requirements over time. Consequently, it is not possible to judge whether decreasing expenditures, changes in employment ratios, or changes in resource supply involved some sacrifice in service quality.

• In evaluating the model's parameters as to the scale of the 50 states' park operations, we cannot assume that a change in inputs necessarily results in a corresponding increase or decrease in park use regardless of the location of a state's system of parks as might be the case in the operations of a private firm. In theory, analysts assume that the production function is homogenous of degree one with the parameter values summing to one, thereby displaying a constant return to scale where the doubling of the use of inputs would lead to twice as much output.