The Breakdown

Explaining Southern California's economy

How to privatize the LA Zoo – the right way

I'm just catching up with the debate about privatizing the management of the LA Zoo. The core issue is that the city is going to find it more difficult to run the zoo in the future, as costs rise. Operations could be cut back, ticket prices could be raised, workers could be laid off, other fees could be levied -- none of these are particularly appealing options, so in early August, the City Council authorized a Request for Proposal (RFP) to allow a bidding process to begin.

So how would this work? KPCC laid it out in a report in late July:

Under a so-called alternative management structure, the city would retain ownership of the zoo, and none of the zoo's 228 full-time workers would be laid off. Employees who do zoo-specific work would keep their current jobs. Plumbers, carpenters, gardeners and other non-zoo specific employees, however, could be transferred into other city departments.

All new hires at the zoo would work for the new private manager.

"All the zoos who transition into this kind of model, their revenues skyrocket,'' said City Administrative Officer Miguel Santana, who will oversee the process. "It's much easier for a private individual or foundation to give money to an organization that's under a non-governmental management structure than it is to give government money.''

The "alternative management structure" sounds appealing because it means that the city still owns the zoo. It's pseudo-privatization. It made sense to me, until I did some digging around. Back in 1992, the World Bank outlined eight steps for successful privatization. This was at the national level, mind you. But one step jumped out at me:

Countries can benefit from privatizing management without privatizing the ownership of assets. Management contracts, leases, and concessions have been successfully used the world over, particularly in sectors where it is difficult to attract private investors. In Côte d'Ivoire, the leased water company improved technical efficiency, increased new connections, became more efficient in billing and collection of receivables --and reduced the number of expatriate employees by 70%. But because a change in ownership is usually needed to lock in performance gains, private management arrangements are likely to work best when they are a step toward full privatization. 

In other words, L.A.'s plan wouldn't be the endgame for the zoo. If a non-profit or private management firm runs the zoo better, ownership would be an eventual reward. This would wind up saving the city millions (the current zoo budget is almost $18 million, paid for by the city and through various other means). In fact, a private ownership entity would likely have to pay the city to provide things like fire services. 

It's also reasonable to assume that a private owner would take very good care of the animals. Change.org has posted a petition online opposing the city's privatization scheme, arguing that a private owner wouldn't provide transparency about the well-being of the animals and would "Disney-fy" the zoo. The Disney part would be up to the new management, but it certainly wouldn't be in either a non- or for-profit's interest to cut into animal welfare to earn fatter profits.

Extracting funding from the city is another story. An outside operator or nonprofit would probably want the city to kick in some funding. But it might be better if the city approves a plan that would get it out of the zoo business entirely – while still permitting it to regulate zoo operations. The goal should be to get the city's contribution off the table, at some future point. It's about $14 million now, and would be $13 million in 2015, even if the zoo's management is privatized. Assuming that city budget deficits are going to be a problem for at least the next few years as LA contends with recession-slowed growth and very high unemployment, the savings that full privatization would bring can't be overlooked.

Photo: Wikimedia Commons

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