News: CJ Exclusives

Plan to Make N.C. Zoo Public-Private Partnership On the Move

Brubaker expects to introduce proposal in short session

The senior chairman of the state House Appropriations Committee said he is prepared to introduce legislation this year to transform the state-owned North Carolina Zoo into a public-private partnership.

“I fully support the public-private partnership. It’s the only way the zoo’s going to move forward,” said state Rep. Harold Brubaker, R-Randolph. “We don’t have the money to do additional programs and expansion” through state funding alone.

Zoo Chief of Staff Mary Joan Pugh said greater funding possibilities exist under a public-private enterprise and that should help the zoo pursue goals of an exhibit featuring animals from the continent of Asia and building a long-sought hotel and conference center.

About 75 percent of the nation’s accredited zoos and aquariums already have switched to public-private partnerships.

Under the final draft plan, rates would go up for daily admission and membership plans and the new management would be expected to boost fundraising efforts. Attendance is expected to rise along with facility and marketing improvements at the zoo. A 5 percent reduction in staff is part of the proposal, and employees would shift from the state retirement system to a private 401(k) plan.

Brubaker, who also chairs the Legislative Committee on Excess Assets, said the next step for the zoo proposal is a review by the Public Private Partnership Committee.

“We’ll probably look for legislation in the short session,” and he likely would author it and seek for it to be channeled through Appropriations, Brubaker said.

Under the plan, drafted by Rick Biddle of the Philadelphia consulting firm Schultz and Williams, the state and a reconstituted North Carolina Zoological Society would enter into a management agreement under which the state would own the land and assets, make an annual allocation and provide for deferred maintenance costs.

The society would fall under the purview of a newly appointed board of directors and committees. It would be responsible for governance, management and operations, fund raising and private funding support.
Proponents presented the plan to Brubaker’s Excess Assets Committee Jan. 23, and he said he heard nothing troubling in the report.

“I know some of the employees are very concerned” about transitioning from state employment to working for a public-private partnership, he said. But he is confident that worry will wane after officials share with staff the positive experiences at other zoos that already have made the transition.

“This is something that the state of North Carolina has decided to explore, and I think they should be commended for doing that because today it doesn’t make sense for states to be running enterprises like this when they can’t even balance a budget,” said Leonard Gilroy, director of government reform at the Reason Foundation.

In addition to other zoos and aquariums, federal forest lands have implemented this model.

“They’ve turned what used to be money losing parks into revenue-generating assets,” campgrounds and marinas, Gilroy said.

The plan has backers outside of Brubaker’s committee. “The governor supports it. The presentation was made to her and she supports it,” Pugh said.

Pugh is hopeful the 33-page study, completed in about three months, will pass in bill form during the short session. While it is winding its way through the General Assembly, there are items the zoo can work on.

“We’re going to have to have insurance, a health insurance plan, vacation and sick leave” policies developed, payroll and accounting systems revamped, she said.

In the final draft, Biddle wrote that transition costs such as new computer systems, signage and marketing efforts would range from $3 million to $4.5 million, based on shifts in governance studies at other zoos. The state likely would be asked to provide those funds.

The proposal lumps together the state employee staff and the private employees of the nonprofit Zoological Society, which currently operates gift shops, sells memberships, and does some fundraising for the zoo. It adds 2 percent to salaries and increases pay for some positions that are not at the market rate, but also poses a 5 percent reduction in the staff.

Pugh cautioned that all the numbers are preliminary and based on Biddle’s working estimates of what has been done at other facilities where he’s developed public-private partnership plans.

Because employees would cease to be state workers, one feature of the plan addresses retirement issues for state employees who are close to state retirement plan benchmarks for higher monthly pension payouts at the 20, 25, and 30 year marks. The zoo would pay up to 36 months into the state retirement system to push the employees to the next benchmark level.

Under the new management, a 401(k) plan would be offered, allowing contributions by both the employee and zoo. State employees now pay a required 6 percent into the retirement system each year. They would have more flexibility to raise or lower that amount under the new plan.

“If you are shifting away from having zoo employees being on the public payroll with public benefits … that can give you some flexibility there and save money on the operational end,” Gilroy said.

“If the new positions at the zoo would not be public positions, the new operator would be able to save money,” he said. “The goal here would be to, over time, draw down the state’s responsibility for funding and ramp up the private entity’s role in that.”

In fiscal year 2013, the salary and benefits paid to the zoo’s 282 full-time employees would be $13,698,696, according to the draft plan. That would be about a $200,000 increase to accommodate merit salary adjustments. Total zoo expenses would be $19,713,196.

Total revenues would be $19,715,250 in 2013, and projected at $23,341,320 by 2018.

That revenue is projected partly on baseline attendance rising from 741,119 in 2010-11 to 750,000 in 2013 and 795,000 in 2018. Current admission rates would rise under the plan from $12 for adults and $8 for children to $14 and $10 in April 2013, and $16 and $12 in April 2016. Family memberships would increase from the current $59 to a recommended $74, and should be trending towards $95 per household in accordance with industry standards, according to the study.

The state allocated $11,451,024 to the zoo for operations in 2010-11. The layout has increased steadily over the years, from $7,363,259 in 2001-02. Under the new plan, the state would allocate $10 million to the zoo in 2013, with a 1 percent increase per year thereafter tied to the Consumer Price Index.

The new model would provide certainty to the funding picture, which has been clouded in the past due to other state priorities, Pugh said. Bringing in a private partner also would allow the zoo to open new exhibits or perform needed maintenance on existing facilities without having to wait for state funding.

“If you don’t keep up the zoo, our attendance falls, we don’t have as much money, and what we contribute to the economy and what we contribute in taxes will go down,” Pugh said. A public-private partnership would ensure continued sustainability and enhancements.

Gilroy said the switch to private management should encourage more private investment in the zoo.

Dan Way is a contributor to Carolina Journal.