Auditor Of Public Accounts
State Auditor Crit Luallen releases an analysis of Ky. State Parks
FRANKFORT, KY (5-07-08) A report issued today by the Office of State Auditor Crit Luallen says the Kentucky Department of Parks is seeing its net losses growing in spite of hundreds of millions of dollars invested in capital improvements in recent years.
The report calls for increased marketing and a strategic plan to aid in the management of the Parks system.
Since a major bond issue in 1995, $316 million has been appropriated to renovate and expand Parks facilities. Yet operating losses increased 14 percent since 2000, and Parks was forced to seek $5 million in a supplemental appropriation in 2008 to meet its obligations.
The Auditor’s Office performed the analysis using specific financial data of the Kentucky Department of Parks from 2000-2007. The report documents a trend in many Parks’ activities where expenditures are increasing at a higher rate than revenues.
This financial trend is especially evident in the Parks system’s largest revenue generator – Kentucky’s 17 resort parks. The analysis of eight years worth of data indicates that certain resort parks’ activities initially operated at a profit or close to break-even; however, financial trends resulted in these activities operating at a decreased profit margin or at a loss, according to the report.
Three figures that impact this trend are the number of occupancies, the number of meals served and the number of rounds of golf played. Over the last eight years, occupancy at the resort parks has decreased by 29,629 units (rooms or cottages), while over the last five years (2003-2007), the number of meals served decreased by 88,885. From 2000-2007, the rounds of golf played at Parks’ 18-hole courses decreased approximately 2,700 though five courses were added. For the seven courses operating in 2000-2007, rounds of golf played decreased 67,383.
The report also provides a financial analysis of resort park activities including golf, dining, gift shops and lodging. The report shows an overall downward financial trend.
For example, though approximately $55 million was provided for golf-related projects from 1994 to 2008, golf activity experienced its greatest loss of approximately $700,000 in 2007. Gift shops revenues decreased almost 24 percent from 2000-2007.
“Our state parks system is the finest in the nation. The concern is that the parks system received significant capital construction funding with the goal that the improvements would bring more people to the parks, but we are not seeing that in our analysis,” Luallen said. “The Parks system needs increased marketing and a strategic plan to improve its revenues and economic impact.”
Luallen said the strategic plan for Parks should identify efficiencies to improve resort park activities’ sales and revenue to reverse the current financial trend. Parks should utilize this data analysis as well as other quantitative research to establish benchmarks and provide a basis for sound management decisions, she said. In the strategic plan, Parks should at a minimum address the following:
- Identify funding sources that can be used to effectively market and advertise Parks facilities and activities such as golf courses and lodging. Luallen suggested that the Commerce Cabinet, which oversees Parks, should consider the recently developed 1-cent lodging tax as a possible source of funding in this area.
- Develop through research and analysis a comprehensive room rate structure to maximize the economic impact of lodging. This may include package pricing, special and seasonal rates.
- Evaluate the price structure, marketing and advertising of other activities, including golfing and dining, to maximize participation and economic benefit.
- Review all existing vendor contracts to determine whether contract costs could be reduced or eliminated.
- Evaluate the approach taken to renovate lodging rooms and dining facilities to minimize the negative economic impact construction has on Parks.
The report does not reflect recent significant budget reductions.
This report is one of many authored by the Auditor’s Office over the past four years as an effort to add value to the public debate on key policy issues. In the past, the Auditor’s Office has reported on Medicaid changes, college tuition increases, drug reimportation specifics, jail spending and the high school dropout rate. For a copy of any of these reports, including the Parks report, visit www.auditor.ky.gov.