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1 This artile was downloaded by: [Texas A&M University] On: 9 November 2010 Aess details: Aess Details: [subsription number ] Publisher Routledge Informa Ltd Registered in England and Wales Registered Number: Registered offie: Mortimer House, Mortimer Street, London W1T 3JH, UK Managing Leisure Publiation details, inluding instrutions for authors and subsription information: Emergene of the unfair ompetition issue in United States' rereation John L. Crompton To ite this Artile Crompton, John L.(1998) 'Emergene of the unfair ompetition issue in United States' rereation', Managing Leisure, 3: 2, To link to this Artile: DOI: / URL: PLEASE SCROLL DOWN FOR ARTICLE Full terms and onditions of use: This artile may be used for researh, teahing and private study purposes. Any substantial or systemati reprodution, re-distribution, re-selling, loan or sub-liensing, systemati supply or distribution in any form to anyone is expressly forbidden. The publisher does not give any warranty express or implied or make any representation that the ontents will be omplete or aurate or up to date. The auray of any instrutions, formulae and drug doses should be independently verified with primary soures. The publisher shall not be liable for any loss, ations, laims, proeedings, demand or osts or damages whatsoever or howsoever aused arising diretly or indiretly in onnetion with or arising out of the use of this material.

2 Managing Leisure 3, (1998) Emergene of the unfair ompetition issue in United States rereation John L. Crompton Department of Rereation, Park and Tourism Sienes, Texas A&M University, Room 106 Franis Hall, College Station, Texas , USA Historially in the United States, there were lear lines of demaration between rereation ativities that were the prerogative of the publi setor and those of the private setor. These boundaries have been eroded with the result that frition between servie providers is now ommon and has beome a prominent poliy debate in many jurisditions. The paper rst disusses the issue in the ontext of ampgrounds and rereation/ tness entres, sine these have been espeially ontroversial areas. Subsequently, illustrations are offered of a wide array of other ontexts in whih the problem is emerging. The onluding setion reviews unfair ompetition disputes that have arisen between ommerial tness lubs and nonpro t organizations suh as YMCAs. INTRODUCTION Two deades ago, it was possible to identify park and rereation servies that were widely reognized to be the prerogative of the private setor, and those whih were onsidered to be a publi setor responsibility. In reent years those lines of demaration have beome fuzzy, overlap is ommon, and the number of ontexts in whih the setors offer ompetitive programmes is growing. The hallenge today is not to de ne the boundaries between the setors in order to determine who should be providing what, beause the setors are now too irrevoably intermeshed for that. Rather the need is to rethink how they might interat and work together more effetively and onstrutively, so their efforts are omplementary rather than dupliative and the angst and arimony between setor ompetitors is redued. Three fators have ontributed to blurring these setor boundaries. First, a host of new ativities have emerged suh as aerobis, mountain biking, power walking, in-line skating, skate-boarding, street hokey, jet skis, beah volleyball, ardiovasular mahines, and so on. These were not offered two deades ago by either setor. Sine there was E & FN Spon no established supplier tradition for these ativities, response in some areas to the new demand ame from the publi setor while in others it was the private setor that supplied these servies. A seond fator is the redued availability of publi funds. The tax revolt whih reverberated aross the United States in the late 1970s and early 1980s, forever hanged the perspetive of eleted of ials and ageny managers. Eleted representatives reognized that survival in of e depended on them demonstrating frugality to the eletorate. Fisal onservatism is the prevailing nanial environment in almost all jurisditions. For most park and rereation managers, this has meant that tax support has been redued. Agenies have responded by raising the pries of their existing servies and by broadening their range of offerings by expanding into revenue-generating ativities that were previously onsidered the exlusive preserve of private operators. The need to generate revenue was suf iently entral to the survival of some agenies, that it superseded any philosophial position they may have held with regard to avoiding ompetition with the private setor.

3 58 Crompton The third fator enouraging setor overlap is a orollary of the higher pries most agenies now harge for servies. It is not possible to give away ake and expet people to rush into the bakery business at the same time. Thus, if user pries are heavily subsidized, then an ageny is, in effet, preventing the private setor from offering a similar servie. If quality and onveniene are equal, a partiipant is likely to use the lowest pried servie. When the pries of publi rereation servies were raised, the private setor was more able to offer a ompetitive programme beause there was now greater opportunity for generating a satisfatory return on the investment. The blurring of traditional servie boundaries has resulted in an inrease in the number of harges made against publi agenies alleging they are engaging in unfair ompetition by offering servies similar to those provided by ommerial businesses. The harge of unfairness stems from the advantages that enable park and rereation agenies to offer programmes of a given quality at a lower prie beause their osts are substantially lower. These ost savings inlude paying no property, sales or inome taxes; being self-insured; naning improvements with tax-exempt funds rather than borrowing money at ommerial rates (in effet, this means that publi agenies an borrow money at about 3% below the rate available to the best private ompanies); not being required to over debt harges with operating revenues; and reeiving free advertising from the ageny. If the ompetition was fair with the publi setor also being required to reover full osts, then businesses would be muh less onerned. The potentially devastating impat of this ompetition is illustrated by the following examples: Lafayette, Colorado has a population of The ity built a $4 million tness faility with three pools, steam rooms, whirlpool, dry saunas, raquetball ourts, gymnasium, indoor trak, tness entre with free weights and ardiovasular equipment, and babysitting servies. When it opened there were three private tness lubs in Lafayette. After one year, one had gone out of business; a seond saw its membership deline from 500 to 250; and the third, whih was an aerobis studio, was unable to maintain the numbers it needed to justify proeeding with an expansion to whih it had previously ommitted (Martinsons, 1994). Gore Mountain Ski Center, a publi faility operated by New York State, reeived an annual tax subsidy of $ a year and was onstruted with tax-free bonds. It applied for $ in federal grants to help in funding a $2.87 million apital extension that involved installing snow-making mahinery and other equipment. The balane of the apital was raised by issuing tax-free bonds. With these advantages Gore Mountain harged $400 for a family season pass. The four ommerial resorts in the area harged an average of $1125, beause they had to pay ommerial pries for investment apital without any assistane from federal grants. They also had to over osts assoiated with taxes and insurane, and to show a reasonable return on their investment. Thus, the publily operated state projet gradually fored the ommerial operations out of business. An editorial in the Wall Street Journal ommented: By a sort of Gresham s law of ompetition, we have notied that state enterprises in the mixed eonomy tend to drive out private enterprise (Wall Street Journal, 1975). A federally funded ampground was onstruted at Pueblo Reservoir in Colorado at a ost of over $5 million. In the immediate area of Pueblo there were three existing privately owned ampgrounds with marginal oupany rates

4 Emergene of the unfair ompetition issue in United States rereation 59 that were struggling to remain solvent. They were fored to lose after the federal faility opened (Oertle, 1981). These kinds of ompetitive ations by the publi setor not only adversely impat existing businesses in a spei area, but they also may dissuade other entrepreneurs from establishing new rereation servies elsewhere for fear that a publi ageny may open near to them and drive them out of business. While ompetition with ommerial operators may present signi ant philosophial, ethial and politial problems, agenies are not legally required to refrain from suh ompetition exept in those rare ases, suh as Colorado, where the state legislature has enated spei laws making it dif ult for park distrits to engage in suh ompetition. Under the general power authorizing them to provide park and rereation opportunities for itizens, agenies an legally provide similar failities and programmes to those offered by private businesses if they hoose to do so. Thus, the ourts have generally rejeted suits brought by businesses alleging unfair ompetition, on rming that agenies have no obligations to businesses whih suffer from suh ations (Kozlowski, 1993). Regardless of the legal and ethial issues raised by unfair ompetition there are two pragmati reasons why agenies should avoid it. First, in many ommunities, park and rereation agenies are the only produers of many servies so they are, in effet, monopolist suppliers. Monopolies in the private setor are vigorously polied by governments and regarded as ontrary to the publi interest beause of inherent inef ienies. Hene, the presene of fair ompetition by private suppliers may stimulate the ageny to improve performane in terms of both responsiveness to user demands and minimizing osts. Seond, most park and rereation agenies are unable to fully satisfy all the demands expeted of them. If some of these an be met by the private setor, then ageny resoures an be redireted to meet other needs. Most of the allegations of unfair ompetition in this eld in the United States have been made in the ontext of ampgrounds or rereation/ tness entres, and these issues are disussed in the next two setions. The third setion gives illustrations of the wide array of ontexts in whih the issue has emerged, while the nal part of the paper reviews the unfair ompetition disputes whih have arisen between tness lubs and nonpro t organizations suh as YMCAs. CAMPGROUNDS The most ontentious debate on the unfair ompetition issue in the parks and rereation eld has raged in the area of amping. Both the publi and private setors have a long history of providing amping servies, but over two-thirds of all ampers stay in publi ampgrounds. The private setor argues that a substantial proportion of ampers go to publi rather than private ampgrounds merely beause they are heaper as a result of being heavily subsidized by publi funds. Publi agenies often justify subsidized ampgrounds on the basis that they are neessary to provide aess to the state, regional and national parks in whih they are loated for moderate and low inome families. However, data onsistently show that a majority of users of these failities are from higher inome households. Private ampground operators argue that there is no rationale for government to be in the lodging business. If there was, then they point out its involvement should logially be extended from ampgrounds to publi motels, publi hotels, publi gas stations, publi restaurants, publi ski-lifts, or publi anything! The primary purpose of publi park and rereation agenies they argue is to

5 60 Crompton provide and preserve park lands and they believe agenies should on ne their efforts to those tasks. However, publi setor agenies do have a mandate to make their lands aessible for publi enjoyment, whih may inlude providing amping opportunities on them. In addition, they have a long tradition of operating ampgrounds, so there is an expetation among the amping publi that they will do this. The tension between the two setors has a long history, as Case Study 1 illustrates. The dilemma in this ase is fairly typial exept that in today s environment the publi Case study 1 Unfair ompetition in ampground provision amp area would not be free, but it is likely to be pried lower than ommerial failities in proximity. The Tennessee Valley Authority (TVA) did not have the resoures to provide all the desired rereation failities at TVA lakes. Hene, it sought to enourage ommerial enterprise to provide some of these failities. However, sine the TVA lakes were onstruted with publi dollars, the ageny felt an obligation to provide the publi free aess to them. Permitting free aess effetively disouraged ommerial enterprise from assisting in providing failities at the lakes. The intriaies and dif ulties of a publi ageny s relationships with ommerial rereation operators have long been reognized. They were illustrated by a on it whih ourred between the Tennessee Valley Authority (TVA) and ommerial ampground operators in the area. TVA s of ial poliy toward ommerial operators was summarized in the following statement: It is not our intention to ompete with private operations... In fat we would like to feel we are doing everything we an do to enourage and assist developers of the ommerial areas so that a wide range of outdoor rereation opportunities will be available on T.V.A. lakes. At the same time TVA felt it had ommitments toward the general tax paying publi: It is T.V.A. s belief that it has an obligation to assure that the publi has adequate opportunities for free aess to T.V.A. lakes whih were reated with publi funds. This was further elaborated upon: T.V.A. s general poliy onerning rereation development on T.V.A. lakes is to provide the land without harge to States and loal governments for the development of parks, aess areas, and other rereation failities. The improvement and maintenane of these failities are onduted by the States and loal agenies. Beause T.V.A. lakes were reated with publi funds, we feel an obligation to make their waters available to everyone. Hene, T.V.A. sought to enourage ommerial development in order to expand the total range of rereational opportunities available, but at the same time wanted to provide free servie to the general publi who had provided the failities with their tax funds. The ommerial ampground operators oneded that TVA had an obligation to ensure that publi waters were aessible, but they believed this mandate should be narrowly de ned and not inlude the provision of a range of amenities. TVA oneded that they inorporated amenities but stated, The failities are not designed to ompete with private operations. The ommerial operators were emphati that they did in fat ompete. Their views were represented by the following statement from a ampground operator: T.V.A. enouraged us to open a ampground on our lakefront land. Soon after we were liensed and open for business, T.V.A. began developing free publi use areas and has ontinually

6 Emergene of the unfair ompetition issue in United States rereation 61 added more failities to attrat people into them. These areas are developed on beautiful waterfront land. They have paved roads, onrete pads and pini tables, replae grills, ush toilet failities, drinking fountains, garbage ans, water pipes whih are apped but not dif ult to onnet a hose to, and outdoor pavilions. White sand is hauled in and spread on some banks to make sandy beahes. Paved launhing ramps with paved parking areas, shing piers, et., are provided. The operator went on to assess the impat of this development on ommerial ampground operators in the area: These free publi use areas hurt the private ampground operators in many ways. Many have been fored out of business entirely, others have phased out amping and inreased marina or other phases of their business to ompensate. Many, many times, when our advertising has brought in vaationing tourists, they stay a day or two with us, then they tell us that our ampground is lovely, that we have been very nie to them, et., but why should they pay to stay here when there are free plaes just down the road? Soure: This ase study was ompiled from an exhange of letters published in National Campground Owners Assoiation News, May The ase for removing the soures of the publi setor s unfair ompetition may be onvining, but the politial reality of the strength of speial interest groups makes it dif ult to ahieve. Existing amping organizations have large numbers of members, are well organized, and are effetive in lobbying eleted of ials and senior managers. Thus, for example, organizations like the Good Sam Club and the National Campers and Hikers Assoiation are likely to turn out large numbers of members to lobby and testify in support of more publi amping failities and against any inrease in their prie. Many park managers would like to raise amping fees beause the additional revenues would ontribute to improving their agenies nanial resoures, but the strength of speial interest lobby groups has often thwarted their efforts. In some jurisditions, prie inreases remain the prerogative of eleted of ials rather than professional managers. The politial reality for eleted of ials is that these organizations ontain thousands of potential votes, whereas protesting private ampground operators offer only a handful of votes. In reent years, ampers have sought higher levels of human omfort in their amping experienes. They now travel in rereation vehiles and mobile homes, and prefer the omforts of readily available hot and old water, eletri, sewer and able television hook-ups to the inonvenienes of roughing it. This has resulted in both publi and private ampground operators substantially inreasing their level of investment in ampgrounds. As the required level of investment has risen, the dif ulty of seuring a return on that investment has inreased, and private operators have beome more voiferous and strident in expressing their opposition to publi provision. The publi setor originally met its mandate to make parklands aessible by providing basi amenities limited to washrooms, drinking water and sanitary stations. The private setor believes there should be no elaboration of that basi role into investing in more luxurious failities, espeially if there are private ampgrounds loated nearby. Many publi ampgrounds have an inherent advantage in that they are loated on seni publi lands in lose proximity to

7 62 Crompton magni ent natural resoures. This inherent advantage over private ampgrounds is enhaned by a number of other fators whih private operators regard as being unfair favourable treatment of publi ampgrounds: Pries at publi ampgrounds do not re et the ageny s ost of providing or operating them. These low rates effetively establish limits on what private ampgrounds an harge, even in situations where there is no diret ompetition from a nearby publi faility. This limit ours beause ampers have an expeted or referene prie in their mind based on their experienes elsewhere, and they are likely to rejet a prie that is not reasonably onsistent with their previous experiene. The losses sustained by publi ampgrounds are subsidized by general taxpayers who reeive no bene ts from them, inluding the private taxpaying ampground owner. Publi ampgrounds are not required to pay property, sales, or inome taxes as are private operators. Double standards sometimes exist for publi and private operated ampgrounds, with the publi failities often having to ontend with less burdensome regulations and poliies assoiated with suh issues as zoning, onstrution, sewage and sanitation. Thus, for example, many publi ampgrounds are not held to the same sanitary standards that are enfored on private owners. This sometimes ours beause the regulations do not always apply to publi ampgrounds. In other ases, where the regulations do apply, they may not be as stritly enfored beause of the fraternal relationship between publi agenies. Publi failities often don t meet restroom standards required of private ampgrounds, either in quality or number. Publi ampgrounds reeive free advertising and promotion from publi agenies inluding brohures, magazine advertisements and stories, literature, mentions in ageny-produed television programmes, and promotion from ageny booths at outdoor shows. Publi ampgrounds rarely have problems persuading highway authorities to provide signs informing travellers of their existene and loation, but suh signage is muh more dif ult for private ampgrounds to obtain. Private ampground operators would like these treatment inonsistenies to be removed and for publi ampgrounds to be established as enterprise funds. An enterprise fund is a trading aount that would legally require publi operators to generate suf ient revenues to over all operating osts, regular depreiation on apital improvements, interest and debt harges against the value of the land, and an amount in lieu of paying taxes. This would remove the unfair elements of ompetition and result in publi ampground pries and revenues being inreased substantially, whih private ampground owners believe would help the whole industry, both publi and private setors. RECREATION/FITNESS CENTRES New rereation/ tness entres onstruted by publi agenies are emerging as another primary fous of the unfair ompetition debate, as they evolve beyond basi gymnasia and pools to inorporate a higher quality level of provision in response to itizens expetations of an inreased level of sophistiation. Private health and tness lub owners allege that many proposed new rereation enters are indistinguishable from their failities and serve only to drive them out of the market plae. Some of their more

8 Emergene of the unfair ompetition issue in United States rereation 63 extreme spokespeople ask, Why should government build publi rereation enters, when they don t build publi foodstores or pharmaies? Others more reasonably ask, Is the ity going to build and operate its own movie theaters and bowling enters as well as rereation enters, sine they are also rereation failities? Publi agenies argue that sine ommunity rereation entres are usually naned with general obligation bonds that have to be approved by a referendum, the publi s willingness to do this indiates that itizens do not pereive their demands are being met by the private setor. Competing publi rereation entres are generally defended on the grounds that they aim at target markets in the ommunity that do not have aess to ommerial failities suh as families, seniors and hildren, whereas ommerial operators primarily target young relatively af uent adults in the age group. For example, a spokesman defending the deision of the City of North Rihmond Hills, Texas, to build a $7.8 million fun water park stated, The park is not meant to ompete with the large ommerial water parks that target teens with their high-adventure rides, but is for families, partiularly those with young hildren... We wanted elements that mom and dad would get out with the kids and interat together (Shmid, 1995). In Boise, Idaho, the West Family YMCA/Boise City Aquati Center was the result of a threeway partnership between the ity, whih paid $5 million of the $9.4 million onstrution osts; the YMCA, whih paid the rest of the onstrution ost and operates both the ity s aquati-entre portion and its own tness entre portion of the faility; and a researh park whih donated the land. The faility s manager stated, Part of the Y s mission is to help provide for those who would otherwise not be able to afford it. That losely onforms to what the ity wants to do by making rereation failities very affordable. However, it was pereived differently by ommunity health and tness lub owners in the area. One of them desribed it as one of the most lavish health lubs in the area whih has been responsible for putting four lubs out of business sine it opened. Another lub owner stated, It was presented as a plae for our youth to learn solid values and strengthen body, mind and spirit, as a way to ounterat the in uene of gangs. Who an omplain about that?... But in atual fat, they re atering to middle- and upper-lass adults. From our point of view, what they are doing is using their speial treatment through their tax exemptions, and the fat that they don t have a mortgage to pay. They were given this faility by the ommunity, and are using these advantages to unfairly ompete with the tax-paying businesses in the tness industry here in Boise (Cohen, 1996). Often, the different targeted segments identi- ed by the publi setor are pereived to be unable to afford the private setor failities whih usually offer a higher level of personal servie. Indeed, some see ommunity rereation entres as plaes at whih some people are introdued to ativities, and when they feel more on dent and ommitted to them they may move to ommerial failities seeking a higher quality experiene. Case study 2 Defeat of a $25 million bond proposal for a family rereation entre Proposal A on the ballot in South eld, Mihigan, sought a 20-year bond issue of up to $25 million to expand the existing ivi entre sports arena whih ontained a 30-year-old ie rink into a Family Rereation Centre and to renovate the existing spae. This would have added a 1.09 mill tax to taxpayers bills, so the owner of a $ home, average for South eld, would pay $50.14 a year. The proposed failities inluded:

9 64 Crompton a three-ourt gymnasium; an elevated jogging trak; an indoor/outdoor aquati entre with a leisure pool, and a seond pool for lap swimming; a seond full-sized ie arena with 1500 spetator seats, plus a studio ie faility for gure skating; a senior itizen entre; a teen entre; meeting rooms, kithen failities, food servies, loker rooms. Fitness businesses in the ommunity quikly organized to oppose it. We pay a lot of taxes and pay a lot of people and we will be hurt by this, said the general manager of Franklin Fitness & Raquet Club. We ve been a solid business operation in this ommunity for 25 years, he said. You don t want to start ompeting with the ity whih is using donated land and doesn t pay taxes to itself. If the measure passes, we and other lubs through the inreased taxes we d be paying, in effet would be subsidizing a ompetitor. Is there a need to tax 100% of the people for what 5, 10 or even 15% are going to use? The ity authorities argued that they had an obligation to provide rereational failities for their itizens, to whih the tness lub general managers responded, Maybe, but to what degree? When does it stop? Sure ities provide rereational failities, but at what level? Would they want to provide bowling? Should they build a movie house? There s a misunderstanding that may be there, said the assistant ity parks and rereation diretor. They feel we re being ompetitive, but we re not. We have a family atmosphere, not a lub atmosphere. We feel we an bring in fun for young people, toddlers and adults. There would be no full-blown tness program or body-building faility... We don t think we ompete for the same lientele. We offer an introdution to people to the things they do at the private lubs. In that regard, we may atually be helping them beause people try something out and if they nd out they like it they might want to sign up with a lub. Franklin Raquet Club elebrated its 25th anniversary that year by dediating a new $1 million basketball/volleyball oor. Basketball leagues are ourishing here on weekends and in the evenings, the lub s manager said, but volleyball hasn t yet gotten so popular here. And if the ity winds up with a new basketball/volleyball gym what will that mean to plaes like Franklin? It de nitely will affet our business. We an t grow like we want to. If someone ould afford a league over here and get it at half-prie over there even if they ould afford the higher prie why wouldn t they go there? We may not have made that $1 million investment if we knew we d have been ompeting with the ity. At approximately the same time that this proposal was announed, the ity in onjuntion with Providene Hospital, opened a new wellness entre at its Beah Woods Rereation Center. They lled an existing square foot room with equipment. They harged $250 per year for membership and hoped to attrat members. Four outside physiologists were available to members, eah working 20 hours per week in the entre. The tness lubs developed a brohure whih emphasized reasons the bond proposal should be rejeted. This is shown in Fig. 1. There is no indiation on this brohure that the ampaign was planned and funded by the tness lubs. The group registered itself as Friends Opposed to Proposal A. This strategy was designed to ensure that the points raised were objetively reviewed by residents. If this had not been done, some reipients may have dismissed the ampaign as merely the disgruntled efforts of a narrow vested ommerial interest.

10 Emergene of the unfair ompetition issue in United States rereation 65 Fig 1.

11 66 Crompton The tness group invested approximately $ in their opposition ampaign whih inluded the following: 1. A brohure mailed to eah household in South eld (Fig. 1) printing, postage and mailing ost $ Brohure inserts in the Detroit Free Press and News for South eld $ Full page advertisement in the Free Press and News $ Full page advertisement in South eld Observer $ Handing out brohure by individuals outside voting areas on day of balloting $2000. As a result of their efforts Proposal A was defeated overwhelmingly by 5582 votes to 2055 votes. Case Study 2 reports the response of tness lub owners who led a suessful ampaign to defeat a $25 million bond proposal for a Family Rereation Centre in South eld, Mihigan. A similar ampaign in Fairfax County, Virginia, was not suessful, but it emphasized the onvining arguments that an be made by the tness industry against new publi rereation entres. In the Fairfax County ase, the private setor rereation suppliers authored a 16-page report doumenting how the County Park Authority was diretly and unfairly ompeting with them when it proposed to build four new rereation entres. The report was entitled, Unfair, Unfair, Unfair Competition: How The Fairfax County Government and Fairfax County Park Authority Diretly Compete Against Private Rereation. The rst two paragraphs of the report stated: We are optimisti this doument will make governmental agenies aware of the unfair situation that ours when non-taxpaying publi failities ompete diretly against private taxpaying failities, and will enourage responsible publi of ials to pass legislation that would prohibit any government rereation faility to loate within a spei distane of an existing private faility. This type of legislation would give the Fairfax County Park Authority a lear guideline and prohibit the park system from ompeting unfairly or dupliating rereation whih is already provided by a tax paying business. In Fairfax County there are numerous privately owned rereational failities... Competition in the leisure/rereation eld has beome inreasingly ere due to many fators; however, when you onsider normal business expenses and the additional burden reated by trying to ompete with the very government you pay taxes to, it is dif ult to understand why any new rereational businesses would enter the market. It should be noted that hundreds of privately-owned rereation/leisure failities are ompeting for the same rereation/leisure dollar. A large general publi is needed to support and patronize these businesses for them to sueed. As the County ontinues to expand into the revenue-produing rereation eld, the rereational dollar is further diluted, whih eventually will bankrupt some businesses and ertainly disourage others that hope to build additional failities (Weisiger, 1983). OTHER PUBLIC SECTOR CONTEXTS The unfair ompetition issue is endemi to the park and rereation eld beause of the broad range of servies offered by many agenies. As the blurring of traditional setor responsibilities inreases, the range of ontexts in whih the issue emerges is likely to be extended. Case Study 3 and the following examples give an indiation of the extent of the issue: The University of Colorado at Boulder operates an outdoor programme for its

12 Emergene of the unfair ompetition issue in United States rereation 67 Case study 3 Unfair ompetition by the National Park Servie? In New Orleans, ommerial tour operators and nonpro t groups suh as the Friends of the Cabildo, whih is the primary support organization for the Louisiana State Museum, omplained that they ould not ompete with tours offered by rangers from Jean La tte National Histori Park and Preserve. The ommerial and nonpro t organizations harged $7 $10 for their walking tour of the Frenh Quarter, while those offered by the National Park Servie were free. Part of the Park s mandate is to portray the development of ultural diversity in southern Louisiana, and to do this it has established a small ultural entre at several loations in the area, inluding the Frenh Quarter of New Orleans. At this site it offered tours, letures, arts performanes and interpretive programmes. A spokesman said tours dupliate almost exatly the same tours that for-pro t groups offer... In effet, the National Park Servie designates the Frenh Quarter, the Garden Distrit and the emeteries a national histori park, but it takes no responsibility for them and ontributes nothing to their upkeep. There s no way the rest of us an ompete with their budget. The Superintendent of Jean La tte Park said, We don t feel we are ompeting. We feel we are enhaning tourism in the Frenh Quarter by making visitors aware there is more to the Quarter than Bourbon Street... When tourists see a uniformed Park Servie ranger in the Frenh Quarter, it helps them realize this is a unique historial area. Soure: Brue Eggler Tourgroups: Park Servie stealing turf. The Times Piayune. September 24, p. 4. students. The owner of a Boulder adventure travel ompany led a omplaint that it was underutting his business by offering low-ost outdoor trips. The owner said he ould not ompete beause the University s programme was subsidized by both student fees and equipment and vehiles owned by the State of Colorado. He said, The University should be dealing in eduation, not adventure travel (Light, 1989). Should an ageny develop its own nurseries to supply publi parks with plant materials when there are ommerial ompanies whih offer this servie? The US Forest Servie raises about 150 million trees a year at 12 nurseries around the ountry. It has been growing seedlings for nearly 80 years for reforestation purposes. Some of the nursery jobs fumigating, weeding, harvesting are done by private ontrators. So is some of the planting. When the ageny started raising its own seedlings around the turn of the entury, there were no private-setor resoures. However, the Amerian Assoiation of Nurserymen ontends that operating tree nurseries is a ommerial ativity that should be left to the private setor (Jaobs, 1984). The Marine Command at Camp Pendleton, California saw nothing wrong with a base rereational programme that inluded sail-boat rentals, a diving shool, whale-wathing ruises, and sport shing trips. However, all of these ompeted with loal businesses that ould provide these ativities for the Marines and their dependents on the base. The base refurbished a surplus harbour tugboat for diving, shing, and whalewathing trips. As a result, boat operations in nearby Oeanside lost nearly 100 trips a year that the base used to harter from them.

13 68 Crompton Camp Pendleton harged $11 a person, inluding takle, for a day shing trip, whereas the typial prie harged by loal operators was $29 a person. However, the Marine Corps got its boat for nothing, didn t have to pay $ to $ a year to insure it, and was not required to make a pro t. The operators argued that this onstituted unfair ompetition (Jaobs, 1985). NONPROFIT ORGANIZATIONS Allegations of unfair ompetition have extended beyond the publi setor to embrae nonpro t organizations suh as YMCAs. Like publi park and rereation agenies, nonpro ts have been impated by an adverse nanial environment, heightened ompetition for private giving, hanging lientele groups, and expetations for higher quality servies. Many have responded by hanging from their traditional role of haritable, donation organizations to operating in a ommerial style to generate a soure of dependable operating revenue. Traditionally, YMCAs offered basi no-frills failities in urban areas and targeted their programmes at low inome youth. Hundreds of YMCAs ontinue to serve the poor, aged, underprivileged, handiapped and youth, and are learly publi harities. However, in some areas the YMCA has moved away from this model and has onstruted modern tness entres that ater to downtown businessmen or middle-lass suburbanites. These are physially and operationally indistinguishable from ommerially operated tness and health lubs. These new failities use ommerial advertising whih fouses on selling memberships, not on appeals for volunteer and nanial help for the needy. In form and format their advertisements are often no different from those of ommerial faility operators. The unfair ompetitive advantage enjoyed by the YMCAs stems from a myriad of speial privileges granted under federal, state and loal laws and regulations governing them. These inlude: Exemption from federal inome taxation under Setion 501 of the Internal Revenue Code. Nonpro ts also enjoy exemption from state and loal inome and property taxes, and many are exempt from state unemployment ompensation regulations. They bene t from signi antly lower nonpro t postal rates. In addition, a nonpro t organization enjoys a speial status in the marketplae; tax-exempt status makes an organization espeially attrative to prospetive ustomers (De Marus, 1985). The oneptual rationale for these exemptions is that the YMCAs are providing soial servies that would otherwise have to be provided by government, so it is appropriate that they be subsidized in this way. However, tness lub owners argue that these new YMCAs render few if any haritable servies; alloate only small proportions of their revenue toward nanial assistane or subsidized programmes targeted at low inome groups; and target their servies at those who an pay substantive fees. The YMCA points out that it needs to have some pro table programmes, even if suh programmes ompete with private businesses, beause they are a major revenue soure for providing servies to the needy. The Assoiation of Quality Clubs, whih is a trade group representing over 1500 ommerial tness and health businesses, estimates that the tax and regulatory advantages mean that a $3 million nonpro t tness faility would enjoy an annual operating ost advantage in exess of $ over an idential private lub (Mehegan, 1994). Aordingly, the Assoiation of Quality Clubs has hallenged the tax-exempt status of some of the new model YMCAs. Their Exeutive Diretor artiulated their ase in the following terms: We argue that YMCA rereation and tness enters are not tax-exempt by reason of what

14 Emergene of the unfair ompetition issue in United States rereation 69 they do (providing suh failities), but rather by reason of whom they are serving. YMCA failities whose servies are foused primarily on taking are of youth, the elderly, the poor, the handiapped, et., deserve every tax break they reeive. On the other hand, YMCA failities whose servies are primarily foused on providing rereational and tness servies to af uent suburban ommunities or an upsale business and professional lientele are not publi harities and ought not be tax-exempt (MCarthy, 1990). This fundamental priniple has been aepted as the key fator by ourts that have ruled in these ases. The fous of the ourt ases to this point has been the legitimay of the YMCA s exemption from loal property taxes. The most prominent ase onerned the Columbia Willamette YMCA s Metro Fitness Center loated in Portland, Oregon. The Oregon Supreme Court ruled that this entre should be plaed on the tax roles beause too few of its servies ould be de ned as haritable. Indeed, only 5% of its revenue went towards nanial assistane. This required the YMCA to pay $ in annual property taxes from whih it had previously been exempt. However, two years later its property tax exemption status was restored when it hanged its name to Metro Family YMCA, expanded beyond its adult tness fous by adding 20 new programmes for youth inluding drug and alohol rehabilitation and alternative eduation and inreased the level of nanial assistane so it was extended to 33% of its members. In some states, the YMCA has engaged in substantial lobbying to protet its taxexempt status. In Illinois and Kansas, for example, this has resulted in laws being passed on rming the YMCA s tax-exempt status, provided they are ommitted to serving people without regard to ability to pay. CONCLUDING COMMENTS Unfair ompetition is esalating in the United States as a publi poliy issue. Entrepreneurs are lobbying state legislatures for laws to be passed whih prohibit publi agenies from offering new park and rereation programmes in loations where similar programmes are offered by the private setor. They have had some suess. A law making suh ompetition muh more dif ult was passed in Colorado in the early 1990s. Publi park and rereation agenies invariably have a number of ost advantages, and often a mandate to subsidize disadvantaged users of servies. The extent to whih these features onstitute a basis for alleging unfair ompetition depends on ontextual fators suh as relative proximity, harateristis of the target market, magnitude of demand, and quality of ommerial suppliers. The position artiulated by The Assoiation of Quality Clubs appears to offer a guiding riterion: that it is who is being served whih is the key. Coneptually, many park and rereation managers may agree that their fous should be direted at dependent populations and that independent populations (generally de ned as being relatively wealthy) should be the domain of the private setor. However, the politial reality is that these segments expet to be servied at a subsidized rate by park and rereation agenies and are most able to bring pressure on publi of ials for this to ontinue. There is no obvious solution to this onundrum and it is likely to remain a prominent poliy issue in many jurisditions. REFERENCES Cohen, A. (1996) Togetherness. Athleti Business, Otober, De Marus, R. (1985) Nonpro t ommerialism: a growing problem. IRSA Club Business, November,

15 70 Crompton Eggler, B. (1989) Tourgroups: Park Servie stealing turf. The Times Piayune, September 24, p. 4. Jaobs, S.L. (1984) Tree nurseries re et battle against federal ompetition, Wall Street Journal, April 30, p. 23. Jaobs, S.L. (1985) Loal rms say a marine base has stolen their ustomers. Wall Street Journal, Otober 14, p. 15. Kozlowski, J.C. (1993) Authorized publi rereation may legally ompete with private failities. Parks and Rereation, September, Light, S. (1989) Outdoor program faes legal hallenge. Colorado Daily, 96(222), p 1. Martinsons, J. (1994) The new kids on the blok: Parks and re departments. Club Industry, May, MCarthy, J. (1990) Competition for the sports dollar A response to Mr. Cousins. Non-Pro t Times, February, Mehegan, S. (1994) Bak on the hot seat: Congress eyes nonpro ts ompetition with business. Non-Pro t Times, August, 4 8. National Campground Owners Assoiation News, May Oertle, V.L. (1981) Let free enterprise do it Mr. Reagan. Woodall s Campground Management, January, 3. Shmid, S. (1995) Water world: It s water, water everywhere at a Texas water park. Athleti Business, Otober, 24. Wall Street Journal (1975) Mike Brandt s ompetitors. September 12, p.4. Weisiger, H. (1983) Unfair, unfair, unfair ompetition: how the Fairfax County Government and Fairfax County Park Authority diretly ompete against private rereation. Unpublished paper distributed to members of the Fairfax County Park Authority. Virginia. Otober.