Will Philanthropy Solve Park Funding Problems? Not Likely

Jan 21, 2014 | Margaret A. Walls

[caption id="attachment_7152" align="alignright" width="300"] Matthew Knott / flickr Source: Matthew Knott / flickr[/caption]

State and local park system budgets have been slashed in recent years, leading many communities to turn their attentions toward philanthropy. Oftentimes, especially in large cities, the philanthropy works through park conservancies and other nonprofit organizations. In other cases, there is direct fundraising. The new crowdfunding movement, in which small monetary contributions are solicited from a large number of people over the Internet, is being used for park projects in several cities.

The hope that charitable donations will be able to provide significant and sustainable park funding arises, in part, from successes in New York City and some other major cities. In New York, conservancies relying largely on donations from individuals and corporations have turned around Central Park and Brooklyn’s Prospect Park and created wholly new parks such as the unique and popular High Line.

In a new RFF Issue Brief, I discuss this trend toward park philanthropy and lay out some of the drawbacks.

  • One problem is free-riding. Because donations are voluntary, not everyone will contribute and this will lead to underfunding except in very special circumstances. Central Park, where the Central Park Conservancy is now covering 85 percent of park operating expenses, may be one of those special circumstances: surrounding residents enjoy a large enough benefit from the park that they are willing (and able) to pay for it. But this situation is highly unusual.
  • A second problem with a donations-based approach is the inherent uncertainty in the year-to-year revenue stream. This makes it difficult to rely on philanthropy for ongoing operational expenses, which are the most glaring need in parks today.
  • Another problem is “crowding-out” of government funding. In many cases of successful philanthropy, private funds have led to declines in government funding.
  • Conservancies and nonprofits have to spend money to make money. For a group of 16 major organizations, I found that an average of 18 percent of expenditures, as reported on the IRS 990 forms, went to non-program-related activities such as fundraising.
  • And finally, philanthropy can lead to idiosyncratic choices in what gets funded and inequities across a park system. Large gifts are often targeted to specific investments. The donation of an avid cyclist to the Brooklyn Bridge Park was linked with plans for a velodrome in the park (an idea that was eventually dropped). New Yorkers have complained about what they see as “gold-plating” of Central Park while parks in poorer parts of the city languish.

In the Issue Brief, I also describe some of the “old-fashioned” success stories of parks that are financed by tax dollars. Some of these are special park districts (SPDs), governmental units that have substantial administrative and fiscal independence from general-purpose local government. SPDs have taxing authority, can issue bonds, and must balance their budgets each year. Many of them assess a dedicated property tax to cover park operations and back any bonds that are issued; some are financed with sales taxes. In some communities and states, dedicated taxes are taken to the voters periodically, which encourages buy-in by all residents and provides incentives for the park system to be responsive to residents. In King County, Washington, home of the city of Seattle, voters recently approved a dedicated property tax to pay for parks.

In my view, dedicated taxes should provide base funding for any park system. Ideally, the tax should be one with a broad base that imposes a minimal excess burden on the economy relative to the revenues raised. And taking the tax to the voters periodically is a good idea.

What role for philanthropy? Conservancies are mainstays in some communities, but where they are not already well-established, I would like to see communities consider setting up park endowment funds that would take direct contributions. The earnings from such a fund could provide supplemental funding for annual operations while the principal remains untouched for the future. This idea needs more research, however. What is the best approach to encourage donations to such a fund? Economists have carried out some interesting field experiments on charitable giving in recent years. Applying these methods to parks would be worthwhile.