Near the end of his Administration, on December 16, 2016, President Barack Obama made a Republican politician very happy.
Jeff Denham, first elected to Congress from California’s 19th District and reelected three times from the redrawn 10th District, had made it a central plank of his first run for the House of Representatives that the federal government owned too much property and needed to shed weight. Term after term since 2010, Denham introduced and reintroduced legislation requiring the government to dispose of any unused or underused portion of its building inventory, reckoned to amount to more than 250,000 buildings as of 2015.
Operating costs for that 2.5 billion square feet of building space, by most estimates, run to about $22 billion. In and near his home district, Denham argued, there were not only empty federal buildings but also many acres of undeveloped land that could be put to better use. By extension, he added, there was plenty of room in the federal inventory for belt-tightening, furthering the Obama administration’s agenda of lessening the federal footprint while advancing the long-held Republican agenda of shrinking the federal government, period.
Late in 2016, Denham finally succeeded. With cosponsors from both sides of the aisle, his Federal Assets Sale and Transfer (FAST) Act went through Congress with only modest opposition and met with no objection from President Obama, who signed it into law without comment. The intent of the act was, Denham announced, to “decrease the deficit by consolidating and selling federal buildings and other civilian real property,” in line with previous legislation—but with a few wrinkles.
One of them is the requirement that the government establish a Public Buildings Reform Board whose purpose is to identify federal properties that are eligible to be sold precisely because underused or unused. The follow-on Federal Property Management Reform Act of 2016, which was signed into law the day after the FAST Act, amends its predecessor to require the president of the United States to appoint to the Reform Board members recommended by the speaker of the House of Representatives, the Senate majority leader, and the minority leaders of both the House and Senate—removing, it would seem, executive prerogative.
Each federal agency, for its part, is charged with supplying to the Office of Management and Budget and the General Services Administration a roster of properties under its purview, rationalizing the uses of those properties and identifying those that can be repurposed—shared, for instance, with another agency, or transferred to or exchanged with another agency that can make more appropriate use of a property.
The FAST Act, now Public Law 114–287, requires that the Public Buildings Reform Board “identify at least five federal civilian properties not on the list of surplus or excess properties that have a total fair market value of not less than $500 million and not more than $750 million.” The Federal Property Management Reform Act, in conjunction with existing provisions of the FAST Act, also requires the government to sell, “at fair market value at highest and best use,” the James Forrestal Building south of the National Mall in Washington, DC, as well as several adjoining properties, and to pay the proceeds into the Federal Buildings Fund. The Forrestal Building, once known as the “Little Pentagon,” is currently occupied by the Department of Energy.
Federal buildings identified by the Board as being eligible for sale under a “Report of Excess” are to be sold, the new law states, within a year of the report’s being accepted. The law makes some provision for market timing, but even so allows an extension only of another year before the property is sold, for a total of two years after being slated for sale.
Of particular interest to federal property investors is the FAST Act’s stated subsidiary goal of “reducing the reliance on leased space.” The new law does not mandate specific steps toward that end but we can’t help but note this continuing mantra within the government. One day soon we hope to conclusively report on whether leased space is a bad thing or a good thing for the federal government. For now, we should be satisfied that the government appears poised to better manage its owned space inventory through dispositions of excess property.