The Public Buildings Reform Board Eyes Federal Properties to Sell

On December 27, 2019, the five-person Public Buildings Reform Board (PBRB) presented a report to the Office of Management and Budget that identifies a dozen federal properties that, it urges, should be sold.

Guided by the provisions of the Federal Assets Sale and Transfer Act of 2016 (FASTA), the report maintains that properties owned and leased by the federal government far exceed current needs and that the government “continues to waste taxpayer money operating and maintaining properties that should be disposed.” These properties, the report adds, should not be disposed of as if in a fire sale, but instead should bring a price that represents “the highest and best value for the taxpayer.”

To that end, the PBRB argues that there is a need to reform the entire corpus of the federal government’s real property management practices, saying that “without reform, the PBRB cannot effectively meet FASTA’s overall objectives.” It also notes that previous reform efforts have not been sufficient, adding that the Government Accountability Office (GAO) admitted last year that “momentum has slowed” in disposing of surplus federal properties.

The PBRB identifies specific avenues for reform, arguing that the current framework of property management and disposal was built over decades in piecemeal fashion without thought to sound public policy. By its lights, that policy must include the expertise of brokers in the private sector who can help maximize the proceeds of any sale, and it must incorporate an approach to owned and leased property that goes beyond simple inventorying to a true portfolio management system.

FASTA mandated that the Board, made up of individuals with experience in commercial real estate and related fields, identify no fewer than five properties that are not already listed as surplus and that would bring in between $500 million and $750 million in total on the open market—from seven to ten times the amount the government currently realizes in total property sales each year. Among the law’s guidelines are that these properties may not be located on military installations, on Indian reservations, or outside the United States. These guidelines narrowed eligible properties from nearly 400,000 to a little more than a quarter of that number.

Of the properties the report identifies for sale, all used by civilian agencies, five are in California, two in Washington State, and one each in Idaho, New Jersey, Colorado, Pennsylvania, and Maryland. One of the California properties is a Department of Labor job center in Sacramento, sited on 170 acres, of which more than 80 acres are unused. Selling that excess land for residential development, for which it is currently zoned, would not have an impact on the Job Corps mission. The Idaho property is a partially used building that falls under the aegis of the Department of Energy’s Idaho National Lab, along with an empty 4.5 acre lot. The sale of that property would yield a savings of nearly $800,000 in deferred maintenance, apart from the direct proceeds, and would fulfill a FASTA goal of bringing value to the area in the form of tax revenues and economic growth.

The Colorado property is much more extensive, consisting of 18 buildings totaling 530,264 square feet of disposable space, part of a Veterans Administration medical complex in Denver that is almost completely vacant. Selling the property, the PBRB states, will realize more than $3.8 million in annual savings for operating and maintenance costs, as well as nearly $65 million in deferred maintenance costs—again, apart from whatever money the sale of the property brings in. One of the Washington State properties, located in Auburn, is more than three times larger, consisting of more than 1.75 million square feet of warehouse space that, though mostly vacant, still incur annual operating and maintenance costs of more than $2.25 million. The Maryland site is comparatively tiny at 32,331 square feet on 13.71 acres, the former home of a Nike missile battery; still, because of the property’s proximity to Washington, DC, its sale is sure to command a high price.

Proceeds from sales are earmarked for the Asset Proceeds and Space Management Fund, which in turn is subject to Congressional oversight. Any sale would be administered by the U.S. General Services Administration (GSA), the designated manager for all federal properties since 1949. The report urges, however, that the Board take an active role in the process, apart from simply making recommendations.

These properties, the report notes, are merely representative of a much larger body of federal holdings that can be exchanged, redeveloped, sold, or “otherwise released from the Federal inventory.” The PBRB recommends that reforms surrounding their management and disposal include giving prospective private-sector buyers better notice of upcoming auctions and using a private broker to manage sales. Interestingly, the report also notes that the PBRB will accord priority to providing shelter for the homeless population, going beyond simple compliance with regulations to actively building relationships with nongovernmental organizations and local governments to help alleviate a growing crisis.