Proposed sale of unused federal property becomes ‘tug-of-war’

The plan seemed simple enough.

The federal government has a long history of owning more real estate than it knows what to do with – empty buildings and underdeveloped sites – but there are steps it needs to take before it can sell its holdings. So surplus properties languish as taxpayers foot the bill for maintenance.

The solution, stemming from legislation passed in 2016, was an independent agency that would quickly identify underutilized properties and speed up their elimination.

But nothing was easy with the Public Buildings Reform Board, as the little-known agency is called.

It took three years for the current five board members to be sworn in, and two vacancies remain, including that of chairman. The Government Accountability Office reported that the board did not adequately document how it went about selecting properties for sale. The board was sued when it sought to sell a Seattle building that is a repository of important tribal documents. The General Services Administration, the agency that owns most federal property, has flouted the advice of the board.

And so far only one property that the council has recommended for sale has been sold.

“It took a lot more effort to get rid of these things than reformers hoped,” said Demian Brady, vice president of research at the National Taxpayers Union Foundation, a lobby group.

The tribulations of the board are a reminder of how difficult it can be to disentangle the red tape of government. Some of the problems can be attributed to growing pains and difficulty functioning during the pandemic, and board members say the agency has taken a step forward.

But the increase in remote working means federal agencies will likely need less office space, forcing the government to shrink its footprint.

“This tool is going to be more, not less, important in the future,” said Daniel Mathews, federal sales manager at WeWork and former director of personnel for the House subcommittee that drafted the legislation creating the board. administration.

But it remains to be seen if the board will have the intended impact.

“It became a showdown,” said Norman Dong, managing director of FD Stonewater, a real estate company. He supported the legislation as commissioner of the public buildings service in the general service administration.

The problem of surplus federal assets dates back decades, before the creation of the Public Buildings Reform Board. In 2003, the Government Accountability Office placed the management of federal real property on a “high risk” list, in part because of longstanding difficulties in offloading unnecessary assets.

The General Service Administration functions as the federal owner, managing the buildings that the government owns. But he can only sell a building if the agency that occupies it declares it “surplus”. And agencies have had little incentive to do so.

It can cost an agency less to maintain a building on an annual basis than to move employees to a smaller space and prepare the old building for sale, although it makes long-term sense to remove the property. of his books. And agencies may not benefit financially from a sale because the proceeds often go directly to the Treasury Department.

If an agency considers a building to be “surplus”, there are additional obstacles: the property must first be offered to other agencies and, if there are no lessees, made available for sale. homeless services and other uses. The process can take years, leading to a backlog.

In the federal government’s 2015 fiscal year, agencies reported more than 7,000 surplus or underutilized properties, according to the Government Accountability Office.

Attempts have been made, through the Republican and Democratic administrations, to remedy the problem. A bipartisan breakthrough came in 2016 with the passage of the Federal Sale and Transfer of Assets Act, known as FASTA, modeled on a successful process of downsizing Ministry of Defense facilities after the Cold War. FASTA, it was hoped, would do for civilian properties what the base realignment and closure process had done for military sites.

Promulgated by President Barack Obama just before he left office, FASTA authorized the board of directors to offer three rounds of sales, starting with a group of “high-value asset” properties that would bring in between 500 and $ 750 million. The high-value cycle was also seen as a high-speed strategy, as these properties could bypass the usual procedural hoops and go straight for sale, with the profits funding the preparation of other properties for sale. Total projected profit over the board’s six-year term: $ 7 billion.

But members were only sworn in in May 2019, which forced them to scramble to hire staff and identify high-value properties before the fall deadline.

A former Nike missile site in Gaithersburg, Maryland, a suburb of Washington, has been held up. The same is true of 17 acres in Menlo Park, Calif., Dotted with buildings that the United States Geological Survey was evacuating. Real estate is at a premium in both areas.

But the board stumbled with its selection of a Seattle building where the National Archives and Records Administration stores historical records. Board members felt the dilapidated building was ripe for redevelopment, but protests from academics and tribes concerned about loss of access to documents led to a lawsuit by the Washington Attorney General and, finally, the withdrawal of the property.

The board also recommended the sale of the Chet Holifield Federal Building – a 92-acre ziggurat-shaped office building in Laguna Niguel, a town in Orange County, Calif. – but historic preservation issues have delayed the process.

The final list of FASTA properties was reduced to 11. To speed up sales and maximize returns, the board recommended that the General Services Administration hire a brokerage firm to sell the remaining properties together. The board felt that a portfolio sale would attract “the biggest and best potential buyers,” said D. Talmage Hocker, board member, founder and managing director of a real estate company in Louisville, Ky.

“We’re supposed to make money,” said Angela Styles, board member and former head of the Bureau of Management and Budget.

But after hiring a brokerage firm, the administration turned the tide, deciding to sell the properties themselves, one by one, on their auction website – the same place they dump used forklifts, the office furniture, railroad spikes and combat boots.

Last year, the General Services Administration sold 59 properties on the auction website for a total of $ 52.59 million, but that’s a fraction of what was envisioned for FASTA properties.

“The GSA has determined that offering properties on the basis of a sale of individual assets, rather than a bundled portfolio sale, is the best solution,” said Christina Wilkes, spokesperson for the agency.

But so far, only eight of the FASTA properties have been auctioned; among these, a parking lot in Idaho Falls, Idaho, was sold for $ 268,000.

“The proof is in the pudding,” said David L. Winstead, board member and former head of General Service Administration. “It took longer to make these sales, and we look forward to making them and funding them from the public asset fund. “

As profits pour in, the board of directors prepares its next list of properties, due in December, with some changes in the way it does business. In response to criticism from the Government Accountability Office, the Board of Directors expanded the documentation. After the Seattle property debacle, members are doing more outreach with government officials in whose districts the potential sites are located.

“We have learned a lesson,” Ms. Styles said. “Communication is absolutely essential. “

Despite their initial struggles, board members remain optimistic about their mission, which includes making recommendations on consolidating the agency’s operations – potentially freeing more buildings for sale – and making voice heard. their voice.

The council has until 2025 to make its mark.

About Mary Moser

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