CBO deflates claims on revenues from selling excess properties

The Obama administration's hopes for sizable revenues from impaneling a new body to streamline sales of unused federal real estate took a beating Wednesday when the Congressional Budget Office said the proposal offered in May would actually cost the government money -- as much as $60 million over the next decade.

The Office of Management and Budget has estimated that the plan for an independent federal properties board similar to the Pentagon's Base Realignment and Closure Commission could save the government $15 billion over 10 years. Rep. Jeff Denham, R-Calif., author of a House bill (H.R. 1734) with similar goals for unloading unused and costly to maintain federal properties, has characterized the administration's figure as too low.

"CBO's review of the president's proposal concluded that it was not likely to significantly increase receipts from sales of federal property in part because there is only a limited amount of excess property with significant market value, and there are numerous legal, practical and political obstacles to the sale of such property," Theresa Gullo, deputy assistant director in CBO's budget analysis division, told a hearing of the House Oversight and Government Reform Committee.

Hence, Gullo said, CBO estimates that discretionary spending to identify and prepare property for sale or transfer would total $420 million over 2012 to 2016, after which some savings could materialize. Many of the properties the administration has deemed unneeded "are not valuable," she said. Some are owned by the Defense Department and wouldn't be covered by the legislation, and are simply being demolished.

CBO studied past efforts to dispose of large obsolete federal properties such as the Presidio in San Francisco, Governors Island in New York City and the Old Chicago Main Post Office, all of which took years to process and failed to produce the revenues that were expected, Gullo said.

To successfully increase the proceeds from disposing of federal properties, Gullo added, legislation likely would have to create clearer incentives for agencies to sell (rather than give away) property; exempt property from federal laws that discourage or impede sales; and be very specific about which properties must be sold.

The hearing, called by Chairman Darrell Issa, R-Calif., to highlight the new CBO findings, offered time in the spotlight to three House members who have introduced legislation to accelerate disposal of federal properties.

In addition to Denham, who chairs the House Transportation and Infrastructure subcommittee on federal buildings, the panel heard from Rep. Mike Quigley, D-Ill., whose bill (H.R. 1205) would seek to bring transparency to the property sales process by requiring the General Services Administration to deliver an updated list to Congress annually and post it online for the public. "Putting it online will help other agencies learn of properties they don't know about," said Quigley. He also questioned the accuracy of some GSA descriptions of properties, recounting how his staff visited one in his home state that the Agriculture Department had characterized as being in "excellent condition" but instead was a "dilapidated mess."

Rep. Jason Chaffetz, R-Utah, said his bill (H.R. 665) would remove "onerous disposal requirements" that give priority claim on unneeded federal buildings to public users, and said he would allow agencies to keep 20 percent of sale proceeds while devoting 80 percent to deficit reduction.

His proposal drew opposition from an advocate for the homeless, Maria Foscarinis, executive director of the National Law Center on Homelessness and Poverty, who said it failed to protect legal guarantees of timely input in property disposal from providers of services for the homeless. She also said it would give OMB too much discretion.

Issa told the three House members their bills were unlikely to clear committee without some provisions to protect procedures in building disposal that benefit the homeless.

Also testifying were a current and former official at GSA, which is the government's specialist in disposal of federal properties. Both emphasized that GSA has demonstrated success in the endeavor and has adopted private sector financial management techniques.

David Foley, deputy commissioner of the Public Buildings Service, said, "Since 2002, we have disposed of more than 200 GSA properties valued at $467 million and covering more than 9.5 million square feet. These dispositions represent an elimination of almost $484 million in future anticipated repair needs. Since GSA gained the authority to retain sales proceeds in 2005, GSA's disposal actions have returned almost $227 million in receipts to PBS' Federal Buildings Fund."

F. Joseph Moravec, a former Public Buildings Service commissioner, gave his reasons why agencies have trouble getting rid of unused property. "Federal executives have inadequate financial incentive to declare properties 'excess' and turn them over to GSA for disposal," he said. "Agencies incur front-end costs, which are often not reimbursed, and in the absence of special legislative authority, they do not get to retain sales proceeds, even if their property makes it to the open market and has any market value."

He added that the "disposal process itself is attenuated and Byzantine. Statute and regulation, including adherence to rigid environmental standards, community benefit criteria and historic preservation considerations, virtually ensure that disposals become public benefit conveyances, or negotiated sales with no economic benefit to the federal government, as seller."

Finally, he said, "Politics, or as they say in government `external shareholders,' including members of Congress, special interest and advocacy groups, and state, county and local officials, have ample opportunity to intervene, slow down and redirect the process to achieve every result, except returning money to the federal Treasury."

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