Views converge on creation of board to sell federal properties

By Charles S. Clark

May 12, 2011

Legislation to accelerate the sale of excess federal properties through creation of an independent board of experts is gaining support from both the Obama administration and House Republicans, though there is disagreement on some details of implementation.

At a House Transportation and Infrastructure subcommittee hearing Thursday, agency and private sector officials expressed confidence that a board similar to the Defense Department's Base Realignment and Closure Commission could succeed in unloading some of the 14,000 federal properties designated as underused or excess.

A push to move federal real estate launched by the President Obama aims to save $3 billion by the end of 2012 and $15 billion in the longer term. Newly empowered House Republicans have joined in the effort to shrink government and reduce the federal deficit.

"I doubt most government agencies could recognize a good real estate opportunity if it stared them in the face," said Rep. Jeff Denham, R-Calif., chairman of the Economic Development, Public Buildings and Emergency Management Subcommittee.

Denham told the hearing he hopes a new civilian board would tap private sector expertise to cut through "red tape" and "turf battles" in facilitating property sales. But he said he's aware that a more strategic approach, one that focuses on high-value sites, local market conditions and tools of consolidation, would be needed to avoid simply "having a fire sale of excess federal properties during a bad real estate market."

Denham's bill , the Civilian Property Realignment Act H.R. 1734 , "has the same core values" as the proposal released last week by the Office of Management and Budget, said OMB Controller Danny Werfel. "Both bills build off the best practices of the proven approach taken by the BRAC," he said.

An independent board would help resolve conflict among competing stakeholders, which, when federal properties are up for sale, include homelessness organizations, historic preservationists, municipal governments and environmentalists. The administration and Denham part company on several issues, including whether the board would be required in initial stages to follow the National Environmental Policy Act in determining impact of sales and redevelopment. Obama's team favors it, saying it won't delay action, while Denham would waive compliance. Another point of disagreement is whether the board members would serve for 12 years (Obama's choice) or six (favored by Denham). And a third issue is whether OMB should have review of the board recommendations (Obama's approach) or the General Services Administration, the government's chief landlord, should call the shots (favored by Denham).

Werfel said the administration can be flexible on the board's term, but stressed that a longer tenure would give board members the "right tools to hit the ground running" while holding off on some of the properties that might be more profitably disposed of under future market conditions.

Another possible bone of contention is whether the State Department, whose overseas property management services has long been permitted to retain proceeds from property sales for investment in new U.S.-owned facilities, should continue to do so. Patrick Kennedy, State's undersecretary for management, told the hearing Denham's bill would "codify the best practices" used by State, which is currently working on disposing of 76 properties.

But he stressed the complications of maintaining well-secured property overseas. "In many countries, there is no free market," and the government's permission is needed to buy and sell, he said.

Allowing State to keep proceeds reduces the need for appropriated funds, which saves the taxpayer money, he added. In central London, for example, the United States maintains three "aging" and expensive properties that could be sold to finance the building of a new embassy at no net cost, he said.

District of Columbia Del. Eleanor Holmes Norton, a Democrat, said, "Both bills provide objective information to right-size the federal property footprint." But she favors Denham's approach of giving GSA the most active role, citing the agency's "institutional knowledge."

Among the most promising proposals to save money through consolidation is to convert many existing U.S. Postal Service facilities for "co-location" with units of such agencies as the Social Security Administration, the Agriculture Department and law enforcement, Werfel said. Many post offices are holdovers from before the Internet Age, when every county needed one, he said.

The new board also could exploit computer mapping technology to draw up the federal footprint in any given region, Werfel added. This would provide "new analytics and break down agency barriers."

Anthony Principi, the former Veterans Affairs secretary who chaired the 2005 BRAC, told the panel he was worried that routing recommendations through OMB would slow down action because of a lack of set procedures.

To achieve independence and speed, Principi recommended the board model itself on the Resolution Trust Corporation, which was created to deal with the 1980s savings and loan crisis. GSA may not agree with using RTC as a model. David Winstead, former commissioner of the GSA's Public Buildings Service, cautioned that sales of ailing S&Ls were done under emergency conditions.

Michael Glosserman, managing partner of JBG Cos, a large Washington-area investor and landlord, called the plan for a BRAC-style board a "win-win situation" for government and private sector. He sees "untapped value in many existing federal sites that could be made more energy-efficient with lowered maintenance costs without any costs to taxpayers." He said the private sector would be willing to work with the independent board if business people have a certain time frame for action.

By Charles S. Clark

May 12, 2011