Lawmakers examine proposals to reduce federal government’s real estate holdings

by Vicki Needham - 07/28/11 12:52 AM ET

At the hearing, CBO noted that in order to generate savings, new properties would have to be identified and their value would have to be higher than those currently listed.

The White House has indicated to Oversight Committee staff that the 14,000 properties that have been analyzed by CBO were already identified as excess, and that there are additional as yet undisclosed properties which help them reach the $15 billion figure.

“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, Budget Analysis Division, with CBO told the panel.

“But CBO has reviewed the results of earlier efforts to dispose of unneeded federal property and has concluded that the legislation probably would not result in a significant increase in proceeds over the next 10 years because the number and value of properties sold under the proposal would not be significantly greater than would be the case under current law,” she said.

Most of the property that the federal government disposes of is not sold.

In 2009, the government disposed of 19,460 properties, only 2,200 through sales. On average, the annual operating cost per property of those that were disposed of came to about $7,500, according to CBO.

Still, David Foley, deputy commissioner, General Services Administration (GSA), was insistent that the administration’s cost analysis goes beyond sales and includes proceeds from eliminating operating costs, cost avoidance of future renovations, consolidations and downsizing.

“When look at all of those factors the potential for cost savings are enormous,” he said.

Gullo said it’s CBO’s job to look at the net effect on federal budget and while “we do think the president’s proposal increases receipts by a modest amount” it would allow agencies to keep 40 percent of the proceeds, meaning the savings is only realized to the Treasury if future appropriations are reduced.

Foley argued that just saving the operating and maintenance costs could save “millions and billions.”

The administration has been working with lawmakers to craft a plan to have a maximum effect to save money.

So far, one bill sponsor, Rep. Jeff Denham (R-Calif.), chairman of the House Transportation and Infrastructure Subcommittee on Economic Development, Public Buildings and Emergency Management, has led the way in creating a civilian version of the Defense Base Closure and Realignment Commission (BRAC), which led to the closure more than 350 installations between 1989 and 2005.

Denham’s measure focuses on the long-term restructuring of how the federal government manages its real estate to consolidate the real estate, determine a way to house more federal employees in less overall space and reduce the reliance on expensive leased space.

In early July, Sens. Tom Carper (D-Del.), chairman of Homeland Security and Governmental Affairs Subcommittee on Federal Financial Management, and Rob Portman (R-Ohio), former director of the Office of Management and Budget, sent letters to eight federal agencies requesting information on real property disposal initiatives.

Carper’s panel held a hearing in June, asking the agencies to provide details on their property management overhaul efforts, including properties previously identified as excess or underutilized, properties previously sold as well as any plan for reducing the costs of owned and leased property.

Denham’s bill would require a panel to designate properties for sale, then Congress would then take an up-or-down vote on whether to accept the board’s recommendations. Congress also has to approve creation of the board.

The chosen board will hold hearings and reach out broader expertise in commercial real estate, city officials and others with knowledge of the properties to determine the best way to shed them.

White House officials have called the BRAC method “a proven approach to the process of dispensing with unused federal properties” although it’s the first time the process has been applied to civilian properties.

The federal government owns and operates more than 1.2 million buildings costing about $20 billion a year to operate.

Tags Rob Portman Tom Carper