Federal government struggling to offload excess property even after law change

Federal real estate officials and Congress both know the government has plenty of property to dispose of. Yet 20 years of effort has produced very little in the...

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Federal real estate officials and Congress both know the government has plenty of property to dispose of. Yet 20 years of effort has produced very little in the way of excess property sales. Five years after Congress refreshed the effort with a new law, the General Services Administration has only sold one building. For more, Federal Drive with Tom Temin turned to the acting director of physical infrastructure issues at the Government Accountability Office, Jill Naamane.

Interview transcript:

Tom Temin: Ms. Naamane, good to have you on.

Jill Naamane: Great morning. Thank you.

Tom Temin: Alright, describe this management process. There’s a whole activity surrounding the disposal of federal properties that you took a look at. And we should note, it’s been on the High Risk List for ages. Tell us how this is all supposed to work.

Jill Naamane: Managing federal real property has been on GAO High Risk since 2003. And one continuing aspect of this high risk area is that federal agencies really have some challenges effectively disposing of excess and underutilized properties. And that’s because of a couple of reasons. There’s really underlying challenges of a really lengthy disposal process, and a lack of upfront funding to prepare these properties for sale. And it just continues to affect progress in this area.

Tom Temin: Well, couldn’t they simply say, here’s the property, buy it as is, maybe get a little less, but not have to have all this money to fix them up, or whatever they do before they sell them?

Jill Naamane: These funds are really needed to prepare the properties for things like completing environmental assessments, historic preservation assessments. Some of the properties may need to close out service contracts or move tenants, or maybe resolve access issues. The General Services Administration has a lot of steps that it needs to go through to prepare these properties for sale. And that costs money. And so this program, the Federal Assets Sale and Transfer Act, or FASTA, was intended to address some of these challenges with a self sustaining funding mechanism.

Tom Temin: Got it. And before we get to some of the FASTA issues, is it fair to say, though, that when this is all said and done, the government does hope to make money selling the properties?

Jill Naamane: Well, the sales are intended to maximize the value to the government. But the purpose of the program really is to continue to build on itself. One round of properties is supposed to help fund the next round of properties in this program, and reduce the federal footprint.

Tom Temin: Got it. Yeah, so FASTA then revved up the program in what specific ways? What did it add to this whole long term issue?

Jill Naamane: I think of it as having really three main elements. First was a centralized process with an independent board that was intended to really think creatively about ways to reduce federal space and look across agencies. The Office of Management and Budget is supposed to review these recommendations that the board makes and approve them. And then the General Services Administration is responsible for executing the recommendations, for example, by selling the properties. And I mentioned the self sustaining funding mechanism. And this is supposed to work by the proceeds of the sales of the first round being put into an account and appropriated to be used to fund the activities to get the next round of properties ready for sale. And then the third element is really some deadlines that the program put into place. Certain steps have deadlines, and there’s targets for sales proceeds for each of the rounds of properties.

Tom Temin: And what you note is that though, since FASTA was enacted, there were initially 11 properties that could have been sold, only one has been. So what is holding up things?

Jill Naamane: Despite its name, it’s not proving to be very fast. Properties were identified and approved according to those deadlines that I mentioned in the act. But it is taking some time to sell those properties. And some of those activities that I mentioned, like historic preservation and environmental assessments, are taking some time to work through for GSA. That current list was approved nearly two years ago. And like you said, just one property has been sold so far, and it’s just a pretty low value one. GSA still has a few of the properties, the highest value ones, that it’s working on getting ready for sale, and working through some of those issues, and they probably won’t be listed till next year. Another complicating factor is COVID actually. The ongoing pandemic, agencies are really unsure what their space needs might be, and have been a little reluctant to identify properties as needed with so much uncertainty. And this has affected what that independent board has to choose from in its recommendations for its next round of properties that are due this month.

Tom Temin: We’re speaking with Jill Naamane, she is the acting director of physical infrastructure issues at the Government Accountability Office. You answered the question I was going to ask, not only has the COVID maybe made the government uncertain of its real estate needs, but it has also made industry uncertain, and therefore maybe the market for these buildings is not so strong right now. Fair to say?

Jill Naamane: Well, we do have some ongoing work on this program that we’re going to be looking into the sale process and strategy a little more. And this report doesn’t cover it, but some of the things we’ve heard so far is that there is a fairly robust market still for some of these types of properties. But we have heard that there’s just a lot of uncertainty from the agencies about what they’re going to be needing going forward.

Tom Temin: And the one that they were able to sell, what was it? Where was it? What type of a structure was it?

Jill Naamane: Actually, it was a park and ride lot in Idaho Falls, Idaho, and it sold for about $260,000. So one of the lower value properties. Some of the other properties that are on the list expected to be listed for sale in the next year over $100 million each.

Tom Temin: Yeah, I would say I’ve never heard of a parking lot getting a historic designation, but there could be environmental concerns. Sometimes they’re built over graveyards, or there could be lord knows what underground there. So even a parking lot, it’s not that easy, though, is it?

Jill Naamane: That’s true. It could be. We heard of some access issues with one of the properties where some fencing needed to be put up, or there wasn’t actually any legal right of access to the property that didn’t go through an adjacent federal property. So there are some tricky issues to work out.

Tom Temin: Yeah, kind of hard to sell a parking lot if you’re not allowed to drive into it, I suppose. And what’s the overall assessment then of GAO of this program that works through GSA?

Jill Naamane: Yeah, unfortunately, Tom, it’s looking like the FASTA program is not going to be meeting its expectations. So far, even if several of those higher value properties were sold soon, the money would need to be appropriated before it’s available for the board to use for its next round. And the board’s recommendations for this next round are due this month. So it’s really too late for any funding to impact this round of recommendations the way it was intended. But there is a final round in 2024. So it’s possible we could still kind of prove this concept. But really, the success of those subsequent rounds are dependent on sales in these first rounds. And it’s really more important than ever to have proof of this concept. As we’re speaking about the impacts of COVID, it’s likely the agencies will need less space in the post pandemic. So really having an effective, proven way of disposing a needed federal real property is really important.

Tom Temin: And were there any GAO recommendations on the program itself?

Jill Naamane: We didn’t make any recommendations in this report. What we were really trying to do is raise attention to this issue before it’s really too late to make changes, but we are required to report on this program at least annually. And we have ongoing work where we’ll be looking into the sales strategy and some of the potential changes that can be made to the program and could have recommendations coming out of that work next year.

Tom Temin: Jill Naamane is acting director of physical infrastructure issues at the Government Accountability Office. Thanks so much for joining me.

Jill Naamane: You’re very welcome. Happy to be here.

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