Commentary: Government needs private-sector expertise in shedding surplus sites

May 29, 2011

President Obama’s plan to sell some 14,000 surplus federal properties could be a valuable opportunity for the government to raise revenue and help local economies, including the District and surrounding areas, but it needs to be done right. This opportunity will be wasted if the government simply holds a fire sale and dumps properties quickly to the lowest bidder without carefully considering their individual value.

Rather than just relying on federal agencies, the government needs to use the know-how of private commercial real estate experts to identify creative ways of ensuring the maximum return to taxpayers.

A House subcommittee that oversees federal buildings recently approved legislation that would create a civilian equivalent of the Base Closure and Realignment Commission (BRAC) to decide how to dispose of the federal properties that the government says it doesn’t need but spends millions to maintain.

Congress created BRAC in 1990 to make nonpartisan, objective recommendations about which military bases no longer were needed. Similarly, the Civilian Property Realignment Act, introduced by Rep. Jeff Denham (R-Calif.), would create an independent board to submit all or nothing recommendations to Congress regarding which surplus federal properties it believes should be sold.

This is a good idea, and it has bipartisan support. Obama, who announced in this year’s State of the Union Address his intention to get rid of unneeded properties, released his own, similar version of the bill, and administration officials are working constructively with Denham to pass a final bill.

The Obama administration estimates that selling surplus federal properties, including a number of properties in the Washington metropolitan area, would generate up to $15 billion in new revenue and result in substantial long-term savings for taxpayers. New construction projects could be a shot in the arm for communities that desperately need private-sector investment to create jobs.

Under the Denham bill, the General Services Administration would be responsible for developing standards and recommending properties to the independent board. While relying on the GSA’s expertise is important, it will be critical to ensure private-sector participation on the board and in the disposal process to maximize the value of the 14,000 properties that the government has identified for disposal.

At a recent hearing on the bill, Michael Glosserman, managing member of the JBG Cos., testified that the board should be given the authority to form public-private partnerships to leverage the private sector’s knowledge of the real estate market during its review process. This would ensure that the independent board would make informed decisions and secure the greatest possible financial return for taxpayers. He provided examples of how the board could maximize the value of sites. The federal government, for example, could in some instances sell or lease a portion of a property at a greater development density, and use the extra proceeds to pay for a newly constructed federal building on or near the site. Not only would this involve no new spending, it would raise more revenue and allow the property’s value to be fully realized.

Congress should endorse the public-private partnership model and make sure that the new civilian BRAC takes advantage of private-sector expertise as it reviews properties and issues its recommendations for disposal of the federal government’s surplus real estate.

Keith Styles and Jon Bouker are co-chairmen of Arent Fox LLP’s public buildings practice.

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