CBO Testified on Selling Federal Property

July 27, 2011

This morning Deputy Assistant Director for Budget Analysis, Theresa Gullo, testified before the House Committee on Oversight and Government Reform on CBOs analysis of the Presidents proposal to expedite the disposal of unneeded federal civilian real property. Such property consists of buildings, structures, and lands owned by the federal government within and outside of the United States.

The President included such a proposal in his 2012 budget submission to the Congress in February, and the Administration recently transmitted similar draft legislation to the Congress in the form of the Civilian Property Realignment Act. Todays testimony focused on: (1) the analysis of that proposal, which was discussed in a letter that CBO sent to the Committee in June, and (2) how a process for disposing of unneeded federal property could be structured to increase proceeds to the federal government.

CBO Estimates That the Presidents Property Proposal Would Not Result in Significant Additional Sales Receipts

CBO concluded that the Presidents proposal was not likely to significantly increase receipts from sales of federal property because we expect that the number of properties sold would not be significantly higher than what would be sold under current law

CBO came to its conclusion based on a review of other efforts to dispose of federal property, finding that:

  • The Base Realignment and Closure (BRAC) programestablished in 1988 to dispose of unneeded federal properties managed by the Department of Defensehas yielded a total of $2 billion from three sales (BRACs main goal is to consolidate base operations and reduce expenditures on operations and maintenance).
  • Other efforts to dispose of unneeded federal properties have had mixed results. The proceeds from the sale of civilian real property, minus the share of the proceeds that agencies were allowed to spend, totaled about $70 million over the past five years. In one example of a legislatively mandated sale, the Balanced Budget Act of 1997 required the General Services Administration (GSA) to dispose of Governors Island, a 172-acre island in Upper New York Bay near Manhattan, at fair market value. GSA appraised the island at $500 million (later revised to $300 million) but sold it to the state of New York for one dollar.
  • Most of the property that the federal government disposes of is not sold, in part because of existing laws governing property disposal. For example, before soliciting bids from potential buyers, GSA must offer property, at a discount of up to 100 percent, to states, local governments, and nonprofit organizations, which can use it for purposes such as parks, prisons, schools, airports, or other public facilities. In addition, numerous laws, including the Stewart B. McKinney Homeless Assistance Act and the National Historic Preservation Act, limit the ability of some federal agencies to sell their excess property.
  • Many agencies with unneeded but valuable property would have little additional incentive to sell it under the proposal; and
  • The inventory of excess property has uncertain market value and much of it is already being disposed of under current law. The Administration recently released information about 12,000 federal buildings and structures it currently designates as excess. Less than 1 percent of the properties (about 30 in all) are expected to be available for sale or have already been sold. Of that group, three are federal office buildings, and the largest, in Portland, Oregon, was sold at auction in 2010 for $2.5 million.

On Net, the Proposal Would Increase Federal Spending

CBO estimates, enacting the proposal would increase net direct spending by $60 million over the 20122021 period. Such increases would result because, although the legislation might induce some agencies to sell additional properties that may not be sold under current law, the proposal also would allow agencies to spend a portion of sale proceeds that will accrue to the federal government under current law and that otherwise could not be spent.

In addition, under the assumption that the necessary amounts would be appropriated, CBO estimates that discretionary spending to identify and prepare property for sale or transfer would total $420 million over the 20122016 period. Some savings might accrue in later years because the proposal could significantly increase the number of properties disposed of, although not necessarily by sale, thus reducing future costsand the necessary appropriationsto maintain them. Most of such savings would have to come from consolidating existing operations and disposing of buildings that are currently being used.

The Federal Government Could Take Steps to Increase the Proceeds from Property Sales

To be successful in substantially increasing the proceeds from disposing of federal properties, legislation would probably have to do one or more of the following:

  • 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.