Dialogue with David | CBO Scoring Misses the Mark on CPRA’s Proceeds and Long-Term Savings

Dec 15

CBO Scoring Misses the Mark on CPRA’s Proceeds and Long-Term Savings

Bill’s sponsor disputes CBO estimate that legislation’s near-term implementation would cost $200M.

Late last week, the Congressional Budget Office (CBO) released its cost analysis of H.R. 1734 (Civilian Property Realignment Act, or CPRA)-- approved by the House Transportation and Infrastructure Committee back in October. It estimated the bill would result in direct spending of some $200M for implementation (mostly to support the new CPRA Commission) and generate net savings of almost $600M over the next 10 years.

The CBO report produced an immediate negative response from Representative Jeff Denham’s office—the Congressman who initially sponsored this bill. According to an article in last Friday’s the Washington Business Journal, a spokesperson for the California Republican called the $200M near-term cost overinflated since getting the CPRA Commission process off the ground would cost much less than CBO anticipates.

It was further noted that the CBO based its cost analysis (in part) on historical spending patterns for the way the government has traditionally disposed of federally owned properties. Denham’s spokesperson noted the CPRA legislation is intended to significantly streamline those disposal processes and the new approach to disposals inherent in the bill would reduce disposal costs compared to past practice.

In its analysis, the CBO assumed that the government would be forced to discount the value of properties it is seeking to sell in the first year by about 20 percent. Such a discount would be necessary since private sector buyers could not access the purchased properties while current federal employee occupants were being relocated to other space. Accordingly, CBO indicated proceeds from the initial auction of properties worth $500M would actually yield only $400M, or $100M less than their presumed market value.

Another aspect of the CBO study which we also found lacking was its failure to adequately account for the money the federal government will save from not having to operate or maintain the properties that will be disposed of as part of the CPRA legislation’s Commission process. As we have observed previously, every building square foot that our federal government retains in its facilities portfolio represents a long-term financial obligation to operate and maintain that space. Reducing the federal facilities footprint has an immediate affect of decreasing the dollars spent on the operation and maintenance (O&M) of space and this savings continues to accumulate over time. This pattern of long-term savings is illustrated in the following graph.

No doubt, Congress is looking for some immediate returns from reducing the federal real property portfolio and this H.R. 1734 appears to provide a positive step in that direction. Even if we accept some investment on the front end, the long-term payback can represent a meaningful contribution towards reducing our national deficit. As I have noted before, both reducing the deficit and managing the federal real property portfolio are, after all, long-term propositions.

In their March 2011 report, Opportunities to Reduce Potential Duplication in Government Programs, Save Tax Dollars, and Enhance Revenue, the GAO estimated that 60-85% of the lifetime costs of owning a building are attributable to O&M. One can conclude, then, that reducing overall facilities O&M costs by eliminating our building footprint will have a positive effect on the lifetime cost of ownership. Our recent analysis of the former military installation, the Presidio of San Francisco (see my blog post of August 4, 2011) reinforces the substantial nature of long-term accumulated savings. Let’s hope that CBO can embrace this reality as part of their analysis.

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CBO, H.R. 1734, CPRA, Congressman Jeff Denham, disposal, federal properties, House Transportation and Infrastructure Committee, Washington Business Journal

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CBO Scoring Misses the Mark on CPRA’s Proceeds and Long-Term Savings

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