New Federal Law Attacks Budget Deficit by Disposal of
Unused Real Property
Potential Savings to Taxpayers May Ultimately Reach Trillions of Dollars
Herndon, VA (20 DECEMBER | 2006)
A provision of newly-signed Federal legislation holds the Office of Management and Budget (OMB) accountable for recommending the sale of 100 separate pieces of surplus government real property (land and buildings) - in a move that may start the government down the path to save taxpayers trillions of dollars.
"This new law may have a real benefit to taxpayers, and is a step in the right direction for reducing the federal deficit," said David Baxa, president and CEO of VISTA, a Herndon, VA-based firm that provides real property asset management services to the Federal government.
On Friday, December 15, 2006 the President signed into law H.R. 3699 (the "Federal and District of Columbia Government Real Property Act of 2006"). This legislation was intended to authorize the exchange of some 29 parcels of land between the Federal Government and the District of Columbia.
While the Congressional Budget Office (CBO) estimates that "enacting H.R. 3699 would not significantly affect the federal budget," Section 408 of the law may in fact be a step toward substantially reducing the federal deficit.
Under Section 408, no later than six months after enactment of H.R. 3699 - that is, by the end of June 2007 - Director of OMB is required to report to Congress on the total value and amount of surplus government property - both in the aggregate and totaled by agency. The report must also list the 100 most eligible surplus government properties for sale and an estimate of how much each is worth.
In addition, the Director of OMB is accountable for reporting on data sharing among federal agencies. Congress requires a report on procedures to share data on surplus Federal real property under the jurisdiction of each agency. The report must also provide an update on the development and implementation of the data sharing procedures.
The true value of this legislation on the Federal deficit, however, has to do with creating a greater understanding of the negative effect under-utilized government real property has on the taxpaying public.
"Disposal of unused property is just the tip of the iceberg here," explained Baxa. "The benefit for the Federal budget lies not just in receiving fair market value on the sale of unused buildings and land, but in avoiding the expense of maintaining and operating this unnecessary real property."
As early as 2005, in testimony before the Senate Subcommittee on Federal Financial Management, OMB Deputy Director for Management Clay Johnson referenced a potential $15 billion in savings to be realized by disposing of just five percent of unneeded Federal real property.
That five percent surplus could translate into as much as an additional $15 billion per year in maintenance and operations costs, beyond the fair market value of the property. Over five years, the total savings (return on sold property and saved cost of operations and maintenance) could be as much as $90 billion.
Extending that calculation to the entire 100 percent of excess property and unnecessary spending as estimated by OMB's Johnson, the savings would be as much as $1.8 trillion on a five-year projected basis.
"Of course, the requirement under this newly-approved legislation is to identify only 100 properties out of the entire surplus inventory, so the savings is a tiny fraction of what is possible," cautioned VISTA's Baxa. "Nonetheless, this is an encouraging step in the right direction of shedding the burden of surplus Federal real property."
About VISTA
VISTA helps its clients gain the greatest value from money spent on real property assets.
Government financial and operations executives use VISTA for information technology, management consulting, decision support systems and services. VISTA's services and solutions help collect and analyze massive volumes of asset-related data. The result is high quality financial and performance information that makes it easier to plan and implement effective policy, management, stewardship, and budgetary decisions.
By working with VISTA, organizations develop best practices, as well as consistent reporting standards and performance measures. The return on investment for VISTA's services can be as much as 100-to-1.
For more than 20 years, VISTA's solutions have simplified cash management strategies - cutting costs, eliminating waste and improving overall workplace efficiency. To learn more, visit www.vistatsi.com.
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