New Federal Law Attacks Budget Deficit by Disposal of Unused Real Property

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.

In a December 21 Federal Times article, reporter Aimee Curl noted that Rep. Tom Davis (R-VA) added the OMB requirement to HR 3699 with input from Senator Tom Coburn (R-OK).

Curl quoted Davis spokesperson Dave Marin as saying that "Both [Davis and Coburn] wanted a sense of how much surplus property the government had in its possession." "The purpose," Curl quoted Marin as saying, "is to better understand the extent of the surplus property owned by the Federal government that could be put to better use by a different owner."

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 VISTA Director of Business Development Steve Darner. "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 Darner. "Nonetheless, this is an encouraging step in the right direction of shedding the burden of surplus Federal real property."

For the complete article in Federal Times regarding the signing of this legislation, visit http://www.federaltimes.com/index.php?S=2436123.