Land Exchange

Legislation passed in 1988 authorized the Interior Department to swap its former Indian School property in downtown Phoenix for more than 100,000 acres of land near the Florida Everglades owned by the Collier family along with $34.9 million in cash to set up two Indian trust funds. While most of the exchange conditions set by the law have been met, the City of Phoenix placed limitations on the uses of the Indian School land and the Barron Collier Co. had the right to match the highest bid. As a result, no competing bids for the property were received, and Congress' intent to test the value of the land by exposing the school site to meaningful competitive bidding was not met. For several reasons, GAO cannot conclude that the Florida land, along with the $34.9 million, equals the value of the Colliers' portion of the Indian School property. For instance, the Florida land, which was possibly overvalued in 1988, has not been reevaluated since then, and its value could have fallen during the recession. GAO does not question the right of the City of Phoenix to decide how privately-owned property should be used. Yet the city's action in this case raises questions about whether a locality should have the authority to use zoning as a way of acquiring land in federal disposition programs without compensation to the federal government. Conflict arose during the Phoenix exchange because of efforts by the various entities to meet the intent of the exchange. Such natural conflict raises the issue of how future exchanges can be designed to accommodate the demands of several parties and still meet a market demand test.

GAO found that: (1) an exchange agreement between Interior and the firm provided that the firm would exchange four tracts of environmentally sensitive land it owned in Florida for a portion of land occupied by the Phoenix Indian School and a payment of $34.9 million by the firm for 2 Indian educational trust funds; (2) most conditions to exchange the Florida and Arizona lands have been met; (3) 16 acres of the school land will be used for medical care facilities, Phoenix will have 77 acres of parkland, and the federal government will acquire 108,000 acres of land in Florida; (4) Congress was unable to test the land's value by competitive bidding because the firm had the right to match the highest bid and Phoenix placed limitations on the permitted uses of the land; (5) it could not conclude that the Florida properties along with the $34.9 million for the trust funds equal the value of the firm's portion of the Indian School property, because the Florida land has not been revalued since 1988 and the value of the Indian School property cannot be determined using professional methodologies; and (6) Phoenix's actions in the exchange raised questions regarding whether a locality should have the authority to use zoning as a means of acquiring land in federal disposition programs without compensation to the federal government if the goal is to maximize the return to the federal government.