Federal Real Property
The Government Faces Challenges to Disposing of Unneeded Buildings Gao ID: GAO-11-370T February 10, 2011In Process
The federal government holds many excess and underutilized properties that cost billions of dollars annually to operate. Excess properties are buildings that agencies have identified as having no further program use, and underutilized properties serve a program purpose that could be satisfied with only a portion of the property. In fiscal year 2009, 24 federal agencies including the Department of Defense reported 45,190 underutilized buildings that cost $1.66 billion annually to operate. GSA specifically holds 282 excess or otherwise underutilized buildings that cost $93 million annually to operate. Underutilized buildings represent the first places to look for possible consolidations that could, in turn, allow GSA to dispose of additional properties. Excess and underutilized properties erode the viability of FBF by forcing GSA to pay for buildings for which it gets no return. The viability of FBF is essential to ensuring that GSA is able to respond to changing government real estate needs over the coming years and make sound investment decisions. A June 2010 Presidential Memorandum continued government efforts to dispose of unneeded properties by establishing a new governmentwide target of $3 billion savings through disposals and other methods by the end of fiscal year 2012. The problem of excess and underutilized property is exacerbated by a number of factors that impede the government's ability to efficiently dispose of unneeded property. First, numerous stakeholders, including local governments, private real estate interests, and advocacy groups, have an interest in how the federal government carries out its real property acquisition, management, and disposal practices. These competing interests, that often view government buildings as the physical face of the federal government in local communities, can build barriers to property disposal. In 2007, GAO recommended that OMB develop an action plan to address the effects of stakeholder interests but it has yet to be implemented. Second, the complex legal environment has a significant impact on real property decisionmaking and may not lead to economically rational outcomes. GSA's ability to effectively dispose of its unneeded property can also be hampered by its lengthy disposal process, which is legislatively mandated and includes requirements, such as determining whether the property can be used by other federal agencies, for homeless assistance, and for the public benefit. For example, GSA continues to hold numerous buildings that have been listed as excess for years. The lengthy disposal process may inhibit GSA's ability to achieve cost savings under the Presidential Memorandum by the 2012 deadline.
GAO-11-370T, Federal Real Property: The Government Faces Challenges to Disposing of Unneeded Buildings
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United States Government Accountability Office:
GAO:
Testimony:
Before the Subcommittee on Economic Development, Public Buildings and
Emergency Management, Committee on Transportation and Infrastructure,
House of Representative:
For Release on Delivery:
Expected at 10:00 a.m. EDT:
Thursday, February 10, 2011:
Federal Real Property:
The Government Faces Challenges to Disposing of Unneeded Buildings:
Statement of David J. Wise, Director:
Physical Infrastructure Issues:
GAO-11-370T:
GAO Highlights:
Highlights of GAO-11-370T, a testimony before the Subcommittee on
Economic Development, Public Buildings, and Emergency Management,
Committee on Transportation and Infrastructure, House of
Representatives.
Why GAO Did This Study:
The federal real property portfolio, comprising over 900,000 buildings
and structures and worth hundreds of billions of dollars, presents
management challenges. In January 2003, GAO designated the management
of federal real property as a high-risk area in part due to the
presence of unneeded property. The Office of Management and Budget
(OMB) is responsible for reviewing agencies‘ progress on federal real
property management. The General Services Administration (GSA), often
referred to as the federal government‘s landlord, controls more square
feet of buildings than any other civilian federal agency. GSA funds
real property acquisition, operation, maintenance, and disposal
through the rent it collects from tenant agencies that is deposited
into the Federal Buildings Fund (FBF). This testimony discusses (1)
the scope and costs of the excess real property held by GSA and other
federal agencies; and (2) the challenges GSA and other federal
agencies face in disposing of excess and underutilized real property.
GAO analyzed GSA data from a centralized real property database,
reviewed GSA real property plans and previous GAO reports, and
interviewed GSA and OMB officials.
What GAO Found:
The federal government holds many excess and underutilized properties
that cost billions of dollars annually to operate. Excess properties
are buildings that agencies have identified as having no further
program use, and underutilized properties serve a program purpose that
could be satisfied with only a portion of the property. In fiscal year
2009, 24 federal agencies including the Department of Defense reported
45,190 underutilized buildings that cost $1.66 billion annually to
operate. GSA specifically holds 282 excess or otherwise underutilized
buildings that cost $93 million annually to operate. Underutilized
buildings represent the first places to look for possible
consolidations that could, in turn, allow GSA to dispose of additional
properties. Excess and underutilized properties erode the viability of
FBF by forcing GSA to pay for buildings for which it gets no return.
The viability of FBF is essential to ensuring that GSA is able to
respond to changing government real estate needs over the coming years
and make sound investment decisions. A June 2010 Presidential
Memorandum continued government efforts to dispose of unneeded
properties by establishing a new governmentwide target of $3 billion
savings through disposals and other methods by the end of fiscal year
2012.
The problem of excess and underutilized property is exacerbated by a
number of factors that impede the government‘s ability to efficiently
dispose of unneeded property. First, numerous stakeholders, including
local governments, private real estate interests, and advocacy groups,
have an interest in how the federal government carries out its real
property acquisition, management, and disposal practices. These
competing interests, that often view government buildings as the
physical face of the federal government in local communities, can
build barriers to property disposal. In 2007, GAO recommended that OMB
develop an action plan to address the effects of stakeholder interests
but it has yet to be implemented. Second, the complex legal
environment has a significant impact on real property decisionmaking
and may not lead to economically rational outcomes. GSA‘s ability to
effectively dispose of its unneeded property can also be hampered by
its lengthy disposal process, which is legislatively mandated and
includes requirements, such as determining whether the property can be
used by other federal agencies, for homeless assistance, and for the
public benefit. For example, GSA continues to hold numerous buildings
that have been listed as excess for years. The lengthy disposal
process may inhibit GSA‘s ability to achieve cost savings under the
Presidential Memorandum by the 2012 deadline.
View GAO-11-370T or key components. For more information, contact
David Wise at (202) 512-2834 or wised@gao.gov.
[End of section]
Mr. Chairman and Members of the Subcommittee:
Thank you for the opportunity to testify today on our work related to
federal real property and in particular, the issue of excess and
underutilized property held by the General Services Administration
(GSA) and other agencies. As you know, since 1990, we have
periodically reported on government operations that we identify as
"high risk." In January 2003, we designated the management of federal
real property as a high-risk area, in part because of excess and
underutilized property. Other reasons included over-reliance on
leasing and the challenges associated with protecting government
assets from terrorism. Later this month, we plan to issue an update on
the status of these issues as part of our update to the high-risk
series. My testimony today will discuss (1) the scope and costs of
excess and underutilized real property held by GSA and other federal
agencies; and (2) the challenges GSA and other federal agencies face
in disposing of excess and underutilized real property. To address
these objectives, we analyzed GSA data from the Federal Real Property
Profile, a centralized real property database, for fiscal year 2009.
We determined the data were sufficiently reliable for our purposes
through data testing and interviews with government officials
responsible for submitting and maintaining the data. We also reviewed
GSA real property plans and previous GAO reports, and interviewed GSA
and Office of Management and Budget (OMB) officials. We performed this
work from June 2010 to February 2011 in accordance with generally
accepted government auditing standards. Those standards require that
we plan and perform the audit to obtain sufficient, appropriate
evidence to provide a reasonable basis for our findings and
conclusions based on our audit objectives. We believe that the
evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives.
Background:
The federal government's real property portfolio presents significant
management challenges and, in many cases, reflects an infrastructure
based on the business model and technological environment of the
1950s. In identifying governmentwide real property management as a
high risk issue, we found that many government real property assets
are no longer effectively aligned with, or are responsive to,
agencies' changing missions. As a result, many are no longer needed.
These can include excess properties, which agencies have identified as
having no further program use, and underutilized properties, which
serve a program purpose that could be satisfied with only a portion of
the property. [Footnote 1] As we have previously reported, excess and
underutilized properties present significant risks to federal agencies
because they are costly to maintain and could be put to more cost-
beneficial uses or sold to generate revenue for the government.
The federal real property portfolio includes buildings used as
offices, warehouses, schools, laboratories, hospitals, and family
housing and land. Over 30 federal agencies control real property
assets--including both facilities and land--in the United States and
abroad. In fiscal year 2009, the federal inventory included over 3
billion square feet of building space and over 900,000 buildings and
structures that are worth hundreds of billions of dollars.
Approximately 83 percent of federally occupied space is owned by the
federal government, while the remaining amount is leased or otherwise
managed.
GSA, often referred to as the federal government's landlord, controls
more square feet of buildings--most of which it leases to other
federal agencies and entities--than any other civilian federal agency.
Figure 1 illustrates GSA's ten largest tenants by rent, ranked by
total square feet.
Figure 1: Top 10 GSA Tenants by Rent, Ranked by Total Square Feet:
[Refer to PDF for image: combined vertical bar and line graph]
Tenant: DOJ;
Total square feet: 46.8 million;
Total annual rent: $1.369 billion.
Tenant: Judiciary;
Total square feet: 41.4 million;
Total annual rent: $976.3 million.
Tenant: DHS;
Total square feet: 37.7 million;
Total annual rent: $1.129 billion.
Tenant: Treasury;
Total square feet: 30.6 million;
Total annual rent: $675.5 million.
Tenant: SSA;
Total square feet: 29.3 million;
Total annual rent: $621.9 million.
Tenant: HHS;
Total square feet: 15.8 million;
Total annual rent: $392.5 million.
Tenant: DOD;
Total square feet: 15.1 million;
Total annual rent: $340.2 million.
Tenant: Interior;
Total square feet: 14.3 million;
Total annual rent: $273.8 million.
Tenant: Commerce;
Total square feet: 13.5 million;
Total annual rent: $326.4 million.
Tenant: GSA;
Total square feet: 10.3 million;
Total annual rent: $231.1 million.
Source: GSA.
[End of figure]
GSA provides a range of real estate services to its tenant agencies,
including acquisition, operations, maintenance, and disposal of
property which it finances through a revolving fund called the Federal
Buildings Fund (FBF). GSA deposits the rent it collects from tenant
agencies into FBF, which it then proposes to spend as part of the
President's annual budget request to Congress. In fiscal year 2009,
GSA collected over $8.5 billion in rent, of which almost three
quarters came from its 10 largest tenants. In 2005, GSA received the
authority to deposit the net proceeds for its property dispositions
directly into FBF.[Footnote 2] The disposal of 133 GSA-controlled
properties from fiscal years 2005 through 2009 generated almost $200
million in net proceeds for FBF.
The Government Has Many Excess and Underutilized Buildings, Costing
Billions to Operate:
In fiscal year 2009, agencies reported 45,190 underutilized buildings
with a total of 341 million square feet, an increase of 1,830 such
buildings from the previous fiscal year. These underutilized buildings
accounted for $1.66 billion in annual operating costs. These totals
include buildings reported by 24 agencies, the largest of which is the
Department of Defense.[Footnote 3] Underutilized buildings represent
the first places to look for possible consolidations that could, in
turn, allow agencies to dispose of such properties.
GSA also has many properties it no longer needs. In fiscal year 2009
(the most recent year for which data are available), GSA reported
having 282 excess or otherwise underutilized buildings. These
buildings, which include offices and warehouses, cost about $93
million a year to operate. They encompass about 18 million square feet
and are located in 43 states and the District of Columbia.
Approximately 70 percent of these properties are federally owned which
GSA controls and the rest are leased from private owners. For example,
GSA's excess properties include an office and warehouse complex,
covering about 1 million square feet in Fort Worth, Texas. GSA spent
about $1.3 million in fiscal year 2009 to operate this complex.
According to GSA officials, these properties are planned for public
sale in spring 2011.
Excess and underutilized properties erode FBF, potentially threatening
its financial viability. GSA funds maintenance and repair costs to
operate excess facilities from FBF. It must then pay to operate and
maintain unneeded buildings without gaining tenant rent in return to
cover these expenses. The viability of FBF is essential to ensuring
that GSA is able to respond to changing government real estate needs
over the coming years and make sound investment decisions.
The administration recently built upon the previous administration's
focus on the need to dispose of unneeded properties throughout the
government. In a June 2010 Presidential Memorandum to federal
agencies, the administration stated that the federal government, as
the largest property owner and energy user in the United States,
wastes both taxpayer dollars and energy resources to maintain unneeded
real estate. The memo established a new target of saving $3 billion
governmentwide through disposals and other methods by the end of
fiscal year 2012. The memo directed that these cost savings be derived
from increased proceeds from the sale of assets and reduced operating,
maintenance, and energy expenses from disposals or other space
consolidation efforts, including leases that are ended.
Challenges Impede the Disposal of Excess Real Property:
As we have previously reported, the problem of excess and
underutilized property is exacerbated by a number of factors that
impede the government's ability to efficiently dispose of unneeded
property.[Footnote 4] For example, numerous stakeholders have an
interest in how the federal government carries out its real property
acquisition, management, and disposal practices. These include local
governments; business interests in the communities where the assets
are located; private sector construction and leasing firms; historic
preservation organizations; various advocacy groups for citizens that
benefit from or use federal programs; and the public in general, which
often view the facilities as the physical face of the federal
government in local communities. These competing stakeholder interests
can build barriers to real property disposals. In 2007 we recommended
that OMB, which is responsible for reviewing agencies' progress on
federal real property management, could assist agencies by developing
an action plan to address key problems associated with unneeded real
property, including reducing the effect of stakeholder interests in
real property decisions.[Footnote 5] OMB agreed with the
recommendation but has yet to implement it. OMB officials said they
are unsure how to reduce the impact of stakeholder influence on real
property decisions.
The complex legal environment also has a significant impact on real
property decisionmaking and may not lead to economically rational
outcomes. Not all agencies are authorized to retain proceeds from
property sales. In addition, federal agencies are required by law to
assess and pay for any environmental cleanup that may be needed before
disposing of a property--a process that may require years of study and
result in significant costs. In some cases, the cost of the
environment cleanup may exceed the costs of continuing to maintain the
excess property in a shut-down status. We have also noted that the
National Historic Preservation Act, as amended, requires agencies to
manage historic properties under their control and jurisdiction and to
consider the effects of their actions on historic preservation.
[Footnote 6] The issue of historic preservation will become of
critical importance to GSA since properties more than 50 years old are
eligible for historic designation and GSA's portfolio has an average
age of 46 years.
GSA's ability to effectively dispose of its unneeded property can also
be hampered by its lengthy disposal process, which is legislatively
mandated (see Figure 2). This process includes screening other federal
agencies for possible continued federal need. In addition, GSA has the
authority to retain the net proceeds from the sale of real property
but must, before offering property for sale, follow requirements under
Title 40 of the United States Code and the McKinney-Vento Homeless
Assistance Act.[Footnote 7] Some of these steps many result in the
property being disposed of with no proceeds. For example, under the
public benefit conveyance program, state or local governments and
certain tax exempt nonprofit organizations can obtain surplus real
property for public uses such as homeless centers, educational
facilities, or fire or police training centers. These steps in the
disposal process serve as opportunities for stakeholder input and
invite opportunities for stakeholder conflicts, such as conflicting
views from local community groups for how best to use excess
properties.
Figure 2: GSA's Legislatively Mandated Process for Selling Excess
Property:
[Refer to PDF for image: illustration]
1. Public Buildings Service reports the property excess.
2. Property is screened for use by other federal agencies:
If transferred to another federal agency, continue to step 3;
If not transferred to another federal agency: Proceeds-–if any–-
go to GSA‘s Federal Buildings Fund.
3. Property is screened for use by homeless providers at no cost:
If conveyed for homeless use, continue to step 4;
If not conveyed for homeless use: No proceeds.
4. Property is screened for certain other public uses for up to 100
percent discount of fair market value, and for negotiated sale to
public entities:
Property not conveyed as PBC or negotiated sale: proceed to step 5;
Property conveyed as PBC or negotiated sale: Proceeds-–if any–-go
to GSA‘s Federal Buildings Fund.
5. Property is offered for competitive public sale.
6. Property is sold: Proceeds go to GSA‘s Federal Buildings Fund for
GSA‘s real property capital needs (congressional action is necessary
for the proceeds to be used).
Source: GAO.
[End of figure]
The fact that GSA's underutilized or excess properties, even those
slated for disposal, may remain in GSA's possession for years,
provides further evidence of GSA's difficulties in this area. For
example, we previously reported on a GSA-created list of vacant and
underutilized GSA properties as of October 1, 2002, including some
which GSA had initiated actions for disposal.[Footnote 8] These
properties slated for disposal included a collection of federal
building properties at one location in Alameda, California, and 6
federal buildings in Kansas City, Missouri. At the time, the
properties in Kansas City were entirely vacant. In fiscal year 2009,
GSA reported that the agency owned excess properties at these same
locations totaling about 646,000 square feet and costing a total of
around $182,000 annually to operate. While GSA has attempted to
dispose of these excess properties, the agency has had to continue to
maintain the properties over the past 7 years. The lengthy disposal
process may therefore limit GSA's ability to achieve cost savings
under the Presidential Memorandum. GSA officials said they are
unlikely to have enough time to identify additional properties for
disposal, complete the disposals, and achieve the cost savings by the
2012 deadline included in the Presidential Memorandum. Instead,
officials said that they will have to rely on cost savings achieved
from previously planned disposals in the "pipeline" and through other
sources of savings, such as improvements in energy efficiency.
In closing, the government has many excess and underutilized
properties that cost billions of dollars each year to maintain.
Despite efforts to reduce this inventory, multiple obstacles remain
that preclude quick and easy solutions. Until these obstacles are
overcome, this issue will remain high risk.
Thank you, Mr. Chairman, that concludes my statement. I will be
pleased to answer any questions that you or other Members of the
Subcommittee may have at this time.
For further information on this testimony, please contact David Wise
at (202) 512-2834 or wised@gao.gov. Contact points for our
Congressional Relations and Public Affairs offices may be found on the
last page of this statement. Individuals making key contributions to
this testimony were Keith Cunningham, Assistant Director; Lynnelle
Evans; Colin Fallon; Erik Kjeldgaard; Emily Larson; Susan Michal-
Smith; Minette Richardson; and Swati Thomas.
[End of section]
Footnotes:
[1] Utilization is obtained by calculating a ratio of occupancy to
current design capacity. An office is considered underutilized if this
ratio is less than 75 percent. A warehouse is considered underutilized
if this ratio is less than 50 percent.
[2] Section 412 of P.L. No. 108-447, 118 Stat. 2809, 3529 (2004).
[3] The Department of Defense accounted for 64% of the total building
square feet held by these 24 agencies in fiscal year 2009.
[4] GAO, Federal Real Property: Progress Made Toward Addressing
Problems, but Underlying Obstacles Continue to Hamper Reform,
[hyperlink, http://www.gao.gov/products/GAO-07-349] (Washington, D.C.;
April 2007).
[5] [hyperlink, http://www.gao.gov/products/GAO-07-349].
[6] 16 U.S.C. § 470 et seq.
[7] U.S.C. § 11411.
[8] GAO, Federal Real Property: Vacant and Underutilized Properties at
GSA, VA, and USPS, [hyperlink, http://www.gao.gov/products/GAO-03-747]
(Washington, D.C.; Aug. 2003). This list also included some of the
properties in Forth Worth previously mentioned.
[End of section]
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