John Taylor,
President of the Virginia Institute for Public
Policy, publisher of Virginia Viewpoint.
|
As
we inch closer to another biennial budget in the
commonwealth, another budget brawl is likely.
Expenditures for most services are rising, while tax
and fee increases remain politically unpopular and
unlikely to pass both houses of the General
Assembly. Fortunately,
Virginia’s policymakers at the city, county, and state
level are sitting on a virtual gold mine that can
bail them out of immediate fiscal troubles, help
balance budgets, and prevent tax hikes.
Virginia
has millions, even billions of dollars in often
overlooked public-use infrastructure assets that —
when sold or leased through public-private
partnerships — can yield hundreds of millions in
revenue. This
can be achieved all in a manner that preserves or
improves services, while ensuring the assets
continue to serve the community. The state ought to
establish a process for systematically reviewing the
real property it owns and evaluating which assets
can be put to more productive or efficient use if
sold.
Cities
like Seattle, Milwaukee, Indianapolis, and
Boston are saving hundreds of millions of dollars this way.
States like Florida, Massachusetts, Texas, and even
California
have used, or are using, asset divestiture and
enhanced-use leasing to save money.
For instance, in 2001 California
sold surplus state real estate in
Silicon Valley
for $149 million. Furthermore,
Maryland Gov. Robert Ehrlich recently ordered the
Department of Planning to undertake a survey of
state agencies and their asset and property needs.
The goal is to identify property that is not
needed for state functions and divest that land.
First,
Virginia, too, needs to undertake a survey of state agencies
and their asset and property needs.
The inventory will be analyzed to find
property that has the most value to developers —
residential, commercial, or industrial.
In this paradigm, divesting surplus or
underutilized land has few, if any, downsides.
Beyond the one-time cash revenues realized
from the sale of the property, Virginia
also removes assets from its books and creates an
ongoing revenue stream as the new owner begins to
pay property tax on the now-private asset.
Virginia
last undertook such an asset review in 1994 when
state buildings and land were identified that could
reasonably be declared surplus.
The report did not specifically identify
consolidation opportunities but rather focused only
on excess property. The
report noted that the process for disposing of
surplus real property often experienced significant
delays and that property records frequently included
errors and omissions.
A new review must be completed chronicling
excess assets the commonwealth owns.
But it should not stop there; it should also
actively seek consolidation opportunities to free up
additional assets that could be divested.
Furthermore, the report should outline a new
procedure that would streamline the process and
resolve deficiencies identified in previous efforts.
Money
raised from asset divestiture can be used to
supplement existing services, reduce maintenance
backlogs, or provide new capital funding for
transportation projects.
Simply put, divestiture of assets and
enhanced-use leasing arrangements examine what real
property the state owns and determines if it can be
put to more productive use when sold outright, or
sold and then leased back to the state under an
agreement with the new private owner.
Given
the likelihood of continued fiscal struggles,
policymakers at the city, county, and state level
should re-evaluate their property and asset needs.
Undoubtedly, opportunities to generate
revenue, while staving off the need for tax hikes,
are there. Doing
so will be yet another step toward relieving current
budgetary pressures while maintaining services and
service levels the public has grown to expect.
--
January 19, 2003
|
|