SD7 - Review of State-Owned Real Property

  • Published: 1995
  • Author: Joint Legislative Audit and Review Commission
  • Enabling Authority: Senate Joint Resolution 239 (Regular Session, 1993)

Executive Summary:
The Commonwealth of Virginia owns approximately 730,000 acres of land -- the equivalent of the combined size of Loudoun, Prince William, and Stafford counties -- and more than 10,000 buildings. Most of this land is held for highway right-of-way, conservation, or forestry. Item 15 of the 1993 Appropriation Act and Senate Joint Resolution 239, approved by the 1993 General Assembly, directed the Joint Legislative Audit and Review Commission (JLARC) to (1) examine and make recommendations for improving the State's management of real property, and (2) identify potentially surplus real property and estimate the market value of this property. JLARC last reviewed the State's real property management in 1977.

Conclusions of the current study are:

• The Commonwealth holds approximately 7,100 acres of land and 30 buildings that may reasonably be declared surplus.

• Surplus real property held by agencies and institutions of the Commonwealth has an estimated market value of about $36.5 million.

• Most surplus buildings owned by the Commonwealth have limited alternative uses due to their poor condition and outdated design.

• The State's process for disposing of surplus real property often experiences significant delays and is neither efficient nor effective.

• Real property records maintained by the Department of General Services' Bureau of Real Property Management contain a significant number of errors and overlap with databases maintained by the Division of Risk Management and the Department of Accounts.

• The State needs a system for recording the market value of significant real property assets to allow for a more proactive, business-like approach to real property asset management.

• The Secretary of Administration should examine the State's real property policies and make recommendations to the Governor and the General Assembly regarding (1) the appropriate relationship between institutions of higher education and higher education foundations in management of real property, and (2) the disposition of surplus properties that were donated or purchased with special funds that have no deed restrictions on their future use.

• The Secretary of Administration should also examine the advisability of revising (1) the Code of Virginia's provisions for disposition of the proceeds from the sale of surplus real property, and (2) the Code of Virginia so that real property transferred by State agencies to other State agencies will revert to the control of the originating agency in the event the receiving agency does not need or does not fully utilize the transferred property. The Secretary of Administration should present the administration's proposals on these issues prior to the 1995 General Assembly.

Progress Has Been Slow in Declaring Real Property Surplus

Since JLARC last reviewed real property management in 1977, little progress has been made by State agencies in identifying additional surplus properties other than facilities which have been closed by State agencies. Nine properties identified in the 1977 JLARC report as surplus and which were deemed surplus during the current review have either not been disposed of or have not been declared surplus. The Department of General Services' (DGS) latest inventory of surplus real property contained eight properties, five of which had been identified as surplus by the 1977 JLARC report. State agencies need to be more proactive in identifying surplus real property.

JLARC staff conducted 68 site visits to State-owned properties and surveyed all executive branch agencies and institutions. As a result of this review, JLARC staff identified 25 additional surplus real properties that are not contained on the DGS inventory. Surplus real property identified during this review, with an estimated market value of approximately $36.5 million, is shown on the table on page III of this report.

Real Property Records Are Unreliable

JLARC staff assessed the accuracy of the Bureau of Real Property Management's (BRPM) records by surveying State agencies and institutions and asking them to verify the accuracy of their holdings as reflected by BRPM records. JLARC staff identified a significant number of errors in BRPM's records of both land and buildings. The errors included missing tracts, listings of buildings or land no longer or never held by the agency, duplicate entries, incorrect acreage or building size, and failure to note properties that had been declared surplus. BRPM's director conceded in an interview with JLARC staff that BRPM's records are not very reliable.

Real Property Databases Overlap

There is overlap among three real property databases maintained by State agencies: (1) BRPM's real property management system, (2) the Division of Risk Management's Property Information System, and (3) the Department of Accounts' (DOA) Fixed Asset Accounting and Control System. These three systems create an unnecessary duplication of effort for State agencies holding real property. Since the first two systems are located within DGS, the department's management should assign a high priority to the consolidation of these systems. In addition, DGS and DOA should work together to improve the compatibility of their real property systems.

DGS should also develop a method for recording the market value of the State's most valuable real property assets. This would allow the State to practice more prudent asset management by determining whether the activities taking place on valuable properties are sufficiently compelling to justify the retention of these activities at the site. By determining the market value of potentially valuable properties, the State will be able to determine whether it may be more prudent to sell the property and relocate the present activity.

Disposition of Surplus Real Property Could Be Improved

Improvements are needed in the State's disposition of its surplus real property. JLARC staff identified numerous instances in which the State was unable to dispose of surplus real property in a timely manner. The General Assembly may wish to consider revising the Code of Virginia in order to expedite the sale of surplus real property assets by the Commonwealth and to generate general fund revenue from the sale of these assets. Suggested changes to State law include:

• allowing DGS greater discretion in the use of real estate brokers,

• developing a consistent policy for the transfer of State-owned real property to local jurisdictions, and

• requiring a reversion clause in all transfers of surplus real property from one agency to another so that the property will revert to the control of the originating agency if the property is subsequently declared surplus to the needs of the receiving agency.

Options for Disposing of Surplus Real Property

The State has several options for disposing of surplus real property. These include: (1) selling the property to generate revenue, (2) transferring selected properties deemed to be prudent investments by the Virginia .Retirement System (VRS) to VRS in lieu of a cash contribution, and (3) alternative public uses. However, under current State law there is little potential for generating general fund revenue from surplus real properties identified in this report. The Governor and General Assembly may wish to consider recommendations made in this report in order to improve the potential for generating general fund revenue from surplus real properties.