Military Base Closures:

Questions Concerning the Proposed Sale of Housing at Mather Air Force Base

NSIAD-99-13: Published: Oct 8, 1998. Publicly Released: Oct 8, 1998.

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David R. Warren
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Office of Public Affairs
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Pursuant to a congressional request, GAO reviewed the proposed negotiated sale of 1,271 surplus family housing units at Mather Air Force Base, California, to the Sacramento Housing and Redevelopment Agency (SHRA), focusing on whether: (1) the Air Force's attempts to obtain competition satisfy requirements of section 203(e)(3)(H) of the Federal Property Act to obtain such competition as is feasible under the circumstances; (2) the disposal at Mather meets the test of a public benefit given that SHRA plans to transfer ownership immediately to a private developer; (3) the Air Force, contrary to General Services Administration (GSA) policy and applicable laws, disclosed the appraised value of the family housing property to prospective purchasers; (4) the Air Force allowed a developer's representatives to participate in negotiations between the Air Force and SHRA; and (5) there is evidence that the property has a higher fair market value than the proposed sale price.

GAO noted that: (1) the Air Force's decision to pursue a negotiated sale with SHRA rather than compete the sale publicly was made early on and was documented in the Air Force's 1993 official record of decision regarding the disposal of the Mather property; (2) the SHRA, as the authorized representative of Sacramento County, was the only governmental entity authorized to deal with the Air Force and to express an interest in acquiring the Mather housing; (3) under these circumstances, competition was not possible and, therefore, the Air Force satisfied the requirement of the Federal Property Act to obtain such competition as is feasible under the circumstances; (4) applicable law and regulation do not define public benefit; (5) in the Mather case, the proposed public benefit was the sale of at least 30 percent of the housing units to low- or moderate-income families and the creation of a stable home ownership community; (6) available documents indicate that neither the Air Force nor GSA, which was assisting in the sale, questioned this proposed public benefit as a reasonable basis for conducting a negotiated sale; (7) moreover, SHRA has entered into an agreement with a private developer (who was selected competitively and will obtain ownership of the property) that establishes conditions designed to protect and promote this public benefit; (8) SHRA further agreed to accept and require the developer to adhere to both an excess profits clause and a windfall profits clause; (9) GSA policy, but not law, prohibits the disclosure of the government's appraisal because disclosure makes it more difficult for the government to negotiate a higher price; (10) records and discussions with the parties involved indicate that the Air Force disclosed the value of the property in the first GSA-approved appraisal; (11) SHRA's appraisal was much lower; (12) this difference caused prolonged negotiations and disagreements over the value of the property; (13) a representative of the developer did participate as a partner of SHRA in negotiations with the Air Force; (14) though not inconsistent with law or regulation, this action is contrary to the policy in GSA's Excess and Surplus Real Property Handbook; (15) there is no concrete evidence that the property has a higher fair market value than the proposed selling price; (16) the proposed selling price matches the appraised value of the most recent GSA-approved appraisal; and (17) according to SHRA and its developer, the sale price is reasonable because there is substantial financial risk in developing the property.

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