Accelerating Disposition of Surplus State Property

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In 2003, the Massachusetts Division of Capital Asset Management and Maintenance (DCAM) drafted legislation to accelerate the disposition of surplus state property. The new legislation eliminated two steps that had historically slowed the process:

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  the need to get special legislation to sell any land other than highway parcels.
  
• the ability of communities to claim land for local use (communities would often put property in limbo by claiming it, but not appropriating funds to pay for it).

The new legislation, known as Section 548, was enacted as part of the fiscal 2004 budget and became law on July 1, 2003. It has a sunset clause under which it is scheduled to expire on June 30, 2005.

In the three fiscal years prior to enactment of Section 548, DCAM generated a total of $5.3 million from the sale of surplus state property. In its first year alone, revenue under Section 548 jumped to $10.2 million. Revenue for the current fiscal year is estimated at nearly $22 million. Much of the surplus property is suitable for new housing development, helping address one of the Commonwealth’s most significant challenges.

Several parties benefit from the new law. In some cases, DCAM spent over $175,000 per year securing and maintaining a single piece of surplus property. State-owned property is not taxed at the municipal level. Property that would still be in state hands under the old rules now generates over $400,000 annually in local tax revenue, a number that will increase dramatically as the property is developed. The agencies that give up property receive an additional dollar in capital allocation for every dollar the land brings in. Most importantly, taxpayers benefit. The first $25 million—enough to pay the salaries of about 500 teachers—goes to the Commonwealth’s general fund. Proceeds in excess of $25 million go to the Smart Growth Housing Trust, which provides planning grants to communities to help offset the impacts of adding new housing in their municipalities.

Section 548 allows DCAM to use the auction method of sale, which has been a critical factor in the law’s success. Because of the certainty of the outcome and speed of closing (generally 60 days from auction), auctions have driven up prices by attracting more qualified bidders than the traditional Request for Proposals (RFP) method of disposition. In two cases RFPs were withdrawn because bids were well below appraised value. The properties then went to auction and bids exceeded those attracted by the RFP.

Section 548 has streamlined the process for disposing of surplus state property to the benefit of municipalities, state agencies, and taxpayers generally. At the same time, it is helping to address one of the Commonwealth’s biggest economic development challenges by making more property available for housing development.