Proceeds from the sale of public property should be used to pay down debt, not finance budget shortfalls.
Sarasota County is selling its unneeded real estate. That’s a good thing. These properties will no longer languish on the government rolls, requiring taxpayer-funded maintenance. Instead, they will be out in the economy providing new housing, commerce and even tax revenue.
This is a great example for all cities and counties, and puts Sarasota County in good company.
For example, just this past year, after an investigation by the Arizona Republic newspaper revealed hundreds of neglected city-owned properties, the city of Phoenix created an asset inventory and system for selling unneeded property. Getting those properties back into the market allows for infill development and generates economic activity, jobs, homes and tax revenue.
A few years ago, Oklahoma put a system in place creating a detailed inventory of all assets, assessing how much each is being utilized and estimating the values of the most underutilized ones and the market for selling them. All proceeds from sales of assets go into a long-term building maintenance fund to help sustain the more utilized assets.
Examples like these incorporate a few basic principles:
First, knowing what you own and knowing what you need to own are crucial, and selling what you don’t need to own follows from that. How can leaders sensibly assess which properties they should keep owning and which they should consider selling if they don’t have a list to look at?
The starting point for competent asset management is having an up-to-date, simple and accessible inventory of real property owned by the city or county, just like private businesses do. That would include land, buildings and major capital items like heavy equipment and bulk parts and materials.
This seems like common sense, and a business could not even do its annual tax return without such an inventory. But few governments bother to do them, or if so, the lists are unconsolidated and lie scattered in various departments. Today’s technology makes it easy to track properties and keep online, comprehensive inventories, so governments should take advantage of those tools.
Second, because each asset is unique, governments can’t use a cookie-cutter approach to selling them. They have to be a good seller and get the best price for the taxpayers the market will provide. Sometimes that means considering changes to zoning or rules governing a property’s uses to maximize its value, as long as that doesn’t create incompatible uses.
Third, governments should make the inventory and sales open and transparent. Few governments bother to do this, but the inventory should be transparent to the commissioners, media and taxpayers. This is one way Sarasota County (and the city of Sarasota as well) could improve their services to taxpayers: making their inventory transparent online. Everyone should know what cities and counties own and why, and anything being sold should be made as widely available as possible to prevent rumors of backroom or sweetheart deals. Plus, more competition drives up the sales price.
Fourth, as mentioned before, proceeds should be used to pay down debt or to pay for long-term commitments like capital projects, not to patch short-term budget holes that only come back the next budget cycle. A responsible approach uses the proceeds of asset sales to pay off debts, like unfunded pension obligations, or to fund long-term capital investments in the place of new debt.
Selling unused properties is a step in the right direction for Sarasota County, but it could make more progress here. Right now, the county’s proceeds are slated to cover current recurring budget spending that exceeds revenue, which is a bit like bailing out a boat with a hole in it. It would be more prudent to “patch the hole” by using the asset sale proceeds to pay down the county’s debts.
The city of Sarasota even more so. It should be following the county’s lead by selling the wholly commercial and quite valuable asset of the Bobby Jones Golf Course, as I have written about before, at least for starters. Turn a liability sucking money out of the budget into a productive part of the local economy and use the proceeds to dramatically address the city’s huge unfunded pension liabilities.
Adrian Moore is vice president of Reason Foundation and lives in Sarasota.