New and Exciting Opportunities for Federal Property Transfers Michael P. Comodeca Spencer Fane Britt & Browne LLP

Federal government as property owner The Federal government is the largest real property owner in the United States The domestic building inventory contains 300,000 buildings requiring approximately $21 billion of annual operation and maintenance expenditures including approximately $6.8 billion of annual lease costs

GAO Reports criticized federal management of real property GAO Reports in 2012 and 2013 criticized federal government efforts to manage excess and underutilized properties - “A comprehensive, long-term national strategy would support better management of excess and underutilized property”

National Strategy for the Efficient Use of Real Property – Spring 2015 This Spring, the Administration responded with the National Strategy for the Efficient Use of Real Property One of the priorities is to reduce the size of the federal inventory by prioritizing actions to consolidate, co-locate and dispose of properties

Challenges relating to federal property transfer – Unfamiliar and complicated property transfer process – Potential liability for existing environmental contamination

Understanding the federal property transfer process – Identifying surplus property – Public benefit conveyance – Negotiated sale – Public sale – BRAC

Identifying surplus federal property Annual survey Determination of “excess” Notice of availability to other federal agencies

Public Benefit Conveyance State and local governments, as well as nonprofits, may have surplus property transferred to them for a discount of up to 100% of fair market value, provided they use the property for a public benefit

Negotiated Sale Surplus property that is not disposed of through the public benefit conveyance process may be sold to state and local governments at fair market value when “a public benefit, which would not be realized from a competitive sale, will result from the negotiated sale.”

Public Sale Surplus properties that are still available after screening for public benefit conveyance and negotiated sale may be offered for public sale through sealed bids, physical auctions, and Internet auctions

Base Realignment and Closure (BRAC) Congress has occasionally granted special temporary authority to the Secretary of Defense to carry out wholesale reviews of domestic defense real property with the intention of evaluating and reducing the inventory deemed excess to defense needs and surplus to federal requirements

How to mitigate potential liability for existing environmental contamination “Early transfer” – deferral of the CERCLA covenant Environmental insurance

Early Transfer Property is transferred before the cleanup is complete, and the CERCLA covenant is deferred until after cleanup Early transfer provides the opportunity for simultaneous redevelopment and cleanup

Pre-Early Transfer law The process under CERCLA 120(h) hindered economic development “All remedial action necessary to protect human health and the environment” must be completed prior to property transfer.

Early Transfer is a valuable tool Early Transfer accelerates the return of idled or underused former federal property to productive use because it provides the opportunity for simultaneous cleanup and redevelopment

How Early Transfer works Early Transfer allows the federal agency to defer making the CERCLA covenant until the completion of the cleanup, even if the cleanup occurs after the transfer

Financing an Early Transfer Financial assurances and environmental insurance Federal funding through credits off the purchase price, an escrow account, or an Environmental Services Cooperative Agreement (“ESCA”)

Environmental insurance Nowhere has the role of environmental insurance grown faster in its importance and effectiveness than as a tool in the redevelopment of federal property Environmental insurance is now used routinely to address exposures and break down potential obstacles to successful redevelopment.

PLL insurance Pollution Legal Liability insurance policies provide coverage for claims or losses associated with: Third-party legal liability claims, including on-site and off-site bodily injury and property damage Unanticipated remediation costs from pollution conditions on, at, under or emanating from the covered location

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