GAO -.--_ -- . . . --_..-_.l”ll_l__._~-l--.__-.- -1_1 HOMELESSNESS Oc*toEwr IWO . . Action Needed to Make Federal Surplus Property Program More Effective IIIllIll I ll 142600 RMTRI~--Not to be released outside the General Accounting Office unless specifically approved by the Office of Congressional Relations. “” . ““,” “. ..“.^ .“.I.“~.. ._ ..“.” . ,” ._^. “,____I. ___“-..-.. .--. “.ll-.__-~ *___--,-- _ -- P-P-“- ‘! , 1 United States GAO General Accounting Office Washiugtou, D.C. 20548 Resources, Community, aud Economic Development Division B-236486 October 9,lQOO The Honorable John Glenn Chairman, Committee on Governmental Affairs United States Senate The Honorable Cardiss Collins Chairwoman, Government Activities and Transportation Subcommittee, Committee on Government Operations House of Representatives This report respondsto your requests of March 23,1989, to review how surplus federal property is made available for use by the homelessunder title V of the McKinney Act. Specifically, the report addresses(1) barriers to making the program work and (2) actions taken or being taken to improve the process. As agreed with your offices, unless you publicly announceits contents earlier, we plan no further distribution of this report until 30 days from the date of this letter. At that time, we will send copiesto the Secretariesof Health and Human Services,Housing and Urban Development, and Defense;the Administrator of the General ServicesAdministration; the Executive Director of the Interagency Council on the Homeless;the Director, Office of Managementand Budget; and other interested parties. We will also make copies available to others upon request. Our work was conducted under the direction of John M. Ols, Jr,, Director, Housing and Community Development Issues,(202) 276-6626.Other major contributors are listed in appendix IV. Assistant Comptroller General , Executive Summary The Congress,in title V of the Stewart B. McKinney HomelessAssistance Purpose Act, enacted on July 22, 1987, attempted to provide shelter and services to the homelessby allowing federal property to be leased for uses such as emergencyshelters and food kitchens. By September 1988 only a few properties had been made available to the homeless,and advocatesfor the homelesssued the responsible federal agenciesbecauseof their slownessin implementing title V. The U.S. District Court, District of Columbia, issued several court orders to force federal agenciesto begin the processof making federal properties available to the homeless. Becauseof their concern about the federal agency responseto making federal properties available, the Chairman of the SenateCommittee on Governmental Affairs and the Chairwoman of the Government Activi- ties and Transportation Subcommittee,HouseCommittee on Govern- ment Operations, asked GAO to evaluate (1) barriers to making title V work and (2) actions taken or being taken to improve the process.In addition, GAO reviewed federal leaseswith assistanceproviders to deter- mine whether the leasesexposethe government to liability and costs. To bring about compliance with the McKinney Act, the District Court set Background forth specific steps to be followed by all federal landholding agencies. All federal landholding agenciesmust provide the Department of Housing and Urban Development (HUD) with inventories of their surplus properties on a quarterly basis. HUD then determines whether any of those properties are suitable for use by the homeless.HUD publishes the results in the Federal Register and notifies the agencieswhich proper- ties were found suitable. Individuals or organizations providing assis- tance to the homelessmust express interest to the Department of Health and Human Services(HHS) on properties listed in the Federal Register within 30 days of the notice, and the agenciesmust report to HUD whether or not they will make the property available for application by providers within that same30 days. At the sametime, someproperties may still require screeningfor use by other federal agencies.Regardless, assistanceproviders must complete their application within 90 days of the Federal Register notice for someproperties, and HHS must decide on completed applications within 16 days of receipt. According to HUD officials, from January to June 1990 HUD reviewed 7,666 buildings and parcels of land and found about half suitable for homelessuse. However, becauseof either their poor condition or remote location, many of these properties may not be usable. By June 16,1990, 28 properties (valued by the General ServicesAdministration (GSA) at Page 2 GAO/RCED-9142 Federal Property for the Homeleas Executive Summary about $49 million) had been leasedor had permits issued for their use, and another 10 had leasespending for use as transitional housing projects, emergencyshelters, multi-service centers, and facilities to feed the homeless.In the future, more federal properties will be made avail- able, including at least 10,000 Department of Defense(DOD) military base closure properties. Although progress has been made in making federal property available Results in Brief for use by the homeless,problems remain that hinder the effective implementation of title V. Specifically, properties are identified in the Federal Register as suitable for homelessuse before screeningfor fed- eral need is completed. As a result, assistanceproviders are misled and may be applying for properties that are not available. In addition, assis- tance providers arenot satisfied with the current method of publicizing federal properties becausemany providers do not have easy accessto the Federal Register. In response,GSA and HUD have developed addi- tional methods of publicizing federal properties, such as sending notices directly to known interested assistanceproviders. . Becausethe McKinney Act authorizes only the leasing of federal proper- ties and not transfers of property title or donations, surplus federal property may be of limited use to assistanceproviders. Someassistance providers told GAO that they cannot afford to renovate these properties or obtain loans to cover renovation costs becauseleasedproperty cannot be used as loan collateral. These providers stated that allowing federal agenciesto donate the properties in somecases,instead of leasing them, would enable assistanceproviders to get loans. Federal leasesused for facilities for the homelessmay exposethe gov- ernment to liability. Also, local jurisdictions may seek compensation for the additional costs incurred (such as emergencyservicesfor shelter residents) associatedwith nongovernment use. Changesin the leases could minimize these potential problems. Principal Findings Property Identification The procedure for identifying federal properties as suitable for use by ProcessCan Be Misleading the homelesswas established by title V and subsequently interpreted by the US, District Court. As a result, HUD lists properties as suitable in the Page 8 GAO/RCED-Bl93 Federal Property for the Homeless llxemmw summary Federal Register before the individual agenciesdeclare them to be avail- able for nonfederal use. Thus, assistanceproviders may be applying for federal property that is not available for public use. Agency officials agreethat federal need should be determined before providers are noti- fied that federal properties are suitable. Assistance Providers Another barrier to making federal properties available has been inade- Dissatisfied with Publicity quate program publicity. About 80 percent of the assistanceproviders we surveyed suggestedthat other methods of publicizing federal surplus for Properties properties are needed.For example, someassistanceproviders told GAO that locating federal property listed as suitable in the Federal Register was difficult becausethe notices often contained inaccurate and incom- plete addresses.In addition, someproviders said that they cannot afford to subscribe to the Federal Register or that they are often unaware of when to check for property listings. HUDofficials are taking steps to improve the property information printed in the notices, such as including complete addresses.In addition to Federal Register notices, GSAand HUD are providing additional publicity for federal properties, such as sending property notices directly to state and local authorities for further distribution to assistanceproviders. Providers Believe Leasing Assistance providers told GAOthat the title V program limits their ability Properties Limits to arrange financing to renovate existing buildings or build new ones becausethey are able only to leasefederal property. If the property Program’s Potenti .a1 requires substantial investment, the provider has two problems: diffi- culty in obtaining a loan on leasedproperty and the likely loss of the investment when the leaseexpires and possessionof the property reverts to the federal government. To overcomethis problem, someproviders advocate a gift or donation of the property by the federal government, as is done in someHHShealth programs. However, donation of federal property needsto be balanced against the monetary worth of the property to the federal government. Also, donating property requires legislative change. LeasesMay Expose the GAOreviewed someof the leasesnow in use for McKinney Act property Government to Liability and found that they exposethe federal government to potential liability from, among other things, personsharmed by physical defects of the and Costs * properties. In addition, local jurisdictions may seek compensation for the additional costs incurred (such as for emergencyservices) associated Page 4 GAO/RCEDB1-33 Federal Property for the Homeless . Executivesummary with changing the federal property to nongovernment use becausethe leasesdo not state that any chargesor fees required by state and local governments are the sole responsibility of the tenant. The leasescould be amendedto ensure that the federal government’s interests are as fully protected as possible. GAOrecommendsthat the Congressamend title V, section 501, of the Recommendationto McKinney Act to require that properties suitable for use by the home- the Congressand less are publicized in the Federal Register only after they are determined Matter for to be available. Becauseof the difficulties assistanceproviders say they have in financing the renovation or construction of facilities, the Con- Congressional gress also may wish to consider amending the McKinney Act to allow Consideration transferring ownership of somesurplus federal properties to assistance providers for use by the homeless,However, the decision to donate fed- eral property needsto be balanced against the monetary worth of the property to the federal government. GAOrecommendsthat the Secretariesof Defenseand HHSand the Admin- Recommendation to istrator of GSAreview and amend as necessarytheir leasing or permit- the Secretaries of ting instruments for properties to be leasedunder title V of the Defense and HHS and McKinney Act to ensure that the federal government is protected, as much as possible, from liability and costs associatedwith nongovern- the Administrator of ment use, GAOis making additional recommendationsin this report to GSA improve the implementation of title V. GAOdiscussedthe information in this report with officials from HUD,GSA, Agency Comments HHS,DOD,and the Interagency Council on the Homeless.These officials generally agreed with the principal findings and conclusions.Their com- ments have been incorporated throughout the report where appropriate. However, as requested,GAOdid not obtain official agency commentson this report. Page 5 GAO/RCED-91-33 Federal Property for the Homeless , Contents Executive Summary 2 Chapter 1 8 Introduction Background Assistance Providers Sueto Force Implementation of 8 9 Title V ProcessEstablished by Title V and Court Orders 10 Court Orders Result in Properties for HomelessUse 15 Many Federal Properties May Not Be Usable 16 Objectives,Scope,and Methodology 18 Chapter 2 21 Barriers Still Exist to Current ProceduresHave Hindered Program Success 21 Assistance Providers Dissatisfied With Federal Property 25 Making Federal Publicity hOped$ Available for ComprehensiveGuidanceWould Help Implement Title V 27 the Homeless Leasing Limits the Program’s Potential 27 Conclusions 29 Recommendationto the Congress 30 Matters for Consideration by the Congress 36 Recommendationsto the Administrator of GSA 30 Recommendationto the Secretariesof HUD and HHS and 31 the Administrator of GSA Chapter 3 32 LeasesMay Expose Federal Government Could Be Exposed to Liability for LeasedProperty 32 the Government to LeasesDo Not Specify Who Pays for Certain Costs 34 Liability and Costs Conclusions 36 Recommendationsto the Secretariesof HHS and Defense 36 and the Administrator of GSA Appendixes Appendix I: Federal Landholding Agenciesand Number of 38 Federal Properties Leasedor Permitted as of June 16, 1990 Appendix II: Federal Properties Applied for And/Or 39 Leasedor Permitted for HomelessUse as of June 16, 1990 Appendix III: Other Federal Property Programs That Can 42 Help the Homeless Page 6 GAO/RCED-D1-83 Federal Property for the Homeless Content8 Appendix IV: Major Contributors to This Report 44 Figures Figure 1.1: The Processfor Converting ExcessFederal 12 Property to HomelessUse Figure 1.2: The Processfor Converting Under- And 14 Unutilized Federal Property to HomelessUse Figure 1.3: Converted Military Barracks Moved From Fort 17 Sill to Lawton, Oklahoma Figure 1.4: Interior View of Converted Military Barracks 18 in Lawton, Oklahoma Abbreviations COE US. Army Corps of Engineers DOD Department of Defense DOT Department of Transportation FEhfA Federal Emergency ManagementAgency Federal Housing Administration Farmers Home Administration GAO General Accounting Office GSA General ServicesAdministration HI-IS Department of Health and Human Services HUD Department of Housing and Urban Development RTC Resolution Trust Corporation VA Department of Veterans Affairs Page 7 GAO/RCED-91-93 Federal Property for the Homeless Chapter 1 Intmkction The Stewart B. McKinney HomelessAssistanceAct (P.L. 100-77,July 1987), as amended,was enacted to respond to a crisis facing a growing number of individuals and families in the United States-the lack of shelter and other supportive services.A major purpose of the McKinney Act is to use public resourcesand programs to meet the needsof the nation’s homeless.Title V of the act addressesthis purpose by allowing organizations providing assistanceto the homelessan opportunity to leasesurplus federal property for servicessuch as emergencyshelters and facilities for feeding the homeless. The processof identifying and leasing federal properties to those who Background provide servicesto the homelessis set out in title V, section 601, of the McKinney Act. This processwas further defined by the U.S. District Court, District of Columbia, in a series of court orders. The properties available under title V are referred to generally as “sur- plus federal properties,” a phrase that covers four specific categoriesof federal properties: (1) excess,(2) surplus, (3) underutilized, and (4) unu- tilized. Generally, the excessand surplus properties are under the Gen- eral ServicesAdministration’s (GSA)jurisdiction and the under- and unutilized properties are under the jurisdiction of the landholding agen- cies (see app. I). Excessand surplus are defined by statute as follows: . Excessproperty is property that a federal agency no longer needsto carry out its responsibilities. Control of the property remains with the landholding agency while GSAdetermines if any other federal agency will use the property-this is called federal screening.Excessproperty can be declared surplus. . Surplus property is property that no federal agency claims under the federal screeningprocess.GSA'Sresponsibility is to disposeof it (1) by direct sale, lease,or donation or (2) through assignmentto another agency for leasing or donation. The terms under- and unutilized are defined as follows: . Underutilized property is property that is not being fully used (underused) but which is retained by the landholding agency for inter- mittent or future use. . Unutilized property is property that is not being used (unused) but which is retained by the agency for intermittent or future use. Page 8 GAO/RCED-91-99 Federal Property for the Homeless chapter 1 Introduction Assistance Providers Between the passageof the McKinney Act in July 1987 and September 1988, only a few properties had been made available to the homeless Sue to Force and little action had been taken by federal agenciesto implement the Implementation of program, As a result, organizations representing homelesspersons brought suit against the agenciesresponsible for implementing title V Title V and two major landholding agencies.’The organizations claimed that the responsible federal agencieshad failed to implement title V and that organizations providing assistanceto the homelesswere unable to obtain federal property under the statute. The district court found that the fed- eral agencieshad failed to properly implement the act and issued a pre- liminary injunction on September30, 1988, prohibiting the sale or disposal of property eligible for use under section 601 of the McKinney Act until the defendants complied with section 601’s terms.2 On December12,1988, the court issued a permanent injunction requiring the landholding agenciesto produce by December23,1988, lists of currently under- and unutilized property that they owned, con- trolled, or managed.The court ordered detailed steps to be taken by HUD, GSA,HHS,and the other federal landholding agenciesto comply with title V before they disposedof any property. In a separate opinion, the court noted that only 12 properties had been identified by the federal govern- ment for possible use by the homelesssince passageof the McKinney Act 17 months previously. On October 6,1989, GSAissued temporary regulations that incorporate the court’s orders outlining procedures to be followed for excessand surplus property under the act. Between January 1, 1989, and May 22,1989, neither HHSnor the land- holding agencieswould accept assistanceproviders’ applications for under- and unutilized federal property. Agency officials could not agree on which agency would be responsible for accepting and reviewing applications for these properties. On May 22,1989, the court ordered HHSto receive and processall applications for the title V program regardlessof the category of the property. ‘The defendants were GSA, and the Departments of Health and Human Services (HHS), Housing and Urban Development (HUD), Veterans Affairs (VA), and Defense (DOD). 2National Coalition for the Homeless v. Veteran’s Administration, 696 F. Supp. 1226 (D.D.C. 1988). Page 9 GAO/RCED-9133 Federal Property for the Homeless Chapter1 Intraduction Title V of the McKinney Act, as interpreted by the court and in subse- ProcessEstablished by quent agency regulations, assignsseparate administrative responsibili- Title V and Court ties to the Secretariesof HI-IS and HUD,the Administrator of GSA,and the Orders heads of all federal landholding agencies.HUDmust canvas all federal landholding agencies,on a quarterly basis, to obtain a list of properties identified as under- and unutilized. In general, GSAdoesthe same for surplus and excessproperties. HUDthen determines whether each prop- erty is suitable for use in assisting homelesspeople and publishes the results in the Federal Register.3At the sametime as the Federal Register notice is published, HUD notifies the appropriate landholding agencies, including GSA,which properties from their inventories have-beenlisted as suitable in the Federal Register. Assistanceoroviders have 30 davs from the publication date to notify HHSof their interest in the prope-&es. Then, they must send their completed applications to HHS(not later than 90 days from the publication date for surplus property). HHSis respon- sible for recording all expressionsof interest in publicized properties and completing all action within 16 days of receipt of a completed appli- cation. Additional time to file an application may be granted by the landholding agency and HHS. Excess and Surplus Under the Federal Property and Administrative ServicesAct of 1949, as Property amended,if a federal agency no longer needsa property, it shall declare the property excessand report it to GSAfor disposal. GSA,pursuant to title V of the McKinney Act, then sendsHUD information on the property so that HUDcan determine its suitability for the homeless.When HUD determines a property suitable, GSA immediately sendsout notices that the property may be applied for by assistanceproviders even though federal screeningmay not have been completed. GSA screensfor other federal agency needsat the sametime providers are applying to HHSfor the property. If there is no federal need,GSA declaresthe property sur- plus. This makes the property available for sale on the open market or public benefit conveyance(which is either a leaseor transfer of title at little or no cost, including leasing to assistanceproviders under the McKinney Act). Under title V, HHSis responsible for processingall assistanceproviders’ applications and for leasing surplus property to successfulapplicants. If 3HUD’s criteria for suitability, developed by the Secretary of HUD in consultation with the Secretary of HHS and the Adminiitrator of GSA, are generally exclusionary, meaning that if the property is not obviously unsafe and not in a restricted area, it is suitable. A property may be excluded because it is (1) in an isolated area without access by road, (2) contaminated, (3) within 2,000 feet of flammable or explosive materials, or (4) within an airport runway. Page10 GAO/RCED-Bl-X3 FederalPropeztyfor the Homeleaa Chapter 1 rntroductlon HHSapproves an application from an assistanceprovider for a property, it requests an assignmentof the property from GSA.If there is more than one applicant for public benefit conveyance,GSAdecidesthe highest and best use of the property, giving priority consideration to assistance providers for the homeless.If GSAassignsthe property requested, HHS negotiates a leasewith the successfulapplicant. (Seefig. 1.1.) Surplus property is more desirable than under- and unutilized property because the leasescan be for lo-year terms with a renewal option of 10 years. Page 11 GAO/RCISD-91-99 Federal Property for the Homeless . Chapter 1 Introduction Flguro 1.l: The Procesr for Converting Excess Federal Property to Homeless Use * Landholding agency reports property excess to GSA GSA performs federal screening I I 6 I GSA reports property to HUD for suitabllily determination HUD determines suitabillty within 2 months HUD publishes lists of suitable property in Federal Reg& Assistance provkfers notify HHS of their intent to apply within 30 days of the Federal Regispkr notfce I Another federal agency wants property so property not available, or GSA declares property surplus and Assistance provident apply not later than 90 days after the Federal available for public use &gj&t notice HHS accepts or rejects completed application within 15 days of receipt , For surplus property, GSA perfoms HHS requests assignment of the property from GSA second screening among * -4 public-benefit users HHS negotiates lease with successful applicant 4 GSA approves of assignment to HHS Page 12 GAO/RCED91-33 Federal Property for the Homeless chapter 1 In~uctlon Under- And Unutilized From the date that the landholding agenciesare notified of HUD’Ssuita- Property bility decisionson their under- and unutilized properties, each agency has 30 days to notify HUDwhether any of the suitable properties will be made available on an interim basis for use as facilities to assist the homeless.After HUD finds the agency properties suitable, the agency must declare whether they will be made available or state its reason for not doing so. An agency’sdetermination on whether a property will be made available is final. From the time that the landholding agenciessubmit properties to HUD for the suitability review until 30 days after the suitability notice is published in the Federal Register, the agenciesmust withhold the prop- erty from any other use or disposition. If HHS receivesan application or a notice of intent to apply during that time, the property continues to be withheld from sale or other disposition until HI-IS acts on the application. If HHS approves an application and the agency determines that it will make the property available, then the landholding agency negotiates a leaseor permit with the successfulapplicant for a specified time period (seefig. 1.2.), which is likely to be much shorter than in the caseof surplus property. Page15 GAO/~91-88 FederalPropertyfor the Homele~ Chapter 1 lntroductton Flgure 1.2: The Process for Converting Under- And Unutilized Federal Property to Homeless Ure Landholding agency reviews It0 properties annually to determine utilization Landholdlng agenoy rends HUD a list of all under- and unutilized properties quarterfy for suitability determination I I 1 ...- -...-_-...- HUD ,,. . determines . ..- suitability . within 2 month6 HUD publishes suitable HUD notifies the landholding agency of the suitable pKipWti66 . A~slstance provkfers notify HHS of their intent to apply within 30 day6 of the Federal Register notice or to exce86 the properly to GSA (refer to Asehitance provider6 apply to HHS HHS acceptsor rejects completed application within 15 days of HHS notifies the landholding agency of it6 decision on the If the landholding agency decide6 to make the appliition ’ property available, it negotiate6 a lease or permit L --- with the 6UCC666ft.d applicant Page 14 GAO/RCFD-W-33 Federal Property for the Homeless Chapter 1 Introduction Sincethe December1988 permanent injunction, HUDhas reviewed and Court Orders Result in publicized properties and providers have applied for and are using a few Properties for of these properties. According to HUD officials, from January to June HomelessUse 1990 HUDreviewed 7,666 properties for potential use by the homeless and found about 62 percent suitable.4Twenty-eight applicants have leased and another 10 are in processof leasing 38 properties, valued by GSAat about $49 million, as transitional housing, emergencyshelters, and multi-service centers. Of the 38 properties, 27 are excessor surplus and the remainder are under- and unutilized. Twenty-four of the 27 excessor surplus properties were leasedor permitted as of June 16, 1990. Two providers successfully applied for surplus federal property but did not sign the leasebecausethey were given an alternative prop- erty or money to withdraw their applications6 Sixteen different groups representing the homelesshave applied for underutilized properties; 12 of the 16 applied for part of a single federal office building in New York City. An entire floor of this building was divided into smaller parcels to be used by the various approved appli- cants, mostly for office space.Sevenof the applicants either have per- mits or pending permits. The estimated costsof fixing up these offices, where information was available, ranged from $10,000 to $240,000.As of June 16,1990, four applicants for underutilized properties had leases, sevenhad leasespending, two had been disapproved, and three had withdrawn. (Seeapp. II.) 4This is not a cumulative number because HUD reviews the suitability of federal properties on a continuous basksand thus some properties may be double-counted. %i Bardane, West Virginia, a local provider applied for a surplus federal property. The lease applica- tion went to HHS where it was approved. However, the City of Bardane wanted to purchase the property from GSA for an industrial park. Before HHS asked GSA to assign the property to it in order to lease to the assistance provider, GSA entered Into negotiations with the provider and the city. Because the city offered the provider sufficient money to expand its existing shelter, the provider accepted the offer and withdrew ita application for the property. The city then negotiated with GSA to pay for the property directly. \ In the other case, the provider also was a successful applicant with\HHS for a building in Providence, Rhode Island. The state wanted the property, and the provider was offered another property by the city in exchange for withdrawing its application. The assistance provider accepted the offer and the state has successfully negotiated a purchase of the buikling with GSA. Page 16 GAO/RCED-91-33 Federal Property for the Homeless chapt.er1 Introduction According to,HUD and other agency officials, as well as someproviders Many Federal we spoke to, someavailable properties listed as suitable are not usable. Properties May Not Be The reasonswe were given include that (1) the cost to improve or reno- Usable vate someproperties exceedsthe money that can be raised or (2) the property is so far away from other urban servicesprovided to the home- less that transportation back and forth is impractical. An agency official told us that it is impossible for HUDto determine which available properties will meet the needsof providers and, there- fore, it cannot limit the list of properties found suitable for the home- less. Thus, it is likely that many properties currently listed as suitable by HUDwill not be applied for becauseproviders cannot make use of them. However, the Department of Defense’smilitary base closureswill increasethe number of properties that could be applied for by assis- tance providers. Baseclosure property will be reviewed by HUD for suit- ability and becomeeligible for application by assistanceproviders under title V. Specifically, by the end of fiscal year 1996, DOD will close86 bases,partially close 6, and realign 54 others nationwide. Many of these are in or near urban areas and, possibly, near large homelesspopula- tions. Military family housing units could be particularly useful to the homeless,and thousands of these units are expected to becomesurplus. As of January 1990, a US. Navy official estimated that about 64 housing units in three states (California, Pennsylvania, and New York) will becomesurplus property; a U.S. Air Force official estimated that over 6,000 units in three states (California, Illinois, and Maine) will be surplus; a U.S. Army official estimated that almost 5,000 units in about 17 states will becomesurplus.~Other military buildings and open land also could be useful to assistanceproviders. Figures 1.3 and 1.4 show military property that has been converted for homelessuse. 6The 17 states are California, Connecticut, Illinois, Indiana, Kentucky, Maryland, Massachusetts, Mis- sourl, New Jersey, New Mexico, New York, Pennsylvania, Rhode Island, Utah, Virginia, Washiin, and Wisconsin. Page 16 GAO/RCED-91-99 Federal Property for the Homeleas Figure 1.3: Converted Military Barrack8 Moved From Fort 8111to Lawton, Oklahoma Page 17 GAO/WED-91-88 Federal PmpertY for the Homeless Figure 1.4: Interior View of Converted IMilItary Barrack8 In Lawton, Oklahoma The Chairman of the SenateCommittee on Governmental Affairs and Objectives, Scope,and the Chairwoman of the Government Activities and Transportation Sub- Methodology committee, HouseCommittee on Government Operations,jointly requested on March 23, 1989, that GAOexamine the implementation of the provisions of title V of the McKinney Act. The requesters noted that a lawsuit had forced HUDto take the initial step of reviewing federal properties for their suitability for homelessuse. They expressedconcern that few properties had actually been leasedor permitted through the program since passageof the McKinney Act. As agreed with the requesters’ offices, our objectives were to evaluate (1) barriers to making title V work and (2) actions taken or being taken to improve the process.In addition, we reviewed the leasessigned by federal landholding agenciesas of September30, 1989, to determine whether the leasesexposethe government to liability and costs. Page 18 GAO/WED-91-33 Federal Property for the Homeless chapter 1 Introduction To determine how title V, section 501, of the McKinney Act was being implemented, we reviewed applicable regulations; the proceedingsof the US. District Court, District of Columbia, related to title V; agency files; and the act’s legislative history. We interviewed representatives from several federal agencies,including HUD, HHS, GSA, DOD and its related ser- vices, and the Interagency Council on the Homeless.We also interviewed representatives of the National Governors’ Association and the National Coalition for the Homeless,as well as individuals who attempted to obtain or who contacted federal agenciesabout federal surplus properties. We conducted our review primarily at HUD headquarters in Washington, DC., and at the headquarters of other federal agenciesinvolved with implementing title V. We reviewed all applications for surplus property received by HHS as of September30, 1989. We interviewed eight assis- tance providers who applied for federal properties, and we also reviewed documents from organizations that had applied for or con- tacted a federal agency about surplus federal property. In order to determine the sourcesof information by which organizations were made aware of surplus federal properties, we conducted a tele- phone survey of organizations or individuals identified in HHS records as having sought information on properties involved in the title V process from March 1988 through September 1989. To conduct the survey, we drew a random sample of 222 out of 535 separate contacts made with HHS by organizations interested in obtaining specific surplus federal propertys7Of the 222 groups or individuals we called, we were able to complete interviews for 132, yielding a responserate of about 60 per- cent. All sample surveys are subject to sampling error. Sampling errors define the upper and lower bounds of the estimates made from the survey. Sampling errors for the estimates in this report were calculated at the 95-percent confidence level; this meansthat 19 out of 20 times, the sample survey procedure used would produce an interval capturing the true value. All sampling errors for the estimates in this report were calculated at the g&percent confidence level and were between 5.1 per- cent and 6.5 percent. The results of this survey are discussedin chapter 2. ‘For purposes of the sample, a “contact” is any inquiry by an organization to HHS concerning a property. Any organization can make multiple contacts by inquiring about more than one property. For purposes of counting the number of contacts, each organization making an inquiry about a prop erty was counted as one contact. Page19 GAO/RCED-91-39 FederalPropertyfor the Homeless chapter 1 Introdutztion To determine whether leasesexposethe federal government to liability and costs, we reviewed someleasesin effect at the time of our review. Our review was conducted from April 1989 through July 1990 in accor- dance with generally acceptedgovernment auditing standards. We dis- cussedthe information in this report with HUD,GSA,HHS,and DOD officials and officials of the Interagency Council on the Homeless,and incorporated their comments as appropriate. In general, these officials agreed with our principal findings and conclusions.However, as requested, we did not obtain official agency comments on this report. Page 20 GAO/WED-91-22 Federal Property for the Homeless Barriers Still l3xist to Making Federti property Available for the Homeless Although court orders succeededin getting federal agenciesto make fed- eral properties available for use by the homeless,problems remain, such as (1) having assistanceproviders apply for suitable federal properties before it is known whether the properties are available for public use; (2) inadequate publicity of available properties to assistanceproviders; and (3) the lack of comprehensiveguidance on how to obtain federal properties. In addition, assistanceproviders told us that title V limits their ability to arrange financing to rehabilitate .existing structures or to build new structures becausethey are able only to leasethe federal property. They stated that transfer of the title, or donation from the federal govern- ment, would give them a better opportunity to obtain loans and grants that could be used for renovation purposes or to build new structures. Proceduresnow in use, as a result of the court order, to publicize suit- Current Procedures able federal properties for the homelessallow assistanceproviders to Have Hindered apply for federal property that may not be available to the public Program Success becauseof a federal need. Further, GSA'Stemporary regulation regarding excessand surplus property doesnot state when this property will be made available to providers. Lists of Suitable Properties The procedures established pursuant to title V of the McKinney Act (and Are Published Before the as subsequently interpreted by the US. District Court, District of Columbia) to identify federal properties for use in assisting the homeless Properties Are Available do not assure assistanceproviders that the properties they apply for are actually available for use. Suitable property listings are published by HUD in the Federal Register before the landholding agencies,including GSA,decide whether there is a federal need for the properties or if they will be made available for use by the homeless.Therefore, assistance providers may apply for properties that are not available for public use, and HHSmust review these applications even though the properties may not becomeavailable to assistanceproviders. HUD, HHS,GSA,and Interagency Council on the Homelessofficials agree that availability of the federal properties should be determined by land- holding agenciesbefore the property is publicized in the Federal Reg- ister as suitable for use by the homeless.However, title V would have to be amendedto allow such a procedure. In addition, there is a time limit for determining availability on certain classesof federal properties but Page 21 GAO/RCED-91-93 Federal Property for the Homeless Burierr Still Erirrt to Making Federal Property Avallable for the Homeleas not others. A reasonabletime limit should be established for all federal Property. Property Required to Be Currently, assistanceproviders have 30 days from the time that a prop- Held From Other Uses erty is published in the Federal Register to notify HHS of their interest in the property. They must complete their application not later than 20 Until Applications Are days from the original publication date. HHShas 16 days to accept or Acted Upon reject the application. This processwas established in large part as a result of the December12,1988, permanent injunction (seech. 1). The court also required that the property be held from other usesfor at least 30 days from publication in the Federal Register or until HHShas com- pleted action on the application. Currently, the agenciesare following the 30day hold period required by the court order. It is important to hold from other usesthose federal properties that have been applied for under title V until the application has been acted upon by HI-IS; otherwise, the properties could be disposedof through sale or by other means. GSA’s Regulation on GSA issued a temporary regulation on October 6, 1989, modifying its poli- ties and procedures for making federal public buildings and other real Application for Excess and properties available for homelessassistanceunder the McKinney Act.1 Surplus Property Is The regulation states that when an agency reports excessproperty to Unclear GSA that has not previously been reviewed for suitability, GSA will notify HUD and request a suitability review. Following the sameprocedure applicable to other suitability determinations, HUD has 60 days to pub- lish its determination in the Federal Register; the 30-day time frame for expressionsof interest begins on the date that the property is listed in the Federal Register. The temporary regulation also applies to under- and unutilized proper- ties that had been reviewed by HUD for suitability and have subse- quently been declared excessby the landholding agency. The temporary regulation specifies that when GSA becomesaware that a landholding agency will “excess” property, GSA will notify assistanceproviders that have been identified by GSA,HHS,and HUD; state and local governmental units; persons who previously expressedinterest in the property; and ‘GSA’s temporary regulation will be in effect until October 7,199l. It applies to federal agencies that report excess property to GSA pursuant to the Federal Property and Administrative Services Act of 1949. Page 22 GAO/RCED-91-99 Federal Property for the Homeless BnrriermiWlEdmttoMaMngFeded Property AvaUable for the Homelew other organizations, as appropriate. With the exception of assistance providers, this follows GSA'Sstandard notification processfor surplus properties. According to the temporary regulation, the 30-day period for assistanceproviders to express interest in excessproperties begins when GSAsendsout the notices. GSAdoes not plan to publish the list of newly excessedproperty in the Federal Register. We identified several weaknessesin this procedure. First, GSA's mailing list may be incomplete or may contain errors that prevent interested assistanceproviders from receiving the notice. Assis- tance providers who may have thought it was not worth their time to pursue a property when it was classified as under- and unutilized, might wish to apply for it when it changesto excessbecauseof more favorable leaseterms. In addition, new provider groups may have been formed since the property was originally published in the Federal Register as suitable under- and unutilized property. Second,mailed notices may not be received timely, unduly restricting the application period for the property. Using a mailing date unnecessa- rily opens the door to controversy and possible court challenges-for example, the question of when the 30-day holding period actually began. Technically, the previous publication of HUD'Ssuitability determination in the Federal Register (when the under- and unutilized property was reviewed) meets the court-ordered requirement for public notice. That publication requirement is linked to the mandatory 30-day holding period during which suitable property is withheld from public sale or other disposition so that assistanceproviders can apply to lease it. GSA interpreted the injunction to require another 30-day application window when the property becomesexcess.However, having a 30-day holding period becomesa futile exercise if persons who are interested and might apply do not know the property is “on the market.” For this reason, republishing the information about suitable excessproperty in the Fed- eral Register, along with mailing notices to potentially interested per- sons,would be more in keeping with the spirit of the court’s notification order. GSAofficials said that using their mailing list in lieu of publishing suit- able excessproperties in the Federal Register eliminates a secondpubli- cation of the properties. However, republishing the list of properties would clearly establish the beginning of the 30-day period. Further, in our view, publishing a list of these properties might allow assistance providers not previously knowledgeable or interested to apply for excessand surplus properties. Page 28 GAO/WED-91-99 Federal Property for the Homeless Chapter 2 Radem Still Ex&t to Making Federal PropertyAvailablefor the Homelees Screening Federal Federal and public-use screeningsare part of the ordinary property dis- Property position processunder the Federal Property and Administrative Ser- vices Act of 1949 and its implementing regulations. When property is classified as excess,it is usually made available to any other federal entity having a need for the property. However, GSA can waive the screeningprocessunder extenuating circumstances.If the screening requirement is not waived,2GSA would balance any competing uses.This meansthat a federal use may outweigh a homelessuse for any excess property. Becausethe GSA screeningprocessoccurs concurrently with the application process,an organization for the homelesscould apply to lease a property only to discover well into the processthat it is not available after all.3 In our view, the whole property program would work more smoothly if assistanceproviders were invited to apply for property only after it has been determined that no federal use exists. In order to make such a suggestionwork, a reasonabletime period would have to be established during which any immediate federal need for the property would be identified; if no need exists, the property would be held for 30 days for assistanceproviders to initiate applica- tions. This action would require a changein GSA’S current federal screening regulations, which do not limit the amount of time GSA may take to determine whether the property ought to be transferred. The temporary regulation also envisions a secondlevel of screening during that same30-day holding period. This comesabout becausethe regulation states that property transferred to HHS for leaseto assistance providers will be declared surplus4 At the stage of property disposition where excessfederal property becomessurplus, GSA regulations call for a secondlevel of screening.In this secondstage, states, local govern- ments, and public bodies are invited to apply to receive surplus property for various public uses.These uses can include community centers, drug treatment facilities, day care centers, or prisons, among others. 2GSAemploys screening because title V states that it is to he administered “in accordance with appli- cable Federal law.” Although the court held that GSA would be authorized to waive either or both levels of screening, it also held that a waiver is not mandatory. 3National Law Center on Homelessnessand Poverty v. Lkp’t. of Veterans Affairs, 736 F. Supp. 1148 @DC. . . 1990), The plaintiff had received HHS approval of its application to use a federal property for the homeless, but GSA transferred the property to the U.S. Navy. The court ruled that as a result of the screening process, GSA could transfer the property to the U.S. Navy. 4GSA officials told us that they are statutorily required to declare excess property to be surplus under the Federal Property Act before HHS can lease property for the homeless. Under GSA’s normal procedures, surplus property is subject to a second level of screening for public-benefit uses. Page 24 GAO/RCED-91-33 Federal Property for the Homeless Chapter 2 Bawler6 Still Hxbt to Making Federal Property AvaIlable for the Horn&a As with federal screening,GSAcan waive the second-levelscreening,but is not required to do so. To help evaluate competing beneficial usesfor surplus property, GSAhas issued guidelines for public-use screeningthat suggestan assistanceprovider should have preference over other types of public-use applicants, but the guidelines are not definite on that point, and in any event, they are not binding. Another barrier to making federal properties available under title V has Assistance Providers been inadequate program publicity. We conducted a telephone survey of Dissatisfied With organizations and people that had expressedinterest in federal proper- Federal Property ties to determine, among other things, how they found out about federal surplus property.6 (Seventy-two of 132 contacts, or 54.6 percent, were Publicity local nonprofit organizations. Twenty-six, or 20 percent, of our contacts were state or local governments.) We found that 31 (or about one-fourth of our contacts) first learned about federal surplus properties from the Federal Register. Another 32 (or about 24 percent) stated that they first found out about properties from federal agenciessuch as GSAor the Interagency Council on the Homeless.Twenty-six (or about 20 percent) of those contacted first obtained their information from the National Coalition for the Homeless.One city official (not a survey respondent) told us that he learned about the property the city applied for from the local newspaper. About 80 percent of the respondentsto our telephone survey, as well as other providers we interviewed, suggestedthat other methods of pub- licizing federal surplus properties are needed.One suggestedthat lists of properties be prepared by state and sent to the state coordinators of programs for the homeless,who could then send them to providers. Another suggestionwas that lists be publicized in local newspapers. According to officials of the Interagency Council on the Homeless,HUD, HHS, and GSA,providers also told them that the Federal Register notices are not readily available. Unless they are on a mailing list or are sent information by someonewho is, providers often do not find out about the properties listed in the Federal Register. Someassistanceproviders told us that although the Federal Register is available in public libraries (when a subscription is too costly for them), they have no idea when to check it for lists of properties. Further, someproviders we spoke to did 6All survey results are based on 132 completed surveys. Our survey results generalii only to those organizations or persons who contacted HHS about information on federal property. Page 26 GAO/RCED-9133 Federal Property for the Homeless chapter 2 l&rrlem Still E&t to MakingFederal property Availablefor the Homeless not know that HUDpublished a list of properties in the Federal Register every week. Those same agency officials told us that the Federal Register alone is not adequate notice for many providers. To improve this situation, separate publicity efforts have been developed by HUD, GSA,and the Interagency Council on the Homeless.HUD is providing additional publicity about surplus federal properties using HUD field offices. GSAsendsindividual publicity notices for each suitable excessand surplus property to a wide range of interested persons, state and local officials, newspapers, and local post offices. The Interagency Council on the Homelesshas taken steps to increase publicity of the title V program. The Council’s 1989 annual report states that to improve the record of making federal real property available, the Council is pursuing the goal of more widely disseminating information about suitable and available properties. It has already published and distributed program information on federal property. In addition to the problem of inadequate program publicity, many of the Federal Register notices contained erroneous or incomplete addresses. When HUDbegan publicizing properties in the Federal Register, many of the notices (1) contained incomplete location information, (2) listed the properties as belonging to the wrong federal agency, and/or (3) incor- rectly described the property as vacant land or buildings. These inaccu- racies causedconfusion and delays among assistanceproviders in locating these properties. Several assistanceproviders we spoke with told us that time delays in finding the property listed in the Federal Register were a problem becausethe 30-day notification requirement begins with the listing in the Federal Register. The longer it takes to find a specific property, the less time is left to determine if the property will meet the provider’s needs.In order to apply for a property, somenonprofit organizations must get approval from a board of directors, and a city government may need approval from a city council. Obtaining such approval can take time. Thus, it was difficult for providers to meet the 30-day deadline for notifying HHSof their intent to apply for a property becauseof the time it took them to locate the properties listed in the notices. According to one HUD official, insufficient information in the notices was a result of incomplete information submitted by the landholding agen- cies. HUDnow requires agenciesto submit complete and correct Page26 GAO/RCJSD-91-62 FederalPropertyfor the Homeless chapter 2 BurlersBtlllBdrtto~Fedenl Pmperty Available for the Homeless paperwork on properties. For example, beginning with the last quarter in calendar year 1989, HUD required each agency sending information to identify (1) the property’s zip code,(2) a complete address,and/or (3) adequate directions to the property site if no addressexists. Three years after title V was enacted into law, there is no comprehen- Comprehensive sive federal guidance on how to obtain federal properties. As a result, Guidance Would Help assistanceproviders cannot go to one source to learn how this program Implement Title V works. Although HUD has issued guidance on how to obtain federal properties for the homeless,HUD'Snotice doesnot cover the application processfor federal properties, and HHShas not issued a separate regula- tion covering that process.In addition, GSA'Stemporary regulation on how it will handle excessand surplus property under title V provides a 30-day application period for properties that have been listed as suit- able. The notification processdoesnot give all prospective applicants the sameopportunity to apply and may not provide adequate notice. The Interagency Council on the Homelessstated in its 1989 annual report to the Congressand the President that to improve the implemen- tation of title V, the Council’s goal is to have GSA,HHS,and HUDpublish a joint regulation describing the current processthat is required by law and to solicit comments on streamlining alternatives. In a July 13, 1990, meeting, the Council’s Executive Director told us that a draft regulation is currently being reviewed by HUD,GSA,and HHSofficials and efforts are being made to finalize it as soon as possible. However, no time table had been established for when this will be completed, according to the Exec- utive Director. Someassistanceproviders told us that the title V surplus property pro- Leasing Limits the gram limits their ability to arrange financing to rehabilitate existing Program’s Potential structures or to build new structures becausethey are able only to lease federal property. If the property requires substantial investment, the provider has two problems: difficulty in obtaining a loan and the likely loss of the investment when the leaseexpires and the property reverts to the federal government. Since assistanceproviders may lack financial resourcesto fix up or build entirely with their own money, they may need to turn to lending institutions for the required capital. Assistance providers told us that loan requests are likely to be denied unless the provider has adequate collateral not connectedto the leasedproperty. Page 27 GAO/RCED91-22 Federal Property for the Homeless chapter 2 Hurlers Still H&t to MakingFederal Roperty Availablefor the Homelees Two providers told us that the currently allowable HHSlo-year lease term with a lo-year option makes it difficult to obtain financing. For example, one provider plans to renovate a federal building on the National Register of Historic Places.Renovations will cost over $3.2 mil- lion An outright gift of the property would allow the provider to obtain funding quickly for this project through loans. However, under the cur- rent leasing arrangement, the provider was unable to get a loan. The short lease-termsavailable for under- and unutilized properties require that the property be immediately useful to providers or they will not apply. Agency officials and someproviders told us that many of these properties may be leasedonly for very short terms (about 1 to 6 years) becausethe landholding agency may need to use these properties. As of June 16, 1990, five underutilized properties, including one floor of a New York office building, had been applied for by assistance providers. An outright gift of the property is advocated by some assistanceprov- iders as a mechanismto obtain the necessaryrehabilitation financing. According to providers, agency officials, and organizations assisting the homelessthat we spoke to, transfer of title from the federal government would give providers a better opportunity to obtain loans and grants that could then be used to rehabilitate existing buildings or to build new structures. Donating property for homelessuse would require legislative changeto implement. The question of donating federal property, how- ever, needsto be weighed against the monetary value of the property to the federal government. HUD, GSA,and HHSofficials told us that they gen- erally agree that providers would have an easier time getting loans if providers held title to the property. HHSissued a revision to its existing regulations for disposal of federal property under the Federal Property and Administrative ServicesAct of 1949 on August 8,lOOO.~The regulatory revision would allow transfer of property title to assistanceproviders for such homelessfacilities as transitional housing and food kitchens, in addition to the public health uses already specified. However, on the basis of our analysis of the applicable laws, existing statutes do not allow deeding federal property to assistanceproviders for the homelessunless such use was previously authorized under the Federal Property Act. (Seeapp. III.) 6TheFederalPropertyendAdministrativeServices Act of 1049allowsGSAto assignfederalprop erty to HI-IS,whichin turn cantransfertitle of surplusfederalpropertyto stateendlocalgovem- mentsor nonprofitmedicaloqanhationsfor publichealthuse. Page28 GAO/RCEB91-22 FederalPropertyfor the Homekss chapter 2 lht’tli~ Still Exist to Making Feded Propem AvdIable for the Homelear, Although progress has been made in making federal properties available Conclusions to the homeless,problems remain that need correction. Until these problems are corrected, the true potential of this program to assist the homelesswill remain unknown. Specifically, the current procedure of identifying suitable federal properties for assisting the homelessdoesnot permit assistanceprov- iders to be certain that the properties they apply for are actually avail- able for use. Sincethe lists of suitable properties are publicized before it is determined if other federal agenciesneed the property or whether it will be made available for public use, time and money may be wasted by assistanceproviders who apply for unavailable properties and HHS which processessuch applications. We believe that the procedures established in GSA’stemporary regulation are not as clear as they could be about notifying interested persons, establishing the date on which a court-ordered 30-day holding period begins, or ensuring that excessproperty is not neededby another fed- eral agency before assistanceproviders apply for a lease.In addition, if the property applied for under title V is made available for application, no assuranceexists that the property will actually be available because screeningwill not have been completed at the time of application. Publication of all suitable properties in the Federal Register is important for establishing the 30-day notification period. However, providers and agency officials agreethat other publicity methods are neededto ensure that the broadest number of assistanceproviders are made aware of these properties. Agency efforts, such as using GSA’Sexisting excessand surplus property notification process,should help expand publicity of properties beyond the Federal Register. The Interagency Council on the Homelessconcluded in its 1989 annual report that overall federal guidance is neededto improve implementa- tion of title V, but this regulatory guidance had not been issued as of July 31,199O. In addition, assistanceproviders have told us that they face difficulties in obtaining financing to fix up or build on federal surplus properties. They said that their financing problems can be easedto someextent by giving them title to federal properties, similar to HHS' mental health pro- gram, which could enable them to get loans more readily to improve the properties or to build new structures. The question of donating federal Page29 GAO/RCED-9199 FederalPropertyfor the Homeless BurbmBtUlExbttoMaklngFederd Property Avallable for the Homelee property, however, needsto be balanced against the monetary worth of the property to the federal government. HHs’regulations allow property title transfer for all homelessfacilities. We believe that these regulations exceedHHS’ authority under title V of the McKinney Act. In our opinion, title V must be amendedbefore the federal government can transfer ownership of property to assistance providers under title V. - We recommendthat the Congressamend section 601 of title V of the .uablulL bd McKinney Act to require that properties suitable for the homelessare the congress not publicized until properties are actually available or declared surplus to the federal government. The Congressmay wish to amend title V to codify the court’s require- Matters for ment that landholding agencieshold property available until HI-E3has Consideration by the acted on assistanceproviders’ applications. In addition, the Congress Congress may wish to consider amending title V of the McKinney Act to allow transferring ownership of somefederal surplus properties to assistance providers for use as facilities for the homeless.This could give assis- tance providers a better opportunity to obtain financing for constructing or renovating these properties. However, the question of donating fed- eral property needsto be balanced against the monetary worth of the property to the federal government. We recommendthat GSA finalize and issue its regulation on excessreal Recommendationsto property to include title V requirements. This regulation should include the Administrator of a requirement that federal screeningof excessproperty be completed in GSA a reasonableperiod of time. We also recommendthat GSA ensure that excessand surplus property is publicized in the Federal Register after federal screeningis completed, whether or not the property has been previously published in the Federal Register as suitable under- and unu- tilized property. This action will ensure a well publicized date for the beginning of the 30-day notification period. Page 80 GAO/RCED91-99 Federal Property for the Homeleee chapter 2 Badem Still Exist to Making Federal aOperty Avnilable for the Homelew We recommendthat the Secretariesof HUD and HHS and the Adminis- Recommendationto trator of GSA finalize and issue their joint, comprehensivetitle V pro- the Secretaries of HUD gram regulation. This will provide the necessaryguidance to applicants and HHS and the for federal property. Administrator of GSA Page 31 GAO/ltCED-9143 Federal Property for the Homelew , , Chapter 3 LeasesMay Exposethe Governmentto Liability and Costs The McKinney Act allows providers of assistanceto the homelessto lease federal property. These leasesset forth the government’s rights and responsibilities as a landlord to the assistanceproviders who are its tenants. The leasesnow in use exposethe government to potential lia- bility from, among other things, litigation by persons harmed by phys- ical defects of the properties. In addition, local jurisdictions may seek compensation for coststhey could incur (such as for emergencyser- vices) associatedwith changing the property from federal agency use to a facility for the homeless.Becausethe leasesdo not state that any chargesor fees required by state and local governments are the sole responsibility of the tenant, the federal government, as landlord, could incur additional expenses. The federal government and nonprofit assistanceprovider organiza- Federal Government tions, as of June 16, 1990, had agreedto and signed 18 leasesand 10 Could Be Exposed to permits for federal property to be used as facilities to assist the home- Liability for Leased less. Other applications were in various stagesof review prior to leasing or permitting. (Seeapp. II.) We reviewed nine of the signed leasesand Property found that they do not adequately protect the government’s interests from liability arising from such occurrencesas accidental injury and related problems. Under the Federal Tort Claims Act, as amended,the government assumeslegal responsibility for injuries or damagescausedas a result of its negligenceor misconduct on the samebasis as a private party. In private leasetransactions in most states, a landlord has a duty to point out any dangerousconditions and hidden defects that exist on the prop- erty when the leaseis signed.’ Even if the tenant is not paying rent, the landlord must discloseany dangerousconditions and hidden defects that are known or that could be discovered in the exercise of reasonabledili- gence.Failure to disclosecan result in the landlord being legally respon- sible for lossesor injuries that occur becauseof the defect. Also, in most states the law places an extra duty of burden on landlords renting to tenants who intend to open the premises to the general public. This is known as the public purpose doctrine. Under this doctrine, a landlord will be liable for injuries to public users of the property caused by hidden defects if a tenant allows public entry onto the property lTypically included are such conditions as weak floorboards, loose stair railings, faulty wiring, and the like. Page 32 GAO/RCED-91-33 Federal Property for the Homeless Chapter 3 Leaem May Rxpoee the Government to Lhhfflty and Costa before any such defects are found and repaired. The landlord can dis- charge his or her responsibility to the public by warning the tenant of any defects and ensuring their complete repair before the public is allowed on the property. Alternatively, the landlord can make the repair or warn the public personally. Taken together, these rules on hidden defects protect the tenant, its employees,and especially public users- the residents of shelters, the patrons of soup kitchens and food banks, community volunteers, etc- from injuries causedby dangerouscondi- tions in existence at the time the leaseis signed. Although the legal rationale for holding the landlord liable is the land- lord’s superior knowledge of the leasedproperty’s physical characteris- tics and state of repair, a McKinney Act property owner may not have the information on which to base appropriate disclosures.This occurs becauseHUD'Ssuitability review of property under the McKinney Act is perfunctory and doesnot involve physical inspection of the property. The government’s liability should be minimized by the “hold harmless” clause in the government lease.Under this clause the tenant agreesto obtain commercial liability insurance and to indemnify the United States against any and all liability directly or indirectly arising out of the prop- erty’s condition or state of repair.2 DOD’S hold harmless clause is a little stronger than that of other federal agencieswe reviewed becauseit also includes a statement that the government makes no warranty as to the condition of the property. Despite the indemnification agreementand insurance, we foresee sev- eral potential problems. The most obvious would occur if the tenant did not procure insurance or allowed its policy to lapse. Second,somecom- mercial insurance policies may not cover liability causedby undisclosed hidden defects because,under the rules described above,that is the landlord’s legal responsibility, not the insured tenant’s3 Third, even if 2The hold harmless clause in the government’s lease states that the tenant will indemnify and save and keep harmless, the United States of America, ... against any and all loss, cost, damage, claim, expense or liability whatsoever due to personal hjury or death or damage to property of others directly or indirectly arising out of the condition, state of repair, or the use or operation of the property.... The same clause obligates the tenant to obtain commercial liability insurance in amounts of at least $200,000 per individual and $600,000 per incident. 3Thls ls particularly true in the case of the public purpose doctrine, because the landlord has a duty to the public at large. In that case, the hold harmless clause in the lease might not insulate the govern- ment from liability if a member of the public lnjured by an undisclosed unrepaired defect were to sue the government directly. Page 33 GAO/WED-91-33 Federal Property for the Homelesa Chapter3 Leases May Expose the Govemment to Ltabillty andCoata the policy fully covered damagesfor undisclosedhidden defects, the government might still be held liable for damagesthat exceedboth the policy limits and the tenant’s ability to satisfy a judgment. While there may be no guaranteed way of completely avoiding liability for injuries causedby the condition of the property at the time of lease, the possibility of such injuries occurring could be minimized by inserting a clause in the leaserequiring the tenant to engagethe servicesof a certified architect, engineer, or building inspector to perform a thorough building inspection at the tenant’s own expense.4The leasecould further require the inspection to be completed either within 30 days of signing the leaseor before allowing the public to use the property, whichever is earlier. The tenant could be required to provide a written report of the inspector’s findings to the federal landlord. Further, if defects or haz- ardous conditions are disclosedby the inspection, the tenant could be required by the leaseto make all repairs in a safe manner and document their completion to the landlord before permitting the public to use the premises. If the alterations or repairs neededto ensure safety are too extensive or costly, the tenant could be permitted to terminate the lease. Finally, the leasecould require the tenant to furnish periodic evidence of current insurance. In addition to the liability issues,none of the leasesin use at the time of LeasesDo Not Specify our review contain any statement on taxes or local service charges. Who Pays for Certain Local jurisdictions may seek compensation for costs they could incur costs (such as for emergencyservices)when the property is changed from federal agency use to a facility for the homeless.Becausethe leasesdo not state that any chargesor fees required by state and local govern- ments are the sole responsibility of the tenant, the government (as prop- erty owner) would have to respond to such requests, creating expense and inconvenienceto the federal landholding agency that could be avoided. The federal government is exempt from paying property or other taxes to state and local governments.As a result, local authorities sometimes do not want to provide governmental services(fire, police, ambulance, trash, etc.) on federal property. In someinstances,local governments have tried to collect revenue to offset the cost of governmental services 4The requirement could stipulate that the term “hidden defect” or hazardous condition need not include the mere failure of the structure to comply with local building codes unless the defect or condition is patently hazardous or poses an imminent threat to life or property. Page34 GAO/RCED-91-33 FederalPropertyfor the Homeless Chapter 3 Leases May Expose the Government to Liability and Costs by calling the collections “service charges” or “special assessments”and the like. Unless a service charge is for a measurable service (a number of gallons of water through the sewers,for example), and unless taxpayers in the jurisdiction are assessedon the samebasis for the service, the government equates such fees with taxes and will not pay them. As long as property is made available to McKinney Act assistanceprov- iders under lease,federal ownership and, by extension, the federal gov- ernment’s exempt status remains unchanged.At the sametime, the McKinney Act tenants probably will require even more local government services,particularly schoolsand emergencyassistance,than the pre- vious federal occupants of the property. Although we would not expect such a problem to occur with respect to the leaseson property disposed of under the 1988 DefenseAuthorization Amendments and BaseClosure and Realignment Act, P.L. loo-526 (1988): somejurisdictions might seek additional payments in connection with other leasesor other DOD leasesto assistanceproviders for homelessshelters.6 Another problem exists with respect to leasesfor shelters on active mili- tary bases,where the property is held as a “federal enclave.” Bases located in a federal enclave are not within the jurisdiction of state or local governments. As a result, for example, fire companiesand police departments do not serve the federal enclave and have no legal authority on the federal enclave’s land. The DOD standard leasestipulates that an assistanceprovider may not take possessionof the leasedpremises in a federal enclave until the state agreesto accept concurrent jurisdiction on the property. Because the property was not previously served by local government authorities, accepting concurrent jurisdiction means adding local government responsibilities without adding any property taxes to support them. There is no legal authority for a federal landlord to make a compensa- tory payment to a local government on behalf of a McKinney Act tenant; however, a tenant may chooseto make such payments with its own funds, particularly if securing servicesis an otherwise insurmountable barrier to operating its facility. ?he taxation issue should not arise for any leases for property under th’e Base Closure Act because the act provides for special adjustment payments to local governments near bases that are being closed. ‘In addition to the McKinney Act, the Secretary of Defense has authority under 10 U.S.C. 2646 to enter into leases for homeless shelters on military bases. Page 36 GAO/RCFJB91-33 Federal Property for the Homeless Chapter 3 Leases May Expose the Govemment to Jhblllty and Cwta Our review of leasesfor property leasedunder title V of the McKinney Conclusions Act showed that the existing leasesdo not adequately protect the inter- ests of the federal government. Specifically, the leasesand permits exposethe government to potential liability claims. In addition, none of the leaseswe reviewed ensure that, when necessary,negotiating for ser- vices and paying any chargesand other fees requested by state and local governments are the sole responsibility of the tenant. We believe that corrections to these leasesare required to ensure that the federal gov- ernment’s interests are as fully protected as possible. We recommendthat the Secretariesof HHS and Defenseand the Adminis- Recommendationsto trator of GSA review and amend as necessarythe leasing or permitting the Secretaries of HHS instruments for properties to be leasedfor the homelessunder title V of and Defeke and the the McKinney Act to require that the lesseehold the federal government harmless for any injury that occurs on the property, inspect the prem- Administrator of GSA ises, and repair all hazardous conditions before allowing the public to enter. In addition, for property other than baseclosure property, we rec- ommend that the leasestate that the federal government assumesno service chargesor fees that may be requested for the homelessfacility. Further, we recommendthat, in addition to lease amendments,the Sec- retaries of HHS and Defenseand the Administrator of GSA obtain evi- denceof current insurance coverageby the lessee. We also recommendthat the Administrator of GSA, as federal property manager, inform the heads of other landholding agenciesabout the need to review their leasesor permits should any title V property under their jurisdiction be applied for. Page 36 GAO/WED-9133 Federal Property for the Homeletw . . ’ . ‘i, . Page 37 GAO/ltCEDBl-33 Federal Property for the Homelew Appendix I Federal Landholding Agenciesand Number of Federal Properties Leasedor Permitted as of June 15,199O Agency Number of propertier Department of Agriculture 1 Department of the Air Force 2 Department of the Army 3 Central intelligence Agency 0 Department of Commerce 0 US. Armv Corps of Enaineers 0 Department of Education 0 Department of Energy 0 Environmental Protection Aaencv 0 Federal Communications Commission 0 Federal Emergency Management Agency 0 General Services Administration 15 Department of Health and Human Services 1 Department of the Interior 2 Department of Justice 1 Department of Labor 0 National Aeronautics & Space Administration 0 National Science Foundation 0 Department of the Navy 0 US. Postal Service 0 Department of State 0 Department of Transportation 0 Department of the Treasury 0 U.S. Information Aaencv 0 Department of Veterans Affairs 3 Total 28 Note: While there are four other federal landholding agencies, they were not solicited by HUD for prop erty to review for suitability. Page 33 GAO/RCED91-33 Federal Property for the Homeleas Federti PropertiesApplied for And/Or Leased or Permitted for HomelessUse as of June 15,199O Landholding Assistance -_.-agency -- ..._-.-. Property description Leasing status Value provider Intended use Excess -- -....... federal - .._. - -.... - property: GSA 18,000 sq. ft. bldg.; Bell Federal GSA permit $324,000 Salvation Army 200-bed shelter Service Center; Bell, CA effective _____..... -_-..__.......___..-- 12/15/87 GSA 31,000 sq. ft. bldg.; Bell Federal GSA permit $669,000 The Shelter Supply distribution center ._.__ ,_._... -_-. .^__ Service -__.-- Center; Bell, CA effective 2/l 3189 Resource Bank GSA 0.35 acres of land; Bell Federal GSA permit $234,000 pcod Partnership, Office trailer parking .___- ..-_.___ Service Center; Bell, CA - _-___ effective 6/l/88 DOT 11.95 acres of land; Navy Annex Transfer to HHS !§6,000,000 Creative Housing Transitional housing units (Barracks K); Arlington, VAa -_.- I..-..-.~._. . ..-.----. denied Solutions, Inc. Sumlus federal urooertv: GSA 3.1 acres of land; former Raritan Lease effective $716,000 Middlesex Interfaith Housing for 18 families Depot; Edison, NJ 417’189 Partners with the Homeless, Inc. GSA 2.13 acres of land and a 2,900 GSA permit $4,500,000 Salvation Army Temporary shelter for 14 sq. ft. bld .; 1401 Sepulveda issued 2/8/89 homeless veteran families ._-_ -..-_ _..-- ___-_ d3; W. Los Angeles, CA Boulevar and a recreation center GSA 7 acres of land; former Fort 2nd application $280,000 Sudbury Housing 100 units transitional. Devens; Sudbury, MA under reviewb Authority housing HHS 0.40 acres of land and a 23,757 Lease effective $350,000 City of Lynn, MA SO-bed shelter, health sq. ft. bldn; former old Post 717189 clinic and food kitchen - . .._.....- .----Office ..-.- bldg.; Lynn, MA GSA 0.63 acres of land and a 35,613 Lease effective $500,000 Pontiac Rescue Dormitory and transitional sq. ft. bld .; Furlong Building 6126189 Mission apartments and meals for -"--___ .-.-.--..Pontiac, $1 the homeless Air Force 4.83 acres of land and 6 Lease effective $50,000 Municipality of Homeless facility buildings (19,215 sq. ft.); former 6120189 Aquadilla, PR providing meals and Ramey AFB; Aquadilla, PR medical services Army 3.1 acres unimproved land; Lease effective $1,250,000 Uplift Assistance, Transitional housing former US Army Reserve Center 6/19/89 Inc. .I ..-.- - ._..---- West Palm Beach, FL GSA 0.4 acres of land and a 51,573 Lease effective $800,000 City of San Antonio, Multi-service including sq. ft. bldg.; Federal Building 6/ 19189 TX emergency shelter, San Antonio, TX transitional housing, and ------ dining facility GSA 0.75 acres of land and a 7,951 GSA permit $175,000 Whitman ‘Grady’ Temporary shelter servin sq. ft. bldg.; Federal Building effective 8189; Mayo Scholarship homeless persons in a 1B- Port Gibson, MS lease effective Foundation, Inc. county area -... .__ . _. -. _.......-._-_-_C..-.^______ 2/l I90 Army 4.67 acres of land; Camp Lease effective $50,000 Home Between Transitional housin for Sherman Rifle Range 7124189 Homes, Inc. 54 homeless indivi CY uals Chillicothe, OH and families Agriculture 0.26 acres of land and a 1,600 Lease effective $35,000 Interchristian Four families to be sq. ft. house; Ranger residence 7/l 2189 Correlation housed and fed _- .___..- _...___ Lander, -.-...-- WY -....----_ Organization, Inc. VA 4 acres of land and 6 buildings GSA permit $50,000 Our House, Inc. Shelter for 50 individuals, (30,000 q. ft.); VA Medical 10/27/89; lease food program, and child Center; e,rttle Rock, AR effective 3/21/90 care services (continued) Page 3B GAO/lUZD-Q1-88 Federal Property for the Homeleaa Appendir II Federal Propertier Applied for And/Or Leeoed or Permitted for Homeleeo Use au of June 16,lBfJO Landholding Amlrtance aoency Promrhr deSCriDtiOn Leaslna status Value DrOVider Intended ube GSA 0.32 acres of land; Camp Elliot Lease effective $10,000 San Die o Coalition Transitional housing for .-_-.__-..*_.- San Diego, CA l/5/90 for the II omeless 21 individuals GSA 0.84 acres of land and a 4,766 Lease effective $20,000,000 National Coalition Job trainin and sq. ft. bldg.; Square 571 l/22/90 for the Homeless, recreation Bor 1,500 --._.--- Washington, DC 1 Inc. individuals weekly Justice 0.30 acres of land and 2 bldgs.; Lease effective $27,650 Community Shelter for 20 homeless Border Patrol Station Carrizo 0129109 Services Agency of individuals and Springs, TX Dimmitt, LaSalle, counseling program for and Maverick the entire community Counties Interior 8 small bld s. and 96 acres of Lease effective $175,000 Conch0 Valley Shelter and job training land; Fish I?atchery #2 2/l 9190 Center for Human for 12 handicapped adults .--- San Angelo, TX Advancement Army 35 acres of land; Fort George G. le$y;9;ffective $260,000 Housing America 300 rental housin units Meade; Maryland City, MD :,hcrough Trarnrng, to be constructe dgfor 400- 500 individuals Interior 4 acres of land; Santa Ana, CA Lease effective $500,000 Orange Coast 64 units of 2- and 3- 11/7/89 Interfaith Shelter, bedroom apartments for Inc. 256 homeless, including a --... daycare facility GSA 13.55 acres of land and 6 GSA permit $535,500 Community Mental Residential units for five buildings; former Valley For e effective Health Services families and 20 individuals General Hospital; Phoenixvr 7le, l/25/90; lease Properties, Inc. PA ~;;$JI as of ----~ HHS 1.69 acres of land and 1 Lease pending $150,000 New Day, Inc. Shelter for 500 homeless building; Indian School of as of 6/l 5190 youth per year and cztical Nursing; Albuquerque, counseling services -.- ---.-- Air Force 19.64 acres of land; Davis Lease effective $1,544,000 Vietnam Veterans 80 units of housing for Monthan AFB; Tuscan, AZ 2/t/90 of America, Inc. 320 homeless veterans and families plus -..--___I_ counseling GSA 10 acres of land; VA Hospital Lease pending $350,000 New Day, Inc. Services for housing Albuquerque, NM . . as of 6/15/90 I homeless youth -~-1 GSA 40 acres of land; Bardane, WV Applicant $225,280 Coalition for the Emergency and withdrew Homeless of transitional housing application after Jefferson County, -._____ HHS approval WV, Inc. - GSA 0.18 acres of land and 1 bld . Applicant $1,950,000 Travelers Aid Multi-service center (19,655 sa. ft.): Federal Buil 3 ina withdrew Societv of Rhode Providence, PI’ application Island - ---.- 1o/5/09 VA 2.39 acres of land and a 3500 Lease effective $100,000 Transitional Life Transition housin for sq. ft. 2-story farm house; VA 6/l l/90 Center, Inc. adult female ex-o Pfenders Medical Center; Lincoln, NE VA 80,000 sq. ft. IO-story building; GSA permit $16,000,000 Vietnam Veterans Multi-service center VA clinic; Boston, MA effective Workshop 12/21/09; lease to be effective * a/31190 Page 40 GAO/RCED-B1-33 Federal Property for the Homelew Appendix tI FederalhoperthrApplkdforhd/Or laoed or Permitted for HomeleMl Use aa of June 15,lssO Landholding Assistance amncy ProDem deSCriDtiOn Learina status Value Provider Intended use The following applicatlona pertain to one floor of an underutllized GSA property at 252 7th Avenue, New York City, N.Y.: 7,000 sq. ft. Permit pending $28,000 per Coalition for the Administrative offices as of 6/l 5190 annum Homeless, Inc. 1,000 sq. ft. GSA permit $4,000 per Community Administrative offices ----- effective 5/l 190 annum Access, Inc. 4,000 sq. ft. GSA permit $16,000 per Community Administrative offices - effective 5/l/90 . I annum Counseling and --- Mediation- 1,600 sq. ft. GSA permit $6,400 per Food & Hunger Administrative offices effective 2/l/90 annum Hotline, Inc. 1,000 sq. ft. Permit pending $4,000 per Interfaith Assembly Administrative offices as of S/l 5190 annum on Homelessness & Housing 3,000 sq. ft. Applicant $12,000 per Legal Action Center Administrative offices withdrew annum for the Homeless, reauest Inc. 6,200 sq. ft. GSA permit $24,800 per The Doe Fund, Inc. Training and education effective 4/l/90 annum center 5-7,000 sq. ft. Applicant $20,000-28,000 Westside Cluster of Administrative offices withdrew per annum Centers & request Settlements, Inc. 2,500 sq. ft. Applicant $10,000 per Center on Social Administrative offices dropped request annum Welfare Policy & --_-..- Law, Inc. - 2,200 sq. ft. Application $8,800 per New York City Administrative offices dHirspproved by annum Coalition Against --I. Hunger, Inc. 1,500 sq. ft. Application $6,000 per Friends and Administrative offices disapproved bv annum Advocates of the -.. HHS ’ . Mentally Ill, Inc. - 1,000 sq. ft. Permit pending $4,000 per Upper Room AIDS Administrative offices as of 6/l 5190 annum Ministrv The following applications pertain to other underutilized property: - - . - GSA 1,000 sq ft. of the Federal Bldg. Permit pending Unavailable Nazareth Home, Storage of furniture for ~--_-~ #l ; Brooklyn, NY as of 6/l 5190 Inc. the homeless VA 11 housing units; 3.76 acres of Permit pending Unavailable The Veterans Transitional housing land: Ft. Snellina. MN as of 6/l 5190 Incentive Proiect Air Force land; Norton AFB Incomplete Unavailable Women’s Network 200 beds and services for Communications Site application as of for Cancer homeless men -.~- San Bernadino, CA 6/15/90 Prevention COE 32 single family homes; Midway Application Unavailable Housing Authority Transitional and Housing Site; Kent, WA approved by of King County emergency housing HHS on 6/l l/90 BAnother federal agency requested the property. This property was erroneously labeled as excess by GSA; it was actually being used by the Navy. Y bApplication conditionally approved 1l/3/89; however, the entire site was designated a Superfund site in February 1990 until a complete environmental assessment is completed. Page 41 GAO/~91-38 Federal Property for the Homeless Appendix III 1 Other Federal property ProgramsThat Can -* Help the Homeless Besidesthe title V surplus federal property program, there are other ways to get federal property or use existing federal facilities for the homeless.These include (1) ownership of existing facilities under fed- eral property law for public health facilities, such as drug treatment centers for the homeless;(2) ownership or leasing of homesthat the Department of Veterans Affairs (VA), the Federal Housing Administra- tion (FXA),or the Farmers Home Administration (FM-IA) repossessed when the owner defaulted on the federally insured mortgage; (3) owner- ship of homes acquired from failed thrifts by the Resolution Trust Cor- poration (RTC); and (4) use of existing buildings on military installations for shelters. Public-Benefit Programs- Section 203 (k) of the Federal Property and Administrative ServicesAct of 1949 authorizes the sale or lease of sur- plus properties for public-benefit use to state and local governments or nonprofit medical organizations.1Public-benefit usesinclude facilities such as prisons, hospitals, parks, and drug treatment centers. An assis- tance provider who wants to open a drug treatment center for the home- less can apply to HHSto buy or leasesurplus federal property under HHS’ public health benefit program. Federally Acquired ForeclosedHomes-Four federal entities offer repossessedhousing to nonprofit groups to assist the homeless.They are administered by VA, FHA, F~HA,and the RTC.The VA program allows for outright purchase of housing with defaulted VA loans. WHA allows leasing for up to 10 years and purchase of defaulted properties for tran- sitional housing at a 10 percent discount off fair market value. FHA allows leasing of defaulted housing at $1 a year for 3 years to assistance providers and/or sale at a 10 percent discount off fair market value. The RlT gives advanceopportunity to public agencies,nonprofit organiza- tions, and lower income families to purchase eligible single- and multi- family properties acquired from failed thrifts. These entities give priority for certain properties to assistanceproviders over others who might want the property. Department of DefenseHomelessFacility Assistance-In addition to the McKinney Act, DODcan make military installation property available under its own authority (10 USC. section 2646) for homelessshelters. ‘Surplus property in this case means only the category surplus. Page 42 GAO/lZCED-91-33 FederalPropertyfor the Homeless AppsndlxIn OtJmFederaIPrope~prolpamr~hatcnn Help thelHome4eM The military may furnish and provide, without reimbursement, inci- dental services as required, such as utilities, bedding, security, and reno- vation of facilities. DODhas established or allowed to be established 16 facilities nationwide under this authority. Page 43 GAO/RCED91-33Federal Property for the Homeleerr f Appendix IV m Major Contributors to This Report Marnie Shaul, Assistant Director Resources, EugeneE. Aloise, Assignment Manager Community, and Donna M, Lucas, Evaluator-in-Charge Economic Molly MacLeod,Reports Analyst Development Division, Washington, D.C. Margaret Ax-men,Senior Attorney Office of the General Counsel (385186) Page44 GAO/ICED-9149 Federal Pmperty for the Homeless
Homelessness: Action Needed to Make Federal Surplus Property Program More Effective
Published by the Government Accountability Office on 1990-10-09.
Below is a raw (and likely hideous) rendition of the original report. (PDF)