Gov. Kate Brown has an ambitious plan to raise $5 billion by selling off a wide range of public assets, from surplus property to possibly even some state agencies.
But experts say there are many potential pitfalls, particularly if Oregon follows the route of many states and seeks quick cash by selling off other assets it would continue to use.
“This kind of thing has been happening in the U.S. for a long time where the current politicians decide they need cash now and figure out how to get it,” said Robert Barone, a Reno-based economist and investment fund adviser who has written on the topic. “But then it’s mortgaging the future because the building they sold to the private sector now requires that the taxpayers through taxes pay the private sector for rents in that building.”
Brown plans to appoint her task force by the end of the month.
“I expect the task force to examine state assets as well as the assets of other public employers that could be sold, bonded against or otherwise leverage,” she said when she announced the plan last month.
Brown has ruled out privatizing prisons or selling state parks or forests. But aides say they expect the task force to otherwise cast a wide net – perhaps even looking at agencies like the state’s liquor control commission or SAIF, the state-owned workers’ compensation insurer.
Many Republicans are skeptical. Jonathan Lockwood, the spokesman for Senate Minority Leader Ted Ferrioli, R-John Day, said this “liquidation charade is a phony distraction” from the hard work of reining in “out-of-control government spending.”
“Well, I think it’s a goal and it’s one worth considering,” she said. “Do I think we’re going to get $5 billion out of it? Probably not.”
Still, Leonard Gilroy of the Reason Foundation, a Washington, D.C.-based free-market think tank, said asset sales can make a lot of sense when a governmental body is trying to pay off a big debt like PERS.
“If you start pre-paying it like a mortgage,” he said, “you will pay less over the long run, then you relieve yourself of that debt much faster.”
Gilroy said that, in any case, it makes a lot of sense for public agencies to periodically see what they have.
“I tend to think of government assets being akin to dust bunnies that are rarely ever cleaned out,” he said, “and are rarely even thought about it.”
He noted that the City of Phoenix is now preparing a big surplus property sale after The Arizona Republic reported that the city had some 1,400 unused parcels of land the city mostly didn’t even know it owned.
Both Gilroy and Barone, the Reno investment adviser, agree that a lot of the success of these is in the details.
Rahm Emanuel denounced the deal during his successful campaign for mayor in 2011 and gained some concessions from the private consortium that now operates the parking meters. But for the most part, Emanuel said, the city was stuck with the deal.
In Oregon, Brown said she wants to open a conversation that would involve not just state agencies but schools and other local governments as well. She noted that all levels of government share in the PERS debt and should help to pay it down.
“This is going to be a bit uncomfortable,” Brown said, “but we must do it.”
At this point, it’s not clear if the governor has any clear plans in mind for exactly what she wants the government to shed. When pressed by reporters for a concrete example, the governor said the task force should see if there is any land around Coffee Creek prison near Wilsonville that could be sold.
That puzzled Wilsonville officials. Mark Ottenad, the city’s government affairs director, said staffers couldn’t find any state-owned land outside the berm that surrounds the prison. Corrections officials also said they couldn’t identify any excess land.
Chris Pair, Brown’s acting communications director, said the Coffee Creek reference was an “example of the types of options that need to be explored.”
Some existing surplus property sales also illustrate some of the benefits and pitfalls. In Salem, the state is working toward the sale of the old campus of the Oregon State Hospital. Patients have been moved to a new complex, and the Department of Administrative Services has been working since 2012 to sell off the old campus.
The 47-acre site offers the opportunity to bring major development to a close-in neighborhood where property values are rising. The agency first tried to market the property “as is,” but said problems with the aging buildings prevented a successful sale. Instead, the agency persuaded the Legislature to pony up $8.3 million to demolish most of the buildings and ready the property for sale.
Meanwhile, neighbors – and several of their political representatives – successfully pressed the agency to preserve grassy parts of the campus they’ve long used as an informal park.
“When we looked at it, we saw a patch of grass that sometimes people were playing on,” said Matt Shelby, the department spokesman. “But for generations, it was their de facto neighborhood park. We didn’t know that until we started selling it.”
Shannon Ryan, the department’s enterprise asset manager, said she hopes the state can finally sell the site in a year or two. But she said the state has to move cautiously, in a way the private sector often doesn’t.
“This is everybody’s asset,” she said, adding, “the taxpayers own it. And they have a voice, and rightly so.”