Chapter IV

Property Acquisition

Similar to the leasing process, state agencies looking to purchase space must submit its request to DPW. However, purchase requests are handled by staff in Property Acquisition. As mentioned previously, DPW's property acquisition staff consists of one person reporting to a deputy commissioner. A summary of the acquisition process is provided below and outlined in Figure IV-1.

Process. A state agency initiates the acquisition process by submitting its written request to DPW. The formal request may be sent to the DPW commissioner or directly to the property acquisition staff. Unlike the leasing process in which DPW staff calculates and confirms space requirements, the requesting agency alone identifies purchase need. DPW does not conduct a formal assessment of space needs for purchases and prior OPM approval is not required to begin the process.

The agency's written request typically states the reason and purpose for the acquisition. This information helps the property acquisition staff identify suitable parcels¹. The purchasing agent advertises for proposals but is not statutorily required to do so. All ads are drafted by the purchasing agent based on the information provided by the requesting agency. Similar to the leasing procedures, all responses are received by DPW bidding office. Proposals are then forwarded to Property Acquisition.

The purchasing agent will also seek for suitable properties by investigating available parcels in the specified location or may be aware of property available from prior proposals. All proposals meeting the agency's requirements are explored. The purchasing agent, accompanied by an agency representative, will conduct site visits of all potential properties.

The requesting agency decides which properties are acceptable, however, a formal agency evaluation of each property is not done. Once the search is narrowed to one or two proposals, the purchasing agent arranges for site appraisals.

Appraisals are conducted by outside appraisers selected by the purchasing agent from a list of previously used appraisers. Criteria for the selection is based on appraiser's proximity to the property, expertise and knowledge of area, and availability. If the property is valued in excess of $1.5 million, two separate appraisals must be conducted.

The appraisals are reviewed by the purchasing agent and a copy is provided to the agency. In addition to a description of the property, the appraisal will contain a market analysis. The purpose of the appraisal is to estimate the market value of the proposed property. In assessing market value, the appraiser may consult data from sources such as building assessors, town clerks, zoning and tax collectors records, property owners, real estate brokers, and various real estate publications including multiple listing services and local newspapers.

Figure IV- 1. DPW Property Acquisition

Agency sends DPW a request letter explaining why they need space and what kind of space they would like.

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Depending on the specifications of the property needed, an environmental study might also be required. If so, any needed evaluations are prepared internally by the appropriate DPW staff in other divisions.

Based on this information, the DPW property acquisition staff may enter into verbal negotiations with the proponents. The requesting agency may not be involved in the negotiations. According to the purchasing agent, he is the only staff from DPW involved in purchase negotiations for most transactions. Occasionally, the deputy commissioner may get involved in larger negotiations. In all cases, the purchasing agent keeps the deputy commissioner informed of all progress and any problems.

Once a tentative agreement is made, the purchasing agent, authorized by the deputy commissioner, may draft a formal offer letter to proponents. However, the offer is conditional and not binding. The offer is then reviewed by the client agency, the DPW commissioner, OPM, and the State Properties Review Board (SPRB). For review, the purchasing agent prepares a formal proposal package containing the request letter from the agency, the appraisal, the conditional offer letter, and any relevant background information or materials such as maps or environmental studies. All parties must sign off and approve the offer prior to execution.

As with the leasing process, the requesting agency must obtain OPM approval on the negotiated deal. OPM's Asset Management staff checks the state-owned inventory for any suitable and available options. If none exists, OPM assesses the agency's budgetary condition, determines what the agency can afford, and approves proposals fitting its program budget. If OPM rejects the proposal, the agency may attempt to re-negotiate or re-bid. Once OPM has granted approval, the SPRB will examine the offer's terms and conditions. Similar to its review of lease transactions, the SPRB may conduct a site visit of the proposed property. It will consider the appraisal, check the offer against comparable sales in the area, explore any other available options, and request additional information or documentation if warranted. Although a formal presentation to the SPRB is not made, the board may ask for a meeting with DPW staff or a client agency representative to answer questions. The board, at its discretion, may recommend changes to the terms and conditions of the deal before approval. DPW staff will attempt to address the board's concerns before resubmittal. If the changes affect the sale price, then the deal must be resubmitted to all parties for reconsideration and approval.

As with leasing transactions, the terms or conditions approved by the board cannot be changed or modified without its consent. Final board decisions are returned to DPW for execution. The purchasing agent forwards a draft of the board's approved transaction to the Office of the Attorney General for review. The assistant attorney general assigned to handle DPW property transfers will examine the transaction for legal sufficiency and submit it to the Attorney General for final approval.

DPW Purchases. Table IV-1 provides the SPRB approval rates of DPW purchase acquisitions since FY 1994. As the table shows, DPW submitted a total of 37 purchase proposals to the SPRB during the seven year period. The most transactions occurred in 1994 when 13 were placed for consideration. Since that time considerably less purchase proposals have been put forth. Almost all proposals have been approved with two denials, two withdrawn, and one approved upon reconsideration.

The area size and purchase price of approved transactions between FYs 1994-2000 are provided in Table IV-2. As the table shows, DPW has purchased approximately 249 acres of land and slightly over two million gross square feet for $85,452,006.

The size range of land and building area purchased has varied over the years. Total land acreage purchased annually has ranged from three to slightly more than 88 acres. The total building square footage purchased annually has ranged from approximately 2,500 up to 1.5 million. The majority of purchases have been for expansion of educational facilities, judicial operations, and parking.

The purchase price range has also varied widely with purchases for only $1 to nearly $20 million. With the exception of two years (FYs 94 and 95), the median purchase price has been between $100,000 and $200,000.

Space Disposition

State law outlines the steps in disposition of state property. Before state real estate may be offered for sale, the property must be declared surplus. Figure IV-2 charts the disposition of surplus property.

Surplus property. All state agencies, departments, or institutions must notify the secretary of the Office of Policy and Management (OPM) of any unneeded real property under its custody and control. OPM must approve an agency's determination that property is not needed. By statute, the agency controlling the surplus property must transfer custody and control to the Department of Public Works (DPW). OPM's Asset Management division supervises the property conveyance and gives notice to all state agencies of its availability. Any agency wishing

to use the property may submit a plan to OPM within 90 days outlining its intended use, budget, and timetable.

State law grants the commissioner of the Department of Economic and Community Development (DECD) the right of first refusal if the property can be used or adapted for use as an emergency shelter, transitional living facility for homeless persons, or low and moderate income housing. Within 90 days of notice, the DECD commissioner may submit a preliminary plan to OPM outlining its anticipated use. Within six months following the 90 day notification period, DECD must submit its comprehensive plan for development to OPM. Once its plans are submitted, the property shall be conveyed to DECD.

If DECD decides not to pursue the property for housing development, OPM will analyze any other agency plan and arrange for conveyance. If no agency submits a proposal to use the property, DPW is responsible for disposing of the surplus property.

Status of surplus property. Since 1995, 27 properties located throughout Connecticut have been declared surplus by a variety of state agencies. Half of the properties were designated surplus in 1997. The size and type of property has been quite diverse including a forest ranger's home, four state hospital campuses, an armory, a radio tower, and several small vacant lots. A breakdown by year, agency, and location is provided in Appendix F.

According to OPM staff, the length of the disposition process depends on many factors. First, there must be a determination made whether the property can be used by any other agency. The state must also assess the condition of all properties prior to offering it for sale or transfer. The size, type, location, and condition of property may make it difficult to market. In addition, the statutes require the state to offer the municipalities where the property is located the opportunity to purchase prior to placing it on the open market. This subjects the property to local policies and procedures which can be quite lengthy before being placed in the state's formal disposition process. Further explanation of the state's disposition process is provided below.

Disposition process. The Department of Public Works (DPW), in conjunction with OPM's Asset Management staff, is responsible for the disposition of most state property that is declared surplus.² The town(s) where the property is located as well as the members of the General Assembly representing the town(s) must be notified of the state's intent to dispose of the property. A general summary of the disposition process in charted in Figure IV-3.

As with the acquisition process, a property's fair market value is determined by an independent appraisal. OPM will solicit environmental studies and survey to determine property boundaries and liabilities, if any. Once the sale price has been established, the municipality where the property is located is provided the first opportunity to purchase the property at the fair market value. By statute, towns have 45 days to notify the state if they are interested in purchasing the property. OPM, together with DPW staff, will work with the municipality to

Figure IV- 3. DPW Property Disposition

OPM declaration of surplus property

Environmental studies, survey, and appraisal done by an independent appraiser selected by DPW PA.

complete the sale if interest exists. State law dictates the sale transaction be completed within 60 days.

If the municipality is not interested in acquiring the parcel or fails to notify the state of its interest within the 45 day period, DPW and OPM may proceed with the property disposition in the open market. In some instances particularly large parcels, OPM has hired real estate consultants to assist in the disposal. The consultants advise the state on potential strategies for optimizing marketing and sale activities. The DPW property agent will prepare an advertisement soliciting bids and sets a date for bid opening. All bids are initially received by DPW's bidding office, opened publicly, and read aloud on the bid opening date. The minimum acceptable bid is the high appraisal value along with a 10 percent bid deposit.

The DPW property agent prepares a package of information which includes the appraisal report, copies of bid documents showing bid price, and any other related materials. The package must be reviewed and approved by the DPW commissioner, the OPM secretary, and the SPRB. In addition, the state keeps the affected town(s) informed of the disposition process. If the bid package is not approved by all parties, the property may have to be re-advertised and re-bid.

If the terms of the proposal are different than what was initially contemplated by the town where the property is located, the state must again offer the town the opportunity to purchase upon such terms. If the town has no interest, the disposition may proceed.

Once the package is approved by all parties, the legislature's Finance, Revenue and Bonding and Government Administration and Elections committees receive a copy. The committees have fifteen days after receipt to approve or disapprove the transaction. The committees may not change any terms or conditions of the transaction. If the committees do not act within that timeframe, the transaction is considered approved. In addition, the state treasurer must approve the disposal of any property purchased or improved with state tax-exempt proceeds.

Once all required approvals have been obtained, the DPW property agent notifies the approved bidder by certified mail that the bid has been accepted. The bid proposal is then submitted to the attorney general's office for final legal review. The proceeds from the sale of most state surplus property are divided between the State Properties Improvement Account and the original user agency for capital improvements to or maintenance of other property under its control.

Sale transactions. Information on DPW sale transactions for the seven years spanning FYs 1994 to 2000 is provided in Table IV-4. As the table shows, DPW has submitted 23 sale proposals of state owned property during this time. All sale transactions submitted to the SPRB have been approved. Two were approved after resubmittal and one was withdrawn from consideration.

The total size and sales price of transactions approved between FYs 1994 and 2000 are listed in Table IV-5. During this timeframe, DPW sold approximately 191 acres of land and 148,000 square feet of property for a total of $4,684,706.

The total acres of land sold annually ranged in size from less than one acre to 85. The total building square footage sold annually ranged from 5,775 to 53,383. Similar to purchase prices, sale prices also covered a wide range from $1 to slightly more than $2 million. The median sale price was $6,000. The properties were sold to a combination of municipalities and private developers. Among the proposed uses for the sold properties include recreation, a museum, medical and elderly facilities, and other miscellaneous private development.

Leasing of state-owned property. The DPW commissioner is authorized to lease state-owned land, buildings, and facilities to private individuals when the property is otherwise not used or needed by the state (C.G.S. § 4b-38). ³ By law, a municipality can lease such property for up to 20 years for a municipal use. The commissioner may also lease state-owned space for commercial, cultural, educational, or recreational activities at the prevailing commercial rental rate.

Parties interested in leasing space in state owned and controlled facilities may submit a request to DPW's leasing unit. Upon receipt, the leasing supervisor confers with DPW's Facilities Management division to check inventory of state owned facilities for available space. The leasing supervisor notifies interested party of space availability. If the party is still interested, the facility management staff will accompany them for a site inspection.

If the site is acceptable, the leasing supervisor will negotiate terms and conditions of the lease-out with the interested party. The lease terms including the rental rate is established and approved by the custodial state agency. Upon agreement, the DPW leasing supervisor will submit lease-out terms to the DPW Commissioner who reviews and grants approval. The proposed lease-out then goes through same process as all other LPOs including review and approval by SPRB and the attorney general's office.

Once all approvals are gathered, the proposal is formally drafted into lease and executed. If the term of the proposed lease is for more than six months, written notice must be given to the chief executive officer of the town where the property is located. The notice must be delivered at least two weeks before lease execution and describe how the lessee proposes to use the property. The commissioner must deposit rental or lease payments in the General Fund and use them for the operation of the building or facility. Periodically, the facility management staff reassesses the condition of the property to see if improvements or changes need to be made which would be reflected in the lease terms.

DPW lease-out statistics. During FY 2000, the SPRB approved nine lease-out of state-owned property for total annual rent of $66,359. The lease-outs were made to a variety of private mainly non-profit organizations. Among their proposed uses were: six leases-outs for office space, two residential facilities, one daycare, and 94 parking spaces. In addition to the lease-outs, two easements were granted for utility companies.

As of June 29, 2001, DPW had 59 lease-outs to non-state entities. Table IV-6 displays the lease rates per year for existing DPW lease-outs. As the table shows, eleven leases are set at $100 or less. Twelve leases have annual rents between $1,000 and $10,000. Eight yearly rates fall between $10,000 and $20,000. Four leases charge more than $20,000 a year.

In addition, four lease-outs are being provided by the state free of charge. Twenty leases have nominal rates of $1, $10, $50, or $100 per term. According to DPW, lower rates are primarily given to municipalities and non-profit agencies - many providing on-site services to the custodial agency clients.

¹ In some cases such as expansion projects, the agency may have already identified the desired property.

² With OPM's approval, the Department of Environmental Protection (DEP) and the Department of Transportation (DOT) may sell or transfer property under its control.

³ The Department of Transportation and Environmental Protection are exempt.

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