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FHWA Office of Real Estate Services Research Results:
2006 Preferred Future Scenario for Public Sector Real Estate

August, 2006

OUTCOMES

As mentioned above, the primary purpose of the Think Tank was to make recommendations for critical policies, procedures, tools, technologies and best practices for providing public sector real estate services in the years 2006-2030 based on plausible futures scenarios. This section focuses on the key results of the Think Tank - those recommendations - and the process followed in developing the scenarios and gleaning the recommendations from the scenarios.

Before being broken up into teams and getting down to the task of developing plausible future scenarios, Think Tank participants engaged in several exercises as a group. These exercises prepared the group for the kind of long-range thinking required to develop the type of scenarios envisioned under the Preferred Future Scenario Development Method. These exercises are detailed in Section 3 of this report.

Section 2.1 focuses on the process followed in building the plausible future scenarios (the actual scenarios are presented in Section 3.3). Section 2.2 discusses the images for the future that each scenario building team considered preferable. Section 2.3 highlights the preferred future elements found to be common between the scenario teams. Finally, Section 2.4 presents the specific recommendations for HEPR policies and actions that the teams identified as necessary in order to bring about the preferred future common ground elements.

2.1 Building Plausible Scenarios

Participants were assigned to specific tables upon registration. Each of the four tables - identified as yellow, red, blue and green - operated as a scenario development group from this point in the Think Tank to the end.

The first step in developing plausible scenarios was to review expected future events, trends and developments (see Section 3.2) in order to identify the trends that are so likely as to be considered "pre-determined elements" and others that are uncertain, but critical. The "pre-determined elements" by nature identify a direction, e.g. population will increase or funding will decrease. The "critical uncertainties", as the name implies, could go either of two directions, but will directly impact the future of public sector real estate either way. This formed the basic information for scenario creation.

The pre-determined elements and critical uncertainties identified by the Think Tank participants included:

Pre-Determined Elements

• Greater diversity and aging of the U.S. population
• Public sector funding will not be sufficient to meet transportation or other public project needs
• Deteriorating and obsolete public infrastructure
• More severe environmental events, leading to population migrations and increases in demand for public funding
• Rapid technology advances
• Oil availability will peak and begin decline
• Increased globalization
• Changes in travel demand brought on by trends such as telecommuting, changes in transport technology and use of internet for shopping
• Sensitivity to environmental issues will continue to increase
• U.S. becomes increasingly financially constrained at all levels of government
• More Public-Private Partnerships as a way to deal with funding issues
• Security concerns will continue

Critical Uncertainties

• National disasters, e.g. natural, terror, or health-related, will occur but the type, level of severity, timing and types of impacts are unknown
• Changes in legislation related to eminent domain could affect the Uniform Act
• Federal legislation and policy could or could not influence use of Public Private Partnerships
• Impact of China and India - friend or foe; customer or competitor?

For the purpose of building the future scenarios within a day and a half Think Tank environment, the list of twelve pre-determined elements had to be reduced in number. The group reviewed the list and voted on the five most important elements to public sector real estate. These elements became the five circumstances that would definitely be involved in any possible future. The consulting team then developed each of the "critical uncertainties" into their two possible directions (therefore ending up with eight items), and randomly assigned a set of two critical uncertainties to each of the four groups. As summarized in Exhibit 2-1, this set of five predetermined elements and expanded critical uncertainties guided the development of the future scenarios.

Exhibit 2-1 Circumstances Guiding Scenario Development

Five Most Important Predetermined Elements Greater diversity and aging of the U.S. population Public sector funding will not be sufficient to meet transportation or other public project needs Deteriorating and obsolete public infrastructure More severe environmental events, leading to population migrations and increases in demand for public funding Rapid technology advances Expanded Critical Uncertainties: Two national disasters occur - terrorist attack and earthquake Two national disasters occur - pandemic flu and severe sea level rise Severe limitations placed (through legislative actions) on the definition of "public use" on which eminent domain can be used No significant change (through legislative action) in the definition of "public use" on which eminent domain can be used Legislative and policy changes occur that encourage Public-Private Partnerships Legislative and policy changes occur that discourage Public-Private Partnerships Chinese and Indian markets significantly open to U.S. goods and services Chinese and Indian markets significantly limited to U.S. goods and services

The groups then spent approximately two hours developing a timeline-based scenario, in outline form, noting both external trends and developments and responses and trends within public sector real estate. The goal of each team was to develop a plausible future to the year 2030. At the end of the first day, the scenarios were presented.

2.2 Preferred Future Images

At the beginning of the second day of the Think Tank, the scenario teams came together and designed a preferred future for public sector real estate assuming that their scenario was the actual future. They asked themselves, "In this scenario, what would be preferred responses in the public sector real estate community in terms of policies, practices, tools and technologies?" Each team developed a long list of ideas that are presented below. More importantly, the teams, though working under four different scenarios, ended up with a number of common ground elements - overlapping ideas of what the preferred responses in the public sector real estate community would be. These common ground elements are detailed in section 2.3.

The teams developed the following sets of ideas.

Blue Team Preferred Future

• Public/Private Partnerships:
• Privatization - change regulations to include private partnerships
• Change Office of Management and Budget (OMB) and Congressional Budget Office (CBO) scoring process (the requirement to determine value of contract commitments over all years to commit/obligate those funds at execution of contract) to allow more private partnerships
• Greater local share
• More partnerships between agencies (especially in planning)
• Real estate skill sets change from specialists to generalists
• Greater incentives to governments' real property management and use, i.e. funds are returned to the project and not to a general fund
• Urban Focus
  • Increase in mass transit use
• Cluster of Resources
• Transit oriented type of real estate development (TOD)
• Focus back on rail - more rail throughout America
• Ports
• Rebuild
• Reinvest
• Working Flexibility
• Telecommuting
• Better Broadband (High Speed)
• Virtual Teaming
• Political Process (Change)
• Earmarking

Red Team Preferred Future

Processes/Regulations:

• Simplify and Streamline Uniform Act
  • Look to Europe
• Outside influence of any one agency
• Payment for acquisition and relocation periodically re-evaluated
• Reform business relocation to increase payments and have flexibility to cover all impacts/costs
• Residential relocation tax caps and relief.
• Establish true lead agency outside of FHWA with funding for implementing the Uniform Act.
  • Facilitate exchange of information
  • Hold Think Tank with good mix of people to guide changes and new developments in public sector real estate

People and Skills, Professional Development, Training:

• Real estate needs different skills:
• Higher qualifications
• More specialized
• Need regular knowledge and experience exchanges
• Uniform Act certification used for:
• Contracting
• Hiring
• Professional standards
• Policies and planning in place for employing technology
• Appropriate employee/contractor management
• Prioritize program oversight
• Need to assure qualified people doing the work
• Some real estate professionals need to be project/program managers

Financing:

• Constant and reliable source of financing - Public or Private
• Encourage multi-use, multi-dimension and multi-modal use of public real estate
• Planning
• Risk Management
• Teaming

Law/Authority:

• New legislation to facilitate Public/Public and Public/Private Partnerships (PPP)
• Private sector needs to understand public needs/requirements
• Public sector needs to identify and understand private sector and how to evaluate them for PPPs
• Explore Virginia public/private ventures
  • Encourage unsolicited proposals
  • Are followed by competitive offer

Asset Management:

• Effectively manage and dispose of excess under utilized land and property
• Money needs to return to managing agency
• Electronic inventory of any assets with Federal participation

Green Team Preferred Future

• Create an effective, timely Communication Center (FHWA)
• Develop a Predictable Process
• Have a process for more collaborative approaches for timely coordination of public/private issues
• FHWA create "Swat Teams" for disseminating information in crisis situations
• Proactive consideration of peak oil and global warming scenarios (by FHWA and other governmental agencies)
• Easier to find information on more user friendly, interactive website
• Revise Uniform Act to simplify relocation assistance
• Make flood insurance for one use only
• Create sample templates for Public/Private Partnerships (PPPs)
• FHWA create a certification program for Local Public Agency (LPA) guidance and professional development to include Uniform Act guidance and public/private partnership development knowledge.
• "Action Team" plan for collaborative planning and action in urgent situations
• FHWA lead development of public/private coordination of identifying and facilitating new technology uses for public real estate.
  • Use of new technologies to identify comparables for relocation in "hot markets"
• Congestion Pricing on Public Roads
• Facilitate use of existing Right-of-Way for transit and urban development

Yellow Team Preferred Future

• Creation of national database for cadastral information with standards, redundancy - IT Investment/Asset Management
• Supplement Uniform Act For:
• Emergency provisions
• Provide mechanism to determine dollar amounts versus the current inclusion of hard dollar limits
• Structure in place to manage dollar shifting in case of emergency
• Shift towards private partnerships
• Educate public with visualizations, models (e.g., Google Earth)
• Do not underestimate public relations
• State DOTs refocus to regulatory oversight, training, inspection, management
• Title 23 - Expand to FAA/FTA/All Feds
• Develop AASHTOware Software to bring consistency to all ROW calculations
• Empower FHWA with oversight of ROW practices from state to state:
• Funding
• Personnel
• Training
• Require adherence to Uniform Act for all use of eminent domain regardless of source of funding
• Federal mandate for certification for State and Local Public Agencies (LPAs), private entities, consultants, contractors, etc.
• Reinstate or require an acquisition-relocation plan as part of the project planning process
  • Early disclosure

2.3 Preferred Future Common Ground

Each scenario development team was given a few minutes to present their preferred future to the group. The participants, working as a group, reviewed the preferred futures and identified the common themes. These were areas that, regardless of the circumstances occurring in the future, the public sector real estate community need to address in some fashion. These themes became the heart of the recommendations for public sector real estate and the consequent strategic directions for HEPR.

The preferred future common ground themes included:

• Certification and training for competency development at all government levels and for all those private entities and consultants conducting work for the government, to one set of standards.
• Create a lead agency, an action team, someone in charge. This entity would be independent, with a mission focused on the Uniform Act and public real estate more broadly. It would set and coordinate general public sector real estate policy and be responsible for oversight and enforcement. Policy areas of responsibility could include PPPs, property management and disposal.
• Policy planning for employing technology both in terms of using technology to improve how people work, and to change where people work, i.e. applying technology to reduce the need for facilities and infrastructure. Identify and facilitate technology development and databases. Deploy and train for technology.
• National emergency planning and risk management.
• Public - Private Partnerships, and Public - Public Partnerships. Education and training to facilitate acceptance of these partnerships and to identify best practices across Federal agencies and state and local agencies.
• Continual and reliable funding source must be available, i.e. Public-Private Partnerships are likely a necessary inevitability.
• Revision and simplification of the Uniform Act in the areas of:
  • Business relocation - look into issues such as: adjustment to monetary caps (either increase or index); create last resort payment category for businesses; make actual, reasonable and necessary the base for costs and other possible revisions.
  • Global settlements - Packaging relocation entitlements (moving, mortgage interest, price differential, etc.) with the just compensation offer to reach an administrative settlement of the acquisition and relocation together as one lump sum offer is not provided for in the 2005 regulation that implements the Uniform Act. However, many real estate practitioners feel that conducting a relocation study to determine the cost of a comparable dwelling and offering that amount (global) could replace the concept of providing an acquisition payment (based on the appraised value) plus a relocation payment.
  • Automatic annual increase of monetary caps for various relocation and re-establishment payments according to some index (e.g. Office of Personnel Management's Cost-of-Living Allowance or other index).
  • Provide for more predictability
• There needs to be predictability, consistency, and accountability in all public sector real estate transactions across the board. Increased coordination - between Federal agencies, states, local public agencies, private entities, contractors, consultants, etc. - is necessary to make this happen.
• There needs to be increased communication between and amongst real estate professionals in order to achieve the predictable, consistent and high quality work required of the public sector real estate profession.

2.4 Strategic Issues for FHWA Office of Real Estate

In a final round of discussion, the Think Tank participants looked nearer term and more specifically at the kinds of policies, practices, tools and technologies that they would recommend the FHWA Office of Real Estate Services pursue in order to achieve at least some of the elements identified to be part of the preferred future. In order to accomplish this, participants asked, "What should HEPR do, learn, or prepare for in the coming years?"

• Partnerships, both public-private, and public-public
  • Formalize the process
  • Creative regulations
  • Coordinate with other agencies, other levels of government, academics and the private sector
• Develop training and certification template that can be used by other agencies and consultants.
• Peak oil and global warming: Develop scenarios for what happens when, for example, the price of gasoline increases to $10 a gallon, or the sea level rises one foot: what are the implications for public sector real estate.
• Emergency preparedness: Identify issues to be addressed, proactively, in future emergencies and create plans for doing so. Identify where responsibilities lie.
• Evaluate information technology (IT) and make recommendations. Encourage AASHTO to take the lead in developing best practices and computer tools. Encourage greater uniformity across the country.
• FHWA should embody ideas of effective communication and processes, in all activities.
• As Uniform Act revisions are proposed, include the idea of forming an independent "Lead Agency" organization into the proposals.
• Encourage an on-going "Think Tank" or advisory group, to assist in making progress. Include a good mix of perspectives and participants, e.g. both public and private.
• Federal agencies should devote more resources, priority and emphasis to:
  • Program oversight
  • Outreach for consistency
  • Enforcement

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