Managing public property assets

Around the world, billions of dollars in public property assets are controlled by various levels of government. These assets include large swatches of land, office buildings, and assorted structures ranging from jails to laboratories. How these diverse assets are managed is the subject of a new book co-edited by James McKellar (right), professor and director of the program in real property at York’s Schulich School of Business, and Olga Kaganova, senior associate and scholar at the Urban Institute based in Washington, DC. 

The book, Managing Government Property Assets: International Experiences, published this spring by the Urban Institute, a non-partisan economic and social policy research organization, collects the work of 16 scholars and practitioners from seven countries. Managing Government Property Assets bridges the gap between two seemingly disconnected universes: those few countries that have implemented public property management reforms and the majority of countries only now beginning to struggle with the task. The book also offers insights into management experiences below the national level, about which little has been previously written.

“This benchmark book raises, for the first time in a unified and comparative way, the major question of how central, regional and local governments can become better owners of their real estate assets, in advanced economies and emerging economies alike,” said Bertrand Renaud, former adviser at the World Bank’s Financial Development Department.

The result of a collaboration between McKellar, Kaganova and the Urban Institute, the book offers a selection of different approaches to managing public property assets. It arose out of discussions between McKellar and Kaganova. Both are involved in various aspects of public property asset management, McKellar, an architect by training, is the director of one of the few academic programs in Canada dedicated to real property and Kaganova is a scholar specializing asset in management of government owned property.

“There are reform activities both in advanced countries and emerging nations,” said McKellar. “If you go back to the 1990s, for instance, New Zealand was warned by the International Monetary Fund because of its mounting deficit, and Canada was accused of having a third-world economy for the same reason. As a result, all of these countries began to look seriously at how they managed their public property assets.”

McKellar and Kaganova decided to review trends in managing public property assets at national, provincial and state, and local government levels. “We wanted to say to emerging economies ‘Here are some practices that may assist you to move forward.’ We also thought that we could inform reform-minded governments of best practices. The difficulty then arose as we had to find experts to write these chapters because this is such a new area that it has never been written about,” said McKellar. “To make our task more manageable, we decided to focus on those assets that governments essentially own and manage that are needed to carry out the business of government.”

Such assets include municipal, provincial and federal buildings or properties owned by government that are essential for the delivery of services and programs. “We did not look at housing, parks, schools and hospitals, or infrastructure,” said McKellar. “A common understanding is that property rights are a fundamental reflection of culture and there is not a one-size-fits-all concept. North American countries routinely buy and sell properties, but that is not the case for countries such as Japan and Germany. So we had to be careful about the underlying attitude and culture. We also had to keep in mind that we were dealing with the vagaries of political systems that directly impact decision-making.”

One of the issues addressed in the book involves privatization. Many governments are privatizing their assets and McKellar urges careful reflection on whether this is a best practice, as illustrated by the problems associated with the privatization of the 407 Toll Route by the Ontario government.

Knowledge is key, said McKellar. Many governments don’t know what land or buildings they own. Negative implications of not managing public property assets can be long-lasting, as evidenced by the poor condition of public school buildings in Toronto. “You might argue that it is irresponsible for the current generation to pass on assets that have not been taken care of, and in most countries we are doing just that,” said McKellar.

In Canada, Ottawa has a good information system on its assets, but the maintenance problem remains. “The average age of the buildings owned by the federal government is likely 45 years or more, and many have limited value because of the shape they are in,”  McKellar said. “One of the things we try to get governments to understand is that they have to build these the costs of operating and maintaining these assets into their overall financial systems. We also indicate that governments must think through the institutions by which they manage these assets. Governments can’t just say they’ll form a crown corporation or outsource to the private sector to manage their assets. There are many different options.”

For more information on Managing Government Property Assets: International Experiences, visit the Urban Institute Web site.