First, asset divestiture typically results in a lump-sum payment of cash, providing much needed resources in this time of need.
Second, divesting state-owned real estate increases the tax base. State-owned lands do not pay property taxes nor do they typically produce sales and income taxes. Moreover, in constrained real estate markets with limited developable land, state-owned property represents a desperately needed source of capital for private economic activity.
Finally, systematically reviewing the state's assets portfolio—and divesting the state of those assets which are not deemed to be most efficiently owned by the state—will result in lower maintenance and operations costs, and, hence free money for other priorities. Divesting an unneeded property rids the government of an unproductive asset that saps resources. Selling this deadwood streamlines government service.
State asset sales and realignment can take a variety of forms. In some cases, government entities sell real property outright, in either an "as is" or "entitled" state (having secured necessary zoning approval). In other cases, these transactions are established (particularly for enterprises like a golf course or other fee-generating facility) as a long-term franchise agreement or concession. Still in other cases, such as state-owned buildings, asset realignment includes sale-leasebacks, where the private sector purchases the property for a fixed price and agrees to leaseback the facility to the government entity for an agreed upon period of time. Importantly, the state receives a lump sum cash payment in all three scenarios.
A review of assets that could be divested in California netted an interesting find including several billion dollars worth of assets. While Mississippi may not generate the same findings, similar types of properties may offer some potential to the state of Mississippi. Those include:
- Unused or underutilized portions of state correctional facilities, state universities, and state hospitals, particularly in high-growth areas;
- State-owned parking garages;
- State-owned transportation right of way;
- Old or obsolete state-owned buildings in high-value urban commercial real estate markets (shifting located services to leased facilities funded through sale proceeds)
- State-owned maintenance yards and facilities
- Obsolete or unneeded armories
- Developable parcels of state-owned vacant land (does not include conservation lands, trust lands, etc.);
It is important to note that in most cases, the properties identified for potential disposal in California provided no direct benefit to the delivery of state programs. For instance, huge buffers exist around state correctional facilities and hospitals. Where once these facilities were located in largely remote areas with low property values, explosive growth has brought both population and commerce into these regions and property values have skyrocketed. What was once a relatively worthless piece of buffer land has become high-value developable land in a housing-starved region. The facilities can continue to operate with smaller buffers.
Other government entities across the United States can confirm Mississippi's opportunities. In June of 2003, the Arizona Land Department generated $51.2 million through the sale of two parcels of land, even though the properties appraised for $27.9 million. In other words, the state generated more than $23 million more than anticipated through the sale of two parcels of state owned land.
In another illustration, Orange County, California raised more than $300 million through real asset sales and sale leasebacks over the course of 18 months to help recover from collapse into bankruptcy in 1995. In New York, the Empire State Development Corporation also generated hundreds of millions of dollars in revenues through sales and leasebacks of state-owned properties including the New York Coliseum, state mental health campuses, parking lots, armories, and state-owned golf courses. In one of its first sales, New York divested a state-owned golf course for more than $3 million.
In addition, the state should be careful not to disregard buildings and facilities that are being used. These assets can also be leveraged through a variety of approaches. For instance, state office buildings, particularly older buildings in higher cost regions, can be sold and replaced with build-to-suit lease facilities in other regions where commercial real estate costs are lower. Additionally, this may enable the program to acquire better, more modern facilities at lower cost.
Geoffrey F. Segal is the director of government reform at Reason Foundation.
 The sale-leaseback only works because an investor can take account of and use depreciation to generate a lease rate lower than the state costs. This idea was explored in the last legislative session, and found universal condemnation. Many saw it as economic sleight-of-hand; another accounting gimmick. Neither side wanted to go into debt to buy its buildings back. In addition, many felt that the one-time monies will be spent, and the annual operating costs increased by the debt service. The first effort was poorly communicated, and more thoughtful proposals deserve consideration.
 High Value Urban Properties in the State's Portfolio: A Report to the Governor in Accordance with Executive Order S-10-04, California Performance Review, http:// http://cpr.ca.gov/pdf/86244_WebBk2.pdf
 Telephone Interview with William Lange, founder of LFC Group of Companies, which coordinated the real estate sales and services to Orange County, California during the County bankruptcy proceedings, February 2, 2005. http://www.lfc.com
 Telephone Interview with John Buttarazzi, managing partner of Liberty Hall Advisers and former Senior Vice President for the Privatization Group of the Empire State Development Corporation.