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The State Of Wisconsin Moves Some State Assets Closer To The Marketplace

In June 2013, the state legislature approved the Governor’s Executive Budget and gave the Wisconsin Department of Administration (“DOA”) the authority to sell a wide range of state assets.i   This law vastly expanded DOA’s authority to sell property owned by the state.  Until then, the authority of state agencies was limited to the sale of “surplus” properties.  The asset sale legislation allows the state to sell assets that remain vital to the state’s operations, like state heating and cooling plants, that are necessary to provide heat and cooling to a host of state buildings including, university dormitories, state and municipal office buildings and prisons.

The asset sale law has not been without controversy. Since its inception, legislative members of both parties have raised concerns including that any deal must be a good bargain for tax payers in the long run, not just the short term.

Since the law’s passage, the state has taken steps towards implementing the asset sale law and recently took several actions bringing some state assets closer to the marketplace.

Former Governor’s Mansion And State Heating Plants Are Among Assets For Sale, But Fair Market Value Is Unknown

In a recent letter to members of the State Building Commission, DOA identified a number of properties under consideration for sale. Those properties include all 33 state heating and cooling plants, a former Governor’s mansion, an airplane hangar at the Dane County Regional Airport, telecommunications towers, excess property at the WisDOT headquarters in Madison, a state office building in Madison that currently houses the Department of Employee Trust Funds, and the Northern Wisconsin Center, a residential facility for individuals with disabilities, in Chippewa Falls.ii

The asset sale law requires DOA to both identify those properties under consideration for sale, as well as the fair market value of those properties.iii Though DOA identified the properties under consideration for sale, it did not identify the fair market value as called for in the statute.iv This omission was called into question by two members of the State Building Commission, Senator Risser and Representative Hintz, who argued that the identification of fair market value is mandatory under the asset sale law.v In response, DOA Secretary Huebsch countered that the state would only be hurting itself by publicly identifying the fair market value of properties it intends to sell. Doing so, he argued, would only hurt the state’s bargaining

It is unknown how this conflict between State Building Commission members charged with the responsibility of ensuring that the asset sales follow a “competitive or transparent” process, and DOA, who is charged with getting the best deal for the tax payers, will be resolved.vii 

Team Of Outside Consultants Hired To Help Sell The Assets

In addition to providing the required notice to State Building Commission members of those assets under consideration for sale, DOA also identified a number of consultants it retained to assist them with the process. DOA hired Public Financial Management, C.H. Guernsey & Co., and J.P. Morgan Securities, all to assist in some capacity on the analysis of and sale of state heating and cooling plants. DOA will also consult with banking and brokerage firms Robert W. Baird & Co., William Blair & Co., Loop Capital Markets, and law firms Latham & Watkins and Godfrey & Kahn.viii  All of these contracts and analyses will cost nearly $1.7 Million.

DOA has not yet identified what negotiated, competitive or transparent process it intends to use for each of the asset sales, or how the team of consultants may be involved in that process.

Environmental Concerns And Necessary Upgrades Complicate Process

Providing a valuation for some of the listed state assets is no easy task. As an example, valuation of the state’s fleet of aging heating and cooling plants is no doubt complicated by a history of environmental concerns. Sierra Club and the Environmental Protection Agency (“EPA”) has for years raised concerns about Clean Air Act compliance at the facilities, most of which still rely heavily upon coal as the primary source of fuel. Most of the state heating and cooling plants are many decades old and could be nearing the end of their useful lives. Costly upgrades and lengthy permitting processes are certainly awaiting whomever ends up with title to these facilities. For many, the value is most likely in the long-term operation contracts that will be necessary if the facilities are sold. Complicating matters more is the outstanding debt load of those facilities.ix This substantial debt must be retired in order to sell them.

The asset sales are, no doubt, a complicated endeavor that will continue to be watched closely by potential investors, legislators, regulators and citizen groups alike.

i    Wis. Stat. § 16.848(1).

ii   June 30, 2014 letter from Sec. Huebsch to State Building Commission. 

iii  Wis. Stat. § 13.48(14)(d). 

iv  Wis. Stat. § 13.48(14)(d).

v   July 9, 2014 and July 30, 2014 letters to Sec. Huebsch from Risser and Hintz.

vi  July 30, 2014 letter from Secretary Huebsch to Risser and Hintz.

vii Wis. Stat. § 16.848(1).

viii June 30, 2014 letter from Secretary Huebsch to State Building Commission.

ix   Legislative Fiscal Bureau Paper #160, May 21, 2013, pg. 11, Attachment. 

About the Author

Cari Anne Renlund is a partner practicing out of our Madison office. She is a member of the Environmental Law, Government Relations and Litigation practice groups. Contact Cari Anne by email or by phone at 608-395-6731.


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