An investigation conducted by the Veterans Affairs Office of the Inspector General found that the VA might have overpaid $3,055,000 for land in Kentucky, and then misrepresented information to the House Committee on Veteran’s Affairs.
In 2006 VA Secretary James Nicholson announced that the VA would be building a replacement hospital in Louisville, Kentucky, this hospital would be co-located with the University of Louisville Hospital and the VA Office of Acquisitions, Logistics, and Construction (OLAC) got to work finding suitable locations.
The hired property appraiser, Galloway Appraisal, was to conduct appraisals on various properties, and gave the VA a report on 4906 Brownsboro Road that valued the 36 acre land “AS IS” at $9,850,000. Then-VA Secretary Eric Shinseki choose this as the location for the new hospital in 2011 after reviewing several other sites.
“Due to the passage of time (14 months) and to comply with the Uniform Appraisal Standards for Federal Land Acquisitions, an updated second appraisal was conducted. On February 29, 2012, Galloway Appraisal issued an updated appraisal report for this property. This report indicated that the market value of the property was $12,905,000 “AS IS.” In July 2012, OALC, Real Property Service Division (RPS) purchased the parcel of land for $12,905,000, from Midlands-Louisville, LLC.
As required by law, a federal agency is required to have a “review appraisal” on any completed appraisal. The VA did not contract one till 2014, two years after the $12 million purchase. When asked why they didn’t follow this law the VA’s Real Property Service said, “that obtaining a review appraisal was not part of RPS’s normal course of doing business.”
The Inspector General’s report found that not only did they not follow federal regulations, but on top of that they wasted taxpayer money, “The timing of the review appraisal was useless in determining whether VA paid just compensation for this property. Spending the $2,447 for the review appraisal was a waste of the taxpayers’ money.”
The review appraisal ended up finding that the 2012 appraisal for $12,850,000 failed to, “comply with standards and the purchased price could not be substantiated. The review appraiser stated that the highest and best-use conclusion in the appraisal was inadequate and did not comply with appraisal standards. Also, the review appraiser stated that the appraiser’s analysis was unsupported and the conclusion of market value was not considered credible regarding the commercial component of the Brownsboro property.”
Since the VA had not acquired this review appraisal they could’ve overpaid $3,055,000 on the property, and when asked by Congressional committee about this purchase, agency official were not entirely forthright.
“OALC misrepresented information provided to the [House Committee on Veteran’s Affairs] regarding the 31 percent increase in the property’s market value over a 14-month period, December 2010 to February 2012. OALC stated the analysis of highest and best use of the property was revised from residential to mixed-use development. This was contrary to our findings, as both appraisals state that the highest and best use of the property would be for mixed-use development,” according to the Office of Inspector General.