[DOCID: f:sr343.110]
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Calendar No. 755
110th Congress Report
SENATE
2nd Session 110-343
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TO AMEND THE INTERNATIONAL CENTER ACT TO AUTHORIZE THE LEASE OR
SUBLEASE OF CERTAIN PROPERTY DESCRIBED IN SUCH ACT TO AN ENTITY OTHER
THAN A FOREIGN GOVERNMENT OR INTERNATIONAL ORGANIZATION IF CERTAIN
CONDITIONS ARE MET
_______
June 2, 2008.--Ordered to be printed
Mr. Biden, from the Committee on Foreign Relations,
submitted the following
REPORT
[To accompany H.R. 3913]
The Committee on Foreign Relations, having had under
consideration the bill (H.R. 3913), to amend the International
Center Act to authorize the lease or sublease of certain
property described in such Act to an entity other than a
foreign government or international organization if certain
conditions are met, having considered the same, reports
favorably thereon without amendment and recommends that the
bill do pass.
CONTENTS
Page
I. Purpose..........................................................1
II. Committee Action.................................................1
III. Discussion.......................................................2
IV. Section-by-Section Analysis......................................3
V. Cost Estimate....................................................4
VI. Evaluation of Regulatory Impact..................................5
VII. Changes in Existing Law..........................................5
VIII.Appendix.........................................................5
I. Purpose
The purpose of the legislation is to amend the
International Center Act (P.L. 90-553) to permit the lease or
sublease of property in the Center to an entity other than a
foreign government or international organization, subject to
the approval of the Secretary of State.
II. Committee Action
H.R. 3913 was introduced on October 22, 2007, by
Representative Ileana Ros-Lehtinen. It was approved by the
House Committee on Transportation and Infrastructure on January
16, 2008. The House of Representatives approved the bill by
voice vote on January 28, 2008. Senator Cardin introduced an
identical companion bill, S. 2322, on November 7, 2007. It is
cosponsored by Senators Coleman and Stevens.
On May 20, 2008, the committee ordered H.R. 3913 favorably
reported, without amendment.
III. Discussion
Forty years ago, Congress set aside several dozen acres of
federally-owned land in northwest Washington, DC (bordered
roughly by Connecticut Avenue, Tilden Street, Reno Road and
Yuma Street), to serve as a site for the construction of
foreign embassies. The legislation helped enable the United
States to fulfill its obligation under Article 21 of the Vienna
Convention on Diplomatic Relations, which requires a
``receiving State'' to ``either facilitate the acquisition on
its territory, in accordance with its laws, by the sending
State of premises necessary for its mission or assist the
latter in obtaining accommodation in some other way.'' The
legislation enacted in 1968, known as the International Center
Act (P.L. 90-553), authorized the Secretary of State to sell or
lease property in the Center to foreign governments and
international organizations. Another purpose of the Act was to
set aside land within the International Center for a
headquarters building for the Organization of American States
(OAS); however, the OAS did not move its headquarters to the
International Center.
In 1982, the International Center Act was amended in
several respects. One purpose of the 1982 legislation (P.L. 97-
186) was to facilitate the construction of the headquarters of
the International Telecommunications Satellite Organization, or
INTELSAT, in the south-easternmost section of the property. At
the time, INTELSAT was an international organization that had
been established in the 1960s pursuant to an initiative of the
Kennedy Administration. Following enactment of P.L. 97-186 and
pursuant to a ground lease initially signed with the Department
of State in 1982, INTELSAT constructed its headquarters
building in the International Center. The lease, which has been
amended several times, is for a term of 99 years, with an
option to renew for an additional 99 years. To sum up, the
company owns the headquarters building, but leases the land
under the building from the Department of State.
In the late 1990s, the Clinton Administration and Congress
undertook an initiative to privatize INTELSAT, which resulted
in the enactment of the ``Open-market Reorganization for the
Betterment of International Telecommunications Act'' or the
``ORBIT Act'' (P.L. 106-180). Pursuant to the ORBIT Act,
INTELSAT was converted into a private company, now called
Intelsat, Ltd., on July 18, 2001. Thus, as of that date, the
company was no longer an international organization. The
presence of its headquarters building in the International
Center is, therefore, inconsistent with the provision in the
International Center Act limiting occupants to foreign
embassies or international organizations. Nonetheless, the
Department of State has continued to accept lease payments from
the company, as well as agreed to amendments to the lease, most
recently in 2006. Although there is no danger of the Department
seeking to eject Intelsat from the property, the company
considers the current situation a ``cloud'' on its lease.
Accordingly, it has requested support from the Department of
State and the Congress for the amendment to the International
Center Act made by H.R. 3913.
The Department of State has indicated to the committee that
it does not oppose H.R. 3913. In 2007, in response to a request
from the committee, the Department undertook a new real estate
appraisal of the Intelsat building in order to determine the
viability of federal acquisition of it. The Department
leadership, after reviewing the appraisal and various options,
decided that federal purchase was not viable. See Letter from
Jeffrey T. Bergner, Assistant Secretary of State for
Legislative Affairs to Senator Biden, May 16, 2008 (set forth
in the appendix).
It is possible that Intelsat will seek to sell the
headquarters building and its leasehold interests and relocate
its headquarters operations. Under the lease with the State
Department, the company has the right to assign, sublet or
otherwise transfer its leasehold interests to another entity,
subject to the approval of the Secretary of State. The terms of
the lease empower the Secretary to deny Intelsat the right to
complete a transfer if the Secretary determines (1) that the
use, development or occupancy by the proposed transferee could
impair the safety or security of the International Center
(under the Vienna Convention, the United States has the duty to
protect the embassies there), or (2) if the Secretary
reasonably demonstrates that the use, development or occupancy
could impair the continued operation of the International
Center or could be contrary to the character of commercially
acceptable uses or occupants in the surrounding area. Any
determination based on safety or security must be made
personally by the Secretary and shall be final and conclusive
as a matter of law. Any determination based on other grounds is
subject to judicial review. The Department believes that the
lease provisions are adequate to protect the interests of the
United States. See Letter from Jeffrey T. Bergner, Assistant
Secretary of State for Legislative Affairs to Senator Biden,
May 23, 2007 (set forth in the appendix). Under the terms of
the lease, the United States would have no right to any profits
arising from the transfer of the leasehold interests.
The committee expects that the Department of State will
closely review any new tenant or proposed use, consistent with
its duty under the Vienna Convention and its rights under the
lease. The committee also expects that the Department will
inform the committee about any significant change in the status
of the ownership or occupancy of the building.
IV. Section-by-Section Analysis
H.R. 3913 has only one section. It adds a new sentence to
the end of Section 1 of the International Center Act to
override the provision in that section limiting the sale,
exchange or lease of property in the International Center to
foreign governments or international organizations. The
provision in H.R. 3913 allows certain portions of the
International Center to be ``leased or subleased to an entity
other than a foreign government or international
organization,'' subject to the approval of the Secretary of
State.
V. Cost Estimate
In accordance with Rule XXVI, paragraph 11(a) of the
Standing Rules of the Senate, the committee provides this
estimate of the costs of this legislation prepared by the
Congressional Budget Office.
United States Congress,
Congressional Budget Office,
Washington, DC, May 29, 2008.
Hon. Joseph R. Biden, Jr.,
Chairman, Committee on Foreign Relations,
U.S. Senate, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 3913, an act to
amend the International Center Act to authorize the lease or
sublease of certain property described in such act to an entity
other than a foreign government or international organization
if certain conditions are met.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Sunita
D'Monte.
Sincerely,
Peter R. Orszag.
------
Congressional Budget Office Cost Estimate
May 29, 2008.
H.R. 3913 would amend current law to allow private entities
to lease certain property at the International Chancery Center
(ICC)--a parcel of land in Washington, D.C., owned by the
Federal Government. Under current law, only foreign governments
and international organizations are eligible to lease property
at the ICC. CBO estimates that H.R. 3913 wouldhave no effect on
the Federal budget.
The property specified in H.R. 3913 has been leased to
Intelsat since 1982. Intelsat was established in 1964 as an
international organization, but was privatized in 2001. The act
would clarify Intelsat's right to continue under its lease as a
private corporation. The Department of State reports that since
being privatized, Intelsat has made all the payments required
under its lease, and CBO expects it would continue to do so
under the act.
H.R. 3913 also would allow Intelsat to sublet or otherwise
transfer its lease to another private entity, subject to
approval of the Secretary of State.
H.R. 3913 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act and
would impose no costs on state, local, or tribal governments.
On January 18, 2008, CBO transmitted a cost estimate for
H.R. 3913 as ordered reported by the House Committee on
Transportation and Infrastructure on January 16, 2008. The two
versions of the legislation are similar, and their estimated
costs are identical.
The CBO staff contact for this estimate is Sunita D'Monte.
This estimate was approved by Theresa Gullo, Deputy Assistant
Director for Budget Analysis.
VI. Evaluation of Regulatory Impact
Pursuant to Rule XXVI, paragraph 11(b) of the Standing
Rules of the Senate, the committee has determined that there is
no regulatory impact as a result of this legislation.
VII. Changes in Existing Law
Pursuant to Rule XXVI, paragraph 12 of the Standing Rules
of the Senate, changes in existing law made by the bill, as
reported, are shown as follows (existing law proposed to be
omitted is enclosed in black brackets, new matter is printed in
italic, and existing law in which no change is proposed is
shown in roman).
INTERNATIONAL CENTER ACT (P.L. 90-553)
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled, That in
order to facilitate the conduct of foreign relations by the
Department of State in Washington, District of Columbia,
through the creation of a more propitious atmosphere for the
establishment of foreign government and international
organization offices and other facilities, the Secretary of
State is authorized to develop in coordination with the
Administrator of General Services for, or to sell, exchange, or
lease to foreign governments and international organizations
property owned by the United States in the Northwest section of
the District of Columbia bounded by Connecticut Avenue, Yuma
Street, 36th Street, Reno Road, and Tilden Street, except that
portion of lot 802 in square 1964, the jurisdiction over which
was transferred to the District of Columbia for use as an
educational facility, upon such terms and conditions as the
Secretary may prescribe. Every lease, contract of sale, deed,
and other document of transfer shall provide (a) that the
foreign government shall devote the property transferred to use
for legation purposes, or (b) that the international
organization shall devote the property transferred to its
official uses. Notwithstanding the foregoing limitations, the
property identified by the District of Columbia as tax lots
803, 804, 805, and 806 within the area described in this
section may be leased or subleased to an entity other than a
foreign government or international organization, so long as
the Secretary maintains the right to approve the occupant and
the intended use of the property.
VIII. Appendix
U.S. Department of State,
Washington, DC, May 18, 2007.
Hon. Joseph R. Biden, Jr.,
Chairman, Committee on Foreign Relations,
U.S. Senate, Washington, DC.
Dear Mr. Chairman: Thank you for your letter of April 26
regarding Intelsat, Ltd.'s request for a legislative amendment
to the International Center Act (P.L. 90-553) to permit the
continued presence of its headquarters building at the
International Center in Washington, D.C. The answers to your
questions are enclosed.
We hope this information is helpful in addressing your
concerns. Please feel free to contact us further on this or any
other matter of concern to you.
Sincerely,
Jeffrey T. Bergner, Assistant Secretary Legislative
Affairs.
Enclosure: As Stated.
Questions and Answers
Question 1. Does the Department support the proposed
amendment to the International Center Act? If so, why?
Answer. At this time we do not oppose the proposed
amendment. The proposed legislation would serve to correct the
anomaly of a commercial corporation holding an International
Center lease. This anomaly arose incident to Intelsat's
privatization.
Question 2. Has the Department considered the feasibility
of purchasing the building from Intelsat? Would it be of any
use to the Department operations? Could the building be
purchased, followed by the removal of the building, and the
sale of the vacant land? Please elaborate on the factors
relevant to these questions.
Answer. The Department originally considered the
feasibility of purchasing the building from Intelsat in 2003.
At that time the market purchase price was between $120 and
$138 million, The Department found the building inefficiently
designed, with considerable unusable space. The Department
still believes the building will not meet our current and
planned office space needs. However, due to the time lapse
since the last appraisal, a new appraisal for the land has been
contracted and should be done by August 30.
Question 3. Are there any limitations on Intelsat's ability
to assign the ground lease?
Answer. Under Article 7-1(B) of the amended lease, Intelsat
has the right to assign and transfer the ground lease to: (1)
an International organization or a foreign government
acceptable to the Department, for the official uses of an
International Organization or for Legation purposes, or to an
agency or instrumentality of the United States Government; (2)
a Non-Official Party, as provided in Article 7-2 or as
otherwise provided by the express terms of the Lease, for
purposes of performing Lessee's obligations to construct,
reconstruct, repair, or maintain Improvements and/or transfer
by such Non-Official Party to an International Organization or
a foreign government for the official uses of an International
Organization or for Legation purposes or to an agency or
instrumentality of the United States Government; or (3) by
Novation to the Successor Entity upon transfer of the
Improvements to the Successor Entity.
In addition, Intelsat has the right to assign, sublet or
otherwise transfer the property subject to the approval
requirements summarized in the response to question #4 below.
Question 4. What ability does the Department have under the
ground lease to review or reject any assignee?
Answer. Under Article 7-1(B) of the amended lease, Intelsat
must provide the Department a written request prior to any
Transfer at least 60 days prior to the date of the proposed
Transfer. The Department may deny Intelsat the right to
complete the transfer if the Secretary of State determines that
the use, development or occupancy by the proposed Transferee
could impair the safety or security of the International Center
or the Secretary reasonably demonstrates that the use,
development or occupancy could impair the continued operation
of the International Center or could be contrary to the
character of commercially acceptable uses or occupants in the
surrounding area. Any determination based on safety and
security considerations must be made personally by the
Secretary and is final and conclusive as matter of law.
Denial of permission to complete a transfer on the other
grounds specified is subject to judicial review.
Question 5. Are there any zoning matters under District of
Columbia law that should be addressed prior to congressional
consideration of the legislation?
Answer. While zoning issues could arise regarding potential
future uses for the property, the Department is not aware of
any current issues.
Question 6. Are there any applicable laws or regulations
administered by the General Services Administration that would
govern any assignment of the lease of which the Committee
should be aware?
Answer. No.
Question 7. Does the Department believe any additional
provisions are necessary in any legislation in order to protect
the interests of the United States?
Answer. The Department believes the terms of the lease as
amended adequately protect the interests of the United States
Government.
----------
U.S. Department of State,
Washington, DC, May 16, 2008.
Hon. Joseph R. Biden, Jr.,
Chairman, Committee on Foreign Relations,
U.S. Senate, Washington, DC.
Dear Mr. Chairman: The Department of State wishes to
provide you with an updated report regarding Intelsat, Ltd.'s
request for a legislative amendment to the International Center
Act (P.L. 90-553) to permit the continued presence of its
headquarters building at the International Center in
Washington, D.C.
The Department's position has not changed from last year.
We do not oppose H.R. 3913, which passed the House earlier this
year. The legislation would serve to correct the exception of a
commercial corporation holding an International Center lease.
The Department contracted for a new appraisal of the
Intelsat building to include an evaluation of the viability of
federal ownership. The current market value of the building is
approximately $81,000,000 plus an amount to terminate the land
lease. Since the building is inefficiently designed for a
single occupant such as the Department, we also looked at the
possibility of using the 14 separate pods as potential sites to
house foreign embassies as an expansion to the International
Chancery Center (ICC). Excluding the cost of purchasing the
building, the total renovation costs under this use scenario is
estimated to be $19,000,000.
On a practical matter, the viability of the Intelsat
Building as a possible expansion of the ICC is questionable and
far exceeds the original intent of establishing an ICC in which
each chancery is built and maintained by the particular foreign
government, with only minimal oversight by the Department.
Given this, the Department continues to believe that it is not
within its best interest to attempt to purchase the Intelsat
building.
We hope this information is helpful as you consider H.R.
3913.
Please feel free to contact us further on this or any other
matter of concern to you.
Sincerely,
Jeffrey T. Bergner, Assistant Secretary Legislative
Affairs.