<DOC> [108 Senate Hearings] [From the U.S. Government Printing Office via GPO Access] [DOCID: f:90240.wais] S. Hrg. 108-270 DETERIORATING BUILDINGS AND WASTED OPPORTUNITIES: THE NEED FOR FEDERAL REAL PROPERTY REFORM ======================================================================= HEARING before the COMMITTEE ON GOVERNMENTAL AFFAIRS UNITED STATES SENATE ONE HUNDRED EIGHTH CONGRESS FIRST SESSION __________ OCTOBER 1, 2003 __________ Printed for the use of the Committee on Governmental Affairs 90-240 U.S. GOVERNMENT PRINTING OFFICE WASHINGTON : 2003 ____________________________________________________________________________ For Sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; (202) 512ÿ091800 Fax: (202) 512ÿ092250 Mail: Stop SSOP, Washington, DC 20402ÿ090001 COMMITTEE ON GOVERNMENTAL AFFAIRS SUSAN M. COLLINS, Maine, Chairman TED STEVENS, Alaska JOSEPH I. LIEBERMAN, Connecticut GEORGE V. VOINOVICH, Ohio CARL LEVIN, Michigan NORM COLEMAN, Minnesota DANIEL K. AKAKA, Hawaii ARLEN SPECTER, Pennsylvania RICHARD J. DURBIN, Illinois ROBERT F. BENNETT, Utah THOMAS R. CARPER, Delaware PETER G. FITZGERALD, Illinois MARK DAYTON, Minnesota JOHN E. SUNUNU, New Hampshire FRANK LAUTENBERG, New Jersey RICHARD C. SHELBY, Alabama MARK PRYOR, Arkansas Michael D. Bopp, Staff Director and Chief Counsel James R. McKay, Counsel Johanna L. Hardy, Counsel Joyce A. Rechtschaffen, Minority Staff Director and Counsel Donny R. Williams, Minority Professional Staff Member Amy B. Newhouse, Chief Clerk C O N T E N T S ------ Opening statements: Page Senator Collins.............................................. 1 Senator Bennett.............................................. 16 Senator Coleman.............................................. 25 Senator Carper............................................... 26 Prepared statement: Senator Lautenberg........................................... 31 WITNESSES Wednesday, October 1, 2003 Hon. David M. Walker, Comptroller, U.S. General Accounting Office 3 Johanna L. Hardy, Senior Counsel, Committee on Governmental Affairs........................................................ 9 James R. McKay, Counsel, Committee on Governmental Affairs....... 10 William C. Stamper, Deputy Assistant Secretary for Facilities Management and Policy, U.S. Department of Health and Human Services....................................................... 17 Martha B. Knisley, Director, Department of Mental Health, Government of the District of Columbia, accompanied by David Norman, Acting General Counsel, Department of Mental Health.... 20 Alphabetical List of Witnesses Hardy, Johanna L.: Testimony.................................................... 9 Prepared Statement........................................... 64 Knisley, Martha B.: Testimony.................................................... 20 Prepared Statement........................................... 77 McKay, James R.: Testimony.................................................... 10 Prepared Statement........................................... 65 Stamper, William C.: Testimony.................................................... 17 Prepared Statement........................................... 67 Walker, Hon. David H.: Testimony.................................................... 3 Prepared Statement........................................... 32 Appendix Letter from William C. Stamper, dated Novermber 12, 2003, in response to an article in The Washington Post.................. 82 Powerpoint presentation by Mr. McKay and Ms. Hardy consisting of photographs of the West Campus................................. 83 DETERIORATING BUILDINGS AND WASTED OPPORTUNITIES: THE NEED FOR FEDERAL REAL PROPERTY REFORM ---------- WEDNESDAY, OCTOBER 1, 2003 U.S. Senate, Committee on Governmental Affairs, Washington, DC. The Committee met, pursuant to notice, at 9:32 a.m., in room SD-342, Dirksen Senate Office Building, Hon. Susan M. Collins, Chairman of the Committee, presiding. Present: Senators Collins, Bennett, Coleman, and Carper. OPENING STATEMENT OF CHAIRMAN COLLINS Chairman Collins. The Committee will come to order. Good morning. Today the Committee on Governmental Affairs will examine the challenges the Federal Government faces in managing its real property. The government's real property assets are worth an estimated $328 billion and include more than 3 billion square feet of building space. Some of the government's assets are historically significant and valuable yet deteriorating and rundown. In January of this year, the General Accounting Office added Federal real property to its High-Risk List. The High-Risk List is reserved for programs that are particularly vulnerable to waste, fraud, abuse, or mismanagement. The GAO's work in this area has shown that the Federal portfolio is in an alarming state of deterioration, in large part because of the Federal Government's ineffective management of these assets. The Federal Government also has considerable property that it no longer needs. Just weeks ago, the General Accounting Office released a report identifying 600 vacant properties and 327 underutilized properties owned by just three agencies--the General Services Administration, the Department of Veterans' Affairs, and the U.S. Postal Service. These 927 properties represent more than 2,000 acres and 32.1 million square feet of vacant or underutilized space. By way of comparison, the Pentagon consists of approximately 3.7 million square feet of office space. This means that the GSA alone currently possesses the equivalent of almost five Pentagons' worth of vacant or underutilized space, which is costly to maintain and could be put to better use. We can and must do better. To see an example of underutilized Federal property, the Committee staff visited the L. Mendel Rivers Federal Building in South Carolina. It has sat vacant since it was damaged in a hurricane in 1999, despite the fact that it is located on valuable property on the edge of downtown Charleston. Another example of underutilized Federal property is right down Pennsylvania Avenue. Due to government inaction, the Old Post Office Pavilion Annex has been empty for more than 10 years. Adding insult to injury, the Federal Government spends considerable money to maintain this empty space. This is government waste, plain and simple. Today I have asked David Walker, the Comptroller General of the General Accounting Office, to report to this Committee on the longstanding challenges facing the Federal Government in this area. Federal property is, after all, the property of the American people. A disturbing example of the mismanagement of taxpayers' property can be found right in the Capitol's backyard. St. Elizabeths Hospital was founded in 1855 to provide for the treatment of individuals suffering from mental illness. This hospital served as the first and only national Federal mental health facility. At its height in the early to mid-1960's, St. Elizabeths had almost 4,000 employees who cared for approximately 7,000 patients. The deterioration of the West Campus of St. Elizabeths is a particularly tragic example of how the Federal Government's mismanagement of its real property can result in massive waste of taxpayer dollars. This hearing will examine how this once elegant, thriving Federal property has deteriorated to the point that it could cost nearly $500 million to rehabilitate its buildings. Many people mistakenly believe that St. Elizabeths is owned by the District of Columbia. In fact, that is only half right. St. Elizabeths is fairly equally divided between an East and West Campus, the former of which was given to the District of Columbia by an act of Congress in 1984. The 182-acre West Campus is still owned by the Department of Health and Human Services but is currently occupied by the D.C. Department of Mental Health under a use permit signed in 1987. As a result, HHS and the D.C. Government share responsibility for its deplorable condition. Although the D.C. Government by agreement was responsible for the upkeep of St. Elizabeths, HHS as owner and landlord should never have allowed St. Elizabeths to reach such a deteriorated state. The poor oversight of St. Elizabeths by both HHS and the D.C. Government is inexcusable. What was a valuable asset in the mid-1980's today is a massive liability. I have visited this historic property, and its condition is truly deplorable. The Committee staff have documented the extent of damage resulting from the neglect of this property and will be presenting the results of that investigation at our hearing today. I have also asked witnesses from the Department of Health and Human Services and the D.C. Government to testify today about the management of St. Elizabeths. Although St. Elizabeths Hospital may be an extreme example of mismanagement of federally-owned property, it is not an isolated case. If a 182-acre historic landmark just 2 miles away from the Capitol can be so mismanaged, what confidence can we have that thousands of other Federal buildings scattered across the country are being managed effectively, efficiently, and properly to preserve their value and to ensure their best use. I look forward to hearing the testimony of all our witnesses today as we tackle this issue. As our first witness, I am very pleased to welcome back to the Committee the Hon. David M. Walker, Comptroller General of the General Accounting Office. Since assuming this responsibility on November 9, 1998, Mr. Walker has done an outstanding job as the Nation's chief accountability officer. He has been a leader in improving the performance of the Federal Government on behalf of the American taxpayer. This Committee works very closely with Mr. Walker and with the GAO on a wide variety of projects. When Federal real property management was added to the GAO's High-Risk List, I talked with Mr. Walker about working with the Committee so that we do not keep adding programs and agencies to the High-Risk List but actually try to identify the problems that land them on the list and the steps that could be taken to get them off the list. So it is a pleasure to welcome Mr. Walker here today. You may proceed. TESTIMONY OF HON. DAVID M. WALKER,\1\ COMPTROLLER GENERAL, U.S. GENERAL ACCOUNTING OFFICE Mr. Walker. Thank you, Madam Chairman. It is a pleasure to be back before the Senate Governmental Affairs Committee. --------------------------------------------------------------------------- \1\ The prepared statement of Mr. Walker appears in the Appendix on page 32. --------------------------------------------------------------------------- I would ask that my entire statement be included in the record. Chairman Collins. Without objection. Mr. Walker. Thank you. I will now move to summarize it. As you pointed out, Madam Chairman, the GAO added the area of real property management to our High-Risk List in January 2003. This is a major challenge that crosses a number of organizational boundaries within the Federal Government. It is also a major multidimensional challenge involving billions of dollars, with significant budget, safety, security, environmental, and economic development implications. Much of the government's current infrastructure is based upon a 1950's environment and business model. The world has changed significantly since then, yet our approach to infrastructure has not kept pace. The result--billions in excess property that is inadequately maintained and not properly secured. Taxpayer dollars are being wasted on maintaining excess properties, and asset recoveries are not being achieved for the benefit of taxpayers. In addition, there are significant opportunity costs associated with the failure to act. The excess property challenge spans numerous Federal agencies, including DOD, the Postal Service, VA, GSA, the DOE, and the State Department, just to name a few. Given current and projected Federal budget deficits, we cannot afford to maintain the status quo in this area. We have boards just to illustrate four particular properties, and I know that this Committee is going to have a number of witnesses after me dealing with this first property, which is St. Elizabeths here in the District of Columbia. But these four examples are illustrative of a much larger problem. The first one is St. Elizabeths Hospital, which is largely a vacant property in the District of Columbia which, as you noted, a portion of which is owned by the Department of Health and Human Services. The next one is a vacated postal facility in Chicago, Illinois. It is downtown Chicago, Illinois, and yes, that is the Sears Tower right down the street, so I would say that property is worth a fair amount of money. The next one represents an IRS Service Center in Andover, Massachusetts up on the left. There is also a significant amount of valuable real estate that is underutilized in that area. And the last one on the bottom right is a property in Portland, Oregon. These are just four examples of either vacant or underutilized properties where we are spending money and we are not recovering asset values in circumstances that could be of benefit to the taxpayer. What are some of the steps that need to be taken in order to address this challenge? First and foremost, we have to ask the question, who is in charge? Who is responsible and accountable for making sure that the billions and billions of dollars of vacant and underutilized property that the taxpayers own is accounted for and managed effectively and for the benefit of the taxpayer? It is not clear right now who is in charge. We have individuals within the various departments and agencies, but who has been charged on a government-wide basis on this issue? It demands that somebody be in charge, responsible and accountable on a government-wide basis. Second, how big is the problem? We need timely, accurate, useful information to understand how many vacant and underutilized properties we have. We do not have that right now. There is no consolidated, government-wide list, it is my understanding, and we need additional transparency over that list to try to spur people to action. Third, we need a plan to rationalize any excess infrastructure. We also need additional authorities and incentives for people to act. In some cases, there is going to have to be legislation to give people additional authorities or incentives to act, and in some cases, we are going to have to look at our scoring rules and who benefits from the savings in order to make sure that actions are taken. We also need to make sure that there are accountability mechanisms in place if people do not act; so incentives to do the right thing and accountability mechanisms if they do not do the right thing. And furthermore, given past history, competing stakeholder claims and interests, and a variety of other considerations, we may have to employ a government-wide task force or even a BRAC- type approach in order to rationalize this excess infrastructure, because there are a variety of stakeholder interests, and we need to look at this on a consolidated basis rather than a piecemeal basis in order to try to achieve timely action. Now, what type of action is it going to take in order to get this area off the High-Risk List? There are four general factors. First, there has to be an overall transformation strategy for Federal real property. There needs to be demonstrated leadership, attention, and commitment to the strategy and meaningful progress toward its implementation. Second, there needs to be enactment of real property reform legislation to give real property-holding agencies the tools that they need to achieve better outcomes, to foster a more businesslike real property environment, and to provide for greater accountability for real property stewardship. Third, there needs to be a successful implementation effort of ongoing agency initiatives and adoption of key open GAO recommendations, critical ones in the real property area. And last but certainly not least, we need to use a set of performance measures to assess results and demonstrate sustained progress toward solving the larger problem over a reasonable period of time--the larger problem meaning the excess property, the repair backlogs, poor data, security challenges, and over-reliance on leasing. Many times, what is happening is we have this excess property or underutilized property, yet we are still adding, and sometimes we are entering into operating leases because of the budget-scoring rules. Specifically, currently you may get better treatment under budget-scoring rules and yet it may not be in the best economic interest of the taxpayers, because there are other methods that clearly would be less costly for the taxpayers; yet the way we keep score sometimes causes people to either take actions they should not take or not take actions that they should take. In closing, this subject--real property management--is illustrative of one of many transformation challenges the Federal Government faces. It is illustrative of a horizontal challenge that crosses the various silos or stovepipes in government, traditionally known as departments and agencies. The base of government programs, policies, processes, functions, and operations represents an amalgamation of past actions that have taken place over decades. They may have made sense and hopefully did make sense initially. However, given the profound changes that have occurred in the world, and our position in the world, and business practices and technological advances, etc., just to name a few, the status quo is clearly unacceptable. We have to fundamentally review, reassess, re- engineer, reprioritize and in some cases eliminate things that have accumulated over the years because they may have made sense in the past, but they may not make sense today, and they may make even less sense in the future. We are talking about asking fundamental questions like what the Federal Government should do, how it should do business, and in some cases, who should do its business. The base is unacceptable, the base is unsustainable. The clock is working against us. We need to start acting now. Thank you, Madam Chairman. Chairman Collins. Thank you very much, Mr. Walker, for your excellent overview of this problem. The Federal Government clearly owns many more properties than it needs. In a report that was released in August, the GAO found that there were three agencies--the GSA, the VA, and the Postal Service--that together held almost 1,000 vacant or underutilized properties. Obviously, it is expensive to maintain those properties. And as you point out, in some cases, we have agencies with vacant buildings leasing space in other buildings, so the taxpayer in essence is paying twice. Can you explain why there are so many unused properties in the Federal inventory? Is it just lack of proper management, or is it that the system for disposing of those properties is too cumbersome? Mr. Walker. I think it is a multidimensional challenge. First, there is not adequate accountability. We do not have a person or persons who are put on the line, where their responsibility is to deal with these issues and they are held accountable for achieving results. Second, we do not have a current inventory of how many of these we have on a government-wide basis. Third, in some cases, agencies do not have the authority to enter into out-leasing arrangements or to enter into public- private partnerships. Fourth, there are circumstances in which the current budget scoring rules discourage people from taking certain actions that they otherwise should take, or encourage them to take actions such as leasing rather than lease-purchase or purchase decisions that might make more sense for the taxpayers. So we do not have the right kinds of incentives and in some cases the right kinds of authorities. We do not have adequate transparency, and we do not have enough accountability mechanisms for the failure to act. So I think we need to take steps in all those three dimensions and along the lines of what I articulated in my opening statement. Chairman Collins. Since the GAO added real property management to the High-Risk List, have you seen any improvement in the management of Federal property? The reason I am asking this question is that as you and I have discussed before, there are certain agencies and programs that are on the High-Risk List every 2 years when it is released--some have been on for as long as a decade. And what I want to get into as Chairman of this Committee is helping programs and agencies get off the list. Now that you have identified this area, are you seeing any progress or any response to your findings? Mr. Walker. The answer is yes, and it is from two dimensions. The first dimension is a government-wide dimension. As I mentioned, this is a government-wide challenge. It is more acute in some departments and agencies than others, but it is a government-wide challenge. I have had conversations with the Director of OMB and the Deputy Director of OMB for Management as well as other parties. They are taking this very seriously. As you know, when we add something to the High-Risk List, that is intended to bring light to an issue; with light, you get heat, and with heat, hopefully, you get action. OMB is looking at whether or not they are going to add this item to the President's Management Agenda. They are taking it seriously, and that is encouraging. There are a number of other departments and agencies who are starting to take additional actions in this area. But I think we cannot underestimate the degree of difficulty and the significance of this issue. It is going to take action by both the Congress as well as the Executive Branch. It is going to take the sustained attention of a variety of parties over an extended period of time to get to where we need to be, but we need to get started now. Chairman Collins. One aspect that surprised me as our Committee has been investigating this issue is the lack of information that many agencies seem to have about their own property. If you survey Federal agencies, you will find that it is very difficult to get basic information about what they own, what they occupy, what the condition is. GAO has found that many agencies do not even have current data about the property that they own, and even when they do, that their inventories often lack key information needed to make budgetary and other strategic decisions. It seems basic to me that if agencies do not even know what properties they own, they are not going to be doing an effective job managing it. Would you comment on that problem and how you see that being addressed? Mr. Walker. I think you put your finger on a key issue. You manage what you measure, and if you do not have adequate measurements here, you are not going to be able to effectively manage it. We do not have adequate information with regard to the nature and scope of this challenge in certain agencies, and we clearly do not have it on a government-wide basis. We need that. We need to have a currant inventory. We need to have adequate information. We need to have transparency so the Congress and other parties can monitor what is going on. So that is one of the fundamental steps that I think we need to take. Chairman Collins. Today, as you know, we are looking at St. Elizabeths Hospital as a case study of some of the problems, and as you know from GAO's own extensive review of St. Elizabeths, the West Campus has deteriorated significantly during the 16 years that it has been used by the District of Columbia. There have been disagreements between the Federal Department of Health and Human Services and the D.C. Government as to who is responsible for the deterioration of St. Elizabeths and who is responsible for many of the costs to remedy the years of neglect and deterioration. What can we do to make sure that when the Federal Government is leasing a building to a non-Federal entity that it is still being effectively managed, and how would you assess responsibility for the deplorable state of St. Elizabeths? Mr. Walker. Well, the fact of the matter is as you have pointed out, the Department of Health and Human Services owns about half the property, the West portion of that property. Even if you enter into leasing arrangements or use arrangements with a third party, whether that be a governmental party or a private sector party, you still own it. You still have stewardship responsibility and accountability. So part of it comes back to making sure that we have the people responsible and accountable for making sure that the right thing is done, the right types of contractual arrangements are entered into, that these issues are addressed up front as to who is responsible for what. I do think, however, that St. Elizabeths is an example of why we are debating all these questions about who is responsible and how much it is going to cost, but also the question is what are we going to do with the property. In the time that we are debating all of this, we are incurring additional cost, there is additional deterioration, and we are not recovering asset values. One thing that I would like to raise, Madam Chairman--and I do not know if they have considered this or not, but it is something that we did at GAO, and it may make sense here--as you know, the GAO building is a national historic property. The GAO building had an asbestos problem. And we entered into an arrangement--a public-public partnership, but it could easily have been a public-private partnership. Specifically, in our case, we entered an arrangement with the Army Corps of Engineers where they agreed to work on remediation of our asbestos problem. We then ended up leasing space to them and we gave them rent concessions to pay for the remediation effort. Some of these same factors exist for St. Elizabeths--so what if anything is being done to try to work out either a public- public or a public-private partnership to restore and redevelop this area such that the parties who might want to use it and who might benefit economically might end up incurring some of the cost to deal with the remediation, to deal with the restoration, and in a way that we can actually make some progress. I am not so sure that has been considered, but I think it is something that needs to be done. Chairman Collins. When I toured St. Elizabeths, I was struck by the lack of common sense maintenance of roofs, of steam tunnels, for example, that would have prevented at least a substantial part of the deterioration. How good a job does the Federal Government do in maintaining its properties? Mr. Walker. Well, it obviously varies by agency and by location. The ``bottom line'' answer is ``Not good enough,'' and we need to do a better job. But in the aftermath of September 11, 2001, we have got a new dimension that we need to be concerned about. For so many years, we had extra money that we were paying on maintenance, we had deferred maintenance because of deteriorating properties, and we had asset recovery values that we were not achieving because we were not taking the right steps. I would respectfully suggest that we have a new dimension now. We need to rationalize our excess infrastructure. We need to streamline it down to absolutely the minimum amount that we need, because what we have to do is not only make sure that we deal with the budgetary aspects; we have to deal with the security aspects. We need to minimize our footprint. We need to have as few Federal properties and facilities as possible in order to save money and gain asset recovery values, so we can properly secure those facilities. This is not just an issue in the United States; it is also an overseas issue in connection with our embassies. This is a real issue for the State Department. We need to be rationalizing our presence overseas, which many countries have already started to do, like the United Kingdom and others, in light of recent world events and changing circumstances. Chairman Collins. Thank you. I want to thank you very much for your testimony this morning. It has given us a very helpful overview of this problem as we proceed. We are looking at both legislative and other reforms, and if GAO as your work continues, has some specific suggestions for the Committee, we would very much welcome them. Mr. Walker. Thank you, Madam Chairman. Chairman Collins. Thank you. For our next panel, I would like to welcome two members of the Committee staff, Johanna Hardy, and James McKay. They are both members of the Committee's legal and investigative staff. They have conducted an extensive investigation of the property at St. Elizabeths Hospital. They have also prepared a powerpoint presentation consisting of photographs of the West Campus that detail much of its deterioration.\1\ --------------------------------------------------------------------------- \1\ The powerpoint presentation by Mr. McKay and Ms. Hardy consisting of photographs of the West Campus appears in the Appendix on page 83. --------------------------------------------------------------------------- I want to thank the staff for its investigation. I think they did a terrific job. I will ask Ms. Hardy to proceed. TESTIMONY OF JOHANNA L. HARDY,\1\ SENIOR COUNSEL, COMMITTEE ON GOVERNMENTAL AFFAIRS, U.S. SENATE Ms. Hardy. Madam Chairman, my name is Johanna Hardy, sitting to my left is James McKay. We are part of the Governmental Affairs Committee's legal and investigative staff. --------------------------------------------------------------------------- \1\ The prepared statement of Ms. Hardy appears in the Appendix on page 64. --------------------------------------------------------------------------- Over the last 8 months, the Committee has been conducting an investigation into the management of Federal real property. As part of the investigation, we looked at several Federal buildings that were underutilized, vacant, or deteriorating. St. Elizabeths Hospital was the most striking. The West Campus of St. Elizabeths is owned by the Department of Health and Human Services. St. Elizabeths, of course, is right here in the Capitol's back yard. In fact, we are the same distance from St. Elizabeths as we are from the Lincoln Memorial. Yet, despite the proximity, what we found during our five visits to St. Elizabeths could not contrast more from the well-maintained Capitol complex. The St. Elizabeths property includes over 300 acres of land, 182 of which compose the federally-owned West Campus. The television monitor shows an overhead picture of St. Elizabeths which is bounded by the red. There are 61 buildings with approximately 1.1 million square feet on the West Campus alone. In addition, the campus contains a Civil War cemetery, sweeping views of the downtown and monumental core of the city, as well as a park-like landscape. In addition, the West Campus of St. Elizabeths is designated as a National Historic Landmark. In 1987, pursuant to an act of Congress, the hospital's East Campus was transferred to the District. Shortly thereafter, HHS entered into various agreements with the District to allow the District to use the federally-owned West Campus. St. Elizabeths Hospital, the first and only national Federal mental health facility, began its operations in 1855. For more than a century, the hospital was a world premier mental health and research facility. Since the District assumed responsibility for the D.C. mental health functions, St. Elizabeths' patient population has significantly decreased, as has the District's need for the facilities. During the 1990's, the District began moving personnel and property from the Federal West Campus to the East Campus. While all personnel have been relocated to the East Campus, considerable District property still remains in vacant West Campus buildings owned by HHS. Chairman Collins. Thank you. Mr. McKay. TESTIMONY OF JAMES R. McKAY,\1\ COUNSEL, COMMITTEE ON GOVERNMENTAL AFFAIRS, U.S. SENATE Mr. McKay. Madam Chairman and Members of the Committee, I would now like to explain the current situation at St. Elizabeths and then begin a slide presentation. --------------------------------------------------------------------------- \1\ The prepared statement of Mr. McKay appears in the Appendix on page 65. --------------------------------------------------------------------------- Although the District's personnel have vacated the West Campus, a substantial amount of District property remains including patient records, employment files, billing records, personal items, and furniture. Subsequent to the start of our investigation, the District, GSA, and HHS signed an agreement to provide for the removal of the District's remaining items. After the removal of all District items from the West Campus is complete, HHS and GSA plan to begin mothballing the buildings in compliance with standards set by the Secretary of the Interior. ``Mothballing'' is the process by which a building is deactivated and temporarily sealed to protect it from the elements and to secure it from vandalism. It is not returning a building to productive use. Estimates of the cost to complete the mothballing of the entire West Campus vary, but according to a February 2003 estimate provided to GSA, the cost will be at least $18 million, or approximately double an estimate found in a GAO report from just 2 years earlier. We would now like to begin a slide presentation that shows the conditions in which we found St. Elizabeths during our five visits to the West Campus. We have also provided a color copy of the slide presentation to each Member of the Committee. [Powerpoint presentation.] The following slides were taken in and around the Center Building, the most historic building on the West Campus. Ms. Hardy. As we go through these slides, it is important to highlight the Stabilization and Mothballing Study completed this year by consultants hired by GSA, which highlighted the problems that needed to be rectified on other buildings on the West Campus prior to them being mothballed. It is interesting to note that many of those problems, including furnishings and debris still in the buildings, exist in the Center Building even though it has supposedly already been mothballed. Mr. McKay. The slides that we are looking at are photos of various rooms in the Center Building. You will notice ceilings and floors collapsing as well as furnishings and debris remaining in the building. Here is the room in which the poet Ezra Pound was confined between 1946 and 1958. This further illustrates the historic significance of the property. Here are some good examples of how many of the floors in the Center Building are collapsing. In many cases, the floor below can clearly be seen through the collapsing floor. In the Center Building's basement, many of the wooden supports have rotted and have been replaced by these temporary metal poles. This picture and the next are of the last rooms the District occupied in the Center Building. Besides the obvious poor condition of the room, what this picture does not fully capture is the sagging floor. An engineering firm that examined this floor described it as having ``failed.'' As late as 1997, District employees occupied this room, which was used for photocopying. We understand that they complained to the District about the floor to no avail, then to HHS. HHS did write a letter to the District supporting the employees, but nothing was done. We were told that eventually, the District employees took matters into their own hands and moved from one side of the room to the other. This further highlights the deterioration of St. Elizabeths, the District's lack of maintaining the buildings it was occupying, and HHS's failure to preserve and protect its own property. The following two slides were taken in the gymnasium located on the top floor of the Center Building. As you can see, a portion of the roof has collapsed, and there has been extensive water damage. Here is a bathroom located off the gymnasium. Again, the roof is collapsing, and there is water damage. On one visit to the site, the water was actively streaming into the room. In this slide and the next, you see an open door and a tunnel leading directly into the Center Building. The next several slides show some of the refuse that has accumulated behind the Center Building. This slide shows several barrels, some marked as containing chemicals. Ms. Hardy. The next couple of slides not only show the amount of trash and debris left outside the buildings, but on one visit, we captured pictures of an individual who, according to District representatives, engages in informal salvage work. This person was allowed to enter the site in what is supposedly the secure West Campus. Mr. McKay. The bakery is another historic building. On one visit, we could not even enter the bakery because the floor was flooded with water. And despite the fact that this picture was taken several days after the last rainstorm, water damage is still clearly visible, and in fact, standing water can still be seen on the floor of this room. Ms. Hardy. This is important to highlight because of the potential consequences of standing water. In the study completed by the GSA consultant that I referenced earlier, the study highlighted a sprinkler accident in another building that was never contained or mopped up. This caused rotting and rusting of interior structural elements and resulted in a massive infestation of termites that badly damaged that building. Mr. McKay. The remaining slides are taken of the Administration Building, which was vacated by District personnel in January. Many of you will recognize this building from the movie ``A Few Good Men.'' According to GSA's Mothballing and Stabilization Report from earlier this year, it will cost around $270,000 to mothball this building. The following slides are taken of the Administration Building's interior. Notice paint peeling, mildew, open windows that expose the interior of the building to the elements, and items left by the District. It is our understanding that HHS has repeatedly asked the District to remove their items. Ms. Hardy. This slide shows damage to items left in the building, including papers and records. We obtained this binder from the Administration Building as an example of the condition of many of the records left on the campus. The binder contains travel and expense records, including names and Social Security numbers of U.S. Department of Health and Human Services employees. There appears to be some sort of growth on the binder; the binder and its contents are clearly warped and damaged, and even through the plastic bag storing it, there is an odor emanating from this object. This is indicative of the state in which we found a number of records and items left in the building. Mr. McKay. In this area of the Administration Building, there was a strong odor of mildew, humidity from the steam tunnels, and leaking water. In this slide, you will notice extensive growth of mold on the wall. And this appears to be some sort of animal print, probably from a raccoon, that we found on the stairway leading from the main floor to the second floor of the Administration Building. The following slides were taken in the basement of the Administration Building. This slide shows water actively streaming into the basement, and as you can see, items left in the basement have suffered extensive damage from the water and moisture and are now totally ruined. Ms. Hardy. The last set of slides demonstrates the types of files and records we found left in the Administration Building. I am holding up an example of those files. According to District officials, they are in the process of removing these items and maintain that the building is secure and that there is controlled access to the campus. However, on one visit, the front door of this building was unlocked and, as mentioned previously, on all of our visits, a number of windows were left open. Mr. McKay. This slide was taken in the basement of the Administration Building. As you can see, due to the water damage, the filing cabinets are warped and rotting. The filing cabinets and several open shelves in this room contain what appeared to be thousands of patient records going back decades to when HHS still occupied the West Campus. The types of records we found included a file with a corporate credit card; boxes of documents labeled ``Confidential--Please Shred''; lab results containing patient personal information. In one room of the Administration Building, we found folders of patient records strewn on the floor, and sitting on top of these records was medical information for a 13-year-old girl. Here, we have redacted any identifying information, but the information included her Social Security number, her parents' names, her address and birth date. We saw literally hundreds of records like this. This information was found right next to this open window. More information was found in the computer room, including computer tapes containing Medicaid outpatient claims, some of which were also strewn on the floor. Moving the West Campus from a mothballed state to productive use is likely to be extraordinarily expensive. As discussed earlier, this property is a National Historic Landmark, and most of the buildings have to be preserved. The 1985 physical plant audit of St. Elizabeths estimated the cost of renovating both campuses at between $66 and $69 million, plus the cost of hazardous materials removal. Later, a 1993 estimate, which assumed that 52 percent of the West Campus would continue to be used for the District's mental health services with the remainder adapted for other institutional- type uses, assessed this cost to be as high as between $116 and $128 million. The current cost to renovate the West Campus is likely to run much higher due to its accelerated deterioration. Nearly every building on the West Campus has severely deteriorated, and almost all of the buildings will require remediation of lead and asbestos. They will also need to have their heating and air conditioning systems completely replaced. As a result, GSA has estimated that it will cost between $400 and $450 per square foot to bring St. Elizabeths to normal occupancy levels and in a manner that complies with the Secretary of the Interior's Standard for Historic Properties. If this estimate proves to be consistent across the West Campus' 1.1 million square feet, restoring it can be expected to cost between $440 and $495 million. Ms. Hardy. Earlier this year, GSA hired a consultant to conduct a Stabilization and Mothballing Study of St. Elizabeths West Campus. The report concluded, and I quote: ``The current deteriorating state of the West Campus is the unfortunate result of the discontinuation of maintenance and repair,'' and ``minor maintenance problems have gone unrepaired long enough to have had a major impact on the structural integrity of the buildings.'' The bottom line is that this is not simply one or two buildings that were lost in the bureaucracy of a large agency. St. Elizabeths is 182 acres of Federal land, 61 buildings, and 1.1 million square feet of space with the highest historic designation. The sad demise of this once stunning landmark institution raises a real question of how other Federal properties are being managed and maintained. Thank you. This concludes the staff testimony. Chairman Collins. Thank you very much for your excellent presentation. When I joined you at one point in visiting the West Campus, I believe you told me that there were some 61 buildings; is that correct? Ms. Hardy. That is correct. Chairman Collins. And I went into two of the major buildings that we have featured today, but could you give us an overview of the condition of the other buildings as well? Ms. Hardy. The two other buildings that we went into included the bakery, as you saw in the pictures, as well as the firehouse. All of the buildings seemed to have some level of decay and deterioration. As you saw with the bakery, there was standing water and clearly a lot of water damage on the walls and on the floors. Chairman Collins. It is very troubling to see the deterioration of these buildings in an area of the city with beautiful views. This was once a spectacular campus. Many of the buildings from the outside look beautiful as well as being historically significant. But in addition to the deterioration of the buildings, what I found most astounding and your presentation amply documents was the number of personal documents, psychiatric records, and other confidential materials that had been left unattended. Could you elaborate on the security of those materials? Were they easily available to you? Were they open, or was there any security evident? Ms. Hardy. The documents inside the building were very accessible. In terms of the security, we were told by District officials that they believed that the West Campus was secure, there was controlled access, and that the buildings remained secure. But as we indicated in our presentation, on at least one occasion when we visited the Administration Building where most of the records were found, the front door was unlocked, and as you noticed in a number of the slides, a number of windows open. On at least one occasion, there was an individual who did gain access to that side of the campus. Chairman Collins. Did you inform District officials of the personal records, the medical records in particular, that you found during your tours of these buildings? Ms. Hardy. Yes, we did. Chairman Collins. And what was the reaction of the District officials? Were they concerned? Ms. Hardy. I think that they felt pretty confident that there was controlled access and that the building was secure, but there was some level of concern that we were able to gain access to these files. Chairman Collins. In your subsequent visits to these buildings, did you still find personal files after you had notified the District officials? Ms. Hardy. Yes, we did. Chairman Collins. So no one went in and cleaned out all of those files in between your visits to the campus? Ms. Hardy. No. While we did see some cleanup work that apparently had occurred between visits, there was still a significant amount of patient records and confidential records still left in the building. Chairman Collins. Did some of those records seem beyond repair as you looked at them, because of water damage, mold, or other problems? Ms. Hardy. Yes, they did. Chairman Collins. And again I want to emphasize for the record that the records that you found had identifying information about some of the patients who had been treated at St. Elizabeths; is that correct? Ms. Hardy. Yes. Chairman Collins. Such as names, addresses, Social Security numbers, and diagnoses. Ms. Hardy. Exactly, including, as one slide showed, lab results. Chairman Collins. Mr. McKay, clearly the failure to maintain St. Elizabeths has added to the cost of ultimately renovating these buildings so that they can be returned to productive use. Do you have any idea how much of the current estimate of rehabilitating the West Campus, which you have estimated based on GSA and other reports to be approximately half a billion dollars, can be attributed to the poor maintenance of the West Campus over the past 15 years? Mr. McKay. While no definitive study has been done, it is the case that in many of the buildings, there were some very simple maintenance tasks that could have been done that would have prevented more serious problems down the line. In many cases--for example, in the Administration Building--there was a tremendous amount of humidity as a result of steam still being pumped into the building. In fact, we heard dripping water. The damage was clearly extremely intense, and this was something that would not necessarily have cost a lot of money to fix at the beginning, but as things escalated, it became more and more expensive. Chairman Collins. Was the deterioration of St. Elizabeths due to a lack of funds to do basic, essential maintenance? Ms. McKay. Well, while more money always helps, much of the damage that was done appears to be the result of unnecessary neglect. As we said, during our visits to the campus, we discovered wide open windows exposing the interior of the building to the elements. In addition, there was still a large amount of trash and personal property that was left in the buildings. This is going to be expensive to remove, and it is going to add to the overall price of mothballing. As you saw in the Center Building, many of the floors that were collapsing still had items on them, which is obviously going to increase the likelihood that the floors will actually collapse. Chairman Collins. Ms. Hardy, it is obvious that District officials knew of the poor condition and the continuing deterioration of these buildings, because after all, the D.C. Government was essentially the tenant. In your review of documents, did you come across any evidence that indicated that the Federal owners, the Department of Health and Human Services, were aware of the deterioration of conditions at St. Elizabeths? Ms. Hardy. Yes, we did. In fact, documents supplied to the Committee by HHS which included correspondence from HHS to the District dating back to 1992 clearly indicate that HHS was fully aware of the deteriorated state of the property. The letters are apparent attempts by HHS to notify the District of these problems, but again, all we have is evidence of the letters and no evidence of further action taken by HHS. Chairman Collins. And did the General Accounting Office also do a review of the condition of St. Elizabeths that would have put the Federal Government on notice if there were a lack of understanding of what was going on? Ms. Hardy. Yes. In fact, a couple of years ago, there was a GAO study done specifically on St. Elizabeths Hospital, and in fact that report highlighted the deteriorated state of the property. So again, HHS was fully aware of the problems with St. Elizabeths. Chairman Collins. Thank you. Senator Bennett. OPENING STATEMENT OF SENATOR BENNETT Senator Bennett. Thank you, Madam Chairman. I do not have a lot of questions because you have been very thorough in your analysis of this. The thing that stuns me as I go through this material is that I find photographs of dates--1999, 2000, and 2001. This is very recent if the building was being used. To look through these photographs, you would think this thing was abandoned in the 1980's, and nothing had been done for 20 years. To have it being used to the point where you have computer printouts that are dated 2001 left on the floor indicates on the face of it a very rapid and sudden abandonment and decline. Is that accurate? That is my impression from looking at this, but I could very easily be wrong. Ms. Hardy. That is accurate. In fact, our understanding is that the Administration Building was used as recently as January of this year. The deterioration, as you can see, is accelerated deterioration, and we are told it is from a number of causes--water leaks, steam leaks, etc.--that clearly were not dealt with when they occurred. Senator Bennett. Well, I thank you for holding the hearing, Madam Chairman, and going after this. My own experience would dictate at this point, from a financial point of view, just bulldoze the whole thing and start over. You could build new buildings with better facilities than you could rehabilitate this at this point. I know the preservationists will not like that because they love these old buildings, and certainly there are cases where we have spent money on old buildings--the Library of Congress Jefferson Building, Union Station--and we have gotten our money's worth even though we could have created the same amount of square footage for less money than we put into rehabilitation. But I would view this one very carefully before I would say let us go back and rehabilitate those buildings, because the deterioration is so severe that it looks like you could call out the Seabees and get their bulldozers and go to work. Thank you. Chairman Collins. Thank you, Senator Bennett. It is extraordinary the state of these buildings. The fact that the Federal Government owns 61 buildings on a beautiful campus so close to the Capitol, that is clearly very valuable real estate, and as the Comptroller General said in his testimony, one of the problems that they found is that Federal agencies are not even clear about what they own in some cases, and it is pretty hard to manage effectively what you do not realize that you own. So there is a lot of work to be done in this area. I want to thank our witnesses for an excellent presentation and for all of your hard work as we explore this important area. I would now like to welcome our third panel of witnesses to the hearing. William C. Stamper is Deputy Assistant Secretary for Facilities at the U.S. Department of Health and Human Services. He began his current position on July 1, 2002. Previously, he served as Deputy Director of Facilities for the National Aeronautics and Space Administration and as Director of the Air National Guard Facility Requirements Branch. Martha Knisley is Director of the District of Columbia's Department of Mental Health which operates the East Campus of St. Elizabeths Hospital. She began serving in her position last November. Prior to that, she spent three decades as a mental health clinician and administrator. I want to thank you both for appearing today. I also want to say for the record that both the Department of Health and Human Services and the D.C. Government have been fully cooperative with the Committee in its investigation of St. Elizabeths as a case study of the Federal Government's management of its real property. Mr. Stamper, we are going to begin with you. TESTIMONY OF WILLIAM C. STAMPER,\1\ DEPUTY ASSISTANT SECRETARY FOR FACILITIES MANAGEMENT AND POLICY, U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES Mr. Stamper. Thank you, Madam Chairman and Committee Members. Good morning. --------------------------------------------------------------------------- \1\ The prepared statement of Mr. Stamper appears in the Appendix on page 67. --------------------------------------------------------------------------- Thank you for inviting me to testify today on behalf of the Department of Health and Human Services. Secretary Thompson sends his thanks to the Committee for addressing an issue that many executive agencies are experiencing. As stated in the GAO report on real property, many Federal assets are no longer effectively aligned with or responsive to agencies' changing missions and are therefore no longer needed. I have been asked to speak about one such asset owned by the Department of Health and Human Services. The West Campus of St. Elizabeths Hospital in Southeast Washington, DC has been excess to the Department's needs for many years. However, due to a unique set of circumstances, we have been unable to dispose of the property. As testified to before, there are 61 buildings on the West Campus, approximately 1.1 million square feet. In addition to the historic buildings, the West Campus is the site of a Civil War cemetery reported to be the only public cemetery containing the remains of both Union and Confederate and black and white soldiers. In December 1990, St. Elizabeths was designated a National Historic Landmark. Congress adopted the St. Elizabeths Hospital and District of Columbia Mental Health Services Act, otherwise known as the Transfer Act, in 1984. The Act provided for the transition of the District's mental health system to local control and gave the District two opportunities to take title to the St. Elizabeths Hospital grounds and buildings. On October 1, 1987, those buildings identified by the District as necessary for its mental health system were transferred, including the entire East Campus except for one building, five buildings on the West Campus, and approximately $27 million to pay for repairs. The Transfer Act also provided the District a right of first refusal on the remaining property, which included most of the West Campus. Although the District occupied about 34 buildings on the West Campus, the second transfer did not take place. In 1987, then Mayor Marion Barry signed a Use Permit with HHS that specifically required the District to preserve, maintain and repair the West Campus. The Use Permit was extended indefinitely in 1997. Although HHS oversight was minimal, our records show that we notified the city of various violations throughout the years but took no action beyond the notification. The buildings have deteriorated significantly, as you have seen. To prevent further damage to the large Center Building, HHS spent $1 million on a new roof and gutter system in 1991 and spent another million dollars on mothballing and stabilization projections in the year 2000. One million dollars requested from Congress in 1998 was not appropriated. Once we were notified by District officials in 2000 of their intent to vacate personnel from the campus the following year, we immediately began to take the steps necessary to protect and dispose of the property. GSA instructed HHS on the steps necessary to declare the property excess, and in September 2000, we completed Phase I of the required Environmental Assessment. In January 2001, HHS officially notified GSA of its intent to declare the property as excess. In April 2001, the GAO on behalf of the Committee on Appropriations verified the need for funds associated with property disposal, including fulfilling the requirements of the National Environmental Policy Act and the National Historic Preservation Act. Later in 2001, Congress provided $6.5 million to begin the disposal process and mothballing. In 2002, HHS awarded a contract for a building-by-building mothballing assessment of Federal buildings on the West Campus and completed the Phase II Environmental Survey. In May 2002, the Urban Land Institute conducted a study to develop suggestions on potential land use for the entire St. Elizabeths campus, both East and West. In late 2002, the District hired an architectural firm to develop a framework plan for the campus, to identify appropriate uses, and to establish implementation strategies. To start off 2003, in January, Mayor Williams held a public meeting to inform the community about the planning process for St. Elizabeths. Also, at the beginning of this year, the District vacated its last employees from the campus, and HHS received a report on the building-by-building assessment. GSA has arranged for bids on the mothballing and stabilization, but it was immediately apparent that the project was going to cost far more than the $6 million appropriated. We plan to complete the project in three or more phases depending on available funding. HHS recently contracted with GSA to award the first phase, which will involve roofing, boarding up windows, securing entrances, and pest control. That should begin within the next 2 months. Most of the buildings on the West Campus were constructed from 1855 to the early 1900's. Nearly every building suffers severe deterioration due to age and lack of maintenance. Our estimate to finish the mothballing and stabilization is approximately $20 million. This figure continues to rise with natural events such as our recent Hurricane Isabel and last year's severe winter. The District is still removing furniture, files, and other articles from the buildings and is required by the Use Permit to give us written, 180-day notice that the property is no longer needed. HHS will be responsible for security and maintenance after the turnover by the District until GSA assumes responsibility. St. Elizabeths' West Campus is one of the largest developable tracts in the District of Columbia and therefore an extremely valuable asset to the Federal Government, the community, and the future of Southeast Washington. Redevelopment will have a positive impact on the city and will promote economic growth in the area around St. Elizabeths. The government can and should make every effort to ensure that the property is redeveloped in such a way to preserve the historic buildings and site. With its rich heritage, St. Elizabeths Hospital offers a wonderful look at an important aspect of our Nation's history. Creativity must be a part of a negotiation process between the Federal Government, the District and, if needed, private entities to preserve this important cultural asset. GSA has informed HHS that there may be other Federal uses for the property. If a Federal transfer occurs, we believe it will greatly benefit the immediate community and the city as a whole. The continued mothballing and maintenance of the property is costly, and decisions need to be made as soon as possible. At Secretary Thompson's initiative, HHS is redoubling our efforts to work with GSA, the District, and the community to make certain that the potential for St. Elizabeths Hospital is realized. Thank you for allowing me to speak with you today, and I will try to answer any questions you might have. Chairman Collins. Thank you very much. Ms. Knisley, could you also introduce the person with you as you begin your statement? TESTIMONY OF MARTHA B. KNISLEY,\1\ DIRECTOR, DEPARTMENT OF MENTAL HEALTH, GOVERNMENT OF THE DISTRICT OF COLUMBIA, ACCOMPANIED BY DAVID NORMAN, ACTING GENERAL COUNSEL, DEPARTMENT OF MENTAL HEALTH Ms. Knisley. Yes. Senator Collins, Senator Coleman, with me today is David Norman, who is our Acting General Counsel for the Department of Mental Health. He worked on the St. Elizabeths Campus for the Public Defender's Office in the District for 17 years and has been a source of informal information as we try to piece together these individual issues and is going to assist me today. --------------------------------------------------------------------------- \1\ The prepared statement of Ms. Knisley appears in the Appendix on page 77. --------------------------------------------------------------------------- Chairman Collins, Senator Coleman, my name is Martha Knisley. I am Director of the District of Columbia Department of Mental Health, and I thank you for inviting me to testify before you on a subject of great importance to myself, my Department, and the citizens of our Nation's Capital--the past, the present, and the future of the West Campus of St. Elizabeths Hospital. Before I begin, I would like to divert from the text for a moment and talk to you as a mental health professional who has worked in over 40 States, including the State of Maine, working at the Machias Campus and also in Bangor at that campus in my career. I have worked in, as I said, 41 States. I have worked in 77 State psychiatric hospitals during my career. I have found personally and tragically, both as a young woman in undergraduate school when I did work in a deteriorating campus--it was hard to say ``a deteriorating campus'' when it had never been very functional to begin with-- in Huntington, West Virginia, that as a Nation--and this goes beyond the scope of today's discussion--but as a Nation, what I found with our buildings, where we have placed our most vulnerable citizens, is that what we have done as a Nation to those people, to the people who work there, parallels the history of this campus. It is an unspeakable tragedy. I came to the District of Columbia at the request of a transitional receiver in the Dixon case that began in 1974. This case was brought against the HHS at that time, which was running St. Elizabeths, and the District of Columbia, which was operating a few small community clinics. That case was brought with the expressed purpose to develop a system of care for people with mental illness in the District. It is 2003, and that case has not been settled. It just so happens that the transfer of this hospital came at the time that the Federal Government wanted to exit the case. The point in fact is that the deterioration of St. Elizabeths Hospital began probably several decades before the case was even brought. These buildings have been rotting away for many decades. And as testified to earlier this morning by your staff, who have done an excellent job, Senator Collins, I found the same situation when I arrived that they found at St. Elizabeths. The situation got so bad with the city's operation--again, all the time with HHS and the city operating not just for the buildings but for the people--that Federal Judge Aubrey Robinson in the Dixon case placed the mental health system in the District in receivership in 1997. Mayor Williams aggressively argued to bring this system out of court receivership so that the city could begin to manage this system--partly because of this valuable property, the people who worked there, but the citizens in the District who need mental health care. We did that in April 2001. One of the first actions that I had to take as director was to stop the renovation of the William A. White Building, where the renovation had begun before they had removed asbestos. They had not even removed the asbestos. And today, we heard about the conditions continuing this year. There are two issues I would like to raise about those. One is that while in receivership, the Commission on Mental Health transferred all of the operations of their recordkeeping and those files you saw to a private firm without sufficient guarantees in that contract to manage those records that you saw. We have had to discontinue that contract. But the recordkeeping, Madam Chairman, was just as horrendous in terms of the billing for the services, so we had a double problem there. And we are rapidly trying to reconstruct what even went on with the patients during that period of time. So those were billing records that you saw in the pictures. But even the other medical records, when we wanted to move them to buildings on the East Campus, our medical records building that we were using, where we wanted to use things, and that was under our control was in just as bad shape, so we had to shore up that building so we could move out of the other deteriorated buildings over onto the East Campus where we operate. We are also aggressively moving to build a new hospital on that campus on the southwest corner of the East Campus so that we can meet the basic safety and health concerns of our patients whom you did not see on the East Campus but who are living in some of the same conditions. When I arrived, Madam Chairman, the Centers for Medicaid and Medicare Services had placed this system on the endangered species list, if you will, for just its care. In August, they gave us a clean bill of health on active treatment at the hospital, brought us out of the conditions that we were in and said that at least our care for patients was on the upswing. Madam Chairman, as you can see, we still have a lot of catching up to do on the buildings themselves. So I just wanted to give you that background, because we need to develop a fully functioning community mental health system here in the District. Mayor Williams is adamant that we do that. We have exited the receivership, and we should be able to exit that case in 2 years. You have asked me to comment specifically on how the West Campus arrived at its current state of deterioration, and let me say that I have only secondhand knowledge of those events, and I have been trying to patch them together as you have, prior to my appointment. It appears that there was very little institutional memory, and I do believe that HHS has captured it very well, as have your staff, so that we could begin to piece together who was responsible for what and when. But beyond that, what are we going to do next? The Transfer Act that was initiated in 1987, as well as basically the original version of that Transfer Act, was charged with the responsibility for repairing and renovating those buildings and support systems that the District indicated it would need to use in its final system implementation plan, which was a part of the delivery of mental health services. Pursuant to that Act, HHS contracted for a physical plant audit which was conducted by an architectural and engineering firm, and this audit concluded that it would cost $55.8 million to bring up to code those portions of the campus that the District intended to use. Of that amount, $25.8 million was attributed to renovation of the West Campus. Unfortunately, this story, as you have heard this morning, only goes downhill from there. I would have to say, knowing what I have been going through, for example, just in the cleanup that we had to do after the storm last week, that probably every administrator in my seat before I became the director--and by the way, as we came out of receivership, it was the first time we actually created a Department of Mental Health; I report directly to the Mayor, and that did not occur before, either--but every year, they would have had to make the decision on cleaning up a building or making it safe for people living there today. And I myself personally have had to make that decision at least two or three dozen times in my short tenure--where am I going to place the resources that I have--in this deteriorating building or in a location where patients are actually living. So in summary, yes, not enough money, promises probably not kept, and when HHS did come to the District and request that activity occur, that did not happen. And the challenges, as I said, exist both for the care of the patients and with respect to the care of the campus. I can only say to you now, Senator Collins and Senator Coleman, that we are moving rapidly out of the buildings on the West Campus so that the mothballing can go ahead, and it has been a challenge for us to even do that this year, as has been evidenced here today, and we have been continuing even after the time that your staff were on the campus. I am available to answer questions, and I would like to ask that my statement that I was going to read be put into the record. Chairman Collins. Without objection, your statement will be entered in full. Ms. Knisley, you have obviously spent your entire life dedicated to serving those with mental illness, and I salute you for that commitment. Since you have been a mental health clinician for many years, I would like to get your reaction to the fact that we found during our investigation patients' medical records--not just billing records; I am talking about actual patient files with full identifying information, with diagnosis information--and not just one or two files, but hundreds of files on each of five different visits to the West Campus. Ms. Knisley. Madam Chairman, the A Building, where I believe that--again, from the pictures of where most of the files were found--in that particular building during my tenure, there were no staff offices or medical records offices. Those were the offices of the firm that had been contracted with that was located in that building, and it does appear, both from what we have been trying to construct just for the billing as well as for cleaning up the files and moving them, that many of the files migrated over to this billing operation. So the medical records--that is, the recordkeeping facility or division for the hospital that is used by the clinicians is actually located in a different building on the East Campus where we were operating. So it is somewhat of a mystery how the volume and those types of records found their way into the offices of these staff. Chairman Collins. Please understand--this is in a vacant building with no staff, with virtually no security, with the roof caving in, with water dripping on these confidential medical records. And we informed your department the first time we found these records, because we were so alarmed at what we were seeing. We expected by our next visit that individuals from your department would have come and immediately moved the records or taken some steps to secure them. But that did not occur. Moreover, there were members of your department who actually accompanied my staff on one of the visits and saw it for themselves. I assume the District of Columbia has patient confidentiality laws, and I am just wondering why no action. It is bad enough that the records were left there in the first place, but after we informed your department, nothing was done. Ms. Knisley. Madam Chairman, I am pleased to say that those records have been removed. The length of time to remove them-- and this is not an excuse--but the length of time to remove them is in part related to the fact that the place where we were moving them, we were also cleaning up that building and shoring up the wall there, so we were doing both activities at the same time. I might also add that the condition with the water coming in was going on while people were working in those buildings. I am not sure you were even aware--you went when they were vacant, but I do not know if they had taken the tarp down or not. They put a tarp up over the records and the computer equipment instead of repairing the building. So you are absolutely right. It has been a challenge for us to remove those records, and they are removed now, and again, we are doubly challenged by getting them into a place that would be safe. Chairman Collins. Mr. Stamper, in October 1996, the D.C. Preservation League, which is an organization of District historic preservationists, named St. Elizabeths Hospital to its list of eight most endangered properties, and a story in The Washington Post described the league as arguing that, ``A lack of proper maintenance by the District Government has created a desperate need for repair and has made the structure's long- term fate uncertain.'' That was 7 years ago. What actions did HHS take when alerted by outside groups to the deterioration of these buildings? Mr. Stamper. Madam Chairman, I am not familiar with that particular report. I think I can go back to the advent of this administration at least and say that we have been trying to be much more proactive about dealing with the St. Elizabeths problem. We are certainly aware of it. There is some kind of a trail of correspondence that took place in the nineties between the Department and the District. I have not read up on the specific one that you are referencing. I could get back to you with a written answer on that.\1\ --------------------------------------------------------------------------- \1\ Letter from Mr. Stamper, dated November 12, 2003, in response to the question of an article in The Washington Post appears in the Appendix on page 82. --------------------------------------------------------------------------- Chairman Collins. In your testimony and just now, you referred to correspondence back and forth between HHS and the District, but you also conceded that HHS oversight was minimal and that HHS did nothing other than notify the District of its violations. Why didn't the Department take stronger actions to safeguard the taxpayers' investment in these properties? Mr. Stamper. I wish I knew the answer. I really--it is difficult for me to speculate back that far as to what recourse there was. There were certain things that probably could have been done short of an eviction notice or something, I guess. I would also like to add, though, that there is a context here of a drawdown in the Department headquarters facilities staff in HHS, and in the mid-90's, it was drawn down to, I think, two people to oversee departmental facilities activities in total, which is virtually nothing. Secretary Thompson, when he came in, recognized that we had a severe shortfall in the facilities function at Headquarters and took action to establish a new office that I am in charge of to establish an oversight presence at headquarters to try to avoid these kinds of problems. Chairman Collins. Well, before I turn to my colleague, Senator Coleman, let me say in response to that that if HHS only had two people at headquarters in charge of overseeing all of the property--is that what you are saying---- Mr. Stamper. That is my understanding. Chairman Collins [continuing]. I cannot think of a more penny-wise and pound-foolish decision than to cut back on the staff that is responsible for ensuring the quality of the taxpayers' investment in real estate property that is valued in the multiple millions--just this one property alone, not to mention all the other HHS property. Ms. Knisley. Madam Chairman, if I might, it is possible, knowing the individuals involved at the time, that if HHS attempted to pursue that with the District, the District officials could have said, ``Well, this is our operating money; it would take away from patient care.'' Again, that is not to say that HHS should not have done more, but I think that the responsibility for that maintenance during that period of time, the District did need to step up to the plate, and I would suspect that there was some hope that during that receivership period, the District would in fact have done that. So I am not trying to say that HHS should not have done more, but it was very evident to individuals whom I have interviewed that, because the city was taking the repair money out of their operating budget, what people could see was that that was taking away from the patients. So that may have been going on. And again, that is not to at all say---- Chairman Collins. I would argue that it is not good care-- -- Ms. Knisley. No, it is not good. Chairman Collins [continuing]. Of patients or fair treatment of the staff---- Ms. Knisley. It was not, no. Chairman Collins [continuing]. To allow this kind of deterioration. Senator Coleman. OPENING STATEMENT OF SENATOR COLEMAN Senator Coleman. Thank you, Madam Chairman. Madam Chairman, first let me thank you for your leadership on this issue. This is important. You are always doing a public service, but this is a public service. This is a public service, and I appreciate it. I always and quite often, as you know, reflect upon my experience as a mayor. I will have to tell you that in my city, when we went through our list of problem properties, the leading landlord of problem properties was the Federal Government. So I think that what we are exploring here in a very dramatic and almost beyond comprehension way is perhaps symptomatic of a range of other issues that deserve further exploration. Again, I saw that in my city. We did not take this kind of action to deal with it; we dealt with it one-on-one. But I hope that down the road, we can kind of get our arms around this. I am not even sure what question I want to ask here, but I will tell you that I always have an appreciation for folks who dedicate their lives to public service and what you have done, Ms. Knisley, but as I listened and reading your testimony--I am still, by the way, trying to figure out how files migrate over; I am not sure what that means--but I would say that particularly in regard to the issue of patient confidentiality, that issue is one that folks are not being cared for if those records are made available. I am trying to sort out what happened here, and I think you are faced with what folks around cities always face when you have ``x'' number of dollars, and do you put them into patient care, or do you put them into fixing something up. And the problem is that there is a delicate balance, and when the balance is somehow not dealt with appropriately, you have problems, and there are clearly dramatic problems here. In your testimony, you note that ``You asked me to address the responsibility for this state of affairs,'' and you then say ``The responsibility ultimately rests with HHS as a holding agency of the property.'' I think I would have much preferred both of you coming up here and saying, ``Do you know something--we really messed up. We did not do what should have been done, and we will do everything in our power from this day forth to address that.'' From the HHS perspective, I hope that you are looking over your list of 10 worst properties and taking a very close look at what you are doing and not doing rather than waiting for the Chairman to show up on the doorstep and figure out what has not been done. I would hope that has been done already. Mr. Stamper. Well, in fact, I think we had started the process to look and fix this problem prior to the Committee's interest. Maybe we could be criticized for the speed, but we have been working on this very diligently. Senator Coleman. My concern about working on it is that as I am listening to the testimony, I hear a lot of discussion about long-term plans, grand vision, land institute, future use, but there is the more immediate need of did you get a broom in there to pick up the garbage. I mean, I worry that sometimes we are not seeing the forest for the trees here. And the first step says we are going to make this safe. This is a safety issue. I do not know if there are kids in the area, Madam Chairman, but God forbid that there are, with these kinds of conditions. So, rather than ask a question, I would say that I hope the Department is not getting caught up in what the long-term vision is, but first saying ``We will make sure that these properties are cleaned up. We will make sure that they are secure.'' And then we can go beyond that. And I would hope, Ms. Knisley, that you would go back and figure out why it took so long for files that were sitting around not to be picked up and have somebody responsible to act on that. Ms. Knisley. Yes, I totally agree, Senator Coleman. And let me just say that even with the ultimate responsibility as the landlord, we have the responsibility of the care of the patients and the security of the records, absolutely. The first is no longer working for us in part because of this, and our staff have had to go in behind them and clean up these records. And I cannot fathom, either, this migration of that information to a company that was going to be doing billing. I cannot fathom that, either. I have the responsibility now, this is the shape I found it in, but I totally agree that it is my responsibility to get it cleaned up, and we are doing that as quickly as we can. Senator Coleman. I appreciate that, but I will tell you that it is hard for me to fathom when a Member of the U.S. Senate or Congress raises an issue about something, and files are lying around, that someone is going to come back and see them still there ``x'' number of days later. I cannot fathom that the next day, I do not have somebody there, figuring out what is being done and taking care of it--and if it is not done, figuring out who did not do it and deal with that, because if you do not, the problem will still exist. Ms. Knisley. Right. And Senator Coleman, yes, we did both. We dealt with the people who were supposed to have done it, and now we have dealt with the conditions themselves--or, I should say with the files. The conditions themselves are along way from being complete. Senator Coleman. Thank you. Thank you, Madam Chairman. Chairman Collins. Thank you, Senator Coleman. Senator Carper. OPENING STATEMENT OF SENATOR CARPER Senator Carper. Thanks, Madam Chairman, and to our witnesses, thank you for joining us today. I apologize for not being here during the time that you were testifying, and what I am going to ask you to do is, if you will, just take a minute or two apiece and, as we approach the end of this hearing, just share with me what you would hope the Members of this Committee would take from this hearing, what we and our staff would take from this hearing as we go forward. Ms. Knisley. Senator Carper, and to the Members of the Committee, if I could summarize for me personally, I would go back and redo as much as we possibly can do. That is obviously not going to happen, and I apologize to the Members of the Committee and particularly, Madam Chairman, to you for the amount of time that it has taken us to fulfill our responsibilities to clean out these buildings. The matter of St. Elizabeths Hospital, as I said in my opening statement, is a very large and very personal concern. It was the crown jewel of psychiatric hospitals in the United States at one point in time, and since the 1960's, it has become the worst example of our treatment and care of persons with mental illness that I can imagine or that I have ever seen. And the lack of follow-up and follow-through by the D.C. Government during the last 20 years has been a tragedy. Mayor Williams, who fought valiantly to get this Department back under his control, has given us a very strong mandate to clean up the mental health system and to make good use of the hospital and to build a new hospital on this campus for the care of our patients, and we are proceeding as vigorously as we can to see that that occurs. Again, in a way, this is about Federal property today in the hearing, and it is a very important hearing, and we understand our responsibilities as part of that and our responsibilities to the care and treatment of the patients. Senator Carper. Thank you. Mr. Stamper. Mr. Stamper. Thank you, Senator. Several points--the Department of Health and Human Services has declared the property excess to our needs. Factually, we have not needed it since mental health care was transferred to the District in 1987. We are working with GSA to release the property and are following the Federal process that we have to follow to do that. The District has been responsible for maintenance and repair since the Use Agreement was signed in 1987. Our oversight, admittedly, of that Use Agreement was not what it should have been. The property is in bad shape, and we believe it has a high potential for redevelopment in the right hands. Senator Carper. Thanks very much. Madam Chairman, thank you. Chairman Collins. Thank you very much, Senator. Mr. Stamper, you testified that it would take approximately $20 million just to mothball the buildings. Is that the route that HHS is now pursuing? Would it make sense since, as you pointed out, this is one of the largest developmental tracts, buildable tracts, left in the city to instead partner with the private sector to try to develop this property instead of investing $20 million just in mothballing it--or are the buildings so far gone at this point that you have to mothball them first before you can go on to try to find a developer who might be interested? Mr. Stamper. It is a difficult question to answer because timing becomes important, and the rate of deterioration is so rapid because of where we are now. What I can say, though, is that, working through the Federal process, GSA has to determine if there is a Federal need for the property, and it is really going to be in their hands as the government's property manager. The Department of Health and Human Services does not have the legal authority to negotiate those kinds of partnerships. Chairman Collins. GSA would take over that responsibility? Mr. Stamper. Yes, ma'am. Chairman Collins. Another question that I want to ask you comes from a comment that was made by Ms. Knisley, and that is when she said that there was a concern about taking from patient care. And your written statement makes a similar comment. Didn't the Use Permit between the Department and the District of Columbia call upon the District to be fully responsible for all the maintenance, repairs, and operations of the West Campus? Mr. Stamper. Yes, it did. Chairman Collins. So presumably, when the District agreed to the Use Permit, it agreed to take over the maintenance of the buildings in a way that should have been separate from the money for patient care; is that not accurate? Mr. Stamper. I do not know how the District would normally run their budget, but certainly the Use Agreement requires them to maintain and preserve the facilities. Chairman Collins. Ms. Knisley, would you like to comment on that? My point is that when the District agreed to these conditions, it presumably knew what it was agreeing to. Ms. Knisley. Madam Chairman, I think that is part of the problem, and as a matter of fact, we are in litigation because in the due diligence phase of turning over the land and, again, an audit--and again, I was not here at the time--but an audit revealed that there was a certain amount of money that was required--I believe it was $55 million--but only $25 million was forthcoming as part of that transfer at that time. So the District took on this responsibility and agreed to certain responsibilities without fully appreciating the repair costs--not capital costs, but repair costs--that come out of the operating budget. Since I have been director, I have asked for--and Mayor Williams has granted and it is before Congress as we speak--additional capital funds so that we are not dipping into the operating funds, because in operating, you are moving between the day-to-day maintenance and your staffing in an operating budget. And what was happening was that they were sucking up these daily operating funds, because they did not have capital funds to do the kinds of repairs. We had two dozen water main breaks this winter that cost us about $2.7 million. I took that out of patient care. And I believe that is what happened over this period of time, that because there was not a capitalization of these repairs, it then fell naturally to the operating budget. Chairman Collins. Of course, one of the obvious problems here is that very small maintenance problems were not attended to which would have been inexpensive, relatively speaking, had they been dealt with at the time that they occurred, and because they did not, there is, for example, extensive water damage, which produced a host of other problems. It is just very troubling to see these buildings, this extraordinary asset that the Federal Government owns, and today the best estimate is that it will take $450 million to rehabilitate these buildings. Ms. Knisley. I would not like to have to buy the bottled water--even though we get very good Poland water, Madam Chair-- I would not like to have to buy bottled water for our patients. I would like to be able to use the water there. That is just an example. I have employees who have never had hot water in their entire careers--or patients--30 years, because we made a difference between hot water and fixing something else. Chairman Collins. I just want to end my questioning with one clarification. As I indicated to you, in each of the five visits that my staff made to the buildings, we still found confidential patient records, lab results, and during my visit, a corporate credit card, an American Express card, all sorts of materials that should not have been left there. Are you testifying today that the District has now removed and safeguarded all of those personnel and patient records that we saw? Ms. Knisley. Yes, Madam Chairman. There are two sets of items in the Administration Building, and I believe we are still removing material out of the basement and some items, but the patient records have been removed. The corporate credit card, by the way, was the firm that is no longer working for us. Our agency has no credit cards. And again, that just illustrates the fact that this whole operation had been turned over to a private company with no oversight of that company. The contract had no oversight even written into the contract over the company. Chairman Collins. That is also inexcusable but outside the scope of this particular hearing. Ms. Knisley. Absolutely. I understand, Madam Chairman. Chairman Collins. I would like to ask my two colleagues if they have any further comments or questions. Senator Coleman. Senator Coleman. Madam Chairman, just one. Actually, in reference or in follow-up to the question you asked Mr. Stamper about the possibility of some kind of public-private partnership for further development, those things do take time. I would certainly urge the Department to get in there and clean it up. Do that, and at the same time, you can be involved in some long-term planning. But development takes a while--it is great to have a long-term vision, but I think there are some immediate needs. And whether it is this property, St. Elizabeths, or others, I do hope the Department is looking to say, OK, what are we going to get done today to make sure that facilities are safe. Thank you, Madam Chairman. Chairman Collins. Thank you, Senator, and thank you for your participation. Senator Carper. Senator Carper. I would simply say to you, Madam Chairman, that I look forward to taking a minute or so at the conclusion of this hearing just to talk about what other steps we might need to contemplate; if we could do that, I would appreciate it. Chairman Collins. Absolutely. Thank you. I want to thank our witnesses today. As I said when I began this hearing, St. Elizabeths was the most egregious example of a deteriorated Federal real property asset that our Committee has looked at, but there are many others that we found as part of our review. As the GAO testified, the number of vacant and underutilized Federal buildings or federally-owned buildings is truly astonishing. We have a lot of work to do in this area to make sure that the investment of Federal taxpayers in real property is safeguarded. So we look forward to continuing this investigation. We will be keeping the record open for 15 days for the submission of any additional statements or questions. I thank our witnesses for their cooperation. We look forward to working with you to ultimately produce a happy outcome for the reuse of the West Campus of St. Elizabeths. This hearing is now adjourned. Thank you. [Whereupon, at 11:15 a.m., the Committee was adjourned.] A P P E N D I X ---------- PREPARED STATEMENT OF SENATOR LAUTENBERG Madam Chairman, this is an important hearing. The Federal Government owns or leases 3.3 billion square feet of building floor area and has real property assets worth nearly 330 billion dollars. That's a lot of property and a lot of money. I doubt anyone would argue that the Federal Government needs every square foot of that space. Clearly, the Federal Government could get rid of some of this property. There are ``opportunity costs'' when the Federal Government holds onto excess property: Taxpayers pay higher taxes to maintain the property and it's not being put to a more beneficial use. Moreover, the money used to maintain property we don't use isn't available to refurbish the property we do use. According to the General Accounting Office, the General Services Administration has a maintenance and repair backlog of somewhere between 4.0 and 5.7 billion dollars. Clearly, the time is ripe for real property reform. There is another subject which I hope will be addressed to some extent today: Terrorism and its impact on government buildings and other property. We have been told that we are winning the war against terrorism. It sure doesn't look like it to me. Just drive down Constitution Avenue or Pennsylvania Avenue. Barricades everywhere. Streets blocked off. It looks like a war zone. As best as I can tell, there are concrete barriers surrounding every government building in town except-- interestingly--the Internal Revenue Service! Putting flowers in these things isn't a big improvement! I realize much of this was done hastily, and is meant to be temporary. Let's hope so. One of the important characteristics of our democracy is openness. We have lost that since 9-11. I don't mean to trivialize the very real threat that modern terrorism poses but I would like to think that we have the creativity and skill to protect our buildings and other property without making Washington look like Berlin during the Cold War. I look forward to hearing from our witnesses about this. Thank you, Madam Chairman. 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