<DOC>
[108th Congress House Hearings]
[From the U.S. Government Printing Office via GPO Access]
[DOCID: f:88504.wais]
WASTED SPACE, WASTED DOLLARS: REFORMING FEDERAL REAL PROPERTY TO MEET
21ST CENTURY NEEDS
=======================================================================
HEARING
before the
COMMITTEE ON
GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTH CONGRESS
FIRST SESSION
__________
JUNE 5, 2003
__________
Serial No. 108-35
__________
Printed for the use of the Committee on Government Reform
Available via the World Wide Web: http://www.gpo.gov/congress/house
http://www.house.gov/reform
______
88-504 U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON : 2003
____________________________________________________________________________
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COMMITTEE ON GOVERNMENT REFORM
TOM DAVIS, Virginia, Chairman
DAN BURTON, Indiana HENRY A. WAXMAN, California
CHRISTOPHER SHAYS, Connecticut TOM LANTOS, California
ILEANA ROS-LEHTINEN, Florida MAJOR R. OWENS, New York
JOHN M. McHUGH, New York EDOLPHUS TOWNS, New York
JOHN L. MICA, Florida PAUL E. KANJORSKI, Pennsylvania
MARK E. SOUDER, Indiana CAROLYN B. MALONEY, New York
STEVEN C. LaTOURETTE, Ohio ELIJAH E. CUMMINGS, Maryland
DOUG OSE, California DENNIS J. KUCINICH, Ohio
RON LEWIS, Kentucky DANNY K. DAVIS, Illinois
JO ANN DAVIS, Virginia JOHN F. TIERNEY, Massachusetts
TODD RUSSELL PLATTS, Pennsylvania WM. LACY CLAY, Missouri
CHRIS CANNON, Utah DIANE E. WATSON, California
ADAM H. PUTNAM, Florida STEPHEN F. LYNCH, Massachusetts
EDWARD L. SCHROCK, Virginia CHRIS VAN HOLLEN, Maryland
JOHN J. DUNCAN, Jr., Tennessee LINDA T. SANCHEZ, California
JOHN SULLIVAN, Oklahoma C.A. ``DUTCH'' RUPPERSBERGER,
NATHAN DEAL, Georgia Maryland
CANDICE S. MILLER, Michigan ELEANOR HOLMES NORTON, District of
TIM MURPHY, Pennsylvania Columbia
MICHAEL R. TURNER, Ohio JIM COOPER, Tennessee
JOHN R. CARTER, Texas CHRIS BELL, Texas
WILLIAM J. JANKLOW, South Dakota ------
MARSHA BLACKBURN, Tennessee BERNARD SANDERS, Vermont
(Independent)
Peter Sirh, Staff Director
Melissa Wojciak, Deputy Staff Director
Rob Borden, Parliamentarian
Teresa Austin, Chief Clerk
Philip M. Schiliro, Minority Staff Director
C O N T E N T S
----------
Page
Hearing held on June 5, 2003..................................... 1
Statement of:
Perry, Stephen, Administrator, General Services
Administration; Linda Springer, Controller, Office of
Federal Financial Management, Office of Management and
Budget; Bernard Ungar, Director, Physical Infrastructure
Issues, General Accounting Office; Mark Catlett, Principal
Deputy Assistant Secretary for Management, Department of
Veterans Affairs; Major General Charles Williams, Director,
Overseas Buildings Operations, Department of State; and
Brent Bitz, executive vice president, Charles E. Smith
Commercial Realty, on behalf of the Building Owners and
Managers Association....................................... 18
Letters, statements, etc., submitted for the record by:
Bitz, Brent, executive vice president, Charles E. Smith
Commercial Realty, on behalf of the Building Owners and
Managers Association, prepared statement of................ 107
Catlett, Mark, Principal Deputy Assistant Secretary for
Management, Department of Veterans Affairs, prepared
statement of............................................... 86
Davis, Chairman Tom, a Representative in Congress from the
State of Virginia, prepared statement of................... 4
LaTourette, Hon. Steven C., a Representative in Congress from
the State of Ohio, prepared statement of................... 9
Perry, Stephen, Administrator, General Services
Administration, prepared statement of...................... 21
Springer, Linda, Controller, Office of Federal Financial
Management, Office of Management and Budget, prepared
statement of............................................... 45
Ungar, Bernard, Director, Physical Infrastructure Issues,
General Accounting Office, prepared statement of........... 53
Waxman, Hon. Henry A., a Representative in Congress from the
State of California, prepared statement of................. 14
Williams, Major General Charles, Director, Overseas Buildings
Operations, Department of State, prepared statement of..... 90
WASTED SPACE, WASTED DOLLARS: REFORMING FEDERAL REAL PROPERTY TO MEET
21ST CENTURY NEEDS
----------
THURSDAY, JUNE 5, 2003
House of Representatives,
Committee on Government Reform,
Washington, DC.
The committee met, pursuant to notice, at 10:06 a.m., in
room 2154, Rayburn House Office Building, Hon. Tom Davis of
Virginia (chairman of the committee) presiding.
Present: Representatives Tom Davis of Virginia, Ose,
LaTourette, Souder, Shays, Janklow, Duncan, Schrock, Mrs. Davis
of Virginia, Deal, Ms. Miller, Turner, Mrs. Blackburn, Waxman,
Owens, Cummings, Kucinich, Tierney, Clay, Ruppersberger,
Norton, and Cooper.
Staff present: Peter Sirh, staff director; Melissa Wojciak,
deputy staff director; Ellen Brown, legislative director and
senior policy counsel; Robert Borden, counsel/parliamentarian;
David Marin, director of communications; Scott Kopple, deputy
director of communications; Drew Crockett, professional staff
member; Teresa Austin, chief clerk; Joshua E. Gillespie, deputy
clerk; Robin Butler, financial administrator; Michael Layman,
Susie Schulte, and Jason Chung, legislative assistants; Brien
Beattie, staff assistant; Phil Schiliro, minority staff
director; Phil Barnett, minority chief counsel; Michelle Ash
and Tony Haywood, minority counsels; Tania Shand, minority
professional staff member; Earley Green, minority chief clerk;
Jean Gosa, minority assistant clerk; Cecelia Morton, minority
office manager; and Christopher Davis, minority staff
assistant.
Chairman Tom Davis. A quorum being present, the Committee
on Government Reform will come to order.
I want to welcome everyone to today's hearing on the
current conditions of the Federal Government's real property
holdings and the reforms that could be implemented to
revitalize these extensive assets.
The Federal Government is one of the world's largest real
propertyholders. Its real estate portfolio has over 3.2 billion
square feet and nearly 525,000 buildings valued at over $328
billion. Literally hundreds of millions of taxpayer dollars are
spent each year just to maintain these extensive properties.
Many Federal properties are in disrepair, lack up to date
technological infrastructure, are ill equipped for adequate
security protection and pose health and safety threats to
workers and visitors alike. Others are no longer suitable to
meet the Federal Government's changing mission. For instance,
of the 8,000 buildings managed by GSA, more than half are over
50 years old and are in deteriorating conditions that require
an estimated $5.7 billion in repairs.
The State Department alone faces an estimated $736 million
in repairs for deteriorating buildings. The situation has led
the GAO to include vacant, underutilized and deteriorating
Federal real property to its high risk list. GAO finds that the
magnitude of this problem puts the Government at significant
risk for lost revenues and opportunities. Specifically, GAO
points to the fact that under-utilized or excess property is
costly to maintain. The Department of Defense spends between
$3-$4 billion annually just for maintenance of unneeded
facilities. Also, GAO finds that excess government buildings
and land can be put to more effective uses, exchanged for more
useful property, or even sold. Clearly, these findings should
concern every American taxpayer. Every Member of Congress can
likely identify at least one Federal property site in his or
her district that is either vacant or deteriorating and in need
of revitalization.
The adverse effects to the agency, the workers of that
agency and the local community are apparent. Reuse would result
in enormous benefits. One such example can be found right here
in the District of Columbia. The old General Post Office
occupying the entire block bordered by E, F, 7th and 8th
Streets, NW, near MCI Center was built in the 1830's and has
fallen into disrepair. In fact, by the 1990's this national
landmark had become a crack house. Then, through congressional
authority granted to GSA, the site was leased to a private
entity and transformed into the Hotel Monaco.
As I believe you will see in the GSA Administrator's
testimony later this morning, its architectural significance
has been preserved and restored, the waste of taxpayer dollars
in maintenance has been stopped, and the local community is
benefiting from this revitalized area.
We are clearly facing a critical situation in Federal real
property management. We must take action to stem this tide of
deterioration to Federal buildings and subsequent waste of
taxpayer dollars. We can't just throw more money at the
problem. Fiscal responsibility requires that we also grant
agencies alternative property management authority. We must
expand the agency incentives to dispose of unneeded properties
and extend their authority to enter into partnerships with the
private sector.
Federal agencies are subject to several laws that limit
their authority to acquire, manage and dispose of real
property. GSA has broad responsibility over Federal real
property but its freedom to effectively manage holdings is
severely restricted by law. Other agencies, such as State, VA,
Defense, have separate authority that gives them limited
flexibility to outlease or dispose of their property under
specific conditions.
GSA and other agencies need broader management authority in
order to efficiently and cost effectively manage their
properties. The first step in solving this problem is to
require an accurate and updated inventory of all Federal real
property and to establish a real property officer in each
agency. Improving asset management is consistent with the
President's management agenda.
Next, agencies must be given expanded authority to exchange
or transfer property with other Federal agencies. Subleased,
unexpired portions of leased property now lease under utilized
property. In addition, agencies should be permitted in
appropriate circumstances to retain the proceeds from
disposition of excess real property to meet the agency's
capital asset needs.
In the last Congress, I co-sponsored with Representative
Pete Sessions, H.R. 3947, ``The Federal Property Asset
Management Reform Act of 2002.'' That contained these reforms
and provided for adequate congressional oversight. That bill
had bipartisan support in the last Congress and it passed out
of this committee. We have to continue to pursue solutions to
the crisis in Federal property management disposal.
We had hoped to have the Honorable Pete Sessions as our
first witness. He has been an outspoken advocate for providing
authority to agencies to enter into public/private partnerships
but responsibilities on the House floor this morning prevent
him from being here. If he can break away during this hearing,
we will give him the opportunity to testify at that point.
Our panel today is a distinguished panel and includes
witnesses from government agencies having responsibility for
property management as well as from the private sector. We are
going to hear from the Honorable Stephen Perry, Administrator
of the General Services Administration; Linda Springer, the
Controller of the Office of Federal Financial Management of
OMB; Bernard Ungar, Director, Physical Infrastructure Issues,
GAO; Mark Catlett, Principal Deputy Assistant Secretary for
Management, Department of Veterans Affairs; Major General
Williams is not here but on his way and Brent Bitz representing
the Building Owners and Managers Association and executive vice
president, Charles E. Smith Commercial Realty.
I want to thank all our witnesses for appearing before the
committee and look forward to their testimony.
Do any other Members wish to make an opening statement? The
gentleman from Ohio, Mr. LaTourette.
[The prepared statement of Chairman Tom Davis follows:]
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[GRAPHIC] [TIFF OMITTED] T8504.003
Mr. LaTourette. Thank you very much, Mr. Chairman, and
thank you for having this important hearing today. You have
assembled a distinguished panel.
The issue of underutilized property is one that has vexed
us for quite some time. I don't believe there is an easy answer
to the question of how we maintain our Federal building
inventory to continually meet the needs of the myriad of
agencies and departments of the Federal Government in an age of
ever declining appropriations to the GSA.
As we proceed in our discussions of this issue, it is vital
that we keep in mind that all real property is not the same.
The Federal inventory ranges from parklands as small as the
grounds of the White House to the Yellowstone in Montana,
office buildings in cities as large as New York City and as
small as Asheville, NC and landmarks like the Statute of
Liberty. While I use those examples as hyperbole, I don't think
we should kid ourselves as to what we are really talking about,
and that is the enormous inventory of Federal office buildings.
I am pleased Administrator Perry is with us today, As the
head of the GSA, he runs the Federal agency that controls the
majority of the general purpose office space in the Federal
inventory. GSA acts as the government's landlord, controlling
approximately 1,900 Federal buildings with 184 million square
feet of space and leases approximately 6,400 facilities with
153 million square feet of space. GSA's total inventory of 337
million square feet represents about 10 percent of the total
governmentwide inventory but again, that is the vast majority
of the Governments general purpose office space.
In addition to its role as the Government's landlord, GSA
acts as a central management agency for governmentwide real
property. It provides policy guidance to agencies concerning
real property matters and disposes of surplus property. GSA
also is charged with the construction, alteration and
acquisition of general purpose office space for Federal
agencies without landholding authority.
It is important to note that a few agencies do have
independent landholding authority apart from GSA. They do so
only for a limited purpose and limited scope and the types of
properties that authority extends to. The Department of
Defense, the Veterans Administration and Park Service, for
example, do not have the authority to acquire and construct
general purpose office space. This authority has rested with
the GSA since its creation. At that time, the Congress
recognized the need to centralize these functions to reduce
waste and ensure that the real property policy proceeded in a
coordinated manner.
While I support giving the executive branch enhanced tools
to manage its real property inventory, I believe this authority
should be limited to those agencies already with similar
authorities and in terms of general purpose office space solely
within the GSA. The diminution of this authority to every
agency that occupies space threatens the ability of the
Congress to oversee the use of Federal property and exposes the
Government to waste, fraud and abuse and risks the loss of
valuable Federal assets.
I agree with my colleagues that each agency has a role to
play in the process of determining the best use of the property
they occupy and as such, I support many of the changes that
have been recommended. The requirement of an accurate and up to
date inventory of real property and the establishment of a real
property officer in each agency to coordinate with GSA on the
use of each agency's facilities would go a long way to ensure
we are maximizing our resources.
I also support the use of public/private partnerships. In
the 106th Congress we authorized legislation that would
revitalize the Southeast Federal Center and the response to
that initiative has so far been very positive.
With ever decreasing appropriations for the repair,
alteration and renovation of Federal real property, we must
continually be looking for new and innovative ways to pay for
this work. However, new authorities to conduct this work should
be limited to those agencies with the expertise to use them
efficiently and effectively. I believe that only the GSA has
that expertise.
I look forward to hearing from the witnesses today. I thank
you for having this hearing and I thank you, Mr. Chairman, for
your intense interest in this subject. I also want to commend
Mr. Sessions for his work not only in the last Congress but in
this Congress as well.
[The prepared statement of Hon. Steven C. LaTourette
follows:]
[GRAPHIC] [TIFF OMITTED] T8504.004
[GRAPHIC] [TIFF OMITTED] T8504.005
[GRAPHIC] [TIFF OMITTED] T8504.006
Chairman Tom Davis. I thank my friend from Ohio who has
also taken a leadership role in this on the other committee
that has jurisdiction on these issues and look forward to
continuing to work with you to resolve this issue as
expeditiously as possible.
I will now recognize our ranking member, the gentleman from
California, Mr. Waxman.
Mr. Waxman. Thank you very much, Mr. Chairman.
We are here today to examine the very genuine, costly and
pressing problems the Federal Government has managing its real
property, its public buildings and lands. As GAO has indicated
by placing this issue on its high risk list, problems abound.
Unneeded and under-used buildings are in the Federal inventory.
Some buildings are literally falling apart. Accurate data on
Federal real property is hard to obtain from agencies and
costly leasing of office space is too often the quick answer.
These are far from trivial problems. In fact, they are
costing the Federal Government and the American taxpayers
billions of dollars. We are spending $3-$4 billion a year on
buildings we don't need. In addition, the amount of money
required to bring needed Federal facilities up to minimally
acceptable standards is truly staggering, $63 billion at the
Department of Defense, $11 billion at Interior, close to $6
billion at GSA facilities. We probably can't get reliable data
but we could be looking at $100 billion in needed repairs.
One approach to specifically addressing the problem of the
maintenance of Federal buildings is to provide agencies the
ability to engage in public/private partnerships on specific
properties. The basic idea is that the Government provides the
property, the private sector provides capital for improvements
and the property is then managed for the benefit of both
parties.
I know that Chairman Davis supports this approach and
therefore, in the last Congress I worked with him to develop a
bipartisan bill on property reform that built on this concept
and gave agencies new tools to modernize Federal property
management. The bill gave agencies the authority to sublease or
outlease vacant space or land use and to use the proceeds to
make other capital asset improvements. In addition, it
contained important safeguards to ensure local community input
is given appropriate consideration.
Last year, the bill was never considered by the full House.
It was referred to the Transportation and Infrastructure
Committee. While that committee seems to agree in principle
with many of the approaches the bill took, it had
jurisdictional concerns with the way it was drafted and never
reported out the measure. Continuing staff discussions on the
issue in this Congress have so far failed to resolve these
jurisdictional concerns which seemed to boil down to whether we
amend the Federal Property Administrative Services Act of 1949
over which we have jurisdiction or the Public Buildings Act of
1959 over which the Transportation Committee has jurisdiction.
I hope we can surmount these procedural and jurisdictional
issues. I hope we can work together to make appropriate
revisions to the substance of the legislation to address issues
raised by the Congressional Budget Office and others.
Mr. Chairman, we have a widely recognized and quite serious
problem with the management of Federal real property. I am
ready to work with you, with Representatives Norton and
LaTourette, the Chair and ranking members of the Public
Buildings Subcommittee of the Transportation and Infrastructure
Committee to find a solution to this impasse.
[The prepared statement of Hon. Henry A. Waxman follows:]
[GRAPHIC] [TIFF OMITTED] T8504.007
[GRAPHIC] [TIFF OMITTED] T8504.008
Chairman Tom Davis. I thank my friend for his statement. I
will be introducing some legislation shortly on that and again,
will work with you to bring to our committee quickly. We have
to resolve these jurisdictional disputes between the committee
because of this issue every day millions of taxpayer dollars
are being used to keep up buildings we can't use. It is a waste
and we are going to move quickly on that. I appreciate my
friend's pledge to work with us.
Any other opening statements at this point? The gentleman
from Ohio.
Mr. Turner. This certainly is a wonderful initiative that
is going to result in significant savings to the Federal
Government and sounds as if it will constitute responsible
management of Federal property.
One of the concerns I have concerning this proposal, and
some of the examples we have received, is the impact it might
have on urban cores. As we look to buildings that are
dilapidated and need to either be renovated or abandoned we
must not have a migration of Federal jobs to the suburbs. Some
of the examples we have here include a statement of a suburban
location that would be more desirable for prospective Federal
tenants and probably cheaper. We all know that suburban
locations are going to be cheaper but there are also Federal
interests in making certain we maintain our urban core.
Being a former mayor, we know that through Federal mandated
programs, cities are significantly burdened with issues of
schools, Brownfields, social services, special needs
populations, public housing, environmental mandates and
infrastructure burdens that support an entire urban area. I am
interested as to how the process of relocation might also
include some interest in looking to supporting the urban core.
Chairman Tom Davis. Thank you very much.
Any other opening statements? The gentleman from Maryland.
Mr. Cummings. Thank you very much, Mr. Chairman.
The Federal Government is one of the world's largest
propertyowners with more than 400,000 buildings and 500 million
acres of land. In fiscal year 2001, the Federal Government's
real property assets were valued at $328 billion, with the
Government spending billions annually to maintain its
properties. More than 30 agencies control the real property
assets.
In January 2003, the Government Accounting Office
designated Federal real property as new, high risk area in its
report ``High Risk Series, Federal Real Property.'' The GAO
found that many assets are in an alarming state of
deterioration with an estimated restoration and repair cost to
be in the tens of billions of dollars. The property is managed
with outdated technology and business models dating back to the
1950's. GAO further found that compounding these problems are
the lack of reliable, governmentwide data for strategic asset
management and the costs and challenges of protecting these
assets against potential terrorism.
The General Services Administration has broad
responsibility over Federal property including the sale of
surplus Federal property to State and local governments, non-
profit organizations, private individuals and companies. This
authority is given to GSA through the Federal Property and
Administrative Services Act. During the 107th Congress, the
Federal Property and Asset Management Reform Act passed out of
this committee by voice vote. That bill would have given
agencies the authority to sublease vacant space or land and use
the proceeds to offset the cost of holding such property and to
make other capital asset improvements.
Given the rise of the Federal deficit and the numerous
unfounded mandates from Congress like the No Child Left Behind
Act, I hope that similar legislation can be introduced to
enhance Federal asset management. The Government should not be
wasting billions of dollars. Federal managers of these
properties confront a multitude of challenges securing the
property due to the threat of terrorism and problems managing
deteriorating facilities.
I look forward to hearing from our colleague, Pete
Sessions, today and all of our witnesses as we explore the best
ways to ensure the effective and economical use of Federal and
real property. I have said many times there is one that
Republicans and Democrats agree on and that is that peoples'
tax dollars should be spent effectively and efficiently.
I thank you for this hearing.
Chairman Tom Davis. Any other statements? Mr. Janklow.
Mr. Janklow. Thank you very much, Mr. Chairman. I am going
to be extremely brief.
Looking at the two page precis that preceded this hearing,
you have one paragraph that says it all. Federal agencies are
subject to several laws that limit their authority to acquire,
manage and dispose of real property. The GSA has broad
responsibility over Federal real property but its freedom to
effectively manage buildings is severely restricted. Other
agencies such as DOD, the Department of State, the Veterans
Administration have separate authority that gives them limited
flexibility to outlease or dispose of their property under
specific conditions.
The problem we have is everybody in the Congress wants to
run the executive branch. Everybody wants to micromanage,
everybody wants to tell everybody how to do everything. No one
has the freedom to run this like a $3 billion real estate
enterprise ought to be run. The net result is what we have
today. We can entitle any bill we want with all the grand
titles about reform, reform, reform, but the reality is unless
we are really willing to reform something, unless we are
willing to turn loose people to make independent, sensible,
discretionary decisions, unless we turn them loose to make them
property asset managers, we are going to continue to have the
mess we have and for the next 50 years, they will be holding
hearings discussing things and what we ought to do to fix the
Federal property.
Thank you for having this hearing today, Mr. Chairman.
Chairman Tom Davis. Thank you. I am glad we have a former
Governor on the committee because I think you bring that
executive perspective to this.
The gentleman from Ohio.
Mr. LaTourette. I was out of the room when Mr. Waxman spoke
and I listened to Mr. Cummings as well. I want to make one
comment so the record is clear. H.R. 3947 passed by a voice
vote out of this committee during the last Congress but it was
never reported by the Government Reform Committee because of
some scoring questions, so there was not a delay in the
Transportation and Infrastructure Committee because it wasn't
actually reported out of this committee. I just want that to be
clear.
Chairman Tom Davis. Again, we look forward to working with
you. You hold a critical subcommittee chairmanship over there
and time is important. I think the testimony today is going to
show us that everyday that goes by, we are wasting millions of
dollars. We have a unique opportunity in this Congress to give
our agencies the appropriate flexibility to dispose of these in
some innovative ways. There are literally billions of savings
over the years that we can make.
Any other opening statements? If not, let us move to our
distinguished panel. Mr. Perry, thank you so much for being
with us. You have been very innovative, very proactive in this,
you have some great ideas. Your entire testimony is a part of
the record, as are all the others. I would like you to try to
limit your testimony to 5 minutes. It looks like we are not
going to have that early vote, so we may be able to move
straight through and then do questions. Your light after 4
minutes will turn yellow and that gives you 1 minute to sum up
and when it is red, your time is up.
I have to swear you in because that is the way the
committee works.
[Witnesses sworn.]
Chairman Tom Davis. Thanks for being with us, Commissioner
Perry.
STATEMENTS OF STEPHEN PERRY, ADMINISTRATOR, GENERAL SERVICES
ADMINISTRATION; LINDA SPRINGER, CONTROLLER, OFFICE OF FEDERAL
FINANCIAL MANAGEMENT, OFFICE OF MANAGEMENT AND BUDGET; BERNARD
UNGAR, DIRECTOR, PHYSICAL INFRASTRUCTURE ISSUES, GENERAL
ACCOUNTING OFFICE; MARK CATLETT, PRINCIPAL DEPUTY ASSISTANT
SECRETARY FOR MANAGEMENT, DEPARTMENT OF VETERANS AFFAIRS; MAJOR
GENERAL CHARLES WILLIAMS, DIRECTOR, OVERSEAS BUILDINGS
OPERATIONS, DEPARTMENT OF STATE; AND BRENT BITZ, EXECUTIVE VICE
PRESIDENT, CHARLES E. SMITH COMMERCIAL REALTY, ON BEHALF OF THE
BUILDING OWNERS AND MANAGERS ASSOCIATION
Mr. Perry. I also want to thank you for holding this
hearing to bring more focus to what obviously is an urgent need
for Congress to pass legislation which will enable the
Government to use authorities which will enable us to be more
effective in the management of real property assets. It is the
only way in which those of us who have that responsibility at
least from the agency point of view can effectively carry out
our stewardship of this Nation's vast inventory of real
property assets, most of which are used to provide work space
for Federal workers.
Since 1999, GSA has strongly supported congressional
proposals for legislative reform to authorize effective real
property management practices. We believe this is the most
viable option at our disposal to address the longstanding and
extraordinary and perhaps emerging crisis we are facing. It was
clear from opening comments made by members of this committee a
moment ago that this is well understood. The issue is where do
we go from here, how do we address this longstanding,
extraordinary problem we have.
The problem manifests itself in the form of a huge and
growing multibillion dollar backlog of deferred maintenance
which is resulting in significant deterioration, under
utilization and vacancy of many Federal buildings. If we
continue to let this problem fester and grow, it will surely
have an unacceptable, adverse impact on our Government's
ability to function efficiently and effectively.
GSA which manages only about 10 percent of the Government's
total space has a backlog of deferred maintenance of $5.7
billion. Looking at the Federal Government as a whole, this
figure is estimated to be well over $100 billion.
In addition to GSA's support of legislative action, the
Department of Defense, Department of Veterans Affairs,
Department of State, NASA and many other Federal agencies have
strongly advocated for congressional passage of real property
reform legislation. Also, as we know, the General Accounting
Office issued and conducted studies which concluded that this
extraordinary problem is not being addressed adequately. This
is due in large part to the lack of authority in agencies to
use effective real property management practices. My written
statement for the record gives the details and rationale that
we have for the kinds of property management practices we
believe this Congress should enact and I will just mention them
and talk about one in particular.
They include the use of public/private partnerships to
enable private sector funds to be used to help address the
backlog of deferred maintenance; they include out leasing so
that the Government could lease to private organizations vacant
space not needed for Federal purposes, subleasing and exchange
and sale of real property and financial incentives to assist
agencies in the disposal of real property that they no longer
need for agency purposes.
For purposes of this testimony, I will just focus on
public/private partnerships. This would be modeled on the
common practice in the commercial sector where an owner of
property leverages their equity in the property to secure
funding from private sources to help cover the cost of
renovating a deteriorated building. The GAO report in 2001
recommended that a pilot project be authorized where this
approach could be tested further. While Congress did not
authorize that pilot project, certainly we have lots of
evidence that public/private partnership in the Federal
Government can work. It is being done at DOD, at VA, State,
soon at NASA and there will be many examples we could cite and
some are cited in my testimony regarding that.
GSA has even used public/private partnerships successfully.
You may know that under Section 111 of the National Historic
Preservation Act we have limited authority to use this approach
as it would relate to a historical building and a historical
building which has been determined to have no further Federal
need. In those very limited situations, we have used this
authority successfully. One example of it is shown in the
exhibits we have over there, the top tier of building show the
old Tariff Building when it was mothballed, when were spending
millions of dollars to keep it in that moth-balled condition.
We used the authority for public/private partnership to convert
that with the private sector partner into the facility you see
on the right. Other examples abound. My point is this is not a
new process that isn't tried and true. We know we can do it.
Another example at GSA is the case of the Southeast Federal
Center along the Anacostia River. There was special legislation
provided that enabled us to use public/private partnership to
develop that site and that project is proceeding.
The bottom tier of slides is another facility which happens
to be near Seattle, WA which is an example of another site. The
left slide shows a deteriorated Federal facility we now have
which could be renovated into something you see on the right.
In conclusion, I will agree with the sentiment of the
comments made in the opening remarks, that we do have a very
extraordinary problem, as I said, perhaps an emerging crisis.
It will only be addressed successfully with an extraordinary
solution. This means Congress and the administration will have
to be aggressive and creative and focused on results to
overcome the many obstacles that to this point have impeded our
progress in addressing this problem.
We look forward to working with you and the members of the
committee in addressing them.
[The prepared statement of Mr. Perry follows:]
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Chairman Tom Davis. Thank you very much.
Ms. Springer, thanks for being with us.
Ms. Springer. Thank you, Mr. Chairman, for asking me to
testify today.
The administration's Asset Management Initiative is
critical to meeting our stewardship responsibilities in
improving the overall management of the Federal Government. I
would like to share with you the following excerpt on asset
management.
``There is substantial evidence of weakness in the Federal
Government's management of assets including acquiring and
retaining unneeded and poorly performing assets, excess holding
costs and ineffective asset disposal. Agencies are hampered in
their efforts to identify and correct these problems by lack of
strategies, procedures, and incentives to manage a wide range
of assets.''
This could very easily have been taken from the GAO report
in the high risk series but in fact it was included in the 2002
Federal Financial Management Report published by the Office of
Management and Budget. Accordingly, we agree wholeheartedly
with GAO's addition in their January 2003 Real Property
Management addition to the High Risk list update. This is a
confirmation of the administration's efforts beginning in 2001
to address this issue.
Much of the Government's real property no longer serves the
needs for which it was acquired in the first place. The current
laws and regulations make it difficult if not impossible for
agencies to maximize the use of its real property investments.
For these reasons, the administration has taken several
important steps to improve the Government's asset management.
We are making improved asset management a part of the
President's management agenda. We expect the results of this
new focus to include expanded asset portfolio tracking and
analysis capabilities, comprehensive asset management
strategies, increased sales of underperforming assets and
reduced maintenance and operating costs.
GAO recently credited the administration for proposing
several reform efforts and other initiatives to address asset
management challenges. The administration proposed in the last
Congress, as part of the Managerial Flexibility Act,
legislation to establish these practices and provide the
incentives and tools necessary to bring about sound asset
management.
Our proposal reforms the Federal Property Administration
Services Act of 1949 by addressing all phases of an asset's
life cycle and would support an integrated portfoliowide
approach for overall property management decisionmaking. This
proposal would not alter existing authorities for properties
under the current Property Act structure, nor would it alter
authorities that were granted under other statutes. Rather, it
would provide incentives and flexibility in addition to those
authorities and grant agencies the necessary tools to manage
their assets more effectively and efficiently. Absent these
authorities, we will be unable to improve sufficiently the
asset management practices currently in place throughout the
Government. Even if we improve the data we have and condition
of our assets, we will not have a sufficient range of options
with which to execute the best asset management solutions for
specific situations.
In the spirit of the administration's initiative, some
agencies have moved aggressively to collect data about their
asset management practices even now but better information is
just the first step. We are asking agencies in the upcoming
budget process to provide us with concrete examples of what
they might do to maximize the use of their property with these
new authorities.
One of the hurdles to enactment of the administration's
proposal is the high cost attributed to it by the Congressional
Budget Office. We believe that CBO's scoring of the property
sales provision ignores the near certainty that agencies would
sell almost no excess property without the incentive provided
by the administration's proposal. Therefore, the additional
spending scored by CBO should be offset by the additional
property sales receipts that would be generated by the
incentives provided in the administration's proposal.
In any event, we believe that the issues raised by CBO can
be addressed by making proceeds from any property sale or from
the exercise of new public/private partnership authorities
granted under the proposal subject to appropriations.
Mr. Chairman and members of the committee, I ask for your
support for this common sense proposal. If we look to the
examples set for us recently in the area of erroneous payments,
we can see that the combined work of the executive and
legislative branches can enhance our management improvement
efforts considerably.
The administration launched an initiative to reduce
erroneous payments but it was only able to reach its full
impact when this committee crafted and shepherded through the
legislative process legislation that would require erroneous
payment reduction efforts of all programs and activities
administered by the Federal Government. This is the kind of
partnership that I hope we can have in the area of asset
management.
The administration has an initiative to improve our
stewardship over the Government's holdings. With your help, we
can provide Federal agencies with the tools they need to meet
their asset management responsibilities.
This concludes my statement. I look forward to answering
your questions and working with the committee.
[The prepared statement of Ms. Springer follows:]
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Chairman Tom Davis. Excellent. Finished right on time.
Great debut before the committee.
Mr. Ungar, see if you can follow Ms. Springer's lead.
Mr. Ungar. Mr. Chairman, this is going to be a hard act to
follow.
We are pleased to be here to assist the committee as well
as Mr. LaTourette's subcommittee which we have worked with
before, to address this very important problem of Federal real
property. For the reasons that have been cited this morning,
the amount of property that the Federal Government owns and the
dollar values associated with that property, this is clearly a
very, very important problem.
As mentioned, in January of this year we did add the issue
of Federal real property to our high risk list. We did that for
a number of reasons, primarily because Federal real property
has been experiencing some very significant, complex and
longstanding problems. The Federal Government has not been
postured very well to address those problems from either the
legislative authorization standpoint or the management of the
issue from the administration standpoint for a variety of
reasons.
One of the major issues that has been discussed and
specifically the leading reason why we did put the issue on the
high risk list was the subject of excess property, under used
or under utilized property. The Federal Government owns a
substantial amount of this property. Just for three agencies
alone, the Postal Service, the VA and GSA, we have identified
over 900 properties as of the beginning of this fiscal year,
that were vacant or under utilized.
There are a number of these properties in a variety of
agencies. Just a couple of examples, one that we see over here
is the Charleston Federal Building which has been vacant since
1999 due to hurricane damage; it has asbestos; it has been
condemned. It is a very nice piece of property in a very
desirable area in Charleston. Unfortunately, it was a candidate
for public/private partnership but GSA lacks the authority to
enter such an agreement or arrangement for this type of
property and it is currently negotiating with the city of
Charleston for an exchange of property.
Another example is the St. Elizabeth's Hospital here in
Washington, DC, a very large piece of property that has not
been used as a Federal hospital for many years. It has been a
long time in coming but finally in the last couple of years,
HHS has been working with GSA to address the problems of the
property. A number of problems are associated with those that
are typical of Federal properties. It has deteriorated, it has
environmental issues and it is historic. So there are a number
of challenges there.
Finally, I would like to point out a third example which is
the old Chicago Post Office, a very large facility which has
been vacant for several years when it was replaced by a new
facility. This property costs the Postal Service over $2
million a year to hold. A sale has been agreed to but there
have been complications that have arisen for a variety of
reasons. So it is still vacant and still costing the Postal
Service money. There are many other examples but I won't go
into those.
There are other reasons that we put this issue on the high
risk list. There are many buildings that are deteriorated. The
Government relies too often on leasing rather than ownership.
One example of that is the Patent and Trademark Office complex
currently being constructed in Alexandria. It has been
estimated that is going to cost the Government almost $50
million to lease as opposed to own. There are other examples.
Finally, the Government faces many challenges these days as a
result of the events of September 11 in securing its property.
Of course, to the extent the Government has to secure property
it doesn't really need, those funds could be used for other
purposes.
As I indicated, we don't see that the Federal Government is
in a good position to address these issues. One, there has been
no central focus on this because over 30 agencies have
responsibility and jurisdiction to own property. Agencies lack,
as indicated, the authority to do many of the things that need
to be done. In our view agencies need to have appropriate tools
and authority to deal with this problem and the executive
branch needs to pull together its efforts and basically provide
leadership, oversight and a comprehensive transformation plan
that would lay out what needs to be done. We are very pleased
that OMB has taken the initiative. We all came to the same
conclusion I think pretty much at the same time and we are very
pleased to be able to work with OMB, GSA, your committee and
Mr. LaTourette's subcommittee to address these problems in the
future.
[The prepared statement of Mr. Ungar follows:]
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Chairman Tom Davis. Thank you very much.
Mr. Catlett.
Mr. Catlett. Thank you, Mr. Chairman and members of the
committee for asking me to testify today regarding new
legislation for Federal agencies to enter into public/private
partnerships, arrangements and Federal real property
management.
At the VA, our public/private partnership is known as
enhanced use leasing authority. It authorizes the department to
lease its property or facilities for up to 75 years. VA has 12
years of experience with this program which is an integral part
of our asset management program. In return for allowing VA
property to be used for VA or non-VA mission compatible uses,
VA can require rent in the form of reduction in the cost of
free use of facilities or services for VA programs, monetary
payments or other in-kind considerations which in the opinion
of the Secretary enhances a particular VA activity mission.
Since its inception, VA has studied over 100 enhanced use
leasing initiatives, we have awarded 27 projects, and we are
actively developing 29 new initiatives. This program allows VA
to maximize return from underutilized properties while
protecting flexibility to retain, reuse or to dispose as
dictated by future needs. It utilizes private resources instead
of appropriation and creates a win-win situation for VA and the
local communities by encouraging economic development of
otherwise underutilized lands.
VA has been able to acquire office buildings, transitional
housing, energy facilities, garages, lodging facilities,
research and medical facilities, hospice care and adult and
child care centers through this program.
As stated earlier, the enhanced use lease program is just
one aspect of VA's overall asset management program. VA has
been developing a capital asset portfolio that consists of six
asset classes which are owned and leased real property, land,
information technology, equipment and agreements. Business
processes and decision frameworks covering long term management
of VA's assets are being developed for each of these asset
classes.
VA is also striving to move beyond asset management to
portfolio management which involves leveraging and investment
or combination of investments in order to minimize risk and
maximize cost effectiveness and performance of assets.
VA has seven approved portfolio goals and is working to
define the metrics for these goals.
Again, it is a pleasure to be here to discuss with you this
important issue.
[The prepared statement of Mr. Catlett follows:]
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Chairman Tom Davis. Thank you.
Major General Williams.
General Williams. Thank you, Mr. Chairman and members of
the committee, for the opportunity to discuss the work of the
Overseas Buildings Operations in the Department of State and
managing our real properties overseas. It is a very delicate
and complex set of responsibilities involving property valued
at over $12 billion. I have submitted a full statement for the
record which outlines this and I will briefly summarize some
points.
Our mission was reshaped after the 1998 bombings in East
Africa and was reinforced after September 11 and required the
State Department to accelerate the construction of new
facilities and use, quite frankly, new and improved best
practices and different concepts.
GAO reported in January 2000 that the need to adequately
protect our people overseas from threatened terrorist attacks
well may be the single most important management issue facing
the Department of State and OBO. The Overseas Buildings
Operations and the Department have put in place a number of new
reforms starting with the creation of a long range capital
strategic plan which outlines how we would deal with both
construction and disposal of properties.
Second, the Department put in place a more systematic way
of gathering information to make certain that we build at the
right size and obviously eliminate excess properties.
Third, the Department introduced a standard embassy design
concept which allows us to achieve the objective.
Moving to management of overseas real estate, needless to
say the backlog of unmet needs is really substantial. To the
extent that we must maintain underutilized or unneeded
facilities we are creating an even larger financial burden. The
State Department is vigorously pursuing the disposal of excess
and underutilized and overstandard properties. The significant
changes in our security standards over the last few years have
made this more of a challenge.
As stewards of the Department of State's real estate
investments and representatives of the taxpaying public, we
recognize our obligation. The authority to use the proceeds of
sales, and I might add we are on a glad path this year for
producing some $90 million through sales of underutilized
properties and to use these proceeds of sales to replace and
rehabilitate our existing facilities, is a further incentive to
pursue the prompt and economically sound sale of these
properties.
We might point out as well that there are some foreign
policy considerations that we have that make us unique from the
rest of the colleagues here. There are a number of reasons why
we cannot connect as well as we would like the public/private
dimension. However, we are using very effectively the build to
lease concept where we do leverage the private sector in order
to help us in many areas on certain types of facilities.
We have a reciprocity issue as well which is connected to
international law which disallows us again to deal with some of
the matters as related to public/private partnerships.
Unique expertise obviously is a requirement in the State
Department in as much as we have to deal with the laws and
rules of 260 locations around the world, that is where we have
diplomatic facilities today. We have been very aggressive on
this matter, we think we have a concept and program in place
which allows us to effectively manage the assets.
GAO has made several recent inquiries into this matter and
we have made presentations before Mr. Shays' subcommittee as
well on this same matter.
I appreciate the opportunity on behalf of the State
Department to participate today and look forward to answering
your questions.
[The prepared statement of Major General Williams follows:]
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Chairman Tom Davis. Thank you very much.
Mr. Bitz.
Mr. Bitz. Good morning, Chairman Davis and members of the
committee.
My name is Brent Bitz. I am executive vice president of
Charles E. Smith Commercial Realty, a division of Vornado
Realty Trust. I am here today representing the Building Owners
and Managers Association International, the largest and oldest
trade association representing the commercial real estate
industry.
BOMA greatly appreciates the opportunity to appear before
the committee to discuss how GSA and other Federal agencies can
more effectively manage the Government's aging and
underutilized properties. BOMA International supported H.R.
2710 and H.R. 3947 during the 107th Congress and looks forward
to once again showing its support for similar legislation in
the 108th Congress.
We are here today because BOMA's membership, owners,
managers and investors in commercial office real estate are
ideally suited and are eagerly awaiting the opportunity to
enter the type of public/private partnerships envisioned by the
GSA and the committee.
For private sector investors to participate in a public/
private partnership, Congress must carefully balance the need
for oversight with flexibility and the opportunity for a sound
return on investment. Deals will not be done if they take too
long and if unnecessary regulatory burdens diminish any returns
the investor could hope to make.
Several different types of deals have the potential to
appeal to private sector companies and provide clear benefits
to the Federal Government. Outright sales of Federal buildings
or land that is underutilized or obsolete could generate income
for the Federal Government to purchase or lease space more
suitable to its specific needs.
A long term ground lease could be an effective tool for
office or warehouse space that may be in need of repair but is
in a marketable location. The private sector company partnering
with the Government would invest in the repairs, lease the
space to private sector companies and make a profit through
tenant rents. After the expiration of the ground lease, the
building would revert to the Government who would inherit the
improved property. The length of lease terms would need to tie
into the underlying debt and equity financing of the project.
Lease terms in excess of 50 years would be expected for major
projects.
Subleases should also be considered where a Federal agency
owns a property but is not occupying the entire building. GSA
or the Federal agency should be allowed to rent the vacant
portion of the building to private sector tenants. However, the
Government does need to understand that restrictive operating
practices such as the new high levels of security may seriously
diminish the economic attractiveness of such subleases.
In a lease-back arrangement, the Government would have a
private sector entity take economic control of a building and
renovate it. The Government would have a first right of refusal
option to lease the building back for a rent that would include
a return on the building improvements. Unless the Government
would guarantee to lease back the building, there would have to
be strong private sector demand for the space based on either
location or physical attributes for this arrangement to work.
The private developer would need a reasonable expectation that
the building could be leased at a rate that would allow for
investments to be recouped.
Transfers or exchanges of properties could help the
Government dispose of underutilized or obsolete buildings in
exchange for properties that more closely serve their needs.
All of these should be allowed in cases where it makes sound
business sense and results in the agency or GSA receiving fair
market value. This would allow the GSA to look at each need
within the context of their entire portfolio.
Chairman Davis, you and Mr. Perry of GSA mentioned the
Hotel Monaco here in Washington as an existing successful
example that we all could see. This is a very good prototype
for consideration.
In summation, BOMA International supports congressional
action on this issue. However, we must once again caution that
GSA and the private sector will need flexibility in crafting
these types of arrangements. Every building is different, every
real estate market is different and every real estate
transaction is different. The GSA and private sector partners
must have the ability to enter into arrangements that are
mutually beneficial. Otherwise, nothing will be accomplished.
Thank you for the opportunity to appear before you today.
BOMA International welcomes the opportunity to work with the
committee and provide additional expertise on these issues in
the future.
Thank you.
[The prepared statement of Mr. Bitz follows:]
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Chairman Tom Davis. Thank you very much. Let me start the
questioning.
Ms. Springer, what we are trying to do is give the Federal
Government ability to lease, joint partner, selling, that
clearly from the testimony of everybody here saves the
Government money and allows us to do innovative things with
property that right now is deteriorating, that we have carrying
costs on, and yet we get back scoring from the Congressional
Budget Office that is a net decrease to taxpayers. I don't
understand it. We have been dealing with them. How do we get
around that? Any thoughts?
Ms. Springer. There are a couple of thoughts I would have.
First, as I mentioned in my testimony, we believe these sales
of excess properties would not occur absent the flexibilities
in the legislation. To the extent there are outlays with
respect to purchases off those sales, we believe the proceeds
of the sales should also be accounted for in any scoring. In
the scoring from last May they were not recognized. That is one
point.
Chairman Tom Davis. Let me ask you this. Could we draw a
criteria in the legislation that would ensure that?
Ms. Springer. What we have suggested is exactly along that
line which would be, speaking for the administration and not
just OMB, not only utilization of the proceeds but also any new
private/public partnership transaction should be made subject
to appropriation. We believe that addresses that issue.
Chairman Tom Davis. Commissioner Perry, would that still
give us the flexibility you need to carry this out?
Mr. Perry. Yes, I think it would, and you hit on obviously
one of the real sticking points in this and that is the budget
scoring process. In addition to the points Linda made, I think
the legislation includes a lot of things that accommodate what
some people would be concerned about in that area. For example,
the Government would have limited liability, that there would
be no guarantee as to the fact that a Federal tenant would move
into a building, we would not guarantee the loans or financing
of the private sector partner in the case of these items. So
when we went through that discussion last time, we did talk
about a lot of things we would do in administering public/
private partnerships that are in fact to some extent limiting
but in fact address some of the concerns the scoring people had
raised. I think those are addressed.
Chairman Tom Davis. This is so common sense. I think
everybody has spelled out here, the representative from the
private sector, Governor Janklow in his earlier testimony, you
want to give your executive branch the tools they need to do
common sense things to protect a real estate portfolio of $328
billion. It is not your fault the law is written in such a way
now that your hands are tied but getting it through here has
two major problems. One is the scoring issue, getting it
through the Congressional Budget Office where they are looking
at only one side of the equation. We have to satisfy that, I
think.
Second is the jurisdictional fight between the 1949 Act and
the 1959 Act that go between the Transportation Committee and
this committee. We may just have to escalate this. Mr.
LaTourette and I are working on it. We have staffs that are
conscious of committee jurisdiction but this is something we
are going to have to try to write the law and share
jurisdiction, whatever, as we move through but those are the
two things we need to focus on, it seems to me.
The rest of this is pretty common sense. Mr. Waxman and I
last year negotiated some language and we have some differences
over how to best do it and how much authority you give your
different agencies, the GSA and checks and balances, but those
can be worked through as well.
As I said, we have a $328 billion portfolio. We are
spending billions on maintenance and upkeep of excess or under
utilized property that wastes literally billions of dollars
over time. Commissioner Perry starting with you, I would like
to hear what tools you would really like to have in an ideal
world that would give you the flexibility to run this as
professionally and in the taxpayers' interest as you could?
Mr. Perry. I think among the various challenges we face,
the biggest one or certainly one of the bigger ones is this
issue of addressing the large and growing backlog of
deteriorated and vacant space. We find that it is sort of a
death spiral. First of all, as we have this deteriorated space,
we either have to have Federal workers working in substandard
space, which we do in some instances, or also the agency will
move to other space, oftentimes to leased space. We might think
we are solving the problem but we are continuing to incur the
expense and we are adding expense on top of that when agencies
move to leased space.
The public/private partnership portion of this would enable
us to begin to address some of that $5.7 billion backlog as it
relates to GSA and a larger number in other agencies, if you
add all the other agencies together. So that management
practice would be very helpful to us.
I would just mention that on previous occasions when it
appeared that management flexibility was going to be granted to
us, we began to move in anticipation and getting our people
ready with the training they need to move ahead identifying
specific projects that we would work on. Everyone at GSA was
ready to go.
I will tell you that when we weren't able to get it across
the finish line, that was a significant setback in terms of our
peoples' thoughts but we are very, very hopeful that as we gear
up this time around that we will be able to put this in place.
Chairman Tom Davis. Let me make this pledge to you and I
think Mr. LaTourette will also, we are going to get something
done this time and we have some difficult issues to work
through, both jurisdictionally and scoring and the like but we
know how important this is. The importance of taxpayers trumps
any other issues that may arise in my opinion. I know Mr.
Waxman and Ms. Norton would agree with that. So we are going to
work together as quickly as we can to try to work through these
issues at least on the House side. I will let you handle the
Senate side. We don't handle the other body and make no
promises on what happens there but we need to initiate it and
get this through here.
As I said, it wasn't the Transportation Committee that held
it up last year, it was a scoring issue we had with CBO and
coming back with some additional language may be able to solve
that.
Mr. Perry. I agree with you and my understanding is those
three things. One, as you point out, the question of scoring
and that can be dealt with, I am sure it must be dealt with.
The other you have also talked about is the issue of
jurisdiction and I think we are going to have to find a way to
move beyond that because as I say, Rome is burning, we are
still having problems. The third one that has come up is the
question of the retention of proceeds and whether or not that
can be done in such a way that the congressional committees
will still have oversight of how those proceeds are used and
whether or not this is in any way a violation of the
appropriations process. Here again, we have incorporated ways
in which to deal with that so that the committees are made
aware of what is being done and have an opportunity to
authorize it.
Chairman Tom Davis. Great. Thank you very much.
Who should I recognize on this side. Mr. Ruppersberger was
here first, Ms. Norton is ranking on the Transportation
Committee. Who would like to go first?
The gentleman from Maryland is recognized for 5 minutes.
Mr. Ruppersberger. This issue is really relevant to us as
far as the cost point of view, the performance point of view
and we are probably talking about hundreds of billions of
dollars. Would you agree with that? I see everyone shaking
their heads yes.
I think before we really decide what we are going to do we
have to set a strategy. That strategy, I think the first thing
is to get the inventory, the information. My first question is
basically we need to get a comprehensive inventory. I don't
know whether we have the expertise in-house or not to not only
identify all the properties we have, the type of properties,
whether they are deteriorating, are there asbestos issues
involved, as far as the heating, is the building or the
property really worth keeping or should we get rid of it
because every property you keep is going to cost you money,
especially the ones you are not using.
My notes here say because of the budget and the tax cut
this year, we have had to cut Veterans' spending and I have
information here that the Department of Veterans Affairs spends
$235 million annually to maintain vacant properties. That money
could be used to help veterans when we need money.
My question is, first, do we have the comprehensive data
base and information that we need to start to implement a
program to deal with this massive issue. Do we have that type
of data base, that information?
Mr. Perry. If I may venture and answer first, I will answer
that the answer is yes, we have enough information to proceed
with this right away and then I will qualify my answer a bit
and say we don't have a comprehensive, accurate and reliable
data base of all the Federal Government asset information. We
will continue to work to put that together.
GSA, for example, in our portfolio management process,
identifies every asset under our management, we do know with
some specificity where the vacancies are, where the under
utilization is, where the deteriorated buildings are. We have
more than enough information to keep ourselves busy in the
office space type arena which is where this problem is the
greatest, I believe for a very long period of time based on the
information we have.
As we step out and begin the process, we can work with the
other agencies to refine the governmentwide data but we have
the GSA portion of that which is a sizable part.
Mr. Ruppersberger. GSA is really the agency dealing with
most the agencies on that, correct?
Mr. Perry. No, we have 10 percent of the Federal
Government's total, most of the office type.
Mr. Ruppersberger. What do you need from a resource point
of view to be more aggressive to make sure this happens?
Mr. Perry. The major thing we need is the authorization to
use these management practices which we do not have today.
Mr. Ruppersberger. I think of the management practices Mr.
Bitz brought up. One of the things is a government lease is
probably one of the best leases you can take to get financing
or whatever. Would you agree, Mr. Bitz? We have a great
leverage with respect to that lease but we have to deal with
today's world and today's business environment and work with
the business community. I heard testimony today we feel
purchasing is probably the best way to go but if you don't have
the money you might have to have a long term lease with an
option to come back. That is the issue.
I would like someone else to address the issue because if
we want to get anything out of this hearing, we are talking
about where we need to go and do you need Congress to act on
this. The chairman has said he wants to move forward.
Mr. Ungar. I would like to add we would agree that at least
some of the agencies now have enough information to get started
but as he indicated, the inventory of information GSA has is
not as comprehensive or complete as it needs to be for a couple
of reasons. One, GSA depends upon over 30 agencies to provide
the information it needs and some of those agencies do a better
job than others in providing complete, current and accurate
information.
One of the pieces of the previous perform proposal was to
mandate that an inventory be kept and give GSA additional
leverage and the individual independent agencies like
Agriculture and Energy leverage for securing resources for
providing accurate information.
Another area where some agencies have better information
than others is identifying vacant and underutilized properties.
Some of the agencies we have contacted do not have this kind of
information centrally. GSA does have a regulation that requires
agencies to annually identify this kind of information but
unfortunately the regulation does not require the agencies to
pull it together centrally within that agency or to report it
to any central location within the Federal Government. That is
a gap that probably needs to be addressed.
Mr. Ruppersberger. My time is up. The other issue I would
like to address if I had the time is maintenance which if you
spend $1,000 it might save you $1 million down the road.
Mr. Shays [presiding]. We will definitely cover that
territory.
Mr. LaTourette.
Mr. LaTourette. Mr. Ungar, Administrator Perry talked about
the death spiral and the $5.7 billion of unmet requirements to
rehabilitate buildings. Is it your experience and observation
that this condition exists because of a lack of willingness on
the part of the GSA or lack of resources, or both to address
that problem?
Mr. Ungar. I think it is primarily a lack of resources. We
have looked at this issue at GSA and other agencies. At GSA,
there were some management issues that we suggested GSA could
improve in terms of getting better information and perhaps
improved planning but the real issue was resources and tools
that have been talked about to deal with this problem.
Mr. LaTourette. I think most people who have looked at it
have looked favorably at these public/private partnerships.
Does GAO have an opinion as to who would be best able to manage
these public/private partnerships for the disposition of
Federal properties?
Mr. Ungar. We haven't looked at all the agencies. We
certainly think that, whoever is going to do this on behalf of
the Federal Government needs to have appropriate expertise. We
know that all 30 agencies would not have the kind of expertise
needed to deal with these complex arrangements. For example,
recently the Department of Defense which obviously has a lot of
property was given enhanced use lease authority or expanded
authority to do leasing and in effect, engage in public/private
partnerships. We looked at this within the last year or so and
found it has only implemented that authority in a very limited
way. One of the reasons is because it didn't have appropriate
expertise.
If this authority were granted governmentwide, there would
probably need to be some control in place to go through an
organization like GSA or a comparable organization to make sure
the Government is doing the appropriate thing.
Mr. LaTourette. The other issue, Ms. Springer, CBO was
mentioned but OMB also engages in scoring as well. I would ask
if the goal is to maximize the Federal dollar? Is the OMB
considering changing its scoring rules to allow leases of
longer than 10 years?
Ms. Springer. OMB is currently looking at leasing scoring
and I think that is an issue they are going to be looking at as
part of that effort. That has arisen as a result of the
anticipation of this legislation and what is going on in
agencies like VA that have current opportunities today. I would
expect that would be a part of it.
We would also look forward to working with the committee
and the committee staff and CBO as we go forward.
Mr. LaTourette. Your testimony and your comments in
response to the chairman's question of do you support the
notion, as does everybody that I think has looked at this issue
of public/private partnerships, but been made aware that OMB
has not released a prospectus that would allow the outlease of
the old Post Office Pavilion. Are you able to give us an update
on where that stands at the OMB today?
Ms. Springer. I do not have that with me today but I could
get back to you with that.
Mr. LaTourette. If you could maybe send the committee
something in writing, I would appreciate that.
Mr. Perry, first of all, let me publicly commend you for
the work you are doing on behalf of the administration and the
country. I think folks are going to be more than impressed with
the legislation Ms. Norton wrote allowing the public/private
partnership at the Southeast Federal Center. I think that is
going to be something we are all going to be very proud of.
As all committees talk about the idea of these public/
private partnerships, do you foresee any difficulties if the
GSA was tasked with the administration of those public/private
partnerships? I guess specifically I am asking whether or not
GSA is in a position to handle the additional workload that
might be occasioned as a result of that change in policy?
Mr. Perry. Given our mission to be the stewards of the real
properties that have been entrusted to us, we will handle that
as a priority. We have already identified it as a priority and
we will rise to the occasion of getting it done.
Will that be a challenge for us? Of course it will but my
answer to your question is yes, we are fully prepared to take
on this responsibility. We are advocating for it, we have the
people who have the expertise, we have processes we are using
to identify how to make this work and we know we can do it.
I would add to that given the degree to which this backlog
has grown, now that it is $5.7 billion, this is something that
will have to be taken on over a period of time. We obviously
will not complete it in a year or two but we will begin the
journey, we will stay the course and using appropriated funds
as well as the moneys that might be available to us through
these other techniques, we will make a significant improvement
in the near term.
Mr. LaTourette. Thank you.
Mr. Shays. We will go to Ms. Norton.
Ms. Norton. Thank you, Mr. Chairman.
No one perhaps has been more frustrated with Federal
property policies than this member in large part because this
is the Nation's Capital with a fair amount of unused Federal
property.
My good friend, Chairman Davis, made a very important point
that I really think as we look at cause and effect, needs to be
put on the table. Read my lips, scoring and scoring has not
always been done for Federal property the way it has been done
for the last decade. Indeed, the way we score the management of
Federal assets is unique. We who give lip service to the
private sector don't have a capital budget or even a Federal
version of a capital budget. We manage assets through scoring
rules that have no application to the private sector, would be
considered abundantly wasteful, nobody in his right mind in the
private sector would use them, the way we score leases, for
example.
Therefore, this hearing is important but it is important to
put on the record that this is not a hearing about why GSA has
just allowed a backlog of properties to develop when all it had
to do was go out and do something with them. The scoring rules
of the United States of America obviously made that impossible.
So do the priorities of our country as to how we should spend
money. That is why the notion of public/private partnerships
are indeed the only way to go.
Mr. Perry, my bill on the Southeast Federal Center was done
by the time you came to GSA but I take it you are aware of the
Southeast Federal Center?
Mr. Perry. Yes, ma'am, and I specifically mentioned that as
an example or model in my opening remarks.
Ms. Norton. Is this a model that GSA would be prepared to
replicate throughout the country, the use of Federal land, the
Federal Government retains the land but allows the private
sector to build on it, to use it with the returns coming to the
Federal Government?
Mr. Perry. Yes. I believe there are a number of examples of
other properties that we manage where that could apply. We
talked earlier about a property in Seattle, our Federal Center
there which is along the waterway as was the case with the
Southeast Federal Center, very desirable location, happens to
exist in a market where the market conditions would be
conducive to this type of public/private investment.
There is a continuing Federal need but that could be mixed
or associated with some private sector or mixed use needs. This
property happens to be 37 acres which is of sufficient size to
do something like that. So there are those examples.
Then there are some individual buildings where the same
process could work. I believe there is more than we could
handle in terms of identifying how this authority could be
applied.
Ms. Norton. In the case of the Southeast Federal Center, to
get around any possible scoring problem, we simply did the
natural thing, we left open the private sector to come back to
us to tell us what to do with the property which is the way it
ought to happen anyway if you are in partnership with the
private sector. What does the market want to do and therefore
this obviously is not a Federal scoring problem.
I note that the homeland security bill gave to the new
department the right to acquire its own headquarters. My
understanding is that the Department turned around and asked
the GSA what to do, correct?
Mr. Perry. That is correct. We are working with the new
Department of Homeland Security in that area.
Ms. Norton. I just mention this because it points up the
need for expertise when you are dealing in property. I am a
lawyer, I wouldn't begin to deal with property, even my house,
without talking to a real estate lawyer.
Mr. Shays. The gentlelady's time has expired. If we could
get to the other Members, I thank her for that.
Mr. Schrock.
Mr. Schrock. You can see from where I sit, I haven't been
here many years and a couple of years ago I might have believed
that when we said something was going to come out of committee
and we would get it to the floor and provide relief for you, I
might have bought it. I don't buy it anymore. We are the ones
who should be down there testifying, you should be up here
asking us why we haven't done what we are supposed to do. I
think the monkey is on our back to get this done.
As my friend, Governor Janklow said, for God's sake, let us
get it done. How many more hearings do we have to have to get
this done? There are a lot of agencies out there, especially
the Department of Defense, that are hurting because of all this
excess property. That is why they are going to go through a
BRAC here to get rid of some of that. We are tying your hands
in the process.
Mr. Perry, you talked about PPVs. The military, as you
know, is going to do that with regards to housing. The military
shouldn't be the Charles E. Smith's of the world, they should
be fighting wars and let Charles E. Smith, and I am not
promoting your company because I live in Hampton Roads and you
are not down there, but PPVs I think are very important and can
save our government a lot of money so we don't have to be in
this maintenance crunch. You agree with that obviously?
Mr. Perry. Yes, I certainly do agree with it and I agree
with your earlier sentiment that we must really make a
proactive step. We can't afford to continue to let this fester.
Mr. Schrock. If agencies had senior real property officers
with experience in place to manage the portfolio, why wouldn't
they be in a position to use management tools we have discussed
today, namely to do PPVs?
Mr. Perry. Well, they wouldn't be able to use the public/
private partnership because it wouldn't be authorized. The
statute would prevent that but they certainly could use other
good management practices for life cycle management of assets
including better planning, thoughts about maintenance and
disposal but would still be limited to not use public/private
partnerships under current law.
Mr. Schrock. Why can't we change that?
Mr. Perry. That is what we are here to ask.
Mr. Schrock. You should be asking that question. I
understand.
The CBO scoring kind of bothers me too, Ms. Springer. Maybe
there is a problem with the scoring. I agree with Chairman
Davis that when you score something and getting rid of excess
property is going to cost more money, something is wrong there.
I don't quite understand that. Is the scoring the problem? Is
that voodoo economics as I have heard people say from time to
time?
Ms. Springer. One of the first things I looked at when I
came here last fall was scoring for this particular piece of
legislation and I had the same reaction you just did. Certainly
with respect to use of proceeds when there is no recognition of
the proceeds themselves and it is viewed solely as an outlay, I
think that needs to be addressed.
Either way, we believe at OMB and I know I speak for Mr.
Perry, that we can work with the committee to resolve that
issue. That is an obstacle we need to take out of the way. Let
me say without a bill, we won't even be getting to the scoring.
It is important for us to get the bill. Whichever version it
turns out to be, we need to get the bill. That is what we are
here to say.
Mr. Schrock. This excess property didn't create any
revenue. This is the same issue revisited and is creating
revenue. We need to get some of this stuff off the rolls.
Mr. Ungar, I think you wanted to say something?
Mr. Ungar. I just wanted to add that I wouldn't
underestimate the difficulty and complexity that will be
associated with dealing with the scoring issue. One of the main
obstacles--one of the issues that CBO raised is--that it would
basically account for or score these partnerships as a lease-
purchase arrangement which is another issue aside from
retaining funds.
Scoring is a double edged sword. There certainly is a very
good reason for the scoring process. On the other hand, it
unfortunately results in some adverse consequences. One thing
the committee might want to think about is perhaps forming,
getting, or prompting some sort of a working group with members
of the committee staff, OMB, CBO and maybe relevant committees
and agencies like VA and DOD to really tackle the scoring
issue.
Mr. Schrock. I agree. Mr. Chairman, that is something we
need to get our hands around because it sounds like that is one
of the main flies in the ointment. If we could get that
resolved, then we could go forward on this a lot quicker than
we are.
Mr. Ungar, the vacant St. Elizabeth's Hospital building is
historical, which means you can't knock it down, which means
you have to protect it. What are you going to do with that
building?
Mr. Ungar. That is a tough issue. HHS and GSA are wrestling
with that now. Because it is historic, they have to work within
some constraints and work with the folks who administer the
provisions of that act. I don't know that it is impossible to
knock it down. VA I think and maybe other agencies have had
some experience with this and have been able to work with the
Historic Preservation people, but it does make it much more
complicated and takes much more time.
Mr. Schrock. If you want to know how to knock down a
building like that, come see me. We did it with 11 buildings at
the Naval Base in Norfolk that were historic. We said baloney,
we won and tore them down and new buildings are there now. So
it can be done.
Mr. Shays. The gentleman's time has expired.
We have a committee meeting after and we can allow for a
second round if there a few folks that need to ask some
questions.
Mr. Cooper, you have the floor.
Mr. Cooper. I thank the gentleman from Connecticut.
As I understand it, the rationale for treating public/
private partnerships like operating leases or direct
appropriations, forcing an up-front score from CBO is something
OMB doesn't agree with but has OMB been working with CBO to
resolve this internally? I realize the gentleman from
Virginia's request for a working group on this committee but
the new head of the CBO came from the White House. I would have
expected some sort of coordination on this issue. Is that
right?
Ms. Springer. OMB is taking a fresh look at scoring of
these leases as the proposal is seriously being revisited, so
we contemplate working with CBO.
Mr. Cooper. Has CBO put up fixed resistance? Are they
battling this to the end or they just haven't had meetings on
it yet?
Ms. Springer. We are at the beginning stages of essentially
restarting this discussion with them on it.
Mr. Cooper. Another question would be the issues addressed
by CBO can be addressed by making the proceeds from any
property sales from the exercise of new private/public
partnership authorities granted under the proposal subject to
appropriations. I don't understand that. How exactly does
making the exercise a public/private authority subject to
appropriations address CBO's concerns?
Ms. Springer. What we had in mind would be as each
opportunity arose for entering into a public/private
partnership or using the proceeds of a sale for a new purchase,
that opportunity would be evaluated and scored on its own
merits and according to whatever type of lease it was, whether
operating, capital or what have you and would be subject to the
full review with Congress from an appropriations standpoint,
rather than anticipation up front that wouldn't recognize
specifically all the merits of each one, so it would be subject
to an appropriation rather than just scoring of an
anticipation.
Mr. Cooper. I am still not sure I understand that but I
yield the balance of my time.
Mr. Shays. The gentleman yields. We are going to Mr.
Turner.
Mr. Turner. Thank you.
As I stated in my opening comments, one of the things I am
very concerned about is the issue of a policy of abandonment of
cities. One of the examples we have in front of us says, ``GSA
also owns a courthouse in downtown Jacksonville, FL but we
vacated in less than a year. Although there are Federal
agencies in the Jacksonville area that need space, the agencies
would prefer to locate in suburban locations because of access
and parking constraints downtown. The city of Jacksonville has
expressed interest in acquiring this building. The freedom to
manage the proposal would give GSA the authority to sell the
building to the city, use the proceeds to build in a suburban
location that would be more desirable for prospective Federal
tenants and probably cheaper.''
First, I want to say that in looking at the proposals for
increased flexibility, I think the flexibilities themselves are
very important but the outcome is what I am concerned about
because basically what we are talking about doing to host
communities is we are saying because we have deferred
maintenance in these buildings, we have created something that
is a blighting influence and we are going to leave, you are
going to have the responsibility. I am certain the city of
Jacksonville is not acquiring this property because it is a
gold mine. They are acquiring it most likely because it doesn't
have any other marketable use. It will probably require
significant subsidy by the local community to bring it up to
something that is viable.
Then we are going to take the Federal jobs, move them out
to the suburbs because our rules are going to provide a
preference for suburban locations instead of cities, so all the
people who would eat lunch, all the people who would shop, all
the people who would pay payroll taxes in the Federal jobs that
would help support the community that is now subsidizing
blighted influence we are leaving behind are going to be gone
off to the suburbs.
As a former mayor of a city I have dealt with this issue of
looking at Federal rules as to where jobs locate. Working with
the Postal Service, we were told in an initial attempt to get
Federal jobs located in our downtown area that because of the
rules, we would be virtually unable to compete.
Ultimately we were able to win, but we were often told that
the constraints of issues of convenience and parking, all of
the definitions that we would give to a normal, downtown, urban
area were actually used against us as opposed to in favor of an
urban core.
We all know there are Federal mandates that burden our
urban cores, Brownfields, social services, special needs
populations, public housing, environmental mandates without
compensation, infrastructure burdens for supporting the entire
metropolitan urban area.
I am very concerned we are getting a Federal policy that is
almost anti-cities. As I look at this, it goes on to say ``you
may provide a lease back option to the Federal Government to
occupy space in any facility, require construction, repair or
renovation by the non-governmental entity provided that the
agreement does not guarantee government occupancy in any
subsequent agreements. To lease back in such facilities must be
in accordance with the competition requirements of Title III.''
I would like you to speak on the issue of why our Federal
rules, as the process goes, if we are going to go to leasing,
don't have a preference for us to support and maintain our
Federal jobs in our urban core with the tax bases necessary and
where the synergies of workers are necessary in order for us to
maintain our cities which, as you know, are the jewels of this
country?
Mr. Perry. Thank you for that question. That is a very
important point with two parts to it. One has to do with the
exchange of property. If my facts are right, that is something
that we would be doing under our present authority which does
not enable us to enter into public/private partnerships.
Rather, if we have a situation like the one you describe, the
only tool available to us today is to do a like kind exchange
where the city would grant us something and we would grant them
something so that we could provide an appropriate workspace for
Federal workers and the city would do the best it could do to
protect the development in the urban core.
If we had the authority we are talking about today, that
would have enabled us to do the development of the downtown
facility. In fact, the list we prepared entitled our ``100 Most
Egregious Cases,'' many were in fact Federal buildings in the
urban core that had we had this authority or as we get this
authority, they would be candidates for development in the
downtown as opposed to our having to go to a second option
which is to exchange property which is the only authority we
would have had today.
Mr. Turner. My time is almost up so let me just add to
that. It seemed to me in reading it that you are subject to the
same rules in determining what would be the competition
property, the one that you are disposing. Those rules might
cause it to have a suburban preference. Is that not accurate?
Mr. Perry. I can't read that into that. If I understand the
issue, if there is a building and we had the ability either
through appropriation or through public/private partnership
bring that building up to standard, we would do it at that
location. We wouldn't get into the swap.
You could assume possibly the agency had a mission related
reason why it wanted to move but lacking that, our approach,
our policy would be to opt for the urban core location.
Mr. Turner. That is great to hear.
Chairman Tom Davis [presiding]. The gentleman's time has
expired.
Mr. Janklow.
Mr. Janklow. Thank you.
I would like to apologize for my preliminary remarks made
when I came in here. I had read some of this testimony as I had
indicated. I thought we were discussing a country where the
authority to acquire, manage and dispose of property was
limited, freedom to effectively manage holdings was severely
restricted, separate authority to give people flexibility to
out lease and dispose of property under specific conditions
wasn't allowed, I thought we were talking about a country where
the National Park Service will think it is really a great
management technique in fiscal year 2003 to develop a facility
inventory to see what buildings it maintains and perform asset
assessments to determine the condition of these assets and
establish a baseline facility condition index and that would be
an accomplishment where we spend $50 million more in acquiring
a patent office than we need for the taxpayers while everybody
sits around talking about the difficulty to fund things like
education in this country and medical issues and the other
kinds of issues that we deal with, that environmental laws
stifle what it is we are trying to do with property and we have
inventory and historical problems. Frankly, I thought I walked
into a meeting on how the old Soviet Union operated. I had no
idea we were discussing the United States of America until I
heard you people testify. I would have never made those
comments had I known it was my country. I thought we were
talking about the Peoples Republic of China or the old Soviet
Union.
Given the fact we are talking about the United States of
America, how do we fix this? This is insane. This is absolutely
insane. Everybody in Congress knows it and we sit around
talking about our specific projects. We don't want to give you
any authority to do this for all of America, so every one of us
can find a project or two in our State or city that we want to
make a pilot project.
I don't care what party you are in, Presidents of recent
vintage don't have any trouble hiring top, competent talent to
come into the government to work. Are you folks really too dumb
to do this? Are you crooked? Are you on the take? Do you want
to be on the take? What is it that prevents us from giving you
the authority? In your perspective, what is it that prevents us
from giving you the authority to do it or are we too stupid or
on the take? [Laughter.]
Chairman Tom Davis. Let us see if there is a volunteer to
take the question.
Mr. Ungar. I can't answer your last question but in terms
of why this problem has gone on so long and why it hasn't been
solved, I can address these.
Chairman Tom Davis. Mr. Ungar, you are fully vested in your
retirement?
Mr. Ungar. Yes, absolutely and I will say that I can leave
at any time.
Mr. Janklow. I used to be able to pardon people but I can't
anymore.
Mr. Ungar. Maybe you can put in a good word with the
President or the Comptroller General depending on what happens.
Mr. Janklow. I will do that. We will score you OK.
Mr. Ungar. It is a very, very complex problem and there are
many factors to it. One is leadership and a plan.
Mr. Janklow. Go to No. 2.
Mr. Ungar. No. 2 is legislative action.
Mr. Janklow. Go to three.
Mr. Ungar. Three would be individual actions by Federal
agencies to basically do the right thing once they have the
tools to do that.
Mr. Janklow. What is four?
Mr. Ungar. Four would be to make more resources available.
Five would be maybe even higher up in your order, addressing
the scorekeeping rules so they make sense from both a budget
standpoint and a real property management standpoint.
Mr. Janklow. Nothing you described is complicated. It is
simple. It takes leadership and it takes the courage to move
forward. It takes people that have the intelligence level to
know the difference between right and wrong and when someone is
getting ripped off and $2 million to maintain a post office
every year, I come from a small State and you could buy a
reading book for every first grade child in my State for $2
million. For what the post office is wasting every year to
maintain a building in Chicago, you could buy a reading book
for every first grader and an advanced reading course for the
whole State of South Dakota. That is how ludicrous this all is.
Thank you, Mr. Chairman. I don't have any other questions.
This is crazy and everyone knows it.
Chairman Tom Davis. Let me make one comment. We are going
to be introducing legislation in the next week or so. There
have been basically two problems legislatively. One has been
the scoring issues which are arcane, which we are trying to
work around with the Congressional Budget Office but the fact
is you bring this bill forward at this time, you have to show
offsets or it goes nowhere and significant offsets. We are
looking at wording that will get around that.
Second are jurisdictional issues between what is called the
1949 Act and the 1959 Act that puts it before different
committees. Mr. LaTourette, who is on both committees, has
pledged to work with us. This is a priority for our leadership.
The third problem is going to be the Senate but let us take
care of the House. We can do what we can do and I will tell you
that we will have a bill out of here this year that meets your
needs.
I want to commend Commissioner Perry. From the minute he
stepped in, he headed GSA in Ohio.
Mr. Janklow. These are all competent people. Listen to
them, they know what they are talking about.
Chairman Tom Davis. Exactly but he has taken the lead, made
it a priority and we did get it through the committee last year
before we ran into problems at CBO.
Mr. Waxman worked closely with us to make it a bipartisan
but let us just make it a priority and move it.
Mr. Janklow. Thank you, Mr. Chairman. I bet these folks
drive home every night from work and say I can't believe these
idiots I have to deal with.
Chairman Tom Davis. They are under oath and I am not going
to ask them.
Ms. Blackburn.
Ms. Blackburn. Thank you. It is always hard to follow the
good Governor because he brings so much common sense to the
table for all of us.
Mr. Ungar, I think you probably are sitting there looking
at us and agreeing with everything Governor Janklow has said.
Mr. Ungar. Yes, ma'am.
Ms. Blackburn. Being one from the private sector, I felt
that probably was the thought running through your mind. Ms.
Springer, is always a delight to have you come before us. I
know being the lowly freshman, I am hard to see down here on
the end.
A couple of thoughts. Looking at the stewardship assets,
when you think about we are the steward of 28 percent of the
Nation's land mass. Going to that as we talk about having a law
and you all being able to do a bit more with your management
and public/private partnerships, has there been any movement or
do you have a process in place for evaluation of the
stewardship assets which are not included in the consolidated
financial statements? If you don't have a process in place, how
long do you think that is going to take?
Ms. Springer. That is a good question and I want to thank
you for it because it does recognize that OMB does more than
just deal with scoring. On the management side as part of the
President's management agenda in anticipation of this
legislation, we are asking agencies in this 2005 cycle to pick
some very specific properties, including not only the ones
reported in the financial balance statements but also the
stewardship assets so that would cover things like the parks
and other types of assets reported there, to actually pick a
sampling of those and report on the values, the maintenance
condition, what opportunities and things they could do. So we
want some very concrete examples in anticipation of opening
that once we have the authorities under the legislation.
Ms. Blackburn. Do you anticipate that being done through
the rulemaking process or do you feel our bill should include a
structure for that?
Ms. Springer. We can take a first step in the A-11 guidance
that we issue and we are working up that right now to come out
for the beginning of the 2005 budget cycle. That will only go
so far, it will be a first step, a good first step but it will
be done with the expectation that we would have the broader
legislation to really open it up.
Ms. Blackburn. Mr. Chairman, I would like for the record
and for our process to recommend that we give some special
thought to the stewardship assets as we look at the totality of
the bill and then make provisions for addressing that.
One other thing, either you or Mr. Ungar, as we are looking
at asset management and the President's management agenda,
knowing this is kind of a weak link as we look at our entire
budgeting process, developing a financial statement for the
Federal Government, do you have a corporate model that you are
working from with your asset management and the real property
and also the stewardship assets or are you kind of taking the
lessons learned and trying to develop a template we will work
from?
Ms. Springer. We will be moving from that latter view of
lessons learned and kind of reactive to a more proactive
formulation of structure for how we would like some standard
metrics, some standard reporting mechanisms. Clearly the
financial statements, an important point to take note of, the
FSAV which covers the financial reporting of the assets that
are in the balance sheet has some very strict rules on
reporting that we think covers comprehensively these types of
transactions that are envisioned in the legislation.
The financial statements themselves are pretty well
governed. Beyond that, we think there is a certain aspect of
performance we need to capture more fully and we will be
looking to provide direction on that.
Ms. Blackburn. Thank you.
Chairman Tom Davis. Mr. Duncan.
Mr. Duncan. Thank you.
This is something I have been very interested in because I
spent 10 years on the Public Buildings Subcommittee and first
of all, I want to say to my colleague, Mr. Turner, he is
exactly right. I agree with everything he said in his
statement. This business of moving to a suburban location in
Jacksonville, oftentimes we have found it is just some high
level official in that particular building who wants to get a
new office or wants to get an office closer to home and they
cook the figures so they can so in a convoluted way that some
money is going to be saved.
If people look at these moves closely it would save much
more money to stay in the building where they are. In fact, we
have found also that some of these people complain about the
buildings they are in when they are Federal buildings and they
are buildings that were built in the 1960's and 1970's, not old
buildings at all. We are working in a building that opened in
1800, the Capitol. It is just ridiculous as Governor Janklow
said, what is going on here.
We dealt I guess most often with Federal courthouses and
what we found was State governments were building beautiful
Supreme Court buildings and courthouses for $125 and $150 a
square foot and the Federal Government was building courthouses
for $265 and $285 a square foot because nobody would say to the
Federal judges you can't just have all the gold and high
furnishings that you want. It has gotten totally out of hand.
The National Security Administration building in Virginia cost
$320 a square foot. Somebody has got to get on top of this
thing and say no.
I noticed in the report that the Department of Defense has
so many unneeded buildings that it is costing $3-$4 billion a
year the GAO report says just to maintain those buildings. Mr.
Ungar, are they making any progress, really doing a lot to get
rid of these buildings or sell these properties?
Mr. Ungar. Some progress is being made. Each agency is
grappling with this problem but unfortunately the problem is so
big that without a much more aggressive effort, probably what
is going to happen is the properties that become unneeded or
underutilized or in serious disrepair are going to overtake the
ones getting off that list.
Without a more intensive effort, the problem will probably
get worse.
Mr. Duncan. In the report on the Mendell Rivers building in
South Carolina, that looks like a fairly new building, it
doesn't look like an old building but apparently they moved out
because of the asbestos. The report says there is very little
Federal demand there and yet they are trying to get the city to
take the building and build them a 27,000 square food building.
It is crazy as Mr. Schrock just said. Why don't they just go in
and remove the asbestos because if it is good enough to turn
over to the city, it should be good enough for the Federal
Government to clean up and keep working in there.
Mr. Ungar. That is a very good question. There are a couple
issues. One, the building was actually damaged by the
hurricane. It could have been repaired conceptually but the
asbestos really made it a big problem. There is a funding issue
to get the money to repair it.
The reason our report said there wasn't strong demand was
that at the time we looked at this property a couple of years
ago, the Federal agencies that were there were moved out into
leased space for the most part and they had leases of several
years. It wasn't that the property was not a good candidate, it
was at that particular time, those agencies couldn't move back
in right away.
On the other hand, it is a very desirable location and I
don't know that the exchange is really the optimal solution but
right now it is probably the only solution that GSA has unless
it has additional authority.
Mr. Duncan. Let me say this. These prices are getting
ridiculous and somebody, the GSA, the OMB, needs to start
putting more pressure to hold down the cost of these Federal
buildings and not just go so lavishly overboard.
I will tell you one quick story. The Secret Service a few
years ago, we found they were paying $7,723,000 for a 1.3 acre
piece of property in downtown Washington for a new
headquarters. We ran a computer search and found nine other
parcels of property all costing between $10-$30 million that
were within the parameters. We fussed about that.
The head of the Secret Service came to see me and four of
their heads and said, will you stop fussing about this if we
agree to knock $50 million off the price of the building. I
said yes, because I thought at least we are saving $50 million.
Mr. Shays [presiding]. Would the gentleman suspend? We have
an option of possibly clearing this panel, the red light is on.
I haven't asked questions.
Mr. Duncan. I will stop, Mr. Chairman.
Mr. Shays. Finish your sentence if you want but I just need
to move on here.
Mr. Duncan. All I was saying was they instantly agreed to
knock off $50 million of the price of the building just because
we raised some questions at a hearing. That shows you how much
fluff and surplus is in these buildings and it is getting
ridiculous. It is not fair to the taxpayers.
Mr. Shays. Mr. Souder.
Mr. Souder. I have two brief comments and I have two
questions. One is that we have been hearing all morning about
the basic problem of why the Federal Government is different
than the private sector cash-flow annual budgeting or biannual
budgeting which simply does not work when your cash-flow
expenses are coming that year and your income is a later year.
We have all kinds of scoring problems and this whole thing of
trying to separate assets from income and how we score that
leads us to do really dumb things, en bloc, good things. We
have to address some fundamental process questions of how we
account income and assets because it leads to other short term
decisions that aren't wise long term decisions. Anybody who has
been in business can see this every time we deal with our
annual statements.
I also want to resist the temptation to ask Mr. Bitz about
why it takes so long to get the air conditioning in the spring.
I am a constituent.
Mr. Bitz. I will look into that, sir.
Mr. Souder. No, I think it is a standard procedure.
It is a Charles Smith Co. operated building that I stay in
when I am here in Washington.
I had a question for Mr. Catlett. In your testimony, you
referred to the VA and how you have been able to do a number of
things in local communities with flexibility. Do you involve
the local communities in the enhanced use leasing projects and
what is the review process you have in those local communities?
Mr. Catlett. Yes, sir. There is a public hearing for each
of these proposals we put forward to get comments both from the
private sector as well as other government officials. There is
a public hearing at the location for each of these projects.
Mr. Souder. That is well publicized and groups come in.
Have you had the experience of people coming in and
participating in that process?
Mr. Catlett. Yes, sir, very much so.
Mr. Souder. Can you give an example of one where you saw
such participation and how that might have affected the
project?
Mr. Catlett. The one that would come to mind now would be
just north of Baltimore at a facility we call Fort Howard. We
had a public hearing there about a month or 6 weeks ago in
which about 40 participants came in. Again, we don't need the
property, we are looking for a use there for a long term care
type of community, not just a facility for institutional care.
Obviously the neighborhood is very much interested, the
developers were interested, so we had over 45 participants
there representing what we feel was the most interest in that
community or affected by that proposal.
Mr. Souder. General Williams, I also had a question for
you. Can you give us some examples of how revenues from sales
and leases of Department of State property have been used to
improve other Department of State properties?
General Williams. I would be happy to. We are able to take
the proceeds and identify, we have a long range strategic plan
that is in place with the next most urgent project, so once the
proceeds are identified and we make the necessary reporting to
our oversight apparatus, then we are able to proceed ahead very
expeditiously with projects. For example, we have built
embassies out of proceeds of sales.
Mr. Souder. Does it have to stay in the same region?
General Williams. No, it does not.
Mr. Souder. Could you give an example of an embassy where
that might have occurred?
General Williams. Regarding the use of proceeds of sale,
for example, we are in the process now of gathering the funds
for our Berlin Embassy. The proceeds of sales came from other
regions other than Europe, they go to a central pot. The next
most urgent requirement we have in State is if the option is to
fund from the proceeds of sales, it comes out. So Berlin would
be an example. Uganda and Angola would be other examples.
Mr. Souder. Thank you very much.
Mr. Shays. I thank the gentleman.
Let me say I do have questions but time is running out and
I don't want you to have to wait for us to get back. I think
most has been covered. I do take a little bit of pride in the
oversight of our committee with VA and State. I think you all
have tried to move forward and use the instruments you have
available to be a bit more efficient here.
I do appreciate the testimony of all our witnesses. Is
there anything we need to put on the record that you might have
thought about last night that you wanted to make sure was part
of the record before we adjourn this hearing?
Thank you all for your participation. This is a noble cause
and I think we are going to see action and don't underestimate
the power of our chairman to get this through even the Senate.
With that, before adjourning, I will announce we have a
committee business meeting that will begin promptly at 1:30
p.m.
The record will remain for 2 weeks on this hearing for
anyone who wants to submit information.
Thank you all for participating and this hearing is
adjourned.
[Whereupon, at 11:36 a.m., the committee was adjourned, to
reconvene at the call of the Chair.]
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