[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]
LEGISLATIVE PROPOSALS TO REFORM THE GOVERNMENT'S APPROACH TO PROPERTY
MANAGEMENT: S. 2805, THE FEDERAL PROPERTY ASSET MANAGEMENT REFORM ACT;
AND H.R. 3285, THE FEDERAL ASSET MANAGEMENT IMPROVEMENT ACT
=======================================================================
HEARING
before the
SUBCOMMITTEE ON GOVERNMENT MANAGEMENT,
INFORMATION, AND TECHNOLOGY
of the
COMMITTEE ON GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTH CONGRESS
SECOND SESSION
ON
S. 2805
TO AMEND THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949,
AS AMENDED, TO ENHANCE FEDERAL ASSET MANAGEMENT, AND FOR OTHER PURPOSES
AND ON
H.R. 3285
TO AUTHORIZE PUBLIC-PRIVATE PARTNERSHIPS TO REHABILITATE FEDERAL REAL
PROPERTY, AND FOR OTHER PURPOSES
__________
JULY 12, 2000
__________
Serial No. 106-237
__________
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
-----------
U.S. GOVERNMENT PRINTING OFFICE
72-934 WASHINGTON : 2001
_______________________________________________________________________
For sale by the Superintendent of Documents, U.S. Government Printing
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COMMITTEE ON GOVERNMENT REFORM
DAN BURTON, Indiana, Chairman
BENJAMIN A. GILMAN, New York HENRY A. WAXMAN, California
CONSTANCE A. MORELLA, Maryland TOM LANTOS, California
CHRISTOPHER SHAYS, Connecticut ROBERT E. WISE, Jr., West Virginia
ILEANA ROS-LEHTINEN, Florida MAJOR R. OWENS, New York
JOHN M. McHUGH, New York EDOLPHUS TOWNS, New York
STEPHEN HORN, California PAUL E. KANJORSKI, Pennsylvania
JOHN L. MICA, Florida PATSY T. MINK, Hawaii
THOMAS M. DAVIS, Virginia CAROLYN B. MALONEY, New York
DAVID M. McINTOSH, Indiana ELEANOR HOLMES NORTON, Washington,
MARK E. SOUDER, Indiana DC
JOE SCARBOROUGH, Florida CHAKA FATTAH, Pennsylvania
STEVEN C. LaTOURETTE, Ohio ELIJAH E. CUMMINGS, Maryland
MARSHALL ``MARK'' SANFORD, South DENNIS J. KUCINICH, Ohio
Carolina ROD R. BLAGOJEVICH, Illinois
BOB BARR, Georgia DANNY K. DAVIS, Illinois
DAN MILLER, Florida JOHN F. TIERNEY, Massachusetts
ASA HUTCHINSON, Arkansas JIM TURNER, Texas
LEE TERRY, Nebraska THOMAS H. ALLEN, Maine
JUDY BIGGERT, Illinois HAROLD E. FORD, Jr., Tennessee
GREG WALDEN, Oregon JANICE D. SCHAKOWSKY, Illinois
DOUG OSE, California ------
PAUL RYAN, Wisconsin BERNARD SANDERS, Vermont
HELEN CHENOWETH-HAGE, Idaho (Independent)
DAVID VITTER, Louisiana
Kevin Binger, Staff Director
Daniel R. Moll, Deputy Staff Director
James C. Wilson, Chief Counsel
Robert A. Briggs, Clerk
Phil Schiliro, Minority Staff Director
Subcommittee on Government Management, Information, and Technology
STEPHEN HORN, California, Chairman
JUDY BIGGERT, Illinois JIM TURNER, Texas
THOMAS M. DAVIS, Virginia PAUL E. KANJORSKI, Pennsylvania
GREG WALDEN, Oregon MAJOR R. OWENS, New York
DOUG OSE, California PATSY T. MINK, Hawaii
PAUL RYAN, Wisconsin CAROLYN B. MALONEY, New York
Ex Officio
DAN BURTON, Indiana HENRY A. WAXMAN, California
J. Russell George, Staff Director and Chief Counsel
Randy Kaplan, Counsel
Bryan Sisk, Clerk
Trey Henderson, Minority Counsel
C O N T E N T S
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Page
Hearing held on July 12, 2000.................................... 1
Text of S. 2805.............................................. 3
Text of H.R. 3285............................................ 36
Statement of:
Barram, David, Administrator, General Services
Administration, accompanied by David Bibb, Deputy Associate
Administrator for Real Property, General Services
Administration; and Becky Rhodes, Deputy Associate
Administrator for Personal Property, General Services
Administration............................................. 39
Ungar, Bernie, Director, Governmentwide Business Operations
Issues, General Accounting Office; David Bibb, Deputy
Associate Administrator, Office of Governmentwide Policy,
General Services Administration; Rear Admiral Ronald F.
Silva, Assistant Commandant for Systems and Chief Engineer,
U.S. Coast Guard; Steven J. Weiner, president, Signet
Partners; Maria Foscarinis, executive director, National
Law Center on Homelessness and Poverty, accompanied by
Laurel Weir, Policy Director; and Steve Perica, director of
the Arizona State Agency for Surplus Property, president of
the National Association of State Agencies for Surplus
Property................................................... 41
Letters, statements, etc., submitted for the record by:
Bibb, David, Deputy Associate Administrator, Office of
Governmentwide Policy, General Services Administration,
prepared statement of...................................... 59
Foscarinis, Maria, executive director, National Law Center on
Homelessness and Poverty, prepared statement of............ 82
Horn, Hon. Stephen, a Representative in Congress from the
State of California:
Information concerning judicial review................... 106
Letter dated February 24, 2000........................... 135
Prepared statement of.................................... 37
Perica, Steve, director of the Arizona State Agency for
Surplus Property, president of the National Association of
State Agencies for Surplus Property, prepared statement of. 98
Silva, Rear Admiral Ronald F., Assistant Commandant for
Systems and Chief Engineer, U.S. Coast Guard, prepared
statement of............................................... 68
Ungar, Bernie, Director, Governmentwide Business Operations
Issues, General Accounting Office, prepared statement of... 43
Weiner, Steven J., president, Signet Partners, prepared
statement of............................................... 75
LEGISLATIVE PROPOSALS TO REFORM THE GOVERNMENT'S APPROACH TO PROPERTY
MANAGEMENT: S. 2805, THE FEDERAL PROPERTY ASSET MANAGEMENT REFORM ACT;
AND H.R. 3285, THE FEDERAL ASSET MANAGEMENT IMPROVEMENT ACT
----------
WEDNESDAY, JULY 12, 2000
House of Representatives,
Subcommittee on Government Management, Information,
and Technology,
Committee on Government Reform,
Washington, DC.
The subcommittee met, pursuant to notice, at 10:10 a.m., in
room 2247, Rayburn House Office Building, Hon. Stephen Horn
(chairman of the subcommittee) presiding.
Present: Representatives Horn, Ose, Turner, and Kanjorski.
Staff present: J. Russell George, staff director and chief
counsel; Randy Kaplan, counsel; Bonnie Heald, director of
communications; Bryan Sisk, clerk; Elizabeth Seong, staff
assistant; Will Ackerly, Chris Dollar, and Davidson Hulfish,
interns; Trey Henderson, minority counsel; and Jean Gosa,
minority assistant clerk.
Mr. Horn. A quorum being present, the Subcommittee on
Government Management, Information, and Technology will come to
order.
Effective management of the Federal Government's real and
personal property assets is an important issue involving
billions of dollars and affecting hundreds of communities
across our Nation. The government's worldwide real estate
portfolio consists of more than 500,000 buildings and over half
a billion acres of land. This property houses Federal workers;
stores historic, cultural and educational artifacts; and
provides services to the public. However, as agencies have
streamlined their operations and realigned their missions, the
need for this government property has lessened.
The National Research Council and the General Accounting
Office have both reported that the physical condition,
functionality and quality of Federal facilities is
deteriorating. Management of Federal buildings is especially
challenging, considering that roughly half of them are 40 to 50
years old. A March 2000 General Accounting Office report noted
that the General Services Administration has struggled over the
years to meet the repair and alteration needs of these
buildings. Nevertheless, billions of dollars will be required
to bring them up to usable standards.
The Federal Property and Administrative Services Act of
1949 is the general authority governing the government's
approach to property management. This law established a
framework for the purchase, use and disposal of real and
personal property, as well as government services. Although it
has been amended several times, Federal policies and methods
regarding real property acquisitions and disposals have
generally remained unchanged.
There is a concern that the Property Act no longer
adequately meets the government's needs. In fact, increased
funding pressures in recent years have led several agencies to
seek authority to dispose of or lease unneeded property outside
the Property Act and use the proceeds to further their core
missions. At a subcommittee hearing in April 1999, we heard
from witnesses representing some of those Federal departments
and agencies that have been granted this specific legislative
authority.
Today we will examine two legislative proposals designed to
reform the government's approach to property management. The
first bill is the product of an extensive review of the
Property Act conducted by the General Services Administration
in collaboration with other Federal agencies. This proposal,
recently introduced in the Senate by Senators Fred Thompson and
Joseph Lieberman as Senate bill 2805, contains a variety of
provisions to improve the government's real and personal
property management. For example, the bill would require
agencies to develop asset plans to ensure that their real
property holdings are consistent with their strategic mission
goals and objectives. The bill would also grant agencies the
authority to sell or exchange property so they could acquire
property that is more suited to their mission. As an incentive,
an agency would be authorized to retain the proceeds from a
real property transaction and use it to help meet their capital
asset needs.
The second proposal, H.R. 3285, the Federal Asset
Management Improvement Act, introduced by Representative Pete
Sessions of Texas, would authorize the General Services
Administration or other agencies under delegated authority to
enlist the private sector capital and expertise in public-
private partnership ventures to develop or improve Federal real
property.
[The texts of S. 2805 and H.R. 3285 follow:]
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Mr. Horn. We have before us many knowledgeable witnesses
who will--beginning with the Administrator of the General
Services Administration, who will discuss the merits of these
legislative proposals. We welcome our witnesses. We look
forward to their testimony.
But now I yield for an opening statement to the
distinguished ranking member on this subcommittee, the
gentleman from Texas Mr. Turner.
[The prepared statement of Hon. Stephen Horn follows:]
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Mr. Turner. Thank you, Mr. Chairman.
Clearly the Federal Government must be the world's largest
property owner and manager, and inasmuch as we have been
operating under the Federal Property Administration Services
Act of 1949, with some amendments, it is perhaps time to update
our laws regarding Federal property management.
The principles that were established in the law have worked
extremely well over the years, and I think they have assured
the American people the value of Federal property will be
maximized, but it does seem that in many cases we do not have
the flexibility that we really need to be good Federal property
managers.
We're going to hear testimony today relating to two bills,
one of the bills introduced by Congressman Sessions, H.R. 3285.
Mr. Sessions has recommended that the GSA be allowed to enter
into public-private partnerships to lease Federal property,
renovate current Federal property and develop new Federal
property.
The other legislation yet to be introduced is the work
product of the General Services Administration in collaboration
with other agencies. It's called the Federal Property Asset
Management Reform Act, and I want to commend the GSA on their
excellent work in putting together this piece of legislation. I
think it offers much to the committee and to the Congress in
terms of improving Federal property management and moving us in
the right direction.
So, Mr. Chairman, I look forward to hearing from the
witnesses today on this very critical issue.
Mr. Horn. I thank you very much.
Mr. Sessions is apparently delayed, probably the same
reason I was, and we'll move to panel two and the Honorable
David Barram, the Administrator of the General Services
Administration. We're glad to have you here.
STATEMENTS OF DAVID BARRAM, ADMINISTRATOR, GENERAL SERVICES
ADMINISTRATION, ACCOMPANIED BY DAVID BIBB, DEPUTY ASSOCIATE
ADMINISTRATOR FOR REAL PROPERTY, GENERAL SERVICES
ADMINISTRATION; AND BECKY RHODES, DEPUTY ASSOCIATE
ADMINISTRATOR FOR PERSONAL PROPERTY, GENERAL SERVICES
ADMINISTRATION
Mr. Barram. Thank you, Mr. Chairman, Mr. Ranking Member and
other Members. Thank you for asking us here today to discuss
our legislative proposal to amend the Federal Property and
Administrative Services Act of 1949. Accompanying me from GSA's
Office of Governmentwide Policy are Mr. David Bibb, Deputy
Associate Administrator for Real Property, and Ms. Becky
Rhodes, Deputy Associate Administrator for Personal Property.
I'd like to speak for 1 minute, introductory remarks, and
let you bring up David and Becky and others who know really
what's going on. Thank you for letting me do that.
Over the last several years we have worked together on a
number of significant issues addressing change and a need for
Federal Government reform. Your help was instrumental to our
success, and we thank you. Today we have another occasion where
we can work together to get things done, Federal asset
management reform.
Mr. Chairman, you commented today, and I'd like to quote
also from your opening statement from last April's hearing on
Federal real property management, you said, overall the Federal
Government has not been a very good steward. While we have made
many improvements within existing law, collectively we have not
been the kind of stewards and good asset managers that we could
have been. Why? Because the business rules by which Federal
agencies manage their assets were established over a half
century ago and were obsolete years ago.
As you both have noted this morning, the Federal Property
Act is 50 years old. With the dollar value of Federal real and
personal property assets estimated to be in the hundreds of
billions of dollars, it is increasingly imperative that
prevailing policies ensure their efficient and effective
stewardship.
It's time we used the same common-sense property management
strategies in the Federal Government that have already proven
successful in the private sector. I think we all recognize that
we must make the Federal Government more efficient and more
accountable. This bill represents a big step forward in
achieving that goal. It is simply good government.
I believe you will quickly see that its enactment will
result in a governmentwide property management system that,
quote, works better and costs less. It reflects the way we
should be doing business in the 21st century.
Thank you.
Mr. Horn. Well, we thank you, and we will now begin with
panel three, who will join you at the table to stay there as--
because we'd like during the question period to have a dialog.
And the panel three is Bernie Ungar, the Director,
Governmentwide Business Operations Issues, GAO; David Bibb,
Deputy Associate Administrator, Office of Governmentwide
Policy, General Services Administration; Rear Admiral Ronald F.
Silva, Assistant Commandant for Systems and Chief Engineer,
U.S. Coast Guard; Steven Weiner, president, Signet Partners;
Maria Foscarinis, executive director, National Law Center on
Homelessness and Poverty, and is accompanied by Laurel Weir;
Steve Perica, director of Arizona State Agency for Surplus
Property.
We're going to, if you will--we take the oath, and please
stand, raise your right hands, and that will include support
people that also whisper in your ears. So get them all up, and
the clerk will take their name.
[Witnesses sworn.]
Mr. Horn. The clerk will note all who have stood and get
the names of the assistants.
We thank you. And just the way we have the routine here is
we have all had a chance to read the papers, if they got in
last night, and your written statement is automatically put in
the record, so you don't have to ask for it. It's done, so is
your resume. And we'd like you to summarize your testimony in 5
minutes, if you could, 5 to 6 minutes, and then we'd like to
open it up to questions, and I want--to not only the members
here and will be here, but also to bring the issues to point
with those that are with you at the table. So let us start with
Bernie Ungar, the Director, Governmentwide Business Operations
Issues, U.S. General Accounting Office, part of the legislative
branch, and we depend on GAO heavily for good basic research
and we're delighted to have Mr. Ungar here.
STATEMENTS OF BERNIE UNGAR, DIRECTOR, GOVERNMENTWIDE BUSINESS
OPERATIONS ISSUES, GENERAL ACCOUNTING OFFICE; DAVID BIBB,
DEPUTY ASSOCIATE ADMINISTRATOR, OFFICE OF GOVERNMENTWIDE
POLICY, GENERAL SERVICES ADMINISTRATION; REAR ADMIRAL RONALD F.
SILVA, ASSISTANT COMMANDANT FOR SYSTEMS AND CHIEF ENGINEER,
U.S. COAST GUARD; STEVEN J. WEINER, PRESIDENT, SIGNET PARTNERS;
MARIA FOSCARINIS, EXECUTIVE DIRECTOR, NATIONAL LAW CENTER ON
HOMELESSNESS AND POVERTY, ACCOMPANIED BY LAUREL WEIR, POLICY
DIRECTOR; AND STEVE PERICA, DIRECTOR OF THE ARIZONA STATE
AGENCY FOR SURPLUS PROPERTY, PRESIDENT OF THE NATIONAL
ASSOCIATION OF STATE AGENCIES FOR SURPLUS PROPERTY
Mr. Ungar. Thank you, Mr. Chairman. Mr. Turner, other
members of the subcommittee, staff, we're certainly pleased to
be here this morning to help the subcommittee consider the two
proposals for reforming Federal real property management. I'm
accompanied today by Donald Bumgardner and Gary Lawson, both
senior evaluators in GAO. As you requested, I'd like to
summarize my statement.
While we have not had time to fully analyze all the
implications of the provisions of the bills, particularly S.
2805, we have certainly looked at them and we believe the
thrust of both the Senate bill as well as H.R. 3285 are in line
with information that we have reported for over a decade. They
would certainly help address a number of the problems that we
have identified and reported on, as well as provide Federal
agencies the opportunity to adopt and use some innovative and
best practices that are being used by other organizations.
I would like to focus on two areas this morning very
briefly. First is real property leadership. S. 2805 would
require GSA to take a greater leadership role in Federal real
property management and require landholding agencies to focus
accountability on real property management by designating
senior real property managers. H.R. 3285--in a little different
vein but in the same general direction--would require GSA to
establish governmentwide property management measures. These
provisions are consistent with actions that we have recommended
as far back as our general management review of GSA in 1989.
However, we note that S. 2805 does not contain any
qualification requirements for the senior real property
managers. Considering the complexity and the diversity of the
portfolio of assets that the Federal Government controls and
owns and has to manage, and the complicated nature of the
transactions that the bill would authorize, we believe it's
important that the subcommittee consider this and may want to
add some qualification requirements in terms of experience or
training or professional certifications for the persons that
are going to be holding these positions.
Second, both bills would provide managers at Federal
agencies that hold land with greater flexibility and incentives
for better property management. Our work has shown that
agencies need more flexibility and certainly more incentives to
manage real property more effectively and in the same vein as
the private sector is able to do. There are three issues that I
would like to point out for the subcommittee's consideration
this morning.
The first is that S. 2805 does contain a general 20-year
limit on the outleasing authority that would be granted to the
landholding agencies. We believe that this 20-year limit could
limit the usefulness of this tool for the agencies,
particularly in those cases where you're dealing with a
historically significant property or a property that might be
in an economically depressed area. This is because a
substantial amount of investment would probably be required to
bring those types of facilities up to date and meet local
health, and safety and quality standards and private sector
developers would probably be unlikely to enter into an
agreement for a period that would be 20 years or less, given
the need to make an adequate return on their investment and
have an adequate payback period.
Second, while allowing agencies to retain the funds that
they would receive in exercising or using the new tools and
flexibilities that both bills would provide, that provision, or
that allowance, would limit congressional flexibility in
overseeing or reviewing how these funds are allocated among
agencies, and should governmentwide priorities change, it could
cause a misallocation. Therefore, the subcommittee may want to
consider whether the funds ought to be controlled by a central
organization or by each agency. On the other hand, we recognize
if the funds were controlled by a central agency, this
certainly could limit the incentives that go to the individual
agency. So therefore, the Congress has a tradeoff there to
consider.
Finally, although both bills would provide Congress with
information before and after the individual tools would be
applied that are authorized by both bills, it's unclear to us
in both cases what information, what specific information, the
Congress would receive on how the moneys generated by these
tools would be used by the agencies. Therefore, we think it's
very important that the subcommittee explore this area this
morning and in the future to make sure that it is comfortable
with the amount of information it's going to receive and the
oversight and review it will be able to exercise over the
proposed use of these funds that the agencies retain.
That would conclude my summary, Mr. Chairman.
Mr. Horn. Thank you very much.
[The prepared statement of Mr. Ungar follows:]
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Mr. Horn. And we now move to the next witness, who is David
L. Bibb, the Deputy Associate Administrator, Office of
Governmentwide Policy of the General Services Administration.
Mr. Bibb.
Mr. Bibb. Thank you, Mr. Chairman, Mr. Turner, Mr.
Kanjorski and staff. It is a pleasure to be here today. I'm
David Bibb, Deputy Associate Administrator for Real Property at
GSA. With me today, as Dave Barram has said, is Becky Rhodes,
Deputy Associate Administrator for Transportation and Personal
Property.
The Property Act, the law of general application governing
properties acquired to carry out Federal agency program
missions, is over 50 years old, as you've indicated. While much
has occurred over the past half century, the policies governing
these assets have generally remained unchanged.
We think it's imperative that our Nation's governing asset
management policies ensure their efficient and effective
stewardship on a solid businesslike basis, and we firmly
believe that enactment of the Federal Property Asset Management
Reform Act will do just that.
Briefly, the bill contains four concepts: First, the bill
deals with life cycle planning and management. Effective asset
management must consider the entire life cycle of a property.
However, the present focus of the Property Act is oriented
toward the disposal phase of the asset. Some agencies lack a
full range of policy guidance, accountable management
structures, information on their property holdings, and
planning processes necessary to manage their property holdings
effectively in support of their missions.
Specifically, to deal with life cycle planning and
management, the bill proposes several things. One is adoption
of governmentwide asset management principles; another is
development of strategic real property planning; the third is
designation by each agency of a senior real property officer
who would be accountable for the performance of the inventory;
and fourth would be a statutory basis for a governmentwide real
property information data base. So that's the first concept.
The second concept is flexibility to optimize asset
performance. Federal managers are being encouraged to be more
businesslike and innovative. However, in our judgment, too
often when something makes sense, the government simply can't
do it. The average age of government-owned buildings has
increased to nearly 50 years. Many of these buildings are
inefficient and functionally obsolete. Unlike the private
sector, most Federal agencies have no opportunity to apply any
value or underlying equity of the property that may reside in
underused or obsolete property toward meeting their ongoing or
future facility needs. With few exceptions, agencies are not
currently authorized to sell, exchange, sublease or outlease
capital assets that they still need, but which no longer
support their missions well and to use the proceeds for newer
replacement capital projects. Agencies lacking sufficient
appropriations often have to make do with substandard
facilities.
To improve this situation, the proposed bill would give
agencies several new authorities: One, exchange/sale of
personal property; two, exchange/sale of real property;
subleasing; outleasing. The bill would authorize agencies to
outlease to the private sector assets that must remain in
Federal ownership and underutilized portions of nonexcess
government-owned property.
However, I must note at this point that the administration
opposes the use of such outleases, that is public private
partnerships, solely or primarily as a vehicle for obtaining
private financing of Federal construction and repair projects
for the simple reason that private financing is more expensive
to the Federal taxpayer than government financing. In this
regard, the bill permits an outlease/leaseback arrangement to
the government only when it's less expensive than direct
Federal renovation or construction.
The third concept under our bill deals with incentives for
better property management. Federal agencies lack incentives.
This has resulted in agencies not pursuing optimal use of
property and to retaining assets that are of diminished
functional value to their missions. The Property Act reform
bill would provide a much needed catalyst for sound asset
decisionmaking and would permit agency use of proceeds as
follows: For personal property, it would authorize agencies to
retain proceeds from the sale of surplus personal property and
offset direct and indirect disposal costs. For real property,
it would authorize agencies to retain the bulk of proceeds from
real property transactions and allow such funds to be used to
offset direct and indirect disposal costs and in meeting agency
capital asset needs.
To strengthen this incentive, the proposed bill would also
put agencies in charge of disposing of their surplus real
property, an authority that the GSA administrator currently has
alone. Agencies, under the bill, will still have the ability to
use GSA to manage the disposal process and to delegate disposal
property disposal decisions to GSA if they wish.
Our fourth concept is to streamline and enhance processes.
The governmentwide review of the act, which we performed,
identified opportunities to redefine other sections of the act
to deliver savings and improve productivity.
None of these changes is major in our judgment by itself,
but taken together, they will increase efficiency, deliver
savings, reduce administrative burdens and streamline asset
management processes.
Mr. Chairman, this concludes my statement. I would be glad
to answer questions when that point comes.
Mr. Horn. I thank you.
[The prepared statement of Mr. Bibb follows:]
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Mr. Horn. And the next presenter is Rear Admiral Ronald F.
Silva, the Assistant Commandant for Systems and Chief Engineer
of the U.S. Coast Guard.
Admiral Silva. Good morning, Mr. Chairman, Mr. Ranking
Member and members of the subcommittee. I'm Rear Admiral Ron
Silva, U.S. Coast Guard, Assistant Commandant for Systems and
Chief Engineer. I appreciate the opportunity to speak with you
today and thank you for your consideration of the General
Services Administration proposal to amend the 1949 Property
Act.
I am the designated corporate asset manager for the Coast
Guard as shore facilities. What this means, in brief, is that I
have the responsibility to ensure that the Coast Guard's shore
assets are the right sizes in the right place and provided at
the right cost to enable the Coast Guard to accomplish our
missions, our visions and our strategic goals. We have been
working closely with the General Services Administration to
ensure that our business practices are all that they can be
under the existing authorities. The forums that the GSA
provides, especially through their Office of Governmentwide
Policy, are an invaluable service for landholding agencies to
compare best practices and discuss progressive concepts, such
as sustainable development. Their efforts have helped make us
all better stewards of the property entrusted to us.
The Coast Guard's process for developing policies to be
better stewards of the property we hold is called ``shore
facility capital asset management.'' This initiative is an
integral part of the Coast Guard's current strategic plan. Our
shore infrastructure is spread across 1,600 sites and consists
of over 23,000 buildings and structures. These facilities have
an average age of 37 years and a replacement value of over $7
billion exclusive of land value.
These facilities support 43,000 personnel, 230 ships, 1,400
small boats and 197 aircraft, as they go about the Coast
Guard's business of protecting the public, our environment and
U.S. economic interests. The combined acreage of those 1,600
sites is only 66,000 acres. The amount of the acreage we hold
is not large in comparison with many other agencies, but the
nature of these sites along all of the Nation's ports, coasts
and waterways, makes them unique and valuable national assets
deserving of the best care that we can provide.
Our asset management initiative is an integrated approach
that will help align the Coast Guard's shore facility inventory
to operational and support requirements. The guiding principles
of good asset management take into consideration the entire
shore facility life cycle which consists of planning,
investing, using, and disposing of shore facilities and
infrastructure. We believe the proposed legislation facilitates
our asset management initiative.
The Coast Guard's asset management initiative seeks to
improve our portfolio of real property assets by managing them
from a life cycle perspective. The following principles will
guide all of our new capital asset management activities, and
ensure the best value shore capability for the Coast Guard,
match shore capabilities mission, keep a life cycle
perspective, encourage collaboration and feedback, provide top
down direction, use information technology effectively, and
foster professional development. Shore facility capital asset
requirements will be incorporated into all aspects of Coast
Guard strategic planning. We are working to better link our
shore capital asset requirements as identified in our agency
capital plan that is primarily developed from our field
commanders' Regional Strategic Assessments, our Headquarters
Assistant Commandants' business plans and our leadership
council goals.
We are also pursuing a program to revitalize the master
planning efforts throughout the Coast Guard. As mentioned, the
Commandant of the Coast Guard has designated me as the
corporate asset manager for shore facilities. He did this in
recognition of the impact that strategic portfolio management
of real property assets has on the accomplishment of Coast
Guard missions. This initiative also recognizes the importance
of a centralized information technology system to manage our
real property holdings.
We are currently developing the requirements upon which to
build this system. These efforts will be closely coordinated
with General Services Administration to ensure compatibility
with their proposed governmentwide real property information
data base. Our current portfolio of real property assets is an
assortment of inheritances from our antecedent agencies, the
U.S. Lighthouse Service, the U.S. Lifesaving Service, and the
Revenue Cutter Service, as well as numerous targets of
opportunity afforded to us by the Department of Defense during
their restructuring. This has resulted in a shore plant that is
not optimally sized or configured to carry out our modern day
missions.
I believe that the proposed changes to the Federal Property
and Administrative Services Act of 1949 relating to the
exchanges, sales, subleasing and outleasing of real property
assets will provide us with the flexibility to align our shore
capital asset inventory with our Coast Guard mission needs. The
enactment of this legislation is an important step toward
improving the management in Federal real property assets and is
required for the Coast Guard to fully implement our SFCAM
strategic initiative.
Mr. Chairman and members of the subcommittee, this
concludes my prepared remarks, and again, thank you for the
opportunity to appear before this distinguished subcommittee to
discuss the proposed Property Reform Act bill. I welcome the
opportunity to address any questions that you or the members of
the subcommittee may have. Thank you.
Mr. Horn. Thank you, Admiral.
[The prepared statement of Admiral Silva follows:]
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Mr. Horn. We're going to have to recess until 10:50 because
we have a vote on the floor right now. So we are in recess
until 10:50.
[Recess.]
Mr. Horn. We thank you, Admiral, and now we move to Steven
Weiner, the president of Signet Partners.
Mr. Weiner.
Mr. Weiner. Mr. Chairman and members of the committee,
thank you very much for giving me the opportunity to speak to
the two bills before you. My comments tend to be directed
toward private-public partnerships.
Signet Partner is a real estate and financial adviser to
State, local and Federal Government agencies. Our firm has run
public-private partnerships for the FDIC and RTC. We have
consulted to GSA in the past on private sector practices and
portfolio management in public private partnerships, and we
remain active participants in private real estate investments
and development projects.
Real estate partnerships are a way of life in the private
sector. These partnerships bring together expertise, money and
business opportunities. It's the way the private sector
develops real estate. Increasingly, they're used more and more
by local, State and now Federal Government agencies. They have
different names, these partnerships do, and they tend to be a
patch quilt of approaches, each having its own procedures and
its own bureaucracy, but they all have a common story,
shrinking dollars from traditional sources of funding.
The ideal Federal public private partnership has five
elements. No. 1, selected properties and projects will only
serve agency space needs with renovation and the prerequisite
here is that appropriation funds are not available. If you have
the funds, chances are you don't need to look at a public-
private partnership.
No. 2, the partnership structure mirrors the private
sector. As Mr. Barram pointed out, keep it simple, use a
familiar structure, this will encourage private sector
involvement.
No. 3, governmentwide application. Use a common approach.
This reduces bureaucracies, it motivates the private sector,
and most of all, it speeds up the process.
No. 4, the private sector runs the partnership and carries
the financial risk. The reward to the private sector has to be
commensurate with the perceived risk, but these tradeoffs, this
balance is compatible for Federal projects from what we've
already seen.
And No. 5, Federal agencies are allowed to retain the
government's share of partnership proceeds. We need to motivate
those who are charged with implementation of partnership
projects.
With respect to the two bills, the Sessions bill uses the
successful features of existing authorities, that's existing
Federal authority. It applies governmentwide. It has a simple
private sector structure, and it allows flexibility in the
partnership agreements.
Now the administration bill, let me start by first
injecting something that the Admiral and I talked about, and
that is the administration bill, it facilitates changing the
mix of the national portfolio. This is really good because you
have to change the mix on a global basis to be in line with the
changing needs of government. The portfolio can't remain
static. So that's a tremendous feature.
But the closest the administration's bill comes to public-
private partnership is in section 401, having to do with
outleasing of vacant space to private users. This can be good
fiscal policy for space that otherwise remains vacant. However,
if space once renovated could be used by Federal agencies, then
the bill provides for a 20-year so called outlease to a private
user. The private user then would renovate the space and lease
it back to the government.
Well, there's two fatal flaws with this approach. No. 1,
the leaseback can only take place if it's found to be less
expensive than appropriations. To me that's like an oxymoron.
The point that seems to be lost is increasingly appropriations
are just not available. The leaseback will almost always be, or
I should say always will be, more expensive than GSA building
out the space with its own appropriations. Why? Because the
private sector has a cost of capital of about 10 percent, and
the private sector is going to need, perhaps, a 15 percent
profit margin on a project. That's compared to GSA's cost to
capital of, say, 6 percent.
The real issue is, in the absence of appropriations
funding, is a public-private partnership economically--an
economically viable alternative for the government. Well, the
answer is on a case-by-case basis. From what we have already
seen and from what GAO has looked at, and from other
feasibility studies that have been done within GSA, the answer
can be yes. You know, there's an expression about giving
someone the sleeves out of your vest. I think that's what the
administration bill does, it gives GSA an unworkable supplement
to appropriations. It renders GSA to the status quo.
The other problem, No. 2, with the bill is the 20-year
lease term. It's just too short. Based on our experience and
extensive interviews with institutional players and major
developers throughout the country, across the board, all feel
that for the kind of projects that they would get involved in,
the magnitude of projects they would get involved in, they need
at least 50 years. They need that 50 years to amortize their
front end investment, and they need that 50 years to allow them
to have an economic and functional life for the project. A 20-
year lease term just doesn't make it. GAO found much of this to
be the case in several projects it studied, and probably the
classic example is Grand Central Station that was done by the
U.S. Postal Service, where the required lease term was 99
years. A lease has to act to the private sector as effectively
the conveyance of fee simple land. It can't have a short fuse.
So in summary, I've seen a diligent effort by GSA and GAO,
among others, to identify a workable public-private partnership
for governmentwide application at the Federal level, but this
bill fails to reflect that research. Therefore, aggressive and
continued involvement by Congress and this subcommittee is
going to be necessary not only to get a workable bill in place,
but more importantly, to make sure that it's implemented, and
that those charged with responsibility to implement the program
are held accountable.
Accordingly, I recommend, No. 1, that you enact a public-
private partnership as a complement, not as a substitute, to
appropriations.
No. 2, that you use a proven and simple private sector
model.
No. 3, that you merge both bills.
And No. 4, that you eliminate portions of the
administration's bill beyond the simple outlease of vacant
space.
I think by combining the two bills, you will have a global
package that gives the agencies, not only GSA, but other
agencies, the tools, it's not a panacea, but it is a powerful
tool that can address situations where appropriations just
aren't there.
Thank you.
Mr. Horn. Thank you very much. And you've raised some very
good questions.
[The prepared statement of Mr. Weiner follows:]
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Mr. Horn. Maria Foscarinis is the executive director of the
National Law Center on Homelessness and Poverty, and she is
accompanied by Laurel Weir, the policy director.
Ms. Foscarinis. Thank you very much, Mr. Chairman, and
members of the committee. We very much appreciate the
opportunity to testify. The National Law Center has been
actively working to implement the Federal Surplus Property
Program since its inception. We're very familiar with it and we
appreciate the chance to speak on its impact, the impact of
this legislation on homeless people.
The Federal Surplus Property is essential to the national
effort to address homelessness in America. It is a common
sense, cost-effective approach and it uses public resources to
meet an important public problem, the problem of homelessness
in America. And according to recent estimates, over 800,000
Americans are homeless on any given night across the country,
men, women and children.
Vacant Federal property is a key part of the Federal
Government's response to homelessness. Just this past year
alone, over 140,000 homeless persons will be served through the
property program. Under Title V of the Stewart B. McKinney
Homeless Assistant Act, which is a major Federal law addressing
homelessness, groups that serve homeless people, groups that
help homeless people, which include State entities, local
governments and private nonprofit voluntary groups, have the
right to apply for unused Federal property and acquire it
either through a no-cost lease or deeding, and use it to
provide services to homeless people from shelters to job
training to transitional housing, to day care. And just this
past year, 140,000 people were served at sites across the
country using these facilities.
We had prepared a slide show to give the members of the
committee a more concrete idea of how these properties can be
put to these good uses. Unfortunately, the room cannot
accommodate slides, but in your packets you should have
photographs of selected properties, like the VA Medical Center
in Los Angeles, which now serves homeless veterans; the site in
Tucson, AZ, that is run by Vietnam Veterans of America; a site
in Little Rock, AR that provides transitional housing and job
training and day care for homeless families. There are several
more, and there are many more all across the country. These are
essential to the effort to address homelessness.
Property is key for many groups that often operate on
shoestring budgets or cash-strapped local governments seeking
to address the problem of homelessness in their communities,
and as the committee members may know, especially during our
booming, the time of our economic prosperity, our booming
economy, the cost to property has risen tremendously, and often
it's access to property that makes the key difference to
whether groups can actually provide the services they need. If
a group can acquire vacant Federal property at no cost, that
will allow it to leverage other resources and to make the
difference between a program going forward or not going forward
at all. So this is a very important program.
Now to get to the draft legislation. We're especially
concerned about the administration's proposal, and I'll just
run through that quickly. First of all, the draft legislation,
the administration's draft exempts property, as we've heard,
that is leased or sold to a third party if the revenue
generated is then used to acquire capital assets. Essentially
what this does is it gives unbridled discretion to the agency
to create its own fund, what we've called a slush fund, which
it can use for its own purposes from the sale of property that
is a public resource and takes away the opportunity to use that
property for the public interest for homeless Americans, but
also would take it away from other public benefit uses, as has
been provided for by the Property Act since its inception. For
example education uses or health uses. Our particular concern
is homeless uses.
There will be no oversight. It's basically the agency's
skirting their--there is already a process in place. It's the
appropriations process. That provides for reasoned government
oversight in the allocation of public resources. What the
administration's bill would do is take that away and it would
take it away at the expense of homeless Americans who
desperately need these resources.
And I can give you some examples. This isn't just
speculation. The agencies have been reluctant to comply with
Title V of the McKinney Act ever since it was passed. In one
case, for instance, the Department of Veterans Affairs owns
property, the VA Medical Center in Los Angeles, and rented that
property out to a movie studio and generated money which it
then did not use for a public benefit purpose. It was only
after the National Law Center got involved and we threatened to
litigate that the property was even put through the McKinney
Act process as is required by Federal law, and as a result of
that intervention, the property is now being used to serve
homeless veterans, and 156 homeless veterans are helped each
day there with housing, substance abuse treatment and job
training.
Second point, the administration's draft would eliminate
the ability to sue GSA and the other landholding agencies if
they failed to comply with its provisions. That alone would
essentially gut this program. And again, this is based on not
on speculation, but on our direct experience. In order to
enforce Title V of the McKinney Act, we have had to go to
court. There is now a court injunction in place enforcing the
program.
We've been to court a total of five times so far, most
recently this past spring, to enforce compliance with this law.
This past spring we were in court because of what the judge
said was an effort to get around the law and we had GSA
internal documents demonstrating that the clear intent was to
avoid compliance with the Stewart McKinney Act.
Third, the administration's bill would limit the
application period for groups serving homeless people to a
single 90-day window of time. This would severely undermine the
McKinney Act. It would make it very difficult for providers to
find out about and apply for the property. It is already very
difficult as it is. There is an outreach provision in the law,
and also in one of the court orders, but it has been extremely
difficult to get the agencies to comply with that. It's hard
for these providers. Many of them are small grassroots groups,
run by volunteers. They don't necessarily get the Federal
Register where these properties are published. It's hard enough
for them as it is to find out about the program and to get
access to the property.
One of the reasons for this provision is to bring finality
to the process and not tie up property, but we believe that if
the agencies were to take seriously their outreach obligations,
then groups would find out about the property--and I'm sorry, I
guess I'm going on too long, but this is important.
Mr. Horn. We would like you to summarize. We've got the
statement.
Ms. Foscarinis. I'm almost at the end.
Mr. Horn. Reading it doesn't help us. We want you to
summarize.
Ms. Foscarinis. I am. The written version is actually much
longer.
Mr. Horn. OK.
Ms. Foscarinis. The last portion we're objecting to is the
portion that limits authority to make the property available
only to groups whose primary function is to serve homeless
groups. This would effectively eliminate many church groups
whose primary function is not to serve the homeless, but who
now use the program.
These are our major concerns. We also have concerns with
H.R. 3285 again, because there is a lack of definition in that
provision, but I will--I know I have gone over, and we'd be
happy to answer any questions. We'd also be happy to work with
the committee after the hearing. Thank you very much.
Mr. Horn. The exhibits you showed are not with your
testimony. Can we put them in the record with your testimony?
Ms. Foscarinis. Yes, absolutely.
Mr. Horn. All right. I'd like to ask GSA and GAO to give us
a list of the various homeless projects around the country. If
you have it, fine, but I want it checked by GSA and GAO so we
have in one place what has happened, and I'm particularly
interested in the LA case, and to what degree on-the-job
training are these people getting jobs, and that to me is the
key, is it training or does it train for a job and how many--
and take your time on that. Just file it with us if you have
the data.
Ms. Foscarinis. Sure. We'd be happy to address that.
Mr. Horn. OK. Thank you.
[The prepared statement of Ms. Foscarinis follows:]
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Mr. Horn. OK. We have our last presenter is Steve Perica
the director of the Arizona State agency for surplus property
and he's the president of the National Association of State
Agencies for Surplus Property, and I assume you're speaking on
their behalf.
Mr. Perica. Yes, thank you. Mr. Chairman, members of the
committee, my name is Steve Perica. I manage the Federal
Surplus Personal Property Donation Program in Arizona and am
President of the National Association of State Agencies for
Surplus Property. Joining me today is Scott Pepperman, my
colleague from the Commonwealth of Pennsylvania and Ann
McKinnon, colleague from the State of Maryland who also manage
those programs respectively in their States and commonwealth.
On behalf of the 56 State agencies, territories and
possessions that comprise the membership of the National
Association and the over 60,000 donee organizations that
participate in the Federal Personal Property Donation Program,
I wanted to thank you for the opportunity to speak with you.
The State Agencies for Surplus Property have served as the
primary conduit for the donation of personal property from the
Federal Government to the States for over 50 years since the
passage of the Federal Property Administrative Services Act of
1949.
Through the donation program, countless agencies, emergency
services providers and public safety organizations have
benefited from property that is no longer needed by our Federal
Government. The Federal Property Asset Reform--excuse me, I
have got to get that correct--the Federal Property Asset
Management Reform Act--too many acts and reforms today--
legislation before you affects the donation program in four
areas.
First, subject to regulation, it provides for title passage
from the Federal Government to the end recipient, which is, we
term the donee immediately upon the transfer from the State
agency with no recompliance requirement.
And second, it cleans up some inconsistencies in current
statute regarding service educational organizations, replaces
some outmoded language, and establishes a dedicated category of
eligibility for food banks and providers of assistance to the
impoverished and homeless.
Third, it provides additional incentives, we believe, for
agencies to bypass redistribution channels for personal
property through a further expansion of the exchange sale
authority.
Fourth, we believe it reinforces these incentives by
allowing the retention of sales proceeds from the sale of
undistributed Federal personal property.
The title passage portion of the bill is our first area of
concern. We believe that this potentially could create an
administrative nightmare for the State agencies, the General
Services Administration, and the donees because it will create
two distinct classes of property that are transferred through
the program, first property with compliance, property without.
Essentially, they could be identical, just separated by
acquisition or condition.
So we believe it could be very difficult for the donee to
figure out what they have up to 5-year compliance or an 18-
month or a 1-year compliance on and property that has no
compliance restriction period. We're always worried about
fraud, waste, abuse. We feel that this might be a thing that
could lead for donees to be confused and make mistakes they
shouldn't make.
Second, while--this comes in section 605. The second
portion of section 605 clarifies our eligible donees, we think
that's a good idea, cleaning up the language, taking outmoded
language out of the bill or out of the act, creating the
separate class of providers for providers of assistance to
homeless and impoverished is a good idea. It would also help
clarify it from an eligibility standpoint. We're very much in
favor of that.
The personal property exchange sale provision of this act
we believe will change the face of reutilization by allowing
executive agencies of the Federal Government to generate
revenue by circumventing the redistribution system.
Specifically, section 603 of this bill grants agencies the
freedom to divest the assets of government, hard assets, things
our taxpayers have purchased, for services. For example, we
believe that an agency could take lab equipment that is being
used in universities and schools that come through the donation
program, and they could use that to pay for the demolition of a
building that was housed within that building.
Redistribution of excess and surplus property has
historically been our country's first source of supply. It has
been a central theme of our personal property management
structure for over 50 years. On the excess level, it prevents
government waste by allocating the extra resources of one
agency and allowing another agency to use it. We see the Law
Enforcement Support program, the Forest Services Excess and
Personal Property Program, the National Science Foundation's
programs, USDA programs, all of these passing the assets of
government around, making the fullest use of the taxpayer's
dollars.
Given that currently we believe there's no oversight of the
exchange sale provisions, we feel that expansion further at
this point would be premature.
I realize I'm out of time. In summation, I would like to
say thank you for the opportunity to allow us to speak today.
We realize that the majority of the presenters have been
talking about real property, and we are here talking about
personal property, and we appreciate your indulgence. Again, we
would like to take any opportunity for questions from the
committee and like a further dialog if possible. Thank you.
[The prepared statement of Mr. Perica follows:]
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Mr. Horn. We thank you and we have been joined by Mr.
Sessions, and I need the consent of our colleagues to have him
sit with us and make a statement and also participate in the
questions.
Mr. Turner. No objection.
Mr. Ose. Can we put that to a vote, Mr. Chairman?
Mr. Horn. Without objection. Some stern people around here.
OK.
Mr. Sessions, if you want a few opening remarks.
Mr. Sessions. Mr. Chairman, thank you so much. I will tell
you I appreciate my colleague Mr. Turner, the gentleman from
Texas, and Mr. Kanjorski, for being on my side today. It is not
unusual for me, whether it's Methodist church or Rotary Club to
not have unanimous vote about anything that I'm a part of. And
I also apologize for being late. I was over with royalty today
on the Senate side for another bill that I have got that I
appeared with Senator Kennedy from Massachusetts that I was
working on.
I'd like to thank you, Chairman Horn and this subcommittee
and the members for allowing me to testify today on my
legislation, H.R. 3285, the Federal Asset Management
Improvement Act of 2000. I appreciate each of the witnesses
joining us today to talk about their support and their ideas
about improving Federal property management. It is my hope that
this hearing will resolve the billions of dollars in waste that
are lost each year from underutilized Federal buildings.
As chairman of the Results Caucus, I have sought to
highlight the waste, inefficiency and mismanagement found in
our government and looked for innovative solutions to these
problems. Accordingly, I have introduced H.R. 3285, the Federal
Asset Management Improvement Act. This would benefit government
by turning aging Federal properties that have become financial
liabilities into modern facilities that are an asset to the
taxpayer.
The government is the largest holder of property in the
United States. Unfortunately, many of those facilities are
underutilized and unneeded. For example, the GAO has found that
the Veteran's Administration spends about $1 million a day to
operate unneeded hospital buildings. Unfortunately, this is
only the tip of the iceberg.
As Federal agencies and programs evolve, their facilities
need changes. As a consequence, government-owned real estate
often becomes underperforming, inefficient and functionally
obsolete. The real estate marketplace is constantly changing
making portfolio management increasingly challenging to the
Federal Government. The GSA's property inventory has a
replacement value of approximately $30 billion; 50 percent of
its government-owned space is more than 45 years old. GSA
estimates that its current reinvestment needs exceed $4 billion
over the next 5 years.
This legislation will correct problems in current law which
allow these buildings to be--today to be underutilized and
wasting taxpayer dollars. By partnering government agencies
with private sector investment interests to revitalize the
property without lease obligations and debt guarantees by the
Federal Government. This means that the Federal Government can
stop wasting taxpayers dollars on empty buildings.
I appreciate the continuing dialog I have had with the
administration, GSA and other Federal agencies on this
legislation, and look forward to working with them to pass much
needed legislation.
I want to thank you, Mr. Chairman, for your interest in
this matter and holding this hearing, and I hope that we can
highlight changes that are necessary and needed in the law and
I thank each of the witnesses for their attention today to the
efficiency of the U.S. Government.
Thank you, Chairman.
Mr. Horn. Thank you very much.
I have one question, then I'm going to turn to Mr. Turner
and then we'll alternate 5 minutes per person. What I want to
know just going down the line is what do you feel is the proper
number of years for a lease term, and what's your rationale
behind it, if we can do it very succinctly? Yes, let's start
with GAO.
Mr. Ungar. Mr. Chairman, I don't have a magic number. I
think for the situations that we're talking about here with
partnerships with the private sector, it certainly would be
enough years that the private sector would find it advantageous
to enter into the agreement, and in those cases where I
indicated where we're dealing with special properties that
needed a substantial investment, it's more likely to be more
than 20 years and maybe more than 30 years obviously.
Mr. Horn. So you would do 30.
Mr. Ungar. At least that, and probably more in those cases
where we're talking about historical properties or properties
in economically depressed areas that require a substantial
amount of reinvestment. In those cases, it may have to be
beyond 30, but there ought to be probably a general rule and
Congress can control that by perhaps saying if it's more than a
certain amount of time, because it's 30 years, having some kind
of a special process within maybe GSA or elsewhere to approve
it.
Mr. Horn. Mr. Bibb, how about you?
Mr. Bibb. Well, Mr. Chairman I think my answer would depend
upon the use that you're putting the property to. Certainly if
you're talking about simple vacant space within a Federal
building, a 20-year term to recover the amortization and space
improvements would be fine. If you're talking about the type of
full blown public-private partnership that Congressman Sessions
has proposed where you are dealing with complete renovation of
a building, I agree with some of the comments that Mr. Weiner
made, that the longer the term, the more like ownership--more
like an ownership position that the developer for the
development entity has, probably the better rates you can get.
So I can't give you an exact number. We've proposed either 20
or 35 years, depending upon the situation, but we've also
recognized that the legislation is not really intended to
develop property for leaseback for Federal agencies. I think if
you're going to do that economically, it would take a longer
term.
Mr. Horn. Admiral.
Admiral Silva. Mr. Chairman, my comments are very similar
to the first two witnesses and the statement made by Mr.
Weiner. I really don't have a lot of practical experience with
this, but I believe that it should be looked at on a case-by-
case basis or a category-of-use by category-of-use basis. And
that's all I have, sir.
Mr. Horn. Mr. Weiner, how about it?
Mr. Weiner. The timeframe has to be, for a project of any
consequence, at least 50 years. Thirty-five years that the VA
has used has limited the size and scope of a number of
projects. The developer--the private sector developer that goes
into a partnership goes in thinking about its exit strategy.
That's the nature of real estate business. The developer wants
to be in for 3 to 5 years, maybe 10 on a complex project, and
then sell its interest to a long-term player like a pension
plan or a life company. They need a long lease term so they
have something to sell as part of their exit strategy, and even
35 years is just too short for major projects.
Mr. Horn. Ms. Foscarinis, what are your feelings on this?
Ms. Foscarinis. I don't think we have anything to say on
this particular provision since that's not really our concern.
Mr. Horn. OK. Mr. Perica--you finished on that?
Ms. Foscarinis. Yeah.
Mr. Horn. Mr. Perica.
Mr. Perica. I believe the National Association would not
have any input on this particular provision.
Mr. Horn. Now, is your group primarily on personal
property, not the real estate?
Mr. Perica. Not on the real property at all.
Mr. Horn. So you don't have an opinion either on this then?
Mr. Perica. No.
Mr. Horn. OK. Well that's one thing I think we have got to
deal with, so I was interested in what you have to say on it.
I now yield 5 minutes to the gentleman from Texas, Mr.
Turner.
Mr. Turner. Thank you, Mr. Chairman.
It seems clear to me when I look at the comparison between
the GSA draft bill that's already been introduced in the Senate
and H.R. 3285 that it presents several very key and critical
issues that we have to resolve. I know suggestion was made a
minute ago that perhaps some of the provisions could be merged,
but when I look at the comparison, there are pretty clear
conflicts in what the two bills would propose to do, and I
think that we need some comment on that.
I don't know how many of you have looked at the comparison
that I have in my hand. I don't know who put this together, if
staff did, but I think it would be helpful for our witnesses to
look at that and give us our thoughts on the differing
approaches to the problem.
And I guess to get ahold of one that maybe is a little more
manageable, I found it interesting here, the testimony on the
provision of the law regarding the homeless. And perhaps Mr.
Bibb is the one to ask the question, but I'd like to know a
little bit more about what the controversy was in the case
involving the Federal courthouse in Lafayette. Because,
obviously, there seems to be a problem in this area that we
probably have an obligation to ferret out and to try to
resolve; and, obviously, the two bills even deal with that
issue a little differently. Could you give us a little history
on that and what the conflict is and why that conflict arises
apparently more often than we would like?
Mr. Bibb. I'd be glad to. Would you like me to start with
comparison of the two bills or move to Lafayette?
Mr. Turner. Perhaps you could tell us how the two bills
differ, and then maybe that will work into your discussion of
what happened in Lafayette.
Mr. Bibb. OK. Just briefly, there are areas where the bills
are very compatible. The GSA bill is broader in that I
represent the Office of Governmentwide Policy, and the bill has
been written to affect all agencies who are covered by the
Federal Property Act. Congressman Sessions' bill, although it
does allow for the GSA administrator to delegate certain
authorities, is aimed more at the GSA inventory, which is
really only one-tenth of the total Federal inventory of real
property.
So our bill is broader. We have pieces on sound life-cycle
planning and management, like the appointment of a senior real
property officer. We think this front-end planning phase is
important. That's not to say that Congressman Sessions wouldn't
agree with that, but we have actually placed that into the
bill.
We have a broader variety of tools. In addition to
outleasing, we have sale exchange, retention of proceeds if a
property is sold, and public-private partnership, as we have
discussed.
Congressman Sessions' bill is very broad, intended for
broad use by Federal agencies in leasing back either the
renovated or newly constructed facilities. Our bill was
submitted in recognition by the administration that because
cash on the barrel is a less costly alternative than financing
from the private sector that we would not use that or would not
recommend using that as a major tool for meeting Federal space
needs.
And then Congressman Sessions has a broad section on
governmentwide performance measures which we do not have in our
bill. We like performance measures. In fact, we've been leading
a governmentwide effort to begin to compile those from agency
to agency. We've been doing that voluntarily and would,
frankly, like to pursue that. But the inclusion of performance
measures in our bill is something we don't have there, but
certainly we could discuss.
So I think the thrust is to get the agencies to manage
their assets better, and there are varying tools in the two
bills, but the idea is common, I believe.
On the homeless issue, I would like to make just--if I
could have just a couple of minutes to respond to Ms.
Foscarinis' concerns and questions--is that acceptable? And
then I'll move to the Lafayette.
Just in perspective, and we will submit the records we have
on transfers to homeless groups, our numbers, the numbers I
have with me show over 60 properties valued at over $60 million
since the act was passed.
We believe by introducing incentives into Federal real
property management that we're going to create a climate where
more properties are identified for a variety of different uses,
whether it's sale exchange, either limited or more full public-
private partnerships, for sale for retention of proceeds, and
as unutilized or underutilized. This means homeless groups get
an opportunity at the property. So I envision more, not less.
Another point I'd like to make is simply the huge magnitude
of the Federal inventory. We have in all agencies 3.2 billion
square feet of space. That's a staggering number.
Just to put it in perspective, if you take the Washington,
DC, market from the Dulles corridor to Rosslyn to downtown
Washington to Bethesda, there's some 22 million square feet in
the Washington, DC, market of commercial space. The Federal
Government owns approximately 14 times the amount of space as
in the entire Washington market.
That's not all in office buildings. A lot of that is in
storage, special space. But the point I'm making is, it is a
huge inventory, almost beyond the ability to grasp it; and
within that kind of inventory my feeling is there are all kinds
of opportunities for everybody to play here. There are lots of
opportunities for public benefit discounts for park land and
that sort of use. There are lots of opportunities for homeless
groups to acquire properties, and there are lots of
opportunities for the Federal Government to recoup or take
advantage of the equity in their properties and do something
with them.
I'm not going to comment about each of the factors that
were identified as being in the bill. Some of them I'm a little
mystified by, such as the taking away----
Mr. Horn. Would you mind sending us a letter on this that
we can put in the record at this point?
Mr. Bibb. I certainly will.
One last point on that. I would say I'm a little surprised,
genuinely surprised. We felt that we had coordinated the entire
bill with the--Ms. Foscarinis' group through both the Domestic
Policy Council and HUD and had, in fact, offered an annual
payment from property proceeds in lieu of a claim on each and
every property. So I'm surprised. I felt like we'd reached
agreement. Obviously, we hadn't; and we'd be happy to work to
resolve those.
On the Lafayette case, I don't know the details other than
at just a very surface level; and I'd be glad to provide that
for the record.
Mr. Horn. Without objection, it will be put in at this
point.
Mr. Bibb. My understanding is the disposing agency--in this
case it was a public building service property, a GSA
property--that the folks dealing with the disposal of that
embarked on using a piece of the--not a piece of the Property
Act, an older Surplus Property Act. Whether they should have or
not, I don't know. As I understand it, it's been in court; and
the court will resolve that.
Mr. Horn. We have a vote on the floor, and so I'm going to
ask Mr. Ose--5 minutes for questioning. And then we'll go over
to the floor, and we'll be in recess until probably 10 after
noon, and we'd like you to stay for the questions.
Ms. Foscarinis. Mr. Chairman, perhaps we could respond then
in writing if we're not going to--if we don't have an
opportunity to respond now to your questions about Lafayette.
Mr. Horn. If you could file it for the record. Thank you.
We'll put it at this point.
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Mr. Horn. Mr. Ose.
Mr. Ose. Mr. Chairman, I don't need the 5 minutes. I can
submit my question in writing.
The question--that really boils down to, I have a copy of a
letter dated February 24th signed by Jacob Lew suggesting that
agencies retain the excess proceeds from a redeployment of
their real property assets, and that is reflected in the GSA's
draft bill also. And I guess my question would be, is why would
Congress not retain discretionary authority over an
appropriation? I don't understand the logic behind giving the
agencies the discretion over the recaptured proceeds. So I will
submit a question in the interest of time.
Mr. Horn. You might want to do it now while the Federal
officials are here.
Mr. Ose. Paul may have some questions, and I'd be happy to
defer to him. I'd be happy to submit it in writing.
Mr. Horn. OK. Any other questions?
Mr. Ose. No. It was just very structural in nature.
Mr. Horn. Gentleman from Pennsylvania, Mr. Kanjorski, 5
minutes for questioning.
Mr. Kanjorski. I don't know if we're going to have 5
minutes, but I'll try and be prepared when the next bell goes
off.
Sitting here and listening to the testimony today and some
of the Members' questions, it seems to me that we really have a
hearing on three distinct areas, and that is, one, the handling
of surplus real estate for nonreuse of the Federal Government.
And that is a problem, and we should address it as a problem.
Then we have Mr. Weiner's position of using the private sector
to avoid immediate appropriations and provide for the needs of
the Federal Government in a leasing operation, which is I think
acceptable.
Mr. Horn. Let me interject and say, when Mr. Kanjorski is
done, we will be in recess until 10 after 12.
Mr. Kanjorski. We should study that as to its ramifications
governmentwide. And then, of course, we should examine the
private property problem, and how it impacts on everything from
the HAP program to the homeless program to the State program,
which is very complicated.
I think that in listening I'm not sure that all of us
understand how big a problem we're talking about and how large
a ramification it is and why it should take a great deal of the
attention of the Congress to work with the Federal agencies to
do it.
First, I would compliment GSA. I've worked with them over
the years. They have very frustrating problems where they can
do things that are effective and efficient, but they don't have
the legal authority to do it and, very often, a very valuable
piece of Federal property will go literally to waste because
there's no way under the existing authorities of the law to
handle the problem.
Two, there's a tremendous turnover in government, so we
lack sometimes institutional memory, which is a big problem.
Three, we do not have transparency of the Federal inventory
of property because there's literally no way to know all the
property of the Federal Government that's available both in the
nature of real estate and personal property. So that there
develops a culture within the reuse of the property community
that has to be watched out for because it could eventually
cause abuse and fraud and mismanagement. I think every
administrator that I've been working with at GSA has struggled
with it, every property person has struggled with that, and I
think that's what our friend here from the State agencies
talked about.
It is very nice to limit the timeframe in which you control
property, 18 months or 5 years. But in some communities you
find people going to work using the State system. They get a
piece of property, and if the day after they have that property
they can pass it off as a private transaction, they will go
into business for themselves. Then you have a problem diverse
across the country of small communities versus large
communities, sophisticated States and unsophisticated States
and the balance of those assets going back.
And then, finally, particularly in the real estate field,
if you look at the map of the United States and you take the
Mississippi as the dividing line, two-thirds of the land mass
West of the Mississippi is Federal property. Now that property
was either acquired by purchase or development; and the
question is, who in the Federal Government should benefit from
it? Who in the various States should benefit from it?
I think I made a point the other day addressing this issue
that in the buildup of the cold war, States like Pennsylvania
who are not well-known for industrial--military industrial
complexes or military installations didn't receive the economic
largess of the Federal Government, but it was a war effort. Now
that the Third World War has not been fought and the cold war
is, for all intents and purposes over, all these Federal
assets, both in the Defense Department and the Energy
Department, which amount to hundreds of billions of dollars in
assets, how should they be disposed of in an equitable way to
the taxpayers who put in the money to pay for it?
Well, if you are going to give it to the communities or to
the States where the property is located, you're going to find
out that probably a third of the property goes to the South,
and the other third or 40 percent goes to the West, and maybe 5
or 10 percent ends up in the rust mill of the Midwest or
Northeastern part of the country; grossly unfair distribution
of assets.
As a matter of fact, in our base closing policy that we
activated several years ago, it was a perfect example of what
really was a detrimental occurrence. You have distressed
communities of the United States that do not have Federal
property or Federal investments that can be reutilized, and yet
you have very wealthy and very successful areas in the United
States that have the benefit of a growing economy because of
the largess of the Federal Government investment. And then,
when we closed the bases, we handed these facilities over to
these States and these localities. So that the disproportionate
fact is Texas and California got superindustrial parks with
airports and warehouses. The Midwest, to a large extent, and
northeastern Pennsylvania got very little.
So it was a negative hit in an economic development sense
toward the States that didn't benefit from the largesse of the
buildup of the cold war. And now when we build down we lose
again, and I think that's something to look at.
In listening to the homeless organization, I think that's a
problem that can be solved, and I calculated in my mind about
$4 billion would house all 800,000 homeless people. That should
not be a holdup. In a lot of instances, while we did act
sympathetic, we gave rights that now cost us hundreds of
millions or maybe billions of dollars of losses to protect
those rights.
Anyway, I think these issues are very large. I think they
certainly warrant further hearings and examination, and I am
certainly available to work with all my friends on that.
Mr. Ose [presiding]. Congressman Kanjorski, could we
recess? We'd be happy to come back for questions. So we're in
recess until 12:10.
[Recess.]
Mr. Horn [presiding]. Subcommittee will come to order.
Let me ask you, just down the line, the administration's
bill would authorize agencies to retain and spend proceeds from
the sale of real property assets without further authorization
or appropriation. While creating an incentive, this approach
reduces Congress' ability to oversee these funds. I'd just be
curious how you think about that.
Mr. Ungar.
Mr. Ungar. Mr. Chairman, we certainly think that this is an
issue that the subcommittee needs to address. It was one of the
concerns that we certainly had when we looked at the bill.
There's no question in our mind that the agencies need to have
a source of funds in addition to appropriations for repair and
alterations. We found that across government, including in DOD,
VA, GSA, and other agencies.
The question is how far you want to go with that, and I
think that's up to you. One possibility would be to require a
plan in advance as to how the agencies want to spend the
proceeds and then having some kind of report at the tail end as
to how they actually did.
There is a requirement in one of the bills for a report
after 5 years from GSA and also a review by GAO. That would
certainly help, but that's a long period of time to go without
any congressional oversight.
Mr. Horn. Well, as you look at--and I don't know what
comparisons the GAO has on it--but how can Congress ensure that
proceeds from the sale of real property assets are
appropriately spent by the Federal agencies? What is the
process now? I know we're probably short on preventive
maintenance.
Mr. Ungar. I'll start, and maybe Dave Bibb would like to
add on. I know right now for the larger dollar projects there's
a prospectus process, at least in GSA's case, whereby for
projects that involve $2 million or thereabout, GSA has to
provide what's called a prospectus, or a plan, to the
appropriate House and Senate authorizing committees. They would
review that plan. The plan looks at the need for the project,
discusses alternatives, and then explains how GSA arrived at
the decision it did. This provides both Houses of Congress and
relevant committees with background information and details
which they can then decide upon.
While the processes in these bills would provide
information front for the actual use of the tools, such an
arrangement is not identical to the prospectus process, but it
at least would give you some information. Where it's a little
unclear is on the tail end. Once the agency goes through the
transaction and has the money in a capital account, what
oversight does Congress have there? And it's at that point
where we think there needs to be some information coming to
Congress on perhaps the planned use and then something on
actual use.
Mr. Horn. Mr. Bibb, and I guess Admiral Silva also, with
all of the property you have, what are your thoughts on the
approach suggested by the General Accounting Office that would
require proceeds from the sale of property to be deposited into
a centrally managed account?
Mr. Bibb. Mr. Chairman, I think we're not particularly in
favor of a central account simply because we're trying to
encourage responsible asset management by each Federal agency.
We'd prefer to see individual accounts.
We do think some controls are needed. There are some
controls in the bill, such as specifying what the amounts in
that fund could be used for, but I expect that is an issue we
need to have extensive discussion about before the bill is
finally passed. I believe central control--the government is so
big in its real property inventory that I'm not comfortable
with one place making decisions on each and every transaction.
Mr. Horn. I take it in your development of it you would
want to place the responsibility on the chief operating
officer, chief executive of the particular department or
agency?
Mr. Bibb. The bill would provide for a senior real property
officer, and that's where we would like to place the
accountability, yes.
Mr. Horn. And that would essentially be in the Treasury?
Mr. Bibb. That would be an officer in each agency
responsible for prioritizing and accountable for the spending
of that money.
Mr. Horn. And it would be deposited in the Treasury in some
account I take it?
Mr. Bibb. Yes. There would be agency accounts established
within the Treasury.
Mr. Horn. Yes. And the use of it would simply be whether
the chief executive or chief operating officer signs off on it
or delegates it?
Mr. Bibb. As long as it's used for the purposes specified
in the bill.
Mr. Horn. Do any States have this type of process, do we
know?
Mr. Bibb. I don't know the State process on that particular
piece. We have talked with the States about using some of the
other tools in the bill but not on that particular one.
Mr. Horn. You might want to check if the GAO could on--with
the State of California and the State of New York, they have
extensive real estate, and how do they handle the maintenance
which everybody seems to want to avoid? And when we looked at
one university in California they had $4 billion in back
maintenance that they hadn't done. They just let that account
go. So now they have a real problem, to say the least.
Well, any other thoughts here on this issue?
Admiral Silva. Yes, Mr. Chairman.
As we strive to be leaders and innovators in real property
management, the more tools that a land holding agency has I
think that is good. But I also think that having some kind of a
measured and controlled way where the agencies can retain some,
if not all, of the proceeds from the real property transaction
will provide some incentives. I think that a lot of the
agencies need to not only have incentives but be able to
reinvest through good initiatives into opportunities that make
sense. To your point about the maintenance backlog growing, the
opportunity to divest or through constructive reuse of
facilities as to possibly avoid those costs, those maintenance
costs.
I think it provides a great incentive, particularly as you
move into good asset management through the Federal Government.
Mr. Horn. Let me ask you about Governors Island. We have
had a hearing up there, and the Coast Guard for a while had
custodianship. Do you still have it?
Admiral Silva. Yes, sir. It's funded--protection and
maintenance funding is provided by GSA. But in our partnership
agreement we still have resources that provide the protection
and maintenance on Governors Island and carrying on the
stewardship through the disposal process.
Mr. Horn. Well, where are we on that process? Last I knew
we had the city and the State and some universities that
perhaps wanted to use it.
Admiral Silva. GSA should probably speak to that issue.
They're the disposal agent. The process is, to my
understanding, continuing; and that's the extent of my
knowledge on it.
Mr. Bibb. Thanks a lot, Admiral.
Mr. Chairman, I don't have that information. I'm not in the
operational side of GSA, but we will certainly----
Mr. Horn. Can we get a statement as to status of where we
are, just for the interest of it all? Does anybody have any
thoughts over here on that particular question of deferred
maintenance and central accounts versus agency accounts?
Yes, Mr. Weiner.
Mr. Weiner. Just one brief comment that Mr. Sessions spoke
to waste in the use of the existing inventory----
Mr. Horn. Pull it toward you, the whole works. Horrible
microphones in this building.
Mr. Weiner. Just as Mr. Sessions spoke to waste in the
operation of the current inventory, there is the potential that
the proceeds that are retained by individual agencies could
also be subject to waste. What is needed, though, is an
incentive within the agencies to motivate the agencies to
participate. So with a properly designed program that has
accountability and addresses the sources of where these
proceeds are going to come from and what the end intended uses
are, subject to some oversight or review, perhaps by this
subcommittee, then you have the checks and balances that can be
a successful program.
Mr. Horn. Any other thoughts, Miss?
Ms. Foscarinis. Yes. I would like to point out two things.
One is that this process would represent a major shift in
Federal policy away from using these resources for public
benefit uses and toward using them for--to serve the agencies'
specific interest. I think maintenance is important, clearly
maintenance is important, but providing for maintenance at the
expense of this shift in policy I don't think is appropriate. I
also think it provides an incentive for agencies to dispose of
property, again, potentially at the expense of other uses of
these resources.
Mr. Horn. Mr. Perica.
Mr. Perica. With respect to retention of sales proceeds, we
have a couple of thoughts, both from the personal property side
and the real property side.
One, we'll echo the thoughts on accountability. We believe
that you all do a really good job of taking care of figuring
out where you want the taxpayers' money to be spent, and we
feel that the Federal agencies may not be concerned with the
full aspect of what the taxpayer wants, more to the point of
what they're trying to accomplish within their agency.
We feel by allowing retention of proceeds and that in that
particular function of government of allocating those resources
is taken out of your hands, and we're somewhat concerned over
that, with respect to the accountability. That's about it with
respect to real and personal property, if that makes any sense.
Thank you.
Mr. Horn. Now, Mr. Kanjorski was questioning the witnesses
when we broke for the four votes. Did you get all 5 minutes in?
Mr. Kanjorski. I'm not sure if I did, Mr. Chairman, but I'm
willing to take another 5.
Mr. Horn. Well, one person hasn't had a chance here, Mr.
Sessions, 5 minutes; and then back to Mr. Kanjorski.
Mr. Sessions. Also, Mr. Chairman, I recognize that I have
been given the opportunity to be here today as a result of the
favorability of this committee. I would be very pleased to
yield my time to the gentleman. I'm not trying to consume----
Mr. Kanjorski. If you have questions, go ahead.
Mr. Sessions. That will be fine then. Thank you, Mr.
Chairman.
I would like to direct my comments to Mr. Weiner, if you
could begin, and Rear Admiral Silva and Mr. Bibb.
I'm interested in specifically those things that deal with
H.R. 3285, which is my bill. If you could take just a minute--
because I know that we've heard a lot of testimony today. If
you could kind of paint a picture about if this became a law
what would happen, the dynamic nature of what this would do to
the marketplace and to the realization of helping the
government. Or, in your opinion, Mr. Bibb or Mr. Silva, if you
believe that there's a downside, if you would, or Mr. Weiner,
if you see a downside to it, also.
Mr. Weiner. Well, this is not a panacea, and we're talking
about your bill specifically.
Mr. Sessions. My wife tells me that every day, that I have
some good ideas, but it's not everything. I must confess to you
I'm used to hearing this at home, too.
Mr. Weiner. Well, I'm trying to make you feel at home.
Mr. Sessions. Thank you.
Mr. Weiner. It's a tool, and not all properties would lend
themselves to a partnership approach. But the point is, if you
have the choice of letting a property sit underutilized, being
a budgetary liability instead of treating it like a financial
asset, that is waste; and if that particular property can serve
a need of a Federal agency and if its location and its other
amenities make it attractive for private investment, then
you're going to turn a liability into an asset which will
produce income, not drain income, to the Federal Government.
So if the projects are properly selected--and I can't
emphasize that enough, that this may apply to less than 10
percent or 5 percent of the national portfolio--but if it's
there and it can be utilized, then it will have a tremendous
benefit.
The current prospectus program that's used for
appropriations, that can take at least 3 years, often more for
major capital projects; and by the time those projects are
approved, money is appropriated, the need has shifted. The
money's been appropriated. We really don't need it. Gee, we
better spend it or we're going to lose it.
So things are just really inefficient the way they're
currently conducted. Again, this is viewed as a supplement, not
a replacement to appropriations.
Mr. Sessions. And do you believe that the marketplace,
people who are engaged in this business across the country,
would view this as being favorable?
Mr. Weiner. Absolutely. We interviewed many of the large
investors and developers years ago; and, if anything, the
situation has improved where developers are squeezed or pressed
to find projects that will drive the kind of returns I'm
convinced these public-private partnerships can produce at the
Federal level.
Mr. Sessions. One thing in addition that I believe you and
I spoke about--and it was my view, you did not have to agree--
but this helps us use an existing supply of buildings that we
have, rather than going out and rebuilding.
Mr. Weiner. Absolutely.
Mr. Sessions. It helps us with a term that we all know, is
urban sprawl. It helps to utilize very carefully those things
that are, many times, on bus routes, in inner cities where we
already have goods and services, where we already have
infrastructure around those areas. And I think that that's a
real advantage, and I hope it will be seen this way by the
marketplace.
Mr. Weiner. And to embellish that point, in some situations
that I'm familiar with, the local governments view that as an
incentive to urban renewal, that it can help facilitate their
urban renewal plans by seeing the renovation of Federal
facilities. So it really has a lot of local public policy
benefit potential.
Mr. Sessions. That which one time was a diamond or a jewel
could still be that in the current place by someone else, and I
think that that's an advantage.
Admiral, do you have any comments related to either of
those questions?
Admiral Silva. Yes, sir. As I said before, I'm looking for
all the tools that I can get to manage our shore assets better.
However, I think that the tool of the public-private
partnership for the Coast Guard is a limited tool, limited use
tool from the prospective of we have very few large facilities
and very many very small facilities, that I'm just wondering
whether it would be that the tool of public-private
partnerships would be applicable and economically advantageous
to you.
As I mentioned, we have like 1,600 sites in my opening
statement, which we have 66,000 acres of property. So most of
our assets are 25-person small boat stations up and down the
coast and on the rivers and so forth; and I'm not sure that
that tool, while we'd be able to use it to a certain extent,
would be the total solution for the Coast Guard.
Mr. Sessions. Good. Thank you.
Mr. Bibb.
Mr. Bibb. Mr. Sessions, from a parochial standpoint I think
it's a terrific real estate tool and would have broad
application, but I recognize and I think this committee has to
look hard at the broader issues, and it's in the context of the
broader budgeting issues that we have to look at this.
In February, the Director of OMB wrote a letter to Chairman
Horn expressing the administration's position. That was not
done lightly. I can assure you there was a lot of discussion
within the administration about whether this tool was the way
to go or not.
The bottom line was the administration felt that it could
not endorse a tool which is second best in terms of budgetary
impact. We would all agree that cash on the barrel is the least
expensive alternative--pay cash for your renovation on your
facility. And, ultimately, a decision was made within the
administration to recommend as a matter of policy to the
Congress that we go with the second-best alternative would not
be, within the context of the larger budget debates, the
responsible thing to do. So, from that standpoint, it was not
offered up, but it was certainly looked at hard.
And again, from a very selfish standpoint, I would love to
have the tool to run a real estate program with. It's just this
larger context----
Mr. Horn. Without objection, I would like to put in the
record at this point the letter to which you referred from the
Director of OMB to myself and a copy to Mr. Turner dated
February 24, 2000.
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Mr. Sessions. Chairman, I would like to thank the witnesses
that we've had today. I believe each and every one of them have
brought forth not only compelling arguments but it's been done
so in a very forthright manner, and I appreciate not only their
indulgence on this matter but also my colleagues on both sides
of the aisle to be here today on this important issue. I yield
back.
Mr. Horn. Thank you.
The gentleman from Pennsylvania, Mr. Kanjorski, for 5
minutes.
Mr. Kanjorski. Mr. Chairman, I'm going to give an example
of sometimes how you can't make an evaluation whether something
is more efficient being done by the appropriation method or the
lease-back private partnership.
In my District, I have an experience where we have a
beautiful GSA-constructed facility, a computer facility for the
Social Security Administration. It's well designed, well-built,
but it took 10 years from the point where we appropriated and
authorized the construction until final construction.
On the other hand, I have an example of an old brewery that
was in existence and abandoned for 20 years, and the post
office needed to expand its facility. And in an arrangement
between the GSA, the post office and a private partnership,
work was completed within 2 years----
Mr. Horn. What city was that in?
Mr. Kanjorski. Wilkes-Barre.
Mr. Horn. Wilkes-Barre.
Mr. Kanjorski. And if you looked at the 8 years of delay
and tie-up of funds and you amortize that value on the front
end cost, you may actually find out that the private
partnership in reconstruction rehabilitation was a much cheaper
investment for the U.S. Government. And so I am delighted that
we have the issue, but I think it is a very complicated issue.
I particularly have worked very long over the last 5 or 6
years with the Department of Energy. The Department of Energy
has identified approximately $50 billion worth of excess assets
amounting to 12,000 real estate locations and 4,000 warehouses.
I'm embarrassed to say most people don't know what's in those
warehouses in terms of actual equipment or value or reuse
potential.
If we were to perhaps go as broad as we are going now
without the protections, the fear that I would have with the
turnover of the high administration people over 2 years in the
Federal departments, nobody would have an institutional memory
or knowledge of what's going on. And there is a culture that
would grow, just as the Beltway bandits have grown up to become
contractors of the government. If you turn loose $100 billion
worth of property for reuse reallocation sales, you're inviting
that without really adequate control and oversight by the
Congress and the agencies and someone with that institutional
memory.
So I would like to see the process move forward but with a
little more involved hearing processes and field examinations
and really getting out there and working with these people.
And, ultimately, if I had my way--you know, we've heard
such a divergence of testimony of different interests and
potential happenings, everybody with the common end, we want to
get a better bang for the buck for the Federal taxpayer, but
the question of how to get it done remains. It seems to me,
just by calling this hearing, what you succeeded in doing is
showing how multifaceted the problem is. And in order to iron
out these differences maybe we have to break the bills up into
two or three, concentrating on real estate, concentrating on
avoiding the appropriation process and going through the
partnership process and how to handle personal property.
But it would seem to me a roundtable discussion on these
various aspects, allowing more concentration and greater focus,
would be very helpful. In this discussion, the real people and
those in the audience here that have the insight and knowledge
of what's going on could have their information and knowledge
used in the structure of the legislation to go forward.
But I think we have to--to the best of my mind is--identify
Energy, Department of Defense and probably GSA as the major
property people, and they hold excess property well over $100
billion. I couldn't even estimate it.
If we pass this bill, it would seem to me--give an example
to the Admiral here. I represent a development company, and I
come to you, and I say, you've only got 66,000 acres of land,
but they're on the East Coast of the United States, Florida to
Maine, and the West Coast of the United States, Seattle to San
Diego, awfully nice. I just spent a week in Florida at one of
your installations, right near it, 166 acres at a little inlet,
a little Coast Guard station, a doctor's inlet I think it is;
and I sighted about 10 acres of land that would be beautiful
for a 300 to 400 apartment condominium.
Now, I have this bill. I want to rent that land from you. I
want to put up the 300 condominiums, and you're going to derive
out of that, say, the value--pick a figure--$10 million, and
you don't have to do anything with it. And the commander would
like another jet plane. He says, hell, I just trade this little
lease off, and I got myself a jet plane.
And I think that's a problem. I think if you magnify that
problem what it could be--maladministration, misadministration
or lack of information--could be a catastrophe. And I think, in
anything we do like this, that I have worked with GSA and
surplus property for 16 years now, actually longer than that,
before I came to Congress--they are very successful sometimes
in the reutilization of property, particularly to the States
and municipalities, but it doesn't work perfectly.
I think if we don't take the time when we're making the
correction we may have a possibility that we'll--maybe only 1
out of 100 will be a charlatan, but, believe you and me, the
administration, the leadership of that Department and this
Congress will be grossly embarrassed if that one out of a
hundred charlatans occurs.
So the ownership of property in the Federal Government is
so huge, so diverse and so complicated an issue that I'm not
sure a single bill addressing all of those issues can be added.
Let me give you one example, again going to surplus
property; and we talked about it the other day. The Federal
Government allowed an amendment to this bill to allow the HAP
project, which is overseas nations coming in and getting
surplus personal property from the U.S. Government. It
initially occurred in overseas bases, and it was intended for
poor countries who needed pieces of equipment. But now it's
been extended to the extent that foreign representatives can
come to the United States to any surplus area and have priority
over any State or municipality or any other agency of
government of getting this equipment. And I've seen experiences
where they literally have come in and taken millions of dollars
worth of equipment. The government pays to haul it to wherever
they want to take it.
Mr. Horn. We'll continue this, but could we have Mr.
Sessions 5 minutes and you get another 5?
Mr. Kanjorski. It sits there and deteriorates. And I think
we have to look at those programs, too, and put them in
perspective.
Mr. Horn. Those are good suggestions.
Gentleman from Texas, 5 minutes.
Mr. Sessions. Mr. Chairman, thank you.
I would just respond back to my colleague who has offered
some very thoughtful insight, and I would say that I think that
there could be a way for us to get together. It could be one
piece of legislation. I think we could incorporate the feedback
that we've received from each one of you today.
As the main sponsor of this bill, I will tell you that I
intend to do that. I intend for us to work together. I intend
for us to take the good parts of the bill, being as reasonable
as I am, and taking the things that some other people feel are
reasonable. I intend to move this bill. I intend to take the
feedback that's been given today, and I intend for it to be an
opportunity for my colleagues on both sides of the aisle and
for those in the administration and outside to come together on
a consensus bill. I think it's possible. I think it's possible
for me to take what we've heard today and move it forward.
I would also, with great respect, tell the gentleman from
Pennsylvania that if we had been able to do this that I would
like to move it. If we have not, then I will engage in hearing
more testimony, and I would ask this chairman to do that. But I
believe that for the good of the taxpayer and the good of the
industry and the people, the industries and the people who are
here, that I think we can get closer and that, in my opinion, I
have gained great knowledge and have benefited from what has
happened today.
So I intend to move forward to see if we can gain
consensus. Mr. Kanjorski, I promise that I will continue in
this endeavor and will work with you, including the gentleman
from Texas, Mr. Turner, who brings great depth to this argument
and discussion also.
So, Mr. Chairman, I yield back my time, but that is what I
intend to do as a result of this time that we've spent
together.
Mr. Horn. I think it's a good suggestion. And we will have
Mr. Turner, Mr. Kanjorski and Mr. Sessions all, two Texans and
a Pennsylvanian, and that will be the subcommittee that put
this all together which I will delegate delightedly to see what
happens. So we'll proceed in that way, and you can all share
ideas with each other, and I think you will have a pretty good
product coming out of this. And if you want to do it before the
August break, why good luck. If you want to do it after, we're
going to be here every day in September, probably so.
Mr. Sessions. Well, I would, as the chairman has offered, I
do intend to work diligently and would anticipate that
September--before the end of September timing, would say that
we must do that, and so I will engage in that time line. Thank
you, Mr. Chairman.
Mr. Horn. Admiral, I have just got one question. Since Mr.
Kanjorski has explored all the Coast Guard properties on the
East Coast, I want to say something for the West Coast. Have
you ever been at the--what was the home of the commandant
commander of the 11th Coast Guard District? Have you ever been
there on Terminal Island?
Admiral Silva. No, sir.
Mr. Horn. OK. Well, you should go there. It's really a
marvelous piece of land, and we're very sorry--we have great
respect for the Coast Guard, but we're sorry you moved out of
southern California where the action is up there, where you've
got a couple of bridges you can look at. But another part of
the State--you've been to San Diego?
Admiral Silva. I'm on a plane to San Diego this afternoon,
sir.
Mr. Horn. Well, take it to Terminal Island. Because that
property--the only worry is when you have got a few escapees
from the Federal prison on that property, but that's under
control, usually. But this is one of the most beautiful homes
in southern California, with several acres around it. If you
put that out for auction, you would either put it in the Coast
Guard Academy's foundation or some place--let me tell you, that
would be at least $10 million for that home. Now that home was
never built for the Coast Guard. Believe it or not, it was
built for the chief public health officer in 1934, and they
lived very well.
Mr. Sessions. Or did.
Mr. Horn. Well, the Coast Guard Commander, until they moved
north, that was his home; and it was a great place to
entertain.
So I like the suggestions you gentlemen have agreed on. And
so let's hear what we get out of that, and I'll be glad to do
whatever you want in getting more witnesses in, whatever. So
you're quite welcome. So if there's no further questions--do
you have some more? Do you have any more?
Mr. Sessions. I'm done, sir. Thank you.
Mr. Horn. We will then put this in recess rather than
adjourn. We're in recess subject to call of the Chair. Thank
you very much.
I would also like to thank the following people: J. Russell
George, staff director and chief counsel; Randy Kaplan,
counsel; Bonnie Heald, director of communications; Bryan Sisk,
clerk; Elizabeth Seong, staff assistant; Will Ackerly, intern;
Chris Dollar, intern; Davison Hulfish, intern. And for the
minority, Trey Henderson, counsel; and Jean Gosa, minority
clerk. Also, our court reporter of debates, Melinda Walker.
[Whereupon, at 12:50 p.m., the subcommittee was adjourned,
subject to the call of the Chair.]
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