Table Of Content

\V TO AMEND THE PUBLIC BUILDINGS ACT OF 1959 CONCERNING CALC=ULATION OF =PUB—LIC ^^ ^ ^ BUILDING TRANSACTIONS == Y 4. P 96/11: 103-46 (103-46) To Anend the Public Buildings Act o... HEARING | BEFORE THE SUBCOMMITTEE ON PUBLIC BUILDINGS AND GROUNDS OF THE COMMITTEE ON PUBLIC WORKS AND TRANSPORTATION HOUSE OF REPRESENTATIVES ONE HUNDRED THIRD CONGRESS FIRST SESSION ON H.R. 2680 TO AMEND THE PUBLIC BUILDINGS ACT OF 1959 CONCERNING CALCULATION OF PUBLIC BUILDING TRANSACTIONS OCTOBER 28, 1993 _ Printed for the use of the Committee on Public Works and Tranns?portation , sep U.S. GOVERNMENT PRINJTTIINNGG*.&QFFFFIICCEE 78-708 WASHINGTON : ForsalebytheU.S.GovernmentPrintingOffice ^73)lf5» SuperintendentofDocuments,CongressionalSalesOffice,Washington.DC 20402 ISBN 0-16-044674-0 Vy TO AMEND THE PUBLIC BUILDINGS ACT OF 1959 CONCERNING CALCULATION OF PUBLIC ____ BUILDING TRANSACTIONS ' 4. P 96/11: 103-46 (103-46) o Anend the Public Buildings Act o... HEAEING BEFORE THE SUBCOMMITTEE ON PUBLIC BUILDINGS AND GROUNDS OFTHE COMMITTEE ON PUBLIC WORKS AND TRANSPORTATION HOUSE OF REPRESENTATIVES ONE HUNDRED THIRD CONGRESS FIRST SESSION ON H.R. 2680 TO AMEND THE PUBLIC BUILDINGS ACT OF 1959 CONCERNING CALCULATION OF PUBLIC BUILDING TRANSACTIONS OCTOBER 28, 1993 Printed for the use of the Committee on Public Works and Transportation U.S. GOVERNMENT PRINTING,OFFICE WASHINGTON 78-708 : ForsalebytheU.S.GovernmentPrintingOffice ^^.fOT'i'r SuperintendentofDocuments,CongressionalSalesOffice,Washington,DC 20402 ISBN 0-16-044674-0 COMMITTEE ON PUBLIC WORKS AND TRANSPORTATION NORMAN Y. MINETA, California, Chair JAMES L. OBERSTAR, Minnesota BUD SHUSTER, Pennsylvania NDIOCUKGLJ.ASRAAHPAPLLLEGIAI,TWEe,stOhViiorginia WTIHLOLMIAASMEF..PCELTIRNIG,ERWi,scJorn.,siPnennsylvania RON DE LUGO, Virgin Islands SHERWOOD BOEHLERT, New York ROBERT A. BORSKI, Pennsylvania JAMES M. INHOFE, Oklahoma TIM VALENTINE, North Carolina BILL EMERSON, Missouri WILLIAM O. LIPINSKI, Illinois JOHN J. DUNCAN, Jr., Tennessee JRAOMBEESRTA.E.TRWAIFSEI,CAJNr.T,,WJeRs.,tOVhirigoinia SWIULSLAINAMMOHL.INZAERLIIF,F,NeJwr.,YoNrekw Hampshire PETERA. DeFAZIO, Oregon THOMAS W. EWING, Illinois JIMMY HAYES, Louisiana WAYNE T. GILCHREST, Maryland BOB CLEMENT, Tennessee JENNIFER B. DUNN, Washington JERRY F. COSTELLO, Illinois TIM HUTCHINSON, Arkansas MIKE PARKER, Mississippi WILLIAM P. BAKER, California GREG LAUGHLIN, Texas MICHAEL A. "MAC" COLLINS, Georgia GPEETOERGGEEREE.NS,ATNeGxMaEsISTER, Illinois JDAAYVIKDIMA, CLaElVifYo,rnNiaew York GLENN POSHARD, Illinois STEPHEN HORN, Cahfornia DICK SWETT, New Hampshire BOB FRANKS, New Jersey BUD CRAMER, Alabama PETER I. BLUTE, Massachusetts BARBARA-ROSE COLLINS, Michigan HOWARD P. "BUCK" McKEON, California ELEANOR HOLMES NORTON, Districtof JOHN L. MICA Florida Columbia PETER HOEKSTRA Michigan LUCIEN E. BLACKWELL, Pennsylvania JACK QUINN, New York JERROLD NADLER, New York SAM COPPERSMITH, Arizona LESLIE L. BYRNE, Virginia MARIA CANTWELL, Washington PAT (PATSY ANN) DANNER, Missouri KAREN SHEPHERD, Utah ROBERT MENENDEZ, New Jersey JAMES E. CLYBURN, South Carolina CORRINE BROWN, Florida NATHAN DEAL, Georgia JAMES A. BARCIA, Michigan DAN HAMBURG, California BOB FILNER, California WALTER R. TUCKER, California EDDIE BERNICE JOHNSON, Texas PETER W. BARCA, Wisconsin Subcommittee on Public Buildings and Grounds JAMES A. TRAFICANT, Jr., Ohio, Chair ELEANOR HOLMES NORTON, District of JOHN J. DUNCAN, Jr., Tennessee Columbia, Vice Chair THOMAS E. PETRI, Wisconsin EDDIE BERNICE JOHNSON, Texas BILL EMERSON, Missouri DOUGLAS APPLEGATE, Ohio BUD SHUSTER, Pennsylvania JAMES E. CLYBURN, South Carolina (Ex Officio) WALTER R. TUCKER, Cahfornia NORMAN Y. MINETA, California (Ex Officio) (ID CONTENTS Page V H.R. 2680 (textof) TESTIMONY Rivlin,Alice M., Deputy Director, Office ofManagement and Budget 11 Shehadi, Michael T., Group SeniorVice President, Charles E. Smith, Manage- ment, Inc., Arlington,Virginia 71 Stasch, Julia, DeputyAdministrator, General Services Administration, accom- paniedby Dennis Fischer, ChiefFinancial Officer 57 Stevens, L. Nye, Director of Planning and Reporting, General Government Division, U.S. General Accounting Office, accompanied by Paul Posner, Director, Budget Issues Group, and David Matheson, Assistant to the ComptrollerGeneral 79 Williams, J. McDonald, President and Chief Executive Officer, Trammell Crow Company, Dallas, Texas 71 PREPARED STATEMENTS SUBMITTED BY WITNESSES Rivlin, Alice M 85 Shehadi, MichaelT 90 Stevens, L. Nye 100 Williams, J. McDonald 169 SUBMISSIONS FOR THE RECORD Clyburn, Hon. James E., a Representative in Congress from South Carolina, posthearing questions submitted toAlice M. Rivlin, Deputy Director, Office ofManagementand Budget 49 Rivlin, Alice M., Deputy Director, Office ofManagementand Budget: Office of Management and Budget's position on the proposed Atlanta lease 16 Savings from implementation ofscoringrules 46 Responses to post-hearing questions submitted by Hon. James E. Clyburn 49 Stevens, L. Nye, Director of Planning and Reporting, General Government Division, U.S. General Accounting Office, "Federal Office Space: Increased OwnershipWouldResultin SignificantSavings" (December 1989report) .... 113 Traficant, Hon. James A., Jr., a Representative in Congress from Ohio, letter toHon. Leon E. Panetta, Director, OfficeofManagement and Budget 9 (III) 103d CONGRESS H. R. 2680 1st Session To amend the Public BuildingsAct of 1959 concerningthe calculation of public buildingtransactions. IN THE HOUSE OF REPRESENTATIVES July 20, 1993 Mr. Traficant (for himself, Mr. DUNCAN, Mr. Mineta, Mr. Shuster, Mr. Borski, Ms. Norton, and Mr. Lewis ofGeorgia) introduced the following bill; which was referred to the Committee on Public Works and Transportation A BILL To amend the Public Buildings Act of 1959 concerning the calculation ofpublic building transactions. 1 Be it enacted by the Senate and House ofRepresenta- 2 tives ofthe United States ofAmerica in Congress assembled, 3 SECTION 1. PUBLIC BUILDINGTRANSACTIONS. 4 Section 7 of the Public Buildings Act of 1959 (40 5 U.S.C. 606) is amended byadding at the end the following 6 new subsection: — 7 "(g) Calculation" of Transactions. For pur- 8 poses of calculating public building transactions, any con- 9 tract entered into by the Administrator under this Act for (V) VI 2 1 the purchase, lease-purchase, or lease of a public building 2 approved pursuant to subsection (a) shall be treated in 3 the same manner as ifthe contractwas entered into imme- 4 diatelyprior to fiscalyear 1991.". •HR 2680 IH — AMENDING THE PUBLIC BUILDINGS ACT OF 1959 CONCERNING CALCULATION OF PUB- LIC BUILDING TRANSACTIONS THURSDAY, OCTOBER 28, 1993 House of Representatives, Committee on Public Works and Transportation, Subcommittee on Public Buildings and Grounds, Washington, DC. The subcommittee met, pursuant to notice, at 9:32 a.m. in room 2253, Rayburn House Office Building, Hon. James A. Traficant, Jr. [chairman ofthe subcommittee] presiding. Mr. Traficant. The subcommittee will come to order. This morning the subcommittee will hear testimony from officials of the Executive Branch, the Administrative Office of the General Services Administration; Alice Rivlin, Deputy Director ofthe Office of Management and Budget; and Mr. Nye Stevens of the General A Accounting Office. panel of private sector real estate experts will also participate in today's proceedings. We are all here today to receive testimony on H.R. 2680, an idea that is overdue, and for some reason Congress wants to pile on and continue to pile on long-term debt rather than face the realities of real scoring as far as the deficit is concerned. H.R. 2680 is a bill to restore to the General Services Administra- tion a full set of financing tools that the committee believes the agency needs to conduct an efficient and effective real estate trans- action opportunity for our Government. As members ofthe committee which authorizes GSA—real estate appropriations, we believe that GSA should present and be able to include and discuss lease-purchase options as the committee arbitrates on GSA project funding. Lease-purchase combines characteristics of ownership with characteristics of leasing, and should be available to the committee for comparison and consideration with other funding alternatives. Our job is to authorize funding. In order to make the most informed decision, all funding options should be presented to the committee. In its role as the Federal Government's central property manager, GSA has a very broad array of responsibilities and tasks. GSA has control over approximately 258 million square feet of space through ownership and leasing. Contrary to popular opinion, GSA's record as a central property manager is excellent, an excellent record, and we want to make their presence in the real estate field even more significant than it is. They are in the forefront of energy management; handicapped accessibility programs; design (l) awards; small business opportunity programs, and health and safe- ty measures. However, in the financial arena GSA is in left field. They are playing, at best, second nature. Scoring rules imposed by the Budg- et Enforcement Act of 1990 have severely limited GSA's ability to consider bargains: bargains for the taxpayer. That's what we're here about today. For the past three budget cycles this subcommittee has been presented with countless prospectuses which analyze in detail various alternatives to acquiring Federal office space. Too often, the committee has been informed that in the absence of di- rect Federal appropriation, a cost-effective lease arrangement, such as lease-purchase, is not available to GSA, and therefore, by exten- sion, not available to the taxpayer. There has been ample articulation of this problem. In December of 1989, GAO did a report entitled "Federal Office Space: Increased Ownership Would Result in Significant Savings." Nobody—no- — body responded. In fact, we have seen a lot of excuses. We've heard an awful lot of complaints, a lot of analytical garbage, but nobody has responded to that GAO report. On page 2, Results in Brief, "Funding limitations and biases in the current budget struc- ture have led GSA to lease space that would be more economical to own." And on page 3, "Efforts to increase ownership are also hampered by a budgetary bias against capital investment. The Fed- eral budget makes no distinction between the benefits associated with a capital asset, which produces a future stream of benefits, and an outlay for an annual rent payment, which does not." Further, the Office of Management and Budget, in agency com- ments in the same report, states, "GSA and OMB plan to work with Congress to achieve legislation to authorize GSA to enter into least cost financing mechanisms." soImcaonulydpaelompolsetsafayllsoasmlaeenpytgaolkoidngthaibnogustatnhdatd.oInhoatvhienngeivnermyhelairfed, and I'm getting phone calls that we should back off. Further, the Office of Management and Budget in agency com- ments in the same report states, "We have to have least cost financing mechanisms." I should read that a third time. In more recent GAO testimony, in July of 1993 before Senator Levin, Mr. J. William Gadsby testified, "Our work has shown that GSA could save billions of dollars by increasing the amount of fed- erally-owned space and reducing leased space." I think Ronald McDonald wrote a letter to that effect to the Congress. Administrator Johnson, in his testimony before Senator Glenn on June 8, 1993, said, "The current budget scoring rules need to be reevaluated. It seems to me that the scoring techniques, at best, make the budget difficult and confusing; and at worst, may not be in the best interest ofthe taxpayer because they often do not result in the most cost-effective decision." Further, on October 14th, 1993, Mr. Johnson stated, "The Gov- ernment should ensure that there is no budget bias against long- term investments. Poor choices of capital investments and the means ofacquisition are currently costing taxpayers millions ofdol- lars each year."