U.S. GOVERNMENT PRINTING OFFICE

57–989 u WASHINGTON : 1999

FRANCHISE FEE CALCULATIONS OF FORT SUMTER

TOURS, INC.

OVERSIGHT HEARING

BEFORE THE

SUBCOMMITTEE ON NATIONAL PARKS AND PUBLIC

LANDS

OF THE

COMMITTEE ON RESOURCES

HOUSE OF REPRESENTATIVES

ONE HUNDRED SIXTH CONGRESS

FIRST SESSION

JULY 1, 1999, WASHINGTON, DC

Serial No. 106–44

Printed for the use of the Committee on Resources

(

Available via the World Wide Web: http://www.access.gpo.gov/congress/house

or

Committee address: http://www.house.gov/resources

(II)

COMMITTEE ON RESOURCES

DON YOUNG, Alaska, Chairman

W.J. (BILLY) TAUZIN, Louisiana

JAMES V. HANSEN, Utah

JIM SAXTON, New Jersey

ELTON GALLEGLY, California

JOHN J. DUNCAN, JR., Tennessee

JOEL HEFLEY, Colorado

JOHN T. DOOLITTLE, California

WAYNE T. GILCHREST, Maryland

KEN CALVERT, California

RICHARD W. POMBO, California

BARBARA CUBIN, Wyoming

HELEN CHENOWETH, Idaho

GEORGE P. RADANOVICH, California

WALTER B. JONES, JR., North Carolina

WILLIAM M. (MAC) THORNBERRY, Texas

CHRIS CANNON, Utah

KEVIN BRADY, Texas

JOHN PETERSON, Pennsylvania

RICK HILL, Montana

BOB SCHAFFER, Colorado

JIM GIBBONS, Nevada

MARK E. SOUDER, Indiana

GREG WALDEN, Oregon

DON SHERWOOD, Pennsylvania

ROBIN HAYES, North Carolina

MIKE SIMPSON, Idaho

THOMAS G. TANCREDO, Colorado

GEORGE MILLER, California

NICK J. RAHALL II, West Virginia

BRUCE F. VENTO, Minnesota

DALE E. KILDEE, Michigan

PETER A. DEFAZIO, Oregon

ENI F.H. FALEOMAVAEGA, American

Samoa

NEIL ABERCROMBIE, Hawaii

SOLOMON P. ORTIZ, Texas

OWEN B. PICKETT, Virginia

FRANK PALLONE, JR., New Jersey

CALVIN M. DOOLEY, California

CARLOS A. ROMERO-BARCELO ́ , Puerto

Rico

ROBERT A. UNDERWOOD, Guam

PATRICK J. KENNEDY, Rhode Island

ADAM SMITH, Washington

WILLIAM D. DELAHUNT, Massachusetts

CHRIS JOHN, Louisiana

DONNA CHRISTIAN-CHRISTENSEN, Virgin

Islands

RON KIND, Wisconsin

JAY INSLEE, Washington

GRACE F. NAPOLITANO, California

TOM UDALL, New Mexico

MARK UDALL, Colorado

JOSEPH CROWLEY, New York

RUSH D. HUNT, New Jersey

LLOYD A. JONES, Chief of Staff

ELIZABETH MEGGINSON, Chief Counsel

CHRISTINE KENNEDY, Chief Clerk/Administrator

JOHN LAWRENCE, Democratic Staff Director

SUBCOMMITTEE ON NATIONAL PARKS AND PUBLIC LANDS

JAMES V. HANSEN, Utah, Chairman

ELTON, GALLEGLY, California

JOHN J. DUNCAN, JR., Tennessee

JOEL HEFLEY, Colorado

RICHARD W. POMBO, California

GEORGE P. RADANOVICH, California

WALTER B. JONES, JR., North Carolina

CHRIS CANNON, Utah

RICK HILL, Montana

JIM GIBBONS, Nevada

MARK E. SOUDER, Indiana

DON SHERWOOD, Pennsylvania

CARLOS A. ROMERO-BARCELO ́ , Puerto

Rico

NICK J. RAHALL II, West Virginia

BRUCE F. VENTO, Minnesota

DALE E. KILDEE, Michigan

DONNA CHRISTIAN-CHRISTENSEN, Virgin

Islands

RON KIND, Wisconsin

JAY INSLEE, Washington

TOM UDALL, New Mexico

MARK UDALL, Colorado

JOSEPH CROWLEY, New York

RUSH D. HOLT, New Jersey

ALLEN FREEMYER, Counsel

TODD HULL, Professional Staff

LIZ BIRNBAUM, Democratic Counsel

GARY GRIFFITH, Professional Staff

(III)

C O N T E N T S

Page

Hearing held July 1, 1999 ....................................................................................... 1

Statements of Members:

Hansen, Hon. James V., a Representative in Congress from the State

of Utah ........................................................................................................... 1

Sanford, Hon. Mark, a Representative in Congress from the State of

South Carolina .............................................................................................. 3

Statements of witnesses:

Campsen, George, President, Fort Sumter Tours, Inc. ................................. 34

Prepared statenent of ................................................................................ 37

Jackson, David E., Certified Public Accountant ............................................ 65

Prepared statenent of ................................................................................ 67

Stanton, Robert, Director, National Park Service; accompanied by Mr.

Cohen, Solicitor’s Office; Robert Hyde, Financial Analyst, Division of

Concession Management .............................................................................. 6

Prepared statenent of ................................................................................ 9

Additional material supplied:

Affidavit of Mark F. Hartley, DBA ................................................................. 234

An Analysis of the Appropriate Franchise Fee For Fort Sumter Tours,

Inc. ................................................................................................................. 249

Brief, Fort Sumpter Tours, Inc. v. Bruce Babbitt, Secretary, Dept. of

the Interior .................................................................................................... 87

Brief, Fort Sumpter Tours, Inc. v. Bruce Babbitt, Secretary, Dept. of

the Interior .................................................................................................... 108

NPS Franchise Fee Analysis & Southeast Regional NPS Critique Thereof 135

NPS Mistakes in Calculating a 12 percent Franchise Fee for For Sumpter

Tours, Inc. ...................................................................................................... 130

(1)

OVERSIGHT HEARING ON FRANCHISE FEE

CALCULATIONS OF FORT SUMTER TOURS,

INC.

THURSDAY, JULY 1, 1999

HOUSE OR REPRESENTATIVES,

SUBCOMMITTEE ON NATIONAL PARKS

AND PUBLIC LANDS,

COMMITTEE ON RESOURCES,

Washington, DC.

The Subcommittee met, pursuant to notice, at 10:59 a.m., in

Room 1324, Longworth House Office Building, Hon. James Hansen

[chairman of the Subcommittee] presiding.

STATEMENT OF HON. JAMES HANSEN, A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF UTAH

Mr. HANSEN. Good morning, and welcome to the oversight hearing today.

I am glad to see the Director has recovered from his illness and

with us. We appreciate your presence.

The purpose of this oversight hearing is to examine the franchise

fee imposed by the National Park Service on Fort Sumter Tours,

Inc., a small family-owned concessionaire that provides tour boat

transportation to and from Fort Sumter National Monument in

South Carolina.

In 1992, the Park Service nearly tripled Fort Sumter’s franchise

fee from 4.25 to 12 percent. This has had a direct negative economic consequence at Fort Sumter Tours. They tried to find out

from the Park Service why this had happened.

However, the Park Service refused to give Fort Sumter Tours the

information they needed to understand the drastic rise in the franchise fee. Thus began a continuing confrontation between Fort

Sumter Tours and the Park Service, and which has led us to convene this oversight hearing today.

After recently reviewing the material, I cannot understand why

the Park Service is so reluctant to give it to Fort Sumter Tours.

In my opinion, it is riddled with major errors, it grossly overstates

the profitability of this concession. As we hear testimony today, I

believe this will become clear.

The Park Service has never admitted to Fort Sumter Tours that

errors were committed in calculating the franchise fee, and an absolute refusal by the Park Service to discuss the merits of the miscalculated franchise fee.

2

I want to make a point here: This oversight may be seen by some

as an inappropriate function of the Subcommittee; that is, as some

sort of private relief rather than centered on an issue of policy. But

would disagree with this opinion. In fact, subjects like this one is

the reason we have oversight hearings. It is a question of making

sure the Federal Government, and in this case the National Park

Service, does not trample on the rights of our citizens.

It is a question of the Federal Government following its own policies and guidelines, and it is a question of whether the Federal

Government can possibly ever admit its own mistakes, correct

those mistakes, and then move forward toward reasonable solutions.

One other point: It is fairly easy for Federal bureaucrats in

Washington to decide from afar how things are going to be for people around the country. However, it is quite another thing for those

same bureaucrats to understand that the decisions they make and

the mistakes that they may make can be devastating to hard-working Americans trying to make a living. I believe that this is what

we have here today. And it is not to be taken lightly.

Be that as it may, I was hopeful that the hearing would never

occur. By this means, that I held a meeting in my office some

months ago with the Director, the Solicitor’s Office, Fort Sumter

Tours, and other Members of Congress, Mr. Sanford, and Mr.

Spence, imploring the Park Service to take another look at this situation and resolve it to the satisfaction of both parties.

I stated at the time that the Subcommittee would hold an oversight hearing if the problems with the franchise fee were not resolved. Obviously, the Park Service did not take my suggestion

very seriously because we are here today.

It is my understanding that, following this meeting, the Park

Service asked Fort Sumter Tours for an offer. Fort Sumter responded, and the Park Service essentially said Fort Sumter’s offer

is no offer to them, apparently, to sit down and attempt to hammer

this out on the merits of the fee and discuss how it was calculated.

I am disappointed that nothing came of this. However, I am

quite willing to have this oversight in order to expedite getting this

thing resolved in a fair and equitable and honest way.

I would like to welcome our witnesses here today, and I would

now recognize the gentleman from Puerto Rico if he was here. Because he isn’t, I will turn to the gentleman from Tennessee for any

opening comments he may have.

Mr. DUNCAN. Well, I have no formal opening statement, Mr.

Chairman. I agree with you that it is unusual for us to hold a hearing on a dispute like this. And I am disappointed, like you, that

the Park Service did not work this out in some fair and reasonable

manner. But I suppose we can ask some questions about that at

the appropriate time.

Thank you very much.

Mr. HANSEN. I thank the gentleman from Tennessee.

I ask unanimous consent that the letter from Congressman Floyd

Spence be included in the record, and also the letter from Senator

Ernest Hollings be included in the record.

Mr. HANSEN. I won’t go through the entire thing, but I would like

to point out that Floyd Spence has a great personal knowledge of

3

this issue, and he says, ‘‘I am familiar with the ongoing dispute involving franchise fees at Fort Sumter. In the interest of Fort Sumter Tours, and the National Park Service and the visitors to Fort

Sumter, this matter needs to be resolved. If errors were made in

the calculation of this franchise fee, then the errors should be corrected.’’ Senator Hollings says, ‘‘As you know, by statutory law, all park

concessionaires are required to pay a franchise fee based upon a

percentage of their gross receipts. It is my understanding that in

1992 the Park Service unilaterally attempted to increase the franchise fee from 4.25 percent to 12 percent, and a dispute has existed

ever since. ‘‘This increase was based upon a franchise fee analysis prepared

by the National Park Service which the Tours claims to be inconsistent with the Park Service guidelines that existed at the time.

While I have limited knowledge of the merits, I do believe if errors

were made, they need to be corrected.’’ And it talks about the relationship that we should have between

the Park Service and our concessionaires, and as many of you

know, that is a major issue with this Committee.

And last year, we passed a new concessionaires bill. And this is

an ongoing issue which we have.

The gentleman from Nevada, we appreciate your presence here.

Do you have any opening comments before we start?

Mr. GIBBONS. No, Mr. Chairman. I welcome our witnesses and

the panel here today to hear this very important issue, and I know

how it is important for all of our tourists today to be—as well as

those people that offer services at our parks—to be afforded the

right treatment under the law, and I look forward to your leadership here today.

Mr. HANSEN. I thank the gentleman.

Our first witness will be our colleague from South Carolina,

Mark Sanford. Mark actually represents that area. And we will

now turn the time to you.

STATEMENT OF HON. MARK SANFORD, A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF SOUTH CAROLINA

Mr. SANFORD. I thank you, Mr. Chairman, and I thank you. Mr.

Duncan, Mr. Gibbons, for the chance to testify before the Subcommittee. And I would say I wanted to come by here simply because for me it would be an honor to introduce Mr. Campsen and

his family, and, frankly, his enterprise. And I say that because if

I was to pull down one word about this family, I would say honorable.

Now here is what I am getting at by that: My roots go very deep

with this family. Chip and I overlapped for a year of college. He

was actually at our family farm the night that my dad died. I spent

the better part of 20 years on hunting and fishing trips throughout

the woods and waters of the Low Country with Chip.

And the net of that is, as we all know, markets are efficient. And

if you are going over to somebody else’s house and they are coming

over to yours, sooner or later you get that phrase from somebody

that says, oh, you are going over to so and so’s house; I heard this

about them. And you go on to hear some horror story.

4

And yet over the many years that I have been with this family,

I have never heard one of those stories. So I would say ‘‘honorable’’ would be a description of the family. But I would say that there

is even a simpler word that describes this family, and that is the

word ‘‘integrity.’’ In other words, there is a match between what they say they are

going to do and what they do. There is a match between what they

say they are about and what they are about.

And I think that this goes to the heart of this issue of the enterprise, Fort Sumter Tours, because each of us is stewards for the

Federal Government. I think that, you know, for most people, their

experience with the Federal Government is basically derived from

an experience with the National Park Service, but oftentimes with

a concessionaire tie-in with the Park Service.

So each of us, as fiduciaries for the Federal Government, want

to have in place people who have integrity—in other words, that

there is a match between what they talk about doing and what

they do. And this isn’t important just in general in terms of that

being, of wanting to have good stewards represent the face of the

Federal Government, but it is also, frankly, important to a lot of

folks back home.

Sure, it is important to a lot of tourists who visit Charleston, but

it is important just because a lot of people back home, when somebody comes in from out of town, they say, well, you know, that first

shot was fired out at Fort Sumter, I’d like to go on out there, and

we go on out there. And for 364 days out of the year, three times

a day, Fort Sumter Tours runs a boat out there.

And there is nothing more important than the word ‘‘integrity’’ in that service, because, again, somebody’s experience at Fort Sumter is, in large part, driven by, you know, were the toilets clean on

the boat getting to and from Fort Sumter, did the boat, in fact,

leave on time?

In other words, this issue of integrity goes to the heart of what

a concessionaire ought to be about, and if not only recognized by

folks back home or by me, but, frankly, by the Park Service itself.

Now I have here a copy of an unsolicited letter to Mr. Campsen,

who had received it some time ago from the National Park Service.

And it reads as follow: ‘‘His reputation for quality of service is

matched by few concessions in the National Park Service and exceeded by none. His operation in Charleston has always been characterized by excellence and a concern for our visitors and the people who live in the city.’’

I think that that is one part of what we are dealing with, the

issue of integrity and the importance of that in a concessionaire.

The other issue is what you correctly highlighted, Mr. Chairman,

and that is there is a whole lot bigger issue than having to do with

the Campsens, Fort Sumter Tours, Fort Sumter itself, and that is

the issue of concessions.

To me, this is very important because, you know, last year, when

we had that concession bill, I voted for it. In fact, I had talked to

Chip Campsen. Chip didn’t think it was a good idea. He said,

‘‘Mark, I think it is going to be a problem if somebody has to get

two different tickets, one ticket for Fort Sumter, one ticket to go

to Fort Sumter.’’

5

I said, ‘‘Chip, I am going to vote against you. I think you are

wrong on this because if you can isolate costs, in other words, you

can say, what does it cost to do these different functions tied to or

from getting, let’s say, to a park, then if you can isolate that costs,

and if private enterprise can do it less expensively than the Federal Government, then we ought to make more options for that

being the case because as a conservative I don’t want to grow the

Federal Government.’’ And yet, what is going on here sends precisely the wrong signal

in terms of trying to grow more private enterprise and more concessions through our park system. When you have a 300 percent

increase in the middle of contract period, there is no worse signal

to future concessionaires, and that to me, more than the right number or the wrong number, that to me is what this issue is all about,

and that is, if a concessionaire has a contract with our Federal

Government, the government not breaking that contract in the

middle of the contract period.

I would just ask us to remember that we have three branches of

government up here for a very good reason, and that is, our Founding Fathers wanted a slow and meticulous system that would basically, you know, keep anybody from doing anything too fast. And

I would just beg of the Park Service to really look at this very

closely because I think we are dealing with an issue far, far greater

than the Fort Sumter issue itself.

And I would yield back the balance of my time. I thank you for

letting me come before you, Mr. Chairman.

Mr. HANSEN. We thank you.

Questions for Mark Sanford, our colleague from North Carolina?

The gentleman from Tennessee is recognized.

Mr. DUNCAN. I have just one question, Mark. I wasn’t clear. Who

wrote that real positive letter that you quoted from and when was

that?

Mr. SANFORD. I don’t have the date on that. I would suspect Mr.

Campsen could give you the dates on that, because it was from the

Park Service.

Mr. DUNCAN. It was from the Park Service?

Mr. SANFORD. Yes, sir.

Mr. DUNCAN. All right. Thank you.

Mr. SANFORD. Thank you.

Mr. HANSEN. The gentleman from Nevada.

Mr. GIBBONS. Mr. Sanford, I have not been to Fort Sumter, and

I hope someday to have the privilege and the honor of visiting

there, and I am not familiar with all the other concessionaires that

are in the Park Service. Have the other concessionaires—are there

other concessionaires in that Park area for the visitors there?

Mr. SANFORD. Yes. In fact, if you go on up a little bit north, there

are a couple of islands that are owned and, for instance, there is

a concessionaire that runs, again not to Fort Sumter but runs out

to one of these coastal islands. It is a little bit north of the Charleston community. That is one that I immediately know of. And I suspect that there are others. But those are the ones that immediately

jump to mind.

Mr. GIBBONS. Has there been any effort to talk to that concessionaire with regard to an increase in the franchise fee, similar—

6

in other words, a 300 percent increase in their fees that would be

commensurate with the fees increase that we are talking about in

this matter?

Mr. SANFORD. I have not done so. That is something worth doing.

And I would be glad to have my office do just that.

Mr. GIBBONS. Well, maybe we can ask the Park Service, when

they come, whether or not they have increased—— Mr. SANFORD. And in fairness to the Park Service, that is a not

a national park that the other concession runs. So it may be run

through a different branch of government.

Mr. GIBBONS. All right. But then so as far as we know, this is

the only concessionaire at Fort Sumter that has had a 300 percent

fee increase in the middle of the contract?

Mr. SANFORD. To the best of my knowledge, yes, sir.

Mr. GIBBONS. Thank you, Mr. Chairman.

Mr. HANSEN. We thank our colleague. Mr. Sanford. Would you

like to join us up on the dais?

Mr. SANFORD. Unfortunately, I have got a markup on OPEC, and

I have to run in that direction.

Mr. HANSEN. Well, I understand. Thank you very much for your

time.

Mr. SANFORD. Thank you.

Mr. HANSEN. We will call our panel up. We are pleased to have

Robert Stanton, the Director of National Park Service with us; also,

George Campsen, president of Fort Sumter Tours, and David E.

Jackson, a certified public accountant.

If those three gentlemen would like to come up, we would appreciate it.

And, Mr. Director, if you have somebody you want at your shoulder there, that is fine. Just bring them up, too.

Mr. STANTON. Yes. Thank you very much, Mr. Chairman. I am

accompanied by Mr. Cohen of our Solicitor’s Office, and Mr. Bob

Hyde, who is a financial analyst with the National Park Service in

our Division of Concession Management.

Mr. HANSEN. Okay. Well, we will turn to you, Mr. Stanton. And

you have got the floor.

STATEMENT OF ROBERT STANTON, DIRECTOR, NATIONAL

PARK SERVICE; ACCOMPANIED BY MR. COHEN, SOLICITOR’S

OFFICE; ROBERT HYDE, FINANCIAL ANALYST, DIVISION OF

CONCESSION MANAGEMENT

Mr. STANTON. Thank you, Mr. Chairman, and members of the

Committee, for the opportunity to appear before you and to discuss

certain issues surrounding the reconsideration of the franchise fees

for Fort Sumter Tours, Incorporated.

Mr. Chairman and members of the Committee, I submit at the

beginning of my testimony, I have been advised by our Solicitor’s

Office to make the following statement:

I am here today to answer questions and respond to comments concerning the franchise fee reconsideration for Fort

Sumter Tours, Incorporated. You have assure me and my staff

that this hearing will not be covering any of the issues in litigation between Fort Sumter Tours and the National Park

Service.

7

I appreciate this, and certainly in keeping with this agreement, I would like to make clear that the National Park Service is not reconsidering the established franchise fees for Fort

Sumter Tours. Accordingly, any statements, discussions, description, or assessments concerning the Fort Sumter franchise

fee that I may make before you today do not and will not constitute a review of, a reconsideration of, or a new decision in

any nature regarding the established franchise fee.

Furthermore, I note that the various calculations that we

might discuss here today have been upheld in four different

court proceedings, including the Fourth Circuit Court of Appeals, as lawful and not an arbitrary nor capricious.

Any statement that I may make before you today, Mr. Chairman and this Committee, to the effect that a particular calculation could be done other ways, does not in any manner

suggest, admit, or otherwise imply that the decision made by

the National Park Service in this process was arbitrary, capricious, or otherwise unlawful.

Now, in addition, I note that as part of this hearing, Mr. Chairman, you and the Committee have requested significant financial

information on Fort Sumter Tours. Some of this information is proprietary or confidential. But because of Fort Sumter Tours participation in today’s hearing, we assume that the release of this information is agreeable by the concessionaire under law 18 USC 1905.

And I would hope, Mr. Chairman, that you would advise it is appropriate that this information be available on the concessionaire’s

financial status.

This matter is certainly an essentially money dispute on a business contract. And if I may, I would like to elaborate. The contract

was entered into by the National Park Service and Fort Sumter

Tours in 18—pardon me, in 1986 and expires in the year 2000. The

contract grants for Fort Sumter Tours the exclusive opportunity to

transport by tour boat visitors from Charleston, South Carolina, to

Fort Sumter National Monument for Fort Sumter current annual

visitation of approximately 230,000 visitors per year.

Ninety-nine percent of these visitors travel to Fort Sumter on

boats operated by Fort Sumter Tours. Fort Sumter Tours charges

visitors $10.50 for adults. The gross receipts for 1998 were

$2,471,938. The contract requires Fort Sumter Tours to remit 12

percent of the gross receipts to the United States for the privilege

of serving on an exclusive basis anyone wishing to visit Fort Sumter through the use of their boat.

Fort Sumter Tours’ 15-year contract was entered into under the

Concession Policy Act of 1965. The contracts governed by the Concession Policy Act were not subject to meaningful competition because existing concessionaires enjoy preference over outside business.

These preferential rights often precluded market forces from affecting franchise fees. Under the Concession Policy Act, the National Park Service was required to include in concession contracts

of more than five years in duration, provision provided for reconsideration of the contract franchise fees at least every five years.

Since 1979, the National Park Service concession contracts have

provided that the contract-established franchise fees may be adVerDate 11-MAY-2000 11:45 Mar 12, 2001 Jkt 068079 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 E:\HEARINGS\57989 pfrm09 PsN: 57989
8

justed, up or down, every five years at the request of either the

concessionaire or the National Park Service.

The provision provides that if the National Park Service and the

concessionaire do not agree upon an adjusted franchise fee within

a specified period, the concessionaire may appeal to the Secretary

his position as to an appropriate franchise fee. And the concessionaire may choose to invoke arbitrary—pardon me, advisory arbitration proceeding in this process.

Any fee resulting from a reconsideration either up or down must

be consistent with the probable value of the privilege by the contract based upon a reasonable opportunity, a reasonable opportunity for net profit in relation to both gross receipts and capital

investment.

The standard was set by Congress in the Concession Policy Act

that I referenced earlier. The standard is protection for both the

concessionaire and the taxpayers.

Briefly, it is important to review the history of this provision and

its application. Since 1979, several hundred franchise-fee consideration periods have occurred under existing NPS contracts. In many

of these instances, neither the Park Service nor the concessionaire

sought changes either up or down to the franchise fee.

In a number of other instances, when either the Park Service or

the concessionaire sought a franchise fee reconsideration, both the

National Park Service and the concessionaire were able to arrive

at a mutually acceptable agreements as to the appropriate franchise fee.

In four instances recently, concessionaires have chose to invoke

the advisory arbitrary process established in the contract to resolve

proposed franchise fees. In one of these situations, the matter was

settled. In the remaining three, the National Park Service and concessionaire participated in the arbitration proceeding, and the Secretary made a final decision, taking into consideration results of

the arbitration.

In each of these instances, the franchise fees were increased.

However, in each of these cases, concessionaires accepted the final

decision of the Secretary and the higher franchise fee became part

of the contract without judicial challenge. All these concessions remain profitable in business today.

In no cases, except in one that is the focus of today’s hearing, has

a concessionaire challenged the legality of the process of the executed contract. In no cases, except the one before us today, has a

concessionaire refused to negotiate the appropriate franchise fee.

In this case, Fort Sumter Tours chose to litigate the issues before

the courts. The courts have uniformly upheld the legality of the reconsideration provision and the basis of our decision.

The National Park Service has a system for establishing franchise fees. In 1980, the National Park Service was repeatedly criticized by Congress, by the General Accounting Office of Congress,

by the Inspector General’s Office of the Department of Interior, and

others in terms of a need to take a more critical look at the establishment and reconsideration of franchise fees.

We took these criticisms seriously and have now ensure a more

rigorous implementation of the system. This implementation is fair

9

to the concessionaire, fair to the National Park Service, and certainly fair to the taxpayer.

In performing the reconsideration analysis, the National Park

Service compares the financial record of the concession to its counterparts in the industry to assist in determining the probably value

of the contract.

When the Fort Sumter Tours were initially executed, the fee was

designated 4.25 percent of gross revenue. However, a franchise fee

analysis performed in 1991 showed that the probably value of these

privileges warranted a fee of 12 percent. This analysis compared

the financial records and the business opportunity of Fort Sumter

to those similarly situated businesses using statistics generated by

Dun and Bradstreet.

We understand that it has been reported to the Committee that

the National Park Service took into account non-concession revenues for calculating the profit of Fort Sumter Tours makes under

this concession contract. While there was one technical error in the

original franchise fee, that may suggest that this income was taken

into account as we described to you in the letter of December 8th.

This income was not taken into account in the final determination,

nor did it affect the final determination.

A complete review of the financial analysis shows that the 12

percent fee was determined solely on the basis of the revenue associated with the concession contract and a proper allocation of cost

associated both with the concession and with the non-concession

business. It is not disputed that in 1992 that Fort Sumter Tours

was notified of the proposed franchise fees reconsideration and that

it had contractual right to seek advisory arbitration over its reconsidered fee. As detailed in the letter of December 5, 1998, to you,

Mr. Chairman, and the Committee, we advised that the litigation

has since pursued. The United States Government has prevailed in

every phase of this litigation.

I want to close and underscore the fact that we remain, however,

receptive to resolving this dispute. We have asked the United

States Attorney’s Office to be open to any reasonable settlement

offer by Fort Sumter Tours. To date, Fort Sumter Tours has not

participated in any substantive discussions with respect to settlement of this dispute.

Mr. Chairman and members of the Committee, this concludes my

prepared remarks with respect to the background on the reconsideration of the franchise fee for Fort Sumter Tours, Incorporated.

Along with my colleague, Mr. Ed Cohen and Mr. Bob Hyde, we will

be more than happy to respond to any questions or comments on

the part of you, Mr. Chairman, and members of the Committee.

Thank you again for this opportunity.

[The prepared statement of Mr. Stanton follows:]

STATEMENT OF ROBERT STANTON, DIRECTOR, NATIONAL PARK SERVICE

Thank you for the opportunity to discuss with you certain issues surrounding the

reconsideration of the franchise fee of Fort Sumter Tours, Incorporated. As I begin

my testimony, I have been advised by the Solicitor’s Office to make the following

statement:

I am here today to answer your questions concerning the franchise fee reconsideration for Fort Sumter Tours. You have assured me and my staff that this

hearing will not be covering any of the issues in litigation between Fort Sumter

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Tours and the National Park Service. I appreciate this and in keeping with this

agreement I would like to make clear that the National Park Service is not reconsidering the established franchise fee for Fort Sumter Tours. Any statements, discussions, descriptions or assessments concerning the Fort Sumter

franchise fee that I may make before you today do not and will not constitute

a review of, a reconsideration of, or a new decision of any nature regarding the

established franchise fee. Furthermore, I note that the various calculations that

we discuss here today have been upheld in four different court proceedings, including the 4th Circuit Court of Appeals, as lawful, and neither arbitrary nor

capricious. Any statement that I may make before you today to the effect that

a particular calculation could be done another way does not in any manner suggest, admit, or otherwise imply that the decisions made by the National Park

Service in this process were arbitrary, capricious or otherwise unlawful.

In addition, I note that, as part of this hearing, you have requested significant financial information of Fort Sumter Tours. Some of this information is

proprietary or confidential. Because of Fort Sumter Tours participation in today’s hearing, we are assuming that the release of this information is agreed

to by the concessioner under law, including 18 U.S.C. 1905. Please advise us

if the concessioner believes otherwise.

This matter is essentially a money dispute under a business contract. The contract was entered into by the National Park Service and Fort Sumter Tours in 1986,

and expires in 2000. The contract grants Fort Sumter Tours the exclusive opportunity to transport by tour boat visitors from Charleston, South Carolina, to Fort

Sumter National Monument. Fort Sumter’s current annual visitation is approximately 230,000 visitors per year. Ninety nine percent of the visitors travel to Fort

Sumter on boats operated by Fort Sumter Tours. Fort Sumter Tours charges visitors

$10 per adult visitor. The business’ gross receipts for 1998 were $2,471,938. The

contract requires Fort Sumter Tours to remit 12 percent of the contract’s gross receipts to the United States for the privilege of serving, on an exclusive basis, anyone

wishing to visit Fort Sumter.

Fort Sumter Tours’ 15-year contract was entered into under the Concessions Policy Act of 1965. The contracts governed by the Concessions Policy Act were not subjected to meaningful competition because existing concessioners enjoyed preferences

over outside businesses. These preferential rights often precluded market forces

from affecting franchise fees.

Under the Concessions Policy Act, NPS was required to include in concessions

contracts of more than five years in duration a provision providing for the reconsideration of the contract’s franchise fee at least every five years. Since 1979, NPS concession contracts have provided that the contract’s established franchise fee may be

adjusted, up or down, every five years, at the request of either the concessioner or

the NPS. The provision provides that if the NPS and the concessioner do not agree

upon an adjusted franchise fee within a specified period, the concessioner may appeal to the Secretary its position as to an appropriate franchise fee, and the concessioner may choose to invoke advisory arbitration proceedings in this process. Any

fee resulting from a reconsideration, either up or down, must be consistent with the

probable value of the privileges granted by the contract, based upon a reasonable

opportunity for net profit in relation to both gross receipts and capital invested. This

standard was set by Congress in the Concessions Policy Act. The standard protects

both the concessioner and the taxpayer.

It is important to review the history of this provision. It is also important to discuss with you the implementation of this provision.

Since 1979, several hundred franchise fee reconsideration periods have occurred

under existing NPS concession contracts. In many of these instances, neither the

NPS nor the concessioner sought changes, either up or down, to the franchise fee.

In numerous other instances, when either the NPS or the concessioner sought a

franchise fee reconsideration, both the NPS and the concessioner were able to arrive

at a mutually acceptable agreement as to the appropriate franchise fee.

In four (4) instances, concessioners have chosen to invoke the advisory arbitration

process established in the contract to resolve a proposed franchise fee increase. In

one of these situations, the matter was settled. In the remaining three, the NPS and

the concessioner participated in the arbitration proceedings, and the Secretary made

a final decision, taking into consideration the results of the arbitration. In each of

these three instances, the franchise fee was increased. However, in each of these

cases, the concessioner accepted the final decision of the Secretary, and the higher

franchise fee became part of the contract without judicial challenge. All of these concessioners remain profitably in business today.

In no case, except the one that is the focus of today’s hearing, has a concessioner

challenged the legality of the process of the executed contract. In no case, except

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the one before us today, has a concessioner refused to negotiate the appropriate

franchise fee. In this case, Fort Sumter Tours chose to litigate the issues before the

courts. The courts have uniformly upheld the legality of the reconsideration provision, and the basis for our decision.

This concessioner is not being treated differently from other concessioners. This

concessioner has not been treated unfairly.

The National Park Service has a system for establishing franchise fees. In the

1980s, the National Park Service was repeatedly criticized by numerous reports

from both the Inspector General’s Office of the Department of the Interior and the

General Accounting Office for its implementation of this system.

The National Park Service took these criticisms seriously. We have now ensured

a more rigorous implementation of our system. This implementation is fair to the

concessioner, fair to the National Park Service, and fair to the taxpayer. In those

cases when this has resulted in increased franchise fees, we note that the concessioners operating under these contracts continue to operate profitably. We have no

shortage of individuals and companies that are willing to do business in our National Parks under this system.

In performing the reconsideration analysis, the National Park Service compares

the financial records of a concessioner to its counterparts in the industry to assist

in determining the probable value of the contract.

When the Fort Sumter Tours contract was initially executed, the fee was designated as 4.25 percent of gross revenue. However, a franchise fee analysis performed in 1991 showed that the probable value of these privileges warranted a fee

of 12 percent. This analysis compared the financial records and the business opportunity of Fort Sumter Tours, Inc. to those of similarly situated businesses, using industry statistics generated by Dun and Bradstreet. We understand that it has been

reported to the Committee that the National Park Service took into account nonconcession revenue when calculating the profit that Fort Sumter Tours makes under

this concessions contract. While there was one technical error in the original financial analysis that may suggest that this income was taken into account, as we described to you in our letter of December 5, 1998, this income was not taken into

account in the final fee determination, nor did it affect this determination. A complete review of the financial analysis shows that the 12 percent fee was determined

solely on the basis of the revenue associated with the concessions contract, and a

proper allocation of costs associated with both the concession and the non-concession

businesses.

It is not disputed that in 1992, Fort Sumter Tours was notified of the proposed

franchise fee reconsideration, and that it had a contractual right to seek advisory

arbitration over this reconsidered fee. Fort Sumter Tours chose not to engage in negotiations with the National Park Service, or in advisory arbitration. Fort Sumter

Tours instead chose to sue the United States over the reconsidered fee. As is detailed in my letter to you, of December 5, 1998 (attached to this testimony), Mr.

Chairman, this matter has been in litigation ever since. And, the United States has

prevailed at every phase of this litigation.

We remain, however, receptive to resolving this dispute. We have asked the

United States Attorney’s Office to be open to any reasonable settlement offer made

by Fort Sumter Tours. To date, Fort Sumter Tours has refused to participate meaningfully in any settlement discussions.

This concludes my testimony. I would be happy to answer any of your questions.

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Mr. HANSEN. Thank you, Director Stanton.

As you folks know, we have no control over what happens on the

floor. And those two lights at the back mean that we have a vote

on that we have to run on a rule. We will try to get back as soon

as we can, and we will stand in recess till then.

[Recess.]

Mr. HANSEN. The Committee will come to order.

Staff tells me that, Mr. Director, that you have to leave here at

12:30. Is that correct?

Mr. STANTON. In deference to you, Mr. Chairman, I will be flexible on that.

Mr. HANSEN. I would like to have you hear the testimony of the

other witnesses. So, how long is your testimony going to be, Mr.

Campsen?

Mr. CAMPSEN. Mr. Chairman, five minutes is the allotted time,

and I will be within five minutes.

Mr. HANSEN. Well, we are being generous today. We may give

you seven or eight minutes, if that is what you need.

Mr. CAMPSEN. Thank you, sir.

Mr. HANSEN. Okay. And Mr. Jackson?

Mr. JACKSON. I would hope to finish mine in five minutes as

well.

Mr. HANSEN. Well, then we have got about 43 minutes. So, Mr.

Campsen, why don’t we turn to you, and then we will question all

three of you and we’ll complete our testimony.

Mr. Campsen, you have the floor.

STATEMENT OF GEORGE CAMPSEN, PRESIDENT, FORT

SUMTER TOURS, INC.

Mr. CAMPSEN. Thank you, Mr. Chairman, gentlemen of the Committee. My name is George Campsen. I am president of Fort Sumter Tours. Now Fort Sumter National Monument in Charleston is

accessible only by boat, and in 1961, the Park Service was publicly

seeking a private concessionaire, to begin public boat transportation out to the Fort.

Out of five competing proposals, we were selected. And with

money borrowed from a local bank, we acquired the vessels and so

forth, and enthusiastically became involved with our government in

business. We viewed it as a partnership, with the Park Service

being the senior partner.

We are family-owned and -operated. And over the years, my wife

and I and our four children, as they grew older, all worked to make

this concession successful, and working in complete harmony with

local park officials. We build and developed a highly reputable

service, and visitation steadily increased.

Now, in the mid-1980’s, the service recognized that a second

mainland docking facility and a larger vessel was really necessary

and desirable at Fort Sumter. The estimated cost to the concessionaire would be at least $1 million.

Now, Mr. Chairman and gentlemen, we are a small, relatively

speaking, we are a very small concessionaire, with annual gross income approximately at that time of $1.4 million. But we recognized

that this expansion desired by the Service was really needed.

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And to facilitate private financing of these needs, the Service offered a 15-year contract so that you could borrow money from a

bank and show them how you were going to be able to pay off the

loan.

And they issued a prospectus and published it widely seeking

proposals from all interested parties. But no one else was interested. So we borrowed more money, and we agreed to make the investments, and we did make the investments. And this 15-year,

current 15-year contract was executed in 1986.

As you know, all concessionaires pay a franchise fee based upon

the ‘‘probable value’’ of your particular contract privileges. At that

time, the Service valued our privileges at the rate of 4.25 percent

of our gross receipts. Now even though this was a 1 percentage increase over our contract that we had at that time, we nevertheless

thought it was reasonable. And we agree to it.

But we were shocked and dismayed that after the first five years

of this 15-year contract, we were advised that the Service had reconsidered the probable value of these same contract privileges, but

we were shocked and dismayed because the Service informed us

that these same privileges had somehow increased in value to 12

percent.

We were shocked because the scope of our privileges had not

changed one bit. We were really shocked, Mr. Chairman, because

the franchise fee analysis, developed by a bureaucrat in the Washington office of the Service, contained serious mistakes. These are

the same mistakes that are plaguing us and threatening to destroy

us today, the mistakes that we have pointed out in this franchise

fee analysis.

We prepared a professionally-developed critique highlighting

these mistakes, and in good faith we requested an opportunity to

present them to appropriate officials of the National Park Service.

This we did in 1996. We said, ‘‘Gentlemen, here are the mistakes

that were made in this franchise fee calculation. Here are the consequences of these mistakes. We don’t deserve this kind of treatment. These things are clear errors. Won’t you please reconsider

your position and correct them?’’ They listened, but they refused to

budge.

Now, these mistakes in this franchise feel analysis, they create

the illusion that our small concession is more profitable than it actually is. We have demonstrated that in figures, in positions which

the Park Service really does not contradict.

Please, please understand that we are not attempting to avoid

paying a properly calculated fee. What we are seeking, gentlemen,

is relief from paying a fee based upon an analysis that contains obvious mistakes, which are very, very destructive to our small business.

Now, we are all imperfect human beings, and we all make mistakes. Certainly, we have made mistakes. But what we can’t understand is why in the world our own government, which I love and

respect, cannot admit to some obvious mistakes and correct them.

The principles of our small company, gentlemen, and our 44 employees have been living in job peril for almost seven years. It has

been a costly and unwarranted nightmare. We are mystified why

the United States of America behaves in this fashion.

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We have always provided outstanding service at Fort Sumter.

And the Park Service admits this. We have done nothing to deserve

this type of treatment. And please, in the interest of all, please

help resolve this matter on its true merits.

I thank you for your consideration. I shall be happy to answer

any questions.

[The prepared statement of Mr. Campsen follows:]

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Mr. HANSEN. Thank you, Mr. Campsen.

Now, Mr. Jackson, we will turn to you sir.

Mr. INSLEE. Mr. Chair? Mr. Chair?

Mr. HANSEN. Sorry.

Mr. INSLEE. I am sorry. Could I interrupt just for a moment? I

need to go over to the floor, and I have one question I would love

to ask. Would you permit me to ask the witnesses that question?

Mr. HANSEN. Surely, I will recognize you for one question. Is that

what——

Mr. INSLEE. Yes, just one.

Mr. HANSEN. Sure, go right ahead.

Mr. INSLEE. I appreciate the Chair’s indulgence. I am sorry I

won’t be able to stay. I have to excuse myself to go to the floor.

I just wanted to ask Mr. Stanton a question. I have talked to

these folks about this situation, and I am not an expert on this obviously, but I wanted to—they relayed a concern to me about a disagreement. Disagreements are human. All people in contractual relationships get into disagreements, not too irregularly. They described their concern to me as much, not—obviously they are concerned by the disagreement, but they said that they couldn’t get

the Park Service to sit down with them to explain the Park Service’s rationale or logic or analytical system in devising this. And

they had asked the Park Service for that information the Park

Service based their numbers on, basically, and that the Park Service was unwilling to share that with them.

And I thought that was a little surprising. I would think in this

context that each side would sort of share their model or their

analysis with the other so that each could poke holes in it, basically, and everybody could put their cards on the table and have

a good argument.

I just want to, would like you to comment. Is their characterization accurate? Or is there a misunderstanding? Or do we need to

improve that sort of showing each other’s cards?

Mr. STANTON. Appreciate the question, and I will attempt to be

brief in response, and I also would ask Mr. Cohen to comment because I would reference the present status.

As mentioned in my testimony, that as a condition or provision

within the concession contract there was to be, or could be, a reconsideration of the franchise fees five years after the first five years

of the contract, that would involve the National Park Service conducting a financial analysis of the concessionaire, providing a financial report on which we based the financial analysis, and then

communicating with the concessionaire and see whether there was

any difference or problem with that.

As that process was underway, there was not any major substantive discussion prior to the concessionaire filing a suit, arguing

that the franchise fee calculation by the Park Service, although

preliminary at that stage, was totally off base, if you will.

Consequently, as we entered into discussion with the courts or

the Justice Department, there was some limitation in terms of how

we could interact unilaterally with the concessionaire. And I will

ask Mr. Cohen to just comment on what those procedures that

were applied in that instance.

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Mr. COHEN. Thank you, Mr. Director. Let me just expand for a

moment. The contract itself specifies a process for the reconsideration of a fee. And it indicates that every five years either party

may seek an adjustment up or down. In this case, in the first fiveyear period, the Park Service sought an adjustment up.

The normal process in this is for the Park Service to put its cards

on the table and for there to ensue an informal give-and-take, just

as you described. That did not occur. In the normal case—in the

normal case—there is an opportunity, if the concessionaire does not

agree with the decision of the Park Service, to appeal it to the Secretary. That did not occur.

In that same process, there is an opportunity for the concessionaire to seek voluntary arbitration. That did not occur in this

case. It did not occur because the concessionaire made the decision,

for whatever reason, and is certainly free to make that decision, to

go directly to court.

So the normal opportunity, where the differing figures in this

process, and this is not a precise process because you are trying to

reconstruct a marketplace circumstance, which is an artificial situation because you don’t have competition.

So the purpose of the informal process is to have that give-andtake that didn’t happen here. It is unfortunate that it didn’t happen here. But it wasn’t just once that it didn’t happen. It didn’t

happen the second five-year period either. And we can have discussions as to why it did or didn’t happen the second five-year period,

but I can tell you that when the second five-year period was appealed to District Court, the government offered the opportunity to

go back and start the process over again in mediation. And that did

not occur.

So I think there is a record that demonstrates that our process

envisions exactly what you have described. It just hasn’t been employed here. And I don’t think it is a coincidence that the only situation where a franchise fee reconsideration has ended up in court

is the only situation where the process that I have just described

did not occur.

Mr. INSLEE. Thank you. And I will read your testimony for the

remainder of the hearing. I need to excuse myself. Thank you very

much.

Mr. HANSEN. I don’t want to hold this up, but I think the gentleman from Washington asked quite an interesting question there.

Let me just quickly ask this one to pick up on what he said: When

they asked for information from the Park Service before going to

court, was it forthcoming from the Park Service?

Mr. Campsen, do you want to respond to that?

Mr. CAMPSEN. Mr. Chairman, I would defer to my legal adviser,

Mr. Dickson.

Mr. HANSEN. I don’t want to get you all tied up in legalistics

here. Remember, you are not in court here. We don’t even have a

contempt charge.

Mr. Stanton?

Mr. DICKSON. There is a simple answer to the question, Mr.

Chairman, and you will note that neither the Director nor his attorney gave Mr. Inslee a direct answer to his question. The answer

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to the question is the information was not turned over. To this day,

it has not been turned over.

Mr. HANSEN. I guess I just assumed—and I don’t want to belabor

this; I want to get to Mr. Jackson here—but I assumed why they

didn’t go through the procedure, and maybe I am on a false assumption, I don’t know, was because they were asking for information that wasn’t given to them.

Mr. DICKSON. That is correct.

Mr. HANSEN. And that is the reason that they circumvented the

process, if I understand this right? Keep in mind, I don’t have a

dog in this fight. I am just trying to figure out what happened.

Mr. DICKSON. What happened was, the draft franchise fee analysis was prepared and was given over to Fort Sumter Tours. It was

obvious that a number of decisions had been made based on industry statistics, such as Dun and Bradstreet numbers. But Fort Sumter Tours said, can we have this information, please. The Park

Service said, no, you cannot. And so, I don’t know how you are supposed to negotiate with somebody if you don’t understand the basis

on which the decision was made.

They filed a Freedom of Information Act appeal, and that was denied. And for the year that this process of trying to get the data

went on, all parties agreed that access to this data was withdrawn.

Then, in April of 1993, the Park Service changed its mind and

said, ‘‘We are done. Here is your franchise fee. It is over.’’ Mr. HANSEN. We have some interesting rules of discovery here,

haven’t we?

Mr. Jackson, let’s turn to you, sir.

STATEMENT OF DAVID E. JACKSON, CERTIFIED PUBLIC

ACCOUNTANT

Mr. JACKSON. Good morning, Mr. Chairman and honorable member of the Subcommittee. First, I want to thank you for allowing

me to testify this morning.

Mr. Chairman, I am here because my firm has served as the

independent auditors of Fort Sumter Tours since 1995. They asked

me to review a franchise fee analysis, which had been prepared by

the Park Service from the information which had been extracted

from its audited financial statements. Mr. Chairman, my review revealed that this analysis contains numerous mistakes that fall into

three categories of errors.

First, there are errors which violate Park Service guidelines. Second, there are errors in the application of generally accepted accounting principles. And third, there are errors resulting from a

lack of understanding as to how a small, family-owned business operates.

Because of these mistakes, Fort Sumter Tours will incur over a

hundred thousands dollars a year in additional franchise fees due

to the false conclusions derived from this analysis. Mr. Chairman,

this represents a significant amount of money to Fort Sumter

Tours because it is a small, family-owned business, and during this

period of time, its gross receipts was only $1.4 million.

Basically, the Park Service went through four steps in this analysis. First, it calculated the company’s average annual concession

profit. Next, it made some financial adjustments. Third, it calVerDate 11-MAY-2000 11:45 Mar 12, 2001 Jkt 068079 PO 00000 Frm 00069 Fmt 6633 Sfmt 6602 E:\HEARINGS\57989 pfrm09 PsN: 57989
66

culated some financial ratios. And then finally, it compared these

ratios with what it claimed are industry standards to determine if

a franchise fee increase was justified.

I have an exhibit which is captioned, ‘‘The Wrong Way: What the

Park Service Did,’’ which presents the conclusions derived by the

Park Service from these four steps. This is worksheet four, which

is in their analysis. Mr. Chairman, I would like to present four

mistakes of the types of errors that I found in the analysis.

The first two mistakes are violations of Park Service guidelines. The first mistake is the Park Service included over $195,000 of

non-concession income in the calculation of concession net profits.

It is a clear violation of its guidelines.

I don’t understand why this income was included because it was

clearly identified in the analysis. This mistake represents almost

50 percent of the concession profit that the Park service claims

Fort Sumter Tours earned. This one mistake invalidates the ratio

comparisons contained in the analysis and eliminates the justification for a fee increase. It is a very serious mistake.

The second mistake is a byproduct of the first mistake, because

including the incorrect income in the calculation of the maximum

allowable fee is to cause this to be overstated. The maximum allowable fee, without this income, is only 8.7 percent, not the 15.6 percent that the Park Service claimed in the analysis. Because of this

mistake, the Park Service increased Fort Sumter’s franchise fee

rate to 12 percent, which is significantly greater than 8.7 percent.

And it is again a clear violation of their guidelines.

We have an exhibit which is captioned ‘‘The First Correction,’’ taking out the non-concession income, which presents the conclusions which would have been derived if this income had been removed. Again, these are very serious mistakes.

The next mistake results from errors in the application of generally accepted accounting principles as it related to an adjustment

to capitalize a vessel that was leased by the company from a related partnership. This vessel, as Mr. Campsen indicated earlier,

was the basis for the 15-year new contract that the company was

granted in 1986. This adjustment should not have been made because it had already been properly reported and recorded in the

company’s audited financial statements. This mistake caused the

concession profit to be overstated by $70,000—another serious mistake which invalidates the ratio comparisons.

The final mistake that I want to present clearly demonstrates a

lack of understanding by the Park Service as to how a family business operates. Without an investigation of the type of duties performed, the Park Service reduced officer salaries by $163,000. Mr.

Chairman, it is very common, for all family members working in

a small business, to be named as officers. In fact, Fort Sumter

Tours officers perform numerous non-officer functions.

And they are compensated in line with the industry pay for the

duties performed. Again, the Park Service made no attempt to gain

an understanding of the actual duties being performed. And this

adjustment should not have been made—another serious mistake

which invalidates the ratio comparisons.

To summarize, Mr. Chairman, in my opinion, this analysis contains mistakes totaling over $428,000 in the calculation of Fort

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Sumter Tours’ concession profits. These serious mistakes represent

almost one-third of the company’s total gross revenue of $1.4 million.

If these mistakes are corrected—and we have an exhibit which

is captioned, ‘‘What the Park Service Was Supposed to Do’’—the

conclusions would have been that there was no fee increase justified.

Thank you, Mr. Chairman. This concludes my prepared remarks.

And I also will be happy to answer questions of the Subcommittee.

[The prepared statement of Mr. Jackson follows:]

STATEMENT OF DAVID E. JACKSON, CPA

Because my firm has served as the outside independent auditors of Fort Sumter

Tours, Inc. (FST) since 1995, I was asked to review a Franchise Fee Analysis (FFA)

dated February 27, 1992, which had been prepared by the National Park Service

(NPS). To formulate a reasonable basis for my opinion, I familiarized myself with

the Concession Policy Act, Public Law 89-249 and NPS-48 as they relate to calculating franchise fees. My review revealed that this analysis contains numerous mistakes that fall into three categories of errors which include violations of the NPS’s guidelines for the preparation of franchise fee analysis, improper applications of

Generally Accepted Accounting Principles (GAAP), and a lack of understanding of

how a small family business operates. If these mistakes are not corrected, it will

cost FST over $100,000 a year in additional franchise fees because of the faulty conclusions derived from this analysis which served as the basis for a recommended

franchise fee increase from 4.25 percent to 12 percent of gross revenue from concession operations. This represents a significant sum of money to FST because it is a

small family owned business whose average annual gross revenue from its concession operations as calculated by the NPS in this analysis was only $1.4 million a

year.

In general, to prepare this analysis, the NPS extracted financial information from

the audited financial statements of FST for the five year period 1986 through 1990.

From this information, the NPS calculated the average annual profit generated by

the company from its concession operations, made certain financial adjustments,

and then calculated three financial ratios. These three financial ratios are Return

of Gross Revenue (ROG), Return on Equity (ROE) and Return on Assets (ROA). Return is defined as the net profits after income taxes generated by the company from

its concession operations. This net income is the numerator in each of the profitability measures utilized by the NPS. The denominators are gross concession revenue for ROG, average equity for ROE, and average assets for ROA. After calculating the financial ratios, the NPS then compares them to some industry standards

for similar companies to determine if the operating results fall within an acceptable

range. If the ratios are acceptable, no franchise fee increase is warranted. In this

instance, because of the erroneous adjustments contained in the analysis, the NPS

decided to increase the existing franchise fee rate. In the following paragraphs, I

will present examples of the types of mistakes contained in the analysis.

Mistakes/Omissions Which Violate NPS Guidelines

This first mistake made by the NPS in this analysis was the inclusion of non-concession income of $195,603 in the calculation of the profit FST was generating from

its concession operations. This income was clearly identified in the analysis as other

non-concession income. Its inclusion is an indisputable violation of its own guidelines. NPS-48 clearly states that financial reports should reflect only in-park operations and should not include income or expenses of other non-concession operations

or business of a concessioner’s organization. This error represents almost 50 percent

of the concession profit calculated by the NPS in the analysis. This one mistake

completely invalidates the entire ratio analysis comparisons contained in the document because as previously stated ‘‘Return’’ means the net profits from concession

operations. It also eliminates the justification for a fee increase because if this error

were corrected, the financial ratios of FST would fall within the acceptable industry

standards. (See Exhibit 1 for calculations.)

NPS guidelines state that the maximum franchise fee should not be greater than

50 percent of the concessioner’s pre-tax and pre-franchise profit. The purpose of this

calculation is not to set the fee, but to establish the maximum fee NPS may impose.

NPS calculated FST’s maximum permissible fee at 15.6 percent. If the above error

(including non-concession income in this maximum fee calculation) is corrected, the

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maximum permissible franchise fee would be 8.7 percent not the 15.6 percent fee

calculated by NPS. The recommended 12 percent franchise imposed by the NPS on

the company is greater than the correct maximum allowable fee and is another violation of its guidelines. (See Exhibit 1 for calculations.)

NPS’s worksheet found on page 6 of the analysis contains numerous mistakes

which affect the conclusions which were supposed to be derived from the information presented. In the column which presents the average amounts with a 4.25 percent franchise fee, several errors can be found. First, as mentioned above, the reported amounts include other income of $195,603 from non-concession sources. In

addition, the income taxes of $36,330 presented in this column is incorrect. In the

calculation of this average from the information extracted from FST’s audited financial statements, NPS failed to consider that no income taxes were included for two

out of the five years presented. In 1989, FST elected under allowable Internal Revenue Codes to be taxed as an ‘‘S’’ corporation. Under these regulations, the taxable

income of the company is reported on the individual income tax returns of its shareholders. A provision for income taxes should have been included for these two years

in the determination of the true net income the company earned from its concession

operations. Again, this caused the reported profit to be overstated which would have

also caused the financial ratios to be overstated. The titles for the other columns

presented are very misleading. The column descriptions contain which new franchise fees are included in its presentation. However, in each instance, the heading

amounts did not agree with the actual calculated amount of the franchise fee used

in the column. For example, the actual fee rate used in the column designated as

including a 12 percent rate was actually only 10.3 percent. This misrepresents the

results contained in the worksheet and the conclusions which can be derived from

them. As discussed in more detail below, NPS failed to include the effects of a capitalization adjustment relating to a vessel when calculating ROE and ROA in this

worksheet. Again, this caused these profitability measures to be overstated. (See Exhibit 2 for calculations.)

NPS guidelines also permit making positive adjustments which might be beneficial to a concessioner. This is a recognition that a mature company is likely to have

fully depreciated assets and little debt which would make it appear more profitable

in a comparison with a relatively new business because its depreciation and interest

expense deductions would not be as large. NPS failed to make any adjustments in

the calculation of the financial ratios even though FST is a mature company with

significant fully depreciated assets and very little debt.

Mistakes in the Application of Generally Accepted Accounting Principles

Material errors were made in a capitalization adjustment by NPS relating to a

vessel which was leased to FST by a partnership in which it was a 50 percent partner. This acquisition is the single largest financial transaction ever undertaken by

the company. In addition, the purchase of this boat was the basis for the NPS granting FST a new 15 year contract in 1986. This adjustment should not have been

made because this lease had already been recorded and properly reported in accordance with GAAP in the audited financial statements of the company, This incorrect

adjustment caused the concession profit to be overstated by $70,000 in the analysis.

Again, the ‘‘Return’’ portion of the financial ratio calculations were overstated and

the underlying profitability measures were overstated because of this error.

Even if you agree with the premise that the adjustment should be made, and I

don’t because it is not in accordance with GAAP, NPS incorrectly used a cost of $1

million and debt of $600,000 in the capitalization adjustments. I also prepare the

income tax returns for the partnership which owns this vessel and it cost over $1.4

million and the debt incurred in its purchase was $1.3 million. There was no explanation given in the analysis to support the use of the wrong amounts and I can

think of no basis under GAAP for the use of incorrect dollar amounts. The use of

the wrong amounts caused the concession profit to be overstated by $56,000 because

both depreciation and interest expenses would be understated. Once again, the ‘‘Return’’ portion of the financial ratio calculations were overstated and so were the underlying profitability measures. In addition, the company was deprived of the right

to earn a return on $400,000 of its assets. To compound this mistake, when the profitability ratios of ROA and ROE were calculated, the related capitalized value and

equity were ignored. Again, this caused these two profitability ratios to be overstated ( See Exhibit 2 for calculations)

Another mistake in the application of GAAP occurred when NPS assumed away

$347,700 of the company’s equity. The only reason given in the analysis was that

this was done ‘‘to approximate industry.’’ Equity and debt are the two primary

sources of capital utilized by a company. Capital is the amount invested by the owners of the company and debt is a loan to the company. Neither are free because an

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owner wants a return on his investment, usually in the form of a dividend, and interest must be paid on a loan. NPS guidelines recognizes that in setting franchise

fees, owners are entitled to a return on their invested capital. As previously mentioned, an adjustment should be made to reflect the fact that a company has low

debt because retained capital is being used to finance the operations of the business.

I can think of no place in GAAP when you can just assume away equity of a business and that is what was done with this adjustment. By assuming away this equity, the profitability measure of ROE was overstated in the analysis.

If you agree with the premise that this adjustment was correct, and I do not, NPS

should have increased the debt of the company by the same $347,700. In addition,

an adjustment should have been made to the concession profit for the interest which

would be due on this loan. Again, by not making this adjustment, the ‘‘Return’’ in

the profitability measures of ROG, ROA and ROE would have been overstated and

the resulting calculations incorrect.

Lack of Understanding of How a Small Business Operates

NPS clearly demonstrated a lack of understanding of how a small family owned

business operates when officer salaries were reduced by $162,762 without any investigation of what type of duties were being performed by the officers of the company.

It is common practice for all family members who work in the business to be named

an officer of their company. Their birthright not their actual duties is the reason

for them being elected as officers. The officers of FST perform many non-officer duties and are compensated in line with industry pay for these duties. The NPS made

no attempt to gain an understanding of the actual duties of the officers and this

adjustment should not have been made. Again this resulted in the concession profit

to be overstated which caused the ‘‘Return’’ in the profitability ratios to be overstated and invalidates their calculations.

Conclusion

In my opinion, this analysis contains mistakes totaling over $428,000 in the determination of FST’s concession profits. These errors represent almost one third of the

average gross revenue of $1.4 million it derived from its concession operations.

These mistakes invalidate the financial ratio comparisons contained in the analysis

and eliminates the NPS’s basis for the fee increase.

This concludes my prepared testimony. I will be happy to answer any questions

from the Subcommittee.

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Mr. HANSEN. Thank you. We have copies of these charts here in

our hands. Does the Park Service have these charts?

Would you get—you can take those down, if you would, please.

But, would somebody get the Park Service these charts? I would

like to have them there. Would you get those and get those to the

Park Service? I would like a response from those.

And while we are doing that, Mr. Gibbons, we will turn to you,

sir.

Mr. GIBBONS. Thank you very much, Mr. Chairman. And I appreciate the Director of the National Park Service being here today on

this issue. And I know that a lot of these decisions probably you

have been briefed on, some of which were not your decisions, and

I certainly appreciate that as well.

But I noticed in your testimony, which was obviously written by

counsel, to be very legalistic in your approach to this whole matter.

It also states throughout the whole tenure of this thing that the

Fort Sumter Tours did not go to arbitration, did not seek an alternative method of resolving this dispute and seek some sort of arbitration, which you think is some middle ground? Is that what you

are saying to them? Or is there something else that you are implying by the fact that they didn’t go to an arbitration?

Mr. STANTON. That is a process that is outlined in the concession

contract.

Mr. GIBBONS. Well, I know what the process says. But if you go

to arbitration, what I am saying is, do you believe in your heart,

in your mind, that if they went to arbitration there would be some

middle ground between the 12 percent and the original franchise

fee that was adjusted.

I know the guy sitting next to you is probably advising you on

this, but what do you think? Is there room in there for change?

Mr. STANTON. It is difficult to speculate if there would have been

any change. In looking at what the past practices have been in

those cases that gone to arbitration, it certainly gives an opportunity for the two principal parties, that being the Park Service

and the concessionaire to mutually review the differences of opinion and come out with, hopefully, a mutually accepted adjustment

in the franchise fees.

Mr. GIBBONS. Mr. Stanton, that is a wonderful answer to a yesor-no question, and I appreciate it. My question is, having looked

at the information that has now been presented to you and has

been presented before this Committee, do you believe that the Park

Service made a mistake and are they willing to correct it?

Mr. STANTON. I don’t believe that we made a mistake. As I mentioned in response to the three points that the previous speaker

made with respect to the inclusion of outside income, which was in

fact included in the initial analysis, and I commented on that in

my testimony, that error was corrected. And consequently, in the

final computation, it was not included.

With respect to the calculation of the value of the boat and also

the adjustment in the Director’s income, I would ask that our financial analyst, Mr. Bob Hyde, comment briefly on that.

Mr. GIBBONS. Well, Mr. Stanton, let me also say that I am looking at testimony, page 5, and it says that ‘‘while there was one

technical error’’—what was that technical error?

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Mr. STANTON. The technical error was the inclusion of the nonconcession income in the first preliminary analysis, and that was

corrected.

Mr. GIBBONS. Now in assessing Fort Sumter Tours’ profitability,

the Park Service did include non-concession income. Is that not

true?

Mr. STANTON. In the initial or the preliminary analysis, and that

was detected and it was corrected. And in the final computation,

no non-concession related income was included in the final computation.

Mr. GIBBONS. You mean no non-concession-related income was

included? You said no concession-related.

Mr. STANTON. Non-concession, non-concession.

Mr. GIBBONS. Well, does that mean that the Park Service for the

first five years of Fort Sumter Tours income profitability was overstated, in your calculation?

Mr. STANTON. I could not—— Mr. HYDE. If I may?

Mr. HANSEN. Please identify yourself for the record, please, sir.

Mr. HYDE. My name is Robert Hyde. I am the financial analyst

who performed the analysis. There is a two-step process in

reviewing—— Mr. GIBBONS. Well, let me just say, the process—the question

asked, does that say that the tour service’s income in the first five

years was overstated, according to the Park Service’s calculation— if what the Director has already said, that there was a mistake in

the technical addition of non-concession profit in that, so the answer would be?

Mr. HYDE. It was overstated in the initial part of the analysis,

but it was corrected in the latter part of the analysis where the fee

was set. Page 5 is where it was carried, and page 6 it was eliminated properly.

Mr. GIBBONS. Well, then, if you don’t take it out in the beginning, I mean, that would adjust the idea of whether or not, or state

the idea of whether or not an increase in the fee was even warranted. Is that not true?

Mr. HYDE. There is a part where you are looking at the original

fee, and yes, it would be overstated at that point, but then—— Mr. GIBBONS. And that would go to the basis of whether or not

justification of a fee increase was needed?

Mr. HYDE. At that stage, there is no franchise fee applied to the

concessionaire’s results, proper results. And the process then applies the fee at the point where the new fees, the prospective new

fees are applied. It did not include any non-concession income.

Mr. GIBBONS. Let me go over here to the CPA for the person. He

is just sitting on pins and needles waiting to answer these very

questions. And I would like to ask you, if you have a different opinion of the questions I have asked, and whether or not——

Mr. JACKSON. Yes, I have a very different opinion.

Mr. GIBBONS. Would you go ahead and tell us what your opinion

is on this matter?

Mr. JACKSON. The inclusion of the $195,000 greatly overstated

the profitability, which caused these three ratios, return on gross,

return on equity, return on assets, to be greatly overstated. So then

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when they looked at the ratios they calculated, and compared them

to their industry statistics, how could they compare them properly,

they were overstated. The first part—that is the first error.

Then the second one is very critical too. The inclusion of this income caused the maximum allowable fee to be overstated. I mean,

it wasn’t 15.6 percent. It was 8.7. They, because of the errors, set

a rate at 12 percent. We shouldn’t even be talking about 12 percent, we should be talking at most at 8.7 percent.

Mr. GIBBONS. Excuse me. Your belief is that, by the inclusion of

the mistaken inclusion of the non-concession profit in the original

five-year contract term, caused the erroneous consideration of warranting a fee increase?

Mr. JACKSON. Yes, sir. Exactly.

Mr. GIBBONS. Thank you, Mr. Chairman.

Mr. HANSEN. The gentleman from Nevada brought up some very

interesting points here I would kind of like to square in my own

mind and see if we got this right.

It seems like they did include non-concession fees. If you did, calculating the maximum franchise fee, if we figured this right that

you could charge, the National Park Service guideline 48 says that

the maximum fee you can charge is 50 percent of the pre-franchise

tax and pre-tax income, if I am reading your guidelines right. Is

that right?

Mr. JACKSON. That’s correct.

Mr. HANSEN. Well, that is on chapter 24, page 18. So you used

the figure $441,871, and, Mr. Jackson, you correct me if I am

wrong on this because I could be. Well, in fact, that includes

$195,603 of non-concession income. Is that right?

Mr. JACKSON. That’s correct.

Mr. HANSEN. So, if that premise is right, we go to guideline 48,

then the fee would have been 8.7 percent. Is that right?

Mr. JACKSON. Yes, sir. That is correct.

Mr. HANSEN. Better than 12 percent.

Mr. JACKSON. The maximum allowable fee. Now that is not necessarily the fee that——

Mr. HANSEN. Well, I am going by their guidelines here.

Mr. JACKSON. The guideline is for the maximum allowable fee,

not necessarily what the fee should be.

Mr. HANSEN. Mr. Stanton, would you like to—am I figuring this

wrong?

I would have Mr. Hyde comment.

Mr. HYDE. You are correct, sir. The maximum is overstated in

the analysis, using the overstated figure on page 5. That is correct.

Mr. HANSEN. So that would have been—what I just said would

be a correct statement, and the fee would have been 8.7 percent,

rather than 12 percent, if all these assumptions are correct?

Mr. HYDE. That is correct. The maximum guideline as a preliminary analysis would be 8.7 percent.

Mr. HANSEN. I see. Well, that is interesting.

Mr. Stanton, I guess we could debate this thing for a long time

regarding what procedure should have been followed. Your colleague mentioned to Mr. Inslee that they didn’t follow this procedure. They claim that you didn’t give them the information. And

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so what is the use of going into arbitration. We don’t know what

the other side is going to say.

Having been part of arbitration when I used to work for a large

insurance company, you know, we didn’t go in blind. We walked in

and all three parties pretty well knew what was going on when we

walked in there. And we were kind of stuck with the results. And

you are kind of a river boat gambler when you do that, but I guess

that is one of the things you do.

Following that, if I heard the gentleman correctly, he said the

next thing they do is the Secretary would make a decision. Does

that follow arbitration? Or is that before arbitration?

Mr. STANTON. That would follow arbitration.

Mr. HANSEN. So the final arbitrator, if they choose to go that

route, would be the Secretary?

Mr. STANTON. That is correct.

Mr. HANSEN. So you start out, they can appeal—then go from appeal to arbitration to the secretary?

Mr. STANTON. That is correct.

Mr. HANSEN. But in this case, and their contention is because

they didn’t have the information so they didn’t feel comfortable

doing that, they went straight to court, which was what, Federal

District Court?

Mr. STANTON. Federal District Court.

Mr. HANSEN. And, in the Federal District Court, they in effect— you prevailed. Is that correct?

Mr. STANTON. The Federal Government prevailed. That is correct.

Mr. HANSEN. And this was then appealed?

Mr. STANTON. It was appealed.

Mr. HANSEN. And you prevailed again?

Mr. STANTON. Prevailed again.

Mr. HANSEN. On what grounds? Could you tell me?

Mr. STANTON. As I understand that the court held that the process employed by the National Park Service was proper, and that

our calculation, that we had given adequate notice to the concessionaire with respect to reconsideration of the franchise fees, and

that the Park Service had the authority to adjust the franchise fees

from 4.25 to 12 percent.

Mr. HANSEN. Mr. Stanton, as you may recall in my office, Mr.

Campsen and his son and their counsel argued that it wasn’t discussed, that the franchise fee wasn’t brought up in court, and that

the merits of the franchise fee was not as issue. Is that a correct

statement?

Mr. STANTON. That is not my understanding, Mr. Chairman.

Mr. GIBBONS. Mr. Chairman?

Mr. HANSEN. Excuse me. Who has got the floor here?

Mr. GIBBONS. I was going to ask you to yield for a second on a

question like this because it seems to me what we should have is

the court decision before us because I am under the standing, understanding, reading Director Stanton’s testimony, the only issue

that was brought before the court was whether or not the Park

Service had the right to adjust the fee, which is part of the contract, and secondly, the calculation of the fee was not at issue in

that decision.

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I find nowhere in the decision does it talk about the merit or the

correctness of the calculation of the fee. So maybe we should have

the actual court decision before us.

Mr. STANTON. If you would please, Mr. Chairman?

Mr. HANSEN. Excuse me, go ahead, sir.

Mr. STANTON. I wanted to provide for the record a copy of the

court decision. And the court did address the calculation of the

franchise fee.

Mr. HANSEN. That would certainly be helpful for us as far as this

oversight hearing goes.

[The information follows:]

Mr. COHEN. Mr. Chairman?

Mr. Campsen—oh, excuse me. I am sorry. Go ahead.

Mr. COHEN. I just wanted to read from the Fourth Circuit opinion: ‘‘FST raises what it believes are three errors in NPS’s calculation of 12 percent franchise fee in the instant case.’’ And then they

proceed to analyze the three errors that were raised and discussed.

And we will provide this for the record.

Mr. HANSEN. Well, thank you. We appreciate having that.

Hang on a minute.

Mr. Campsen, you testimony is always interesting. You started

this business in 1961?

Mr. CAMPSEN. Yes, sir.

Mr. HANSEN. And the theory behind this is a lot of folks would

like to be ferried out to Fort Sumter to see it and, I assume, you

started buying vessels, as you pointed out, advertised your business, people would come to wherever your vessels were tied up.

And you would then take them out.

Tell us, go through that operation a little bit, would you, just for

the benefit of the Committee? What you do, in other words.

Mr. CAMPSEN. Yes, sir. Fort Sumter National Monument was not

created until 1948, and there was no concession operations going

on at Fort Sumter. There was no concession boats taking people

out there. The Park Service wanted to start public boat transportation out to the Fort, and they sought people, interested people,

to do that.

We were one of five proposals. And we were evaluated, and we

were selected. I went to the local banks, and I borrowed sufficient

money to get the first boat in operation. And we started operating,

carrying people to the Fort on January the 1st, 1962. And we have

been doing that since. We borrowed money. I always personally

guaranteed the note.

Mr. Chairman, I don’t come from a rich family. As a very young

man, I really didn’t have any money, but I guaranteed the note,

and the banker trusted me. We have always paid back everything

we ever borrowed, and our credit standing is good. But that is how

we got started.

And I had some cousins who were involved in operating shrimp

boats around Charleston, very, very fine, honorable people who

knew all about boats. They helped me to get started, and none of

us made any money at all or drew any income from Fort Sumter

Tours.

It was a wing and prayer and a hope that we would be able to

build a business that made some sense economically, and we

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worked very closely with the local Park Service officials. We have

always got the highest ratings possible. We did the advertising. We

did the promotion. And visitation started increasing.

It got to the point where I could even start having a little profit

from Fort Sumter Tours. But we grew and we expanded, and we

went into doing things other than Fort Sumter, like conducting

harbor tours around Charleston Harbor. The boat did not stop at

the Fort.

Some people are really not interested in going to the Fort. And

we also expanded by using our boats for special charters, people

want to charter a boat for any number of reasons. Churches want

to charter the boats, private businesses, and so forth. We charter

those at night.

Mr. HANSEN. Mr. Campsen, if I may interrupt you, we are going

to lose this Director in a minute.

Let me just ask you, how many boats or ships do you have?

Being an old Navy man——

Mr. CAMPSEN. We have three.

Mr. HANSEN. Three? How many people do they hold?

Mr. CAMPSEN. We have three. One is the Spirit of Charleston,

which has been described and talked about here. That boat was

built down in Louisiana. We had a naval architect design the boat.

That boat was—plans and specifications were approved by the local

Park Service people, as we were developing to be used to carry people over to Fort Sumter. And at night, this boat is used to carry

people on dinner excursions.

We had a different crew come in, and the boat is transformed

from daytime operation to nighttime operation. And we do that to

make as much money as we can to pay for the boat and pay for

the people who work for us.

We have 44 people, and we have a payroll that we have to meet,

of course, meet every Friday.

Mr. HANSEN. Yes. How long does it take to get from the Harbor

to Fort Sumter?

Mr. CAMPSEN. It takes 30 minutes from our landing facility to

get out to Fort Sumter, 30 minutes.

Mr. HANSEN. And, Mr. Campsen, before we lose our time here,

I don’t know that—we are not mediators here, we are just trying

to resolve some of these things. I would like to ask the Director this

question: Have you ever considered the National Park Service

going back and recalculating. I remember many times with a new

battery of folks, not that the others haven’t done a good job, and

taking another look at it.

And on your side of the issue, Mr. Campsen, you figure if you

were given the opportunity to go to arbitration, would you do it?

Mr. CAMPSEN. Well, yes, sir, provided it was binding arbitration.

Let me say this, Mr. Chairman: We have proposed to the Park

Service that we would be willing to submit the correctness of this

franchise fee calculation to an independent accounting firm, like

Ernst and Young or someone that we don’t have any real control

over that are nationally recognized, and ask them to—tell the Service, here is where we think this was an error based upon the guidelines of the Park Service in existence at the time.

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And we would be bound by that. And we would pay for that analysis. We proposed that to the Park Service, and they didn’t react

to it at all. They didn’t refuse or accept. They just acted like they

didn’t receive it.

But, yes sir, to answer your question, if we had an opportunity

to go to binding arbitration, we would agree to that.

However, please understand that our small company since 1992

has been incurring enormous expenses, enormous expenses trying

to correct the NPS’s mistakes and miscalculations. I don’t know.

There has got to be an end to this sometime, because we are going

bankrupt one or two ways. Either we are going bankrupt fighting

this 12 percent calculation, or we are going bankrupt when they

impose it and make us pay it. And so we are in between a rock

and a hard place, Mr. Chairman, if you will.

The expense of attorneys and other consultants and time and

frustration has been enormous. So, yes, sir, we want to end this.

We want to come to some arrangement whereby a proper calculation of our fee is finally obtained.

Mr. HANSEN. I appreciate that, Mr. Campsen. I am just sitting

here trying to figure out a way to resolve an issue.

Mr. CAMPSEN. I understand.

Mr. HANSEN. And it seems to me that if there was a way, and

I don’t understand all the procedures and what is in statutory law

here, I am just kind of off the top of my head. If we could—way

we could put arbitration together and we live with the results, that

is one way we have been in the past.

Another thing, of course, is that we look to the Park Service.

Maybe they will take another look at this, come up with some other

folks to do that. I have seen judges order people to do that, saying

you go in and put some new folks in there and take another look

at this thing and see if it was done right, and then come back. So,

that is another remedy that may be there.

Mr. Gibbons, maybe you would like to comment?

Mr. GIBBONS. Well, I thank the gentleman, and I know that his

leadership is appreciated on this issue because it is an important

issue, not just for the Park Service but for the future of 40-some

employees who are sitting out there worried about their income.

I mean, their income depends upon the success of this operation.

It doesn’t necessarily equate to the same payroll check that the

Federal bureaucrats get every Friday without worry about whether

or not the lights are going to come on, or somebody is going to pay

the tax and do this.

And I would just simply like to reiterate that if the calculations,

according to the accountants for the Park Service that we have

gone over are correct, and, Mr. Chairman, I think you put it very

correctly that we are looking at somewhere around $246,000—

$242,000, excuse me, $246,260 is the calculation, and that would

put it in the 8.7 percent maximum cap, compared to the 12 percent.

I would think the Park Service has to realize right away that

there is at least a conceding point right there to go to some kind

of negotiating position. And I would hope the Park Service realizes

that it is not all one way.

And some days the Park Service has to give in when they are

wrong as well. And from what I have heard, Mr. Chairman, I think

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the Park Service did have a technical error and should be willing

to work with the gentleman as well.

Mr. HANSEN. Just as the gentleman points out in just this hearing we have had, the Park Service has pointed out that it should

have been 8.7 on this if we take those fees, which is substantial.

Mr. GIBBONS. Well, Mr. Chairman, that is the maximum. And

then we have to start with somewhere between where they were

originally and then the maximum cap of 8.7, not the 12 percent.

Mr. HANSEN. That is all predicated on if we accept these assumptions, which apparently we do in this case.

Well, I know, Mr. Stanton, you are here three-and-half minutes

overtime.

Mr. STANTON. That’s fine. Mr. Chairman, Mr. Gibbons, again, I

appreciate the opportunity. Let me make a couple of comments, if

I may.

One is with respect to Mr. Campsen’s assessment of the relationship with the National Park Service. I concur wholeheartedly. It

has been an excellent partnership. The services that Mr. Campsen

and the Fort Sumter Tours, Incorporated have provided over the

years have been valuable service benefiting thousands and thousands of visitors to Fort Sumter and Fort Moultrie. And it is a

value, their partnership is a value of service that they provide to

the public.

That is not the question that is before us today. So I don’t want

any comments that I make diminish the quality of services that the

concessionaire has provided. It has been satisfactory, indeed, outstanding over the years.

Secondly, as I indicated in my testimony, is that we have asked

the district attorney—rather, the U.S. Attorney’s Office to be open,

receptive to any proposal or suggestions from the concessionaire in

hopes that we can move towards a resolution of this as soon as possible. And we are committed to working again with the U.S. Attorney to resolve the suit and move to a different level of work.

Mr. HANSEN. I appreciate that, Mr. Director, and I appreciate

you being here.

We are sitting scratching our heads, like you folks, on how is this

resolved. It seems to me there are a couple of things that logical,

reasonable people could sit down and get it done, and then we

wouldn’t have to go through all this expense, time, and effort.

And that is one of the reasons you have arbitration; that is one

of the reasons we have other things that don’t get it wrong to all

you lawyers out there, but sometimes I think the only guy that

wins on this thing is counsel. No disrespect, Counselor.

Mr. DICKSON. None taken, sir.

Mr. HANSEN. But having seen a lot of money go out and having

signed a lot of those checks, I can tell you that—anyway, with that

said, we will take it under advisement as the Committee and see

if there is a legislative remedy. We would like to get this over with.

Frankly, I think, of my 10 terms on this Committee, the biggest

thorn in our flesh is always the fight with concessionaires, Park

Service, other folks. And as the Director aptly pointed out, concessionaires are integral and an important part of the Park Service.

And there has been a good relationship here for years, I hate to

see this blow up. I know it is an extremely important thing to the

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folks who want to see this very interesting historical place. So if

we could do anything in our power to help this thing out, we want

to do it and bring this to a reasonable and amicable solution.

And unless Mr. Gibbons wants to add anything to that, we

will——

Mr. DICKSON. Mr. Chairman, may I—— Mr. HANSEN. Counselor.

Mr. DICKSON. I simply wish to express the deep appreciation of

Fort Sumter Tours for this hearing. It is obvious to us, I believe

that after several trips to the courthouse and numerous statements

by the Park Service that there was never anything wrong with this

franchise fee analysis, it took this oversight hearing and your efforts to get them to concede that the fee should never have gone

above 8.7 percent, not from the very beginning. And we are very,

very grateful to you for that.

Mr. HANSEN. Well, we thank you for that, and Mr. Director,

again we apologize. We have held you eight minutes over, and I

know the Vice President is over there and that is probably where

you are supposed to be, and so am I.

But I wanted to have this hearing. And let me thank all of you

for being here, and this will conclude this oversight hearing.

[Whereupon, at 12:38 p.m., the Subcommittee was adjourned.]

[Additional material submitted for the record follows.]

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