Report to Congressional Committees

United States General Accounting Office

GAO

October 2001 NATIONAL PARKS

Significant Progress

Made in Preserving

the Presidio and

Attaining Financial

Self-Sufficiency

GAO-02-87
Page i GAO-02-87 The Presidio Trust

Letter 1

Results in Brief 2

Background 3

The Presidio Trust Has Made Significant Progress in Preserving,

Protecting, and Improving the Presidio 6

Implementation Plan and Financial Projections Indicate That the

Trust Should Become Financially Self-Sufficient by 2013 13

Conclusions 18

Recommendation to the Presidio Trust 18

Agency Comments and Our Evaluation 18

Scope and Methodology 18

Appendix I Status of Presidio Trust Buildings and Structures 21

Appendix II Residential and Commercial Leasing 22

Appendix III General Overview of Planning Alternatives

Considered by the Presidio Trust (July 25, 2001) 23

Appendix IV Buildings and Open Space Comparison of Presidio

Trust Planning Alternatives 24

Appendix V Capital Spending Comparison of Presidio Trust

Planning Alternatives 25

Appendix VI GAO Contact and Staff Acknowledgments 26

GAO Contact 26

Acknowledgments 26

Contents
Page ii GAO-02-87 The Presidio Trust

Tables

Table 1: Commercial and Residential Buildings, as of January 2001 21

Table 2: Commercial and Infrastructure Building Space, as of

January 2001 21

Table 3: Status of Residential Housing Units, as of January 2001 22

Table 4: Status of Commercial Building Leases, as of January 2001 22

Figures

Figure 1: Area A and Area B Boundaries of the Presidio 3

Figure 2: Presidio Trust Projected Revenue, Fiscal Year 2001 5

Figure 3: Presidio Trust Projected Expenditures, Fiscal Year 2001 6

Figure 4: Residential Housing Unit Before and After Rehabilitation 8

Figure 5: Commercial Building Before and After Rehabilitation 9
Page 1 GAO-02-87 The Presidio Trust

October 4, 2001

Congressional Committees

The Presidio of San Francisco, situated at the confluence of the Pacific

Ocean and the San Francisco Bay, served as an active military post for

nearly 220 years. Containing about 1,490 acres and 770 structures, the

Presidio now offers its visitors open space for recreational activities and

serves as a refuge for several rare and endangered species. Except for its

coastal shoreline, the property is surrounded by dense urban residential

neighborhoods

In 1972, when the Congress established the Golden Gate National

Recreation Area, a small part of the Presidio, then an Army base, was

included in the recreation area. When the Department of Defense

determined that the Presidio was excess to its needs in 1988, the

remainder of the Presidio was designated for inclusion in the recreation

area. On October 1, 1994, the Presidio closed; its grounds became part of

the recreation area and the National Park Service (Park Service) assumed

its management.

Since managing the Presidio’s 770 buildings and unique landscape was, by

far, the most costly of any other single area it managed, the Park Service

suggested that the Congress create an entity to manage the majority of the

property. On November 12, 1996, Public Law 104-333 created the Presidio

Trust—a wholly owned government corporation—to manage a large part

of the Presidio grounds in a manner consistent with sound principles of

land use planning and management while maintaining the area’s scenic

beauty and historic and natural character. The Trust is responsible for

leasing, maintaining, rehabilitating, repairing, and improving the property

it controls. In addition, the law stipulated that the Trust was to become

financially self-sufficient within 15 years of the first meeting of its Board of

Directors—that is, by 2013. Also, the law required the Secretary of the

Interior, in cooperation with the Trust, to provide public interpretive

services, visitor orientation, and educational programs throughout the

Presidio. The Park Service carries out these responsibilities and also

provides additional public safety services under a reimbursable agreement

with the Trust.

The legislation that created the Trust also includes a requirement that we

periodically review and report to the Congress on the Trust’s activities.

Accordingly, we examined (1) the Trust’s ongoing efforts to preserve and

United States General Accounting Office

Washington, DC 20548
Page 2 GAO-02-87 The Presidio Trust

protect the Presidio and (2) the status of the Trust’s efforts to become

financially self-sufficient.

The Trust has made significant progress toward preserving, protecting,

and improving the Presidio. It has launched major efforts to repair and

upgrade the Presidio’s infrastructure and to repair and rehabilitate

residential housing and commercial space. To date, the Trust has

transformed about half of the former military buildings into useable

residential and commercial space. The rehabilitation, repair, and leasing of

the remaining 300 residential units and about 2.2 million square feet of

undeveloped commercial space is critical to the Trust’s efforts to achieve

financial self-sufficiency. The Trust has also embarked on several

environmental initiatives, including the cleanup of over 2 centuries of

military contamination and the restoration of Mountain Lake—one of the

few remaining natural lakes within the San Francisco city limits. The Trust

is also working with the Park Service to revitalize vegetation throughout

the Presidio and to replace trees reaching the end of their life expectancy

in the 300-acre forest.

The Trust should meet its legal obligation of financial self-sufficiency by

2013 according to financial projections prepared by the Trust in

conjunction with its current planning process. As part of this planning

process, the Trust, on July 25, 2001, released for public comment its

preferred alternative and five other alternatives it considered for the future

development of the Presidio. The Trust is accepting comments on the

alternatives until the end of October and expects to release a final

development plan for the Presidio in early 2002. The Trust used a financial

model to prepare an analysis of future revenues and expenses for each of

the alternatives it considered in the planning process. Under every

alternative considered, the model projected that the Trust could achieve

financial self-sufficiency by 2013. We did not independently verify the

calculations of the model because it was, according to the Trust, intended

to allow for comparisons under the various alternatives considered and

not as a definitive projection of future financial results. However, once a

final development plan is selected, we recommend, and the Trust

acknowledges, that the model and its results be independently examined

in accordance with attestation standards. Key to the financial model for

the alternatives considered were the assumptions, such as those for rental

rates. Based on our economic review of these assumptions, it appears that

they were conservative and provided estimates of future revenues at the

lower end of possible outcomes. As such, it is possible that, in the future,

the Trust could generate revenues in future years in excess of those

needed to operate the Presidio including funds for restoration,

Results in Brief
Page 3 GAO-02-87 The Presidio Trust

preservation, and adequate capital reserves. Furthermore, if the Trust does

generate excess revenues in the future, the Congress may, at that time,

want to revisit the issue of what to do with excess revenues.

The Trust manages the interior 80 percent of the Presidio, while the Park

Service manages the remaining 20 percent, essentially the coastal areas.

Figure 1 shows the area managed by the Park Service (Area A) and the

area managed by the Trust (Area B).

Figure 1: Area A and Area B Boundaries of the Presidio

Source: The Presidio Trust.

The Trust’s area of responsibility includes 729 commercial and residential

buildings and structures encompassing almost 6 million square feet of

floor space. The Presidio was designated as a National Historic Landmark

in 1962. Included in this designation are more than 400 buildings and the

Presidio’s landscape. As such, any new development or proposed changes

to the Presidio’s historic buildings and its landscape are guided by

Background
Page 4 GAO-02-87 The Presidio Trust

rehabilitation standards established by the Secretary of the Interior and

the Park Service.

In Public Law 104-333, the Congress gave the Trust wide latitude for

managing, preserving, and protecting the Presidio in its effort to achieve

financial self-sufficiency by 2013. The Trust has the authority to, among

other things, guarantee loans to tenants who finance capital improvements

of Presidio buildings, manage building leases, borrow up to $50 million

from the U.S. Treasury, and demolish buildings that it deems to be beyond

cost-effective rehabilitation.

The Trust is managed by a 7-member Board of Directors. The President of

the United States appoints six members and the Secretary of the Interior

or her designee is the seventh member. Board members, who are not

compensated, are generally appointed to 4-year terms and can be

reappointed; however, no Board member may serve more than 8

consecutive years. The Board must hold three meetings per year, two of

which must be open to the public. An executive director oversees the daily

operations of the Trust and, as of May 30, 2001, managed a 468-member

staff. The Trust is organized into an office of general counsel and six

divisions, each managed by a deputy director; these managers report

directly to the executive director. The Trust can set the compensation and

duties of the executive director and staff as it deems appropriate.

For fiscal year 2001, the Trust projects that its revenues will be $79.4

million. Figure 2 shows the Trust’s projected revenues from all sources for

fiscal year 2001.
Page 5 GAO-02-87 The Presidio Trust

Figure 2: Presidio Trust Projected Revenue, Fiscal Year 2001

Dollars in millions

Note: Percentages may not total due to rounding.

Source: The Presidio Trust.

The Trust’s projected expenditures for fiscal year 2001 are $79.4 million.

Figure 3 shows the Trust’s projected expenditures for fiscal year 2001,

including operations costs such as salaries, day-to-day operations, costs

associated with future planning efforts, and public safety.
Page 6 GAO-02-87 The Presidio Trust

Figure 3: Presidio Trust Projected Expenditures, Fiscal Year 2001

Dollars in millions

Source: The Presidio Trust.

The Trust has made significant progress in preserving, protecting, and

improving the Presidio. Since taking over its portion of the Presidio on

July 1, 1998, the Trust has spent more than $38 million to preserve and

protect the Presidio by upgrading the infrastructure and repairing and

rehabilitating residential housing units and commercial space. In addition,

private entities have spent about $40.8 million to repair and rehabilitate

commercial space that they then leased from the Trust. The Trust has also

assumed responsibility for the environmental cleanup of contamination

across the entire Presidio. In conjunction with the Park Service, the Trust

has embarked on a plan to improve Mountain Lake’s water quality and

shoreline and started work on restoring native vegetation throughout the

Presidio. By repairing, rehabilitating, and subsequently leasing residential

housing and commercial space, the Trust generated about $13.3 million

from residential leases and about $6.3 million from commercial leases in

fiscal year 2000. However, as successful as the Trust has been in

renovating and leasing both residential and commercial space, it still has

some 300 residential housing units to be repaired or rehabilitated and

The Presidio Trust

Has Made Significant

Progress in

Preserving,

Protecting, and

Improving the

Presidio

8%

7%
Page 7 GAO-02-87 The Presidio Trust

almost 2.2 million square feet of commercial space available for

development

From 1997 through March 30, 2001, the Trust spent about $15.4 million to

repair and replace the Presidio’s infrastructure, upgrading roads and

grounds, telecommunications systems, electrical, and water and sewer

systems. From April 1, 2001, through the end of fiscal year 2002, the Trust

plans to spend an additional $7 million and, with these expenditures, about

80 percent of the electrical, water, sewer, and telecommunications

upgrades will be complete. According to the Trust, these improvements

have increased health and safety systems, enhanced park resources, and

prepared more of the Presidio for residential and commercial tenants.

The major infrastructure upgrades undertaken, and their approximate

costs to date, were the following:

• $6.0 million on electrical upgrades by replacing or repairing 12,000

linear feet of existing lines and installing an additional 10,000 linear feet

of lines in support of the Trust’s residential and commercial leasing

programs;

• $5.4 million to upgrade telecommunications capacity including

increasing the number of available lines from 8,000 to 21,000 in support

of the Trust’s residential and commercial leasing programs;

• $2.4 million for sewer system upgrades including replacing about 7,000

linear feet of sewer lines;

• $1.1 million for water system upgrades, including replacing and

repairing old water lines that were leaking millions of gallons of water

a week; and

• $0.5 million to improve roads, trails, sidewalks, and grounds to enhance

resident and visitor facilities.

To preserve the Presidio’s many historic buildings and generate the

revenues needed to achieve financial self-sufficiency by 2013, the Trust

has spent about $23 million to repair and rehabilitate residential housing

units and commercial buildings for lease. Figure 4 shows the interior of a

residential housing unit before and after rehabilitation and figure 5 shows

a commercial building before and after rehabilitation.

Infrastructure

Improvements and

Building Renovations
Page 8 GAO-02-87 The Presidio Trust

Figure 4: Residential Housing Unit Before and After Rehabilitation

Source: The Presidio Trust.
Page 9 GAO-02-87 The Presidio Trust

Figure 5: Commercial Building Before and After Rehabilitation

Source: The Presidio Trust.

The funds to repair and rehabilitate these facilities have come primarily

from congressional appropriations and rental revenue. The Presidio has

1,198 housing units contained in 349 buildings, 155 of which are historic.

According to the Trust’s residential leasing records, as of January 2001,

869 residential housing units contained in 247 buildings were leased.

Appendix I provides more specific information about the number and

types of buildings the Trust manages. The Trust also manages 306
Page 10 GAO-02-87 The Presidio Trust

commercial buildings—225 of which are historic—that contain 3.86

million square feet of space. Currently, the Trust has about 1 million

square feet of commercial space rented to private entities. The Trust and

the Park Service occupy another 660,000 square feet of commercial space.

Private entities have spent about $40.8 million to repair and rehabilitate

commercial space that they subsequently leased from the Trust. In these

cases, the Trust generally reduces rental rates to recognize the private

entity’s investment.

The Trust has embarked on a number of initiatives to clean up and restore

the Presidio’s environment. These initiatives include assuming the Army’s

responsibility for cleaning up the contamination left at the Presidio from

over 2 centuries of use as a military post, restoring Mountain Lake, and

restoring the Presidio’s vegetation and forest.

In October 1994, when the Army transferred jurisdiction of the Presidio to

the Park Service, the Army retained the lead agency responsibility for

cleaning up contamination. The Army began cleanup activities primarily in

Crissy Field in Area A—an area now managed by the Park Service. In May

1997, the Army announced an updated plan for continued cleanup of the

Presidio. The Army’s plan however, was criticized by local neighborhood

groups, the Sierra Club, and the Trust because its cleanup strategy relied

primarily on monitoring contaminated sites and restricting public land use,

rather than removing contamination. Also, the Army’s cleanup plan was

expected to cover a 30-year period.

In May 1998, the Trust presented to the Army its own assessment of the

cleanup plan for the Presidio that was designed to address the areas

criticized in the Army’s plan. The Trust also proposed that the Army

delegate its cleanup authority to the Trust to expedite the cleanup

activities.

In May 1999, the Army, the Trust, and the Department of the Interior

signed a memorandum of agreement transferring cleanup responsibility to

the Trust. Under the agreement, the Army will pay the Trust $100 million

to clean up both Areas A and B. The Trust is responsible for all currently

known contamination; the Army remains responsible for any unknown

contamination that may be discovered. The Trust also purchased a $100

million insurance policy for $6.7 million in the event that cleanup costs

exceed the $100 million paid by the Army. The Trust plans to complete the

environmental cleanup by 2010.

Environmental Cleanup

and Other Restoration

Activities

Environmental Cleanup
Page 11 GAO-02-87 The Presidio Trust

As of March 31, 2001, the Trust had spent about $12 million for cleanup

activities. Almost 80 percent of the expenditures to date were for

insurance premiums, program management and administration, planning,

and oversight. The remaining funds were used for cleanup activities

including monitoring groundwater, evaluating landfills, removing

contaminated soil, and removing lead pellets.

Mountain Lake is one of the few remaining natural lakes within the city of

San Francisco. It is a popular destination for visitors and residents and

provides habitat for many species of birds and plants. Over the years, the

depth of the 4-acre lake has fallen from 30 feet to less than 10 feet. In

addition, the lake’s water quality has deteriorated because of

sedimentation, runoff, and the byproducts of nearby road construction.

The National Park Service, Golden Gate National Park Association, and

the Trust have jointly sponsored a public planning process, including

community forums, site research, and other technical analyses, to produce

a plan to restore the lake and adjacent shoreline, which encompass a total

of 14 acres. A two-phased plan and an environmental assessment were

completed and adopted in the spring of 2001.

The goals of the plan are to improve water quality, enhance the habitat,

and improve visitor experiences. The first phase will consist of

• dredging and aerating the bottom of the lake;

• removing nonnative trees and vegetation and replacing them with

native species; and

• planting native trees and shrubs to buffer the lake from the roadway,

improving trails, and constructing overlooks and interpretive exhibits.

The Trust estimates that phase one of the plan will cost $677,000 and

should be completed by the fall of 2002. This cost estimate assumes that

all removed sediment will be disposed of at a site on the Presidio. If the

lake’s sediment is found to be contaminated, however, it will require offsite disposal and result in additional costs. The San Francisco

International Airport Authority provided $500,000 for phase one as

approved mitigation for filling in wetlands for the airport’s new terminal.1

 1

 Mitigation for filling in wetlands is a requirement of regulations and guidelines

implementing section 404 of the Clean Water Act. The California Regional Water Quality

Control Board approved the airport’s plan to fill in 17.1 acres of wetlands and other waters

in exchange for $500,000 toward the restoration of Mountain Lake.

Mountain Lake Restoration
Page 12 GAO-02-87 The Presidio Trust

The second phase will be initiated within 2 to 5 years after the completion

of the first one. This phase consists of removing an additional 4.3 acres of

weeds around the shoreline and replanting the area with native plants as

well as construction of a bridge. The Trust’s preliminary estimate is that

phase two will cost from $600,000 to $750,000.

The preservation and enhancement of the Presidio’s natural resources,

including its vegetation, is one of the Trust’s goals. The Presidio contains

more than 230 native plant species and a 300-acre forest of eucalyptus,

Monterey cypress, and Monterey pine trees. Over the years, human

activities and the overgrowth of nonnative plants have threatened the

Presidio’s landscape and native vegetation. Also, many of the trees planted

a century ago as part of the Army’s beautification project are nearing the

end of their natural life span and need restoration.

Working in partnership with the Trust, the Park Service developed the

Vegetation Management Plan to preserve and enhance native landscapes

and to extend the life of the park’s forest over the coming decades.

Initially, the Trust and the Park Service will collaborate on a number of

pilot projects designed to test and establish effective restoration

techniques for future vegetation management projects. Over the next 5

years, the Trust expects to spend $9 million on pilot projects aimed at

restoring and nurturing the Presidio’s vegetation and forest.

The Trust has made substantial progress in repairing, rehabilitating, and

leasing buildings since taking over responsibility for its portion of the

Presidio in July 1998. Revenue from residential and commercial leases is

the Trust’s primary source of revenue, and these leases will play a more

important role as the Trust’s federal appropriation declines and then ends

in fiscal year 2012.

In fiscal year 2000, residential leases generated $13.3 million in revenue.

Currently, more than 52 percent of the occupied residential units are

leased at market rental rates averaging about $2,910 per month. The

remaining occupied units are rented under several discounted rental

programs whereby tenants, such as public safety personnel, Presidio

employees, and students, pay less than market rental rates. Monthly rental

rates under these programs average about $1,375. By the end of fiscal year

2001, the Trust expects to have available for rent an additional 140

residential housing units. The Trust anticipates that it will generate about

$21 million in revenue in fiscal year 2001 from residential housing.

Vegetation and Forest

Restoration

Leasing Programs Have

Been Successful
Page 13 GAO-02-87 The Presidio Trust

In fiscal year 2000, commercial leases generated $6.3 million in revenue.

Overall, leases for commercial space average less than $10 per square foot,

with nearly 79 percent of the total square footage leased averaging slightly

more than $3 per square foot. Many of these leases are to tenants who

financed the cost of restoring buildings they occupy in exchange for rental

offsets and tax credits allowed for the restoration of historic buildings.

Other leases are with community organizations that pay only their pro rata

share of common area, infrastructure, and security costs. In fiscal year

2001, the Trust is offering an additional 227,000 square feet for lease or

rehabilitation; this is expected to raise fiscal year 2001 commercial lease

revenues to about $9 million. Appendix II provides information on the

Trust’s residential and commercial leasing programs.

While the Trust has been successful in leasing residential and commercial

space, it still has a considerable amount available for rehabilitation and

leasing. As of January 2001, the Trust had 329 housing units that were

either vacant or awaiting rehabilitation. Similarly, the Trust has 2.2 million

square feet of commercial space that could be made available once a

decision is made on the use of the space and it is repaired or rehabilitated.

Of the 2.2 million square feet, 900,000 square feet will be used for a digital

arts center at the Letterman Hospital site. The development agreement for

this project was signed on August 14, 2001. When this project is

completed, the Trust expects to receive about $5.8 million annually in rent

plus an annual service district charge.

In July 2000, the Trust began a planning process to create a plan for the

future development of its portion of the Presidio. As part of this process,

the Trust considered a number of alternatives for future development. The

Trust used a financial model to prepare a financial analysis for each of the

alternatives it considered and, under every alternative, the model

projected that the Trust could become financially self-sufficient by 2013.

The Trust issued its Draft Implementation Plan, which contained its

proposed action called the “Draft Plan Alternative,” as well as a draft

environmental impact statement on July 25, 2001. After a public comment

period, the Trust expects to issue a final plan and final environmental

impact statement by early 2002. Key to the financial model were the

assumptions the Trust used which appear to be conservative and to

provide estimates of future revenues at the lower end of potential

Implementation Plan

and Financial

Projections Indicate

That the Trust Should

Become Financially

Self-Sufficient by 2013
Page 14 GAO-02-87 The Presidio Trust

estimates.2 After choosing the final development plan, the Trust should

refine the model and prepare a new financial forecast of operating results

under that plan because projections used in the planning process were

designed only as tools to test the comparative economic implications of

various alternatives.

Since assuming responsibility for its portion of the Presidio, the Trust has

managed the Presidio using the Park Service’s 1994 General Management

Plan Amendment. In July 2000, the Trust began to update this plan. The

new planning process, called the Presidio Trust Implementation Plan

(Implementation Plan), was needed, according to the Trust, because some

of the assumptions the Park Service had based its 1994 General

Management Plan Amendment on had changed significantly since it was

adopted. Specifically:

• The Park Service’s 1994 General Management Plan Amendment

assumed that annual appropriations in the range of $16 million to $25

million would be received. However, Public Law 104-333, which

created the Trust, mandated that the Trust become financially selfsufficient by 2013.

• Even after the Presidio closed, the 6th U.S. Army had been expected to

occupy up to 30 percent of the Presidio’s buildings; however, it has

vacated the Presidio.

• The University of California at San Francisco had planned to locate its

research facilities at the Letterman Hospital, but did not do so.

The Implementation Plan process began in July 2000 with a 6-month

“scoping” period and information-gathering process through workshops in

which the public helped define the range of issues and topics to be

included in the Implementation Plan. In mid-November 2000, the Trust

published its Conceptual Alternatives Workbook, which contained five

alternatives for the Presidio’s future development. Public comments were

solicited on the alternatives until January 16, 2001.

 2

 We have not examined the financial model in accordance with attestation standards

established by the American Institute of Certified Public Accountants and, accordingly, do

not express an opinion or any other form of assurance on the forecasts or assumptions.

Furthermore, there will usually be differences between the model and actual results,

because events and circumstances frequently do not occur as expected, and those

differences could be material.

Presidio Trust

Implementation Plan Will

Guide Future Development
Page 15 GAO-02-87 The Presidio Trust

On July 25, 2001, the Trust released the Presidio Trust Draft

Implementation Plan and draft environmental impact statement, which

described and analyzed six alternatives for future development of the

Presidio. Two of the alternatives have, thus far, received the most

attention from the public. One, referred to as the “General Management

Plan Amendment 2000 alternative,” would implement the Park Service’s

1994 General Management Plan Amendment, assuming the year 2000

conditions. The Trust stated that it modified this alternative from the

Conceptual Alternatives Workbook because many neighborhood and

environmental groups had commented that they preferred an alternative

that was patterned after the Park Service’s 1994 General Management Plan

Amendment plan but modified to make it financially feasible. The Trust

developed another alternative, also in response to public comments,

entitled the “Draft Plan Alternative,” which is its proposed action for

future development of the Trust’s portion of the Presidio. The Trust stated

that this alternative is the proposed action because it is patterned after the

General Management Plan Amendment 2000 alternative but includes

modifications to ensure its financial viability and to combine a number of

concepts proposed in the Conceptual Alternatives Workbook into a single

alternative. These concepts include expansion of open space, no reduction

in housing units, and a variety of cultural and educational programs for

visitors. Appendix III contains a summary of the alternatives the Trust

considered. The public has until October 25, 2001, to provide comments on

the Draft Plan Alternative and draft environmental impact statement. The

Trust envisions concluding the planning process with the publication of a

final plan and final environmental impact statement in early 2002.

The Trust’s Draft Plan Alternative contains many of the features of the

General Management Plan Amendment 2000 alternative, but there are

several noteworthy differences between the two. For example, total

development at the Presidio under Draft Plan Alternative is 5.6 million

square feet, or about 6 percent less than current levels, rather than just

over 5 million square feet discussed in the General Management Plan

Amendment 2000 alternative. Furthermore, the Draft Plan Alternative

permits 50,000 square feet less in building demolition than the General

Management Plan Amendment 2000 alternative and replacement buildings

under the Draft Plan Alternative could increase by about 540,000 square

feet over the General Management Plan Amendment 2000 alternative.

Finally, the Draft Plan Alternative calls for 880 more residential housing

units than the General Management Plan Amendment 2000 alternative—

more than doubling the projected number of residents at the Presidio.

Appendix IV contains a comparison of the land use patterns envisioned by

the alternatives.
Page 16 GAO-02-87 The Presidio Trust

The Draft Plan Alternative assumes expenditures of $10 million annually

for Trust programs rather than the $2 million annually provided for in the

General Management Plan Amendment 2000 alternative. The difference is

due, in part, to the Trust providing programs rather than only the tenants

as the General Management Plan Amendment 2000 alternative assumed.

According to the Trust, a wide variety of program possibilities would be

available including interpretive programs for visitors as well as museums,

exhibitions, and community programs. Also, the projected number of

annual visitors under the Draft Plan Alternative is 60 percent higher than

the projection in the General Management Plan Amendment 2000

alternative. Finally, total capital construction costs under the Draft Plan

Alternative would be $61 million higher than under the General

Management Plan Amendment 2000 alternative. Appendix V contains a

comparison of the capital costs among the alternatives.

The Trust’s analysis of the public comments it received before releasing

the Draft Plan Alternative, indicated that many of those commenting noted

concerns with the proposed plans compatibility with the Park Service’s

1994 General Management Plan Amendment. Public reaction when the

Draft Plan Alternative was released indicated that many believed that the

Draft Plan Alternative contained too much development and that the Trust

should not have abandoned the Park Service’s 1994 General Management

Plan Amendment.

As part of the planning process, the Trust used a financial model to

prepare a financial projection for each alternative. According to the Trust,

the financial model was designed as a planning tool to test the

comparative economic implications of the alternatives and not as

definitive projections of future financial conditions. Specifically, the

financial model was designed to (1) evaluate the short-term financial selfsufficiency of each alternative; (2) estimate the time period needed for

each alternative to reach long-term financial sustainability, including

generating sufficient revenues to meet long-term capital needs and

replacement reserves; and (3) compare the relative financial performance

of each alternative against the others. The financial model projected that

the Trust could become financially self-sufficient by 2013 under every

alternative.

In developing the financial model, the Trust relied on historical data from

a number of sources, such as the San Francisco area’s real estate markets

for data on fair market rental and vacancy rates and national studies for

information on capital costs for rehabilitation and new construction. In

addition, the Trust made many assumptions in order to project its financial

Financial Self-Sufficiency

Expected
Page 17 GAO-02-87 The Presidio Trust

analyses into the future. Some of the key variables included land use,

annual program expenditures, and the timing of demolition and

rehabilitation of existing buildings.

According to our economic analysis of the financial model, the Trust’s

assumptions appear to be conservative because they tended to minimize

projected revenues. For example, even though the market rental rate in

calendar year 2000 for Class B office space in San Francisco was about $60

per square foot, the Trust used a more conservative rental rate of $29 per

square foot. This rate was based on the average market rate over the past 7

years.

In developing its financial model, the Trust stated that the model was not

designed to be a budgetary or accounting tool and the results should not

be interpreted as being what will happen, but rather what could happen

given certain assumptions. When the Trust finalizes its Presidio Trust

Implementation Plan, it needs to refine the financial model to assure itself

that the model’s results are based on the latest and best information and

assumptions.

Also, the model meets the definition of a financial forecast as defined by

the American Institute of Certified Public Accountants Statements on

Standards for Attestation Engagements which provide a mechanism by

which financial forecasts that are expected to be used by a third party can

be independently examined. Because it is likely that the public, the

Congress, and the Trust will rely on the new financial forecast, at least in

part, to judge the Trust’s likelihood of becoming financially self-sufficient

by 2013, we believe that the American Institute of Certified Public

Accountants guidelines should be applied and the Trust should have the

financial model independently examined. We brought this issue to the

attention of Trust officials, who stated they were not aware of such

guidance but thought that having a new financial forecast independently

examined was a good idea.

Depending on future rental revenues and how the Trust proceeds with

development of the Presidio, it is possible that at some point the Trust may

generate revenues in excess of its costs. The Trust acknowledges that, at

some point in the future, excess revenues could be generated at which

point it could decide to reduce rents, provide subsidies, or scale back

plans for building space and capital projects. Public Law 104-333 allows

the Trust to retain all proceeds and other revenues it receives.
Page 18 GAO-02-87 The Presidio Trust

When passing the law that brought the Trust into being, the Congress gave

the Trust wide latitude in determining how it would manage and operate

the Presidio. The Trust has made notable progress and now stands ready

to define the future development and operation of the Presidio as a

national park. While the Trust’s financial analysis indicates that the Trust

should achieve financial self-sufficiency by 2013, it is only a predictor of

what could occur based on several assumptions. The Trust should

consider refining its financial forecast once its development plan is

finalized. Furthermore, if the Trust generates excess revenues in the

future, after achieving financial self-sufficiency and funding capital

projects and reserves, the Congress may, at that time, want to revisit the

issue of what to do with excess revenues.

Given the complexity of the financial model and its importance in the

decision-making process and the fact that a refined model could serve as

the standard measure of the Trust’s progress toward self-sufficiency, we

recommend that the Chairman, Presidio Trust Board of Directors, obtain

an independent examination of the financial model as defined by the

American Institute of Certified Public Accountants Statements on

Standards for Attestation Engagements. A certified public accountant’s

report would express an opinion on whether the underlying assumptions

provide a reasonable basis for management’s projection of financial selfsufficiency.

The Presidio Trust provided oral comments that generally agreed with the

report and our recommendation that it have its financial model

independently examined when its development plan is finalized. The

Presidio Trust also provided a number of technical comments and

clarifications, which we have addressed, as appropriate, in the body of the

report.

We obtained information from the Trust on its activities, reviewed relevant

program documents and related materials, and met with Trust officials

responsible for major activities, such as facility improvements, residential

and commercial leasing, and financial management. We also reviewed the

financial model used by the Trust as part of its planning process and

discussed the model with Trust officials and officials from the firm that

developed the model. We did not independently verify the reliability of the

financial data provided nor did we trace the data to the systems from

which they came. Because the Trust manages the Presidio in conjunction

with the Park Service, we also met with Park Service officials to obtain

their views on the Trust’s management of the Presidio and its planning

process.

Conclusions

Recommendation to

the Presidio Trust

Agency Comments

and Our Evaluation

Scope and

Methodology
Page 19 GAO-02-87 The Presidio Trust

We performed our work at the Trust’s headquarters in San Francisco from

January 2001 through August 2001 in accordance with generally accepted

government auditing standards.

We are sending copies of this report to appropriate congressional

committees, the Chairman, Board of Directors, Presidio Trust; the

Secretary of the Interior; the Director, National Park Service; the Secretary

of Defense; the Director, Office of Management and Budget; and other

interested parties. We will also make copies available to others on request.

If you or your staff have any questions regarding this report, please call me

or Ed Zadjura on (202) 512-3841. Key contributors to this report are listed

in appendix VI.

Barry T. Hill

Director, Natural Resources

 and Environment
Page 20 GAO-02-87 The Presidio Trust

List of Committees

The Honorable Robert C. Byrd

Chairman

The Honorable Conrad Burns

Ranking Minority Member

Subcommittee on Interior

Committee on Appropriations

United States Senate

The Honorable Daniel K. Akaka

Chairman

The Honorable Craig Thomas

Ranking Minority Member

Subcommittee on National Parks

Committee on Energy and Natural Resources

United States Senate

The Honorable Joe Skeen

Chairman

The Honorable Norman D. Dicks

Ranking Minority Member

Subcommittee on Interior

Committee on Appropriations

House of Representatives

The Honorable Joel Hefley

Chairman

The Honorable Donna M. Christensen

Ranking Minority Member

Subcommittee on National Parks, Recreation

and Public Lands

Committee on Resources

House of Representatives
Appendix I: Status of Presidio Trust Buildings

and Structures

Page 21 GAO-02-87 The Presidio Trust

Table 1: Commercial and Residential Buildings, as of January 2001

Building type Number

Square

feet (mil)

Historic

buildings

Historic

square

feet (mil)

Buildings

leased

or in use

Square

feet leased

or in use (mil)

Percent

of square

feet in use

Commercial 207 3.76 173 2.41 121 1.68 44.7

Infrastructure 99 0.10 52 0.09 24 0.03 28.8

Residential housing 349 2.02 155 0.81 247 1.43 70.7

Residential

garages/carports

74 0.08 48 0.04 0 0 0

Total 729 5.96 428 3.36 392 3.14 52.6

Source: GAO’s analysis of commercial and residential building data provided by the Presidio Trust.

Table 2: Commercial and Infrastructure Building Space, as of January 2001

Building status Number of buildings Square feet (mil) Percent of total square feet

Leased to tenantsa 75 1.05 27.2

Occupied by Trust/National Park Service 70 0.66 17.1

Ready for lease or rehabilitation 16 0.23 5.9

Letterman Digital Center 0 0.90 23.3

Awaiting development plans 145 1.03 26.6

Total 306 3.86 100.0

Note: Percentages may not total due to rounding.

a

Square feet equals total building space, although not all the square footage is leased.

Source: GAO’s analysis of commercial and residential building data provided by the Presidio Trust.

The Presidio has 729 buildings and structures encompassing nearly 6

million square feet under management of the Presidio Trust. Over half

(428) are historic buildings that contribute to the Presidio’s designation as

a National Historic Landmark District. Ninety-nine buildings (100,000 sq.

ft.) support infrastructure such as sewer, electrical and water pump

stations or maintenance sheds. Over 70 percent of residential squarefootage (1.4 million sq. ft.) is occupied, while less than half of the

commercial space (1.7 million sq. ft.) is leased or in use.

Appendix I: Status of Presidio Trust Buildings

and Structures
Appendix II: Residential and Commercial

Leasing

Page 22 GAO-02-87 The Presidio Trust

Table 3: Status of Residential Housing Units, as of January 2001

Leasing status Number

Percentage of

total units

Average

monthly rents

Units rented at/near market rates 470 39.2 $2,911

Units rented at discounted ratesa 399 33.3 1,376

Vacant units 39 3.3 0

Units in or awaiting rehabilitation 290 24.2 0

Totalb 1,198 100.0 $2,206

a

Discount rent programs for tenants who qualify under program guidelines.

b

Excludes single room occupancy, bachelor officers’ quarters, and dorm rooms.

Source: GAO’s analysis of residential leasing data provided by the Presidio Trust.

Table 4: Status of Commercial Building Leases, as of January 2001

Commercial building status

Number of

building

leases

Number of

buildings

Square feet

leased

Average

annual rent

rate per

square feet a

Leases under $10 per sq. ft. 31 48 709,640 $3.19

Leases between $10 - $20 6 7 56,886 15.78

Leases above $20 16 10 135,798 40.36

Total 53 65 902,324 $9.58

Notes: Excludes the golf course lease, which pays a percentage of gross receipts and 10

buildings/structures associated with the golf course. Projected average rent rates are included for

retail/service leases, which pay a percentage of gross receipts.

a

Calculated annual rent rates include a fee the Trust charges to cover security, common areas, and

infrastructure costs.

Source: GAO’s analysis of commercial leasing data provided by the Presidio Trust.

Currently, the Presidio has 1,198 residential housing units, of which 73

percent (869 units) were leased or occupied as of January 2001. The

remaining 329 units (27 percent) are either vacant or awaiting

rehabilitation. A review of occupied units shows 39 percent (470 units)

leased at market rental rates while 33 percent (399 units) have leases

below market rates. Overall lease rates for commercial space averages less

than $10 per square feet. The majority of total commercial square-feet

leased averages just over $3 per square foot.

Appendix II: Residential and Commercial

Leasing
Appendix III: General Overview of Planning

Alternatives Considered by the Presidio Trust

(July 25, 2001)

Page 23 GAO-02-87 The Presidio Trust

Under this alternative, tenants and residents would work together to make

the Presidio a center for education, communication, and exchange. Open

space would be increased primarily by removing non-historic housing in

the southern portion of the park. Replacement housing would come

primarily from the rehabilitation and reuse of buildings. Cultural and

natural resources would be protected and enhanced.

This alternative would implement the General Management plan

developed by the Park Service in 1994 assuming year 2000 conditions.

Tenants and residents would work together to create a global center

dedicated to addressing the world’s critical environmental, social, and

cultural challenges. Buildings would be removed to increase open space

and/or enhance recreational, cultural, and natural resources.

In this alternative, more open space would be created in the southern part

of the park; development would be concentrated in the northern part of

the Presidio. Overall, building square footage would be reduced and open

space and natural resource enhancements would be maximized.

Under this alternative, the Presidio would become a sustainable live/work

community, and a model of environmental sustainability. Emphasis would

be placed on creating a community that offered innovative approaches on

environmental sustainability. Open space would be enhanced and some

non-historic buildings would be removed.

Under this alternative, the Presidio would become a national and

international cultural destination park, a portal for visitors to the

American West and Pacific, and a place of international distinction for its

programs in research, education and communication. Open space would

be expanded and a substantial number of non-historic buildings would be

removed in the southern part of the park; housing would be added in the

northern part of the park.

Under this alternative, the Presidio would be minimally managed to fulfill

the Presidio Trust’s obligations to protect the Presidio’s resources. There

would be no significant park enhancements and no physical change

beyond those currently underway. There would be no new construction

and building removal.

Appendix III: General Overview of Planning

Alternatives Considered by the Presidio Trust

(July 25, 2001)

Draft Plan

General Management Plan

Amendment (GMPA) 2000

Resource Consolidation

Sustainable Community

Cultural Destination

Minimum Management
Appendix IV: Buildings and Open Space

Comparison of Presidio Trust Planning

Alternatives

Page 24 GAO-02-87 The Presidio Trust

Other alternative plans

Draft plan

GMPA

2000

Difference

between

Draft & GMPA

Resource

consolidation

Sustainable

community

Cultural

destination

Minimum

management

Buildings (thousands of sq. ft.)

Commercial buildings 3,660 3,690 (30) 3,980 3,770 4,070 3,530

Residential buildings 1,940 1,320 620 1,310 1,910 1,890 2,430

Subtotal 5,600 5,010 590 5,290 5,680 5,960 5,960

Planned demolition 1,070 1,120 (50) 1,910 890 1,370 0

New construction 710 170 540 1,240 620 1,370 0

Net reduction in building

space

(360) (950) (590) (670) (270) 0 0

Open space (acres)

Existing 696 696 696 696 696 696

Proposed 793 794 838 772 807 702

Net change (increase) 97 98 (1) 142 76 111 6

Residential housing (units)

Existinga 1,650 1,650 1,660 1,650 1,650 1,650

Proposed 1,650 770 910 1,430 1,700 1,650

Net change 0 (880) (880) (740) (220) 50 0

a

Existing housing units include former military bachelors’ quarters and barracks not in use.

Source: Presidio Trust Draft Environmental Impact Statement, July 2001.

Appendix IV: Buildings and Open Space

Comparison of Presidio Trust Planning

Alternatives
Appendix V: Capital Spending Comparison of

Presidio Trust Planning Alternatives

Page 25 GAO-02-87 The Presidio Trust

Other alternative plans

Capital spending

(Dollars in millions) Draft plan

GMPA

2000

Difference

between

draft & GMPA

Resource

consolidation

Sustainable

community

Cultural

destination

Minimum

management

Residential housing $148 $33 $115 $38 $80 $88 $57

Commercial buildings 191 144 47 156 180 194 230

Lodging/conference buildings 21 122 (101) 45 42 41 4

Miscellaneousa 163 163 0 187 160 175 131

Nonrevenue space 23 23 0 23 23 23 23

Total $546 $485 $61 $449 $484 $521 $445

Note: Numbers may not total due to rounding.

a

Parkwide capital costs, demolition costs, and program capital costs.

Source: Presidio Trust Environmental Impact Statement, July 2001.

Appendix V: Capital Spending Comparison of

Presidio Trust Planning Alternatives
Appendix VI: GAO Contact and Staff

Acknowledgments

Page 26 GAO-02-87 The Presidio Trust

Ed Zadjura, (202) 512-3841

In addition, Mark Connelly; Robert Crystal; John Kalmar, Jr.; Jonathan S.

McMurray, Roderick Moore; Mehrzad Nadji; and Donald Yamada made key

contributions to this report.

Appendix VI: GAO Contact and Staff

Acknowledgments

GAO Contact

Acknowledgments

(141470)
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