U.S. GOVERNMENT PRINTING OFFICE

72–934 DTP WASHINGTON : 2001

LEGISLATIVE PROPOSALS TO REFORM THE GOVERNMENT’S APPROACH TO PROPERTY MANAGEMENT: S.

2805, THE FEDERAL PROPERTY ASSET MANAGEMENT

REFORM ACT; AND H.R. 3285, THE FEDERAL ASSET

MANAGEMENT IMPROVEMENT ACT

HEARING

BEFORE THE

SUBCOMMITTEE ON GOVERNMENT MANAGEMENT,

INFORMATION, AND TECHNOLOGY

OF THE

COMMITTEE ON GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED SIXTH CONGRESS

SECOND SESSION

ON

S. 2805

TO AMEND THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES

ACT OF 1949, AS AMENDED, TO ENHANCE FEDERAL ASSET MANAGEMENT, AND FOR OTHER PURPOSES

AND ON

H.R. 3285

TO AUTHORIZE PUBLIC-PRIVATE PARTNERSHIPS TO REHABILITATE

FEDERAL REAL PROPERTY, AND FOR OTHER PURPOSES

JULY 12, 2000

Serial No. 106–237

Printed for the use of the Committee on Government Reform

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

(

http://www.house.gov/reform

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: (202) 512–1800 Fax: (202) 512–2250

Mail: Stop SSOP, Washington, DC 20402–0001

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COMMITTEE ON GOVERNMENT REFORM

DAN BURTON, Indiana, Chairman

BENJAMIN A. GILMAN, New York

CONSTANCE A. MORELLA, Maryland

CHRISTOPHER SHAYS, Connecticut

ILEANA ROS-LEHTINEN, Florida

JOHN M. MCHUGH, New York

STEPHEN HORN, California

JOHN L. MICA, Florida

THOMAS M. DAVIS, Virginia

DAVID M. MCINTOSH, Indiana

MARK E. SOUDER, Indiana

JOE SCARBOROUGH, Florida

STEVEN C. LATOURETTE, Ohio

MARSHALL ‘‘MARK’’ SANFORD, South

Carolina

BOB BARR, Georgia

DAN MILLER, Florida

ASA HUTCHINSON, Arkansas

LEE TERRY, Nebraska

JUDY BIGGERT, Illinois

GREG WALDEN, Oregon

DOUG OSE, California

PAUL RYAN, Wisconsin

HELEN CHENOWETH-HAGE, Idaho

DAVID VITTER, Louisiana

HENRY A. WAXMAN, California

TOM LANTOS, California

ROBERT E. WISE, JR., West Virginia

MAJOR R. OWENS, New York

EDOLPHUS TOWNS, New York

PAUL E. KANJORSKI, Pennsylvania

PATSY T. MINK, Hawaii

CAROLYN B. MALONEY, New York

ELEANOR HOLMES NORTON, Washington,

DC

CHAKA FATTAH, Pennsylvania

ELIJAH E. CUMMINGS, Maryland

DENNIS J. KUCINICH, Ohio

ROD R. BLAGOJEVICH, Illinois

DANNY K. DAVIS, Illinois

JOHN F. TIERNEY, Massachusetts

JIM TURNER, Texas

THOMAS H. ALLEN, Maine

HAROLD E. FORD, JR., Tennessee

JANICE D. SCHAKOWSKY, Illinois

———

BERNARD SANDERS, Vermont

(Independent)

KEVIN BINGER, Staff Director

DANIEL R. MOLL, Deputy Staff Director

JAMES C. WILSON, Chief Counsel

ROBERT A. BRIGGS, Clerk

PHIL SCHILIRO, Minority Staff Director

SUBCOMMITTEE ON GOVERNMENT MANAGEMENT, INFORMATION, AND TECHNOLOGY

STEPHEN HORN, California, Chairman

JUDY BIGGERT, Illinois

THOMAS M. DAVIS, Virginia

GREG WALDEN, Oregon

DOUG OSE, California

PAUL RYAN, Wisconsin

JIM TURNER, Texas

PAUL E. KANJORSKI, Pennsylvania

MAJOR R. OWENS, New York

PATSY T. MINK, Hawaii

CAROLYN B. MALONEY, New York

EX OFFICIO

DAN BURTON, Indiana HENRY A. WAXMAN, California

J. RUSSELL GEORGE, Staff Director and Chief Counsel

RANDY KAPLAN, Counsel

BRYAN SISK, Clerk

TREY HENDERSON, Minority Counsel

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C O N T E N T S

Page

Hearing held on July 12, 2000 ............................................................................... 1

Text of S. 2805 .................................................................................................. 3

Text of H.R. 3285 .............................................................................................. 36

Statement of:

Barram, David, Administrator, General Services Administration, accompanied by David Bibb, Deputy Associate Administrator for Real Property, General Services Administration; and Becky Rhodes, Deputy Associate Administrator for Personal Property, General Services Administration ............................................................................................................ 39

Ungar, Bernie, Director, Governmentwide Business Operations Issues,

General Accounting Office; David Bibb, Deputy Associate Administrator, Office of Governmentwide Policy, General Services Administration; Rear Admiral Ronald F. Silva, Assistant Commandant for Systems and Chief Engineer, U.S. Coast Guard; Steven J. Weiner, president, Signet Partners; Maria Foscarinis, executive director, National

Law Center on Homelessness and Poverty, accompanied by Laurel

Weir, Policy Director; and Steve Perica, director of the Arizona State

Agency for Surplus Property, president of the National Association

of State Agencies for Surplus Property ....................................................... 41

Letters, statements, etc., submitted for the record by:

Bibb, David, Deputy Associate Administrator, Office of Governmentwide

Policy, General Services Administration, prepared statement of ............. 59

Foscarinis, Maria, executive director, National Law Center on Homelessness and Poverty, prepared statement of .................................................... 82

Horn, Hon. Stephen, a Representative in Congress from the State of

California:

Information concerning judicial review ................................................... 106

Letter dated February 24, 2000 ............................................................... 135

Prepared statement of ............................................................................... 37

Perica, Steve, director of the Arizona State Agency for Surplus Property,

president of the National Association of State Agencies for Surplus

Property, prepared statement of .................................................................. 98

Silva, Rear Admiral Ronald F., Assistant Commandant for Systems and

Chief Engineer, U.S. Coast Guard, prepared statement of ....................... 68

Ungar, Bernie, Director, Governmentwide Business Operations Issues,

General Accounting Office, prepared statement of .................................... 43

Weiner, Steven J., president, Signet Partners, prepared statement of ....... 75

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LEGISLATIVE PROPOSALS TO REFORM THE

GOVERNMENT’S APPROACH TO PROPERTY

MANAGEMENT: S. 2805, THE FEDERAL PROPERTY ASSET MANAGEMENT REFORM ACT;

AND H.R. 3285, THE FEDERAL ASSET MANAGEMENT IMPROVEMENT ACT

WEDNESDAY, JULY 12, 2000

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON GOVERNMENT MANAGEMENT,

INFORMATION, AND TECHNOLOGY,

COMMITTEE ON GOVERNMENT REFORM,

Washington, DC.

The subcommittee met, pursuant to notice, at 10:10 a.m., in room

2247, Rayburn House Office Building, Hon. Stephen Horn (chairman of the subcommittee) presiding.

Present: Representatives Horn, Ose, Turner, and Kanjorski.

Staff present: J. Russell George, staff director and chief counsel;

Randy Kaplan, counsel; Bonnie Heald, director of communications;

Bryan Sisk, clerk; Elizabeth Seong, staff assistant; Will Ackerly,

Chris Dollar, and Davidson Hulfish, interns; Trey Henderson, minority counsel; and Jean Gosa, minority assistant clerk.

Mr. HORN. A quorum being present, the Subcommittee on Government Management, Information, and Technology will come to

order.

Effective management of the Federal Government’s real and personal property assets is an important issue involving billions of dollars and affecting hundreds of communities across our Nation. The

government’s worldwide real estate portfolio consists of more than

500,000 buildings and over half a billion acres of land. This property houses Federal workers; stores historic, cultural and educational artifacts; and provides services to the public. However, as

agencies have streamlined their operations and realigned their missions, the need for this government property has lessened.

The National Research Council and the General Accounting Office have both reported that the physical condition, functionality

and quality of Federal facilities is deteriorating. Management of

Federal buildings is especially challenging, considering that roughly half of them are 40 to 50 years old. A March 2000 General Accounting Office report noted that the General Services Administration has struggled over the years to meet the repair and alteration

needs of these buildings. Nevertheless, billions of dollars will be required to bring them up to usable standards.

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The Federal Property and Administrative Services Act of 1949 is

the general authority governing the government’s approach to property management. This law established a framework for the purchase, use and disposal of real and personal property, as well as

government services. Although it has been amended several times,

Federal policies and methods regarding real property acquisitions

and disposals have generally remained unchanged.

There is a concern that the Property Act no longer adequately

meets the government’s needs. In fact, increased funding pressures

in recent years have led several agencies to seek authority to dispose of or lease unneeded property outside the Property Act and

use the proceeds to further their core missions. At a subcommittee

hearing in April 1999, we heard from witnesses representing some

of those Federal departments and agencies that have been granted

this specific legislative authority.

Today we will examine two legislative proposals designed to reform the government’s approach to property management. The first

bill is the product of an extensive review of the Property Act conducted by the General Services Administration in collaboration

with other Federal agencies. This proposal, recently introduced in

the Senate by Senators Fred Thompson and Joseph Lieberman as

Senate bill 2805, contains a variety of provisions to improve the

government’s real and personal property management. For example, the bill would require agencies to develop asset plans to ensure

that their real property holdings are consistent with their strategic

mission goals and objectives. The bill would also grant agencies the

authority to sell or exchange property so they could acquire property that is more suited to their mission. As an incentive, an agency would be authorized to retain the proceeds from a real property

transaction and use it to help meet their capital asset needs.

The second proposal, H.R. 3285, the Federal Asset Management

Improvement Act, introduced by Representative Pete Sessions of

Texas, would authorize the General Services Administration or

other agencies under delegated authority to enlist the private sector capital and expertise in public-private partnership ventures to

develop or improve Federal real property.

[The texts of S. 2805 and H.R. 3285 follow:]

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Mr. HORN. We have before us many knowledgeable witnesses

who will—beginning with the Administrator of the General Services Administration, who will discuss the merits of these legislative

proposals. We welcome our witnesses. We look forward to their testimony.

But now I yield for an opening statement to the distinguished

ranking member on this subcommittee, the gentleman from Texas

Mr. Turner.

[The prepared statement of Hon. Stephen Horn follows:]

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Mr. TURNER. Thank you, Mr. Chairman.

Clearly the Federal Government must be the world’s largest

property owner and manager, and inasmuch as we have been operating under the Federal Property Administration Services Act of

1949, with some amendments, it is perhaps time to update our

laws regarding Federal property management.

The principles that were established in the law have worked extremely well over the years, and I think they have assured the

American people the value of Federal property will be maximized,

but it does seem that in many cases we do not have the flexibility

that we really need to be good Federal property managers.

We’re going to hear testimony today relating to two bills, one of

the bills introduced by Congressman Sessions, H.R. 3285. Mr. Sessions has recommended that the GSA be allowed to enter into public-private partnerships to lease Federal property, renovate current

Federal property and develop new Federal property.

The other legislation yet to be introduced is the work product of

the General Services Administration in collaboration with other

agencies. It’s called the Federal Property Asset Management Reform Act, and I want to commend the GSA on their excellent work

in putting together this piece of legislation. I think it offers much

to the committee and to the Congress in terms of improving Federal property management and moving us in the right direction.

So, Mr. Chairman, I look forward to hearing from the witnesses

today on this very critical issue.

Mr. HORN. I thank you very much.

Mr. Sessions is apparently delayed, probably the same reason I

was, and we’ll move to panel two and the Honorable David Barram,

the Administrator of the General Services Administration. We’re

glad to have you here.

STATEMENTS OF DAVID BARRAM, ADMINISTRATOR, GENERAL

SERVICES ADMINISTRATION, ACCOMPANIED BY DAVID

BIBB, DEPUTY ASSOCIATE ADMINISTRATOR FOR REAL

PROPERTY, GENERAL SERVICES ADMINISTRATION; AND

BECKY RHODES, DEPUTY ASSOCIATE ADMINISTRATOR FOR

PERSONAL PROPERTY, GENERAL SERVICES ADMINISTRATION

Mr. BARRAM. Thank you, Mr. Chairman, Mr. Ranking Member

and other Members. Thank you for asking us here today to discuss

our legislative proposal to amend the Federal Property and Administrative Services Act of 1949. Accompanying me from GSA’s Office

of Governmentwide Policy are Mr. David Bibb, Deputy Associate

Administrator for Real Property, and Ms. Becky Rhodes, Deputy

Associate Administrator for Personal Property.

I’d like to speak for 1 minute, introductory remarks, and let you

bring up David and Becky and others who know really what’s going

on. Thank you for letting me do that.

Over the last several years we have worked together on a number of significant issues addressing change and a need for Federal

Government reform. Your help was instrumental to our success,

and we thank you. Today we have another occasion where we can

work together to get things done, Federal asset management reform.

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Mr. Chairman, you commented today, and I’d like to quote also

from your opening statement from last April’s hearing on Federal

real property management, you said, overall the Federal Government has not been a very good steward. While we have made many

improvements within existing law, collectively we have not been

the kind of stewards and good asset managers that we could have

been. Why? Because the business rules by which Federal agencies

manage their assets were established over a half century ago and

were obsolete years ago.

As you both have noted this morning, the Federal Property Act

is 50 years old. With the dollar value of Federal real and personal

property assets estimated to be in the hundreds of billions of dollars, it is increasingly imperative that prevailing policies ensure

their efficient and effective stewardship.

It’s time we used the same common-sense property management

strategies in the Federal Government that have already proven

successful in the private sector. I think we all recognize that we

must make the Federal Government more efficient and more accountable. This bill represents a big step forward in achieving that

goal. It is simply good government.

I believe you will quickly see that its enactment will result in a

governmentwide property management system that, quote, works

better and costs less. It reflects the way we should be doing business in the 21st century.

Thank you.

Mr. HORN. Well, we thank you, and we will now begin with panel

three, who will join you at the table to stay there as—because we’d

like during the question period to have a dialog. And the panel

three is Bernie Ungar, the Director, Governmentwide Business Operations Issues, GAO; David Bibb, Deputy Associate Administrator,

Office of Governmentwide Policy, General Services Administration;

Rear Admiral Ronald F. Silva, Assistant Commandant for Systems

and Chief Engineer, U.S. Coast Guard; Steven Weiner, president,

Signet Partners; Maria Foscarinis, executive director, National Law

Center on Homelessness and Poverty, and is accompanied by Laurel Weir; Steve Perica, director of Arizona State Agency for Surplus

Property.

We’re going to, if you will—we take the oath, and please stand,

raise your right hands, and that will include support people that

also whisper in your ears. So get them all up, and the clerk will

take their name.

[Witnesses sworn.]

Mr. HORN. The clerk will note all who have stood and get the

names of the assistants.

We thank you. And just the way we have the routine here is we

have all had a chance to read the papers, if they got in last night,

and your written statement is automatically put in the record, so

you don’t have to ask for it. It’s done, so is your resume. And we’d

like you to summarize your testimony in 5 minutes, if you could,

5 to 6 minutes, and then we’d like to open it up to questions, and

I want—to not only the members here and will be here, but also

to bring the issues to point with those that are with you at the

table. So let us start with Bernie Ungar, the Director, Governmentwide Business Operations Issues, U.S. General Accounting Office,

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part of the legislative branch, and we depend on GAO heavily for

good basic research and we’re delighted to have Mr. Ungar here.

STATEMENTS OF BERNIE UNGAR, DIRECTOR, GOVERNMENTWIDE BUSINESS OPERATIONS ISSUES, GENERAL ACCOUNTING OFFICE; DAVID BIBB, DEPUTY ASSOCIATE ADMINISTRATOR, OFFICE OF GOVERNMENTWIDE POLICY, GENERAL

SERVICES ADMINISTRATION; REAR ADMIRAL RONALD F.

SILVA, ASSISTANT COMMANDANT FOR SYSTEMS AND CHIEF

ENGINEER, U.S. COAST GUARD; STEVEN J. WEINER, PRESIDENT, SIGNET PARTNERS; MARIA FOSCARINIS, EXECUTIVE

DIRECTOR, NATIONAL LAW CENTER ON HOMELESSNESS

AND POVERTY, ACCOMPANIED BY LAUREL WEIR, POLICY DIRECTOR; AND STEVE PERICA, DIRECTOR OF THE ARIZONA

STATE AGENCY FOR SURPLUS PROPERTY, PRESIDENT OF

THE NATIONAL ASSOCIATION OF STATE AGENCIES FOR SURPLUS PROPERTY

Mr. UNGAR. Thank you, Mr. Chairman. Mr. Turner, other members of the subcommittee, staff, we’re certainly pleased to be here

this morning to help the subcommittee consider the two proposals

for reforming Federal real property management. I’m accompanied

today by Donald Bumgardner and Gary Lawson, both senior evaluators in GAO. As you requested, I’d like to summarize my statement.

While we have not had time to fully analyze all the implications

of the provisions of the bills, particularly S. 2805, we have certainly

looked at them and we believe the thrust of both the Senate bill

as well as H.R. 3285 are in line with information that we have reported for over a decade. They would certainly help address a number of the problems that we have identified and reported on, as

well as provide Federal agencies the opportunity to adopt and use

some innovative and best practices that are being used by other organizations.

I would like to focus on two areas this morning very briefly. First

is real property leadership. S. 2805 would require GSA to take a

greater leadership role in Federal real property management and

require landholding agencies to focus accountability on real property management by designating senior real property managers.

H.R. 3285—in a little different vein but in the same general direction—would require GSA to establish governmentwide property

management measures. These provisions are consistent with actions that we have recommended as far back as our general management review of GSA in 1989. However, we note that S. 2805

does not contain any qualification requirements for the senior real

property managers. Considering the complexity and the diversity of

the portfolio of assets that the Federal Government controls and

owns and has to manage, and the complicated nature of the transactions that the bill would authorize, we believe it’s important that

the subcommittee consider this and may want to add some qualification requirements in terms of experience or training or professional certifications for the persons that are going to be holding

these positions.

Second, both bills would provide managers at Federal agencies

that hold land with greater flexibility and incentives for better

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property management. Our work has shown that agencies need

more flexibility and certainly more incentives to manage real property more effectively and in the same vein as the private sector is

able to do. There are three issues that I would like to point out for

the subcommittee’s consideration this morning.

The first is that S. 2805 does contain a general 20-year limit on

the outleasing authority that would be granted to the landholding

agencies. We believe that this 20-year limit could limit the usefulness of this tool for the agencies, particularly in those cases where

you’re dealing with a historically significant property or a property

that might be in an economically depressed area. This is because

a substantial amount of investment would probably be required to

bring those types of facilities up to date and meet local health, and

safety and quality standards and private sector developers would

probably be unlikely to enter into an agreement for a period that

would be 20 years or less, given the need to make an adequate return on their investment and have an adequate payback period.

Second, while allowing agencies to retain the funds that they

would receive in exercising or using the new tools and flexibilities

that both bills would provide, that provision, or that allowance,

would limit congressional flexibility in overseeing or reviewing how

these funds are allocated among agencies, and should governmentwide priorities change, it could cause a misallocation. Therefore,

the subcommittee may want to consider whether the funds ought

to be controlled by a central organization or by each agency. On the

other hand, we recognize if the funds were controlled by a central

agency, this certainly could limit the incentives that go to the individual agency. So therefore, the Congress has a tradeoff there to

consider.

Finally, although both bills would provide Congress with information before and after the individual tools would be applied that

are authorized by both bills, it’s unclear to us in both cases what

information, what specific information, the Congress would receive

on how the moneys generated by these tools would be used by the

agencies. Therefore, we think it’s very important that the subcommittee explore this area this morning and in the future to

make sure that it is comfortable with the amount of information

it’s going to receive and the oversight and review it will be able to

exercise over the proposed use of these funds that the agencies retain.

That would conclude my summary, Mr. Chairman.

Mr. HORN. Thank you very much.

[The prepared statement of Mr. Ungar follows:]

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Mr. HORN. And we now move to the next witness, who is David

L. Bibb, the Deputy Associate Administrator, Office of Governmentwide Policy of the General Services Administration.

Mr. Bibb.

Mr. BIBB. Thank you, Mr. Chairman, Mr. Turner, Mr. Kanjorski

and staff. It is a pleasure to be here today. I’m David Bibb, Deputy

Associate Administrator for Real Property at GSA. With me today,

as Dave Barram has said, is Becky Rhodes, Deputy Associate Administrator for Transportation and Personal Property.

The Property Act, the law of general application governing properties acquired to carry out Federal agency program missions, is

over 50 years old, as you’ve indicated. While much has occurred

over the past half century, the policies governing these assets have

generally remained unchanged.

We think it’s imperative that our Nation’s governing asset management policies ensure their efficient and effective stewardship on

a solid businesslike basis, and we firmly believe that enactment of

the Federal Property Asset Management Reform Act will do just

that.

Briefly, the bill contains four concepts: First, the bill deals with

life cycle planning and management. Effective asset management

must consider the entire life cycle of a property. However, the

present focus of the Property Act is oriented toward the disposal

phase of the asset. Some agencies lack a full range of policy guidance, accountable management structures, information on their

property holdings, and planning processes necessary to manage

their property holdings effectively in support of their missions.

Specifically, to deal with life cycle planning and management,

the bill proposes several things. One is adoption of governmentwide

asset management principles; another is development of strategic

real property planning; the third is designation by each agency of

a senior real property officer who would be accountable for the performance of the inventory; and fourth would be a statutory basis

for a governmentwide real property information data base. So

that’s the first concept.

The second concept is flexibility to optimize asset performance.

Federal managers are being encouraged to be more businesslike

and innovative. However, in our judgment, too often when something makes sense, the government simply can’t do it. The average

age of government-owned buildings has increased to nearly 50

years. Many of these buildings are inefficient and functionally obsolete. Unlike the private sector, most Federal agencies have no opportunity to apply any value or underlying equity of the property

that may reside in underused or obsolete property toward meeting

their ongoing or future facility needs. With few exceptions, agencies

are not currently authorized to sell, exchange, sublease or outlease

capital assets that they still need, but which no longer support

their missions well and to use the proceeds for newer replacement

capital projects. Agencies lacking sufficient appropriations often

have to make do with substandard facilities.

To improve this situation, the proposed bill would give agencies

several new authorities: One, exchange/sale of personal property;

two, exchange/sale of real property; subleasing; outleasing. The bill

would authorize agencies to outlease to the private sector assets

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that must remain in Federal ownership and underutilized portions

of nonexcess government-owned property.

However, I must note at this point that the administration opposes the use of such outleases, that is public private partnerships,

solely or primarily as a vehicle for obtaining private financing of

Federal construction and repair projects for the simple reason that

private financing is more expensive to the Federal taxpayer than

government financing. In this regard, the bill permits an outlease/

leaseback arrangement to the government only when it’s less expensive than direct Federal renovation or construction.

The third concept under our bill deals with incentives for better

property management. Federal agencies lack incentives. This has

resulted in agencies not pursuing optimal use of property and to retaining assets that are of diminished functional value to their missions. The Property Act reform bill would provide a much needed

catalyst for sound asset decisionmaking and would permit agency

use of proceeds as follows: For personal property, it would authorize agencies to retain proceeds from the sale of surplus personal

property and offset direct and indirect disposal costs. For real property, it would authorize agencies to retain the bulk of proceeds

from real property transactions and allow such funds to be used to

offset direct and indirect disposal costs and in meeting agency capital asset needs.

To strengthen this incentive, the proposed bill would also put

agencies in charge of disposing of their surplus real property, an

authority that the GSA administrator currently has alone. Agencies, under the bill, will still have the ability to use GSA to manage

the disposal process and to delegate disposal property disposal decisions to GSA if they wish.

Our fourth concept is to streamline and enhance processes. The

governmentwide review of the act, which we performed, identified

opportunities to redefine other sections of the act to deliver savings

and improve productivity.

None of these changes is major in our judgment by itself, but

taken together, they will increase efficiency, deliver savings, reduce

administrative burdens and streamline asset management processes.

Mr. Chairman, this concludes my statement. I would be glad to

answer questions when that point comes.

Mr. HORN. I thank you.

[The prepared statement of Mr. Bibb follows:]

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Mr. HORN. And the next presenter is Rear Admiral Ronald F.

Silva, the Assistant Commandant for Systems and Chief Engineer

of the U.S. Coast Guard.

Admiral SILVA. Good morning, Mr. Chairman, Mr. Ranking

Member and members of the subcommittee. I’m Rear Admiral Ron

Silva, U.S. Coast Guard, Assistant Commandant for Systems and

Chief Engineer. I appreciate the opportunity to speak with you

today and thank you for your consideration of the General Services

Administration proposal to amend the 1949 Property Act.

I am the designated corporate asset manager for the Coast

Guard as shore facilities. What this means, in brief, is that I have

the responsibility to ensure that the Coast Guard’s shore assets are

the right sizes in the right place and provided at the right cost to

enable the Coast Guard to accomplish our missions, our visions and

our strategic goals. We have been working closely with the General

Services Administration to ensure that our business practices are

all that they can be under the existing authorities. The forums that

the GSA provides, especially through their Office of Governmentwide Policy, are an invaluable service for landholding agencies to

compare best practices and discuss progressive concepts, such as

sustainable development. Their efforts have helped make us all

better stewards of the property entrusted to us.

The Coast Guard’s process for developing policies to be better

stewards of the property we hold is called ‘‘shore facility capital

asset management.’’ This initiative is an integral part of the Coast

Guard’s current strategic plan. Our shore infrastructure is spread

across 1,600 sites and consists of over 23,000 buildings and structures. These facilities have an average age of 37 years and a replacement value of over $7 billion exclusive of land value.

These facilities support 43,000 personnel, 230 ships, 1,400 small

boats and 197 aircraft, as they go about the Coast Guard’s business

of protecting the public, our environment and U.S. economic interests. The combined acreage of those 1,600 sites is only 66,000

acres. The amount of the acreage we hold is not large in comparison with many other agencies, but the nature of these sites along

all of the Nation’s ports, coasts and waterways, makes them unique

and valuable national assets deserving of the best care that we can

provide.

Our asset management initiative is an integrated approach that

will help align the Coast Guard’s shore facility inventory to operational and support requirements. The guiding principles of good

asset management take into consideration the entire shore facility

life cycle which consists of planning, investing, using, and disposing

of shore facilities and infrastructure. We believe the proposed legislation facilitates our asset management initiative.

The Coast Guard’s asset management initiative seeks to improve

our portfolio of real property assets by managing them from a life

cycle perspective. The following principles will guide all of our new

capital asset management activities, and ensure the best value

shore capability for the Coast Guard, match shore capabilities mission, keep a life cycle perspective, encourage collaboration and feedback, provide top down direction, use information technology effectively, and foster professional development. Shore facility capital

asset requirements will be incorporated into all aspects of Coast

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Guard strategic planning. We are working to better link our shore

capital asset requirements as identified in our agency capital plan

that is primarily developed from our field commanders’ Regional

Strategic Assessments, our Headquarters Assistant Commandants’ business plans and our leadership council goals.

We are also pursuing a program to revitalize the master planning efforts throughout the Coast Guard. As mentioned, the Commandant of the Coast Guard has designated me as the corporate

asset manager for shore facilities. He did this in recognition of the

impact that strategic portfolio management of real property assets

has on the accomplishment of Coast Guard missions. This initiative

also recognizes the importance of a centralized information technology system to manage our real property holdings.

We are currently developing the requirements upon which to

build this system. These efforts will be closely coordinated with

General Services Administration to ensure compatibility with their

proposed governmentwide real property information data base. Our

current portfolio of real property assets is an assortment of inheritances from our antecedent agencies, the U.S. Lighthouse Service,

the U.S. Lifesaving Service, and the Revenue Cutter Service, as

well as numerous targets of opportunity afforded to us by the Department of Defense during their restructuring. This has resulted

in a shore plant that is not optimally sized or configured to carry

out our modern day missions.

I believe that the proposed changes to the Federal Property and

Administrative Services Act of 1949 relating to the exchanges,

sales, subleasing and outleasing of real property assets will provide

us with the flexibility to align our shore capital asset inventory

with our Coast Guard mission needs. The enactment of this legislation is an important step toward improving the management in

Federal real property assets and is required for the Coast Guard

to fully implement our SFCAM strategic initiative.

Mr. Chairman and members of the subcommittee, this concludes

my prepared remarks, and again, thank you for the opportunity to

appear before this distinguished subcommittee to discuss the proposed Property Reform Act bill. I welcome the opportunity to address any questions that you or the members of the subcommittee

may have. Thank you.

Mr. HORN. Thank you, Admiral.

[The prepared statement of Admiral Silva follows:]

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Mr. HORN. We’re going to have to recess until 10:50 because we

have a vote on the floor right now. So we are in recess until 10:50.

[Recess.]

Mr. HORN. We thank you, Admiral, and now we move to Steven

Weiner, the president of Signet Partners.

Mr. Weiner.

Mr. WEINER. Mr. Chairman and members of the committee,

thank you very much for giving me the opportunity to speak to the

two bills before you. My comments tend to be directed toward private-public partnerships.

Signet Partner is a real estate and financial adviser to State,

local and Federal Government agencies. Our firm has run publicprivate partnerships for the FDIC and RTC. We have consulted to

GSA in the past on private sector practices and portfolio management in public private partnerships, and we remain active participants in private real estate investments and development projects.

Real estate partnerships are a way of life in the private sector.

These partnerships bring together expertise, money and business

opportunities. It’s the way the private sector develops real estate.

Increasingly, they’re used more and more by local, State and now

Federal Government agencies. They have different names, these

partnerships do, and they tend to be a patch quilt of approaches,

each having its own procedures and its own bureaucracy, but they

all have a common story, shrinking dollars from traditional sources

of funding.

The ideal Federal public private partnership has five elements.

No. 1, selected properties and projects will only serve agency space

needs with renovation and the prerequisite here is that appropriation funds are not available. If you have the funds, chances are you

don’t need to look at a public-private partnership.

No. 2, the partnership structure mirrors the private sector. As

Mr. Barram pointed out, keep it simple, use a familiar structure,

this will encourage private sector involvement.

No. 3, governmentwide application. Use a common approach.

This reduces bureaucracies, it motivates the private sector, and

most of all, it speeds up the process.

No. 4, the private sector runs the partnership and carries the financial risk. The reward to the private sector has to be commensurate with the perceived risk, but these tradeoffs, this balance is

compatible for Federal projects from what we’ve already seen.

And No. 5, Federal agencies are allowed to retain the government’s share of partnership proceeds. We need to motivate those

who are charged with implementation of partnership projects.

With respect to the two bills, the Sessions bill uses the successful

features of existing authorities, that’s existing Federal authority. It

applies governmentwide. It has a simple private sector structure,

and it allows flexibility in the partnership agreements.

Now the administration bill, let me start by first injecting something that the Admiral and I talked about, and that is the administration bill, it facilitates changing the mix of the national portfolio.

This is really good because you have to change the mix on a global

basis to be in line with the changing needs of government. The

portfolio can’t remain static. So that’s a tremendous feature.

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But the closest the administration’s bill comes to public-private

partnership is in section 401, having to do with outleasing of vacant space to private users. This can be good fiscal policy for space

that otherwise remains vacant. However, if space once renovated

could be used by Federal agencies, then the bill provides for a 20-

year so called outlease to a private user. The private user then

would renovate the space and lease it back to the government.

Well, there’s two fatal flaws with this approach. No. 1, the leaseback can only take place if it’s found to be less expensive than appropriations. To me that’s like an oxymoron. The point that seems

to be lost is increasingly appropriations are just not available. The

leaseback will almost always be, or I should say always will be,

more expensive than GSA building out the space with its own appropriations. Why? Because the private sector has a cost of capital

of about 10 percent, and the private sector is going to need, perhaps, a 15 percent profit margin on a project. That’s compared to

GSA’s cost to capital of, say, 6 percent.

The real issue is, in the absence of appropriations funding, is a

public-private partnership economically—an economically viable alternative for the government. Well, the answer is on a case-by-case

basis. From what we have already seen and from what GAO has

looked at, and from other feasibility studies that have been done

within GSA, the answer can be yes. You know, there’s an expression about giving someone the sleeves out of your vest. I think

that’s what the administration bill does, it gives GSA an unworkable supplement to appropriations. It renders GSA to the status

quo.

The other problem, No. 2, with the bill is the 20-year lease term.

It’s just too short. Based on our experience and extensive interviews with institutional players and major developers throughout

the country, across the board, all feel that for the kind of projects

that they would get involved in, the magnitude of projects they

would get involved in, they need at least 50 years. They need that

50 years to amortize their front end investment, and they need

that 50 years to allow them to have an economic and functional life

for the project. A 20-year lease term just doesn’t make it. GAO

found much of this to be the case in several projects it studied, and

probably the classic example is Grand Central Station that was

done by the U.S. Postal Service, where the required lease term was

99 years. A lease has to act to the private sector as effectively the

conveyance of fee simple land. It can’t have a short fuse.

So in summary, I’ve seen a diligent effort by GSA and GAO,

among others, to identify a workable public-private partnership for

governmentwide application at the Federal level, but this bill fails

to reflect that research. Therefore, aggressive and continued involvement by Congress and this subcommittee is going to be necessary not only to get a workable bill in place, but more importantly, to make sure that it’s implemented, and that those charged

with responsibility to implement the program are held accountable.

Accordingly, I recommend, No. 1, that you enact a public-private

partnership as a complement, not as a substitute, to appropriations.

No. 2, that you use a proven and simple private sector model.

No. 3, that you merge both bills.

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And No. 4, that you eliminate portions of the administration’s

bill beyond the simple outlease of vacant space.

I think by combining the two bills, you will have a global package that gives the agencies, not only GSA, but other agencies, the

tools, it’s not a panacea, but it is a powerful tool that can address

situations where appropriations just aren’t there.

Thank you.

Mr. HORN. Thank you very much. And you’ve raised some very

good questions.

[The prepared statement of Mr. Weiner follows:]

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Mr. HORN. Maria Foscarinis is the executive director of the National Law Center on Homelessness and Poverty, and she is accompanied by Laurel Weir, the policy director.

Ms. FOSCARINIS. Thank you very much, Mr. Chairman, and members of the committee. We very much appreciate the opportunity to

testify. The National Law Center has been actively working to implement the Federal Surplus Property Program since its inception.

We’re very familiar with it and we appreciate the chance to speak

on its impact, the impact of this legislation on homeless people.

The Federal Surplus Property is essential to the national effort

to address homelessness in America. It is a common sense, cost-effective approach and it uses public resources to meet an important

public problem, the problem of homelessness in America. And according to recent estimates, over 800,000 Americans are homeless

on any given night across the country, men, women and children.

Vacant Federal property is a key part of the Federal Government’s response to homelessness. Just this past year alone, over

140,000 homeless persons will be served through the property program. Under Title V of the Stewart B. McKinney Homeless Assistant Act, which is a major Federal law addressing homelessness,

groups that serve homeless people, groups that help homeless people, which include State entities, local governments and private

nonprofit voluntary groups, have the right to apply for unused Federal property and acquire it either through a no-cost lease or deeding, and use it to provide services to homeless people from shelters

to job training to transitional housing, to day care. And just this

past year, 140,000 people were served at sites across the country

using these facilities.

We had prepared a slide show to give the members of the committee a more concrete idea of how these properties can be put to

these good uses. Unfortunately, the room cannot accommodate

slides, but in your packets you should have photographs of selected

properties, like the VA Medical Center in Los Angeles, which now

serves homeless veterans; the site in Tucson, AZ, that is run by

Vietnam Veterans of America; a site in Little Rock, AR that provides transitional housing and job training and day care for homeless families. There are several more, and there are many more all

across the country. These are essential to the effort to address

homelessness.

Property is key for many groups that often operate on shoestring

budgets or cash-strapped local governments seeking to address the

problem of homelessness in their communities, and as the committee members may know, especially during our booming, the time of

our economic prosperity, our booming economy, the cost to property

has risen tremendously, and often it’s access to property that

makes the key difference to whether groups can actually provide

the services they need. If a group can acquire vacant Federal property at no cost, that will allow it to leverage other resources and

to make the difference between a program going forward or not

going forward at all. So this is a very important program.

Now to get to the draft legislation. We’re especially concerned

about the administration’s proposal, and I’ll just run through that

quickly. First of all, the draft legislation, the administration’s draft

exempts property, as we’ve heard, that is leased or sold to a third

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party if the revenue generated is then used to acquire capital assets. Essentially what this does is it gives unbridled discretion to

the agency to create its own fund, what we’ve called a slush fund,

which it can use for its own purposes from the sale of property that

is a public resource and takes away the opportunity to use that

property for the public interest for homeless Americans, but also

would take it away from other public benefit uses, as has been provided for by the Property Act since its inception. For example education uses or health uses. Our particular concern is homeless uses.

There will be no oversight. It’s basically the agency’s skirting

their—there is already a process in place. It’s the appropriations

process. That provides for reasoned government oversight in the allocation of public resources. What the administration’s bill would

do is take that away and it would take it away at the expense of

homeless Americans who desperately need these resources.

And I can give you some examples. This isn’t just speculation.

The agencies have been reluctant to comply with Title V of the

McKinney Act ever since it was passed. In one case, for instance,

the Department of Veterans Affairs owns property, the VA Medical

Center in Los Angeles, and rented that property out to a movie studio and generated money which it then did not use for a public

benefit purpose. It was only after the National Law Center got involved and we threatened to litigate that the property was even

put through the McKinney Act process as is required by Federal

law, and as a result of that intervention, the property is now being

used to serve homeless veterans, and 156 homeless veterans are

helped each day there with housing, substance abuse treatment

and job training.

Second point, the administration’s draft would eliminate the ability to sue GSA and the other landholding agencies if they failed to

comply with its provisions. That alone would essentially gut this

program. And again, this is based on not on speculation, but on our

direct experience. In order to enforce Title V of the McKinney Act,

we have had to go to court. There is now a court injunction in place

enforcing the program.

We’ve been to court a total of five times so far, most recently this

past spring, to enforce compliance with this law. This past spring

we were in court because of what the judge said was an effort to

get around the law and we had GSA internal documents demonstrating that the clear intent was to avoid compliance with the

Stewart McKinney Act.

Third, the administration’s bill would limit the application period

for groups serving homeless people to a single 90-day window of

time. This would severely undermine the McKinney Act. It would

make it very difficult for providers to find out about and apply for

the property. It is already very difficult as it is. There is an outreach provision in the law, and also in one of the court orders, but

it has been extremely difficult to get the agencies to comply with

that. It’s hard for these providers. Many of them are small grassroots groups, run by volunteers. They don’t necessarily get the Federal Register where these properties are published. It’s hard

enough for them as it is to find out about the program and to get

access to the property.

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One of the reasons for this provision is to bring finality to the

process and not tie up property, but we believe that if the agencies

were to take seriously their outreach obligations, then groups

would find out about the property—and I’m sorry, I guess I’m going

on too long, but this is important.

Mr. HORN. We would like you to summarize. We’ve got the statement.

Ms. FOSCARINIS. I’m almost at the end.

Mr. HORN. Reading it doesn’t help us. We want you to summarize.

Ms. FOSCARINIS. I am. The written version is actually much

longer.

Mr. HORN. OK.

Ms. FOSCARINIS. The last portion we’re objecting to is the portion

that limits authority to make the property available only to groups

whose primary function is to serve homeless groups. This would effectively eliminate many church groups whose primary function is

not to serve the homeless, but who now use the program.

These are our major concerns. We also have concerns with H.R.

3285 again, because there is a lack of definition in that provision,

but I will—I know I have gone over, and we’d be happy to answer

any questions. We’d also be happy to work with the committee

after the hearing. Thank you very much.

Mr. HORN. The exhibits you showed are not with your testimony.

Can we put them in the record with your testimony?

Ms. FOSCARINIS. Yes, absolutely.

Mr. HORN. All right. I’d like to ask GSA and GAO to give us a

list of the various homeless projects around the country. If you

have it, fine, but I want it checked by GSA and GAO so we have

in one place what has happened, and I’m particularly interested in

the LA case, and to what degree on-the-job training are these people getting jobs, and that to me is the key, is it training or does

it train for a job and how many—and take your time on that. Just

file it with us if you have the data.

Ms. FOSCARINIS. Sure. We’d be happy to address that.

Mr. HORN. OK. Thank you.

[The prepared statement of Ms. Foscarinis follows:]

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Mr. HORN. OK. We have our last presenter is Steve Perica the

director of the Arizona State agency for surplus property and he’s

the president of the National Association of State Agencies for Surplus Property, and I assume you’re speaking on their behalf.

Mr. PERICA. Yes, thank you. Mr. Chairman, members of the committee, my name is Steve Perica. I manage the Federal Surplus

Personal Property Donation Program in Arizona and am President

of the National Association of State Agencies for Surplus Property.

Joining me today is Scott Pepperman, my colleague from the Commonwealth of Pennsylvania and Ann McKinnon, colleague from the

State of Maryland who also manage those programs respectively in

their States and commonwealth.

On behalf of the 56 State agencies, territories and possessions

that comprise the membership of the National Association and the

over 60,000 donee organizations that participate in the Federal

Personal Property Donation Program, I wanted to thank you for

the opportunity to speak with you. The State Agencies for Surplus

Property have served as the primary conduit for the donation of

personal property from the Federal Government to the States for

over 50 years since the passage of the Federal Property Administrative Services Act of 1949.

Through the donation program, countless agencies, emergency

services providers and public safety organizations have benefited

from property that is no longer needed by our Federal Government.

The Federal Property Asset Reform—excuse me, I have got to get

that correct—the Federal Property Asset Management Reform

Act—too many acts and reforms today—legislation before you affects the donation program in four areas.

First, subject to regulation, it provides for title passage from the

Federal Government to the end recipient, which is, we term the

donee immediately upon the transfer from the State agency with

no recompliance requirement.

And second, it cleans up some inconsistencies in current statute

regarding service educational organizations, replaces some outmoded language, and establishes a dedicated category of eligibility

for food banks and providers of assistance to the impoverished and

homeless.

Third, it provides additional incentives, we believe, for agencies

to bypass redistribution channels for personal property through a

further expansion of the exchange sale authority.

Fourth, we believe it reinforces these incentives by allowing the

retention of sales proceeds from the sale of undistributed Federal

personal property.

The title passage portion of the bill is our first area of concern.

We believe that this potentially could create an administrative

nightmare for the State agencies, the General Services Administration, and the donees because it will create two distinct classes of

property that are transferred through the program, first property

with compliance, property without. Essentially, they could be identical, just separated by acquisition or condition.

So we believe it could be very difficult for the donee to figure out

what they have up to 5-year compliance or an 18-month or a 1-year

compliance on and property that has no compliance restriction period. We’re always worried about fraud, waste, abuse. We feel that

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this might be a thing that could lead for donees to be confused and

make mistakes they shouldn’t make.

Second, while—this comes in section 605. The second portion of

section 605 clarifies our eligible donees, we think that’s a good

idea, cleaning up the language, taking outmoded language out of

the bill or out of the act, creating the separate class of providers

for providers of assistance to homeless and impoverished is a good

idea. It would also help clarify it from an eligibility standpoint.

We’re very much in favor of that.

The personal property exchange sale provision of this act we believe will change the face of reutilization by allowing executive

agencies of the Federal Government to generate revenue by circumventing the redistribution system. Specifically, section 603 of

this bill grants agencies the freedom to divest the assets of government, hard assets, things our taxpayers have purchased, for services. For example, we believe that an agency could take lab equipment that is being used in universities and schools that come

through the donation program, and they could use that to pay for

the demolition of a building that was housed within that building.

Redistribution of excess and surplus property has historically

been our country’s first source of supply. It has been a central

theme of our personal property management structure for over 50

years. On the excess level, it prevents government waste by allocating the extra resources of one agency and allowing another agency

to use it. We see the Law Enforcement Support program, the Forest Services Excess and Personal Property Program, the National

Science Foundation’s programs, USDA programs, all of these passing the assets of government around, making the fullest use of the

taxpayer’s dollars.

Given that currently we believe there’s no oversight of the exchange sale provisions, we feel that expansion further at this point

would be premature.

I realize I’m out of time. In summation, I would like to say thank

you for the opportunity to allow us to speak today. We realize that

the majority of the presenters have been talking about real property, and we are here talking about personal property, and we appreciate your indulgence. Again, we would like to take any opportunity for questions from the committee and like a further dialog

if possible. Thank you.

[The prepared statement of Mr. Perica follows:]

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Mr. HORN. We thank you and we have been joined by Mr. Sessions, and I need the consent of our colleagues to have him sit with

us and make a statement and also participate in the questions.

Mr. TURNER. No objection.

Mr. OSE. Can we put that to a vote, Mr. Chairman?

Mr. HORN. Without objection. Some stern people around here.

OK.

Mr. Sessions, if you want a few opening remarks.

Mr. SESSIONS. Mr. Chairman, thank you so much. I will tell you

I appreciate my colleague Mr. Turner, the gentleman from Texas,

and Mr. Kanjorski, for being on my side today. It is not unusual

for me, whether it’s Methodist church or Rotary Club to not have

unanimous vote about anything that I’m a part of. And I also

apologize for being late. I was over with royalty today on the Senate side for another bill that I have got that I appeared with Senator Kennedy from Massachusetts that I was working on.

I’d like to thank you, Chairman Horn and this subcommittee and

the members for allowing me to testify today on my legislation,

H.R. 3285, the Federal Asset Management Improvement Act of

2000. I appreciate each of the witnesses joining us today to talk

about their support and their ideas about improving Federal property management. It is my hope that this hearing will resolve the

billions of dollars in waste that are lost each year from underutilized Federal buildings.

As chairman of the Results Caucus, I have sought to highlight

the waste, inefficiency and mismanagement found in our government and looked for innovative solutions to these problems. Accordingly, I have introduced H.R. 3285, the Federal Asset Management

Improvement Act. This would benefit government by turning aging

Federal properties that have become financial liabilities into modern facilities that are an asset to the taxpayer.

The government is the largest holder of property in the United

States. Unfortunately, many of those facilities are underutilized

and unneeded. For example, the GAO has found that the Veteran’s

Administration spends about $1 million a day to operate unneeded

hospital buildings. Unfortunately, this is only the tip of the iceberg.

As Federal agencies and programs evolve, their facilities need

changes. As a consequence, government-owned real estate often becomes underperforming, inefficient and functionally obsolete. The

real estate marketplace is constantly changing making portfolio

management increasingly challenging to the Federal Government.

The GSA’s property inventory has a replacement value of approximately $30 billion; 50 percent of its government-owned space is

more than 45 years old. GSA estimates that its current reinvestment needs exceed $4 billion over the next 5 years.

This legislation will correct problems in current law which allow

these buildings to be—today to be underutilized and wasting taxpayer dollars. By partnering government agencies with private sector investment interests to revitalize the property without lease obligations and debt guarantees by the Federal Government. This

means that the Federal Government can stop wasting taxpayers

dollars on empty buildings.

I appreciate the continuing dialog I have had with the administration, GSA and other Federal agencies on this legislation, and

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look forward to working with them to pass much needed legislation.

I want to thank you, Mr. Chairman, for your interest in this matter and holding this hearing, and I hope that we can highlight

changes that are necessary and needed in the law and I thank each

of the witnesses for their attention today to the efficiency of the

U.S. Government.

Thank you, Chairman.

Mr. HORN. Thank you very much.

I have one question, then I’m going to turn to Mr. Turner and

then we’ll alternate 5 minutes per person. What I want to know

just going down the line is what do you feel is the proper number

of years for a lease term, and what’s your rationale behind it, if we

can do it very succinctly? Yes, let’s start with GAO.

Mr. UNGAR. Mr. Chairman, I don’t have a magic number. I think

for the situations that we’re talking about here with partnerships

with the private sector, it certainly would be enough years that the

private sector would find it advantageous to enter into the agreement, and in those cases where I indicated where we’re dealing

with special properties that needed a substantial investment, it’s

more likely to be more than 20 years and maybe more than 30

years obviously.

Mr. HORN. So you would do 30.

Mr. UNGAR. At least that, and probably more in those cases

where we’re talking about historical properties or properties in economically depressed areas that require a substantial amount of reinvestment. In those cases, it may have to be beyond 30, but there

ought to be probably a general rule and Congress can control that

by perhaps saying if it’s more than a certain amount of time, because it’s 30 years, having some kind of a special process within

maybe GSA or elsewhere to approve it.

Mr. HORN. Mr. Bibb, how about you?

Mr. BIBB. Well, Mr. Chairman I think my answer would depend

upon the use that you’re putting the property to. Certainly if you’re

talking about simple vacant space within a Federal building, a 20-

year term to recover the amortization and space improvements

would be fine. If you’re talking about the type of full blown publicprivate partnership that Congressman Sessions has proposed

where you are dealing with complete renovation of a building, I

agree with some of the comments that Mr. Weiner made, that the

longer the term, the more like ownership—more like an ownership

position that the developer for the development entity has, probably the better rates you can get. So I can’t give you an exact number. We’ve proposed either 20 or 35 years, depending upon the situation, but we’ve also recognized that the legislation is not really intended to develop property for leaseback for Federal agencies. I

think if you’re going to do that economically, it would take a longer

term.

Mr. HORN. Admiral.

Admiral SILVA. Mr. Chairman, my comments are very similar to

the first two witnesses and the statement made by Mr. Weiner. I

really don’t have a lot of practical experience with this, but I believe that it should be looked at on a case-by-case basis or a category-of-use by category-of-use basis. And that’s all I have, sir.

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Mr. HORN. Mr. Weiner, how about it?

Mr. WEINER. The timeframe has to be, for a project of any consequence, at least 50 years. Thirty-five years that the VA has used

has limited the size and scope of a number of projects. The developer—the private sector developer that goes into a partnership goes

in thinking about its exit strategy. That’s the nature of real estate

business. The developer wants to be in for 3 to 5 years, maybe 10

on a complex project, and then sell its interest to a long-term player like a pension plan or a life company. They need a long lease

term so they have something to sell as part of their exit strategy,

and even 35 years is just too short for major projects.

Mr. HORN. Ms. Foscarinis, what are your feelings on this?

Ms. FOSCARINIS. I don’t think we have anything to say on this

particular provision since that’s not really our concern.

Mr. HORN. OK. Mr. Perica—you finished on that?

Ms. FOSCARINIS. Yeah.

Mr. HORN. Mr. Perica.

Mr. PERICA. I believe the National Association would not have

any input on this particular provision.

Mr. HORN. Now, is your group primarily on personal property,

not the real estate?

Mr. PERICA. Not on the real property at all.

Mr. HORN. So you don’t have an opinion either on this then?

Mr. PERICA. No.

Mr. HORN. OK. Well that’s one thing I think we have got to deal

with, so I was interested in what you have to say on it.

I now yield 5 minutes to the gentleman from Texas, Mr. Turner.

Mr. TURNER. Thank you, Mr. Chairman.

It seems clear to me when I look at the comparison between the

GSA draft bill that’s already been introduced in the Senate and

H.R. 3285 that it presents several very key and critical issues that

we have to resolve. I know suggestion was made a minute ago that

perhaps some of the provisions could be merged, but when I look

at the comparison, there are pretty clear conflicts in what the two

bills would propose to do, and I think that we need some comment

on that.

I don’t know how many of you have looked at the comparison

that I have in my hand. I don’t know who put this together, if staff

did, but I think it would be helpful for our witnesses to look at that

and give us our thoughts on the differing approaches to the problem.

And I guess to get ahold of one that maybe is a little more manageable, I found it interesting here, the testimony on the provision

of the law regarding the homeless. And perhaps Mr. Bibb is the

one to ask the question, but I’d like to know a little bit more about

what the controversy was in the case involving the Federal courthouse in Lafayette. Because, obviously, there seems to be a problem in this area that we probably have an obligation to ferret out

and to try to resolve; and, obviously, the two bills even deal with

that issue a little differently. Could you give us a little history on

that and what the conflict is and why that conflict arises apparently more often than we would like?

Mr. BIBB. I’d be glad to. Would you like me to start with comparison of the two bills or move to Lafayette?

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Mr. TURNER. Perhaps you could tell us how the two bills differ,

and then maybe that will work into your discussion of what happened in Lafayette.

Mr. BIBB. OK. Just briefly, there are areas where the bills are

very compatible. The GSA bill is broader in that I represent the Office of Governmentwide Policy, and the bill has been written to affect all agencies who are covered by the Federal Property Act. Congressman Sessions’ bill, although it does allow for the GSA administrator to delegate certain authorities, is aimed more at the GSA

inventory, which is really only one-tenth of the total Federal inventory of real property.

So our bill is broader. We have pieces on sound life-cycle planning and management, like the appointment of a senior real property officer. We think this front-end planning phase is important.

That’s not to say that Congressman Sessions wouldn’t agree with

that, but we have actually placed that into the bill.

We have a broader variety of tools. In addition to outleasing, we

have sale exchange, retention of proceeds if a property is sold, and

public-private partnership, as we have discussed.

Congressman Sessions’ bill is very broad, intended for broad use

by Federal agencies in leasing back either the renovated or newly

constructed facilities. Our bill was submitted in recognition by the

administration that because cash on the barrel is a less costly alternative than financing from the private sector that we would not

use that or would not recommend using that as a major tool for

meeting Federal space needs.

And then Congressman Sessions has a broad section on governmentwide performance measures which we do not have in our bill.

We like performance measures. In fact, we’ve been leading a governmentwide effort to begin to compile those from agency to agency. We’ve been doing that voluntarily and would, frankly, like to

pursue that. But the inclusion of performance measures in our bill

is something we don’t have there, but certainly we could discuss.

So I think the thrust is to get the agencies to manage their assets better, and there are varying tools in the two bills, but the

idea is common, I believe.

On the homeless issue, I would like to make just—if I could have

just a couple of minutes to respond to Ms. Foscarinis’ concerns and

questions—is that acceptable? And then I’ll move to the Lafayette.

Just in perspective, and we will submit the records we have on

transfers to homeless groups, our numbers, the numbers I have

with me show over 60 properties valued at over $60 million since

the act was passed.

We believe by introducing incentives into Federal real property

management that we’re going to create a climate where more properties are identified for a variety of different uses, whether it’s sale

exchange, either limited or more full public-private partnerships,

for sale for retention of proceeds, and as unutilized or underutilized. This means homeless groups get an opportunity at the property. So I envision more, not less.

Another point I’d like to make is simply the huge magnitude of

the Federal inventory. We have in all agencies 3.2 billion square

feet of space. That’s a staggering number.

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Just to put it in perspective, if you take the Washington, DC,

market from the Dulles corridor to Rosslyn to downtown Washington to Bethesda, there’s some 22 million square feet in the Washington, DC, market of commercial space. The Federal Government

owns approximately 14 times the amount of space as in the entire

Washington market.

That’s not all in office buildings. A lot of that is in storage, special space. But the point I’m making is, it is a huge inventory, almost beyond the ability to grasp it; and within that kind of inventory my feeling is there are all kinds of opportunities for everybody

to play here. There are lots of opportunities for public benefit discounts for park land and that sort of use. There are lots of opportunities for homeless groups to acquire properties, and there are lots

of opportunities for the Federal Government to recoup or take advantage of the equity in their properties and do something with

them.

I’m not going to comment about each of the factors that were

identified as being in the bill. Some of them I’m a little mystified

by, such as the taking away—— Mr. HORN. Would you mind sending us a letter on this that we

can put in the record at this point?

Mr. BIBB. I certainly will.

One last point on that. I would say I’m a little surprised, genuinely surprised. We felt that we had coordinated the entire bill

with the—Ms. Foscarinis’ group through both the Domestic Policy

Council and HUD and had, in fact, offered an annual payment

from property proceeds in lieu of a claim on each and every property. So I’m surprised. I felt like we’d reached agreement. Obviously, we hadn’t; and we’d be happy to work to resolve those.

On the Lafayette case, I don’t know the details other than at just

a very surface level; and I’d be glad to provide that for the record.

Mr. HORN. Without objection, it will be put in at this point.

Mr. BIBB. My understanding is the disposing agency—in this

case it was a public building service property, a GSA property—

that the folks dealing with the disposal of that embarked on using

a piece of the—not a piece of the Property Act, an older Surplus

Property Act. Whether they should have or not, I don’t know. As

I understand it, it’s been in court; and the court will resolve that.

Mr. HORN. We have a vote on the floor, and so I’m going to ask

Mr. Ose—5 minutes for questioning. And then we’ll go over to the

floor, and we’ll be in recess until probably 10 after noon, and we’d

like you to stay for the questions.

Ms. FOSCARINIS. Mr. Chairman, perhaps we could respond then

in writing if we’re not going to—if we don’t have an opportunity to

respond now to your questions about Lafayette.

Mr. HORN. If you could file it for the record. Thank you. We’ll put

it at this point.

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Mr. HORN. Mr. Ose.

Mr. OSE. Mr. Chairman, I don’t need the 5 minutes. I can submit

my question in writing.

The question—that really boils down to, I have a copy of a letter

dated February 24th signed by Jacob Lew suggesting that agencies

retain the excess proceeds from a redeployment of their real property assets, and that is reflected in the GSA’s draft bill also. And

I guess my question would be, is why would Congress not retain

discretionary authority over an appropriation? I don’t understand

the logic behind giving the agencies the discretion over the recaptured proceeds. So I will submit a question in the interest of time.

Mr. HORN. You might want to do it now while the Federal officials are here.

Mr. OSE. Paul may have some questions, and I’d be happy to

defer to him. I’d be happy to submit it in writing.

Mr. HORN. OK. Any other questions?

Mr. OSE. No. It was just very structural in nature.

Mr. HORN. Gentleman from Pennsylvania, Mr. Kanjorski, 5 minutes for questioning.

Mr. KANJORSKI. I don’t know if we’re going to have 5 minutes,

but I’ll try and be prepared when the next bell goes off.

Sitting here and listening to the testimony today and some of the

Members’ questions, it seems to me that we really have a hearing

on three distinct areas, and that is, one, the handling of surplus

real estate for nonreuse of the Federal Government. And that is a

problem, and we should address it as a problem. Then we have Mr.

Weiner’s position of using the private sector to avoid immediate appropriations and provide for the needs of the Federal Government

in a leasing operation, which is I think acceptable.

Mr. HORN. Let me interject and say, when Mr. Kanjorski is done,

we will be in recess until 10 after 12.

Mr. KANJORSKI. We should study that as to its ramifications governmentwide. And then, of course, we should examine the private

property problem, and how it impacts on everything from the HAP

program to the homeless program to the State program, which is

very complicated.

I think that in listening I’m not sure that all of us understand

how big a problem we’re talking about and how large a ramification it is and why it should take a great deal of the attention of

the Congress to work with the Federal agencies to do it.

First, I would compliment GSA. I’ve worked with them over the

years. They have very frustrating problems where they can do

things that are effective and efficient, but they don’t have the legal

authority to do it and, very often, a very valuable piece of Federal

property will go literally to waste because there’s no way under the

existing authorities of the law to handle the problem.

Two, there’s a tremendous turnover in government, so we lack

sometimes institutional memory, which is a big problem.

Three, we do not have transparency of the Federal inventory of

property because there’s literally no way to know all the property

of the Federal Government that’s available both in the nature of

real estate and personal property. So that there develops a culture

within the reuse of the property community that has to be watched

out for because it could eventually cause abuse and fraud and misVerDate 11-MAY-2000 09:55 Aug 02, 2001 Jkt 000000 PO 00000 Frm 00140 Fmt 6633 Sfmt 6633 C:\DOCS\72934.TXT HGOVREF1 PsN: HGOVREF1
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management. I think every administrator that I’ve been working

with at GSA has struggled with it, every property person has

struggled with that, and I think that’s what our friend here from

the State agencies talked about.

It is very nice to limit the timeframe in which you control property, 18 months or 5 years. But in some communities you find people going to work using the State system. They get a piece of property, and if the day after they have that property they can pass it

off as a private transaction, they will go into business for themselves. Then you have a problem diverse across the country of

small communities versus large communities, sophisticated States

and unsophisticated States and the balance of those assets going

back.

And then, finally, particularly in the real estate field, if you look

at the map of the United States and you take the Mississippi as

the dividing line, two-thirds of the land mass West of the Mississippi is Federal property. Now that property was either acquired

by purchase or development; and the question is, who in the Federal Government should benefit from it? Who in the various States

should benefit from it?

I think I made a point the other day addressing this issue that

in the buildup of the cold war, States like Pennsylvania who are

not well-known for industrial—military industrial complexes or

military installations didn’t receive the economic largess of the

Federal Government, but it was a war effort. Now that the Third

World War has not been fought and the cold war is, for all intents

and purposes over, all these Federal assets, both in the Defense

Department and the Energy Department, which amount to hundreds of billions of dollars in assets, how should they be disposed

of in an equitable way to the taxpayers who put in the money to

pay for it?

Well, if you are going to give it to the communities or to the

States where the property is located, you’re going to find out that

probably a third of the property goes to the South, and the other

third or 40 percent goes to the West, and maybe 5 or 10 percent

ends up in the rust mill of the Midwest or Northeastern part of the

country; grossly unfair distribution of assets.

As a matter of fact, in our base closing policy that we activated

several years ago, it was a perfect example of what really was a

detrimental occurrence. You have distressed communities of the

United States that do not have Federal property or Federal investments that can be reutilized, and yet you have very wealthy and

very successful areas in the United States that have the benefit of

a growing economy because of the largess of the Federal Government investment. And then, when we closed the bases, we handed

these facilities over to these States and these localities. So that the

disproportionate fact is Texas and California got superindustrial

parks with airports and warehouses. The Midwest, to a large extent, and northeastern Pennsylvania got very little.

So it was a negative hit in an economic development sense toward the States that didn’t benefit from the largesse of the buildup

of the cold war. And now when we build down we lose again, and

I think that’s something to look at.

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In listening to the homeless organization, I think that’s a prob- lem that can be solved, and I calculated in my mind about $4 billion would house all 800,000 homeless people. That should not be

a holdup. In a lot of instances, while we did act sympathetic, we

gave rights that now cost us hundreds of millions or maybe billions

of dollars of losses to protect those rights.

Anyway, I think these issues are very large. I think they certainly warrant further hearings and examination, and I am certainly available to work with all my friends on that.

Mr. OSE [presiding]. Congressman Kanjorski, could we recess?

We’d be happy to come back for questions. So we’re in recess until

12:10.

[Recess.]

Mr. HORN [presiding]. Subcommittee will come to order.

Let me ask you, just down the line, the administration’s bill

would authorize agencies to retain and spend proceeds from the

sale of real property assets without further authorization or appropriation. While creating an incentive, this approach reduces Congress’ ability to oversee these funds. I’d just be curious how you

think about that.

Mr. Ungar.

Mr. UNGAR. Mr. Chairman, we certainly think that this is an

issue that the subcommittee needs to address. It was one of the

concerns that we certainly had when we looked at the bill. There’s

no question in our mind that the agencies need to have a source

of funds in addition to appropriations for repair and alterations.

We found that across government, including in DOD, VA, GSA, and

other agencies.

The question is how far you want to go with that, and I think

that’s up to you. One possibility would be to require a plan in advance as to how the agencies want to spend the proceeds and then

having some kind of report at the tail end as to how they actually

did.

There is a requirement in one of the bills for a report after 5

years from GSA and also a review by GAO. That would certainly

help, but that’s a long period of time to go without any congressional oversight.

Mr. HORN. Well, as you look at—and I don’t know what comparisons the GAO has on it—but how can Congress ensure that proceeds from the sale of real property assets are appropriately spent

by the Federal agencies? What is the process now? I know we’re

probably short on preventive maintenance.

Mr. UNGAR. I’ll start, and maybe Dave Bibb would like to add on.

I know right now for the larger dollar projects there’s a prospectus

process, at least in GSA’s case, whereby for projects that involve

$2 million or thereabout, GSA has to provide what’s called a prospectus, or a plan, to the appropriate House and Senate authorizing committees. They would review that plan. The plan looks at the

need for the project, discusses alternatives, and then explains how

GSA arrived at the decision it did. This provides both Houses of

Congress and relevant committees with background information

and details which they can then decide upon.

While the processes in these bills would provide information

front for the actual use of the tools, such an arrangement is not

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identical to the prospectus process, but it at least would give you

some information. Where it’s a little unclear is on the tail end.

Once the agency goes through the transaction and has the money

in a capital account, what oversight does Congress have there? And

it’s at that point where we think there needs to be some information coming to Congress on perhaps the planned use and then

something on actual use.

Mr. HORN. Mr. Bibb, and I guess Admiral Silva also, with all of

the property you have, what are your thoughts on the approach

suggested by the General Accounting Office that would require proceeds from the sale of property to be deposited into a centrally

managed account?

Mr. BIBB. Mr. Chairman, I think we’re not particularly in favor

of a central account simply because we’re trying to encourage responsible asset management by each Federal agency. We’d prefer

to see individual accounts.

We do think some controls are needed. There are some controls

in the bill, such as specifying what the amounts in that fund could

be used for, but I expect that is an issue we need to have extensive

discussion about before the bill is finally passed. I believe central

control—the government is so big in its real property inventory

that I’m not comfortable with one place making decisions on each

and every transaction.

Mr. HORN. I take it in your development of it you would want

to place the responsibility on the chief operating officer, chief executive of the particular department or agency?

Mr. BIBB. The bill would provide for a senior real property officer, and that’s where we would like to place the accountability, yes.

Mr. HORN. And that would essentially be in the Treasury?

Mr. BIBB. That would be an officer in each agency responsible for

prioritizing and accountable for the spending of that money.

Mr. HORN. And it would be deposited in the Treasury in some

account I take it?

Mr. BIBB. Yes. There would be agency accounts established within the Treasury.

Mr. HORN. Yes. And the use of it would simply be whether the

chief executive or chief operating officer signs off on it or delegates

it?

Mr. BIBB. As long as it’s used for the purposes specified in the

bill.

Mr. HORN. Do any States have this type of process, do we know?

Mr. BIBB. I don’t know the State process on that particular piece.

We have talked with the States about using some of the other tools

in the bill but not on that particular one.

Mr. HORN. You might want to check if the GAO could on—with

the State of California and the State of New York, they have extensive real estate, and how do they handle the maintenance which

everybody seems to want to avoid? And when we looked at one university in California they had $4 billion in back maintenance that

they hadn’t done. They just let that account go. So now they have

a real problem, to say the least.

Well, any other thoughts here on this issue?

Admiral SILVA. Yes, Mr. Chairman.

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As we strive to be leaders and innovators in real property management, the more tools that a land holding agency has I think

that is good. But I also think that having some kind of a measured

and controlled way where the agencies can retain some, if not all,

of the proceeds from the real property transaction will provide

some incentives. I think that a lot of the agencies need to not only

have incentives but be able to reinvest through good initiatives into

opportunities that make sense. To your point about the maintenance backlog growing, the opportunity to divest or through constructive reuse of facilities as to possibly avoid those costs, those

maintenance costs.

I think it provides a great incentive, particularly as you move

into good asset management through the Federal Government.

Mr. HORN. Let me ask you about Governors Island. We have had

a hearing up there, and the Coast Guard for a while had custodianship. Do you still have it?

Admiral SILVA. Yes, sir. It’s funded—protection and maintenance

funding is provided by GSA. But in our partnership agreement we

still have resources that provide the protection and maintenance on

Governors Island and carrying on the stewardship through the disposal process.

Mr. HORN. Well, where are we on that process? Last I knew we

had the city and the State and some universities that perhaps

wanted to use it.

Admiral SILVA. GSA should probably speak to that issue. They’re

the disposal agent. The process is, to my understanding, continuing; and that’s the extent of my knowledge on it.

Mr. BIBB. Thanks a lot, Admiral.

Mr. Chairman, I don’t have that information. I’m not in the operational side of GSA, but we will certainly—— Mr. HORN. Can we get a statement as to status of where we are,

just for the interest of it all? Does anybody have any thoughts over

here on that particular question of deferred maintenance and central accounts versus agency accounts?

Yes, Mr. Weiner.

Mr. WEINER. Just one brief comment that Mr. Sessions spoke to

waste in the use of the existing inventory—— Mr. HORN. Pull it toward you, the whole works. Horrible microphones in this building.

Mr. WEINER. Just as Mr. Sessions spoke to waste in the operation of the current inventory, there is the potential that the proceeds that are retained by individual agencies could also be subject

to waste. What is needed, though, is an incentive within the agencies to motivate the agencies to participate. So with a properly designed program that has accountability and addresses the sources

of where these proceeds are going to come from and what the end

intended uses are, subject to some oversight or review, perhaps by

this subcommittee, then you have the checks and balances that can

be a successful program.

Mr. HORN. Any other thoughts, Miss?

Ms. FOSCARINIS. Yes. I would like to point out two things. One

is that this process would represent a major shift in Federal policy

away from using these resources for public benefit uses and toward

using them for—to serve the agencies’ specific interest. I think

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maintenance is important, clearly maintenance is important, but

providing for maintenance at the expense of this shift in policy I

don’t think is appropriate. I also think it provides an incentive for

agencies to dispose of property, again, potentially at the expense of

other uses of these resources.

Mr. HORN. Mr. Perica.

Mr. PERICA. With respect to retention of sales proceeds, we have

a couple of thoughts, both from the personal property side and the

real property side.

One, we’ll echo the thoughts on accountability. We believe that

you all do a really good job of taking care of figuring out where you

want the taxpayers’ money to be spent, and we feel that the Federal agencies may not be concerned with the full aspect of what the

taxpayer wants, more to the point of what they’re trying to accomplish within their agency.

We feel by allowing retention of proceeds and that in that particular function of government of allocating those resources is

taken out of your hands, and we’re somewhat concerned over that,

with respect to the accountability. That’s about it with respect to

real and personal property, if that makes any sense. Thank you.

Mr. HORN. Now, Mr. Kanjorski was questioning the witnesses

when we broke for the four votes. Did you get all 5 minutes in?

Mr. KANJORSKI. I’m not sure if I did, Mr. Chairman, but I’m willing to take another 5.

Mr. HORN. Well, one person hasn’t had a chance here, Mr. Sessions, 5 minutes; and then back to Mr. Kanjorski.

Mr. SESSIONS. Also, Mr. Chairman, I recognize that I have been

given the opportunity to be here today as a result of the

favorability of this committee. I would be very pleased to yield my

time to the gentleman. I’m not trying to consume—— Mr. KANJORSKI. If you have questions, go ahead.

Mr. SESSIONS. That will be fine then. Thank you, Mr. Chairman.

I would like to direct my comments to Mr. Weiner, if you could

begin, and Rear Admiral Silva and Mr. Bibb.

I’m interested in specifically those things that deal with H.R.

3285, which is my bill. If you could take just a minute—because

I know that we’ve heard a lot of testimony today. If you could kind

of paint a picture about if this became a law what would happen,

the dynamic nature of what this would do to the marketplace and

to the realization of helping the government. Or, in your opinion,

Mr. Bibb or Mr. Silva, if you believe that there’s a downside, if you

would, or Mr. Weiner, if you see a downside to it, also.

Mr. WEINER. Well, this is not a panacea, and we’re talking about

your bill specifically.

Mr. SESSIONS. My wife tells me that every day, that I have some

good ideas, but it’s not everything. I must confess to you I’m used

to hearing this at home, too.

Mr. WEINER. Well, I’m trying to make you feel at home.

Mr. SESSIONS. Thank you.

Mr. WEINER. It’s a tool, and not all properties would lend themselves to a partnership approach. But the point is, if you have the

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cy and if its location and its other amenities make it attractive for

private investment, then you’re going to turn a liability into an

asset which will produce income, not drain income, to the Federal

Government.

So if the projects are properly selected—and I can’t emphasize

that enough, that this may apply to less than 10 percent or 5 percent of the national portfolio—but if it’s there and it can be utilized, then it will have a tremendous benefit.

The current prospectus program that’s used for appropriations,

that can take at least 3 years, often more for major capital projects;

and by the time those projects are approved, money is appropriated, the need has shifted. The money’s been appropriated. We

really don’t need it. Gee, we better spend it or we’re going to lose

it.

So things are just really inefficient the way they’re currently conducted. Again, this is viewed as a supplement, not a replacement

to appropriations.

Mr. SESSIONS. And do you believe that the marketplace, people

who are engaged in this business across the country, would view

this as being favorable?

Mr. WEINER. Absolutely. We interviewed many of the large investors and developers years ago; and, if anything, the situation has

improved where developers are squeezed or pressed to find projects

that will drive the kind of returns I’m convinced these public-private partnerships can produce at the Federal level.

Mr. SESSIONS. One thing in addition that I believe you and I

spoke about—and it was my view, you did not have to agree—but

this helps us use an existing supply of buildings that we have,

rather than going out and rebuilding.

Mr. WEINER. Absolutely.

Mr. SESSIONS. It helps us with a term that we all know, is urban

sprawl. It helps to utilize very carefully those things that are,

many times, on bus routes, in inner cities where we already have

goods and services, where we already have infrastructure around

those areas. And I think that that’s a real advantage, and I hope

it will be seen this way by the marketplace.

Mr. WEINER. And to embellish that point, in some situations that

I’m familiar with, the local governments view that as an incentive

to urban renewal, that it can help facilitate their urban renewal

plans by seeing the renovation of Federal facilities. So it really has

a lot of local public policy benefit potential.

Mr. SESSIONS. That which one time was a diamond or a jewel

could still be that in the current place by someone else, and I think

that that’s an advantage.

Admiral, do you have any comments related to either of those

questions?

Admiral SILVA. Yes, sir. As I said before, I’m looking for all the

tools that I can get to manage our shore assets better. However,

I think that the tool of the public-private partnership for the Coast

Guard is a limited tool, limited use tool from the prospective of we

have very few large facilities and very many very small facilities,

that I’m just wondering whether it would be that the tool of publicprivate partnerships would be applicable and economically advantageous to you.

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As I mentioned, we have like 1,600 sites in my opening statement, which we have 66,000 acres of property. So most of our assets are 25-person small boat stations up and down the coast and

on the rivers and so forth; and I’m not sure that that tool, while

we’d be able to use it to a certain extent, would be the total solution for the Coast Guard.

Mr. SESSIONS. Good. Thank you.

Mr. Bibb.

Mr. BIBB. Mr. Sessions, from a parochial standpoint I think it’s

a terrific real estate tool and would have broad application, but I

recognize and I think this committee has to look hard at the broader issues, and it’s in the context of the broader budgeting issues

that we have to look at this.

In February, the Director of OMB wrote a letter to Chairman

Horn expressing the administration’s position. That was not done

lightly. I can assure you there was a lot of discussion within the

administration about whether this tool was the way to go or not.

The bottom line was the administration felt that it could not endorse a tool which is second best in terms of budgetary impact. We

would all agree that cash on the barrel is the least expensive alternative—pay cash for your renovation on your facility. And, ultimately, a decision was made within the administration to recommend as a matter of policy to the Congress that we go with the

second-best alternative would not be, within the context of the larger budget debates, the responsible thing to do. So, from that standpoint, it was not offered up, but it was certainly looked at hard.

And again, from a very selfish standpoint, I would love to have

the tool to run a real estate program with. It’s just this larger

context—— Mr. HORN. Without objection, I would like to put in the record

at this point the letter to which you referred from the Director of

OMB to myself and a copy to Mr. Turner dated February 24, 2000.

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Mr. SESSIONS. Chairman, I would like to thank the witnesses

that we’ve had today. I believe each and every one of them have

brought forth not only compelling arguments but it’s been done so

in a very forthright manner, and I appreciate not only their indulgence on this matter but also my colleagues on both sides of the

aisle to be here today on this important issue. I yield back.

Mr. HORN. Thank you.

The gentleman from Pennsylvania, Mr. Kanjorski, for 5 minutes.

Mr. KANJORSKI. Mr. Chairman, I’m going to give an example of

sometimes how you can’t make an evaluation whether something

is more efficient being done by the appropriation method or the

lease-back private partnership.

In my District, I have an experience where we have a beautiful

GSA-constructed facility, a computer facility for the Social Security

Administration. It’s well designed, well-built, but it took 10 years

from the point where we appropriated and authorized the construction until final construction.

On the other hand, I have an example of an old brewery that was

in existence and abandoned for 20 years, and the post office needed

to expand its facility. And in an arrangement between the GSA, the

post office and a private partnership, work was completed within

2 years—— Mr. HORN. What city was that in?

Mr. KANJORSKI. Wilkes-Barre.

Mr. HORN. Wilkes-Barre.

Mr. KANJORSKI. And if you looked at the 8 years of delay and tieup of funds and you amortize that value on the front end cost, you

may actually find out that the private partnership in reconstruction rehabilitation was a much cheaper investment for the U.S.

Government. And so I am delighted that we have the issue, but I

think it is a very complicated issue.

I particularly have worked very long over the last 5 or 6 years

with the Department of Energy. The Department of Energy has

identified approximately $50 billion worth of excess assets amounting to 12,000 real estate locations and 4,000 warehouses. I’m embarrassed to say most people don’t know what’s in those warehouses in terms of actual equipment or value or reuse potential.

If we were to perhaps go as broad as we are going now without

the protections, the fear that I would have with the turnover of the

high administration people over 2 years in the Federal departments, nobody would have an institutional memory or knowledge

of what’s going on. And there is a culture that would grow, just as

the Beltway bandits have grown up to become contractors of the

government. If you turn loose $100 billion worth of property for

reuse reallocation sales, you’re inviting that without really adequate control and oversight by the Congress and the agencies and

someone with that institutional memory.

So I would like to see the process move forward but with a little

more involved hearing processes and field examinations and really

getting out there and working with these people.

And, ultimately, if I had my way—you know, we’ve heard such

a divergence of testimony of different interests and potential happenings, everybody with the common end, we want to get a better

bang for the buck for the Federal taxpayer, but the question of how

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to get it done remains. It seems to me, just by calling this hearing,

what you succeeded in doing is showing how multifaceted the problem is. And in order to iron out these differences maybe we have

to break the bills up into two or three, concentrating on real estate,

concentrating on avoiding the appropriation process and going

through the partnership process and how to handle personal property.

But it would seem to me a roundtable discussion on these various aspects, allowing more concentration and greater focus, would

be very helpful. In this discussion, the real people and those in the

audience here that have the insight and knowledge of what’s going

on could have their information and knowledge used in the structure of the legislation to go forward.

But I think we have to—to the best of my mind is—identify Energy, Department of Defense and probably GSA as the major property people, and they hold excess property well over $100 billion.

I couldn’t even estimate it.

If we pass this bill, it would seem to me—give an example to the

Admiral here. I represent a development company, and I come to

you, and I say, you’ve only got 66,000 acres of land, but they’re on

the East Coast of the United States, Florida to Maine, and the

West Coast of the United States, Seattle to San Diego, awfully nice.

I just spent a week in Florida at one of your installations, right

near it, 166 acres at a little inlet, a little Coast Guard station, a

doctor’s inlet I think it is; and I sighted about 10 acres of land that

would be beautiful for a 300 to 400 apartment condominium.

Now, I have this bill. I want to rent that land from you. I want

to put up the 300 condominiums, and you’re going to derive out of

that, say, the value—pick a figure—$10 million, and you don’t have

to do anything with it. And the commander would like another jet

plane. He says, hell, I just trade this little lease off, and I got myself a jet plane.

And I think that’s a problem. I think if you magnify that problem

what it could be—maladministration, misadministration or lack of

information—could be a catastrophe. And I think, in anything we

do like this, that I have worked with GSA and surplus property for

16 years now, actually longer than that, before I came to Congress—they are very successful sometimes in the reutilization of

property, particularly to the States and municipalities, but it

doesn’t work perfectly.

I think if we don’t take the time when we’re making the correction we may have a possibility that we’ll—maybe only 1 out of 100

will be a charlatan, but, believe you and me, the administration,

the leadership of that Department and this Congress will be grossly embarrassed if that one out of a hundred charlatans occurs.

So the ownership of property in the Federal Government is so

huge, so diverse and so complicated an issue that I’m not sure a

single bill addressing all of those issues can be added.

Let me give you one example, again going to surplus property;

and we talked about it the other day. The Federal Government allowed an amendment to this bill to allow the HAP project, which

is overseas nations coming in and getting surplus personal property

from the U.S. Government. It initially occurred in overseas bases,

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ment. But now it’s been extended to the extent that foreign representatives can come to the United States to any surplus area and

have priority over any State or municipality or any other agency

of government of getting this equipment. And I’ve seen experiences

where they literally have come in and taken millions of dollars

worth of equipment. The government pays to haul it to wherever

they want to take it.

Mr. HORN. We’ll continue this, but could we have Mr. Sessions

5 minutes and you get another 5?

Mr. KANJORSKI. It sits there and deteriorates. And I think we

have to look at those programs, too, and put them in perspective.

Mr. HORN. Those are good suggestions.

Gentleman from Texas, 5 minutes.

Mr. SESSIONS. Mr. Chairman, thank you.

I would just respond back to my colleague who has offered some

very thoughtful insight, and I would say that I think that there

could be a way for us to get together. It could be one piece of legislation. I think we could incorporate the feedback that we’ve received from each one of you today.

As the main sponsor of this bill, I will tell you that I intend to

do that. I intend for us to work together. I intend for us to take

the good parts of the bill, being as reasonable as I am, and taking

the things that some other people feel are reasonable. I intend to

move this bill. I intend to take the feedback that’s been given

today, and I intend for it to be an opportunity for my colleagues

on both sides of the aisle and for those in the administration and

outside to come together on a consensus bill. I think it’s possible.

I think it’s possible for me to take what we’ve heard today and

move it forward.

I would also, with great respect, tell the gentleman from Pennsylvania that if we had been able to do this that I would like to

move it. If we have not, then I will engage in hearing more testimony, and I would ask this chairman to do that. But I believe that

for the good of the taxpayer and the good of the industry and the

people, the industries and the people who are here, that I think we

can get closer and that, in my opinion, I have gained great knowledge and have benefited from what has happened today.

So I intend to move forward to see if we can gain consensus. Mr.

Kanjorski, I promise that I will continue in this endeavor and will

work with you, including the gentleman from Texas, Mr. Turner,

who brings great depth to this argument and discussion also.

So, Mr. Chairman, I yield back my time, but that is what I intend to do as a result of this time that we’ve spent together.

Mr. HORN. I think it’s a good suggestion. And we will have Mr.

Turner, Mr. Kanjorski and Mr. Sessions all, two Texans and a

Pennsylvanian, and that will be the subcommittee that put this all

together which I will delegate delightedly to see what happens. So

we’ll proceed in that way, and you can all share ideas with each

other, and I think you will have a pretty good product coming out

of this. And if you want to do it before the August break, why good

luck. If you want to do it after, we’re going to be here every day

in September, probably so.

Mr. SESSIONS. Well, I would, as the chairman has offered, I do

intend to work diligently and would anticipate that September—beVerDate 11-MAY-2000 09:55 Aug 02, 2001 Jkt 000000 PO 00000 Frm 00153 Fmt 6633 Sfmt 6633 C:\DOCS\72934.TXT HGOVREF1 PsN: HGOVREF1
150

fore the end of September timing, would say that we must do that,

and so I will engage in that time line. Thank you, Mr. Chairman.

Mr. HORN. Admiral, I have just got one question. Since Mr. Kanjorski has explored all the Coast Guard properties on the East

Coast, I want to say something for the West Coast. Have you ever

been at the—what was the home of the commandant commander

of the 11th Coast Guard District? Have you ever been there on Terminal Island?

Admiral SILVA. No, sir.

Mr. HORN. OK. Well, you should go there. It’s really a marvelous

piece of land, and we’re very sorry—we have great respect for the

Coast Guard, but we’re sorry you moved out of southern California

where the action is up there, where you’ve got a couple of bridges

you can look at. But another part of the State—you’ve been to San

Diego?

Admiral SILVA. I’m on a plane to San Diego this afternoon, sir.

Mr. HORN. Well, take it to Terminal Island. Because that property—the only worry is when you have got a few escapees from the

Federal prison on that property, but that’s under control, usually.

But this is one of the most beautiful homes in southern California,

with several acres around it. If you put that out for auction, you

would either put it in the Coast Guard Academy’s foundation or

some place—let me tell you, that would be at least $10 million for

that home. Now that home was never built for the Coast Guard.

Believe it or not, it was built for the chief public health officer in

1934, and they lived very well.

Mr. SESSIONS. Or did.

Mr. HORN. Well, the Coast Guard Commander, until they moved

north, that was his home; and it was a great place to entertain.

So I like the suggestions you gentlemen have agreed on. And so

let’s hear what we get out of that, and I’ll be glad to do whatever

you want in getting more witnesses in, whatever. So you’re quite

welcome. So if there’s no further questions—do you have some

more? Do you have any more?

Mr. SESSIONS. I’m done, sir. Thank you.

Mr. HORN. We will then put this in recess rather than adjourn.

We’re in recess subject to call of the Chair. Thank you very much.

I would also like to thank the following people: J. Russell George,

staff director and chief counsel; Randy Kaplan, counsel; Bonnie

Heald, director of communications; Bryan Sisk, clerk; Elizabeth

Seong, staff assistant; Will Ackerly, intern; Chris Dollar, intern;

Davison Hulfish, intern. And for the minority, Trey Henderson,

counsel; and Jean Gosa, minority clerk. Also, our court reporter of

debates, Melinda Walker.

[Whereupon, at 12:50 p.m., the subcommittee was adjourned,

subject to the call of the Chair.]

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