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[Federal Register Volume 75, Number 101 (Wednesday, May 26, 2010)]
[Notices]
[Pages 29573-29574]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-12703]

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DEPARTMENT OF THE INTERIOR

National Park Service

Concession Contracts; Implementation of Alternate Valuation 
Formula for Leasehold Surrender Interest in the Signal Mountain Lodge 
and Leek's Marina Proposed Concession Contract, Grand Teton National 
Park

AGENCY: National Park Service; Interior.

ACTION: Notice.

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SUMMARY: The National Park Service (NPS), by notice in the Federal 
Register dated February 1, 2010, invited public comments on a proposed 
alternative formula for the valuation of leasehold surrender interest 
(LSI) pursuant to authority contained in Public Law 105-391 enacted in 
1998 (the 1998 Act) to be included in its proposed concession contract 
GRTE003-11 for operation of the Signal Mountain Lodge and Leeks Marina 
at Grand Teton National Park (new contract). NPS invites further public 
comment in the proposed LSI alternative.

DATES: Public comments will be accepted on or before June 25, 2010.

ADDRESSES: Send comments to Ms. Jo Pendry, Chief, Commercial Services 
Program, National Park Service, 1201 Eye Street, NW., 11th Floor, 
Washington, DC 20005, or via e-mail at [email protected] or via fax at 
202-371-2090.

FOR FURTHER INFORMATION CONTACT: Jo Pendry, Chief Commercial Services 
Program, 202-513-7156.

SUPPLEMENTARY INFORMATION: Public comments received in response to the 
February 1, 2010, Federal Register notice regarding the proposed LSI 
alternative expressed concerns, among other matters, that the notice 
did not contain a sufficient explanation of the relationship of the 
proposed LSI alternative to the objectives of providing a fair return 
to the government and fostering competition for the new contract. For 
this reason, NPS considers it appropriate to provide a further 
opportunity for public comment on the proposed LSI alternative. 
Although NPS, among other matters, is considering the possibility of 
changing the currently proposed LSI provisions of the new contract with 
respect to the treatment of fixtures for LSI purposes, the NPS will not 
make a final administrative decision in regard to the proposed LSI 
alternative until after full consideration of all public comments 
received in response to both this and the February 1, 2010, Federal 
Register notice. The submission date for proposals for the new contract 
has been extended to August 10, 2010, by notice in FedBizOpps 
(FedBizOpps.gov) under Solicitation No. GRTE003-11 published on April 
29, 2010.
    The standard formula for LSI value for applicable improvements 
provided by a concessioner under a National Park Service concession 
contract as defined in 36 CFR Part 51 (``standard LSI formula'') is as 
follows:
    (1) The initial construction cost of the related capital 
improvement;
    (2) Adjusted by (increased or decreased) the same percentage 
increase or decrease as the percentage increase or decrease in the 
Consumer Price Index from the date the Director approves the 
substantial completion of the construction of the related capital 
improvement to the date of payment of the leasehold surrender interest 
value;
    (3) Less depreciation of the related capital improvement on the 
basis of its condition as of the date of termination or expiration of 
the applicable leasehold surrender interest concession contract, or, if 
applicable, the date on which a concessioner ceases to utilize a 
related capital improvement (e.g., where the related capital 
improvement is taken out of service by the Director pursuant to the 
terms of a concession contract).
    However, Section 405(a)(4) of Public Law 105-391 authorizes the 
inclusion of alternative LSI value formulas in concession contracts 
(such as the new contract) estimated to have an LSI value in excess of 
$10,000,000. Under this authority, the proposed LSI alternative is as 
follows:
    (1) Initial LSI Value. The reduction of the initial LSI value under 
the new contract on a monthly straight line depreciation basis applying 
a 40-year recovery period regardless of asset class. There is no 
adjustment of the initial LSI value as a result of the installation 
(including replacement) of fixtures in the related capital improvements 
during the term of the proposed contract; and
    (2) New LSI Value. The reduction of the LSI value in any new 
structures or major rehabilitations constructed during the term of the 
new contract to be based on straight line depreciation and also apply a 
40-year recovery period (on a monthly basis) with no asset class 
distinctions. The construction cost of new capital improvements will 
include the costs of installed fixtures. Any installation (or 
replacement) of fixtures after the initial construction would not alter 
the established LSI value in the improvements.
    Section 405(a)(4) of the 1998 Act requires NPS, in certain 
circumstances, to determine that use of the LSI alternative, in 
comparison to the standard LSI formula, is necessary in order to 
provide a fair return to the government and to foster competition for 
the new contract by providing a reasonable opportunity for profit to 
the new concessioner.
    With regard to a fair return to the government, under the standard 
LSI formula the amount of money paid (by the government, directly or 
indirectly) for LSI as of the expiration of the new contract is 
inevitably speculative at the time of contract solicitation, contract 
award, and during the contract term. This is because the future rate of 
the Consumer Price Index (CPI), the amount of future physical 
depreciation that will occur, and the cost to cure such future physical 
depreciation, must all be estimated in advance of the new contract by 
both NPS and prospective concessioners.
    As a consequence, if the NPS were to establish the required minimum 
franchise fee for the new contract under the terms of the standard LSI 
formula, that minimum fee necessarily would incorporate speculative 
estimates of these factors. Likewise, if a prospective concessioner 
offered to meet or exceed the minimum franchise fee established by NPS 
under the standard LSI formula, its business decision would necessarily 
be made in reliance on speculative estimates of future CPI and future 
physical depreciation of LSI improvements.
    If the NPS depreciation and CPI assumptions made at the time of 
contract solicitation ultimately prove to be inaccurate, its minimum 
franchise fee will result in a less than fair return to the government. 
NPS therefore believes, subject to review of public comments, that the 
proposed LSI alternative, in comparison to the standard LSI formula, 
will better provide a fair return to the government under the new 
contract.
    NPS also believes (again, subject to review of public comments) 
that eliminating the speculative aspect of LSI value will help foster 
competition for the new contract by providing a reasonable opportunity 
to make a profit. This is because prospective

[[Page 29574]]

concessioners will know not only the amount of money they will be 
obliged to pay the prior concessioner for existing LSI under the terms 
of the new contract, but also will know with a high degree of certainty 
how much money they will recover from this payment upon the expiration 
of the new contract (based on the 40-year amortization period). The 
proposed LSI alternative effectively eliminates the speculation about 
physical depreciation and CPI that is required for proposed contracts 
under the standard LSI formula. The resulting lower risk and greater 
certainty in the business opportunity will foster competition for the 
new contract by providing a reasonable opportunity to make a profit.
    The proposed LSI alternative is projected to provide approximately 
the same rate of return for the new concessioner as the standard LSI 
formula. This is because, in developing the minimum franchise fee under 
the proposed LSI alternative, NPS estimated that the new contract would 
provide the new concessioner with a reasonable opportunity to make a 
net profit. This estimate took into consideration, among other matters, 
applicable industry rate of return expectations, the purchase price of 
the existing LSI improvements, and the LSI value that will be payable 
to the concessioner after contract expiration under the proposed LSI 
alternative. If the standard LSI formula were utilized, the projected 
LSI value payment to the new concessioner would necessarily be much 
higher, resulting in a much higher minimum franchise fee for the new 
contract.
    In other words, the lower LSI value payment upon contract 
expiration under the proposed LSI alternative (as opposed to the 
standard LSI formula) results in a lower minimum franchise fee, and 
achieves the same approximate projected rate of return to the 
concessioner. The proposed LSI alternative results in increased cash 
flows to the concessioner during the entire term of the contract, while 
the standard LSI formula provides a higher payment of LSI at the 
expiration of the contract.
    The proposed LSI alternative, if adopted by NPS, would be 
applicable only to the new contract, GRTE003-11. NPS has made no 
decision to apply the proposed LSI alternative or any other LSI 
alternative to future concession contracts. If the same or other 
alternative LSI formulas are considered for utilization in subsequent 
contracts pursuant to Section 405(a)(4) of the 1998 Act, opportunities 
for public comment will be provided as required. NPS will provide 
notice of its final decision regarding the LSI provisions of the new 
contract in the Federal Register and/or in FedBizOpps (FedBizOpps.gov 
under Solicitation No. CC-GRTE003-11).
    Before including your address, phone number, e-mail address, or 
other personal identifying information in your comment, you should be 
aware that your entire comment--including your personal identifying 
information--may be made publicly available at any time. While you can 
ask us in your comment to withhold your personal identifying 
information from public review, we cannot guarantee that we will be 
able to do so.

Daniel N. Wenk,
Deputy Director, Operations.
[FR Doc. 2010-12703 Filed 5-25-10; 8:45 am]
BILLING CODE 4312-53-P
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