Evening star., 1943-01-05
Byrd Hits Hotel Buying
By Army as Causing
Postwar Problem
Senator, Patterson Clash
On Policy Of Stevens
And Other Properties
BY ]. A. O'LEARY.

BY J. A. OLEARY.
The Governments policy of buyin.
big hotels, like the Stevens il
Chicago, instead of renting them, tt
house troops, will add greatly t.
postwar liquidation problems. Sena.
tor Byrd, Democrat, of Virgins
warned last night.
He made public correspondence
with the War Department, revealing
that he was still unconvinced of the
wisdom of the policy after studying
a detailed explanation by Under.
secretary of War Robert P. Patter.
son.
Declaring that Government owner
ship Is a step toward state so.
cialism,' the Virginian said lit woulo
seem to me that property needed fol
the present emergency should be
leased, if possible, and not directly
purchased.
Patterson Claims Savings.
Justifying the purchase of the
3,30G-room Stevens for $4,000 900
Mr.. Patterson had contended in q
letter of December 16, just made
public, that the Government coulo
sell the Stevens after the war fol
100000, and come out of the trans
action with saving of S1,295 ,O0C
below the cost on a rental basis fol
a three-year period
II the property had been rented
for only two years, Mr.. Patterson
figured the saving through purchase
would still be $48O,00O.
In arriving at these savings, Mr.
Patterson said the rent would have
been $875,000 year, or So, ,625 900 for
three years. To this he added an
Army estimate of $l,500,000 as the
cost OF putting the building back
into condition for hotel purposes
making his estimate of the total
rental cost for three years, S4,125, 900
From the purchase price of So
10000 he deducted $5OO0OO as a
credit from the sale of hotel furni
ture, making the net price $780,
600. Then assuming the property
would be sold for 100000 he fig
ured the Governments loss on re-
sale at $2,500,000, plus $33O,OOO for
the cost of financing at 2 per cent,
or total cost to the Government
of s2,830000. as against s4,125 900
on the rental basis for three years.
If the property is only held for
two years. he figured the final cost
to the Government would be So
10000, against $3,25Q000 on the
rental basis for two years.
Byrd Replies.
In reply, Senator Byrd had this
to say:
The figure you cite in support Of
your contention that the purchase
OF the Stevens Hotel was a sound
business venture are, I think. open
to question. You state that the
owners Of this property demanded
an annual rental of S875 900, which
Is rental of approximately Is per
cent on its appraised value. In
addition to this rental. you estimate
that one and half million dollars,
which is Is per cent of the pur-
chase price, would have to be ex-
pended by the Government for re-
habilitation, in the event of rental.
provided the property is occupied
for two years or longer.
1T would seem to me that these
figures are unnecessarily high, and
hope the rental of the approx
mately 500 other hotels has not
been on such an extravagant basis.
AS the Government has the
emergency power to commander
properties of this character at fair
rental values. I personally do not
think this purchase was sound
business venture. had the rental
been a reasonable one, based on
the estimated value.
But what I want to emphasize is
that it Is far better to rent at a fair
price than to purchase. You have
only to look at the experience of the
Government in the ownership and
operation of private property. 1t
has been disastrous and costly in
every single instance. 1 have never
known the Government to operate
any business enterprise on COM
parative basis of efficiency with
private industry. In the resettle-
ment projects many millions of dol
lars were lost, and even now those
projects not yet sold are costing the
Government $l,600000 yearly in
losses in operation and expenses.
Asks Other Data.
7 sincerely hope that the War
Department will consider the factors
involved in postwar liquidation and
not make unnecessary direct pur-
chases. which unquestionably will
add greatly to these liquidation diff
culties. Even with the utmost
prudence and caution on the part
of the Government authorities dur
ing this emergency, these postwar
problems will be exceedingly serious. -
Senator Byrd. leader of the
economy bloc, concluded by asking
Mr.. Patterson to send him the rental
prices of ATS other hotels leased,
the estimated rehabilitation cost,
appraised value and taxable value
Earlier in his letter the Virginia
Senator said that before the war the
Federal Government owned about 5
per cent Of the land area of the
country. and added:
Il am informed that the present
and projected wartime land pur-
chases. If they are consummated as
now planned, will increase the Gov
ernment ownership land to about
the size of all New England"
He also made the point that when
property is bought by the Govern
ment it becomes taX-exempt, where
as leasing does not dislocate the tax
systems Of localities and States.
AS further argument to support
the Governments purchase of the
Stevens Hotel, Mr.. Patterson had
stated in his letter that, under the
rental proposal, hotel representatives
would have asked for compensation
to cover the cost of regaining
patronage and goodwill after the
war In condemnation proceedings
to rent the hotel, Mr.. Patterson said,
the Justice Department would have
conceded the Government liability
tn restore the phySjcal condition h,lt