[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]

SITTING ON OUR ASSETS: CUTTING
SPENDING AND PRIVATE REDEVELOPMENT
OF UNDERPERFORMING BUILDINGS

=======================================================================

(112-40)

HEARING

BEFORE THE

SUBCOMMITTEE ON
ECONOMIC DEVELOPMENT, PUBLIC BUILDINGS, AND EMERGENCY MANAGEMENT

OF THE

COMMITTEE ON
TRANSPORTATION AND INFRASTRUCTURE
HOUSE OF REPRESENTATIVES

ONE HUNDRED TWELFTH CONGRESS

FIRST SESSION

__________

FEBRUARY 10, 2011

__________

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COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE

JOHN L. MICA, Florida, Chairman

DON YOUNG, Alaska NICK J. RAHALL II, West Virginia
THOMAS E. PETRI, Wisconsin PETER A. DeFAZIO, Oregon
HOWARD COBLE, North Carolina JERRY F. COSTELLO, Illinois
JOHN J. DUNCAN, Jr., Tennessee ELEANOR HOLMES NORTON, District of
FRANK A. LoBIONDO, New Jersey Columbia
GARY G. MILLER, California JERROLD NADLER, New York
TIMOTHY V. JOHNSON, Illinois CORRINE BROWN, Florida
SAM GRAVES, Missouri BOB FILNER, California
BILL SHUSTER, Pennsylvania EDDIE BERNICE JOHNSON, Texas
SHELLEY MOORE CAPITO, West Virginia ELIJAH E. CUMMINGS, Maryland
JEAN SCHMIDT, Ohio LEONARD L. BOSWELL, Iowa
CANDICE S. MILLER, Michigan TIM HOLDEN, Pennsylvania
DUNCAN HUNTER, California RICK LARSEN, Washington
TOM REED, New York MICHAEL E. CAPUANO, Massachusetts
ANDY HARRIS, Maryland TIMOTHY H. BISHOP, New York
ERIC A. ``RICK'' CRAWFORD, Arkansas MICHAEL H. MICHAUD, Maine
JAIME HERRERA BEUTLER, Washington RUSS CARNAHAN, Missouri
FRANK C. GUINTA, New Hampshire GRACE F. NAPOLITANO, California
RANDY HULTGREN, Illinois DANIEL LIPINSKI, Illinois
LOU BARLETTA, Pennsylvania MAZIE K. HIRONO, Hawaii
CHIP CRAVAACK, Minnesota JASON ALTMIRE, Pennsylvania
BLAKE FARENTHOLD, Texas TIMOTHY J. WALZ, Minnesota
LARRY BUCSHON, Indiana HEATH SHULER, North Carolina
BILLY LONG, Missouri STEVE COHEN, Tennessee
BOB GIBBS, Ohio LAURA RICHARDSON, California
PATRICK MEEHAN, Pennsylvania ALBIO SIRES, New Jersey
RICHARD L. HANNA, New York DONNA F. EDWARDS, Maryland
STEPHEN LEE FINCHER, Tennessee
JEFFREY M. LANDRY, Louisiana
STEVE SOUTHERLAND II, Florida
JEFF DENHAM, California
JAMES LANKFORD, Oklahoma

(ii)

Subcommittee on Economic Development, Public Buildings, and Emergency
Management

JEFF DENHAM, California, Chairman

TIMOTHY V. JOHNSON, Illinois ELEANOR HOLMES NORTON, District of
ERIC A. ``RICK'' CRAWFORD, Columbia
Arkansas, HEATH SHULER, North Carolina
Vice Chair MICHAEL H. MICHAUD, Maine
RANDY HULTGREN, Illinois RUSS CARNAHAN, Missouri
LOU BARLETTA, Pennsylvania TIMOTHY J. WALZ, Minnesota
BOB GIBBS, Ohio DONNA F. EDWARDS, Maryland
PATRICK MEEHAN, Pennsylvania BOB FILNER, California
RICHARD L. HANNA, New York NICK J. RAHALL II, West Virginia
STEPHEN LEE FINCHER, Tennessee (Ex Officio)
JOHN L. MICA, Florida (Ex Officio)

(iii)

CONTENTS

Page

Summary of Subject Matter........................................ vi

TESTIMONY

Peck, Robert A., Commissioner, Public Buildings Service, General
Services Administration........................................ 6
Principi, Hon. Anthony J., Former Secretary, Department of
Veterans Affairs............................................... 6
Wise, David J., Director, Physical Infrastructure Issues,
Government Accountability Office............................... 6

PREPARED STATEMENTS SUBMITTED BY WITNESSES

Peck, Robert A................................................... 22
Principi, Hon. Anthony J......................................... 29
Wise, David J.................................................... 35

SUBMISSION FOR THE RECORD

Wise, David J., Director, Physical Infrastructure Issues,
Government Accountability Office, response to question from the
Subcommittee on Economic Development, Public Buildings, and
Emergency Management........................................... 47

[GRAPHIC] [TIFF OMITTED] T5445.001

[GRAPHIC] [TIFF OMITTED] T5445.002

[GRAPHIC] [TIFF OMITTED] T5445.003

[GRAPHIC] [TIFF OMITTED] T5445.004

SITTING ON OUR ASSETS: CUTTING
SPENDING AND PRIVATE REDEVELOPMENT
OF UNDERPERFORMING BUILDINGS

----------

THURSDAY, FEBRUARY 10, 2011

House of Representatives,
Subcommittee on Economic Development, Public
Buildings, and Emergency Management,
Committee on Transportation and Infrastructure,
Washington, DC.
The subcommittee met pursuant to notice at 10:17 a.m. in
The Old Post Office building annex, Washington, DC, Hon.
Jeffrey Denham (Chairman of the subcommittee) presiding.
Chairman Denham. The Subcommittee on Economic Development,
Public Buildings, and Emergency Management will now come to
order. This is the subcommittee's first hearing of the 112th
Congress, and I want to thank our witnesses and committee
members for braving the cold to be here this morning.
First, let me start by thanking Chairman Mica for providing
me the opportunity to chair this important subcommittee. I
appreciate the trust that you've placed in me and I will work
hard to find ways to save taxpayer dollars and leverage private
resources to redevelop Federal properties. I also want to build
a strong partnership with the Ranking Member, Member Norton.
We have had several meetings already and we look forward to
continuing our relationship. I am truly fortunate to have a
ranking member with such knowledge and experience and I look
forward to continuing this committee's bipartisan tradition. We
are here in the annex of the Old Post Office building to turn
the spotlight on vacant Federal space in Washington, and all
across the country, so that we may find ways to stop sitting on
our assets and save taxpayer money.
The Old Post Office building sits on prime real estate in
the Nation's capital. Walking distance from both the White
House and the Capitol Building on what is considered America's
Main Street, Pennsylvania Avenue. Common sense would tell us
this building should have tremendous value for the taxpayers;
however, the reality is much different. GSA loses over $6
million annually on this building, and the annex has become
vacant for more than a decade--more than a decade.
The sad fact is, there are buildings like this one all over
the country. And as a former State senator from California,
I've seen first hand the cost of poor management of these
public buildings has on all of our budgets, and the waste is
significant. In fact, excess and under used space is a key
reason the Government Accountability Office placed Federal real
property on its high-risk management list in 2003, and why it
remains there today.
It's on the GAO's high-risk list for good reason: vacant
and underperforming assets are costly to all taxpayers.
According to the Federal Real Property Council in fiscal year
2009, the Federal Government spent $1.7 billion in annual
operating costs for underutilized buildings, and $134 million
annually for excess buildings. Last October, Chairman Mica and
the Republican members of the committee issued a report
entitled, ``Sitting On Our Assets: The Federal Government's
Misuse of Taxpayer Owned Assets.''
One of the report's recommendations is to redevelop
millions of square feet of idle or vacant Federal buildings,
such as the Old Post Office building here in Washington, DC,
through public/private partnerships. Ranking Member Norton is
also a strong advocate of redeveloping underutilized properties
and she wrote the Old Post Office Building Redevelopment Act of
2008. In this case, GSA has the legal authority to redevelop
the building and generate a positive return. Yet, this annex
continues to sit vacant and bleeds taxpayer money.
Business as usual must stop. One of our four witnesses
today, Secretary Principi, has tremendous experience attracting
private investment to redevelopment, Veterans Affairs
facilities, and I hope we can apply these models to GSA
properties. In addition, one of the first things we must do is
identify underperforming assets. I understand the GSA maintains
a database of Federal real property.
We have talked about that in recent days, yet we continued
to find that we are absent a complete list. So that's certainly
an area we will be working on very aggressively here. The
practice must end, so our committee can conduct oversight of
all Federal real estate properties.
I look forward to working with Chairman Mica, Ranking
Member Norton and other members of our committee on reforms
that will help stop wasteful spending. I also hope to work with
all of our witnesses and others in the private sector who have
firsthand experience turning around these underperforming
assets.
I would now like to recognize Ranking Member Norton from
the District of Columbia for 5 minutes to make any opening
statements she may have, and we will be operating a little bit
old school here today with the lack of technology or the lack
of wiring here in this facility, so bear with us.
Thank you.
Ms. Norton. Thank you, Mr. Chairman. Can you hear me?
Hello!
[Laughter.]
Ms. Norton. First, I am pleased to be serving with our new
subcommittee chair, Representative Jeffrey Denham, and to
welcome him to Washington. I have had the opportunity to meet
with Chairman Denham and I believe that his prior State and
professional experience and his expertise will serve the
subcommittee and the Congress and the Nation very well.
I would like to apologize to the witnesses and to others
who have come to this important hearing, and I just want to say
for the record that I object to it being held in this annex.
This is a hearing on the Old Post Office. The Old Post Office
had a room, which would have the dignity of a congressional
hearing. This is not a historic building.
It would have allowed us to see this extraordinary
structure and to understand the waste. Today we examine why the
development of the Old Post Office, a nearly empty, unique,
historic treasure located here at 1100 Pennsylvania Avenue,
Northwest, has been delayed.
What this property can tell the subcommittee about how GSA
manages its real estate portfolio and how the agency can
improve, by making this first hearing of the subcommittee a
sight hearing at the Old Post Office, the subcommittee is
making a point to GSA as the subcommittee tries to understand
why the development of a company crying out for development has
been repeatedly delayed in both Democratic and Republican
administrations.
For more than 10 years our subcommittee and the full
committee leadership have expressed mounting concern about the
neglect and underutilization of this valuable government
property and have pressed the GSA to develop and use this
building with its considerable benefit potential--sorry--to
benefit taxpayers. The implication of today's hearing and the
questions we are asking could not be clearer.
We ask today: are there more Old Post Office sites
languishing in full view around the Nation? The magnificence of
the historic Post Office building--you'll see it if you go out
there and look at it as you exit. Its central location and
priceless value have long made the building ripe for
development.
I am mystified why it has been difficult to get GSA through
Republican and Democratic administrations to develop this
building to its highest and best use in light of a directly
applicable precedent, the highly regarded GSA renovation of the
Hotel Monaco, formerly the Tariff Building.
The GSA renovation of the Tariff Building into the Monaco
Hotel demonstrated that GSA could make excellent use of
otherwise antiquated and virtually useless structures. It would
seem that all that was needed was to take out that playbook
that led to the born again Hotel Monaco, now providing
productive use. Located just a few blocks from the Old Post
Office building, the Tariff Building is a recent model that
shows what can be achieved when the Federal Government works
closely with the private sector to develop property, bringing a
return to the government while providing a safe and necessary
facility for the city and preserving a historic structure.
However, GSA was either unable or did not try hard enough to
overcome OMB's objections to proceeding on the Old Post Office
building despite consistent bipartisan insistence by the
subcommittee.
Finally, we included in the 1998 Omnibus Consolidated
Emergency Act language that required GSA to submit a viable
development plan to Congress. That plan was submitted in
December 2000 and on May 16, 2001, this subcommittee approved
the plan by resolution. Notwithstanding these efforts, the
desired development has not occurred.
The waste and risk posed by the way GSA managed the Old
Post Office building became even more apparent with a violent
altercation and killing of a George Washington University
student outside the Old Post Office building in May 2005,
following rental of the Old Post Office for an event held there
as part of GSA's efforts to rent the facility and gain revenue
from the building.
Congressional oversight requiring development of the site
continued, but GSA did not issue a request for expression of
interest or RFI until late that year, and only after the
violent incident. The RFI received many indications of
interest; however, for no good or sufficient reason, GSA has
never proceeded to the next step of development, although
private developers view the Old Post Office as a trophy
building at a trophy location here between the White House and
Congress.
In 2008 in exasperation I introduced H.R. 5001, the Old
Post Office Building Redevelopment Act of 2008 directing the
GSA to move forward. How many bills and how many hearings does
it take to get GSA to develop a single property. Is the Old
Post Office emblematic of GSA's management of its properties
nationwide? Whatever GSA's response, this subcommittee has no
alternative, particularly given today's budget deficit, except
to require GSA to use the assets it has available or to sell
them.
The Old Post Office building is a historic treasure that
cannot be sold; but, GSA's management of the building is a
drastic example of an underperforming asset that has long been
a drain on our Treasury when it could provide a handsome
financial return to the government as the Monaco Hotel has
done. GSA spends $12 million to operate and maintain the Old
Post Office building, while only collecting $5.5 million in
rent, which results in an annual loss of $6.5 million.
This subcommittee has taken action to provide new tools to
develop GSA property. In 2007 Congress enacted and the
President signed Public Law 108-447, which contained a measure
that granted GSA two new significant kinds of authorities,
often referred to as 412 authority. The first allows the
retention of proceeds from the disposal of real property; and,
the second is additional real property disposition authority,
including authority for leaseback arrangements.
To date, GSA has yet to implement this authority to develop
any of its underutilized property on site anywhere in the
United States, even though there are opportunities that could
bring the government a handsome return. It should not have been
necessary for the subcommittee to come to this annex today to
get the requisite attention to the languishing property of the
Old Post Office site and others like it.
The burden is on our witnesses today to get us out of this
building, and particularly out of this annex; and to get the
government out of leasing real estate properties that could be
redeveloped or could be sold, and I thank you Mr. Chairman.
Chairman Denham. Thank you, Ms. Norton.
At this time I now call on the Chairman of the full
Transportation and Infrastructure Committee, Mr. Mica.
Mr. Mica. Thank you. Well, thank you, Chairman Denham and
Ranking Member Norton, also Ms. Edwards for being with us
today, Mr. Crawford from a warmer climate in Arkansas, and
maybe even Maryland's warmer than here today.
I was hoping, actually, when we were planning this hearing
and I kept looking at the temperature that we'd have a warmer
day; but, in fact, it is a cold day for Members of Congress,
but it's been an even colder decade for the taxpayers who've
had to foot the bill for an empty building in the heart of our
Nation's capital as Ms. Norton said just a few blocks from the
White House and a few blocks from Capitol Hill.
Now, I know Ms. Norton, and having worked with her she's
done everything she could to move forward. It is a sad day when
we have to come here on a cold day to emphasize the lack of
moving forward with this property. We've talked about this
property now for more than a decade, and it's been vacant for
more than a decade. So I'm hoping under your leadership,
Chairman Denham and other members of the committee, that we can
turn this situation around. If GSA doesn't have the tools to
make a difference, then we need to provide them with the tools.
If they don't have the initiative or the incentive to move
forward, then we've got to make certain that we provide them
with that here. Now, if this isn't bad enough, being in this
empty building, is that next door you have 400,000 square feet
of which there are only 400 Federal employees, and almost half
of that space is vacant, underutilized, and is a loss of over
$6.5 million per year. This goes on and on, a waste of taxpayer
dollars.
Now, if this wasn't the only example, this empty building
and next door underutilized, just read a little bit about the
report we published on sitting on our assets and the
underutilized and underperforming public buildings. This is a
national disgrace, and this isn't the only example of it. So
somehow, we've got to get a handle on this. The annex that
we're in is only 53,000 square feet, and the government is
again losing money by the hour in keeping it vacant.
In 2008 the Federal Government's real property portfolio
totaled 3.29 billion square feet of space. A review of the
three agencies in 2009 by GAO revealed about 10 percent of
their properties were in excess or underutilized, meaning there
could be as much as 330 million square feet of extra space
costing taxpayers billions of dollars each year to maintain
them.
GSA in particular holds 282 underutilized buildings that
are costing the taxpayers nearly $100 million a year, so our
report details some of this. It's cold and I'm not going to go
into detail. I don't know what the answer is. I don't know if
we should give up on GSA and other Federal agencies that look
to retain some private management agencies to better utilize
and capitalize and get a better deal for the taxpayers. But I'm
willing to look at any solution.
The answer is not what we're seeing in a cold, empty
building today. We have got to do better and we must do better,
because millions of taxpayers and Americans are counting on us.
Yield back the balance of my time, and I thank everybody for
enduring one of the colder days in Washington.
Chairman Denham. Thank you, Mr. Chairman.
I now call on Ms. Edwards for a brief opening statement if
you look.
Ms. Edwards. I think I'll pass.
Chairman Denham. Mr. Crawford.
Mr. Crawford. Thank you, Chairman.
I want to thank Chairman Mica for his leadership on this
effort and the opportunity to serve on the economic development
of public buildings and emergency management subcommittee.
I am from Arkansas. This won't make you feel a bit better,
but believe it or not it is colder there than it is here. I am
looking forward to working with Chairman Denham as well as
Ranking Member Norton, and the full committee to preserve this
historic building. Our goal is to make sure that historic
Federal properties fulfill their highest and best use of
preserving them for future generations.
The Old Post Office is just one example of the many
properties that we have worth saving. I look forward to working
with Chairman Mica and I thank him again for this opportunity.
Chairman Denham. Thank you. I would like to welcome our
witnesses and thank them for being here today; and, I want to
thank Commissioner Peck of GSA for making the space available
for this hearing.
I ask unanimous consent that our witnesses' full statements
be included in the record. Without objection, so ordered.
Since your written testimony has been made a part of the
record, the subcommittee would request that you limit your oral
testimony to 5 minutes. This is the first committee hearing of
this committee, but I do expect to not only run an efficient
committee, but be very mindful of everybody here's schedules,
so thank you in advance.
We have one panel today: Mr. Robert Peck, Commissioner of
Public Building Service, U.S. General Services Administration;
Mr. David Wise, Director, Physical Infrastructure Issues; the
Honorable Anthony Principi, former secretary of the Department
of Veterans Affairs; and Chairman of the 2005 Defense Base
Realignment and Closure Commission, the BRAC.
I would like to thank all of you for joining us today.
Commissioner Peck, you may proceed.

TESTIMONY OF ROBERT A. PECK, COMMISSIONER, PUBLIC BUILDINGS
SERVICE, GENERAL SERVICES ADMINISTRATION; DAVID J. WISE,
DIRECTOR, PHYSICAL INFRASTRUCTURE ISSUES, GOVERNMENT
ACCOUNTABILITY OFFICE; AND THE HONORABLE ANTHONY J. PRINCIPI,
FORMER SECRETARY, DEPARTMENT OF VETERANS AFFAIRS

Mr. Peck. Thank you, Mr. Chairman, and Chairman Mica,
Chairman Denham, Congresswoman Norton, Congresswoman Edwards
and Congressman Crawford. Thank you for the opportunity to talk
to you today. I am, I was going to say, happy, but I am still
happy to be here to join you at the Old Post Office, a fitting
if cold example of a redevelopment opportunity that this
administration is prepared to take.
By a number of measures, I have to say, GSA, itself, is a
leader in asset management of our building inventory and
leases, and I will talk about our performance compared even to
private sector measures. We are building on our successes and
managing our assets with aggressive efforts to improve
utilization of government space across the government to
deliver new and innovative work place strategies and use the
authorities we have to further partner with the private sector
to benefit taxpayers.
Since 2002 GSA in the space that we control, which is about
375 million square feet of space has undertaken a major
portfolio restructuring. We have disposed of 204 vacant or
underutilized properties in the GSA inventory, totaling the
more than 9.5 million square feet and receiving $227 million in
proceeds which we were able to do, by the way, under the
section 412 authority that Congresswoman Norton mentioned. This
represented a 5.3 percent reduction in GSA's own portfolio and
eliminated some $460 million in operating costs, and rather in
repair liabilities.
And I want to give credit to one of my predecessors, Joe
Moravec, a former Commissioner of Public Buildings, who I know
is sitting here today. This administration recognizes the need
to do a better job at getting rid of surplus and excess
property, and in June of 2010 President Obama issued a
memorandum, ``Disposing of unneeded Federal real estate put GSA
along with other agencies in charge of culling through the
Federal inventory of excess assets and making sure that we get
them out of the inventory.'' And in his State of the Union
Address, a few weeks ago, President Obama emphasized that this
is going to be a priority for him.
First, I want to talk a little bit about how we manage our
GSA assets. Just to let you know, the national vacancy rate
right now for real estate, because we have a soft market, is
somewhere between 15 and 20 percent. The comparable rate in the
GSA inventory is 2.4 percent. We manage our assets well; and,
here, I want to get our terms clear. When in the Federal
Government's real estate inventory report, we recorded an asset
as surplus or excess, or underutilized. As always, there's a
term of art here.
Underutilized property can include property, for example,
that are under renovation. So some properties that look like
we're not using them, we're not using them only temporarily,
because we're upgrading them so they can be used better and
more intensively. Having said that there are clearly Federal
surplus properties, and GSA is very good in our inventory of
tiering our properties. We know we have a three-tier system
based on performance measures, return on investment measures in
which we decide whether an asset in our inventory is worth
keeping, or in the long run is going to be disposed of.
For other agencies across the government, GSA serves as a
real estate asset manager also, and we are in charge, except
for defense properties and some others, a few others in the
public lands, mostly, as the disposal agent. Under the 1949
Federal Property Act we disposed of properties in a number of
ways. One is we can take them to sale. Two, we can give them to
public entities, States and localities, for certain specified
purposes in the law.
And then I have to say, just as a reality check, some of
our properties are in areas where it's hard even to give them
away. They just are someplace that nobody wants them, and some
of those will be retained in the inventory. I say that not to
say that we don't want to get out everything we can, but just
to say that some part of the excess inventory is probably not
amenable to redevelopment.
One other long-term trend which I want to note that we are
working on is that we believe that in the Federal inventory we
can make more intensively use of the space that we do have, and
we are working very hard with Federal agencies to take
advantage of the new mobile workplace technologies that allow
workers to work wherever they can and to use less space for an
employee so that in the years to come, you should be seeing us
use less real estate for the ongoing functions of the
government.
I do want to point to a couple of examples of places where
we have used our authorities to get rid of surplus property.
For example, in 2007 we sold more than 50 acres of land at the
Denver Federal Center. We got $18 million in cash from the
county, and $6 million in easement and environmental
remediation done by the public entity and a good example of how
we can work with the locality to promote economic development.
They built a hospital, provided a rapid transit station
there, and we still occupy an adjacent parcel of land. In 2000
under the leadership of Ms. Norton, the Congress passed the
Southeast Federal Center Public-Private Development Act. We
redeveloped what had been part of the Navy Yard in Washington,
DC, and over the term of that agreement, if we expect to see
proceeds of $43 million to the Federal Government, a great
example of a public-private development.
As Mrs. Norton noted, and when I was in GSA before, we
began redevelopment of the historic Tariff Building in
Washington, DC, as Ms. Norton noted, an example directly
relevant to the Old Post Office building. And the Tariff
Building, which is on a long-term ground lease to a hotel
developer, will over the course of the lease, we believe, earn
$50 million in revenues for the Federal Government.
The Old Post Office itself represents a unique opportunity
and unique history. We renovated this building, the Federal
Government did, in the late 1970s, early 1980s. The Government
put in money and so did a private developer put in $28 million
to develop the retail uses in the building. This annex,
itself----
Chairman Denham. We would ask you to be mindful of the
time.
Mr. Peck. I will. I'm summing up.
Chairman Denham. Thank you.
Mr. Peck. In 1989 this annex was built with $5.5 million in
private funds, and $1.75 million in public funds. This building
itself was a commercial failure. The owner went into default,
and the Federal Government eventually acquired the leasehold.
With direction provided by Congress in the Old Post Office
Building Redevelopment Act of 2008 we should now be able to
leverage the private assets and the public assets in this
building with private sector investment to create a new
development. We are--I have to say this carefully. We are
examining best approaches to doing that and working on the
right kind of request for proposals that would include, for
example, all of the safeguards that we would expect and you
would expect to safeguard the government's interest.
Finally, I'll just note that we very much support and enjoy
the opportunities we have to work with the private sector in
redeveloping vacant or underutilized Federal properties. We do
believe that this building, itself, is a great example of one
of those opportunities; and, obviously, I'm happy to answer any
questions.
Chairman Denham. Mr. Peck, thank you for your testimony.
At this time, Mr. Wise, you may proceed.
Mr. Wise. Good morning. I think I could still turn the
pages of my statement, but Chairman Mica, Chairman Denham,
Ranking Member Norton and members of the subcommittee, thank
you for the opportunity to testify today on our work related to
Federal real property; and, in particular, the issue of excess
and underutilized property held by the GSA.
GSA, often referred to as the Federal Government's
landlord, controls more square feet of buildings than any other
civilian Federal agency. GSA provides a range of real estate
services to its tenant agencies, which it finances through a
revolving fund called the Federal Buildings Fund.
In January 2003 we designated the management of Federal
real property as a high-risk area, in part because of excess
and underutilized property. Other reasons included overreliance
on leasing and the challenges associated with protecting
government assets from terrorism. Later this month we will
report on the status of these issues as part of our update to
the high-risk series.
My testimony today will discuss (1) the scope and cost of
excess and underutilized real property held by Federal
agencies, particularly GSA; and, (2) the challenges they face
in disposing of excess and underutilized real property.
Scope/Costs:
In fiscal year 2009 Federal agencies, including the
Department of Defense (the government's largest property
holder), reported 45,190 underutilized buildings accounting for
about $1.66 billion in annual operating costs. While not all
underutilized properties are unneeded, nevertheless, such
buildings represent the first places to look for possible
consolidation that could facilitate property disposals.
GSA itself has a number of such properties. In fiscal year
2009, GSA reported 282 excess or underutilized buildings
costing about $93 million a year. For example, GSA's excess
properties include an office building warehouse complex,
covering about a million square feet in Fort Worth, Texas. GSA
spent about $1.4 million in fiscal year 2009 to maintain this
complex.
The administration is continuing to focus on disposing of
unneeded properties throughout the government. A June 2010
Presidential memorandum to Federal agencies established a new
target of savings $3 billion governmentwide through disposals
and other methods by the end of fiscal year 2012.
Challenges:
The Federal Government's real property portfolio presents
significant management challenges. We found that many
government real property assets are no longer effectively
aligned with agencies' changing missions. As a result, many may
no longer be needed.
A number of factors may impede the government's property
disposal ability. Numerous stakeholders have an interest in how
the Federal Government carries out its real property practices,
including local governments and business interests, private
sector construction and leasing firms, historic preservation
organizations, various local advocacy groups, and the general
public. These competing stakeholder interests may result in
barriers to real property disposals. In 2007 we recommended
that OMB could assist agencies by developing an action plan to
address key problems associated with unneeded real property,
including reducing the effects of stakeholder interests in real
property decisions. OMB agreed with the recommendation, but has
yet to fully implement it, because it's unsure of a strategy to
reduce stakeholder interests.
Legal issues may impact real property decisionmaking. As we
reported in 2007 Federal agencies are required by law to assess
and pay for environmental cleanup that may be needed before
disposing of any property. In some cases, the cost of this
cleanup may actually exceed the cost to maintain the excess
property. Also, certain legislative mandates, such as the
McKinney-Vento Homeless Assistance Act and the Public Benefit
Conveyance Program may lengthen the disposal process and/or
result in zero net proceeds to GSA. As a result, GSA officials
have stated that they are unlikely to have sufficient time to
identify additional properties, complete disposal, and achieve
the cost savings by the 2012 deadline mandated in the
aforementioned Presidential memorandum and will need to employ
other strategies to meet the goal.
In conclusion, the government has many excess and
underutilized properties that cost billions each year to
maintain. Despite efforts to reduce this inventory, multiple
obstacles remain that preclude any quick and easy solutions.
GSA is in a unique position to take a leadership role, to
promote innovation in how the government manages its excess
underutilized properties. Until these obstacles are overcome,
this issue will remain high risk. Mr. Chairman, this concludes
my statement, and I'm happy to answer the subcommittee's
questions.
Chairman Denham. Mr. Wise, thank you for your testimony at
this time.
Mr. Principi, you may proceed.
Mr. Principi. Thank you. Thank you, Mr. Chairman, and
members of the committee. It's a pleasure to be with you this
morning.
I would like to provide my views as to creating value from
underutilized and underperforming Federal assets. My testimony
today is based on my experiences as Secretary of Veterans
Affairs from 2001-2005. I also served as chairman of the 2005
Defense-based Realignment and Closure Commission.
When I assumed my responsibilities at VA, VA was the
Federal Government's second-largest department, being comprised
of a nationwide system of healthcare facilities and services,
benefit program and national cemeteries for our Nation's 25
million veterans and their dependents.
The department was and is now a major landholding agency
with a diverse portfolio of property with over 33,800 square
acres of land--over 5500 buildings with about 146.9 million
square feet at approximately 270 locations. This is in addition
to leasing over 15.5 million square feet nationwide.
While VA is one of the largest direct providers of
healthcare in the world, it has an aging infrastructure with an
average age of buildings of over 50 years, many of which were
built after WWII when treatment was primarily rendered in in-
patient facilities.
Also, since that time we've seen a profound change in the
delivery of healthcare in America, and certainly at the VA. As
a result, a significant amount of space either was
underutilized or became vacant. In order to address these
challenges and in an effort to encourage significant operating
cost reductions and savings that could be applied to expanding
medical care for veterans, I undertook two initiatives.
The first was to bring all the stakeholders together: the
Veterans organizations, academic medicine, our physicians, to
craft a blueprint on how we could transform the VA from a
hospital centric system to a patient focused system. Close down
unneeded hospitals and open up hundreds of outpatient clinics
in veterans communities, so that they get access care without
having to drive hour after hour to a VA medical center to get
their prescription drugs or primary care--things that can be
done on an outpatient basis.
Secondly, I asked two gentleman: Michael Simmons, one of my
senior legal counsels, and Tony Kushner who I took from the
Navy, to establish a new management approach that could be used
as an additional tool in VA's management of its infrastructure.
That approach was ultimately enacted by Congress, and has
become known as enhanced use leasing.
Enhanced use leasing is a cooperative arrangement for the
development of underutilized or vacant Federal property.
Basically, an agency leases Federal property on a long-term
basis to a public or private entity for the development of non-
Federal or Federal uses. In return for the ground lease, the
agency obtains fair consideration which could be in the form of
money, facility, space, services or in-kind consideration.
When applied in the context of an agency's facility
acquisition strategy, the results can be very favorable. For
example, a VA administrative officer is not significantly
different from a commercial office building. During my tenure
at VA, we built three major office buildings along with parking
facilities that were privately financed, developed and operated
on what was once vacant VA land, so that veterans would have
the benefit of one-stop shopping--a VA medical center, an
adjacent medical center, a benefits office where they can apply
for their benefits. Further, because these buildings were
constructed on Federal land, title to the buildings passed to
the government on expiration of the ground lease.
The EU authority also serves as a useful portfolio
management tool. A good example is the Chicago lake side
enhanced use lease. Using this authority, we implemented a much
needed realignment of two underperforming VA medical centers in
Chicago. One hospital was an aging high-rise facility located
in the heart of Chicago's Gold Coast, Michigan Avenue. It was
expensive to operate, and it will serve the veteran patient
base that had moved from downtown Chicago, and returned for a
long-term lease of that campus to Northwestern University
Medical Center and the Rehabilitation Institute of Chicago.
VA received over $50 million that could be applied to
building a new vet tower for veterans in the west side where
most of the veterans who were accessing the VA lived, and it
turned out to be a very, very successful program. So I believe
that both enhanced use leasing and having Federal agencies come
together with their stakeholders to devise a plan for the
future can indeed lead to the better utilization of vacant or
underutilized property.
Thank you Mr. Chairman and members of the committee.
Chairman Denham. Mr. Principi, thank you for your
testimony. At this time we'll start around of questioning. The
first question goes to you, Mr. Peck.
As you know, Congress passed legislation in 2008 to direct
GSA to redevelop the building we are in today. In accordance
with existing authorities, GSA has authority to redevelop
underperforming buildings even without special legislation;
but, it is my understanding the special legislation was needed
last year, even though this building has went vacant for over a
decade.
Can you explain why the timing and why this has taken so
long?
Mr. Peck. Well I can speak some for the period of time I
wasn't at GSA. One, I think that there have been, as you know,
times when it's a good time in the real estate market to go out
with a proposal like this and times when it's not. So if I
could focus on 2008 to the present, I would be more useful;
but, I will note that I'm the guy who signed the report in 2000
suggesting that we redevelop the building.
It clearly took during the succeeding years--I'm not quite
sure what was going on. But I do know that since I've been back
at GSA, in 2009 we've taken a long, hard look at the building;
and, in December 2009 we had a panel of the Urban Land
Institute take a look at the building, give us some advice on
how we might put it out to market.
Their suggestion at that time was it was not a good time to
take the building to market because of the softness in the real
estate economy. I can tell you that one reason we have
rekindled our interest and are prepared to go forward is that
we have been approached by a number of development interests
who've told us that they are interested in taking the Old Post
Office building in some kind of an arrangement that probably
parallels what we did for the Hotel Monaco.
So I'm hoping sometime soon to be able to report to you
that we are going out to the market, and we will, when we do
that, select a developer, negotiate a lease, and as the law
requires bring it to this committee for its review.
Chairman Denham. You made a determination in 2000. You
personally made a determination in 2008, and 2009 you decided
it was a soft economy and were not prepared to sell at that
time; and, yet, it took 2010 to actually push legislation to
get things moving. We're still in a soft market right now. Are
we not?
Mr. Peck. The hotel market has been actually quite active
in the last 6 months or so, 6 to 8 months. The chronology,
again, in 2008 Congress passed the Redevelopment Act. I came
back to GSA in 2009. In late 2009 we were advised by a real
estate panel that that was not a good time to go to market;
but, I can tell you that by at least halfway through midyear
2010, we were being approached by developers who said that the
market--at least for hotel and some high-end office uses--had
changed. Then it might be a good time to go back out to the
market. And we have been working actively since at least 2009
to prepare for bringing this building to market.
Chairman Denham. So are we prepared to go to market now?
Mr. Peck. We are. GSA is working diligently to produce a
request for proposals that we can put out on the street.
Chairman Denham. And when do you expect that to be
complete?
Mr. Peck. I don't want to give you an exact timeframe, but
I can tell you that we are prepared pretty soon to go out.
Chairman Denham. In your best estimation, when do you think
the people of this fine city will actually be able to walk
through here and see development taking place and be able to
utilize this building?
Mr. Peck. Well, let's say we could get an RFP on the street
in a couple of weeks. It would probably take--our assumption is
that we could make a selection for a developer by somewhere
around June-July of this year and probably take another 9
months or so to negotiate a lease. That's our experience in
getting to a real development agreement. I've done this in the
private sector, and that's about the same timeframe that I
experienced doing that kind of work there too.
Chairman Denham. So beyond listing the property as surplus,
excessive or unneeded properties, beyond that, putting the
proposal out to request and actually finding somebody and
moving on it so that it's taking it off of our roles, what do
you expect that average timeframe would be?
Mr. Peck. Well, I would say if we could negotiate----
Chairman Denham. That's understanding how long it takes
just to declare something surplus from the land grabs of all
the other agencies.
Mr. Peck. Well, in this case, we don't in the case of this
building, at least. Are you talking about this building, still,
Mr. Chairman?
Chairman Denham. I'm talking specifically about this
building, but I'm trying to get a good understanding as the
President has talked about this being a priority. As he talked
about it in the State of the Union, we are now looking at
budgetary numbers and making some tough decisions.
I want to get a good idea that we can take back to the
taxpayers of this Nation and say it's going to take us 5 years
to sell properties or it's going to take us 5 months.
Mr. Peck. Right.
Chairman Denham. It's an extraordinary time, and I think
it's going to take extraordinary measures.
Mr. Peck. This property, again, I described the process
before. On this property, we don't have to declare it surplus
or anything else. The Congress has declared for us that this
property should be redeveloped. So I'm telling you that the
amount of time it would take to negotiate a lease and then for
a private sector entity to actually build out the space,
whatever they're going to do, I think you'd probably expect
that we're looking at 2\1/2\ to 3 years.
Three years, I would guess, is a better guess of how much
time before they cut the ribbon and whatever happens in this
building happens, and we can say we've got an asset in full
operation again. For other properties, as you've mentioned,
someone has to declare the property first excess to the
government needs.
It's GSA's job when that happens to go to other Federal
agencies and see if anyone needs that kind of an asset. That's
a process that can take as little as 30 days, and then we
declare a property after that surplus to the government's
needs. And then we go through this, Mr. Wise described a
process in which we have to offer it by law to homeless groups
to see if it's of use to them, and then we offer it to State,
county and city entities to see if they can use it for certain
purposes. And after that we're allowed to take it to a sale if
nobody claims it.
I also have to say though that there have been times when
we've had properties ready to go to sale in various public and
political interests have delayed even that happening, so it can
take a while. I can also tell you that things can happen pretty
fast.
Chairman Denham. So there are a number of regulations that
are impeding your process?
Mr. Peck. There are at times, yes, sir. But once we get it
out to sale, I can tell you that we do on-line auctions. We're
pretty good at that technology. We can move properties pretty
fast. We sold a building in Bethesda a couple months ago for
$12\1/2\ million.
I think the on-line auction took us about 2 months to work
through. So things can move fast when we can be very
businesslike once we actually finally make the decision, we
have a property, and we can put it out on the street.
Chairman Denham. Well this committee expects to be very
aggressive. We plan on making sure that we have plenty of
lists. My final question to you yesterday, at my request you
provided me a list of surplus properties. There were only about
30 properties on that list, even though GSA has thousands under
its purview.
Mr. Peck. Right.
Chairman Denham. And you explained why there were only 30,
but why this building in particular is not on that list?
Mr. Peck. Yes, sir. Well, this building has never, as I
said, this building has never gone through the surplus property
process at all. It's not declared surplus. It's been declared
by the Congress as an asset that we should redevelop, and we're
happy to do that.
The 30 properties that you got on your list were the 30
GSA-controlled properties, in other words, properties in the
GSA inventory per se that are surplus that we are actively--and
we are actively marketing those properties. Of the thousands of
other government properties, I will be happy to work with you
to get you the list as we can.
There are some internal government regulations about how
and when we are allowed to release lists from other government
agency surplus properties, and that's what has not allowed us
in a short timeframe to respond to your request, but I can
assure you we will. We want to work with you. We're as
motivated as you are to get surplus assets out of the
government inventory. I can assure you that.
Chairman Denham. How quickly do you think you'll be able to
provide lists by agency to this committee?
Mr. Peck. Mr. Chairman, I've been in and out of the
government and I would love to give you an estimate. But I'd
like an opportunity to go back and figure out how fast I can
move it. I honestly don't know. There is a cumbersome, probably
too cumbersome process involved in getting the list out.
Chairman Denham. I understand the inefficiencies of
government. I understand that it's taken over 10 years on this
property in particular. We do not have that time.
So let me issue a warning to every agency, that we are
going to be demanding lists. We want to know what properties
are being utilized, underutilized, accessed or surplused; and,
you know, we want to provide the President every opportunity to
sell properties.
But we are coming after agencies to get those lists, so we
are hopeful that every agency will be encouraged to work with
us on a very quickly basis; and, if there are any red tape, if
there's anything that's prohibiting them from providing those
lists, we will make sure that this 112th Congress facilitates
that process in a quick manner.
Mr. Peck. I appreciate that, Mr. Chairman.
We are accountable to you. I work for the President. He's
breathing down our neck also, and we have a mutual interest in
moving these properties.
Chairman Denham. Thank you. At this time, I'd like to open
it up for questioning. I'll recognize each member for 5
minutes, and I'd like to start this round of questioning by
recognizing Chairman Mica, first.
Mr. Mica. I am after Ms. Norton.
Chairman Denham. This time, Ms. Norton.
Ms. Norton. Thank you, Mr. Chairman.
My good friend, the full committee chair, does have a flare
for the dramatic. The next time you want to make a point like
this, I would suggest that you station Mr. Peck here. And
telecast the hearing for the rest of us, who had nothing to do
with the malfeasance that we'd find in here, do not have to
suffer with Mr. Peck.
[Laughter.]
Chairman Denham. At least we're not on Pennsylvania Avenue,
outdoors, in front of the FTC Building.
Ms. Norton. Oh, is that a threat, Mr. Chairman? All right.
We'll see how your fight is.
Mr. Peck, in a meeting last year I asked you to have an RFI
out by the end of the year. We're now into every word. I want
you to tell us exactly where the RFI is. Is it with GSA or is
it at OMB?
Mr. Peck. Ms. Norton----
Ms. Norton. Now, you know, if we can't get straight, Mr.
Chairman, this committee, unlike some committees hasn't always
sworned witnesses. We may have to start. I am asking a direct
question, and it is real clear. I want to know. Is it at GSA or
have you transmitted it to OMB? Yes or no. Where is it?
Mr. Peck. Ms. Norton, the RFP is under review both by GSA
and OMB at the moment.
Ms. Norton. What does that mean?
Mr. Peck. Well, we are responding to some questions from
OMB about what aspect of the RFP.
Ms. Norton. Why in light of the fact that you had a full
model before you, you don't have to start from the beginning
with a historic building. You've got the tariff building. Why
have you been unable to move forward?
Mr. Peck. Well, two things; one is that we learn the Hotel
Monaco/Tariff Building project was a successful project. We did
learn some lessons from it that would apply to this project.
This is a slightly different asset, requires something
different. But I can tell you that we do have a request for
proposals that is in almost final form.
Ms. Norton. Mr. Peck, I think you should deliver this
message, since you say it's two places. That 30 days from today
the chairman of the subcommittee expects the RFP to be out or
to have an explanation from the Administration as to why it is
not out, one or the other within 30 days to the chairman of the
subcommittee.
Mr. Peck. I will be happy to deliver that message. I can
assure you.
Ms. Norton. Appreciate it. By the way, you had one RFI and
they came forward in large numbers.
Mr. Peck. That's correct. That is correct.
Ms. Norton. So you already know the kinds of uses that the
private sector thinks a bit, and yet you had to go out with
another RFI or you're doing an RFP now. This is so redundant
and repetitive, leading nowhere, and the patience of the
subcommittee has gone completely out.
You indicate, and I realize this goes over many
administrations, but Mr. Peck, do not refer to the state of the
market. Not here where the market is stronger than it is in any
other part of the country, and when in fact you had a bull
market in 2005, and it wasn't out in 2005 either. I don't think
you can blame it on the market.
I think that the blame has to be taken where it is in the
Administration, and that's who we're going to hold
responsible--not the people who would love to have this trophy
building out there to build on. What obstacles have kept you
from using the kind of authority Mr. Principi uses routinely
and which the Congress gave you by statute, otherwise known as
412 authority?
Mr. Peck. Since I have been back at GSA, when I was at GSA
in the Clinton administration, we didn't have the 412
authority.
Ms. Norton. Now, just a moment. I only have so much time.
What obstacles since you have been an administrator have kept
you from using 412 authority?
Mr. Peck. Since I've been the Commissioner, there are no
legal obstacles to using 412 authority?
Ms. Norton. What are the obstacles?
Mr. Peck. There really are few obstacles. One is finding a
property that's marketable, that the private sector will be
interested in.
Ms. Norton. Are you joking, Mr. Peck?
Mr. Peck. No, ma'am. Can I finish, please?
Also, all of those properties, all proposals to do those
sorts of things have to go through internal government review.
And, in some cases, they are reviews that----
Ms. Norton. Mr. Peck? Mr. Peck, within 60 days would you
transmit to the chairman of this subcommittee a list of
properties that have the potential for the use of 412
authority, within 60 days to the chairman of this subcommittee?
Mr. Peck. I would be happy to do that.
Ms. Norton. Would you provide a list within 30 days of all
the properties in the national capital region where GSA is
currently losing money?
Mr. Peck. Yes, ma'am.
Ms. Norton. I'd like Mr. Wise and Mr. Principi to indicate
whether you think the government scoring has been an obstacle,
why it hasn't been an obstacle for Mr. Principi, apparently,
why what Mr. Wise believes would be the reasons why an agency
would use 412 authority.
We see that Mr. Peck uses the authority when he is selling
or disposing of property; and, look! We've allowed them to keep
the money, but GSA, it's pretty easy to sell properties. Some
of our properties are themselves quite extraordinary
properties, and I do understand that some, of course, the
market wouldn't be interested in.
So, you see, you know, you put it up for sale. You sell it.
And that doesn't take a lot of expertise. Even I could do that,
but I couldn't build something. And you haven't used 412
authority to build, and yet you are the builder. You are the
developer for the Federal Government.
So Mr. Wise and Mr. Principi, while you are able to build,
Mr. Wise, why are they not able to build since they are in fact
the developers for our government?
Mr. Wise. Congresswoman Norton, thank you for your
question.
I think it's fair to point out that many of the challenges
that GSA faces are really governmentwide. As I mentioned in my
statement, we did recommend in 2007 that OMB, along with the
Federal Real Property Council (of which GSA is a member),
should develop an action plan to address key problems
associated with unneeded property, including reducing----
Ms. Norton. I am asking about disposing a property. I have
indicated, I think, the easy part. And besides we get to keep
the cash. I am asking about building properties. I am asking
about developing properties, and I want to know whether there
are structural obstacles. I even mentioned scoring. I am not
sure that's particularly relevant since they do have 412
authority.
I also heard Mr. Principi, a major builder of the Veterans
Administration. So I am trying to understand why a summit, what
agency builds and the other agency disposes, what sort of I
can't build.
Mr. Principi. We, Madam Ranking Member, we complied with
OMB scoring requirements. Obviously, it was problematic at
times getting our plans through OMB; however, we persisted. We
provided them with the scoring, and as a result, we were able
to develop the buildings, as I indicated, regional office
buildings on the grounds of VA medical centers, so that we
could provide veterans with better service and save money by
not leasing property in the city, if you will. So I think we
accomplished both objectives.
Ms. Norton. Finally, Mr. Wise, you see structural obstacles
at scoring and obstacle of those 412 authorities, essentially
eliminate that obstacle for GSA?
Mr. Wise. Congresswoman Norton, we have not specifically
addressed that issue in our recent work regarding GSA, but it
is certainly something we would be willing to discuss with
subcommittee staff to take to develop that issue.
Ms. Norton. Mr. Peck?
Mr. Peck. May I? It is to answer your question. Section 412
gives us the authority to do land exchanges or public-private
developments, which would allow us to build on a piece of
government land, for example. But all proposals to do that do
have to go through the scoring review at OMB.
Ms. Norton. Do you regard scoring as an obstacle to using
the 412 authority?
Mr. Peck. Yes, ma'am. No question about it; I mean, it is
similar to Capitol East decisions in the private sector.
However, just going through that review and trying to figure
out a way in which you can make it work for the government is a
difficulty.
Ms. Norton. I thank you, Mr. Chairman.
I don't know how Mr. Peck would understand that there was a
scoring problem, since OMB or CBO waits to see what you've got
before it scores. And since, Mr. Peck, you don't have anything
to show us or to show CBO, then of course we cannot know
whether or not you could do 412 authority, as Mr. Principi
does, without being scored. I urge you to find out.
Mr. Peck. Well, Mr. Principi may have clarified, and he can
answer for himself, but the enhanced use lease projects in VA
do have to go through a scoring review.
Mr. Principi. Yes, they do.
Ms. Norton. And somehow they make it.
Mr. Peck. That's true.
Chairman Denham. Thank you. I now call on Chairman Mica.
Mr. Mica. Well, I'll try to be brief since everybody's
about frozen.
Mr. Peck, the ranking member has asked for certain
documentation which we would like to share, not only have come
to the chairman of the subcommittee, but also to the ranking
member in the timeframe sheet allotted.
Also, if you could, in the next 30 days I would like to see
your recommendations for any changes. If OMB is the problem, if
something is an impediment, we've passed laws, several laws.
We've passed specific laws to do this, and we're still sitting
here in an empty, vacant building.
I asked the counsel of the committee or staff director if
we talked to the private sector about what would speed this up.
And with the private sector and probably many of them are out
here today are most of them backed away from this about talking
about what's going on. They're afraid to publicly say anything,
because they deal with GSA.
So we can't get out of them a straight answer what the hell
to do with this, so somehow, if we have to subpoena these
people in and figure out a way to get these projects done and
moving. Unfortunately, this mess that we are sitting in is only
the tip of the iceberg, and this is repeated over and over. And
Mr. Wise is saying that OMB held up an action.
Maybe you could reiterate to the committee in writing, too,
what you see as the obstacles in the next 30 days, and Mr.
Peck, you. And then somehow, if we have to drag some of these
folks in, we will put them under oath, Ms. Norton, or whatever
the people in the real estate business that have to deal with
these folks. But, this isn't getting done, and it's just
frustrating.
We've been talking about this, I think, my entire career
with you, and again, we've got to do a better job. So those are
two requests--expect hopefully in the next 30 days to get those
to the committee.
Mr. Peck. Yes, sir.
Mr. Mica. I yield back the balance of my time.
Chairman Denham. Thank you. At this time, I would like to
invite Ms. Edwards up.
Ms. Edwards. Thank you, Mr. Chairman.
I am shocked I can still move.
[Laughter.]
Ms. Edwards. Just a couple of questions, and to Chairman
Mica and Ranking Member Norton, I haven't been dealing with
this for many, many years, and don't intend to spend my
congressional career trying to figure out what GSA is doing
with the properties, with Federal properties. I am curious,
though, of the 9600 or so assets that you have indicated.
Mr. Peck spoke to several different types of properties,
and I would be interested when you report back to us to have
some indication of where those properties are geographically,
and where they fit in those tiers, because not every property
is just alike. And I mentioned to Chairman Mica when I came in,
my recollection of the Post Office building used to come here
actually quite regularly.
It was much more vibrant earlier on, but that was before
the redevelopment, the full redevelopment of Pennsylvania
Avenue. And it feels as though the property didn't keep pace
with the full redevelopment, and so as a result, no retailer.
You know, sort of hiring retailers, restaurateurs and
commercial occupancy really took place in the building. But the
Post Office building is quite unique in the inventory, and so
it helped to understand the differences in the inventory so
that we can construct both our request and oversight to match
those differences as some properties, it would seem to me,
should be easier to move to market than others.
It would also be helpful to know, and perhaps you can tell
us now, the distinction between the domestic properties and
those abroad, and the different challenges the properties
abroad present versus the inventory that's here domestically.
And what portion of those millions of square feet represent--
properties that pose different challenges--because they're not
located here in the United States?
Mr. Peck. No. Let me answer your first question. I don't
have any internal regulations making it difficult for me to get
you their tier list of our properties. We'll do that right
away, and I appreciate you're asking the question.
Ms. Edwards. Well, what about the full 9600 in assets?
Mr. Peck. That's what I mean. We tier the 1500 properties
that we own. The other 8,000 are leases in private sector
buildings. But in the 1500 we own, which is about 170 million
square feet, we can give you those tiers really quickly.
Ms. Edwards. Thank you.
Mr. Peck. For properties overseas, GSA doesn't actually
manage the overseas properties. They are managed either by the
Defense Department, by and large, or the State Department. And
we can get to the answer to that.
Ms. Edwards. But are they considered part of this broad
asset base?
Mr. Peck. They are, yes, ma'am.
Ms. Edwards. And if it's not helpful, I think, for the
subcommittee to be looking at an asset base of what we think
are 9600 assets, when in fact some percentage of them are
assets abroad that are not within your purview.
Mr. Peck. Right. That's exactly right. There are hundreds
of thousands of government assets. Only 9600 are GSA, and as
you note there are a good number of assets overseas. We can get
you answers on that, too.
Ms. Edwards. Thank you. And then in terms of valuation, I
think when we look at those assets, would it be helpful to have
some idea of the valuation? I mean for this committee's
oversight purposes, looking at the various tiers and where
they're valued, we might say, well, can you prioritize this set
of them, because it has much more productive value to the
taxpayer.
Mr. Peck. We will be happy to. We will be inviting you to
an incredibly stultifying debate about whether we should value
things on their fair market value, replacement value, all those
kinds of things, but we can get you those numbers, too.
Ms. Edwards. Thank you. And then I wonder if you can answer
the question. Of the properties that you have some control
over, the ones that where they may be located in some area that
isn't the best market, but could provide some economic
development opportunity locally, and might we engage in a
different kind of process for those properties to encourage
local economic development and growth, and jobs in places that
are a little bit harder than some of our major metropolitan
areas.
Mr. Peck. Well, I was referring, actually, to assets that
are really pretty far from any kind of a metropolitan center,
or almost any kind of a population base, but assets that are
located near a community, we already do have the authority and
use it pretty successfully, often, to give properties for free
to local entities for either public purposes, public safety,
health, education, or economic development uses, which
communities can also get properties from us to undertake.
Ms. Edwards. Thank you. I know my time is expired, so I may
have some other questions, if we are all just so doggone cold.
Chairman Denham. Well, that's one good thing about having
an outside hearing in a cold location. They're quick hearings!
Mr. Principi. Right.
[Laughter.]
Chairman Denham. I just have one, final question. Mr.
Principi obviously had some great successes with the Base
Realignment and Closure Commission. Could such a commission be
put in place for all of our properties, nationwide?
Mr. Principi. It could. I think it would be a very, very
difficult process. I think BRAC works well for military bases
in the sense that it's a combination of recommendations from
the Department of Defense that have to be applied against
criteria established by Congress. And I think the five
backgrounds that we've had thus far have been able to reduce
excess infrastructure and have the communities where those
bases have been closed to be transferred to either other public
agencies or to the private sector for redevelopment, and we've
seen many, many success stories.
So it is an option that you certainly could consider, but
it would be a massive undertaking, I believe, Mr. Chairman.
But, certainly, it could be done.
Chairman Denham. The BRAC Commission, itself, was a
tremendous undertaking, and yet you were able to have a plan,
multiyear plan, with liquidation happening immediately.
Mr. Principi. Yes.
Chairman Denham. And we need that immediate liquidation
today, so.
Mr. Principi. Well, that's right. By law, when a military
base is closed, take the 2005 BRAC ground. There are a period
of years in which that base has to be closed, and so there's no
delay. By that time it has to be disposed of, sold or
transferred to another agency of government.
Chairman Denham. Thank you. Thank you for your testimony.
At this time, if there are no further questions from Members, I
would ask for a unanimous consent that the record of today's
hearing remain open until such time as our witnesses have
provided answers to any and all questions that have been
submitted to them in writing, and unanimous consent that during
such time as the record remains open, additional comments
offered by individuals of this committee or groups may be
included in the record of today's hearing.
Without objection, so ordered.
I would like to thank our witnesses again for their
testimony in this cold environment; and, if no other Members
have anything to add, the subcommittee stands adjourned.
[Whereupon, at 11:30 a.m., the subcommittee was adjourned.]