[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]
THE OLD POST OFFICE BUILDING: THE GENERAL SERVICES ADMINISTRATION'S
PLANS FOR FUTURE USE
=======================================================================
(110-113)
HEARING
BEFORE THE
SUBCOMMITTEE ON
ECONOMIC DEVELOPMENT, PUBLIC BUILDINGS, AND EMERGENCY MANAGEMENT
OF THE
COMMITTEE ON
TRANSPORTATION AND INFRASTRUCTURE
HOUSE OF REPRESENTATIVES
ONE HUNDRED TENTH CONGRESS
SECOND SESSION
__________
APRIL 10, 2008
__________
Printed for the use of the
Committee on Transportation and Infrastructure
----------
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COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE
JAMES L. OBERSTAR, Minnesota, Chairman
NICK J. RAHALL, II, West Virginia, JOHN L. MICA, Florida
Vice Chair DON YOUNG, Alaska
PETER A. DeFAZIO, Oregon THOMAS E. PETRI, Wisconsin
JERRY F. COSTELLO, Illinois HOWARD COBLE, North Carolina
ELEANOR HOLMES NORTON, District of JOHN J. DUNCAN, Jr., Tennessee
Columbia WAYNE T. GILCHREST, Maryland
JERROLD NADLER, New York VERNON J. EHLERS, Michigan
CORRINE BROWN, Florida STEVEN C. LaTOURETTE, Ohio
BOB FILNER, California FRANK A. LoBIONDO, New Jersey
EDDIE BERNICE JOHNSON, Texas JERRY MORAN, Kansas
GENE TAYLOR, Mississippi GARY G. MILLER, California
ELIJAH E. CUMMINGS, Maryland ROBIN HAYES, North Carolina
ELLEN O. TAUSCHER, California HENRY E. BROWN, Jr., South
LEONARD L. BOSWELL, Iowa Carolina
TIM HOLDEN, Pennsylvania TIMOTHY V. JOHNSON, Illinois
BRIAN BAIRD, Washington TODD RUSSELL PLATTS, Pennsylvania
RICK LARSEN, Washington SAM GRAVES, Missouri
MICHAEL E. CAPUANO, Massachusetts BILL SHUSTER, Pennsylvania
TIMOTHY H. BISHOP, New York JOHN BOOZMAN, Arkansas
MICHAEL H. MICHAUD, Maine SHELLEY MOORE CAPITO, West
BRIAN HIGGINS, New York Virginia
RUSS CARNAHAN, Missouri JIM GERLACH, Pennsylvania
JOHN T. SALAZAR, Colorado MARIO DIAZ-BALART, Florida
GRACE F. NAPOLITANO, California CHARLES W. DENT, Pennsylvania
DANIEL LIPINSKI, Illinois TED POE, Texas
DORIS O. MATSUI, California DAVID G. REICHERT, Washington
NICK LAMPSON, Texas CONNIE MACK, Florida
ZACHARY T. SPACE, Ohio JOHN R. `RANDY' KUHL, Jr., New
MAZIE K. HIRONO, Hawaii York
BRUCE L. BRALEY, Iowa LYNN A WESTMORELAND, Georgia
JASON ALTMIRE, Pennsylvania CHARLES W. BOUSTANY, Jr.,
TIMOTHY J. WALZ, Minnesota Louisiana
HEATH SHULER, North Carolina JEAN SCHMIDT, Ohio
MICHAEL A. ACURI, New York CANDICE S. MILLER, Michigan
HARRY E. MITCHELL, Arizona THELMA D. DRAKE, Virginia
CHRISTOPHER P. CARNEY, Pennsylvania MARY FALLIN, Oklahoma
JOHN J. HALL, New York VERN BUCHANAN, Florida
STEVE KAGEN, Wisconsin ROBERT E. LATTA, Ohio
STEVE COHEN, Tennessee
JERRY McNERNEY, California
LAURA A. RICHARDSON, California
ALBIO SIRES, New Jersey
(ii)
Subcommittee on Economic Development, Public Buildings, and Emergency
Management
ELEANOR HOLMES NORTON, District of Columbia, Chairwoman
MICHAEL H. MICHAUD, Maine SAM GRAVES, Missouri
JASON ALTMIRE, Pennsylvania BILL SHUSTER, Pennsylvania
MICHAEL A. ARCURI, New York SHELLEY MOORE CAPITO, West
CHRISTOPHER P. CARNEY, Virginia
Pennsylvania, Vice Chair CHARLES W. DENT, Pennsylvania
TIMOTHY J. WALZ, Minnesota JOHN R. `RANDY' KUHL, Jr., New
STEVE COHEN, Tennessee York
JAMES L. OBERSTAR, Minnesota JOHN L. MICA, Florida
(Ex Officio) (Ex Officio)
(iii)
CONTENTS
Page
Summary of Subject Matter........................................ vi
TESTIMONY
Winstead, Hon. David, Commissioner, Public Buildings Service,
General Services Administration................................ 5
PREPARED STATEMENTS SUBMITTED BY MEMBERS OF CONGRESS
Altmire, Hon. Jason, of Pennsylvania............................. 24
Norton, Hon. Eleanor Holmes, of the District of Columbia......... 25
Oberstar, Hon. James L., of Minnesota............................ 28
PREPARED STATEMENTS SUBMITTED BY WITNESSES
Winstead, Hon. David............................................. 30
SUBMISSIONS FOR THE RECORD
Winstead, Hon. David, Commissioner, Public Buildings Service,
General Services Administration, responses to questions from
the Subcommittee............................................... 34
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
THE OLD POST OFFICE BUILDING: THE GENERAL SERVICES ADMINISTRATION PLANS
FOR FUTURE USE
----------
Thursday, April 10, 2008
House of Representatives,
Committee on Transportation and Infrastructure,
Subcommittee on Economic Development, Public Buildings, and
Emergency Management,
Washington, DC.
The Subcommittee met, pursuant to call, at 2:05 p.m., in
Room 2167, Rayburn House Office Building, Hon. Eleanor Holmes
Norton [Chairman of the Subcommittee] presiding.
Ms. Norton. Good afternoon, and welcome to all to today's
hearing this afternoon. I am pleased to welcome Public Building
Commissioner David Winstead of the General Services
Administration. I very much look forward to his testimony.
On January 16th, 2008, I had no option but to introduce a
bill, H.R. 5001, the Old Post Office Development Act, to
develop the nearly empty, so-called "Old Post Office"--a
unique, historic treasure located at 1100 Pennsylvania Avenue,
Northwest, owned by the Federal Government's GSA.
For more than 10 years, our Subcommittee on Economic
Development, Public Buildings and Emergency Management has
expressed mounting concern about the neglect and
underutilization of this valuable Government site and has
pressed GSA to develop and use this building to its full
potential.
The Old Post Office Building, completed in 1899, is one of
the oldest buildings here that has yet to be rehabilitated and
preserved. This grand example of Romanesque Revival occupies an
entire city block because it was the main post office of the
Nation's capital. The building was placed on the historic
register in 1973, and it remains one of the city's most
unusual, interesting and appealing landmarks. Part of the
appeal of the Old Post Office Building also is its central
location in the Federal Triangle, its proximity to many Federal
historic sites and buildings and its several Metro lines, as
well as a host of restaurants and other amenities that surround
the location. Its present design as a post office is straight
out of the 19th Century and makes the building virtually
unusable for any purpose absent appropriate remodeling to
maximize return on the building to the Government.
During decades of underutilization, the GSA has attempted
to make the space suitable for office space, but the building's
huge, cavernous, central area and the narrow shelf that
surrounds the atrium can accommodate only very few small
agencies. Efforts to introduce amenities have either failed or
have proven entirely unsatisfactory. In what appeared to be
desperation to create some benefit from the site, GSA built an
annex to the rear of the building that it hoped would become a
shopping mall, but this plan also failed.
The waste and risk posed by the Old Post Office Building
became even more apparent following a violent altercation and
killing of a George Washington University student outside the
Old Post Office Building in May 2005. This killing followed an
event in which the GSA rented the facility to gain revenue from
the building. Only after this embarrassment did the OMB, which
has been a principal impediment to the redevelopment of the
building, allow GSA to proceed. We were pleased when the GSA
issued a 2005 Request for Expression of Interest to which it
received a number of indications of interest from the private
sector. Yet, for no good or sufficient reason that it has been
able or allowed to articulate, GSA has never proceeded to the
next step. It is holding all of these indications of interest
from the private sector.
Consequently, I have introduced a bill to assure the full
use of the Old Post Office for the benefit of our Federal
taxpayers and for this city. A delay in making use of this
centrally located, historic treasure has made it one of the
Government's most wasted assets and a public embarrassment. It
is bad enough that the Government gets no revenue from
beneficial use of the space. It is worse that the building has
drained huge sums from the Federal Building Fund. The
building's 2007 rent payments of $5.4 million paled in
comparison to the total expenses for the property of $11.9
million, resulting in a loss of $6.1 million in 2007.
To understand the financial burden, the drain on the
Federal Government, one has only to multiply this figure--this
$11 million-plus figure--over the many decades during which the
Government has taken millions upon millions of dollars in
losses on the Old Post Office; add this amount to millions of
dollars in renovations and additions that eventually proved
useless in making the building a viable source of revenue, and
we begin to get a clear picture of the need to move this
project forward quickly.
The highly regarded GSA renovation of the nearby Tariff
Building demonstrates the GSA record of making excellent use of
otherwise antiquated and virtually useless Federal structures.
The process that preserved the Tariff Building, while returning
it to productive use as the Hotel Monaco with revenue for the
Government, is the most recent model for the Old Post Office.
Only the Federal Government has the resources and capability to
properly renovate such an historic property, but the return on
the investment is virtually assured. The redevelopment of the
Tariff Building shows what can be achieved when the Federal
Government works with the private sector to produce a site that
brings a return to the Government, provides a safe and
necessary facility for the Government or for the city and
preserves an historic treasure all at the same time. The
historic Old Post Office Building, centrally located in the
heart of the Nation's capital on Pennsylvania Avenue, provides
an opportunity to replicate the return to the Government we
have seen from Hotel Monaco and from other historic structures.
The policy of the Federal Government has long been and
always will be to preserve and to make usable historic
properties rather than sell them for revenue. Preservation and
use are particularly important for this property, where not
only the historic status of the Old Post Office but security
concerns inherent in its location mean that the property must
be maintained by the Federal Government. In today's climate of
budget deficits, it is imperative that the Federal Government
maximize the use of the assets it has available. The Old Post
Office is an underperforming asset and is a drain on revenue
while its full use, its central location and its unique,
historic value could provide a handsome financial return to the
Government.
Barring unforeseen matters in today's testimony, I intend
to move this bill to the Full Committee and to the floor at the
earliest time available.
The Subcommittee received today's testimony an hour before
the hearing. Although informed of the applicable procedures by
Subcommittee staff, GSA staff persisted in its adherence to
incorrect procedures. GSA is all too familiar with the
underlying issues and had ample notice and time to prepare for
this hearing. The Subcommittee is always ready to allow for
exigencies, but this delay was unnecessary and unacceptable and
should not be repeated. The Subcommittee appreciates receiving
today's testimony from Commissioner Winstead about the
development potential of the Old Post Office.
I am pleased to have remarks from the Ranking Member, Mr.
Graves.
Mr. Graves. Thank you, Madam Chair, for holding this
hearing. I want to very much thank Public Building Commissioner
David Winstead for testifying today and for being here. I look
forward to hearing your testimony today on the future plans of
the Old Post Office.
Despite its central location here in the Nation's capital,
the Old Post Office Building is an underutilized Federal asset
and is a financial drain on the Federal Building Fund. The
costs of operating and maintaining this aging and inefficient
historic building are quite high. For example, GSA received
$5.4 million in 2007 for rent payments from Federal tenants
occupying the building. However, the total expenses for the
property were $11.9 million, resulting in a net loss to the
Federal Building Fund of $6.5 million.
Our Subcommittee Chairman, Ms. Norton, has introduced a
bill to authorize GSA to enter into a public-private
partnership to leverage private funding to redevelop this
historic landmark. Moving this building from a liability to an
asset on the Federal Building Fund's balance sheet should
benefit the American taxpayer. As part of the redevelopment of
this property, the current tenants must be relocated. These
include the National Endowment for the Arts, the National
Endowment for the Humanities, the Advisory Council on Historic
Preservation, and the Department of Education. This move will
be necessary in order to accomplish the economic turnaround of
this property.
Again, I want to thank Public Building Commissioner
Winstead for being here today, and I look forward to hearing
your testimony and to learning more about this project.
Thanks, Madam Chair.
Ms. Norton. Thank you, Mr. Graves.
We are pleased to have been joined by the Ranking Member of
the Full Committee, Mr. Mica.
Mr. Mica, do you have any remarks you would like to make at
this time?
Mr. Mica. Well, first of all, I thank you for recognizing
me. Secondly, I came down to compliment Ms. Norton and our
Ranking Member for conducting this hearing. I think we have
discussed the issue of having public assets' values not
realized. In fact, to put it humorously, I am tired of our
sitting on our assets and not realizing their full potential.
Your remarks, Madam Chairman and Mr. Graves, are right on
target. This is a valuable public asset. Let me say, I am
ashamed that with a Republican administration and with a
Republican Congress that we allowed this to continue, and I am
glad to see that you are taking this forward. I support your
legislative efforts. We have talked about other public
buildings and other GSA properties that have not fully realized
their potential. I will do anything I can to assist you.
I am pleased to see our GSA Public Buildings administrator,
Mr. Winstead, here. I hope he understands that we will back
GSA. If it takes going to OMB, the administration or whatever
it takes, I am committed, and I will use any resources we have
to work with the administration to make this successful. You
cited great examples--the Monaco building and others--where
there has been success. Our public trust deserves no less than
fully utilizing the potential of these assets.
I will work with you. We will do anything we can, Ms.
Norton. Again, I am not going to be able to stay, but I came
down just to say thank you for moving this forward. I want to
hear the results of this hearing and what comes forward and
what the delays are or anything that is identified by the
Public Building Commissioner that we need to work on, and we
will do that together.
So thank you again.
Ms. Norton. I want to thank the Ranking Member of the Full
Committee for taking the time to come here. He has been Chair
of this Subcommittee. He knows whereof he speaks. While he
speaks about how, when we were in the minority that the
majority did not move it, I must say that the majority at that
time was every bit as adamant as I am today.
Mr. Mica. We did not get the job done.
Ms. Norton. The two or three Chairs that have pressed this
issue have given GSA every opportunity, but the bipartisan note
that you and Mr. Graves have struck should leave no doubt with
Mr. Winstead and with the GSA that there is no way to stop our
moving. We are not going to continue to pay for a building that
can be paying us, fellas. That is the bottom line here. The
full support you see here is important.
If I may say so to the Ranking Member of the Full Committee
and of the Subcommittee, they know how unusual it is for us to
have to put in a bill to move a project forward. We just do not
do that. We have never had to do that with GSA. Now, we do not
know where the trouble is. If the trouble is at OMB, really,
shame on them because they are the keeper of the dollars. If
anyone were under the illusion that this Subcommittee would
ever sell a historic property, it was surely an illusion
because, when I came here and sitting for 12 years in the
minority, the Subcommittee over and over again has made it
clear that all over the country historic properties are
precious and that these properties will never be sold. Knowing
that, hearing that from the minority, hearing that from the
majority, the only thing we could think to do was to put in a
bill with bipartisan support. We have done that, and you have
heard from both sides of the aisle. I am pleased to receive
your testimony and to thank the Ranking Member.
Mr. Mica. Will the gentlelady yield for just a second.
Also, this is not just any building or asset that we own.
This is in our Nation's capital. It is in a very strategic
location, and it is an important asset for us to retain. This
is also an economic development project that will create jobs,
that will give people opportunity, that will get a return for
the taxpayer. It is located, again, in the heart of our
Nation's capital, so there is even more urgency to this, not
only because of its strategic site but also because of the need
to stimulate the economy. This is a project that can do that.
So, again, I compliment you. Whatever it takes, we will
work together to get this done. I know Mr. Oberstar will join
me in that effort.
Ms. Norton. Thank you again, Mr. Mica.
Indeed, Mr. Mica indicates the location. Here we have an
historic slum--let's call it what it is--within a stone's throw
from the White House. People look at the building. It is a
curiosity. It is gorgeous. There is no landmark like it in
Washington. They pass by it. If they go into it, they are truly
bewildered that such an asset could remain in this condition,
and it is not going to remain in this condition past this
session of Congress.
I had hoped that by simply introducing a bill, unheard of
in my term in the Congress, which is 17 years--unheard of--that
that would be all it took to move the bill forward, and here we
are having a hearing. I hope this proves an embarrassment to
the GSA that we are having to tell the world that the GSA has
been sitting on an historic property that can bring in money
but is spending taxpayers' money, and we do not mean to keep it
to ourselves any longer.
Mr. Winstead, we are glad to hear from you at this time.
TESTIMONY OF HON. DAVID WINSTEAD, COMMISSIONER, PUBLIC
BUILDINGS SERVICE, GENERAL SERVICES ADMINISTRATION
Mr. Winstead. Chairwoman Norton, Ranking Member Graves,
Ranking Member Mica, I am pleased to be here. I am David
Winstead, Commissioner of the Public Buildings Service,
appearing before the Subcommittee to talk about the future of
the historic Old Post Office on Pennsylvania Avenue in
Washington, DC.
I would like to start out by sort of reviewing this asset.
I know you all have expressed a great deal of concern about the
current state of it and how we are managing it through the
National Capital Region and what we intend to do with it. I
would mention, though, that, despite your concerns and despite
the issues raised by you all, I think we have made an awful lot
of progress overall on the inventory on a lot of historic
buildings and in the management of the Federal assets.
As you know, over the last 5 years, we have mounted a very
progressive management of our real estate assets through the
President's management agenda and through the Federal Real
Property Council. In fact, we have focused on restructuring
assets to get rid of those that are underutilized, to do
private-sector, public-private partnerships under the
constraints of the scoring rules and under the authorities we
have. We have actually achieved quite a lot. We have improved
utilization and have increased vacancies--or occupancies,
rather--by 1.5 percent over the last 6 years. We have basically
been operating at 1.6 percent per market. We have reduced
energy consumption by 8 percent. I did want to mention that we
just came out with the new portfolio (State of the Portfolio
FY07 report), which is a document that really sets forth what
we have been doing with all of the assets in the inventory. I
will just call it to your attention because I think, overall,
we have made a great deal of progress in that regard.
In terms of the Old Post Office, itself, obviously, the
Chairwoman and Ranking Members have commented on it. It is a
very old building. It was, obviously, built between 1892 and
1899. It is a nine-story building with a 315-foot clock tower
and a glass-enclosed atrium for the public that comes to view
Washington, D.C., the Mall and the Federal buildings in the
Triangle. OPO has a total of about 315,000 square feet, plus an
unoccupied Annex of 64,000 square feet that was, in fact,
flooded 2 years ago in the floods that took out the IRS
building behind it.
The first three floors are occupied by retail activity.
Federal tenants on the upper floors include the Department of
Education, the Advisory Council on Historic Preservation, the
National Endowment for the Arts, the National Endowment for the
Humanities, and the President's Committee on Arts and
Humanities.
I will mention that, despite the conditions that you have
highlighted on this building, I have had the pleasure in recent
years of attending an historic preservation conference in the
facilities of the Advisory Council on Historic Preservation
where the Nation's historic preservation officers came to the
Old Post Office to conduct and to look at the building and to
talk about historic preservation, GSA's efforts as well as
other Federal agency efforts.
When the Post Office was completed, it was, in fact, the
second tallest building in Washington, exceeded only by the
Washington Monument. It is 28 feet, essentially, taller than
the Statue of Freedom on the Capitol. It was built entirely by
steel and iron. Except for a load-bearing tower, the brick
backing and granite wall are supported only by their weight.
This is really the first major steel structure that is a self-
supporting building erected in the Washington, D.C. area. The
most remarkable internal feature, as you all well know, is the
nine-story light court, topped by an enormous skylight, which
has a lot of natural light.
Madam Chairman, I remember being here about a year ago for
the sustainability hearing. I remember you pulled back the
curtains in this hearing room to let in natural light, and I
think the building interior, actually, is very well lit. Also,
that atrium does, in fact, impede on its efficiency, and I will
mention about that and about some of the challenges that it has
presented to both us and to our tenants.
The Old Post Office Building is the first Federal building
erected on the avenue between the Capitol and the White House.
In 1914, the city's post office moved to new quarters. In 1928,
as a part of the McMillan Commission, the plans for the Federal
Triangle were delineated, and OPO was slated for demolition,
and there was a lack of funding in the Federal budget due to
the Depression. Essentially, there was an effort that went on
for 36 years to save the OPO.
In 1964, there were plans to complete the original Federal
Triangle design for 12th Street, and a proposal was in place to
demolish the OPO, preserving only the clock tower. There was a
lot of local support I know you are well aware of through Do
Not Tear It Down and through other coalitions--the Endowment of
the Arts--that saved the building.
In 1971, there were congressional hearings that did explore
the future as well as looking at executive orders to protect
Federal structures. In 1973, as you noted, Madam Chairman, it
was listed on the National Register of Historic Places. When
the Pennsylvania Avenue Development Corporation got formed in
1974, there was a promise it would be saved. Given its history
and importance in security conditions--and I underline that--
there are enormous security installations and concerns in the
tower, itself. It was continued. It has always been viewed that
this property is a necessary, important part, an historical
part of the Federal inventory and that it is important for the
American people. In 1976, Congress passed the Public Buildings
Cooperative Use Act, permitting space used in Federal buildings
to be leased out for cultural, recreational and educational
purposes. This Act was passed, in part, to provide additional
uses for the OPO.
In 1982, we were awarded a master lease for a portion of
the OPO known as the "Pavilion." The building houses Federal
offices as you know. Above the Pavilion floor, currently, we
have about 200,000 square feet of tenants. I mentioned them
earlier. In the Federal office space portion, there is about a
3 percent vacancy. Overall in the building, it is less than a
25 percent vacancy. The initial retail concept for the
Pavilion, unfortunately, was not successful. The master lease
was amended in 1989 to enable the construction of a new retail
facility, the Annex, to be built in the courtyard of
approximately 64,000 square feet.
In March of 1992, the annex was constructed, and there were
Federal funds totaling $1.7 million and private funds of $5.5
million invested. The development of the OPO and the annex was
not, fortunately, financially successful. I am sure part of the
reason was the real estate market in 1992 was quite a bit
distinguishable from the Washington market today, and it
probably played into that. There are several reasons, in
addition, for the failure back in the early 1990s. There was
poor tenant satisfaction, and there was a constant retail
turnover in the space that is mixed use and that has retail and
food service. There was poor financial performance in the
retail element due to market conditions, as I mentioned
earlier. There was no clear destination/identity associated. I
know that has changed quite a bit in terms of what has happened
in PADC's efforts in the Federal Triangle.
Now MCP sees vision for the Federal Triangle and for
attractions off of the Mall. An investment company acquired the
leasehold interest shortly thereafter, $8.5 million in
foreclosure. The company hired a property management/leasing
consultant to operate the facility in the interim. In 1998,
following unsuccessful attempts to restructure the lease, GSA
began to look at the entire building as a unified approach,
utilizing a competitive process and a prudent approach to
reposition the building.
In 2001, GSA acquired the leasehold interest for $7.1
million. As a result, the annex as well as tenant improvements
in the lease portion of OPO are now unencumbered by any long-
term lease, which financially and from a standpoint of
ownership in how we proceed is a very positive event. In June
of 2002, GSA began a process of tapping the expertise of the
private sector in terms of providing guidance on the
possibility of the redevelopment of the OPO. GSA issued an
outline, a request for qualifications--an RFQ--to elicit public
comment and to established a Web site for this purpose.
In 2005, GSA realized that, due to the rapidly changing
real estate market, it needed new market information. We once
again went out in the market with an RFI for the redevelopment
of the OPO, and we expressed in that RFI that the Government
reserved the right at any time to terminate the process if we
concluded that the redevelopment of the property was not in the
Government's best interest.
I will state and this Committee should be aware of the fact
that there were some 20 responses to that RFI issued in 2005. A
majority of them came from groups with, quite frankly,
significant development expertise, particularly in adaptive-
reuse and in mixed-use development. Most respondents visualized
a mixed-use type of project involving a luxury hotel,
residential units, related units such as restaurants, meeting
places, function spaces, and spas, but other concepts included
the possibility of incorporating museums. We have had a number
of expressions of interest from museums in the use of some
space in the OPO. There was also a proposal for a live
television studio because of the aesthetics and the
architectural setting of the Old Post Office.
After reviewing the responses to the RFI, GSA has been
working to evaluate and to determine how best to proceed on
this building. It is a very historic building. Obviously, you
have mentioned that, Madam Chairman and Ranking Minority
Member. It is very close to the White House. It could be in our
view as well as in your view and in this Committee's view
better utilized, and we need to do that. We need to move
forward on that.
The Federal cultural agencies currently housed in the OPO,
I would mention that this Committee should be aware, do have a
great appreciation for the building value as a symbol of the
architectural destiny and historic preservation. As I
mentioned, I have attended historic preservation conferences
held by the Advisory Council for Historic Preservation, and
there are great expressions of interest in continued tenancy of
NEA. Ultimately, the building's location is too important not
to have optimum use, and we have been evaluating, and we will
continue to evaluate. This Committee's interest is taken under
full consideration, and we will be very responsive to what I
have heard here today.
I will tell you that, nationwide, we continue to have a
large draw on our R&A accounts that you all will be hearing in
a month or so. We do have a substantial backlog of renovation
needs in our old, historic properties. We have some 268
national historic landmarks. The Chairwoman is well aware of
our efforts with St. Elizabeth's in modernizing and in
revitalizing those buildings for use by DHS, but there are
many, many other properties at 268. Our need in that regard is
upwards of $7 billion. We anticipate that NCR needs a
renovation of $2.6 billion.
We are constantly evaluating options for upgrading existing
older buildings--historic site, adaptive reuse. Obviously, the
Old Post Office is one of those assets that requires
considerable evaluation and considerable reinvestment. At last
estimated in 2007, it would cost well over $100 million to
modernize the Old Post Office. It is estimated that if we were
to invest that in the Old Post Office for the existing Federal
office need for our 200,000 square foot of users in that
building, for that same amount of money due to the cost of
renovation of the Old Post Office and with the space and
configuration of the open atrium, we could create with that
same level of investment another building with potentially 40
percent more space with the same investment dollars.
So there is indication through our current and recent
analysis that, with investments in office space use in this
building, there are options that do have greater return, as I
said, more space for the same dollar.
Section 111 of the National Historic Preservation Act
authorizes Federal agencies to lease space not currently needed
for Federal use to non-Federal entities. We have used this
authority to lease space in more than 40 buildings nationwide.
These leases have ranged from storage rooms at 50 U.N. Plaza in
San Francisco to an amazing project that, obviously, has had
much more progress than the Old Post Office, and that is in
Boston, Massachusetts where we recently outleased the entire
McCormack Post Office and courthouse building to the State
courts of the State of Massachusetts. Now they have moved back
out. We are now renovating that building for office space needs
of agencies like the EPA.
So this section 111 is a very viable tool, and we have seen
evidence in Boston. Obviously, Hotel Monaco is another example
of that that enables us to work in partnership with the private
sector to preserve both the historic significance and security
concerns that we have, particularly of the OPO.
As I mentioned earlier, the Public Buildings Cooperative
Use Act provides and permits a portion of the space to be used
for these mixed uses of purpose. Section 111 requires that, if
we outlease under that, revenues coming back have to go back
into historic buildings, of which we have plenty--268
nationwide--that we can reinvest those proceeds in.
So, in conclusion, Madam Chair, I would like to reiterate
my concern I have heard here today from you and from both the
Ranking Member of the Subcommittee and from the Ranking Member
of the Full Committee over the length of time it has taken us
to evaluate this, to look at these options, to test the market,
and to come to the conclusion that adaptive reuse is a major
opportunity that we should look at.
I will tell you that I have had discussions with
Administrator Doan of our agency. As you, Madam Chairman,
stated in your comments, it is not her interest that this be
sold out of the Federal inventory. So we are looking at a way
to both retain it because of its significance in the Federal
Triangle and also to get greater return. I am well aware of
Bart Bush, who is our NCR Assistant Regional Administrator, is
here today with me for any particular questions that might come
up as well as Tony Costa, my Deputy Commissioner, who was the
head of NCR for 7 or 8 years and who was actually there when a
lot of these issues that I have mentioned had come up. So he is
also available. I would be happy to welcome him to come up here
with me if that is okay with the Committee.
In conclusion, I would like to reiterate that I am very
concerned about what I have heard here today. I also apologize
for the tardiness in the submittal of my statement. We will
make sure that that will not happen in the future. I look
forward to not only your initiative here and to the legislation
but also in continuing to work with this Committee in trying to
move this project forward.
I will tell you that--and Bart Bush can give you evidence--
I have heard directly from the current tenants not on full
utilization and not on the highest and best use but that they
do love this facility and that they do currently have a lot of
activity and competent use of this space.
So I would like to conclude my comments, and I will provide
today or at any time following up to this hearing all possible
data about this analysis that I have mentioned that we have
done. What we are doing currently is reevaluating those and are
trying to reach a decision about how to proceed on the highest
and best use of the Old Post Office.
Madam Chair, I will stop at this point. I might ask, with
your concurrence and with that of counsel's, if Tony Costa
could come up here just in case there are some historic
questions and if that would be all right.
Ms. Norton. What was your last comment?
Mr. Winstead. I apologize, Madam Chair. I would like, if I
could, to have Tony Costa, who is former ARA.
Ms. Norton. He is welcome to the table.
Mr. Winstead. Thank you, Madam Chair.
Ms. Norton. He has got a lot to answer for.
Mr. Winstead. Tony, do you want to come on up?
Thank you.
Ms. Norton. Let me just read from your testimony to begin
with.
First, let me ask whether you are aware or whether Mr.
Costa is aware of what the Ranking Member and I have said about
this being under advisement, this building, in the sense that
Congress has been pressing for its renovation and for its
beneficial use for upwards of 8 to 10 years.
Is that understood?
Mr. Winstead. Yes, ma'am, I fully understand that.
Ms. Norton. Can we agree that in 2005--3 years ago--that
you, indeed, did come forward after the murder in front of the
building and put out an RFI? Is that not the case?
Mr. Winstead. Yes, ma'am.
Ms. Norton. Then I would like you to explain these
sentences in your testimony.
After reviewing responses to the RFI--this is on page 4--
GSA has been working to evaluate and determine what the best
course of action would be for this building. This very historic
building in close proximity to the White House could be better
utilized, but we need to do it right. The Federal cultural
agencies currently housed in the OPO appreciate the building's
value as a symbol of artistic destination. Ultimately, the
building and its location are too important to rush to a
decision on what is the best use of the OPO in the future. We
are looking at all of the options.
Now, the rush would be between now and 2005, not to mention
10 years ago when Congress, on a bipartisan basis, had been
pressing. Could you explain to me, with almost 3 years of an
RFI, leaving the private sector that has to invest money in
order to respond to the RFI, whether that is fair to them or to
us and why? Three years is not enough to have evaluated the
option that you, yourself, indicated was the best option, which
was to put this matter out for RFI.
Why is 3 years, not to mention the time before, not enough
time to evaluate the proposals you have received?
Mr. Winstead. Well, Madam Chair----
Ms. Norton. What more needs to be done?
Mr. Winstead. Madam Chair, as you know, we have highlighted
that comment. We, obviously, did have through RFI a great deal
of response. I have a copy of it if the Committee--I am sure
the Committee has it.
Ms. Norton. Has anybody been looking at those responses?
Mr. Winstead. Yes, ma'am, we have been.
Ms. Norton. Would you explain to the Committee what the
complication is. This Committee is aware of the kind of time
and of the amount of time it usually takes for you to proceed.
It takes too long even in the ordinary course. It normally does
not take this long. Why has this taken longer?
Are you looking at options beyond those in the RFI which
you, yourself, asked for?
Mr. Winstead. Madam Chair, this actually came a little
before I got on board, but I will tell you----
Ms. Norton. Well, that is why you have Mr. Costa at the
table. I want an answer.
Mr. Winstead. I know. Let me state what we have been doing.
We have been engaging both Bart Bush and his staff, as well as
us. In looking at the input from the market, I will tell you
that it is not cheap for developers and partners to put
together proposals of this nature, but they have been
preserved, and we do have the currency of their ideas. The
market has changed in the last 2-1/2 years. I will admit to
that. I do think that there is still a high level of interest,
and the evaluation that has been going on is looking at the
proposals that came back from the market as well as the
economic viability of those over the long course of a lease
under either their own authority or under section 111. There
has been dialogue both internally at PBS and with the Federal
Building Fund portfolio people who are involved in this. There
have been discussions at the NCR. There have been discussions
with Mr. Costa. There have been discussions with the
Administration. There have been discussions with OMB.
Ms. Norton. How much longer would it take to complete the
evaluation and to come forward with your decision?
Mr. Winstead. Well, I do believe that we need, obviously,
to make sure that we get----
Ms. Norton. How much longer? Please answer the question.
Mr. Winstead. I think there are two things, Madam Chair.
Ms. Norton. I am not asking for the process. I am asking a
question that goes to time, and I am asking that question on
behalf of the entire Committee and Subcommittee.
Given the fact that we have had 3 years with an RFI hanging
out there----
Mr. Winstead. Right.
Ms. Norton. --its having been placed, apparently, by
developers from around the country who have invested real
dollars in order to meet your RFI and in as much as the
Subcommittee has expressed its impatience with the need to pour
money into this building, my question to you is not what will
the process entail. That is inside baseball.
Mr. Winstead. Right.
Ms. Norton. My question to you is: When will you be
prepared to, in fact, indicate your decision from the RFIs that
have been submitted to you?
Mr. Winstead. We are currently evaluating them within a
very short period of time. That does involve also, as you know,
a submittal to OMB and Congress of any relocation of existing
tenant leases.
Ms. Norton. All right.
Mr. Winstead. That is--that is----
Ms. Norton. No. If you bring these things up, I am going to
question you on these things.
There is now an excess of office space in the District of
Columbia. There is also a credit crunch, and people are dying
to get this space rented. Just to name two that come to mind
out of your portfolio, out of this very Committee, NoMA on M
Street. So let me ask you in light of the fact that you have
raised it:
Do you think that there would be any difficulty in
relocating the small agencies that are now in the Old Post
Office Building?
Mr. Winstead. Madam Chair, I do not. I spoke yesterday at
the----
Ms. Norton. Thank you. Let me go to the Ranking Member.
Mr. Graves. Thank you, Madam Chair.
I have got several questions, Mr. Winstead. If we could,
let's just move through them really quickly and get some
answers.
I do want to point out that you mentioned in your statement
the OMB scoring rules that are a real problem. The fact is we
do waste billions of dollars in overtime because OMB and CBO
scoring forces GSA to rely on short-term operating leases. I
would just like to offer to you that I would like to help with
that. It is a huge problem, and I would like to do anything I
can to help you all move through that process.
Mr. Winstead. Thank you, Congressman.
Mr. Graves. Real quickly, a couple of things.
What Federal agencies right now are tenants in the Old Post
Office Building?
Mr. Winstead. Congressman, the dominant ones are the
National Endowment for the Arts--the NEA--which occupies 85,000
square feet, the National Endowment of Humanities that occupies
84,000 square feet, the Department of Education that occupies
16,000 square feet, the Department of Interior that occupies
20,000 square feet. Part of that interior space is utilized, as
I mentioned, by the Advisory Council on Historic Preservation,
which is the advisory group to all Federal agencies on how to
manage and to preserve Federal resources. So it is sort of
ironic that they are in this wonderful building and that they
love it as a result.
Mr. Graves. How much do they currently pay to rent?
Mr. Winstead. Congressman, they pay about $24 a square foot
in rent, which is obviously way below the market. The market in
that area or NoMA, you know, particularly in that area, would
be around $31 to $49 a square foot, so it is substantially
below market. Obviously, those tenant agencies like that space
because of that rent.
Mr. Graves. They are obviously going to need to be
relocated if the building is redeveloped, I am going to assume.
Where would they most likely be relocated--in leased space or
in Government-owned space--do you know?
Mr. Winstead. Congressman, as you know, by policy, we
always like to look at the Government space in the first order
before we go to private market. As the Chairwoman mentioned,
there are lots of options in Washington, D.C. The high
probability would be that that amount of space would probably
be delivered by the private sector.
Mr. Graves. Will their rent payments increase after they
have relocated? You kind of already answered that.
Mr. Winstead. Well, I just mentioned that comparable space
in some of the newer buildings in downtown as well as at NoMA
and at Foggy Bottom are in the $31 to $49 range, and some are
above that.
Mr. Graves. Would the tenants--and you kind of already
answered this, too. Would the tenants want to move?
Mr. Winstead. I know several tenants--Tony, you wanted to
comment on this. I know some of the tenants have contacted me.
The Advisory Council has. I know NEA has expressed reluctance
to move out of the Old Post Office.
Tony, do you have something to add on that?
Mr. Costa. Good afternoon.
I think the tenants love the location, but everyone is
aware that the building does require renovation. The location
is great, though.
Mr. Graves. Let me ask you this: Does GSA need to seek
approval from anyone before moving forward with relocating
those current Federal tenants?
Mr. Winstead. The only thing, as I mentioned earlier,
Congressman, is obviously the prospectus approval for
relocating those agencies. Obviously, we deal with OMB and with
you all in that regard and with the administration's
concurrence, but that is what would be needed.
Mr. Graves. Has that been done or started?
Mr. Winstead. Actually, some prospectuses were provided,
but they are now 3 or 4 years old. They would have to be
updated based on those agencies' needs, and we are looking at
that. Bart Bush is in charge of that process, and he is looking
at that.
Mr. Graves. Okay. Thank you very much.
Mr. Winstead. Thank you, Congressman.
Ms. Norton. Just let me say for the record, if there were a
scoring problem, that is the first thing OMB would have told
you to put in your testimony. The reason there is not a scoring
problem, of course, is that we are not talking about the use of
Federal money. We are talking about a public-private
partnership. We are talking about the same kind of public-
private partnership where most of the money gets dumped into a
building, yes, with some amount of money from the Government
but certainly not $100 million. It gets dumped into the
building from a private developer who does so because he has
got the right to develop on a prime spot on Pennsylvania
Avenue, and he has got the gold standard--a Federal contract.
Is that not the case?
Mr. Winstead. Yes, ma'am.
Ms. Norton. We are not talking about the Federal
Government's spending $100 million of Federal money, are we?
Mr. Winstead. If we renovated it as a Federal office
building----
Ms. Norton. But we have never talked about renovating. You
did not put out an RFI for the Federal Government to renovate
this building, did you? You put out a public-private
partnership RFI, did you not?
Mr. Winstead. That is correct. It also offered flexibility
in the RFI. We were looking for all sorts of ideas. We
actually--although the dominant response looked at both the OPO
and the annex as a development project overall, there were
several people who came in just looking at one and not the
other. So there were a number of different variations of
expressions of interest and viability. You know, the rent
ranges that were proposed were enormous, but we do have those
facts, Madam Chair, as you mentioned, and I am concerned that
they are several years out of date and that we need to
obviously go back out and follow up on this.
Ms. Norton. Oh. You are suggesting that you need a new RFI,
are you now? Is that what you are suggesting?
Mr. Winstead. No. No. No, ma'am.
Ms. Norton. All right. You testified, did you not, that the
current tenants were paying $24 per square foot?
Mr. Winstead. I believe that is correct.
Ms. Norton. Now, on Pennsylvania Avenue, this is a prime
location. Aren't rents about $45?
Mr. Winstead. Yes, ma'am. I think they are between $31
and----
Ms. Norton.You know, I have got my "cha-ching" running.
Just add this to what the Government is losing because it has
got rent here, you know, that is something close to half of
what somebody could be getting for prime time. I can think of
no location--if you talked to anybody in the real estate or
development business and said to them "pick a place to have a
building in the District of Columbia as the prime spot," I
doubt that anyone would come up with a better location than
this location. Location. Location. Location.
Mr. Winstead. Absolutely. Also, it has a lot of, you know,
public transit, which is obviously----
Ms. Norton. Public transit. 12th Street comes right off of
there. It just has everything.
Now, just let me, for the record, make clear because we
have just gone through an exercise where we changed how
prospectuses will be evaluated. The desire of the tenants are
not determinative on how the taxpayers' money--are no longer
determinative, I should say, on where the taxpayers' money will
be spent for locations in the District of Columbia; is that not
the case?
Mr. Winstead. That is correct.
Ms. Norton. In fact, tenants would all desire to be exactly
where they are. They have to be crazy to want to move from
where they are. Yes, it is a broken-down building, but they are
historic types anyway. They are in the best location in the
District of Columbia. So why should they want to move? The
question is: Why should the taxpayers have a tenant who pays
$24 when they could get $45? I will tell you they could get
more for this location on Pennsylvania Avenue.
Mr. Winstead. As you know, we have had some great successes
recently in the leasing market and along NoMA and in other
areas. So there is an awful lot of interest.
Ms. Norton. So we do have office space that we, ourselves,
on this Committee would like to see used rather than in this
location, which is where most Federal agencies want to be. Most
of them want to be exactly here. We are trying to say, because
of the lower costs on M Street, NoMA and such locations as
that, we are not going to hear where you want to be. We are
going to hear where, given all of the amenities, the best place
for the agency is.
Now, you put some boilerplate language in here, and I
certainly hope that it will continue to be. You say at the
bottom of page 3 and going on to page 4 that the GSA expressly
stated in the RFI that the Government reserves the right at any
time to terminate the process if it concluded that redeveloping
the building was not in the Government's best financial
interest.
That is boilerplate language, is it not?
Mr. Winstead. Yes, ma'am.
Ms. Norton. Have you determined that, quoting you,
redeveloping the building is not in the Government's best
interest?
Mr. Winstead. We have not at this point determined that it
is not in the Government's best interest.
Ms. Norton. Is it conceivable that redeveloping the
building would not be in the Government's best interest?
Mr. Winstead. I think, with the interest from the market,
the options that we have looked at are, obviously, current
tenancy redevelopment or renovation as an office building. I
think the options are--we have to move forward because of the
condition of the building.
Ms. Norton. Do you regard the Monaco Hotel as a precedent
for developing an historic project of this kind?
Mr. Winstead. Madam Chair, as you know, I think the Tariff
Building was a very unique project and a very positive project
in terms of when to move forward, I guess, in 2002, when it
reopened its doors. We did use our authority under section 111
to outlease the building over a period of time. We put about $5
million into it. My understanding is, as a result of----
Ms. Norton. Did you say $5 million?
Mr. Winstead. Yes.
Ms. Norton. Is that all the Government put into that
building?
Mr. Winstead. Yes, ma'am. Is that right, Tony?
Mr. Costa. Yes.
Mr. Winstead. I do understand. Although rental payments in
the earlier years were about $150,000----
Ms. Norton. What does that contract get you----
Mr. Winstead. I apologize.
Ms. Norton. --on the Monaco building?
Mr. Winstead. Last year's revenues were $430,000.
Ms. Norton. $430,000 annually is what you are getting?
Mr. Winstead. Madam Chair, it is $180,000 base plus
$250,000 that we got last year.
Mr. Costa. It is a complicated revenue agreement, but the
amount of revenue has gone up over the last 4 years, and it is
up to $440,000, and we expect it to increase depending on the
sales in the hotel because the Government does get revenue
after sales go up beyond a certain point.
Ms. Norton. You are close to getting your return back
already, aren't you?
Mr. Costa. Yes.
Ms. Norton. And this building was started in 2003?
Mr. Costa. It opened in 2002.
Ms. Norton. It opened in 2002. In 6 years, you are already
close to--you may already have exceeded, but you certainly are
close to getting what you put in it that allowed you $5
million. This is a very expensive building. Anyone who has gone
into this building has seen that every historic part of the
building has been preserved. I hesitate to ask you--perhaps you
know--how much it costs to renovate this building. How much
does it cost? Because it certainly did not cost you.
Mr. Winstead. No.
Ms. Norton. So how much did it cost somebody to make this
old Tariff Building into a state-of-the-art hotel?
Mr. Winstead. Madam Chair, we did have an estimate for
upgrading the building to--at least the figure I had was
between $20 million and $25 million. That was basically, I
think, the cost back then in 2002.
Ms. Norton. In 2002 dollars, $25 million it cost somebody
to renovate a hotel. You put in $5 million. You have already
gotten or are close to getting your return back in 6 years, and
then all the rest of it is going to be gravy from there on out.
Is there any reason to believe that that model could not be
used on the Old Post Office?
Mr. Winstead. As to why this would not be used?
Ms. Norton. Is there any reason to believe that this model
is not applicable?
Mr. Winstead. That is one of the options that was
identified by the RFI, and that is one of the options that is
on the table.
Ms. Norton. We do understand we are not talking--so, for
the record, we are not talking about a substantial investment
of taxpayer dollars in this building in order to renovate this
building for some kind of beneficial use. We are talking about
the investment of private dollars in this building; is that not
the case?
Mr. Winstead. That is one of the options.
Ms. Norton. What is the other option, sir?
Mr. Winstead. Well, the other options are clearly a
renovation of the entire building for office use, but as you
suggested, that would----
Ms. Norton. By the United States of America?
Mr. Winstead. That would cost $100 million----
Ms. Norton. Yes.
Mr. Winstead. --of Federal money.
Ms. Norton. Well, we had a hard enough time, Mr. Winstead,
in getting the money for St. Elizabeth's. The Committee has
never asked you to find the money. We have never asked the
administration to put money in its budget. We have always cited
the Tariff Building, which cost the taxpayers very little. I
just want the record to be clear. You know, you put in your
testimony--the reason I am having to do this, Mr. Winstead, is
that you put $100 million in your testimony. Did you think I
was going to let that go by? You also put in your testimony
that there were other buildings around the United States that
needed renovation.
Why aren't you doing the same thing in other buildings
around the United States?
We are here because we happen to be able to look at this
building every day because it is right in mainstream D.C., but
your suggestion that there are other buildings like this only
makes us suggest why aren't you doing this nationwide.
Could you provide for this Committee within 30 days a list
of historic buildings in every State of the Union, owned by the
GSA, and of their current use and of their ages within 30 days,
please?
Mr. Winstead. I would be happy to. I did highlight some of
those other properties, the Boston property being one, that is
utilizing section 111, but we will be happy to get that
together as well as to indicate what the outlease's terms were
as well as the tenants.
Ms. Norton. Yes. First of all, we have cited the fact that
GSA has done this before. Some of these are State leases. We
are not trying to offload the cost onto anybody who cannot pay
for it. We are in the middle of a downturn that has everybody
very fearful. Frankly, if we had done this--and we do not know
how many of those people who responded to your RFI are still in
a position to do this. I know this much. There were many, many
people in 2002 who leaped at the opportunity to submit an RFI,
so we are already on the tail end of an economy that is going
down. It is making it harder and harder for the Government to
do what, in fact, you could have done years ago.
Let me ask you: What can you tell us about the expressions
of interest you have received?
Mr. Winstead. Madam Chair, the RFI did come in and we have
had substantial----
Ms. Norton. How many expressions of interest did you have?
Mr. Winstead. We have had over 20 expressions of interest.
Ms. Norton. Astounding. When you consider what kind of
commitment that would mean somebody was willing to make to this
building because they understand it is a historic building,
that is an astounding number of responses to the RFI.
Mr. Winstead. You are correct. And I think anybody looking
at a historic building with the challenges it has in terms of
infrastructure and systems, it is much harder to calculate what
your costs are going to be and what you might encounter. So you
are correct, it is----
Ms. Norton. Well, you asked for expressions of interest. So
I don't accept what you just said at all, because these people
have looked at the building. An expression of interest means
this is what we think we would like to do, what can be done to
the building. This wasn't a government RFP--you know, compete
to do this. This means I, ABC, am telling you that I think you
should do this with the building and I, ABC, am willing to put
up the cash to get almost all of it done. So don't cite for me
the usual RFP where we are competing a building. This is an
expression of interest where somebody, without of course now
saying he is prepared to compete because we have not gotten to
that point yet, does say, look, this is what I believe should
be done to the building, which means that if you choose me I
would be prepared to go forward with doing that. That is a very
substantial--nobody just throws in an RFI given what it takes
to prepare a credible RFI for the government without
calculating exactly what he is saying, what she is saying she
would be willing herself to put up, since it is her money she
is talking about, not yours, not the taxpayers' money.
Go ahead.
Mr. Winstead. Well, Madam Chair, I think you are correct. I
didn't mean to say--I think the sophistication of the
respondents was quite high. Ten of them had done projects and
close to a billion dollars. They were very sophisticated
developers. So you are correct, they knew what they were
looking at, they knew what the potential was, and they knew
what they were getting into. So you are correct.
Ms. Norton. Given the fact that--given what you have just
said, do you believe that--well, first of all, let me quote to
you from the part of my testimony that was most painful for me
to write. Here it is. The part of my testimony that was most
painful for me was this part.
The building's 2007 rent payments of $5.4 million paled in
comparison with the total expenses for the property of 11.9,
resulting in a loss of 6.1 million in 2007. Then I asked that
this figure be multiplied by the decades during which the
government has taken money from the building fund in order to
make up for the losses from rents and to add to that the
millions of dollars in renovations and additions that have
proved useless.
In light of this loss to the government on a building that
could, given the tariff building perhaps within 5 or 6 years
bring us some revenue, is there any reason to believe that the
next step after the RFI could not be completed within the next
2 months?
Mr. Winstead. Madam Chair, we obviously will focus on
getting this--getting----
Ms. Norton. Technically would that be possible?
Mr. Winstead. I think technically the decision is made that
technically----
Ms. Norton. No. If we have to--we are going to carry this
forward. So if you need help, you are going to get it.
Mr. Winstead. Within that period.
Ms. Norton. You can either do it before or you can do it
after. But this is going to be done. It would be a real mark on
the GSA if you had to do it that way. But I intend to carry
this, as I said in my opening statement, straight to the first
markup at Full Committee. Would you----
Mr. Winstead. Madam Chair, just one comment. I know you
have the figures in front of you. But the fund for operation
differential, it has unfortunately in the last 2 years been
significantly more. In fiscal year 2003 it was about a $700,000
loss; In 2004, 200,000. It has increased because of the
security costs we have seen in the last 2 years. The uniqueness
of this structure for office use is being open on weekends and
the added burden and cost ofthat----
Ms. Norton. Why was it open on weekends?
Mr. Winstead. Because of obviously the retail and the other
uses that are in the building.
Ms. Norton. And you were renting this building for other
uses? You have been renting this building for other uses?
Mr. Winstead. No, no, no. The retail and food service
functions in the building, and I do believe that occasionally
we have functions in the building on the weekend as well. So
there are----
Ms. Norton. Do you mean for that little food court down
there you have been keeping the building open?
Mr. Winstead. Well, the food court and the other services.
There are shops there and there are also space that has been
rented for events on the weekend.
Ms. Norton. $5.4 million worth of rent? I guess you are
pretty desperate. I guess you have got to go for every penny
because it reduces at least somewhat what you have to invest to
make up for the losses. So you really are on a merry-go-round,
aren't you? You have got to open the building, pay for
security, all of which will bring you a loss but it will
perhaps reduce the loss that you bring.
Mr. Winstead. Your point is made, Madam Chairman.
Ms. Norton. Now, talk about this--I don't know whether to
call it a building or this addition or at the end that kind of
sits aside from the building. It certainly doesn't go with the
historic structure. Why was such a structure put there as a
shopping mall? Whatever happened to it? Was it ever open?
Mr. Winstead. I think I covered in my testimony--and let me
kind of refer back to it. It was, but the original concept was
for essentially a festival food court in that annex building
and unfortunately I think back then the traffic that we were
getting along Pennsylvania Avenue was not quite at the level
obviously of the residential redevelopment of downtown. And the
traffic and tourism--we have much more traffic than we did back
then. The concept--the lessor at that point tried to switch
from the concept of destination retail, which unfortunately
just did not attract enough suitable retail lessees and he went
bankrupt and that was an unfortunate event as a result of that.
Ms. Norton. So it has been closed since when?
Mr. Costa. It actually never was fully occupied. For less--
about a year, 18 months, it was partially occupied and then it
just closed down.
Ms. Norton. Would you submit within 30 days the cost of
that--that I can't criticize there. I can see what you were
doing, you were trying to get some greater use out of the
building. But, again, there is always plenty of traffic on
Pennsylvania Avenue. You have got to have somebody that knows
how to market those things. And that is, of course, what we are
seeking in the public/private partnership. So that has been
just there with no tenant. How about renting--has the space
been rented other than to the food court and the shops that are
there on the first floor?
Mr. Winstead. Madam Chair, I do know during my tenure there
has not been. That is the last 2-1/2 years. There has not been
any rental of that space. I don't know whether before that
there had been.
Ms. Norton. Well, before that it was rented because that is
where the killing took place outside after it was rented to
someone.
Mr. Winstead. Okay. You are speaking of the atrium, not the
annex?
Ms. Norton. No, not the annex.
Mr. Winstead. Oh, I am sorry.
Ms. Norton. The annex you say was open for a year and a
half?
Mr. Winstead. Right.
Ms. Norton. But the building itself was rented and we can
understand why because again with the losses you were getting I
am sure you were trying to get some revenue from the building.
Then we had the killing. Has the building been leased to any
except those who occupy the building in the weekdays for shops,
for selling things I suppose I should say?
Mr. Costa. There are kiosks and also events still take
place. So we are renting out the atrium space even on weekends
at times.
Ms. Norton. So give us examples of who you rent to.
Mr. Winstead. I do know, Madam Chair, they have--as I
mention, they have conferences. I have attended one in some of
the conference areas on the first floor, which is right above
the retail. So there has been an effort to try to get rooms
into at least----
Ms. Norton. The Subcommittee does not take the position you
should not be renting the space. If you were renting the space
to some kind of rowdy student group, that was different. Would
you submit to the Subcommittee within 30 days all of those to
whom the space has been rented since the killing in 2005?
Mr. Winstead. I would be happy to.
Ms. Norton. I ask the Ranking Member if he has any further
questions. I think that I have only a few more questions.
The largest project that the GSA has handled is about to
come out of the Congress. And that, of course, is the
Department of Homeland Security. It really is going to test
your own mettle to see if you can manage such a project, move
it, move it quickly, 5 or 6 agencies on one compound. You don't
usually supervise the building of more than one building and it
is going to be a number of buildings over a number of years.
Would you tell me where you are now in the process of
preparing for St. Elizabeth's? What work has been done and what
remains to be done for preparation for the Department of
Homeland Security construction?
Mr. Winstead. Madam Chairman, we continue at both the NCR
level and the headquarters to be engaged with DHS and their
tenant needs. And St. Elizabeth meetings are being held weekly.
In that regard, as you know, we are planning still at about 4-
1/2 million square feet of office and related space for about
14,000 employees on the 176-acre campus. The project overall
will be about a $3 billion project, $2 billion from GSA and 1.4
billion from DHS. We are still looking at construction
completion in 2016.
I will tell you that I personally--Bart Bush has been very
involved in this, as well as Tony and other members of my
staff. We are making great progress. We are meeting and we will
continue to meet at the highest levels of the DHS, as well as
the project management level.
We have reached out to the community, thanks to your
efforts quite frankly. I attended I think a year and a half ago
a community meeting of the NC up there with you. We continue to
follow up through our project management team. I have reached
out to Harriet Tregoning, who is the Director of Planning for
the District of Columbia at my level. I knew her from years ago
in Maryland. We have coordinated closely with the city. We
continue to make substantial progress. I was not party to a
meeting that was held yesterday, but both Bart and Tony were
with the top level at DHS. We do have a meeting with Lurita
Doan, myself, somebody from the Park Service, as well as higher
levels, I think the Deputy Secretary of DHS, in a couple of
weeks just to go over everything in terms of the plan moving
forward, of which we are very optimistic.
I will tell you a lot of effort has gone into making sure
that that national landmark like OPO is well managed. There is
a lot of concern in that regard about density and placement of
buildings. I personally got involved in that as well as Bart's
staff and Tony, as well as the historic preservation people at
the head office, and I do think we are making substantial
progress. We are understanding DHS's needs. They are committed.
We have housing plans and we are proceeding. I will tell you
that I am pleased.
My information might not be as current as Bart and Tony in
terms of recent meetings, but I am pleased in the efforts I
have made with the Dick Moe, who is the head of the National
Historic Trust and John Nau, who chairs the Advisory Council
for Historic Preservation, who have both gotten very involved
in this process to ensure that we can achieve the densities on
that site that satisfy DHS's housing needs but also are very
sensitive to the aesthetics, the campus at DHS and new building
that we will be doing, which will be substantial. We are going
to reuse a majority of the existing buildings, but there is
going to be new buildings for obviously Coast Guard quarters
and DHS headquarters.
But I am pleased--I don't know whether Tony has a comment
or two about this, but we will keep this Committee informed on
any issues that come up going forward.
Ms. Norton. Well, we have complimented your management of
historic properties, but you have never seen anything like
this. That is probably dotted with historic properties
everywhere. So you are going to be faced with not only building
new structures but with conforming the structures there to what
DHS needs, is going to test every bit of expertise that you
supposedly have.
Now, by law, the Coast Guard will not, cannot move unless
the access road is provided and there were to be negotiations
to make sure that happened with the National Park Service. I
would like to know the exact status of that, please.
Mr. Winstead. All right.
Mr. Costa. We are making good progress.
Ms. Norton. Exactly what is the status now please? We are
always making good progress. That is what bureaucrats always--
you know, we are making progress. What is the exact status? You
should have had this out last year. In fact, we should have had
it out 3 years ago. So you have had extra time to negotiate the
access road. And if that part is done, then we won't be looking
back to say whatever happened to the access road when what you
should be doing is spending your time on the construction
itself. So I have got to ask you the exact status, if there are
difficulties, and you need to tell us what the difficulties
are, so that we can be helpful if there are difficulties.
Mr. Costa. We appreciate the support. We have been doing
engineering studies to actually design exchanges, access around
the campus. The work with the National Park Service is really
about going through statutory requirements to assess the impact
of development along historic roadways. And so I know it is a
bureaucratic answer, but it is the bureaucracy of the process
of going through it.
Ms. Norton. I am not going to burden the hearing with this
technical discussion. I will ask you to call my office. And you
and a representative from the Park Service should come so that
we can understand what that concern would be. The Congress is
extremely frustrated that the Department of Homeland Security
is taking so long to go up. I don't want to be faced with the
notion that it is really an access road problem. And if there
are things that we need to do, if you would call my scheduler,
we will get all the relevant actors together.
What is the state of the environmental cleanup? The
environmental process has been explained by the community to
the community. The mayor himself and I, along with Lorita Doan
were at a press conference informing the community, the parts
of the community that live closest to St. Elizabeth's. So all
of that was done more than a year ago. So I want to know, have
we begun the environmental cleanup? What is the status of the
environmental cleanup?
Mr. Costa. The issue that was raised about a year ago near
the border of the campus, we actually did testing already and
there really was no extensive cleanup needed. There is cleanup
in the middle of the campus associated with the old heating
plant. So there are two separate environmental cleanup issues.
Again, the cleanup issue related to the neighborhood, we have
completed all testing and there is no cleanup required.
Ms. Norton. I know that is very good news for me. I am sure
others in the city already know it. So what we are really
saying is that out of an abundance of caution you did in fact
look at the area that was close to homes, found that no
environmental cleanup in their yards or in that area was needed
at all; is that correct?
Mr. Costa. Yes, we did.
Ms. Norton. Now, everyone understands what you said about
the heating plant. This was a city within a city. What is the
status of the environmental cleanup for inside the property?
Mr. Costa. Most of that cleanup will occur during
construction and excavation. So we wouldn't do it twice. So the
plan will be as we excavate for construction--the basic plan is
the same that we used for the Southeast Federal Center.
Ms. Norton. To hear you say that is interesting to me
because that certainly isn't the way we did it at the Southeast
Federal Center. At the Southeast Federal Center, we had about
three tranches, three separate appropriation years. I asked for
money to clean it up so that by the time you got to the point
that we did the public/private, the Southeast Center for
Public/Private Act, cleanup was not an issue.
Mr. Costa. I should have been clearer, because the
Southeast Federal Center really had two components. One was
associated with the request for funding where we managed
contamination that was frankly running into the Anacostia if we
didn't do that cleanup. We also have additional cleanup through
the development of the Southeast Federal Center, which actually
we are trying to save money by doing it during excavation of
the process.
Ms. Norton. I see. Now, who is to pay for the
infrastructure?
Mr. Costa. For the Southeast Federal Center----
Ms. Norton. No, no.
Mr. Costa. Those are part of our requests.
Ms. Norton. Those are what?
Mr. Costa. Those are part of our funding requests we have
been requesting.
Ms. Norton. They are part of the funding request for this
year?
Mr. Costa. Yes. There is a component for infrastructure.
Ms. Norton. Thank you very much. This Subcommittee works
very closely with the GSA. We understand your concerns, but we
are disappointed in the way this particular project has been
handled. We stand ready to be helpful to the GSA. We believe
that you have many experts who know how to do every bit of what
needs to be done, and all we ask is candor on your part when
there is a problem.
We do understand the role of the OMB in all of this. But
there is the Congress of the United States and we do have
bipartisan support. So no Federal agency I think can keep us
losing money off of this--from this project. We intend to move
forward. We understand the position you have been put in.
We very much appreciate your testimony. This hearing is
adjourned.
[Whereupon, at 3:25 p.m., the Subcommittee was adjourned.]
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