Courthouse Construction
Overview of Previous and Ongoing Work Gao ID: GAO-05-838T June 21, 2005Over the last 20 years, GAO has compiled a large body of work on courthouse construction and federal real property. The General Services Administration (GSA) owns federal courthouses and funds related expenses from its Federal Buildings Fund (FBF)--a revolving fund used to finance GSA real property services, including the construction and maintenance of federal facilities under GSA control. The judiciary pays rent to GSA for the use of these courthouses, and the proportion of the judiciary's budget that goes to rent has increased as its space requirements have grown. In December 2004, the judiciary requested a $483 million permanent, annual exemption from rent payments to GSA to address budget shortfalls. In this testimony, GAO (1) summarizes its previous work on courthouse construction and (2) provides information on FBF and GAO's ongoing work on the federal judiciary's request for a permanent, annual rent exemption of $483 million from rent to GSA.
GAO's courthouse construction work to date has focused primarily on courthouse costs, planning, and courtroom sharing. In the 1990s, GAO reported that wide latitude among judiciary and GSA decision makers in choices about location, design, construction, and finishes often resulted in expensive features in some courthouse projects. The judiciary has since placed greater emphasis on cost consciousness in the guidelines for courthouse construction that it provides to GSA. Related to planning, GAO also found in the 1990s that long-range space projections by the judiciary were not sufficiently reliable, and that the judiciary's 5-year plan did not reflect all of the its most urgently needed projects. The judiciary has made changes to improve its planning and data reliability. During previous work, GAO also found that the judiciary did not track sufficient courtroom use data to gauge the feasibility of courtroom sharing. GSA has been unable to generate sufficient revenue through FBF over the years and thus has struggled to meet the requirements for repairs and alterations identified in its inventory of owned buildings. By 2002, the estimated backlog of repairs had reached $5.7 billion, and consequences included poor health and safety conditions, higher operating costs, restricted capacity for modern information technology, and continued structural deterioration. GSA's inability to generate sufficient revenue in the past has been compounded by restrictions imposed on the rent GSA could charge federal agencies. Consequently, GAO recommended in 1989 that Congress remove all rent restrictions and not mandate any further restrictions, and the most restrictions have been lifted. Some narrowly focused rent exemptions, many of limited duration, still exist today, but together they represent roughly a third of the $483 million permanent exemption the judiciary is currently requesting from GSA. The judiciary has requested the exemption, equaling about half of its annual rent payment, because of budget problems it believes that its growing rent payments have caused. GSA data show that GSA-owned space, occupied by the judiciary, has increased significantly. GAO is currently studying the potential impact of such an exemption on FBF, but past GAO work shows rent exemptions have been a principal reason why FBF has accumulated insufficient money for capital investment.
GAO-05-838T, Courthouse Construction: Overview of Previous and Ongoing Work
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Testimony:
Before the Subcommittee on Economic Development, Public Buildings and
Emergency Management, Committee on Transportation and Infrastructure,
House of Representatives:
United States Government Accountability Office:
GAO:
For Release on Delivery Expected at 1:00 p.m. EDT:
June 21, 2005:
Courthouse Construction:
Overview of Previous and Ongoing Work:
Statement of Mark L. Goldstein, Director, Physical Infrastructure
Issues:
GAO-05-838T:
GAO Highlights:
Highlights of GAO-05-838T, a testimony before the Subcommittee on
Economic Development, Public Buildings and Emergency Management,
Committee on Transportation and Infrastructure, House of
Representatives:
Why GAO Did This Study:
Over the last 20 years, GAO has compiled a large body of work on
courthouse construction and federal real property. The General Services
Administration (GSA) owns federal courthouses and funds related
expenses from its Federal Buildings Fund (FBF)–a revolving fund used to
finance GSA real property services, including the construction and
maintenance of federal facilities under GSA control. The judiciary pays
rent to GSA for the use of these courthouses, and the proportion of the
judiciary‘s budget that goes to rent has increased as its space
requirements have grown. In December 2004, the judiciary requested a
$483 million permanent, annual exemption from rent payments to GSA to
address budget shortfalls.
In this testimony, GAO (1) summarizes its previous work on courthouse
construction and (2) provides information on FBF and GAO‘s ongoing work
on the federal judiciary‘s request for a permanent, annual rent
exemption of $483 million from rent to GSA.
What GAO Found:
GAO‘s courthouse construction work to date has focused primarily on
courthouse costs, planning, and courtroom sharing. In the 1990s, GAO
reported that wide latitude among judiciary and GSA decision makers in
choices about location, design, construction, and finishes often
resulted in expensive features in some courthouse projects. The
judiciary has since placed greater emphasis on cost consciousness in
the guidelines for courthouse construction that it provides to GSA.
Related to planning, GAO also found in the 1990s that long-range space
projections by the judiciary were not sufficiently reliable, and that
the judiciary‘s 5-year plan did not reflect all of the its most
urgently needed projects. The judiciary has made changes to improve its
planning and data reliability. During previous work, GAO also found
that the judiciary did not track sufficient courtroom use data to gauge
the feasibility of courtroom sharing.
GSA has been unable to generate sufficient revenue through FBF over the
years and thus has struggled to meet the requirements for repairs and
alterations identified in its inventory of owned buildings. By 2002,
the estimated backlog of repairs had reached $5.7 billion, and
consequences included poor health and safety conditions, higher
operating costs, restricted capacity for modern information technology,
and continued structural deterioration. GSA‘s inability to generate
sufficient revenue in the past has been compounded by restrictions
imposed on the rent GSA could charge federal agencies. Consequently,
GAO recommended in 1989 that Congress remove all rent restrictions and
not mandate any further restrictions, and the most restrictions have
been lifted. Some narrowly focused rent exemptions, many of limited
duration, still exist today, but together they represent roughly a
third of the $483 million permanent exemption the judiciary is
currently requesting from GSA. The judiciary has requested the
exemption, equaling about half of its annual rent payment, because of
budget problems it believes that its growing rent payments have caused.
GSA data show that GSA-owned space, occupied by the judiciary, has
increased significantly. GAO is currently studying the potential impact
of such an exemption on FBF, but past GAO work shows rent exemptions
have been a principal reason why FBF has accumulated insufficient money
for capital investment.
www.gao.gov/cgi-bin/getrpt?GAO-05-838T.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Mark L. Goldstein at
(202) 512-2834 or goldsteinm@gao.gov.
[End of section]
Mr. Chairman, Ranking Minority Member, and Members of the Subcommittee:
Thank you for the opportunity to testify before you today on our work
related to federal courthouse construction. As you know, we have done
considerable work on federal courthouse construction and other related
federal real property issues over the past 20 years. My testimony today
will (1) summarize our previous work on this topic and (2) provide
information on the Federal Buildings Fund (FBF) and our ongoing
congressionally requested work related to the federal judiciary's
request for a permanent, annual exemption of $483 million from rent
that the General Services Administration (GSA) charges the judiciary to
occupy space in courthouses. GSA owns federal courthouses and funds
courthouse-related expenses from FBF--a revolving fund used to fund GSA
real property services, including space acquisition and asset
management for federal facilities that are under GSA control. The
exemption the judiciary is seeking would represent about half of the
judiciary's 2004 rent payment of $909 million, and the judiciary
represents one of GSA's largest tenants. My testimony today will
highlight the following points:
* GAO's courthouse construction work to date has focused primarily on
courthouse costs, planning, and courtroom sharing. In the 1990s, we
found that wide latitude in choices made by GSA and the judiciary about
location, design, construction, and finishes often resulted in
expensive features in some courthouse projects. Since then, the
judiciary has placed greater emphasis on cost consciousness in its
courthouse construction guidance for GSA. In the 1990s, we also found
that the judiciary's long-term space projections were not sufficiently
reliable, and that the judiciary's 5-year plan did not reflect all of
the judiciary's most urgently needed projects. Since then, the
judiciary has made the changes we recommended. With regard to courtroom
sharing that could help reduce costs, we found that the judiciary did
not collect sufficient data to determine how much sharing could occur.
The judiciary disagreed with this finding and the related
recommendation.
* GSA has historically been unable to generate sufficient revenue
through FBF and has thus struggled to meet the requirements for repairs
and alterations identified in its inventory of owned buildings. By
2002, the estimated backlog of repairs had reached $5.7 billion, and
consequences included poor health and safety conditions, higher
operating costs, restricted capacity for modern information technology,
and continued structural deterioration. GSA charges agencies rent for
the space they occupy, and the receipts from the rent are deposited in
FBF and are then available for the purposes of the fund. Restrictions
imposed on the rent GSA could charge federal agencies have compounded
the agency's inability to address its backlog in the past.
Consequently, we recommended in 1989 that Congress remove all rent
restrictions and not mandate any further restrictions, and most rent
restrictions have been lifted. The GSA Administrator has the authority
to grant rent exemptions, and all of the current exemptions are limited
to single buildings or were granted for a limited duration. Together,
these current exemptions represent about a third of the $483 million
permanent exemption the judiciary is requesting from GSA. The judiciary
has requested the exemption, equal to about half of its annual rent
payment, because of budget problems that it believes its growing rent
payments have caused. GSA data show that one reason the judiciary's
rent is increasing is that the space it occupies is also increasing. We
are currently studying the potential impact of such an exemption on
FBF, but our past work shows that rent exemptions were a principal
reason why FBF has accumulated insufficient money for capital
investment.
Background:
Since the early 1990s, GSA and the federal judiciary have been carrying
out a multibillion-dollar courthouse construction initiative to address
the judiciary's growing needs. In 1993, the judiciary identified 160
court facilities that required either the construction of a new
building or a major annex to an existing building. From fiscal year
1993 through fiscal year 2005, Congress appropriated approximately $4.5
billion for 78 courthouse construction projects. Since fiscal year
1996, the judiciary has used a 5-year plan to prioritize new courthouse
construction projects, taking into account a court's need for space,
security concerns, growth in judicial appointments, and any existing
operational inefficiencies. The judiciary's most recent 5-year plan
(covering fiscal years 2005 through 2009) identifies 57 needed projects
that are expected to cost $3.8 billion. GSA and the judiciary are
responsible for managing the multibillion-dollar federal courthouse
construction program, which is designed to address the judiciary's long-
term facility needs. The Administrative Office of the United States
Courts (AOUSC), the judiciary's administrative agency, works with the
nation's 94 judicial districts to identify and prioritize needs for new
and expanded courthouses. The U.S. Courts Design Guide (Design Guide)
specifies the judiciary's criteria for designing new court facilities
and sets the space and design standards that GSA uses for courthouse
construction. First published in 1991, the Design Guide has been
revised several times to address budgetary considerations,
technological advancements, and other issues, and the guide is
currently undergoing another revision.
GSA provides a range of real property services including maintenance,
repairs, alterations, and leasing to numerous federal agencies and the
federal judiciary. The Public Buildings Amendments of 1972 made several
important revisions to the Federal Property and Administrative Services
Act. First, the 1972 law created a new revolving fund, later named FBF.
Next, it required agencies that occupy GSA-controlled buildings to pay
rent to GSA, which is to be deposited in the revolving fund to be used
for GSA real property services.[Footnote 1] GSA charges rent based on
appraisals for facilities it owns and the actual lease amount for
facilities it leases on the tenants' behalf.[Footnote 2] The
legislation also authorized any executive agency other than GSA that
provides space and services to charge for the space and services. The
rent requirement is intended to reduce costs and encourage more
efficient space utilization by making agencies accountable for the
space they use. GSA proposes spending from FBF for courthouses as part
of the President's annual budget request to Congress.
GSA has been using the judiciary's 5-year plan for new courthouse
projects since fiscal year 1996 to develop requests for both new
courthouses and expanded court facilities. GSA also prepares
feasibility studies to assess various courthouse construction
alternatives and serves as the central point of contact with the
judiciary and other stakeholders throughout the construction process.
For courthouses that are to be selected for construction, GSA prepares
detailed project descriptions called prospectuses that include the
justification, location, size, and estimated cost of the new or annexed
facility. GSA typically submits two prospectuses to Congress. The first
prospectus generally requests authorization and funding to purchase the
site and design the building, and the second prospectus generally
requests authorization and funding for construction, as well as any
additional funding needed for site and design work. Once Congress
authorizes and appropriates funds for a project, GSA refines the
project budget and selects private-sector firms for the design and
construction work. Figure 1 illustrates the process for planning,
approving, and constructing a courthouse project.
Figure 1: Development and Approval Process for Funding a Typical
Courthouse[A]:
[See PDF for image]
[A] This figure shows the typical process for a project that is
procured through the design bid-build method. Projects may also be
procured using the design-build method. Such projects require site,
design, and construction funding at the same time and therefore may be
submitted to OMB and Congress only once, rather than twice as shown in
this figure.
[B] Courthouse projects are financed through the Federal Buildings Fund
(FBF), a revolving fund that is used to fund GSA real property
activities with rent from tenant agencies. The President's annual
budget request to Congress proposes spending from FBF. GSA submits
detailed project descriptions called prospectuses to Congress as part
of its Capital Investment Program. Prospectuses request authorization
for new construction and for repair and alteration projects, including
courthouses.
[End of figure]
Courthouse projects continue to be costly, and increasing rents and
budgetary constraints have given the judiciary further incentive to
control its costs. The judiciary pays rent to GSA for the use of the
courthouses, which GSA owns, and the proportion of the judiciary's
budget that goes to rent has increased as the judiciary's space
requirements have grown. According to the judiciary, rent currently
accounts for just over 20 percent of its operating budget and is
expected to increase to over 25 percent of its operating budget in
fiscal year 2009, when the rental costs of new court buildings are
included. Additionally, in fiscal year 2004, the judiciary faced a
budgetary shortfall and, according to the judiciary, reduced its staff
by 6 percent.
In September 2004, the judiciary announced a 2-year moratorium on new
courthouse construction projects as part of an effort to address its
increasing operating costs and budgetary constraints. During this
moratorium, AOUSC officials said that they plan to reevaluate the
courthouse construction program, including reassessing the size and
scope of projects in the current 5-year plan, reviewing the Design
Guide's standards, and reviewing the criteria and methodology used to
prioritize projects. Judiciary officials also said that they plan to
reevaluate their space standards in light of technological advancements
and opportunities to share space and administrative services.
GAO's Courthouse Construction Work Has Focused on Costs, Planning, and
Courtroom Sharing:
Our work in the 1990s showed that decision makers within GSA and the
judiciary had wide latitude in making choices that significantly
affected costs. The judiciary's 5-year plan did not reflect all of the
judiciary's most urgently needed projects. However, the judiciary has
since made some of our recommended changes. We also found that the
judiciary did not compile data that would allow it to determine how
many and what types of courtrooms it needs. The judiciary concluded
that additional data and analysis were not necessary.
Courthouse Construction Costs:
In 1995, we testified that a primary reason for differences in the
construction costs of courthouses was that GSA and the judiciary had
wide latitude in making choices about the location, design,
construction, and finishes of courthouse projects.[Footnote 3] These
choices were made under circumstances in which budgets or designs were
often committed to before requirements were established. In addition,
design guidance was flexible, and systematic oversight was limited. As
a result, some courthouses had more expensive features than
others.[Footnote 4] While recognizing that some flexibility was needed
and that some costly features may be justifiable, we found that the
flexibility in the process should have been better managed. We
recommended that GSA and AOUSC:
* clearly define the scope of construction projects and refine
construction cost estimates before requesting project approval and
final funding levels;
* establish and implement a systematic and ongoing project oversight
and evaluation process to compare courthouse projects, identify
opportunities for reducing costs, and apply lessons learned to future
projects; and:
* establish a mechanism to monitor and assess the use of flexibility
within design guidance to better balance choices made about courthouse
design, features, and finishes.
GSA and the judiciary said that since 1996, they have also taken
several actions to improve the courthouse construction program,
including developing priority lists of locations needing additional
space (the 5-year plan), revising the Design Guide, and placing greater
emphasis on cost consciousness in its courthouse construction guidance
for GSA.
In a 2004 congressional briefing, we reported that GSA had attributed
some cost growth in courthouse construction projects to a number of
factors, including changes in the scope of the projects. In Buffalo,
New York, for example, GSA had to change the scope of the courthouse
project and acquire an entirely new site in order to achieve the
necessary security-based setbacks from the street. The judiciary said
that funding delays have slowed the progress of the program by creating
a backlog of projects, and increased costs by 3 to 4 percent per year
because of inflation. The judiciary also indicated that limiting the
size of courthouses to stay within budget has resulted in space
shortages sooner than expected at some courthouses. In a 2004 report
related specifically to a new federal courthouse proposed for Los
Angeles, we found that the government will likely incur additional
construction and operational costs beyond the $400 million estimated as
needed for the new courthouse.[Footnote 5] Some of these additional
costs are attributable to operational inefficiencies. Specifically, the
court is split between a new building and an existing courthouse in Los
Angeles, both of which will, according to the judiciary, require
additional courtrooms to meet the district court's projected space
requirements in 2031.
Judiciary Long-and Short-Term Space Planning:
In 1993, we reviewed the long-term planning process used by the
judiciary to estimate its space requirements.[Footnote 6] We found that
AOUSC's process for projecting long-term space requirements did not
produce results that were sufficiently reliable to form the basis for
congressional authorization and funding approval of new construction
and renovation projects for court space. Specifically, three key
problems impaired the accuracy and reliability of the judiciary's
projections. First, AOUSC did not treat all districts consistently. For
example, the procedure used to convert caseload estimates to staffing
requirements did not reflect differences among districts that affect
space requirements. Second, according to AOUSC's assumptions about the
relationship between caseloads and staff needs, many district baseline
estimates did not reflect the districts' current space requirements.
For example, when a district occupied more space than the caseload
warranted, future estimates of needs were overstated. Third, AOUSC's
process did not provide reliable estimates of future space requirements
because the methodology used to project caseloads did not use standard
acceptable statistical methods.
We recommended that AOUSC revise the long-term planning process to
increase consistency across regions, establish accurate caseload
baselines for each district, and increase the reliability of the
projected caseloads by applying an accepted statistical methodology and
reducing subjectivity in the process. In May 1994, we testified that
the judiciary had implemented some of these recommendations.[Footnote
7] For example, on the basis of our recommendation, whenever a decision
was made to proceed on a particular building project, AOUSC provided
GSA with detailed 10-year space requirements for prospectus development
and an overall summary of its projected 30-year space requirements for
purposes of site planning. In 2001, we reported that since 1994, AOUSC
had continued its efforts to improve its long-term planning process in
implementing our previous recommendations.[Footnote 8] Specifically,
the judiciary began (1) using an automated computer program that
applied Design Guide standards to estimate space requirements, (2)
employing a standard statistical forecasting technique to improve
caseload projections, and (3) providing GSA with data on its 10-year
projected space requirements to support the judiciary's request for
congressional approval of funds to build new facilities.
In 1996 we reported that the judiciary had developed a methodology for
assessing project urgency and a short-term (5-year) construction plan
to communicate its urgent courthouse construction needs.[Footnote 9]
Our analysis suggested that its 5-year plan did not reflect all of the
judiciary's most urgent construction needs. We found that the
judiciary, in preparing the 5-year plan, developed urgency scores for
45 projects, but did not develop urgency scores for other locations
that, according to AOUSC, also needed new courthouses. Our analysis of
available data on conditions at the 80 other locations showed that 30
of them likely would have had an urgency score higher than some
projects in the plan. We recommended that the Director of AOUSC work
with the Judicial Conference Committee on Security, Space, and
Facilities to make improvements to the 5-year plan, including fully
disclosing the relative urgency of all competing projects and
articulating the rationale or justification for project priorities,
including information on the conditions that are driving urgency--such
as specific security concerns or operational inefficiencies. In
commenting on the report, AOUSC generally agreed with our
recommendations and indicated that many of the improvements we
recommended were already under consideration. It also recognized that
some courthouse projects, which were currently underway, may have had
lower priority scores because the funding had already been provided by
the time the priority scores were developed.
Courtroom Sharing:
In 1997, we reported that the judiciary maintains a general practice
of, whenever possible, assigning a trial courtroom to each district
judge.[Footnote 10] However, we also noted that the judiciary did not
compile data on how often and for what purposes courtrooms are actually
used and it did not have analytically based criteria for determining
how many and what types of courtrooms are needed. We concluded that the
judiciary did not have sufficient data to support its practice of
providing a trial courtroom for every district judge. We recommended
that the judiciary:
* establish criteria for determining effective courtroom utilization
and a mechanism for collecting and analyzing data at a representative
number of locations so that trends can be identified over time and
better insights obtained on court activity and courtroom usage;
* design and implement a methodology for capturing and analyzing data
on usage, courtroom scheduling, and other factors that may
substantially affect the relationship between the availability of
courtrooms and judges' ability to effectively administer justice;
* use the data and criteria to explore whether the one-judge, one-
courtroom practice is needed to promote efficient courtroom management
or whether other courtroom assignment alternatives exist; and:
* establish an action plan with time frames for implementing and
overseeing these efforts.
In 1999, AOUSC contracted for a study of the judiciary's facilities
program to address, among other things, the courtroom-sharing issue and
identify ways to improve its space and facility efforts. As part of
this study, the contractor analyzed how courtrooms are used, assigned,
and shared by judges. We reviewed the courtroom use and sharing portion
of this study and concluded, along with others, that the study was not
sufficient to resolve the courtroom sharing issue.[Footnote 11] We
recommended that the Director, AOUSC, in conjunction with the Judicial
Conference's Committee on Court Administration and Case Management and
Committee on Security and Facilities, design and implement cost-
effective research more in line with the recommendations in our 1997
report. We also recommended that AOUSC establish an advisory group made
up of interested stakeholders and experts to assist in identifying
study objectives, potential methodologies, and reasonable approaches
for doing this work. In responding to the report, AOUSC disagreed with
our recommendations because it believed the contractor study was
sufficient and additional statistical studies would not be productive.
In a 2002 report, we found that the judiciary's policies recognized
that senior district judges with reduced caseloads were the most likely
candidates to share courtrooms and some active and senior judges were
sharing courtrooms in some locations primarily when there were not
enough courtrooms for all judges to have their own courtroom.[Footnote
12] However, because of the judiciary's belief in the strong
relationship between ensured courtroom availability and the
administration of justice and the wide discretion given to circuits and
districts in determining how and when courtroom sharing may be
implemented, we concluded that there would not be a significant amount
of courtroom sharing in the foreseeable future, even among senior
judges.
Issues Related to FBF:
We have reported over the years that GSA has struggled to address its
repair and alteration needs identified in its inventory of owned
buildings. In 1989, we found that FBF's inability to generate
sufficient revenue in the past was due, in large part, to restrictions
imposed on the amount of rent GSA could charge federal agencies, and we
recommended in 1989 that Congress remove all rent restrictions and not
mandate any further restrictions. It is also important to note that not
all federal property is subject to FBF rent payments because GSA does
not control all federal properties. We are currently conducting a
review for this committee regarding the issues associated with the
judiciary's request of a $483 million permanent, annual exemption from
rent payments to GSA.
Rent Restrictions Have Historically Contributed to Large Repair
Backlogs:
As part of our series on high-risk issues facing the federal
government, we have reported that GSA has struggled over the years to
meet the requirements for repairs and alterations identified in its
inventory of owned buildings.[Footnote 13] By 2002, its estimated
backlog of repairs had reached $5.7 billion. We have reported that
adverse consequences of the backlog included poor health and safety
conditions, higher operating costs associated with inefficient building
heating and cooling systems, restricted capacity to modernize
information technology, and continued structural deterioration
resulting from such things as water leaks.[Footnote 14] We reported
that FBF has not historically generated sufficient revenue to address
the backlog.
On the basis of the work we did in the late 1980s and early 1990s, we
concluded that federal agencies' rent payments provided a relatively
stable, predictable source of revenue for FBF, but that this revenue
has not been sufficient to finance both growing capital investment
needs and the cost of leased space. We found that FBF's inability to
generate sufficient revenue during that time was compounded by
restrictions imposed on the amount of rent GSA could charge federal
agencies. Congress and OMB had instituted across-the-board rent
restrictions that reduced FBF by billions of dollars over several
years, and later continued to restrict what GSA could charge some
agencies, such as the Departments of Agriculture and Transportation.
Because these rent restrictions were a principal reason why FBF has
accumulated insufficient money for capital investment, we recommended
that Congress remove all rent restrictions and not mandate any further
restrictions.[Footnote 15]
According to GSA, most of the restrictions initiated by Congress and
OMB have been lifted. However, the GSA Administrator has the authority
to grant rent exemptions to agencies. GSA data show that several rent
exemptions are currently in place. In general, these exemptions are
narrowly focused on a single building or even part of a single building
or are granted for a limited duration. Table 1 summarizes the current
rent exemptions that exist in GSA buildings, according to data GSA
provided.
Table 1: Current Rent Exemptions in GSA Buildings:
Agency, address: Smithsonian Institution, National Museum of the
American Indian, New York, NY;
Justification: Legislatively mandated exemption;
Estimated forgone annual rent: $4,566,632.
Agency, address: U.S. Postal Service, 271 Cadman Plaza, New York, NY;
Justification: GSA granted an exemption to the Postal Service as part
of a 99-year rent-free agreement with GSA as a condition of the
negotiated sale of the building in lieu of a transfer of funds from
GSA;
Estimated forgone annual rent: $1,820,000.
Agency, address: National Building Museum, 5th & F Sts., Washington,
DC;
Justification: Legislatively mandated exemption;
Estimated forgone annual rent: $1,300,000.
Agency, address: Woodrow Wilson Center, 1300 Pennsylvania Ave.,
Washington, DC;
Justification: GSA granted an exemption based on funding limitations
imposed by Congress and the compelling purpose of memorializing the
nation's 28th President;
Estimated forgone annual rent: $5,400,000.
Agency, address: Department of Commerce, 14th St. & Constitution Ave.,
Washington, DC;
Justification: GSA granted an exemption covering the area of the
building that is maintained at the expense of the tenant agency;
Estimated forgone annual rent: $400,000.
Agency, address: National Imaging and Mapping Agency, M Street, SE,
Washington, DC;
Justification: GSA granted a rent exemption of 50 percent because the
tenant agreed to pay all maintenance, capital improvements, and
security expenses due;
Estimated forgone annual rent: $7,038,552.
Agency, address: Department of Agriculture, multiple locations,
Washington, DC;
Justification: GSA granted a 100-percent rent exemption for the
tenant's three headquarters buildings for fiscal years 1996 through
2006 to allow the tenant to accumulate funds needed for major repairs
on these buildings. The tenant will then pay for the repairs;
Estimated forgone annual rent: $52,406,234.
Agency, address: Railroad Retirement Board, nationwide locations;
Justification: GSA granted a partial rent exemption so that the tenant
would only pay for the actual costs on these buildings through fiscal
year 2013;
Estimated forgone annual rent: $3,655,063.
Agency, address: Centers for Medicare & Medicaid Services, nationwide
locations;
Justification: GSA granted a partial rent exemption so that the tenant
would only pay for the actual costs on these buildings through fiscal
year 2013;
Estimated forgone annual rent: $15,717,264.
Agency, address: Social Security Administration, Washington, DC;
Justification: GSA granted a partial rent exemption so that the tenant
would only pay for the actual costs on these buildings through fiscal
year 2013;
Estimated forgone annual rent: $72,417,477.
Agency, address: Department of State, 1801 Pennsylvania Ave.,
Washington, DC;
Justification: GSA granted an exemption for space used by the
President's G-8 Economic Summit staff from August 2004 to November 2004
because neither the Department of State nor the G-8 Economic Summit has
received appropriated funding for rent payments to GSA;
Estimated forgone annual rent: $1,330,740.
Agency, address: International Broadcasting Board of Governors,
Washington, DC;
Justification: GSA granted an exemption in 2004 based on the tenant's
certification that it did not have funds available to meet the
obligation. A new long-term occupancy agreement is being negotiated;
Estimated forgone annual rent: $1,016,195.
Agency, address: Presidential and Armed Forces Inaugural Committees,
Mary E. Switzer Building, Washington, DC;
Justification: GSA granted an exemption in 2004 because it found that
it was not practical or feasible for the tenant to pay the rent;
Estimated forgone annual rent: $2,415,440.
Agency, address: U.S. Election Assistance Commission, Washington, DC;
Justification: GSA granted an exemption for fiscal year 2004 because
the tenant was appropriated only 12 percent of its authorized budget
and did not have sufficient money to pay its rent;
Estimated forgone annual rent: $100,060.
Total;
Estimated forgone annual rent: $169,583,657.
Source: GAO analysis of GSA data.
Note: According to GSA, the U.S. Senate does not pay market rates for
its GSA facilities (district offices) because of an October 1996 signed
memorandum of agreement between the U.S. Senate and GSA regarding
tenant-requested improvements, but the U.S. Senate has not been granted
a formal exemption:
[End of table]
Direct Appropriations to FBF Generally Benefit the Fund:
In fiscal year 2006, according to data from GSA, $7.7 billion in
expected FBF revenue is projected to come from rent paid by over 60
different federal tenant agencies, such as the Departments of Justice
and Homeland Security. Congress sets annual limits on how much FBF
revenue can be spent for various activities through the appropriations
process. In addition, Congress may appropriate additional amounts for
FBF and between fiscal year 1990 and fiscal year 2005, Congress made
direct appropriations into FBF for all but 3 fiscal years.[Footnote 16]
This additional funding was not tied directly to any specific projects
or types of projects. The statutory language relating to the direct
appropriations states that additional amounts are being deposited into
FBF for the purposes of the fund.
It is also important to note that not all federal property is subject
to FBF rent payments. While GSA owns and leases property and provides
real estate services for numerous federal agencies, we reported in 2003
that GSA owns only about 6 percent of federal facility space in terms
of building floor area. Other agencies, including the Department of
Defense (DOD), the U.S. Postal Service, and the Department of Energy
have significant amounts of space that they own and control without GSA
involvement. In all, over 30 agencies control real property assets.
Property-owning agencies do not pay rent into FBF or receive services
from GSA for the space they occupy in the buildings that they own. For
example, the Pentagon and military bases are owned by DOD, and national
parks facilities are owned by Interior. As a result, these facilities
are maintained by DOD and Interior, respectively.
Our Ongoing Work on the Judiciary's Request for an Exemption from Rent
Payments to FBF:
In December 2004, the judiciary requested that the GSA Administrator
grant a $483 million permanent, annual exemption from rent payments--an
amount equal to about 3 times the amount of all other rent exclusions
combined. This exemption would equal about half of the judiciary's $900
million annual rent payment to GSA for occupying space in federal
courthouses. The judiciary has expressed concern that the growing
proportion of its budget allocated to GSA rent payments is having a
negative effect on court operations. According to GSA data, the
judiciary increased the owned space it occupies by 15 percent from 2000
to 2004. In February 2005, the GSA Administrator declined the request
because GSA considered it unlikely that the agency could replace the
lost income with direct appropriations to FBF. In April 2005, this
subcommittee requested that we look into issues associated with the
judiciary's request for a permanent, annual exemption from rent
payments to GSA. Our objectives for this work are to determine the
following:
1. How are rent payments calculated by GSA and planned and accounted
for by the judiciary?
2. What changes, if any, has the judiciary experienced in rent payments
in recent years?
3. What impact would a permanent rent exemption have on FBF?
Our work is still underway, but our past work on related issues shows
that rent exemptions have been a principal reason why FBF has
accumulated insufficient money for capital investment.
Scope and Methodology:
We conducted our work for this testimony in June 2005 in accordance
with generally accepted government auditing standards. During our work,
we reviewed past GAO work on federal real property and courthouse
construction issues, analyzed AOUSC and GSA documents, and interviewed
AOUSC and GSA officials.
Mr. Chairman, this concludes my prepared statement. I would be pleased
to respond to any questions that you or the other Members of the
Subcommittee may have.
GAO Contacts and Staff Acknowledgments:
For further information about this testimony, please contact me at
(202) 512-2834 or goldsteinm@gao.gov. Keith Cunningham, Randy De Leon,
Maria Edelstein, Bess Eisenstadt, Joe Fradella, Susan Michal-Smith,
David Sausville, and Gary Stofko also made key contributions to this
statement.
FOOTNOTES
[1] Previously, Congress appropriated money to GSA, and GSA paid for
agency space requirements.
[2] Rent is based on approximate commercial charges for comparable
space and services. This method was chosen over a cost-recovery basis
in order to produce more income so that the revolving fund could
finance construction and major repairs.
[3] GAO, Federal Courthouse Construction: More Disciplined Approach
Would Reduce Costs and Provide for Better Decisionmaking, GAO/ T-GGD-96-
19 (Washington, D.C.: Nov. 8, 1995).
[4] GAO/T-GGD-96-19.
[5] GAO, L.A. Federal Courthouse Project: Current Proposal Addresses
Space Needs, but Some Security and Operational Concerns Would Remain,
GAO-05-158 (Washington, D.C.: Dec. 20, 2004).
[6] GAO, Federal Judiciary Space: Long-Range Planning Process Needs
Revision, GAO/GGD-93-132 (Washington, D.C.: Sept. 28, 1993).
[7] GAO, Federal Judiciary Space: Progress Is Being Made to Improve the
Long-Range Planning Process, GAO/T-GGD-94-146 (Washington, D.C.: May 4,
1994).
[8] GAO, Federal Judiciary Space: Update on Improvement of the Long-
Range Planning Process, GAO-01-308R (Washington, D.C.: Jan. 25, 2001).
[9] GAO, Courthouse Construction: Improved 5-Year Plan Could Promote
More Informed Decisionmaking, GAO/GGD-97-27 (Washington, D.C.: Dec. 31,
1996) and GAO/T-GGD-96-19.
[10] GAO, Courthouse Construction: Better Courtroom Use Data Could
Enhance Facility Planning and Decisionmaking, GAO/GGD-97-39
(Washington, D.C.: May 19, 1997).
[11] GAO, Courthouse Construction: Sufficient Data and Analysis Would
Help Resolve the Courtroom-Sharing Issue, GAO-01-70 (Washington, D.C.:
Dec. 14, 2000).
[12] GAO, Courthouse Construction: Information on Courtroom Sharing,
GAO-02-341 (Washington, D.C.: Apr. 12, 2002).
[13] GAO, High-Risk Series: Federal Real Property, GAO-03-122
(Washington, D.C.: Jan. 2003).
[14] GAO-03-122.
[15] GAO, Federal Office Space: Increased Ownership Would Result in
Significant Savings, GAO/GGD-90-11 (Washington, D.C.: Dec. 22, 1989).
[16] Congress did not make direct appropriations into FBF in fiscal
years 1998, 2000, and 2005.
