[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]




         FRANCHISE FEE CALCULATIONS OF FORT SUMTER TOURS, INC.

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

                           OVERSIGHT HEARING

                               before the

            SUBCOMMITTEE ON NATIONAL PARKS AND PUBLIC LANDS

                                 of the

                         COMMITTEE ON RESOURCES
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             FIRST SESSION

                               __________

                      JULY 1, 1999, WASHINGTON, DC

                               __________

                           Serial No. 106-44

                               __________

           Printed for the use of the Committee on Resources




 Available via the World Wide Web: http://www.access.gpo.gov/congress/
                                 house
                                   or
           Committee address: http://www.house.gov/resources

                                 ______

                    U.S. GOVERNMENT PRINTING OFFICE
57-989           WASHINGTON : 1999




                         COMMITTEE ON RESOURCES

                      DON YOUNG, Alaska, Chairman
W.J. (BILLY) TAUZIN, Louisiana       GEORGE MILLER, California
JAMES V. HANSEN, Utah                NICK J. RAHALL II, West Virginia
JIM SAXTON, New Jersey               BRUCE F. VENTO, Minnesota
ELTON GALLEGLY, California           DALE E. KILDEE, Michigan
JOHN J. DUNCAN, Jr., Tennessee       PETER A. DeFAZIO, Oregon
JOEL HEFLEY, Colorado                ENI F.H. FALEOMAVAEGA, American 
JOHN T. DOOLITTLE, California            Samoa
WAYNE T. GILCHREST, Maryland         NEIL ABERCROMBIE, Hawaii
KEN CALVERT, California              SOLOMON P. ORTIZ, Texas
RICHARD W. POMBO, California         OWEN B. PICKETT, Virginia
BARBARA CUBIN, Wyoming               FRANK PALLONE, Jr., New Jersey
HELEN CHENOWETH, Idaho               CALVIN M. DOOLEY, California
GEORGE P. RADANOVICH, California     CARLOS A. ROMERO-BARCELO, Puerto 
WALTER B. JONES, Jr., North              Rico
    Carolina                         ROBERT A. UNDERWOOD, Guam
WILLIAM M. (MAC) THORNBERRY, Texas   PATRICK J. KENNEDY, Rhode Island
CHRIS CANNON, Utah                   ADAM SMITH, Washington
KEVIN BRADY, Texas                   WILLIAM D. DELAHUNT, Massachusetts
JOHN PETERSON, Pennsylvania          CHRIS JOHN, Louisiana
RICK HILL, Montana                   DONNA CHRISTIAN-CHRISTENSEN, 
BOB SCHAFFER, Colorado                   Virgin Islands
JIM GIBBONS, Nevada                  RON KIND, Wisconsin
MARK E. SOUDER, Indiana              JAY INSLEE, Washington
GREG WALDEN, Oregon                  GRACE F. NAPOLITANO, California
DON SHERWOOD, Pennsylvania           TOM UDALL, New Mexico
ROBIN HAYES, North Carolina          MARK UDALL, Colorado
MIKE SIMPSON, Idaho                  JOSEPH CROWLEY, New York
THOMAS G. TANCREDO, Colorado         RUSH D. HUNT, New Jersey

                     Lloyd A. Jones, Chief of Staff
                   Elizabeth Megginson, Chief Counsel
              Christine Kennedy, Chief Clerk/Administrator
                John Lawrence, Democratic Staff Director
                                 ------                                

            Subcommittee on National Parks and Public Lands

                    JAMES V. HANSEN, Utah, Chairman
ELTON, GALLEGLY, California          CARLOS A. ROMERO-BARCELO, Puerto 
JOHN J. DUNCAN, Jr., Tennessee           Rico
JOEL HEFLEY, Colorado                NICK J. RAHALL II, West Virginia
RICHARD W. POMBO, California         BRUCE F. VENTO, Minnesota
GEORGE P. RADANOVICH, California     DALE E. KILDEE, Michigan
WALTER B. JONES, Jr., North          DONNA CHRISTIAN-CHRISTENSEN, 
    Carolina                             Virgin Islands
CHRIS CANNON, Utah                   RON KIND, Wisconsin
RICK HILL, Montana                   JAY INSLEE, Washington
JIM GIBBONS, Nevada                  TOM UDALL, New Mexico
MARK E. SOUDER, Indiana              MARK UDALL, Colorado
DON SHERWOOD, Pennsylvania           JOSEPH CROWLEY, New York
                                     RUSH D. HOLT, New Jersey
                        Allen Freemyer, Counsel
                     Todd Hull, Professional Staff
                    Liz Birnbaum, Democratic Counsel
                   Gary Griffith, Professional Staff




                            C O N T E N T S

                              ----------                              
                                                                   Page

Hearing held July 1, 1999........................................     1

Statements of Members:
    Hansen, Hon. James V., a Representative in Congress from the 
      State of Utah..............................................     1
    Sanford, Hon. Mark, a Representative in Congress from the 
      State of South Carolina....................................     3

Statements of witnesses:
    Campsen, George, President, Fort Sumter Tours, Inc...........    34
        Prepared statenent of....................................    37
    Jackson, David E., Certified Public Accountant...............    65
        Prepared statenent of....................................    67
    Stanton, Robert, Director, National Park Service; accompanied 
      by Mr. Cohen, Solicitor's Office; Robert Hyde, Financial 
      Analyst, Division of Concession Management.................     6
        Prepared statenent of....................................     9

Additional material supplied:
    Affidavit of Mark F. Hartley, DBA............................   234
    An Analysis of the Appropriate Franchise Fee For Fort Sumter 
      Tours, Inc.................................................   249
    Brief, Fort Sumpter Tours, Inc. v. Bruce Babbitt, Secretary, 
      Dept. of the Interior......................................    87
    Brief, Fort Sumpter Tours, Inc. v. Bruce Babbitt, Secretary, 
      Dept. of the Interior......................................   108
    NPS Franchise Fee Analysis & Southeast Regional NPS Critique 
      Thereof....................................................   135
    NPS Mistakes in Calculating a 12 percent Franchise Fee for 
      For Sumpter Tours, Inc.....................................   130

 
 OVERSIGHT HEARING ON FRANCHISE FEE CALCULATIONS OF FORT SUMTER TOURS, 
                                  INC.

                              ----------                              


                         THURSDAY, JULY 1, 1999

              House or Representatives,    
                 Subcommittee on National Parks    
                                      and Public Lands,    
                                    Committee on Resources,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 10:59 a.m., in 
Room 1324, Longworth House Office Building, Hon. James Hansen 
[chairman of the Subcommittee] presiding.

 STATEMENT OF HON. JAMES HANSEN, A REPRESENTATIVE IN CONGRESS 
                     FROM THE STATE OF UTAH

    Mr. Hansen. Good morning, and welcome to the oversight 
hearing today.
    I am glad to see the Director has recovered from his 
illness and with us. We appreciate your presence.
    The purpose of this oversight hearing is to examine the 
franchise fee imposed by the National Park Service on Fort 
Sumter Tours, Inc., a small family-owned concessionaire that 
provides tour boat transportation to and from Fort Sumter 
National Monument in South Carolina.
    In 1992, the Park Service nearly tripled Fort Sumter's 
franchise fee from 4.25 to 12 percent. This has had a direct 
negative economic consequence at Fort Sumter Tours. They tried 
to find out from the Park Service why this had happened.
    However, the Park Service refused to give Fort Sumter Tours 
the information they needed to understand the drastic rise in 
the franchise fee. Thus began a continuing confrontation 
between Fort Sumter Tours and the Park Service, and which has 
led us to convene this oversight hearing today.
    After recently reviewing the material, I cannot understand 
why the Park Service is so reluctant to give it to Fort Sumter 
Tours. In my opinion, it is riddled with major errors, it 
grossly overstates the profitability of this concession. As we 
hear testimony today, I believe this will become clear.
    The Park Service has never admitted to Fort Sumter Tours 
that errors were committed in calculating the franchise fee, 
and an absolute refusal by the Park Service to discuss the 
merits of the miscalculated franchise fee.
    I want to make a point here: This oversight may be seen by 
some as an inappropriate function of the Subcommittee; that is, 
as some sort of private relief rather than centered on an issue 
of policy. But would disagree with this opinion. In fact, 
subjects like this one is the reason we have oversight 
hearings. It is a question of making sure the Federal 
Government, and in this case the National Park Service, does 
not trample on the rights of our citizens.
    It is a question of the Federal Government following its 
own policies and guidelines, and it is a question of whether 
the Federal Government can possibly ever admit its own 
mistakes, correct those mistakes, and then move forward toward 
reasonable solutions.
    One other point: It is fairly easy for Federal bureaucrats 
in Washington to decide from afar how things are going to be 
for people around the country. However, it is quite another 
thing for those same bureaucrats to understand that the 
decisions they make and the mistakes that they may make can be 
devastating to hard-working Americans trying to make a living. 
I believe that this is what we have here today. And it is not 
to be taken lightly.
    Be that as it may, I was hopeful that the hearing would 
never occur. By this means, that I held a meeting in my office 
some months ago with the Director, the Solicitor's Office, Fort 
Sumter Tours, and other Members of Congress, Mr. Sanford, and 
Mr. Spence, imploring the Park Service to take another look at 
this situation and resolve it to the satisfaction of both 
parties.
    I stated at the time that the Subcommittee would hold an 
oversight hearing if the problems with the franchise fee were 
not resolved. Obviously, the Park Service did not take my 
suggestion very seriously because we are here today.
    It is my understanding that, following this meeting, the 
Park Service asked Fort Sumter Tours for an offer. Fort Sumter 
responded, and the Park Service essentially said Fort Sumter's 
offer is no offer to them, apparently, to sit down and attempt 
to hammer this out on the merits of the fee and discuss how it 
was calculated.
    I am disappointed that nothing came of this. However, I am 
quite willing to have this oversight in order to expedite 
getting this thing resolved in a fair and equitable and honest 
way.
    I would like to welcome our witnesses here today, and I 
would now recognize the gentleman from Puerto Rico if he was 
here. Because he isn't, I will turn to the gentleman from 
Tennessee for any opening comments he may have.
    Mr. Duncan. Well, I have no formal opening statement, Mr. 
Chairman. I agree with you that it is unusual for us to hold a 
hearing on a dispute like this. And I am disappointed, like 
you, that the Park Service did not work this out in some fair 
and reasonable manner. But I suppose we can ask some questions 
about that at the appropriate time.
    Thank you very much.
    Mr. Hansen. I thank the gentleman from Tennessee.
    I ask unanimous consent that the letter from Congressman 
Floyd Spence be included in the record, and also the letter 
from Senator Ernest Hollings be included in the record.
    Mr. Hansen. I won't go through the entire thing, but I 
would like to point out that Floyd Spence has a great personal 
knowledge of this issue, and he says, ``I am familiar with the 
ongoing dispute involving franchise fees at Fort Sumter. In the 
interest of Fort Sumter Tours, and the National Park Service 
and the visitors to Fort Sumter, this matter needs to be 
resolved. If errors were made in the calculation of this 
franchise fee, then the errors should be corrected.''
    Senator Hollings says, ``As you know, by statutory law, all 
park concessionaires are required to pay a franchise fee based 
upon a percentage of their gross receipts. It is my 
understanding that in 1992 the Park Service unilaterally 
attempted to increase the franchise fee from 4.25 percent to 12 
percent, and a dispute has existed ever since.
    ``This increase was based upon a franchise fee analysis 
prepared by the National Park Service which the Tours claims to 
be inconsistent with the Park Service guidelines that existed 
at the time. While I have limited knowledge of the merits, I do 
believe if errors were made, they need to be corrected.''
    And it talks about the relationship that we should have 
between the Park Service and our concessionaires, and as many 
of you know, that is a major issue with this Committee.
    And last year, we passed a new concessionaires bill. And 
this is an ongoing issue which we have.
    The gentleman from Nevada, we appreciate your presence 
here. Do you have any opening comments before we start?
    Mr. Gibbons. No, Mr. Chairman. I welcome our witnesses and 
the panel here today to hear this very important issue, and I 
know how it is important for all of our tourists today to be--
as well as those people that offer services at our parks--to be 
afforded the right treatment under the law, and I look forward 
to your leadership here today.
    Mr. Hansen. I thank the gentleman.
    Our first witness will be our colleague from South 
Carolina, Mark Sanford. Mark actually represents that area. And 
we will now turn the time to you.

 STATEMENT OF HON. MARK SANFORD, A REPRESENTATIVE IN CONGRESS 
                FROM THE STATE OF SOUTH CAROLINA

    Mr. Sanford. I thank you, Mr. Chairman, and I thank you. 
Mr. Duncan, Mr. Gibbons, for the chance to testify before the 
Subcommittee. And I would say I wanted to come by here simply 
because for me it would be an honor to introduce Mr. Campsen 
and his family, and, frankly, his enterprise. And I say that 
because if I was to pull down one word about this family, I 
would say honorable.
    Now here is what I am getting at by that: My roots go very 
deep with this family. Chip and I overlapped for a year of 
college. He was actually at our family farm the night that my 
dad died. I spent the better part of 20 years on hunting and 
fishing trips throughout the woods and waters of the Low 
Country with Chip.
    And the net of that is, as we all know, markets are 
efficient. And if you are going over to somebody else's house 
and they are coming over to yours, sooner or later you get that 
phrase from somebody that says, oh, you are going over to so 
and so's house; I heard this about them. And you go on to hear 
some horror story.
    And yet over the many years that I have been with this 
family, I have never heard one of those stories. So I would say 
``honorable'' would be a description of the family. But I would 
say that there is even a simpler word that describes this 
family, and that is the word ``integrity.''
    In other words, there is a match between what they say they 
are going to do and what they do. There is a match between what 
they say they are about and what they are about.
    And I think that this goes to the heart of this issue of 
the enterprise, Fort Sumter Tours, because each of us is 
stewards for the Federal Government. I think that, you know, 
for most people, their experience with the Federal Government 
is basically derived from an experience with the National Park 
Service, but oftentimes with a concessionaire tie-in with the 
Park Service.
    So each of us, as fiduciaries for the Federal Government, 
want to have in place people who have integrity--in other 
words, that there is a match between what they talk about doing 
and what they do. And this isn't important just in general in 
terms of that being, of wanting to have good stewards represent 
the face of the Federal Government, but it is also, frankly, 
important to a lot of folks back home.
    Sure, it is important to a lot of tourists who visit 
Charleston, but it is important just because a lot of people 
back home, when somebody comes in from out of town, they say, 
well, you know, that first shot was fired out at Fort Sumter, 
I'd like to go on out there, and we go on out there. And for 
364 days out of the year, three times a day, Fort Sumter Tours 
runs a boat out there.
    And there is nothing more important than the word 
``integrity'' in that service, because, again, somebody's 
experience at Fort Sumter is, in large part, driven by, you 
know, were the toilets clean on the boat getting to and from 
Fort Sumter, did the boat, in fact, leave on time?
    In other words, this issue of integrity goes to the heart 
of what a concessionaire ought to be about, and if not only 
recognized by folks back home or by me, but, frankly, by the 
Park Service itself.
    Now I have here a copy of an unsolicited letter to Mr. 
Campsen, who had received it some time ago from the National 
Park Service. And it reads as follow: ``His reputation for 
quality of service is matched by few concessions in the 
National Park Service and exceeded by none. His operation in 
Charleston has always been characterized by excellence and a 
concern for our visitors and the people who live in the city.''
    I think that that is one part of what we are dealing with, 
the issue of integrity and the importance of that in a 
concessionaire. The other issue is what you correctly 
highlighted, Mr. Chairman, and that is there is a whole lot 
bigger issue than having to do with the Campsens, Fort Sumter 
Tours, Fort Sumter itself, and that is the issue of 
concessions.
    To me, this is very important because, you know, last year, 
when we had that concession bill, I voted for it. In fact, I 
had talked to Chip Campsen. Chip didn't think it was a good 
idea. He said, ``Mark, I think it is going to be a problem if 
somebody has to get two different tickets, one ticket for Fort 
Sumter, one ticket to go to Fort Sumter.''
    I said, ``Chip, I am going to vote against you. I think you 
are wrong on this because if you can isolate costs, in other 
words, you can say, what does it cost to do these different 
functions tied to or from getting, let's say, to a park, then 
if you can isolate that costs, and if private enterprise can do 
it less expensively than the Federal Government, then we ought 
to make more options for that being the case because as a 
conservative I don't want to grow the Federal Government.''
    And yet, what is going on here sends precisely the wrong 
signal in terms of trying to grow more private enterprise and 
more concessions through our park system. When you have a 300 
percent increase in the middle of contract period, there is no 
worse signal to future concessionaires, and that to me, more 
than the right number or the wrong number, that to me is what 
this issue is all about, and that is, if a concessionaire has a 
contract with our Federal Government, the government not 
breaking that contract in the middle of the contract period.
    I would just ask us to remember that we have three branches 
of government up here for a very good reason, and that is, our 
Founding Fathers wanted a slow and meticulous system that would 
basically, you know, keep anybody from doing anything too fast. 
And I would just beg of the Park Service to really look at this 
very closely because I think we are dealing with an issue far, 
far greater than the Fort Sumter issue itself.
    And I would yield back the balance of my time. I thank you 
for letting me come before you, Mr. Chairman.
    Mr. Hansen. We thank you.
    Questions for Mark Sanford, our colleague from North 
Carolina? The gentleman from Tennessee is recognized.
    Mr. Duncan. I have just one question, Mark. I wasn't clear. 
Who wrote that real positive letter that you quoted from and 
when was that?
    Mr. Sanford. I don't have the date on that. I would suspect 
Mr. Campsen could give you the dates on that, because it was 
from the Park Service.
    Mr. Duncan. It was from the Park Service?
    Mr. Sanford. Yes, sir.
    Mr. Duncan. All right. Thank you.
    Mr. Sanford. Thank you.
    Mr. Hansen. The gentleman from Nevada.
    Mr. Gibbons. Mr. Sanford, I have not been to Fort Sumter, 
and I hope someday to have the privilege and the honor of 
visiting there, and I am not familiar with all the other 
concessionaires that are in the Park Service. Have the other 
concessionaires--are there other concessionaires in that Park 
area for the visitors there?
    Mr. Sanford. Yes. In fact, if you go on up a little bit 
north, there are a couple of islands that are owned and, for 
instance, there is a concessionaire that runs, again not to 
Fort Sumter but runs out to one of these coastal islands. It is 
a little bit north of the Charleston community. That is one 
that I immediately know of. And I suspect that there are 
others. But those are the ones that immediately jump to mind.
    Mr. Gibbons. Has there been any effort to talk to that 
concessionaire with regard to an increase in the franchise fee, 
similar--in other words, a 300 percent increase in their fees 
that would be commensurate with the fees increase that we are 
talking about in this matter?
    Mr. Sanford. I have not done so. That is something worth 
doing. And I would be glad to have my office do just that.
    Mr. Gibbons. Well, maybe we can ask the Park Service, when 
they come, whether or not they have increased----
    Mr. Sanford. And in fairness to the Park Service, that is a 
not a national park that the other concession runs. So it may 
be run through a different branch of government.
    Mr. Gibbons. All right. But then so as far as we know, this 
is the only concessionaire at Fort Sumter that has had a 300 
percent fee increase in the middle of the contract?
    Mr. Sanford. To the best of my knowledge, yes, sir.
    Mr. Gibbons. Thank you, Mr. Chairman.
    Mr. Hansen. We thank our colleague. Mr. Sanford. Would you 
like to join us up on the dais?
    Mr. Sanford. Unfortunately, I have got a markup on OPEC, 
and I have to run in that direction.
    Mr. Hansen. Well, I understand. Thank you very much for 
your time.
    Mr. Sanford. Thank you.
    Mr. Hansen. We will call our panel up. We are pleased to 
have Robert Stanton, the Director of National Park Service with 
us; also, George Campsen, president of Fort Sumter Tours, and 
David E. Jackson, a certified public accountant.
    If those three gentlemen would like to come up, we would 
appreciate it.
    And, Mr. Director, if you have somebody you want at your 
shoulder there, that is fine. Just bring them up, too.
    Mr. Stanton. Yes. Thank you very much, Mr. Chairman. I am 
accompanied by Mr. Cohen of our Solicitor's Office, and Mr. Bob 
Hyde, who is a financial analyst with the National Park Service 
in our Division of Concession Management.
    Mr. Hansen. Okay. Well, we will turn to you, Mr. Stanton. 
And you have got the floor.

 STATEMENT OF ROBERT STANTON, DIRECTOR, NATIONAL PARK SERVICE; 
  ACCOMPANIED BY MR. COHEN, SOLICITOR'S OFFICE; ROBERT HYDE, 
      FINANCIAL ANALYST, DIVISION OF CONCESSION MANAGEMENT

    Mr. Stanton. Thank you, Mr. Chairman, and members of the 
Committee, for the opportunity to appear before you and to 
discuss certain issues surrounding the reconsideration of the 
franchise fees for Fort Sumter Tours, Incorporated.
    Mr. Chairman and members of the Committee, I submit at the 
beginning of my testimony, I have been advised by our 
Solicitor's Office to make the following statement:

          I am here today to answer questions and respond to 
        comments concerning the franchise fee reconsideration 
        for Fort Sumter Tours, Incorporated. You have assure me 
        and my staff that this hearing will not be covering any 
        of the issues in litigation between Fort Sumter Tours 
        and the National Park Service.
          I appreciate this, and certainly in keeping with this 
        agreement, I would like to make clear that the National 
        Park Service is not reconsidering the established 
        franchise fees for Fort Sumter Tours. Accordingly, any 
        statements, discussions, description, or assessments 
        concerning the Fort Sumter franchise fee that I may 
        make before you today do not and will not constitute a 
        review of, a reconsideration of, or a new decision in 
        any nature regarding the established franchise fee.
          Furthermore, I note that the various calculations 
        that we might discuss here today have been upheld in 
        four different court proceedings, including the Fourth 
        Circuit Court of Appeals, as lawful and not an 
        arbitrary nor capricious.
          Any statement that I may make before you today, Mr. 
        Chairman and this Committee, to the effect that a 
        particular calculation could be done other ways, does 
        not in any manner suggest, admit, or otherwise imply 
        that the decision made by the National Park Service in 
        this process was arbitrary, capricious, or otherwise 
        unlawful.
    Now, in addition, I note that as part of this hearing, Mr. 
Chairman, you and the Committee have requested significant 
financial information on Fort Sumter Tours. Some of this 
information is proprietary or confidential. But because of Fort 
Sumter Tours participation in today's hearing, we assume that 
the release of this information is agreeable by the 
concessionaire under law 18 USC 1905. And I would hope, Mr. 
Chairman, that you would advise it is appropriate that this 
information be available on the concessionaire's financial 
status.
    This matter is certainly an essentially money dispute on a 
business contract. And if I may, I would like to elaborate. The 
contract was entered into by the National Park Service and Fort 
Sumter Tours in 18--pardon me, in 1986 and expires in the year 
2000. The contract grants for Fort Sumter Tours the exclusive 
opportunity to transport by tour boat visitors from Charleston, 
South Carolina, to Fort Sumter National Monument for Fort 
Sumter current annual visitation of approximately 230,000 
visitors per year.
    Ninety-nine percent of these visitors travel to Fort Sumter 
on boats operated by Fort Sumter Tours. Fort Sumter Tours 
charges visitors $10.50 for adults. The gross receipts for 1998 
were $2,471,938. The contract requires Fort Sumter Tours to 
remit 12 percent of the gross receipts to the United States for 
the privilege of serving on an exclusive basis anyone wishing 
to visit Fort Sumter through the use of their boat.
    Fort Sumter Tours' 15-year contract was entered into under 
the Concession Policy Act of 1965. The contracts governed by 
the Concession Policy Act were not subject to meaningful 
competition because existing concessionaires enjoy preference 
over outside business.
    These preferential rights often precluded market forces 
from affecting franchise fees. Under the Concession Policy Act, 
the National Park Service was required to include in concession 
contracts of more than five years in duration, provision 
provided for reconsideration of the contract franchise fees at 
least every five years.
    Since 1979, the National Park Service concession contracts 
have provided that the contract-established franchise fees may 
be adjusted, up or down, every five years at the request of 
either the concessionaire or the National Park Service.
    The provision provides that if the National Park Service 
and the concessionaire do not agree upon an adjusted franchise 
fee within a specified period, the concessionaire may appeal to 
the Secretary his position as to an appropriate franchise fee. 
And the concessionaire may choose to invoke arbitrary--pardon 
me, advisory arbitration proceeding in this process.
    Any fee resulting from a reconsideration either up or down 
must be consistent with the probable value of the privilege by 
the contract based upon a reasonable opportunity, a reasonable 
opportunity for net profit in relation to both gross receipts 
and capital investment.
    The standard was set by Congress in the Concession Policy 
Act that I referenced earlier. The standard is protection for 
both the concessionaire and the taxpayers.
    Briefly, it is important to review the history of this 
provision and its application. Since 1979, several hundred 
franchise-fee consideration periods have occurred under 
existing NPS contracts. In many of these instances, neither the 
Park Service nor the concessionaire sought changes either up or 
down to the franchise fee.
    In a number of other instances, when either the Park 
Service or the concessionaire sought a franchise fee 
reconsideration, both the National Park Service and the 
concessionaire were able to arrive at a mutually acceptable 
agreements as to the appropriate franchise fee.
    In four instances recently, concessionaires have chose to 
invoke the advisory arbitrary process established in the 
contract to resolve proposed franchise fees. In one of these 
situations, the matter was settled. In the remaining three, the 
National Park Service and concessionaire participated in the 
arbitration proceeding, and the Secretary made a final 
decision, taking into consideration results of the arbitration.
    In each of these instances, the franchise fees were 
increased. However, in each of these cases, concessionaires 
accepted the final decision of the Secretary and the higher 
franchise fee became part of the contract without judicial 
challenge. All these concessions remain profitable in business 
today.
    In no cases, except in one that is the focus of today's 
hearing, has a concessionaire challenged the legality of the 
process of the executed contract. In no cases, except the one 
before us today, has a concessionaire refused to negotiate the 
appropriate franchise fee.
    In this case, Fort Sumter Tours chose to litigate the 
issues before the courts. The courts have uniformly upheld the 
legality of the reconsideration provision and the basis of our 
decision.
    The National Park Service has a system for establishing 
franchise fees. In 1980, the National Park Service was 
repeatedly criticized by Congress, by the General Accounting 
Office of Congress, by the Inspector General's Office of the 
Department of Interior, and others in terms of a need to take a 
more critical look at the establishment and reconsideration of 
franchise fees.
    We took these criticisms seriously and have now ensure a 
more rigorous implementation of the system. This implementation 
is fair to the concessionaire, fair to the National Park 
Service, and certainly fair to the taxpayer.
    In performing the reconsideration analysis, the National 
Park Service compares the financial record of the concession to 
its counterparts in the industry to assist in determining the 
probably value of the contract.
    When the Fort Sumter Tours were initially executed, the fee 
was designated 4.25 percent of gross revenue. However, a 
franchise fee analysis performed in 1991 showed that the 
probably value of these privileges warranted a fee of 12 
percent. This analysis compared the financial records and the 
business opportunity of Fort Sumter to those similarly situated 
businesses using statistics generated by Dun and Bradstreet.
    We understand that it has been reported to the Committee 
that the National Park Service took into account non-concession 
revenues for calculating the profit of Fort Sumter Tours makes 
under this concession contract. While there was one technical 
error in the original franchise fee, that may suggest that this 
income was taken into account as we described to you in the 
letter of December 8th. This income was not taken into account 
in the final determination, nor did it affect the final 
determination.
    A complete review of the financial analysis shows that the 
12 percent fee was determined solely on the basis of the 
revenue associated with the concession contract and a proper 
allocation of cost associated both with the concession and with 
the non-concession business. It is not disputed that in 1992 
that Fort Sumter Tours was notified of the proposed franchise 
fees reconsideration and that it had contractual right to seek 
advisory arbitration over its reconsidered fee. As detailed in 
the letter of December 5, 1998, to you, Mr. Chairman, and the 
Committee, we advised that the litigation has since pursued. 
The United States Government has prevailed in every phase of 
this litigation.
    I want to close and underscore the fact that we remain, 
however, receptive to resolving this dispute. We have asked the 
United States Attorney's Office to be open to any reasonable 
settlement offer by Fort Sumter Tours. To date, Fort Sumter 
Tours has not participated in any substantive discussions with 
respect to settlement of this dispute.
    Mr. Chairman and members of the Committee, this concludes 
my prepared remarks with respect to the background on the 
reconsideration of the franchise fee for Fort Sumter Tours, 
Incorporated. Along with my colleague, Mr. Ed Cohen and Mr. Bob 
Hyde, we will be more than happy to respond to any questions or 
comments on the part of you, Mr. Chairman, and members of the 
Committee.
    Thank you again for this opportunity.
    [The prepared statement of Mr. Stanton follows:]

      Statement of Robert Stanton, Director, National Park Service

    Thank you for the opportunity to discuss with you certain 
issues surrounding the reconsideration of the franchise fee of 
Fort Sumter Tours, Incorporated. As I begin my testimony, I 
have been advised by the Solicitor's Office to make the 
following statement:

          I am here today to answer your questions concerning the 
        franchise fee reconsideration for Fort Sumter Tours. You have 
        assured me and my staff that this hearing will not be covering 
        any of the issues in litigation between Fort Sumter Tours and 
        the National Park Service. I appreciate this and in keeping 
        with this agreement I would like to make clear that the 
        National Park Service is not reconsidering the established 
        franchise fee for Fort Sumter Tours. Any statements, 
        discussions, descriptions or assessments concerning the Fort 
        Sumter franchise fee that I may make before you today do not 
        and will not constitute a review of, a reconsideration of, or a 
        new decision of any nature regarding the established franchise 
        fee. Furthermore, I note that the various calculations that we 
        discuss here today have been upheld in four different court 
        proceedings, including the 4th Circuit Court of Appeals, as 
        lawful, and neither arbitrary nor capricious. Any statement 
        that I may make before you today to the effect that a 
        particular calculation could be done another way does not in 
        any manner suggest, admit, or otherwise imply that the 
        decisions made by the National Park Service in this process 
        were arbitrary, capricious or otherwise unlawful.
          In addition, I note that, as part of this hearing, you have 
        requested significant financial information of Fort Sumter 
        Tours. Some of this information is proprietary or confidential. 
        Because of Fort Sumter Tours participation in today's hearing, 
        we are assuming that the release of this information is agreed 
        to by the concessioner under law, including 18 U.S.C. 1905. 
        Please advise us if the concessioner believes otherwise.
    This matter is essentially a money dispute under a business 
contract. The contract was entered into by the National Park Service 
and Fort Sumter Tours in 1986, and expires in 2000. The contract grants 
Fort Sumter Tours the exclusive opportunity to transport by tour boat 
visitors from Charleston, South Carolina, to Fort Sumter National 
Monument. Fort Sumter's current annual visitation is approximately 
230,000 visitors per year. Ninety nine percent of the visitors travel 
to Fort Sumter on boats operated by Fort Sumter Tours. Fort Sumter 
Tours charges visitors $10 per adult visitor. The business' gross 
receipts for 1998 were $2,471,938. The contract requires Fort Sumter 
Tours to remit 12 percent of the contract's gross receipts to the 
United States for the privilege of serving, on an exclusive basis, 
anyone wishing to visit Fort Sumter.
    Fort Sumter Tours' 15-year contract was entered into under the 
Concessions Policy Act of 1965. The contracts governed by the 
Concessions Policy Act were not subjected to meaningful competition 
because existing concessioners enjoyed preferences over outside 
businesses. These preferential rights often precluded market forces 
from affecting franchise fees.
    Under the Concessions Policy Act, NPS was required to include in 
concessions contracts of more than five years in duration a provision 
providing for the reconsideration of the contract's franchise fee at 
least every five years. Since 1979, NPS concession contracts have 
provided that the contract's established franchise fee may be adjusted, 
up or down, every five years, at the request of either the concessioner 
or the NPS. The provision provides that if the NPS and the concessioner 
do not agree upon an adjusted franchise fee within a specified period, 
the concessioner may appeal to the Secretary its position as to an 
appropriate franchise fee, and the concessioner may choose to invoke 
advisory arbitration proceedings in this process. Any fee resulting 
from a reconsideration, either up or down, must be consistent with the 
probable value of the privileges granted by the contract, based upon a 
reasonable opportunity for net profit in relation to both gross 
receipts and capital invested. This standard was set by Congress in the 
Concessions Policy Act. The standard protects both the concessioner and 
the taxpayer.
    It is important to review the history of this provision. It is also 
important to discuss with you the implementation of this provision.
    Since 1979, several hundred franchise fee reconsideration periods 
have occurred under existing NPS concession contracts. In many of these 
instances, neither the NPS nor the concessioner sought changes, either 
up or down, to the franchise fee. In numerous other instances, when 
either the NPS or the concessioner sought a franchise fee 
reconsideration, both the NPS and the concessioner were able to arrive 
at a mutually acceptable agreement as to the appropriate franchise fee.
    In four (4) instances, concessioners have chosen to invoke the 
advisory arbitration process established in the contract to resolve a 
proposed franchise fee increase. In one of these situations, the matter 
was settled. In the remaining three, the NPS and the concessioner 
participated in the arbitration proceedings, and the Secretary made a 
final decision, taking into consideration the results of the 
arbitration. In each of these three instances, the franchise fee was 
increased. However, in each of these cases, the concessioner accepted 
the final decision of the Secretary, and the higher franchise fee 
became part of the contract without judicial challenge. All of these 
concessioners remain profitably in business today.
    In no case, except the one that is the focus of today's hearing, 
has a concessioner challenged the legality of the process of the 
executed contract. In no case, except the one before us today, has a 
concessioner refused to negotiate the appropriate franchise fee. In 
this case, Fort Sumter Tours chose to litigate the issues before the 
courts. The courts have uniformly upheld the legality of the 
reconsideration provision, and the basis for our decision.
    This concessioner is not being treated differently from other 
concessioners. This concessioner has not been treated unfairly.
    The National Park Service has a system for establishing franchise 
fees. In the 1980s, the National Park Service was repeatedly criticized 
by numerous reports from both the Inspector General's Office of the 
Department of the Interior and the General Accounting Office for its 
implementation of this system.
    The National Park Service took these criticisms seriously. We have 
now ensured a more rigorous implementation of our system. This 
implementation is fair to the concessioner, fair to the National Park 
Service, and fair to the taxpayer. In those cases when this has 
resulted in increased franchise fees, we note that the concessioners 
operating under these contracts continue to operate profitably. We have 
no shortage of individuals and companies that are willing to do 
business in our National Parks under this system.
    In performing the reconsideration analysis, the National Park 
Service compares the financial records of a concessioner to its 
counterparts in the industry to assist in determining the probable 
value of the contract.
    When the Fort Sumter Tours contract was initially executed, the fee 
was designated as 4.25 percent of gross revenue. However, a franchise 
fee analysis performed in 1991 showed that the probable value of these 
privileges warranted a fee of 12 percent. This analysis compared the 
financial records and the business opportunity of Fort Sumter Tours, 
Inc. to those of similarly situated businesses, using industry 
statistics generated by Dun and Bradstreet. We understand that it has 
been reported to the Committee that the National Park Service took into 
account non-concession revenue when calculating the profit that Fort 
Sumter Tours makes under this concessions contract. While there was one 
technical error in the original financial analysis that may suggest 
that this income was taken into account, as we described to you in our 
letter of December 5, 1998, this income was not taken into account in 
the final fee determination, nor did it affect this determination. A 
complete review of the financial analysis shows that the 12 percent fee 
was determined solely on the basis of the revenue associated with the 
concessions contract, and a proper allocation of costs associated with 
both the concession and the non-concession businesses.
    It is not disputed that in 1992, Fort Sumter Tours was notified of 
the proposed franchise fee reconsideration, and that it had a 
contractual right to seek advisory arbitration over this reconsidered 
fee. Fort Sumter Tours chose not to engage in negotiations with the 
National Park Service, or in advisory arbitration. Fort Sumter Tours 
instead chose to sue the United States over the reconsidered fee. As is 
detailed in my letter to you, of December 5, 1998 (attached to this 
testimony), Mr. Chairman, this matter has been in litigation ever 
since. And, the United States has prevailed at every phase of this 
litigation.
    We remain, however, receptive to resolving this dispute. We have 
asked the United States Attorney's Office to be open to any reasonable 
settlement offer made by Fort Sumter Tours. To date, Fort Sumter Tours 
has refused to participate meaningfully in any settlement discussions.
    This concludes my testimony. I would be happy to answer any of your 
questions.
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    Mr. Hansen. Thank you, Director Stanton.
    As you folks know, we have no control over what happens on 
the floor. And those two lights at the back mean that we have a 
vote on that we have to run on a rule. We will try to get back 
as soon as we can, and we will stand in recess till then.
    [Recess.]
    Mr. Hansen. The Committee will come to order.
    Staff tells me that, Mr. Director, that you have to leave 
here at 12:30. Is that correct?
    Mr. Stanton. In deference to you, Mr. Chairman, I will be 
flexible on that.
    Mr. Hansen. I would like to have you hear the testimony of 
the other witnesses. So, how long is your testimony going to 
be, Mr. Campsen?
    Mr. Campsen. Mr. Chairman, five minutes is the allotted 
time, and I will be within five minutes.
    Mr. Hansen. Well, we are being generous today. We may give 
you seven or eight minutes, if that is what you need.
    Mr. Campsen. Thank you, sir.
    Mr. Hansen. Okay. And Mr. Jackson?
    Mr. Jackson. I would hope to finish mine in five minutes as 
well.
    Mr. Hansen. Well, then we have got about 43 minutes. So, 
Mr. Campsen, why don't we turn to you, and then we will 
question all three of you and we'll complete our testimony.
    Mr. Campsen, you have the floor.

STATEMENT OF GEORGE CAMPSEN, PRESIDENT, FORT SUMTER TOURS, INC.

    Mr. Campsen. Thank you, Mr. Chairman, gentlemen of the 
Committee. My name is George Campsen. I am president of Fort 
Sumter Tours. Now Fort Sumter National Monument in Charleston 
is accessible only by boat, and in 1961, the Park Service was 
publicly seeking a private concessionaire, to begin public boat 
transportation out to the Fort.
    Out of five competing proposals, we were selected. And with 
money borrowed from a local bank, we acquired the vessels and 
so forth, and enthusiastically became involved with our 
government in business. We viewed it as a partnership, with the 
Park Service being the senior partner.
    We are family-owned and -operated. And over the years, my 
wife and I and our four children, as they grew older, all 
worked to make this concession successful, and working in 
complete harmony with local park officials. We build and 
developed a highly reputable service, and visitation steadily 
increased.
    Now, in the mid-1980's, the service recognized that a 
second mainland docking facility and a larger vessel was really 
necessary and desirable at Fort Sumter. The estimated cost to 
the concessionaire would be at least $1 million.
    Now, Mr. Chairman and gentlemen, we are a small, relatively 
speaking, we are a very small concessionaire, with annual gross 
income approximately at that time of $1.4 million. But we 
recognized that this expansion desired by the Service was 
really needed.
    And to facilitate private financing of these needs, the 
Service offered a 15-year contract so that you could borrow 
money from a bank and show them how you were going to be able 
to pay off the loan.
    And they issued a prospectus and published it widely 
seeking proposals from all interested parties. But no one else 
was interested. So we borrowed more money, and we agreed to 
make the investments, and we did make the investments. And this 
15-year, current 15-year contract was executed in 1986.
    As you know, all concessionaires pay a franchise fee based 
upon the ``probable value'' of your particular contract 
privileges. At that time, the Service valued our privileges at 
the rate of 4.25 percent of our gross receipts. Now even though 
this was a 1 percentage increase over our contract that we had 
at that time, we nevertheless thought it was reasonable. And we 
agree to it.
    But we were shocked and dismayed that after the first five 
years of this 15-year contract, we were advised that the 
Service had reconsidered the probable value of these same 
contract privileges, but we were shocked and dismayed because 
the Service informed us that these same privileges had somehow 
increased in value to 12 percent.
    We were shocked because the scope of our privileges had not 
changed one bit. We were really shocked, Mr. Chairman, because 
the franchise fee analysis, developed by a bureaucrat in the 
Washington office of the Service, contained serious mistakes. 
These are the same mistakes that are plaguing us and 
threatening to destroy us today, the mistakes that we have 
pointed out in this franchise fee analysis.
    We prepared a professionally-developed critique 
highlighting these mistakes, and in good faith we requested an 
opportunity to present them to appropriate officials of the 
National Park Service. This we did in 1996. We said, 
``Gentlemen, here are the mistakes that were made in this 
franchise fee calculation. Here are the consequences of these 
mistakes. We don't deserve this kind of treatment. These things 
are clear errors. Won't you please reconsider your position and 
correct them?'' They listened, but they refused to budge.
    Now, these mistakes in this franchise feel analysis, they 
create the illusion that our small concession is more 
profitable than it actually is. We have demonstrated that in 
figures, in positions which the Park Service really does not 
contradict.
    Please, please understand that we are not attempting to 
avoid paying a properly calculated fee. What we are seeking, 
gentlemen, is relief from paying a fee based upon an analysis 
that contains obvious mistakes, which are very, very 
destructive to our small business.
    Now, we are all imperfect human beings, and we all make 
mistakes. Certainly, we have made mistakes. But what we can't 
understand is why in the world our own government, which I love 
and respect, cannot admit to some obvious mistakes and correct 
them.
    The principles of our small company, gentlemen, and our 44 
employees have been living in job peril for almost seven years. 
It has been a costly and unwarranted nightmare. We are 
mystified why the United States of America behaves in this 
fashion.
    We have always provided outstanding service at Fort Sumter. 
And the Park Service admits this. We have done nothing to 
deserve this type of treatment. And please, in the interest of 
all, please help resolve this matter on its true merits.
    I thank you for your consideration. I shall be happy to 
answer any questions.
    [The prepared statement of Mr. Campsen follows:]
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    Mr. Hansen. Thank you, Mr. Campsen.
    Now, Mr. Jackson, we will turn to you sir.
    Mr. Inslee. Mr. Chair? Mr. Chair?
    Mr. Hansen. Sorry.
    Mr. Inslee. I am sorry. Could I interrupt just for a 
moment? I need to go over to the floor, and I have one question 
I would love to ask. Would you permit me to ask the witnesses 
that question?
    Mr. Hansen. Surely, I will recognize you for one question. 
Is that what----
    Mr. Inslee. Yes, just one.
    Mr. Hansen. Sure, go right ahead.
    Mr. Inslee. I appreciate the Chair's indulgence. I am sorry 
I won't be able to stay. I have to excuse myself to go to the 
floor.
    I just wanted to ask Mr. Stanton a question. I have talked 
to these folks about this situation, and I am not an expert on 
this obviously, but I wanted to--they relayed a concern to me 
about a disagreement. Disagreements are human. All people in 
contractual relationships get into disagreements, not too 
irregularly. They described their concern to me as much, not--
obviously they are concerned by the disagreement, but they said 
that they couldn't get the Park Service to sit down with them 
to explain the Park Service's rationale or logic or analytical 
system in devising this. And they had asked the Park Service 
for that information the Park Service based their numbers on, 
basically, and that the Park Service was unwilling to share 
that with them.
    And I thought that was a little surprising. I would think 
in this context that each side would sort of share their model 
or their analysis with the other so that each could poke holes 
in it, basically, and everybody could put their cards on the 
table and have a good argument.
    I just want to, would like you to comment. Is their 
characterization accurate? Or is there a misunderstanding? Or 
do we need to improve that sort of showing each other's cards?
    Mr. Stanton. Appreciate the question, and I will attempt to 
be brief in response, and I also would ask Mr. Cohen to comment 
because I would reference the present status.
    As mentioned in my testimony, that as a condition or 
provision within the concession contract there was to be, or 
could be, a reconsideration of the franchise fees five years 
after the first five years of the contract, that would involve 
the National Park Service conducting a financial analysis of 
the concessionaire, providing a financial report on which we 
based the financial analysis, and then communicating with the 
concessionaire and see whether there was any difference or 
problem with that.
    As that process was underway, there was not any major 
substantive discussion prior to the concessionaire filing a 
suit, arguing that the franchise fee calculation by the Park 
Service, although preliminary at that stage, was totally off 
base, if you will.
    Consequently, as we entered into discussion with the courts 
or the Justice Department, there was some limitation in terms 
of how we could interact unilaterally with the concessionaire. 
And I will ask Mr. Cohen to just comment on what those 
procedures that were applied in that instance.
    Mr. Cohen. Thank you, Mr. Director. Let me just expand for 
a moment. The contract itself specifies a process for the 
reconsideration of a fee. And it indicates that every five 
years either party may seek an adjustment up or down. In this 
case, in the first five-year period, the Park Service sought an 
adjustment up.
    The normal process in this is for the Park Service to put 
its cards on the table and for there to ensue an informal give-
and-take, just as you described. That did not occur. In the 
normal case--in the normal case--there is an opportunity, if 
the concessionaire does not agree with the decision of the Park 
Service, to appeal it to the Secretary. That did not occur.
    In that same process, there is an opportunity for the 
concessionaire to seek voluntary arbitration. That did not 
occur in this case. It did not occur because the concessionaire 
made the decision, for whatever reason, and is certainly free 
to make that decision, to go directly to court.
    So the normal opportunity, where the differing figures in 
this process, and this is not a precise process because you are 
trying to reconstruct a marketplace circumstance, which is an 
artificial situation because you don't have competition.
    So the purpose of the informal process is to have that 
give-and-take that didn't happen here. It is unfortunate that 
it didn't happen here. But it wasn't just once that it didn't 
happen. It didn't happen the second five-year period either. 
And we can have discussions as to why it did or didn't happen 
the second five-year period, but I can tell you that when the 
second five-year period was appealed to District Court, the 
government offered the opportunity to go back and start the 
process over again in mediation. And that did not occur.
    So I think there is a record that demonstrates that our 
process envisions exactly what you have described. It just 
hasn't been employed here. And I don't think it is a 
coincidence that the only situation where a franchise fee 
reconsideration has ended up in court is the only situation 
where the process that I have just described did not occur.
    Mr. Inslee. Thank you. And I will read your testimony for 
the remainder of the hearing. I need to excuse myself. Thank 
you very much.
    Mr. Hansen. I don't want to hold this up, but I think the 
gentleman from Washington asked quite an interesting question 
there. Let me just quickly ask this one to pick up on what he 
said: When they asked for information from the Park Service 
before going to court, was it forthcoming from the Park 
Service?
    Mr. Campsen, do you want to respond to that?
    Mr. Campsen. Mr. Chairman, I would defer to my legal 
adviser, Mr. Dickson.
    Mr. Hansen. I don't want to get you all tied up in 
legalistics here. Remember, you are not in court here. We don't 
even have a contempt charge.
    Mr. Stanton?
    Mr. Dickson. There is a simple answer to the question, Mr. 
Chairman, and you will note that neither the Director nor his 
attorney gave Mr. Inslee a direct answer to his question. The 
answer to the question is the information was not turned over. 
To this day, it has not been turned over.
    Mr. Hansen. I guess I just assumed--and I don't want to 
belabor this; I want to get to Mr. Jackson here--but I assumed 
why they didn't go through the procedure, and maybe I am on a 
false assumption, I don't know, was because they were asking 
for information that wasn't given to them.
    Mr. Dickson. That is correct.
    Mr. Hansen. And that is the reason that they circumvented 
the process, if I understand this right? Keep in mind, I don't 
have a dog in this fight. I am just trying to figure out what 
happened.
    Mr. Dickson. What happened was, the draft franchise fee 
analysis was prepared and was given over to Fort Sumter Tours. 
It was obvious that a number of decisions had been made based 
on industry statistics, such as Dun and Bradstreet numbers. But 
Fort Sumter Tours said, can we have this information, please. 
The Park Service said, no, you cannot. And so, I don't know how 
you are supposed to negotiate with somebody if you don't 
understand the basis on which the decision was made.
    They filed a Freedom of Information Act appeal, and that 
was denied. And for the year that this process of trying to get 
the data went on, all parties agreed that access to this data 
was withdrawn.
    Then, in April of 1993, the Park Service changed its mind 
and said, ``We are done. Here is your franchise fee. It is 
over.''
    Mr. Hansen. We have some interesting rules of discovery 
here, haven't we?
    Mr. Jackson, let's turn to you, sir.

   STATEMENT OF DAVID E. JACKSON, CERTIFIED PUBLIC ACCOUNTANT

    Mr. Jackson. Good morning, Mr. Chairman and honorable 
member of the Subcommittee. First, I want to thank you for 
allowing me to testify this morning.
    Mr. Chairman, I am here because my firm has served as the 
independent auditors of Fort Sumter Tours since 1995. They 
asked me to review a franchise fee analysis, which had been 
prepared by the Park Service from the information which had 
been extracted from its audited financial statements. Mr. 
Chairman, my review revealed that this analysis contains 
numerous mistakes that fall into three categories of errors.
    First, there are errors which violate Park Service 
guidelines. Second, there are errors in the application of 
generally accepted accounting principles. And third, there are 
errors resulting from a lack of understanding as to how a 
small, family-owned business operates.
    Because of these mistakes, Fort Sumter Tours will incur 
over a hundred thousands dollars a year in additional franchise 
fees due to the false conclusions derived from this analysis. 
Mr. Chairman, this represents a significant amount of money to 
Fort Sumter Tours because it is a small, family-owned business, 
and during this period of time, its gross receipts was only 
$1.4 million.
    Basically, the Park Service went through four steps in this 
analysis. First, it calculated the company's average annual 
concession profit. Next, it made some financial adjustments. 
Third, it calculated some financial ratios. And then finally, 
it compared these ratios with what it claimed are industry 
standards to determine if a franchise fee increase was 
justified.
    I have an exhibit which is captioned, ``The Wrong Way: What 
the Park Service Did,'' which presents the conclusions derived 
by the Park Service from these four steps. This is worksheet 
four, which is in their analysis. Mr. Chairman, I would like to 
present four mistakes of the types of errors that I found in 
the analysis.
    The first two mistakes are violations of Park Service 
guidelines. The first mistake is the Park Service included over 
$195,000 of non-concession income in the calculation of 
concession net profits. It is a clear violation of its 
guidelines.
    I don't understand why this income was included because it 
was clearly identified in the analysis. This mistake represents 
almost 50 percent of the concession profit that the Park 
service claims Fort Sumter Tours earned. This one mistake 
invalidates the ratio comparisons contained in the analysis and 
eliminates the justification for a fee increase. It is a very 
serious mistake.
    The second mistake is a byproduct of the first mistake, 
because including the incorrect income in the calculation of 
the maximum allowable fee is to cause this to be overstated. 
The maximum allowable fee, without this income, is only 8.7 
percent, not the 15.6 percent that the Park Service claimed in 
the analysis. Because of this mistake, the Park Service 
increased Fort Sumter's franchise fee rate to 12 percent, which 
is significantly greater than 8.7 percent. And it is again a 
clear violation of their guidelines.
    We have an exhibit which is captioned ``The First 
Correction,'' taking out the non-concession income, which 
presents the conclusions which would have been derived if this 
income had been removed. Again, these are very serious 
mistakes.
    The next mistake results from errors in the application of 
generally accepted accounting principles as it related to an 
adjustment to capitalize a vessel that was leased by the 
company from a related partnership. This vessel, as Mr. Campsen 
indicated earlier, was the basis for the 15-year new contract 
that the company was granted in 1986. This adjustment should 
not have been made because it had already been properly 
reported and recorded in the company's audited financial 
statements. This mistake caused the concession profit to be 
overstated by $70,000--another serious mistake which 
invalidates the ratio comparisons.
    The final mistake that I want to present clearly 
demonstrates a lack of understanding by the Park Service as to 
how a family business operates. Without an investigation of the 
type of duties performed, the Park Service reduced officer 
salaries by $163,000. Mr. Chairman, it is very common, for all 
family members working in a small business, to be named as 
officers. In fact, Fort Sumter Tours officers perform numerous 
non-officer functions.
    And they are compensated in line with the industry pay for 
the duties performed. Again, the Park Service made no attempt 
to gain an understanding of the actual duties being performed. 
And this adjustment should not have been made--another serious 
mistake which invalidates the ratio comparisons.
    To summarize, Mr. Chairman, in my opinion, this analysis 
contains mistakes totaling over $428,000 in the calculation of 
Fort Sumter Tours' concession profits. These serious mistakes 
represent almost one-third of the company's total gross revenue 
of $1.4 million.
    If these mistakes are corrected--and we have an exhibit 
which is captioned, ``What the Park Service Was Supposed to 
Do''--the conclusions would have been that there was no fee 
increase justified.
    Thank you, Mr. Chairman. This concludes my prepared 
remarks. And I also will be happy to answer questions of the 
Subcommittee.
    [The prepared statement of Mr. Jackson follows:]

                   Statement of David E. Jackson, CPA

    Because my firm has served as the outside independent 
auditors of Fort Sumter Tours, Inc. (FST) since 1995, I was 
asked to review a Franchise Fee Analysis (FFA) dated February 
27, 1992, which had been prepared by the National Park Service 
(NPS). To formulate a reasonable basis for my opinion, I 
familiarized myself with the Concession Policy Act, Public Law 
89-249 and NPS-48 as they relate to calculating franchise fees. 
My review revealed that this analysis contains numerous 
mistakes that fall into three categories of errors which 
include violations of the NPS's guidelines for the preparation 
of franchise fee analysis, improper applications of Generally 
Accepted Accounting Principles (GAAP), and a lack of 
understanding of how a small family business operates. If these 
mistakes are not corrected, it will cost FST over $100,000 a 
year in additional franchise fees because of the faulty 
conclusions derived from this analysis which served as the 
basis for a recommended franchise fee increase from 4.25 
percent to 12 percent of gross revenue from concession 
operations. This represents a significant sum of money to FST 
because it is a small family owned business whose average 
annual gross revenue from its concession operations as 
calculated by the NPS in this analysis was only $1.4 million a 
year.
    In general, to prepare this analysis, the NPS extracted 
financial information from the audited financial statements of 
FST for the five year period 1986 through 1990. From this 
information, the NPS calculated the average annual profit 
generated by the company from its concession operations, made 
certain financial adjustments, and then calculated three 
financial ratios. These three financial ratios are Return of 
Gross Revenue (ROG), Return on Equity (ROE) and Return on 
Assets (ROA). Return is defined as the net profits after income 
taxes generated by the company from its concession operations. 
This net income is the numerator in each of the profitability 
measures utilized by the NPS. The denominators are gross 
concession revenue for ROG, average equity for ROE, and average 
assets for ROA. After calculating the financial ratios, the NPS 
then compares them to some industry standards for similar 
companies to determine if the operating results fall within an 
acceptable range. If the ratios are acceptable, no franchise 
fee increase is warranted. In this instance, because of the 
erroneous adjustments contained in the analysis, the NPS 
decided to increase the existing franchise fee rate. In the 
following paragraphs, I will present examples of the types of 
mistakes contained in the analysis.

Mistakes/Omissions Which Violate NPS Guidelines

    This first mistake made by the NPS in this analysis was the 
inclusion of non-concession income of $195,603 in the 
calculation of the profit FST was generating from its 
concession operations. This income was clearly identified in 
the analysis as other non-concession income. Its inclusion is 
an indisputable violation of its own guidelines. NPS-48 clearly 
states that financial reports should reflect only in-park 
operations and should not include income or expenses of other 
non-concession operations or business of a concessioner's 
organization. This error represents almost 50 percent of the 
concession profit calculated by the NPS in the analysis. This 
one mistake completely invalidates the entire ratio analysis 
comparisons contained in the document because as previously 
stated ``Return'' means the net profits from concession 
operations. It also eliminates the justification for a fee 
increase because if this error were corrected, the financial 
ratios of FST would fall within the acceptable industry 
standards. (See Exhibit 1 for calculations.)
    NPS guidelines state that the maximum franchise fee should 
not be greater than 50 percent of the concessioner's pre-tax 
and pre-franchise profit. The purpose of this calculation is 
not to set the fee, but to establish the maximum fee NPS may 
impose. NPS calculated FST's maximum permissible fee at 15.6 
percent. If the above error (including non-concession income in 
this maximum fee calculation) is corrected, the maximum 
permissible franchise fee would be 8.7 percent not the 15.6 
percent fee calculated by NPS. The recommended 12 percent 
franchise imposed by the NPS on the company is greater than the 
correct maximum allowable fee and is another violation of its 
guidelines. (See Exhibit 1 for calculations.)
    NPS's worksheet found on page 6 of the analysis contains 
numerous mistakes which affect the conclusions which were 
supposed to be derived from the information presented. In the 
column which presents the average amounts with a 4.25 percent 
franchise fee, several errors can be found. First, as mentioned 
above, the reported amounts include other income of $195,603 
from non-concession sources. In addition, the income taxes of 
$36,330 presented in this column is incorrect. In the 
calculation of this average from the information extracted from 
FST's audited financial statements, NPS failed to consider that 
no income taxes were included for two out of the five years 
presented. In 1989, FST elected under allowable Internal 
Revenue Codes to be taxed as an ``S'' corporation. Under these 
regulations, the taxable income of the company is reported on 
the individual income tax returns of its shareholders. A 
provision for income taxes should have been included for these 
two years in the determination of the true net income the 
company earned from its concession operations. Again, this 
caused the reported profit to be overstated which would have 
also caused the financial ratios to be overstated. The titles 
for the other columns presented are very misleading. The column 
descriptions contain which new franchise fees are included in 
its presentation. However, in each instance, the heading 
amounts did not agree with the actual calculated amount of the 
franchise fee used in the column. For example, the actual fee 
rate used in the column designated as including a 12 percent 
rate was actually only 10.3 percent. This misrepresents the 
results contained in the worksheet and the conclusions which 
can be derived from them. As discussed in more detail below, 
NPS failed to include the effects of a capitalization 
adjustment relating to a vessel when calculating ROE and ROA in 
this worksheet. Again, this caused these profitability measures 
to be overstated. (See Exhibit 2 for calculations.)
    NPS guidelines also permit making positive adjustments 
which might be beneficial to a concessioner. This is a 
recognition that a mature company is likely to have fully 
depreciated assets and little debt which would make it appear 
more profitable in a comparison with a relatively new business 
because its depreciation and interest expense deductions would 
not be as large. NPS failed to make any adjustments in the 
calculation of the financial ratios even though FST is a mature 
company with significant fully depreciated assets and very 
little debt.

Mistakes in the Application of Generally Accepted Accounting 
Principles

    Material errors were made in a capitalization adjustment by 
NPS relating to a vessel which was leased to FST by a 
partnership in which it was a 50 percent partner. This 
acquisition is the single largest financial transaction ever 
undertaken by the company. In addition, the purchase of this 
boat was the basis for the NPS granting FST a new 15 year 
contract in 1986. This adjustment should not have been made 
because this lease had already been recorded and properly 
reported in accordance with GAAP in the audited financial 
statements of the company, This incorrect adjustment caused the 
concession profit to be overstated by $70,000 in the analysis. 
Again, the ``Return'' portion of the financial ratio 
calculations were overstated and the underlying profitability 
measures were overstated because of this error.
    Even if you agree with the premise that the adjustment 
should be made, and I don't because it is not in accordance 
with GAAP, NPS incorrectly used a cost of $1 million and debt 
of $600,000 in the capitalization adjustments. I also prepare 
the income tax returns for the partnership which owns this 
vessel and it cost over $1.4 million and the debt incurred in 
its purchase was $1.3 million. There was no explanation given 
in the analysis to support the use of the wrong amounts and I 
can think of no basis under GAAP for the use of incorrect 
dollar amounts. The use of the wrong amounts caused the 
concession profit to be overstated by $56,000 because both 
depreciation and interest expenses would be understated. Once 
again, the ``Return'' portion of the financial ratio 
calculations were overstated and so were the underlying 
profitability measures. In addition, the company was deprived 
of the right to earn a return on $400,000 of its assets. To 
compound this mistake, when the profitability ratios of ROA and 
ROE were calculated, the related capitalized value and equity 
were ignored. Again, this caused these two profitability ratios 
to be overstated ( See Exhibit 2 for calculations)
    Another mistake in the application of GAAP occurred when 
NPS assumed away $347,700 of the company's equity. The only 
reason given in the analysis was that this was done ``to 
approximate industry.'' Equity and debt are the two primary 
sources of capital utilized by a company. Capital is the amount 
invested by the owners of the company and debt is a loan to the 
company. Neither are free because an owner wants a return on 
his investment, usually in the form of a dividend, and interest 
must be paid on a loan. NPS guidelines recognizes that in 
setting franchise fees, owners are entitled to a return on 
their invested capital. As previously mentioned, an adjustment 
should be made to reflect the fact that a company has low debt 
because retained capital is being used to finance the 
operations of the business. I can think of no place in GAAP 
when you can just assume away equity of a business and that is 
what was done with this adjustment. By assuming away this 
equity, the profitability measure of ROE was overstated in the 
analysis.
    If you agree with the premise that this adjustment was 
correct, and I do not, NPS should have increased the debt of 
the company by the same $347,700. In addition, an adjustment 
should have been made to the concession profit for the interest 
which would be due on this loan. Again, by not making this 
adjustment, the ``Return'' in the profitability measures of 
ROG, ROA and ROE would have been overstated and the resulting 
calculations incorrect.

Lack of Understanding of How a Small Business Operates

    NPS clearly demonstrated a lack of understanding of how a 
small family owned business operates when officer salaries were 
reduced by $162,762 without any investigation of what type of 
duties were being performed by the officers of the company. It 
is common practice for all family members who work in the 
business to be named an officer of their company. Their 
birthright not their actual duties is the reason for them being 
elected as officers. The officers of FST perform many non-
officer duties and are compensated in line with industry pay 
for these duties. The NPS made no attempt to gain an 
understanding of the actual duties of the officers and this 
adjustment should not have been made. Again this resulted in 
the concession profit to be overstated which caused the 
``Return'' in the profitability ratios to be overstated and 
invalidates their calculations.

Conclusion

    In my opinion, this analysis contains mistakes totaling 
over $428,000 in the determination of FST's concession profits. 
These errors represent almost one third of the average gross 
revenue of $1.4 million it derived from its concession 
operations. These mistakes invalidate the financial ratio 
comparisons contained in the analysis and eliminates the NPS's 
basis for the fee increase.
    This concludes my prepared testimony. I will be happy to 
answer any questions from the Subcommittee.
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    Mr. Hansen. Thank you. We have copies of these charts here 
in our hands. Does the Park Service have these charts?
    Would you get--you can take those down, if you would, 
please. But, would somebody get the Park Service these charts? 
I would like to have them there. Would you get those and get 
those to the Park Service? I would like a response from those.
    And while we are doing that, Mr. Gibbons, we will turn to 
you, sir.
    Mr. Gibbons. Thank you very much, Mr. Chairman. And I 
appreciate the Director of the National Park Service being here 
today on this issue. And I know that a lot of these decisions 
probably you have been briefed on, some of which were not your 
decisions, and I certainly appreciate that as well.
    But I noticed in your testimony, which was obviously 
written by counsel, to be very legalistic in your approach to 
this whole matter. It also states throughout the whole tenure 
of this thing that the Fort Sumter Tours did not go to 
arbitration, did not seek an alternative method of resolving 
this dispute and seek some sort of arbitration, which you think 
is some middle ground? Is that what you are saying to them? Or 
is there something else that you are implying by the fact that 
they didn't go to an arbitration?
    Mr. Stanton. That is a process that is outlined in the 
concession contract.
    Mr. Gibbons. Well, I know what the process says. But if you 
go to arbitration, what I am saying is, do you believe in your 
heart, in your mind, that if they went to arbitration there 
would be some middle ground between the 12 percent and the 
original franchise fee that was adjusted.
    I know the guy sitting next to you is probably advising you 
on this, but what do you think? Is there room in there for 
change?
    Mr. Stanton. It is difficult to speculate if there would 
have been any change. In looking at what the past practices 
have been in those cases that gone to arbitration, it certainly 
gives an opportunity for the two principal parties, that being 
the Park Service and the concessionaire to mutually review the 
differences of opinion and come out with, hopefully, a mutually 
accepted adjustment in the franchise fees.
    Mr. Gibbons. Mr. Stanton, that is a wonderful answer to a 
yes-or-no question, and I appreciate it. My question is, having 
looked at the information that has now been presented to you 
and has been presented before this Committee, do you believe 
that the Park Service made a mistake and are they willing to 
correct it?
    Mr. Stanton. I don't believe that we made a mistake. As I 
mentioned in response to the three points that the previous 
speaker made with respect to the inclusion of outside income, 
which was in fact included in the initial analysis, and I 
commented on that in my testimony, that error was corrected. 
And consequently, in the final computation, it was not 
included.
    With respect to the calculation of the value of the boat 
and also the adjustment in the Director's income, I would ask 
that our financial analyst, Mr. Bob Hyde, comment briefly on 
that.
    Mr. Gibbons. Well, Mr. Stanton, let me also say that I am 
looking at testimony, page 5, and it says that ``while there 
was one technical error''--what was that technical error?
    Mr. Stanton. The technical error was the inclusion of the 
non-concession income in the first preliminary analysis, and 
that was corrected.
    Mr. Gibbons. Now in assessing Fort Sumter Tours' 
profitability, the Park Service did include non-concession 
income. Is that not true?
    Mr. Stanton. In the initial or the preliminary analysis, 
and that was detected and it was corrected. And in the final 
computation, no non-concession related income was included in 
the final computation.
    Mr. Gibbons. You mean no non-concession-related income was 
included? You said no concession-related.
    Mr. Stanton. Non-concession, non-concession.
    Mr. Gibbons. Well, does that mean that the Park Service for 
the first five years of Fort Sumter Tours income profitability 
was overstated, in your calculation?
    Mr. Stanton. I could not----
    Mr. Hyde. If I may?
    Mr. Hansen. Please identify yourself for the record, 
please, sir.
    Mr. Hyde. My name is Robert Hyde. I am the financial 
analyst who performed the analysis. There is a two-step process 
in reviewing----
    Mr. Gibbons. Well, let me just say, the process--the 
question asked, does that say that the tour service's income in 
the first five years was overstated, according to the Park 
Service's calculation--if what the Director has already said, 
that there was a mistake in the technical addition of non-
concession profit in that, so the answer would be?
    Mr. Hyde. It was overstated in the initial part of the 
analysis, but it was corrected in the latter part of the 
analysis where the fee was set. Page 5 is where it was carried, 
and page 6 it was eliminated properly.
    Mr. Gibbons. Well, then, if you don't take it out in the 
beginning, I mean, that would adjust the idea of whether or 
not, or state the idea of whether or not an increase in the fee 
was even warranted. Is that not true?
    Mr. Hyde. There is a part where you are looking at the 
original fee, and yes, it would be overstated at that point, 
but then----
    Mr. Gibbons. And that would go to the basis of whether or 
not justification of a fee increase was needed?
    Mr. Hyde. At that stage, there is no franchise fee applied 
to the concessionaire's results, proper results. And the 
process then applies the fee at the point where the new fees, 
the prospective new fees are applied. It did not include any 
non-concession income.
    Mr. Gibbons. Let me go over here to the CPA for the person. 
He is just sitting on pins and needles waiting to answer these 
very questions. And I would like to ask you, if you have a 
different opinion of the questions I have asked, and whether or 
not----
    Mr. Jackson. Yes, I have a very different opinion.
    Mr. Gibbons. Would you go ahead and tell us what your 
opinion is on this matter?
    Mr. Jackson. The inclusion of the $195,000 greatly 
overstated the profitability, which caused these three ratios, 
return on gross, return on equity, return on assets, to be 
greatly overstated. So then when they looked at the ratios they 
calculated, and compared them to their industry statistics, how 
could they compare them properly, they were overstated. The 
first part--that is the first error.
    Then the second one is very critical too. The inclusion of 
this income caused the maximum allowable fee to be overstated. 
I mean, it wasn't 15.6 percent. It was 8.7. They, because of 
the errors, set a rate at 12 percent. We shouldn't even be 
talking about 12 percent, we should be talking at most at 8.7 
percent.
    Mr. Gibbons. Excuse me. Your belief is that, by the 
inclusion of the mistaken inclusion of the non-concession 
profit in the original five-year contract term, caused the 
erroneous consideration of warranting a fee increase?
    Mr. Jackson. Yes, sir. Exactly.
    Mr. Gibbons. Thank you, Mr. Chairman.
    Mr. Hansen. The gentleman from Nevada brought up some very 
interesting points here I would kind of like to square in my 
own mind and see if we got this right.
    It seems like they did include non-concession fees. If you 
did, calculating the maximum franchise fee, if we figured this 
right that you could charge, the National Park Service 
guideline 48 says that the maximum fee you can charge is 50 
percent of the pre-franchise tax and pre-tax income, if I am 
reading your guidelines right. Is that right?
    Mr. Jackson. That's correct.
    Mr. Hansen. Well, that is on chapter 24, page 18. So you 
used the figure $441,871, and, Mr. Jackson, you correct me if I 
am wrong on this because I could be. Well, in fact, that 
includes $195,603 of non-concession income. Is that right?
    Mr. Jackson. That's correct.
    Mr. Hansen. So, if that premise is right, we go to 
guideline 48, then the fee would have been 8.7 percent. Is that 
right?
    Mr. Jackson. Yes, sir. That is correct.
    Mr. Hansen. Better than 12 percent.
    Mr. Jackson. The maximum allowable fee. Now that is not 
necessarily the fee that----
    Mr. Hansen. Well, I am going by their guidelines here.
    Mr. Jackson. The guideline is for the maximum allowable 
fee, not necessarily what the fee should be.
    Mr. Hansen. Mr. Stanton, would you like to--am I figuring 
this wrong?
    I would have Mr. Hyde comment.
    Mr. Hyde. You are correct, sir. The maximum is overstated 
in the analysis, using the overstated figure on page 5. That is 
correct.
    Mr. Hansen. So that would have been--what I just said would 
be a correct statement, and the fee would have been 8.7 
percent, rather than 12 percent, if all these assumptions are 
correct?
    Mr. Hyde. That is correct. The maximum guideline as a 
preliminary analysis would be 8.7 percent.
    Mr. Hansen. I see. Well, that is interesting.
    Mr. Stanton, I guess we could debate this thing for a long 
time regarding what procedure should have been followed. Your 
colleague mentioned to Mr. Inslee that they didn't follow this 
procedure. They claim that you didn't give them the 
information. And so what is the use of going into arbitration. 
We don't know what the other side is going to say.
    Having been part of arbitration when I used to work for a 
large insurance company, you know, we didn't go in blind. We 
walked in and all three parties pretty well knew what was going 
on when we walked in there. And we were kind of stuck with the 
results. And you are kind of a river boat gambler when you do 
that, but I guess that is one of the things you do.
    Following that, if I heard the gentleman correctly, he said 
the next thing they do is the Secretary would make a decision. 
Does that follow arbitration? Or is that before arbitration?
    Mr. Stanton. That would follow arbitration.
    Mr. Hansen. So the final arbitrator, if they choose to go 
that route, would be the Secretary?
    Mr. Stanton. That is correct.
    Mr. Hansen. So you start out, they can appeal--then go from 
appeal to arbitration to the secretary?
    Mr. Stanton. That is correct.
    Mr. Hansen. But in this case, and their contention is 
because they didn't have the information so they didn't feel 
comfortable doing that, they went straight to court, which was 
what, Federal District Court?
    Mr. Stanton. Federal District Court.
    Mr. Hansen. And, in the Federal District Court, they in 
effect--you prevailed. Is that correct?
    Mr. Stanton. The Federal Government prevailed. That is 
correct.
    Mr. Hansen. And this was then appealed?
    Mr. Stanton. It was appealed.
    Mr. Hansen. And you prevailed again?
    Mr. Stanton. Prevailed again.
    Mr. Hansen. On what grounds? Could you tell me?
    Mr. Stanton. As I understand that the court held that the 
process employed by the National Park Service was proper, and 
that our calculation, that we had given adequate notice to the 
concessionaire with respect to reconsideration of the franchise 
fees, and that the Park Service had the authority to adjust the 
franchise fees from 4.25 to 12 percent.
    Mr. Hansen. Mr. Stanton, as you may recall in my office, 
Mr. Campsen and his son and their counsel argued that it wasn't 
discussed, that the franchise fee wasn't brought up in court, 
and that the merits of the franchise fee was not as issue. Is 
that a correct statement?
    Mr. Stanton. That is not my understanding, Mr. Chairman.
    Mr. Gibbons. Mr. Chairman?
    Mr. Hansen. Excuse me. Who has got the floor here?
    Mr. Gibbons. I was going to ask you to yield for a second 
on a question like this because it seems to me what we should 
have is the court decision before us because I am under the 
standing, understanding, reading Director Stanton's testimony, 
the only issue that was brought before the court was whether or 
not the Park Service had the right to adjust the fee, which is 
part of the contract, and secondly, the calculation of the fee 
was not at issue in that decision.
    I find nowhere in the decision does it talk about the merit 
or the correctness of the calculation of the fee. So maybe we 
should have the actual court decision before us.
    Mr. Stanton. If you would please, Mr. Chairman?
    Mr. Hansen. Excuse me, go ahead, sir.
    Mr. Stanton. I wanted to provide for the record a copy of 
the court decision. And the court did address the calculation 
of the franchise fee.
    Mr. Hansen. That would certainly be helpful for us as far 
as this oversight hearing goes.
    [The information follows:]
    Mr. Cohen. Mr. Chairman?
    Mr. Campsen--oh, excuse me. I am sorry. Go ahead.
    Mr. Cohen. I just wanted to read from the Fourth Circuit 
opinion: ``FST raises what it believes are three errors in 
NPS's calculation of 12 percent franchise fee in the instant 
case.'' And then they proceed to analyze the three errors that 
were raised and discussed.
    And we will provide this for the record.
    Mr. Hansen. Well, thank you. We appreciate having that.
    Hang on a minute.
    Mr. Campsen, you testimony is always interesting. You 
started this business in 1961?
    Mr. Campsen. Yes, sir.
    Mr. Hansen. And the theory behind this is a lot of folks 
would like to be ferried out to Fort Sumter to see it and, I 
assume, you started buying vessels, as you pointed out, 
advertised your business, people would come to wherever your 
vessels were tied up. And you would then take them out.
    Tell us, go through that operation a little bit, would you, 
just for the benefit of the Committee? What you do, in other 
words.
    Mr. Campsen. Yes, sir. Fort Sumter National Monument was 
not created until 1948, and there was no concession operations 
going on at Fort Sumter. There was no concession boats taking 
people out there. The Park Service wanted to start public boat 
transportation out to the Fort, and they sought people, 
interested people, to do that.
    We were one of five proposals. And we were evaluated, and 
we were selected. I went to the local banks, and I borrowed 
sufficient money to get the first boat in operation. And we 
started operating, carrying people to the Fort on January the 
1st, 1962. And we have been doing that since. We borrowed 
money. I always personally guaranteed the note.
    Mr. Chairman, I don't come from a rich family. As a very 
young man, I really didn't have any money, but I guaranteed the 
note, and the banker trusted me. We have always paid back 
everything we ever borrowed, and our credit standing is good. 
But that is how we got started.
    And I had some cousins who were involved in operating 
shrimp boats around Charleston, very, very fine, honorable 
people who knew all about boats. They helped me to get started, 
and none of us made any money at all or drew any income from 
Fort Sumter Tours.
    It was a wing and prayer and a hope that we would be able 
to build a business that made some sense economically, and we 
worked very closely with the local Park Service officials. We 
have always got the highest ratings possible. We did the 
advertising. We did the promotion. And visitation started 
increasing.
    It got to the point where I could even start having a 
little profit from Fort Sumter Tours. But we grew and we 
expanded, and we went into doing things other than Fort Sumter, 
like conducting harbor tours around Charleston Harbor. The boat 
did not stop at the Fort.
    Some people are really not interested in going to the Fort. 
And we also expanded by using our boats for special charters, 
people want to charter a boat for any number of reasons. 
Churches want to charter the boats, private businesses, and so 
forth. We charter those at night.
    Mr. Hansen. Mr. Campsen, if I may interrupt you, we are 
going to lose this Director in a minute.
    Let me just ask you, how many boats or ships do you have? 
Being an old Navy man----
    Mr. Campsen. We have three.
    Mr. Hansen. Three? How many people do they hold?
    Mr. Campsen. We have three. One is the Spirit of 
Charleston, which has been described and talked about here. 
That boat was built down in Louisiana. We had a naval architect 
design the boat. That boat was--plans and specifications were 
approved by the local Park Service people, as we were 
developing to be used to carry people over to Fort Sumter. And 
at night, this boat is used to carry people on dinner 
excursions.
    We had a different crew come in, and the boat is 
transformed from daytime operation to nighttime operation. And 
we do that to make as much money as we can to pay for the boat 
and pay for the people who work for us.
    We have 44 people, and we have a payroll that we have to 
meet, of course, meet every Friday.
    Mr. Hansen. Yes. How long does it take to get from the 
Harbor to Fort Sumter?
    Mr. Campsen. It takes 30 minutes from our landing facility 
to get out to Fort Sumter, 30 minutes.
    Mr. Hansen. And, Mr. Campsen, before we lose our time here, 
I don't know that--we are not mediators here, we are just 
trying to resolve some of these things. I would like to ask the 
Director this question: Have you ever considered the National 
Park Service going back and recalculating. I remember many 
times with a new battery of folks, not that the others haven't 
done a good job, and taking another look at it.
    And on your side of the issue, Mr. Campsen, you figure if 
you were given the opportunity to go to arbitration, would you 
do it?
    Mr. Campsen. Well, yes, sir, provided it was binding 
arbitration. Let me say this, Mr. Chairman: We have proposed to 
the Park Service that we would be willing to submit the 
correctness of this franchise fee calculation to an independent 
accounting firm, like Ernst and Young or someone that we don't 
have any real control over that are nationally recognized, and 
ask them to--tell the Service, here is where we think this was 
an error based upon the guidelines of the Park Service in 
existence at the time.
    And we would be bound by that. And we would pay for that 
analysis. We proposed that to the Park Service, and they didn't 
react to it at all. They didn't refuse or accept. They just 
acted like they didn't receive it.
    But, yes sir, to answer your question, if we had an 
opportunity to go to binding arbitration, we would agree to 
that.
    However, please understand that our small company since 
1992 has been incurring enormous expenses, enormous expenses 
trying to correct the NPS's mistakes and miscalculations. I 
don't know. There has got to be an end to this sometime, 
because we are going bankrupt one or two ways. Either we are 
going bankrupt fighting this 12 percent calculation, or we are 
going bankrupt when they impose it and make us pay it. And so 
we are in between a rock and a hard place, Mr. Chairman, if you 
will.
    The expense of attorneys and other consultants and time and 
frustration has been enormous. So, yes, sir, we want to end 
this. We want to come to some arrangement whereby a proper 
calculation of our fee is finally obtained.
    Mr. Hansen. I appreciate that, Mr. Campsen. I am just 
sitting here trying to figure out a way to resolve an issue.
    Mr. Campsen. I understand.
    Mr. Hansen. And it seems to me that if there was a way, and 
I don't understand all the procedures and what is in statutory 
law here, I am just kind of off the top of my head. If we 
could--way we could put arbitration together and we live with 
the results, that is one way we have been in the past.
    Another thing, of course, is that we look to the Park 
Service. Maybe they will take another look at this, come up 
with some other folks to do that. I have seen judges order 
people to do that, saying you go in and put some new folks in 
there and take another look at this thing and see if it was 
done right, and then come back. So, that is another remedy that 
may be there.
    Mr. Gibbons, maybe you would like to comment?
    Mr. Gibbons. Well, I thank the gentleman, and I know that 
his leadership is appreciated on this issue because it is an 
important issue, not just for the Park Service but for the 
future of 40-some employees who are sitting out there worried 
about their income.
    I mean, their income depends upon the success of this 
operation. It doesn't necessarily equate to the same payroll 
check that the Federal bureaucrats get every Friday without 
worry about whether or not the lights are going to come on, or 
somebody is going to pay the tax and do this.
    And I would just simply like to reiterate that if the 
calculations, according to the accountants for the Park Service 
that we have gone over are correct, and, Mr. Chairman, I think 
you put it very correctly that we are looking at somewhere 
around $246,000--$242,000, excuse me, $246,260 is the 
calculation, and that would put it in the 8.7 percent maximum 
cap, compared to the 12 percent.
    I would think the Park Service has to realize right away 
that there is at least a conceding point right there to go to 
some kind of negotiating position. And I would hope the Park 
Service realizes that it is not all one way.
    And some days the Park Service has to give in when they are 
wrong as well. And from what I have heard, Mr. Chairman, I 
think the Park Service did have a technical error and should be 
willing to work with the gentleman as well.
    Mr. Hansen. Just as the gentleman points out in just this 
hearing we have had, the Park Service has pointed out that it 
should have been 8.7 on this if we take those fees, which is 
substantial.
    Mr. Gibbons. Well, Mr. Chairman, that is the maximum. And 
then we have to start with somewhere between where they were 
originally and then the maximum cap of 8.7, not the 12 percent.
    Mr. Hansen. That is all predicated on if we accept these 
assumptions, which apparently we do in this case.
    Well, I know, Mr. Stanton, you are here three-and-half 
minutes overtime.
    Mr. Stanton. That's fine. Mr. Chairman, Mr. Gibbons, again, 
I appreciate the opportunity. Let me make a couple of comments, 
if I may.
    One is with respect to Mr. Campsen's assessment of the 
relationship with the National Park Service. I concur 
wholeheartedly. It has been an excellent partnership. The 
services that Mr. Campsen and the Fort Sumter Tours, 
Incorporated have provided over the years have been valuable 
service benefiting thousands and thousands of visitors to Fort 
Sumter and Fort Moultrie. And it is a value, their partnership 
is a value of service that they provide to the public.
    That is not the question that is before us today. So I 
don't want any comments that I make diminish the quality of 
services that the concessionaire has provided. It has been 
satisfactory, indeed, outstanding over the years.
    Secondly, as I indicated in my testimony, is that we have 
asked the district attorney--rather, the U.S. Attorney's Office 
to be open, receptive to any proposal or suggestions from the 
concessionaire in hopes that we can move towards a resolution 
of this as soon as possible. And we are committed to working 
again with the U.S. Attorney to resolve the suit and move to a 
different level of work.
    Mr. Hansen. I appreciate that, Mr. Director, and I 
appreciate you being here.
    We are sitting scratching our heads, like you folks, on how 
is this resolved. It seems to me there are a couple of things 
that logical, reasonable people could sit down and get it done, 
and then we wouldn't have to go through all this expense, time, 
and effort.
    And that is one of the reasons you have arbitration; that 
is one of the reasons we have other things that don't get it 
wrong to all you lawyers out there, but sometimes I think the 
only guy that wins on this thing is counsel. No disrespect, 
Counselor.
    Mr. Dickson. None taken, sir.
    Mr. Hansen. But having seen a lot of money go out and 
having signed a lot of those checks, I can tell you that--
anyway, with that said, we will take it under advisement as the 
Committee and see if there is a legislative remedy. We would 
like to get this over with. Frankly, I think, of my 10 terms on 
this Committee, the biggest thorn in our flesh is always the 
fight with concessionaires, Park Service, other folks. And as 
the Director aptly pointed out, concessionaires are integral 
and an important part of the Park Service.
    And there has been a good relationship here for years, I 
hate to see this blow up. I know it is an extremely important 
thing to the folks who want to see this very interesting 
historical place. So if we could do anything in our power to 
help this thing out, we want to do it and bring this to a 
reasonable and amicable solution.
    And unless Mr. Gibbons wants to add anything to that, we 
will----
    Mr. Dickson. Mr. Chairman, may I----
    Mr. Hansen. Counselor.
    Mr. Dickson. I simply wish to express the deep appreciation 
of Fort Sumter Tours for this hearing. It is obvious to us, I 
believe that after several trips to the courthouse and numerous 
statements by the Park Service that there was never anything 
wrong with this franchise fee analysis, it took this oversight 
hearing and your efforts to get them to concede that the fee 
should never have gone above 8.7 percent, not from the very 
beginning. And we are very, very grateful to you for that.
    Mr. Hansen. Well, we thank you for that, and Mr. Director, 
again we apologize. We have held you eight minutes over, and I 
know the Vice President is over there and that is probably 
where you are supposed to be, and so am I.
    But I wanted to have this hearing. And let me thank all of 
you for being here, and this will conclude this oversight 
hearing.
    [Whereupon, at 12:38 p.m., the Subcommittee was adjourned.]
    [Additional material submitted for the record 
follows.]S6602
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