[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]


 
  THE OLD POST OFFICE BUILDING: THE GENERAL SERVICES ADMINISTRATION'S 
                          PLANS FOR FUTURE USE 

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

                               (110-113)

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
    ECONOMIC DEVELOPMENT, PUBLIC BUILDINGS, AND EMERGENCY MANAGEMENT

                                 OF THE

                              COMMITTEE ON
                   TRANSPORTATION AND INFRASTRUCTURE
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                             APRIL 10, 2008

                               __________

                       Printed for the use of the
             Committee on Transportation and Infrastructure

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41-941 PDF                       WASHINGTON : 2008 

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             COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE

                 JAMES L. OBERSTAR, Minnesota, Chairman

NICK J. RAHALL, II, West Virginia,   JOHN L. MICA, Florida
Vice Chair                           DON YOUNG, Alaska
PETER A. DeFAZIO, Oregon             THOMAS E. PETRI, Wisconsin
JERRY F. COSTELLO, Illinois          HOWARD COBLE, North Carolina
ELEANOR HOLMES NORTON, District of   JOHN J. DUNCAN, Jr., Tennessee
Columbia                             WAYNE T. GILCHREST, Maryland
JERROLD NADLER, New York             VERNON J. EHLERS, Michigan
CORRINE BROWN, Florida               STEVEN C. LaTOURETTE, Ohio
BOB FILNER, California               FRANK A. LoBIONDO, New Jersey
EDDIE BERNICE JOHNSON, Texas         JERRY MORAN, Kansas
GENE TAYLOR, Mississippi             GARY G. MILLER, California
ELIJAH E. CUMMINGS, Maryland         ROBIN HAYES, North Carolina
ELLEN O. TAUSCHER, California        HENRY E. BROWN, Jr., South 
LEONARD L. BOSWELL, Iowa             Carolina
TIM HOLDEN, Pennsylvania             TIMOTHY V. JOHNSON, Illinois
BRIAN BAIRD, Washington              TODD RUSSELL PLATTS, Pennsylvania
RICK LARSEN, Washington              SAM GRAVES, Missouri
MICHAEL E. CAPUANO, Massachusetts    BILL SHUSTER, Pennsylvania
TIMOTHY H. BISHOP, New York          JOHN BOOZMAN, Arkansas
MICHAEL H. MICHAUD, Maine            SHELLEY MOORE CAPITO, West 
BRIAN HIGGINS, New York              Virginia
RUSS CARNAHAN, Missouri              JIM GERLACH, Pennsylvania
JOHN T. SALAZAR, Colorado            MARIO DIAZ-BALART, Florida
GRACE F. NAPOLITANO, California      CHARLES W. DENT, Pennsylvania
DANIEL LIPINSKI, Illinois            TED POE, Texas
DORIS O. MATSUI, California          DAVID G. REICHERT, Washington
NICK LAMPSON, Texas                  CONNIE MACK, Florida
ZACHARY T. SPACE, Ohio               JOHN R. `RANDY' KUHL, Jr., New 
MAZIE K. HIRONO, Hawaii              York
BRUCE L. BRALEY, Iowa                LYNN A WESTMORELAND, Georgia
JASON ALTMIRE, Pennsylvania          CHARLES W. BOUSTANY, Jr., 
TIMOTHY J. WALZ, Minnesota           Louisiana
HEATH SHULER, North Carolina         JEAN SCHMIDT, Ohio
MICHAEL A. ACURI, New York           CANDICE S. MILLER, Michigan
HARRY E. MITCHELL, Arizona           THELMA D. DRAKE, Virginia
CHRISTOPHER P. CARNEY, Pennsylvania  MARY FALLIN, Oklahoma
JOHN J. HALL, New York               VERN BUCHANAN, Florida
STEVE KAGEN, Wisconsin               ROBERT E. LATTA, Ohio
STEVE COHEN, Tennessee
JERRY McNERNEY, California
LAURA A. RICHARDSON, California
ALBIO SIRES, New Jersey

                                  (ii)

  


 Subcommittee on Economic Development, Public Buildings, and Emergency 
                               Management

        ELEANOR HOLMES NORTON, District of Columbia, Chairwoman

MICHAEL H. MICHAUD, Maine            SAM GRAVES, Missouri
JASON ALTMIRE, Pennsylvania          BILL SHUSTER, Pennsylvania
MICHAEL A. ARCURI, New York          SHELLEY MOORE CAPITO, West 
CHRISTOPHER P. CARNEY,               Virginia
Pennsylvania, Vice Chair             CHARLES W. DENT, Pennsylvania
TIMOTHY J. WALZ, Minnesota           JOHN R. `RANDY' KUHL, Jr., New 
STEVE COHEN, Tennessee               York
JAMES L. OBERSTAR, Minnesota         JOHN L. MICA, Florida
  (Ex Officio)                         (Ex Officio)

                                 (iii)


























                                CONTENTS

                                                                   Page

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

                               TESTIMONY

Winstead, Hon. David, Commissioner, Public Buildings Service, 
  General Services Administration................................     5

          PREPARED STATEMENTS SUBMITTED BY MEMBERS OF CONGRESS

Altmire, Hon. Jason, of Pennsylvania.............................    24
Norton, Hon. Eleanor Holmes, of the District of Columbia.........    25
Oberstar, Hon. James L., of Minnesota............................    28

               PREPARED STATEMENTS SUBMITTED BY WITNESSES

Winstead, Hon. David.............................................    30

                       SUBMISSIONS FOR THE RECORD

Winstead, Hon. David, Commissioner, Public Buildings Service, 
  General Services Administration, responses to questions from 
  the Subcommittee...............................................    34

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


THE OLD POST OFFICE BUILDING: THE GENERAL SERVICES ADMINISTRATION PLANS 
                             FOR FUTURE USE

                              ----------                              


                        Thursday, April 10, 2008

                  House of Representatives,
    Committee on Transportation and Infrastructure,
Subcommittee on Economic Development, Public Buildings, and 
                                      Emergency Management,
                                                    Washington, DC.
    The Subcommittee met, pursuant to call, at 2:05 p.m., in 
Room 2167, Rayburn House Office Building, Hon. Eleanor Holmes 
Norton [Chairman of the Subcommittee] presiding.
    Ms. Norton. Good afternoon, and welcome to all to today's 
hearing this afternoon. I am pleased to welcome Public Building 
Commissioner David Winstead of the General Services 
Administration. I very much look forward to his testimony.
    On January 16th, 2008, I had no option but to introduce a 
bill, H.R. 5001, the Old Post Office Development Act, to 
develop the nearly empty, so-called "Old Post Office"--a 
unique, historic treasure located at 1100 Pennsylvania Avenue, 
Northwest, owned by the Federal Government's GSA.
    For more than 10 years, our Subcommittee on Economic 
Development, Public Buildings and Emergency Management has 
expressed mounting concern about the neglect and 
underutilization of this valuable Government site and has 
pressed GSA to develop and use this building to its full 
potential.
    The Old Post Office Building, completed in 1899, is one of 
the oldest buildings here that has yet to be rehabilitated and 
preserved. This grand example of Romanesque Revival occupies an 
entire city block because it was the main post office of the 
Nation's capital. The building was placed on the historic 
register in 1973, and it remains one of the city's most 
unusual, interesting and appealing landmarks. Part of the 
appeal of the Old Post Office Building also is its central 
location in the Federal Triangle, its proximity to many Federal 
historic sites and buildings and its several Metro lines, as 
well as a host of restaurants and other amenities that surround 
the location. Its present design as a post office is straight 
out of the 19th Century and makes the building virtually 
unusable for any purpose absent appropriate remodeling to 
maximize return on the building to the Government.
    During decades of underutilization, the GSA has attempted 
to make the space suitable for office space, but the building's 
huge, cavernous, central area and the narrow shelf that 
surrounds the atrium can accommodate only very few small 
agencies. Efforts to introduce amenities have either failed or 
have proven entirely unsatisfactory. In what appeared to be 
desperation to create some benefit from the site, GSA built an 
annex to the rear of the building that it hoped would become a 
shopping mall, but this plan also failed.
    The waste and risk posed by the Old Post Office Building 
became even more apparent following a violent altercation and 
killing of a George Washington University student outside the 
Old Post Office Building in May 2005. This killing followed an 
event in which the GSA rented the facility to gain revenue from 
the building. Only after this embarrassment did the OMB, which 
has been a principal impediment to the redevelopment of the 
building, allow GSA to proceed. We were pleased when the GSA 
issued a 2005 Request for Expression of Interest to which it 
received a number of indications of interest from the private 
sector. Yet, for no good or sufficient reason that it has been 
able or allowed to articulate, GSA has never proceeded to the 
next step. It is holding all of these indications of interest 
from the private sector.
    Consequently, I have introduced a bill to assure the full 
use of the Old Post Office for the benefit of our Federal 
taxpayers and for this city. A delay in making use of this 
centrally located, historic treasure has made it one of the 
Government's most wasted assets and a public embarrassment. It 
is bad enough that the Government gets no revenue from 
beneficial use of the space. It is worse that the building has 
drained huge sums from the Federal Building Fund. The 
building's 2007 rent payments of $5.4 million paled in 
comparison to the total expenses for the property of $11.9 
million, resulting in a loss of $6.1 million in 2007.
    To understand the financial burden, the drain on the 
Federal Government, one has only to multiply this figure--this 
$11 million-plus figure--over the many decades during which the 
Government has taken millions upon millions of dollars in 
losses on the Old Post Office; add this amount to millions of 
dollars in renovations and additions that eventually proved 
useless in making the building a viable source of revenue, and 
we begin to get a clear picture of the need to move this 
project forward quickly.
    The highly regarded GSA renovation of the nearby Tariff 
Building demonstrates the GSA record of making excellent use of 
otherwise antiquated and virtually useless Federal structures. 
The process that preserved the Tariff Building, while returning 
it to productive use as the Hotel Monaco with revenue for the 
Government, is the most recent model for the Old Post Office. 
Only the Federal Government has the resources and capability to 
properly renovate such an historic property, but the return on 
the investment is virtually assured. The redevelopment of the 
Tariff Building shows what can be achieved when the Federal 
Government works with the private sector to produce a site that 
brings a return to the Government, provides a safe and 
necessary facility for the Government or for the city and 
preserves an historic treasure all at the same time. The 
historic Old Post Office Building, centrally located in the 
heart of the Nation's capital on Pennsylvania Avenue, provides 
an opportunity to replicate the return to the Government we 
have seen from Hotel Monaco and from other historic structures.
    The policy of the Federal Government has long been and 
always will be to preserve and to make usable historic 
properties rather than sell them for revenue. Preservation and 
use are particularly important for this property, where not 
only the historic status of the Old Post Office but security 
concerns inherent in its location mean that the property must 
be maintained by the Federal Government. In today's climate of 
budget deficits, it is imperative that the Federal Government 
maximize the use of the assets it has available. The Old Post 
Office is an underperforming asset and is a drain on revenue 
while its full use, its central location and its unique, 
historic value could provide a handsome financial return to the 
Government.
    Barring unforeseen matters in today's testimony, I intend 
to move this bill to the Full Committee and to the floor at the 
earliest time available.
    The Subcommittee received today's testimony an hour before 
the hearing. Although informed of the applicable procedures by 
Subcommittee staff, GSA staff persisted in its adherence to 
incorrect procedures. GSA is all too familiar with the 
underlying issues and had ample notice and time to prepare for 
this hearing. The Subcommittee is always ready to allow for 
exigencies, but this delay was unnecessary and unacceptable and 
should not be repeated. The Subcommittee appreciates receiving 
today's testimony from Commissioner Winstead about the 
development potential of the Old Post Office.
    I am pleased to have remarks from the Ranking Member, Mr. 
Graves.
    Mr. Graves. Thank you, Madam Chair, for holding this 
hearing. I want to very much thank Public Building Commissioner 
David Winstead for testifying today and for being here. I look 
forward to hearing your testimony today on the future plans of 
the Old Post Office.
    Despite its central location here in the Nation's capital, 
the Old Post Office Building is an underutilized Federal asset 
and is a financial drain on the Federal Building Fund. The 
costs of operating and maintaining this aging and inefficient 
historic building are quite high. For example, GSA received 
$5.4 million in 2007 for rent payments from Federal tenants 
occupying the building. However, the total expenses for the 
property were $11.9 million, resulting in a net loss to the 
Federal Building Fund of $6.5 million.
    Our Subcommittee Chairman, Ms. Norton, has introduced a 
bill to authorize GSA to enter into a public-private 
partnership to leverage private funding to redevelop this 
historic landmark. Moving this building from a liability to an 
asset on the Federal Building Fund's balance sheet should 
benefit the American taxpayer. As part of the redevelopment of 
this property, the current tenants must be relocated. These 
include the National Endowment for the Arts, the National 
Endowment for the Humanities, the Advisory Council on Historic 
Preservation, and the Department of Education. This move will 
be necessary in order to accomplish the economic turnaround of 
this property.
    Again, I want to thank Public Building Commissioner 
Winstead for being here today, and I look forward to hearing 
your testimony and to learning more about this project.
    Thanks, Madam Chair.
    Ms. Norton. Thank you, Mr. Graves.
    We are pleased to have been joined by the Ranking Member of 
the Full Committee, Mr. Mica.
    Mr. Mica, do you have any remarks you would like to make at 
this time?
    Mr. Mica. Well, first of all, I thank you for recognizing 
me. Secondly, I came down to compliment Ms. Norton and our 
Ranking Member for conducting this hearing. I think we have 
discussed the issue of having public assets' values not 
realized. In fact, to put it humorously, I am tired of our 
sitting on our assets and not realizing their full potential.
    Your remarks, Madam Chairman and Mr. Graves, are right on 
target. This is a valuable public asset. Let me say, I am 
ashamed that with a Republican administration and with a 
Republican Congress that we allowed this to continue, and I am 
glad to see that you are taking this forward. I support your 
legislative efforts. We have talked about other public 
buildings and other GSA properties that have not fully realized 
their potential. I will do anything I can to assist you.
    I am pleased to see our GSA Public Buildings administrator, 
Mr. Winstead, here. I hope he understands that we will back 
GSA. If it takes going to OMB, the administration or whatever 
it takes, I am committed, and I will use any resources we have 
to work with the administration to make this successful. You 
cited great examples--the Monaco building and others--where 
there has been success. Our public trust deserves no less than 
fully utilizing the potential of these assets.
    I will work with you. We will do anything we can, Ms. 
Norton. Again, I am not going to be able to stay, but I came 
down just to say thank you for moving this forward. I want to 
hear the results of this hearing and what comes forward and 
what the delays are or anything that is identified by the 
Public Building Commissioner that we need to work on, and we 
will do that together.
    So thank you again.
    Ms. Norton. I want to thank the Ranking Member of the Full 
Committee for taking the time to come here. He has been Chair 
of this Subcommittee. He knows whereof he speaks. While he 
speaks about how, when we were in the minority that the 
majority did not move it, I must say that the majority at that 
time was every bit as adamant as I am today.
    Mr. Mica. We did not get the job done.
    Ms. Norton. The two or three Chairs that have pressed this 
issue have given GSA every opportunity, but the bipartisan note 
that you and Mr. Graves have struck should leave no doubt with 
Mr. Winstead and with the GSA that there is no way to stop our 
moving. We are not going to continue to pay for a building that 
can be paying us, fellas. That is the bottom line here. The 
full support you see here is important.
    If I may say so to the Ranking Member of the Full Committee 
and of the Subcommittee, they know how unusual it is for us to 
have to put in a bill to move a project forward. We just do not 
do that. We have never had to do that with GSA. Now, we do not 
know where the trouble is. If the trouble is at OMB, really, 
shame on them because they are the keeper of the dollars. If 
anyone were under the illusion that this Subcommittee would 
ever sell a historic property, it was surely an illusion 
because, when I came here and sitting for 12 years in the 
minority, the Subcommittee over and over again has made it 
clear that all over the country historic properties are 
precious and that these properties will never be sold. Knowing 
that, hearing that from the minority, hearing that from the 
majority, the only thing we could think to do was to put in a 
bill with bipartisan support. We have done that, and you have 
heard from both sides of the aisle. I am pleased to receive 
your testimony and to thank the Ranking Member.
    Mr. Mica. Will the gentlelady yield for just a second.
    Also, this is not just any building or asset that we own. 
This is in our Nation's capital. It is in a very strategic 
location, and it is an important asset for us to retain. This 
is also an economic development project that will create jobs, 
that will give people opportunity, that will get a return for 
the taxpayer. It is located, again, in the heart of our 
Nation's capital, so there is even more urgency to this, not 
only because of its strategic site but also because of the need 
to stimulate the economy. This is a project that can do that.
    So, again, I compliment you. Whatever it takes, we will 
work together to get this done. I know Mr. Oberstar will join 
me in that effort.
    Ms. Norton. Thank you again, Mr. Mica.
    Indeed, Mr. Mica indicates the location. Here we have an 
historic slum--let's call it what it is--within a stone's throw 
from the White House. People look at the building. It is a 
curiosity. It is gorgeous. There is no landmark like it in 
Washington. They pass by it. If they go into it, they are truly 
bewildered that such an asset could remain in this condition, 
and it is not going to remain in this condition past this 
session of Congress.
    I had hoped that by simply introducing a bill, unheard of 
in my term in the Congress, which is 17 years--unheard of--that 
that would be all it took to move the bill forward, and here we 
are having a hearing. I hope this proves an embarrassment to 
the GSA that we are having to tell the world that the GSA has 
been sitting on an historic property that can bring in money 
but is spending taxpayers' money, and we do not mean to keep it 
to ourselves any longer.
    Mr. Winstead, we are glad to hear from you at this time.

    TESTIMONY OF HON. DAVID WINSTEAD, COMMISSIONER, PUBLIC 
       BUILDINGS SERVICE, GENERAL SERVICES ADMINISTRATION

    Mr. Winstead. Chairwoman Norton, Ranking Member Graves, 
Ranking Member Mica, I am pleased to be here. I am David 
Winstead, Commissioner of the Public Buildings Service, 
appearing before the Subcommittee to talk about the future of 
the historic Old Post Office on Pennsylvania Avenue in 
Washington, DC.
    I would like to start out by sort of reviewing this asset. 
I know you all have expressed a great deal of concern about the 
current state of it and how we are managing it through the 
National Capital Region and what we intend to do with it. I 
would mention, though, that, despite your concerns and despite 
the issues raised by you all, I think we have made an awful lot 
of progress overall on the inventory on a lot of historic 
buildings and in the management of the Federal assets.
    As you know, over the last 5 years, we have mounted a very 
progressive management of our real estate assets through the 
President's management agenda and through the Federal Real 
Property Council. In fact, we have focused on restructuring 
assets to get rid of those that are underutilized, to do 
private-sector, public-private partnerships under the 
constraints of the scoring rules and under the authorities we 
have. We have actually achieved quite a lot. We have improved 
utilization and have increased vacancies--or occupancies, 
rather--by 1.5 percent over the last 6 years. We have basically 
been operating at 1.6 percent per market. We have reduced 
energy consumption by 8 percent. I did want to mention that we 
just came out with the new portfolio (State of the Portfolio 
FY07 report), which is a document that really sets forth what 
we have been doing with all of the assets in the inventory. I 
will just call it to your attention because I think, overall, 
we have made a great deal of progress in that regard.
    In terms of the Old Post Office, itself, obviously, the 
Chairwoman and Ranking Members have commented on it. It is a 
very old building. It was, obviously, built between 1892 and 
1899. It is a nine-story building with a 315-foot clock tower 
and a glass-enclosed atrium for the public that comes to view 
Washington, D.C., the Mall and the Federal buildings in the 
Triangle. OPO has a total of about 315,000 square feet, plus an 
unoccupied Annex of 64,000 square feet that was, in fact, 
flooded 2 years ago in the floods that took out the IRS 
building behind it.
    The first three floors are occupied by retail activity. 
Federal tenants on the upper floors include the Department of 
Education, the Advisory Council on Historic Preservation, the 
National Endowment for the Arts, the National Endowment for the 
Humanities, and the President's Committee on Arts and 
Humanities.
    I will mention that, despite the conditions that you have 
highlighted on this building, I have had the pleasure in recent 
years of attending an historic preservation conference in the 
facilities of the Advisory Council on Historic Preservation 
where the Nation's historic preservation officers came to the 
Old Post Office to conduct and to look at the building and to 
talk about historic preservation, GSA's efforts as well as 
other Federal agency efforts.
    When the Post Office was completed, it was, in fact, the 
second tallest building in Washington, exceeded only by the 
Washington Monument. It is 28 feet, essentially, taller than 
the Statue of Freedom on the Capitol. It was built entirely by 
steel and iron. Except for a load-bearing tower, the brick 
backing and granite wall are supported only by their weight. 
This is really the first major steel structure that is a self-
supporting building erected in the Washington, D.C. area. The 
most remarkable internal feature, as you all well know, is the 
nine-story light court, topped by an enormous skylight, which 
has a lot of natural light.
    Madam Chairman, I remember being here about a year ago for 
the sustainability hearing. I remember you pulled back the 
curtains in this hearing room to let in natural light, and I 
think the building interior, actually, is very well lit. Also, 
that atrium does, in fact, impede on its efficiency, and I will 
mention about that and about some of the challenges that it has 
presented to both us and to our tenants.
    The Old Post Office Building is the first Federal building 
erected on the avenue between the Capitol and the White House. 
In 1914, the city's post office moved to new quarters. In 1928, 
as a part of the McMillan Commission, the plans for the Federal 
Triangle were delineated, and OPO was slated for demolition, 
and there was a lack of funding in the Federal budget due to 
the Depression. Essentially, there was an effort that went on 
for 36 years to save the OPO.
    In 1964, there were plans to complete the original Federal 
Triangle design for 12th Street, and a proposal was in place to 
demolish the OPO, preserving only the clock tower. There was a 
lot of local support I know you are well aware of through Do 
Not Tear It Down and through other coalitions--the Endowment of 
the Arts--that saved the building.
    In 1971, there were congressional hearings that did explore 
the future as well as looking at executive orders to protect 
Federal structures. In 1973, as you noted, Madam Chairman, it 
was listed on the National Register of Historic Places. When 
the Pennsylvania Avenue Development Corporation got formed in 
1974, there was a promise it would be saved. Given its history 
and importance in security conditions--and I underline that--
there are enormous security installations and concerns in the 
tower, itself. It was continued. It has always been viewed that 
this property is a necessary, important part, an historical 
part of the Federal inventory and that it is important for the 
American people. In 1976, Congress passed the Public Buildings 
Cooperative Use Act, permitting space used in Federal buildings 
to be leased out for cultural, recreational and educational 
purposes. This Act was passed, in part, to provide additional 
uses for the OPO.
    In 1982, we were awarded a master lease for a portion of 
the OPO known as the "Pavilion." The building houses Federal 
offices as you know. Above the Pavilion floor, currently, we 
have about 200,000 square feet of tenants. I mentioned them 
earlier. In the Federal office space portion, there is about a 
3 percent vacancy. Overall in the building, it is less than a 
25 percent vacancy. The initial retail concept for the 
Pavilion, unfortunately, was not successful. The master lease 
was amended in 1989 to enable the construction of a new retail 
facility, the Annex, to be built in the courtyard of 
approximately 64,000 square feet.
    In March of 1992, the annex was constructed, and there were 
Federal funds totaling $1.7 million and private funds of $5.5 
million invested. The development of the OPO and the annex was 
not, fortunately, financially successful. I am sure part of the 
reason was the real estate market in 1992 was quite a bit 
distinguishable from the Washington market today, and it 
probably played into that. There are several reasons, in 
addition, for the failure back in the early 1990s. There was 
poor tenant satisfaction, and there was a constant retail 
turnover in the space that is mixed use and that has retail and 
food service. There was poor financial performance in the 
retail element due to market conditions, as I mentioned 
earlier. There was no clear destination/identity associated. I 
know that has changed quite a bit in terms of what has happened 
in PADC's efforts in the Federal Triangle.
    Now MCP sees vision for the Federal Triangle and for 
attractions off of the Mall. An investment company acquired the 
leasehold interest shortly thereafter, $8.5 million in 
foreclosure. The company hired a property management/leasing 
consultant to operate the facility in the interim. In 1998, 
following unsuccessful attempts to restructure the lease, GSA 
began to look at the entire building as a unified approach, 
utilizing a competitive process and a prudent approach to 
reposition the building.
    In 2001, GSA acquired the leasehold interest for $7.1 
million. As a result, the annex as well as tenant improvements 
in the lease portion of OPO are now unencumbered by any long-
term lease, which financially and from a standpoint of 
ownership in how we proceed is a very positive event. In June 
of 2002, GSA began a process of tapping the expertise of the 
private sector in terms of providing guidance on the 
possibility of the redevelopment of the OPO. GSA issued an 
outline, a request for qualifications--an RFQ--to elicit public 
comment and to established a Web site for this purpose.
    In 2005, GSA realized that, due to the rapidly changing 
real estate market, it needed new market information. We once 
again went out in the market with an RFI for the redevelopment 
of the OPO, and we expressed in that RFI that the Government 
reserved the right at any time to terminate the process if we 
concluded that the redevelopment of the property was not in the 
Government's best interest.
    I will state and this Committee should be aware of the fact 
that there were some 20 responses to that RFI issued in 2005. A 
majority of them came from groups with, quite frankly, 
significant development expertise, particularly in adaptive-
reuse and in mixed-use development. Most respondents visualized 
a mixed-use type of project involving a luxury hotel, 
residential units, related units such as restaurants, meeting 
places, function spaces, and spas, but other concepts included 
the possibility of incorporating museums. We have had a number 
of expressions of interest from museums in the use of some 
space in the OPO. There was also a proposal for a live 
television studio because of the aesthetics and the 
architectural setting of the Old Post Office.
    After reviewing the responses to the RFI, GSA has been 
working to evaluate and to determine how best to proceed on 
this building. It is a very historic building. Obviously, you 
have mentioned that, Madam Chairman and Ranking Minority 
Member. It is very close to the White House. It could be in our 
view as well as in your view and in this Committee's view 
better utilized, and we need to do that. We need to move 
forward on that.
    The Federal cultural agencies currently housed in the OPO, 
I would mention that this Committee should be aware, do have a 
great appreciation for the building value as a symbol of the 
architectural destiny and historic preservation. As I 
mentioned, I have attended historic preservation conferences 
held by the Advisory Council for Historic Preservation, and 
there are great expressions of interest in continued tenancy of 
NEA. Ultimately, the building's location is too important not 
to have optimum use, and we have been evaluating, and we will 
continue to evaluate. This Committee's interest is taken under 
full consideration, and we will be very responsive to what I 
have heard here today.
    I will tell you that, nationwide, we continue to have a 
large draw on our R&A accounts that you all will be hearing in 
a month or so. We do have a substantial backlog of renovation 
needs in our old, historic properties. We have some 268 
national historic landmarks. The Chairwoman is well aware of 
our efforts with St. Elizabeth's in modernizing and in 
revitalizing those buildings for use by DHS, but there are 
many, many other properties at 268. Our need in that regard is 
upwards of $7 billion. We anticipate that NCR needs a 
renovation of $2.6 billion.
    We are constantly evaluating options for upgrading existing 
older buildings--historic site, adaptive reuse. Obviously, the 
Old Post Office is one of those assets that requires 
considerable evaluation and considerable reinvestment. At last 
estimated in 2007, it would cost well over $100 million to 
modernize the Old Post Office. It is estimated that if we were 
to invest that in the Old Post Office for the existing Federal 
office need for our 200,000 square foot of users in that 
building, for that same amount of money due to the cost of 
renovation of the Old Post Office and with the space and 
configuration of the open atrium, we could create with that 
same level of investment another building with potentially 40 
percent more space with the same investment dollars.
    So there is indication through our current and recent 
analysis that, with investments in office space use in this 
building, there are options that do have greater return, as I 
said, more space for the same dollar.
    Section 111 of the National Historic Preservation Act 
authorizes Federal agencies to lease space not currently needed 
for Federal use to non-Federal entities. We have used this 
authority to lease space in more than 40 buildings nationwide. 
These leases have ranged from storage rooms at 50 U.N. Plaza in 
San Francisco to an amazing project that, obviously, has had 
much more progress than the Old Post Office, and that is in 
Boston, Massachusetts where we recently outleased the entire 
McCormack Post Office and courthouse building to the State 
courts of the State of Massachusetts. Now they have moved back 
out. We are now renovating that building for office space needs 
of agencies like the EPA.
    So this section 111 is a very viable tool, and we have seen 
evidence in Boston. Obviously, Hotel Monaco is another example 
of that that enables us to work in partnership with the private 
sector to preserve both the historic significance and security 
concerns that we have, particularly of the OPO.
    As I mentioned earlier, the Public Buildings Cooperative 
Use Act provides and permits a portion of the space to be used 
for these mixed uses of purpose. Section 111 requires that, if 
we outlease under that, revenues coming back have to go back 
into historic buildings, of which we have plenty--268 
nationwide--that we can reinvest those proceeds in.
    So, in conclusion, Madam Chair, I would like to reiterate 
my concern I have heard here today from you and from both the 
Ranking Member of the Subcommittee and from the Ranking Member 
of the Full Committee over the length of time it has taken us 
to evaluate this, to look at these options, to test the market, 
and to come to the conclusion that adaptive reuse is a major 
opportunity that we should look at.
    I will tell you that I have had discussions with 
Administrator Doan of our agency. As you, Madam Chairman, 
stated in your comments, it is not her interest that this be 
sold out of the Federal inventory. So we are looking at a way 
to both retain it because of its significance in the Federal 
Triangle and also to get greater return. I am well aware of 
Bart Bush, who is our NCR Assistant Regional Administrator, is 
here today with me for any particular questions that might come 
up as well as Tony Costa, my Deputy Commissioner, who was the 
head of NCR for 7 or 8 years and who was actually there when a 
lot of these issues that I have mentioned had come up. So he is 
also available. I would be happy to welcome him to come up here 
with me if that is okay with the Committee.
    In conclusion, I would like to reiterate that I am very 
concerned about what I have heard here today. I also apologize 
for the tardiness in the submittal of my statement. We will 
make sure that that will not happen in the future. I look 
forward to not only your initiative here and to the legislation 
but also in continuing to work with this Committee in trying to 
move this project forward.
    I will tell you that--and Bart Bush can give you evidence--
I have heard directly from the current tenants not on full 
utilization and not on the highest and best use but that they 
do love this facility and that they do currently have a lot of 
activity and competent use of this space.
    So I would like to conclude my comments, and I will provide 
today or at any time following up to this hearing all possible 
data about this analysis that I have mentioned that we have 
done. What we are doing currently is reevaluating those and are 
trying to reach a decision about how to proceed on the highest 
and best use of the Old Post Office.
    Madam Chair, I will stop at this point. I might ask, with 
your concurrence and with that of counsel's, if Tony Costa 
could come up here just in case there are some historic 
questions and if that would be all right.
    Ms. Norton. What was your last comment?
    Mr. Winstead. I apologize, Madam Chair. I would like, if I 
could, to have Tony Costa, who is former ARA.
    Ms. Norton. He is welcome to the table.
    Mr. Winstead. Thank you, Madam Chair.
    Ms. Norton. He has got a lot to answer for.
    Mr. Winstead. Tony, do you want to come on up?
    Thank you.
    Ms. Norton. Let me just read from your testimony to begin 
with.
    First, let me ask whether you are aware or whether Mr. 
Costa is aware of what the Ranking Member and I have said about 
this being under advisement, this building, in the sense that 
Congress has been pressing for its renovation and for its 
beneficial use for upwards of 8 to 10 years.
    Is that understood?
    Mr. Winstead. Yes, ma'am, I fully understand that.
    Ms. Norton. Can we agree that in 2005--3 years ago--that 
you, indeed, did come forward after the murder in front of the 
building and put out an RFI? Is that not the case?
    Mr. Winstead. Yes, ma'am.
    Ms. Norton. Then I would like you to explain these 
sentences in your testimony.
    After reviewing responses to the RFI--this is on page 4--
GSA has been working to evaluate and determine what the best 
course of action would be for this building. This very historic 
building in close proximity to the White House could be better 
utilized, but we need to do it right. The Federal cultural 
agencies currently housed in the OPO appreciate the building's 
value as a symbol of artistic destination. Ultimately, the 
building and its location are too important to rush to a 
decision on what is the best use of the OPO in the future. We 
are looking at all of the options.
    Now, the rush would be between now and 2005, not to mention 
10 years ago when Congress, on a bipartisan basis, had been 
pressing. Could you explain to me, with almost 3 years of an 
RFI, leaving the private sector that has to invest money in 
order to respond to the RFI, whether that is fair to them or to 
us and why? Three years is not enough to have evaluated the 
option that you, yourself, indicated was the best option, which 
was to put this matter out for RFI.
    Why is 3 years, not to mention the time before, not enough 
time to evaluate the proposals you have received?
    Mr. Winstead. Well, Madam Chair----
    Ms. Norton. What more needs to be done?
    Mr. Winstead. Madam Chair, as you know, we have highlighted 
that comment. We, obviously, did have through RFI a great deal 
of response. I have a copy of it if the Committee--I am sure 
the Committee has it.
    Ms. Norton. Has anybody been looking at those responses?
    Mr. Winstead. Yes, ma'am, we have been.
    Ms. Norton. Would you explain to the Committee what the 
complication is. This Committee is aware of the kind of time 
and of the amount of time it usually takes for you to proceed. 
It takes too long even in the ordinary course. It normally does 
not take this long. Why has this taken longer?
    Are you looking at options beyond those in the RFI which 
you, yourself, asked for?
    Mr. Winstead. Madam Chair, this actually came a little 
before I got on board, but I will tell you----
    Ms. Norton. Well, that is why you have Mr. Costa at the 
table. I want an answer.
    Mr. Winstead. I know. Let me state what we have been doing. 
We have been engaging both Bart Bush and his staff, as well as 
us. In looking at the input from the market, I will tell you 
that it is not cheap for developers and partners to put 
together proposals of this nature, but they have been 
preserved, and we do have the currency of their ideas. The 
market has changed in the last 2-1/2 years. I will admit to 
that. I do think that there is still a high level of interest, 
and the evaluation that has been going on is looking at the 
proposals that came back from the market as well as the 
economic viability of those over the long course of a lease 
under either their own authority or under section 111. There 
has been dialogue both internally at PBS and with the Federal 
Building Fund portfolio people who are involved in this. There 
have been discussions at the NCR. There have been discussions 
with Mr. Costa. There have been discussions with the 
Administration. There have been discussions with OMB.
    Ms. Norton. How much longer would it take to complete the 
evaluation and to come forward with your decision?
    Mr. Winstead. Well, I do believe that we need, obviously, 
to make sure that we get----
    Ms. Norton. How much longer? Please answer the question.
    Mr. Winstead. I think there are two things, Madam Chair.
    Ms. Norton. I am not asking for the process. I am asking a 
question that goes to time, and I am asking that question on 
behalf of the entire Committee and Subcommittee.
    Given the fact that we have had 3 years with an RFI hanging 
out there----
    Mr. Winstead. Right.
    Ms. Norton. --its having been placed, apparently, by 
developers from around the country who have invested real 
dollars in order to meet your RFI and in as much as the 
Subcommittee has expressed its impatience with the need to pour 
money into this building, my question to you is not what will 
the process entail. That is inside baseball.
    Mr. Winstead. Right.
    Ms. Norton. My question to you is: When will you be 
prepared to, in fact, indicate your decision from the RFIs that 
have been submitted to you?
    Mr. Winstead. We are currently evaluating them within a 
very short period of time. That does involve also, as you know, 
a submittal to OMB and Congress of any relocation of existing 
tenant leases.
    Ms. Norton. All right.
    Mr. Winstead. That is--that is----
    Ms. Norton. No. If you bring these things up, I am going to 
question you on these things.
    There is now an excess of office space in the District of 
Columbia. There is also a credit crunch, and people are dying 
to get this space rented. Just to name two that come to mind 
out of your portfolio, out of this very Committee, NoMA on M 
Street. So let me ask you in light of the fact that you have 
raised it:
    Do you think that there would be any difficulty in 
relocating the small agencies that are now in the Old Post 
Office Building?
    Mr. Winstead. Madam Chair, I do not. I spoke yesterday at 
the----
    Ms. Norton. Thank you. Let me go to the Ranking Member.
    Mr. Graves. Thank you, Madam Chair.
    I have got several questions, Mr. Winstead. If we could, 
let's just move through them really quickly and get some 
answers.
    I do want to point out that you mentioned in your statement 
the OMB scoring rules that are a real problem. The fact is we 
do waste billions of dollars in overtime because OMB and CBO 
scoring forces GSA to rely on short-term operating leases. I 
would just like to offer to you that I would like to help with 
that. It is a huge problem, and I would like to do anything I 
can to help you all move through that process.
    Mr. Winstead. Thank you, Congressman.
    Mr. Graves. Real quickly, a couple of things.
    What Federal agencies right now are tenants in the Old Post 
Office Building?
    Mr. Winstead. Congressman, the dominant ones are the 
National Endowment for the Arts--the NEA--which occupies 85,000 
square feet, the National Endowment of Humanities that occupies 
84,000 square feet, the Department of Education that occupies 
16,000 square feet, the Department of Interior that occupies 
20,000 square feet. Part of that interior space is utilized, as 
I mentioned, by the Advisory Council on Historic Preservation, 
which is the advisory group to all Federal agencies on how to 
manage and to preserve Federal resources. So it is sort of 
ironic that they are in this wonderful building and that they 
love it as a result.
    Mr. Graves. How much do they currently pay to rent?
    Mr. Winstead. Congressman, they pay about $24 a square foot 
in rent, which is obviously way below the market. The market in 
that area or NoMA, you know, particularly in that area, would 
be around $31 to $49 a square foot, so it is substantially 
below market. Obviously, those tenant agencies like that space 
because of that rent.
    Mr. Graves. They are obviously going to need to be 
relocated if the building is redeveloped, I am going to assume. 
Where would they most likely be relocated--in leased space or 
in Government-owned space--do you know?
    Mr. Winstead. Congressman, as you know, by policy, we 
always like to look at the Government space in the first order 
before we go to private market. As the Chairwoman mentioned, 
there are lots of options in Washington, D.C. The high 
probability would be that that amount of space would probably 
be delivered by the private sector.
    Mr. Graves. Will their rent payments increase after they 
have relocated? You kind of already answered that.
    Mr. Winstead. Well, I just mentioned that comparable space 
in some of the newer buildings in downtown as well as at NoMA 
and at Foggy Bottom are in the $31 to $49 range, and some are 
above that.
    Mr. Graves. Would the tenants--and you kind of already 
answered this, too. Would the tenants want to move?
    Mr. Winstead. I know several tenants--Tony, you wanted to 
comment on this. I know some of the tenants have contacted me. 
The Advisory Council has. I know NEA has expressed reluctance 
to move out of the Old Post Office.
    Tony, do you have something to add on that?
    Mr. Costa. Good afternoon.
    I think the tenants love the location, but everyone is 
aware that the building does require renovation. The location 
is great, though.
    Mr. Graves. Let me ask you this: Does GSA need to seek 
approval from anyone before moving forward with relocating 
those current Federal tenants?
    Mr. Winstead. The only thing, as I mentioned earlier, 
Congressman, is obviously the prospectus approval for 
relocating those agencies. Obviously, we deal with OMB and with 
you all in that regard and with the administration's 
concurrence, but that is what would be needed.
    Mr. Graves. Has that been done or started?
    Mr. Winstead. Actually, some prospectuses were provided, 
but they are now 3 or 4 years old. They would have to be 
updated based on those agencies' needs, and we are looking at 
that. Bart Bush is in charge of that process, and he is looking 
at that.
    Mr. Graves. Okay. Thank you very much.
    Mr. Winstead. Thank you, Congressman.
    Ms. Norton. Just let me say for the record, if there were a 
scoring problem, that is the first thing OMB would have told 
you to put in your testimony. The reason there is not a scoring 
problem, of course, is that we are not talking about the use of 
Federal money. We are talking about a public-private 
partnership. We are talking about the same kind of public-
private partnership where most of the money gets dumped into a 
building, yes, with some amount of money from the Government 
but certainly not $100 million. It gets dumped into the 
building from a private developer who does so because he has 
got the right to develop on a prime spot on Pennsylvania 
Avenue, and he has got the gold standard--a Federal contract. 
Is that not the case?
    Mr. Winstead. Yes, ma'am.
    Ms. Norton. We are not talking about the Federal 
Government's spending $100 million of Federal money, are we?
    Mr. Winstead. If we renovated it as a Federal office 
building----
    Ms. Norton. But we have never talked about renovating. You 
did not put out an RFI for the Federal Government to renovate 
this building, did you? You put out a public-private 
partnership RFI, did you not?
    Mr. Winstead. That is correct. It also offered flexibility 
in the RFI. We were looking for all sorts of ideas. We 
actually--although the dominant response looked at both the OPO 
and the annex as a development project overall, there were 
several people who came in just looking at one and not the 
other. So there were a number of different variations of 
expressions of interest and viability. You know, the rent 
ranges that were proposed were enormous, but we do have those 
facts, Madam Chair, as you mentioned, and I am concerned that 
they are several years out of date and that we need to 
obviously go back out and follow up on this.
    Ms. Norton. Oh. You are suggesting that you need a new RFI, 
are you now? Is that what you are suggesting?
    Mr. Winstead. No. No. No, ma'am.
    Ms. Norton. All right. You testified, did you not, that the 
current tenants were paying $24 per square foot?
    Mr. Winstead. I believe that is correct.
    Ms. Norton. Now, on Pennsylvania Avenue, this is a prime 
location. Aren't rents about $45?
    Mr. Winstead. Yes, ma'am. I think they are between $31 
and----
    Ms. Norton.You know, I have got my "cha-ching" running. 
Just add this to what the Government is losing because it has 
got rent here, you know, that is something close to half of 
what somebody could be getting for prime time. I can think of 
no location--if you talked to anybody in the real estate or 
development business and said to them "pick a place to have a 
building in the District of Columbia as the prime spot," I 
doubt that anyone would come up with a better location than 
this location. Location. Location. Location.
    Mr. Winstead. Absolutely. Also, it has a lot of, you know, 
public transit, which is obviously----
    Ms. Norton. Public transit. 12th Street comes right off of 
there. It just has everything.
    Now, just let me, for the record, make clear because we 
have just gone through an exercise where we changed how 
prospectuses will be evaluated. The desire of the tenants are 
not determinative on how the taxpayers' money--are no longer 
determinative, I should say, on where the taxpayers' money will 
be spent for locations in the District of Columbia; is that not 
the case?
    Mr. Winstead. That is correct.
    Ms. Norton. In fact, tenants would all desire to be exactly 
where they are. They have to be crazy to want to move from 
where they are. Yes, it is a broken-down building, but they are 
historic types anyway. They are in the best location in the 
District of Columbia. So why should they want to move? The 
question is: Why should the taxpayers have a tenant who pays 
$24 when they could get $45? I will tell you they could get 
more for this location on Pennsylvania Avenue.
    Mr. Winstead. As you know, we have had some great successes 
recently in the leasing market and along NoMA and in other 
areas. So there is an awful lot of interest.
    Ms. Norton. So we do have office space that we, ourselves, 
on this Committee would like to see used rather than in this 
location, which is where most Federal agencies want to be. Most 
of them want to be exactly here. We are trying to say, because 
of the lower costs on M Street, NoMA and such locations as 
that, we are not going to hear where you want to be. We are 
going to hear where, given all of the amenities, the best place 
for the agency is.
    Now, you put some boilerplate language in here, and I 
certainly hope that it will continue to be. You say at the 
bottom of page 3 and going on to page 4 that the GSA expressly 
stated in the RFI that the Government reserves the right at any 
time to terminate the process if it concluded that redeveloping 
the building was not in the Government's best financial 
interest.
    That is boilerplate language, is it not?
    Mr. Winstead. Yes, ma'am.
    Ms. Norton. Have you determined that, quoting you, 
redeveloping the building is not in the Government's best 
interest?
    Mr. Winstead. We have not at this point determined that it 
is not in the Government's best interest.
    Ms. Norton. Is it conceivable that redeveloping the 
building would not be in the Government's best interest?
    Mr. Winstead. I think, with the interest from the market, 
the options that we have looked at are, obviously, current 
tenancy redevelopment or renovation as an office building. I 
think the options are--we have to move forward because of the 
condition of the building.
    Ms. Norton. Do you regard the Monaco Hotel as a precedent 
for developing an historic project of this kind?
    Mr. Winstead. Madam Chair, as you know, I think the Tariff 
Building was a very unique project and a very positive project 
in terms of when to move forward, I guess, in 2002, when it 
reopened its doors. We did use our authority under section 111 
to outlease the building over a period of time. We put about $5 
million into it. My understanding is, as a result of----
    Ms. Norton. Did you say $5 million?
    Mr. Winstead. Yes.
    Ms. Norton. Is that all the Government put into that 
building?
    Mr. Winstead. Yes, ma'am. Is that right, Tony?
    Mr. Costa. Yes.
    Mr. Winstead. I do understand. Although rental payments in 
the earlier years were about $150,000----
    Ms. Norton. What does that contract get you----
    Mr. Winstead. I apologize.
    Ms. Norton. --on the Monaco building?
    Mr. Winstead. Last year's revenues were $430,000.
    Ms. Norton. $430,000 annually is what you are getting?
    Mr. Winstead. Madam Chair, it is $180,000 base plus 
$250,000 that we got last year.
    Mr. Costa. It is a complicated revenue agreement, but the 
amount of revenue has gone up over the last 4 years, and it is 
up to $440,000, and we expect it to increase depending on the 
sales in the hotel because the Government does get revenue 
after sales go up beyond a certain point.
    Ms. Norton. You are close to getting your return back 
already, aren't you?
    Mr. Costa. Yes.
    Ms. Norton. And this building was started in 2003?
    Mr. Costa. It opened in 2002.
    Ms. Norton. It opened in 2002. In 6 years, you are already 
close to--you may already have exceeded, but you certainly are 
close to getting what you put in it that allowed you $5 
million. This is a very expensive building. Anyone who has gone 
into this building has seen that every historic part of the 
building has been preserved. I hesitate to ask you--perhaps you 
know--how much it costs to renovate this building. How much 
does it cost? Because it certainly did not cost you.
    Mr. Winstead. No.
    Ms. Norton. So how much did it cost somebody to make this 
old Tariff Building into a state-of-the-art hotel?
    Mr. Winstead. Madam Chair, we did have an estimate for 
upgrading the building to--at least the figure I had was 
between $20 million and $25 million. That was basically, I 
think, the cost back then in 2002.
    Ms. Norton. In 2002 dollars, $25 million it cost somebody 
to renovate a hotel. You put in $5 million. You have already 
gotten or are close to getting your return back in 6 years, and 
then all the rest of it is going to be gravy from there on out. 
Is there any reason to believe that that model could not be 
used on the Old Post Office?
    Mr. Winstead. As to why this would not be used?
    Ms. Norton. Is there any reason to believe that this model 
is not applicable?
    Mr. Winstead. That is one of the options that was 
identified by the RFI, and that is one of the options that is 
on the table.
    Ms. Norton. We do understand we are not talking--so, for 
the record, we are not talking about a substantial investment 
of taxpayer dollars in this building in order to renovate this 
building for some kind of beneficial use. We are talking about 
the investment of private dollars in this building; is that not 
the case?
    Mr. Winstead. That is one of the options.
    Ms. Norton. What is the other option, sir?
    Mr. Winstead. Well, the other options are clearly a 
renovation of the entire building for office use, but as you 
suggested, that would----
    Ms. Norton. By the United States of America?
    Mr. Winstead. That would cost $100 million----
    Ms. Norton. Yes.
    Mr. Winstead. --of Federal money.
    Ms. Norton. Well, we had a hard enough time, Mr. Winstead, 
in getting the money for St. Elizabeth's. The Committee has 
never asked you to find the money. We have never asked the 
administration to put money in its budget. We have always cited 
the Tariff Building, which cost the taxpayers very little. I 
just want the record to be clear. You know, you put in your 
testimony--the reason I am having to do this, Mr. Winstead, is 
that you put $100 million in your testimony. Did you think I 
was going to let that go by? You also put in your testimony 
that there were other buildings around the United States that 
needed renovation.
    Why aren't you doing the same thing in other buildings 
around the United States?
    We are here because we happen to be able to look at this 
building every day because it is right in mainstream D.C., but 
your suggestion that there are other buildings like this only 
makes us suggest why aren't you doing this nationwide.
    Could you provide for this Committee within 30 days a list 
of historic buildings in every State of the Union, owned by the 
GSA, and of their current use and of their ages within 30 days, 
please?
    Mr. Winstead. I would be happy to. I did highlight some of 
those other properties, the Boston property being one, that is 
utilizing section 111, but we will be happy to get that 
together as well as to indicate what the outlease's terms were 
as well as the tenants.
    Ms. Norton. Yes. First of all, we have cited the fact that 
GSA has done this before. Some of these are State leases. We 
are not trying to offload the cost onto anybody who cannot pay 
for it. We are in the middle of a downturn that has everybody 
very fearful. Frankly, if we had done this--and we do not know 
how many of those people who responded to your RFI are still in 
a position to do this. I know this much. There were many, many 
people in 2002 who leaped at the opportunity to submit an RFI, 
so we are already on the tail end of an economy that is going 
down. It is making it harder and harder for the Government to 
do what, in fact, you could have done years ago.
    Let me ask you: What can you tell us about the expressions 
of interest you have received?
    Mr. Winstead. Madam Chair, the RFI did come in and we have 
had substantial----
    Ms. Norton. How many expressions of interest did you have?
    Mr. Winstead. We have had over 20 expressions of interest.
    Ms. Norton. Astounding. When you consider what kind of 
commitment that would mean somebody was willing to make to this 
building because they understand it is a historic building, 
that is an astounding number of responses to the RFI.
    Mr. Winstead. You are correct. And I think anybody looking 
at a historic building with the challenges it has in terms of 
infrastructure and systems, it is much harder to calculate what 
your costs are going to be and what you might encounter. So you 
are correct, it is----
    Ms. Norton. Well, you asked for expressions of interest. So 
I don't accept what you just said at all, because these people 
have looked at the building. An expression of interest means 
this is what we think we would like to do, what can be done to 
the building. This wasn't a government RFP--you know, compete 
to do this. This means I, ABC, am telling you that I think you 
should do this with the building and I, ABC, am willing to put 
up the cash to get almost all of it done. So don't cite for me 
the usual RFP where we are competing a building. This is an 
expression of interest where somebody, without of course now 
saying he is prepared to compete because we have not gotten to 
that point yet, does say, look, this is what I believe should 
be done to the building, which means that if you choose me I 
would be prepared to go forward with doing that. That is a very 
substantial--nobody just throws in an RFI given what it takes 
to prepare a credible RFI for the government without 
calculating exactly what he is saying, what she is saying she 
would be willing herself to put up, since it is her money she 
is talking about, not yours, not the taxpayers' money.
    Go ahead.
    Mr. Winstead. Well, Madam Chair, I think you are correct. I 
didn't mean to say--I think the sophistication of the 
respondents was quite high. Ten of them had done projects and 
close to a billion dollars. They were very sophisticated 
developers. So you are correct, they knew what they were 
looking at, they knew what the potential was, and they knew 
what they were getting into. So you are correct.
    Ms. Norton. Given the fact that--given what you have just 
said, do you believe that--well, first of all, let me quote to 
you from the part of my testimony that was most painful for me 
to write. Here it is. The part of my testimony that was most 
painful for me was this part.
    The building's 2007 rent payments of $5.4 million paled in 
comparison with the total expenses for the property of 11.9, 
resulting in a loss of 6.1 million in 2007. Then I asked that 
this figure be multiplied by the decades during which the 
government has taken money from the building fund in order to 
make up for the losses from rents and to add to that the 
millions of dollars in renovations and additions that have 
proved useless.
    In light of this loss to the government on a building that 
could, given the tariff building perhaps within 5 or 6 years 
bring us some revenue, is there any reason to believe that the 
next step after the RFI could not be completed within the next 
2 months?
    Mr. Winstead. Madam Chair, we obviously will focus on 
getting this--getting----
    Ms. Norton. Technically would that be possible?
    Mr. Winstead. I think technically the decision is made that 
technically----
    Ms. Norton. No. If we have to--we are going to carry this 
forward. So if you need help, you are going to get it.
    Mr. Winstead. Within that period.
    Ms. Norton. You can either do it before or you can do it 
after. But this is going to be done. It would be a real mark on 
the GSA if you had to do it that way. But I intend to carry 
this, as I said in my opening statement, straight to the first 
markup at Full Committee. Would you----
    Mr. Winstead. Madam Chair, just one comment. I know you 
have the figures in front of you. But the fund for operation 
differential, it has unfortunately in the last 2 years been 
significantly more. In fiscal year 2003 it was about a $700,000 
loss; In 2004, 200,000. It has increased because of the 
security costs we have seen in the last 2 years. The uniqueness 
of this structure for office use is being open on weekends and 
the added burden and cost ofthat----
    Ms. Norton. Why was it open on weekends?
    Mr. Winstead. Because of obviously the retail and the other 
uses that are in the building.
    Ms. Norton. And you were renting this building for other 
uses? You have been renting this building for other uses?
    Mr. Winstead. No, no, no. The retail and food service 
functions in the building, and I do believe that occasionally 
we have functions in the building on the weekend as well. So 
there are----
    Ms. Norton. Do you mean for that little food court down 
there you have been keeping the building open?
    Mr. Winstead. Well, the food court and the other services. 
There are shops there and there are also space that has been 
rented for events on the weekend.
    Ms. Norton. $5.4 million worth of rent? I guess you are 
pretty desperate. I guess you have got to go for every penny 
because it reduces at least somewhat what you have to invest to 
make up for the losses. So you really are on a merry-go-round, 
aren't you? You have got to open the building, pay for 
security, all of which will bring you a loss but it will 
perhaps reduce the loss that you bring.
    Mr. Winstead. Your point is made, Madam Chairman.
    Ms. Norton. Now, talk about this--I don't know whether to 
call it a building or this addition or at the end that kind of 
sits aside from the building. It certainly doesn't go with the 
historic structure. Why was such a structure put there as a 
shopping mall? Whatever happened to it? Was it ever open?
    Mr. Winstead. I think I covered in my testimony--and let me 
kind of refer back to it. It was, but the original concept was 
for essentially a festival food court in that annex building 
and unfortunately I think back then the traffic that we were 
getting along Pennsylvania Avenue was not quite at the level 
obviously of the residential redevelopment of downtown. And the 
traffic and tourism--we have much more traffic than we did back 
then. The concept--the lessor at that point tried to switch 
from the concept of destination retail, which unfortunately 
just did not attract enough suitable retail lessees and he went 
bankrupt and that was an unfortunate event as a result of that.
    Ms. Norton. So it has been closed since when?
    Mr. Costa. It actually never was fully occupied. For less--
about a year, 18 months, it was partially occupied and then it 
just closed down.
    Ms. Norton. Would you submit within 30 days the cost of 
that--that I can't criticize there. I can see what you were 
doing, you were trying to get some greater use out of the 
building. But, again, there is always plenty of traffic on 
Pennsylvania Avenue. You have got to have somebody that knows 
how to market those things. And that is, of course, what we are 
seeking in the public/private partnership. So that has been 
just there with no tenant. How about renting--has the space 
been rented other than to the food court and the shops that are 
there on the first floor?
    Mr. Winstead. Madam Chair, I do know during my tenure there 
has not been. That is the last 2-1/2 years. There has not been 
any rental of that space. I don't know whether before that 
there had been.
    Ms. Norton. Well, before that it was rented because that is 
where the killing took place outside after it was rented to 
someone.
    Mr. Winstead. Okay. You are speaking of the atrium, not the 
annex?
    Ms. Norton. No, not the annex.
    Mr. Winstead. Oh, I am sorry.
    Ms. Norton. The annex you say was open for a year and a 
half?
    Mr. Winstead. Right.
    Ms. Norton. But the building itself was rented and we can 
understand why because again with the losses you were getting I 
am sure you were trying to get some revenue from the building. 
Then we had the killing. Has the building been leased to any 
except those who occupy the building in the weekdays for shops, 
for selling things I suppose I should say?
    Mr. Costa. There are kiosks and also events still take 
place. So we are renting out the atrium space even on weekends 
at times.
    Ms. Norton. So give us examples of who you rent to.
    Mr. Winstead. I do know, Madam Chair, they have--as I 
mention, they have conferences. I have attended one in some of 
the conference areas on the first floor, which is right above 
the retail. So there has been an effort to try to get rooms 
into at least----
    Ms. Norton. The Subcommittee does not take the position you 
should not be renting the space. If you were renting the space 
to some kind of rowdy student group, that was different. Would 
you submit to the Subcommittee within 30 days all of those to 
whom the space has been rented since the killing in 2005?
    Mr. Winstead. I would be happy to.
    Ms. Norton. I ask the Ranking Member if he has any further 
questions. I think that I have only a few more questions.
    The largest project that the GSA has handled is about to 
come out of the Congress. And that, of course, is the 
Department of Homeland Security. It really is going to test 
your own mettle to see if you can manage such a project, move 
it, move it quickly, 5 or 6 agencies on one compound. You don't 
usually supervise the building of more than one building and it 
is going to be a number of buildings over a number of years.
    Would you tell me where you are now in the process of 
preparing for St. Elizabeth's? What work has been done and what 
remains to be done for preparation for the Department of 
Homeland Security construction?
    Mr. Winstead. Madam Chairman, we continue at both the NCR 
level and the headquarters to be engaged with DHS and their 
tenant needs. And St. Elizabeth meetings are being held weekly. 
In that regard, as you know, we are planning still at about 4-
1/2 million square feet of office and related space for about 
14,000 employees on the 176-acre campus. The project overall 
will be about a $3 billion project, $2 billion from GSA and 1.4 
billion from DHS. We are still looking at construction 
completion in 2016.
    I will tell you that I personally--Bart Bush has been very 
involved in this, as well as Tony and other members of my 
staff. We are making great progress. We are meeting and we will 
continue to meet at the highest levels of the DHS, as well as 
the project management level.
    We have reached out to the community, thanks to your 
efforts quite frankly. I attended I think a year and a half ago 
a community meeting of the NC up there with you. We continue to 
follow up through our project management team. I have reached 
out to Harriet Tregoning, who is the Director of Planning for 
the District of Columbia at my level. I knew her from years ago 
in Maryland. We have coordinated closely with the city. We 
continue to make substantial progress. I was not party to a 
meeting that was held yesterday, but both Bart and Tony were 
with the top level at DHS. We do have a meeting with Lurita 
Doan, myself, somebody from the Park Service, as well as higher 
levels, I think the Deputy Secretary of DHS, in a couple of 
weeks just to go over everything in terms of the plan moving 
forward, of which we are very optimistic.
    I will tell you a lot of effort has gone into making sure 
that that national landmark like OPO is well managed. There is 
a lot of concern in that regard about density and placement of 
buildings. I personally got involved in that as well as Bart's 
staff and Tony, as well as the historic preservation people at 
the head office, and I do think we are making substantial 
progress. We are understanding DHS's needs. They are committed. 
We have housing plans and we are proceeding. I will tell you 
that I am pleased.
    My information might not be as current as Bart and Tony in 
terms of recent meetings, but I am pleased in the efforts I 
have made with the Dick Moe, who is the head of the National 
Historic Trust and John Nau, who chairs the Advisory Council 
for Historic Preservation, who have both gotten very involved 
in this process to ensure that we can achieve the densities on 
that site that satisfy DHS's housing needs but also are very 
sensitive to the aesthetics, the campus at DHS and new building 
that we will be doing, which will be substantial. We are going 
to reuse a majority of the existing buildings, but there is 
going to be new buildings for obviously Coast Guard quarters 
and DHS headquarters.
    But I am pleased--I don't know whether Tony has a comment 
or two about this, but we will keep this Committee informed on 
any issues that come up going forward.
    Ms. Norton. Well, we have complimented your management of 
historic properties, but you have never seen anything like 
this. That is probably dotted with historic properties 
everywhere. So you are going to be faced with not only building 
new structures but with conforming the structures there to what 
DHS needs, is going to test every bit of expertise that you 
supposedly have.
    Now, by law, the Coast Guard will not, cannot move unless 
the access road is provided and there were to be negotiations 
to make sure that happened with the National Park Service. I 
would like to know the exact status of that, please.
    Mr. Winstead. All right.
    Mr. Costa. We are making good progress.
    Ms. Norton. Exactly what is the status now please? We are 
always making good progress. That is what bureaucrats always--
you know, we are making progress. What is the exact status? You 
should have had this out last year. In fact, we should have had 
it out 3 years ago. So you have had extra time to negotiate the 
access road. And if that part is done, then we won't be looking 
back to say whatever happened to the access road when what you 
should be doing is spending your time on the construction 
itself. So I have got to ask you the exact status, if there are 
difficulties, and you need to tell us what the difficulties 
are, so that we can be helpful if there are difficulties.
    Mr. Costa. We appreciate the support. We have been doing 
engineering studies to actually design exchanges, access around 
the campus. The work with the National Park Service is really 
about going through statutory requirements to assess the impact 
of development along historic roadways. And so I know it is a 
bureaucratic answer, but it is the bureaucracy of the process 
of going through it.
    Ms. Norton. I am not going to burden the hearing with this 
technical discussion. I will ask you to call my office. And you 
and a representative from the Park Service should come so that 
we can understand what that concern would be. The Congress is 
extremely frustrated that the Department of Homeland Security 
is taking so long to go up. I don't want to be faced with the 
notion that it is really an access road problem. And if there 
are things that we need to do, if you would call my scheduler, 
we will get all the relevant actors together.
    What is the state of the environmental cleanup? The 
environmental process has been explained by the community to 
the community. The mayor himself and I, along with Lorita Doan 
were at a press conference informing the community, the parts 
of the community that live closest to St. Elizabeth's. So all 
of that was done more than a year ago. So I want to know, have 
we begun the environmental cleanup? What is the status of the 
environmental cleanup?
    Mr. Costa. The issue that was raised about a year ago near 
the border of the campus, we actually did testing already and 
there really was no extensive cleanup needed. There is cleanup 
in the middle of the campus associated with the old heating 
plant. So there are two separate environmental cleanup issues. 
Again, the cleanup issue related to the neighborhood, we have 
completed all testing and there is no cleanup required.
    Ms. Norton. I know that is very good news for me. I am sure 
others in the city already know it. So what we are really 
saying is that out of an abundance of caution you did in fact 
look at the area that was close to homes, found that no 
environmental cleanup in their yards or in that area was needed 
at all; is that correct?
    Mr. Costa. Yes, we did.
    Ms. Norton. Now, everyone understands what you said about 
the heating plant. This was a city within a city. What is the 
status of the environmental cleanup for inside the property?
    Mr. Costa. Most of that cleanup will occur during 
construction and excavation. So we wouldn't do it twice. So the 
plan will be as we excavate for construction--the basic plan is 
the same that we used for the Southeast Federal Center.
    Ms. Norton. To hear you say that is interesting to me 
because that certainly isn't the way we did it at the Southeast 
Federal Center. At the Southeast Federal Center, we had about 
three tranches, three separate appropriation years. I asked for 
money to clean it up so that by the time you got to the point 
that we did the public/private, the Southeast Center for 
Public/Private Act, cleanup was not an issue.
    Mr. Costa. I should have been clearer, because the 
Southeast Federal Center really had two components. One was 
associated with the request for funding where we managed 
contamination that was frankly running into the Anacostia if we 
didn't do that cleanup. We also have additional cleanup through 
the development of the Southeast Federal Center, which actually 
we are trying to save money by doing it during excavation of 
the process.
    Ms. Norton. I see. Now, who is to pay for the 
infrastructure?
    Mr. Costa. For the Southeast Federal Center----
    Ms. Norton. No, no.
    Mr. Costa. Those are part of our requests.
    Ms. Norton. Those are what?
    Mr. Costa. Those are part of our funding requests we have 
been requesting.
    Ms. Norton. They are part of the funding request for this 
year?
    Mr. Costa. Yes. There is a component for infrastructure.
    Ms. Norton. Thank you very much. This Subcommittee works 
very closely with the GSA. We understand your concerns, but we 
are disappointed in the way this particular project has been 
handled. We stand ready to be helpful to the GSA. We believe 
that you have many experts who know how to do every bit of what 
needs to be done, and all we ask is candor on your part when 
there is a problem.
    We do understand the role of the OMB in all of this. But 
there is the Congress of the United States and we do have 
bipartisan support. So no Federal agency I think can keep us 
losing money off of this--from this project. We intend to move 
forward. We understand the position you have been put in.
    We very much appreciate your testimony. This hearing is 
adjourned.
    [Whereupon, at 3:25 p.m., the Subcommittee was adjourned.]

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