[Senate Report 118-35]
[From the U.S. Government Publishing Office]


                                                   Calendar No. 81                                            

118th Congress}                                           { Report
                                 SENATE
 1st Session  }                                           { 118-35

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

                           SMART LEASING ACT

                               __________

                              R E P O R T

                                 OF THE

                   COMMITTEE ON HOMELAND SECURITY AND

                          GOVERNMENTAL AFFAIRS

                          UNITED STATES SENATE

                              TO ACCOMPANY

                                 S. 211

                   TO AUTHORIZE THE ADMINISTRATOR OF
               GENERAL SERVICES TO ESTABLISH AN ENHANCED
            USE LEASE PILOT PROGRAM, AND FOR OTHER PURPOSES

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


                  May 30, 2023.--Ordered to be printed
                  
                               __________

                                
                    U.S. GOVERNMENT PUBLISHING OFFICE                    
                           WASHINGTON : 2023                    
          
-----------------------------------------------------------------------------------                   
                
        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

                   GARY C. PETERS, Michigan, Chairman
THOMAS R. CARPER, Delaware           RAND PAUL, Kentucky
MAGGIE HASSAN, New Hampshire         RON JOHNSON, Wisconsin
KYRSTEN SINEMA, Arizona              JAMES LANKFORD, Oklahoma
JACKY ROSEN, Nevada                  MITT ROMNEY, Utah
ALEX PADILLA, California             RICK SCOTT, Florida
JON OSSOFF, Georgia                  JOSH HAWLEY, Missouri
RICHARD BLUMENTHAL, Connecticut      ROGER MARSHALL, Kansas

                   David M. Weinberg, Staff Director
                    Zachary I. Schram, Chief Counsel
            Lena C. Chang, Director of Governmental Affairs
              Chelsea A. Davis, Professional Staff Member
           William E. Henderson III, Minority Staff Director
              Christina N. Salazar, Minority Chief Counsel
                  Andrew J. Hopkins, Minority Counsel
                     Laura W. Kilbride, Chief Clerk
                     
                     
                     
                                                   Calendar No. 81                                            

118th Congress}                                           { Report
                                 SENATE
 1st Session  }                                           { 118-35

======================================================================                     
 
                           SMART LEASING ACT

                                _______
                                

                  May 30, 2023.--Ordered to be printed

                                _______
                                

 Mr. Peters, from the Committee on Homeland Security and Governmental 
                    Affairs, submitted the following

                              R E P O R T

                         [To accompany S. 211]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Homeland Security and Governmental 
Affairs, to which was referred the bill (S. 211) to authorize 
the Administrator of General Services to establish an enhanced 
use lease pilot program, and for other purposes, having 
considered the same, reports favorably thereon with an 
amendment in the nature of a substitute and recommends that the 
bill, as amended, do pass.

                                CONTENTS

                                                                   Page
  I. Purpose and Summary..............................................1
 II. Background and Need for the Legislation..........................2
III. Legislative History..............................................3
 IV. Section-by-Section Analysis of the Bill, as Reported.............4
  V. Evaluation of Regulatory Impact..................................5
 VI. Congressional Budget Office Cost Estimate........................5
VII. Changes in Existing Law Made by the Bill, as Reported............8

                         I. PURPOSE AND SUMMARY

    S. 211, the Saving Money and Accelerating Repairs Through 
Leasing Act (SMART Leasing Act), would provide the General 
Services Administration (GSA) the authority to help agencies 
fully realize the potential of their property through an 
enhanced use lease pilot program. Under this program, the GSA 
Administrator may authorize Federal agencies to sublease 
underutilized non-excess real and related personal property. 
This bill is modeled on a National Aeronautics Space 
Administration (NASA) program, which has generated millions of 
dollars in revenue that were used to fund capital projects and 
facilities maintenance.\1\
---------------------------------------------------------------------------
    \1\On November 3, 2021, the Committee approved S. 2793, the SMART 
Leasing Act. That bill is substantially similar to S. 211. Accordingly, 
this committee report is, in many respects, similar to the committee 
report for S. 2793. See S. Rept. 117-147.
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              II. BACKGROUND AND THE NEED FOR LEGISLATION

    While Congress has passed major legislative reforms 
regarding federal property over the last ten years, these 
efforts have not fully accounted for the untapped potential of 
underutilized non-excess property.\2\ For instance, agency 
campuses may have extra space they cannot sell, but which could 
provide an optimal home for capital generating opportunities, 
such as cell towers and solar panels. Some agencies may also 
have excess space and equipment they need part time but would 
otherwise be well-suited to university or private partnerships. 
If agencies are provided the freedom to explore sensible 
projects to more fully utilize their property, they could 
generate revenue for deficit reduction purposes and to fund 
long-needed maintenance, capital revitalization, and 
improvements.\3\
---------------------------------------------------------------------------
    \2\The Federal Assets Sale and Transfer Act of 2016, Pub. L. No. 
114-287 was amended by the Federal Property Management Reform Act of 
2016, Pub. L. No. 114-318.
    \3\Senate Committee on Commerce, Science, and Transportation, 
National Aeronautics and Space Administration Authorization Act of 2019 
(Sept. 8, 2020) (S. Rept. 116-262).
---------------------------------------------------------------------------
    The SMART Leasing Act would provide GSA the authority to 
help agencies fully realize the potential of underutilized non-
excess property through an enhanced use lease pilot program. 
Under this program, the GSA Administrator may authorize Federal 
agencies to sublease underutilized non-excess real property and 
related personal property to any person or entity, including 
another department or agency of the Federal government or an 
entity of a State or local government. The Administrator must 
ensure that all subleases generate revenue at a fair market 
value.
    To guard against any potential abuses, this legislation 
prohibits the GSA Administrator from entering into a lease 
unless the Administrator certifies that the lease will not have 
a negative impact on the mission of GSA or the applicable 
Federal agency. The Administrator may also require terms and 
conditions appropriate to protect the interests of the United 
States. The pilot program has a duration of two years, is 
limited to six leases per year, and each lease can only last up 
to 15 years. The legislation also prohibits leasing to foreign 
entities and political organizations, and prohibits use of the 
leases to conduct lobbying or illicit activities. Entities with 
a federal contract, grant, or award will not be permitted to 
enter into a lease with the awarding federal agency. At the 
conclusion of the pilot, this bill provides GSA the opportunity 
to report on the program's merits and advise on whether the 
program should be extended.
    This legislation was modeled after NASA's enhanced use 
leasing program. For years, NASA has used enhanced use leasing 
to develop public-private partnerships that have made 
productive use of formerly underutilized property. NASA has 
used the rent payments it receives to fund capital projects and 
facilities maintenance. Under this program, NASA has generated 
millions of dollars in revenue.\4\ In fiscal year 2019, NASA's 
enhanced use leasing program generated $10.8 million in 
revenue;\5\ NASA recovered $6.8 million in fiscal year 2018 and 
another $5.4 million in fiscal year 2017.\6\ The 2022 
Consolidated Appropriations Act extended enhanced use leasing 
authority until December 31, 2022, and the bill text noted that 
NASA's use of enhanced use leasing authority contributes to 
reducing the rate of increase of the Agency's overall deferred 
maintenance cost.\7\
---------------------------------------------------------------------------
    \4\Id.
    \5\Consolidated Appropriations Act of 2022, Pub. L. No: 117-103, 
Div. HH, Title II.
    \6\Senate Committee on Commerce, Science, and Transportation, supra 
note 3.
    \7\Consolidated Appropriations Act of 2022, Pub. L. No. 117-103, 
Div. HH, Title II, Sec. 202.
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                        III. LEGISLATIVE HISTORY

    Chairman Gary Peters (D-MI) introduced S. 211, the SMART 
Leasing Act, on February 1, 2023, with original cosponsors 
Senators James Lankford (R-OK), Josh Hawley (R-MO), and Kyrsten 
Sinema (I-AZ). The bill was referred to the Committee on 
Homeland Security and Governmental Affairs.
    The Committee considered S. 211 at a business meeting on 
March 29, 2023. At the business meeting, Chairman Peters 
offered a substitute amendment. The Peters substitute amendment 
requires 50 percent of the revenue generated from the pilot 
program to be sent to the Treasury for the purpose of deficit 
reduction. The remaining 50 percent would continue to fund 
capital revitalization and improvements for agencies. The 
Peters substitute amendment reflects a compromise with Ranking 
Member Paul. The Committee adopted the Peters substitute 
amendment by unanimous consent with Senators Peters, Hassan, 
Sinema, Rosen, Padilla, Ossoff, Blumenthal, Paul, Lankford, 
Romney, Scott, and Hawley present. At the business meeting, 
Senator Johnson offered an amendment to the bill as well as a 
modification to that amendment based on negotiations with the 
Chairman. The Johnson amendment prohibits the GSA Administrator 
from entering into leases under the pilot program with any 
entities that (1) intend to break the law, (2) are classified 
as a political organization, (3) are owned, operated, and 
controlled by a foreign government, or (4) received any federal 
grant, contract, or award from the applicable federal agency 
that is still in the performance period. The Johnson amendment 
also prohibits prospective lessees from using property under 
the lease to carry out lobbying activities. The Committee 
adopted the modification to the Johnson amendment by unanimous 
consent, then adopted the Johnson amendment as modified by 
voice vote with Senators Peters, Hassan, Sinema, Rosen, 
Padilla, Ossoff, Blumenthal, Paul, Lankford, Romney, Scott, and 
Hawley present, and Senator Padilla recorded ``No.'' The bill, 
as amended by the Peters substitute amendment and the Johnson 
amendment as modified, was ordered reported favorably by roll 
call vote of 12 yeas to 0 nays, with Senators Peters, Hassan, 
Sinema, Rosen, Padilla, Ossoff, Blumenthal, Paul, Lankford, 
Romney, Scott, and Hawley voting in the affirmative, and with 
Senators Carper, Johnson, and Marshall voting yea by proxy, for 
the record only.

        IV. SECTION-BY-SECTION ANALYSIS OF THE BILL, AS REPORTED

Section 1. Short title

    This section establishes the short title of the bill as the 
``Saving Money and Accelerating Repairs Through Leasing Act'' 
or the ``SMART Leasing Act.''

Section 2. Enhanced use leasing pilot program

    Subsection (a) defines the terms ``Administrator,'' ``pilot 
program,'' and ``relevant congressional committees.''
    Subsection (b) permits the GSA Administrator to establish 
an enhanced use lease pilot program. Under this program, 
federal agencies may sublease any underutilized non-excess real 
property and related personal property under the jurisdiction 
of the Administrator.
    Subsection (c) requires entities entering into a lease 
under the pilot program are required to provide monetary 
consideration for the lease at fair market value, as determined 
by the Administrator. The Administrator may use the funds 
received for a lease to cover the administrative costs of the 
lease. 50 percent of funds must be deposited in a working 
capital account and remain available until expended for 
maintenance, capital revitalization, and improvements to the 
real and related personal property at the federal agency. The 
other 50 percent of the revenue generated from the pilot 
program must be deposited in the general fund of the Treasury 
for the sole purpose of deficit reduction.
    Subsection (d) provides the Administrator with authority to 
require any terms and conditions in connection with a lease 
under the pilot program the Administrator considers appropriate 
to protect the national interest.
    Subsection (e) clarifies the authority of the Administrator 
to lease properties is in addition to any other authority under 
Federal law.
    Subsection (f) waives the requirements of section 501 of 
the McKinney-Vento Homeless Assistance Act for property leased 
under the pilot program, which would have required federal 
agencies to make excess property available to assist the 
homeless.
    Subsection (g) restricts the Administrator from leasing 
back property under the pilot program during the term of the 
lease or enter into guaranteed service or similar contracts 
with the lessee relating to the property. The Administrator 
also may not enter into a lease under the pilot program unless 
the Administrator certifies that the lease will not have a 
negative impact on GSA's mission or that of the applicable 
Federal agency. It further bars the Administrator from entering 
into more than 6 leases under the pilot program during each 
fiscal year. The Administrator may not enter into a lease under 
the pilot program more than 15 years in duration.
    Subsection (g) additionally prohibits the GSA Administrator 
from entering into a lease under the pilot program with any 
individual or entity that (1) intends to carry out activities 
that are illegal; (2) is classified as a political 
organization; (3) is owned, operated, or controlled by a 
foreign government; or (4) received any federal grant, contract 
or award from the applicable Federal agency that is still in 
the performance period. This section also prohibits a lease 
entered into under the pilot program from being used to carry 
out lobbying activities.
    Subsection (h) requires the GSA Administrator to report to 
relevant Congressional committees on the pilot program. This 
includes annual reporting on the pilot with a description of 
each lease entered into that year, the value of the lease, and 
the availability and use of the funds received. The bill also 
requires the Administrator to submit a final report not later 
than 2 years after the date of enactment of this Act that 
includes a recommendation on whether the pilot program should 
be extended.
    Subsection (i) sunsets the authority to enter into leases 
under the pilot program 2 years after enactment of this Act.

                   V. EVALUATION OF REGULATORY IMPACT

    Pursuant to the requirements of paragraph 11(b) of rule 
XXVI of the Standing Rules of the Senate, the Committee has 
considered the regulatory impact of this bill and determined 
that the bill will have no regulatory impact within the meaning 
of the rules. The Committee agrees with the Congressional 
Budget Office's statement that the bill contains no 
intergovernmental or private-sector mandates as defined in the 
Unfunded Mandates Reform Act (UMRA) and would impose no costs 
on state, local, or tribal governments.

             VI. CONGRESSIONAL BUDGET OFFICE COST ESTIMATE
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    The bill would:
           Authorize the General Services 
        Administration to create a pilot program allowing the 
        agency to enter into enhanced-use leases (EULs) with 
        private parties for underused, nonexcess property
    Estimated budgetary effects would mainly stem from:
           Use of third-party financing to construct or 
        renovate certain federal facilities under EULs
    Areas of significant uncertainty include:
           Estimating the value of investments and the 
        extent of government use of facilities constructed by 
        third parties under EUL agreements
    Bill summary: S. 211 would establish a pilot program under 
which the General Services Administration (GSA) could enter 
into long-term enhanced-use leases (EULs) for certain 
underused, nonexcess federal property. The bill also would 
allow GSA to retain proceeds from each lease to cover the full 
costs of the lease. Half of any remaining proceeds would be 
available to use for maintenance and revitalization of the 
leasing agency's assets, and the remaining amounts would be 
deposited into the general fund of the Treasury. S.211 also 
would require GSA to submit annual progress reports to the 
Congress.
    Estimated Federal cost: The estimated budgetary effect of 
S. 211 is shown in Table 1. The costs of the legislation fall 
within budget function 800 (general government) and other 
budget functions that contain landholding agencies.

                                                     TABLE 1.--ESTIMATED BUDGETARY EFFECTS OF S. 211
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                                                                                     By fiscal year, millions of dollars--
                                                      --------------------------------------------------------------------------------------------------
                                                        2023   2024   2025   2026   2027   2028   2029   2030   2031   2032   2033  2023-2028  2023-2033
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              Increases in Direct Spending
 
Estimated Budget Authority...........................      5     30     25      0      0      0      0      0      0      0      0        60         60
Estimated Outlays....................................      *     15     20     15     10      0      0      0      0      0      0        60         60
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*=between zero and $500,000.
CBO estimates that discretionary costs stemming from the requirement for GSA to prepare annual reports for the Congress would be less than $500,000 over
  the 2023-2028 period.

    Basis of estimate: For this estimate, CBO assumes that the 
bill will be enacted in August 2023.
    Background: The budgetary treatment of transactions 
financed by third parties depends on the extent and nature of 
federal support. In CBO's view, transactions supported entirely 
by private entities would not be recorded in the federal budget 
because the total costs of those activities would be borne by 
nonfederal entities.\1\ Some projects established under EULs, 
however, are effectively governmental and subject to federal 
control, either because of their location on federal land or 
because federal agencies would be the primary or major users of 
the services supported by those facilities. Those transactions 
would be recorded in the federal budget.
---------------------------------------------------------------------------
    \1\See Congressional Budget Office, Third-Party Financing of 
Federal Projects (June 2005), www.cbo.gov/publication/16554.
---------------------------------------------------------------------------
    When a third party recovers at least a portion of its 
investments through contracts with government agencies to use 
specialized facilities, CBO considers such financing to be 
similar to an agency using federal borrowing authority to 
improve physical infrastructure. Because federal funds would be 
used to develop and construct those facilities, CBO believes 
that the full cost of long-term commitments that obligate the 
government to make payments in future years should be recorded 
in the budget as direct spending.\2\
---------------------------------------------------------------------------
    \2\See Congressional Budget Office, How CBO Determines Whether to 
Classify an Activity as Governmental When Estimating Its Budgetary 
Effects (June 2017), www.cbo.gov/publication/52803.
---------------------------------------------------------------------------
    Direct spending: S. 211 would establish a pilot program 
allowing GSA to enter into EULs with private parties to lease 
underused, nonexcess federal property at fair market value. The 
program would direct GSA to collect payments and use those 
proceeds to cover lease-related costs and to fund property 
maintenance and capital improvements. Under the bill, GSA could 
enter into as many as six 15-year EUL agreements annually for 
two years after enactment. Because CBO assumes that enactment 
would be late in fiscal year 2023, we expect that only one EUL 
agreement would be entered into in that year. The bill would 
direct 50 percent of amounts received in excess of lease-
related costs to be made available for spending on maintenance, 
revitalization, and improvements of agency assets; the 
remaining excess amounts would be deposited in the Treasury.
    The Departments of Defense and Veterans Affairs, the 
National Aeronautics and Space Administration, and the National 
Oceanographic and Atmospheric Administration are among the 
federal agencies that currently have some form of EUL 
authority. Using information from a review of relevant 
agreements, CBO expects that the EULs authorized under S. 211 
would allow third parties to, for instance, build new 
facilities or renovate existing ones, establish new energy 
production facilities, or construct facilities for other 
specialized uses.
    CBO cannot predict how the government might use or benefit 
from new projects or the extent to which GSA and other agencies 
it supports would use the new EUL authority. Further, little 
comprehensive information about the value of underused federal 
assets is available.
    Using information about EUL activity under current law and 
the comparatively short 15-year term of the proposed leases, 
CBO expects that the value of facilities constructed or leased 
under the pilot authority would average roughly $5million per 
lease. CBO anticipates that lease payments would be set to 
cover an agency's cost to operate the lease, thus we do not 
estimate that excess amounts would be available to revitalize 
or improve agency assets or to be deposited into the Treasury. 
On that basis, CBO estimates that enacting S. 211 would 
increase direct spending by $60 million over the 2023-2033 
period.
    Spending subject to appropriation: S. 211 would require GSA 
to provide annual reports to the Congress that provide 
information on the types of leases entered into and how funds 
received under the program were used. GSA also would need to 
provide a final report that would include GSA's recommendation 
on whether the pilot program should be continued. CBO estimates 
the costs to prepare those reports would be insignificant.
    Uncertainty: Direct spending under S. 211 could be higher 
or lower than CBO's estimate because of the following sources 
of uncertainty:
           CBO cannot foretell the value of third 
        parties' investments in facilities that would be leased 
        under the pilot program. Generally, investments of 
        higher value would increase the potential for direct 
        spending.
           CBO cannot predict with certainty whether or 
        how the government would use facilities constructed by 
        third parties under EULs. If the government is the 
        primary user of the services provided by a facility, 
        and thus serves as the main source from which a third 
        party would recover its investment, the government's 
        share of indirect financing for and benefits from that 
        project would be higher, resulting in greater direct 
        spending. However, if the federal government makes 
        little or no use of the services provided by a 
        facility, the net effect on direct spending could be 
        much less.
    Pay-As-You-Go considerations: The Statutory Pay-As-You-Go 
Act of 2010 establishes budget-reporting and enforcement 
procedures for legislation affecting direct spending or 
revenues. The net changes in outlays that are subject to those 
pay-as-you-go procedures are shown in Table 1.
    Increase in long-term net direct spending and deficits: 
None.
    Mandates: None.
    Estimate prepared by Federal costs: Matthew Pickford, Kelly 
Durand; Mandates: Andrew Laughlin.
    Estimate reviewed by: Susan Willie, Chief, Natural and 
Physical Resources Cost Estimates Unit; Kathleen FitzGerald, 
Chief, Public and Private Mandates Unit; H. Samuel Papenfuss, 
Deputy Director of Budget Analysis.
    Estimate approved by: Phillip L. Swagel, Director, 
Congressional Budget Office.

       VII. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

    This legislation would make no change in existing law, 
within the meaning of clauses (a) and (b) of subparagraph 12 of 
rule XXVI of the Standing Rules of the Senate, because this 
legislation would not repeal or amend any provision of current 
law.

                                  [all]