National Parks: Significant Progress Made in Preserving the	 
Presidio and Attaining Financial Self-Sufficiency (04-OCT-01,	 
GAO-02-87).							 
								 
On November 12, 1996, legislation created the Presidio Trust--a  
wholly owned government corporation--to manage a large part of	 
the Presidio grounds in a manner consistent with sound principles
of land use planning and management while maintaining the area's 
scenic beauty and historic and natural character. The Trust is	 
responsible for leasing, maintaining, rehabilitating, repairing, 
and improving the property it controls. The Trust must become	 
financially self-sufficient by 2013. GAO found that the Trust has
made significant progress in preserving, protecting, and	 
improving the Presidio. It has launched major efforts to repair  
and upgrade the Presidio's infrastructure and to repair and	 
rehabilitate residential housing and commercial space. So far,	 
the Trust has converted about half of the former military	 
buildings into useable residential and commercial space. The	 
rehabilitation, repair, and leasing of the remaining 300	 
residential units and bout 2.2 million square feet of undeveloped
commercial space is critical to the Trust's efforts to achieve	 
financial self-sufficiency. The trust has also begun several	 
environmental initiatives, including the cleanup of military	 
contamination and the restoration of Mountain Lake--one of the	 
few remaining natural lakes within the San Francisco city limits.
The Trust is also working with the Park Service to revitalize	 
vegetation throughout the Presidio and to replace aging trees in 
the 300-acre forest. The Trust should meet its goal of financial 
self-sufficiency by 2013 according to financial projections	 
prepared by the Trust.						 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-02-87						        
    ACCNO:   A02062						        
  TITLE:     National Parks: Significant Progress Made in Preserving  
the Presidio and Attaining Financial Self-Sufficiency		 
     DATE:   10/04/2001 
  SUBJECT:   Environmental monitoring				 
	     Financial management				 
	     Historic preservation				 
	     Housing						 
	     Land management					 
	     National parks					 
	     Program graduation 				 
	     Strategic planning 				 
	     Golden Gate National Recreation Area		 
	     (CA)						                                                                 
	     National Parks Service/Presidio Trust		 
	     Vegetation Management Plan 			 								 
	     Presidio of San Francisco (CA)			 

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GAO-02-87
     
Report to Congressional Committees

United States General Accounting Office

GAO

October 2001 NATIONAL PARKS Significant Progress Made in Preserving the
Presidio and Attaining Financial Self- Sufficiency

GAO- 02- 87

Page i GAO- 02- 87 The Presidio Trust Letter 1

Results in Brief 2 Background 3 The Presidio Trust Has Made Significant
Progress in Preserving,

Protecting, and Improving the Presidio 6 Implementation Plan and Financial
Projections Indicate That the

Trust Should Become Financially Self- Sufficient by 2013 13 Conclusions 18
Recommendation to the Presidio Trust 18 Agency Comments and Our Evaluation
18 Scope and Methodology 18

Appendix I Status of Presidio Trust Buildings and Structures 21

Appendix II Residential and Commercial Leasing 22

Appendix III General Overview of Planning Alternatives Considered by the
Presidio Trust (July 25, 2001) 23

Appendix IV Buildings and Open Space Comparison of Presidio Trust Planning
Alternatives 24

Appendix V Capital Spending Comparison of Presidio Trust Planning
Alternatives 25

Appendix VI GAO Contact and Staff Acknowledgments 26 GAO Contact 26
Acknowledgments 26 Contents

Page ii GAO- 02- 87 The Presidio Trust Tables

Table 1: Commercial and Residential Buildings, as of January 2001 21 Table
2: Commercial and Infrastructure Building Space, as of

January 2001 21 Table 3: Status of Residential Housing Units, as of January
2001 22 Table 4: Status of Commercial Building Leases, as of January 2001 22

Figures

Figure 1: Area A and Area B Boundaries of the Presidio 3 Figure 2: Presidio
Trust Projected Revenue, Fiscal Year 2001 5 Figure 3: Presidio Trust
Projected Expenditures, Fiscal Year 2001 6 Figure 4: Residential Housing
Unit Before and After Rehabilitation 8 Figure 5: Commercial Building Before
and After Rehabilitation 9

Page 1 GAO- 02- 87 The Presidio Trust

October 4, 2001 Congressional Committees The Presidio of San Francisco,
situated at the confluence of the Pacific Ocean and the San Francisco Bay,
served as an active military post for nearly 220 years. Containing about
1,490 acres and 770 structures, the Presidio now offers its visitors open
space for recreational activities and serves as a refuge for several rare
and endangered species. Except for its coastal shoreline, the property is
surrounded by dense urban residential neighborhoods

In 1972, when the Congress established the Golden Gate National Recreation
Area, a small part of the Presidio, then an Army base, was included in the
recreation area. When the Department of Defense determined that the Presidio
was excess to its needs in 1988, the remainder of the Presidio was
designated for inclusion in the recreation area. On October 1, 1994, the
Presidio closed; its grounds became part of the recreation area and the
National Park Service (Park Service) assumed its management.

Since managing the Presidio?s 770 buildings and unique landscape was, by
far, the most costly of any other single area it managed, the Park Service
suggested that the Congress create an entity to manage the majority of the
property. On November 12, 1996, Public Law 104- 333 created the Presidio
Trust- a wholly owned government corporation- to manage a large part of the
Presidio grounds in a manner consistent with sound principles of land use
planning and management while maintaining the area?s scenic beauty and
historic and natural character. The Trust is responsible for leasing,
maintaining, rehabilitating, repairing, and improving the property it
controls. In addition, the law stipulated that the Trust was to become
financially self- sufficient within 15 years of the first meeting of its
Board of Directors- that is, by 2013. Also, the law required the Secretary
of the Interior, in cooperation with the Trust, to provide public
interpretive services, visitor orientation, and educational programs
throughout the Presidio. The Park Service carries out these responsibilities
and also provides additional public safety services under a reimbursable
agreement with the Trust.

The legislation that created the Trust also includes a requirement that we
periodically review and report to the Congress on the Trust?s activities.
Accordingly, we examined (1) the Trust?s ongoing efforts to preserve and

United States General Accounting Office Washington, DC 20548

Page 2 GAO- 02- 87 The Presidio Trust

protect the Presidio and (2) the status of the Trust?s efforts to become
financially self- sufficient.

The Trust has made significant progress toward preserving, protecting, and
improving the Presidio. It has launched major efforts to repair and upgrade
the Presidio?s infrastructure and to repair and rehabilitate residential
housing and commercial space. To date, the Trust has transformed about half
of the former military buildings into useable residential and commercial
space. The rehabilitation, repair, and leasing of the remaining 300
residential units and about 2.2 million square feet of undeveloped
commercial space is critical to the Trust?s efforts to achieve financial
self- sufficiency. The Trust has also embarked on several environmental
initiatives, including the cleanup of over 2 centuries of military
contamination and the restoration of Mountain Lake- one of the few remaining
natural lakes within the San Francisco city limits. The Trust is also
working with the Park Service to revitalize vegetation throughout the
Presidio and to replace trees reaching the end of their life expectancy in
the 300- acre forest.

The Trust should meet its legal obligation of financial self- sufficiency by
2013 according to financial projections prepared by the Trust in conjunction
with its current planning process. As part of this planning process, the
Trust, on July 25, 2001, released for public comment its preferred
alternative and five other alternatives it considered for the future
development of the Presidio. The Trust is accepting comments on the
alternatives until the end of October and expects to release a final
development plan for the Presidio in early 2002. The Trust used a financial
model to prepare an analysis of future revenues and expenses for each of the
alternatives it considered in the planning process. Under every alternative
considered, the model projected that the Trust could achieve financial self-
sufficiency by 2013. We did not independently verify the calculations of the
model because it was, according to the Trust, intended to allow for
comparisons under the various alternatives considered and not as a
definitive projection of future financial results. However, once a final
development plan is selected, we recommend, and the Trust acknowledges, that
the model and its results be independently examined in accordance with
attestation standards. Key to the financial model for the alternatives
considered were the assumptions, such as those for rental rates. Based on
our economic review of these assumptions, it appears that they were
conservative and provided estimates of future revenues at the lower end of
possible outcomes. As such, it is possible that, in the future, the Trust
could generate revenues in future years in excess of those needed to operate
the Presidio including funds for restoration, Results in Brief

Page 3 GAO- 02- 87 The Presidio Trust

preservation, and adequate capital reserves. Furthermore, if the Trust does
generate excess revenues in the future, the Congress may, at that time, want
to revisit the issue of what to do with excess revenues.

The Trust manages the interior 80 percent of the Presidio, while the Park
Service manages the remaining 20 percent, essentially the coastal areas.
Figure 1 shows the area managed by the Park Service (Area A) and the area
managed by the Trust (Area B).

Figure 1: Area A and Area B Boundaries of the Presidio

Source: The Presidio Trust.

The Trust?s area of responsibility includes 729 commercial and residential
buildings and structures encompassing almost 6 million square feet of floor
space. The Presidio was designated as a National Historic Landmark in 1962.
Included in this designation are more than 400 buildings and the Presidio?s
landscape. As such, any new development or proposed changes to the
Presidio?s historic buildings and its landscape are guided by Background

Page 4 GAO- 02- 87 The Presidio Trust

rehabilitation standards established by the Secretary of the Interior and
the Park Service.

In Public Law 104- 333, the Congress gave the Trust wide latitude for
managing, preserving, and protecting the Presidio in its effort to achieve
financial self- sufficiency by 2013. The Trust has the authority to, among
other things, guarantee loans to tenants who finance capital improvements of
Presidio buildings, manage building leases, borrow up to $50 million from
the U. S. Treasury, and demolish buildings that it deems to be beyond cost-
effective rehabilitation.

The Trust is managed by a 7- member Board of Directors. The President of the
United States appoints six members and the Secretary of the Interior or her
designee is the seventh member. Board members, who are not compensated, are
generally appointed to 4- year terms and can be reappointed; however, no
Board member may serve more than 8 consecutive years. The Board must hold
three meetings per year, two of which must be open to the public. An
executive director oversees the daily operations of the Trust and, as of May
30, 2001, managed a 468- member staff. The Trust is organized into an office
of general counsel and six divisions, each managed by a deputy director;
these managers report directly to the executive director. The Trust can set
the compensation and duties of the executive director and staff as it deems
appropriate.

For fiscal year 2001, the Trust projects that its revenues will be $79.4
million. Figure 2 shows the Trust?s projected revenues from all sources for
fiscal year 2001.

Page 5 GAO- 02- 87 The Presidio Trust

Figure 2: Presidio Trust Projected Revenue, Fiscal Year 2001

Dollars in millions Note: Percentages may not total due to rounding. Source:
The Presidio Trust.

The Trust?s projected expenditures for fiscal year 2001 are $79.4 million.
Figure 3 shows the Trust?s projected expenditures for fiscal year 2001,
including operations costs such as salaries, day- to- day operations, costs
associated with future planning efforts, and public safety.

Page 6 GAO- 02- 87 The Presidio Trust

Figure 3: Presidio Trust Projected Expenditures, Fiscal Year 2001

Dollars in millions Source: The Presidio Trust.

The Trust has made significant progress in preserving, protecting, and
improving the Presidio. Since taking over its portion of the Presidio on
July 1, 1998, the Trust has spent more than $38 million to preserve and
protect the Presidio by upgrading the infrastructure and repairing and
rehabilitating residential housing units and commercial space. In addition,
private entities have spent about $40.8 million to repair and rehabilitate
commercial space that they then leased from the Trust. The Trust has also
assumed responsibility for the environmental cleanup of contamination across
the entire Presidio. In conjunction with the Park Service, the Trust has
embarked on a plan to improve Mountain Lake?s water quality and shoreline
and started work on restoring native vegetation throughout the Presidio. By
repairing, rehabilitating, and subsequently leasing residential housing and
commercial space, the Trust generated about $13.3 million from residential
leases and about $6.3 million from commercial leases in fiscal year 2000.
However, as successful as the Trust has been in renovating and leasing both
residential and commercial space, it still has some 300 residential housing
units to be repaired or rehabilitated and The Presidio Trust

Has Made Significant Progress in Preserving, Protecting, and Improving the
Presidio

8% 7%

Page 7 GAO- 02- 87 The Presidio Trust

almost 2.2 million square feet of commercial space available for development

From 1997 through March 30, 2001, the Trust spent about $15.4 million to
repair and replace the Presidio?s infrastructure, upgrading roads and
grounds, telecommunications systems, electrical, and water and sewer
systems. From April 1, 2001, through the end of fiscal year 2002, the Trust
plans to spend an additional $7 million and, with these expenditures, about
80 percent of the electrical, water, sewer, and telecommunications upgrades
will be complete. According to the Trust, these improvements have increased
health and safety systems, enhanced park resources, and prepared more of the
Presidio for residential and commercial tenants.

The major infrastructure upgrades undertaken, and their approximate costs to
date, were the following:

 $6.0 million on electrical upgrades by replacing or repairing 12,000
linear feet of existing lines and installing an additional 10,000 linear
feet of lines in support of the Trust?s residential and commercial leasing
programs;

 $5.4 million to upgrade telecommunications capacity including increasing
the number of available lines from 8,000 to 21, 000 in support of the
Trust?s residential and commercial leasing programs;

 $2.4 million for sewer system upgrades including replacing about 7,000
linear feet of sewer lines;

 $1.1 million for water system upgrades, including replacing and repairing
old water lines that were leaking millions of gallons of water a week; and

 $0.5 million to improve roads, trails, sidewalks, and grounds to enhance
resident and visitor facilities.

To preserve the Presidio?s many historic buildings and generate the revenues
needed to achieve financial self- sufficiency by 2013, the Trust has spent
about $23 million to repair and rehabilitate residential housing units and
commercial buildings for lease. Figure 4 shows the interior of a residential
housing unit before and after rehabilitation and figure 5 shows a commercial
building before and after rehabilitation. Infrastructure

Improvements and Building Renovations

Page 8 GAO- 02- 87 The Presidio Trust

Figure 4: Residential Housing Unit Before and After Rehabilitation

Source: The Presidio Trust.

Page 9 GAO- 02- 87 The Presidio Trust

Figure 5: Commercial Building Before and After Rehabilitation

Source: The Presidio Trust.

The funds to repair and rehabilitate these facilities have come primarily
from congressional appropriations and rental revenue. The Presidio has 1,198
housing units contained in 349 buildings, 155 of which are historic.
According to the Trust?s residential leasing records, as of January 2001,
869 residential housing units contained in 247 buildings were leased.
Appendix I provides more specific information about the number and types of
buildings the Trust manages. The Trust also manages 306

Page 10 GAO- 02- 87 The Presidio Trust

commercial buildings- 225 of which are historic- that contain 3.86 million
square feet of space. Currently, the Trust has about 1 million square feet
of commercial space rented to private entities. The Trust and the Park
Service occupy another 660, 000 square feet of commercial space. Private
entities have spent about $40.8 million to repair and rehabilitate
commercial space that they subsequently leased from the Trust. In these
cases, the Trust generally reduces rental rates to recognize the private
entity?s investment.

The Trust has embarked on a number of initiatives to clean up and restore
the Presidio?s environment. These initiatives include assuming the Army?s
responsibility for cleaning up the contamination left at the Presidio from
over 2 centuries of use as a military post, restoring Mountain Lake, and
restoring the Presidio?s vegetation and forest.

In October 1994, when the Army transferred jurisdiction of the Presidio to
the Park Service, the Army retained the lead agency responsibility for
cleaning up contamination. The Army began cleanup activities primarily in
Crissy Field in Area A- an area now managed by the Park Service. In May
1997, the Army announced an updated plan for continued cleanup of the
Presidio. The Army?s plan however, was criticized by local neighborhood
groups, the Sierra Club, and the Trust because its cleanup strategy relied
primarily on monitoring contaminated sites and restricting public land use,
rather than removing contamination. Also, the Army?s cleanup plan was
expected to cover a 30- year period.

In May 1998, the Trust presented to the Army its own assessment of the
cleanup plan for the Presidio that was designed to address the areas
criticized in the Army?s plan. The Trust also proposed that the Army
delegate its cleanup authority to the Trust to expedite the cleanup
activities.

In May 1999, the Army, the Trust, and the Department of the Interior signed
a memorandum of agreement transferring cleanup responsibility to the Trust.
Under the agreement, the Army will pay the Trust $100 million to clean up
both Areas A and B. The Trust is responsible for all currently known
contamination; the Army remains responsible for any unknown contamination
that may be discovered. The Trust also purchased a $100 million insurance
policy for $6.7 million in the event that cleanup costs exceed the $100
million paid by the Army. The Trust plans to complete the environmental
cleanup by 2010. Environmental Cleanup

and Other Restoration Activities

Environmental Cleanup

Page 11 GAO- 02- 87 The Presidio Trust

As of March 31, 2001, the Trust had spent about $12 million for cleanup
activities. Almost 80 percent of the expenditures to date were for insurance
premiums, program management and administration, planning, and oversight.
The remaining funds were used for cleanup activities including monitoring
groundwater, evaluating landfills, removing contaminated soil, and removing
lead pellets.

Mountain Lake is one of the few remaining natural lakes within the city of
San Francisco. It is a popular destination for visitors and residents and
provides habitat for many species of birds and plants. Over the years, the
depth of the 4- acre lake has fallen from 30 feet to less than 10 feet. In
addition, the lake?s water quality has deteriorated because of
sedimentation, runoff, and the byproducts of nearby road construction.

The National Park Service, Golden Gate National Park Association, and the
Trust have jointly sponsored a public planning process, including community
forums, site research, and other technical analyses, to produce a plan to
restore the lake and adjacent shoreline, which encompass a total of 14
acres. A two- phased plan and an environmental assessment were completed and
adopted in the spring of 2001.

The goals of the plan are to improve water quality, enhance the habitat, and
improve visitor experiences. The first phase will consist of

 dredging and aerating the bottom of the lake;

 removing nonnative trees and vegetation and replacing them with native
species; and

 planting native trees and shrubs to buffer the lake from the roadway,
improving trails, and constructing overlooks and interpretive exhibits.

The Trust estimates that phase one of the plan will cost $677,000 and should
be completed by the fall of 2002. This cost estimate assumes that all
removed sediment will be disposed of at a site on the Presidio. If the
lake?s sediment is found to be contaminated, however, it will require
offsite disposal and result in additional costs. The San Francisco
International Airport Authority provided $500,000 for phase one as approved
mitigation for filling in wetlands for the airport?s new terminal. 1

1 Mitigation for filling in wetlands is a requirement of regulations and
guidelines implementing section 404 of the Clean Water Act. The California
Regional Water Quality Control Board approved the airport?s plan to fill in
17. 1 acres of wetlands and other waters in exchange for $500, 000 toward
the restoration of Mountain Lake. Mountain Lake Restoration

Page 12 GAO- 02- 87 The Presidio Trust

The second phase will be initiated within 2 to 5 years after the completion
of the first one. This phase consists of removing an additional 4. 3 acres
of weeds around the shoreline and replanting the area with native plants as
well as construction of a bridge. The Trust?s preliminary estimate is that
phase two will cost from $600,000 to $750, 000.

The preservation and enhancement of the Presidio?s natural resources,
including its vegetation, is one of the Trust?s goals. The Presidio contains
more than 230 native plant species and a 300- acre forest of eucalyptus,
Monterey cypress, and Monterey pine trees. Over the years, human activities
and the overgrowth of nonnative plants have threatened the Presidio?s
landscape and native vegetation. Also, many of the trees planted a century
ago as part of the Army?s beautification project are nearing the end of
their natural life span and need restoration.

Working in partnership with the Trust, the Park Service developed the
Vegetation Management Plan to preserve and enhance native landscapes and to
extend the life of the park?s forest over the coming decades. Initially, the
Trust and the Park Service will collaborate on a number of pilot projects
designed to test and establish effective restoration techniques for future
vegetation management projects. Over the next 5 years, the Trust expects to
spend $9 million on pilot projects aimed at restoring and nurturing the
Presidio?s vegetation and forest.

The Trust has made substantial progress in repairing, rehabilitating, and
leasing buildings since taking over responsibility for its portion of the
Presidio in July 1998. Revenue from residential and commercial leases is the
Trust?s primary source of revenue, and these leases will play a more
important role as the Trust?s federal appropriation declines and then ends
in fiscal year 2012.

In fiscal year 2000, residential leases generated $13.3 million in revenue.
Currently, more than 52 percent of the occupied residential units are leased
at market rental rates averaging about $2,910 per month. The remaining
occupied units are rented under several discounted rental programs whereby
tenants, such as public safety personnel, Presidio employees, and students,
pay less than market rental rates. Monthly rental rates under these programs
average about $1,375. By the end of fiscal year 2001, the Trust expects to
have available for rent an additional 140 residential housing units. The
Trust anticipates that it will generate about $21 million in revenue in
fiscal year 2001 from residential housing. Vegetation and Forest

Restoration Leasing Programs Have Been Successful

Page 13 GAO- 02- 87 The Presidio Trust

In fiscal year 2000, commercial leases generated $6.3 million in revenue.
Overall, leases for commercial space average less than $10 per square foot,
with nearly 79 percent of the total square footage leased averaging slightly
more than $3 per square foot. Many of these leases are to tenants who
financed the cost of restoring buildings they occupy in exchange for rental
offsets and tax credits allowed for the restoration of historic buildings.
Other leases are with community organizations that pay only their pro rata
share of common area, infrastructure, and security costs. In fiscal year
2001, the Trust is offering an additional 227,000 square feet for lease or
rehabilitation; this is expected to raise fiscal year 2001 commercial lease
revenues to about $9 million. Appendix II provides information on the
Trust?s residential and commercial leasing programs.

While the Trust has been successful in leasing residential and commercial
space, it still has a considerable amount available for rehabilitation and
leasing. As of January 2001, the Trust had 329 housing units that were
either vacant or awaiting rehabilitation. Similarly, the Trust has 2.2
million square feet of commercial space that could be made available once a
decision is made on the use of the space and it is repaired or
rehabilitated. Of the 2.2 million square feet, 900,000 square feet will be
used for a digital arts center at the Letterman Hospital site. The
development agreement for this project was signed on August 14, 2001. When
this project is completed, the Trust expects to receive about $5.8 million
annually in rent plus an annual service district charge.

In July 2000, the Trust began a planning process to create a plan for the
future development of its portion of the Presidio. As part of this process,
the Trust considered a number of alternatives for future development. The
Trust used a financial model to prepare a financial analysis for each of the
alternatives it considered and, under every alternative, the model projected
that the Trust could become financially self- sufficient by 2013. The Trust
issued its Draft Implementation Plan, which contained its proposed action
called the ?Draft Plan Alternative,? as well as a draft environmental impact
statement on July 25, 2001. After a public comment period, the Trust expects
to issue a final plan and final environmental impact statement by early
2002. Key to the financial model were the assumptions the Trust used which
appear to be conservative and to provide estimates of future revenues at the
lower end of potential Implementation Plan

and Financial Projections Indicate That the Trust Should Become Financially
Self- Sufficient by 2013

Page 14 GAO- 02- 87 The Presidio Trust

estimates. 2 After choosing the final development plan, the Trust should
refine the model and prepare a new financial forecast of operating results
under that plan because projections used in the planning process were
designed only as tools to test the comparative economic implications of
various alternatives.

Since assuming responsibility for its portion of the Presidio, the Trust has
managed the Presidio using the Park Service?s 1994 General Management Plan
Amendment. In July 2000, the Trust began to update this plan. The new
planning process, called the Presidio Trust Implementation Plan
(Implementation Plan), was needed, according to the Trust, because some of
the assumptions the Park Service had based its 1994 General Management Plan
Amendment on had changed significantly since it was adopted. Specifically:

 The Park Service?s 1994 General Management Plan Amendment assumed that
annual appropriations in the range of $16 million to $25 million would be
received. However, Public Law 104- 333, which created the Trust, mandated
that the Trust become financially selfsufficient by 2013.

 Even after the Presidio closed, the 6th U. S. Army had been expected to
occupy up to 30 percent of the Presidio?s buildings; however, it has vacated
the Presidio.

 The University of California at San Francisco had planned to locate its
research facilities at the Letterman Hospital, but did not do so.

The Implementation Plan process began in July 2000 with a 6- month

?scoping? period and information- gathering process through workshops in
which the public helped define the range of issues and topics to be included
in the Implementation Plan. In mid- November 2000, the Trust published its
Conceptual Alternatives Workbook, which contained five alternatives for the
Presidio?s future development. Public comments were solicited on the
alternatives until January 16, 2001.

2 We have not examined the financial model in accordance with attestation
standards established by the American Institute of Certified Public
Accountants and, accordingly, do not express an opinion or any other form of
assurance on the forecasts or assumptions. Furthermore, there will usually
be differences between the model and actual results, because events and
circumstances frequently do not occur as expected, and those differences
could be material. Presidio Trust

Implementation Plan Will Guide Future Development

Page 15 GAO- 02- 87 The Presidio Trust

On July 25, 2001, the Trust released the Presidio Trust Draft Implementation
Plan and draft environmental impact statement, which described and analyzed
six alternatives for future development of the Presidio. Two of the
alternatives have, thus far, received the most attention from the public.
One, referred to as the ?General Management Plan Amendment 2000
alternative,? would implement the Park Service?s 1994 General Management
Plan Amendment, assuming the year 2000 conditions. The Trust stated that it
modified this alternative from the Conceptual Alternatives Workbook because
many neighborhood and environmental groups had commented that they preferred
an alternative that was patterned after the Park Service?s 1994 General
Management Plan Amendment plan but modified to make it financially feasible.
The Trust developed another alternative, also in response to public
comments, entitled the ?Draft Plan Alternative,? which is its proposed
action for future development of the Trust?s portion of the Presidio. The
Trust stated that this alternative is the proposed action because it is
patterned after the General Management Plan Amendment 2000 alternative but
includes modifications to ensure its financial viability and to combine a
number of concepts proposed in the Conceptual Alternatives Workbook into a
single alternative. These concepts include expansion of open space, no
reduction in housing units, and a variety of cultural and educational
programs for visitors. Appendix III contains a summary of the alternatives
the Trust considered. The public has until October 25, 2001, to provide
comments on the Draft Plan Alternative and draft environmental impact
statement. The Trust envisions concluding the planning process with the
publication of a final plan and final environmental impact statement in
early 2002.

The Trust?s Draft Plan Alternative contains many of the features of the
General Management Plan Amendment 2000 alternative, but there are several
noteworthy differences between the two. For example, total development at
the Presidio under Draft Plan Alternative is 5.6 million square feet, or
about 6 percent less than current levels, rather than just over 5 million
square feet discussed in the General Management Plan Amendment 2000
alternative. Furthermore, the Draft Plan Alternative permits 50,000 square
feet less in building demolition than the General Management Plan Amendment
2000 alternative and replacement buildings under the Draft Plan Alternative
could increase by about 540,000 square feet over the General Management Plan
Amendment 2000 alternative. Finally, the Draft Plan Alternative calls for
880 more residential housing units than the General Management Plan
Amendment 2000 alternative- more than doubling the projected number of
residents at the Presidio. Appendix IV contains a comparison of the land use
patterns envisioned by the alternatives.

Page 16 GAO- 02- 87 The Presidio Trust

The Draft Plan Alternative assumes expenditures of $10 million annually for
Trust programs rather than the $2 million annually provided for in the
General Management Plan Amendment 2000 alternative. The difference is due,
in part, to the Trust providing programs rather than only the tenants as the
General Management Plan Amendment 2000 alternative assumed. According to the
Trust, a wide variety of program possibilities would be available including
interpretive programs for visitors as well as museums, exhibitions, and
community programs. Also, the projected number of annual visitors under the
Draft Plan Alternative is 60 percent higher than the projection in the
General Management Plan Amendment 2000 alternative. Finally, total capital
construction costs under the Draft Plan Alternative would be $61 million
higher than under the General Management Plan Amendment 2000 alternative.
Appendix V contains a comparison of the capital costs among the
alternatives.

The Trust?s analysis of the public comments it received before releasing the
Draft Plan Alternative, indicated that many of those commenting noted
concerns with the proposed plans compatibility with the Park Service?s 1994
General Management Plan Amendment. Public reaction when the Draft Plan
Alternative was released indicated that many believed that the Draft Plan
Alternative contained too much development and that the Trust should not
have abandoned the Park Service?s 1994 General Management Plan Amendment.

As part of the planning process, the Trust used a financial model to prepare
a financial projection for each alternative. According to the Trust, the
financial model was designed as a planning tool to test the comparative
economic implications of the alternatives and not as definitive projections
of future financial conditions. Specifically, the financial model was
designed to (1) evaluate the short- term financial selfsufficiency of each
alternative; (2) estimate the time period needed for each alternative to
reach long- term financial sustainability, including generating sufficient
revenues to meet long- term capital needs and replacement reserves; and (3)
compare the relative financial performance of each alternative against the
others. The financial model projected that the Trust could become
financially self- sufficient by 2013 under every alternative.

In developing the financial model, the Trust relied on historical data from
a number of sources, such as the San Francisco area?s real estate markets
for data on fair market rental and vacancy rates and national studies for
information on capital costs for rehabilitation and new construction. In
addition, the Trust made many assumptions in order to project its financial
Financial Self- Sufficiency

Expected

Page 17 GAO- 02- 87 The Presidio Trust

analyses into the future. Some of the key variables included land use,
annual program expenditures, and the timing of demolition and rehabilitation
of existing buildings.

According to our economic analysis of the financial model, the Trust?s
assumptions appear to be conservative because they tended to minimize
projected revenues. For example, even though the market rental rate in
calendar year 2000 for Class B office space in San Francisco was about $60
per square foot, the Trust used a more conservative rental rate of $29 per
square foot. This rate was based on the average market rate over the past 7
years.

In developing its financial model, the Trust stated that the model was not
designed to be a budgetary or accounting tool and the results should not be
interpreted as being what will happen, but rather what could happen given
certain assumptions. When the Trust finalizes its Presidio Trust
Implementation Plan, it needs to refine the financial model to assure itself
that the model?s results are based on the latest and best information and
assumptions.

Also, the model meets the definition of a financial forecast as defined by
the American Institute of Certified Public Accountants Statements on
Standards for Attestation Engagements which provide a mechanism by which
financial forecasts that are expected to be used by a third party can be
independently examined. Because it is likely that the public, the Congress,
and the Trust will rely on the new financial forecast, at least in part, to
judge the Trust?s likelihood of becoming financially self- sufficient by
2013, we believe that the American Institute of Certified Public Accountants
guidelines should be applied and the Trust should have the financial model
independently examined. We brought this issue to the attention of Trust
officials, who stated they were not aware of such guidance but thought that
having a new financial forecast independently examined was a good idea.

Depending on future rental revenues and how the Trust proceeds with
development of the Presidio, it is possible that at some point the Trust may
generate revenues in excess of its costs. The Trust acknowledges that, at
some point in the future, excess revenues could be generated at which point
it could decide to reduce rents, provide subsidies, or scale back plans for
building space and capital projects. Public Law 104- 333 allows the Trust to
retain all proceeds and other revenues it receives.

Page 18 GAO- 02- 87 The Presidio Trust

When passing the law that brought the Trust into being, the Congress gave
the Trust wide latitude in determining how it would manage and operate the
Presidio. The Trust has made notable progress and now stands ready to define
the future development and operation of the Presidio as a national park.
While the Trust?s financial analysis indicates that the Trust should achieve
financial self- sufficiency by 2013, it is only a predictor of what could
occur based on several assumptions. The Trust should consider refining its
financial forecast once its development plan is finalized. Furthermore, if
the Trust generates excess revenues in the future, after achieving financial
self- sufficiency and funding capital projects and reserves, the Congress
may, at that time, want to revisit the issue of what to do with excess
revenues.

Given the complexity of the financial model and its importance in the
decision- making process and the fact that a refined model could serve as
the standard measure of the Trust?s progress toward self- sufficiency, we
recommend that the Chairman, Presidio Trust Board of Directors, obtain an
independent examination of the financial model as defined by the American
Institute of Certified Public Accountants Statements on Standards for
Attestation Engagements. A certified public accountant?s report would
express an opinion on whether the underlying assumptions provide a
reasonable basis for management?s projection of financial selfsufficiency.

The Presidio Trust provided oral comments that generally agreed with the
report and our recommendation that it have its financial model independently
examined when its development plan is finalized. The Presidio Trust also
provided a number of technical comments and clarifications, which we have
addressed, as appropriate, in the body of the report.

We obtained information from the Trust on its activities, reviewed relevant
program documents and related materials, and met with Trust officials
responsible for major activities, such as facility improvements, residential
and commercial leasing, and financial management. We also reviewed the
financial model used by the Trust as part of its planning process and
discussed the model with Trust officials and officials from the firm that
developed the model. We did not independently verify the reliability of the
financial data provided nor did we trace the data to the systems from which
they came. Because the Trust manages the Presidio in conjunction with the
Park Service, we also met with Park Service officials to obtain their views
on the Trust?s management of the Presidio and its planning process.
Conclusions

Recommendation to the Presidio Trust

Agency Comments and Our Evaluation

Scope and Methodology

Page 19 GAO- 02- 87 The Presidio Trust

We performed our work at the Trust?s headquarters in San Francisco from
January 2001 through August 2001 in accordance with generally accepted
government auditing standards.

We are sending copies of this report to appropriate congressional
committees, the Chairman, Board of Directors, Presidio Trust; the Secretary
of the Interior; the Director, National Park Service; the Secretary of
Defense; the Director, Office of Management and Budget; and other interested
parties. We will also make copies available to others on request.

If you or your staff have any questions regarding this report, please call
me or Ed Zadjura on (202) 512- 3841. Key contributors to this report are
listed in appendix VI.

Barry T. Hill Director, Natural Resources

and Environment

Page 20 GAO- 02- 87 The Presidio Trust

List of Committees

The Honorable Robert C. Byrd Chairman The Honorable Conrad Burns Ranking
Minority Member Subcommittee on Interior Committee on Appropriations United
States Senate

The Honorable Daniel K. Akaka Chairman The Honorable Craig Thomas Ranking
Minority Member Subcommittee on National Parks Committee on Energy and
Natural Resources United States Senate

The Honorable Joe Skeen Chairman The Honorable Norman D. Dicks Ranking
Minority Member Subcommittee on Interior Committee on Appropriations House
of Representatives

The Honorable Joel Hefley Chairman The Honorable Donna M. Christensen
Ranking Minority Member Subcommittee on National Parks, Recreation and
Public Lands Committee on Resources House of Representatives

Appendix I: Status of Presidio Trust Buildings and Structures

Page 21 GAO- 02- 87 The Presidio Trust

Table 1: Commercial and Residential Buildings, as of January 2001 Building
type Number Square

feet (mil) Historic buildings

Historic square feet (mil)

Buildings leased or in use

Square feet leased or in use (mil)

Percent of square feet in use

Commercial 207 3.76 173 2.41 121 1.68 44.7 Infrastructure 99 0.10 52 0.09 24
0.03 28.8 Residential housing 349 2.02 155 0.81 247 1.43 70.7 Residential
garages/ carports 74 0.08 48 0.04 0 0 0

Total 729 5.96 428 3.36 392 3.14 52.6

Source: GAO?s analysis of commercial and residential building data provided
by the Presidio Trust.

Table 2: Commercial and Infrastructure Building Space, as of January 2001
Building status Number of buildings Square feet (mil) Percent of total
square feet

Leased to tenants a 75 1.05 27.2 Occupied by Trust/ National Park Service 70
0. 66 17.1 Ready for lease or rehabilitation 16 0.23 5.9 Letterman Digital
Center 0 0. 90 23.3 Awaiting development plans 145 1.03 26.6

Total 306 3.86 100.0

Note: Percentages may not total due to rounding. a Square feet equals total
building space, although not all the square footage is leased.

Source: GAO?s analysis of commercial and residential building data provided
by the Presidio Trust.

The Presidio has 729 buildings and structures encompassing nearly 6 million
square feet under management of the Presidio Trust. Over half (428) are
historic buildings that contribute to the Presidio?s designation as a
National Historic Landmark District. Ninety- nine buildings (100,000 sq.
ft.) support infrastructure such as sewer, electrical and water pump
stations or maintenance sheds. Over 70 percent of residential squarefootage
(1.4 million sq. ft.) is occupied, while less than half of the commercial
space (1.7 million sq. ft.) is leased or in use. Appendix I: Status of
Presidio Trust Buildings

and Structures

Appendix II: Residential and Commercial Leasing

Page 22 GAO- 02- 87 The Presidio Trust

Table 3: Status of Residential Housing Units, as of January 2001 Leasing
status Number Percentage of

total units Average monthly rents

Units rented at/ near market rates 470 39.2 $2,911 Units rented at
discounted rates a 399 33.3 1, 376 Vacant units 39 3. 3 0 Units in or
awaiting rehabilitation 290 24.2 0

Total b 1,198 100.0 $2,206

a Discount rent programs for tenants who qualify under program guidelines. b
Excludes single room occupancy, bachelor officers? quarters, and dorm rooms.

Source: GAO?s analysis of residential leasing data provided by the Presidio
Trust.

Table 4: Status of Commercial Building Leases, as of January 2001 Commercial
building status

Number of building

leases Number of buildings Square feet

leased Average

annual rent rate per square feet a

Leases under $10 per sq. ft. 31 48 709,640 $3.19 Leases between $10 - $20 6
7 56,886 15.78 Leases above $20 16 10 135,798 40.36

Total 53 65 902,324 $9.58

Notes: Excludes the golf course lease, which pays a percentage of gross
receipts and 10 buildings/ structures associated with the golf course.
Projected average rent rates are included for retail/ service leases, which
pay a percentage of gross receipts. a Calculated annual rent rates include a
fee the Trust charges to cover security, common areas, and

infrastructure costs. Source: GAO?s analysis of commercial leasing data
provided by the Presidio Trust.

Currently, the Presidio has 1,198 residential housing units, of which 73
percent (869 units) were leased or occupied as of January 2001. The
remaining 329 units (27 percent) are either vacant or awaiting
rehabilitation. A review of occupied units shows 39 percent (470 units)
leased at market rental rates while 33 percent (399 units) have leases below
market rates. Overall lease rates for commercial space averages less than
$10 per square feet. The majority of total commercial square- feet leased
averages just over $3 per square foot. Appendix II: Residential and
Commercial

Leasing

Appendix III: General Overview of Planning Alternatives Considered by the
Presidio Trust (July 25, 2001)

Page 23 GAO- 02- 87 The Presidio Trust

Under this alternative, tenants and residents would work together to make
the Presidio a center for education, communication, and exchange. Open space
would be increased primarily by removing non- historic housing in the
southern portion of the park. Replacement housing would come primarily from
the rehabilitation and reuse of buildings. Cultural and natural resources
would be protected and enhanced.

This alternative would implement the General Management plan developed by
the Park Service in 1994 assuming year 2000 conditions. Tenants and
residents would work together to create a global center dedicated to
addressing the world?s critical environmental, social, and cultural
challenges. Buildings would be removed to increase open space and/ or
enhance recreational, cultural, and natural resources.

In this alternative, more open space would be created in the southern part
of the park; development would be concentrated in the northern part of the
Presidio. Overall, building square footage would be reduced and open space
and natural resource enhancements would be maximized.

Under this alternative, the Presidio would become a sustainable live/ work
community, and a model of environmental sustainability. Emphasis would be
placed on creating a community that offered innovative approaches on
environmental sustainability. Open space would be enhanced and some non-
historic buildings would be removed.

Under this alternative, the Presidio would become a national and
international cultural destination park, a portal for visitors to the
American West and Pacific, and a place of international distinction for its
programs in research, education and communication. Open space would be
expanded and a substantial number of non- historic buildings would be
removed in the southern part of the park; housing would be added in the
northern part of the park.

Under this alternative, the Presidio would be minimally managed to fulfill
the Presidio Trust?s obligations to protect the Presidio?s resources. There
would be no significant park enhancements and no physical change beyond
those currently underway. There would be no new construction and building
removal. Appendix III: General Overview of Planning

Alternatives Considered by the Presidio Trust (July 25, 2001)

Draft Plan General Management Plan Amendment (GMPA) 2000

Resource Consolidation Sustainable Community Cultural Destination

Minimum Management

Appendix IV: Buildings and Open Space Comparison of Presidio Trust Planning
Alternatives

Page 24 GAO- 02- 87 The Presidio Trust

Other alternative plans Draft plan GMPA

2000 Difference

between Draft & GMPA Resource

consolidation Sustainable community Cultural

destination Minimum management Buildings (thousands of sq. ft.)

Commercial buildings 3, 660 3,690 (30) 3,980 3,770 4,070 3,530 Residential
buildings 1, 940 1,320 620 1,310 1,910 1,890 2,430

Subtotal 5,600 5,010 590 5,290 5,680 5,960 5,960

Planned demolition 1, 070 1,120 (50) 1,910 890 1,370 0 New construction 710
170 540 1,240 620 1,370 0

Net reduction in building space (360) (950) (590) (670) (270) 0 0 Open space
(acres)

Existing 696 696 696 696 696 696 Proposed 793 794 838 772 807 702

Net change (increase) 97 98 (1) 142 76 111 6 Residential housing (units)

Existing a 1,650 1,650 1,660 1,650 1,650 1,650 Proposed 1,650 770 910 1,430
1,700 1,650

Net change 0 (880) (880) (740) (220) 50 0

a Existing housing units include former military bachelors? quarters and
barracks not in use. Source: Presidio Trust Draft Environmental Impact
Statement, July 2001.

Appendix IV: Buildings and Open Space Comparison of Presidio Trust Planning
Alternatives

Appendix V: Capital Spending Comparison of Presidio Trust Planning
Alternatives

Page 25 GAO- 02- 87 The Presidio Trust

Other alternative plans Capital spending (Dollars in millions) Draft plan
GMPA

2000 Difference

between draft & GMPA Resource

consolidation Sustainable community Cultural

destination Minimum management

Residential housing $148 $33 $115 $38 $80 $88 $57 Commercial buildings 191
144 47 156 180 194 230 Lodging/ conference buildings 21 122 (101) 45 42 41 4
Miscellaneous a 163 163 0 187 160 175 131 Nonrevenue space 23 23 0 23 23 23
23

Total $546 $485 $61 $449 $484 $521 $445

Note: Numbers may not total due to rounding. a Parkwide capital costs,
demolition costs, and program capital costs.

Source: Presidio Trust Environmental Impact Statement, July 2001.

Appendix V: Capital Spending Comparison of Presidio Trust Planning
Alternatives

Appendix VI: GAO Contact and Staff Acknowledgments

Page 26 GAO- 02- 87 The Presidio Trust

Ed Zadjura, (202) 512- 3841 In addition, Mark Connelly; Robert Crystal; John
Kalmar, Jr.; Jonathan S. McMurray, Roderick Moore; Mehrzad Nadji; and Donald
Yamada made key contributions to this report. Appendix VI: GAO Contact and
Staff

Acknowledgments GAO Contact Acknowledgments

(141470)

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