Courthouse Construction: Overview of Previous and Ongoing Work	 
(21-JUN-05, GAO-05-838T).					 
                                                                 
Over the last 20 years, GAO has compiled a large body of work on 
courthouse construction and federal real property. The General	 
Services Administration (GSA) owns federal courthouses and funds 
related expenses from its Federal Buildings Fund (FBF)--a	 
revolving fund used to finance GSA real property services,	 
including the construction and maintenance of federal facilities 
under GSA control. The judiciary pays rent to GSA for the use of 
these courthouses, and the proportion of the judiciary's budget  
that goes to rent has increased as its space requirements have	 
grown. In December 2004, the judiciary requested a $483 million  
permanent, annual exemption from rent payments to GSA to address 
budget shortfalls. In this testimony, GAO (1) summarizes its	 
previous work on courthouse construction and (2) provides	 
information on FBF and GAO's ongoing work on the federal	 
judiciary's request for a permanent, annual rent exemption of	 
$483 million from rent to GSA.					 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-05-838T					        
    ACCNO:   A27198						        
  TITLE:     Courthouse Construction: Overview of Previous and Ongoing
Work								 
     DATE:   06/21/2005 
  SUBJECT:   Facility maintenance				 
	     Facility repairs					 
	     Federal courts					 
	     Federal facilities 				 
	     Federal funds					 
	     Funds management					 
	     Real property					 
	     Rent policies					 
	     Revolving funds					 
	     Facility management				 
	     Interagency relations				 
	     Government facility construction			 
	     Financial analysis 				 
	     Federal Buildings Fund				 

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GAO-05-838T

United States Government Accountability Office

GAO Testimony

Before the Subcommittee on Economic Development, Public Buildings and
Emergency Management, Committee on Transportation and Infrastructure,
House of Representatives

For Release on Delivery

Expected at 1:00 p.m. EDT COURTHOUSE

June 21, 2005

CONSTRUCTION

                     Overview of Previous and Ongoing Work

Statement of Mark L. Goldstein, Director Physical Infrastructure Issues

GAO-05-838T

June 21, 2005

COURTHOUSE CONSTRUCTION

Overview of Previous and Ongoing Work

[IMG]

  What GAO Found

GAO's courthouse construction work to date has focused primarily on
courthouse costs, planning, and courtroom sharing. In the 1990s, GAO
reported that wide latitude among judiciary and GSA decision makers in
choices about location, design, construction, and finishes often resulted
in expensive features in some courthouse projects. The judiciary has since
placed greater emphasis on cost consciousness in the guidelines for
courthouse construction that it provides to GSA. Related to planning, GAO
also found in the 1990s that long-range space projections by the judiciary
were not sufficiently reliable, and that the judiciary's 5-year plan did
not reflect all of the its most urgently needed projects. The judiciary
has made changes to improve its planning and data reliability. During
previous work, GAO also found that the judiciary did not track sufficient
courtroom use data to gauge the feasibility of courtroom sharing.

GSA has been unable to generate sufficient revenue through FBF over the
years and thus has struggled to meet the requirements for repairs and
alterations identified in its inventory of owned buildings. By 2002, the
estimated backlog of repairs had reached $5.7 billion, and consequences
included poor health and safety conditions, higher operating costs,
restricted capacity for modern information technology, and continued
structural deterioration. GSA's inability to generate sufficient revenue
in the past has been compounded by restrictions imposed on the rent GSA
could charge federal agencies. Consequently, GAO recommended in 1989 that
Congress remove all rent restrictions and not mandate any further
restrictions, and the most restrictions have been lifted. Some narrowly
focused rent exemptions, many of limited duration, still exist today, but
together they represent roughly a third of the $483 million permanent
exemption the judiciary is currently requesting from GSA. The judiciary
has requested the exemption, equaling about half of its annual rent
payment, because of budget problems it believes that its growing rent
payments have caused. GSA data show that GSA-owned space, occupied by the
judiciary, has increased significantly. GAO is currently studying the
potential impact of such an exemption on FBF, but past GAO work shows rent
exemptions have been a principal reason why FBF has accumulated
insufficient money for capital investment.

                 United States Government Accountability Office

Mr. Chairman, Ranking Minority Member, and Members of the Subcommittee:

Thank you for the opportunity to testify before you today on our work
related to federal courthouse construction. As you know, we have done
considerable work on federal courthouse construction and other related
federal real property issues over the past 20 years. My testimony today
will (1) summarize our previous work on this topic and (2) provide
information on the Federal Buildings Fund (FBF) and our ongoing
congressionally requested work related to the federal judiciary's request
for a permanent, annual exemption of $483 million from rent that the
General Services Administration (GSA) charges the judiciary to occupy
space in courthouses. GSA owns federal courthouses and funds
courthouse-related expenses from FBF-a revolving fund used to fund GSA
real property services, including space acquisition and asset management
for federal facilities that are under GSA control. The exemption the
judiciary is seeking would represent about half of the judiciary's 2004
rent payment of $909 million, and the judiciary represents one of GSA's
largest tenants. My testimony today will highlight the following points:

o  	GAO's courthouse construction work to date has focused primarily on
courthouse costs, planning, and courtroom sharing. In the 1990s, we found
that wide latitude in choices made by GSA and the judiciary about
location, design, construction, and finishes often resulted in expensive
features in some courthouse projects. Since then, the judiciary has placed
greater emphasis on cost consciousness in its courthouse construction
guidance for GSA. In the 1990s, we also found that the judiciary's
longterm space projections were not sufficiently reliable, and that the
judiciary's 5-year plan did not reflect all of the judiciary's most
urgently needed projects. Since then, the judiciary has made the changes
we recommended. With regard to courtroom sharing that could help reduce
costs, we found that the judiciary did not collect sufficient data to
determine how much sharing could occur. The judiciary disagreed with this
finding and the related recommendation.

o  	GSA has historically been unable to generate sufficient revenue
through FBF and has thus struggled to meet the requirements for repairs
and alterations identified in its inventory of owned buildings. By 2002,
the estimated backlog of repairs had reached $5.7 billion, and
consequences included poor health and safety conditions, higher operating
costs, restricted capacity for modern information technology, and
continued structural deterioration. GSA charges agencies rent for the
space they occupy, and the receipts from the rent are deposited in FBF and
are then available for the purposes of the fund. Restrictions imposed on
the rent

Background

GSA could charge federal agencies have compounded the agency's inability
to address its backlog in the past. Consequently, we recommended in 1989
that Congress remove all rent restrictions and not mandate any further
restrictions, and most rent restrictions have been lifted. The GSA
Administrator has the authority to grant rent exemptions, and all of the
current exemptions are limited to single buildings or were granted for a
limited duration. Together, these current exemptions represent about a
third of the $483 million permanent exemption the judiciary is requesting
from GSA. The judiciary has requested the exemption, equal to about half
of its annual rent payment, because of budget problems that it believes
its growing rent payments have caused. GSA data show that one reason the
judiciary's rent is increasing is that the space it occupies is also
increasing. We are currently studying the potential impact of such an
exemption on FBF, but our past work shows that rent exemptions were a
principal reason why FBF has accumulated insufficient money for capital
investment.

Since the early 1990s, GSA and the federal judiciary have been carrying
out a multibillion-dollar courthouse construction initiative to address
the judiciary's growing needs. In 1993, the judiciary identified 160 court
facilities that required either the construction of a new building or a
major annex to an existing building. From fiscal year 1993 through fiscal
year 2005, Congress appropriated approximately $4.5 billion for 78
courthouse construction projects. Since fiscal year 1996, the judiciary
has used a 5year plan to prioritize new courthouse construction projects,
taking into account a court's need for space, security concerns, growth in
judicial appointments, and any existing operational inefficiencies. The
judiciary's most recent 5-year plan (covering fiscal years 2005 through
2009) identifies 57 needed projects that are expected to cost $3.8
billion. GSA and the judiciary are responsible for managing the
multibillion-dollar federal courthouse construction program, which is
designed to address the judiciary's long-term facility needs. The
Administrative Office of the United States Courts (AOUSC), the judiciary's
administrative agency, works with the nation's 94 judicial districts to
identify and prioritize needs for new and expanded courthouses. The U.S.
Courts Design Guide (Design Guide) specifies the judiciary's criteria for
designing new court facilities and sets the space and design standards
that GSA uses for courthouse construction. First published in 1991, the
Design Guide has been revised several times to address budgetary
considerations, technological advancements, and other issues, and the
guide is currently undergoing another revision.

GSA provides a range of real property services including maintenance,
repairs, alterations, and leasing to numerous federal agencies and the
federal judiciary. The Public Buildings Amendments of 1972 made several
important revisions to the Federal Property and Administrative Services
Act. First, the 1972 law created a new revolving fund, later named FBF.
Next, it required agencies that occupy GSA-controlled buildings to pay
rent to GSA, which is to be deposited in the revolving fund to be used for
GSA real property services.1 GSA charges rent based on appraisals for
facilities it owns and the actual lease amount for facilities it leases on
the tenants' behalf.2 The legislation also authorized any executive agency
other than GSA that provides space and services to charge for the space
and services. The rent requirement is intended to reduce costs and
encourage more efficient space utilization by making agencies accountable
for the space they use. GSA proposes spending from FBF for courthouses as
part of the President's annual budget request to Congress.

GSA has been using the judiciary's 5-year plan for new courthouse projects
since fiscal year 1996 to develop requests for both new courthouses and
expanded court facilities. GSA also prepares feasibility studies to assess
various courthouse construction alternatives and serves as the central
point of contact with the judiciary and other stakeholders throughout the
construction process. For courthouses that are to be selected for
construction, GSA prepares detailed project descriptions called
prospectuses that include the justification, location, size, and estimated
cost of the new or annexed facility. GSA typically submits two
prospectuses to Congress. The first prospectus generally requests
authorization and funding to purchase the site and design the building,
and the second prospectus generally requests authorization and funding for
construction, as well as any additional funding needed for site and design
work. Once Congress authorizes and appropriates funds for a project, GSA
refines the project budget and selects private-sector firms for the design
and construction work. Figure 1 illustrates the process for planning,
approving, and constructing a courthouse project.

1Previously, Congress appropriated money to GSA, and GSA paid for agency
space requirements.

2Rent is based on approximate commercial charges for comparable space and
services. This method was chosen over a cost-recovery basis in order to
produce more income so that the revolving fund could finance construction
and major repairs.

a

Figure 1: Development and Approval Process for Funding a Typical
Courthouse Planning

External Stakeholders

General Services Administration and Prospectus Development

Site and Design Funding Request

                                   2-3 years

Construction Funding Request

2 years

Construction Begin Construction

3-5 years

Construction Completed

Source: GSA.

aThis figure shows the typical process for a project that is procured
through the design bid-build method. Projects may also be procured using
the design-build method. Such projects require site, design, and
construction funding at the same time and therefore may be submitted to
OMB and Congress only once, rather than twice as shown in this figure.

bCourthouse projects are financed through the Federal Buildings Fund
(FBF), a revolving fund that is used to fund GSA real property activities
with rent from tenant agencies. The President's annual budget request to
Congress proposes spending from FBF. GSA submits detailed project
descriptions called prospectuses to Congress as part of its Capital
Investment Program. Prospectuses request authorization for new
construction and for repair and alteration projects, including
courthouses.

Courthouse projects continue to be costly, and increasing rents and
budgetary constraints have given the judiciary further incentive to
control its costs. The judiciary pays rent to GSA for the use of the
courthouses, which GSA owns, and the proportion of the judiciary's budget
that goes to rent has increased as the judiciary's space requirements have
grown. According to the judiciary, rent currently accounts for just over
20 percent of its operating budget and is expected to increase to over 25
percent of its operating budget in fiscal year 2009, when the rental costs
of new court buildings are included. Additionally, in fiscal year 2004,
the judiciary faced a budgetary shortfall and, according to the judiciary,
reduced its staff by 6 percent.

In September 2004, the judiciary announced a 2-year moratorium on new
courthouse construction projects as part of an effort to address its
increasing operating costs and budgetary constraints. During this
moratorium, AOUSC officials said that they plan to reevaluate the
courthouse construction program, including reassessing the size and scope
of projects in the current 5-year plan, reviewing the Design Guide's
standards, and reviewing the criteria and methodology used to prioritize
projects. Judiciary officials also said that they plan to reevaluate their
space standards in light of technological advancements and opportunities
to share space and administrative services.

Our work in the 1990s showed that decision makers within GSA and the
judiciary had wide latitude in making choices that significantly affected
costs. The judiciary's 5-year plan did not reflect all of the judiciary's
most urgently needed projects. However, the judiciary has since made some
of our recommended changes. We also found that the judiciary did not
compile data that would allow it to determine how many and what types of
courtrooms it needs. The judiciary concluded that additional data and
analysis were not necessary.

  GAO's Courthouse Construction Work Has Focused on Costs, Planning, and
  Courtroom Sharing

Courthouse Construction Costs

In 1995, we testified that a primary reason for differences in the
construction costs of courthouses was that GSA and the judiciary had wide
latitude in making choices about the location, design, construction, and
finishes of courthouse projects.3 These choices were made under
circumstances in which budgets or designs were often committed to before
requirements were established. In addition, design guidance was flexible,
and systematic oversight was limited. As a result, some courthouses had
more expensive features than others.4 While recognizing that some
flexibility was needed and that some costly features may be justifiable,
we found that the flexibility in the process should have been better
managed. We recommended that GSA and AOUSC

o  	clearly define the scope of construction projects and refine
construction cost estimates before requesting project approval and final
funding levels;

o  	establish and implement a systematic and ongoing project oversight and
evaluation process to compare courthouse projects, identify opportunities
for reducing costs, and apply lessons learned to future projects; and

o  	establish a mechanism to monitor and assess the use of flexibility
within design guidance to better balance choices made about courthouse
design, features, and finishes.

GSA and the judiciary said that since 1996, they have also taken several
actions to improve the courthouse construction program, including
developing priority lists of locations needing additional space (the
5-year plan), revising the Design Guide, and placing greater emphasis on
cost consciousness in its courthouse construction guidance for GSA.

In a 2004 congressional briefing, we reported that GSA had attributed some
cost growth in courthouse construction projects to a number of factors,
including changes in the scope of the projects. In Buffalo, New York, for
example, GSA had to change the scope of the courthouse project and acquire
an entirely new site in order to achieve the necessary securitybased
setbacks from the street. The judiciary said that funding delays have
slowed the progress of the program by creating a backlog of projects, and

3GAO, Federal Courthouse Construction: More Disciplined Approach Would
Reduce Costs and Provide for Better Decisionmaking, GAO/T-GGD-96-19
(Washington, D.C.: Nov. 8, 1995).

4GAO/T-GGD-96-19.

increased costs by 3 to 4 percent per year because of inflation. The
judiciary also indicated that limiting the size of courthouses to stay
within budget has resulted in space shortages sooner than expected at some
courthouses. In a 2004 report related specifically to a new federal
courthouse proposed for Los Angeles, we found that the government will
likely incur additional construction and operational costs beyond the $400
million estimated as needed for the new courthouse.5 Some of these
additional costs are attributable to operational inefficiencies.
Specifically, the court is split between a new building and an existing
courthouse in Los Angeles, both of which will, according to the judiciary,
require additional courtrooms to meet the district court's projected space
requirements in 2031.

Judiciary Long- and Short-Term Space Planning

In 1993, we reviewed the long-term planning process used by the judiciary
to estimate its space requirements.6 We found that AOUSC's process for
projecting long-term space requirements did not produce results that were
sufficiently reliable to form the basis for congressional authorization
and funding approval of new construction and renovation projects for court
space. Specifically, three key problems impaired the accuracy and
reliability of the judiciary's projections. First, AOUSC did not treat all
districts consistently. For example, the procedure used to convert
caseload estimates to staffing requirements did not reflect differences
among districts that affect space requirements. Second, according to
AOUSC's assumptions about the relationship between caseloads and staff
needs, many district baseline estimates did not reflect the districts'
current space requirements. For example, when a district occupied more
space than the caseload warranted, future estimates of needs were
overstated. Third, AOUSC's process did not provide reliable estimates of
future space requirements because the methodology used to project
caseloads did not use standard acceptable statistical methods.

We recommended that AOUSC revise the long-term planning process to
increase consistency across regions, establish accurate caseload baselines
for each district, and increase the reliability of the projected caseloads
by

5GAO, L.A. Federal Courthouse Project: Current Proposal Addresses Space
Needs, but Some Security and Operational Concerns Would Remain, GAO-05-158
(Washington, D.C.: Dec. 20, 2004).

6GAO, Federal Judiciary Space: Long-Range Planning Process Needs Revision,
GAO/GGD-93-132 (Washington, D.C.: Sept. 28, 1993).

applying an accepted statistical methodology and reducing subjectivity in
the process. In May 1994, we testified that the judiciary had implemented
some of these recommendations.7 For example, on the basis of our
recommendation, whenever a decision was made to proceed on a particular
building project, AOUSC provided GSA with detailed 10-year space
requirements for prospectus development and an overall summary of its
projected 30-year space requirements for purposes of site planning. In
2001, we reported that since 1994, AOUSC had continued its efforts to
improve its long-term planning process in implementing our previous
recommendations.8 Specifically, the judiciary began (1) using an automated
computer program that applied Design Guide standards to estimate space
requirements, (2) employing a standard statistical forecasting technique
to improve caseload projections, and (3) providing GSA with data on its
10-year projected space requirements to support the judiciary's request
for congressional approval of funds to build new facilities.

In 1996 we reported that the judiciary had developed a methodology for
assessing project urgency and a short-term (5-year) construction plan to
communicate its urgent courthouse construction needs.9 Our analysis
suggested that its 5-year plan did not reflect all of the judiciary's most
urgent construction needs. We found that the judiciary, in preparing the
5year plan, developed urgency scores for 45 projects, but did not develop
urgency scores for other locations that, according to AOUSC, also needed
new courthouses. Our analysis of available data on conditions at the 80
other locations showed that 30 of them likely would have had an urgency
score higher than some projects in the plan. We recommended that the
Director of AOUSC work with the Judicial Conference Committee on Security,
Space, and Facilities to make improvements to the 5-year plan, including
fully disclosing the relative urgency of all competing projects and
articulating the rationale or justification for project priorities,
including information on the conditions that are driving urgency-such as
specific security concerns or operational inefficiencies. In commenting on

7GAO, Federal Judiciary Space: Progress Is Being Made to Improve the
Long-Range Planning Process, GAO/T-GGD-94-146 (Washington, D.C.: May 4,
1994).

8GAO, Federal Judiciary Space: Update on Improvement of the Long-Range
Planning Process, GAO-01-308R (Washington, D.C.: Jan. 25, 2001).

9GAO, Courthouse Construction: Improved 5-Year Plan Could Promote More
Informed Decisionmaking, GAO/GGD-97-27 (Washington, D.C.: Dec. 31, 1996)
and GAO/T-GGD-96-19.

the report, AOUSC generally agreed with our recommendations and indicated
that many of the improvements we recommended were already under
consideration. It also recognized that some courthouse projects, which
were currently underway, may have had lower priority scores because the
funding had already been provided by the time the priority scores were
developed.

                               Courtroom Sharing

In 1997, we reported that the judiciary maintains a general practice of,
whenever possible, assigning a trial courtroom to each district judge.10
However, we also noted that the judiciary did not compile data on how
often and for what purposes courtrooms are actually used and it did not
have analytically based criteria for determining how many and what types
of courtrooms are needed. We concluded that the judiciary did not have
sufficient data to support its practice of providing a trial courtroom for
every district judge. We recommended that the judiciary

o  	establish criteria for determining effective courtroom utilization and
a mechanism for collecting and analyzing data at a representative number
of locations so that trends can be identified over time and better
insights obtained on court activity and courtroom usage;

o  	design and implement a methodology for capturing and analyzing data on
usage, courtroom scheduling, and other factors that may substantially
affect the relationship between the availability of courtrooms and judges'
ability to effectively administer justice;

o  	use the data and criteria to explore whether the one-judge,
one-courtroom practice is needed to promote efficient courtroom management
or whether other courtroom assignment alternatives exist; and

o  	establish an action plan with time frames for implementing and
overseeing these efforts.

In 1999, AOUSC contracted for a study of the judiciary's facilities
program to address, among other things, the courtroom-sharing issue and
identify ways to improve its space and facility efforts. As part of this
study, the contractor analyzed how courtrooms are used, assigned, and
shared by judges. We reviewed the courtroom use and sharing portion of
this study

10GAO, Courthouse Construction: Better Courtroom Use Data Could Enhance
Facility Planning and Decisionmaking, GAO/GGD-97-39 (Washington, D.C.: May
19, 1997).

and concluded, along with others, that the study was not sufficient to
resolve the courtroom sharing issue.11 We recommended that the Director,
AOUSC, in conjunction with the Judicial Conference's Committee on Court
Administration and Case Management and Committee on Security and
Facilities, design and implement cost-effective research more in line with
the recommendations in our 1997 report. We also recommended that AOUSC
establish an advisory group made up of interested stakeholders and experts
to assist in identifying study objectives, potential methodologies, and
reasonable approaches for doing this work. In responding to the report,
AOUSC disagreed with our recommendations because it believed the
contractor study was sufficient and additional statistical studies would
not be productive.

In a 2002 report, we found that the judiciary's policies recognized that
senior district judges with reduced caseloads were the most likely
candidates to share courtrooms and some active and senior judges were
sharing courtrooms in some locations primarily when there were not enough
courtrooms for all judges to have their own courtroom.12 However, because
of the judiciary's belief in the strong relationship between ensured
courtroom availability and the administration of justice and the wide
discretion given to circuits and districts in determining how and when
courtroom sharing may be implemented, we concluded that there would not be
a significant amount of courtroom sharing in the foreseeable future, even
among senior judges.

We have reported over the years that GSA has struggled to address its
repair and alteration needs identified in its inventory of owned
buildings. In 1989, we found that FBF's inability to generate sufficient
revenue in the past was due, in large part, to restrictions imposed on the
amount of rent GSA could charge federal agencies, and we recommended in
1989 that Congress remove all rent restrictions and not mandate any
further restrictions. It is also important to note that not all federal
property is subject to FBF rent payments because GSA does not control all
federal properties. We are currently conducting a review for this
committee

11GAO, Courthouse Construction: Sufficient Data and Analysis Would Help
Resolve the Courtroom-Sharing Issue, GAO-01-70 (Washington, D.C.: Dec. 14,
2000).

12GAO, Courthouse Construction: Information on Courtroom Sharing,
GAO-02-341 (Washington, D.C.: Apr. 12, 2002).

  Issues Related to FBF

regarding the issues associated with the judiciary's request of a $483
million permanent, annual exemption from rent payments to GSA.

Rent Restrictions Have Historically Contributed to Large Repair Backlogs

As part of our series on high-risk issues facing the federal government,
we have reported that GSA has struggled over the years to meet the
requirements for repairs and alterations identified in its inventory of
owned buildings.13 By 2002, its estimated backlog of repairs had reached
$5.7 billion. We have reported that adverse consequences of the backlog
included poor health and safety conditions, higher operating costs
associated with inefficient building heating and cooling systems,
restricted capacity to modernize information technology, and continued
structural deterioration resulting from such things as water leaks.14 We
reported that FBF has not historically generated sufficient revenue to
address the backlog.

On the basis of the work we did in the late 1980s and early 1990s, we
concluded that federal agencies' rent payments provided a relatively
stable, predictable source of revenue for FBF, but that this revenue has
not been sufficient to finance both growing capital investment needs and
the cost of leased space. We found that FBF's inability to generate
sufficient revenue during that time was compounded by restrictions imposed
on the amount of rent GSA could charge federal agencies. Congress and OMB
had instituted across-the-board rent restrictions that reduced FBF by
billions of dollars over several years, and later continued to restrict
what GSA could charge some agencies, such as the Departments of
Agriculture and Transportation. Because these rent restrictions were a
principal reason why FBF has accumulated insufficient money for capital
investment, we recommended that Congress remove all rent restrictions and
not mandate any further restrictions.15

According to GSA, most of the restrictions initiated by Congress and OMB
have been lifted. However, the GSA Administrator has the authority to
grant rent exemptions to agencies. GSA data show that several rent
exemptions are currently in place. In general, these exemptions are
narrowly focused on a single building or even part of a single building or

13GAO, High-Risk Series: Federal Real Property, GAO-03-122 (Washington,
D.C.: Jan. 2003).

14GAO-03-122.

15GAO, Federal Office Space: Increased Ownership Would Result in
Significant Savings, GAO/GGD-90-11 (Washington, D.C.: Dec. 22, 1989).

are granted for a limited duration. Table 2 summarizes the current rent
exemptions that exist in GSA buildings, according to data GSA provided.

Table 2: Current Rent Exemptions in GSA Buildings

Estimated forgone Agency, address Justification annual rent

Smithsonian Institution, National Museum of the American Indian, New York,
NY

Legislatively mandated exemption. $4,566,632 U.S. Postal Service, 271 Cadman GSA
granted an exemption to the Postal Service as part of a 99-year $1,820,000
                              Plaza, New York, NY

rent-free agreement with GSA as a condition of the negotiated sale of the
building in lieu of a transfer of funds from GSA.

    National Building Museum,   Legislatively mandated exemption.  $1,300,000 
             5th & F                                               
      Sts., Washington, DC                                         
                                GSA granted an exemption based on             
Woodrow Wilson Center, 1300   funding limitations imposed by    $5,400,000
       Pennsylvania Ave.,      Congress and the compelling purpose 
         Washington, DC           of memorializing the nation's    
                                         28th President.           

Department of Commerce, 14th St. & GSA granted an exemption covering the
area of the building that is $400,000 Constitution Ave., Washington, DC
maintained at the expense of the tenant agency.

National Imaging and Mapping Agency, GSA granted a rent exemption of 50
percent because the tenant $7,038,552 M Street, SE, Washington, DC agreed
to pay all maintenance, capital improvements, and security expenses due.

Department of Agriculture,   GSA granted a 100-percent rent    $52,406,234 
            multiple           exemption for the tenant's three   
                              headquarters buildings for fiscal   
locations, Washington, DC  years 1996 through 2006 to allow    
                              the                                 
                               tenant to accumulate funds needed  
                                  for major repairs on these      
                              buildings. The tenant will then pay 
                                       for the repairs.           

Railroad Retirement Board, nationwide GSA granted a partial rent exemption
so that the tenant would only pay $3,655,063 locations for the actual
costs on these buildings through fiscal year 2013.

Centers for Medicare & Medicaid GSA granted a partial rent exemption so
that the tenant would only pay $15,717,264 Services, nationwide locations
for the actual costs on these buildings through fiscal year 2013.

Social Security Administration, GSA granted a partial rent exemption so
that the tenant would only pay $72,417,477 Washington, DC for the actual
costs on these buildings through fiscal year 2013.

Department of State, 1801   GSA granted an exemption for space  $1,330,740 
                                  used by the President's G-8      
       Pennsylvania Ave.,      Economic Summit staff from August   
         Washington, DC          2004 to November 2004 because     
                              neither the Department of State nor  
                                  the G-8 Economic Summit has      
                               received appropriated funding for   
                                     rent payments to GSA.         

International Broadcasting Board of GSA granted an exemption in 2004 based
on the tenant's certification $1,016,195 Governors, Washington, DC that it
did not have funds available to meet the obligation. A new longterm
occupancy agreement is being negotiated.

Presidential and Armed Forces GSA granted an exemption in 2004 because it
found that it was not $2,415,440
Inaugural Committees, Mary E. Switzer practical or feasible for the tenant
to pay the rent.
Building, Washington, DC

U.S. Election Assistance Commission, GSA granted an exemption for fiscal
year 2004 because the tenant $100,060 Washington, DC was appropriated only
12 percent of its authorized budget and did not

have sufficient money to pay its rent.

                               Total $169,583,657

Source: GAO analysis of GSA data.

Note: According to GSA, the U.S. Senate does not pay market rates for its
GSA facilities (district offices) because of an October 1996 signed
memorandum of agreement between the U.S. Senate and GSA regarding
tenant-requested improvements, but the U.S. Senate has not been granted a
formal exemption

Direct Appropriations to FBF Generally Benefit the Fund

In fiscal year 2006, according to data from GSA, $7.7 billion in expected
FBF revenue is projected to come from rent paid by over 60 different
federal tenant agencies, such as the Departments of Justice and Homeland
Security. Congress sets annual limits on how much FBF revenue can be spent
for various activities through the appropriations process. In addition,
Congress may appropriate additional amounts for FBF and between fiscal
year 1990 and fiscal year 2005, Congress made direct appropriations into
FBF for all but 3 fiscal years.16 This additional funding was not tied
directly to any specific projects or types of projects. The statutory
language relating to the direct appropriations states that additional
amounts are being deposited into FBF for the purposes of the fund.

It is also important to note that not all federal property is subject to
FBF rent payments. While GSA owns and leases property and provides real
estate services for numerous federal agencies, we reported in 2003 that
GSA owns only about 6 percent of federal facility space in terms of
building floor area. Other agencies, including the Department of Defense
(DOD), the U.S. Postal Service, and the Department of Energy have
significant amounts of space that they own and control without GSA
involvement. In all, over 30 agencies control real property assets.
Propertyowning agencies do not pay rent into FBF or receive services from
GSA for the space they occupy in the buildings that they own. For example,
the Pentagon and military bases are owned by DOD, and national parks
facilities are owned by Interior. As a result, these facilities are
maintained by DOD and Interior, respectively.

Our Ongoing Work on the Judiciary's Request for an Exemption from Rent
Payments to FBF

In December 2004, the judiciary requested that the GSA Administrator grant
a $483 million permanent, annual exemption from rent payments- an amount
equal to about 3 times the amount of all other rent exclusions combined.
This exemption would equal about half of the judiciary's $900 million
annual rent payment to GSA for occupying space in federal

16Congress did not make direct appropriations into FBF in fiscal years
1998, 2000, and 2005.

courthouses. The judiciary has expressed concern that the growing
proportion of its budget allocated to GSA rent payments is having a
negative effect on court operations. According to GSA data, the judiciary
increased the owned space it occupies by 15 percent from 2000 to 2004. In
February 2005, the GSA Administrator declined the request because GSA
considered it unlikely that the agency could replace the lost income with
direct appropriations to FBF. In April 2005, this subcommittee requested
that we look into issues associated with the judiciary's request for a
permanent, annual exemption from rent payments to GSA. Our objectives for
this work are to determine the following:

1. 	How are rent payments calculated by GSA and planned and accounted for
by the judiciary?

2. 	What changes, if any, has the judiciary experienced in rent payments
in recent years?

3. What impact would a permanent rent exemption have on FBF?

Our work is still underway, but our past work on related issues shows that
rent exemptions have been a principal reason why FBF has accumulated
insufficient money for capital investment.

We conducted our work for this testimony in June 2005 in accordance with
generally accepted government auditing standards. During our work, we
reviewed past GAO work on federal real property and courthouse
construction issues, analyzed AOUSC and GSA documents, and interviewed
AOUSC and GSA officials.

Mr. Chairman, this concludes my prepared statement. I would be pleased to
respond to any questions that you or the other Members of the Subcommittee
may have.

For further information about this testimony, please contact me at (202)
512-2834 or [email protected]. Keith Cunningham, Randy De Leon, Maria
Edelstein, Bess Eisenstadt, Joe Fradella, Susan Michal-Smith, David
Sausville, and Gary Stofko also made key contributions to this statement.

  Scope and Methodology

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