closest analogy to the USBG among the components of the Smithsonian is the National Zoological Park, which combines scientific and exhibition functions in the animal world that resemble USBG activities in the plant world. The USBG could take its appropriate position as another star in the firmament of Mall museums of the Institution. Its proximity to them would create a natural connection. It is the sister institution with which the USBG cooperates most extensively now.

The Departments of Agriculture and Interior have central missions that, while to some degree are not inconsistent with the mission of the USBG, would inevitably relegate it to ancillary or minor status within the overall agency.

Upon any such transfer the special relationship of the USBG to the Congress could cease in regard to the provision of plants for Capitol Grounds and the Capitol Complex and the locus of Congressionally sponsored receptions, unless the Congress determined otherwise.

E. Potential for Privatization or Revenue Generation of the USBG

Were the institution to be transferred to operation by a private non-profit organization, it would likely be devoted wholly to a scientific, educational and display museum eliminating the production of plants for use on Capitol Grounds and within the Capitol Complex unless it could compete successfully with the private sector to supply such needs. (In the area of rental of its existing extensive collection of palms it might well succeed in such competition.)

As part of the answer to the question concerning the continuation of the institution as a support agency of Congress, a preliminary analysis has been made to determine whether the institution could ultimately be self sustaining were it to become operated by a private non-profit organization. This analysis also assumes completion of the renovation and the National Garden; the likelihood that a non-profit group would substitute itself for the Congress as the trustee for the renovation of the facility seems low. The possibility of achieving a self-sustaining status would be wholly dependent on the renovation of the conservatory and the completion of the National Garden.

Operations have been identified that could be revenue producing by conversion of certain activities from subsidized status to user-fee status. The analysis does not constitute a recommendation; it is simply an aid to the Committee in its consideration of ways to achieve reductions in appropriations while maintaining or enhancing services to the public. It may be desirable in this regard to authorize the USBG to collect certain revenues even though it retains its present historic status as an instrumentality of the Congress.

It should also be noted that any "privatization" decision would need to address the status of current employees. Previous legislation (Public Laws 99-500 and 99-591) relating to the transfer of House restaurant employees to employment by a private contractor provided certain protections to employees, including pay and job security and

retirement and disability benefits. The experience under such transfer would need to be carefully evaluated in any consideration of "privatization."

Current annual operating costs for the USBG approximate $3.25 million including utilities. It is assumed that reductions in some costs through the elimination of labor and plants for production for Capitol Grounds would be offset by new positions required for education and public programs and care and upkeep of the National Garden on its completion, sales shop, development personnel, security and the like. Under privatization there would be a need to pay for liability and other insurance, a cost likely to approximate $100,000. For analytical purposes maintaining a target operating budget of $3.35 million accordingly appears to be reasonable. This amount, however, does not include any reserves for capital replacements.

Several potential revenue sources may be identified, as follows:

1.

Admission Fee to Conservatory and National Garden

Counterpart institutions around the nation typically charge $6 for
admission. Current attendance at the USBG is somewhat more than
600,000 annually. Attendance at the Smithsonian museums, like the
USBG at present, is free, although the Secretary of the Smithsonian has
publicly stated that an admission fee may need to be considered. The
public may be initially resistant to an admission fee, resulting in fall off
of attendance, at least initially, particularly if other attractions on the
Mall remain free. Nevertheless, a renovated facility together with the
National Garden and suitable promotion are likely to attract enough
additional attendance to merit projecting the current attendance for
potential revenue estimates. Located between the most visited museum
in the world (Air and Space) and the Capitol, the USBG has the best
location of any botanical garden in the nation. The advent of the
neighboring National Museum of Health and Medicine and the National
Museum of the American Indian will add to potential visitor traffic. A
$4 average admission fee would seem reasonable to project.

2.

Reception Fee

600,000 x $4

=

$2,400,000

A renovated facility together with the National Garden will be an
unusually attractive venue for Congressional and other receptions and
dinners. It would provide a unique setting in a unique location. A fee
of $5,000 per event would be reasonable to project in relation to
competitive sites. (The LOC charges $25,000 for rental of its Great
Hall.) The current number of events would no doubt drop, but the
improved setting, and improved environmental controls, which would
extend the availability of the facility for events during the summer,
would strengthen the facility's attraction. A conservative estimate would

project 20 events per year (a reduction of virtually 50% from the current
volume) in the Conservatory and/or the National Garden.

20 x $5,000 =

$100,000

3.

Membership in "Friends of the Botanic Garden"

Memberships could be sold that would provide free admission, discounts
in the Sales Shop and to various educational programs. With proper
promotion, a conservative estimate would be 4,000 members @ $25.

4,000 x $25 = $100,000

4.

Sales Shop

With professional purchasing and management it should be possible to
net, after sales, $144,000 based very conservatively on 20% of gross
income of $720,000, derived on the basis of a projection of $1.20 per
visitor.

5.

600,000 x $1.20 = $720,000 x 20% = $144,0000

Palms and Other Plants for Congressional Receptions

At present an installation of as many as 18 palms from the USBG for a
Congressional reception costs as little as $20 for the entire installation.
The fee goes into the U. S. Treasury and does not inure to the USBG.
Last year there were 434 installations averaging 18 palms. The market
is made up primarily of private sector sponsors who could afford $20 per
palm for an installation. The USBG collection of palms is unlikely to
be replicated numerically in the inventory of private providers, nor is the
USBG's rapid response and pickup matched by the private sector. The
1994 record of 7,812 individual palms installed, reduced by 50% for a
conservative projection, would yield $78,000 @ $20/palm. (A local
prime source of rental palms charges $40 per palm and $25-30 for
delivery and pickup per event.)

Charging a modest admission fee for expanded educational programs,
similar to those charged for Smithsonian Resident Associates programs,
is estimated initially to produce $10,000 net after lecture fees and staff
costs.

$10,000

With a professional development staff it should initially be possible after
a transition period to raise $300,000 annually for specialized purposes,
such as a sponsored or underwritten flower show. Each specialized or
restricted grant would contain an overhead contribution. As the
educational program matures, grants for special education programs
should be able to produce additional donations.

This projection leaves a deficit of over $200,000 per year after conversion. It is obvious from the foregoing that "privatization" could not become at all feasible without the successful imposition of a post-renovation admission fee, which would constitute a profound change of philosophy for an institution on the Mall in Washington. In the absence of such a fundamental change, however, the analysis does indicate how authorization for the collection of certain fees could contribute to a reduction in the costs now incurred against appropriated funds.

The question is asked whether it would be cost effective to terminate the role of the USBG in producing plants for the grounds of the Capitol, Supreme Court and LOC.

The USBG performs this function by buying seeds and "plugs" (five week-old seedlings in 1⁄2 inch square cubes) at minimal cost on the basis of lists of desired plants provided in August of the preceding year by the Senior Landscape Architect. It should be noted that this system enables plantings of some new or unusual flowers, not generally available from commercial growers, to be grown for such use. The USBG nurtures this material until it is ready for planting. As planting seasons arrive crews from Capitol Grounds pick up plants daily at the Shepherd Parkway facility; until planted the material remains at the growing facility under controlled conditions. Plant material tends to be

larger than would be available from a commercial vendor. The colorful cannas that are a hallmark of Capitol Grounds are wintered over (recycled) at Shepherd Parkway until ready for planting. Spring bulbs, however, are now purchased from private vendors. The attractiveness of the grounds has been a source of pride to the Congress and this office. Visitors have noted that the grounds of the Capitol Complex attain a higher standard than the Mall, for example, and have commented on the diversity of floral displays from year to year.

It is estimated that plant material could be purchased from private sources for approximately $120,000 annually, with an additional $25,000 expended on cannas for yearly planting (unless eliminated). Labor costs to produce plant material under present practice is estimated to be $143,000 annually; such production takes up 14% of greenhouse space and 25% of exterior growing space. While conversion to purchase from vendors would result in reduction of three FTE employees, this would be offset to an extent by the increased administrative costs associated with preparing competitive bid packages for proposals from larger growers and administration of contracts to assure proper performance of logistical requirements. Specifications for such bids would need to be tightly drawn.

In addition, a premium might have to be paid to vendors to make logistical accommodations to ship only when requested (for example, if a delay is necessary because the soil is too wet to be worked) or in quantities less than the total order (to avoid having plants lost during staging due to theft or drying out) or to deliver to several designated locations rather than to a single holding area, which is not available because it would not be economical to reserve space in the USBG greenhouses for this purpose. It is in a vendor's interest to ship the plants at its own convenience as soon as possible regardless of planting or our staffing conditions and to shift responsibility to the purchaser for care of the delivered plants. Moreover, in those instances where a vendor has a crop failure or a defective crop it might not be possible readily to substitute plant material from another vendor because of the long lead time for large orders.

Notwithstanding the foregoing observations, most municipalities and park districts do not nave extensive in-house production of landscape materials, and a careful analysis of whether this would be cost effective to contract out appears to be merited.

The question focused on plant production for outdoor use on the grounds, but a similar question is appropriate in regard to indoor plants. Currently the foliage department at the USBG supplies foliage plants to Senate offices and loans plants for public areas throughout the Capitol Hill Complex. Services to Members of the House were terminated in 1992 by order of the Speaker. This function requires about 14% of greenhouse space.

The services provided to the Senate offices are outlined as follows:

Offices can request up to six foliage plants per year from a monthly list of available plants grown at the USBG Production Facility. Ranging in size from a 4" to 10" pot,