President. Some costs are those which an ordinary property owner with property like the San Clemente property would have been required to incur in the normal course of maintaining their property. The remaining costs were for installation of a sprinkling system, which served no security purpose and did benefit the President. Thus, the entire amounts of $8,800 in the 1970 contract and $1,100 in the 1971 contract should be income to the President.

The total amounts for all landscape maintenance cost that should be included in income would thus be $5,799 in 1969, $15,635 in 1970, $1,593 in 1971 and $391 in 1972.

4. Expenditures at Key Biscayne

INTRODUCTION

On December 19, 1968, President Nixon purchased two houses at 500 and 516 Bay Lane, Key Biscayne, Florida. At that time, Mr. C. G. Rebozo owned a house next door at 490 Bay Lane. Subsequent to the President's purchase, the Federal Government leased the two houses next to Mr. Rebozo's house, at 478 and 468 Bay Lane. These houses are used as office facilities for Secret Service and GSA personnel, as a telecommunications facility for the White House communications agency and as an office for military aides to the President.

Since the President's purchase, the Government has secured this area of five properties by enclosing it into a single compound. The total Government expenditures in the compound are listed by GSA at $1,180,500; approximately $600,000 of this total was spent by GSA and Secret Service on the President's two properties.43 Many of the improvements on these two properties did not primarily benefit the President and serve solely a security function. For example, bulletproof glass was installed in all windows and doors of the residences, and automatic door openers were installed because the bullet-proof glass made the doors too heavy for manual operation. A Secret Service command post was built on the property at 516 Bay Lane. Sophisticated flood-lighting systems were placed on the property. Various noise detection devices were implanted, and Secret Service outlook posts were established. As in the case of San Clemente, installation of these devices, plus a remodeling of the landscaping described below, required that the grounds within the Key Biscayne compound be torn up considerably. The committee staff believes that the cost involved in the above expenditures should clearly not be taxable income to the President.

Other expenditures not discussed below were of a more questionable nature and were closely reviewed by the staff. For example, extensive additional paving work was done at 500 and 516 Bay Lane at a cost of $5,100 which may have significantly improved the President's properties. The staff believes that this expenditure should not be included in taxable income because it appears that the expenditure may aid Secret Service somewhat in controlling the movement of vehicles into and out of the compound. In addition, the staff did not recommend that the cost of a new heating system installed at 500

43 United States General Accounting Office Report to the Congress: Protection of the President at Key Biscayne and San Clemente (With Information on Protection of Past Presidents) B-155950 12 (Dec. 18, 1973).

Bay Lane (at a cost of $1,870) be included in income. The staff reached this conclusion because Secret Service prefers to have electric heating systems rather than gas heating systems and initiated the request for this reason. Thus, the expenditure was incurred primarily at Secret Service request and should not result in taxable income even though it resulted in a significant economic benefit to the President.

However, there were significant additional expenditures which the staff feels primarily benefited the President and should be taxable income to him. The following is a detailed discussion of the facts relating to these expenditures and the staff's conclusion as to the amount of its taxable income to the President.

A. SHUFFLEBOARD COURT

In 1969, a shuffleboard court was installed at 516 Bay Lane at a cost of $2,000. The entire cost was paid by GSA.

Facts

As a result of the construction of the command post, a concrete slab shuffleboard court which existed on the President's property was destroyed. To replace the shuffleboard court which was destroyed, GSA installed a shuffleboard court made of terrazzo construction. The cost of the court was $2,000.

Staff Conclusion

The staff believes that of the total cost of the new shuffleboard court of $2,000, $1,600 should be taxable income to the President. Basis for Conclusion

The staff believes that the shuffleboard court destroyed during the construction of the command post could be replaced by the Government because the command post was constructed for security purposes. However, since the old shuffleboard court was made of concrete slab, the new shuffleboard court should have been comparably built. The additional cost incurred by replacing the concrete court with a terrazzo court was not required for security purposes. The staff has estimated that a comparable concrete court could have been built at a cost of approximately $400. As a result, the staff has concluded that the $1,600 increase in cost attributable to the terrazzo construction should be taxable income to the President.

B. FENCE AND HEDGE SYSTEM

In 1969, a fence and hedge system was installed around the Key Biscayne compound at a total cost of $71,100. The total amount of this cost was paid by GSA.

Facts

In a letter to the Commissioner of the Public Building Service (GSA), dated December 20, 1968, (Exhibit VII-53) Mr. David Phillips (GSA) listed the security requirements at Key Biscayne. Item #1 of this letter requires that the existing low level fence be removed and replaced with a "seven-foot-high security-type fence," and that a hedge be planted along the entire length of the fence for screening purposes. Testimony before the subcommittee indicated that the

GSA design for this fence was submitted to Mr. Charles G. Rebozo, and after being shown to the President and his family, it was decided that this design was not acceptable and a fence similar to the White House fence was desired.44

Subsequently, an additional design was prepared and was ready for presentation to Mr. Rebozo and the President-elect on December 20, 1968. This design was approved, and a contract was awarded to Snead Construction Company for $49,446. A subsequent change order to the original contract was made which resulted in a total contract price of $66,314 (Exhibit VII-54).

45

Testimony before the Government Activities Subcommittee also indicated that Secret Service officials agreed that a more conventional anodized chain link fence could have been installed instead of the anodized aluminum fence without sacrificing any security.* The cost of such a chain link fence has been estimated by the contractor who installed the fence at Key Biscayne at less than $10,000. The additional cost of installing the required electronic gate equipment would be approximately an additional $10,000.46 The staff has contacted the contractor who installed the fence and he has stated that most of the increased cost resulted from three factors: (1) the attractive special design of the fence, (2) the fact that the fence had to be custom built, and (3) the fact that solid aluminum bars were used for the fence pickets.

Staff Conclusion

The staff believes that of the total cost of the fence $12,679 should be taxable income to the President.

Basis for Conclusion

The staff believes that the installation of a fence, as initially requested by the Secret Service, would primarily serve a security purpose and not result in any taxable income to the President. However, it is clear that the original security requirements were substantially modified, resulting in a substantial increase in cost, because of the personal desires of the President and his family. As a result, the staff has concluded that a portion of the additional cost resulting from the President's personal tastes should be taxable income to him. Since the fence surrounds all five properties at Key Biscayne, the staff believes it is appropriate to allocate to the President only that part of the fence which is on his property. According to GAO, 438 feet out of a total 800 feet of fence are on the President's property. Thus, the amount of the excess cost allocable to the fence on the President's property is $25,357. The staff believes that one-half of this amount, or $12,679, should be taxable income to the President.

C. LANDSCAPE CONSTRUCTION

In 1969, GSA conducted substantial landscape construction operations at the Key Biscayne compound costing $47,200.

44 Expenditure of Federal Funds in Support of Presidential Properties, Hearings Before a Subcommittee of the Committee on Government Operations, House of Representatives, 93d Cong., 1st Sess., 45 (October 10, 11, 12, and 15, 1973).

45 Expenditure of Federal Funds in Support of Presidential Properties, Hearings Before a Subcommittee of the Committee on Government Operations, House of Representatives, 93d Cong., 1st Sess., (October 10, 11, 12, and 15, 1973).

46 The staff has verified these approximate costs with a local fence contracting firm.

Facts

At the request of the Secret Service, the landscaping of the two properties purchased by the President was completely redone by early 1969 (Exhibit VII-55). Prior to the President's ownership, the grounds had an open perimeter and had various trees and shrubs placed within the property. Because of the small size of the compound, Secret Service indicated that it desired to have the perimeter enclosed with tall fences and hedges and to remove all obstacles from two to eight feet above ground within the perimeter. It was felt that this style of landscaping would best enclose the property from the outside and would make any intruders most visible if they penetrated into the properties. To accomplish this goal, substantial changes in the landscaping were undertaken at an approximate cost, according to the General Accounting Office, of $47,200.48

47

In a GSA change order dated June 16, 1969, (Exhibit VII-56), it is indicated that the changes included in this order were caused in part because some already ordered shrubs could not be obtained, but also because the President had expanded the 516 Bay Lane residence and because "as the job progressed, changes were made to coincide with the President's desires." The total change order amounted to $4,685.70. Related documents indicate that $3,414 of this total were caused by the "design additions" such as the installation of a flower garden and the addition of a flagstone patio area made pursuant to the President's request.

Staff Conclusion

The staff believes that of the entire amount paid by GSA, $3,414 should be taxable income to the President.

Basis for Conclusions

The staff has no substantial evidence that the landscape construction work required to restore the President's properties after the installation of security devices provided a substantial benefit to the President. However, the staff believes that some additional costs were incurred (beyond the amounts needed to restore the property) pursuant to the President's personal desires. The amount of expenditures incurred for this reason are described on a change order which totaled $4,685.70. The documents accompanying the change order indicate that at least $3,414 of this total were incurred because of the President's personal desires. Accordingly, the staff has concluded that this amount should be taxable income to the President.

D. LANDSCAPE MAINTENANCE

In years 1969 to 1972, a significant amount of landscape maintenance was performed on the President's grounds at 500 and 516 Bay Lane in Key Biscayne. The total amount of these expenditures, $17,363, was paid by GSA.

Facts

Subsequent to the landscape construction work which was completed in early 1969, the General Services Administration has incurred

United States General Accounting Office Report to the Congress: Protection of the President at Key Biscayne and San Clemente (With Information on Protection of Past Presidents) B-155950 20 (Dec. 18, 1973). United States General Accounting Office Report to the Congress: Protection of the President at Key Biscayne and San Clemente (With Information on Protection of Past Presidents) B-155950 24 (Dec. 18, 1973).

significant annual expenses for maintaining the President's grounds in Key Biscayne.

The staff has estimated that the following maintenance expenditures were incurred by GSA at 500 and 516 Bay Lane:

1 This represents 40 percent of Manual Yero's salary. It was felt that 40 percent, or two-fifths, of his time should be allocated to 500 and 516 Bay Lane.

2 Primarily for clean-up and maintenance work prior to visits by the President.

3 Includes $945 for "trees, shrubs and fertilizer," some of which may have been construction landscaping work but which was incurred 11/25/69, after construction work was finished.

* Excludes $1,290 for use of a tugboat, apparently in connection with Secret Service construction.

NOTE: These figures were calculated from invoices and workpapers gathered by GAO investigations.

Staff Conclusion

The staff believes that the following amounts should be taxable income to the President:

In keeping with the staff's analysis of landscape maintenance expenditures at San Clemente, the staff believes that no more than 50 percent of such expenditures are required because of the existence of security devices on the President's property. Thus, to the extent of the remaining landscape maintenance cost paid by GSA, the President was saved a personal expense which he otherwise would have incurred. For this reason the staff believes that 50 percent of total landscape maintenance costs should be included in taxable income for the relevant years.

5. Summary

The following table summarizes the additional taxable income because of the expenditure of Federal funds at the President's properties in San Clemente and Key Biscayne.