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Mr. BARTH. I think it is a distinction without a difference.
Mr. WRIGHT. So, in effect the postal system has acquired title to 2,780 buildings for which title previously reposed in the Government of the United States.
Mr. BARTH. I think that is a fair statement.
Mr. WRIGHT. Now, Mr. Gray mentioned a point a moment ago that under the broad powers given to the corporation-that it might be able to sell these buildings. Do you find anything in the Postal Reorganization Act, Mr. Barth, which would prohibit that?
Mr. BARTH. No, sir.
Mr. WRIGHT. I see. So, if the Postal Corporation was to decide to sell on the private market a building in which GSA and GSA tenants were housed, you would have no recourse, would you?
Mr. BARTH. No direct method of stopping it. No direct way of stopping them from proceeding with the disposal.
Now, under our agreement with the Postal Service, if they decide they no longer have any use for a building, it will be offered to GSA first before they dispose of it on the open market.
Mr. WRIGHT. That is fine.
Now, here is a building that we have constructed, let us say, in the 1940's or the 1950's, and perhaps it has been amortized out to a certain degree, and now it has been given to the Postal Corporation, and let us assume that the Postal Corporation does decide to sell it. It offers it first to you. On what basis is it going to offer you that building, Mr. Barth? Is it going to offer you that building on the basis of book value, amortized, or on a fair market value?
Mr. BARTH. Mr. Chairman, I could not say at this stage of the game. I would say this: As I read the act, the transfer of such property out of the Postal Service into another branch of the Federal Government would probably be covered by 2002 (d), which gives the President the power to make such transfers, and provides, it can be with or without reimbursement.
Mr. CONSTANDY. That is now what your agreement says. Your interim agreement makes it possible for the property to be sold to you or anybody else at fair market value, does it not?
Mr. BARTH. That, again, is an interim agreement.
Mr. CONSTANDY. The point is, the law permits it to be on some other basis.
Mr. BARTH. The law permits it to be without any reimbursement at
Mr. CONSTANDY. Exactly.
Mr. BARTH. I have no problem with that.
Mr. CONSTANDY. The one agreement that the agency and the Post Office has entered into with the agreement that the sale back to you would be at fair market value, would it not?
Mr. BARTH. Well, I would be hopeful that property, whichever way it goes, now that the Postal Service is in being, would go on the same basis. I think this is probably essential
Mr. CONSTANDY. Same basis as what?
Mr. BARTH. Either way. We would pay them fair market value for property which we obtained from the Postal Service, which in turn,
if they wanted property over which GSA had concern for, I would hope that it would be at fair market value also.
Mr. CONSTANDY. You might hope so, but other assets of the U.S. Government can be turned over, but it does not make the provision that if they are turned over by the Post Office to you, it will not be at anything except fair market.
Mr. BARTH. I read "D" going both ways.
Mr. CONSTANDY. Well, "The President is authorized to transfer to the Postal Service, and the Postal Service is authorized to transfer to other departments, agencies, or independent establishments of the Government of the United States, with or without reimbursement, any property of that department, agency, or independent establishment and the Postal Service, respectively, when the public interest would be served by such transfer."
Is that right? It would seem to suggest that it could go on the same basis, either way. You have to go back to the other part, to read the whole thing. Under "C" the Postal Service and the Administrator of General Services where properties under the jurisdiction of the Administrator are involved, with the approval of the Director of the Office of Management and Budget, shall determine which Federal properties shall be transferred to the Postal Service and which shall remain under the jurisdiction of any other department, agency, or establishment of the Government of the United States in the commencement of operations of the Postal Service.
The transfer shall be accomplished at the time of, or as near as possible to the commencement of operations of the Postal Service and the evaluation of the assets and capital of the Postal Service shall be adjusted accordingly.
Mr. GROVER. May I make a point?
Mr. CONSTANDY. Yes, sir.
Mr. GROVER. If we refer back to the powers of the new Postal Service corporation, 401, five or six are in separate paragraphs. In five, the very, very broad powers of conveying and encumbering, et cetera, all of its properties, and, six, construction operation, maintenance of buildings, facilities, under section 2002, so I think the thing is subject to interpretation, whether these very, very broad powers of disposition do affect the properties required to transfer under section 2002. Mr. BARTH. I have no authority to dispose of property acquired by our transfer. That authority seems to be clear in the Postal Service. If we are talking now after the Postal Service comes into existence, and property moving back and forth between the GSA and Postal Service, you are dealing in effect with an organization here which was set up to be in effect self-sufficient. To be run on basically a businesslike basis.
Mr. CONSTANDY. Theirs or yours?
Mr. BARTH. Theirs. One, it has very many aspects of a wholly-owned Government corporation, and I would think that any property going out of that corporation or service into the Federal Government, they would have to receive payment for.
By the same token, any property moving from the Federal Government into the corporation would have to be paid for.
Mr. CONSTANDY. Let me make a distinction, Mr. Barth.
You are not exactly on equal footing with the Postal Service. I hoped we would develop this piecemeal, and I still hope we will, and the Postal Service has responsibilities to other people you do not have.
Is that true? They intend to float up to $10 billion worth of bonds, and do you not think the indenture is going to require that when the Post Office commits itself to a transaction, that it conserves its assets! Mr. BARTH. It depends upon how those assets are pledged under the bond issue.
Mr. CONSTANDY. Well, have you ever seen one that is not?
Mr. BARTH. Well, that is what the Post Office is going to do with their revenue authority.
Mr. SNYDER. They could be revenue bonds. That would not encumber the
Mr. BARTH. They could be bonds, also, of the Treasury Department which would not encumber the building.
Mr. CONSTANDY. And furthermore, they have the right to call upon the full faith and credit of the Federal Government to sell bonds. Mr. BARTH. Yes, sir.
Mr. CONSTANDY. We are both speculating. I think we have to recognize that that is there. It cannot be treated with indifference, and the more that is true, I think the more reason it is for them to sell off the properties.
As a matter of fact, they are at liberty to reduce the difference between the book value that they carry for a particular property, depreciated from its original cost and its market value. If they are occupying space in the building that they are carrying on their books, prudent business would suggest that they sell the building consistent with their plan to relocate, anyhow, and produce the $8 million in assets. Mr. BARTH. I could sit here and speculate
Mr. CONSTANDY. I think we are in a serious issue, and I think we should focus on it.
Mr. WRIGHT. Let me return to a statement that was made prior to this colloquy by Mr. Barth.
The assumption is that if the Postal Service were to dispose of buildings, and the Government were to acquire them, that the Government would be expected to pay for them. Conversely, if the Government were to dispose of a building, and the Postal Service to acquire it, the Postal Service would be required to pay for it. And yet on these 2,780 buildings the Postal Service did not pay for anything, did it?
Mr. BARTH. That is correct. I consider 2002 (e), and 2002 (d) are different: 2002 (c) were the buildings turned over to the Postal Service at its inception, 2002 (d) speaks of transfers after the Postal Service comes into being.
Mr. WRIGHT. In effect, the Government has given the Postal Service a building, and then, if the Government takes it back over, it has to pay for it?
Mr. BARTH. That is how I see it. I think the Government has capitalized the Postal Service.
Mr. WRIGHT. Now, 2,780 buildings-do you have a ballpark figure for the value of those buildings?
Mr. KREGER. No, sir; we do not.
Mr. WRIGHT. At one time I believe Mr. Blount characterized the property in the neighborhood of $1.6 billion worth of buildings. Does that sound reasonable to you?
Mr. KREGER. It sounds reasonable, Mr. Chairman. We have figures on acquisition costs of around $933 million on those buildings, and with the repairs and expenses that have been made on them through the years, Mr. Blount may be indeed correct.
We have no information as to where he got his $1.6 billion figure. Mr. WRIGHT. You have heard the figure also, have you not?
Mr. KREGER. Yes, sir.
Mr. WRIGHT. In other words, he regards the value of the property that the Postal Service inherited from the Government as approximately $1.6 billion.
Mr. BARTH. We can come to that same figure by taking in effect the initial acquisition cost of those buildings and adding to the initial acquisition cost, probably the alterations, extensions of the buildings, but this in no way would tend to represent what is today's fair market. value of those buildings were they to be put on the market for sale. Mr. WRIGHT. That could be appreciably more.
Mr. BARTH. I would believe it could be more if only the land values went up.
Mr. KREGER. The only way we could get the fair market land value was by the survey we talked about earlier.
Mr. CONSTANDY. I ask you specifically about an offer made to purchase the Post Office Grand Central building on Lexington Avenue in New York City.
The building was built in 1932, at a cost of $9 million. In 1956 a complex offer was made to buy this property. The offer amounted to $10 million in cash, plus an option to lease to the Federal Government 200,000 square feet of space on a long-term basis of 20 years.
This offer would be $35 million to the Government. Since no appraisal of this property was made, however, whether or not this offer reflected fair market value is a matter of conjecture.
On a straight-line, 50-year-depreciation basis alone, the property, with a $9 million cost, would have a book value of $7.1 million. So I think that gives us some insight into the differences in some cases that we are talking about.
Since 1932, there has been a considerable appreciation on the land values on Lexington Avenue and Manhattan, and this is probably a very conservative estimate.
Mr. KREGER. We have no certification if the $35 million was a fair market value, because the only way to determine that was to offer to
sell the building and the land, and have an appraisal made before we sold it.
Mr. CONSTANDY. I suspect the actual value of the property may be more than $32 million.
Mr. BARTH. The offer in that case was about 3 years ago, if I recall correctly.
Mr. CONSTANDY. Just to give an insight into how that process works, the Supreme Court building cost $7.4 million, and would have a book value today of $4.8 million, and I think we can recognize that the Supreme Court building is worth appreciably more than $4 million.
Mr. BARTH. I think it is not even open for discussion. The values of these buildings on the open market is way in excess of any depreciation value.
Mr. CONSTANDY. We are talking about only the cost of the land and construction, minus the depreciation, but plus the appreciation.
Mr. BARTH. That was just the acquisition cost plus the construction.
Mr. WRIGHT. The $1.6 billion represents, in your opinion, the amount of money the Federal Government has spent on acquiring land, constructing a building, and adding to it?
Mr. KREGER. Mr. Chairman, the $1.6 billion represents the acquisition cost of the building, plus what we find was added on as additions and extensions. It might represent that.
We do not know where Mr. Blount got his $1.6 billion figure, but trying to construct some answer around that, this is what we come up with. Mr. Constandy, I have a letter concerning the offer of this New York property.
Mr. CONSTANDY. It is roughly the figures we used. I think that that will suffice. May I ask why you do not accept the Post Office's figures on the worth of the space that you are occupying?
Mr. KREGER. I think we would not accept anybody's figures. Otherwise, we would be taken to task for not good management.
Mr. CONSTANDY. But they have some figures.
Mr. KREGER. I am informed that they have not submitted any figures to us. I thought they had, but I am informed that they have not.
Mr. CONSTANDY. I thought that the net payments between GSA to the Post Office for this space, that the figure would be in the neighborhood of $50 million.
Mr. KREGER. Mr. Constandy, there was a $50 million figure bandied about, and even got so far as to go into a supplement that was forwarded to the Office of Management and Budget.
The public buildings service people found this was so far in error that they withdrew the supplemental requests, and they now come up with the statements that they think we might receive money from the Post Office Department.
Mr. CONSTANDY. In how many buildings that you retained will the the Post Office be doing business?