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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

Mr. RREGER. 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

went up:

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!

Mr. KREGER. About 300, the ones that I mentioned previously.

Mr. CONSTANDY. That, in itself, would suggest that you would lose money, would it not? Even recognizing you were a minor tenant!

Mr. KREGER. Again, I believe it depends on the location of the building, the site where it is located, and the amount of space. These 1,200 buildings are mainly in rural areas, where the major activity is the Post Office, and there would be small amounts of space for other agencies, and, also, it would be cheaper rates.

Mr. CONSTANDY. Well, maybe we could get back to the eight projects.

I think we had done Manchester.
Mr. KREGER. Yes; we did.
Mr. CONSTANDY. We are about to do the Bronx.

POST OFFICE DEPARTMENT,

BUREAU OF FACILITIES,

Washington, D.C., October 1, 1970. Mr. ARTHUR F. SAMPSON, Commissioner, Public Buildings Service, General Services Administration, Washington, D.C.

DEAR MR. SAMPSON: This will confirm the decision of the Post Office Department to withdraw from the proposed post office-Federal office building to be located in the Bronx, New York.

As I explained in discussions about this facility with Ray Nixon and Mel Hemmer, the Department's need for a major mail handling facility to serve this part of the New York metropolitan area can be satisfied at much less cost, with greater economic benefit, by a facility of an entirely different type and location than had been planned for the Bronx. Our every extensive studies of the New York metropolitan area show that low cost, commercialtype facilities are more suitable for our purposes and will achieve greater efficiency at less cost than the traditional type of Federal building proposed for the Bronx.

Further, we have found that we can modernize the present Bronx facility at a small fraction of the cost and in much less time than would be required for a completely new structure. This modernization would involve the installation of letter sorting machines, and modification and extension of the present dock faciilties. This action would, in our judgment, render the present Bronx facility adequate for processing the type of mail that we envision will be handled at that location.

For these reasons we have reluctantly decided to withdraw from the project.

During the time the proposed Bronx project was in the planning stages, the Department continued to use its Fordham Station, located near the proposed site for the new facility, even though this station was completely inadequate. It was contemplated that this station would no longer be required when the new facility was completed. Our New York regional office has suggested that with the change in plans it will be necessary to provide an adequate Fordham Station and some other facilities in the area.

Accordingly, and pending a final decision on this matter, we are asking that the site now under the control of your Agency for the proposed Bronx facility be retained. We will proceed promptly to analyze the proposal we have from our New York regional office with respect to the utilization of this site and give you a final answer on our need for it at an early date. Sincerely yours,

HENRY LEHNE, Assistant Postmaster General.

BRONX, NEW YORK-CHARLES A. BUCKLEY Post OFFICE AND FEDERAL OFFICE

BUILDING

Prospectus approved : Senate-Aug. 20, 1963. House—July 31, 1963.
Total estimated project cost : $29,547,100.

[blocks in formation]

Site : Size and location–140,200 sq. ft.; entire block bounded by East Fordham Road, Third Ave., East 189th St. and Washington Ave.

Status of acquisition : Completed Mar. 2, 1965.

Building area : Gross—692,786 sq. ft. Net–549,600 sq. ft. 67% of space for postal use.

Status of design: Completed Mar. 27, 1970.
Date of postal withdrawal : Oct. 1, 1970.

Remarks: Insufficient demand for non-postal space to warrant a separate project.

Mr. KREGER. In the Bronx we had planned a building of 140,200 square feet, an entire block. The acquisition of the site has been completed. It was completed in 1965.

I am sorry. I misspoke. The building has a gross square footage of 692,842 square feet. Six percent of this building—67 percent of this building is for postal use. The design was completed in early 1970.

The Post Office withdrew in late 1970. There was an insufficient demand for nonpostal space to warrant the

Mr. CONSTANDY. If now we could do Williamsport, Pa.

Mr. KREGER. It has a building planned at 194,100 square feet, with 45 percent of the space for postal use. The design has not been started. The Post Office withdrew in 1970. They reduced the prospectus, and revised the prospectus being contemplated, and the prospectus is in the process of being developed.

Mr. Wright. Let me point out with respect to the Bronx, this was a big building. Total estimated project cost for the combined use of the Post Office and other Federal agencies initially was $29,547,000.

Mr. KREGER. Yes, sir.

Mr. WRIGHT. The Post Office withdrew on the grounds that it needed other space. Do you know what the Post Office is doing there? Is it building its own building in the Bronx?

Mr. KREGER. They told us in their letter that their study showed that the New York metropolitan area showed that low-cost commercial-type facilities are more suitable for their purposes, and will be better for their costs, and will be better than the building for the Bronx. They have asked us to hold the site, but we have no definite information on their plans.

Mr. GRAY. Would you repeat that, the reason for the Post Office abandoning the Bronx site?

Mr. KREGER. "Our very extensive studies of the New York metropolitan area”

Mr. WRIGHT. You are quoting the Post Office?
Mr. KREGER. A letter, signed by Mr. Henry Lehne.

Mr. GRAY. Now, you are talking about the New York metropolitan area.

Mr. KREGER. That is what he is talking about. Our very extensive studies of the New York metropolitan area show that lowcost commercial-type facilities are more suitable for our purposes and will achieve greater efficiency at less cost than the traditional cost of the Federal building proposed for the Bronx.

Mr. GRAY. You notice he says "low-cost" ?
Mr. KREGER. Right.

Mr. GRAY. I would like the record to show that our committee authorized a $50 million facility to take care of all the New York met ropolitan area. That so-called low-cost facility has already catapulted to $120 million, and is still going up. That is more than $80 million more than our committee authorized, and I wanted to show the disparity between the statement they gave to GSA as a reason for abandoning this facility, and what they are actually doing on the site-$120 million, plus. If that is low cost, I do not want to be involved.

Mr. WRIGHT. They were going to abandon this $29 million project in order to achieve, by their own words, this project at less cost.

Mr. GRAY. We will get testimony from Mr. Lehne this afternoon, Mr. Chairman, and the last figures I had were in excess of $120 million.

Mr. WRIGHT. A very significant point.
Mr. GRAY. Thank you, Mr. Chairman.

Mr. CONSTANDY. Since we are talking about the Bronx, and we had been talking about the relationship between the two entities, the transfer of property, I would like to get into this later, but if you

could turn to your interim agreement, to the last page.

Now, this is the agreement that was entered into on an interim basis between the GSA and the Postal Service to provide for the problems that you could foresee arising in the transfer of properties, and the fact that you have interwoven relationships in some of them.

Number 14 says: Any or all of the following sites may, if the Postal Service agrees, subject to the approval of the President, be transferred to the Postal Service under 39 U.S.C. 2002 (a), with or without reimbursement.

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