HOUSE APPROPRIATIONS HEARINGS, 1965

Mr. SOMMER. Well, the record of the Public Printer before the subcommittee last year, this happens to be from the House record, and I don't recall if it is in the Senate record, but they spell that out.

Senator MONRONEY. It has not been spelled out before this committee, and the plans change so much, there are no plans yet drawn for this building, as I understand it. It is merely a site location and the money that has been spent out of the appropriation last year went to the site matter, which has been disposed of now.

I would be happy to have the figures that you have there. I understood from the other day that they were not yet firm.

Mr. SOMMER. I am sure that that is true. I have a proposal that was submitted earlier in the course of this testimony, showing that production square feet now, 475,000, and the proposed is 615,000. Now that is labeled "Production." In other words it is not administration and not for documents.

Senator MONRONEY. That would be printing space.

Mr. SOMMER. This would be my opinion. That is a 30-percent increase. The gross that I keep quoting is the total picture including cafeteria, halls, aisles, the total. Presently it is 1,628,000, and the proposed is around 2 million. That is everything.

PRESENT AND PROPOSED PRINTING FLOORSPACE

Senator MONRONEY. To finish this point, the thing that I think the printing industry has a justified position in the comparison of the printing floor now, and the comparison of the printing floor as we wind up. I don't think that we would necessarily be persuaded about whether we will get the Congressional Record faster or slower. That is our problem, to worry about the location, and whether we want it. under our doorstep, or whether it should be a more distant location. I think the centralization of documents for distribution for the agencies is a matter for our determination, rather than comparing— or even the cafeteria, if we make it a little more attractive by having more room to spread out in the cafeteria maybe they can get better food than the Senate can in our cafeteria. I hope they can. I am glad that you are able to supply this information. Was the 475,000 feet versus 615,000, or an increase, as you say, of 30 percent?

Mr. SOMMER. That is right. We are with you, and we are using these figures and we try to answer the questions using their data, which is reasonable, we think.

REDUCTION IN FLOOR SPACE REQUIREMENTS THROUGH PRINTING TECHNOLOGY

Senator PROXMIRE. At this point, could I say that this ties back with what you said one page 12, when you say changes in printing technology are constantly reducing floor space requirements, to produce a given volume of printing. So here you have a 30- or 34-percent increase in your space for printing, and, as you say, 15 to 25 percent more production because of the improved layout, and on top of that a 30-percent increase, and you have in addition to that probably a much greater increase because of more efficient presses, and because of more efficient technology. So that your total increase in production might very well be much more than 100 percent.

Mr. SOMMER. You are absolutely right and this is our concern. When we do what you did, how can we reach any other conclusion but to be concerned?

Senator PROXMIRE. I know from the brief experience that I had, under the tutelage of Harry Mikalson, one of this morning's witnesses, and incidentally I would like to say Mr. Mikalson was my partner at Art Craft Press Co. in Waterloo. He and I had a printing company there, and Harry bought me out and he has done a lot better since I left.

Senator MONRONEY. Instead of him running for mayor, his partner ran for the Senate.

GOVERNMENT PRINTING OFFICE COMPETITION WITH INDUSTRY

Senator PROXMIRE. That is correct. But one point that is most obvious to people in printing industry is the way to stay alive and do well and the constant pressure on you is to keep your presses going not just 8 hours a day, but if possible 16, and, of course, if you can do it 24, then you are really doing well. This is something that the Government is understandably wanting to do, and if they have this bigger layout and additional efficient equipment, there is no question about it, that they are going to compete more with the printing industry. So I can understand their concern.

Senator MONRONEY. You may proceed.

Mr. SOMMER. The next item that we would like to call to your attention again gets off into a sincere difference of opinion between industry experts and the Government Printing Office.

IN-LINE PLANT CONVENIENCES VIS-A-VIS TOTAL COST

We don't disagree that single-story plants are efficient, but we say that what really counts are total costs. To be merely swayed by the nice view of a single-story building and say this is the trend is true, but by itself is not an efficient argument for abandoning a multistory building.

ABSENCE IN GOVERNMENT DATA OF INTEREST

In paragraph J, when we look at the supporting data which the Public Printer submits, showing that there will be approximately $4.5 million a year in savings, and that is quoted, which, of course, would appear to show that this expense will amortize itself in about 11 years, we find some spots that we certainly would like to have more mutual agreement on than we now have. The one point being interest, and you gentlemen have heard this before, and Senator Proxmire has brought this up several times, but it is a fact when you borrow $50 million, you are going to have an amortization cost of about $1 million a year. It depends on the life of the mortgage or the loan. It is a $1 million a year cost. To just ignore this cost, in this computation, in order to say that this building will pay for itself in 10 years is in our opinion not the better way of showing total cost data.

SPURIOUS ALLEGED SAVINGS ASSERTED

In addition to that, we notice that there is a figure of $1.5 million of rental value which lists in the report of the Public Printer as a "savings."

Our men in industry maintain that if we have a landlord and he is going to get $1.5 million from renting his building, it is not accurate to say that at the end of the year he has had a profit of $1.5 million in the renting of that building. That may be his gross income, but if the value of the space should it be vacated and rented to another agency is $1.5 million, this is not $1.5 million of savings. Probably the quickest way to call that to your attention is again to show or to report that the Public Printer says that if they move out of that building they will not have an expense of $150,000 to maintain the elevators. So they move out, and they don't have $150,000 expense, and in moves another agency of the Government who pays the $150,000. We submit that since the Government is the common landlord, when the year is over, that all of the costs of maintaining this building are important to the figure of whether or not there is $1.5 million of savings to the Government Printing Office, by vacating the building. This is another example, and there are others such as the maintenance of the air conditioning and maintenance of the doors, and maintenance of the escalators. These are shown as savings that would accrue if the Government Printing Office moved out.

Yes, but if another Government agency moves in, we submit, gentlemen, I think I have made the point, that we do not agree that there is a net savings of $1.5 million in rental value should the agency move out and another Government agency move in.

AMORTIZATION THROUGH SAVINGS IN ALLEGED TIME DISPUTED

Consequently, we sincerely disagree with the statement that this will amortize itself in 11 years. Why does the industry feel badly about that? We feel badly because we disagree with the data that comes to that total.

I turn now to page 16. This refers to the elevator maintenance. There is air conditioning and heating costs of $130,000. The point is we do not accept, based on our way of reasoning, that these are savings that should be used in the computation that subsequently is shown to result in the amortization of this project over 10 years. We think we ought to be able to get together and get a better figure for that, if we want to use amortization results as part of reaching the conclusions on this situation.

INDUSTRY INVESTMENT RETURNS

There is one other comment I want to make, and this, I think, ties into your earlier question, Senator Monroney, and it relates to what Senator Proxmire brought up the other day, and that is this ratio. of what does the commercial printing industry get in terms of sales dollars for $1 invested in plant and equipment. We call this the ratio of sales to gross plant investment. This is a common denominator figure, as you have said, used by many businesses, to relate the effectiveness of the use of dollars. We have had these ratio studies for 40 years. The Public Printer was not aware of where we got our figure that you were asking about. It is in these ratio studies which we have accumulated for 40 years and we have some extra copies that we don't want you to print, but as per your suggestion to have them be a part of the record.

Senator MONRONEY. You might sell those out. Those ratios of tional businesses are always very helpful.

Mr. SOMMER. But the ratio of sales to plant investment in the commercial printing industry cruises along at about 2.7. In other words, for every dollar invested in plant and equipment, this is total gross plant investment, equipment without depreciation, what does the industry get in terms of sales out of those dollars? That is 2.7 times.

Senator MONRONEY. That would include the machinery and equipment as well.

Mr. SOMMER. The total assets and not depreciated. Now, just think. Here is a $46 million building.

Senator MONRONEY. I think it is more than that.

Mr. SOMMER. We will use your figure.

Senator MONRONEY. The best figure to use is $49 million. We have not gotten our plans drawn, but that is the way it comes out, and there is no use to overstate or understate.

Mr. SOMMER. As long as we are communicating, that is right. It is $49 million of investment in a building. If I multiply just that, let us make it $50 million so I can do it easily, 2.7 times $50 million. What is that figure?

Senator MONRONEY. That is 2 cents out of every dollar, that is what you are figuring on.

Mr. SOMMER. No, we should get $2.70 of sales for every dollar that you put into plant and investment.

METHOD OF DETERMINING OCCUPANCY COST

Senator MONRONEY. You figure your ratio differently from what I do. If it were $3, instead of $2.70, your occupancy cost would be 33 percent of gross, isn't that right? Roughly this would translate, would it not, into $2.79 for investment for every dollar of sales, that would make your occupancy cost roughly chargeable as a third of your overhead. Is that correct?

Mr. SOMMER. If I have followed you, I think that you are correct. Senator PROXMIRE. The enumerator would not be the $50 million, because you have your equipment which would be several million

more.

Mr. SOMMER. At one of the recent General Accounting Office reports, the figure is about $15 million. That is the present value of the equipment.

RATIO COMPONENTS

Senator PROXMIRE. Then you have your site cost, because you don't have to pay it and it is not included in the $50 million, but a commercial firm in figuring its ratio would include that.

Mr. SOMMER. That is right.

Senator PROXMIRE. That would be at least another $3 or $4 million and perhaps a lot more than that.

Mr. SOMMER. That is right, and this is the point you made the other day, or the question you raised the other day, and if you use our line of reasoning, which is "So we are going to invest $50 million, what should we get out of that?" If you multiply $50 million times 2.7, it says that that building should be getting $135 million worth of sales. That is without equipment. Now, you put another $15 million of equipment and put another $2 million in land, and the cost does not include interest which you normally would compute.

Senator MONRONEY. Would not that be considered the interest factor, whether you own it or not?

Mr. SOMMER. We will figure your interest over here all by itself. Senator MONRONEY. You would not figure the interest and the cost of the plant, too. You either pay for your plant, and the interest runs in the paying for it, or you get a double cost.

Senator PROXMIRE. You figure the interest when you figure the sayings. The Government is going to have to borrow $50 million in order to build this plant at 4 percent.

Senator MONRONEY. That would be your occupancy cost on the building then, because you are amortizing that over the period of time.

Mr. SOMMER. Well, this is one thing. We want the record to include these summary data, and this is the total data that shows, and incidentally this is based on 1,000 companies, and about $1 billion worth of sales, so that we really think this has some validity, in terms of being a meaningful yardstick.

PRINTING PRODUCTION DOLLAR VALUE

Senator PROXMIRE. I am sure that we are agreed on the figure that we are talking about. What is the actual dollar volume of printing production? I have heard you this morning say something like 65 or 70, and I have heard another estimate of around $80 million, and another estimate of $138 million.

Mr. SOMMER. I am not sure I am understanding your question. Senator PROXMIRE. What is the dollar volume of the printing now done by the Government Printing Office, that would be done in this building, that is now done in the present building?

Mr. SOMMER. What it would project to be, you mean?
Senator PROXMIRE. What is it at the present time?

Mr. SOMMER. The present dollar volume of business is $64 million.
Senator PROXMIRE. This figure is not under dispute.

Mr. SOMMER. We don't dispute that. We know of no reason for disputing it.

Senator PROXMIRE. This is the figure that you are using in determining what should be the cost of a building to do this printing.

DETERMINATION OF PROPER BUILDING INVESTMENT

Mr. SOMMER. If you do this the other way around and start with $64 million and work that back to, therefore, how many dollars you should invest in building and equipment to produce only $64 million, then you will get down to the figure that you quoted yesterday, or we were talking about yesterday, that you would need about $20 million.

Senator MONRONEY. You would divide that by roughly, $3, to your way of thinking.

Mr. SOMMER. That is right.

Senator MONRONEY. It would be $21 million?

Mr. SOMMER. This is the point that you raised and this is the answer, based on these data. We think that they are valid.

Senator MONRONEY. This would assume, however, to keep the figures straight, that the entire $50 million was being invested in printing facilities. You would be more proper in your cost accounting if you took your percent of the floorspace, assuming that all floorspace the same.