AMENDMENTS TO THE GENERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949 AS AMENDED (Transfers of Real Property) TUESDAY, JULY 21, 1953 HOUSE OF REPRESENTATIVES, SPECIAL SUBCOMMITTEE ON H. R. 5605 OF THE COMMITTEE ON GOVERNMENT OPERATIONS, Washington, D. C. The special subcommittee met, pursuant to adjournment, at 10:15 a. m., in room 1501, New House Office Building, Hon. Katharine St. George, chairman of the special subcommittee, presiding. Present: Representatives Katharine St. George, Jeffrey P. Hillelson, and Frank Ikard. Also present: Clyde W. Smith, counsel. Mrs. ST. GEORGE. The subcommittee will please come to order. Mr. Hillelson I know will be here in a minute, so we will continue our hearings on H. R. 5605. First of all, Mr. Peyton, I believe you wanted to make a brief statement that was not covered yesterday. FURTHER STATEMENT OF THOMAS L. PEYTON, DIRECTOR, SURPLUS REAL PROPERTY DIVISION, PUBLIC BUILDINGS SERVICE, GENERAL SERVICES ADMINISTRATION Mr. PEYTON. Madam Chairman, I would like to try to bring this plant picture in a little better focus by giving the committee a few additional facts. Since the end of World War II the General Services Administration and one of its predecessor agencies have made a total of 1,158 plant sales. They represented original Government cost of $4,253,300,000. Of that total, 1,068 plants were sold to private industry and are now back on the tax rolls. They represented a Government cost of $3,741,500,000. There were 75 plants transferred to Federal agencies and title is now in the United States Government. They had an acquisition cost of $495,900,000. Fifteen plants were transferred to States or their instrumentalities for research or other purposes, at discounts ranging up to 100 percent. These 15 plants had an original cost of $15,900,000. I appreciate this opportunity of giving the committee the whole plant picture, because I think it does show that we have attempted to pursue a consistent policy of selling these plants wherever we could. The only reason why all of them have not been sold is because there has been a Federal need, and under various laws authorized by Con 45 gress certain plants have been transfererd to the ownership of the Federal Government. I noticed in looking over the literature on the committee table that there is not a copy of Public Law 883 of the 80th Congress, which is the National Industrial Reserve Act of 1948. I think some of the witnesses might want to get a copy of that law, because our records indicate that the greatest number of transfers of property to the Federal Government have taken place under the provisions of that act. If I might briefly describe the processes involved: As soon as a plant becomes excess to the needs of either a Government corporation or the Federal Government itself, it is first submitted to the Munitions Board to see whether in its determination there is a mobilization requirement for the property. If the Board determines that there is such a requirement the General Services Administration is required to offer that property for sale subject to the recapture provisions and other conditions of use described in this public law. If we are unable to obtain a purchaser who is willing to abide by those conditions and we have exhausted all negotiating efforts to perfect such a sale, then it is our duty to report those facts to the Munitions Board and ask it either to modify the clause to meet the offer of the prospective purchaser or withdraw it entirely, if the prospective purchaser insists. If the Munitions Board holds to it's first determination and we find that the plant is not salable under the conditions imposed, then title is transferred to the United States and it is placed in the National Industrial Reserve, in the custody of the General Services Administration, for either layaway or standby maintenance, and it can be rented subject to those conditions. Yesterday I gave the committee a list of plants owned by the United States that were in the custody of the General Services Administration and I want to mention the fact that of the 29 plants so listed, 25 are in that custodial reserve, placed there at the direction of the Department of Defense, and either maintained by us in standby or rented temporarily to relieve the Government of the maintenance cost. I think those are pertinent facts I wanted to bring to the committee's attention this morning, and I hope it will be helpful in looking at the overall picture. Mrs. ST. GEORGE. Mr. Peyton, there is only one thing that I do not quite understand. Mr. PEYTON. Yes. Mrs. ST. GEORGE. That is, when these plants have been sold or disposed of by the Government, as evidently happened in the case of this particular plant we were talking about yesterday, at Adrian, at a later date the Government would write the municipality and inform them that that plant was no longer liable for taxes. That is the thing I think we are all quite naturally worried about, because it puts these municipalities, especially the small ones, in an impossible situation, as you can well see, from a housekeeping angle. If they make up their budget and suddenly in the middle of the year, let us say in 6 months, a third of the taxes are cut off by the Government, then Mr. PEYTON. Let me explain what happened at Adrian, because it may be that there has been a little misunderstanding. Mrs. ST. GEORGE. Yes. I wish you would. Mr. PEYTON. The plant at Adrian was leased to Bohn Aluminum & Brass Co. They were producing 100 percent for the Air Forces. The Air Forces came to us and said In view of the fact the entire production of this plant is being paid for by the Air Force, we are going to ask Congress to authorize the transfer of this plant to the Department of Defense, and pending the approval of such legislation we request that you give us a permit of occupancy and control, since the occupant is our prime contractor. Acting on that request, we granted the permit to the Air Force. It is under the Air Force custody and control at the present time. Upon being granted that permit the Air Force canceled the rental agreement with the company and entered into, in lieu of the rental agreement, a facilities contract, which is a housekeeping contract, so to speak. So the Air Force has two contracts today with Bohn. One is a facilities contract and the other is a cost-plus-a-fixed-fee contract for production. The plant has never been sold, Mrs. St. George. Mrs. ST. GEORGE. No, but you still get my meaning, that the hardship on the municipality is nonetheless great. Mr. PEYTON. That is right. We do not question the purpose of the proposed legislation. I do want to explain, however, that the reason why Adrian was notified that it could not receive taxes was due to the Comptroller General's directive to the Air Force that it was not authorized to pay taxes, in view of the Sedgwick County case, plus the Comptroller's own determination. That was the reason why that city was notified of the fact that the Air Force could not, under the Comptroller General's directive, pay taxes in the future. Mr. HILLELSON. If the compay operating the plant, for example, if taxes had to be paid on property to the local taxing authorities, where would the money come from? Would it come out of rental from those who leased the building, or would it have to be just additional apropriations on our part? Mr. PEYTON. Let us take it both ways. If your legislation is passed then the payments of taxes would have to come from the Department of Defense. There is no rental agreement with the company under the existing circumstances. It is purely a facilities contract. Mr. HILLELSON. May I ask a question again then? Why isn't there an agreement on a rental basis? Mr. PEYTON. I was explaining that, I believe, just before. Mr. PEYTON. Just before you came in. Briefly, the situation, Mr. Hillelson, is this: We had a lease agreement with the Bohn Co. Under that agreement they paid us a net rental, and in addition thereto the company paid the State and local real estate tax. The Air Force came to us sometime after the Korean war started with the explanation that that plant was being used 100 percent for defense work; that the company was a prime contractor of the Air Force; and, therefore, that they wanted to take over the plant and were going to introduce legislation to authorize the transfer from the General Services Administration to the Department of Defense, without an exchange of funds. In the interim period, pending the passage of legislation, they requested that we issue a permit of occupancy and transfer custody and accountability, which was done. Thereafter the Air Force canceled the lease with the Bohn Co. and entered into a facilities contract with that company, plus, of course, their cost-plus-a-fixed-fee contract for the end product. So at the present time the Air Force has two contracts in effect with Bohn. One is a facilities contract for the management of the Government plant, and the other is a cost-plus-fixed-fee contract for the production of the end product. Mr. HILLELSON. In other words, the Federal Government would pay the taxes, no matter how you look at it. Is that right? Mr. PEYTON. Under your bill the Federal Government would pay those taxes. Mr. HILLELSON. There is no other way that anyone else could pay for the taxes? Mr. PEYTON. No. Not with the facilities contract, because that is just a housekeeping contract. It is not a lease. Mrs. ST. GEORGE. So, in other words, the Federal Government would be liable for these local taxes. Is that right? Mr. PEYTON. That is right. Mrs. ST. GEORGE. Of the States, counties, and school districts? Mrs. ST. GEORGE. Have you any questions, Mr. Ikard? Mr. IKARD. No; I have none. Mr. PEYTON. Do you want to divert for a moment from this subject? The mayor of St. Paul mentioned yesterday his problems with regard to the St. Paul Municipal Airfield. Mrs. ST. GEORGE. Yes. Mr. PEYTON. I would like to show or to tell the committee exactly what our records show. My Division transferred over the past years a grand total of 584 surplus military airfields to various States and local governments, which had an original cost of $1,338,461,000. Under Public Law 289 of the 80th Congress, authority was granted for these transfers to be made without monetary consideration. In return thereof and in lieu of monetary consideration, the law provided that the Federal Government be granted certain privileges, among which was the partial use by the military insofar as it did not interfere with civilian aviation. Those provsions have been wrtten into every deed and bill of sale that has been passed on these airports. In the Minneapolis-St. Paul area there was transferred to the Minneapolis-St. Paul Airport Commission realty amounting to $564,000 at original cost to the Government; another transfer to the Minneapolis-St. Paul Airport Commission of a Federal property costing $1,572,000, and personalty costing $82,000; and to the city of South St. Paul, Government property costing $941,000 and personalty costing $5,000; or a total for those communities of $3,077,000. It was the congressional policy, as stated in Public Law 289, that in lieu of monetary payment the Department of Defense be given certain privileges for the training of Reserves and other military use so far as that did not interfere with civil aviation. Now, it is conceivable that there has been a question as to whether it does interfere or not. Mrs. ST. GEORGE. Yes. I think that was the question. Mr. PEYTON. Under Public Law 311, 81st Congress, the Civil Aeronautics Administration has the authority to straighten those differ ences out. Mrs. ST. GEORGE. Yes. Mr. PEYTON. Thank you very much. Mrs. ST. GEORGE. If there are no further questions, thank you very much indeed, Mr. Peyton. Now, Mr. Knott, who represents the Department of Defense, is here. Mr. Knott, do you wish to file a statement or make a statement? FURTHER STATEMENT OF LAWSON B. KNOTT, JR., CORPS OF ENGINEERS, REPRESENTING THE DEPARTMENT OF DEFENSE Mr. KNOTT. Madam Chairman, I do not have a prepared statement and I am a reluctant witness. I find that the distance from the Pentagon to here has gotten considerably longer, I thought, because when I spoke yesterday I understood that an interim report was on its way. I verified that again this morning. It had been signed and it was on its way. While portions of that report had been read to me over the phone, I have not personally seen it, and I am afraid I could do no more than nod my head. Mrs. ST. GEORGE. Would you just care to file the report when it arrives? Mr. KNOTT. Yes. Mrs. ST. GEORGE. Would we not be perfectly satisfied with that? Mr. IKARD. Yes. Mr. KNOTT. I believe this is all. And, since the report is necessarily general in nature, perhaps this would be informative and I have Mr. Peyton to thank for this: His records-and they jibe pretty closely with what we have-show that the transferred 29 of these properties to us; and at the time those properties left the taxrolls the total annual tax amounted to $1,354,000. That gives you some indication of the impact on the budget. Mrs. ST. GEORGE. Yes. Mr. KNOTT. And, as Mr. Hillelson pointed out, it is a matter which would require appropriated funds, and insofar as it is retroactive to the first of the year, it does present the dilemma that we find ourselves in when we have an authorization. Mr. HILLELSON. May I ask a question? Mr. KNOTT. Yes, sir. Mr. HILLELSON. Originally did you not plan to pay those taxes, though? Mr. KNOTT. Not where they were transferred. That is, where they were transferred out of corporate property into Federal property. Mr. HILLELSON. I see. Mr. KNOTT. Some of those we do have and have had on a permit arrangement, such as the one that has been mentioned at Adrian. I believe that is all. Mr. HILLELSON. Could I ask one other question? Mrs. ST. GEORGE. Yes. Mr. HILLELSON. What in your opinion is the attitude of the Department of Defense in regard to this bill? |