Mr. SAMPSON. Yes, sir. And they're placed on the market and purchased by an underwriting syndicate, which then resells them to investors. That money is then used to finance the construction of the project, including, in some instances, design, and management and inspection of construction. The money is paid as the construction progresses and costs are incurred. In the meantime, the money is invested so that it does accrue interest while it's in our possession.

Once the building is constructed, we start paying those who purchased our certificates over a 30-year period at a fixed interest rate.

SINKING FUND

Mr. ROBISON. There is a reference in the prospectus for sale, or offering, of these participation certificates to a sinking fund, the benefit of which will commence on November 1, 1976.

What is that?

Mr. SAMPSON. Bob, could you explain that?

Mr. RICE. Yes. The sinking fund is established by the trust indenture and is the annual payment for the redemption of the securities: we redeem a certain percentage each year.

In the case of the particular offering circular you're referring to. sinking fund payments begin in 1976. We pay a percentage of the entire issue that year into that sinking fund. That sinking fund payment is used to redeem that percentage of outstanding participation certificates.

Mr. SAMPSON. That is not a Government sinking fund as such.

Mr. RICE. That is correct. This is paid to our trustee, who is the trustee for the security holders under the indentures. He in turn makes the redemption payments to the individual certificate holders, who are selected by a random redemption process.

USE OF RENT PROCEEDS

Mr. ROBISON. Let's see if I can recapitulate how this is supposed to work. Once you get one of the buildings completed, let's say the one at Detroit, that building will contain a variety of occupants from a number of Federal agencies, departments, bureaus, offices, and so forth, is that right? And you, Mr. Sampson, will be collecting rent from them for the portion of the building they occupy?

Mr. SAMPSON. Yes, that's true.

Mr. ROBISON. What do you do with those proceeds?

Mr. SAMPSON. Those proceeds will go into a Federal building fund. and they will be used to finance the design, construction, maintenance, protection, and cleaning of buildings.

Mr. ROBISON. But not to pay off the participation certificates? Mr. SAMPSON. Some of those proceeds will be used to liquidate the Government obligations under this program.

Mr. ROBISON. That's included, so the money eventually to go into this sinking fund will come from the rent accounts?

Mr. SAMPSON. The funds collected from other agencies will go into the Federal building fund.

Mr. ROBISON. And, then the money will go from the Federal building fund into the sinking fund to pay off the certificates as they come due?

Mr. SAMPSON. Right.

PARTICIPATION CERTIFICATES

Mr. ROBISON. How many participation certificates, if this is the proper way to put it, have been sold to date, in total numbers of dollars?

Mr. SAMPSON. $522.5 million worth.

Mr. ROBISON. And that's probably substantially more than you would need in actual dollars to advance either site acquisition, or the beginning of construction, on the 33 projects you have going?

Mr. SAMPSON. That's accurate.

Mr. ROBISON. And some of that money is deposited and is earning interest?

Mr. SAMPSON. It's deposited the same day it is received.

Mr. ROBISON. And do you hold those accounts, or do they go into the Treasury?

Mr. SAMPSON. These are held by the trustee. We contract with a trustee to handle funds under this program.

Mr. ROBISON. The same trustee in each instance, or do they have to be different for each issue?

Mr. SAMPSON. Bob, do we have the same trustee for different issues? Mr. RICE. We have had the same trustee for different issues. We have five large institutions bidding on it, but one trustee has just happened to be low bidder each time.

Mr. SAMPSON. We seek proposals to get the lowest contract price. Mr. ROBISON. There's a contract price for the services of the trustee as well?

Mr. SAMPSON. Yes.

DUAL SYSTEM

Mr. ROBISON. As I read through one of the offerings, there's an indication that the program contemplates arrangements for funds to advance each project and its ownership pending its eventual purchase. Each project will be provided initially either through a "package system," arrangement, whereunder a single bidder agrees to construct the project and provide the financing, or alternatively, through a "dual system" arrangement whereunder one bidder agrees to construct, and the second bidder agrees to provide the financing. Which way have you gone, in most instances so far?

Mr. SAMPSON. We tested both methods to determine which was in the best interest of the Federal Government, in other words, the most economical.

We solicited bids on five consecutive projects on five consecutive days where the bidding was submitted under both systems. On all the projects the dual system was superior, and all of our projects now, with few exceptions, are being handled under the dual system.

Mr. ROBISON. So this is the system under which you are getting one bidder, or one contractor, in effect?

Mr. SAMPSON. Under the dual system we have a contractor for construction and a contractor for the financing.

Mr. ROBISON. That contractor for construction, is he the same person in the long run, or the same firm in the long run, that actually constructs the building, or does he just take the contract and arrange for its construction?

Mr. SAMPSON. No. He is the construction contractor.

Mr. ROBISON. He is the construction contractor?

Mr. SAMPSON. Yes.

Mr. ROBISON. And the second bidder, who then provides under the arrangement-the financing, is probably a financial institution? Mr. SAMPSON. It's a syndicate normally.

Mr. ROBISON. And the participation certificates are backed by the full faith and credit of the United States?

Mr. SAMPSON. Yes.

Mr. ROBISON. But the interest paid on them is not exempt from Federal income tax?

Mr. SAMPSON. That's accurate.

Mr. ROBISON. Is there any other information you might give us along these lines that would help supplement our understanding of how this portion of the new program is working?

I know you've told us already about the generally satisfactory interest rates, and so forth.

Mr. SAMPSON. Just to emphasize again what was in my statement, Mr. Robison.

SOCIOECONOMIC IMPACT OF FEDERAL FACILITIES

Mr. ROBISON. With reference to the status report of last Fall, this document which came out of your Public Buildings Service International Environmental Conference, running through it briefly while we were waiting for the hearings to recommence, I ran across some suggestions wherein people who were involved in that conference apparently wanted you to consider, more specifically than you have in the past, what is referred to here as the "positive socioeconomic impacts of Federal facilities," and so forth.

In analyzing it specifically as to the socioeconomic and physical factors, as they may relate to the functions of the facility and to the maximization of the constant local benefit, there were also suggestions that the local community be given an opportunity to comment on plans for Federal facilities prior to actual site selection.

Another one-to find a functional use for architecturally, historically, or culturally significant buildings that are no longer needed, like an older Federal building.

That covers a variety of topics. Would you like to discuss some of those for us?

Mr. SAMPSON. At that particular conference, I participated in discussions on that subject. What is referred to is more history than present practice, because we pointed out that almost universally, with only rare exceptions, our current selection of sites includes consideration of socioeconomic factors. We are required by law and regulation to consult with the local, county, and State agencies before we choose a site. What we are doing is to be sure that the building is consistent with local government's land use plans; and that the placement of the building is where it will help their socioeconomic problems. We believe we are fulfilling our responsibility in that respect.

DISPOSITION OF BUILDINGS

Mr. ROBISON. How about the disposition of buildings no longer needed by the Federal Government? What progress is being made toward an operating plan of procedures for doing that?

Mr. SAMPSON. We have a two-part program in that respect. One is under the aegis of historic preservation. There is a great deal of concentration now in GSA concerning historic preservation of facilities. I have established an office reporting directly to me to be sure that any Federal building that has historical significance will not be destroyed or sold, but will be maintained and repaired and

used.

The Congress passed a law last year, and at the present time this law allows us to deed some of these buildings to local or State organizations, so that the exterior of the building can be maintained, with the interior put to revenue-producing uses to pay for the maintenance of the architecture and preserve it for the country.

Where we find buildings that are not of historical significance, we have a program now to try and clear the building very quickly and to clear the land and make the land useable. Where feasible, we make that land available to State and local governments for parks or other purposes.

Mr. ROBISON. Do you have a substantial backlog of public buildings awaiting disposal of this sort?

Mr. SAMPSON. No, not a substantial backlog.

Mr. ROBISON. But a backlog of sorts always, I suppose. It's an ongoing thing?

Mr. SAMPSON. Yes.

One of the things we are doing, by the way, is inventorying our buildings. We have identified 45 that we have submitted to the Department of Interior for evaluation to determine if they are of historical significance.

We're planning ahead so as to keep some of these buildings for our heritage.

Mr. ROBISON. Do you have an inventory, overall, of Federal buildings, not just those that are to be disposed of or have some historical significance? Do you try to keep a running inventory of all Federal buildings?

Mr. SAMPSON. Yes, we do.

Mr. ROBISON. How many are there?

Mr. SAMPSON. There are about 2,500 federally owned and about 7,500 that are leased.

ADDITIONAL ACCOUNTING RESPONSIBILITY

Mr. ROBISON. Last year, we had some testimony from one of your people relative to the additional accounting responsibilities that would become GSA's once this purchase contract arrangement began, and you had the obligation of trying to determine who should pay rent, how much that rent should be, and keeping track of the rent payments, handling the ordinary headaches of the day-to-day job of being the landlord, as you will be, and as you are already are.

What's the situation now with respect to setting up those procedures against the day when you are going to be so much more in this landlord business than you have been in the past?

Mr. GARDNER. We're deeply involved in that at this time, Mr. Robison. There is a joint effort underway between the Office of Administration and the Public Buildings Service. The Federal building fund part alone, as we discussed last year, is going to require us to completely

redo the antiquated bookkeeping system which we now have, which is some 20 years old. It's inadequate, and in no way can it support a fund of this type operation.

Mr. ROBISON. Will you require additional employees in order to oper ate this system?

Mr. GARDNER. Yes, sir. You gave us some last year, and we're asking for more this year. We did not have the resources in the budget in the year in which the amendments were enacted and the fund was established. We had about a year's lag in it.

Mr. ROBISON. What budget account would that item appear under?
Mr. GARDNER. It's in the Office of Administration.

Mr. ROBISON. We'll get to that, probably, later on.
Mr. GARDNER. Yes, sir.

MANAGEMENT OF BUILDINGS

Mr. ROBISON. For management of these buildings, are you going to contract management for some of them, or does GSA handle the management itself?

Mr. ROUSH. We are managing all these buildings, but may contract for cleaning and guarding.

Mr. SAMPSON. We did evaluate both methods, having them managed as contrasted with our managing them and found it in the best interest of the Government that we do it ourselves.

Mr. ROBISON. When you have cafeterias, or provisions for eating spaces in the buildings, do you sometimes run a cafeteria operation as well, or are they usualy leased out or contracted out?

Mr. SAMPSON. They're contracted out.

Mr. ROBISON. You don't want to get into the food business?

Mr. SAMPSON. No.

Mr. ROBISON. Thank you, Mr. Chairman. I have nothing further here.

BUDGET AMENDMENTS FOR OEP FUNCTIONS

Mr. STEED. Going back to page 5 of your statement which you gave this morning, in the first paragraph you say that:

The President transmitted last week proposed amendments to GSA's 1974 Budget requests to include $4,846,000 for "Salaries and expenses, emergency preparedness" and $3,370,000 for "Defense mobilization functions of Federal agencies."

Mr. SAMPSON. Yes, Mr. Chairman. The first item, $4.8 million for "Salaries and expenses, emergency preparedness," is basically a salary account, and that is the proration by the Office of Management and Budget to support 163 people who have been identified for transfer to GSA.

Mr. STEED. What kind of work do they perform?

Mr. SAMPSON. Basically they are involved in the continuity of Government emergency preparedness material and in the resource and management area. To give an example of that, in the Federal agencies plans have to be made and locations identified in cases of national disaster of some kind. We also have to work with State and local gov ernments, civil defense operations in the State governments in particular, so that you have an emergency plan in case there is a na tional emergency.