1 (1949 estimate, $15,000,000; 1948 act, Public Law 147, $13,257,000, Second Supplemental Appropriation Act, Public Law 299, $650,000.) (House hearings, Treasury and Post Office Departments Subcommittee, pp. 201 to 202) (P. 35, line 7) Page 35, line 7, strike out $14,300,000" and insert in lieu thereof "$15,000,000," the estimate, an increase of $500,000. House report No statement was contained in the House report relative to this appropriation. Justification The following tabulation shows the apportionment of expenditures under the original estimate and under the $14,500,000 contained in the bill as passed by the House. As noted, the $500,000 reduction is assigned to four individual items, as follows: Basic cost. This has been reduced in the sum of $159,499. This reduction can be accomplished only by avoiding any expenditures for the balance of the fiscal year 1948 which create an annual obligation to be carried during the full year 1949. To accomplish this, we will have to discontinue immediately making leases for new postal stations, even though the service necessity for such stations has been established and their installation has been approved by the First Assistant Postmaster General. New leases (net).—$287,500 of the reduction has been apportioned to this item. This means that during the fiscal year 1949 the Department will not be able to make leases for new postal units established by the First Assistant Postmaster General to meet service requirements, no matter how urgent the need. It means, further, that it will not be possible to lease space to relieve congestion in existing Federal buildings, even where such congestion is so great as to interfere with the proper handling of the mail and with the furnishing of proper working conditions for employees. There has been no authorization for Federal building construction since 1938, and it is not known when further authorizations of this character may be made. There has been in the intervening years a tremendous growth in the volume of postal business, and in a number of instances the space available for post office operation in leased quarters and in Federal buildings is grossly inadequate. Notwithstanding this condition, if the $500,000 cut is not restored we will not be able to give consideration to affording relief. We have at this time under investigation cases involving the leasing of outside space at 16 different offices over the country, and this number will unquestionably be augmented as time goes on. Increases in allowances for rental units (net).—This item has been reduced in the amount of $45,395. There are over 14,000 postal units which occupy space on a rental basis without formal contract. The owners of these properties have the right to request increases in rental at any time or to insist on the vacation of their properties. Under existing economic conditions large numbers of owners of these rented post office quarters are demanding increases. Based on the most recent experience it would appear that the expenditures under this item for the fiscal year 1949 would be approximately $171,700. If the Department must operate with an appropriation of $14,500,000, it will be necessary to restrict expenditures for these increased rentals to the sum of $91,885. It is not known how this can be accomplished since, as stated, the owners of the properties have the right to demand the increased rental or the vacation of the premises. In the light of economic conditions, the increase must be granted if service is to be maintained. Increases in cost of renewing leases (net).—This item is being reduced in the amount of $7,606 below the original estimate of $183,182. However, based on our most recent information, the cost of renewing leases expiring in 1949 would be approximately $234,100, so that the actual reduction below a normal operation would be $58,524. It is not known whether this reduction can be accomplished. If it is accomplished it can only be through the refusal to provide additional space or facilities even where a complete justification therefor is shown to exist. This will mean that existing leased facilities would have to be continued in operation without change or enlargement no matter what the service conditions might be. JUSTIFICATION OF RESTORATION REQUESTED Mr. BETTERLEY. The original estimate for fiscal 1949 for this item was $15,000,000. The House reduced this amount to $14,500,000. We are asking for the restoration of the amount to the original figure of $15,000,000. This appropriation pays for rent, fuel, and utility services for about 20,000 postal units of the first, second, and third classes. About 5,500 of those are under long-term leases. About 14,000 plus are occupied on a monthly rental basis. INCREASED COSTS We are under considerable pressure in this appropriation because of economic conditions. Building costs are high and are going higher. Property values and rental values are going up. The costs to the owners of property are increasing because of higher maintenance costs, higher taxes generally, and other items. As we come to make a renewal of a lease, such as that of a 10-year lease that was made in 1938, we are faced with the pressures from the owner for an increase to compensate him for changed economic conditions. EXPANDING SERVICE We are faced, secondly, with the pressure to get more space and to improve facilities because of the increase in the postal business. With respect to the long-term leases, they expire at varying times. During fiscal 1949, about 700 of these leases will expire. When we made up this estimate in the summer of 1947, we thought, based on what we knew then, that we could renew those leases at about a 31 percent increase, in the aggregate, even paying for the cost of additional space. Changed conditions and current information make it apparent that that was too conservative and that we are going to probably have to pay about 40 percent. With respect to the offices that are not occupied under formal leases, we have no contracts under which we can hold the owners of the properties. They are free to come in and to ask for rental increases at any time. As their costs change and as prices go up, maintenance, taxes, and what have you, they, in turn, insist on passing those increases along to the Department, in the way of a request for more rent. Unless we can develop other space in the community, which can be done only rarely, we have to meet the owners' demands, if we are to keep the post office in operation. If we were estimating today for the fiscal year, 1949, we would probably have to say that the $15,000,000 would be inadequate to do the job that we should do; that is, to keep our existing units in operation, to meet our increased costs for utility services, which are constantly increasing, and to provide for the necessary expansion of service. This expansion of service has to do not only with the enlargement of existing buildings, but also with the leasing of space for new stations which the Postmaster General referred to earlier. These stations are established by the First Assistant Postmaster General as a result of extensive investigations. They are needed to afford postal service to large populations in metropolitan areas. If that service is to be provided, we must have the money in this appropriation to pay for rents and utility services. We have an additional problem that is becoming more prominent in connection with this appropriation which involves the question of providing leased space to relieve congestion in existing Federal buildings. FEDERAL BUILDING CONSTRUCTION We have had no authorization for Federal building construction since 1938. Since that time there has been possibly an 85- to 90-percent increase in postal business. Even in 1938, the Federal building needs had not been met. There were many places over the country where Federal building construction was required in 1938 and had not been accomplished, and, of course, has not been accomplished since. Many of these Federal buildings have reached the point where they simply cannot accommodate the postal requirements. We have investigations in progress now at 18 individual points over the country, with a view to leasing outside space to relieve congestion in the Federal buildings. EXPANSION OF FACILITIES NOT PROVIDED FOR With the $14,500,000 based on present indications, we will be able to provide for no expansion of facilities whatever, no quarters for new postal stations, no space to relieve congestion in Federal buildings. and we will be hard put to it to keep our existing postal units housed in the facilities that they are now using. EXAMPLE OF LEASE PROBLEM Specimen cases come across our desks frequently illustrating the problem. We have a case, for example, on Long Island, outside of New York City. I do not want to mention the name of the unit because we are still negotiating on it. This is one of the fastest growing towns on Long Island. The receipts have jumped from about $75,000 to $175,000. It serves a population of about 15,000 people. Under our old lease, which is expiring, we have 3,200 square feet of space. There has been a need established, under a new lease, for 8,000 feet. We have taken bids on that basis. We are paying now $3,600 a year. We received six bids. The lowest bid was $14,400, and that is the best bid that we have been able to get. For a postal station in Jersey City, we have 5,236 square feet. Our 10-year lease is expiring. We have been paying $6,000 for the space. We have received four bids. The best bid for suitable quarters is $15,000, representing an increase of 150 percent. These may be said to be exceptional cases, yet they are ones that have come across our desks in the last 10 days or 2 weeks, when this estimate was under consideration. RENT-CONTROL LEGISLATION, NOT APPLICABLE TO COMMERCIAL SPACE Senator HAYDEN. Have the rent-control legislations that Congress has enacted from time to time helped you with respect to these longterm leases? Mr. BETTERLEY. No, sir. There has never been any rent-control legislation applicable to commercial space, as far as the Federal laws are concerned. We are estimating now on the basis of renewing leases that will expire in 1949 on an aggregate increase of 40 percent. Frankly, we do not know whether we are going to be able to do it or not. We hope that we will, and we will keep bearing down. If we get the $14,500,000 to live within that amount, we will have to renew these leases at an aggregate increase of 30 percent. That will eliminate all possibility of expansion no matter what the conditions may be. 1948 APPROPRIATION Senator REED. What is your present appropriation? Mr. BETTERLEY. For fiscal 1948, the appropriation was $13,907,000. Senator REED. How much have you obligated to pay out of the present appropriation? Do you have any margin left?! Mr. BETTERLEY. We do not have a problem this year, Senator. That will not help us in fiscal 1949 because if we make a lease, we create a continuing obligation. We might have a surplus of money in our 1948 appropriation, but were we to create an obligation, it continues from year to year, so that we make a charge against the 1949 appropriation. In other words, this is not an appropriation from which we can spend up to June 30 and then stop. If we put an obligation on the books, it goes on from year to year. Senator REED. Your appropriation has to increase as your costs increase. You have a lump sum here out of which you pay these rents? Mr. BETTERLEY. That is correct. Senator REED. If your rents were uniform and you had no increases, your appropriation would remain level. Mr. BETTERLEY. Yes, sir. ADDITIONAL FUNDS REQUIRED TO OFFSET INCREASED RENTAL COSTS Senator REED. The increase from your present appropriation to the sum requested is to take care of increased costs in your new leases? Mr. BETTERLEY. Yes, sir. Senator REED. Is that correct? Mr. BETTERLEY. Yes, sir; that is correct. It is for new leases. Senator REED. If they were all new leases, 40 percent would result in a much larger increase; is that correct? Mr. BETTERLEY. That is correct. Senator REED. Does that conclude your statement? Mr. BETTERLEY. Yes, sir; unless there are some questions. VEHIBLE SERVICE Senator REED. At this point in the record, there will appear the classification schedule and the justification for the Vehicle Service, 1949. |