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Mr. MULLIGAN. To the so-called monument or landmark.
Mr. MULLIGAN. That is right. We have ascribed no value to the improvements on the land.
Now, I say this because it is a fact, and I wrestled hard with the question of trying to place a value on the monument, and I consider it is incalculable. Therefore, the lease, as we visualize it, would not include in the valuation base any amount representing the present station. We would expect to include in the value base the $5 million or less that might be spent for new improvements, but nothing for the existing improvements.
Mr. GRAY. The new improvements would be in connection with the visitor center?
Mr. MULLIGAN. Yes.
Mr. GRAY. And you would provide up to $11 million for the parking facility and $5 million for remodeling the existing Union Station, and $3.5 million for a new railroad terminal, making a total investment of $19.5 million plus the existing investment plus the air rights over the tracks, and the aggregate cost to the United States for the leases would not exceed $2.9 million a year for a term of not more than 20 years?
Mr. MULLIGAN. That is right. Mr. Chairman, I think we should recognize that all of these figures are ceilings, they are maximum figures.
Mr. Gray. You would have no objection to this committee writing in that the exact figures would be determined through negotiation but not to exceed $2.9 million?
Mr. MULLIGAN. I would prefer to go with Mr. Knott's figure of not to exceed $3 million.
Mr. GRAY. We are talking about less than a $100,000 a year differ
Mr. MULLIGAN. Yes, the point, sir, is this: I don't think any of us know now precisely what the $11 million will buy. Hopefully, it will buy 4,000 spaces. It might well prove that it would be a few more. My own guess is it will be less. So that if the $11 million will only buy 3,000 spaces, that is what it will buy.
I know you understand, Mr. Chairman, as do the other members who served on the Study Commission, there is ample additional area, up to 300 acres, but I think this should be clear, we get as the parking facility what the $11 million will buy. Still to be worked out as to design would
be the new station facility. We continue to recognize that this is the Nation's Capital and that passengers arriving by train should have an adequate facility, and we intend to provide one, and the present thinking of ours and your consultants is that the new station facility would be incorporated in what you can imagine will have to be a very massive structure.
Mr. GRAY. For parking ?
Mr. GRAY. You contemplate that visitors arriving by automobile or by train or by subway or by helicopter would go through the Visitor Center. This would
be a part of the overall complex. Mr. MULLIGAN. Definitely. Mr. GRAY. But not in the existing structure?
Mr. MULLIGAN. It would be incorporated physically in the parking facility. Bear in mind that to shoot for 4,000 parking spaces would require, depending somewhat on how the ramps are laid out, a total of 1,400,000 square feet. The new station would, we think, require possibly 150,000. So it tucks in there very nicely and its precise location would be dictated by that which is optimum from the standpoint of all uses.
Mr. Gray. Any further questions!
Mr. GROVER. Mr. Chairman, the gentleman has discussed the basis for an appraisal. I would like to be reassured on the record that the basis for the fair market value and for the appraisal will in no event take into consideration the values of the existing building but would be predicated on the land value!
Mr. MULLIGAN. That depends on what the assignment is as given to the appraiser. A qualified appraiser—and I had one of the outstanding ones in the country appraise the property for us at the time the Smithsonian Institution made a study concerning the possible use of the station area for a transportation museum and/or a Visitor Center—now real estate appraisals, with which I have some experience, are far from an exact science. I am not trying to evade your question. I think we are prepared to stand on a value of the land as determined by a qualified appraiser or more than one. If some appraiser were to report that in his judgment the land was only worth $16 million, I would not be able to buy that.
Mr. GRAY. What you are saying is that in your best judgment the value you have set on the property in the proposed lease arrangement is just for the land, and if they wanted to include the building you would have no objection?
Mr. MULLIGAN. No objection.
Congress would most probably have an objection, if an appraisal came in that substantially exceeded the approximate $19 million figure. So as I see it, our practical problem is how do we tie down in the report or otherwise a figure of approximate value of $19 million. It should be thoroughly understood the present station will not be included if the value is approximately $19 million.
Mr. GRAY. I think the sole value of the appraisal proposed by the Administrator of the General Services Administration is to make sur the Government will not be cheated. It is only in an advisory capacity that they would make such an appraisal and the memorandum of agreement is based on the figure of approximately $19.5 million. If we make an appraisal and it comes to more, the gentleman does not intend to ask for an additional rental payment. Is that right? The gentleman is prepared to stand on the recommendation he has made based on his estimate of value. So that if GSA came back and said their appraisal shows your property is worth $25 million, the gentleman would not expect to come back and ask for additional rental, would you?
Mr. MULLIGAN. Just as the Congress would be unhappy with an appraisal report that showed the property worth $30 million, so would my management if I committed us to $19.5 million.
Mr. Gray. But if they come back and say it is worth $16 million, would the gentleman come down in the rental payment? This is a twoway street. We both could be in trouble. That is why I felt we ought
to have an appraisal to be used as more or less a guideline, but you should not ask for an additional rental based on an increase in the
appraisal, and we should not ask you to make a substantial reduction in the rental amount if the appraisal showed less value. In other words, if we write in the bill $2.9 million based on your estimated value of the land and not the building, and later on some appraiser says it is worth more, would you have any objection to our using these figures as a maximum and
additional savings would accrue to the Federal Government? That is what Mr. Knott proposes, that any such savings would accrue to the Government. That is why he wants to use the maximum amount.
Mr. MULLIGAN. That is quite correct, Mr. Chairman. Let me put it also this way—but before I go to the second point I want to make it clear we use 6 percent per annum as the estimated cost of borrowing.
Mr. Gray. This is just for the new improvements?
Mr. MULLIGAN. It would be using, again, the numbers we have talked about-$11 million for the parking facility, $5 million for remodeling of the station. Now, I would hope we could borrow for no more than 6 percent. I would be delighted if we could borrow for less.
Mr. GRAY. But if it is less the savings will accrue to the Government? I want the record to show that.
Mr. MULLIGAN. The record should show if the interest is less the savings would be reflected in the rental, but, on the other side of that coin, if the interest rate is more there would be an increase reflected in the rental.
Mr. GRAY. I felt we should reach a compromise both on the appraisal and the amount of money because these are funds of the taxpayers and our Commission wanted to get as near as we could to the exact figure.
In your best judgment this morning the figure of $2.9 million would be a fair and reasonable annual rental to the Federal Government for these improvements and the present facility, and in your judgment this would not vary very much one way or another?
Mr. MULLIGAN. That is correct.
Mr. GROVER. On page 2 of your statement, the last two sentences, you say:
It is also my understanding that the lessor would be protected against any increase in real estate tax liability or increase in other financial liability which might arise as a consequence of the leases to the Government of the properties and improvements contemplated under this legislation.
I have two questions: What other financial liability do you have in contemplation other than tax liability?
Mr. MULLIGAH. We have none specifically in contemplation, and I would like to make this point, if I may:
The Terminal Co. does not seek to escape payment of the taxes to the District which it is paying, and those aggregate approximately-real estate taxes I am talking about now-$350,000 a year. However, this projecí is being undertaken by the Government. Left to our own devices we would not build a parking facility for 4,000 vehicles. And we think, in all fairness, since we are undertaking this at your request, and since we are predicating our rental on what I think is a very modest rate of return-if we had started out at the beginning talking 7 percent no heads would have fallen to the floor
Mr. GROVER. I am troubled by your language "other financial liability.” Are you talking about increased insurance cost or what do you have in mind ?
Mr. MULLIGAN. We don't have a thing in mind, sir. It is a broad escape clause, a protective clause.
Mr. CRAMER. Will the gentleman yield! We struck that out. It is not now in the bill.
Mr. GROVER. When you refer to improvements, the new terminal is also contemplated. You don't mean to get an exemption from taxation on the new terminal, do you?
Mr. MULLIGAN. We would pay taxes on the new passenger station.
Mr. GRAY. Will the gentleman yield ? Is it not a fact that the Washington Terminal Co. paid this year better than $300,000 in taxes ?
Mr. MULLIGAN. Yes, sir.
Mr. Gray. And if the gentleman would continue under this arrangement to pay the District of Columbia those taxes, it was his feeling if he added in the taxes on the improvements it would be in the lease. We felt it would be better to keep the rental payments lower and the Washington Terminal Co. will continue to pay the assessed valuation they are now paying?
Mr. MULLIGAN. Yes. In other words, we will continue to pay taxes on a station as we are today.
Mr. CRAMER. Will the gentleman yield? Is it your understanding that the language relating to taxes and increased value by reason of improvements made on the property, that there shall not be an increased assessed valuation, refers to all improvements including paragraph (4) for a new railroad terminal as well as those constructed for the Federal Government?
Mr. MULLIGAN. No, sir.
The District of Columbia shall not, during the term of any lease entered into by the United States and the Washington Terminal Company pursuant to this Act, include in the assessed valuation of the leased properties for tax purposes any increase in value by reason of the improvements made on such properties by said company in meeting its obligations under any lease or agreement made pursuant to this Act.
You will note it refers to the assessed valuation of "leased properties" ?
Mr. MULLIGAN. Yes, sir
Mr. CRAMER. The new terminal facility will not be a “leased property"; is that correct?
Mr. MULLIGAN. That is correct.
Mr. CRAMER. Therefore, the increased valuation of the new terminal facility could result in an increased assessed valuation and this bill would not preclude the District of Columbia from making such an increased assessed valuation?
Mr. MULLIGAN. As written that is correct, and that is one of the matters I would cover in my supplemental statement for the record.
Mr. CRAMER. Would the bill as drafted cause any change in maximum figure for annual rental?
Mr. MULLIGAN. No.
Mr. CRAMER. The bill as drafted specifically would not permit any addition. That is the top limit?
Mr. MULLIGAN. Yes.
Mr. CRAMER. Do you think that would cause a serious problem?
Mr. MULLIGAN. Again, sir, may I put it to you this way: We would not plan to go out and construct a new station if we were not going to turn over the present station to you. We might possibly close portions of it surplus to the need and reduce the cost of operation to a level consistent with actual use in a railroad operation, but there has been no contemplation on the part of the Terminal Co. to build a new station unless it disposes of the old.
Mr. CRAMER. Would the gentleman have any objection to lifting the taxation on existing facilities if the Government takes over?
Mr. MULLIGAN. Well, subject to the advice of tax counsel I think that might be a possible solution.
Mr. CRAMER. It is something we could consider. Mr. Gray. I would like to see this stay on the tax rolls. I would not like to ask Congress to exclude taxes. But, as the gentleman said a moment ago, if we put in additional taxes on these government improvements, then the annual rental the government will have to pay will be increased. We could exclude the facility used by the Government and tax the new facility.
Mr. CRAMER. I gather from the discussion, in order to accomplish what the gentleman has said, this would require some amendments.
Mr. GRAY. I appreciate the gentleman's observation.
Mr. CRAMER. I do not know whether I would agree with the policy or not. Obviously, it would require some amendment.
The other question I had relates to the $5 million for improvement in the station itself, and the $10 million or $11 million for parking space. What contract-letting procedure will be used? I gather from the manner in which the bill is drafted that the actual contractletting for the improvements is not a function of the Department of the Interior or GSA; is that correct? It would be a private enterprise function.
Mr. MULLIGAN. We would be willing to do it. We had assumed that we would be expected to do it. We would be very happy if the Government chose to do it.
Mr. CRAMER. What contract-letting procedure would you contemplate if the bill remained in its present status, that is, private enterprise letting the contract? The Federal Government's interest would be to achieve the lowest possible cost basis, by competitive bid or otherwise.
Mr. MULLIGAN. Frankly, sir, I had not reached that point in my thinking. I had assumed two things, of course. First, as far as alterations to the station, we will carry out whatever you tell us you want done. Coming to the parking facilities and a new station incorporated in it, obviously there must be complete agreement between our engineers and the Government's engineers as to design and specifications. I would expect to consult the authorities in the executive branch-I guess it is GSA and the Secretary of the Interior-relative to their procedures for letting contracts of this kind.
Mr. GRAY. Putting the question simply, since we are pressed for time here, would it not be your purpose, if the delegation of authority were given to you, to advertise on a competitive bid basis for the construction works?
Mr. MULLIGAN. Answering the question today, “Yes.”