July 2006

House Subcommittee Won't Back Rent Waiver

Following up on a hearing on rent relief for the Judiciary last summer, a House subcommittee continued its look into the future of the federal courthouse construction program with a June 2006 hearing.

“We are here today,” said Representative Bill Shuster (R-PA), chair of the House Transportation and Infrastructure Subcommittee on Economic Development, Public Buildings and Emergency Management, “because over a year ago, the Judiciary requested a permanent rent exemption from the Federal Buildings Fund, claiming the rising GSA rent payment was creating a fiscal crisis.” According to the Government Accountability Office (GAO), “the Judiciary’s rental obligations for federally owned and leased space have steadily risen from $780 to $990 million, or 27 percent, from fiscal year 2000 through 2005, after controlling for inflation.”

Judge Jane Roth (3rd Cir.), chair of the Judicial Conference Committee on Space and Facilities, testified before the subcommittee, with David Winstead, Commissioner of the General Services Administration’s (GSA) Public Buildings Service, and Mark Goldstein, Director of GAO’s Physical Infrastructure Issues.

The House subcommittee concluded a 2005 hearing with the request that GAO look into the Judiciary’s plea for rent relief, and report on the impact a permanent rent exemption would have on the Federal Buildings Fund, possible alternative solutions, how rent payments are calculated by GSA, and how rent increases are planned and accounted for by the Judiciary. GAO’s Goldstein presented the report at last month’s hearing.

In his comments during the hearing, Shuster was critical of both the Judiciary and GSA. He criticized GSA for claims of rent bill errors and inaccurate appraisals. “GSA should not be overcharging tenants and if appraisals are inaccurate, they too must be corrected.”

He faulted the Judiciary for failing to manage its space requirements and now asking for what he termed “the equivalent of a ‘get out of jail free’ card, with its request for rent relief. “The GAO findings,” said Shuster, “only solidify my, and I believe this committee’s stance, against such a rent waiver. . . .To provide the Judiciary with a rent exemption would be disastrous to the Federal Buildings Fund and the government’s ability to control its real property needs.”

According to the GAO report, while about two-thirds of the Judiciary’s $210 million rent increase is attributable to a 19 percent increase in net square footage, the remaining increase is attributable to “disproportionately high increases in security and operating costs.” GAO also found that neither the Judiciary nor the GSA had routinely and comprehensively analyzed the factors influencing the rent increases. The report went on to state that, “the Judiciary faces several challenges to managing its rent costs, including costly architectural and structural requirements for modern courthouses, a lack of incentives for efficient space use, and a lack of space allocation criteria for appeals and senior district judges.” The report recommended that the Judiciary begin tracking and analyzing rent trends, establish incentives to encourage local decision-makers to use space efficiently, and improve its space allocation criteria.

Roth characterized the GAO report as “seriously flawed,” noting that GAO’s “assessment of the underlying reasons for the Judiciary’s increased rental charges was both insufficient and misleading.” As to the GAO assertion that roughly two thirds of the increase in the Judiciary’s rental obligations to GSA are attributable to growth in the amount of space, Roth countered that, since 1985, rent has increased 333 percent, even after adjusting for inflation, whereas square footage has increased by only 166 percent, which is half that amount.

Roth voiced concern that GAO decided what challenges the Judiciary faced, without consulting Judiciary officials with policy-making responsibilities. The report also criticized the Judiciary for inefficient space use without considering future growth and the need for expansion.

“By failing to ground its analysis in the mission-related drivers for judicial space,” Roth said, “the GAO conclusions do not address the facilities planning challenges we face.”

Roth acknowledged that, despite the Judiciary’s concerns with the report findings, the GAO recommendations “are consistent with efforts we already have underway to control rent costs,” including the imposition of tighter budgetary controls and rent caps on facilities decisions made by circuit judicial councils, and changes to the U.S. Courts Design Guide.

Roth told the subcommittee of other Judiciary initiatives to help control and contain space costs. They include a re-tooling of the long-range facilities planning process to introduce life cycle cost-benefit analysis into the evaluation of housing alternatives; comparative analysis of space uses between and among the various circuits and court components; and a rent validation initiative with GSA to ensure the basis of the rent charges in terms of square footage calculations and space classifications are accurate, and that the rent has been properly computed.

“We will continue to enhance our facilities planning and management processes,” Roth concluded, “but we still face the situation where mandatory rent payments to GSA have been increasing at a faster rate than the Judiciary’s appropriations increases.”