GSA Blows Quarter Billion Dollars on Breaking Lease; Lies to Congress About It

John Ransom
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Posted: Jun 03, 2013 12:01 AM
GSA Blows Quarter Billion Dollars on Breaking Lease; Lies to Congress About It

Just a few blocks away from Nationals Park the federal government holds a below-market lease at 2100 2nd Street, SW, Washington D.C.

The 600,000 square foot lease doesn’t expire until May 15, 2018 and is valued at least $48 million in rent and likely represents another $40 million in savings below market rates for commercial real estate.

But, in a time of tight budgets, when taxes have been raised on all Americans to support Washington’s addiction to spending, bureaucrats at the General Services Administration (GSA) have decided to…wait… abandon the cost-effective space, move the employees to a new, higher rent building and pay rent on the vacated building; at the cost to taxpayers of at least $250 million according to sources familiar with the terms of the lease.

And we wonder why the government has such a tough time cutting their budget while having such an easy cutting our household budgets through taxes?  

Sources close to Capitol Hill, however, say there is growing outrage over this specific illustration of the waste of more than $250 million taxpayer dollars.

“The GSA is making a major mistake by neglecting to take advantage of existing below market lease rates for an extended term. It is outrageous that they simply seem to be ignoring a significant cost savings to the taxpayer,” said a source close to Congress. “This is a time we all need to be exercising prudent fiscal responsibility, a basic responsibility of the GSA. They have dropped the ball and had better pick it up soon”.

I guess that’s the reason why the GSA has suddenly gone all “Eric Holder” on Congress, testifying to the House subcommittee responsible for the oversight of federal real estate that the broken lease won’t cost taxpayers a dime, when in fact the opposite seems true. 

From the Washington Business Journal:

The federal government will be on the hook for at least $30 million in lease payments for the Coast Guard's current Buzzard Point headquarters after the agency moves to St. Elizabeths later this year, according to sources familiar with terms of the agency's lease with Monday Properties Inc.

That would contradict congressional testimony from Dorothy Robyn, public buildings service commissioner for the General Services Administration, who told a House subcommittee May 22 that the federal government has an early termination clause with Monday and will not owe any rent.

Sources say the Coast Guard is allowed to terminate its Buzzard Point lease in May 2015, meaning the government would have to pay the lease term until then. There remains disagreement over how much that exposure would be: Some sources say it would be $30 million, while others say it will be as high as $60 million.

That’s not just Contempt of Congress- or even perjury- that’s Contempt of Common Sense, Taxpayers, Economics and, most likely, at least a minor violation of Einstein’s concept of space-time.  

Negotiated in 2008, the lease is estimated to save the government at least $14 per square foot in a real estate market that often fetches $50 per square foot for commercial property.  For all intents and purposes, the lease is a shrewd one to hold at a time that the government is trying to save a few dollars. 

“Not only is the remaining 18 months of vacant/wasted space a problem,” said a person familiar with the lease, “but also that GSA foolishly terminated early a major federal asset that it had for years into the future – very cheap space that is perfectly well suited for numerous federal requirements.  This is possibly the most foolish of all GSA blunders, and hurts the taxpayers the most.”

The government could save a lot of taxpayer dollars if it continued to occupy the building including:

·         $60 million in lease liability in an unoccupied building

·         $40 million they already spent in infrastructure improvements

·         $140-280 million in savings by extending the terms already negotiated at below market rates.

Because of the below-market deal negotiated in 2008, instead of moving out, the government should be moving more people in.

I know we see this type of government waste every day – but hundreds of millions of dollars are going to be wasted by keeping this building unoccupied – an outrage for sure.

But unlike a lot of other government outrages, this one can still be remedied. 

Congress? Can you hear us?

Because someone has been taking “Eric Holder” lessons from you.