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Economic Development In The District Of Columbia

Chairwoman Morella, Members of the Subcommittee, my name is Donald C. Williams, the Regional Administrator for the General Services Administration's (GSA's) National Capital Region. I am pleased to have the opportunity to discuss the impact that GSA, through the work of its National Capital Region (NCR), has on the economic development of the District of Columbia.

GSA's mission is to provide the best value to our customers through superior workplaces, expert solutions, acquisition services and management policies. For this presentation, I will focus on the real property functions that allow us to meet our goal to provide world-class workplaces for Federal agencies in Washington DC (District). Specifically, I will provide an overview of some of the work of NCR that directly affects the District.

As the largest real estate management organization in the Washington metropolitan area, NCR manages over 86 million square feet of space, of which 49 million square feet is in the District of Columbia. Over one-third of the space managed by the Region in the District is leased directly from the commercial market.

In addition to our direct real property impact, GSA is the largest non-Defense procurement agency in the region. A recent Brookings Institution study estimates total Federal procurement expenditures reached $28.6 billion in 2000. In that year alone, GSA spent $4.5 billion with half of the total being spent in the District. The Brookings study indicates the growth in Federal spending between 1999 and 2000 accounted for 25% of all the new jobs created in the Region during that period. So, NCR has an impact on the economy of the Washington metropolitan area, both directly and indirectly.

In real property terms, GSA is the government's landlord. NCR's associates work with our customers to plan, design, construct, manage, renovate, and dispose of real estate. Especially here in Washington, we serve as the stewards of the buildings that are owned by the United States of America. The buildings situated here, are emblematic of our government. When visitors come to Washington, DC, they may not remember all the sites they see, but they will surely remember the grand buildings that house our government. Therefore, it is imperative that we in the National Capital Region ensure that these iconic structures continue to exemplify our republic.

The economic impact of NCR's real property activities is far-reaching. Currently, new construction activity totals about $1.2 billion throughout the Region. Of this total, over $213 million is occurring in the District, with two projects noteworthy of the impact NCR's activities have on the community. One project provides a signature building for the Bureau of Alcohol, Tobacco & Firearms (ATF), while the other project constructs a needed enlargement of the E. Barrett Prettyman Courthouse. There is additional NCR construction activity elsewhere in the Region, such as the new Federal Drug Administration headquarters, which is being built in White Oak, Maryland.

As well as constructing new government-owned buildings, NCR leases over 18 million square feet of space from the Washington, DC private sector. While our leasing volume has held relatively constant, it continues to have a significant impact on the local office market. This is because approximately 10% of NCR's leases expire each year. For instance, about 5 million square feet of space has expired in each of the last two fiscal years. Of NCR's total spending on procurements in 2000, about $1 billion was used for lease payments. I was very proud to recently announce one of GSA's largest leases ever for the new headquarters of the Department of Transportation in the Southeast Federal Center (SEFC) area.

NCR's proudest heritage is embodied in our government-owned, historic inventory of buildings here in Washington, DC. Many of these buildings are over 50 years old, and much of the inventory is only now being renovated for the first time since built. Currently, GSA is spending $1.7 billion on renovations throughout NCR, of which $1.6 billion will be used in the District. Projects here include the Department of Justice, ICC/Customs/Connecting Wing, and the Herbert Hoover Building, which are all in the Federal Triangle. Nearby, we are renovating the Department of the Interior, the Harry S Truman Building, and the Eisenhower Executive Office Building. NCR takes our stewardship of the historic structures in Washington, DC very seriously and will continue to do everything within our means to maintain them as working government buildings, as well as symbols of the government that they represent.

It is my understanding that much of today's hearing concerns the activities of the National Capital Revitalization Corporation (NCRC). The NCRC is an entity created to manage designated development projects in the District of Columbia. It can both initiate new real estate development projects through partnerships with the private sector, and provide real estate consultant services for parcels controlled by the District. NCR has experience in working with alternative approaches to major redevelopment projects here in Washington, DC. Therefore, we recognize the potential of working with NCRC, as they represent the District in some of the projects that may interact with those being executed by GSA.

Over the last 15 years, NCR has utilized several alternatives to traditional project development, administration and execution. Such projects as NCR's completion of the Pennsylvania Avenue Development Corporation's (PADC) work, underscores the potential for benefits from our work being experienced by the District.

I am pleased to report that virtually all of these parcels have been committed for development. Last November, ground was broken for Square 457, the last PADC parcel available for development. As a mixed-use residential development, this conversion of the District's oldest downtown area into a lively community will serve office workers, tourists, and residents.

In our more traditional role as Federal real estate manager, NCR's work is also an important catalyst to the area's economy. The Ronald Reagan Building and International Trade Center, the second largest Federal office building in the country, includes over 3 million square feet of government and private sector office space, convention facilities, a food court, and a new restaurant operated by Michael Jordan. This project demonstrates NCR's ability to combine governmental and private sector functions. It also completes the work on the historic Federal Triangle, which was begun in the mid-1920s.

GSA projects can have positive impacts on specific neighborhood such as the new headquarters for ATF at the intersection of Florida and New York Avenues, NE. This project will provide a major gateway on the New York Avenue corridor and play a major role in the redevelopment of part of the city that is now in transition. This project stands as an example of GSA providing an impressive headquarters building for our customer while furthering the redevelopment efforts of the District of Columbia.

In the Penn Quarter section, I am especially proud of our efforts with the Tariff Building. GSA employed the National Historic Preservation Act to assist in the redevelopment of this historic site. The Kimpton Group is converting the Tariff Building into a first class, boutique hotel, with 170 rooms and a restaurant. Kimpton signed a unique, 60-year lease with GSA to obtain long-term control of the building. When completed, this renovation and conversion will have injected $32 million into this historic project and the District's economy. In addition, ongoing rent payments will be paid to GSA and the hotel will pay tax revenues to the District.

One of our most impressive examples of the use of innovative development tools is NCR's ongoing redevelopment of the Southeast Federal Center (SEFC). This 55-acre site was once part of the historic Washington Navy Yard. GSA obtained the property in the mid-1960s. Over the years, several attempts to develop it as a traditional Federal office enclave were unsuccessful.

Several factors have influenced the project's current progress. First, the Navy has transferred the NAVSEA command from Northern Virginia to the Washington Navy Yard, thereby doubling employment to 11,000 workers. The Navy's growth has generated initial demand for private sector office space for their contractors.

In addition, the Department of Housing and Urban Development and the District announced the award of a Hope VI grant for the area north of M Street, which borders the site.

The most important milestone for the redevelopment of the SEFC was the passage of the Southeast Federal Center Public-Private Development Act of 2000. Congresswoman Eleanor Holmes Norton's leadership was instrumental in this legislation, which gives GSA exceptional flexibility in developing SEFC. For instance, NCR can work jointly with a developer, lease the site, or sell it outright, using a streamlined approach. Currently, NCR is completing the Request for Qualifications and developing the Request for Proposals. This project is so important to the future of the Southeast section of Washington, DC, and NCR has worked closely with the District to ensure that the resulting development will provide far-reaching benefits to all parties. NCR's selection process will maximize the amount of information we provide to the market about our requirements so that we receive the highest quality responses from interested developers. We anticipate a mixed-use development of office space, retail uses and housing, making this an attractive project that will be accessible to the entire District.

GSA also manages the end of the real estate life cycle - the disposal of surplus real property. Surplus properties are made available for various public purposes, including the donation or sale to state and local governments and eligible nonprofit institutions; or, they are sold competitively to the general public. The disposal activities in Washington DC, were formerly managed by of GSA's Atlanta office. Due to the unique needs of this Region, the Administrator recently established a property disposal office in NCR. Currently, there are two disposal projects that could have an impact on the Washington, DC marketplace; the West Campus of St. Elizabeths Hospital and the sale of air rights over the railroad tracks behind Union Station.

St. Elizabeths Hospital opened for business in the late 1850s, as the first Federal facility for the insane. Its first building was designed by Thomas U. Walter, who also designed the expansion of the Capitol. During the Civil War, it served as an extended care facility for Civil War amputees, many of whom are buried in a cemetery on the site. The last patient left the West Campus in the 1960s.

Currently under the jurisdiction of the United States Department of Health and Human Services, the West Campus site comprises 186 acres, with some 50 buildings and 1.2 million square feet of space. The site commands a magnificent view of the District and Northern Virginia and is a National Historic Landmark. However, many of its buildings are now in such decline that they cannot be used. Other West Campus buildings are being used by the District's Department of Mental Health, which controls the East Campus of St. Elizabeths. The District is in the process of consolidating its operations to the East Campus.

The St. Elizabeths property provides a significant opportunity for both GSA and the District of Columbia. As NCR is beginning to develop a strategy for the West Campus, the District is also beginning a planning effort for the East Campus of St. Elizabeths. As with the redevelopment of the Southeast Federal Center, it will be imperative to ensure that all interested parties share benefits from the future uses of St. Elizabeths. Therefore, as NCR looks to the future of the West Campus, there needs to be close coordination with the District on planning for the overall site

NCR is also pursuing the sale of air rights over the railroad tracks, from behind Union Station to K Street, NE. Rather than progressing through the normal disposal process, GSA was directed by Congress to sell these rights by September 30, 2002, at fair market value. NCR is currently negotiating with the District on this matter.

In closing, I would like to reiterate that we recognize our impact on the local economy and continue to make decisions that reflect sensitivity to it. We are committed to working with the District of Columbia, whenever possible, attempting to ensure that all parties receive benefits from the Federal presence here. In particular, NCR looks forward to identifying opportunities to work with the National Capital Revitalization Corporation, on behalf of the District, on certain projects of mutual interest.

Our goal to ensure that our customers succeed, by supplying them with the workspace they need to meet their mission, is only exceeded by our steadfast commitment to be good stewards of the special resources we oversee in Washington, DC. There is no greater honor than to ensure that these buildings that are symbolic to all Americans continue to be used and appreciated.

The National Capital Region of GSA is committed to working closely with our customer agencies, the marketplace that provides us with services and space, the District of Columbia and you as we face the challenges of our unique mission.

Thank you for your interest in, and support for our work in our Nation's Capital. I will be happy to answer any questions you may have.