3d Session No. 2339 TO PROVIDE FOR THE PURCHASE OR CONSTRUCTION OF BUILDINGS FOR POST-OFFICE STATIONS, BRANCHES, AND GARAGES, AND FOR OTHER PURPOSES JANUARY 22, 1931.-Committed to the Committee of the Whole House on the state of the Union and ordered to be printed Mr. ELLIOTT, from the Committee on Public Buildings and Grounds, submitted the following REPORT [To accompany H. R. 13566] The Committee on Public Buildings and Grounds, to which was referred the bill H. R. 13566, having duly considered the same, hereby make report of it to the House with amendments and with the recommendation that the bill, as amended, do pass. On page 1, line 7, after the word "necessary" insert the following: "and to contract for the construction thereon of adequate and suitable buildings". On page 1, line 9, after the word "building" strike out the words "now or hereafter" and insert in lieu the following: "and premises the whole or any part of which is now or may hereafter be.' On page 2, line 5, after the word "service" strike out the period, insert a semicolon, and insert the following: "and he is further authorized to enlarge, extend, or remodel any building acquired for any of the foregoing purposes. On page 3, line 7, after the word "Budget" strike out the period, insert a colon, and insert the following: Provided, however, That all contracts within the purview of this act shall be let in accordance with the terms of the general law governing the construction of public buildings. On page 3, line 9, after the word "act" strike out the following words "such sums as may be necessary are" and insert in lieu thereof the following: "the sum of $45,000,000 is." The committee has conducted exhaustive hearings on this bill and a vast amount of information and evidence was presented but it seems that the whole proposition is very completely and accurately covered in the report on post-office leases with recommendations submitted by the Postmaster General under date of September 16, 1930, which report we attach hereto and make it a part of this report. THE PRESIDENT, REPORT ON POST OFFICE LEASES The White House. OFFICE OF THE POSTMASTER GENERAL, MY DEAR MR. PRESIDENT: Pursuant to your request made last March, the department has now completed a survey of post-office leases. I am outlining below the important facts relating to this subject, together with recommendations for certain changes of policy which, if they meet your approval, should in my judgment be submitted for the consideration of Congress. Generally speaking, they contemplate the ultimate ownership by the Government of all extensive quarters required on a substantially permanent basis by the Postal Service. Broadly, the buildings occupied for post-office purposes fall into four categories, as follows: (a) Post offices; (b) post-office stations and branches; (e) post-office garages; and (d) terminal railway-mail facilities. QUARTERS FOR POST OFFICES On June 30, 1930, there were 49,103 post offices in the United States, distributed by classes as follows: The Government does not contract directly for the housing of post offices of the fourth class. In the usual case, a fourth-class office is conducted by a general storekeeper of the community as an incident to his principal means of livelihood, the necessary facilities being located in a portion of the store. Postmasters at fourth-class offices receive an allowance amounting to 15 per cent of their compensation to cover rent, light, fuel, and equipment. For post offices of the first, second, and third classes, the so-called presidential offices, the Government must supply quarters. The following table gives the facts regarding the ownership of the quarters occupied by presidential post offices: TABLE I-Statement showing ownership of quarters occupied by presidential post offices June 30, 1930, by classes QUARTERS FOR STATIONS AND OTHER AUXILIARIES In each large city the Government must supply quarters likewise for postoffice stations and branches, as well as the garage space needed for the care and upkeep of collection and delivery trucks. In a number of cities space is required for the separation and distribution of "transit" railway mail and office space for the supervisory and clerical personnel of the Railway Mail Service. The tables which follow show the ownership of the quarters at present occupied for these auxiliary purposes: TABLE II.-Statement showing ownership of quarters occupied by post-office stations, branches, and garages June 30, 1930 TABLE III.-Statement showing ownership of quarters occupied by the Railway Mail Service June 30, 1930 It will be observed from the foregoing tables that the Government owns the buildings which it occupies for post-office purposes in a minority of cases only. The following summary, covering buildings of all classes, will make this clear. TABLE IV.-Statement showing ownership of quarters occupied by the Postal Service for all purposes, except offices of the fourth class As a rule, the Government owns the post-office building in all the larger cities and towns; and under the Federal building program now in process, buildings are being constructed in additional cities as rapidly as funds are made available, suitable sites can be procured, and the plans drawn. The apparent policy of Congress under the present program is to provide a Federal building in every city and town having postal receipts of $20,000 or more yearly. A total of about 2,200 cities and towns meet this requirement, in about 1,300 of which there is already a Federal building. This leaves about 900 additional buildings to be provided ultimately, under the present policy. RENTED QUARTERS In most cases, the quarters used for postal purposes in privately owned buildings are rented from month to month without formal lease. In the small towns, served by offices of the second or third class, the limited space required for the post office can readily be secured in any conveniently located business block at a low rental rate. The average rent for the 9,300 post offices housed in rented quarters does not exceed $40 a month. Satisfactory quarters for stations and branches and garages in the cities can ordinarily be obtained similarly, by monthto-month rental, and more than 1,100 of these auxiliaries are so provided for. Not infrequently, space for motor trucks is rented in commercial garages, the rates depending upon the number of machines accommodated. The aggregate annual rental for quarters occupied on a month-to-month basis, for all purposes, is $3,185,597.1 LEASED QUARTERS Thus, there appear two well-defined classes of cases—at the one extreme, the larger cities and towns where the Government owns, or, under the present policy, expects ultimately to own, the main post-office building; and at the other extreme, the smaller towns where it is economical and satisfactory to rent the space required for post-office purposes on a month-to-month basis. Between these extremes is a third group of cases-cases where the Government does not own the necessary buildings and where it is not practicable to rent suitable quarters on a month-to-month basis. As will be seen from Table IV, the department now occupies quarters in 6,526 buildings under lease. With a few exceptions, the terms range from 5 to 20 years. In 4,980 towns, the main post office is leased. In the large cities, space is leased for 1,386 postal stations and branch post offices, 99 garages, 48 terminal railway post offices, and 13 headquarters offices of the Railway Mail Service. The rent on the space leased for these various purposes ranges from a few hundred dollars a year in particular cases to $360,000, which is the average annual rental on the Van Buren Street postal station in Chicago. The annual rent paid on the 6,526 leases is $16,541,324, or an average of $2,535 for each lease. Following is a table classifying post-office leases according to the amount of rental paid yearly. For convenience, it is subdivided to show separately the leases for (a) post offices, (b) branches and stations, (c) garages, and (d) railway post-office terminals and offices. TABLE V.-Statement showing classification of post-office leases by amount of rental paid, June 30, 1930 The practice of the Government has been to erect a Federal building in each important city and town, in which to accommodate the post office, along with such other Federal agencies as may require office space. While there was formerly no very definite standard for determining when and where public buildings should be erected, Congress has, of course, generally limited such buildings to the larger communities. As has been said, the present policy is to provide such a building for each town having postal receipts of $20,000 or more yearly. Carried to conclusion, this policy will mean Government-owned buildings for all post offices of the first class and about 1,000 offices of the second class. While the Government has thus followed a policy of constructing and owning the buildings needed to house the main post office in every sizeable town, it has at the same time been the almost invariable practice to lease or rent the quarters required for branches, stations, and garages. The public buildings act approved May 25, 1926, and the legislation supplementary to that act, has brought about no change in this particular. This legislation is being limited in its application to buildings for main post offices and annexes, for Federal courts, for marine hospitals and quarantine stations, and for stations for the customs and immigration services. It has not been applied to such auxiliary buildings as post-office branches, stations, and garages. 1 Excluding the estimated value of heat and light furnished by the lessors and covered in the rental charged The result of this policy of limiting Government ownership to the buildings needed for main post offices and annexes, leaving stations and branches and garages to be housed in leased quarters, has been to pile up a huge rent bill in the large cities, as will be apparent by a reference to columns (b) and (c) of Table V. This bill is increasing and will continue to increase until the Government modifies its policy, and determines upon a program of ownership for quarters for these purposes. I believe that this should be promptly done. Before setting down the definite recommendations which I have in mind, it will be instructive, particularly in view of recent criticism, largely uninformed, of the department's leasing activities, to discuss briefly the development of the practice of leasing post-office buildings in recent years and to give some description of the methods, past and present, used in the execution of such leases. Needless to say, the leasing of quarters for post-office purposes is as old as the department itself. As far back as 1890, more than a million dollars was expended for the rent of facilities for offices of the first, second, and third class. By 1913, the year which witnessed the establishment of the parcel post, the annual expenditure for this purpose had grown to approximately $4,000,000. It is now about $20,000,000, including expenditures for both leased quarters and quarters rented from month to month. The establishment of the parcel post, of course, greatly increased the volume of the mails, and within a few years made necessary a substantial expansion of the plant of the Postal Service, particularly in the commercial centers like New York, Chicago, and Philadelphia. In normal times, this need for expanded quarters would doubtless have been met by the enlargement of existing Federal buildings and the erection of additional buildings. But before any plan could be formulated to that end the United States entered the war with Germany and suspended all building cònstruction save that which was essential to the conduct of military operations. This forced the Post Office Department to secure the additional accommodations which it needed for the growing postal business, and particularly the parcel post, by leasing additional quarters in privately owned buildings. THE LEASE OF SPECIALLY CONSTRUCTED BUILDINGS In this period-during and immediately following the war-the quarters in Federal buildings were in many instances no longer adequate even for the normal postal needs, exclusive of the parcel post. In the larger cities the only means of relief was to establish special stations, branches, and annexes. Where satisfactory privately owned buildings were available in convenient locations at a fair rental, these were leased as they stood, with such alterations as were necessary to adapt them to the business of handling the mail. But in many instances no suitable buildings were to be found, and in these cases the department had no alternative except to contract with private persons to construct special buildings, to be leased to the Government upon completion. Although this was the only practicable course of action, there is no question that it frequently placed the Government at a disadvantage. A company erecting and equipping a post-office building on a contract to lease it to the Government for 10, 15, or 20 years, is usually obliged to figure on recovering the whole cost of the building in rental during the term of the lease, because of the likelihood that at the end of the term it will have on its hands a vacant building ill adapted for anything but the special uses of the Postal Service. The result is that during the term of the lease the Government is required to pay in rental not merely a reasonable return on the builder's investment, but virtually the full cost of the building as well. Yet at the expiration of the lease, the building with its equipment remains the property of the lessor and the Government has absolutely nothing to show for its expenditure. Nor does this tell the whole story. The builder must borrow the money to finance the project, at an interest rate which ranges from 7 to 10 per cent, including all expenses of financing. Moreover, he must pay taxes on the property, notwithstanding the fact that it is occupied by the Government, and taxes, interest, and financing charges are all passed on to the Government in the rental charge. Under these conditions, there is no doubt that in the period from about 1918 up to the present time the Post Office Department has in many cases been compelled to pay excessive rentals for the buildings which it has leased for post-office uses. It is necessary, however, to keep certain things in mind. The leasing policy on its present broad scale was not of the department's choosing. It was the inevitable consequence of the Government's suspension of ordinary building operations during the war and for a considerable period afterwards. The de |