Work has in several letters to the joint commission emphasized the necessity for additional Government-owned buildings and for a complete change in policy in respect to the leasing of property for postal purposes, and copies of certain of these are submitted. OFFICE OF THE POSTMASTER GENERAL, JOINT COMMISSION ON POSTAL SERVICE, Washington, D. C. MY DEAR SIRS: There are at present 5,846 post offices in leased quarters and 1,119 post offices in buildings owned by the Government. The aggregate annual rental paid for the occupancy of these 5,846 leased quarters is $9,262,515.47, but this aggregate does not include the amount paid for quarters not under lease, which, when added to $9,262,515.47, makes a present total annual rental bill of $11,660,056, not including garages, to be paid by the Government from appropriation made to the Post Office Department. There are at present five Government-owned buildings actually under construction and eleven under contract for construction in which post offices will find quarters. The earnings of the Post Office Department have doubled in the last 10 years. This ever-increasing postal business demands and must have space in which it may be efficiently and economically carried on. During the last holiday season several cities handled heavy parcel-post business on the sidewalks under protection of guards but without protection against the weather. This increased volume of postal business has forced the use of basements and subbasements, and has brought about a congestion in workrooms in some of our larger cities. This condition caused by inadequate and unsuited quarters is detrimental to the comfort and physical well being of many postal workers, is subversive to efficiency of service, and from any viewpoint is wholly undesirable. Renewal leases entered into from March 4, 1921, to August 5, 1922, show an increase in space of 71 per cent over the space in the expired leases, but in this calculation the space of additional post offices established at various places since the expiration of the aforesaid leases because of the necessities of the service is not included. If this new and additional space be included then there is an increase of 153 per cent over the expired leases. The per cent of increase in the rental of these renewed leases over the expired leases is 147, but this does not include the rental for the new and additional post offices which, when added, make an increase of 342 per cent over the rental of these expired leases. In addition to the amount of $11,660,056 annually paid for the rental of post-office quarters, there are 76 garages throughout the country under lease for which the amount of $588.921 is annually paid for rental. This sum of $588.921 when added to $11,660,056 brings the total amount of rental paid by the Government for buildings leased for postal uses up to $12,248.977. · Confronted with this annual expenditure of $12,248,977 for rental of real estate for postal uses, which will annually steadily increase, two questions at once arise for answer with reference to first-class post offices, the larger second-class post offices, and the larger classified stations and their branches. First. Viewed solely from the financial side, is the present plan of leasing in keeping with the best business methods and practice? Second. Aside from the financial point of view, is the present plan giving the best postal service results? My answer to the first question is in the negative. I am decidedly of the opinion, and I believe that your business experience and observation will support my view, that annually a great saving in money would result if a policy of Government ownership were adopted. I do not advocate Government ownership of all offices, stations, and garages, for, manifestly, at times and on occasions it is better business to lease than own. But I do advocate and urge Government ownership in those cases where an economy would be realized and where good business judgment demands ownership rather than tenancy. Of course, at times efficiency of service will suggest leasing rather than ownership even when a considerable money saving could be effected by ownership, but these cases are exceptional and good judgment can always be depended upon to leave such cases to the leasing plan. Many reasons can be given in support of the Government-ownership plan. among which are the following: 1. The Government can borrow money on practically a 4 per cent basis to build post offices, whereas, when it leases it pays a rental sufficient to permit the lessor to borrow money at 7 per cent, and in some cases as much as 10 per cent. In other words, by this lease policy, the Government is indirectly paying 7 per cent and 10 per cent interest on money when it is able to borrow at 4 per cent. 2. When the Government owns a post-office building it is free from taxation, whereas when it leases an office it is indirectly paying taxes at the rate of about 2 per cent on the investment, and many times at a very much higher rate. When a building required for postal uses represents an investment of a large amount of money, it is readily seen that the taxes alone which the Government must pay to the lessor in the form of rent is a very considerable sum. 3. Another way of stating in a combined form the two preceding propositions is that the ordinary lessor usually obtains about 10 per cent gross on his investment, whereas if the Government owned the property, building it with 4 per cent money, it would be costing the Government about one-half as much as it is obliged to pay in the form of a lease for the use of a building. 4. If the Government adopted the policy of owning its post-office buildings, it would be in a position to take property by right of eminent domain, whereas it can not take a leasehold interest by such right. 5. In our negotiations for leases with prospective lessors, we are confronted with the fact that we can not build and therefore we must pay what they ask. If we could say to bidders, "Unless you bring your rental down to a certain reasonable figure the Government will put up a building of its own," we would then have a powerful weapon of negotiation where we now have none. But that is only possible when the Government has adopted a policy of ownership and provided funds to carry out such a policy. 6. Leased buildings are constantly being outgrown, confronting the department with the necessity of either adding additional space or seeking an entirely new location. With a lease policy and without the right of condemnation the additional adjacent space is often held at unconscionable figures, and we are often compelled to pay far more than we know to be reasonable on account of the situation. 7. When a Government post office or postal building is erected by a lessor, in a very large percentage of cases it enhances the value of all property in the vicinity, so that it becomes necessary to renew such lease at much higher figures, whereas if the Government owned the building it would receive the benefit of the enhancement of values which it has created. 8. The lessor who builds a post office or postal station for the Government on a contract for lease for 10 or 20 years is obliged to figure on absorbing either the whole or a large percentage of the original cost of the building, and this he does. He is obliged to do this because he knows he may be compelled at the end of the lease to reconvert it into other uses. The result of such a lease policy is that the Government not only pays about 10 per cent on the original investment, but it pays in addition thereto a certain per cent of all the original investment distributed over a term of years, so that at the end of the lease the Government has nothing, but is obliged to start over again, still at the mercy of lessors, with no efficient weapon to compel fair prices. My answer to the second of the above questions is also in the negative. It frequently is impossible to lease buildings having satisfactory working conditions, such as natural light and ventilation. In erecting Government-owned buildings ideal working conditions would be provided, thereby insuring the health and comfort of employees, which should always be given first consideration. Then, too, such buildings would be erected in accordance with plans and specifications either made or approved by the Post Office Department based upon its experience with a view to efficiency of service, as well as to cost of service. The Joint Commission on Postal Service expressed the opinion in its report to the Senate and House of Representatives that the site immediately west of the present general post-office building at New York City, commonly called the Pennsylvania Railroad site, was a desirable site for a building to relieve the present congested condition of the general post office at New York City. The department began negotiations to lease for a period of 20 years a building to be erected on this site, but no agreement has been made. Of the offers submitted to the department the aggregate rental for 20 years ranged from $19,245,695 to $24,900,000. If the Government would purchase this site and erect the building and become the owner instead of lessee, at the end of 20 years the aggregate expenditure would be considerably less than the lowest offer and in addition the Government would own the property. What is said of the advantage of ownership as against tenancy of this New York City site can with equal force be said of other sites. Where the business and circumstances justify Government ownership, it seems unbusinesslike for the Government to deny to itself and forego all the advantages, financial and otherwise, of ownership and become lessee with a money loss and with all the other many attendant disadvantages of tenancy. It is not my present purpose to suggest or advocate any particular way for the execution of this general plan of Government ownership of buildings for postal use. My present purpose is to call attention to the necessity for the adoption of this general plan of Government ownership of buildings within the limitation of good business judgment as herein-above pointed out, as against the leasing system. I regard the present plan of leasing as unbusinesslike and in view of this present practice I hope the Congress may enact the necessary legislation to effect the change herein suggested and advocated. I earnestly solicit your support and cooperation. Sincerely yours, HUBERT WORK, Postmaster General. OFFICE OF THE POSTMASTER GENERAL, The JOINT COMMISSION ON POSTAL SERVICE, Washington, D. C. GENTLEMEN: Because of the recommendation of this department in favor of the Government ownership of post-office buildings in lieu of leasing the same in those cases where it is manifestly in the interest of the Government to build instead of lease, I am calling your attention to a project at Detroit, Mich., in order that I may have the benefit of your advice and recommendation before proceeding further. An additional postal building at Detroit is now a necessity. The service is suffering and will continue to suffer until it is provided. The congested condition in the basement, where the parcel-post mail is handled, and other reasons, demands the establishment of a parcel-post station. Taking all things into account, this station should be in the immediate vicinity of the Michigan Central Railroad Station, through which 75 per cent of the volume of mail is handled. This necessity has been felt for a long time, and the growth of the business of Detroit has at last brought us to a point where action must be had forthwith. Following our custom in such cases, inspectors under the direction of the First Assistant, have been making a careful analysis of the situation, and have obtained bids on six different sites in the vicinity of this station. The site which is nearest to the station, and, therefore, most economical, also happens to be the one upon which we can secure the lowest figures, so that as between the sites there is no difficulty of decision. The proposition, like similar propositions, is to lease for a term of 10 or 20 years. The annual rental on the 10-year basis is $52,000 and on the 20year basis $47,710. The value of the lot is difficult to determine. We are informed that the bidder on our project has an option on this lot, or rather on the different parcels which compose the lot. We do not know the terms of this option. There are so few sales in this vicinity that it is difficult to estimate the value of this site. The value of the building to be erected can be computed with some degree of accuracy. The building is to be of steel and concrete fireproof construction, and reckoning 30 cents per cubic foot, it would amount to about $275,000. The equipment would cost something like $25,000. The bidder claims that his lot will cost him about $100,000. Reckoning along these lines, he would have an investment of about $400,000. The bidder is willing to put into the contract an option to sell at the end of 10 years for $325,000, and at the end of 20 years for $150,000. This would indicate that he is charging off a good slice of his investment through rentals or else that his investment is not as large as he claims. This site is one which will undoubtedly enhance in value very rapidly. I might add that there could be consolidated into this new building a classified carrier station about half a mile away upon which we are now pay ing a rental of $1,200 on a lease which is expiring October 1. When this lease expires we can not take care of that situation alone for less than $8,000 because of the need for additional space and increase in rentals. The department will appreciate your advices and assurances in the matter and also suggests that an early consideration is necessary. Sincerely yours, HUBERT WORK, Postmaster General, OFFICE OF THE POSTMASTER GENERAL, JOINT COMMISSION ON POSTAL SERVICE, Washington, D. C. MY DEAR SIR: On August 21, 1922, I had the honor to send to your commission a communication concerning the ownership by the Government of such new postal buildings as must of necessity be erected from time to time to accommodate the rapidly expanding volume of mail.. Basing my recommendation wholly on principles of business economy, I cited the fact that the department is constantly compelled to secure additional postal buildings by contracting for leases of structures not in existence but to be erected by private capital. Although such leases are negotiated with the greatest care and through the best competition available, they are usually made on an investment basis of from 8 to 15 per cent. This state of affairs arises from the fact that, generally speaking, Congress, in the past. has followed the policy of appropriating moneys for the leasing of postal buildings, but has not appropriated for the construction and ownership of such buildings as they become necessary. The Postal Service must be maintained. Mail is received in such volume as the public business requires. It must be housed, transmitted, and delivered in safety. The department can not decline to negotiate leases on new buildings. They must be had, otherwise valuable mail is exposed to the elements and ruined in transmission. Under the law as it exists to-day, the department is absolutely compelled to execute leases on the best terms it can get, whether they are reasonable or otherwise. Entertaining the belief that Congress would change this policy as soon as it could come to a complete understanding of all facts, I have refrained from completing contracts for the erection of certain buildings, although their urgency is great. It is the purpose of this letter to present those cases to your consideration which are just now particularly pressing and which will become exceedingly acute before buildings can be constructed. It is also the purpose of this letter to explain to you more fully the entire leasing situation, showing how leases now in existence are constantly expiring, presenting almost daily problems as to whether they shall be renewed or not. But if the policy of owning postal buildings shall be adopted by Congress, the logical method, in my opinion, would be to take care of the pressing cases as they occur by ownership, just as under the present policy we take care of them by leasing, although I do not wish to presume upon the manner in which Congress may see fit to act in these matters. The extent to which this leasing policy has gone and the extent to which it will go in the next few years is almost startling. In my former communication I recited that we now have 5,846 post-office buildings under lease, while the Government owns only 1,132. Many of the Government-owned buildings have become outgrown. The aggregate annual rental for leased quarters is about $12,000,000. Unless a building policy is adopted this will increase by large amounts from year to year. These leases are expiring almost daily, and whenever one expires it presents a new problem of what shall be done in a given locality. Renewals are made at increases of from two to four times the old rate, although careful study is made in each case and every possible effort made to secure the best terms. The popular objection to changing the location of post offices, particularly in the smaller cities and towns, militates strongly against making a good trade for a lease. The greatest actual and imperative demand for new buildings comes from the larger cities and from rapidly growing cities, where parcel-post stations, sub stations, and garages must constantly be added. Another class of cities where the building problem is acute are those having a single Government-owned building which is no longer adequate for the needs of the office, and where men are obliged to work in insanitary cellars or basements. The department has for more than a year been investigating this problem of buildings and has been making a careful survey to determine the adequacy of space in postal buildings. Since it requires from one to two years to construct buildings, it is necessary to anticipate to that extent the needs of each case. While we have reliable information from more than 100 post offices that the space for the postal business is wholly inadequate and the conditions unsuitable, and while these cases are being more carefully studied to determine which are the most pressing, I desire for the moment to present for your information certain cases which have been delayed awaiting your policy, where the demand for the same is extremely acute but where we still think it would be advisable to decline to lease and to begin a program of Government ownership. NEW YORK CITY. The proposition in the city of New York has been before your committee for more than a year and concerning which you have had the details. This as you will recall is practically a duplication of the present central post office on Thirty-fourth Street. The requirement is for 800,000 square feet. The site is owned by the Pennsylvania Railroad and is said to be available at $2,000,000. The average rental for such a building by the lowest bidders is approximately $1,000,000 per year. While these bids contain various options for purchase, there is no legislation by which such purchase could be made effective. The department has approved of plans and specifications, but has declined to enter into any contract for a lease of this proposed building until Congress shall have acted in the matter. DETROIT, MICH. Another proposition which demands immediate action is that of a parcelpost station at Detroit, Mich., to contain approximately 55,000 square feet of floor space on two or three floors. Negotiations for the construction of such a building through the lease method have been under way for several months and are now ready for decisión. A lease can be obtained on the proposed building when erected for $52,000 per year. I am not satisfactorily informed as to the cost of such a building, but believe the entire expense, including the lot, would be from $300,000 to $500,000. SAN FRANCISCO, CALIF. In this city 150,000 square feet of floor space in a new building must be provided forthwith. This proposition is under investigation, and while the need is well known, I have not the details with sufficient accuracy to submit them to you herewith, but will do so in a later communication. DALLAS, TEX. Here a new building must be provided as soon as possible containing 85,000 square feet of floor space on two or three floors. This case has been under careful investigation and negotiation for several months and the best proposition for a lease now in sight is for a building to be constructed for the department and rented at $84,250 per year. My information is that such a building would cost in the vicinity of $700,000. It would, however, enable us to discontinue two smaller stations which we are leasing at $9,000 each. BROOKLYN, N. Y. The department is now considering what would be necessary to do here at the Flatbush Station when the lease expires on April 1 next. The old rental was $5,000 per year, but the premises are inadequate and the proposition to take its place will cost about $20,000 per year. BUFFALO, N. Y. At this place a garage must be provided to accommodate the motor-vehicle service. It must contain about 30.000 square feet of floor space. On a rental basis it will cost $30,000 per year for a building which we are informed can be erected for $175,000. |