[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]
HISTORIC LEASING IN THE NATIONAL PARK SYSTEM: ASSESSING CHALLENGES AND
BUILDING ON SUCCESSES
=======================================================================
OVERSIGHT FIELD HEARING
before the
COMMITTEE ON NATURAL RESOURCES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTEENTH CONGRESS
SECOND SESSION
__________
Monday, September 17, 2018, in Hot Springs National Park, Arkansas
__________
Serial No. 115-54
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Printed for the use of the Committee on Natural Resources
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Available via the World Wide Web: http://www.govinfo.gov
or
Committee address: http://naturalresources.house.gov
_________
U.S. GOVERNMENT PUBLISHING OFFICE
31-588 PDF WASHINGTON : 2018
COMMITTEE ON NATURAL RESOURCES
ROB BISHOP, UT, Chairman
RAUL M. GRIJALVA, AZ, Ranking Democratic Member
Don Young, AK Grace F. Napolitano, CA
Chairman Emeritus Madeleine Z. Bordallo, GU
Louie Gohmert, TX Jim Costa, CA
Vice Chairman Gregorio Kilili Camacho Sablan,
Doug Lamborn, CO CNMI
Robert J. Wittman, VA Niki Tsongas, MA
Tom McClintock, CA Jared Huffman, CA
Stevan Pearce, NM Vice Ranking Member
Glenn Thompson, PA Alan S. Lowenthal, CA
Paul A. Gosar, AZ Donald S. Beyer, Jr., VA
Raul R. Labrador, ID Ruben Gallego, AZ
Scott R. Tipton, CO Colleen Hanabusa, HI
Doug LaMalfa, CA Nanette Diaz Barragan, CA
Jeff Denham, CA Darren Soto, FL
Paul Cook, CA A. Donald McEachin, VA
Bruce Westerman, AR Anthony G. Brown, MD
Garret Graves, LA Wm. Lacy Clay, MO
Jody B. Hice, GA Jimmy Gomez, CA
Aumua Amata Coleman Radewagen, AS Nydia M. Velazquez, NY
Daniel Webster, FL
Jack Bergman, MI
Liz Cheney, WY
Mike Johnson, LA
Jenniffer Gonzalez-Colon, PR
Greg Gianforte, MT
John R. Curtis, UT
Cody Stewart, Chief of Staff
Lisa Pittman, Chief Counsel
David Watkins, Democratic Staff Director
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CONTENTS
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Page
Hearing held on Monday, September 17, 2018....................... 1
Statement of Members:
Bishop, Hon. Rob, a Representative in Congress from the State
of Utah.................................................... 1
Prepared statement of.................................... 2
Westerman, Hon. Bruce, a Representative in Congress from the
State of Arkansas.......................................... 3
Prepared statement of.................................... 5
Statement of Witnesses:
Cassidy, Tom, Vice President, Government Relations and
Policy, National Trust for Historic Preservation,
Washington, DC............................................. 19
Prepared statement of.................................... 21
Questions submitted for the record....................... 29
Kempkes, Bob, Owner, Quapaw Bathhouse and Spa, Hot Springs
National Park, Arkansas.................................... 33
Prepared statement of.................................... 35
McCabe, Hon. Pat, Mayor, City of Hot Springs, Hot Springs
National Park, Arkansas.................................... 6
Prepared statement of.................................... 8
McCaskill, Cole, Vice President, Hot Springs Chamber of
Commerce, Hot Springs National Park, Arkansas.............. 16
Prepared statement of.................................... 17
Simmons, Tracy, Chief of Commercial Services, Midwest Region,
National Park Service, U.S. Department of the Interior,
Omaha, Nebraska............................................ 10
Prepared statement of.................................... 12
Questions submitted for the record....................... 14
Additional Materials Submitted for the Record:
Submission for the Record by Chairman Bishop
Pew Charitable Trusts, Testimony for the Record.......... 47
Submissions for the Record by Rep. Westerman
Boozman, John, Senator from Arkansas, Letter to Chairman
Bishop dated September 12, 2018........................ 48
Burrough, Bill, Deputy City Manager, City of Hot Springs,
Letter to Chairman Bishop dated September 17, 2018..... 49
Ferriter, Olivia B., Deputy Assistant Secretary, U.S.
Department of the Interior, Letter to Senator Lisa
Murkowski dated March 29, 2018......................... 49
Hot Springs Sentinel Record, Article titled ``Hot
Springs: A wonderful story to tell,'' dated September
16, 2018............................................... 51
Schweikhart, Rose, owner of Superior Bathhouse Brewery,
Letter to Congressman Westerman dated September 15,
2018................................................... 53
OVERSIGHT FIELD HEARING ON HISTORIC LEASING IN THE NATIONAL PARK
SYSTEM: ASSESSING CHALLENGES AND BUILDING ON SUCCESSES
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Monday, September 17, 2018
U.S. House of Representatives
Committee on Natural Resources
Hot Springs National Park, Arkansas
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The Committee met, pursuant to call, at 2:00 p.m., Hot
Springs City Hall, 133 Convention Boulevard, Hot Springs
National Park, Arkansas, Hon. Rob Bishop [Chairman of the
Committee] presiding.
Present: Representatives Bishop, Westerman, Radewagen, and
Hill.
The Chairman. This Committee is meeting today to hear
testimony on historic leasing in national parks, assessing the
challenges and building on success. I am happy that we have
three of our Committee members here. Amata Radewagen from
American Samoa is here, and Bruce Westerman, who you all know
from this particular area. I am the Chairman from Utah, and I
am going to ask you to now consent that Mr. French Hill be
added and allowed to sit with the Committee and participate in
today's hearing.
Having no objections, so ordered. We will begin with that.
I want to start off with just a simple and very quick
opening statement to you as we outline the rest of this. Let me
go through a couple of procedural things, first of all. Opening
statements will go between myself and Mr. Westerman. Any other
Members, since this is a formal hearing, can add statements if
they submit it to the record today. I want to start off with
the original statement, though, on why I am excited to be here.
STATEMENT OF THE HON. ROB BISHOP, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF UTAH
The Chairman. As you all know, we have a Park Service that
has a maintenance backlog. That is not unusual because we have
a BLM that has a huge maintenance backlog as well as the Fish
and Wildlife system with a huge maintenance backlog. One of the
things we talked about just before we broke last Thursday was
that pieces of legislation can actually help provide a
mechanism to go forward on how we can reach that backlog, but
one of the things we did not talk about in that process is this
idea of leasing and lease management. I am excited about this
for the simple reason that, in my home district, I am trying to
establish another historic park where the rails met at the
Golden Spike, which is about 30 miles from my home. I am
interesting in seeing how this historic park is actually going
to be managed.
And if you actually do a lease process, not only can you
get additional revenues coming into the process, but I think
you are going to be involved in the community more in the
process, and that is one of the things of which I am truly
interested of how we can get local communities more involved in
our public lands, including the ability of getting them to
start becoming the ones we go to to find out the mechanisms of
how lands are going to be managed and how the parks will be
managed into the future. But far too often, it seems like we
import somebody from some other part of the country in here
when we have local people who care about this area, who know
this area, who should be empowered to make more decisions on
how these areas run. I think in the future that will bring a
better way of managing the lands, it will bring a better way of
attracting visitors, so tourism can develop in those particular
areas, and hopefully we can move this entire process further.
[The prepared statement of Chairman Bishop follows:]
Prepared Statement of the Hon. Rob Bishop, Chairman, Committee on
Natural Resources
Good Afternoon. Before we get started with opening statements, I
want to thank the city of Hot Springs for hosting us today and for all
of your help in making this hearing possible. I would like to thank our
witness for joining us and sharing their experiences with us. Thank you
for giving us your time.
I would also like to thank Representative Westerman for bringing
attention to this important program and encouraging us to look at Hot
Springs as a model of success.
Today, the House Committee on Natural Resources meets to examine
the Historic Leasing Program of the National Park Service. The public-
private partnership of leasing in the NPS is truly a win-win. It saves
historic buildings and saves taxpayers money. It reduces the
maintenance backlog in our national parks and creates jobs. And
importantly, it is thinking outside of the box.
Innovative programs like leases between the NPS and private
business are the future of how we will manage our parks.
You may have heard that the National Park Service is facing an
$11.6 billion backlog of maintenance needs, and $37.6 million of that
total is right here in Arkansas. It is going to take a wide variety of
approaches to fix our parks. Historic leasing is one important tool.
When a business leases a building from the National Park Service,
they take on the cost of repairs. That not only saves the NPS money,
but also frees up park maintenance staff to perform other priority
projects. Putting buildings back into use ensures they get the
attention they need. Hard-working tenants perform repairs and catch
problems before they become insurmountable. The historic character of
buildings is restored using the established standards for the treatment
of historic properties.
Leasing also means that boarded-up storefronts become thriving
business districts again. The transformation that has occurred here in
Hot Springs is remarkable. Your historic downtown is a point of pride
once more and an economic driver of this community. We want to see more
successes like this all across the country.
We are also here today to see what can be done better. How can we
grow the leasing program? How can we make it more user-friendly? Let's
get rid of the red tape and bring in more support to fix our national
parks.
I'm looking forward to hearing about the Historic Leasing Program
here in Hot Springs, what is going well, and where there have been
bumps in the road. We can all learn a lot from Hot Springs National
Park and the wonderful city of Hot Springs.
Again, I want to thank everyone for being here today.
______
The Chairman. With that, I appreciate the fact that we are
in a formal hearing. I am now going to do something that is
different and actually going to turn the management of this
hearing over to Congressmen Westerman, who is not just on the
Committee, he is also the chairman of one of our subcommittees
and does a great job. But I would remind the audience, once
again, this is still a formal hearing, which means the rules of
procedure that we have in the House will also have to be
followed here. This is not a town hall. This is actually a
Committee hearing. We will let Mr. Westerman explain how the
timers will be working for you, but for the introduction of our
guests and the actual calling of that testimony, I would like
to turn the remainder of this meeting over to Mr. Westerman,
whether he wants to or not.
STATEMENT OF THE HON. BRUCE WESTERMAN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF ARKANSAS
Mr. Westerman. Thank you, Chairman Bishop. It is an honor
to have you here with us today, and I appreciate your service,
not only to the Members in your district in Utah, but to the
country, and the work that you do on the Natural Resources
Committee. I was especially glad to see us mark up the bill
last week that looked at addressing the maintenance backlog.
I also want to welcome my fellow Committee member, Amata
Radewagen, from American Samoa. I visited her district before.
It is a beautiful place if you can ever get a chance to get out
there. And also welcome my colleague from Little Rock,
Representative French Hill, who is joining the Committee today.
Thank you for being here. And welcome everyone to Hot Springs,
which is also my hometown. I am honored that you visited this
wonderful part of the country. The Natural State has a lot to
offer both to residents and tourists, and Hot Springs is no
exception to that rule. Just to be official here, I am
recognizing myself for a 5-minute opening.
Today, we are focusing on one particular success story here
in Hot Springs and that is Bathhouse Row, and specifically, we
are looking at the National Park Service Historic Leasing
Program that has allowed Hot Springs to grow economically while
also saving the American taxpayer millions of dollars. It is a
program I am eager to explore, to improve, and to potentially
provide to other Americans across Arkansas and across the
country.
If you walk up Central Avenue, as we will do shortly after
the conclusion of this meeting, you will see a magnolia-lined
street bustling with economic activity and growth. There is a
new boutique hotel going in on one side, with restaurants,
small businesses, and more going up on the other. You would
never guess that Central Avenue is the dividing line between a
national park and a small town. Hot Springs National Park and
the bathhouses preserved within are a crucial component to our
town. Without the innovation provided by the Historic Leasing
Program, our town would not be as successful as it is today.
Hot Springs National Park is our Nation's oldest protected
land, predating the Park Service, Yellowstone National Park,
and the state of Arkansas itself. Set aside as a national
reserve in the early 1800s, for generations people have flocked
here for the healing thermal waters and public bathhouses. Hot
Springs is the home to baseball spring training, and this is
our resident Cubs' expert here to my right, the Chairman. We
are going to also get to take a tour of the historic baseball
trail.
The Chairman. And if I can interrupt for just a second, I
was met by a couple of Cardinals fans out there. If any of you
are Cardinals fans, you are dismissed now.
Mr. Westerman. We don't have a professional team here in
the state, but I believe still 60 percent of the people who are
in the baseball Hall of Fame participated in spring training
right here in Hot Springs and a big part of that was because of
the bathhouses, which we will fill you in on during the tour.
However, as time passed and the interest in the thermal
waters waned, attendance to the bathhouses dropped. By the
1980s, nearly all the bathhouses had closed their doors,
draining jobs from Hot Springs, killing tourism, and saddling
the National Park Service with millions of dollars in
restoration and maintenance work. Without innovation, these
bathhouses, and perhaps the prosperity in Hot Springs as a
whole, were headed in the wrong direction.
Now enter the Historic Leasing Program. By law, the
National Park Service has the authority to rent out unused
buildings to entrepreneurs and local businesses. These
businesses, in exchange for use of the space, must pay rent to
the Park Service. More importantly, they must take on the
maintenance cost of the buildings.
For Hot Springs, this meant two things: (1) it breathed new
life into a faltering downtown. The private businesses that
began to inhabit the bathhouses anchored us through a
catastrophic fire in 2014 and have continued to drive tourism
and investment downtown; and (2) it saved the American taxpayer
millions of dollars. It took the cost of refurbishment and
yearly maintenance off the Park Service books, freeing up
dollars for other investment around the park and around the
system.
The focus of this field hearing is simple. We are here not
only to highlight the success of Hot Springs National Park, but
we are here to examine the challenges facing the Historic
Leasing Program. Nationally, the Park Service is facing nearly
a $12 billion maintenance backlog. While the Historic Leasing
Program is not a silver bullet, it is a valuable tool in the
toolbox we need to consider when addressing the backlog. This
hearing is, in part, to help identify the challenges with the
program, and I am eager to hear from today's witnesses about
how best we can improve the process and how to best distribute
the program to other parts around the country.
As we sit here right now, the Park Service has two things
going on: (1) it has a $12 billion maintenance backlog, and (2)
it has thousands of unused buildings and spaces that are
contributing to that debt. As we are about to discuss, Hot
Springs National Park figured out a way to put the unused
buildings to work, while helping the local economy. I am eager
to hear from our witnesses about the good work they have done
promoting this program. I want to, again, thank everyone for
traveling to my hometown, and I cannot wait to get this program
implemented more nationally.
[The prepared statement of Mr. Westerman follows:]
Prepared Statement of the Hon. Bruce Westerman, a Representative in
Congress from the State of Arkansas
Mr. Chairman, members of the Committee, thank you for holding this
hearing today, and welcome to my hometown of Hot Springs. I am honored
that you have visited my wonderful part of the world. The Natural State
has a lot to offer both residents and tourists, and Hot Springs is no
exception to that rule.
Today, we are focusing on one particular success story here in Hot
Springs. Bathhouse Row, and specifically, the National Park Service
Historic Leasing Program, has allowed my hometown to grow economically,
while also saving the American taxpayer millions of dollars. It is a
program I am eager to explore, improve, and potentially provide to
other Americans across Arkansas and across the country.
If you walk up Central Avenue, as we will do shortly after the
conclusion of this meeting, you will see a magnolia-lined street,
bustling with economic activity and growth. There is a new boutique
hotel going in on one side, with restaurants, small businesses, and
more going up on the other. You would never guess that Central Avenue
is the dividing line between a National Park and a small town. Hot
Springs National Park, and the Bathhouses preserved within, are a
crucial component to our town. Without the innovation provided by the
Historic Leasing Program, our town would not be as successful as it is
today.
Hot Springs National Park is our Nation's oldest protected lands,
predating the Park Service, Yellowstone National Park, and the state of
Arkansas itself. Set aside as a National Reserve in the early 1800s,
for generations people have flocked here for the healing thermal waters
and public bathhouses. Hot Springs is the home to baseball's spring
training, as our resident Cubs' expert to my left mentioned, and over
the years this town has hosted everyone from celebrities to gangsters.
However, as time passed and interest in the thermal waters waned,
attendance to the Bathhouses dropped. By the 1980s, nearly all the
bathhouses had closed their doors, draining jobs from Hot Springs,
killing tourism, and saddling the National Park Service with millions
of dollars in restoration and maintenance work. Without innovation,
these bathhouses, and perhaps the prosperity of Hot Springs as a whole,
were headed for the gutter.
Enter the Historic Leasing Program. By law, the National Park
Service has the authority to rent out unused buildings to entrepreneurs
and local businesses. These businesses, in exchange for use of the
space, must pay rent to the Park Service. More importantly, they must
take on the maintenance cost of the buildings.
For Hot Springs, this meant two things: (1) it breathed new life
into a faltering downtown. The private businesses that began to inhabit
the bathhouses anchored us through a catastrophic fire in 2014 and have
continued to drive tourism and investment downtown. (2) it saved the
American taxpayer millions of dollars. It took the cost of
refurbishment and yearly maintenance off the Park Service books,
freeing up dollars for other investment around the Park, and around the
system.
The focus of this field hearing is simple--we are here not only to
highlight the success of Hot Springs National Park, but we are here to
examine the challenges facing the Historic Leasing Program. Nationally,
the National Park Service is facing nearly a $12 billion maintenance
backlog. While the Historic Leasing Program is not a silver bullet, it
is a valuable tool in the toolbox we need to consider when addressing
the backlog. This hearing is in part to help identify the challenges
with the program, and I am eager to hear from today's witnesses about
how we can best improve the process, and how to best distribute the
program to other parks around the country.
As we sit right now, the Park Service has two things going on: (1)
it has a $12 billion maintenance backlog, and (2) it has thousands of
unused buildings and spaces that are contributing to that debt. As we
are about to discuss, Hot Springs National Park figured out a way to
put the unused buildings to work, while helping the local economy. I am
eager to hear from our witnesses about the good work they have done
promoting this program. I want to again thank everyone for traveling to
my hometown, and cannot wait to get this program implemented
nationally.
______
Mr. Westerman. Now I will introduce our witnesses. Our
first witness is the Honorable Pat McCabe, the Mayor of Hot
Springs, who has a unique interest in the bathhouses that he
will share later. We have Ms. Tracy Simmons, the Chief of
Commercial Services for the Midwest Region of the National Park
Service, out of Omaha, Nebraska. We have Mr. Cole McCaskill,
the Vice President of the Hot Springs Chamber of Commerce, who
has worked very closely not only with the bathhouse projects
but all the redevelopment downtown.
Cole, I was telling somebody earlier that this past summer,
Senator Boozman and I were able to meet with the Chamber of
Commerce for the opening of the 100th new business since the
fire in 2014. We appreciate your leadership on that.
We have Mr. Tom Cassidy, the Vice President of Government
Relations and Policy with the National Trust for Historic
Preservation, out of Washington, DC. And we also have Mr. Bob
Kempkes, the owner of the Quapaw Bathhouse and Spa. He is also
an architect and has done a lot of work on not only the
bathhouse side of Central Avenue but also many of the other
businesses along Central Avenue.
I want to remind everyone about the sound system we have.
The microphones are hot at all times, so you can see the green
light here. If you need to mute your microphone at any point,
just press and hold the button down, but as soon as you release
the button, your microphone is hot again.
Just a few pieces of housekeeping here. You will see the
timers situated around. When you begin your testimony, the
lights on the timers will turn green. After 4 minutes, the
yellow light will come on. I know in Arkansas when we see a
yellow light, a lot of times that means we speed up before the
red light, and you probably want to speed up because when the
red light comes on, your time is over. And to keep us on track,
we will have to follow those time limits pretty strictly.
Again, I would also like to remind our audience that this
is a congressional hearing, not a town hall, and unfortunately,
there will be no time for public comment during the meeting.
We will now hear testimony from our witnesses, and to start
off, the Chair recognizes Mayor Pat McCabe for 5 minutes.
STATEMENT OF THE HONORABLE PAT McCABE, MAYOR, CITY OF HOT
SPRINGS, HOT SPRINGS NATIONAL PARK, ARKANSAS
Mr. McCabe. Thank you very much.
As mayor of Hot Springs, let me welcome you to our
community. We are very pleased that the House Committee on
Natural Resources has elected to hold a meeting here to explore
the feasibility of expanding the leasing programs to other
national parks across the country. The vibrancy of any
community can be measured with a stroll through their downtown.
The heart of downtowns across America have not been without
challenge.
The city of Hot Springs has had similar challenges over the
years. Bathhouse Row had been very vibrant up to the 1970s, but
from that point forward until recent years, not so much so. The
Buckstaff Bathhouse for years was the only facility on
Bathhouse Row that was operational. Today, the only structure
which is vacant is the Maurice Bathhouse. When visitors and
locals alike now stroll Bathhouse Row, they are able to avail
themselves to the very bathhouses that have now been
refurbished.
Without the leasing program of the National Park Service,
the bathhouses would remain vacant. We thank the National Park
Service for their assistance in the revitalization of our
downtown. I would like to personally thank former Hot Springs
National Park Superintendent Josie Fernandez for her efforts in
this regard. We also look forward to working in partnership
with Superintendent Laura Miller as we strengthen ties and
complete the build-out of Bathhouse Row and the business side
of Central Avenue.
On a personal note, my wife, Ellen, and I were interested
in implementing a business in downtown Hot Springs. We inquired
of our architect friends, Bob Kempkes and Anthony Taylor, as to
structures that might be available on the business side of
Central Avenue. Upon entering the Hale Bathhouse, we were
greatly surprised and pleased that the National Park Service
years before had removed the lead-based paint and asbestos
thereby leaving the structure bare of interior finish. The
ability of the National Park Service to ready any facility in
this manner makes it very desirable for leasing since the
abatement process can be time-consuming and expensive.
Following the walk-through, we completed the application of
the National Park Service for a lease. A letter of intent was
issued in June of 2014. After working 18 months with a local
bank and another entity, the local bank elected not to finance
the project. We were without wind in our sails. One of the
challenges in securing financing, in part, was the fact that my
wife and I would not be owners of the building. Therefore, the
bank, to get comfortable with their ability to be made whole
should we fail was a challenge for them because the building
could not be used as collateral, nor could the physical
improvements to the building. The National Park Service needs
to be sensitive that collateralizing projects of this size can
be a challenge for the banks.
The lease that was proposed by the National Park Service
was a lease that the lending institution felt was overweighted
in favor of the National Park Service in providing great
exposure to the lending institution. A significant area of
concern was the distribution, or lack thereof, of insurance
proceeds if the structure was significantly destroyed or
destroyed in total during our occupancy. The original agreement
allowed the National Park Service to retain all the insurance
proceeds and elect not to rebuild, leaving my wife and I with
no ability to satisfy the loan except through personal funds.
The financing entity was able to negotiate a provision within
the lease that would insulate them as well as ourselves should
the Park Service elect not to have a structure rebuilt if the
historic nature of the facility was compromised.
A loan must be guaranteed by the Small Business
Administration, and they have their issues as well and need to
have their agreements modified specifically pertaining to the
collateral agreements so that the Federal Government would be
protected and exposure would be minimized. However, some of the
concern should not have been that great given that the funds
being expended on this project were going into a Federal
building and into a structure owned by Ellen and Pat McCabe. If
we were to fail, the taxpayers would not really be out
anything.
Developing the plan for reuse can be a challenge even as we
receive more input from others. I would encourage that the
decision making on the build-out of bathhouses be left at the
regional office level. Superintendent Fernandez and I agreed
early on to remove ourselves from that process and allow the
professionals to take the lead. The regional office has the
expertise to work with our local project architect to make
those decisions that need to be made.
There are a lot of great things going on within the lease.
There are about four factors that I did mention that are very,
very strong and very, very positive. The areas that I mentioned
were only those that I felt could be addressed.
In closing, this quasi public-private partnership in the
restoration of Bathhouse Row has been a win for the National
Park Service, a win for the taxpayers, a win for the Hot
Springs community, and a win for the leaseholders. The ability
to establish a program that allows others to develop creative
ideas within these fine structures ensures that they will be
safeguarded and available for years to come without any holding
costs to the Federal Government.
Thank you very much.
[The prepared statement of Mr. McCabe follows:]
Prepared Statement of Pat McCabe, Mayor, City of Hot Springs, Arkansas
As Mayor of Hot Springs, let me welcome you to our community. We
are very pleased that the House Committee on Natural Resources has
elected to hold a meeting here to explore the feasibility of expanding
the Leasing Program to other National Parks across the country. The
vibrancy of any community can be measured with a stroll through their
downtown area. The heart of downtowns across America have not been
without challenge. Many have seen businesses move to fancy centers out
of the heart of the city, leaving vacant buildings and storefronts. The
city of Hot Springs has not been without similar style challenges over
the years. Hot Springs differs from other communities in that a large
footprint within the downtown area is the Hot Springs National Park.
Bathhouse Row had been very vibrant up to the 1970s, but from that
point forward until recent years not so much so. The Buckstaff
Bathhouse for years was the only facility on Bathhouse Row that was
operational. Today, the only structure which is vacant is the Maurice
Bathhouse. When visitors and locals alike now stroll Bathhouse Row,
they are able to avail themselves to the very bathhouses that have been
repurposed.
Without the Leasing Program of the National Park Service, the
vacant Bathhouses would have remained vacant. We thank the National
Park Service for their assistance in the revitalization of our
downtown. I would like to thank former Hot Springs National Park
Superintendent, Josie Fernandez, for her efforts in this regard. We
also look forward to working in partnership with Superintendent Laura
Miller as we strengthen ties and complete the build-out of Bathhouse
Row and the business side of Central Avenue.
The business side of downtown Central Avenue has also undergone a
renaissance of sorts. This occurred, in part, with the creation of the
Thermal Basin Fire District in November of 2013. The Thermal Basin Fire
District required structures within its boundaries to provide a fire
suppression system if the structure was three floors or greater. This
resulted in a number of property owners selling their structures in
lieu of meeting the new standard. New buyers of these buildings did so
with creative ideas for new business opportunities. Recently, we
celebrated the hundredth new business in downtown since February of
2014. Now, both sides of downtown Central Avenue are very robust and
provide an economic engine to the community.
On a personal note, in September of 2013, my wife, Ellen, and I
were interested in implementing a business in downtown Hot Springs. I
inquired of our architect friends, Bob Kempkes and Anthony Taylor of
Taylor Kempkes Architects, as to structures that may be available on
the business side of Central Avenue. They indicated that, while there
were no buildings available for lease/purchase on the business side of
downtown Central Avenue, there were a couple of bathhouses available
within the National Park. We immediately scheduled a day and time to
walk through the Ozark Bathhouse and the Hale Bathhouse. My wife and I
had a concept of establishing a boutique hotel with dining area within
a downtown structure. While the Ozark Bathhouse appeared to be in
exceptional condition for immediate use, the configuration of the rooms
would require substantial demolition prior to repurposing as a boutique
hotel with a restaurant. Upon entering into the Hale Bathhouse, we were
greatly surprised and pleased that the demolition had already occurred,
and we would be in a position to begin a restoration process with
minimal additional demolition. The National Park Service years before
had moved forward with the abatement of lead-based paint and asbestos,
thereby, essentially leaving the structure bare of interior finish. The
ability of the National Park Service to ready any facility in this
manner makes it very desirable for leasing since the abatement process
can be time consuming and expensive.
Following the walk-through, we contacted the Hot Springs National
Park Administrative office to determine the next steps. We received the
Request for Proposal and set out to complete and provide the same. We
did so in late February of 2014 in advance of the deadline of February
27, 2014. Toward the end of June 2014, the National Park Service issued
a Letter of Intent which we executed and began the process of securing
financing following receipt of cost estimates from the architect. After
working 18 months with a local bank and another entity, the local bank
elected not to finance the project. Therefore, we were caught without
any wind in our sails. However, the other entity was still onboard, but
needed to have a bank partner which we then sought. One of the
challenges in securing financing, in part, was the fact that my wife
and I would not be owners of the building. Therefore, for the bank to
get comfortable with their ability to be made ``whole'' should we fail
was a challenge for them since the building could not be used as
collateral nor could the physical improvements to the building be held
as collateral, as the bank would not be able to remove the physical
modifications to the facility, such as electrical, plumbing and heating
and air. This would leave the financing entities with only items such
as beds, mattresses, tables and chairs, refrigeration units, stove,
etc. as collateral. The National Park Service needs to be sensitive
that collateralizing projects of this size can be a challenge for the
banks.
The Lease that was proposed by the National Park Service was a
Lease that the lending institution felt was overweighted in favor of
the National Park Service and provided greater exposure to the lending
institution. A significant area of concern was the distribution, or
lack thereof, of insurance proceeds if the structure was significantly
destroyed or destroyed in total during our occupancy. The original
Agreement allowed the National Park Service to retain all the insurance
proceeds, elect not to rebuild, leaving my wife and I with no ability
to satisfy the loan balance except through personal funds. The
financing entity was able to negotiate a provision within the Lease
that would insulate them, as well as ourselves, should the Park Service
elect not to have the structure rebuilt if the historic nature of the
facility was compromised. As such, it took no less than 9 months for
the financial entity and the National Park Service to negotiate an
appropriate Lease.
Our loan was to be guaranteed by the Small Business Administration,
and they had their issues as well and needed to have agreements
modified, specifically pertaining to the Collateral Agreement so that
the Federal Government would be protected, and the exposure would be
minimalized to the greatest extent possible. This too required some
time and energy, though it was significantly less than that of the
Lease negotiation. However, some of these concerns should not have been
as great given that the funds being expended on this project were going
into a Federal building and not into a structure owned by Pat and Ellen
McCabe. If we were to fail, the taxpayers would not really be out
anything, as the McCabe's would not have profited since the funds
expended would have gone into a Federal building. Perhaps there can be
some recognition of this fact and the ability for the SBA to gain
comfort could be reviewed. In speaking with our leading financial
institution, it appeared that the goals of the Park Service and the SBA
were polar opposites in this regard.
Developing the plan for the reuse can be challenging, and even more
so when a number of varied players inject themselves into the design
process. Superintendent Fernandez and I agreed early on to remove
ourselves from the process and allow the professionals; the Project
Architect, the Historic Architect of the Midwest Region, Health
Inspector and the Life Safety Codes Officer to be responsible for
decisions relating to how the varied codes would be met. The Regional
Office has the capability of working directly with the Project
Architect. While we all desire to have the National Park Superintendent
accept an ownership role within their respective parks, the repurposing
of this bathhouse would result in looking at varied ways in which to
meet the required standards which would not necessarily be contained
within the skill sets of a Superintendent. I would recommend that the
National Park Service focus on being an advocate for repurposing these
styled structures with decision making at the Regional Office level.
The National Park Service was very thoughtful in the development of
the Lease in many ways. The National Park Service allowed the Lease to
be $1.00 a year for the first 3 years prior to elevating to the full
Lease price. In this manner, the holder of the Lease would be able to
build out the project and become operational with essentially zero
Lease expense for the first 3 years. We anticipate being operational
before year end which will allow us approximately 20 months of
operations at $1.00 per year Lease expense. After which, we will
increase to the stated amount in the Lease document. We will be well on
our way to stabilizing business operations.
Furthermore, the National Park Service provided credit in the Lease
for the renovation costs of the facility. Here again this becomes
favorable to the tenant, as the renovation costs are prorated over the
term of the Lease reducing the effective monthly Lease expense. Without
this credit for renovation costs, the Bathhouses may not have been
renovated.
The Lease requires that 2 percent of all gross sales be placed in a
Capital Improvement Fund. Access to these funds can be used to repair
and replace major plant and equipment. This better ensures that the
tenant will always have funds to make major repairs and capital
improvements should the need arise.
The National Park Service provides for up to a 60 year lease. Ellen
and I secured a 55 year Lease. While we certainly do not anticipate
operating the project through the 55 years, we wanted to ensure that
those that would come behind us would not be concerned that the Lease
was about to expire. We felt that the project could change hands a
number of times in advance of the expiration of the Lease.
Consequently, those who would assume the project will know that they
had the ability to purchase the operations and not have the Lease
expire from underneath them.
In closing, the Quasi-Public Private Partnership in the restoration
of Bathhouse Row has been a win for the National Park Service, a win
for the taxpayers, a win for the Hot Springs community and a win for
the Lease Holders. The ability to establish a program that allows
others to develop creative ideas within these fine structures ensures
that they will be safeguarded and available for years to come without
any holding costs to the Federal Government.
Thank you for the opportunity to address the Committee today.
______
Mr. Westerman. Thank you, Mayor.
Just a reminder, if you can't cover everything in your
testimony, the written testimony will be part of the record, so
if there were some areas you didn't get a chance to cover, we
will have all those in the written record.
And then a little more housekeeping details. After all the
witnesses, we will have time where we will have questions, so
we can pose any questions to you at that point.
Next, the Chair recognizes Ms. Tracy Simmons to testify for
5 minutes.
STATEMENT OF TRACY SIMMONS, CHIEF OF COMMERCIAL SERVICES,
MIDWEST REGION, NATIONAL PARK SERVICE, U.S. DEPARTMENT OF THE
INTERIOR, OMAHA, NEBRASKA
Ms. Simmons. Mr. Chairman and members of the Committee, I
appreciate the opportunity to appear before you today. We thank
the Committee for approving H.R. 6510, the Restore Our Parks
and Public Lands Act, on September 13. This initiative, which
would direct up to $6.5 billion toward reducing the deferred
maintenance backlog at our national parks and other public
lands, is Secretary Zinke's Number one priority, and we
appreciate the Committee's support.
In addition to supporting the direct investment of Federal
dollars through H.R. 6510, the National Park Service is
committed to using every tool at its disposal to tackle the
deferred maintenance backlog. One of these tools is to enlist
willing lessees in assuming the maintenance responsibilities of
our historical assets through the effective use of leasing
authorities.
The National Park Service has authority to lease historic
buildings and other structures under two laws: the Historic
Preservation Act of 1966 and the National Parks Omnibus
Management Act of 1998. This authority allows us to enter into
public and private partnerships to use properties that are not
needed for park purposes. In some cases, it has enabled major
rehabilitation projects that would have otherwise not been
possible. One key provision in the statute is the authority to
adjust the fair market value rent to take into account the cost
of restoring and maintaining structures.
Nationwide, the National Park Service currently has
approximately 160 leases that cover over 340 structures. In
Fiscal Year 2017, these leases generated over $9 million, money
that was retained by the National Park Service.
The National Park Service leasing program provides support
to parks and regions of all aspects of the leasing process,
including assisting with drafting requests for proposals,
drafting lease documents, determining regulatory compliance,
and increasing awareness of opportunities that are available
through the leasing authority. The leasing program continues to
develop formal training for staff to expand capacity across the
National Park System.
The historic bathhouses in Hot Springs National Park have
often been cited as an example of success of the National Park
Service's leasing program. Several facilities on Bathhouse Row
have been rehabilitated and repurposed through leases and in
combination with the historic tax credit program. The Quapaw
was opened in 2008 as a bathhouse and spa under a 55-year
lease. This was followed by the Ozark in 2009. The Ozark lease
was eventually terminated but was later repurposed as an art
museum operated by the Friends of Hot Springs National Park.
The Superior Bathhouse, which reopened as a brewery in 2013,
continues to successfully operate under a long-term lease. The
Hale Bathhouse is being converted to a boutique hotel and is
expected to open in the coming year.
Elsewhere, three of our most notable projects are the
Cavallo Point Lodge north of San Francisco, the Argonaut Hotel
in San Francisco, and Williams Transco Facility in New York
City. All three have resulted in large amounts of deferred
maintenance costs being eliminated.
While these examples demonstrate how the National Park
Service leasing authority can be used to redevelop, repurpose,
and revitalize park structures, this authority has not always
resulted in a valuable lease. Despite the National Park
Service's investment of millions of dollars to stabilize the
bathhouse structures in Hot Springs over the years, numerous
attempts to find operators for the last two bathhouses, the
Maurice and the Libby, have been unsuccessful.
In general, market conditions and market demand pose the
greatest challenges to expanding the current leasing program.
The majority of successful National Park Service leases have
been located around large metropolitan areas, in particular New
York, San Francisco, and Philadelphia, where there is greater
demand to lease facilities.
Challenges have also been encountered when working to lease
parties to other government entities. While an authority called
Service First allows the Departments of the Interior and
Agriculture to enter into agreements to share resources, other
fellow agencies do not have an authority to enter into a lease
with the National Park Service. Instead, they must use the
services provided by the General Services Administration, which
entails a much more lengthy and complex process than the
process available through Service First.
The National Park Service leasing program continues to
learn from the market and develop best practices, while
expanding the portfolio of the lease properties across the
system.
Mr. Chairman, this concludes my statement, and I would be
pleased to answer any questions you or other members of the
Committee may have.
[The prepared statement of Ms. Simmons follows:]
Prepared Statement of Tracy Simmons, Chief of Commercial Services,
Midwest Region, National Park Service, Department of the Interior
Mr. Chairman and members of the Committee, I appreciate the
opportunity to appear before you today at this oversight field hearing
on ``Historic Leasing in the National Park System: Assessing Challenges
and Building on Successes.''
We thank the Committee for approving H.R. 6510, the Restore Our
Parks and Public Lands Act, on September 13. This initiative, which
would direct up to $6.5 billion toward reducing the deferred
maintenance backlog in our national parks and other public lands, is
Secretary Zinke's Number one legislative priority and we appreciate the
Committee's support.
In addition to supporting the direct investment of Federal dollars
through H.R. 6510, the National Park Service is committed to using
every tool at its disposal to tackle the deferred maintenance backlog.
One of those tools is to enlist willing lessees in assuming the
maintenance responsibilities of our historical assets through the
effective use of leasing authorities.
leasing program overview
The National Park Service (NPS) has general authority to lease
historic buildings and other structures, including associated property,
under the Historic Preservation Act of 1966 (54 U.S.C. 306121) and the
National Parks Omnibus Management Act of 1998 (54 U.S.C. 102102). These
authorities allows the NPS to enter into public-private partnerships
through leases that allow the lessee to use properties that are not
needed for park purposes. In some cases, it has enabled major
rehabilitation projects that would have otherwise not been fiscally
possible.
The NPS's leasing authority under the Historic Preservation Act of
1966 and the National Parks Omnibus Management Act of 1998 are
implemented by Part 18 of Title 36 of the Code of Federal Regulations.
These regulations require parks to make the determinations that the
lease: will not result in the degradation of the purposes and values of
the park; will not deprive the park of property necessary for
appropriate park protection, interpretation, visitor enjoyment, or
administration; will contain terms and conditions that will assure the
leased property will be used for activity and in a manner that are
consistent with the purposes established by law for the park; is
compatible with the programs of the NPS; is for rent at least equal to
the fair market value rent of the leased property; will adequately
insure the preservation of historic property; and is of a term length
of 60 years or less. These regulations also require parks to make the
determination that the proposed activities under the lease are not
subject to authorization through a concession contract, commercial use
authorization, or similar instrument.
The NPS is also authorized by statute to adjust the fair market
value rent to take into account the costs to the lessee for
preservation, maintenance, restoration, improvement, or repair and
related expenses. This flexibility has been a valuable tool for the NPS
to require the lessee to address deferred maintenance and continue to
maintain and improve the facility during the lease term. It is often
the case for facilities with a large amount of deferred maintenance
that the lessee pays little or no rent during the lease term, because
lessee's rent is reduced by these costs.
Nationwide, the NPS currently has approximately 160 leases that
cover over 340 structures. These leases generated $9,371,006 in total
revenues in FY 2017 that were retained by the NPS. A few of the NPS's
recent leases include a master residential lease at First State
National Historical Park; a lease with Navajo Nation Hospitality
Enterprises, a wholly owned subsidiary of the Navajo Nation, at Canyon
De Chelly National Monument; and a lease with the U.S. Forest Service
of two buildings at Fort Vancouver National Historic Site. Efforts to
increase the portfolio of leased properties continue by identifying
properties eligible for leases.
The NPS leasing program provides support to parks and regions on
all aspects of the leasing process, including assisting with drafting
requests for proposals (RFPs), drafting lease documents, determining
regulatory compliance, and increasing awareness of opportunities that
are available through the NPS's leasing authority. The leasing program
continues to develop formal training for staff to expand capacity
across the NPS to initiate and manage park-level leasing programs.
nps leasing successes
The historic bathhouses in Hot Springs National Park have often
been cited as an example of the success of the NPS leasing program.
Several facilities on Bathhouse Row have been rehabilitated and
repurposed through leases and in combination with the Historic Tax
Credit program.
The first bathhouse to be renovated and repurposed through a lease
was the Quapaw in 2008. The Quapaw was opened as a bathhouse and spa
under a 55-year lease. This was followed by the Ozark in 2009, which
was repurposed as an art museum. The Ozark operated until 2013 when the
lessee was unable to generate enough revenue to continue operations and
asked to terminate the lease. The Ozark is currently operated by the
park's non-profit supporting organization, the Friends of Hot Springs
National Park, through an agreement with the park. It currently houses
the Hot Springs National Park Cultural Center and displays artwork from
the park's Artist-In-Residence Program. The Friends make the Ozark
available for private events for a fee.
The Superior bathhouse, which reopened as a brewery in 2013,
continues to successfully operate under a long-term lease. The Hale
bathhouse is expected to open as a boutique 10-room hotel in 2019.
While these examples demonstrate how the NPS's leasing authority
can be used to redevelop, repurpose, and revitalize park structures,
there are instances where this authority has not resulted in an active
lease. Despite the NPS's investment of millions to stabilize the
bathhouse structures over the years, numerous attempts to find
operators for the last two bathhouses, the Maurice and the Libby, have
been unsuccessful. The most recent RFPs for the Maurice, issued last
year, did not attract any offers.
The NPS has had success with major leasing projects elsewhere in
the National Park System. Three of our most notable projects are the
Cavallo Point Lodge in Golden Gate National Recreation Area, the
Argonaut Hotel in San Francisco Maritime National Historical Park, and
the Williams Transco facility in Gateway National Recreation Area. All
three have resulted in large amounts of deferred maintenance being
eliminated as a result of multi-million dollar investment from the
private sector in projects involving renovation of historic assets. In
all three cases, special park-specific leasing authorities were used in
conjunction with system-wide general leasing authorities.
federal rehabilitation tax credit (historic tax credits)
Some lessees have been able to take advantage of the benefits
offered by the Federal Historic Preservation Tax Incentives program,
which is administered by the NPS in conjunction with the Internal
Revenue Service and State Historic Preservation Offices. This program
encourages private sector investment in the rehabilitation and re-use
of historic buildings through tax credits on income-producing
(commercial) properties. Examples include the Cavallo Point Lodge, the
Argonaut Hotel, the Quapaw Bathhouse, and the Fort Mason Center for
Arts and Culture in Golden Gate National Recreation Area.
Navigating the multiple steps involved in obtaining historic
preservation certification from the NPS is a complex process. Also,
historic rehabilitation tax credits and other forms of third-party
financing often require long-term leases. The NPS takes this into
consideration when negotiating the final lease terms with a potential
lessee and is always looking for ways to further partner with the
private sector in the most seamless and appropriate manner.
leasing challenges
While the examples given above highlight successes that have been
achieved under the current leasing authority, the NPS has also faced a
number of challenges in trying to utilize leases to reuse,
rehabilitate, and revitalize our aging infrastructure. Some of the RFPs
that have been issued by parks have received limited responses, or none
at all. That was the case for a number of residential houses at Natchez
Trace Parkway in Mississippi and for The Inn at Sleeping Bear Dunes
within Sleeping Bear Dunes National Lakeshore in Michigan.
Nowhere are the challenges more evident than at Fort Hancock within
the Sandy Hook unit of Gateway National Recreation Area, where there
are over 30 vacant structures. The park is making steady progress and
has now entered into seven letters of intent that cover 13 separate
buildings. However, the NPS has put a lot of effort into finding
potential lessees and working with them to develop restoration plans
that will fit the lessees' desired design and use. Given the historic
nature of these structures, it is often difficult to negotiate terms
that allow for the preservation of the historic fabric of the structure
while at the same time providing the lessee flexibility to renovate the
structure to meet their needs. Depending on the complexity of the
restoration requirements, negotiations have sometimes taken years to
complete.
In general, market conditions and demand pose the greatest
challenge to expanding the current leasing program. In intensely urban
areas, there appears to be a greater demand from the public to lease
facilities in parks for residential use, office space, or other
commercial activity. The majority of successful NPS leases have been
located around large metropolitan areas, in particular New York, San
Francisco, and Philadelphia.
In addition, developers and investors are often more interested in
purchasing outright fee title to property, rather than investing in the
rehabilitation of a property that is owned by, and possession of which
will eventually be returned to, the Federal Government. Also, the lease
opportunities available within parks may not provide a viable business
opportunity given the higher costs associated with the restoration or
rehabilitation of the structures compared to the lower rents that may
be available, especially in rural and sparsely populated areas.
Finally, NPS sometimes has difficulty executing leases with other
government entities. The NPS has been able to enter into leases with
other agencies within the Department of the Interior and the Department
of Agriculture utilizing the Service First authority (43 U.S.C.
Sec. 1703) which allows the two departments to enter into agreements to
share resources. However, with respect to other Federal agencies, while
the NPS has authority to enter into leasing agreements, the other
agencies generally do not have a reciprocal authority to enter into a
lease with the NPS. Instead, they use the services provided by the
General Services Administration, which entails a much more lengthy and
complex process than the process available through Service First.
Mr. Chairman, the NPS greatly appreciates the Committee's interest
in the leasing issue and looks forward to continuing to work with you
on ways to further utilize public-private partnerships to help preserve
and maintain the NPS's historic assets for future generations to use
and enjoy. The Secretary remains committed to improving how this
process works to make it more feasible and stable for historic leasing
to occur. We look forward to working with you and your colleagues
toward that end. This concludes my prepared statement and I am happy to
answer any questions.
______
Questions Submitted for the Record by Chairman Bishop to Ms. Tracy
Simmons, Chief of Commercial Services, Midwest Region, National Park
Service, U.S. Department of the Interior
Ms. Simmons did not submit responses to the Committee by the
appropriate deadline for inclusion in the printed record.
Question 1. The focal point of NPS historic leasing appears to be
on the use of NPS buildings for commercial or business purposes. In
addition to this use, it is clear that historic leases can be issued
also for other purposes, such as residential and agricultural use. Has
NPS issued historic leases for these purposes and do you agree that NPS
favors broad and flexible use of historic leasing for a wide range of
purposes--not just to run businesses?
Question 2. NPS has testified that historic leasing is appropriate
for buildings that are not used for ``park purposes.'' This is a very
broad concept that could preclude almost any use of properties for
historic leasing. We assume that ``park purposes'' would have a narrow
definition for this limitation and would apply only to those instances
where NPS itself intends to use and occupy a building for
administration, management, public health and safety, or other similar
purposes. For example, lessees can perform interpretation as well as
NPS in many cases and we assume that interpretation of a historic site
would NOT be considered the kind of ``park purpose'' that prohibits its
use for historic leasing. Please confirm that our understanding is
correct and provide any additional insight on the meaning of this
phrase as applied to historic leasing.
Question 3. It is commonly understood that one of the impediments
to the use of historic leasing has been resistance at the local level,
and from within individual parks, to adopt this innovative tool. Some
superintendents are reluctant to yield their total control over
buildings and historic properties to outside parties. Despite this
well-known fact, it appears that NPS has continued to look to local
park managers for a list of appropriate buildings for historic leasing.
What is NPS doing from the HQ and regional office level to ensure that
a broad and inclusive list of appropriate facilities is developed for
historic leasing? Also, will NPS establish a process where third
parties and potential lessees can identify those properties that would
be the subject for historic leasing and, in doing so, activate a
meaningful review process that is not subject solely to the whims of
local officials?
Question 4. Given the vast number of buildings that are available
for historic leasing, we are surprised that only 47 properties have
been identified by NPS as priority targets. What is NPS doing to look
at the longer list of 9,000 or so buildings from which candidates for
historic leasing can be drawn.
Question 5. Much of the focus in the hearing has been on the use of
historic leasing for buildings already in the maintenance backlog. It
is clear that historic leasing can also be used as a strong tool to
prevent structures from even being placed on the backlog. Does NPS
agree that historic leasing should be used in a proactive manner to
avoid the need to even put properties into the backlog? What steps has
NPS taken to encourage the use of historic leasing to avoid a problem
rather than just eliminate a problem that has already arisen.
Question 6. On November 21, 2013, the NTHP responded to an NPS
request by submitting a list of 12 NPS units that are prime candidates
for historic leasing. A copy of that letter is attached. Did the NPS
act upon the NTHP recommendations? Are most of those properties now
under active leases?
Question 7. One of the parks on the NTHP list of priority locations
for historic leasing is the Apostle Islands National Lakeshore. Is
there any prohibition that would prevent the use of historic leasing in
this park?
Question 8. The General Services Administration (GSA) is the
commercial real estate expert for the Federal Government. Does the NPS
reach out to GSA for subject matter expertise? Has the Park Service
considered adapting GSA job aides or training curriculum for use in the
NPS? What is the NPS doing to ensure staff have the resources and
training they need?
Question 9. What recommendations did the NPS implement after the
completion of the 2010 ``Leasing Program Assessment''--a report that
was completed by the Center for Park Management at the request of your
agency?
Question 10. The Northeast Region of the NPS has a high number of
leases in place. Has the NPS implemented any Northeast Region practices
service-wide to promote the success and expansion of historic leasing?
Question 11. Many leases require lessees to deposit a percentage of
their gross revenues into a maintenance reserve fund. While ensuring
that funds are available for major repairs is important, a significant
amount of capital can accumulate in those funds, as businesses grow and
repairs are checked off. Would the Park Service consider establishing a
cap on the total funds that need to be deposited into the maintenance
reserve fund?
______
Mr. Westerman. Thank you, Ms. Simmons.
The Chair now recognizes Mr. Cole McCaskill to testify for
5 minutes.
STATEMENT OF COLE McCASKILL, VICE PRESIDENT, HOT SPRINGS
CHAMBER OF COMMERCE, HOT SPRINGS NATIONAL PARK, ARKANSAS
Mr. McCaskill. Thank you very much, Mr. Chairman. I
appreciate the opportunity to be here today to represent the
business community of Hot Springs. The bathhouse leasing
program has had an intensely positive impact on Hot Springs. I
am going to share three observations that help to illustrate
this point.
Prior to the leasing program, the majority of the
bathhouses sat empty, dark, and vacant. Since the program was
created and filled these new bathhouses with new businesses,
the national park side of the street appears to be open for
business.
So, it is a common principal in economic development that
private investment follows public investment, so economic
developers are always mindful to steer capital in a fashion
that will catalyze further investment in an area. What is great
about this scenario is that instead of shouldering the burden
of capital outlay to open these bathhouses to the public, the
national park leveraged the private sector's creativity to put
this real estate back into productive use in financing the
final property improvements privately, all the while retaining
oversight of the land, real estate, and business.
This reactivation of public space due to the leasing
program will serve as a catalyst for private investment and
business growth in our downtown historic district. As you have
heard now, we have had over 100 new businesses open in the
downtown area and over $80 million has been reinvested just in
the past few years. I truly don't believe that would have been
possible if the national park side of the street appeared to be
closed for business.
A second observation is that the businesses that are now
occupying these bathhouses get an extraordinary amount of
national and international attention, which pays dividends for
our community when it comes to tourism. Due to the unique
nature of these businesses and the uniqueness of the lease with
the national park, the press loves these businesses.
Just one example, the Superior Bathhouse Brewery operates
the business on Bathhouse Row that is most fundamentally
different from the original bathing experience. They sell beer
that is brewed with thermal water. This is a very unique
practice. In fact, it is the only business in the world that is
doing this, and because of that, and because the beer is good,
they get a tremendous amount of national exposure. In just 1
year, they were covered by the Chicago Tribune and featured on
the CBS Sunday Morning show with the rest of the national park.
Our local tourism agency, Visit Hot Springs, estimates that
just those two pieces of coverage reached nearly 3 million
people and was worth over $120,000 in retail advertising value.
That is exposure that we didn't have to pay for.
This type of international coverage is very impactful on
our local economy because it generates tourism interest from
very credible editorial sources, and as you know, tourism is
the Number one sector in our economy, employing over 22 percent
of the workforce.
My third observation is that the leasing program has a
general reputation for being complicated, which may deter
applicants. The average citizen of Hot Springs doesn't know the
exact specifics of the leasing program. However, there is a
perception that it is an extremely complicated and lengthy
process. This perception is fueled by the drawn-out timeline of
the process. Oftentimes, there is an announcement of a new
business and then months and years can go by before the public
sees any activity.
The difficulty of this process is magnified when compared
to the process of leasing historic space just a few dozen feet
across the street in a privately-owned building, which a simple
lease agreement and a few days is all you might need to move
your business in, and a business oftentimes cannot take that
long of a time period between announcing the business and
actually moving in without revenue coming back in.
This issue is also reflected in the fact that the few folks
that do hold these leases are highly regarded in our community
as having an extraordinary aptitude for success. These are not
ordinary citizens. Pat McCabe is the mayor of Hot Springs and
he has been the CEO of the hospital for nearly two decades.
Anthony Taylor and Bob Kempkes are both successful architects
and own multiple businesses under real estate developers. So,
the fact that only the most exceptional people are holding
these leases to the bathhouses makes me question the ability of
the average businessperson to see this process through.
In closing, the leasing program has an extremely positive
impact on our community, especially the downtown area. I think
it has set a foundation for the tremendous wave of investment
we have seen over the past 2 years, and I am sure that none of
this would have happened if the national park side of the
street would have appeared to be closed for business.
Thank you.
[The prepared statement of Mr. McCaskill follows:]
Prepared Statement of Cole McCaskill, Vice President of Economic
Development, Hot Springs Metro Partnership
introduction
Hot Springs National Park's Bathhouse Leasing Program has had an
incredible impact on the community and economy of Hot Springs,
Arkansas. In this testimony, I will illustrate some of the most
important factors related to the benefits to the community of this
leasing program.
number one
It's a common principle in economic development that private
investment follows public investment. Economic developers are always
mindful to steer capital in a fashion that will catalyze further
investment from the private sector. Hot Springs National Park's
Bathhouse Row along the eastern side of Central Avenue, is a
significant public institution that is uniquely intertwined with the
city of Hot Springs' historic downtown district on the western side of
Central Ave., where the vast majority of the land and improved property
is privately owned.
Prior to the bathhouse leasing program, the majority of the eight
bathhouses along Bathhouse Row sat empty, dark and vacant. Since the
leasing program has filled these bathhouses with new businesses, the
eastern national park side of the street has come alive with activity.
Instead of shouldering the burden of the full capital outlay to
open these structures to the public, Hot Springs National Park
solicited business ideas from the private sector that would put this
real estate back into productive use, reactivate the square footage,
and finance the final property improvements privately. The only
compromise that the national park has had to make, is to allow
businesses to fill these spaces that sell a product or service that is
not identical to the thermal bathing of 100 years ago for which these
structures were built.
When these bathhouses were built 100 years ago, before the
invention of penicillin, thermal bathing was a popular treatment for
many illnesses. The demand for bathing has decreased significantly
since that day and caused most of the bathing businesses in the
bathhouses to close by the 1980s.
The bathhouse leasing arrangement has allowed the public
institution to offload the ideation and capital investment needed to
put this property back to work to the private sector while still
retaining oversight of the land, real estate and business.
It's also important to consider the genesis of the Bathhouse
structures themselves. They were built by the private sector on Federal
land for the purpose of operating as private businesses, so in Hot
Springs this concessioner concept is over 100 years old.
This reactivation of public space due to the bathhouse leasing
program has served as a catalyst for private investment and business
growth in the City of Hot Springs' downtown historic district, where
these two areas are so uniquely intertwined. Where nearly all of the
bathhouses on the eastern side of the street appeared closed and dark,
they are now open for business. The new businesses that have occupied
the bathhouses have proved some interesting new markets in Hot Springs
and set the foundation for a tremendous wave of investment in recent
years. In downtown over the past 4 years, over 100 new businesses have
opened, over 80 historic commercial properties have been bought and
sold, and over $80 million of private capital has been invested. I'm
sure none of this would have been possible if the Hot Springs National
Park side of downtown remained ``closed for business.''
And even better for Hot Springs National Park, instead of a sizable
public investment, private capital has been used to improve, preserve
and maintain the bathhouse properties. That capital was attracted by
the opportunity of the bathhouse leasing program and the unique markets
that exist in Hot Springs.
number two
The businesses that occupy these bathhouses get an extraordinary
amount of national and international attention, which pays dividends
for our community. Due to the unique nature of their business and to a
certain degree, the uniqueness of the lease with the national park, the
press loves these businesses.
The Superior Bathhouse Brewery operates the business on Bathhouse
Row that is most fundamentally different than the original bathing
experience; they sell beer that's made with the thermal water from Hot
Springs National Park. This is a very unique practice. In fact, this is
the only business making beer with naturally thermal water in the
world. Because of this unique quality, and because the beer is good,
Superior gets a remarkable amount media exposure nationwide.
Just two examples of this type of national coverage in 2016 are
that Superior was featured on the CBS Sunday Morning Program and in the
Chicago Tribune. Visit Hot Springs, our city's tourism agency,
estimates the reach of these two pieces alone at nearly 3 million
people with a retail advertising value of just over $120,000.
Additionally, owners of The Quapaw Baths & Spa attended an
international summit on thermal bathing in Japan representing Hot
Springs, Arkansas, where they were the only attendees from the United
States of America.
This type of national and international coverage is very impactful
on our local economy, because not only does it promote exciting new
businesses, the news coverage always introduces Hot Springs as the
setting for this interesting activity. This equates to great exposure
from very credible editorial sources that generates tourism for Hot
Springs.
Tourism is very important to Hot Springs. It is the largest sector
in the Hot Springs economy, supporting 7,592 jobs or roughly 22 percent
of the workforce in our area. Visitors spent $799 million in Hot
Springs last year.
number three
The Bathhouse Leasing program has a general reputation for being
onerous and the business owners who have completed the process are
regarded as exceptionally capable people.
The average citizen in our community does not know the exact
specifics and particulars related to completing the bathhouse leasing
process. But there is a perception among the general population of Hot
Springs that it is an extremely complicated and lengthy process which
may deter potential applicants.
This perception is fueled by the elongated timeline of the process.
Many of these prospective lessees make very highly visible
announcements announcing their intent to lease a bathhouse. In many
cases, years pass by before any tangible progress is seen, either
through construction or occupation of the real estate. A multiyear
timeline to open a business is not feasible for most businesses and
most cannot sustain a business through this period without revenue
coming in. Other factors are involved in extending the timeline for
opening with financing being central among them, but the leasing
process is always the most visible public obstacle.
The difficulty of this process is magnified when compared to the
process for leasing a private commercial space just a few dozen feet
across Central Avenue in the City of Hot Springs' downtown historic
district. A simple lease agreement between two parties is usually all
that's needed and in a best-case scenario where the property is ready
to be occupied, a tenant business could have the opportunity to move in
within days. This scenario looks more favorable to most businesses, but
the bathhouses offer the unique benefit of access to the thermal water
which is important enough for most of the businesses who have leased
bathhouses to opt for this more difficult lease route.
This issue is also reflected in the fact that many of the bathhouse
lessees are highly regarded in our community as having an exceptional
aptitude for success. These people show extraordinary tenacity in their
everyday lives and the management and execution of their businesses and
they exhibit characteristics of extremely competent and successful
people. Pat McCabe is the Mayor of Hot Springs and has been the CEO of
Levi Hospital for nearly two decades. Anthony Taylor and Bob Kempkes
are both accomplished architects, business owners, and real estate
developers. Rose Schweikhart is an accomplished musician, business
owner and beer brewer. The fact that only the most exceptional business
people are holding leases to the bathhouses makes me question the
ability of the average business owner to see this process through to
completion.
conclusion
The Bathhouse Leasing Program has had an extremely positive impact
on Hot Springs and especially the downtown area. What was once an
entire half of downtown that appeared closed and dark is now open for
business. The new businesses that have occupied the bathhouses have set
the foundation for a tremendous wave of investment in recent years. In
downtown over the past 4 years, over 100 new businesses have opened,
over 80 historic commercial properties have been bought and sold, and
over $80 million of private capital has been invested. Many other
factors were involved in the development of downtown Hot Springs over
the years, but I'm sure none of this would have been possible if the
Hot Springs National Park side of downtown remained to appear ``closed
for business.''
______
Mr. Westerman. Thank you, Cole.
The Chair now recognizes Mr. Tom Cassidy for 5 minutes.
STATEMENT OF TOM CASSIDY, VICE PRESIDENT, GOVERNMENT RELATIONS
AND POLICY, NATIONAL TRUST FOR HISTORIC PRESERVATION,
WASHINGTON, DC
Mr. Cassidy. Chairman Bishop, members of the Committee,
Mayor McCabe, and other distinguished guests, I appreciate the
opportunity to present the National Trust testimony on the
challenges and successes of historic leasing as a strategy to
abate the maintenance backlog. But first, Chairman Bishop, on
behalf of the hundreds of organizations, some of which are here
today, who support your bipartisan Restore Our Parks and Public
Lands Act, thank you for successful markup of the legislation
last Thursday. We look forward to continuing to work with you
on getting that across the finish line by the end of the year.
We appreciate the attention you are focusing on historic
leasing. While leasing is not a magic or silver bullet that
will solve the backlog, leasing is not the solution to ensure
that national icons such as the Statue of Liberty, Independence
Hall are maintained for the American public. And under current
concessional law, numerous public services that are necessary
and appropriate to visitation in parks, such as Yosemite and
Canyonlands, are the appropriate subjects of concession
contracts. The leasing of historic buildings is an important
improvement but still an underutilized strategy to rehabilitate
and bring back to economic life and public enjoyment abandoned
or underutilized historic resources.
Hot Springs demonstrates the successes and the continued
future opportunities. The Trust published a major report on
historic leasing 5 years ago. It provided an overview of policy
concerns, legal authorities, recommendations, and case studies
from parks throughout the country, including Hot Springs. Since
then, we have visited numerous parks to evaluate existing and
potential leases and we continue to meet with National Park
Service leadership to encourage expanded leases. I would note
that long-term leases of 55 to 60 years enable lessees to
utilize the Federal historic tax credit, by far the most
significant investment in historic preservation. But the tax
credit has been used in only a small number of Park Service
leases, including the Quapaw Bathhouse, and we hope soon Hale
and Superior bathhouses.
So, what are the barriers and how can they be overcome? We
are impressed and humbled by the remarkable staff of our
National Park Service. There are few finer interpreters of our
shared national stories. But little girls and boys who dream of
being a park ranger, dream of being a ranger in Yosemite or
Denali, or the smart ones, perhaps Zion, Golden Spike, and Hot
Springs, And I would venture that very few imagine becoming a
commercial real estate specialist.
The fact is there is very little practical experience with
commercial leasing within the Service either at the park,
region, or headquarters level. There are a number of
outstanding real estate professionals, but they are often
concentrated in individual parks over few regions. They are not
well distributed throughout the agency.
And related to this fact is that Park Service practice and
culture precludes experts in one region from assisting park
officials in another region, and national staff are reluctant
to offer advice to parks unless there is a request from the
region. Our recommendation--and this actually emerged in a
conversation we had with Acting Director Danny Smith--is that
the Park Service should commit to catalyze historic leasing by
creating a ``tiger team'' of real estate specialists
knowledgeable in park regulations and policies and perhaps,
most importantly, commercial real estate, to assist individual
parks and regions in advancing specific projects and innovative
adaptive reuse partnerships. The Park Service also has to
provide the financial support to fund the necessary staff
training.
We also have opaque guidance from headquarters. In April
2016, the Park Service issued a memorandum to the regional
directors that explicitly addressed a bias against leasing, and
that was an important first step. It included a decision guide
to choosing a lease or a concession contract, but the
underlying policies and interpretations remain confusing.
Speaking personally, I have suffered brain damage trying to
understand the distinction between necessary and appropriate
and how that implicates a lease or a concession contract and to
still find its practical application. One simple recommendation
is that the Park Service should develop a set of more specific
examples to describe how existing leases are consistent with
policy or what would be examples of leases that might violate
policy, and particular care is needed to ensure there are clear
standards to determine when a concession agreement is required
and leasing is appropriate.
The red light indicates I am done. I would be happy to
answer any questions, especially on other successful examples
besides the great ones here in Hot Springs.
[The prepared statement of Mr. Cassidy follows:]
Prepared Statement of Thomas J. Cassidy, Jr., Vice President of
Government Relations and Policy, National Trust for Historic
Preservation
Chairman Bishop, Ranking Member Grijalva and members of the
Committee, I appreciate the opportunity to present the National Trust
for Historic Preservation's testimony on the challenges and successes
of historic leasing as a strategy to bring abandoned and underutilized
buildings back to public enjoyment and use, while also abating the
$11.6 billion maintenance backlog of our national parks. My name is
Thomas J. Cassidy, Jr. and I am the Vice President of Government
Relations and Policy.
The National Trust for Historic Preservation is a privately-funded
charitable, educational and non-profit organization chartered by
Congress in 1949 in order to ``facilitate public participation in
historic preservation'' and to further the purposes of Federal historic
preservation laws.\1\ The intent of Congress was for the National Trust
``to mobilize and coordinate public interest, participation and
resources in the preservation and interpretation of sites and
buildings.'' \2\ The National Trust has more than 1 million members and
supporters. With headquarters in Washington, DC, 9 field offices, 28
historic sites, and a national network of partners in states,
territories, and the District of Columbia, the National Trust takes
direct, on-the-ground action when historic sites are threatened,
advocates to save America's heritage, and strives to create a cultural
legacy that is as diverse as the Nation itself, so all can take pride
in the American story.
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\1\ 54 U.S.C. Sec. Sec. 312102(a), 320101.
\2\ S. Rep. No. 1110, 81st Cong., 1st Sess. 4 (1949).
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The National Trust has worked closely with many stakeholders on a
legislative solution that would provide dedicated funding to address
the maintenance backlog. We strongly endorse the bipartisan Restore Our
Parks and Public Lands Act (H.R. 6510) introduced by Chairman Rob
Bishop and Ranking Member Grijalva which enjoys the support of nearly
160 co-sponsors. Thank you again, Mr. Chairman, for your successful
markup of this legislation last Thursday.
We also support the Restore Our Parks Act (S. 3172) introduced by
Senators Portman, Warner, Alexander, and King that to-date has secured
support from over a quarter of the U.S. Senate. We believe these bills
can make a substantial and meaningful investment in our national parks.
We are also pleased the legislation provides dedicated funding financed
by unobligated Federal mineral revenues in such a way that allocations
to the Land and Water Conservation Fund and Historic Preservation Fund
are not impacted. The National Trust is a strong supporter of both
these programs and believes that both should receive the dedicated
funding they have long been promised.
Thank you for the attention the Committee is focusing on historic
leasing, an underutilized tool to abate the NPS maintenance backlog.
Historic leasing is not a magic bullet that will solve the maintenance
backlog. Leasing to a third party is not the solution to ensure that
national icons such as the Statue of Liberty, Independence Hall, or the
Jefferson Memorial are maintained for the American public. And, under
current concession law, numerous public services that are ``necessary
and appropriate'' to visitation in many of our large rural parks such
as the Grand Canyon, Yosemite, Great Smoky Mountains, and Yellowstone
are the appropriate subjects of concession contracts. But, leasing of
historic buildings in national parks is an important and proven, but
still underutilized strategy, to rehabilitate and bring back to
economic life and public enjoyment abandoned or underutilized historic
resources.
the need
The National Park System is an astonishing national treasure. It is
absolutely one of our Nation's best ideas--a network of 417 parks and
sites that protect spectacular historic, cultural, and natural
resources and tell the stories of remarkable people and events in our
country's history. Three-quarters of national park units were
established to protect our country's most important historic and
cultural resources. These places include such national treasures as
Ellis Island National Monument, Gettysburg National Battlefield, Chaco
Cultural National Historic Park, and the Washington Monument. Over the
past two decades, the NPS has added over 30 new park units that are
predominantly historical and cultural. These new parks that help tell
the stories of all Americans include Rosie the Riveter World War II
Home Front National Historical Park, Cesar E. Chavez National Monument,
Tuskegee Airmen National Historic Site, Reconstruction Era National
Monument, and the Birmingham Civil Rights National Monument.
The National Park System includes more than 84 million acres across
all 50 states, the District of Columbia, and many U.S. territories. NPS
protects and interprets an estimated 2 million archaeological sites,
4,200 historic statues and monuments and more than 27,000 properties
listed on or eligible for the National Register of Historic Places,
including 9,600 buildings.
National parks, and the historic and cultural sites they protect,
are some of our Nation's most popular attractions and were visited by
over 331 million people last year. In 2017 alone, these visits
generated visitor spending of an estimated $18.2 billion in nearby
communities--spending that supported 306,000 jobs and provided a $35.8
billion boost to the national economy.
I will address two issues in this testimony. First, the need for
direct Federal investments through annual appropriations and the
proposed ``National Park Service and Public Lands Legacy Restoration
Fund.'' Second, the challenges and opportunities available to
rehabilitate and maintain historic properties through historic leasing.
direct federal investments
The NPS maintenance backlog of $11.6 billion demonstrates that
additional investments and new strategies are necessary if NPS is to
meet its stewardship responsibilities. We are encouraged, Mr. Chairman,
by your successful markup last Thursday of H.R. 6510. We are impressed
by the many statements of support by numerous Senators, Secretary of
the Interior Ryan Zinke, and hundreds of organizations nationwide for
reducing the maintenance backlog and prioritizing this issue as part of
policy proposals to invest in our Nation's infrastructure.
For several years the National Trust has focused on increased
funding for the NPS line items for Repair and Rehabilitation and Cyclic
Maintenance to alleviate the maintenance backlog and ensure adequate
preservation and protection of resources in our parks. Both the House
and Senate-passed versions of the FY19 Interior Appropriations bills
would increase funding for these two accounts. The Senate bill adds $15
million while the House bill increases those accounts by $40 million
compared with FY18. Notably, the FY18 total for these accounts was
already about $100 million more than it was just 3 years prior--a
roughly 55 percent increase. We support continued increases in
appropriations for these accounts.
But the scale of the backlog demonstrates the need for a reliable,
dedicated Federal funding source distinct from annual appropriations to
address the deferred maintenance backlog. And, if we are successful in
securing enactment of the Restore Our Parks and Public Lands Act, we
will also need to be mindful of the need to provide sufficient staffing
to preserve properly historic sites, maintain buildings and
infrastructure in safe condition, and keep our parks open and
accessible to the public.
historic leasing
The National Trust published a major report in September 2013:
``Historic Leasing in the National Park System: Preserving History
Through Effective Partnerships.'' \3\ Our study provided an overview of
policy concerns, legal authorities, policy recommendations, and a set
of 17 case studies from throughout the country. Since then, we have
visited numerous parks to evaluate successful leases and opportunities
to expand leasing. We have updated 4 of our case studies and expect to
complete 4 more in the near future, a number of which are summarized
below. We have also continued to meet with National Park Service
leadership and Congressional staff to encourage additional use of
historic leasing.
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\3\ Historic Leasing in the National Park System: Preserving
History Through Effective Partnerships; http://forum.savingplaces.org/
viewdocument/historic-leasing-in-the-national-pa?; September 2013.
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Leasing of historic buildings in the National Park System to non-
NPS entities is an effective and proven public-private partnership that
can be used as part of a suite of options to abate the deferred
maintenance backlog in our national parks. Historic leases alleviate
the burden on the National Park Service to maintain historic buildings.
Long-term commercial leases of 55-60 years also enable lessees to
utilize the Federal 20 percent historic tax credit for qualified
rehabilitation expenses. We were very pleased that Congress chose to
maintain the historic tax credit (HTC), championed by President Ronald
Reagan, in the Tax Cuts and Jobs Act of 2017. The HTC has proven to be
the most significant Federal investment in historic preservation. Since
1982, it has rehabilitated more than 43,000 buildings, creating 2.4
million jobs and leveraging $131 billion in private investment. As
described below, the HTC has been used in only a small number of NPS
leases, including at the Quapaw Bath House here in Hot Springs. We know
that it can and should be used more extensively than it is now.
Congressional support for leasing has long existed, as evidenced by
grants of authority to enter into leases and historic leases,\4\ which
Congress has extended to the NPS over the years. In addition, there has
been consistent direction from the Interior Appropriations Subcommittee
and Full Committee encouraging historic leases to abate the maintenance
backlog. For example, the Interior FY12 House Interior Appropriations
Report stated:
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\4\ See 54 U.S.C., section 102102 and section 306121.
The Committee encourages the Park Service to pursue the use of
cost-effective, innovative solutions like historic leases when
practical and when the arrangement comports with a park unit's
enabling legislation. These solutions can help mitigate a
growing backlog of historic structures in need of
preservation.\5\
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\5\ House Report 112-51, H.R. 2584.
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In FY16, the Full Committee stated:
Leasing of Historic Buildings. Leasing of historic park
buildings has proven to be an effective public-private
partnership that has brought private investment to the repair
and maintenance of historic park resources. In previous years,
the Committee has encouraged the Service to make expanded use
of leasing authority. The Committee commends the Service for
recent steps it has taken to increase the utilization of this
tool, including establishing a leasing manager to oversee and
expand the historic leasing program. The Committee directs the
Service to provide a report, within 6 months of enactment of
this Act, detailing its progress toward expanding use of this
authority. Included in this report should be (1) an assessment
of how many historic structures are leasable, (2) the cost of
undertaking a leasing program, and (3) any statutory or
regulatory impediments that now inhibit the enhanced use of
leasing of historic structures.\6\
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\6\ FY16, H. Report 114-170, H.R. 2822.
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And, in FY17, the Full Committee stated:
Leasing of Historic Buildings. Leasing of historic park
buildings has proven to be an effective public-private
partnership that has brought private investment to the repair
and maintenance of historic park resources. In previous
Committee reports, the Committee has encouraged the Service to
make expanded use of leasing authority. The Committee commends
the Service for recent steps it has taken to increase the
utilization of this tool, including establishing a leasing
manager to oversee and expand the historic leasing program. The
Committee renews its previous request that directs the Service
to provide a report, within 6 months of enactment of this Act,
detailing its progress toward expanding use of this authority.
Included in this report should be (1) a list of structures the
Service considers high-priority candidates for leasing, (2) a
list of structures currently under a lease arrangement, (3) an
estimate of the number of leases that have enabled private
sector investments using the Service-administered historic tax
credit, and (4) any statutory or regulatory impediments that
now inhibit the enhanced use of leasing of historic
structures.\7\
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\7\ FY17, H. Report 114-632, H.R.
The Department of the Interior, responding to the FY17 report
language, reported to Chairman Calvert on January 18, 2017,\8\ that
among the 27,000 assets on the List of Classified Structures (LCS),
potentially 9,000 structures could be evaluated for re-use through
leasing. And in a letter to Chairman Murkowski of March 29, 2018, the
Department identified 47 high-priority candidates for leasing, about
350 structures currently subject to a lease, and 3 leases that utilize
the historic tax credit.\9\
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\8\ The letter is date stamped ``Jan 18 2016'' but we believe it is
a 2017 letter.
\9\ We understand there are at least five current historic tax
credit projects including within the following parks: Hot Springs, Fort
Hancock, San Francisco Maritime, Fort Baker (GGNRA) and Fort Mason
(GGNRA).
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Barriers to Leasing and Policy Recommendations:
Historic leasing can enhance opportunities for the private and non-
profit sector to assist in the preservation, maintenance and use of
historic buildings. Even with the availability of leasing authority
included in the National Historic Preservation Act and the Concessions
Management Act, and congressional encouragement, the NPS has struggled
to fully use its authority to preserve historic structures and cultural
resources. Barriers to full use of this authority--including unduly
restrictive policy interpretations or statutory and regulatory hurdles,
as well as staff capacity and expertise--have often stood in the way.
If implemented, the following recommendations would help address these
barriers and make historic leasing an even more effective tool.
Lack of capacity and experience in the field: After many
years of studying the use of historic leasing in the parks
and meeting with park staff on the ground, in regional
offices and in DC, we are impressed and humbled by the
remarkable staff of the National Park Service. There are
few finer interpreters of our shared national stories. But,
there is very little practical experience with commercial
leasing within the Service, either at the park, region or
headquarters level. There are a number of examples of
outstanding real estate professionals, but they are often
concentrated in individual parks or a few regions--they are
not well-distributed throughout the agency.
-- Recommendation: NPS should commit to significantly
catalyze historic leasing by creating a ``tiger team'' of real
estate specialists, knowledgeable in park service regulations
and policies and perhaps most importantly, commercial real
estate, to assist individual parks and regions in advancing
specific projects and innovative adaptive reuse partnerships.
Internal Culture and Policy: Existing park service policy
and culture precludes experts in one region from assisting
park officials in another region. In addition, national
staff is reluctant to offer advice to parks unless there is
a request from the region. And, park service leadership has
not yet broken through these barriers to make clear that
expanded use of historic leasing is a National Park Service
priority that will be supported by policy clarifications,
small but necessary budget reforms and spotlighting
successful models of innovation.
-- Recommendation: NPS should provide financial support to
fund staff training and administration of a larger leasing
program. Subsequent to our 2013 report, the NPS did add its
first leasing program specialist in the Washington office, and
we understand that additional capacity is being considered. In
many parks, more technical skills are needed before a more
robust leasing program can be implemented. The ``tiger team''
identified above would also address this.
Opaque Guidance: On April 18, 2016, the NPS Chief
Financial Officer issued a Memorandum to the Regional
Directors on ``Guidance on Authorizing Commercial Services
under Concession Contracts or Leases.'' It explicitly
addressed a bias against leasing based upon a policy
interpretation, which is an important policy statement. And
it does include a ``Decision Guide--Choosing a Lease or a
Concession Contract.'' However, the underlying policies and
interpretations remain opaque. Speaking personally, I have
invested significant time trying to understand the
``necessary and appropriate'' requirement for a concession
contract rather than a lease and still find its practical
application, and guidance, to be a challenge.
-- Recommendation: NPS should develop a set of more specific
examples to describe how existing leases are consistent with
policy or what would be examples of leases that would violate
policy. The NPS should undertake a thorough review of the laws,
regulations, policies, and procedures for historic leasing and
address inconsistencies and areas of confusion. Particular care
is needed to insure that there are clear standards to determine
when a concession agreement is required and when leasing is
appropriate.
The costs of preparing properties for leasing, including
appraisals, is often cited as a barrier.
-- Recommendation: A fund should be available to prepare
buildings for lease, including necessary historic building
surveys, costs of appraisals and, in some cases, funds to
stabilize and complete basic improvements to structures. The
NPS should define the need for such funding and include it in
the FY20 budget request.
Administrative Costs: The authority for ``leasing''
permits rental payments to be deposited in a special
account for various uses, but not for the costs of
administration. The proceeds of a ``historic lease,''
however, are deposited in a fund and may be used for the
costs of administration, but the fund is only 2 year money.
-- Recommendation: Harmonize these sections and permit lease
funds to be used for administration without a 2 year limitation
on expenditures.
Despite these obstacles, there are numerous examples where historic
leasing and public-private partnership agreements have been used to
authorize non-Federal entities to operate businesses, provide services
and housing, and manage event spaces in historic structures within the
National Park System. In many cases, the involvement of non-Federal
entities has meant the difference between preservation and reuse or
deterioration and neglect of irreplaceable historic resources. The
American public has directly benefited from these private investments
through increased opportunities to enjoy historic properties that
otherwise would have been unavailable. However, despite successful
examples of historic leasing being used to rehabilitate historic
structures in almost every NPS region, some Superintendents have not
used the NPS's leasing authorities to their full extent.
examples of historic leasing
Hot Springs National Park, Arkansas
Every year 1.5 million people visit ``The American Spa'' in Hot
Springs, Arkansas. In the late 19th century, developers turned this
area and its 47 geothermal springs into a resort town complete with
hotels and bathhouses. The bathhouses fell into disuse as public
interest in therapeutic baths declined. In order to restore the eight
remaining bathhouses to make them both usable and important for
interpretation, the park explored historic leasing opportunities. An
initial Federal investment of $18 million in the early 2000s made the
bathhouses ``tenant-ready'' and attractive to lessees. Today, only one
bathhouse remains to be leased. Since becoming a unit of the National
Park System in 1921, the park has remained a major economic driver to
the city of Hot Springs and draws more than $99 million in tourist
dollars to local communities.
Quapaw Bathhouse
The Quapaw--one of the largest bathhouses--had been vacant since
the 1980s until Taylor Kempkes Architects stepped in. An initial $2.5
million investment, aided by the historic tax credit, and a year of
rehabilitation work, led to the reopening of the Quapaw as a luxury spa
in 2008, and it remains popular a decade later. As part of the 55-year
lease, the NPS is no longer responsible for monthly utility bills or
maintenance costs and 2 percent of annual gross revenue must be put
into a restricted fund for maintenance work. Quapaw Bath and Spa
handles the daily maintenance operations of the building, yet the park
remains an active partner by ensuring that any work is consistent with
National Park Service standards.
Superior Bathhouse
Aspiring brewer and entrepreneur Rose Schweikhart discovered the
natural temperature and pH of the thermal springs were ideal for beer
making. She subsequently turned the Superior Bathhouse into a beer-
making facility, improving the floors and electric conduits to
accommodate thousands of pounds of equipment, pumps, and food
facilities. She added features--like a glass wall so visitors could see
the beer-making process--without harming the historic fabric. Using the
same lease structure as the Quapaw, Schweikhart maintains the integrity
of the building while staying economically viable. The Superior
Bathhouse Brewery opened in 2014 and designs for a German-style beer
garden are in the works.
Valley Forge National Historical Park, Pennsylvania
After a harsh winter in Valley Forge, the Continental Army emerged
from their encampment in June 1778 a more united and disciplined
fighting force. This defining moment in the American Revolution
motivated civic groups to host rallies and lead preservation efforts
until Valley Forge became Pennsylvania's first state park in 1893. When
suburban development pressures and funding concerns at the state level
threatened the integrity of the park, the commonwealth transferred the
management of the park to the National Park Service (NPS) in time for
the bicentennial in 1976. Each year more than 2.4 million visitors come
to the park and spend approximately $30 million in local communities.
To meet increased visitors' demands and to help compensate for
insufficient Federal appropriations, the NPS has pursued historic
leasing opportunities. The park utilizes both long- and short-term
leases, and a multi-year plan enables the NPS to identify future
leasing projects that benefit the park through additional revenue
streams, capital improvements, and maintenance savings.
Philander Chase Knox Estate
The late 18th-century Philander Chase Knox Estate sits
picturesquely amidst the rolling hills of Valley Forge. The mansion was
used as a library and storage facility until a 10-year lease was signed
in 2015 with Valley Forge Park Events, LLC--a partnership between The
Party Center and Robert Ryan Catering--to create an event space. The
company preserved the historic integrity of the house and landscape
while completing necessary updates and restorations. The park receives
a percentage of the revenue from fees and catering sales at the more
than 50 annual events, far exceeding initial forecasts. In this
partnership, the park uses half of the house as a library while the
event company maintains the indoor and outdoor spaces it leases. The
beautifully restored mansion is now accessible to the public and guests
can enjoy scenic views that will inspire them to return to the park.
The Montessori Children's House of Valley Forge
The Montessori Children's House was seeking a permanent home when
they learned the park was interested in leasing several historic
buildings. Following a capital campaign, archaeological and historic
surveys, and architectural planning, the Montessori Children's House
signed a 40-year lease in 2009 and began rehabilitating the structures.
The large house, two-story barn, and cottage were in serious disrepair
from water damage, unchecked ivy, wood decay, mold, and asbestos. The
school's repair work preserved the historic integrity of key structures
and maintained the basic footprint of the site. The park and the school
forged a symbiotic relationship wherein the park benefits from annual
rent, mortgage, and maintenance payments while the school enjoys use of
a beautiful property in a historic setting, with access to park rangers
for educational programming.
Golden Gate National Recreation Area, California
One of the largest urban parks in the world, Golden Gate National
Recreation Area protects significant historic, cultural, natural,
scenic, and recreational resources. In addition to rich natural
ecosystems and habitats, the park interprets thousands of years of
human history from Native American cultures, to the frontiers of the
Spanish Empire, to American maritime and military heritage, to the
development of modern-day San Francisco. Established in 1972, the park
manages more than 366 historic structures, 5 National Historic Landmark
districts, and 13 National Register of Historic Places properties.
Every year, more than 15.6 million visitors are drawn to the diverse
experiences offered at the park and spend approximately $392.1 million
in local communities. To better steward the historic buildings, the
park began to enter into formal historic lease agreements in the early
2000s. Now the park has approximately 30 leasing partners who help to
maintain and fund the park while creating new opportunities for
visitors.
Fort Mason Center for Arts & Culture
Intermittently over the past 200 years, Spanish, Mexican, and
American forces have fortified this hilltop promontory overlooking the
San Francisco Bay. Renamed Fort Mason in 1882, the post became
incorporated into the park when it was established in 1972. After 40
years of partnering with a local non-profit, the park signed a 60-year
lease in 2006 with the Fort Mason Center for Arts & Culture (FMCAC).
The lessee pays an annual rent to the park and also contributes to a
maintenance reserve fund, where they far exceed their minimum
requirement every year. As part of the lease, the park is financially
responsible for shoring up the substructure of the piers and FMCAC
develops the superstructure. After identifying a for-profit investor,
FMCAC used the historic tax credit to tack Pier 2 and is now looking to
rehabilitate Pier 3. FMCAC has subleased many of its buildings to other
non-profits and for-profit entities to create a thriving campus for the
arts. The campus--which includes five buildings on land and two pier
buildings--now hosts five theaters, two art schools, an art supply
shop, a bookstore, a cafe, and two restaurants.
Golden Gate NRA Residential Master Lease
To build on this success, the NPS entered the Golden Gate National
Recreation Area Residential Master Lease with Gaetani Real Estate in
2013. The 10-year master lease includes buildings at Fort Mason
(including Officer's Row), Fort Barry, and Point Bonita totaling more
than 110,00 square feet. Gaetani has currently rehabilitated and leased
out 30 housing units. As part of the lease, the NPS makes 71.5 percent
of the gross revenue and an additional 20 percent of revenue is added
to a repair and maintenance reserve that is nearly expended annually.
In less than 5 years, more than $10 million was paid to NPS in rent and
an additional $3.25 million was used to repair, maintain, and preserve
the historic properties.
Cavallo Point Lodge at Fort Baker
Built in 1905 as a U.S. Army post, Fort Baker was the largest
military post added to the park in 2002. When the park became
interested in leasing the space, the Fort Baker Retreat Group--an
ambitious partnership between Passport Resorts, Equity Community
Buildings, and Ajax Capital Group--signed a 60-year lease in 2006 with
a goal of preserving the fort and rehabilitating it into a hotel and
retreat center. The scale of the restoration and the length of the
lease allowed the lessee to use the historic tax credit, which was a
critical investment component of the project. The Fort Baker Retreat
Group preserved 29 historic buildings and built 14 new ones in a green
fashion, making the hotel at Golden Gate the first national park lodge
with a LEED Gold certification. In addition to paying an amortized base
rent, the lessee also spends around $1 million annually to maintain the
premises, which includes 198,000 square feet of buildings within a 30-
acre historic landscape. Now a destination spot, the Cavallo Point
Lodge offers historic accommodations, cooking classes, a luxury spa,
and event spaces.
San Francisco Maritime National Historic Park, California
The Argonaut Hotel is another exemplary leasing example in the
Pacific West Region. The hotel is located in the century-old Haslett
Warehouse within the San Francisco Maritime National Historic Park.
Under a 60-year lease, this one-time fish cannery is now open to the
public as a hotel. The rehabilitated historic building includes the
park's Visitor Center on site. The length of the lease term allowed the
hotel operators to qualify for Federal historic tax credits that made
the building's rehabilitation financially feasible. Without the
investment of private funds, and the utilization of the Federal
historic tax credit, it is likely that these beautifully restored
buildings would be sitting unused.
Gateway National Recreation Area, New York/New Jersey
For centuries, the safest way to sail into New York Harbor was by
hugging the shore of Sandy Hook. From the colonial period to the cold
war, Sandy Hook lighted the paths of seafarers and protected the city
from potential attack and invasion. In 1895, the U.S. Army renamed the
fortifications Fort Hancock and developed an installation that grew to
7,000 people by the 1940s. Decommissioned in 1974, Fort Hancock became
part of the Sandy Hook unit of Gateway National Recreation Area. Today,
Gateway interprets America's largest port, its oldest surviving
lighthouse, and its first municipal airport. Time and harsh coastal
conditions have caused severe deferred maintenance. With 110 historic
military buildings at Fort Hancock alone, the park has looked to
leasing opportunities. The first lease rehabilitated a deteriorating
property and signaled the adaptive re-use potential of some 35 nearby
buildings at the Sandy Hook unit, which receives roughly 2.2 million
visitors annually.
Sandy Hook Chapel
Among the officers' homes, army barracks, and mess halls, the Sandy
Hook Chapel--built in 1941--is a relatively new addition to the main
post at Fort Hancock. Occupying a unique location at the end of the
Sandy Hook Bay, the church had fallen into serious disrepair by the
late 1990s. At that point, the NPS made an ongoing commitment to
preserve and protect the structure, and it was one of the very few
buildings successfully rehabilitated during the 1990's-era leasing
program. Now rehabilitated as an event space, the historic Sandy Hook
Chapel is available for short-term rentals for weddings, meetings,
family gathers, memorials, and other occasions. The park maintains the
structure and grounds and manages the books, while the lessee is
responsible for other event costs. This investment realizes
substantial, ongoing revenue for the NPS. Now fully booked, the park is
accepting reservations for dates in 2020.
Duplex Family Housing Quarters/Building #21
The iconic yellow brick buildings comprising Officer's Row at Fort
Hancock were constructed largely between 1898-1910. Originally built to
house officers and their families, today many of these buildings are
abandoned and face serious maintenance challenges. About 5 years ago,
the park created the Fort Hancock 21st Century Federal Advisory
Committee, dedicated to preserving these deteriorating buildings. In
2016, the park entered its first lease. The 60-year agreement enabled
the investors to use the historic tax credit, and the duplex is now
available for short-term rentals year-round. The park benefits by
saving a deteriorating historic structure that will now be maintained
and returned to productive public use. Since then, the park has
executed formal Letters of Intent for 13 buildings at Fort Hancock with
individuals and organizations with plans to rehabilitate those
buildings.
Cuyahoga Valley National Park, Ohio
Originally designated as a National Recreation Area in 1974,
Cuyahoga Valley National Park protects a restored landscape with deep
cultural roots. Surrounded by cities like Cleveland and Akron, Ohio,
scenic Cuyahoga Valley provides historical, educational, natural, and
recreational opportunities for its neighbors as well as its more far-
flung visitors. The park includes hundreds of cultural assets including
part of the Ohio & Erie Canal, railways, historic communities and
districts, and old farms. Recognizing the importance of preserving
these historic sites but limited by staffing and funding, the park
turned to historic leasing and developed two programs: the
``Countryside Initiative,'' which focuses on leasing historic farms,
and; the ``Historic Property Leasing Program,'' which repurposes
historic buildings for events, accommodations, and other uses. Farm
leases in particular allow for the preservation of important rural
historic resources, put farmlands back into production, create
opportunities for entrepreneurial farmers, and teach visitors about
where their food comes from. Today, the park holds 15 leases--including
11 for farms--and is exploring opportunities to encourage more leasing.
In 2017, more than 2.2 million visitors explored Cuyahoga Valley and
spent more than $78.1 million in local gateway communities.
Martin Luther King, Jr. National Historical Park, Georgia
To preserve the historic character of Auburn Avenue, and the block
of historic houses that includes the Birth Home of Dr. Martin Luther
King, Jr., the NPS established the Martin Luther King, Jr. National
Historic Site in 1980. The park encompasses 38 acres in the Old Fourth
Ward neighborhood of Atlanta, Georgia. Dr. King's Birth Home is open to
visitors. The NPS funds the maintenance for all of the federally-owned
houses within the park unit with revenue generated by leasing 29 of the
federally-owned historic buildings for private residential purposes.
These structures include apartments, duplexes and single family homes.
The leasing program has been very popular, leading to the establishment
of a waiting list for potential tenants.
In addition to the private residential leases, another federally-
owned building is operated as a commercial barber shop, and the
remaining homes are used for park employee housing or by park partner
organizations under cooperative agreements, including the Martin Luther
King Jr. Center for Nonviolent Social Change and the historic Ebenezer
Baptist Church. The nearly $200,000 in annual rental revenue collected
through these rental agreements is used to perform major maintenance
and restoration in the historic district while the lessees are
individually responsible for funding routine maintenance.
We have made two site visits to this park. We believe that the
existing leasing arrangement might be modified to include a master
lease, as has been done for multiple properties at First State National
Historical Park and GGNRA. This would free NPS staff to focus on other
visitor centered activities. In addition, we think that there are very
real possibilities for utilization of long-term leases that could
utilize the historic tax credit to create modest bed and breakfast
lodgings.
conclusion
The American people love their national parks. Our national
character and heritage are defined in many of the places entrusted to
the care of the NPS, one of the nation's finest institutions.
As the Committee knows from its work on the maintenance backlog,
there is a significant need and a set of complex financial,
institutional, and political challenges that must be overcome if the
aspirational charge of the National Park Service's Organic Act, enacted
nearly a century ago, is to be fulfilled.
Thank you again for the opportunity to present the National Trust's
perspectives on these issues, and we look forward to working with the
Committee and other stakeholders as you consider policy proposals to
address the deferred maintenance backlog. We hope that this hearing
will encourage the National Park Service to catalyze greater
utilization of historic leasing throughout our park system. We are
confident that the leasing of more underutilized historic buildings
will sustain our Nation's rich heritage of cultural and historic
resources and generate economic vitality for communities throughout the
Nation.
______
Questions Submitted for the Record by Chairman Bishop to Mr. Tom
Cassidy, Vice President, Government Relations and Policy, National
Trust for Historic Preservation
Question 1. Do you continue to believe that all of the 12 priority
parks you mentioned in the November 13, 2013 letter to the NPS should
remain in the priority category? In your oral testimony you indicated
that the NTHP has visited many parks that appropriate for historic
leasing. Can you identify which parks the NTHP has investigated further
and what the results of those visits has been? Have you visited any of
the parks on the November 13, 2013 list?
Answer. We do believe that many of the parks mentioned in our
November 21, 2013 letter should continue to be identified as
priorities. As identified below, there are several parks for which we
have no updates. The parks that we have visited since our November 21,
2013 letter include:
a. Delaware Water Gap National Recreation Area
I do not presently recall if my visit there was before or after our
letter, but under any circumstance there are a significant number of
historic buildings that await rehabilitation. A significant challenge
here--and elsewhere--is to identify a particular adaptive such as a B&B
or agricultural use that is economically viable.
b. Harpers Ferry National Historical Park
I visited this park earlier this year and visited both the Murphy's
Farm site and a large stabilized barn near Bolivar Heights and the
``Nash-Randolph Wildlife Sanctuary.'' Both buildings would appear to be
obvious sites for adaptive reuse, including potentially as a B&B or
event site. There are also vacant buildings formerly part of Storer
College and other buildings in the park that could be leased.
c. Valley Forge National Historical Park
We have visited this park. The Philander Knox House has been
productively leased as an event space since our letter. There are
numerous potential opportunities here that park staff have identified.
We are optimistic that this is a park where continued successes will be
found.
d. Cumberland Island National Seashore
We have not visited this park. But, we continue to believe that
there are several buildings in the Dungeness Historic District that
could be leased. The reluctance to enter into a lease agreement with a
former life-tenant may have foreclosed a real opportunity for an
effective public-private partnership for adaptive reuse.
e. Chesapeake & Ohio Canal National Historical Park
We have visited portions of this very linear park. We understand
that unreasonably long negotiations for a historic lease with the
Washington Canoe Club may soon be completed. We understand there
continue to be effective short-term cooperative agreements for the use
of particular lock houses. We know of interest to enter into longer
term leases on at least one potential commercial venue.
f. Sandy Hook Unit of Gateway National Recreation Area
We have visited this park and will soon publish an updated case
study.
Sandy Hook Chapel
Among the officers' homes, army barracks, and mess halls, the
Sandy Hook Chapel--built in 1941--is a relatively new addition
to the main post at Fort Hancock. It was one of the very few
buildings successfully rehabilitated during the 1990s-era
leasing program. Now rehabilitated as an event space, the
historic Sandy Hook Chapel is available for short-term rentals
for weddings, meetings, family gathers, memorials, and other
occasions. Now fully booked, the park is accepting reservations
for dates in 2020.
Duplex Family Housing Quarters/Building #21
The iconic yellow brick buildings comprising Officer's Row at
Fort Hancock were constructed largely between 1898-1910. About
5 years ago, the park created the Fort Hancock 21st Century
Federal Advisory Committee, dedicated to preserving these
deteriorating buildings. In 2016, the park entered into a 60-
year lease that has enabled investors to use the historic tax
credit to restore the building and successfully use it for
short-term rentals year-round. The park benefits by saving a
deteriorating historic structure that will now be maintained
and returned to productive public use. Since then, we
understand the park has executed formal Letters of Intent with
individuals and organizations with plans to rehabilitate an
additional 13 buildings.
g. Apostle Islands National Lakeshore
We visited the Lakeshore last August and visited several of the
historically significant properties. We also met with local
organizations interested in historic preservation and partnership
opportunities. Among the National Register buildings now eligible for
historic leasing are the West Bay Club on Sand Island and the Hadland
and Benson Cabins in the Rocky Island Historic District. These
properties have already been the subject of community-based volunteer
restoration efforts or proposals, that were, or are proposed to be,
undertaken without Federal funding. Some of the lighthouses also might
be opportunities for historic leasing. Many of the historic buildings
that are under retained rights through life estates are currently well-
maintained by the historic use families. Future historic leases or
similar arrangements could be important tools to ensure these
properties are maintained after the expiration of the use and occupancy
rights and before they become part of the maintenance backlog.
h. Cuyahoga Valley National Park
We have not visited this park, but we have interviewed NPS staff
and are preparing to publish a case study.
Originally designated as a National Recreation Area in 1974,
Cuyahoga Valley National Park protects a restored landscape with deep
cultural roots. The park includes hundreds of cultural assets including
part of the Ohio & Erie Canal, railways, historic communities and
districts, and old farms. Recognizing the importance of preserving
these historic sites but limited by staffing and funding, the park
turned to historic leasing and developed two programs: the
``Countryside Initiative,'' which focuses on leasing historic farms,
and the ``Historic Property Leasing Program,'' which repurposes
historic buildings for events, accommodations, and other uses. Farm
leases in particular allow for the preservation of important rural
historic resources, put farmlands back into production, create
opportunities for entrepreneurial farmers, and teach visitors about
where their food comes from. Today, the park holds 15 leases--including
11 for farms --and is exploring opportunities to encourage more
leasing.
i. New River Gorge National River
We have no updates.
j. Glacier National Park
We understand that a number of the potential lease properties near
Lake McDonald were damaged or destroyed by the most recent fire.
k. Grand Canyon National Park
We have no updates.
l. North Cascades National Park
We have no updates.
Other parks we have visited to evaluate leasing opportunities include:
Hot Springs National Park
Those of us who participated in the Committee's September 17 field
hearing in Hot Springs were able to experience firsthand the enormous
impact that historic leasing--and the Federal historic tax credit--have
had in the park and the surrounding community.
We were able to directly see firsthand the community and economic
impacts of leasing in restoring the Quapaw and Superior bathhouses and
the ongoing work at the Hale Bathhouse. We also saw the need for a
successful leading project to revitalize the Maurice Bathhouse.
In addition to bringing abandoned properties to life, the existing
leases of the Quapaw and Superior result in private lessees assuming
the financial responsibility of rehabilitating and maintaining the
buildings, paying utility bills and returning revenues to the park.
First State National Historical Park
This park provides an outstanding example of creative regional and
park staff entering into a master lease of at least 14 buildings that
enabled existing residential and agricultural uses to continue. The
small staff of this new park would never have had the capacity to
administer these properties without the use of a master lease. The
master lease provides centralized property management by a 3rd party
while also addressing responsibilities for deferred maintenance and
lease revenue to the park.
Golden Gate National Recreation Area (GGNRA)
The San Francisco Bay area continues to benefit from historic
leasing. Our 2013 report highlighted the use of the historic tax credit
to revitalize the Inn at Cavallo Point/Fort Baker and the Argonaut
Hotel/San Francisco Maritime National Historical Park.
Fort Mason
Historic leasing has continued at Fort Mason within GGNRA.
After 40 years of partnering with a local non-profit, the park
signed a 60-year lease in 2006 with the Fort Mason Center for
Arts & Culture (FMCAC). The lessee pays an annual rent to the
park and also contributes to a maintenance reserve fund, where
they far exceed their minimum requirement every year. As part
of the lease, the park is financially responsible for shoring
up the substructure of the piers and FMCAC develops the
superstructure. After identifying a for-profit investor, FMCAC
used the historic tax credit to address issues at Pier 2 and is
now looking to rehabilitate Pier 3. FMCAC has subleased many of
its buildings to other non-profits and for-profit entities to
create a thriving campus for the arts. The campus--which
includes five buildings on land and two pier buildings--now
hosts five theaters, two art schools, an art supply shop, a
bookstore, a cafe, and two restaurants.
Golden Gate NRA Residential Master Lease
The NPS entered the Golden Gate National Recreation Area
Residential Master Lease with Gaetani Real Estate in 2013. The
10-year master lease includes buildings at Fort Mason
(including Officer's Row), Fort Barry, and Point Bonita
totaling more than 110,00 square feet. Gaetani has currently
rehabilitated and leased out 30 housing units. As part of the
lease, significant revenue is returned to NPS and to a repair
and maintenance reserve that is nearly expended annually. In
less than 5 years, more than $10 million was paid to NPS in
rent and an additional $3.25 million was used to repair,
maintain, and preserve the historic properties.
Indiana Dunes National Lakeshore
We have also visited Indiana Dunes National Lakeshore. The historic
assets that are best known at this park are the five homes which were a
part of the Century of Progress International Exposition for the 1933-
34 World's Fair in Chicago. Preservation non-profit Indiana Landmarks
partnered with the National Park Service to lease all five houses, four
of which are subleased to private residents. The House of Tomorrow
remains, and Indiana Landmarks plans to restore and lease the house on
a short-term basis in the future.
Isle Royale National Park
We have visited this park. Like Apostles Island National Lakeshore
and Cumberland Island National Seashore there are many historic sites
maintained by life-tenants who owned their property before the
establishment of the park. We recommend that the NPS give serious
consideration toward developing a policy to ensure that life-tenants,
at the end of their tenancy, are eligible to lease the properties they
have lived in and maintained for many years.
Martin Luther King, Jr. National Historical Site
See discussion immediately below.
Question 2. Do you agree with NPS that there are only 47 priority
buildings for historic leasing? How would you go about developing such
a list that is all-inclusive?
Answer. We have reviewed the March 29, 2018 letter from the Office
of the Secretary to Chairman Murkowski describing the NPS process in
identifying the 47 ``High Priority Candidates for Leasing.'' It seems
like a fine process, but we expect there are multiple other buildings
that would qualify as high priorities. For example, we have had a
series of conversations with Martin Luther King National Historical
Park and the Southeast Regional Office regarding a potential commercial
B&B opportunity at 497 Auburn Avenue, NE and 493 (A, B & C) Auburn
Avenue. The SE Region was preparing a ``Request for Expression of
Interest'' in late 2017. It is our understanding that the Request was
never formally issued. We do not think that this situation meets the
criteria in the March 29, 2018 letter. However, we continue to believe
that the subject property could be a very viable candidate for leasing
if NPS leadership were to focus commercial real estate expertise from
other regions and national staff to assist the park and region in
successfully moving the project forward.
We do not have a specific recommendation on how to develop an all-
inclusive list and we do not believe that is the most productive
activity the NPS should undertake at this time. Instead, we would
recommend, as described more fully below, creating a ``Timer-Team'' to
identify real-world, commercially viable opportunities and then invest
the time, resources and leadership necessary to make a growing number
of individual projects successful.
Question 3. Do you agree that historic leasing should be used
proactively to head off the need to even include properties on the
backlog? It appears NPS has limited its review to properties already on
the backlog. Is that correct? How would you go about looking more
broadly for the advance use of historic leasing to keep buildings good
shape before they decline and become a liability for NPS and the
Federal budget?
Answer. From our perspective, the preservation priority is to lease
underutilized historic structures, many of which are vacant and needing
rehabilitation funds. Our general sense is that the properties NPS has
reviewed are already on the backlog, but NPS would be in the better
position to answer that specific question.
We have not evaluated the ``advance use'' of leasing to maintain
buildings before they decline. One exception to consider is discussed
above in our answer to Question 1 as it relates to the life-estate uses
at Apostle Islands (and other similar situations like Cumberland Island
and Isly Royale). There may be instances where that is a viable
strategy but we have not explored where those opportunities may be
found. This could be a task for the ``Tiger-Team'' described below.
One of the benefits of leasing is that a third party, and not the
NPS, is responsible for the maintenance of the leased building, and
also the beneficiary of lease payments generating net positive income
to the agency. In some cases, such as Hot Springs, the NPS has invested
funds in preparing long abandoned buildings to a condition where third
parties would be more willing to enter into long-term leases.
Question 4. Much of the focus of historic leasing to date has been
to wait for NPS to decide to make a property available for leasing.
This appears to be a slow and bureaucratic process that is limiting the
use of this tool. What would you do to create new avenues for getting
properties onto the list of possible leasing? Do you believe that
outside parties should be able to propose unsolicited leases? And
should the full range of potential uses be covered, not just high
visibility business uses in metropolitan areas?
Answer. We agree that the existing process is not resulting in a
critical mass of new successes. There are some successes, and we know
the agency is working on a number of exciting projects, which is very
positive, but we believe there could be more. Even if properties were
on a list, if leasing is not identified as a priority by NPS
leadership, and if there is not the staff capacity and funding required
to actually solve the real estate and process challenges that preclude
the creation of more leases, there is little reason to believe that
placing a property on a list would result in successfully executing a
lease.
We would defer to NPS on the best way to identify how outside
parties can best catalyze opportunities for successful leases. Perhaps
proposals from third parties could go to a national team to provide an
initial assessment of practicality and for those ideas that passed a
threshold of consistency with park use and potential economic
viability, the national team could recommend action and provide support
to the park and region to create a fuller proposal. And, yes,
absolutely, a full range of uses compatible with the park mission
should be evaluated, including smaller business and agricultural leases
in small towns, rural and suburban areas. Existing successes at Hot
Springs, Valley Forge and Cuyahoga demonstrate the potential.
Question 5. Your organization has suggested that a ``Tiger Team''
of historic leasing experts in the Park Service could be established to
improve the program. What would a tiger team look like? What function
would they serve to field staff?
Answer. The term ``Tiger Team'' arose in a conversation with
National Park Service leadership as a cost effective and pragmatic
approach that would address the general lack of successful leasing
experience throughout the agency. It would also address the significant
barriers of culture and practice that preclude experts in headquarters
from reaching out directly to parks to make recommendations on
successfully pursuing leasing opportunities and, similarly, barriers
that preclude an expert in one region from reaching out to a park in
another region.
Creation of a ``Tiger Team'' would be a tangible expression that
NPS leadership is committed to expanding the use of historic leasing as
an agency priority, through a cost-effective approach of applying
existing expertise to solving commercial real estate challenges beyond
the experience of most Superintendents and regional staff.
We are not wedded to any particular model and believe that the NPS
is in the best position to identify the optimal configuration of a
small group to effectively implement change. But as we have discussed
the concept of a ``Tiger Team'' needs to be a small group of
experienced real estate professionals well-versed in successful
examples of historic leasing from throughout the NPS, including
headquarters, select Regions and parks. The team could travel to
specific parks where leasing opportunities exist and advise
Superintendents and regions on the best practices to achieve success.
It could also participate/lead national trainings and workshops focused
on the keys to overcoming obstacles to achieve success.
Once high priority properties are identified, a multi-disciplinary
group similar to the Northeast Regional Roundtable should be assembled
to evaluate more critically particular proposals, including staff who
are experts in facilities management, partnerships, leasing/concessions
and budget.
However, we are convinced that the most important key to success is
for NPS leadership to embrace the concept that historic leasing is a
significant strategy to rehabilitate underutilized buildings for
visitor enjoyment, to bring new uses to revitalize communities in and
near specific parks, and to abate the maintenance backlog.
______
Mr. Westerman. The gentleman yields back.
The Chair now recognizes Mr. Bob Kempkes for 5 minutes.
STATEMENT OF BOB KEMPKES, OWNER, QUAPAW BATHHOUSE AND SPA, HOT
SPRINGS NATIONAL PARK, ARKANSAS
Mr. Kempkes. Thank you all for being here. We really
appreciate you coming to Hot Springs.
I think Mr. McCabe has kind of hit on some of the financing
hurdles that we all face trying to get a bathhouse open, and I
think Mr. Cassidy's on point with the suggestion of commercial
real estate specialists.
A little background. In 2005, we submitted a proposal to
lease the Quapaw Bathhouse. Our idea at that point in time was
to provide low-cost access to thermal waters and bathing for
the general public. Currently that was being provided by the
Buckstaff Bathhouse in a traditional format, which works well,
but we thought something maybe a little more updated might be
well received. We then signed a lease in 2007, so it took a
couple years to work through all those lease terms. We opened
our business in 2008.
We are now in the 11th year of our lease. I am very
satisfied with our relationship with the National Park Service.
I would like to mention, as Pat did, Superintendent Fernandez,
without which we would have never gotten through the leasing
program.
And to Mr. Cassidy's point, I think it is really well made,
we had numerous people we had to deal with through the leasing
process. I think this could be simplified. I think the person
we were dealing with most was Sandy Cool. She is retired now.
She was director of concessions, so not necessarily up to date
on leasing.
The other problem we had in our financing situation was
nobody could give us a value to the lease. Well, a lease
actually does have value and a real estate specialist would
understand, promote that, or a real estate appraiser. We pay a
very limited rent in return for our return on investment of our
initial money we put in the bathhouse, so there are things
there that really are not being, I don't think, championed to
people. And I think, to your point, somebody along the lines
that has more day-to-day knowledge of real estate could make a
huge difference.
And the other thing that would be nice to see is some kind
of single source to deal with in terms of trying to go through
the leasing process. As Pat has experienced in his lease terms,
you think you are done and then somebody from some other
department sends an e-mail saying what about this, and then you
think you have to start over. So, I think some simplification
that would allow a one-stop shopping kind of thing would be
really helpful.
Now, going back to the whole maintenance idea, I do see
that as a total win-win. In my written testimony, I have kind
of outlined the amount of investment we made, the amount of
maintenance we have done, the amount that we keep in a
maintenance reserve fund. One other thing I could suggest is
that that maintenance reserve fund be capped at a certain
point, because as it is, it is 2 percent of our gross progress,
and that is pretty substantial. We tried to negotiate with that
when we were negotiating our lease, but that didn't go
anywhere. And I think Pat tried to do the same thing with the
same result.
Anyway, I do see, as Pat said, the program being just a
win-win for everyone. We see the fact that we have to do
maintenance as prescribed by the National Park Service as
something that comes with the territory of being a steward of a
national historic landmark building, and I think we all take
that seriously, and I think the city of Hot Springs does too.
The fact that we do have to maintain our buildings regularly is
great. I mean, this is our best foot forward to the world.
Quapaw Baths gets people from all over the world, not just
the United States, and people always comment on how beautiful
Hot Springs National Park is. So, it is a wonderful thing.
I would also like to say, under the overall program, it is
really a jobs creation program too, and I don't know that that
gets stressed enough. Quapaw currently has 46 team members. We
have a payroll in excess of $1.4 million annually. We are
generating a lot of good things there with people now having
jobs, people paying taxes, people investing all sorts of things
that benefit our entire community. I understand that the lease
program may not be right for areas, as you mentioned, that are
rural. But in any kind of a semi-urban environment, it just
makes so much sense to get the participation of the city and
the parks working together. That public-private partnership is
a great thing and I think it works really well here.
In closing, I would just say thank you again. We think the
program is working well, and hope to see it being used more
often around the country.
[The prepared statement of Mr. Kempkes follows:]
Prepared Statement of Bob Kempkes, Chief Executive Member, Quapaw
Baths, LLC
Chairman Bishop, thank you for bringing Washington, DC to Hot
Springs, Arkansas. My name is Bob Kempkes and I am an architect by
trade and also a partner in Quapaw Baths, LLC. As the name implies our
group leases and operates the Quapaw Bathhouse in Hot Springs National
Park. The Quapaw was the first leased bathhouse to reopen to the
public. During that leasing process and subsequent business operation
we learned a great deal and hope our testimony today can help other
entrepreneurs around the country to invest in our National Parks and
the communities they inhabit.
In May 2005 our group, Quapaw Baths, LLC, submitted a Proposal to
the National Park Service to lease the Quapaw Bathhouse in Hot Springs
National Park, Arkansas. Our goal was to provide low cost access to the
Hot Springs thermal water to individuals and groups in a modern
facility in a National Landmark Building. Our Proposal was accepted at
the Regional Level of the NPS and we began due diligence which included
securing the necessary financing and reviewing the sample lease for any
items requiring negotiation.
One of the major challenges with leasing from the NPS is that they
retain ownership of the improvements to the building leaving a lender
with minimal collateral which when coupled with an unproven, start-up
business significantly increases the risk exposure. The required
project equity can also be challenging but the NPS was able to work
with us to provide a long-term lease of 55 years that allowed us to
take advantage of the Federal Historic Rehabilitation Tax Credits which
at the time were 25 percent of the qualified rehabilitation expenses.
These tax credits were syndicated to an investment group which provided
capital to meet the equity requirement of the financing package. The
NPS was also able to receive permission to provide the lender and
investor an estoppel agreement which in case of default by the borrower
would allow them, with NPS approval, to bring in a new operator.
One of the big unknowns when we were talking to lenders was
determining the value of the lease. Since no one had a leased a
Bathhouse and because the lease rate had not been determined it was
difficult to assign a value to the lease for appraisal purposes.
Eventually the NPS determined that the fair market (in 2007) rent
should be $9.50 per square foot per year. Noting that the lessee was
making a considerable investment in the Bathhouse it was determined
that the rent would be $1.00 per square foot per year. The difference
between fair market rent and the NPS rent gave the lease a value and
provided us with a reasonable annual rate of return of approximately
7.5 percent on our overall investment of $2.5 million. Another NPS
incentive for the developer was the construction term rent of $1.00 per
year for 3 years. This allowed us to get the building renovated and
open for business while operating essentially rent free. This enabled
us to get the business stabilized faster and provided an additional
level of comfort for the lender.
After working through the financing challenges, we executed a lease
with the NPS in April of 2007 during the NPS celebration of the 175
year anniversary of the Hot Springs Reservation.
One of the major advantages of the leasing program for the NPS are
the maintenance requirements in the lease. The lessee is required to
fund a maintenance reserve account with 2 percent of the gross
revenues. This fund has no cap and if the lessee leaves the fund
balance becomes the property of the NPS. The NPS must approve any
expenditures from the account. A Reserve Account is a typical
requirement by a lender but being held by the Lessor it provides the
NPS with the ability to stay proactive on the condition of its
building. Major maintenance items are typically things that occur every
5 years or longer. We received a grace period to start depositing to
the fund of 2 years of business operation which was another aid to the
business start-up. Since 2010 we have spent approximately $200,000 on
major maintenance items and maintain a six figure balance in the fund.
We are also required to perform routine maintenance, which includes
painting the exterior of the building on a 5 year schedule, as defined
in our Preservation Maintenance Plan and as noted in any NPS
inspections. This plan includes correcting any deficiencies in
accordance with the Secretary of Interiors Standard for Rehabilitation
which ensures proper preservation of an historic structure. We have
spent over $170,000 on routine maintenance since opening the business.
As the lessee we have never had any issues with the NPS over routine or
major maintenance issues. We both understand our responsibilities in
caring for a public treasure and take that very seriously.
Quapaw Baths and Spa employs 46 team members with an annual payroll
of $1.4 million. We are currently in the 11th year of our lease and are
extremely satisfied with our working relationship with the NPS. Our
interaction has always been more like a working partnership than the
standard Landlord-Tenant agreement we are involved with on the private
side of Central Ave. The NPS' efforts to lease, renovate and bring back
to life the long vacant bathhouses has been a catalyst for increased
downtown tourism as well as a source of pride for our community and our
visitors.
______
Mr. Westerman. Thank you, Mr. Kempkes.
I also want to thank all the witnesses for your testimony,
and remind the members of the Committee that Committee Rule
3(d) imposes a 5-minute limit on questions. The Chair will now
recognize Members for any questions they may wish to ask the
witnesses. I was going to yield to Chairman Bishop, but he has
yielded back to me, so I will begin the questioning.
First off, just to maybe highlight the magnitude of what we
are talking about, and I will ask Ms. Simmons this question. My
understanding is there are 8,000 to 9,000 buildings in the
National Park Service system that are currently unused, and of
the $12 billion of maintenance backlog, $4 billion to $5
billion of that is for those historic structures. Do you have
different numbers?
Ms. Simmons. We have a database that identifies
approximately 50 buildings that would be available for lease
across the National Park Service. That information is provided
by parks across the Service.
And in regards to the deferred maintenance numbers, it
really depends greatly on the adapter reuse of that building as
far as the deferred maintenance, because when a lessee comes
into a building, they are not simply addressing the deferred
maintenance for that building, but they are adapting it for
what they will be using it for. So, they would not just, like I
said, be addressing the deferred maintenance, but if they were
going to convert it into a boutique hotel, there are items in
there that they would actually improve for that adaptive reuse.
Mr. Westerman. Leasehold improvements, I guess, is what--
--
Ms. Simmons. Actually, the capital improvements that are
made in those structures can go toward offsetting the rent, so
it is a credit toward the rent.
Mr. Westerman. Mayor McCabe, you talked about the
difficulty in going through the financing process, and I am
guessing Representative Hill, who is actually the Whip on the
Financial Services Committee in the House, he will probably
have some questions around that as well. And then you talked
about the expertise, Mr. Cassidy, and then Mr. Kempkes talked
about it as well, the expertise within the Park Service to do
all the real estate side of it. Now, you suggested a tiger
team. We would like to call it something different here in
Arkansas, the Razorback team or maybe, for Secretary Zinke's
purpose, a strike team or something like that.
I would like to go down the panel and have you give me your
Number one improvement you think could be made to the Historic
Leasing Program. Because if we want to expand this to other
places, and there is so much experience here in Hot Springs
about how to make it work, is there like a top one or two
recommendation you would make?
Mr. McCabe. I want to go back to the National Park Service
as a landlord. Take the word ``National Park Service'' out and
you think of a landlord and you are going to make improvements
to that building. They want to retain those improvements. I get
that. I understand that. From a bank's perspective, in
financing those improvements, they know that those are attached
and they are not going to get those back. You have the SBA on
this other side telling the finance institution we are
guaranteeing this loan. You have to get more collateral. You
have to ensure that the taxpayers are protected.
And then one of the issues that we ran into was the loan
proceeds in the event that the structure burned beyond
recognition or significant enough that the Park Service said,
well, we are not going to rebuild. That was an issue that we
just had, and Superintendent Fernandez was in my corner on
that, at least from the comment, why is the SBA being so
difficult here? It is money going into a Federal building.
Mr. Westerman. So, we need to maybe work on getting those
SBA loans where they are more friendly toward us?
Mr. McCabe. I think so. I mean, I think that would be a
good thing, where those dollars are going into a Federal
building and that project is considered to be a good project by
the virtue of the lease. I think they can relax that.
Mr. Westerman. We have 30 seconds. Anybody else have a
comment?
Mr. Cassidy. Sure. I would just note that you had a number
of about 26,000 or 27,000 buildings that are potentially
subject to lease, 27,000 assets from the Park Service. This is
a letter from the Interior to Sherman Calvert about a year and
a half ago. He identified potentially 9,000 structures that
could be evaluated through leasing. And then a letter of March
29 of this year. The Park Service identified 47 high-priority
candidates for leasing. I would note that, based upon our
experience, there are more. But what it comes down to--and I
don't mean to--well, I guess I do mean to emphasize this.
Mr. Westerman. Make it quick. I am out of time.
Mr. Cassidy. OK. All right.
Mr. Westerman. So, I yield back, and I recognize Mrs.
Radewagen from American Samoa for 5 minutes of questions.
Mrs. Radewagen. Thank you, Mr. Chairman.
I, too, would like to welcome the panel. Thank you for
appearing today.
I have a question for Ms. Simmons. Are there any statutes
that prevent the full implementation of a user-friendly leasing
program across the NPS? Are there any that you would recommend
be repealed or amended or new authorities authorized, and are
there any provisions in the Code of Federal Regulations that
the agency could consider revising that would make it easier to
expand and improve historic leasing in national parks?
Ms. Simmons. Thank you. That is a very good question. We
feel that we have the flexibility that we need to initiate the
leasing program across the National Park Service. We would be
more than happy to work with the Committee on any suggestions
that you may have, but we do feel like we have the flexibility.
We realize Secretary Zinke's interest in public-private
partnership to address deferred maintenance, and that leasing
may be one of those tools, but we will be more than happy, if
you have any suggestions, to look at those suggestions.
Mrs. Radewagen. Mr. Cassidy, can you speak to how historic
leasing can help address the $11.6 billion deferred maintenance
backlog of the NPS?
Mr. Cassidy. Sure. I think we have had a couple of
examples already. The Park Service doesn't have to pay to keep
in mothballs buildings that weren't productive and weren't
being utilized by people. We had some adaptive reuses. We will
see them this afternoon on the tour.
The leasing authority that exists is used to bring
buildings that have been abandoned from derelict to productive
use, and in some cases, it has also gone to have a net positive
return income back to the Treasury. I think of a place like the
Presidio, which is a little bit of an odd case because a
specialized system was set up to deal with that. But the day
the Presidio became part of the Park Service, it was the
biggest part of the maintenance backlog in the whole country.
Fort Baker near Sausalito was an enormous maintenance backlog,
but you have innovative regional leadership that facilitated
long-term leases that brought in the historic tax credit. And
right now, you have this remarkable place that Ms. Simmons
referenced, the Cavallo Point. It is a cool place to go. People
go there all the time. Before it was just buildings on a list
of things that weren't being taken care of.
Mrs. Radewagen. Thank you, Mr. Chairman. I yield back the
balance of my time.
Mr. Westerman. The gentlelady yields back.
The Chair recognizes the gentleman from Arkansas, my
colleague, Mr. Hill, for 5 minutes.
Mr. Hill. Well, thank you, Mr. Westerman, to be in your
district. It is the second best district in the state.
I want to welcome our distinguished Chairman. We appreciate
him taking his time to be in Arkansas. And I do commend both of
you for holding this hearing.
And, Chairman Bishop, I hope you get a chance to go up the
old Carriage Road to the top of the mountain and get on top of
the tower before you leave because that is the same view Teddy
Roosevelt had when he visited here and climbed the first tower
back in 1910. It will give you a real feel for just what a
beautiful, beautiful place Hot Springs is.
Bruce, yes, I was very interested in talking about this
from a banker's point of view. I was in banking for 30 years
before I ran and was elected to Congress, and so I do think
about this from a financial point of view, and I think the
witnesses have done an excellent job thinking that through,
which is all over America, people use a ground lease owned by
somebody else and yet they build extraordinary things and
somehow that gets financed. And I promise they are not all
putting up their grandparents' CDs and have not necessarily a
very good secondary source of collateral.
One question I had for Mr. Cassidy. You referenced historic
tax credit, something that Mr. Westerman worked very hard on in
the last tax bill. We appreciate his leadership. I support it
as well. Could you reflect on the historic tax credit as well
as the new market tax credit program? Because both these
programs, under certain circumstances, build an equity
component which does make lenders quite comfortable. Could you
reflect on that, and have you seen that used somewhere in the
National Park Service?
Mr. Cassidy. In the same letter that the Park Service sent
to the Appropriations Committee earlier this year, I think they
identified three leases that utilized the historic tax credit.
That is not enough; I think actually it is a little bit wrong,
there are probably five or six. If Hot Springs comes fully on-
line, we are up to seven, but that is not enough.
I am not aware of a new markets project within the Park
Service, but I am aware of multiple instances where new markets
has been a part of the capital staff. Everybody may not know
what that is, but that is what you need to figure out how much
money you have to make the deal happen. There are multiple
examples of new markets being twinned with historic, and the
benefit of that is that you would have a structure
rehabilitated to the Secretary's standards for historic
preservation. On its own, a new markets project is not subject
to those restrictions.
So, why hasn't that been done more? I think it is what I
spoke to earlier. The expertise on commercial leasing is a rare
commodity in the National Park Service.
Mr. Hill. Not to interrupt you, but one issue is that the
new markets program has gotten so many people's hands in the
pockets of the program that the cost is so high, that you have
to have a $10 million project before it really warrants doing
the agency cost aspect of it. One suggestion I have always made
before I committed in other places is we need to drive down
those agency costs and offer a new market tax credit to make
more programs qualify for it. There are a lot of good ideas for
a national park building that don't require $10 million in
capital outlet.
Mr. Cassidy. I would be delighted to speak with you off-
line because we have a for-profit subsidiary, the National
Trust Community Investment Corporation, that regularly receives
new market allocations. And we are working with them as we did
the reauthorization of the historic tax credit. Thank you,
again, Congressman Westerman. Thank you, Mr. Bishop, for co-
sponsoring that bill. We want to make improvements in the new
markets tax credit. I would love to have this conversation with
you.
Mr. Hill. Good. And I can't see how much time I have left,
but I will ask Ms. Simmons in the seconds remaining, hidden
best practices on a ground lease, is there any statute that
prohibits you to have a different negotiation, for example, on
the maintenance log or is that purely just a policy decision of
the Department?
Ms. Simmons. It is absolutely possible to have that as
part of the negotiation. We look at the length of the lease
term, the maintenance that is needed, and we want that
maintenance reserve in there because we are protecting those
resources to ensure that there is a pot of money set aside
should some unforeseen maintenance need arise in that building.
But it is a negotiation tool that we have at our disposal.
Mr. Hill. Thank you, Chairman, I yield back.
Mr. Westerman. The gentleman yields back.
I would, again, like to thank Representative Hill for
joining the Committee today. As I said, he serves on the
Financial Services Committee, but Federal land issues are very
important to him and he took time out of his busy schedule to
come over and meet with our Committee today, so thank you for
doing that.
The Chair now recognizes the Chairman, Representative
Bishop, from Utah, for 5 minutes.
The Chairman. Let me go through some of these as quickly
as we can. Ms. Simmons, I know the Park Service has compiled a
high-priority candidate list of leases, potential leasing. Have
you considered developing an inventory of all unused property
that can be considered for leasing?
Ms. Simmons. We rely on our parks to provide information
related to property that meets the determinations for leasing.
That is a very good question. From the field level, I would be
more than happy to talk to my Washington staff and provide an
answer for that.
The Chairman. But we have yet to compile that in one spot?
Ms. Simmons. We have a high-priority list, and we have a
database of available properties that relies on the parks
submitting the structures that meet those determinations.
The Chairman. When you choose to go with a concessionaire
or a lease, what criteria do you use?
Ms. Simmons. A concessions contract is a necessary and
appropriate visitor service, and Mr. Cassidy was talking about
developing a headache over reviewing that. Well, it is a
complex process, and it depends greatly on that particular part
because what may be necessary and appropriate visitor service
in one park may not be a necessary and appropriate visitor
service in another park.
The Chairman. OK.
Ms. Simmons. You rely on your park planning documents. You
rely on the demographics. If you have a hotel in a park, such
as the boutique hotel that we are opening here in Hot Springs,
that is an appropriate lease because you can go across the
street and down a block and there is a hotel. If you look at
the north rim of the Grand Canyon, that hotel there is a
concessions contract because there is no other lodging
facilities within close proximity of that hotel, so it makes it
necessary.
The Chairman. So, a case-by-case more than anything else.
Mr. Cassidy, they talked about a strike, or tiger team,
whatever you want to call it. Right now we don't have those
kinds of skill sets except in various entities. If there was
one centralized strike team that worked for everything that was
out of the Park Service, is there enough use or volume of need
to actually justify that?
Mr. Cassidy. I sure think so. Yes.
The Chairman. That was a good answer.
Mr. Kempkes, you talked about the problem you have within
the Park Service itself, one may be approving it and then
somebody else came in there and you had to do the process over
again. Can you be a little bit more specific about that, and
was that all within the Park Service? It wasn't another entity
outside of the Park Service?
Mr. Kempkes. It was not outside the Park Service, no. And
what kind of happens along those lines is, like any government,
there are a lot of different layers there and each layer likes
to be heard. So, when you think you jumped a hurdle with, let's
say, the code reviewer in Omaha, Nebraska, that is a good
thing, and then all of a sudden, there is an environmental
reviewer that is telling you how big your dishwasher should be,
things like that. There is no centralized person or group of
people asking you for information.
The Chairman. Well, this kind of goes back to what
Secretary Zinke was talking about in his reorganization
efforts. But you are talking now within the entity, the agency,
not amongst the different divisions that are already in
existence?
Mr. Kempkes. Yes. I think they all are fine. It is just
somebody overseeing them all and coordinating communication.
The Chairman. Mr. McCaskill, if we are actually going to
be talking about doing leasing programs, urban or rural, I
guess the question is, does the leasing problem provide a draw
to bring tourists in or is it just an asset to bring tourists
in?
Mr. McCaskill. It is an extra layer of interesting things
that are happening here. The national park has a lot of natural
assets that people are coming to visit, but because of the
built structures and built environment that exists in downtown,
to have those bathhouses be sitting there and unused just
doesn't quite make much sense.
The Chairman. I hope this could be used in a rural
atmosphere as well, but we will see with that. And I have 30
seconds, Mayor.
Mr. McCabe. Yes.
The Chairman. You created a hotel off one of these things.
Mr. McCabe. Correct.
The Chairman. Why? Why did you want to do this in the
first place?
Mr. McCabe. I was a young man when we started the process.
That was in 2013. In fact, it was this week in 2013 that I
called Bob Kempkes and we toured the Hale Bathhouse. The Park
Service wasn't all the fault for the delay. The financing was a
challenge. We wanted to do something downtown. I was a city
director at that time. The numbers I saw coming through on our
sales tax were slowly rising. I told my wife, if you want to
get in business, you better do it now, and now is 5 years
later, so we are happy.
The Chairman. There may be some second question rounds, I
think.
Mr. Westerman. Yes. We will give Members an opportunity
for a second round of questions. I will recognize myself for
the first 5 minutes.
We talked about this strike team and how it could be
beneficial in making the process move more quickly. The Federal
Government actually has a commercial real estate expert in
place right now. It is the General Services Administration, or
the GSA.
Ms. Simmons, does the Park Service reach out to GSA for
subject matter expertise?
Ms. Simmons. When we are leasing facilities, we actually
have leases within the Midwest region with GSA on several
structures, and those GSA leases, in turn, are leasing to
another individual.
Mr. Westerman. Have you considered adapting GSA job specs
or using their training curriculum for the Park Service?
Ms. Simmons. There are so many elements that are involved
with our leasing program with the uniqueness of the properties,
the ones that need improvements, the ones that do not need
improvements, on requirement to obtain fair market value rent,
if there are appraisals that are needed. We have not considered
that. If it is something that the Committee is interested in,
we will be more than happy to look into that.
Mr. Westerman. I know this has been talked about quite a
bit at this meeting today, and it is probably not the first
time you have heard about it, but what is the Park Service
doing to ensure that staff has the resources and training that
they need in this area or is it just something new that you are
starting to look into?
Ms. Simmons. No. Absolutely. We have developed training
for the leasing program and it is provided at our commercial
services for superintendents training. It is provided on an
annual basis. Personally speaking, from the Midwest region,
two-thirds of our superintendents have overturned in the last 3
years. When we have a new superintendent come into a park, they
come and spend time in the regional office with the program
leads. I take that opportunity when I see them with the
superintendent to let them know about the leasing program, the
opportunities that exist. They might not know at that time when
they come in if there are structures that would be applicable
for the leasing program, but it gives them a tool in their
toolbox for them to consider that when they get back to their
park. If they run into something, they know they can give us a
call and we can pursue that further.
Mr. Westerman. I have had the opportunity to see this
because I was born here in Hot Springs but, Mayor and Mr.
Kempkes, can you go back maybe 30 years and describe what the
town was like when the bathhouses were shuttered before there
was any real development on that side of Central Avenue?
Mr. McCabe. There wasn't a lot of reason to come downtown.
The Park Service side was basically closed for business, with
the exception of the Buckstaff, which was the one that was
continually operational. What we call the business side had
significant challenges because the mall was built toward the
edge of town. A lot of stores went down there. And they put a
green canopy to try to compete so you could walk underneath
without getting wet, and that was more of an eyesore than a
benefit. We really had some challenges.
Over time, we created a Main Street Hot Springs and other
endeavors, a central business improvement district that the
stores invested in, putting utilities underground, and things
started slowly coming back. So, the leasing program was great.
The city of Hot Springs introduced a thermal basin fire
district, which required owners within that footprint of the
district that had buildings that were three stories or higher
to implement a fire suppression system. That one thing made a
big difference because those building owners who didn't want to
pursue that sold it to people who had an idea.
Mr. Westerman. Bob, 30 seconds. Would you like to add
anything?
Mr. Kempkes. Sure. Thirty years ago, about 30 percent of
the Hot Springs Central Avenue storefronts were occupied, and
those businesses were not any that you could consider family
oriented. A group of local citizens realized the need for the
bathhouses to be improved. One of the first things they did,
and some of them are here today in the audience, and I
appreciate that, was they decided to remove the canopy that Pat
mentioned, which is a great thing because when you walked under
it, you couldn't tell where you were. You couldn't see the tops
of the buildings, so you didn't really know. Anyway, from
there, some investment went into the bathhouses through Senator
Bumpers at the time. He created some changes to tax laws that
helped Hot Springs.
And I did want to say this too, that at that same time, the
Park Service invested a lot of money in the Fordyce Bathhouse
Visitor Center. That investment in the Fordyce Bathhouse
Visitor Center enabled Mountain Valley Spring Company to take a
look at downtown and say, we are seeing this investment over
here. We should make an investment on the private side. So, at
the same time, the two groups opened for business. I believe
Fordyce opened in 1988. And Mountain Valley opened a brand-new
national headquarters in downtown Hot Springs, which included a
visitor center. That was a catalyst to a whole lot of
additional investment.
Mr. Westerman. I am going to have to cut you off because I
am out of time. I didn't get a chance to ask Mr. McCaskill
whether he thinks, when we look at the past, if the future is
looking bright, and I am pretty sure he would say it is looking
bright.
With that, I recognize the gentlewoman from American Samoa,
Mrs. Radewagen, for 5 minutes.
Mrs. Radewagen. Thank you, Mr. Chairman.
I have a question for Ms. Simmons. The Northeast Region of
the National Park Service has a high number of leases in place.
Has NPS implemented any Northeast Region practices service-wide
to promote the success of historic leasing?
Ms. Simmons. From the field perspective of the Midwest
region, I am not familiar if that has taken place. I will be
happy to get the answer and get back with you.
Mrs. Radewagen. Thank you.
Mr. Cassidy, just very briefly, Can you speak to why your
organization is in support of NPS expanding its Historic
Leasing Program?
Mr. Cassidy. Because it could work and because there is a
$12 billion maintenance backlog and because there are
facilities that are underutilized or abandoned that could, with
expertise, which is hard to ask a park to develop, to figure
out how to do a master lease if they have a lot of small
buildings. It is unfair to ask the park superintendent to be an
expert on that. It is unfair to think that an individual park
superintendent is going to have the confidence to cede control
through a lease of one of their properties for an extended
period of time. It has to come from leadership. And what has
happened in the Northeast Region is that you have innovative
superintendents, as was the case in Golden Gate, who have had
the courage to try something new, and now what they have in the
Northeast Region, they have a commercial real estate specialist
who can assist other parks in utilizing just common-sense
approaches to real estate. It is not inherent with most Park
Service people, who are some of the best people in the world,
and we are so lucky to have the National Park Service staff,
but we are speaking about a more specialized and different
knowledge industry.
Mrs. Radewagen. Thank you, Mr. Chairman, I yield back.
Mr. Westerman. The gentlewoman yields back.
I, again, recognize the gentleman from Arkansas, Mr. Hill,
for 5 minutes.
Mr. Hill. Thank you, friends, and we thank you again for
holding the hearing.
I am co-sponsor of H.R. 6510. I appreciate the Chairman and
your leadership on that work as well. We are doing a lot of
things, I think, in Congress right now that really speak to
this backlog.
Representative Dingell and Representative Fortenberry have
a significant issue that is similar for the conservation
agencies in the wildlife area, and I appreciate their work. I
just saw a text where my old friend, John Dingell, has had a
heart attack today, so I hope you will keep him in your prayers
this week, and his wife, now Congresswoman Dingell, our
colleague.
And another reason I am interested is, thanks to Chairman
Bishop and Mr. Westerman, we have expanded the footprint of
Little Rock Central High School this last year. We appreciate
the Chairman's work on that. And there we have added seven
historic houses on South Park Street there across from Central
High. This week is the 61st anniversary. Sixty-one years ago
today, all eyes were on Central High and the possibility of
integration there. So, this educates, I think, all Members of
Congress on how to do a better job on these public-private
partnerships with our National Park Service, but for me are
other natural resource agencies as well, so I am learning a lot
today.
I have successfully gotten the U.S. Forest Service to lease
the old Girl Scout Camp at Lake Sylvia in the Ouachita National
Forest to a private sector entity, and I would like to see more
of that. I am looking at how do we streamline this whole
process of getting unutilized assets into private hands.
On another financial topic, I note that the National Trust
in their 2013 report on the MDS leasing issue found that there
is a typical 10-year recalculation issue for rents built into
projects and that can cause, I would think, lessees to end up
paying twice, one for property appreciation and one for the
fact that they got this 10-year window on the lease term.
What was the rationale between 10 years? Does it have
anything to do with Federal budget rules or again, is that just
some National Park policy? And would you consider longer lease
terms if it fit the business use for the property?
Ms. Simmons. That is a very good question. The National
Park Service is required to obtain fair market value rent, so
that reconsideration clause is partially in there to assure
that the National Park Service is actually obtaining a fair
market value rent. That rent reconsideration can be as simple
as tracking the rent against the Consumer Price Index. And in
addition, that rent reconsideration may not only be on the side
of the National Park Service, it can also apply toward the
lessee, and the lessee could approach the National Park Service
about possibly adjusting the rent. So, it is in there and it
assures that both sides are taken care of.
Mr. Hill. Thank you.
Mr. Cassidy, do you want to respond to that or add some
commentary to it?
Mr. Cassidy. I am less informed on that than most things,
so I will go back to what the report said years ago.
The Chairman. Oh, I am sorry. Yes, Mr. Kempkes?
Mr. Kempkes. We do pay a CPI multiplier annually, so we do
have our rent adjusted that way. I think the other part of that
was the 10-year intervals in our lease gave the Park Service
the right to review our books, for instance, and determine if
our rent payments were still fair, if the business was
successful, not successful, that kind of thing. It just gave
them an opportunity, as she mentioned, a sure fair market rent.
Mr. Hill. So, from your point of view as a user, you
didn't view that per se as a burden?
Mr. Kempkes. No, not at all.
Mr. Hill. Thank you for that.
Chairman, I yield back.
Mr. Westerman. The gentleman yields back.
I now recognize the gentleman from Utah, Mr. Bishop, for 5
minutes.
The Chairman. As we go through this, we are just
scratching the surface of this entire possibility here, so I
think what we are going to have to do is talk about some other
ways of looking at this in the long term. The essential
question is 10 years inhibiting in the ability of getting these
things started or not.
Ms. Simmons, you talked about deciding between
concessionaires and leasing, that sometimes you have to take
them on a case-by-case basis deciding what is necessary and
appropriate. Even those terms, ``necessary'' and
``appropriate,'' are problematic because that is a gray area
and it becomes problematic because we are dealing with a
national program. And the issue is, if we come up with tight
guidelines for these areas, does that then tie our hands so we
are not actually solving problems?
I think one of the things I would like this panel and us to
think about is maybe some kind of a rewards program that we
could institute that would allow the land manager at some park
and/or monument entity to get a bonus or reward for innovating
some of these proposals so that you are not just going out and
putting your neck on the line. But if you actually try
something and it becomes successful, maybe there is a process
that we can give some kind of bonuses toward maintenance
backlog or something else that would encourage the local land
managers to become involved in trying to be much more flexible
in this without having to worry about getting their head handed
to them at the same approach to it. It would also mean that
what I am hoping for is to invite some local entities to be
more of a voice and advise land managers, park managers on what
they should be doing in that particular area and somewhat
providing that kind of flexibility.
You also mentioned--and I am running out of time here, I
apologize--impediments to people applying and getting the
historic tax credit. There are some barriers to that. I would
like to look at that specifically on how we can try to minimize
those type of barriers. We are talking here about having a
leasing process, and all of you said it is a wonderful idea,
but it takes time that is counterproductive. How then do we
actually come up with a program that incentivizes the
shortening of that time period so we can actually get these
things up and running faster without having to come back with
the national guidelines that tie our hands into the creativity
in the future? It is part of the process of having a national
system that needs to be fair with everybody, but at the same
time make it creative enough so you can be flexible to meet
needs of people.
And that is not just with the Park Service. That is a
problem with every Federal program that we run, but what we
need to do is now see that this is a good program. We need to
work on leases. It needs to be approved. How can we actually
eliminate some of those barriers and try to make more
flexibility in the system to get this accomplished, to get
everything up and running?
I am not going to ask a specific question here because as
Chairman, I like to hear my voice. That was a joke by the way.
Mr. Westerman. We all like to hear your voice.
The Chairman. Yeah, yeah, yeah. What I am saying is there
is a great potential here that needs to be expanded, and I need
to have all of you help us to come back with some specifics on
how we can actually go forth to bring more flexibility to this
program without damaging the underlying principle that is
there. And I, too, want to thank you all for being here.
I have like 1 minute left. Let me do this. Mayor, thank you
for allowing us to use your facilities here, your hospitality
in inviting us down here. I appreciate that. I appreciate all
of you.
To the witnesses, thank you for actually coming and
spending your time with us. And to Congressman Westerman, thank
you for encouraging us to come down here into your hometown,
into your district, and for helping to put this thing together.
I appreciate all of that. On behalf of the Committee, thank you
so very much. I am done.
Mr. Westerman. Thank you, Chairman. And you are always
welcome in Hot Springs, as well as all of my fellow Members of
Congress. And I do believe we have a good story here to tell
that can be beneficial for all across the country.
Again, I would like to thank all the witnesses for your
valuable testimony and thank my colleagues for your questions.
Also, for the record, I would like to submit a letter from
Ms. Rose Schweikhart, who is the owner of Superior Bathhouse
Brewery.
Without objection, I would also like to submit a letter
from Senator Boozman, without objection; a letter from Mr. Bill
Burrough, without objection; a letter from the National Park
Service to Senator Murkowski, without objection; and also an
Op-Ed by Gary Troutman from here in Hot Springs, without
objection. I will submit all those for the record.
Members of the Committee may have some additional questions
for the witnesses and we will ask you to respond to these in
writing. Under Committee Rule 3(o), members of the Committee
must submit witness questions within 3 business days following
the hearing by 5 p.m., and the hearing record will be held open
for 10 business days for these responses.
And one other item of business. We are going to take a tour
of Bathhouse Row, and we invite members of the audience to go
along with us to see Bathhouse Row. We will do that as soon as
we wrap up here, and the Park Service will lead that tour.
If there is no further business, without objection, the
Committee stands adjourned. Thank you.
[Whereupon, the Committee was adjourned.]
[ADDITIONAL MATERIALS SUBMITTED FOR THE RECORD]
Rep. Bishop Submission
Written Testimony of The Pew Charitable Trusts
Chairman Bishop, Ranking Member Grijalva, Representative Westerman,
and members of the Committee, thank you for the opportunity to submit
written testimony today on historic leasing and deferred maintenance
within our national parks sites.
The Pew Charitable Trusts' Restore America's Parks campaign seeks
to conserve the natural and cultural assets of the National Park System
by providing common-sense, long-term solutions to the $11.6 billion
deferred maintenance challenge facing the National Park Service (NPS).
National parks often have the same infrastructure as a city or
town, and as a result face the same deterioration and maintenance
needs. In total, the agency is responsible for protecting and managing
over 75,000 assets, while also ensuring that visitors can safely access
and enjoy these resources. NPS assets are tangible properties that
serve a specific park function and can include: roads and bridges,
trails, historic buildings, employee housing, wastewater and electrical
systems, military fortifications, monuments and memorials, and
seawalls. Maintenance is required at regular intervals to ensure
acceptable park facility conditions; when this maintenance is delayed
for more than a year, it's considered to be ``deferred.''
Over 47 percent of assets on NPS' deferred maintenance list are
considered historic. As such, Pew supports and encourages the increased
use of historic leasing as an important tool to address deferred
maintenance challenges facing the NPS. Leasing of historic properties--
there are an estimated 9,000 within the National Park System--is a type
of public-private partnership that helps restore these properties, save
NPS money, and provide revenue-producing businesses in communities.
Examples of historic leasing and public-private partnerships being
leveraged to address deferred maintenance. include:
Hot Springs National Park. In Hot Springs, Arkansas, natural
springs have supplied water for therapeutic baths since the 1800s. The
eight historic bathhouses contained within Bathhouse Row were
constructed between 1892 and 1923; by the 1960s, however, their
popularity declined and bathhouses began to close. In 2004, the NPS
began significant efforts to renovate these historic sites so they
could be enjoyed by the public once again. Of the original eight
bathhouses, the agency helped restore five that are currently used by
NPS or other tenants. Historic leasing, including the historic tax
credit, were essential to financing the renovations, and current uses
include spas, museums, and a brewery and distillery that crafts beer
from the hot springs.
Martin Luther King National Historic Park. NPS funds the
maintenance for federally-owned houses within the park unit with
revenue generated through leasing 29 of the historic buildings as
private residences. These structures include apartments, duplexes and
single-family homes and the leasing program has proven to be very
popular.
Valley Forge National Historical Park. This park site houses a
Montessori school that reached an agreement with the park to pay for
needed repairs to preserve the 3.5-acre Ivy Hollow Farm site in
exchange for a long-term lease that would allow the school to meet
there. The mutually beneficial agreement resulted in the restoration of
the 19th century farm and a vacant barn with years of deferred
maintenance; today, the buildings contain a library and parent meeting
room, and a six-classroom school that is provides an idyllic setting
for its students.
Pew is pleased that the Committee recognizes historic leasing and
its role in addressing the deferred maintenance backlog. We encourage
Congress and the National Park Service to expand opportunities for the
agency and private entities to use this important tool.
______
Rep. Westerman Submissions
United States Senate,
Washington, DC
September 12, 2018
Hon. Rob Bishop, Chairman,
House Committee on Natural Resources,
U.S. House of Representatives,
1324 Longworth House Office Building,
Washington, DC 20515.
Dear Chairman Bishop:
While regrettably unable to attend due to votes in the Senate, I am
glad to hear of the House Committee on Natural Resources' field hearing
in Hot Springs National Park. It is a brilliant idea from my colleague
and friend, Congressman Bruce Westerman, and I commend you for taking
the time to explore the park and illuminate the way the National Park
Service, in partnership with our local officials, have revived the
attraction with creative ideas and the National Park Service's Historic
Preservation Program. As we both know, the National Park Service's
resources are stretched thin and it's imperative that we identify
innovative ways to preserve these national treasures.
I hope that you enjoy your time in Arkansas and find several
examples you can take back. Again, I appreciate the Committee's visit
and the interest in Arkansas' public lands, especially Congressman
Westerman for shedding a public light on the good things happening in
Hot Springs. I'm certain you will understand why Bruce and I are so
proud.
As always, thanks for your friendship and leadership in these
important matters.
Sincerely,
John Boozman,
U.S. Senator.
______
City of Hot Springs,
Hot Springs National Park, Arkansas
September 17, 2018
Hon. Rob Bishop, Chairman,
House Committee on Natural Resources,
1324 Longworth House Office Building,
Washington, DC 20515.
Dear Chairman Bishop:
The City of Hot Springs welcomes you, as warmly as our natural
springs, to our city. We would like to thank you and the House Natural
Resources Committee for visiting Hot Springs National Park.
Since President Andrew Jackson protected our hot springs and the
areas around it in 1832 as the Hot Springs Reservation to the formal
recognition of Hot Springs National Park in 1921, our area has grown in
partnership with federal support. Today, the area continues to attracts
visitors from all over the United States.
Through the persistence of private business leaders and in
partnership with local, state and national agencies, this area is on
track to remain an important natural and economic resource. Last year,
the park attracted nearly 1.6 million visitors, roughly an 18 percent
increase from the previous year.
New businesses, including local hotels, restaurants and breweries,
are thriving from the benefit of this federally-protected resource.
Government protections, afforded by the natural partnership between
federal and local, will sustain private sector growth in our city for
generations to come. In short, we exist but for one another.
As a city, Hot Springs is investing in this area through the
improvement of Northwoods Urban Forest Park. Building upon the existing
natural beauty, we are providing infrastructure that will grow our
ecotourism economy. By making the area accessible to all who enjoy the
outdoors--hikers, sightseers, and mountain bikers included--the City of
Hot Springs is confident that continued public and private investment
will complement each other, creating a multiplying effect on our
economy.
Sincerely,
Bill Burrough,
Interim City Manager.
______
United States Department of the Interior,
OFFICE OF THE SECRETARY,
Washington, DC
March 29, 2018
The Honorable Lisa Murkowski,
Chairman, Subcommittee on Interior, Environment, and Related Agencies,
Committee on Appropriations,
U.S. Senate,
Washington, DC 20510.
Dear Chairman Murkowski:
This letter is in response to the Subcommittee's request to provide
a report on the National Park Service's use of leasing authority for
historic structures. Language contained in House Report 114-632
accompanying the Department of the Interior, Environment and Related
Agencies Appropriation Bill, 2017 (H.R. 5538) is included in the Joint
Explanatory Statement that accompanied the Consolidated Appropriations
Act, 2017. The language from House Report 114-632 is as follows:
Leasing of Historic Buildings.--Leasing of historic park
buildings has proven to be an effective public-private
partnership that has brought private investment to the repair
and maintenance of historic park resources. In previous
Committee reports, the Committee has encouraged the Service to
make expanded use of leasing authority. The Committee commends
the Service for recent steps it has taken to increase the
utilization of this tool, including establishing a leasing
manager to oversee and expand the historic leasing program. The
Committee renews its previous request that directs the Service
to provide a report, within six months of enactment of this
Act, detailing its progress toward expanding use of this
authority. Included in this report should be (1) a list of
structures the Service considers high-priority candidates for
leasing, (2) a list of structures currently under a lease
arrangement, (3) an estimate of the number of leases that have
enabled private sector investments using the Service-
administered historic tax credit, and (4) any statutory or
regulatory impediments that now inhibit the enhanced use of
leasing of historic structures.
The National Park Service (NPS) has authority to lease historic and
other buildings and associated property under the National Historic
Preservation Act and the National Park Omnibus Management Act of 1998.
The NPS continues to make progress toward increasing the number of
public-private partnerships through leasing. In the last 18 months the
NPS has executed a master residential lease at First State National
Monument; a lease with Navajo Nation Hospitality Enterprises, a wholly
owned subsidiary of the Navajo Nation, at Canyon De Chelly National
Monument; and executed an Inter-Agency Agreement with the United States
Forest Service to lease two buildings at Fort Vancouver National
Historic Site.
In addition, the NPS is currently preparing to enter into
negotiations with a potential lessee for the Riis Beach Bathhouse at
Gateway National Recreation Area; is working on an agreement with the
Bureau of Indian Affairs to occupy one of the buildings at Fort
Vancouver National Historic Site; and recently issued a request for
proposal for the Maurice bathhouse at Hot Springs National Park. The
leasing program staff is also continuing to develop formal training for
NPS staff to expand capacity across the NPS to initiate and manage
park-level leasing programs. As part of that effort, the NPS has
integrated a leasing section into the annual Commercial Services
Training for Superintendents curriculum.
House Report 114-632 requested that the following information be
included as part of this report:
A list of structures that the Service considers high-
priority candidates for leasing
See enclosed list. The NPS prioritizes eligible properties for
leasing based on knowledge that park staff have regarding
local market demand for facilities, along with direction
from the service-wide leasing program office. The enclosed
list reflects those properties for which parks and regions
are actively working on leasing. The list contains
properties under a range of situations, including those for
which the NPS expects to issue a Request for Proposal
within the next two years, those for which a Request for
Proposal received no responses, and those that were under
life tenancy and have recently transferred to NPS control.
A list of structures currently under a lease arrangement
See enclosed list, which includes properties reported by parks
through regional leasing and concession staff. This
information has been checked against the NPS facility
management database.
An estimate of the number of leases that have enabled
private sector investments using the Service-administered
historic tax
While the NPS does not include language in its leases that would
prevent a lessee from taking advantage of the historic
preservation tax credit, there are requirements for
obtaining historic preservation certification from the
National Park Service and the State Historic Preservation
Office, as well as Internal Revenue Service regulations
governing the tax credits for rehabilitation that must be
met before the tax credit can be utilized by the lessee.
The NPS is currently aware of three lessees that have taken
advantage of the benefits offered by this program: Cavallo
Point Lodge at Fort Baker, the Argonaut Hotel in Golden
Gate National Recreation Area, and the Quapaw Bathhouse at
Hot Springs National Park. It is possible that other
lessees have used the historic tax program previously, but
NPS records do not cover a number of the early years of the
tax-credit program.
Are there any statutory or regulatory impediments that now
inhibit the enhanced use of leasing of historic structures?
The NPS has authority to enter into a lease with any ``. . .
person or government entity . . .'' (54 U.S.C.
Sec. 102102(a)). Other agencies, with some exceptions,
generally do not have such authority, which is instead
vested with the General Services Administration (GSA) (40
U.S.C. Sec. 585). Therefore, other federal agencies are
often reluctant to execute agreements with the NPS to
occupy facilities that are administered by the NPS without
going through the General Services Administration. So,
while the NPS is authorized to lease structures to any
governmental entity, other agencies do not have clear,
specific authority to enter into a lease with the NPS
without going through GSA. However, under the Service First
authority (43 U.S.C. Sec. 1703), the NPS can enter into
leases with other agencies within the Department of the
Interior and the Department of Agriculture, without
consultation of GSA.
In general, market conditions and demand pose the greatest
challenge to expanding the current leasing program.
Investors are often more interested in purchasing outright
`fee title' property, rather than investing in the
rehabilitation of a property that is owned by, and
possession of which will eventually be returned to, the
federal government. Also, the lease opportunities available
within parks may not provide a viable business opportunity
given the higher costs associated with the restoration or
rehabilitation of the structures compared to the relatively
low rents available in local areas, many of which are rural
and sparsely populated. In more urban areas, there appears
to be a greater demand from the public to lease facilities
in parks for residential use, office space, or other
commercial activity.
Additionally, NPS has limited resources available to conduct the
up-front planning necessary to determine fair market value
rent, and to develop the required Request for Proposal to
lease historic facilities. Without such work, the NPS
cannot accurately gauge the level of private sector
interest in its properties.
The NPS greatly appreciates the Committee's support throughout the
appropriations process and looks forward to collaborating to find
creative ways to utilize public-private partnerships to help preserve
and maintain historic assets for future generations to use and enjoy.
A similar letter has been sent to the Honorable Tom Udall, Ranking
Minority Member, Subcommittee on Interior, Environment, and Related
Agencies, Committee on Appropriations, U.S. Senate; the Honorable Ken
Calvert, Chairman, Subcommittee on Interior, Environment, and Related
Agencies, Committee on Appropriations, House of Representatives; and
the Honorable Betty McCollum, Ranking Minority Member, Subcommittee on
Interior, Environment, and Related Agencies, Committee on
Appropriations, House of Representatives.
Sincerely,
Olivia B. Ferriter,
Deputy Assistant Secretary,
Budget, Finance, Performance, and Acquisition.
______
Hot Springs: A wonderful story to tell
by Gary Troutman
Guest columnist
Hot Springs Sentinel Record
September 16, 2018
Locals and tourists alike know the heart and soul of Hot Springs is
Bathhouse Row. Looking down Central Avenue today, the heart of Hot
Springs beats strong. But as many know, this has not always been the
case.
As generations passed, use of the bath houses dwindled and the once-
majestic properties were forced to close. Gone were the days of the
rich and famous, the days of the sick seeking healing in Hot Springs'
thermal waters. Bathhouse Row had gone from a hub of activity to a line
of boarded up windows, sucking jobs and tourism in Hot Springs down the
drain.
What Bathhouse Row needed was a new vision. The problem, however, was
twofold. For one, when the Quapaw, Superior and the others closed, they
became property of the National Park Service. The federal government
simply lacked the authority or the dollars to radically change the
direction of the deterioration. Compounding that problem as the
condition of the bath houses worsened, the cost to restore them
continued to rise. Without private investment and public support, the
situation looked dire for both Bathhouse Row and Hot Springs as a
whole.
Thus, an innovative idea was hatched--instead of letting the buildings
fall into further disrepair, the Park Service decided to lease the bath
houses to private businesses. Entrepreneurial owners were handed the
keys to these historic structures, under the condition that they
restore the bath houses to their former glory. It took several years to
see the plans come to life, but the gamble worked. Businesses from a
brewery to a boutique hotel currently under construction occupy these
formerly empty structures, and downtown is now thriving.
The result of Hot Springs National Park partnering with private
business resulted in investment and growth. First, it has allowed the
park to reduce its deferred maintenance backlog. With private business
restoring the bath houses, it has saved the federal government and the
American taxpayer millions of dollars in building repairs. Hot Springs
National Park still has a deferred maintenance backlog of more than $12
million, but it would be much higher without the leasing program that
has brought these buildings back to life.
Beyond addressing the park's maintenance backlog, these new businesses
occupy prime real estate downtown and have become active members in Hot
Springs business community. The owners of these businesses are leaders,
investing their hard-earned money in a city and a national park many
had written off for dead.
The fire that destroyed the Majestic Hotel in 2014 created much doubt
about downtown's ability to survive. But the work that had already gone
into redevelopment of Bathhouse Row in the years before and continued
efforts by the Greater Hot Springs Chamber, Metro Partnership, Hot
Springs National Park Rotary Club and downtown business owners allowed
downtown to thrive with more than 100 new businesses opening since
February 2014 and more than $80 million invested downtown. Tourism has
increased, too, with 1,561,616 travelers visiting Hot Springs National
Park in 2017 compared with 1,325,719 in 2013, an increase of nearly 18
percent, or 235,897 people, in just five short years.
Investment in the historic bath houses along Central Avenue is an
example which can be followed by national parks throughout the country.
Whether an urban park like Hot Springs or a park in a more remote
locale, partnering with private industry can bring new life to these
parks and the communities which surround them.
That is why I am excited for the House Committee on Natural Resources
to visit Hot Springs on Monday (Sept. 17). Our city and its national
park have a wonderful story to tell and can be an example for the
country. Congressman Bruce Westerman, a Hot Springs native and a member
of the Natural Resources Committee, knows this. His efforts to bring a
field hearing to the city are appreciated, as we share our story with
America and inspire investment--both public and private--in our
country's national parks.
***
Gary Troutman is the president and CEO of the Greater Hot Springs
Chamber of Commerce and Metro Partnership. He previously served as vice
president of First Security Bank in Hot Springs and general manager of
The Sentinel-Record.
______
September 15, 2018
Congressman Westerman,
My name is Rose Schweikhart, and I am the sole owner and decision
maker of my company, Superior Bathhouse Brewery. I hold a 55 year lease
with the National Park Service to operate my business inside Hot
Springs National Park. I am very proud to be the only brewery in a
National Park and the only brewery in the world to make beer (and root
beer!) with thermal spring water.
I have been asked to write about my experience with the National
Park's leasing program. I want to take this opportunity to briefly and
succinctly share both pros and cons to the process from my unique and
relevant perspective as a park partner.
First the positives. I have been in business for 5 years. The
business was profitable almost immediately with sustained growth year
after year. In year 3, I was ahead of the 10-year projections in the
business plan. I attribute this success to the visibility of my
historic location for which I am very thankful. While the two year
negotiation process was somewhat arduous, it was worth it in the end. I
was able to take a simple business idea (brew beer commercially with
Hot Springs' famous thermal water) and make it happen. The fact that a
pathway existed to propose an idea, negotiate a contract, and turn it
into reality is a shining example of functional public-private
partnership and I am thankful for the officials that made that pathway
possible.
I believe my relationship with the National Park Service is truly a
win-win situation for both parties. I get to operate a profitable
business with a great story in exchange for assuming the financial
burden of a large historic building. I estimate that I am saving the
Park about $100,000-$150,000 per year between utility bills,
maintenance and repair, flood and building insurance, and of course my
monthly rent.
Of course as with any complex business relationship, there have
been difficulties. I wish to take this opportunity to highlight a few
of those difficulties, with the intention of creating an open dialogue
with the goal of improving the process for all parties involved. I
would like to address two contractual obligations from my lease which
could be improved from a small business perspective.
My lease requires me to maintain a maintenance fund of 2% of my
gross sales. ``The funds in the Maintenance Reserve Account shall be
used to carry out, on a project basis, repair and maintenance needs of
the Premises that are non-recurring within a seven-year time frame.'' I
am 100% behind the purpose of the Maintenance fund and I diligently
comply with this requirement. In 2017, the building's main HVAC system
installed by the Park in 2007 needed a total replacement to the tune of
$45,000 across two projects and I was thankful to have the money
available for that project. The negative to this arrangement from a
business perspective is the impact of the maintenance reserve on my
cash-flow. As a small business, I would rather use 2% of my gross
receipts building my business. I could hire additional employees,
purchase inventory or equipment, or pay down debt. My proposal to the
National Park Service is that I be allowed to maintain a maintenance
fund in the form of a revolving line of credit from a local bank. What
is the difference to the National Park Service if I have $45,000
sitting in a bank account or $45,000 in available credit? I would be
happy to pay any interest incurred in drawing upon that line of credit
in exchange for having additional cash available for growing my
business on a day to day basis.
The second issue I would like to mention is the insurance
requirement placed upon me by the lease which is, in my opinion,
excessive. I am required to carry property insurance in the amount of
``the full insurable value of the Premises. All such policies shall
specify that proceeds shall be payable whether or not any damaged or
destroyed improvements are actually rebuilt.'' As you can imagine, a
9,000 sq foot historic brick, plaster, and marble building is literally
priceless. In the event of a building loss, the lease gives the
National Park Service the authority to terminate the lease and collect
the insurance proceeds as `additional rent' or 2) require me to rebuild
the premises. While we can all agree that the loss of the historic
Superior Bathhouse would be a tragedy, can we also agree that it is
irreplaceable? Modern materials, construction methods, and building
codes would make it impossible to recreate this historic structure ``to
the condition that existed prior to the damage or destruction;'' If
such tragedy occurred, it is unlikely that the Park Service would want
a modern structure built on Bathhouse Row. In my first years of
business that coverage cost me an astronomical $13,500 per year! It has
subsequently dropped as I was able to switch to an insurer that handles
business who have been open for 5 or more years but it is still almost
$5,000/year. Does the committee find it reasonable that I should be
required to carry such coverage for 55 years if the lessor has the sole
authority to terminate the lease, and collect the proceeds of such
policy when it is unlikely that the building would ever be rebuilt? My
suggestion is that we find a reasonable ceiling for that property
insurance that could be used in case of a partial loss but that full
coverage is against the interests of the park partner's small business.
Perhaps that ceiling could be the cost of my rent for the remainder of
the lease contract.
If the National Park Service would consider changes to these
policies, it would make long term leases more attractive to future
tenants who may see these expenses as deal breakers. I hope that if any
of my suggestions are considered , that the National Park Service would
consider making these modifications in good faith to my existing lease
so that my company may benefit from them in the future.
Thank you for the opportunity to submit my written testimony.
Sincerely,
Rose Schweikhart,
Owner of Superior Bathhouse Brewery,
Hot Springs National Park, Arkansas.