Federal 'white elephant' goes up Costly offices add to glut

February 13, 1992|By Frank Greve | Frank Greve,Knight-Ridder News Service

WASHINGTON -- The United States' costliest federal building is just poking its reinforcing rods out of a sandy site three blocks southeast of the White House, and already even proponents are dumping on it.

"It's probably the biggest boondoggle to come down the pike in a long time," the building's landlord, Richard Austin, chief of the U.S. General Services Administration, told the House Public Works subcommittee recently.

That's the same Richard Austin who signed the $2.4 billion, 30-year lease-purchase deal making the building inevitable.

"I don't think it got any scrutiny anywhere along the line," former California congressman Douglas Bosco said in an interview last week.

Mr. Bosco should know. He chaired the House Public Buildings subcommittee that watched construction costs double to more than $750 million -- not counting donated federal land worth an estimated $300 million -- for what he now calls "a white elephant."

By 1996, the money is meant to provide downtown Washington with an L-shaped behemoth whose half-mile perimeter frames more than 1.3 million square feet of offices, more than any federal building except the Pentagon.

That hardly comes as manna to a city currently glutted with 13 million square feet of unrented office space. Moreover, to recoup the Federal Triangle Building's staggering construction costs, Mr. Austin intends to charge federal tenants more than $52 a square foot, morethan any existing office rates in Washington.

Some optimistic real estate experts think those rents might prove competitive by opening day in 1996. Most are skeptical, theorizing that the government could save tens to hundreds of millions by moving, now, into available bargain-priced office space.

The lease-purchase deal in effect asks taxpayers to repay the building's construction costs over 30 years, much like a mortgage, adding tens of millions of dollars in interest charges, federal auditors said.

"Of all the things the federal government has done, I suppose this is the craziest," Larry Silverstein, a New York developer, told a reporter when his consortium's offer to build the project -- the third-highest of seven bids -- was picked 27 months ago.

That Mr. Austin, Mr. Bosco, and others now find themselves captured by an extravagant development scheme they deeply mistrust is a tribute to the shrewdness of the capital's local business leaders and to the determination of Mr. Bosco's counterpart in the Senate, Daniel Patrick Moynihan, D-N.Y., the project's chief proponent.

Less worthy of tribute is the building's history of double-crosses, bait-and-switch planning and design, and fancifully optimistic cost estimates.

You might have thought President Bush's anti-deficit police would have blocked construction. Quite the contrary.

Office of Management and Budget auditors cracked down on lease-purchase construction two years ago, but the Triangle Building was a fait accompli by then. So, by feats of what the project's construction overseer, M. J. Brodie, calls "shell game" accounting, the Office of Management and Budget auditors agreed in 1990 to bury its construction costs in the 1987 budget deficit.

In the 1993 administration budget now before Congress, the building appears as a $250 million net savings to taxpayers. That reflects the Environmental Protection Agency's decision to stop planning for new office construction and move into the Triangle Building instead.

When the building was first proposed in 1987, office space was scarce in Washington and a go-go GSA administrator with development experience, Terry Golden, figured he could build an office building, pay for it through a 30-year lease-purchase contract and save money compared to what leasing privately owned office space was costing him.

All that was wrong with Mr. Golden's idea were the numbers. He projected building costs of $362 million recoverable at rents averaging $27 a square foot.

To make his idea fly, Mr. Golden joined forces with Washington's elite Federal City Council, a powerful alliance of local business leaders. They had dreamed for years of an international trade center in downtown Washington, coupled with cultural attractions to enliven the city at night.

Together they sought blessing for a combined culture and trade center and office building from Mr. Moynihan, chairman of the Public Works subcommittee overseeing federal construction.

To assure that aesthetics would dominate financial concerns, Mr. Moynihan took the design selection and construction oversight out of the hands of GSA and gave it to the quasi-governmental Pennsylvania Avenue Development Corporation.

The development corporation picked an expensive grand design offered by the distinguished international architectural firm of Pei Cobb Freed & Partners of New York in October 1989.

Pei Cobb priced the building at $656 million, not counting $128 million in construction financing. The GSA, which was footing the bill, objected unavailingly.

Tenant problems also erupted. The International Cultural and Trade Center, allotted 500,000 square feet of theater, exhibition, retail and reception space in the building, balked at sharing quarters with the Justice Department.

Out the window went Mr. Golden's plan to save hundreds of millions by consolidating the Justice Department in the Federal Triangle Building, rather than in dozens of leased offices. The U.S. Information Agency was wooed and won to replace the Justice Department, though it had voiced no need for consolidation or additional space.

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