Norton, U.S. House of Representatives
Congress of the United States
House of Representatives
Washington, D.C. 20515
JANUARY 30, 1998
    Thank you Mr. Corzine and Ms. Brown for arranging this hearing to give members of Congress, an opportunity to participate in this important dialogue about capital budgeting.

    I am with you today not just as a proponent of capital budgeting theory, or even from the traditional American format of state and city government experience, but rather as the representative of the American city which has the greatest bank of Federal property. Federal assets are spread across the District of Columbia, housing federal agencies which represent the broadest array of government activities.

    I believe that earlier today my colleagues, Mr. Oberstar and Mr. Wise, emphasized the differences between funds expended for the operations of the government and funds spent on acquiring assets with future benefits. Here in the Nation's Capital the federal government carries on activities that encompass both types of expenses -- operating expenses and expenses associated with assets with long term benefits. However, examples of federal spending on projects with long term benefits are scarce here, and in virtually every large American city.

    During 1997 the federal government spent approximately $1.04 billion dollars in rental payments in the National Capital Region. It is projected that the figure will be $1.14 billion during fiscal year 1998. These funds indicate the impact the government has on only one segment of the city's economy -- the real estate market.

    Just a one mile from the Capitol is a federally owned parcel of land known as the Southeast Federal Center. It is a site of approximately 55 acres along the Anacostia River. Developers have indicated that they consider this site one of the most valuable undeveloped sites along the East Coast. Since I was elected to Congress in 1990 1 have been trying to get federal funds to develop this valuable parcel so that federal agencies could occupy federally owned facilities on federal land and thereby reduce the government's huge rental bill. Congress understands the necessity of the waste in not moving forward. Congress has authorized the full amount to develop the Southwest Federal Center. However, because of the current budget requirements regarding scoring, this unique coast line site remains undeveloped and is actually costing the federal taxpayer money through loss of revenue plus rent paid on alternative sites to private landlords. This city has many examples of pent-up federal infrastructure requirements. I urge you to use the District as a case study in federal government budget practices. Such an investigation, would indicate the need to reform those practices if we are serious about budgeting beyond the enforcement of a single piece of legislation, the Balanced Budget Act.

    Capital budgeting is not a new or unique idea. It is a very old, even traditional practice. It is used by almost every state and large city. The Port Authority of New York is but one significant example of knitting a city together by financing a capital program through the sale of bonds. Although we in Congress cherish and nurture the notion of "federal" uniqueness, financing is one area in which the federal government should trade its uniqueness for the financial successes of the private sector, and states and local government and adopt their financing practices.

    The Federal government is wasting its unique and enviable credit rating. We are not leveraging cash flow to leverage buying power, yet. If there is only one certainly here in the Congress, it is that the appropriations bills will be passed and that, as a result, federal funds will flow into the economy. Making the most effective use of that cash flow should be at the core of capital budgeting discussions. Using money over time to fund projects with future benefits is the accepted marketplace strategy for businesses and homeowners alike. This country's global market position no longer allows our government to continue to be a wasteful anomaly.

    The landmark Balanced Budget Act of 1997 provides the optimum opportunity to begin to reflect the capital aspects of federal budgeting. Now is the time to organize the budget around fresh ideas that are consistent with an investment rather than an operating approach to investments.

President's Commission to Study Capital Budgeting

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