A-53339, JULY 30, 1934, 14 COMP. GEN. 83

A-53339: Jul 30, 1934

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RENTAL PAYMENTS WILL BE APPROVED IN THE FULL AMOUNT STIPULATED UNDER LEASE TCC-954. WHICH WAS RENT FREE. IT WAS HELD THAT RENTAL PAYMENTS UNDER SAID LEASE WOULD NOT BE AUTHORIZED IN EXCESS OF THE PER ANNUM RATE OF $6. SUBSEQUENTLY LEASE TCC 954 WAS SUPERSEDED BY LEASE TCC-966. SAID DECISION WAS AFFIRMED BY DECISION TO YOU OF APRIL 20. WHILE THE BUILDING OCCUPIED UNDER THE LEASE IS LOCATED ON LOT 87. SINCE LOT NO. 18 IS NOT COVERED BY EITHER LEASE AND THERE IS NOTHING IN SAID LEASES GIVING THE GOVERNMENT THE RIGHT TO USE LOT 18 OR GUARANTEEING SUCH USE TO THE GOVERNMENT. EVIDENCE OF THE FAIR MARKET VALUE OF SAID LOT WAS NOT CONSIDERED IN THE DECISION OF FEBRUARY 8. THAT IT WAS THEIR UNDERSTANDING AT THE TIME THE LEASES WERE EXECUTED THAT THE LEASES COVERED BOTH LOTS.

A-53339, JULY 30, 1934, 14 COMP. GEN. 83

LEASES - RENTAL - FAIR MARKET VALUE WHERE THE LESSOR OF PREMISES IN THE DISTRICT OF COLUMBIA HAS APPEALED FROM PROPERTY-TAX ASSESSMENTS AS BEING EXCESSIVE WHEN BASED ON "THE FULL AND TRUE VALUE THEREOF IN LAWFUL MONEY" DETERMINED BY THE ASSESSOR OF TAXES AS REQUIRED BY STATUTE, THE LESSOR MAY NOT THEREAFTER SUCCESSFULLY ASSERT A VALUATION IN EXCESS OF THE ASSESSED VALUATION IN ORDER TO SHOW THAT THE RENTAL STIPULATED UNDER THE LEASE DOES NOT EXCEED THE RESTRICTION IN SECTION 322 OF THE ECONOMY ACT OF JUNE 30, 1932 (47 STAT. 412).

COMPTROLLER GENERAL MCCARL TO THE SECRETARY OF THE TREASURY, JULY 30, 1934:

THERE HAS BEEN RECEIVED YOUR LETTER OF JULY 16, 1934, WITH ENCLOSURES, REQUESTING TO BE ADVISED WHETHER, IN VIEW OF THE EVIDENCE NOW SUBMITTED, RENTAL PAYMENTS WILL BE APPROVED IN THE FULL AMOUNT STIPULATED UNDER LEASE TCC-954, DATED NOVEMBER 23, 1933, BETWEEN THE TREASURY DEPARTMENT AND W. H. WALKER AND O. H. P. JOHNSON FOR THE PREMISES AT 119 D STREET NE. FOR THE TERM BEGINNING DECEMBER 27, 1933, AND ENDING FEBRUARY 27, 1934, AT AN ANNUAL RENTAL OF $7,500 FOR EACH FLOOR EXCEPT THE FIRST FLOOR, WHICH WAS RENT FREE. IN DECISION OF THIS OFFICE, FEBRUARY 8, 1934, INVOLVING LEASE TCC-954, IT WAS HELD THAT RENTAL PAYMENTS UNDER SAID LEASE WOULD NOT BE AUTHORIZED IN EXCESS OF THE PER ANNUM RATE OF $6,335.40 FOR EACH FLOOR, OR $38,012.40 PER ANNUM FOR THE ENTIRE BUILDING. SUBSEQUENTLY LEASE TCC 954 WAS SUPERSEDED BY LEASE TCC-966, DATED DECEMBER 27, 1933, COVERING THE TERM BEGINNING DECEMBER 27, 1933, AND ENDING JUNE 30, 1934, AT AN ANNUAL RENTAL OF $45,000. BY LETTER DATED FEBRUARY 16, 1934, W. H. WALKER PROTESTED THE DECISION OF FEBRUARY 8, 1934, CONTENDING THAT THE VALUE OF THE LEASED PREMISES, INCLUDING LOT 18, AMOUNTED TO $525,135.32. HOWEVER, SAID DECISION WAS AFFIRMED BY DECISION TO YOU OF APRIL 20, 1934.

WHILE THE BUILDING OCCUPIED UNDER THE LEASE IS LOCATED ON LOT 87, SQUARE 724, IT HAS BEEN CONTENDED BY THE LESSORS THAT IN DETERMINING THE RENTAL AUTHORIZED UNDER THE LAW, CONSIDERATION SHOULD BE GIVEN TO THE FAIR MARKET VALUE OF LOT NO. 18, ADJOINING LOT 87, AND OWNED BY THE LESSORS ALSO. HOWEVER, SINCE LOT NO. 18 IS NOT COVERED BY EITHER LEASE AND THERE IS NOTHING IN SAID LEASES GIVING THE GOVERNMENT THE RIGHT TO USE LOT 18 OR GUARANTEEING SUCH USE TO THE GOVERNMENT, EVIDENCE OF THE FAIR MARKET VALUE OF SAID LOT WAS NOT CONSIDERED IN THE DECISION OF FEBRUARY 8, 1934, OR THE RECONSIDERATION OF SAID DECISION.

IN SUPPORT OF THE LESSORS' CONTENTIONS THAT THE VALUE OF LOT 18 SHOULD BE GIVEN CONSIDERATION, THE LESSORS ASSERT THAT THE GOVERNMENT HAS CONTINUALLY OCCUPIED LOT 18 FOR PARKING PURPOSES AND USED IT FOR UNLOADING AND LOADING OF TRUCKS AT THE FREIGHT ENTRANCE, AND THAT IT WAS THEIR UNDERSTANDING AT THE TIME THE LEASES WERE EXECUTED THAT THE LEASES COVERED BOTH LOTS. THE ADMINISTRATIVE OFFICE HAS SUBSTANTIATED THE LESSORS' CONTENTIONS IN THIS RESPECT AND THERE HAVE NOW BEEN SUBMITTED TWO PHOTOGRAPHS SHOWING FRONT AND SIDE VIEWS OF THE BUILDING AND THE ADJOINING LOT. IT IS STATED THAT WHILE THE ADMINISTRATIVE OFFICE HAS ALWAYS BEEN OF THE OPINION THAT THE LEASES UNDER CONSIDERATION INCLUDED BOTH LOTS, NEVERTHELESS THE DESCRIPTION OF THE PREMISES CONTAINED IN THE PROPOSED NEW LEASE FOR THE FISCAL YEAR 1935 FOR THESE PREMISES SPECIFICALLY INCLUDES A DESCRIPTION OF BOTH LOTS.

WHILE THE ADMINISTRATIVE OFFICE AND THE LESSORS AGREE THAT THE ASSESSED VALUATION OF THE LEASED PREMISES, AS REPORTED BY THE ASSESSOR OF TAXES FOR THE DISTRICT OF COLUMBIA IS EVIDENCE OF THE FAIR MARKET VALUE OF SUCH PREMISES, IT IS URGED THAT OTHER EVIDENCE, SUCH AS OPINIONS BY EXPERTS, REPRESENTATIVE SALES OF SIMILAR PROPERTY, CONDEMNATION AWARDS, AND OTHER FACTORS COMMONLY USED BY REAL-ESTATE APPRAISERS SHOULD BE GIVEN CONSIDERATION IN DETERMINING THE RENTAL AUTHORIZED UNDER THE LAW. ATTENTION IS CALLED TO THE FACT THAT "THE VALUATION DETERMINED BY YOUR OFFICE (GENERAL ACCOUNTING OFFICE) IS FROM $150,000 TO $175,000 LOWER THAN THAT OF OUR APPRAISERS," AND IT IS REQUESTED THAT THE VALUATION FURNISHED BY THE SENIOR AND ASSOCIATE ARCHITECTURAL ENGINEERS, BECAUSE OF THEIR QUALIFICATIONS, SHOULD BE GIVEN SERIOUS CONSIDERATION.

THE VARIOUS APPRAISALS OF THE LEASED PREMISES, INCLUDING LOT 18, WHICH HAVE BEEN SUBMITTED ARE AS FOLLOWS:

CHART

LAND BUILDING TOTAL SENIOR ARCHITECTURAL

ENGINEER ---------------------- $135,138 $214,000 $349,138.00 ASSOCIATE ARCHITECTURAL

ENGINEER ---------------------- 135,135 243,289 378,424.00 WASHINGTON REAL ESTATE BOARD --- -------- --------- 400,000.00 LESSORS (LETTER DATED FEB. 16,

1934) ------------------------- -------- --------- 525,135.32 ASSESSOR -- --------------------- 57,917 210,000 267,917.00

WITH RESPECT TO THE LESSORS' CLAIMED VALUE OF $525,135.32, THE ASSESSOR OF THE DISTRICT OF COLUMBIA HAS REPORTED THAT IN AUGUST 1909 A PERMIT WAS TAKEN OUT BY THE LESSORS FOR THE ERECTION OF THE BUILDING IN QUESTION, THE ESTIMATED COST BEING STATED AS $150,000; THAT AN ASSESSMENT OF $175,000 (TWO-THIRDS VALUE) WAS PLACED AGAINST THE BUILDING WHEN IT WAS COMPLETED; THAT ON JULY 13, 1910, THE LESSORS APPEALED FROM THIS ASSESSMENT, STATING THAT THE VALUATION OF $175,000 ON THE BUILDING WAS EXCESSIVE; AND THAT AS A RESULT OF THE LESSORS' APPEAL THE ASSESSED VALUATION OF THE BUILDING WAS REDUCED TO $165,000. ON MAY 14, 1914, A FURTHER APPEAL ON THE SAME PROPERTY WAS MADE BY W. H. WALKER AGAINST AN ASSESSMENT OF $140,000 (BASED ON TWO-THIRDS THE VALUE) ON THE BUILDING, THE APPELLANT CLAIMING THAT THE OLD ASSESSMENT WAS FULL BUT THAT 5 YEARS OF DEPRECIATION SHOULD BE ALLOWED. HOWEVER, THE BOARD OF TAX APPEALS MADE NO CHANGE. THE ASSESSOR HAS STATED THAT THE NUMBER OF CUBIC FEET IN THE BUILDING IS 711,422 AND THAT IT COULD BE BUILT TODAY FOR LESS THAN 40 CENTS A CUBIC FOOT. THE ASSESSOR CALLS ATTENTION TO THE FACT THAT THE BUILDING HAS 25 YEARS' DEPRECIATION AND STATES THAT CONSIDERING THE PRESENT COST OF CONSTRUCTION, AND TAKING INTO CONSIDERATION 25 YEARS' DEPRECIATION AT 2 PERCENT, IT WOULD APPEAR THAT THE ASSESSMENT ON THE BUILDING WAS IN NO SENSE TOO LOW, BUT PROBABLY EXCEEDED ITS TRUE FAIR VALUE. HE ASSERTS THAT THE ASSESSMENT ON THE LAND SEEMS TO AGREE WITH SALES IN THIS LOCALITY AND, IN SUPPORT OF SUCH ASSERTION, HE STATES THAT THE LAST SALE IN SQUARE 724 WAS FOR LOTS 50 AND 807, WHICH BROUGHT $1.75 PER SQUARE FOOT IN MAY 1928, WHEN REAL-ESTATE PRICES WERE CONSIDERABLY HIGHER THAN THEY ARE AT THE PRESENT TIME. IT HAS BEEN REPORTED THAT LOT NO. 18 CONTAINS 9,667 SQUARE FEET AND THAT LOT NO. 87 CONTAINS 28,943.77 SQUARE FEET. AS THE ASSESSOR HAS POINTED OUT AND SATISFACTORILY DEMONSTRATED, IT IS GENERALLY CONCEDED THAT CONDEMNATION AWARDS IN THE DISTRICT OF COLUMBIA ARE FAR IN EXCESS OF THE FAIR MARKET VALUE OF REAL ESTATE AS ESTABLISHED BY VOLUNTARY SALES, THE DIFFERENCE BETWEEN THE TWO, AS STATED IN MY LETTER OF APRIL 20, 1934, TO YOU, BEING ACCOUNTED FOR BY REASON OF THE FACT THAT THE CONDEMNATION AWARD IS THE RESULT OF A FORCED SALE. IT IS CONCEDED THAT IT MAY AT TIMES AND UNDER CERTAIN CONDITIONS BE DIFFICULT FOR THE ASSESSOR TO ASSESS PROPERTY AT ITS FULL VALUE, BUT AS THE LAW PRESUMES THAT ALL OFFICERS FAITHFULLY DISCHARGE THEIR DUTIES UNDER THEIR OATHS AND BONDS THIS PRESUMPTION MUST BE OVERCOME BEFORE THEIR OFFICIAL ACTS WILL BE DISREGARDED.

WITH RESPECT TO THE APPRAISAL OF $400,000 FOR THE PREMISES AT 119 D STREET NE., INCLUDING LOTS 87 AND 18, MADE BY THE WASHINGTON REAL ESTATE BOARD, I HAD OCCASION TO STATE IN DECISION OF MARCH 31, 1933, A 47677, RELATIVE TO PROPOSED APPRAISALS BY THE AMERICAN INSTITUTE OF REAL ESTATE APPRAISERS FOR PROPERTIES TO BE LEASED BY THE GOVERNMENT, THAT THE FAIR MARKET VALUE IS FOR SHOWING IN A REASONABLE AND PRACTICAL MANNER, BUT NECESSARILY THE GOVERNMENT CANNOT BE LIMITED TO THE VIEWS OF ANY PARTICULAR GROUP OF REAL-ESTATE BOARDS OR APPRAISERS. ORDINARILY, IN THE CONSIDERATION OF SECTION 322 OF THE ECONOMY ACT OF JUNE 30, 1932, THE APPRAISALS SUBMITTED BY GOVERNMENT EMPLOYEES WHO ARE PARTICULARLY QUALIFIED TO EXPRESS AN OPINION AS TO THE VALUE OF LEASED PREMISES ARE GIVEN CONSIDERATION THE SAME AS ANY OTHER EVIDENCE BEFORE THIS OFFICE. THE EVIDENCE OF THE VALUATION OF THE PREMISES AT 119 D STREET NE. SUBMITTED BY THE SENIOR AND ASSOCIATE ARCHITECTURAL ENGINEERS OF THE TREASURY DEPARTMENT WAS GIVEN DUE CONSIDERATION WHEN THE DECISION OF FEBRUARY 8, 1934, WAS RENDERED, BUT SUCH EVIDENCE WAS NOT CONSIDERED SUFFICIENT TO SUPPORT THE RENTAL STIPULATED IN LEASES TCC-954 AND 966, IN VIEW OF THE ASSESSED VALUATION OF THE PREMISES AND THE REPORT OF THE ASSESSOR, WHO, IN VIEW OF THE PROVISIONS OF SECTION 4 OF THE ACT OF JULY 3, 1926 (44 STAT. 833), AND THE ACT OF FEBRUARY 11, 1932 (47 STAT. 48), WAS PARTICULARLY QUALIFIED TO EXPRESS AN EXPERT OPINION AS TO THE FAIR MARKET VALUE OF PREMISES LOCATED IN THE DISTRICT OF COLUMBIA. IN THIS CONNECTION YOUR ATTENTION IS AGAIN INVITED TO THE FACT THAT THE GOVERNMENT FURNISHES ALL SPECIAL SERVICES, SUCH AS HEAT, LIGHT, WATER, GAS, ELECTRICITY, ELEVATOR SERVICE, AND JANITOR SERVICE, AT ITS OWN EXPENSE, AND THAT THE LEASES PROVIDE THAT "THE LESSOR SHALL BE RESPONSIBLE ONLY FOR REPAIRS THAT BECOME NECESSARY AS A RESULT OF STRUCTURAL DEFECTS OR FAILURES OF THE BUILDING, OR OF CAUSES NOT CONNECTED WITH ITS OCCUPANCY OR THE USE TO WHICH IT IS PUT.' FURTHERMORE, THE APPRAISALS BY THE SENIOR AND ASSOCIATE ARCHITECTURAL ENGINEERS, WHICH EXCEED THE ASSESSED VALUATION, CANNOT BE ACCEPTED AS ESTABLISHING A VALUATION IN EXCESS OF THAT GIVEN BY THE ASSESSOR IN VIEW OF THE APPEALS BY THE LESSORS ON JULY 13, 1910, AND ON MAY 14, 1914, PROTESTING THE VALUATION PLACED ON THE PREMISES BY THE ASSESSOR. CERTAINLY THE LESSORS' OWN STATEMENTS UNDER THE PARTICULAR CIRCUMSTANCES INVOLVED COULD NOT BE IGNORED WHEN CONSIDERED IN CONNECTION WITH THE REPORT AND THE VALUATION AS FURNISHED BY THE ASSESSOR. UNDER THE CIRCUMSTANCES THE LESSORS ARE ESTOPPED FROM NOW ASSERTING THAT THE VALUE OF THE LEASED PREMISES WAS MORE THAN $199,749.69 IN 1910 AND $174,749.69 IN 1914, AND THERE APPEARS NO BASIS FOR ANY CONTENTION THAT THE PROPERTY HAS SINCE DOUBLED IN VALUE.

IN VIEW OF THE EVIDENCE NOW SUBMITTED WITH RESPECT TO THE USE BY THE GOVERNMENT OF LOT NO. 18 AND THE REPRESENTATIONS MADE RELATIVE TO THE UNDERSTANDING OF THE PARTIES TO THE LEASES WITH RESPECT THERETO, THE FAIR MARKET VALUE OF THE PREMISES FOR RENTAL PURPOSES MAY BE CONSIDERED AS $267,917, AND THE DECISION OF FEBRUARY 8, 1934, IS MODIFIED ACCORDINGLY. RENTAL PAYMENTS FOR THE ENTIRE PREMISES WILL BE AUTHORIZED AT THE RATE OF $40,187.55 PER ANNUM, OR THE PROPORTIONATE AMOUNT FOR ANY PART OF THE PREMISES.