Request for Opinion Concerning Compensation for Land Lease

GAO was requested to decide whether the Army could accept a new National Guard armory rather than money as compensation for leasing Army-controlled land to a city. The city owned two acres of land which abutted land that was licensed to the National Guard. The city wanted to turn its land into taxable real estate by allowing a private developer to build a hotel and restaurant on it and build recreational facilities on the eastern portion of the adjacent Army land. The city wanted to lease the eastern portion from the Army to accommodate the developer. Under the city's proposal, the National Guard would relinquish its license on the eastern portion but retain its license on the western portion of the Army land. The city offered to raise the outdated buildings on the western portion of the Army land and replace them with a new maintenance shop and armory as consideration for the lease. The Economy Act provides that, except as otherwise provided by law, the United States may lease its property and buildings for money consideration only. It expressly prohibits the government from accepting agreements to alter, repair, or improve leased property as consideration. It requires that funds received as rent be deposited into the Treasury as miscellaneous receipts. The Army felt that the regulations which govern military leasing authorized it to accept the city's proposal. However, since the work the city was offering to perform would not be on the property it would be leasing, the proposed lease failed to fall within the exception granted in these regulations. The decision does not prevent the Army from leasing the parcel in question to the city if otherwise proper, nor does it prevent the Army from constructing a new armory building if appropriations are made available for that purpose. The GAO holding is only that the Army cannot receive the proposed new armory as consideration for the lease.