B-162289, DEC. 27, 1967

B-162289, DEC. 27, 1967

CONCESSIONS - REPAYMENT LIABILITY DECISION TO SECY. OF THE INTERIOR CONCERNING AMOUNT MOUNT RUSHMORE MEMORIAL SOCIETY, CONCESSIONAIRE, IS OBLIGATED TO REPAY GOVT. FOR CONSTRUCTION OF CONCESSION FACILITIES AT MOUNT RUSHMORE NATIONAL MEMORIAL, S.D. A REVIEW OF THE CONCESSION AGREEMENT INDICATES THAT THE SOCIETY IS NOT OBLIGATED TO PAY ANY AMOUNT SPENT ON THE ORIGINAL TWO-YEAR CONSTRUCTION PROGRAM THAT EXCEEDS THE $500,000 SPECIFICALLY APPROPRIATED IN 1955 AND 1956. HOWEVER, THE AMOUNT REPROGRAMMED IN 1961 AND APPROPRIATED IN 1966 ARE OBLIGATIONS OF THE SOCIETY. UPON REPAYMENT THE FRANCHISE FEE FORMULA IN THE AGREEMENT MAY BE REVISED AND THE GOVT. SHOULD CONSIDER THE GOVERNMENT'S INVESTMENT IN THE FACILITIES.

TO MR. SECRETARY:

ON AUGUST 15, 1967, YOUR DEPARTMENT REQUESTED A DECISION AS TO THE AMOUNT OF THE MOUNT RUSHMORE MEMORIAL SOCIETY'S COMMITMENT TO REPAY APPROPRIATIONS EXPENDED BY THE GOVERNMENT FOR THE CONSTRUCTION OF THE CONCESSION AND RELATED FACILITIES AT THE MOUNT RUSHMORE NATIONAL MEMORIAL, SOUTH DAKOTA, UNDER CONCESSION CONTRACT NO. 14-10-0100-406 DATED FEBRUARY 18, 1955.

WE WERE UNABLE TO REACH A DECISION ON THE BASIS OF THE INFORMATION FIRST SUBMITTED, AND ON SEPTEMBER 15, 1967, ADDITIONAL INFORMATION WAS REQUESTED AT A MEETING ATTENDED BY REPRESENTATIVES OF OUR OFFICE, YOUR DEPARTMENT, AND THE NATIONAL PARK SERVICE. A SUPPLEMENTAL REPORT WAS SENT BY YOUR DEPARTMENT ON DECEMBER 12, 1967. INSOFAR AS THE RECORD SHOWS, THE FACTS GIVING RISE TO THE QUESTION PRESENTED ARE AS FOLLOWS:

DURING THE HOUSE HEARINGS ON THE INTERIOR DEPARTMENT APPROPRIATIONS FOR FISCAL YEAR 1955, MR. JOHN A. BOLAND, PRESIDENT OF THE SOCIETY, PROPOSED THAT IF THE CONGRESS WOULD APPROPRIATE $500,000 FOR A TWO-YEAR DEVELOPMENT PROGRAM AT THE MEMORIAL, THE SOCIETY WOULD ENTER INTO AN AGREEMENT TO REPAY THE AMOUNT APPROPRIATED OVER A TWENTY YEAR PERIOD. IT WAS ESTIMATED THAT THE SOCIETY'S ANNUAL PAYMENT WOULD BE APPROXIMATELY $25,000.

DURING THE HEARINGS BEFORE THE SENATE COMMITTEE ON APPROPRIATIONS ON THE SOCIETY'S REQUEST, SENATOR CASE EXPLAINED THE PROPOSAL AS FOLLOWS:

"AND HERE IS THE PROGRAM FOR WHICH WE SEEK CONGRESSIONAL HELP--AN ADVANCE OF $500,000 OVER A 2-YEAR PERIOD IN ORDER TO PROVIDE THE FOLLOWING ITEMS: AMPHITHEATER AND FACILITIES TO SEAT 2,000 PEOPLE, $125,000; NEW CONCESSION BUILDING, RESTORATION OF STUDIO AND INSTALLATION OF INTERPRETIVE FACILITIES, $205,000; INTERIOR SERVICE ROADS, PATHS AND TRAILS, $47,000; EMPLOYEES' DORMITORY, WATER, SEWER, POWER AND LIGHTING DISTRIBUTION SYSTEM, $192,500, MAKING A TOTAL OF $569,500.

"THE MOUNT RUSHMORE SOCIETY WILL PROVIDE IN CASH OR RAISE THE $69,000 AND AGREES TO PAY BACK THE BALANCE AT THE RATE OF $25,000 A YEAR.' SEE SENATE HEARINGS, INFRA, P. 690.

A MORE DETAILED EXPLANATION OF THE SOCIETY'S PROPOSAL APPEARS IN THE HEARINGS ON THE INTERIOR DEPARTMENT APPROPRIATION FOR 1955 BEFORE THE SUBCOMMITTEE OF THE COMMITTEE ON APPROPRIATIONS, HOUSE OF REPRESENTATIVES, 83RD CONGRESS, 2ND SESSION, PART 2, PAGES 1649-1656 AND THE HEARINGS BEFORE A SUBCOMMITTEE OF THE COMMITTEE ON APPROPRIATIONS, UNITED STATES SENATE, 83RD CONGRESS, 2ND SESSION ON H.R. 8680, PAGES 687-690. THE $500,000 REQUESTED WAS APPROPRIATED IN UNITS OF $250,000 IN FISCAL YEARS 1955 AND 1956.

WITH REGARD TO THE TESTIMONY IN THE HOUSE HEARINGS, SUCH TESTIMONY WAS-- IN EFFECT--INCORPORATED BY REFERENCE IN THE SIXTH WHEREAS CLAUSE OF CONCESSION CONTRACT NO. 14-10-0100-406 AS FOLLOWS:

"WHEREAS, THE CONCESSIONER THROUGH ITS PRESIDENT, JOHN A. BOLAND, IN A HEARING BEFORE THE HOUSE APPROPRIATION COMMITTEE ON FEBRUARY 19, 1954, SET FORTH A BASIS OF PAYMENT OF FRANCHISE FEES TO THE UNITED STATES TO ASSIST IN DEFRAYING THE COST OF A TWO-YEAR DEVELOPMENT PROGRAM AT MOUNT RUSHMORE NATIONAL MEMORIAL AS OUTLINED IN SAID HEARING; "

AS PRESENTED IN SENATOR CASE'S TESTIMONY QUOTED ABOVE, THE TOTAL ESTIMATED CONSTRUCTION COST OF THIS TWO-YEAR PROJECT WAS $569,500, OF WHICH $500,000 WAS TO BE FINANCED BY APPROPRIATED FUNDS.

ON JANUARY 3, 1967, THE PRESIDENT OF THE SOCIETY WROTE TO THE SUPERINTENDENT OF THE MOUNT RUSHMORE NATIONAL MEMORIAL REQUESTING A REVISION OF FRANCHISE FEE PAYMENTS UNDER SECTION 14 OF THE CONCESSION CONTRACT. IN THAT LETTER HE POINTED OUT THAT PARAGRAPH 2 OF SECTION 14 AUTHORIZES THE SECRETARY TO REVISE OR CHANGE THE FRANCHISE FEE PAYMENTS WHEN PAYMENTS TO THE GOVERNMENT EQUALLED THE AMOUNT APPROPRIATED BY THE CONGRESS TO CARRY OUT THE DEVELOPMENT PROGRAM. SPECIFICALLY, PARAGRAPH 2 OF SECTION 14 READS IN PERTINENT PART AS FOLLOWS:

"* * * PROVIDED, THAT WHEN FRANCHISE FEE PAYMENTS BY THE CONCESSIONER TO THE GOVERNMENT TOTAL THE AMOUNT APPROPRIATED BY THE CONGRESS TO CARRY OUT THE DEVELOPMENT PROGRAM HEREINBEFORE REFERRED TO, THE SECRETARY MAY IN HIS DISCRETION REVISE OR CHANGE THE FRANCHISE FEE PAYMENTS PROVIDED FOR IN THIS SECTION TO SUCH NEW FRANCHISE FEE AMOUNT, RATE, OR BASIS AS HE MAY CONSIDER APPROPRIATE IN THE CIRCUMSTANCES THEN EXISTING.' THE PRESIDENT OF THE SOCIETY EXPLAINED THAT FOR THE YEAR ENDED DECEMBER 31, 1966, APPROXIMATELY $595,580.84 HAD BEEN PAID TO THE NATIONAL PARK SERVICE BY THE SOCIETY UNDER THE CONTRACT. THIS FIGURE WAS BASED, IN PART, ON AN ESTIMATED 1966 PAYMENT AND WAS LATER REVISED TO $595,417.00.

ON MAY 16, 1967, ASSISTANT DIRECTOR EDWARD A. HUMMEL DENIED THE SOCIETY'S REQUEST OF JANUARY 3, 1967, BECAUSE IT WAS BELIEVED THAT THE CONDITIONS UNDER WHICH IT WAS AGREED THAT THE FRANCHISE FEE WOULD BE REVISED HAD NOT YET BEEN MET. THE ASSISTANT DIRECTOR WROTE THAT AS OF DECEMBER 31, 1959, THE DEVELOPMENT PROGRAM HAD COST $1,104,700 AND, REDUCING THIS AMOUNT BY DONATIONS OF $101,670, A TOTAL OF $1,003,030 WAS TO BE REPAID THROUGH FRANCHISE FEES.

ADDITIONAL APPROPRIATED FUNDS OF $45,000 IN 1961--BY REPROGRAMMING- AND $100,000 IN 1966--BY APPROPRIATION--WERE MADE AVAILABLE TO THE SOCIETY FOR ADDITIONAL CONSTRUCTION AT THE MEMORIAL. ADDING THESE SUMS TO THE FIGURE OF $1,003,030 AND SUBTRACTING THE FEES PAID THROUGH DECEMBER 31, 1966, RESULTS IN AN UNPAID BALANCE OF $552,613 AS OF THAT DATE. IN A LETTER OF OCTOBER 2, 1961, TO THE CHAIRMAN OF THE HOUSE SUBCOMMITTEE ON INTERIOR AND RELATED AGENCIES APPROPRIATIONS, ASSISTANT SECRETARY D. OTIS BEASLEY ADVISED THAT IF THE REQUESTED $45,000 REPROGRAMMING WAS APPROVED, THE SOCIETY HAD GIVEN ASSURANCE THAT THE AMOUNT MADE AVAILABLE WOULD BE REPAID IN THE SAME MANNER AND IN THE SAME PERIOD AS OTHER FEDERAL FUNDS WERE BEING REPAID. SIMILARLY, THE CONCESSIONAIRE AT MOUNT RUSHMORE, MRS. KAY BURGESS, IN HER TESTIMONY ON THE 1966 REQUEST FOR THE $100,000 APPROPRIATION INDICATED THAT THE AMOUNT REQUESTED WOULD BE REPAID ON THE SAME BASIS AS THE PREVIOUS (1954) REQUEST. SEE HEARINGS ON INTERIOR DEPARTMENT APPROPRIATION FOR 1966 BEFORE A SUBCOMMITTEE OF THE COMMITTEE ON APPROPRIATIONS, HOUSE OF REPRESENTATIVES, 89TH CONGRESS, 1ST SESSION, PART 2, PAGES 682-684.

IN A LETTER OF JULY 11, 1967, TO THE DIRECTOR OF THE NATIONAL PARK SERVICE THE PRESIDENT OF THE SOCIETY ACKNOWLEDGED THAT STATEMENTS WERE MADE IN HEARINGS TO THE EFFECT THAT THE SOCIETY WILL REPAY THE FEDERAL GOVERNMENT MONEYS ADVANCED FOR IMPROVEMENTS AT MOUNT RUSHMORE AND THAT IT WAS THE INTENTION OF THE SOCIETY TO MEET THE SPIRIT OF THESE COMMITMENTS. HE MAINTAINED, HOWEVER, THAT "THE COMMITMENT OF THE SOCIETY AS EXPRESSED IN THE CONTRACT IS LIMITED TO THE PROGRAM AND THE APPROXIMATE AMOUNT OF MONEY SET FORTH IN THE HOUSE APPROPRIATIONS COMMITTEE HEARINGS ON FEBRUARY 19, 1954, AND WAS NOT A COMMITMENT TO PAY, UNDER THE SPECIFIC FRANCHISE FEE FORMULA OF SECTION 14, FOR ALL THE IMPROVEMENTS MADE.'

LEAVING ASIDE THE $45,000 REPROGRAMMED IN 1961 AND THE $100,000 APPROPRIATED IN 1966, WE HAVE FOUND NOTHING IN ANY OF THE DOCUMENTS PRESENTED, CONGRESSIONAL PROCEEDINGS, OR THE CONTRACT, THAT WOULD SPECIFICALLY OBLIGATE THE SOCIETY TO REPAY ANY SUM IN EXCESS OF THE $500,000 APPROPRIATED IN FISCAL YEARS 1955 AND 1956. OUR REVIEW OF THE MATERIAL FURNISHED US BY YOUR DEPARTMENT AND THE CONGRESSIONAL PROCEEDINGS REFERRED TO HEREIN LEAVES US IN AGREEMENT WITH THE VIEW EXPRESSED BY ASSOCIATE DIRECTOR OF THE PARK SERVICE, EIVIND T. SCOYEN, IN HIS MEMORANDUM OF JUNE 29, 1959, TO THE REGIONAL DIRECTOR OF REGION TWO WHEN HE ADVISED:

"WHILE IT IS TRUE THAT THE TOTAL CONSTRUCTION COSTS AT MOUNT RUSHMORE HAVE FAR EXCEEDED THE AMOUNT CONTEMPLATED BY THE SOCIETY AT THE TIME OF THE HEARINGS, WE KNOW OF NO SUGGESTION BY THE SOCIETY THAT WOULD INDICATE AN INTENT TO ASSUME AN ADDITIONAL REPAYMENT OBLIGATION OVER THE AMOUNT OF $569,500, AND IT IS OUR INTERPRETATION OF THE CONCESSION CONTRACT THAT THE SOCIETY HAS OBLIGATED ITSELF ONLY TO THE EXTENT OF MAKING PAYMENTS TO COVER THE ESTIMATED AMOUNT OF THE TWO-YEAR PROGRAM AS DISCUSSED AT THE TIME OF THE HEARING. THIS POSITION IS STATED IN THE 6TH WHEREAS CLAUSE OF THE CONTRACT CITED ABOVE, AT THE BOTTOM OF PAGE 1, AND INFERRED IN SECTION 14, FRANCHISE FEES (A) (2).'

APPARENTLY, THE PRESENT POSITION OF THE PARK SERVICE AND THE DEPARTMENT DOES NOT ACCORD WITH THAT EXPRESSED BY THE FORMER ASSOCIATE DIRECTOR IN HIS MEMORANDUM OF JUNE 29, 1959. IT IS OUR VIEW HOWEVER THAT THE SOCIETY MUST REPAY THE $45,000 REPROGRAMMED IN 1961 AND THE $100,000 APPROPRIATED IN 1966, IN ADDITION TO THE $500,000 APPROPRIATED IN THE FISCAL YEARS 1955 AND 1956 BUT THAT THE SOCIETY IS NOT OBLIGATED UNDER THE CONTRACT TO PAY ANY AMOUNT SPENT ON THE ORIGINAL TWO-YEAR DEVELOPMENT PROGRAM WHICH EXCEEDS THE $500,000 SPECIFICALLY APPROPRIATED FOR THAT PROGRAM IN FISCAL YEARS 1955 AND 1956. UPON THE REPAYMENT BY THE SOCIETY OF THE ABOVE AMOUNTS TOTALLING $645,000, THE SECRETARY, IN HIS DISCRETION COULD REVISE OR CHANGE THE FRANCHISE FEE PAYMENTS UNDER THE TERMS OF SECTION 14. AND WHEN ANY REVISION IN SUCH PAYMENTS IS MADE, THE AMOUNT OF THE GOVERNMENT'S INVESTMENT IN THE FACILITIES OBVIOUSLY WILL BE A FACTOR FOR YOUR CONSIDERATION.

THERE IS AN ADDITIONAL ASPECT OF THIS CASE WITH WHICH WE ARE CONCERNED. ACCORDING TO THE DEPARTMENT FIGURES, AS OF DECEMBER 31, 1959, A TOTAL OF $1,003,030 OF APPROPRIATED FUNDS WAS SPENT ON THIS PROGRAM. THAT FIGURE IS $503,030 IN EXCESS OF THE $500,000 SPECIFICALLY APPROPRIATED IN FISCAL YEARS 1955-56. WE HAVE SEARCHED THE APPROPRIATION ACTS AND THEIR LEGISLATIVE HISTORIES THAT COVER THE PERIOD INVOLVED AND DO NOT FIND ANY ADDITIONAL SPECIFIC REQUESTS FOR FUNDS FOR THE MOUNT RUSHMORE CONSTRUCTION. IT THUS APPEARS THAT AMOUNTS AGGREGATING $503,030, WERE REPROGRAMMED DURING THE PERIOD INVOLVED. IN THE PARK SERVICE DIRECTOR'S TESTIMONY DURING THE SENATE HEARINGS ON THE DEPARTMENT'S 1956 APPROPRIATION, HE INDICATED THAT WHERE SHIFTS OF FUNDS ARE CONTEMPLATED PRIOR CONGRESSIONAL APPROVAL WILL BE OBTAINED BEFORE SUCH SHIFTS ARE MADE. DURING THOSE HEARINGS THE FOLLOWING DISCUSSION TOOK PLACE BETWEEN DIRECTOR WIRTH, CHAIRMAN HAYDEN AND SENATOR THYE.

"CHAIRMAN HAYDEN. OF COURSE, MONEY APPROPRIATED IN A LUMP SUM, REPRESENTATIONS ARE MADE TO CONGRESS HOW YOU ARE GOING TO SPEND IT. YOU DO NOT MAKE THESE SHIFTS WITHOUT REPORTING TO CONGRESS WHAT YOU INTEND TO DO?

"MR. WIRTH. THAT IS RIGHT.

"SENATOR THYE. MR. CHAIRMAN, HAVE THERE BEEN ANY SHIFTS IN THE PAST YEAR, AND IF THERE WERE SHIFTS, WERE THEY, WAS THERE A REPORT TO CONGRESS THAT INDICATED THE INTENDED SHIFT, OR THE SHIFT OF FUNDS?

"CHAIRMAN HAYDEN. I REMEMBER PARTICULARLY THAT THERE WAS A SHIFT OF FUNDS TO THE LAKE MEAD AREA. THIS SHIFT WAS APPROVED DURING THE LAST CONGRESS.

"MR. WIRTH. THAT IS RIGHT.

"CHAIRMAN HAYDEN. NOW, YOU HAVE MADE SOME MORE SAVINGS. WHAT KIND OF PROGRAM DO YOU INTEND TO BRING TO THE ATTENTION OF THE COMMITTEE?

"MR. WIRTH. THERE WAS A SHIFT IN FUNDS BETWEEN THE CARLSBAD AND THE GRAND CANYON AREA. THERE WAS A SAVINGS THERE AT CARLSBAD WHEN WE LET THE ELEVATOR CONTRACT AND SHAFTS, THERE WERE SOME FUNDS LEFT OVER.

"WE ASKED APPROVAL TO TRANSFER THESE FUNDS TO GO ALONG WITH THE APPROPRIATIONS ALREADY GIVEN US FOR THE INFORMATION BUILDING AT GRAND CANYON.

"SENATOR THYE. WHEN DID YOU MAKE THE REQUEST? YOU DID MAKE IT TO THE APPROPRIATIONS OMMITTEE?

"MR. WIRTH. WE MADE A CONTACT WITH SENATOR GUY CORDON, WHO WAS CHAIRMAN AT THAT TIME, AND THEN I THINK SENATOR CHAVEZ, BUT BY LETTER, AND ALSO WITH SENATOR HAYDEN.

"SENATOR THYE. THAT CAME THROUGH AND AN ACKNOWLEDGEMENT WAS MADE AND THE GENERAL STATED APPROVAL OF THE CHAIRMAN OF THAT SUBCOMMITTEE WAS MADE AVAILABLE TO YOU BEFORE YOU SHIFTED THE FUNDS?

"MR. WIRTH. YES, SIR.' SEE HEARINGS BEFORE A SUBCOMMITTEE OF THE COMMITTEE ON APPROPRIATIONS, UNITED STATE SENATE, 84TH CONGRESS, 1ST SESSION ON H.R. 5085, PAGE 364.

AT OUR MEETING WITH PARK SERVICE REPRESENTATIVES ON SEPTEMBER 15, 1967, WE SPECIFICALLY REQUESTED DOCUMENTATION FOR ANY REPROGRAMMING OF THE EXCESS $503,030. SUCH DOCUMENTATION WAS NOT INCLUDED IN THE MATERIALS SUBMITTED HERE BY THE DEPARTMENT ON DECEMBER 12, 1967.

SINCE WE WERE FURNISHED NO DOCUMENTATION SHOWING THAT THE REPROGRAMMING OF THE $503,030 HAD PRIOR APPROVAL OF THE HOUSE AND SENATE COMMITTEES ON APPROPRIATIONS AND SINCE THIS AMOUNT WAS EXPENDED WITHOUT SECURING AN AGREEMENT IN WRITING THAT THE AMOUNT WOULD BE REPAID THE GOVERNMENT BY THE CONCESSIONAIRE, WE ARE FORWARDING COPIES OF THIS LETTER TO THE CHAIRMEN OF SUCH COMMITTEES.