ALTERNATIVE FINANCING

Real Estate WorkshopArgonne National Laboratory, 5 May 2015Scott L. WhitefordDirector, Real Estate and Personal Property Policy

Alternative Financing – What is it?

• Differing ideas:– OMB: Any non-routine financing proposal.

– GSA: Goal of using the best skills and capabilities of public and private sector to provide same or better level of service, at a cost savings to the public.

– DOE: Obtain use of privately-developed capital assets through a lease.

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Alternative Financing – Who has it?

• Department of Defense (DOD):– 10 USC 2667: Outleasing/Enhanced Use Lease (EUL)

– 10 USC 2871-2885: Housing privatization

– 10 USC 18240: DOD reserve component property exchange

• National Aeronautics and Space Administration (NASA):– 51 USC 20145: EUL

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Alternative Financing - What is required?

• OMB Circular A-11, Appendix B: Budgetary Treatment of Lease-Purchases and Leases of Capital Assets– OMB Review for Scoring:

• Total payments over the term exceed $50 million

• Non-routine financing proposal with unusual concepts/characteristics (ex. establishment of LLC; projects constructed on, located on Government land)

– “Lease-Purchase”, “Capital Lease”• Scored in first year at NPV of Government’s total obligations over contract life

– Operating Lease• Not scored

• Must meet six criteria:– Private sector market for the asset

– Not built specifically for the Government, general purpose

– Total lease payments must not exceed 90% of value of the asset

– No bargain-price purchase option

– Ownership must remain with the lessor and not be transferred shortly after lease term

– Lease term does not exceed 75% of economic life of asset4

Alternative Financing – DOE projects

PROGRAM LOCATION PROJECT DATE OMB APPROVE?

COMMENTS

1 Science Oak Ridge Oak Ridge Computational Science

11/1/2001 YES

2 Science Oak Ridge Oak Ridge Res. Office Bldg.

11/1/2001 YES

3 Science Oak Ridge Oak Ridge Engr. Tech. Facility

11/1/2001 YES

4 Science Oak Ridge Oak Ridge Multi-Program Res.

9/1/2004 YES

5 NNSA Oak Ridge Jack Case/New Hope Ofc. Ctr.

8/1/2005 YES White House pushed OMB to approve

6 Science Brookhaven Housing Complex

2006 NO cost too high

7 Science Argonne Argonne Theory/Comp. Science Bldg.

1/1/2007 YES

8 NE INL INL Science & Tech Facility

2007 NO withdrawn by Program (A-11 criteria not met)

9 Science PNNL PNNL Biological Sciences Bldg.

9/12/2007 YES Congressional intervention

10 Science PNNL PNNL CSF Bldg. 9/12/2007 YES Congressional intervention

11 Science Oak Ridge Multi. Comput. Data Ctr.

2009 NO

12 NNSA Los Alamos Science & Technology Ctr

2010 NO withdrawn by Program (high cost)

13 NNSA Y-12/Oak Ridge

Complex Command Ctr

2010 NO withdrawn by Program (A-11 criteria not met)

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Alternative Financing - Hurdles

• No DOE projects since 2007– Value of lease payments under 90% of value of asset

• Use private sector cost estimate for value of asset, not Government cost

– Private sector market for asset

– General purpose asset, not built for Government-specific use

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Alternative Financing - Success

• Work where they work, not a panacea

• Leverage Government capabilities

• Focus on complimentary or synergistic uses

• Address performance milestones

• Address conclusion of transaction

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Current Projects

– TeAM Facility, NREL

–ASC Facility, PANTEX

– LVOC, Sandia/Livermore/LLNL

–NCMC, SRS

–Discovery Park, BNL

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