Testimony of Council Member Mark Kennedy
Billings, Montana

Senator Baucus and Members of the Committee: I welcome the opportunity to provide testimony today regarding issues associated with federal procurement processes for office space. I have been a Billings City Council Member for five years during two separate terms. I am a Billings restaurant owner and a small businessman. Previously, I owned a restaurant in the downtown Billings area and prided myself in contributing to the vibrancy of my community. With that experience, I feel that I am qualified to represent this important component of our city.

In recent months, the Billings City Council and city staff have been involved in an important federal government decision that affects the future of the Billings downtown. A government decision was recently made to award a contract for the construction of a new Bureau of Land Management (BLM) facility outside of the downtown area. Despite repeated efforts of local leaders to urge the consideration of a downtown site, the General Services Administration (GSA), acting on behalf of the BLM, has cited the requirements of the Competition in Contracting Act (CICA) as the reason for making a decision that deserts the downtown of the largest city in Montana.

I am here today to express my concern for my community, its downtown economy and a questionable future brought into play by the actions of these two agencies. Their actions have left a bitter taste in the mouths of many Billings residents, including even some of our own federal employees.

I first want to comment on the requirements of Executive Order 12072, an act signed in 1978 by then President Jimmy Carter. At that time, he recognized the plights of urban cities and realized that the federal government must be a partner in helping the revitalization of America's urban cities. This executive order requires all federal agencies to give primary consideration for their locations to be in central business areas. For the past several years, the City of Billings has been a partner with the federal government in meeting that goal. This has resulted in the recent completion of a new federal office building in downtown.

On this project, however, (GSA Solicitation No. 97˙2D15), something has gone awry. Initially, a bid for facilities in the downtown area was solicited with only the current landlord providing a bid for services. This was not viewed favorably and it was identified that bidding should be opened for new sites throughout the Billings community. The Competition in Contracting Act was cited as the reason that new bids would need to be solicited.

A meeting was held between federal officials, Mayor Chuck Tooley and our City Administrator. Due to CICA, we were told there was no choice but to open bidding up to sites outside of the Billings downtown. This was the extent of federal government efforts to comply with Executive Order #12072. A later letter from our City Administrator (attached) asked for clarification of our community's "rights", but a response was vague and non˙2D responsive.

As a City Council Member, I ask myself if a vote of the Council would have made the difference in granting our community more time in which to respond?? We had a developer from Massachusetts which expressed strong interest in a downtown site. However, other than a 2 week delay, the BLM/GSA process continued until an award was announced between Christmas and New Years. Merry Christmas indeed!

Federal executive orders and contracting law are unclear as to what is the "right" of a community to object to the "competitive removal" of 200 jobs from the downtown area. What is the extent of the duty of the federal government to respond to the local community? These jobs are an important component of the downtown economy. However, no accountability was ever made by the GSA/BLM as to the "costs" associated with their move. We did see a projection of $9 million in savings over 20 years. But we, in Billings, can anticipate a glut of office space to arrive on the market after the completion of the newly awarded building.

We can see local property owners lowering the rents of their facilities to compete with a new 56,000 square feet on the market. Some will ask for property tax value reductions affecting revenues of city government, county government, and our school district. Local restaurants that depend on a vibrant lunch crowd will lose, as well as small specialty shops along our streets.

I also want to object to a process that deliberately "specked out" the Billings downtown. The BLM/GSA proposal required the adjacent location of a wareyard facility. Next to an office building containing over 130 regional "white collar" type workers, a warehouse work area was mandated to be included. This facility could not be located down the street or near the site, but must be directly connected and adjacent.

This requirement created a direct conflict with City of Billings zoning code criteria. A wareyard facility is not allowed in the central business district, as in most American cities. The wareyard would be a facility to store posts, cables, vehicles, horse trailers, and surplus. I would liken this to building a federal vehicle repair shop next to the Hart Senate Office Building in Washington. The types of uses are incompatible and don't mix! Given this situation, the local City Council was put in a situation of ignoring zoning law and create an infamous "spot zoning" situation to comply with federal specifications. Due to 35,000 sq. ft. specifications of the wareyard, the BLM/GSA could not consider locating this material in an indoor facility. We even looked at the basement of the City Library, but it was only 20,000 sq. ft.

The City and private sector have been involved in a year long process of planning for the "Downtown Billings ˙2D Everyone's Neighborhood Project. Due to timetables, the BLM/GSA could not honor waiting for the completion of the project which was adopted by local governments in December, 1997, the same month the project was awarded. Billings now has a plan and government offices are an important part of it. In Montana, where many jobs are with federal agencies, how can they not participate in local efforts? Isn't this contrary to the Executive Order #12072? Our community spent $300,000 in local funding for this effort, so it is not something that we take lightly. The federal government has failed by not recognizing the importance we take in our downtown.

I have included with my testimony, a financial summary of downtown taxable values which are part of a tax increment district. A tax increment district is an area of a community where taxes are frozen at a base level and all new incremental tax value increase use proceeds to reinvest in the district. In Billings case, the district is our downtown central business district. We started in 1982 with an incremental taxable value of $6,258,307. This rose to a high of $11,424,295 in 1991. Since that time, we have seen the incremental taxable value decrease to $5,913,544 in 1997.

Some was attributed to tax reappraisals, but overall a general decline in investment. Without continued reinvestment, the efforts of this community can be for naught. That is why the loss of a major downtown source of jobs and capital investment is so important. The evaluation of $447,000 in annual projected BLM savings will be miniscule in comparison to impact upon the financial vitality of downtown Billings. The federal agencies did not take this into account. A major mistake when assessing total impact.

In summary, the City of Billings' downtown has received major blow to its diligent planning efforts, its economy, and its downtown workplace diversity. Our neighbors and friends are being removed from the area in the name of a bottom line that disregards the environment around it. As a City Council member, I recognize the need to receive competitive bids, but I also recognize the need to award the "most responsible bid."

The federal government in Montana is an important partner in securing the success and vitality of the downtownsof Montana cities. The process now being used is not fair, does not coordinate enough with local officials, and does not fully weigh the economic impacts. We have seen the challenges of our elected representatives go ignored by federal agencies. As a City Councilman, I cannot accept the old adage, "There is nothing we can do!" There is and it starts right here, today!

Respectfully Submitted,
February 17, 1998