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                                                       Calendar No. 755
110th Congress                                                   Report
                                 SENATE
 2nd Session                                                    110-343

======================================================================



 
    TO AMEND THE INTERNATIONAL CENTER ACT TO AUTHORIZE THE LEASE OR 
 SUBLEASE OF CERTAIN PROPERTY DESCRIBED IN SUCH ACT TO AN ENTITY OTHER 
  THAN A FOREIGN GOVERNMENT OR INTERNATIONAL ORGANIZATION IF CERTAIN 
                           CONDITIONS ARE MET

                                _______
                                

                  June 2, 2008.--Ordered to be printed

          Mr. Biden, from the Committee on Foreign Relations,
                        submitted the following

                                 REPORT

                        [To accompany H.R. 3913]

    The Committee on Foreign Relations, having had under 
consideration the bill (H.R. 3913), to amend the International 
Center Act to authorize the lease or sublease of certain 
property described in such Act to an entity other than a 
foreign government or international organization if certain 
conditions are met, having considered the same, reports 
favorably thereon without amendment and recommends that the 
bill do pass.

                                CONTENTS

                                                                   Page

  I. Purpose..........................................................1
 II. Committee Action.................................................1
III. Discussion.......................................................2
 IV. Section-by-Section Analysis......................................3
  V. Cost Estimate....................................................4
 VI. Evaluation of Regulatory Impact..................................5
VII. Changes in Existing Law..........................................5
VIII.Appendix.........................................................5


                               I. Purpose

    The purpose of the legislation is to amend the 
International Center Act (P.L. 90-553) to permit the lease or 
sublease of property in the Center to an entity other than a 
foreign government or international organization, subject to 
the approval of the Secretary of State.

                          II. Committee Action

    H.R. 3913 was introduced on October 22, 2007, by 
Representative Ileana Ros-Lehtinen. It was approved by the 
House Committee on Transportation and Infrastructure on January 
16, 2008. The House of Representatives approved the bill by 
voice vote on January 28, 2008. Senator Cardin introduced an 
identical companion bill, S. 2322, on November 7, 2007. It is 
cosponsored by Senators Coleman and Stevens.
    On May 20, 2008, the committee ordered H.R. 3913 favorably 
reported, without amendment.

                            III. Discussion

    Forty years ago, Congress set aside several dozen acres of 
federally-owned land in northwest Washington, DC (bordered 
roughly by Connecticut Avenue, Tilden Street, Reno Road and 
Yuma Street), to serve as a site for the construction of 
foreign embassies. The legislation helped enable the United 
States to fulfill its obligation under Article 21 of the Vienna 
Convention on Diplomatic Relations, which requires a 
``receiving State'' to ``either facilitate the acquisition on 
its territory, in accordance with its laws, by the sending 
State of premises necessary for its mission or assist the 
latter in obtaining accommodation in some other way.'' The 
legislation enacted in 1968, known as the International Center 
Act (P.L. 90-553), authorized the Secretary of State to sell or 
lease property in the Center to foreign governments and 
international organizations. Another purpose of the Act was to 
set aside land within the International Center for a 
headquarters building for the Organization of American States 
(OAS); however, the OAS did not move its headquarters to the 
International Center.
    In 1982, the International Center Act was amended in 
several respects. One purpose of the 1982 legislation (P.L. 97-
186) was to facilitate the construction of the headquarters of 
the International Telecommunications Satellite Organization, or 
INTELSAT, in the south-easternmost section of the property. At 
the time, INTELSAT was an international organization that had 
been established in the 1960s pursuant to an initiative of the 
Kennedy Administration. Following enactment of P.L. 97-186 and 
pursuant to a ground lease initially signed with the Department 
of State in 1982, INTELSAT constructed its headquarters 
building in the International Center. The lease, which has been 
amended several times, is for a term of 99 years, with an 
option to renew for an additional 99 years. To sum up, the 
company owns the headquarters building, but leases the land 
under the building from the Department of State.
    In the late 1990s, the Clinton Administration and Congress 
undertook an initiative to privatize INTELSAT, which resulted 
in the enactment of the ``Open-market Reorganization for the 
Betterment of International Telecommunications Act'' or the 
``ORBIT Act'' (P.L. 106-180). Pursuant to the ORBIT Act, 
INTELSAT was converted into a private company, now called 
Intelsat, Ltd., on July 18, 2001. Thus, as of that date, the 
company was no longer an international organization. The 
presence of its headquarters building in the International 
Center is, therefore, inconsistent with the provision in the 
International Center Act limiting occupants to foreign 
embassies or international organizations. Nonetheless, the 
Department of State has continued to accept lease payments from 
the company, as well as agreed to amendments to the lease, most 
recently in 2006. Although there is no danger of the Department 
seeking to eject Intelsat from the property, the company 
considers the current situation a ``cloud'' on its lease. 
Accordingly, it has requested support from the Department of 
State and the Congress for the amendment to the International 
Center Act made by H.R. 3913.
    The Department of State has indicated to the committee that 
it does not oppose H.R. 3913. In 2007, in response to a request 
from the committee, the Department undertook a new real estate 
appraisal of the Intelsat building in order to determine the 
viability of federal acquisition of it. The Department 
leadership, after reviewing the appraisal and various options, 
decided that federal purchase was not viable. See Letter from 
Jeffrey T. Bergner, Assistant Secretary of State for 
Legislative Affairs to Senator Biden, May 16, 2008 (set forth 
in the appendix).
    It is possible that Intelsat will seek to sell the 
headquarters building and its leasehold interests and relocate 
its headquarters operations. Under the lease with the State 
Department, the company has the right to assign, sublet or 
otherwise transfer its leasehold interests to another entity, 
subject to the approval of the Secretary of State. The terms of 
the lease empower the Secretary to deny Intelsat the right to 
complete a transfer if the Secretary determines (1) that the 
use, development or occupancy by the proposed transferee could 
impair the safety or security of the International Center 
(under the Vienna Convention, the United States has the duty to 
protect the embassies there), or (2) if the Secretary 
reasonably demonstrates that the use, development or occupancy 
could impair the continued operation of the International 
Center or could be contrary to the character of commercially 
acceptable uses or occupants in the surrounding area. Any 
determination based on safety or security must be made 
personally by the Secretary and shall be final and conclusive 
as a matter of law. Any determination based on other grounds is 
subject to judicial review. The Department believes that the 
lease provisions are adequate to protect the interests of the 
United States. See Letter from Jeffrey T. Bergner, Assistant 
Secretary of State for Legislative Affairs to Senator Biden, 
May 23, 2007 (set forth in the appendix). Under the terms of 
the lease, the United States would have no right to any profits 
arising from the transfer of the leasehold interests.
    The committee expects that the Department of State will 
closely review any new tenant or proposed use, consistent with 
its duty under the Vienna Convention and its rights under the 
lease. The committee also expects that the Department will 
inform the committee about any significant change in the status 
of the ownership or occupancy of the building.

                    IV. Section-by-Section Analysis

    H.R. 3913 has only one section. It adds a new sentence to 
the end of Section 1 of the International Center Act to 
override the provision in that section limiting the sale, 
exchange or lease of property in the International Center to 
foreign governments or international organizations. The 
provision in H.R. 3913 allows certain portions of the 
International Center to be ``leased or subleased to an entity 
other than a foreign government or international 
organization,'' subject to the approval of the Secretary of 
State.

                            V. Cost Estimate

    In accordance with Rule XXVI, paragraph 11(a) of the 
Standing Rules of the Senate, the committee provides this 
estimate of the costs of this legislation prepared by the 
Congressional Budget Office.


                            United States Congress,
                               Congressional Budget Office,
                                      Washington, DC, May 29, 2008.

Hon. Joseph R. Biden, Jr.,
Chairman, Committee on Foreign Relations,
U.S. Senate, Washington, DC.

    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 3913, an act to 
amend the International Center Act to authorize the lease or 
sublease of certain property described in such act to an entity 
other than a foreign government or international organization 
if certain conditions are met.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Sunita 
D'Monte.
          Sincerely,
                                           Peter R. Orszag.

                                ------                                


               Congressional Budget Office Cost Estimate

                                                      May 29, 2008.
    H.R. 3913 would amend current law to allow private entities 
to lease certain property at the International Chancery Center 
(ICC)--a parcel of land in Washington, D.C., owned by the 
Federal Government. Under current law, only foreign governments 
and international organizations are eligible to lease property 
at the ICC. CBO estimates that H.R. 3913 wouldhave no effect on 
the Federal budget.
    The property specified in H.R. 3913 has been leased to 
Intelsat since 1982. Intelsat was established in 1964 as an 
international organization, but was privatized in 2001. The act 
would clarify Intelsat's right to continue under its lease as a 
private corporation. The Department of State reports that since 
being privatized, Intelsat has made all the payments required 
under its lease, and CBO expects it would continue to do so 
under the act.
    H.R. 3913 also would allow Intelsat to sublet or otherwise 
transfer its lease to another private entity, subject to 
approval of the Secretary of State.
    H.R. 3913 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would impose no costs on state, local, or tribal governments.
    On January 18, 2008, CBO transmitted a cost estimate for 
H.R. 3913 as ordered reported by the House Committee on 
Transportation and Infrastructure on January 16, 2008. The two 
versions of the legislation are similar, and their estimated 
costs are identical.
    The CBO staff contact for this estimate is Sunita D'Monte. 
This estimate was approved by Theresa Gullo, Deputy Assistant 
Director for Budget Analysis.

                  VI. Evaluation of Regulatory Impact

    Pursuant to Rule XXVI, paragraph 11(b) of the Standing 
Rules of the Senate, the committee has determined that there is 
no regulatory impact as a result of this legislation.

                      VII. Changes in Existing Law

    Pursuant to Rule XXVI, paragraph 12 of the Standing Rules 
of the Senate, changes in existing law made by the bill, as 
reported, are shown as follows (existing law proposed to be 
omitted is enclosed in black brackets, new matter is printed in 
italic, and existing law in which no change is proposed is 
shown in roman).

                 INTERNATIONAL CENTER ACT (P.L. 90-553)

    Be it enacted by the Senate and House of Representatives of 
the United States of America in Congress assembled, That in 
order to facilitate the conduct of foreign relations by the 
Department of State in Washington, District of Columbia, 
through the creation of a more propitious atmosphere for the 
establishment of foreign government and international 
organization offices and other facilities, the Secretary of 
State is authorized to develop in coordination with the 
Administrator of General Services for, or to sell, exchange, or 
lease to foreign governments and international organizations 
property owned by the United States in the Northwest section of 
the District of Columbia bounded by Connecticut Avenue, Yuma 
Street, 36th Street, Reno Road, and Tilden Street, except that 
portion of lot 802 in square 1964, the jurisdiction over which 
was transferred to the District of Columbia for use as an 
educational facility, upon such terms and conditions as the 
Secretary may prescribe. Every lease, contract of sale, deed, 
and other document of transfer shall provide (a) that the 
foreign government shall devote the property transferred to use 
for legation purposes, or (b) that the international 
organization shall devote the property transferred to its 
official uses. Notwithstanding the foregoing limitations, the 
property identified by the District of Columbia as tax lots 
803, 804, 805, and 806 within the area described in this 
section may be leased or subleased to an entity other than a 
foreign government or international organization, so long as 
the Secretary maintains the right to approve the occupant and 
the intended use of the property.

                             VIII. Appendix



                          U.S. Department of State,
                                      Washington, DC, May 18, 2007.

Hon. Joseph R. Biden, Jr.,
Chairman, Committee on Foreign Relations,
U.S. Senate, Washington, DC.

    Dear Mr. Chairman: Thank you for your letter of April 26 
regarding Intelsat, Ltd.'s request for a legislative amendment 
to the International Center Act (P.L. 90-553) to permit the 
continued presence of its headquarters building at the 
International Center in Washington, D.C. The answers to your 
questions are enclosed.
    We hope this information is helpful in addressing your 
concerns. Please feel free to contact us further on this or any 
other matter of concern to you.
          Sincerely,


       Jeffrey T. Bergner, Assistant Secretary Legislative 
                                                   Affairs.


Enclosure: As Stated.

                         Questions and Answers

    Question 1. Does the Department support the proposed 
amendment to the International Center Act? If so, why?

    Answer. At this time we do not oppose the proposed 
amendment. The proposed legislation would serve to correct the 
anomaly of a commercial corporation holding an International 
Center lease. This anomaly arose incident to Intelsat's 
privatization.


    Question 2. Has the Department considered the feasibility 
of purchasing the building from Intelsat? Would it be of any 
use to the Department operations? Could the building be 
purchased, followed by the removal of the building, and the 
sale of the vacant land? Please elaborate on the factors 
relevant to these questions.

    Answer. The Department originally considered the 
feasibility of purchasing the building from Intelsat in 2003. 
At that time the market purchase price was between $120 and 
$138 million, The Department found the building inefficiently 
designed, with considerable unusable space. The Department 
still believes the building will not meet our current and 
planned office space needs. However, due to the time lapse 
since the last appraisal, a new appraisal for the land has been 
contracted and should be done by August 30.


    Question 3. Are there any limitations on Intelsat's ability 
to assign the ground lease?

    Answer. Under Article 7-1(B) of the amended lease, Intelsat 
has the right to assign and transfer the ground lease to: (1) 
an International organization or a foreign government 
acceptable to the Department, for the official uses of an 
International Organization or for Legation purposes, or to an 
agency or instrumentality of the United States Government; (2) 
a Non-Official Party, as provided in Article 7-2 or as 
otherwise provided by the express terms of the Lease, for 
purposes of performing Lessee's obligations to construct, 
reconstruct, repair, or maintain Improvements and/or transfer 
by such Non-Official Party to an International Organization or 
a foreign government for the official uses of an International 
Organization or for Legation purposes or to an agency or 
instrumentality of the United States Government; or (3) by 
Novation to the Successor Entity upon transfer of the 
Improvements to the Successor Entity.
    In addition, Intelsat has the right to assign, sublet or 
otherwise transfer the property subject to the approval 
requirements summarized in the response to question #4 below.


    Question 4. What ability does the Department have under the 
ground lease to review or reject any assignee?

    Answer. Under Article 7-1(B) of the amended lease, Intelsat 
must provide the Department a written request prior to any 
Transfer at least 60 days prior to the date of the proposed 
Transfer. The Department may deny Intelsat the right to 
complete the transfer if the Secretary of State determines that 
the use, development or occupancy by the proposed Transferee 
could impair the safety or security of the International Center 
or the Secretary reasonably demonstrates that the use, 
development or occupancy could impair the continued operation 
of the International Center or could be contrary to the 
character of commercially acceptable uses or occupants in the 
surrounding area. Any determination based on safety and 
security considerations must be made personally by the 
Secretary and is final and conclusive as matter of law.
    Denial of permission to complete a transfer on the other 
grounds specified is subject to judicial review.


    Question 5. Are there any zoning matters under District of 
Columbia law that should be addressed prior to congressional 
consideration of the legislation?

    Answer. While zoning issues could arise regarding potential 
future uses for the property, the Department is not aware of 
any current issues.


    Question 6. Are there any applicable laws or regulations 
administered by the General Services Administration that would 
govern any assignment of the lease of which the Committee 
should be aware?

    Answer. No.


    Question 7. Does the Department believe any additional 
provisions are necessary in any legislation in order to protect 
the interests of the United States?

    Answer. The Department believes the terms of the lease as 
amended adequately protect the interests of the United States 
Government.

                              ----------                              




                          U.S. Department of State,
                                      Washington, DC, May 16, 2008.

Hon. Joseph R. Biden, Jr.,
Chairman, Committee on Foreign Relations,
U.S. Senate, Washington, DC.

    Dear Mr. Chairman: The Department of State wishes to 
provide you with an updated report regarding Intelsat, Ltd.'s 
request for a legislative amendment to the International Center 
Act (P.L. 90-553) to permit the continued presence of its 
headquarters building at the International Center in 
Washington, D.C.
    The Department's position has not changed from last year. 
We do not oppose H.R. 3913, which passed the House earlier this 
year. The legislation would serve to correct the exception of a 
commercial corporation holding an International Center lease.
    The Department contracted for a new appraisal of the 
Intelsat building to include an evaluation of the viability of 
federal ownership. The current market value of the building is 
approximately $81,000,000 plus an amount to terminate the land 
lease. Since the building is inefficiently designed for a 
single occupant such as the Department, we also looked at the 
possibility of using the 14 separate pods as potential sites to 
house foreign embassies as an expansion to the International 
Chancery Center (ICC). Excluding the cost of purchasing the 
building, the total renovation costs under this use scenario is 
estimated to be $19,000,000.
    On a practical matter, the viability of the Intelsat 
Building as a possible expansion of the ICC is questionable and 
far exceeds the original intent of establishing an ICC in which 
each chancery is built and maintained by the particular foreign 
government, with only minimal oversight by the Department. 
Given this, the Department continues to believe that it is not 
within its best interest to attempt to purchase the Intelsat 
building.
    We hope this information is helpful as you consider H.R. 
3913.
    Please feel free to contact us further on this or any other 
matter of concern to you.
          Sincerely,


       Jeffrey T. Bergner, Assistant Secretary Legislative 
                                                   Affairs.