SPEAKERS CONTENTS INSERTS
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FRANCHISE FEE CALCULATIONS OF FORT SUMTER TOURS, INC.
SUBCOMMITTEE ON NATIONAL PARKS AND PUBLIC LANDS
COMMITTEE ON RESOURCES
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTH CONGRESS
JULY 1, 1999, WASHINGTON, DC
Serial No. 10644
Page 2 PREV PAGE TOP OF DOCPrinted for the use of the Committee on Resources
Available via the World Wide Web: http://www.access.gpo.gov/congress/house
Committee address: http://www.house.gov/resources
COMMITTEE ON RESOURCES
DON YOUNG, Alaska, Chairman
W.J. (BILLY) TAUZIN, Louisiana
JAMES V. HANSEN, Utah
JIM SAXTON, New Jersey
ELTON GALLEGLY, California
JOHN J. DUNCAN, Jr., Tennessee
JOEL HEFLEY, Colorado
JOHN T. DOOLITTLE, California
WAYNE T. GILCHREST, Maryland
KEN CALVERT, California
RICHARD W. POMBO, California
BARBARA CUBIN, Wyoming
HELEN CHENOWETH, Idaho
GEORGE P. RADANOVICH, California
WALTER B. JONES, Jr., North Carolina
WILLIAM M. (MAC) THORNBERRY, Texas
Page 3 PREV PAGE TOP OF DOCCHRIS CANNON, Utah
KEVIN BRADY, Texas
JOHN PETERSON, Pennsylvania
RICK HILL, Montana
BOB SCHAFFER, Colorado
JIM GIBBONS, Nevada
MARK E. SOUDER, Indiana
GREG WALDEN, Oregon
DON SHERWOOD, Pennsylvania
ROBIN HAYES, North Carolina
MIKE SIMPSON, Idaho
THOMAS G. TANCREDO, Colorado
GEORGE MILLER, California
NICK J. RAHALL II, West Virginia
BRUCE F. VENTO, Minnesota
DALE E. KILDEE, Michigan
PETER A. DeFAZIO, Oregon
ENI F.H. FALEOMAVAEGA, American Samoa
NEIL ABERCROMBIE, Hawaii
SOLOMON P. ORTIZ, Texas
OWEN B. PICKETT, Virginia
FRANK PALLONE, Jr., New Jersey
CALVIN M. DOOLEY, California
CARLOS A. ROMERO-BARCELÓ, Puerto Rico
Page 4 PREV PAGE TOP OF DOCROBERT A. UNDERWOOD, Guam
PATRICK J. KENNEDY, Rhode Island
ADAM SMITH, Washington
WILLIAM D. DELAHUNT, Massachusetts
CHRIS JOHN, Louisiana
DONNA CHRISTIAN-CHRISTENSEN, Virgin Islands
RON KIND, Wisconsin
JAY INSLEE, Washington
GRACE F. NAPOLITANO, California
TOM UDALL, New Mexico
MARK UDALL, Colorado
JOSEPH CROWLEY, New York
RUSH D. HUNT, New Jersey
LLOYD A. JONES, Chief of Staff
ELIZABETH MEGGINSON, Chief Counsel
CHRISTINE KENNEDY, Chief Clerk/Administrator
JOHN LAWRENCE, Democratic Staff Director
Subcommittee on National Parks and Public Lands
JAMES V. HANSEN, Utah, Chairman
ELTON, GALLEGLY, California
JOHN J. DUNCAN, Jr., Tennessee
JOEL HEFLEY, Colorado
Page 5 PREV PAGE TOP OF DOCRICHARD W. POMBO, California
GEORGE P. RADANOVICH, California
WALTER B. JONES, Jr., North Carolina
CHRIS CANNON, Utah
RICK HILL, Montana
JIM GIBBONS, Nevada
MARK E. SOUDER, Indiana
DON SHERWOOD, Pennsylvania
CARLOS A. ROMERO-BARCELÓ, Puerto Rico
NICK J. RAHALL II, West Virginia
BRUCE F. VENTO, Minnesota
DALE E. KILDEE, Michigan
DONNA CHRISTIAN-CHRISTENSEN, Virgin Islands
RON KIND, Wisconsin
JAY INSLEE, Washington
TOM UDALL, New Mexico
MARK UDALL, Colorado
JOSEPH CROWLEY, New York
RUSH D. HOLT, New Jersey
ALLEN FREEMYER, Counsel
TODD HULL, Professional Staff
LIZ BIRNBAUM, Democratic Counsel
GARY GRIFFITH, Professional Staff
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Hearing held July 1, 1999
Statements of Members:
Hansen, Hon. James V., a Representative in Congress from the State of Utah
Sanford, Hon. Mark, a Representative in Congress from the State of South Carolina
Statements of witnesses:
Campsen, George, President, Fort Sumter Tours, Inc.
Prepared statenent of
Jackson, David E., Certified Public Accountant
Prepared statenent of
Stanton, Robert, Director, National Park Service; accompanied by Mr. Cohen, Solicitor's Office; Robert Hyde, Financial Analyst, Division of Concession Management
Prepared statenent of
Additional material supplied:
Affidavit of Mark F. Hartley, DBA
An Analysis of the Appropriate Franchise Fee For Fort Sumter Tours, Inc.
Brief, Fort Sumpter Tours, Inc. v. Bruce Babbitt, Secretary, Dept. of the Interior
Brief, Fort Sumpter Tours, Inc. v. Bruce Babbitt, Secretary, Dept. of the Interior
NPS Franchise Fee Analysis & Southeast Regional NPS Critique Thereof
NPS Mistakes in Calculating a 12 percent Franchise Fee for For Sumpter Tours, Inc.
Page 7 PREV PAGE TOP OF DOCOVERSIGHT HEARING ON FRANCHISE FEE CALCULATIONS OF FORT SUMTER TOURS, INC.
THURSDAY, JULY 1, 1999
House or Representatives,
Subcommittee on National Parks
and Public Lands,
Committee on Resources,
The Subcommittee met, pursuant to notice, at 10:59 a.m., in Room 1324, Longworth House Office Building, Hon. James Hansen [chairman of the Subcommittee] presiding.
STATEMENT OF HON. JAMES HANSEN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF UTAH
Mr. HANSEN. Good morning, and welcome to the oversight hearing today.
I am glad to see the Director has recovered from his illness and with us. We appreciate your presence.
The purpose of this oversight hearing is to examine the franchise fee imposed by the National Park Service on Fort Sumter Tours, Inc., a small family-owned concessionaire that provides tour boat transportation to and from Fort Sumter National Monument in South Carolina.
In 1992, the Park Service nearly tripled Fort Sumter's franchise fee from 4.25 to 12 percent. This has had a direct negative economic consequence at Fort Sumter Tours. They tried to find out from the Park Service why this had happened.
However, the Park Service refused to give Fort Sumter Tours the information they needed to understand the drastic rise in the franchise fee. Thus began a continuing confrontation between Fort Sumter Tours and the Park Service, and which has led us to convene this oversight hearing today.
Page 8 PREV PAGE TOP OF DOC After recently reviewing the material, I cannot understand why the Park Service is so reluctant to give it to Fort Sumter Tours. In my opinion, it is riddled with major errors, it grossly overstates the profitability of this concession. As we hear testimony today, I believe this will become clear.
The Park Service has never admitted to Fort Sumter Tours that errors were committed in calculating the franchise fee, and an absolute refusal by the Park Service to discuss the merits of the miscalculated franchise fee.
I want to make a point here: This oversight may be seen by some as an inappropriate function of the Subcommittee; that is, as some sort of private relief rather than centered on an issue of policy. But would disagree with this opinion. In fact, subjects like this one is the reason we have oversight hearings. It is a question of making sure the Federal Government, and in this case the National Park Service, does not trample on the rights of our citizens.
It is a question of the Federal Government following its own policies and guidelines, and it is a question of whether the Federal Government can possibly ever admit its own mistakes, correct those mistakes, and then move forward toward reasonable solutions.
One other point: It is fairly easy for Federal bureaucrats in Washington to decide from afar how things are going to be for people around the country. However, it is quite another thing for those same bureaucrats to understand that the decisions they make and the mistakes that they may make can be devastating to hard-working Americans trying to make a living. I believe that this is what we have here today. And it is not to be taken lightly.
Be that as it may, I was hopeful that the hearing would never occur. By this means, that I held a meeting in my office some months ago with the Director, the Solicitor's Office, Fort Sumter Tours, and other Members of Congress, Mr. Sanford, and Mr. Spence, imploring the Park Service to take another look at this situation and resolve it to the satisfaction of both parties.
Page 9 PREV PAGE TOP OF DOC I stated at the time that the Subcommittee would hold an oversight hearing if the problems with the franchise fee were not resolved. Obviously, the Park Service did not take my suggestion very seriously because we are here today.
It is my understanding that, following this meeting, the Park Service asked Fort Sumter Tours for an offer. Fort Sumter responded, and the Park Service essentially said Fort Sumter's offer is no offer to them, apparently, to sit down and attempt to hammer this out on the merits of the fee and discuss how it was calculated.
I am disappointed that nothing came of this. However, I am quite willing to have this oversight in order to expedite getting this thing resolved in a fair and equitable and honest way.
I would like to welcome our witnesses here today, and I would now recognize the gentleman from Puerto Rico if he was here. Because he isn't, I will turn to the gentleman from Tennessee for any opening comments he may have.
Mr. DUNCAN. Well, I have no formal opening statement, Mr. Chairman. I agree with you that it is unusual for us to hold a hearing on a dispute like this. And I am disappointed, like you, that the Park Service did not work this out in some fair and reasonable manner. But I suppose we can ask some questions about that at the appropriate time.
Thank you very much.
Mr. HANSEN. I thank the gentleman from Tennessee.
I ask unanimous consent that the letter from Congressman Floyd Spence be included in the record, and also the letter from Senator Ernest Hollings be included in the record.
Mr. HANSEN. I won't go through the entire thing, but I would like to point out that Floyd Spence has a great personal knowledge of this issue, and he says, ''I am familiar with the ongoing dispute involving franchise fees at Fort Sumter. In the interest of Fort Sumter Tours, and the National Park Service and the visitors to Fort Sumter, this matter needs to be resolved. If errors were made in the calculation of this franchise fee, then the errors should be corrected.''
Page 10 PREV PAGE TOP OF DOC Senator Hollings says, ''As you know, by statutory law, all park concessionaires are required to pay a franchise fee based upon a percentage of their gross receipts. It is my understanding that in 1992 the Park Service unilaterally attempted to increase the franchise fee from 4.25 percent to 12 percent, and a dispute has existed ever since.
''This increase was based upon a franchise fee analysis prepared by the National Park Service which the Tours claims to be inconsistent with the Park Service guidelines that existed at the time. While I have limited knowledge of the merits, I do believe if errors were made, they need to be corrected.''
And it talks about the relationship that we should have between the Park Service and our concessionaires, and as many of you know, that is a major issue with this Committee.
And last year, we passed a new concessionaires bill. And this is an ongoing issue which we have.
The gentleman from Nevada, we appreciate your presence here. Do you have any opening comments before we start?
Mr. GIBBONS. No, Mr. Chairman. I welcome our witnesses and the panel here today to hear this very important issue, and I know how it is important for all of our tourists today to beas well as those people that offer services at our parksto be afforded the right treatment under the law, and I look forward to your leadership here today.
Mr. HANSEN. I thank the gentleman.
Our first witness will be our colleague from South Carolina, Mark Sanford. Mark actually represents that area. And we will now turn the time to you.
STATEMENT OF HON. MARK SANFORD, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF SOUTH CAROLINA
Page 11 PREV PAGE TOP OF DOC Mr. SANFORD. I thank you, Mr. Chairman, and I thank you. Mr. Duncan, Mr. Gibbons, for the chance to testify before the Subcommittee. And I would say I wanted to come by here simply because for me it would be an honor to introduce Mr. Campsen and his family, and, frankly, his enterprise. And I say that because if I was to pull down one word about this family, I would say honorable.
Now here is what I am getting at by that: My roots go very deep with this family. Chip and I overlapped for a year of college. He was actually at our family farm the night that my dad died. I spent the better part of 20 years on hunting and fishing trips throughout the woods and waters of the Low Country with Chip.
And the net of that is, as we all know, markets are efficient. And if you are going over to somebody else's house and they are coming over to yours, sooner or later you get that phrase from somebody that says, oh, you are going over to so and so's house; I heard this about them. And you go on to hear some horror story.
And yet over the many years that I have been with this family, I have never heard one of those stories. So I would say ''honorable'' would be a description of the family. But I would say that there is even a simpler word that describes this family, and that is the word ''integrity.''
In other words, there is a match between what they say they are going to do and what they do. There is a match between what they say they are about and what they are about.
And I think that this goes to the heart of this issue of the enterprise, Fort Sumter Tours, because each of us is stewards for the Federal Government. I think that, you know, for most people, their experience with the Federal Government is basically derived from an experience with the National Park Service, but oftentimes with a concessionaire tie-in with the Park Service.
Page 12 PREV PAGE TOP OF DOC So each of us, as fiduciaries for the Federal Government, want to have in place people who have integrityin other words, that there is a match between what they talk about doing and what they do. And this isn't important just in general in terms of that being, of wanting to have good stewards represent the face of the Federal Government, but it is also, frankly, important to a lot of folks back home.
Sure, it is important to a lot of tourists who visit Charleston, but it is important just because a lot of people back home, when somebody comes in from out of town, they say, well, you know, that first shot was fired out at Fort Sumter, I'd like to go on out there, and we go on out there. And for 364 days out of the year, three times a day, Fort Sumter Tours runs a boat out there.
And there is nothing more important than the word ''integrity'' in that service, because, again, somebody's experience at Fort Sumter is, in large part, driven by, you know, were the toilets clean on the boat getting to and from Fort Sumter, did the boat, in fact, leave on time?
In other words, this issue of integrity goes to the heart of what a concessionaire ought to be about, and if not only recognized by folks back home or by me, but, frankly, by the Park Service itself.
Now I have here a copy of an unsolicited letter to Mr. Campsen, who had received it some time ago from the National Park Service. And it reads as follow: ''His reputation for quality of service is matched by few concessions in the National Park Service and exceeded by none. His operation in Charleston has always been characterized by excellence and a concern for our visitors and the people who live in the city.''
I think that that is one part of what we are dealing with, the issue of integrity and the importance of that in a concessionaire. The other issue is what you correctly highlighted, Mr. Chairman, and that is there is a whole lot bigger issue than having to do with the Campsens, Fort Sumter Tours, Fort Sumter itself, and that is the issue of concessions.
Page 13 PREV PAGE TOP OF DOC To me, this is very important because, you know, last year, when we had that concession bill, I voted for it. In fact, I had talked to Chip Campsen. Chip didn't think it was a good idea. He said, ''Mark, I think it is going to be a problem if somebody has to get two different tickets, one ticket for Fort Sumter, one ticket to go to Fort Sumter.''
I said, ''Chip, I am going to vote against you. I think you are wrong on this because if you can isolate costs, in other words, you can say, what does it cost to do these different functions tied to or from getting, let's say, to a park, then if you can isolate that costs, and if private enterprise can do it less expensively than the Federal Government, then we ought to make more options for that being the case because as a conservative I don't want to grow the Federal Government.''
And yet, what is going on here sends precisely the wrong signal in terms of trying to grow more private enterprise and more concessions through our park system. When you have a 300 percent increase in the middle of contract period, there is no worse signal to future concessionaires, and that to me, more than the right number or the wrong number, that to me is what this issue is all about, and that is, if a concessionaire has a contract with our Federal Government, the government not breaking that contract in the middle of the contract period.
I would just ask us to remember that we have three branches of government up here for a very good reason, and that is, our Founding Fathers wanted a slow and meticulous system that would basically, you know, keep anybody from doing anything too fast. And I would just beg of the Park Service to really look at this very closely because I think we are dealing with an issue far, far greater than the Fort Sumter issue itself.
And I would yield back the balance of my time. I thank you for letting me come before you, Mr. Chairman.
Mr. HANSEN. We thank you.
Questions for Mark Sanford, our colleague from North Carolina? The gentleman from Tennessee is recognized.
Page 14 PREV PAGE TOP OF DOC Mr. DUNCAN. I have just one question, Mark. I wasn't clear. Who wrote that real positive letter that you quoted from and when was that?
Mr. SANFORD. I don't have the date on that. I would suspect Mr. Campsen could give you the dates on that, because it was from the Park Service.
Mr. DUNCAN. It was from the Park Service?
Mr. SANFORD. Yes, sir.
Mr. DUNCAN. All right. Thank you.
Mr. SANFORD. Thank you.
Mr. HANSEN. The gentleman from Nevada.
Mr. GIBBONS. Mr. Sanford, I have not been to Fort Sumter, and I hope someday to have the privilege and the honor of visiting there, and I am not familiar with all the other concessionaires that are in the Park Service. Have the other concessionairesare there other concessionaires in that Park area for the visitors there?
Mr. SANFORD. Yes. In fact, if you go on up a little bit north, there are a couple of islands that are owned and, for instance, there is a concessionaire that runs, again not to Fort Sumter but runs out to one of these coastal islands. It is a little bit north of the Charleston community. That is one that I immediately know of. And I suspect that there are others. But those are the ones that immediately jump to mind.
Mr. GIBBONS. Has there been any effort to talk to that concessionaire with regard to an increase in the franchise fee, similarin other words, a 300 percent increase in their fees that would be commensurate with the fees increase that we are talking about in this matter?
Mr. SANFORD. I have not done so. That is something worth doing. And I would be glad to have my office do just that.
Mr. GIBBONS. Well, maybe we can ask the Park Service, when they come, whether or not they have increased
Page 15 PREV PAGE TOP OF DOC Mr. SANFORD. And in fairness to the Park Service, that is a not a national park that the other concession runs. So it may be run through a different branch of government.
Mr. GIBBONS. All right. But then so as far as we know, this is the only concessionaire at Fort Sumter that has had a 300 percent fee increase in the middle of the contract?
Mr. SANFORD. To the best of my knowledge, yes, sir.
Mr. GIBBONS. Thank you, Mr. Chairman.
Mr. HANSEN. We thank our colleague. Mr. Sanford. Would you like to join us up on the dais?
Mr. SANFORD. Unfortunately, I have got a markup on OPEC, and I have to run in that direction.
Mr. HANSEN. Well, I understand. Thank you very much for your time.
Mr. SANFORD. Thank you.
Mr. HANSEN. We will call our panel up. We are pleased to have Robert Stanton, the Director of National Park Service with us; also, George Campsen, president of Fort Sumter Tours, and David E. Jackson, a certified public accountant.
If those three gentlemen would like to come up, we would appreciate it.
And, Mr. Director, if you have somebody you want at your shoulder there, that is fine. Just bring them up, too.
Mr. STANTON. Yes. Thank you very much, Mr. Chairman. I am accompanied by Mr. Cohen of our Solicitor's Office, and Mr. Bob Hyde, who is a financial analyst with the National Park Service in our Division of Concession Management.
Mr. HANSEN. Okay. Well, we will turn to you, Mr. Stanton. And you have got the floor.
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STATEMENT OF ROBERT STANTON, DIRECTOR, NATIONAL PARK SERVICE; ACCOMPANIED BY MR. COHEN, SOLICITOR'S OFFICE; ROBERT HYDE, FINANCIAL ANALYST, DIVISION OF CONCESSION MANAGEMENT
Mr. STANTON. Thank you, Mr. Chairman, and members of the Committee, for the opportunity to appear before you and to discuss certain issues surrounding the reconsideration of the franchise fees for Fort Sumter Tours, Incorporated.
Mr. Chairman and members of the Committee, I submit at the beginning of my testimony, I have been advised by our Solicitor's Office to make the following statement:
I am here today to answer questions and respond to comments concerning the franchise fee reconsideration for Fort Sumter Tours, Incorporated. You have assure me and my staff that this hearing will not be covering any of the issues in litigation between Fort Sumter Tours and the National Park Service.
I appreciate this, and certainly in keeping with this agreement, I would like to make clear that the National Park Service is not reconsidering the established franchise fees for Fort Sumter Tours. Accordingly, any statements, discussions, description, or assessments concerning the Fort Sumter franchise fee that I may make before you today do not and will not constitute a review of, a reconsideration of, or a new decision in any nature regarding the established franchise fee.
Furthermore, I note that the various calculations that we might discuss here today have been upheld in four different court proceedings, including the Fourth Circuit Court of Appeals, as lawful and not an arbitrary nor capricious.
Any statement that I may make before you today, Mr. Chairman and this Committee, to the effect that a particular calculation could be done other ways, does not in any manner suggest, admit, or otherwise imply that the decision made by the National Park Service in this process was arbitrary, capricious, or otherwise unlawful.
Page 17 PREV PAGE TOP OF DOC Now, in addition, I note that as part of this hearing, Mr. Chairman, you and the Committee have requested significant financial information on Fort Sumter Tours. Some of this information is proprietary or confidential. But because of Fort Sumter Tours participation in today's hearing, we assume that the release of this information is agreeable by the concessionaire under law 18 USC 1905. And I would hope, Mr. Chairman, that you would advise it is appropriate that this information be available on the concessionaire's financial status.
This matter is certainly an essentially money dispute on a business contract. And if I may, I would like to elaborate. The contract was entered into by the National Park Service and Fort Sumter Tours in 18pardon me, in 1986 and expires in the year 2000. The contract grants for Fort Sumter Tours the exclusive opportunity to transport by tour boat visitors from Charleston, South Carolina, to Fort Sumter National Monument for Fort Sumter current annual visitation of approximately 230,000 visitors per year.
Ninety-nine percent of these visitors travel to Fort Sumter on boats operated by Fort Sumter Tours. Fort Sumter Tours charges visitors $10.50 for adults. The gross receipts for 1998 were $2,471,938. The contract requires Fort Sumter Tours to remit 12 percent of the gross receipts to the United States for the privilege of serving on an exclusive basis anyone wishing to visit Fort Sumter through the use of their boat.
Fort Sumter Tours' 15-year contract was entered into under the Concession Policy Act of 1965. The contracts governed by the Concession Policy Act were not subject to meaningful competition because existing concessionaires enjoy preference over outside business.
These preferential rights often precluded market forces from affecting franchise fees. Under the Concession Policy Act, the National Park Service was required to include in concession contracts of more than five years in duration, provision provided for reconsideration of the contract franchise fees at least every five years.
Since 1979, the National Park Service concession contracts have provided that the contract-established franchise fees may be adjusted, up or down, every five years at the request of either the concessionaire or the National Park Service.
Page 18 PREV PAGE TOP OF DOC The provision provides that if the National Park Service and the concessionaire do not agree upon an adjusted franchise fee within a specified period, the concessionaire may appeal to the Secretary his position as to an appropriate franchise fee. And the concessionaire may choose to invoke arbitrarypardon me, advisory arbitration proceeding in this process.
Any fee resulting from a reconsideration either up or down must be consistent with the probable value of the privilege by the contract based upon a reasonable opportunity, a reasonable opportunity for net profit in relation to both gross receipts and capital investment.
The standard was set by Congress in the Concession Policy Act that I referenced earlier. The standard is protection for both the concessionaire and the taxpayers.
Briefly, it is important to review the history of this provision and its application. Since 1979, several hundred franchise-fee consideration periods have occurred under existing NPS contracts. In many of these instances, neither the Park Service nor the concessionaire sought changes either up or down to the franchise fee.
In a number of other instances, when either the Park Service or the concessionaire sought a franchise fee reconsideration, both the National Park Service and the concessionaire were able to arrive at a mutually acceptable agreements as to the appropriate franchise fee.
In four instances recently, concessionaires have chose to invoke the advisory arbitrary process established in the contract to resolve proposed franchise fees. In one of these situations, the matter was settled. In the remaining three, the National Park Service and concessionaire participated in the arbitration proceeding, and the Secretary made a final decision, taking into consideration results of the arbitration.
In each of these instances, the franchise fees were increased. However, in each of these cases, concessionaires accepted the final decision of the Secretary and the higher franchise fee became part of the contract without judicial challenge. All these concessions remain profitable in business today.
Page 19 PREV PAGE TOP OF DOC In no cases, except in one that is the focus of today's hearing, has a concessionaire challenged the legality of the process of the executed contract. In no cases, except the one before us today, has a concessionaire refused to negotiate the appropriate franchise fee.
In this case, Fort Sumter Tours chose to litigate the issues before the courts. The courts have uniformly upheld the legality of the reconsideration provision and the basis of our decision.
The National Park Service has a system for establishing franchise fees. In 1980, the National Park Service was repeatedly criticized by Congress, by the General Accounting Office of Congress, by the Inspector General's Office of the Department of Interior, and others in terms of a need to take a more critical look at the establishment and reconsideration of franchise fees.
We took these criticisms seriously and have now ensure a more rigorous implementation of the system. This implementation is fair to the concessionaire, fair to the National Park Service, and certainly fair to the taxpayer.
In performing the reconsideration analysis, the National Park Service compares the financial record of the concession to its counterparts in the industry to assist in determining the probably value of the contract.
When the Fort Sumter Tours were initially executed, the fee was designated 4.25 percent of gross revenue. However, a franchise fee analysis performed in 1991 showed that the probably value of these privileges warranted a fee of 12 percent. This analysis compared the financial records and the business opportunity of Fort Sumter to those similarly situated businesses using statistics generated by Dun and Bradstreet.
We understand that it has been reported to the Committee that the National Park Service took into account non-concession revenues for calculating the profit of Fort Sumter Tours makes under this concession contract. While there was one technical error in the original franchise fee, that may suggest that this income was taken into account as we described to you in the letter of December 8th. This income was not taken into account in the final determination, nor did it affect the final determination.
Page 20 PREV PAGE TOP OF DOC A complete review of the financial analysis shows that the 12 percent fee was determined solely on the basis of the revenue associated with the concession contract and a proper allocation of cost associated both with the concession and with the non-concession business. It is not disputed that in 1992 that Fort Sumter Tours was notified of the proposed franchise fees reconsideration and that it had contractual right to seek advisory arbitration over its reconsidered fee. As detailed in the letter of December 5, 1998, to you, Mr. Chairman, and the Committee, we advised that the litigation has since pursued. The United States Government has prevailed in every phase of this litigation.
I want to close and underscore the fact that we remain, however, receptive to resolving this dispute. We have asked the United States Attorney's Office to be open to any reasonable settlement offer by Fort Sumter Tours. To date, Fort Sumter Tours has not participated in any substantive discussions with respect to settlement of this dispute.
Mr. Chairman and members of the Committee, this concludes my prepared remarks with respect to the background on the reconsideration of the franchise fee for Fort Sumter Tours, Incorporated. Along with my colleague, Mr. Ed Cohen and Mr. Bob Hyde, we will be more than happy to respond to any questions or comments on the part of you, Mr. Chairman, and members of the Committee.
Thank you again for this opportunity.
[The prepared statement of Mr. Stanton follows:]
STATEMENT OF ROBERT STANTON, DIRECTOR, NATIONAL PARK SERVICE
Thank you for the opportunity to discuss with you certain issues surrounding the reconsideration of the franchise fee of Fort Sumter Tours, Incorporated. As I begin my testimony, I have been advised by the Solicitor's Office to make the following statement:
I am here today to answer your questions concerning the franchise fee reconsideration for Fort Sumter Tours. You have assured me and my staff that this hearing will not be covering any of the issues in litigation between Fort Sumter Tours and the National Park Service. I appreciate this and in keeping with this agreement I would like to make clear that the National Park Service is not reconsidering the established franchise fee for Fort Sumter Tours. Any statements, discussions, descriptions or assessments concerning the Fort Sumter franchise fee that I may make before you today do not and will not constitute a review of, a reconsideration of, or a new decision of any nature regarding the established franchise fee. Furthermore, I note that the various calculations that we discuss here today have been upheld in four different court proceedings, including the 4th Circuit Court of Appeals, as lawful, and neither arbitrary nor capricious. Any statement that I may make before you today to the effect that a particular calculation could be done another way does not in any manner suggest, admit, or otherwise imply that the decisions made by the National Park Service in this process were arbitrary, capricious or otherwise unlawful.
Page 21 PREV PAGE TOP OF DOC In addition, I note that, as part of this hearing, you have requested significant financial information of Fort Sumter Tours. Some of this information is proprietary or confidential. Because of Fort Sumter Tours participation in today's hearing, we are assuming that the release of this information is agreed to by the concessioner under law, including 18 U.S.C. 1905. Please advise us if the concessioner believes otherwise.
This matter is essentially a money dispute under a business contract. The contract was entered into by the National Park Service and Fort Sumter Tours in 1986, and expires in 2000. The contract grants Fort Sumter Tours the exclusive opportunity to transport by tour boat visitors from Charleston, South Carolina, to Fort Sumter National Monument. Fort Sumter's current annual visitation is approximately 230,000 visitors per year. Ninety nine percent of the visitors travel to Fort Sumter on boats operated by Fort Sumter Tours. Fort Sumter Tours charges visitors $10 per adult visitor. The business' gross receipts for 1998 were $2,471,938. The contract requires Fort Sumter Tours to remit 12 percent of the contract's gross receipts to the United States for the privilege of serving, on an exclusive basis, anyone wishing to visit Fort Sumter.
Fort Sumter Tours' 15-year contract was entered into under the Concessions Policy Act of 1965. The contracts governed by the Concessions Policy Act were not subjected to meaningful competition because existing concessioners enjoyed preferences over outside businesses. These preferential rights often precluded market forces from affecting franchise fees.
Under the Concessions Policy Act, NPS was required to include in concessions contracts of more than five years in duration a provision providing for the reconsideration of the contract's franchise fee at least every five years. Since 1979, NPS concession contracts have provided that the contract's established franchise fee may be adjusted, up or down, every five years, at the request of either the concessioner or the NPS. The provision provides that if the NPS and the concessioner do not agree upon an adjusted franchise fee within a specified period, the concessioner may appeal to the Secretary its position as to an appropriate franchise fee, and the concessioner may choose to invoke advisory arbitration proceedings in this process. Any fee resulting from a reconsideration, either up or down, must be consistent with the probable value of the privileges granted by the contract, based upon a reasonable opportunity for net profit in relation to both gross receipts and capital invested. This standard was set by Congress in the Concessions Policy Act. The standard protects both the concessioner and the taxpayer.
Page 22 PREV PAGE TOP OF DOC It is important to review the history of this provision. It is also important to discuss with you the implementation of this provision.
Since 1979, several hundred franchise fee reconsideration periods have occurred under existing NPS concession contracts. In many of these instances, neither the NPS nor the concessioner sought changes, either up or down, to the franchise fee. In numerous other instances, when either the NPS or the concessioner sought a franchise fee reconsideration, both the NPS and the concessioner were able to arrive at a mutually acceptable agreement as to the appropriate franchise fee.
In four (4) instances, concessioners have chosen to invoke the advisory arbitration process established in the contract to resolve a proposed franchise fee increase. In one of these situations, the matter was settled. In the remaining three, the NPS and the concessioner participated in the arbitration proceedings, and the Secretary made a final decision, taking into consideration the results of the arbitration. In each of these three instances, the franchise fee was increased. However, in each of these cases, the concessioner accepted the final decision of the Secretary, and the higher franchise fee became part of the contract without judicial challenge. All of these concessioners remain profitably in business today.
In no case, except the one that is the focus of today's hearing, has a concessioner challenged the legality of the process of the executed contract. In no case, except the one before us today, has a concessioner refused to negotiate the appropriate franchise fee. In this case, Fort Sumter Tours chose to litigate the issues before the courts. The courts have uniformly upheld the legality of the reconsideration provision, and the basis for our decision.
This concessioner is not being treated differently from other concessioners. This concessioner has not been treated unfairly.
The National Park Service has a system for establishing franchise fees. In the 1980s, the National Park Service was repeatedly criticized by numerous reports from both the Inspector General's Office of the Department of the Interior and the General Accounting Office for its implementation of this system.
Page 23 PREV PAGE TOP OF DOC The National Park Service took these criticisms seriously. We have now ensured a more rigorous implementation of our system. This implementation is fair to the concessioner, fair to the National Park Service, and fair to the taxpayer. In those cases when this has resulted in increased franchise fees, we note that the concessioners operating under these contracts continue to operate profitably. We have no shortage of individuals and companies that are willing to do business in our National Parks under this system.
In performing the reconsideration analysis, the National Park Service compares the financial records of a concessioner to its counterparts in the industry to assist in determining the probable value of the contract.
When the Fort Sumter Tours contract was initially executed, the fee was designated as 4.25 percent of gross revenue. However, a franchise fee analysis performed in 1991 showed that the probable value of these privileges warranted a fee of 12 percent. This analysis compared the financial records and the business opportunity of Fort Sumter Tours, Inc. to those of similarly situated businesses, using industry statistics generated by Dun and Bradstreet. We understand that it has been reported to the Committee that the National Park Service took into account non-concession revenue when calculating the profit that Fort Sumter Tours makes under this concessions contract. While there was one technical error in the original financial analysis that may suggest that this income was taken into account, as we described to you in our letter of December 5, 1998, this income was not taken into account in the final fee determination, nor did it affect this determination. A complete review of the financial analysis shows that the 12 percent fee was determined solely on the basis of the revenue associated with the concessions contract, and a proper allocation of costs associated with both the concession and the non-concession businesses.
It is not disputed that in 1992, Fort Sumter Tours was notified of the proposed franchise fee reconsideration, and that it had a contractual right to seek advisory arbitration over this reconsidered fee. Fort Sumter Tours chose not to engage in negotiations with the National Park Service, or in advisory arbitration. Fort Sumter Tours instead chose to sue the United States over the reconsidered fee. As is detailed in my letter to you, of December 5, 1998 (attached to this testimony), Mr. Chairman, this matter has been in litigation ever since. And, the United States has prevailed at every phase of this litigation.
Page 24 PREV PAGE TOP OF DOC We remain, however, receptive to resolving this dispute. We have asked the United States Attorney's Office to be open to any reasonable settlement offer made by Fort Sumter Tours. To date, Fort Sumter Tours has refused to participate meaningfully in any settlement discussions.
This concludes my testimony. I would be happy to answer any of your questions.
Mr. HANSEN. Thank you, Director Stanton.
As you folks know, we have no control over what happens on the floor. And those two lights at the back mean that we have a vote on that we have to run on a rule. We will try to get back as soon as we can, and we will stand in recess till then.
Mr. HANSEN. The Committee will come to order.
Staff tells me that, Mr. Director, that you have to leave here at 12:30. Is that correct?
Mr. STANTON. In deference to you, Mr. Chairman, I will be flexible on that.
Mr. HANSEN. I would like to have you hear the testimony of the other witnesses. So, how long is your testimony going to be, Mr. Campsen?
Mr. CAMPSEN. Mr. Chairman, five minutes is the allotted time, and I will be within five minutes.
Mr. HANSEN. Well, we are being generous today. We may give you seven or eight minutes, if that is what you need.
Mr. CAMPSEN. Thank you, sir.
Mr. HANSEN. Okay. And Mr. Jackson?
Page 25 PREV PAGE TOP OF DOC Mr. JACKSON. I would hope to finish mine in five minutes as well.
Mr. HANSEN. Well, then we have got about 43 minutes. So, Mr. Campsen, why don't we turn to you, and then we will question all three of you and we'll complete our testimony.
Mr. Campsen, you have the floor.
STATEMENT OF GEORGE CAMPSEN, PRESIDENT, FORT SUMTER TOURS, INC.
Mr. CAMPSEN. Thank you, Mr. Chairman, gentlemen of the Committee. My name is George Campsen. I am president of Fort Sumter Tours. Now Fort Sumter National Monument in Charleston is accessible only by boat, and in 1961, the Park Service was publicly seeking a private concessionaire, to begin public boat transportation out to the Fort.
Out of five competing proposals, we were selected. And with money borrowed from a local bank, we acquired the vessels and so forth, and enthusiastically became involved with our government in business. We viewed it as a partnership, with the Park Service being the senior partner.
We are family-owned and -operated. And over the years, my wife and I and our four children, as they grew older, all worked to make this concession successful, and working in complete harmony with local park officials. We build and developed a highly reputable service, and visitation steadily increased.
Now, in the mid-1980's, the service recognized that a second mainland docking facility and a larger vessel was really necessary and desirable at Fort Sumter. The estimated cost to the concessionaire would be at least $1 million.
Now, Mr. Chairman and gentlemen, we are a small, relatively speaking, we are a very small concessionaire, with annual gross income approximately at that time of $1.4 million. But we recognized that this expansion desired by the Service was really needed.
Page 26 PREV PAGE TOP OF DOC And to facilitate private financing of these needs, the Service offered a 15-year contract so that you could borrow money from a bank and show them how you were going to be able to pay off the loan.
And they issued a prospectus and published it widely seeking proposals from all interested parties. But no one else was interested. So we borrowed more money, and we agreed to make the investments, and we did make the investments. And this 15-year, current 15-year contract was executed in 1986.
As you know, all concessionaires pay a franchise fee based upon the ''probable value'' of your particular contract privileges. At that time, the Service valued our privileges at the rate of 4.25 percent of our gross receipts. Now even though this was a 1 percentage increase over our contract that we had at that time, we nevertheless thought it was reasonable. And we agree to it.
But we were shocked and dismayed that after the first five years of this 15-year contract, we were advised that the Service had reconsidered the probable value of these same contract privileges, but we were shocked and dismayed because the Service informed us that these same privileges had somehow increased in value to 12 percent.
We were shocked because the scope of our privileges had not changed one bit. We were really shocked, Mr. Chairman, because the franchise fee analysis, developed by a bureaucrat in the Washington office of the Service, contained serious mistakes. These are the same mistakes that are plaguing us and threatening to destroy us today, the mistakes that we have pointed out in this franchise fee analysis.
We prepared a professionally-developed critique highlighting these mistakes, and in good faith we requested an opportunity to present them to appropriate officials of the National Park Service. This we did in 1996. We said, ''Gentlemen, here are the mistakes that were made in this franchise fee calculation. Here are the consequences of these mistakes. We don't deserve this kind of treatment. These things are clear errors. Won't you please reconsider your position and correct them?'' They listened, but they refused to budge.
Page 27 PREV PAGE TOP OF DOC Now, these mistakes in this franchise feel analysis, they create the illusion that our small concession is more profitable than it actually is. We have demonstrated that in figures, in positions which the Park Service really does not contradict.
Please, please understand that we are not attempting to avoid paying a properly calculated fee. What we are seeking, gentlemen, is relief from paying a fee based upon an analysis that contains obvious mistakes, which are very, very destructive to our small business.
Now, we are all imperfect human beings, and we all make mistakes. Certainly, we have made mistakes. But what we can't understand is why in the world our own government, which I love and respect, cannot admit to some obvious mistakes and correct them.
The principles of our small company, gentlemen, and our 44 employees have been living in job peril for almost seven years. It has been a costly and unwarranted nightmare. We are mystified why the United States of America behaves in this fashion.
We have always provided outstanding service at Fort Sumter. And the Park Service admits this. We have done nothing to deserve this type of treatment. And please, in the interest of all, please help resolve this matter on its true merits.
I thank you for your consideration. I shall be happy to answer any questions.
[The prepared statement of Mr. Campsen follows:]
Mr. HANSEN. Thank you, Mr. Campsen.
Now, Mr. Jackson, we will turn to you sir.
Mr. INSLEE. Mr. Chair? Mr. Chair?
Mr. HANSEN. Sorry.
Mr. INSLEE. I am sorry. Could I interrupt just for a moment? I need to go over to the floor, and I have one question I would love to ask. Would you permit me to ask the witnesses that question?
Page 28 PREV PAGE TOP OF DOC Mr. HANSEN. Surely, I will recognize you for one question. Is that what
Mr. INSLEE. Yes, just one.
Mr. HANSEN. Sure, go right ahead.
Mr. INSLEE. I appreciate the Chair's indulgence. I am sorry I won't be able to stay. I have to excuse myself to go to the floor.
I just wanted to ask Mr. Stanton a question. I have talked to these folks about this situation, and I am not an expert on this obviously, but I wanted tothey relayed a concern to me about a disagreement. Disagreements are human. All people in contractual relationships get into disagreements, not too irregularly. They described their concern to me as much, notobviously they are concerned by the disagreement, but they said that they couldn't get the Park Service to sit down with them to explain the Park Service's rationale or logic or analytical system in devising this. And they had asked the Park Service for that information the Park Service based their numbers on, basically, and that the Park Service was unwilling to share that with them.
And I thought that was a little surprising. I would think in this context that each side would sort of share their model or their analysis with the other so that each could poke holes in it, basically, and everybody could put their cards on the table and have a good argument.
I just want to, would like you to comment. Is their characterization accurate? Or is there a misunderstanding? Or do we need to improve that sort of showing each other's cards?
Mr. STANTON. Appreciate the question, and I will attempt to be brief in response, and I also would ask Mr. Cohen to comment because I would reference the present status.
Page 29 PREV PAGE TOP OF DOC As mentioned in my testimony, that as a condition or provision within the concession contract there was to be, or could be, a reconsideration of the franchise fees five years after the first five years of the contract, that would involve the National Park Service conducting a financial analysis of the concessionaire, providing a financial report on which we based the financial analysis, and then communicating with the concessionaire and see whether there was any difference or problem with that.
As that process was underway, there was not any major substantive discussion prior to the concessionaire filing a suit, arguing that the franchise fee calculation by the Park Service, although preliminary at that stage, was totally off base, if you will.
Consequently, as we entered into discussion with the courts or the Justice Department, there was some limitation in terms of how we could interact unilaterally with the concessionaire. And I will ask Mr. Cohen to just comment on what those procedures that were applied in that instance.
Mr. COHEN. Thank you, Mr. Director. Let me just expand for a moment. The contract itself specifies a process for the reconsideration of a fee. And it indicates that every five years either party may seek an adjustment up or down. In this case, in the first five-year period, the Park Service sought an adjustment up.
The normal process in this is for the Park Service to put its cards on the table and for there to ensue an informal give-and-take, just as you described. That did not occur. In the normal casein the normal casethere is an opportunity, if the concessionaire does not agree with the decision of the Park Service, to appeal it to the Secretary. That did not occur.
In that same process, there is an opportunity for the concessionaire to seek voluntary arbitration. That did not occur in this case. It did not occur because the concessionaire made the decision, for whatever reason, and is certainly free to make that decision, to go directly to court.
Page 30 PREV PAGE TOP OF DOC So the normal opportunity, where the differing figures in this process, and this is not a precise process because you are trying to reconstruct a marketplace circumstance, which is an artificial situation because you don't have competition.
So the purpose of the informal process is to have that give-and-take that didn't happen here. It is unfortunate that it didn't happen here. But it wasn't just once that it didn't happen. It didn't happen the second five-year period either. And we can have discussions as to why it did or didn't happen the second five-year period, but I can tell you that when the second five-year period was appealed to District Court, the government offered the opportunity to go back and start the process over again in mediation. And that did not occur.
So I think there is a record that demonstrates that our process envisions exactly what you have described. It just hasn't been employed here. And I don't think it is a coincidence that the only situation where a franchise fee reconsideration has ended up in court is the only situation where the process that I have just described did not occur.
Mr. INSLEE. Thank you. And I will read your testimony for the remainder of the hearing. I need to excuse myself. Thank you very much.
Mr. HANSEN. I don't want to hold this up, but I think the gentleman from Washington asked quite an interesting question there. Let me just quickly ask this one to pick up on what he said: When they asked for information from the Park Service before going to court, was it forthcoming from the Park Service?
Mr. Campsen, do you want to respond to that?
Mr. CAMPSEN. Mr. Chairman, I would defer to my legal adviser, Mr. Dickson.
Mr. HANSEN. I don't want to get you all tied up in legalistics here. Remember, you are not in court here. We don't even have a contempt charge.
Page 31 PREV PAGE TOP OF DOC Mr. DICKSON. There is a simple answer to the question, Mr. Chairman, and you will note that neither the Director nor his attorney gave Mr. Inslee a direct answer to his question. The answer to the question is the information was not turned over. To this day, it has not been turned over.
Mr. HANSEN. I guess I just assumedand I don't want to belabor this; I want to get to Mr. Jackson herebut I assumed why they didn't go through the procedure, and maybe I am on a false assumption, I don't know, was because they were asking for information that wasn't given to them.
Mr. DICKSON. That is correct.
Mr. HANSEN. And that is the reason that they circumvented the process, if I understand this right? Keep in mind, I don't have a dog in this fight. I am just trying to figure out what happened.
Mr. DICKSON. What happened was, the draft franchise fee analysis was prepared and was given over to Fort Sumter Tours. It was obvious that a number of decisions had been made based on industry statistics, such as Dun and Bradstreet numbers. But Fort Sumter Tours said, can we have this information, please. The Park Service said, no, you cannot. And so, I don't know how you are supposed to negotiate with somebody if you don't understand the basis on which the decision was made.
They filed a Freedom of Information Act appeal, and that was denied. And for the year that this process of trying to get the data went on, all parties agreed that access to this data was withdrawn.
Then, in April of 1993, the Park Service changed its mind and said, ''We are done. Here is your franchise fee. It is over.''
Mr. HANSEN. We have some interesting rules of discovery here, haven't we?
Page 32 PREV PAGE TOP OF DOC Mr. Jackson, let's turn to you, sir.
STATEMENT OF DAVID E. JACKSON, CERTIFIED PUBLIC ACCOUNTANT
Mr. JACKSON. Good morning, Mr. Chairman and honorable member of the Subcommittee. First, I want to thank you for allowing me to testify this morning.
Mr. Chairman, I am here because my firm has served as the independent auditors of Fort Sumter Tours since 1995. They asked me to review a franchise fee analysis, which had been prepared by the Park Service from the information which had been extracted from its audited financial statements. Mr. Chairman, my review revealed that this analysis contains numerous mistakes that fall into three categories of errors.
First, there are errors which violate Park Service guidelines. Second, there are errors in the application of generally accepted accounting principles. And third, there are errors resulting from a lack of understanding as to how a small, family-owned business operates.
Because of these mistakes, Fort Sumter Tours will incur over a hundred thousands dollars a year in additional franchise fees due to the false conclusions derived from this analysis. Mr. Chairman, this represents a significant amount of money to Fort Sumter Tours because it is a small, family-owned business, and during this period of time, its gross receipts was only $1.4 million.
Basically, the Park Service went through four steps in this analysis. First, it calculated the company's average annual concession profit. Next, it made some financial adjustments. Third, it calculated some financial ratios. And then finally, it compared these ratios with what it claimed are industry standards to determine if a franchise fee increase was justified.
Page 33 PREV PAGE TOP OF DOC I have an exhibit which is captioned, ''The Wrong Way: What the Park Service Did,'' which presents the conclusions derived by the Park Service from these four steps. This is worksheet four, which is in their analysis. Mr. Chairman, I would like to present four mistakes of the types of errors that I found in the analysis.
The first two mistakes are violations of Park Service guidelines. The first mistake is the Park Service included over $195,000 of non-concession income in the calculation of concession net profits. It is a clear violation of its guidelines.
I don't understand why this income was included because it was clearly identified in the analysis. This mistake represents almost 50 percent of the concession profit that the Park service claims Fort Sumter Tours earned. This one mistake invalidates the ratio comparisons contained in the analysis and eliminates the justification for a fee increase. It is a very serious mistake.
The second mistake is a byproduct of the first mistake, because including the incorrect income in the calculation of the maximum allowable fee is to cause this to be overstated. The maximum allowable fee, without this income, is only 8.7 percent, not the 15.6 percent that the Park Service claimed in the analysis. Because of this mistake, the Park Service increased Fort Sumter's franchise fee rate to 12 percent, which is significantly greater than 8.7 percent. And it is again a clear violation of their guidelines.
We have an exhibit which is captioned ''The First Correction,'' taking out the non-concession income, which presents the conclusions which would have been derived if this income had been removed. Again, these are very serious mistakes.
The next mistake results from errors in the application of generally accepted accounting principles as it related to an adjustment to capitalize a vessel that was leased by the company from a related partnership. This vessel, as Mr. Campsen indicated earlier, was the basis for the 15-year new contract that the company was granted in 1986. This adjustment should not have been made because it had already been properly reported and recorded in the company's audited financial statements. This mistake caused the concession profit to be overstated by $70,000another serious mistake which invalidates the ratio comparisons.
Page 34 PREV PAGE TOP OF DOC The final mistake that I want to present clearly demonstrates a lack of understanding by the Park Service as to how a family business operates. Without an investigation of the type of duties performed, the Park Service reduced officer salaries by $163,000. Mr. Chairman, it is very common, for all family members working in a small business, to be named as officers. In fact, Fort Sumter Tours officers perform numerous non-officer functions.
And they are compensated in line with the industry pay for the duties performed. Again, the Park Service made no attempt to gain an understanding of the actual duties being performed. And this adjustment should not have been madeanother serious mistake which invalidates the ratio comparisons.
To summarize, Mr. Chairman, in my opinion, this analysis contains mistakes totaling over $428,000 in the calculation of Fort Sumter Tours' concession profits. These serious mistakes represent almost one-third of the company's total gross revenue of $1.4 million.
If these mistakes are correctedand we have an exhibit which is captioned, ''What the Park Service Was Supposed to Do''the conclusions would have been that there was no fee increase justified.
Thank you, Mr. Chairman. This concludes my prepared remarks. And I also will be happy to answer questions of the Subcommittee.
[The prepared statement of Mr. Jackson follows:]
STATEMENT OF DAVID E. JACKSON, CPA
Because my firm has served as the outside independent auditors of Fort Sumter Tours, Inc. (FST) since 1995, I was asked to review a Franchise Fee Analysis (FFA) dated February 27, 1992, which had been prepared by the National Park Service (NPS). To formulate a reasonable basis for my opinion, I familiarized myself with the Concession Policy Act, Public Law 89-249 and NPS-48 as they relate to calculating franchise fees. My review revealed that this analysis contains numerous mistakes that fall into three categories of errors which include violations of the NPS's guidelines for the preparation of franchise fee analysis, improper applications of Generally Accepted Accounting Principles (GAAP), and a lack of understanding of how a small family business operates. If these mistakes are not corrected, it will cost FST over $100,000 a year in additional franchise fees because of the faulty conclusions derived from this analysis which served as the basis for a recommended franchise fee increase from 4.25 percent to 12 percent of gross revenue from concession operations. This represents a significant sum of money to FST because it is a small family owned business whose average annual gross revenue from its concession operations as calculated by the NPS in this analysis was only $1.4 million a year.
Page 35 PREV PAGE TOP OF DOC In general, to prepare this analysis, the NPS extracted financial information from the audited financial statements of FST for the five year period 1986 through 1990. From this information, the NPS calculated the average annual profit generated by the company from its concession operations, made certain financial adjustments, and then calculated three financial ratios. These three financial ratios are Return of Gross Revenue (ROG), Return on Equity (ROE) and Return on Assets (ROA). Return is defined as the net profits after income taxes generated by the company from its concession operations. This net income is the numerator in each of the profitability measures utilized by the NPS. The denominators are gross concession revenue for ROG, average equity for ROE, and average assets for ROA. After calculating the financial ratios, the NPS then compares them to some industry standards for similar companies to determine if the operating results fall within an acceptable range. If the ratios are acceptable, no franchise fee increase is warranted. In this instance, because of the erroneous adjustments contained in the analysis, the NPS decided to increase the existing franchise fee rate. In the following paragraphs, I will present examples of the types of mistakes contained in the analysis.
Mistakes/Omissions Which Violate NPS Guidelines
This first mistake made by the NPS in this analysis was the inclusion of non-concession income of $195,603 in the calculation of the profit FST was generating from its concession operations. This income was clearly identified in the analysis as other non-concession income. Its inclusion is an indisputable violation of its own guidelines. NPS-48 clearly states that financial reports should reflect only in-park operations and should not include income or expenses of other non-concession operations or business of a concessioner's organization. This error represents almost 50 percent of the concession profit calculated by the NPS in the analysis. This one mistake completely invalidates the entire ratio analysis comparisons contained in the document because as previously stated ''Return'' means the net profits from concession operations. It also eliminates the justification for a fee increase because if this error were corrected, the financial ratios of FST would fall within the acceptable industry standards. (See Exhibit 1 for calculations.)
Page 36 PREV PAGE TOP OF DOC NPS guidelines state that the maximum franchise fee should not be greater than 50 percent of the concessioner's pre-tax and pre-franchise profit. The purpose of this calculation is not to set the fee, but to establish the maximum fee NPS may impose. NPS calculated FST's maximum permissible fee at 15.6 percent. If the above error (including non-concession income in this maximum fee calculation) is corrected, the maximum permissible franchise fee would be 8.7 percent not the 15.6 percent fee calculated by NPS. The recommended 12 percent franchise imposed by the NPS on the company is greater than the correct maximum allowable fee and is another violation of its guidelines. (See Exhibit 1 for calculations.)
NPS's worksheet found on page 6 of the analysis contains numerous mistakes which affect the conclusions which were supposed to be derived from the information presented. In the column which presents the average amounts with a 4.25 percent franchise fee, several errors can be found. First, as mentioned above, the reported amounts include other income of $195,603 from non-concession sources. In addition, the income taxes of $36,330 presented in this column is incorrect. In the calculation of this average from the information extracted from FST's audited financial statements, NPS failed to consider that no income taxes were included for two out of the five years presented. In 1989, FST elected under allowable Internal Revenue Codes to be taxed as an ''S'' corporation. Under these regulations, the taxable income of the company is reported on the individual income tax returns of its shareholders. A provision for income taxes should have been included for these two years in the determination of the true net income the company earned from its concession operations. Again, this caused the reported profit to be overstated which would have also caused the financial ratios to be overstated. The titles for the other columns presented are very misleading. The column descriptions contain which new franchise fees are included in its presentation. However, in each instance, the heading amounts did not agree with the actual calculated amount of the franchise fee used in the column. For example, the actual fee rate used in the column designated as including a 12 percent rate was actually only 10.3 percent. This misrepresents the results contained in the worksheet and the conclusions which can be derived from them. As discussed in more detail below, NPS failed to include the effects of a capitalization adjustment relating to a vessel when calculating ROE and ROA in this worksheet. Again, this caused these profitability measures to be overstated. (See Exhibit 2 for calculations.)
Page 37 PREV PAGE TOP OF DOC NPS guidelines also permit making positive adjustments which might be beneficial to a concessioner. This is a recognition that a mature company is likely to have fully depreciated assets and little debt which would make it appear more profitable in a comparison with a relatively new business because its depreciation and interest expense deductions would not be as large. NPS failed to make any adjustments in the calculation of the financial ratios even though FST is a mature company with significant fully depreciated assets and very little debt.
Mistakes in the Application of Generally Accepted Accounting Principles
Material errors were made in a capitalization adjustment by NPS relating to a vessel which was leased to FST by a partnership in which it was a 50 percent partner. This acquisition is the single largest financial transaction ever undertaken by the company. In addition, the purchase of this boat was the basis for the NPS granting FST a new 15 year contract in 1986. This adjustment should not have been made because this lease had already been recorded and properly reported in accordance with GAAP in the audited financial statements of the company, This incorrect adjustment caused the concession profit to be overstated by $70,000 in the analysis. Again, the ''Return'' portion of the financial ratio calculations were overstated and the underlying profitability measures were overstated because of this error.
Even if you agree with the premise that the adjustment should be made, and I don't because it is not in accordance with GAAP, NPS incorrectly used a cost of $1 million and debt of $600,000 in the capitalization adjustments. I also prepare the income tax returns for the partnership which owns this vessel and it cost over $1.4 million and the debt incurred in its purchase was $1.3 million. There was no explanation given in the analysis to support the use of the wrong amounts and I can think of no basis under GAAP for the use of incorrect dollar amounts. The use of the wrong amounts caused the concession profit to be overstated by $56,000 because both depreciation and interest expenses would be understated. Once again, the ''Return'' portion of the financial ratio calculations were overstated and so were the underlying profitability measures. In addition, the company was deprived of the right to earn a return on $400,000 of its assets. To compound this mistake, when the profitability ratios of ROA and ROE were calculated, the related capitalized value and equity were ignored. Again, this caused these two profitability ratios to be overstated ( See Exhibit 2 for calculations)
Page 38 PREV PAGE TOP OF DOC Another mistake in the application of GAAP occurred when NPS assumed away $347,700 of the company's equity. The only reason given in the analysis was that this was done ''to approximate industry.'' Equity and debt are the two primary sources of capital utilized by a company. Capital is the amount invested by the owners of the company and debt is a loan to the company. Neither are free because an owner wants a return on his investment, usually in the form of a dividend, and interest must be paid on a loan. NPS guidelines recognizes that in setting franchise fees, owners are entitled to a return on their invested capital. As previously mentioned, an adjustment should be made to reflect the fact that a company has low debt because retained capital is being used to finance the operations of the business. I can think of no place in GAAP when you can just assume away equity of a business and that is what was done with this adjustment. By assuming away this equity, the profitability measure of ROE was overstated in the analysis.
If you agree with the premise that this adjustment was correct, and I do not, NPS should have increased the debt of the company by the same $347,700. In addition, an adjustment should have been made to the concession profit for the interest which would be due on this loan. Again, by not making this adjustment, the ''Return'' in the profitability measures of ROG, ROA and ROE would have been overstated and the resulting calculations incorrect.
Lack of Understanding of How a Small Business Operates
NPS clearly demonstrated a lack of understanding of how a small family owned business operates when officer salaries were reduced by $162,762 without any investigation of what type of duties were being performed by the officers of the company. It is common practice for all family members who work in the business to be named an officer of their company. Their birthright not their actual duties is the reason for them being elected as officers. The officers of FST perform many non-officer duties and are compensated in line with industry pay for these duties. The NPS made no attempt to gain an understanding of the actual duties of the officers and this adjustment should not have been made. Again this resulted in the concession profit to be overstated which caused the ''Return'' in the profitability ratios to be overstated and invalidates their calculations.
Page 39 PREV PAGE TOP OF DOC
In my opinion, this analysis contains mistakes totaling over $428,000 in the determination of FST's concession profits. These errors represent almost one third of the average gross revenue of $1.4 million it derived from its concession operations. These mistakes invalidate the financial ratio comparisons contained in the analysis and eliminates the NPS's basis for the fee increase.
This concludes my prepared testimony. I will be happy to answer any questions from the Subcommittee.
Mr. HANSEN. Thank you. We have copies of these charts here in our hands. Does the Park Service have these charts?
Would you getyou can take those down, if you would, please. But, would somebody get the Park Service these charts? I would like to have them there. Would you get those and get those to the Park Service? I would like a response from those.
And while we are doing that, Mr. Gibbons, we will turn to you, sir.
Mr. GIBBONS. Thank you very much, Mr. Chairman. And I appreciate the Director of the National Park Service being here today on this issue. And I know that a lot of these decisions probably you have been briefed on, some of which were not your decisions, and I certainly appreciate that as well.
But I noticed in your testimony, which was obviously written by counsel, to be very legalistic in your approach to this whole matter. It also states throughout the whole tenure of this thing that the Fort Sumter Tours did not go to arbitration, did not seek an alternative method of resolving this dispute and seek some sort of arbitration, which you think is some middle ground? Is that what you are saying to them? Or is there something else that you are implying by the fact that they didn't go to an arbitration?
Page 40 PREV PAGE TOP OF DOC Mr. STANTON. That is a process that is outlined in the concession contract.
Mr. GIBBONS. Well, I know what the process says. But if you go to arbitration, what I am saying is, do you believe in your heart, in your mind, that if they went to arbitration there would be some middle ground between the 12 percent and the original franchise fee that was adjusted.
I know the guy sitting next to you is probably advising you on this, but what do you think? Is there room in there for change?
Mr. STANTON. It is difficult to speculate if there would have been any change. In looking at what the past practices have been in those cases that gone to arbitration, it certainly gives an opportunity for the two principal parties, that being the Park Service and the concessionaire to mutually review the differences of opinion and come out with, hopefully, a mutually accepted adjustment in the franchise fees.
Mr. GIBBONS. Mr. Stanton, that is a wonderful answer to a yes-or-no question, and I appreciate it. My question is, having looked at the information that has now been presented to you and has been presented before this Committee, do you believe that the Park Service made a mistake and are they willing to correct it?
Mr. STANTON. I don't believe that we made a mistake. As I mentioned in response to the three points that the previous speaker made with respect to the inclusion of outside income, which was in fact included in the initial analysis, and I commented on that in my testimony, that error was corrected. And consequently, in the final computation, it was not included.
With respect to the calculation of the value of the boat and also the adjustment in the Director's income, I would ask that our financial analyst, Mr. Bob Hyde, comment briefly on that.
Page 41 PREV PAGE TOP OF DOC Mr. GIBBONS. Well, Mr. Stanton, let me also say that I am looking at testimony, page 5, and it says that ''while there was one technical error''what was that technical error?
Mr. STANTON. The technical error was the inclusion of the non-concession income in the first preliminary analysis, and that was corrected.
Mr. GIBBONS. Now in assessing Fort Sumter Tours' profitability, the Park Service did include non-concession income. Is that not true?
Mr. STANTON. In the initial or the preliminary analysis, and that was detected and it was corrected. And in the final computation, no non-concession related income was included in the final computation.
Mr. GIBBONS. You mean no non-concession-related income was included? You said no concession-related.
Mr. STANTON. Non-concession, non-concession.
Mr. GIBBONS. Well, does that mean that the Park Service for the first five years of Fort Sumter Tours income profitability was overstated, in your calculation?
Mr. STANTON. I could not
Mr. HYDE. If I may?
Mr. HANSEN. Please identify yourself for the record, please, sir.
Mr. HYDE. My name is Robert Hyde. I am the financial analyst who performed the analysis. There is a two-step process in reviewing
Mr. GIBBONS. Well, let me just say, the processthe question asked, does that say that the tour service's income in the first five years was overstated, according to the Park Service's calculationif what the Director has already said, that there was a mistake in the technical addition of non-concession profit in that, so the answer would be?
Page 42 PREV PAGE TOP OF DOC Mr. HYDE. It was overstated in the initial part of the analysis, but it was corrected in the latter part of the analysis where the fee was set. Page 5 is where it was carried, and page 6 it was eliminated properly.
Mr. GIBBONS. Well, then, if you don't take it out in the beginning, I mean, that would adjust the idea of whether or not, or state the idea of whether or not an increase in the fee was even warranted. Is that not true?
Mr. HYDE. There is a part where you are looking at the original fee, and yes, it would be overstated at that point, but then
Mr. GIBBONS. And that would go to the basis of whether or not justification of a fee increase was needed?
Mr. HYDE. At that stage, there is no franchise fee applied to the concessionaire's results, proper results. And the process then applies the fee at the point where the new fees, the prospective new fees are applied. It did not include any non-concession income.
Mr. GIBBONS. Let me go over here to the CPA for the person. He is just sitting on pins and needles waiting to answer these very questions. And I would like to ask you, if you have a different opinion of the questions I have asked, and whether or not
Mr. JACKSON. Yes, I have a very different opinion.
Mr. GIBBONS. Would you go ahead and tell us what your opinion is on this matter?
Mr. JACKSON. The inclusion of the $195,000 greatly overstated the profitability, which caused these three ratios, return on gross, return on equity, return on assets, to be greatly overstated. So then when they looked at the ratios they calculated, and compared them to their industry statistics, how could they compare them properly, they were overstated. The first partthat is the first error.
Page 43 PREV PAGE TOP OF DOC Then the second one is very critical too. The inclusion of this income caused the maximum allowable fee to be overstated. I mean, it wasn't 15.6 percent. It was 8.7. They, because of the errors, set a rate at 12 percent. We shouldn't even be talking about 12 percent, we should be talking at most at 8.7 percent.
Mr. GIBBONS. Excuse me. Your belief is that, by the inclusion of the mistaken inclusion of the non-concession profit in the original five-year contract term, caused the erroneous consideration of warranting a fee increase?
Mr. JACKSON. Yes, sir. Exactly.
Mr. GIBBONS. Thank you, Mr. Chairman.
Mr. HANSEN. The gentleman from Nevada brought up some very interesting points here I would kind of like to square in my own mind and see if we got this right.
It seems like they did include non-concession fees. If you did, calculating the maximum franchise fee, if we figured this right that you could charge, the National Park Service guideline 48 says that the maximum fee you can charge is 50 percent of the pre-franchise tax and pre-tax income, if I am reading your guidelines right. Is that right?
Mr. JACKSON. That's correct.
Mr. HANSEN. Well, that is on chapter 24, page 18. So you used the figure $441,871, and, Mr. Jackson, you correct me if I am wrong on this because I could be. Well, in fact, that includes $195,603 of non-concession income. Is that right?
Mr. JACKSON. That's correct.
Mr. HANSEN. So, if that premise is right, we go to guideline 48, then the fee would have been 8.7 percent. Is that right?
Mr. JACKSON. Yes, sir. That is correct.
Mr. HANSEN. Better than 12 percent.
Page 44 PREV PAGE TOP OF DOC Mr. JACKSON. The maximum allowable fee. Now that is not necessarily the fee that
Mr. HANSEN. Well, I am going by their guidelines here.
Mr. JACKSON. The guideline is for the maximum allowable fee, not necessarily what the fee should be.
Mr. HANSEN. Mr. Stanton, would you like toam I figuring this wrong?
I would have Mr. Hyde comment.
Mr. HYDE. You are correct, sir. The maximum is overstated in the analysis, using the overstated figure on page 5. That is correct.
Mr. HANSEN. So that would have beenwhat I just said would be a correct statement, and the fee would have been 8.7 percent, rather than 12 percent, if all these assumptions are correct?
Mr. HYDE. That is correct. The maximum guideline as a preliminary analysis would be 8.7 percent.
Mr. HANSEN. I see. Well, that is interesting.
Mr. Stanton, I guess we could debate this thing for a long time regarding what procedure should have been followed. Your colleague mentioned to Mr. Inslee that they didn't follow this procedure. They claim that you didn't give them the information. And so what is the use of going into arbitration. We don't know what the other side is going to say.
Having been part of arbitration when I used to work for a large insurance company, you know, we didn't go in blind. We walked in and all three parties pretty well knew what was going on when we walked in there. And we were kind of stuck with the results. And you are kind of a river boat gambler when you do that, but I guess that is one of the things you do.
Following that, if I heard the gentleman correctly, he said the next thing they do is the Secretary would make a decision. Does that follow arbitration? Or is that before arbitration?
Page 45 PREV PAGE TOP OF DOC Mr. STANTON. That would follow arbitration.
Mr. HANSEN. So the final arbitrator, if they choose to go that route, would be the Secretary?
Mr. STANTON. That is correct.
Mr. HANSEN. So you start out, they can appealthen go from appeal to arbitration to the secretary?
Mr. STANTON. That is correct.
Mr. HANSEN. But in this case, and their contention is because they didn't have the information so they didn't feel comfortable doing that, they went straight to court, which was what, Federal District Court?
Mr. STANTON. Federal District Court.
Mr. HANSEN. And, in the Federal District Court, they in effectyou prevailed. Is that correct?
Mr. STANTON. The Federal Government prevailed. That is correct.
Mr. HANSEN. And this was then appealed?
Mr. STANTON. It was appealed.
Mr. HANSEN. And you prevailed again?
Mr. STANTON. Prevailed again.
Mr. HANSEN. On what grounds? Could you tell me?
Mr. STANTON. As I understand that the court held that the process employed by the National Park Service was proper, and that our calculation, that we had given adequate notice to the concessionaire with respect to reconsideration of the franchise fees, and that the Park Service had the authority to adjust the franchise fees from 4.25 to 12 percent.
Mr. HANSEN. Mr. Stanton, as you may recall in my office, Mr. Campsen and his son and their counsel argued that it wasn't discussed, that the franchise fee wasn't brought up in court, and that the merits of the franchise fee was not as issue. Is that a correct statement?
Page 46 PREV PAGE TOP OF DOC Mr. STANTON. That is not my understanding, Mr. Chairman.
Mr. GIBBONS. Mr. Chairman?
Mr. HANSEN. Excuse me. Who has got the floor here?
Mr. GIBBONS. I was going to ask you to yield for a second on a question like this because it seems to me what we should have is the court decision before us because I am under the standing, understanding, reading Director Stanton's testimony, the only issue that was brought before the court was whether or not the Park Service had the right to adjust the fee, which is part of the contract, and secondly, the calculation of the fee was not at issue in that decision.
I find nowhere in the decision does it talk about the merit or the correctness of the calculation of the fee. So maybe we should have the actual court decision before us.
Mr. STANTON. If you would please, Mr. Chairman?
Mr. HANSEN. Excuse me, go ahead, sir.
Mr. STANTON. I wanted to provide for the record a copy of the court decision. And the court did address the calculation of the franchise fee.
Mr. HANSEN. That would certainly be helpful for us as far as this oversight hearing goes.
[The information follows:]
Mr. COHEN. Mr. Chairman?
Mr. Campsenoh, excuse me. I am sorry. Go ahead.
Mr. COHEN. I just wanted to read from the Fourth Circuit opinion: ''FST raises what it believes are three errors in NPS's calculation of 12 percent franchise fee in the instant case.'' And then they proceed to analyze the three errors that were raised and discussed.
Page 47 PREV PAGE TOP OF DOC And we will provide this for the record.
Mr. HANSEN. Well, thank you. We appreciate having that.
Hang on a minute.
Mr. Campsen, you testimony is always interesting. You started this business in 1961?
Mr. CAMPSEN. Yes, sir.
Mr. HANSEN. And the theory behind this is a lot of folks would like to be ferried out to Fort Sumter to see it and, I assume, you started buying vessels, as you pointed out, advertised your business, people would come to wherever your vessels were tied up. And you would then take them out.
Tell us, go through that operation a little bit, would you, just for the benefit of the Committee? What you do, in other words.
Mr. CAMPSEN. Yes, sir. Fort Sumter National Monument was not created until 1948, and there was no concession operations going on at Fort Sumter. There was no concession boats taking people out there. The Park Service wanted to start public boat transportation out to the Fort, and they sought people, interested people, to do that.
We were one of five proposals. And we were evaluated, and we were selected. I went to the local banks, and I borrowed sufficient money to get the first boat in operation. And we started operating, carrying people to the Fort on January the 1st, 1962. And we have been doing that since. We borrowed money. I always personally guaranteed the note.
Mr. Chairman, I don't come from a rich family. As a very young man, I really didn't have any money, but I guaranteed the note, and the banker trusted me. We have always paid back everything we ever borrowed, and our credit standing is good. But that is how we got started.
And I had some cousins who were involved in operating shrimp boats around Charleston, very, very fine, honorable people who knew all about boats. They helped me to get started, and none of us made any money at all or drew any income from Fort Sumter Tours.
Page 48 PREV PAGE TOP OF DOC It was a wing and prayer and a hope that we would be able to build a business that made some sense economically, and we worked very closely with the local Park Service officials. We have always got the highest ratings possible. We did the advertising. We did the promotion. And visitation started increasing.
It got to the point where I could even start having a little profit from Fort Sumter Tours. But we grew and we expanded, and we went into doing things other than Fort Sumter, like conducting harbor tours around Charleston Harbor. The boat did not stop at the Fort.
Some people are really not interested in going to the Fort. And we also expanded by using our boats for special charters, people want to charter a boat for any number of reasons. Churches want to charter the boats, private businesses, and so forth. We charter those at night.
Mr. HANSEN. Mr. Campsen, if I may interrupt you, we are going to lose this Director in a minute.
Let me just ask you, how many boats or ships do you have? Being an old Navy man
Mr. CAMPSEN. We have three.
Mr. HANSEN. Three? How many people do they hold?
Mr. CAMPSEN. We have three. One is the Spirit of Charleston, which has been described and talked about here. That boat was built down in Louisiana. We had a naval architect design the boat. That boat wasplans and specifications were approved by the local Park Service people, as we were developing to be used to carry people over to Fort Sumter. And at night, this boat is used to carry people on dinner excursions.
We had a different crew come in, and the boat is transformed from daytime operation to nighttime operation. And we do that to make as much money as we can to pay for the boat and pay for the people who work for us.
Page 49 PREV PAGE TOP OF DOC We have 44 people, and we have a payroll that we have to meet, of course, meet every Friday.
Mr. HANSEN. Yes. How long does it take to get from the Harbor to Fort Sumter?
Mr. CAMPSEN. It takes 30 minutes from our landing facility to get out to Fort Sumter, 30 minutes.
Mr. HANSEN. And, Mr. Campsen, before we lose our time here, I don't know thatwe are not mediators here, we are just trying to resolve some of these things. I would like to ask the Director this question: Have you ever considered the National Park Service going back and recalculating. I remember many times with a new battery of folks, not that the others haven't done a good job, and taking another look at it.
And on your side of the issue, Mr. Campsen, you figure if you were given the opportunity to go to arbitration, would you do it?
Mr. CAMPSEN. Well, yes, sir, provided it was binding arbitration. Let me say this, Mr. Chairman: We have proposed to the Park Service that we would be willing to submit the correctness of this franchise fee calculation to an independent accounting firm, like Ernst and Young or someone that we don't have any real control over that are nationally recognized, and ask them totell the Service, here is where we think this was an error based upon the guidelines of the Park Service in existence at the time.
And we would be bound by that. And we would pay for that analysis. We proposed that to the Park Service, and they didn't react to it at all. They didn't refuse or accept. They just acted like they didn't receive it.
But, yes sir, to answer your question, if we had an opportunity to go to binding arbitration, we would agree to that.
However, please understand that our small company since 1992 has been incurring enormous expenses, enormous expenses trying to correct the NPS's mistakes and miscalculations. I don't know. There has got to be an end to this sometime, because we are going bankrupt one or two ways. Either we are going bankrupt fighting this 12 percent calculation, or we are going bankrupt when they impose it and make us pay it. And so we are in between a rock and a hard place, Mr. Chairman, if you will.
Page 50 PREV PAGE TOP OF DOC The expense of attorneys and other consultants and time and frustration has been enormous. So, yes, sir, we want to end this. We want to come to some arrangement whereby a proper calculation of our fee is finally obtained.
Mr. HANSEN. I appreciate that, Mr. Campsen. I am just sitting here trying to figure out a way to resolve an issue.
Mr. CAMPSEN. I understand.
Mr. HANSEN. And it seems to me that if there was a way, and I don't understand all the procedures and what is in statutory law here, I am just kind of off the top of my head. If we couldway we could put arbitration together and we live with the results, that is one way we have been in the past.
Another thing, of course, is that we look to the Park Service. Maybe they will take another look at this, come up with some other folks to do that. I have seen judges order people to do that, saying you go in and put some new folks in there and take another look at this thing and see if it was done right, and then come back. So, that is another remedy that may be there.
Mr. Gibbons, maybe you would like to comment?
Mr. GIBBONS. Well, I thank the gentleman, and I know that his leadership is appreciated on this issue because it is an important issue, not just for the Park Service but for the future of 40-some employees who are sitting out there worried about their income.
I mean, their income depends upon the success of this operation. It doesn't necessarily equate to the same payroll check that the Federal bureaucrats get every Friday without worry about whether or not the lights are going to come on, or somebody is going to pay the tax and do this.
And I would just simply like to reiterate that if the calculations, according to the accountants for the Park Service that we have gone over are correct, and, Mr. Chairman, I think you put it very correctly that we are looking at somewhere around $246,000$242,000, excuse me, $246,260 is the calculation, and that would put it in the 8.7 percent maximum cap, compared to the 12 percent.
Page 51 PREV PAGE TOP OF DOC I would think the Park Service has to realize right away that there is at least a conceding point right there to go to some kind of negotiating position. And I would hope the Park Service realizes that it is not all one way.
And some days the Park Service has to give in when they are wrong as well. And from what I have heard, Mr. Chairman, I think the Park Service did have a technical error and should be willing to work with the gentleman as well.
Mr. HANSEN. Just as the gentleman points out in just this hearing we have had, the Park Service has pointed out that it should have been 8.7 on this if we take those fees, which is substantial.
Mr. GIBBONS. Well, Mr. Chairman, that is the maximum. And then we have to start with somewhere between where they were originally and then the maximum cap of 8.7, not the 12 percent.
Mr. HANSEN. That is all predicated on if we accept these assumptions, which apparently we do in this case.
Well, I know, Mr. Stanton, you are here three-and-half minutes overtime.
Mr. STANTON. That's fine. Mr. Chairman, Mr. Gibbons, again, I appreciate the opportunity. Let me make a couple of comments, if I may.
One is with respect to Mr. Campsen's assessment of the relationship with the National Park Service. I concur wholeheartedly. It has been an excellent partnership. The services that Mr. Campsen and the Fort Sumter Tours, Incorporated have provided over the years have been valuable service benefiting thousands and thousands of visitors to Fort Sumter and Fort Moultrie. And it is a value, their partnership is a value of service that they provide to the public.
That is not the question that is before us today. So I don't want any comments that I make diminish the quality of services that the concessionaire has provided. It has been satisfactory, indeed, outstanding over the years.
Page 52 PREV PAGE TOP OF DOC Secondly, as I indicated in my testimony, is that we have asked the district attorneyrather, the U.S. Attorney's Office to be open, receptive to any proposal or suggestions from the concessionaire in hopes that we can move towards a resolution of this as soon as possible. And we are committed to working again with the U.S. Attorney to resolve the suit and move to a different level of work.
Mr. HANSEN. I appreciate that, Mr. Director, and I appreciate you being here.
We are sitting scratching our heads, like you folks, on how is this resolved. It seems to me there are a couple of things that logical, reasonable people could sit down and get it done, and then we wouldn't have to go through all this expense, time, and effort.
And that is one of the reasons you have arbitration; that is one of the reasons we have other things that don't get it wrong to all you lawyers out there, but sometimes I think the only guy that wins on this thing is counsel. No disrespect, Counselor.
Mr. DICKSON. None taken, sir.
Mr. HANSEN. But having seen a lot of money go out and having signed a lot of those checks, I can tell you thatanyway, with that said, we will take it under advisement as the Committee and see if there is a legislative remedy. We would like to get this over with. Frankly, I think, of my 10 terms on this Committee, the biggest thorn in our flesh is always the fight with concessionaires, Park Service, other folks. And as the Director aptly pointed out, concessionaires are integral and an important part of the Park Service.
And there has been a good relationship here for years, I hate to see this blow up. I know it is an extremely important thing to the folks who want to see this very interesting historical place. So if we could do anything in our power to help this thing out, we want to do it and bring this to a reasonable and amicable solution.
And unless Mr. Gibbons wants to add anything to that, we will
Page 53 PREV PAGE TOP OF DOC Mr. DICKSON. Mr. Chairman, may I
Mr. HANSEN. Counselor.
Mr. DICKSON. I simply wish to express the deep appreciation of Fort Sumter Tours for this hearing. It is obvious to us, I believe that after several trips to the courthouse and numerous statements by the Park Service that there was never anything wrong with this franchise fee analysis, it took this oversight hearing and your efforts to get them to concede that the fee should never have gone above 8.7 percent, not from the very beginning. And we are very, very grateful to you for that.
Mr. HANSEN. Well, we thank you for that, and Mr. Director, again we apologize. We have held you eight minutes over, and I know the Vice President is over there and that is probably where you are supposed to be, and so am I.
But I wanted to have this hearing. And let me thank all of you for being here, and this will conclude this oversight hearing.
[Whereupon, at 12:38 p.m., the Subcommittee was adjourned.]
[Additional material submitted for the record follows.]