[Federal Register Volume 75, Number 101 (Wednesday, May 26, 2010)]
[Notices]
[Pages 29573-29574]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-12703]
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DEPARTMENT OF THE INTERIOR
National Park Service
Concession Contracts; Implementation of Alternate Valuation
Formula for Leasehold Surrender Interest in the Signal Mountain Lodge
and Leek's Marina Proposed Concession Contract, Grand Teton National
Park
AGENCY: National Park Service; Interior.
ACTION: Notice.
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SUMMARY: The National Park Service (NPS), by notice in the Federal
Register dated February 1, 2010, invited public comments on a proposed
alternative formula for the valuation of leasehold surrender interest
(LSI) pursuant to authority contained in Public Law 105-391 enacted in
1998 (the 1998 Act) to be included in its proposed concession contract
GRTE003-11 for operation of the Signal Mountain Lodge and Leeks Marina
at Grand Teton National Park (new contract). NPS invites further public
comment in the proposed LSI alternative.
DATES: Public comments will be accepted on or before June 25, 2010.
ADDRESSES: Send comments to Ms. Jo Pendry, Chief, Commercial Services
Program, National Park Service, 1201 Eye Street, NW., 11th Floor,
Washington, DC 20005, or via e-mail at [email protected] or via fax at
202-371-2090.
FOR FURTHER INFORMATION CONTACT: Jo Pendry, Chief Commercial Services
Program, 202-513-7156.
SUPPLEMENTARY INFORMATION: Public comments received in response to the
February 1, 2010, Federal Register notice regarding the proposed LSI
alternative expressed concerns, among other matters, that the notice
did not contain a sufficient explanation of the relationship of the
proposed LSI alternative to the objectives of providing a fair return
to the government and fostering competition for the new contract. For
this reason, NPS considers it appropriate to provide a further
opportunity for public comment on the proposed LSI alternative.
Although NPS, among other matters, is considering the possibility of
changing the currently proposed LSI provisions of the new contract with
respect to the treatment of fixtures for LSI purposes, the NPS will not
make a final administrative decision in regard to the proposed LSI
alternative until after full consideration of all public comments
received in response to both this and the February 1, 2010, Federal
Register notice. The submission date for proposals for the new contract
has been extended to August 10, 2010, by notice in FedBizOpps
(FedBizOpps.gov) under Solicitation No. GRTE003-11 published on April
29, 2010.
The standard formula for LSI value for applicable improvements
provided by a concessioner under a National Park Service concession
contract as defined in 36 CFR Part 51 (``standard LSI formula'') is as
follows:
(1) The initial construction cost of the related capital
improvement;
(2) Adjusted by (increased or decreased) the same percentage
increase or decrease as the percentage increase or decrease in the
Consumer Price Index from the date the Director approves the
substantial completion of the construction of the related capital
improvement to the date of payment of the leasehold surrender interest
value;
(3) Less depreciation of the related capital improvement on the
basis of its condition as of the date of termination or expiration of
the applicable leasehold surrender interest concession contract, or, if
applicable, the date on which a concessioner ceases to utilize a
related capital improvement (e.g., where the related capital
improvement is taken out of service by the Director pursuant to the
terms of a concession contract).
However, Section 405(a)(4) of Public Law 105-391 authorizes the
inclusion of alternative LSI value formulas in concession contracts
(such as the new contract) estimated to have an LSI value in excess of
$10,000,000. Under this authority, the proposed LSI alternative is as
follows:
(1) Initial LSI Value. The reduction of the initial LSI value under
the new contract on a monthly straight line depreciation basis applying
a 40-year recovery period regardless of asset class. There is no
adjustment of the initial LSI value as a result of the installation
(including replacement) of fixtures in the related capital improvements
during the term of the proposed contract; and
(2) New LSI Value. The reduction of the LSI value in any new
structures or major rehabilitations constructed during the term of the
new contract to be based on straight line depreciation and also apply a
40-year recovery period (on a monthly basis) with no asset class
distinctions. The construction cost of new capital improvements will
include the costs of installed fixtures. Any installation (or
replacement) of fixtures after the initial construction would not alter
the established LSI value in the improvements.
Section 405(a)(4) of the 1998 Act requires NPS, in certain
circumstances, to determine that use of the LSI alternative, in
comparison to the standard LSI formula, is necessary in order to
provide a fair return to the government and to foster competition for
the new contract by providing a reasonable opportunity for profit to
the new concessioner.
With regard to a fair return to the government, under the standard
LSI formula the amount of money paid (by the government, directly or
indirectly) for LSI as of the expiration of the new contract is
inevitably speculative at the time of contract solicitation, contract
award, and during the contract term. This is because the future rate of
the Consumer Price Index (CPI), the amount of future physical
depreciation that will occur, and the cost to cure such future physical
depreciation, must all be estimated in advance of the new contract by
both NPS and prospective concessioners.
As a consequence, if the NPS were to establish the required minimum
franchise fee for the new contract under the terms of the standard LSI
formula, that minimum fee necessarily would incorporate speculative
estimates of these factors. Likewise, if a prospective concessioner
offered to meet or exceed the minimum franchise fee established by NPS
under the standard LSI formula, its business decision would necessarily
be made in reliance on speculative estimates of future CPI and future
physical depreciation of LSI improvements.
If the NPS depreciation and CPI assumptions made at the time of
contract solicitation ultimately prove to be inaccurate, its minimum
franchise fee will result in a less than fair return to the government.
NPS therefore believes, subject to review of public comments, that the
proposed LSI alternative, in comparison to the standard LSI formula,
will better provide a fair return to the government under the new
contract.
NPS also believes (again, subject to review of public comments)
that eliminating the speculative aspect of LSI value will help foster
competition for the new contract by providing a reasonable opportunity
to make a profit. This is because prospective
[[Page 29574]]
concessioners will know not only the amount of money they will be
obliged to pay the prior concessioner for existing LSI under the terms
of the new contract, but also will know with a high degree of certainty
how much money they will recover from this payment upon the expiration
of the new contract (based on the 40-year amortization period). The
proposed LSI alternative effectively eliminates the speculation about
physical depreciation and CPI that is required for proposed contracts
under the standard LSI formula. The resulting lower risk and greater
certainty in the business opportunity will foster competition for the
new contract by providing a reasonable opportunity to make a profit.
The proposed LSI alternative is projected to provide approximately
the same rate of return for the new concessioner as the standard LSI
formula. This is because, in developing the minimum franchise fee under
the proposed LSI alternative, NPS estimated that the new contract would
provide the new concessioner with a reasonable opportunity to make a
net profit. This estimate took into consideration, among other matters,
applicable industry rate of return expectations, the purchase price of
the existing LSI improvements, and the LSI value that will be payable
to the concessioner after contract expiration under the proposed LSI
alternative. If the standard LSI formula were utilized, the projected
LSI value payment to the new concessioner would necessarily be much
higher, resulting in a much higher minimum franchise fee for the new
contract.
In other words, the lower LSI value payment upon contract
expiration under the proposed LSI alternative (as opposed to the
standard LSI formula) results in a lower minimum franchise fee, and
achieves the same approximate projected rate of return to the
concessioner. The proposed LSI alternative results in increased cash
flows to the concessioner during the entire term of the contract, while
the standard LSI formula provides a higher payment of LSI at the
expiration of the contract.
The proposed LSI alternative, if adopted by NPS, would be
applicable only to the new contract, GRTE003-11. NPS has made no
decision to apply the proposed LSI alternative or any other LSI
alternative to future concession contracts. If the same or other
alternative LSI formulas are considered for utilization in subsequent
contracts pursuant to Section 405(a)(4) of the 1998 Act, opportunities
for public comment will be provided as required. NPS will provide
notice of its final decision regarding the LSI provisions of the new
contract in the Federal Register and/or in FedBizOpps (FedBizOpps.gov
under Solicitation No. CC-GRTE003-11).
Before including your address, phone number, e-mail address, or
other personal identifying information in your comment, you should be
aware that your entire comment--including your personal identifying
information--may be made publicly available at any time. While you can
ask us in your comment to withhold your personal identifying
information from public review, we cannot guarantee that we will be
able to do so.
Daniel N. Wenk,
Deputy Director, Operations.
[FR Doc. 2010-12703 Filed 5-25-10; 8:45 am]
BILLING CODE 4312-53-P