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A LETTER TO THE CHAIRMAN OF THE COMMITTEE ON NAVAL AFFAIRS OF THE HOUSE OF REPRESENTATIVES IN RE A BILL (H. R. 11922) TO AUTHORIZE THE SECRETARY OF THE NAVY TO LEASE THE UNITED STATES NAVAL DESTROYER AND SUBMARINE BASE, SQUANTUM, MASS.

COMPTROLLER GENERAL OF THE UNITED STATES,
Washington, December 18, 1928.

Hon. FRED A. BRITTEN,

Chairman Committee on Naval Affairs,

House of Representatives.

MY DEAR MR. CHAIRMAN: This office has before it a lease dated August 2, 1927, between the Secretary of the Navy and the Victory Terminal Corporation, Boston, Mass., for the use and occupancy of approximately 592 acres of land known as the "Squantum parcel" of the United States destroyer and submarine base, Squantum, Mass., and the Secretary of the Navy has invited my attention to H. R. 11922 and to hearings on May 16, 1928, where your committee was informed with respect to the existence of the lease in question.

I inclose herewith for the information of the committee, copies of my letters of June 23, August 8, and October 4, 1928, to the Secretary of the Navy, and photostatic copy of his reply dated November 30, 1928, thereto. The insurance policy referred to in my letter of June 23, 1928, was subsequently obtained and forwarded to this office for filing with the lease.

The argument in the letter of November 30, 1928, that the rental may be used without further legislative authority is precluded by the express terms of section 3617, Revised Statutes, and the act of August 29, 1916 (39 Stat. 559), which were quoted in the letter of November 30, 1928. See the quotation in my letter of August 8, 1928, from the Pan American Co. case. (273 U. S. 456, p. 502.)

It will be noted that the Secretary of the Navy states in his letter of November 30, 1928, that he reported in letter dated March 8, 1928, the fact of the lease to the Speaker of the House of Representatives, and while it does not now seem necessary for me to report same to the Congress pursuant to section 312 of the act of June 10, 1921 (42 Stat. 24), I think the matter of the defects in the lease should be brought to the attention of your committee as I feel sure the Congress will wish observed the statutory procedure of depositing in the Treasury all moneys received on behalf of the United States, to the end that the Congress may be permitted, under its authority contained in Article I, section 9, of the Constitution, to appropriate the money for whatever purposes it may deem necessary or desirable.

Respectfully,

2197-28-No. 38

J. R. MCCARL, Comptroller General of the United States.

(247)

COMPTROLLER GENERAL OF THE UNITED STATES,
Washington, June 23, 1928.

The SECRETARY OF THE NAVY.

SIR: Referring to letter dated March 7, 1928, of this office, to the chief clerk, Navy Department, concerning lease No. G-82, dated August 2, 1927, between the Secretary of the Navy and the Victory Terminal Corporation, Boston, Mass., for the letting of approximately 592 acres of land with improvements thereon in the city of Quincy, Mass., known as the "Squantum parcel," and to reply dated June 2, 1928, thereto, from the Judge Advocate General of the Navy, you are requested to advise this office why the matter of securing a proper insurance policy from the Victory Terminal Corporation in accordance with the terms of the contract was permitted to remain unsettled during the period of approximately a year since the date of the lease.

The lease provides, page 7, that the Victory Terminal Corporation shall keep "the leased premises insured against fire in a good and responsible fire insurance company or companies," approved by the Government for a total of $500,000 and that "the policies shall be so written as to show the ownership and interest of the United States with a loss-payable clause attached thereto, making all loss, if any, payable to the" Government. The insurance policy filed by the Victory Terminal Corporation is with the Globe Indemnity Co. and the reduced rate clause provides that in the event of loss, the insurance company shall be liable for no greater proportion thereof than the amount thereby insured bears to 99 per cent of the actual value of the property. In other words, the insurance policy is, as stated in the letter of June 2, 1928, from the Judge Advocate General of the Navy, a coinsurance policy and if, as stated, the Navy Department has objected to such a policy, which is clearly not in accordance with the terms of the lease, it is not understood why the matter has been permitted to remain in such an unsatisfactory shape during nearly a year.

The matter should be promptly adjusted by the securing of an insurance policy by the Victory Terminal Corporation in the sum of $500,000 payable to the United States and with the coinsurance clause omitted. This office should be advised when such adjustment has been made:

Respectfully,

J. R. MCCARL, Comptroller General of the United States.

WASHINGTON, August 8, 1928.

The SECRETARY OF THE NAVY.

SIR: There has been received in reference to letter dated June 23. 1928, of this office in the matter of lease D-82, dated August 2, 1927, between the Secretary of the Navy and the Victory Terminal Corporation, Boston, Mass., for the lease of approximately 592 acres known as the Squantum parcel of the United States destroyer and submarine base, Squantum, Mass., your letter of July 21, 1928, as follows:

Receipt is acknowledged of your letter (A-23359) dated June 23, 1928, wherein you request to be advised why the matter of securing a proper insurance policy from the Victory Terminal Corporation in accordance with the terms of con

tract No. NOd-82 was permitted to remain unsettled during the period of approximately a year since the date of the lease.

You are advised that several factors are responsible for the situation existent relative to the insurance on the premises covered by the lease, contract No. NOd-82. The commandant of the first naval district has been diligent in his endeavors to have the Victory Terminal Corporation, the lessee, furnish the insurance, but has been advised that the delay in furnishing insurance is due to the reluctance of the underwriters to assume the risk on the leased premises due to the nature of the risk and to the fact that no sprinkler protection is afforded. While the Navy Department has the right to terminate the lease for any breach thereof, including failure to furnish the required insurance, such action is not considered advisable. The maintenance of the property would be very expensive to the Government. It is claimed by the lessee that during the term of the lease, beginning August 16, 1927, $200,000 have been expended in the care of the property. The termination of the lease would place the burden of maintenance on the Government, with no resulting benefit, or with the alternative of allowing the property to again fall into disrepair.

In view of the provisions of the acts of March 29, 1894 (28 Stat. 47, title 31, sees. 89, 90, 91, and 92, U. S. C.), the Navy Department believes it has exclusive jurisdiction over naval property. In this connection attention is invited to decisions rendered by the Comptroller of the Treasury dated November 29, 1895 2 Comp. Dec. 264), and July 30, 1913 (20 Comp. Dec. 49). The matter of insurance covering the premises leased to the Victory Terminal Corporation, being a matter of protection of Government property, would appear, by virtue of the above-cited act, to vest in the Navy Department.

The Navy Department is acting in the matter herein set forth in what is believed to be the best interests of the United States. The premises vacant would be a much more hazardous risk than occupied, as at present. If the premises were vacant there would be no authority for the Navy Department to pay for fire protection in the form of insurance. Furthermore, there is no tenant in view who would take the premises under present conditions, and the Navy Department has asked Congress for authority to enter into a lease for a longer term than now authorized. If said longer term is authorized the Victory Terminal Corporation expects to put valuable improvements on the premises which are not justified under the term of the present lease. Under the terms of the lease such improvements will inure to the benefit of the United States.

The lease having been executed, the question of securing insurance in accordance with the terms thereof is not one involving "jurisdiction over naval property" within the meaning of the act of March 29, 1894, but is a question of enforcement of the contract rights of the United States and the proper filing of all the parts of the contract of which the insurance policy is one, in this office as required by law. Furthermore, the lease stipulated a rental of $50,000 a year and

that:

in lieu of the payment of said rental the lessee agrees to make repairs quarterly at an actual cost of one-fourth thereof toward the restoration and upkeep of the property as determined by the lessor as being necessary to prevent physical deterioration. The lessee will initiate and perform all work in connection with such restoration and repairs, and will furnish all funds needed for such work, provided that the fair and reasonable actual cost of such approved work of repairs as determined by the lessor from records and accounts submitted by the lessee and from other available information, shall be credited to quarterly amounts due as rental from the lessee: Provided further, That if the cost of such work done during any quarter, as determined by the lessor, shall be in excess of the rental due for that quarter, such excess shall be applied as a credit toward the rental of subsequent quarterly periods. * * *

In other words, the lease provides that the rental shall be used by the lessee in making repairs to the property and this notwithstanding the express terms of the act of August 29, 1916 (39 Stat. 559, 560), which provides:

That authority be, and is hereby, given to the Secretary of the Navy, when in his discretion it will be for the public good, to lease for periods not exceeding five years and revocable at any time, such property of the United States under his

control as may not for the time being be required for public use and for the leasing of which there is no authority under existing law, and such leases shall be reported annually to Congress: Provided, That the authority herein granted shall not be held to apply to oil, mineral, or phosphate lands: Provided further, That all moneys received from such leases shall be covered into the Treasury as miscellaneous receipts.

The statute extends to the Secretary of the Navy discretion in the matter of leasing such property under his control, not including oil, mineral, or phosphate lands as may not be needed for public use, but there was expressly denied any discretion as to what should be done with the rental, the statute directing that "all moneys received from such leases shall be covered into the Treasury as miscellaneous receipts." This mandatory requirement as to rental is but a repetition of earlier provisions of law referred to by the Supreme Court of the United States in Pan American Co. v. United States (273 U. S. 456, p. 502), where the court, in considering the exchange of oil for storage facilities, said:

* * * The Secretary was not authorized to use money received from the sale of gas products. All such sums are required to be paid into the Treasury. (R. S. sec. 8617, 3618, as amended 19 Stat. 249.)

The repair of Government-owned property is not through the application of rental therefrom, but by appropriation by the Congress for such expenditures.

This office accordingly requests to be advised at the earliest practicable date why this lease stipulated that the entire rental should be used in the upkeep of the premises apparently in disregard of the terms of sections 3617 and 3618, Revised Statutes, and the above quoted provision from the act of August 29, 1916, for deposit of the rental into the Treasury as miscellaneous receipts.

Respectfully,

J. R. McCARL,

Comptroller General of the United States.

WASHINGTON, October 4, 1928.

The SECRETARY OF THE NAVY.

SIR: Referring to your letter of July 21, 1928, your file NB6/14-3 (17) (280817), concerning the lease dated August 2, 1927, between the Secretary of the Navy and the Victory Terminal Corporation, Boston, Mass., and my reply thereto of August 8, 1928, there has been received a letter dated September 13, 1928, from the office of the Judge Advocate General of the Navy transmitting a copy of a bond dated August 25, 1928, in accordance with the terms of the lease.

However, there has not been furnished a reply to that part of my letter of August 8, 1928, which referred to stipulations in the lease for the use of rental in making repairs and extensions, etc., to the property. It is requested that this part of the letter be replied to at the earliest practicable date, and there be furnished a statement of the reasons, if any, why you believe the lease should not be reported to the Congress pursuant to section 312(c) of the act of June 10, 1921. (42 Stat. 26.)

Respectfully,

J. R. MCCARL, Comptroller General of the United States.

DEPARTMENT OF THE NAVY,

OFFICE OF THE SECRETARY,
Washington, November 30, 1928.

The COMPTROLLER GENERAL OF THE UNITED STATES,

Washington, D. C.

SIR: Reference is made to your letters, A-23359 of August 8, 1928, October 4, 1928, and November 23, 1928, concerning the lease dated August 2, 1927, between the Secretary of the Navy and the Victory Terminal Corporation, Boston, Mass., covering the premises known as the United States destroyer and submarine base, Squantum, Mass.

In these letters you request to be advised "why this lease stipulated that the entire rental should be used in the upkeep of the premises apparently in disregard of the terms of sections 3617 and 3618, Revised Statutes, and the above-quoted provision from the act of August 29, 1916, for deposit of the rental into the Treasury as miscellaneous receipts" also why "the lease should not be reported to the Congress pursuant to section 312 (c) of the act of June 10, 1921. (42 Stat. 26.)"

The provisions of law referred to by you are as follows:

Section 3617, Revised Statutes (title 31, sec. 484, U. S. C.):

The gross amount of all moneys received from whatever source for the use of the United States, except as otherwise provided, shall be paid by the officer or agent receiving the same into the Treasury, at as early a day as practicable, without any abatement or deduction on account of salary, fees, costs, charges, expenses, or claim of any description whatever. But nothing herein shall affect any provision relating to the revenues of the Post Office Department.

Section 3618, Revised Statutes (title 31, sec. 487, U. S. C.):

All proceeds of sales of old material, condemned stores, supplies, or other public property of any kind, except the proceeds of the sale or leasing of marine hospitals, or of the sales of revenue cutters, or of the sales of commissary stores to the officers and enlisted men of the Army, or of materials, stores, or supplies sold to officers and soldiers of the Army or of the sale of condemned Navy clothing or of sales of materials, stores, or supplies to any exploring or surveying expedition authorized by law, or of sales for which a different provision for the disposition of the proceeds is made, shall be deposited and covered into the Treasury as miscellaneous receipts, on account of "proceeds of Government property," and shall not be withdrawn or applied, except in consequence of a subsequent appropriation made by law.

Act of August 29, 1916 (39 Stat. 559; title 34, sec. 522, U. S. C.): The Secretary of the Navy is authorized, when in his discretion, it will be for the public good to lease for periods not exceeding five years and revocable at any time, such property of the United States under his control as may not for the time being be required for public use and for the leasing of which there is no authority under existing law, and such leases shall be reported annually to Congress. authority herein granted shall not be held to apply to oil, mineral, or phosphate lands. All moneys received from such leases shall be covered into the Treasury as miscellaneous receipts.

The

This provision was amended by the act of May 29, 1928 (Public No. 611), to the extent that reports of leases are not required to be made to Congress.

Act of June 10, 1921, section 312 (c), 42 Stat. 26 (title 31, sec. 53 (c), U. S. C.):

53. Investigations and reports by Comptroller General.

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(c) The Comptroller General shall specially report to Congress every expenditure or contract made by any department or establishment in any year in violation of law.

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