Biden Infrastructure Bill Proposes $10 Billion Revolving Capital Fund for the Public Buildings Service

By Ron Kendall, Executive Vice President - Easterly Government Properties

President Biden’s S2 Trillion legislative proposal for U.S. Infrastructure, entitled the “American Jobs Plan” calls, among many other things, for the creation of a $10 Billion Capital Revolving Fund for the Public Buildings Service.  This was a feature of the Trump Administration’s budget request to Congress for both fiscal years 2019 and 2020, and neither time was that Fund enacted into law, doubtless because of Congressional Pay-As-You-Go rules (whereby legislative elements that will increase the Federal deficit must have offsetting Treasury receipts via taxes or other means.)  However, this latest proposal feels different, since with a spate of trillion dollar spending bills since the onset of the Covid-19 pandemic, there seems no longer to be Congressional resistance to increasing the Federal deficit if the measure will help reinvigorate the US economy.  In other words, this Infrastructure proposal looks likely to be enacted into law, albeit with Congressional changes, especially now that the Senate Parliamentarian has ruled that it can be passed under Budget Reconciliation procedures, meaning it needs only a simple majority to pass in the Senate and is not subject to filibuster. 

But what is this Capital Revolving Fund, and—if it is indeed enacted into law--- what is its likely effect upon the Public Buildings Service, both in terms of the PBS owned and leased inventory?  The first thing to note is that the Public Buildings Service already has a capital revolving fund, called the Federal Building Fund, created by the Public Buildings Amendments of 1972.  The FBF was envisioned as a self-supporting fund whereby PBS would charge commercial-equivalent rents to end-user agencies in PBS space, and PBS would be able to use those receipts to do a number of things: buy or build new federal office buildings, repair and modernize existing ones, and pay for leased space for the balance of the general-purpose space needs of the Federal government.   To simplify the experience of the last 50 years, the FBF has not quite proven adequate to meet all these needs.  In brief, while PBS has had sufficient money to pay for leases, it has lacked funds do all that PBS would like to do in terms of constructing new federal buildings and modernizing existing ones. 

When the FBF was first created, it did not have the benefit of a large infusion of capital; funds accrued over time as PBS collected rents.  What is novel about the current legislative proposal is that it would essentially endow PBS with an immediate outlay of $10 billion above current Fund balances.  It would certainly enable PBS to do a lot of things  if it is allowed to spend the money as it wishes.  No doubt, however, in enacting this into law, Congress will require that PBS seek approval (likely through prospectus requests) for the projects it wishes to undertake.   Also, the language surrounding the Biden Jobs Plan suggests that much of this funding is intended to be spent on modernizing the existing federally-owned inventory, including improving the building stock in terms of sustainability and climate change “resilience.” This is reminiscent of the Obama-era American Reinvestment and Recovery Act (ARRA) which fenced much of the funding PBS received at that time for “high-performance green building” energy retrofits.   It is probable that funds will also be used to improve or build-new some of the long-neglected southern border land ports of entry in the PBS portfolio and new federal courthouses as well.  What is not clear is how much money will be available, after seeing to those needs, for such matters as replacing leased space with federally-owned space through either new construction or building purchase.  What is clear, though, is that buying existing leased building product is not “stimulative” in the sense of creating good new jobs (in design, construction, etc.)   Further, in-office markets that now appear over-built (in the aftermath of the pandemic) constructing new federally-owned office buildings to be occupied by Federal workers now in leased space—while it would create jobs in the interim---it could, in the long term, prove injurious to the health of real estate office markets in general, and that certainly cannot be a policy goal.  

So, much remains to be seen as to how, if PBS gets this $10 billion, it will spend it.  Or, future Congresses may not approve the projects GSA submits for funding; arguably, this happens now with the FBF, which has fund balances it is not allowed to tap.   But the “revolving” feature of this capital fund---again, already present with the FBF---promises to be a gift that keeps giving: as PBS recoups through rental receipts the funds it expends on properties, it has that money to spend again.  And again.