GOVERNMENT Storage y .511 8113 V 81/4 *s. .\&\ LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS HEARINGS BEFORE THE TERRITORIES AND INSULAR AFFAIRS SUBCOMMITTEE OF THE COMMITTEE ON INTERIOR AND INSULAR AFFAIRS UNITED STATES SENATE EIGHTY-EIGHTH CONGRESS FIRST SESSION ON THE STATUS OF LEASES ON CERTAIN LANDS OWNED BY THE UNITED STATES NAVY ON ST. THOMAS, VIRGIN ISLANDS OCTOBER 29 AND 30, 1963 Printed for the use of the Committee on Interior and Insular Affairs U.S. GOVERNMENT PRINTING OFFICE 25-147 WASHINGTON : 1964 LIBR441, COMMITTEE ON INTERIOR AND INSULAR AFFAIRS HENRY M. JACKSON, Washington, Chairman CLINTON P. ANDERSON, New Mexico THOMAS II. KUCHEL, California ALAN BIBLE, Nevada FRANK CHURCH, Idaho ERNEST GRUENING, Alaska FRANK E. MOSS, Utah QUENTIN N. BURDICK, North Dakota CARL HAYDEN, Arizona GEORGE McGOVERN, South Dakota GAYLORD NELSON, Wisconsin HERBERT S. WALTERS, Tennessee JERRY T. VERICLER, Staff Director STEWART FRENCH, Chief Counsel JAMES H. GAMBLE, Professional Staff Mem5er GORDON ALLOTT, Colorado LEN B. JORDAN, Idaho MILWARD L. SIMPSON, Wyoming E. L. MECHEM, New Mexico PETER H. DOMINICK, Colorado SUBCOMMITTEE ON TERRITORIES AND INSULAR AFFAIRS HENRY M. JACKSON, Washington, Chairman FRANK CHURCH, Idaho GEORGE McGOVERN, South Dakota GAYLORD NELSON, Wisconsin HERBERT S. WALTERS, Tennessee II PETER H. DOMINICK, Colorado THOMAS H. KUCHEL, California E. L. MECHEM, New Mexico 9•1 .„;• • • ; 16. • goit CONTENTS STATEMENTS Bittenbring, Capt. Charles, USN, Bureau of Yards and Docks; accom- Page panied by Lawrence Wright, Lloyd Shaid, and Abner Frank 66 Cramer, Robert, President, Virgin Islands Corporation; accompanied by Mrs. Ruth Van Cleve, General Counsel of Vicorp 71 Dowling, William C., Caribbean Beach Hotel, St. Thomas, V.I 101 Heckert, Eleanor, general manager, the Bay Corp., St. Thomas, V.I 115 Kirwan, John J., Assistant Director, Office of Territories, Department of the Interior; accompanied by Mrs. Ruth Van Cleve, Assistant Solicitor, Territories 2, 121 Resch, Michael J., Island Beachcomber Hotel, St. Thomas, V.I 110 Stanford, Donald, L'Escale, Inc., St. Thomas, V.I 81 Additional statement 139 COMMUNICATIONS Barry, Frank J., Solicitor, Department of the Interior: Letter to Senator Gaylord Nelson, acting chairman, Subcommittee on Territories, dated October 25, 1963, with nine attachments Butler William, comanager, Arena Bowling Lanes, St. Thomas, V.I.: Letter to Erwin Gross Cramer, Robert P., President, Virgin Islands Corporation: Letter to Michael Resch, Tropic Isle Hotel, St. Thomas, V.I., dated November 4, 1963 Dominick, Hon. Peter H., U.S. Senate: Letter to Senator Henry M. Jackson, chairman, Interior and Insular Affairs Committee, dated November 14, 1963 Gross, Erwin, vice president, Arena, Inc., St. Thomas, V.I.: Letter to Senator Henry M. Jackson, chairman, Interior and Insular Affairs Committee, dated October 23, 1963 Kirwan, John J., Assistant Director, Office of Territories, Department of the Interior: Letters to— Birch, Everett B., St. Thomas, V.I., dated October 15, 1963_ _ _ _ 124 Dominick, Hon. Peter, 'U.S. Senate, dated November 18, 1963_ _ 143 French, Stewart, chief counsel, Interior and Insular Affairs Committee, dated November 20, 1963 58 Nelson, Hon. Gaylord, acting chairman, Subcommittee on Ter- ritories, dated November 13, 1963, containing description of leases on St. Thomas, V.I 51 November 13, 1963, containing details of negotiation of leases_ 57 November 18, 1963 144 November 21, 1963 59 Stanford, Donald, L'Escale, Inc., St. Thomas, V.I., dated October 2, 1963 (two letters) 49, 87 Memorandum to John A. Carver, Jr., Assistant Secretary, Public Land Management, dated August 19, 1963 Termination notice sent to lessees of property on St. Thomas, V.I_ _ _ Lausi, Anthony T.: Letter to Hon. Peter Dominick, U.S. Senate, dated November 12, 1963 Maronna, Joseph, Thatch Farm, St. Thomas, V.I.: Letter to S Henry Jackson chairman, Interior and Insular Affairs C dated October 23, 1963 18 138 140 141 138 2 3 141 to. IV CONTENTS Resch, Michael, J., Island Beachcomber Hotel, St. Thomas, V.I.: Letter to Robert P. Cramer, Virgin Islands Corporation, dated November 7, Page 1963 140 Rosov, Howard L., _president, Quality Sales Corp., St. Thomas, V.I.: Letter to Senator Clinton P. Anderson, dated October 24, 1963 136 Stanford, Donald, L'Escale, Inc., St. Thomas, V.I.: Letter to Robert Cramer, President, Virgin Islands Corporation, dated September 16, 1963 86 Wilson, Albert, Chief, Real Property Division, General Services Adminis- tration: Letter to Capt. B. O. Roessler, area public works officer, San Juan, P.R., dated June 18, 1963 68 ADDITIONAL INFORMATION Solicitation of proposals for Building 52 99 Solicitation of proposals 93 LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS TUESDAY, OCTOBER 29, 1963 U.S. SENATE, SUBCOMMITTEE ON TERRITORIES AND INSULAR AFFAIRS OF THE COMMITTEE ON INTERIOR AND INSULAR AFFAIRS, Washington, D.0 . The committee met, pursuant to notice, at 9:30 a.m., in room 3112, New Senate Office Building, Senator Gaylord Nelson (presiding) . Present: Senators Nelson, Dominick, Mechem, and Walters. Also present: Jerry Verkler, staff director; Stewart French, chief counsel; and James Gamble, professional staff member. Senator NELSON. I will call the meeting of the subcommittee to order. This is an open, public hearing by the Subcommittee on Territories and Insular Affairs of the Senate Interior Committee on the status of the occupants of certain lands owned by the U.S. Navy on St. Thomas, V.I., of the United States, and on the action or alleged actions of certain administrative officers with respect to such lands and their present occupants. This inquiry is the result of the unanimous decision of the Interior Committee at its executive session on October 17, and I was asked to serve as chairman in the place of the distinguished Senator from Washington, Senator Jackson, who is chairman of both the Interior Committee and its Territories subcommittee. The facts in the matter are not wholly clear from the records that have been available thus far to the committee, and I believe it would be far better for the witnesses to develop the facts than for me to try to state them at this point. However, we start with a few basic facts: The lands in question were purchased by the U.S. Navy prior to World War II for defense purposes. At the conclusion of hostilities, the Navy found it no longer needed to occupy the defense installations it had constructed on the lands, and the Department of the Interior took over their management in part. Just what the arrangement was be- tween Interior and Navy will, I trust, be made clear by witnesses who are in full possession of the facts. Subsequently, certain instruments which permitted private persons to occupy and use the lands were executed by Government officials for varying periods of time and for varying amounts of compensation. Recently, certain actions have been taken, primarily by the Depart- ment of the Interior officials, which the occupants believe are in- equitable and in derogation of what the occupants consider are their property rights. 1 2 LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS It is to the status of these Navy-owned lands, their present occu- pancy and use, and probable future action with respect to them, that this hearing is directed. The Interior Committee does have clear-cut responsibility and jurisdiction under the Legislative Reorganization Act of 1946 for Federal legislation respecting the Virgin Islands, and it is in fulfillment of this responsibility that this hearing is being held. As witnesses this morning we had spokesmen for both the adminis- trative branch of the Government and for the occupants of the lands. Our first witness will be Mr. John Kirwan, Acting Director of the Office of Territories of the Department of the Interior. Unless some member of the committee desires to make a statement, I will call Mr. Kirwan. Mr. Kirwan, I thought it would be the most orderly procedure to have the presentation of the view of the governmental agencies in- volved and then a statement of any of the other people who have nego- tiations with the Department to follow that, and if anybody wishes at the end of the hearings when both sides have been heard to make any rebuttal we would be happy to hear that. Mr. KIRWAN. I would like our counsel, Mrs. Van Cleve, to sit next to me, if she may. STATEMENT OF JOHN I. KIRWAN, ASSISTANT DIRECTOR, OFFICE OF TERRITORIES, DEPARTMENT OF THE INTERIOR; ACCOM- PANIED BY MRS. RUTH VAN CLEVE, ASSISTANT SOLICITOR, TERRITORIES Mr. KIRWAN. Mr. Chairman, if it would prove feasible I would like to complete the statement first before responding to questions but, of course, that is up to the chairman and the committee. Senator NELSON. Why do you not proceed? Mr. KIRWAN. On August 19, 1963, I sent the following memoran- dum to Assistant Secretary John A. Carver, Jr.: AUGUST 19, 1963. Memorandum To: John A. Carver, Jr., Assistant Secretary, Public Land Management. From: Acting Director. Subject: Naval properties, St. Thomas, V.I. On August 15, 1963, the Navy canceled the January 1, 1948, permit to Interior for the naval properties on St. Thomas. I acknowledged this cancella- tion on the same day. Copies of both Navy's letter and my reply I sent to you at the time. I have also sent out on the same date, e.g., August 15, 1963, letters on the enclosed form to the 30 individuals concerned in St. Thomas. They should have received same on Monday, August 19. I have also accepted, signing "John J. Kirwan, for Robert M. Mangan" a license revocable on 30 days notice from Navy to Vicorp, for all of the 125 acres of college land, which for technical reasons I have on a permit from Navy to Vicorp was necessary in order to do two things: 1. Allow Vicorp to issue at once the necessary sublicenses to the 30 individuals concerned, and to confirm the continued validity of the 70 odd permits also out- standing from Vicorp to the private parties. 2. To allow the continued existence of the Development Department of Vicorp, its payroll, its mission, and so forth. The above actions will enable Navy now to declare the subject property excess to GSA, thus allowing the submarine base to be transferred to Vicorp, and the airfield to the local government. LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS 3 I have also discussed with Governor Paiewonsky and with Mr. Robert Cramer the above lease, permit, and license cancellation situation. I have urged Mr. Cramer to issue to the 30 individuals affected promptly li- censes which will be identical in rent to be paid with the instruments canceled on August 15. These licenses (Vicorp standard permit forms) are revocable at will, although we would always try to give adequate notice. I suggested identi- cal rental rates during the interim period of perhaps 3 to 6 months until Vicorp and the local government have title to the subject property. I have urged both Mr. 'Cramer and Governor Paiewonsky alike to refrain from taking any fixed position, or from making any specific commitments for the fu- ture with any of the 30 former lessees. I suggested they reassure them that they will be given every consideration consistent with the public interest, and that both the local government and Vicorp (whichever may obtain a given parcel of land) have adequate leasing authority to work out any fair arrangements at the time the land is transferred. But I urged that both gentlemen remain free and uncommitted with regard to any specifics until their organization has both the facts and the responsibility for action. I also asked Mr. Cramer to make clear to the lessees in his dealings with them in issuing the new permits that it was the Office of Territories and not the Navy Department which took the initiative in this cancellation. JOHN J. KIRWAN. Enclosure. cc: Hon. Ralph M. Paiewonsky, Mr. Robert P. Cramer. The enclosure to that memo, and I would again call to your notice that it was dated August 19. The enclosure was the standard form of notice of termination given to the tenant. U.S. DEPARTMENT OF THE INTERIOR, OFFICE OF TERRITORIES, Washington, D.C. DEAR Sin: This notice is to advise you that the Department of the Navy has today canceled the permit to this Department of January 1, 1948, pertaining to the St. Thomas naval property and has repossessed all such property. Ac- cordingly, the premises you occupy in St. Thomas, V.I., pursuant to an instrument dated , is under paragraph thereof, canceled. The Virgin Island Corporation will be granted shortly a license for these premises, and will in turn tender to you a new sublicense substantially equal to the instrument canceled above, except that it will be revocable upon not more than 30 days notice. Senator DOMINICK. Just a minute, Mr. Kirwan, did you say a new sublicense? Mr. KIRWAN. I am sorry, tendered to you a sublicense substantially. Senator DOMINICK. Thank you. Mr. KIRWAN (reading) : Equal to the instrument canceled above. The property you occupy is ex- pected to be transferred shortly to either Vicorp or to the Goverment of the Virgin Islands, each of which agencies has full negotiated leasing authority, and each of which can make leases of such duration, and upon snch terms as may be in the public interest. You may be assured that every consideration will be given to minimizing or avoiding completely any interruptions to your activities, or to any hardships or inconveniences to you, consistent with the public interest, and that due regard will be given all concerned to the circumstances of your occupancy to date. Sincerely yours, JOHN J. KIRWAN, Acting Director. Senator NELSON. I don't like to interrupt, but just a question here on the next to the last paragraph. The property you occupy is expected to be transferred shortly to either Vicorp or to the Government of the Virgin Islands each of which agency has full- • 4 LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS Mr. KIRWAN. Negotiated leasing authority. That is, each of those agencies, Mr. Chairman, may enter into leasing arrangements with private parties without going through competitive public bidding. Senator NELSON. This would be after GSA had disposed of the property, would it not ? Mr. KIRWAN. That is correct. Senator NELSON. I thought you meant they have it now. Mr. KIRWAN. They have the authority now but they do not have the property now. After the GSA had worked its work they would have had both the authority and the property itself. I cite this statement of our intentions made more than 2 months ago because there has been some suggestion that Interior was indiffer- ent to the potential problems faced by individual tenants and had no real expectation that they would be dealt with fairly and justly, with due regard for the public interest on the one hand, and all relevant facts surrounding past occupancy on the other. I also wanted to make clear at the beginning that our concern on this matter did not date from the first inquiry from this committee, which we welcome, but indeed has been the most important and consistent single factor in our policy for some years. On the subject properties today are 110 tenants, excluding the purely residential areas. Except for two or three instances, all 110 tenants are commercial enterprises, largely engaged in manufacturing or pro- viding tourist services. Of these 110 tenants, 85 occupy by virtue of instruments called permits" and always have. These 85 tenants pay a total of $15,986.12 per month rent. Many have many substantial investments. The remaining 25 out of the 110 tenants held occupancy until August 15, 1963, by virtue of instruments called leases. They were not leases in fact, and never had been, but rather they were no more and no less than the same kind of permits held by the other 85 tenants. In most cases, however, it is likely that these 25 tenants thought they held leases rather than permits. These 25 tenants pay $3,800.50 per month rent, or less than the "permit" holders on the average. On August 15, 1963, these 25 tenants were given notice of what had always been the fact, i.e., their legal status differed in no way from the other 85 tenants. They were told, however, that notwith- standing this fact, the two entities foreseen as their future landlord (Vicorp and the government of the Virgin Islands) had adequate negotiating leasing authority, something which the Department of the Interior never had, and would work out with them fair arrange- ments, consistent with the public interest, which would take into account the history of any given occupancy. In 1948, the Navy, having no immediate need for the properties in St. Thomas, gave them to Interior on a revocable permit, to allow them to be placed in such use as we could as a permittee subject to notice to quit at any time. The permit included language which said that leases could be given, subject to all such instruments falling at any time the property might be recaptured by Navy. Navy further stated that it did not intend to exercise such right of recapture (which right was itself unqualified) except in the case of an emergency. Whatever may have been the intent of such language, it did not convey authority from Navy to Interior to lease, but at best indicated LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS 5 that Navy had no objection to such leasing as Interior might other- wise be authorized to perform. It is possible, however, that such language was misread as itself authorizing leasing, at least until 1955, when Navy, in a letter relating to a nearby parcel of land but discuss- ing it in the context of the 1948 permit, said that it was not able to delegate such leasing authority to Interior. Nonetheless, beginning in 1950 (with respect to tenants still oc- cupying the property), and continuing through 1960, the Interior Department or its agents did issue instruments to a total of 25 par- ties still in residence (out of an overall total of 110 tenants at pres- ent) which were called "leases" and which held themselves out to be leases. It is difficult to reconstruct what must have been the rationale behind such a practice, particularly after the 1955 letter from Navy. There is no doubt that, in general, there was a great desire to cause these naval properties to play a vital role in the economic develop- ment of St. Thomas. It was realized that such lands could be de- veloped more surely and efficiently if the tenants were there in a lessee, rather than a permittee status, and the wish may have been father to the thought. In retrospect, it was not a kindness to these 25 tenants to have given them instruments which did not accurately and candidly describe the nature of their occupancy. To point out in 1963 that these 25 tenants had been dealt with in a most unusual manner from 1950 to 1960, was simply to state the obvious, to es- tablish a fact, and not to make a new decision. By the early part of 1961, we were morally certain that all tenants without exception on the Navy properties held nothing more than revocable permits, however they might be denominated. By the end of 1961, we were legally certain of this. From the beginning of 1961, until the present time, we have not entered into a single "lease," nor have we permitted the assignment of such "leases" to other par- ties, in view of our knowledge of their nature. We have also not permitted any such tenants to make new substantial investment in their places, knowing them to be without the protection afforded by a valid lease. From that time on, we adopted a policy of issuing permits, called such, for all new occupancy, revocable upon notice, and 85 out of 110 tenants today hold such permits. We also hoped to gradually cause some of the other 25 tenants to change over to an admitted permit basis; for example, when such party sought additional benefits from us, but we had little success on this. We sponsored legislation in 1962, which would have had the fore- seen byproduct of allowing the local government to deal equitably with this problem, just as we now propose in our recommended trans- fer to such government of part of this property. A similar legis- lative proposal was also sponsored by Interior about 1959, but was not introduced, which differed in that it would have transferred all such property to Vicorp. The Department of the Navy notified us in February 1962, that it intended to declare excess this facility if the Congress did not enact during the existing session legislation dealing with the property. The Congress did not enact legislation that year, and we turned to methods of disposal of the property within the framework of existing law; for 6 LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS example, the Federal Property Act. Let me make clear that our desire to have these properties transferred to the local government and Vicorp is not based upon the leasing anomaly we are now discussing, but rather the regularization of such situation is a foreseen, happy, but secondary byproduct. To this end, we not only did not object when we learned that Navy wanted to go forward with the declaration of excess early in 1963, but we urged Navy to expedite such disposal action. We kept in touch with both Navy and the General Services Administration all during the spring of 1963, making clear in letters to GSA, a copy to Navy, that we wanted all of the property to go to the combination of Vicorp and the local government, and the sooner the better. Not only did we not seek the excess declaration as a device to terminate the 1948 permit, it did not occur to us that there was any connection. Instead, we expected that the 1948 permit would continue in force throughout the excess stage, until the properties were transferred to the local government. At no time did Interior seek any of the property involved, nor does it expect to seek any in the future. It simply does not have any program need or funds for the development of such property, while the other two agencies have both. Navy declared the properties excess to GSA on May 23, 1963, to our complete satisfaction. We expected that the 1948 permit would con- tinue, and that the property would move in due course to either of the two parties seeking it. If for some reason any of this property did not reach these parties, an unlikely event considering that the local government has a priority to purchase all surplus property, then we would have to notify the General Services Administration when the time came to describe the nature of the encumbrances upon this land that such instruments were not valid leases but simply permits. We would also have given to that agency at the time a full explanation of the circumstances surrounding the granting of each lease—and the circumstances differ markedly from lease to lease—and let it decide the extent and manner in which equitable adjustments should be made. We could not and would not allow this property to be finally de- clared surplus and sold without disclosing the true nature of the en- cumbrances. We would have to do this for two reasons. Firstly, to the extent that disposal to private parties would be contemplated, it would put the matter beyond the reach of public bodies and their ability to grant such equitable relief as might be just. Secondly, the Federal Government would realize much less in proceeds from the sale' of assets apparently encumbered for a long term of years than it would if such assets were free and clear. The extent to which equity and fair dealing would require these seeming encumbrances to stand, or to be compensated for, is one which should be determined on a case-by-case evaluation of the circumstances surrounding the granting of each instrument. During June 1963, however, we learned to our surprise that the Gen- eral Services Administration did not accept as submitted in May, the Navy excess declaration, but, rejected it as not yet, ready or eligible for declaration while it was still encumbered by the 1948 permit th Interior. Only after receiving this information did we, for the first time, consider asking Navy to revoke the 1948 permit. We wanted to move the property into the hands of Vicorp and the local government as LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS 7 soon as possible in order that Vicorp could begin a new program of industrial development on St. Thomas, that the local government could obtain title to the only airport on St. Thomas, to enable the College of the Virgin Islands to get, land for its campus and its new dormitory construction, and lastly to allow a resolution to be made of this leasing problem that had, among other disadvantages, stymied the 25 tenants themselves in their desire to make new investment in the property. Accordingly, we decided that the correct procedural step, in the light of GSA's unwillingness to take the property with the 1948 per- mit existing, was to ask Navy to cancel the permit. We foresaw clearly at the time that. this would have. the result of terminating the form of the "leases," but it would have no effect what- soever upon the substance of them, if their true substance was rightly understood. If these instruments had in fact. been valid leases, then we would not have undertaken to connive in their cancellation. Since we knew with certitude that they were not leases but. rather revocable permits then we also knew that in fact none of the 25 tenants was being disadvan- taged by this move. On the contrary, it was a necessary first step in the long overdue resolution of this problem. Secretary Udall was assured both orally and in writing in a memorandum accompanying the letter to Navy of July 17, 1963, asking for such revocation, that this step would cause the property to be advanced to further stages where relief, where warranted, could be forthcoming—something that could not be done as long as the property remained in its present status. We also foresaw that such a procedure would leave us open to erroneous but understandable charges of sharp practice from the 25 tenants concerned. We meant. and knew the move to be in their own ultimate interestt but we could not spell out for them just why this was so without convicting ourselves of anomalous actions over the past decade, and leaving them no better off. Incidentally, although the Navy permit to Interior said that Navy intended to revoke only in case of an emergency (i.e., this was its in- tention at the time the permit was granted.), except for a few leases not on standard forms Interior did not give such statement of intention to the tenants but on the contrary put each tenant on notice that the property was subject, to recapture upon demand, without any miticrat- ing or softening language. Some of the rental rates charged would not seem to make sense in any other context. Instead, we gave to them the assurance that their future landlords, public bodies both, had full leasing authority and would have a full knowledge of the circumstances of their occupancy to date, and could take any steps consistent with this in the public interest. In our own talks with and memorandums to the. representatives of these bodies, in turn, we also commended the tenants to them, with the recommendation that they give reassurances general in nature until they had an opportunity to get all the facts in each case, and until they had both the power and the responsibility to act. In closing, I would like to turn to two more specialized aspects of this question. The first might be to ask what kind of leases these were, from the point of view of whether they were good from a business point of view, insofar as the Government is concerned. 8 LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS No generalized statement is true of all aspects of all of these leases. They were entered into over a whole decade of time, although most date from the late 1950's. Some were awarded as a direct result of public advertising. Most were negotiated with private parties directly with- out any public bidding. Some were awarded following advertising followed by extensive negotiations with those responding. In lan- guage, there are many forms and differing provisions, although here again, the majority are on one standard lease form. Most contem- plated that the local economy would be enhanced by the activity to be undertaken, but a few were for private residences with no obvious public benefit, even of a secondary nature. Most have workable rental renegotiation clauses, but some have ineffective ones and some have none. The one constant is that each differs, and must be analyzed on an individual basis. I would like to stress that this was not done, and was intentionally not done. This individual analysis was expected to be done by the agency, either Vicorp or the Government of the Virgin Islands, using the records in the islands, and working with each tenant individually, as well as the Office of Territories. This was not expected to be done until the authority to act definitely was established in the agency to act, and until the tenant could be brought to the same state of aware- ness of the nature of his occupancy that we enjoyed. Mention has been made of the fact that Navy in 1948, stated to Interior that it did not intend to revoke the permit except in a time of emergency, with the suggestion that the 25 tenants relied upon this. Except for a few of the minor leases, when Interior entered into leases with the tenants concerned, it did not include such language in their instruments. It seems reasonable to conclude therefore, that either the tenants in such cases did not know of the conclude, intention (which would have no legal effect in any case) in which case they could not have relied upon it, or alternatively they knew it was in the Navy permit, in which case its absence prom their own instrument with Interior was patent, especially since the rest of the Navy recapture clause was inserted, an absence which it is unlikely would not be noted and evaluated by the tenants and their counsel. But in any event, this subjective point is academic, since as we have shown, we never had any purpose but to deal fairly with the tenants. Similarly, the statement has been made implying that it was clear that these 25 tenants entered into these instruments in good faith, and that they all honestly believed, as did those representing the Govern- ment, that these were leases. I believe that this is not a fact to be discovered or averted to, but rather a subjective judgment that it is reasonable to come by in most cases, and difficult or impossible to prove the contrary in any case. Not surprisingly, our files do not show any instance of either party freely admitting that he knew these instru- ments were anything but leases. Where the instrument was entered into following public advertisement, I believe the presumption of good faith should be accepted without challenge. Where public advertise- ment was not practiced, I would be inclined to be more skeptical. Nevertheless, the instrument holds itself out as a lease, and in the absence of any showing in a given case that such good faith belief was not present, I would assume that a rebuttable presumption exists with regard to each given case that the tenant was in good faith. Ac- LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS 9 cordino i .ly, I would continue to regard the question of whether each tenant honestly believed or understood he was getting a valid lease as best answered by observing that many, perhaps most, probably did, and we are unlikely to be able to prove the contrary in any case at all. As a practical matter, for reasons I will state in discussing the in- dividual leases very briefly, this is not a particularly significant point. It has also been suggested that Interior first came to the conclusion that these "leases" were disadvantageous from a business point of view, and then began to cast about for some device to strike them down. This is a plausible theory, but completely untrue. Instead, first came the conviction that these instruments were not valid—none of them—the seemingly advantageous ones, the seem- ingly disadvantageous ones, and the unexamined ones. At no time did anyone either propose treating them differently, or dividing them into "good" ones and "bad" ones. Once we concluded that all were invalid, we never reached the question of whether they were fa- vorable to the Government or not, insofar as a motive for any actions we have taken are concerned. This is not to say that many of the rental terms are not so low as to cause wonder, or alert one to the compelling necessity in the public interest to examine carefully each of these leases to make sure that one understands the extent to which equitable relief is appro- priate. We want to put each of the 25 tenants in a position where he can expect to receive that to which he is entitled. This is not necessarily the same thing as saying that he is entitled to that which he expected to receive under the former leases. For the reasons given earlier, Interior has not heretofore come to any conclusion about a given lease. Some of the rents are so low that one readily concludes that all would have to be examined, and were to have been, and will be, by the agency which gets the power to act—not Interior. One thing has always been certain, however, and that is the criteria which would have been used by Interior, and any other public body, was to be the same ones of fairness ani equity any reasonable public servant would use. In no event would the question be: "Are the rents as much as we could get at this time?" Rather, the question we would want to start out with would be: "Was this bargain reasonable at the time and in the context in which it was struck?' For several practical reasons, this question, difficult to answer definitively in a short time due to the passage of time, absence of records, and subjective judgment involved, can be further distinguished so that the number of former leases would give rise to problems is greatly reduced. Where the answer to the simple question would be in doubt, or even if defects were obvious, but either the passage of time or specific terms of the contract make the deficiency curable, then the presumption would be established that relief should be given. To be more specific, we would expect to approach the evaluation of these 25 leases in the following manner: 1. Any lease awarded as a resultS of public advertising would be entitled to complete credence. This would hold true also for leases negotiated with the high bidder following a public adver- tisement even though the lease terms differed somewhat from the public offering. Of course, this would not be true of a negotiated lease too different in essentials from that which was offered publicly. 10 LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS 2. Any lease which, even though not publicly advertised, and with- out regard to its original terms, would be given complete credence if by its own terms it either permits now, or would shortly, genuine renegotiation of rent. The only exception to this would be the evidence of impropriety in the original negotia 3. Any lease which was not publicly advertised but which has a relatively short remaining life (say 1970), and absent any indication of impropriety, would be given complete credence except that the right to negotiate a new rental rate for the remainder of the term would be reserved to the Government. 4. This would leave a residue of 6 of 25 leases which should be ex- amined critically and individually. They have in common the fact that they all were privately negotiated rather than exposed to public bidding, they are for long terms, and they do not permit effective rent renegotiation. The six former "leases" which I have in mind here, based upon a review of our Washington office files, are set out below: 1. Gramboko Hotel. Expires 1980. Rent $500 per month through 1970. 2. Texaco. Expires 1982. Rent $179 per month. 3. Virgin Island Pleasure Boats. Expires 1984. Rent $50 per month. 4. Gerard Berne. Expires 1980. Rent $100 per month. 5. Tropic Isle Hotel (if the lease was not result of public adver- tisement). Expires 1977. Rent $400 per month through 1967. 6. Fran de Pina. Expires 1989. Rent $18 per month. I do not foresee that any former lease not listed in paragraph 4 would pose any significant difficulties for the public agency dealing with it. If it were a lease arrived at through public bidding, the agency would accept it without change. If it had a rent renegotiation clause that is both effective and timely, the rent could be renegotiated and all other features left unchanged. Even if it has no renegotiation feature but has only a few years more to run, say about 1970, the rent could be renegotiated for the remainder of the term, in the case of these privately negotiated leases. But if it was one of the six leases listed above, then I believe that each case will have to be adjudged critically, and on the basis of more information than is available now and here. I believe each of these six can be given the same assurance of fair treatment, but this should not be presumed to be the same as an agreement to revivify the old instrument. This is not to say that I agree that the terms of all the other in- struments were reasonable even at the time. But I believe that the terms are better understood if one believes the parties: 1. Clearly understood that the instrument might well fall with the revocation by Navy for any reason whatsoever—the tenants paid "permit-type" rents, although they wanted "lease-type" protection. 2. The Government's representatives were adverting to a philosophy of economic development rather than maximum return to the Govern- ment as the good to be attained. To summarize, 25 tenants out of 110 on the Navy properties in St. Thomas were given instruments never valid as leases by Interior be- tween 1950 and 1960. Our attempts to remedy this situation in 1963, as a subordinate part of a larger transfer of property proposal, threw light on the matter and brought it to a head, but did nothing to change LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS 11 the basic standing of the tenants at all. Their only cause for com- plaint, providing they receive in the future the fair treatment they were promised all along, will be with regard to what happened be- tween 1950 and 1960. We have no reason to believe that the tenants do not so regard the matter in the same light, since in the 2 months following our giving notice none of them has called upon me either in person or through counsel, although several have indicated they will. Let me make clear, however, that we do not wish to deprive any tenant of any legal rights he feels he has. We start from a position that the tenant has and had no legal right to continued tenure, or any given rental rate, but we only start from there—not stop there. In view of the history of the matter, he has a moral, but not a legal, right to expect much more from his Government. That is why we have had a problem for years, instead of an easy legal solution. But if any tenant differs as to his legal position, we can only note that the courts remain open to decide matters of this nature. If any tenant elects to stand on his legal rights alone, then we will take no action adverse to his present status, and we will both abide by the result. We believe this hearing will provide a most useful clarification of the subject, and we welcome it accordingly. One purpose it will not serve, however, will be to instill for the first time in us an intention to deal fairly and justly, even considerately, with the tenants disad- vantaged by this history. I believe the record is clear that we never had any other intention, and the contrary should not be imputed to us. Thank you, and I will be glad to answer any questions. Mr. Chairman, might I ask Mr. Cramer, the President of the Virgin Island Corporation, also to join us at the table if the committee wishes. Senator NELSON. On page 10, the second paragraph, the sentence— Since we knew with certitude that they were not leases but rather revocable permits then we also knew that in fact none of the 25 tenants was being dis- advantaged by this move. I suppose you are referring strictly to it in the legal sense. Mr. KIRWAN. That is right, Mr. Chairman. We were relying on the fact that if these leases in the legal sense were not leases then they were nothing but revocable permits. Our position was that they would not be disadvantaged by the move that we took then, not even financially because we did not increase any- body's rent or ask anybody to leave. They were not disadvantaged technically because all we did was to make clear that they were there on a permit basis, a condition that we maintain had been the only one they ever were there on ever since they first came on to the premises somewhere between 1950 and 1960. Senator NELSON. On page 12, in the last paragraph, second sen- tence, you state: Except for a few of the minor leases when Interior entered into leases with the tenants concerned it did not include such language in their instruments. Was there any language in the instruments which gave notice that they were revocable by the Navy? Mr. KIRWAN. Yes, Mr. Chairman, each instrument without excep- tion contained a clause that read, "Should the Navy recapture these 12 LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS premises the party expressly understands that his instrument will fall and there will be no action for damages and he must leave." Every instrument had language of that sort in it, and we will be glad to in- troduce the exact language in each case. Now, either three or four of the instruments in each case a minor one, none of the large properties, but three or four of the smaller ones which were in the early days entered into by the St. Thomas Develop- ment Authority rather than Interior directly, on a nonstandard form, added to it the same type of reassuring language that Navy gave Inte- rior in its permit and said that, however, Navy did not intend to exer- cise its right to recapture, except in case of a national emergency. This is present, I believe, in 4 of the 25 leases and none of the major properties. Senator NELSON. So I took it-- Senator DOMINICK. What do you mean by a major property? Ex- cuse me, Mr. Chairman. Mr. KIRWAN. One is a small—the Sunbuilt Distilleries across from the arena, Senator Dominick, it is just a small building dealing with rum and not serving the public. Then it is present in three residences. So we have three residences and one small business operation. Senator DOMINICK. Would it surprise you to know it is in the Beachcomber's lease, too? Mr. KIRWAN. It would astound me, Senator, because I checked the Beachcomber lease for that language. Senator NELSON. So then, the Navy's expressed intent to the Interior Department not to recapture except in case of a national emergency was not included in any of the other leases save these four or five that you mentioned now? Mr. KIRWAN. My counsel tells me six precisely that is right, sir. Senator NELSON. And then you also assert further on here some place that even so, the Navy's expressed intent is not binding on the Navy legally from the standpoint of their capacity to cancel even though there were not a national emergency. That is your legal position. Mr. KIRWAN. That is. Senator NELSON. Do you know whether or not the island's govern- ment or Vicorp or anybody has developed a comprehensive plan for the use of the properties involved here? Mr. KIRWAN. I know the extent to which they have done it, Senator, and it is not comprehensive. Both the Virgin Islands Corporation which hopes to get the submarine base and the local government which hopes to get the airfield, intends to have the subject properties sur- veyed in order to determine the highest and best use of the area. Following the results of the survey it would attempt to implement the plan. The Virgin Island Corporation' for example, has requested a half million dollars in the current budget in order to acquire its part, part of which money is budgeted precisely for making this survey. For the engineering phase which caused this survey to be made, but, neither entity has gone beyond that general intention to have it sur- veyed and develop a plan after they get it. Senator NELSON. The property is valuable and is dramatically in- creasing in value and it would seem to be a matter of some concern that a genuinely comprehensive plan for appropriate use, including public use, recreational use, school use, business use, park use, what LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS 13 have you, ought to be carefully drafted but so far as you know there is no such comprehensive plan now under study? Mr. KIRWAN. I know there is no comprehensive plan, Mr. Chair- man, because both Vicorp and the local government have been unsuc- cessful in getting this property for many years, so that in the past 2 years each agency has adopted the view that it would not spend money to have such a plan made until it actually was certain it would get the property. On the other hand, because it, too, feels that the property is uniquely valuable it will not go on the basis of plans other than those which are expensive and thorough. Therefore, it has not done it until it knows it is getting the property for sure. Senator NELSON. Does the Virgin Island Corporation have a ter- mination date? Mr. KIRWAN. June 30,1969. Senator NELSON. This is a public corporation? Mr. KIRWAN. Wholly owned Federal corporation—wholly federally owned. Senator NELSON. The Secretary of Interior is a member of the Board and the Secretary of Agriculture? Mr. KIRWAN. The Administrator of the Small Business Adminis- tration, the Governor of the Virgin Islands, these are the four statu- tory members. In addition there are three public members chosen from the private business world. There is one vacancy today and two private businessmen, one is a lumberman, Mr. Robert Dwyer of Portland, Oreg. one is an industrialist, Mr. Ward Canaday of Toledo, Ohio. Senator NELSON. What is their function? Mr. KIRWAN. Their function is to set the policy for the Corporation itself and also to make the major specific decisions for the Corporation. The Board has a Chairman, Mr. Stewart Udall, the Secretary of the Interior, who oversees the Corporation in between Board meetings. The Corporation itself is under the day-to-day executive direction of its President, Mr. Robert Cramer. Senator NELSON. This is a full-time, paid position? Mr. KIRWAN. Yes, Mr. Chairman. Senator NELSON. Then I suppose if this property ended up, or a portion of it, under the control of the Virgin Island Corporation the respective government representatives on the Board of Directors could, if they so wished, assure that a comprehensive plan was developed be- fore there was miscellaneous disposition of these valuable properties. Mr. KIRWAN. Oh, the representations that the Virgin Islands Cor- poration would have to make before both the Bureau of the Budget on the one hand, the General Services Administration, and on the other before the Congress in order to get the money to acquire the property would mean that the Corporation would have to not only assure these bodies but bind itself to develop the properties before it would be entrusted with them, because the Corporation could not get the property simply in order to ultimately dispose of it. If it were only going to be disposed of the General Services Administration would retain cognizance, so that the Corporation, indeed, Mr. Chair- man, will have to show that it intends to cause the property to be developed rather than sold off piecemeal. Senator NELSON. I am not sure that is the law. 25-147-64 2 14 LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS Mr. KIRWAN. No; it is not the law. The General Services Ad- ministration and the Bureau of the Budget have a discretion about whether to permit, the Corporation to get the property or not and the Congress, as you know, has discretion about whether to give us the money to acquire it. We cannot as a practical matter get the clearance of the two control agencies in the executive branch and get money out of the Congress unless we go forward with a program of develop- ment of the property. If we were simply to say we wanted to acquire the property in order to sell it to private parties, the General Services Administration itself is the agency both authorized and more expert than we in a disposal program, so no one would seriously consider giving it to us foreseeing Senator NELSON. Who is us? Mr. KIRWAN. The Virgin Islands Corporation—foreseeing near term disposal. Senator NELSON. I ask these questions because this property is so valuable' and I would take it the only conceivable function that the Interior Committee has is to gather information to determine whether or not legislation is necessary respecting this problem. If it is not necessary, this, I take it, is the end of the authority of the Interior Committee. Is that correct? Mr. KIRWAN. Well, I would say that there are several areas where this committee reasonably might consider it, Mr. Chairman. One is certainly if any legislation not presently enacted is needed, of course, it would come to this committee. Secondly, there is a bill on this subject pending before the House now, it was introduced over a year ago, but each year there have been bills on the subject. Thirdly, however, I believe we regard the com- mittee also as having an oversight function as well as a specific legis- lative function so that it is meet and seemly that you examine the manner in which we are carrying out our present responsibilities, whether or not there is a clear need for legislation at the moment. Senator NELSON. What is the nature of the legal dimensions of the oversight authority, do you know, by this committee? Mr. KIRWAN. I would say, Mr. Chairman, and you are asking me a question that is not strictly in my field, but I would say it probably stems more indirectly from the ultimate need to legislate, but in ad- dition to your immediate legislative requirement of looking at what we are doing to see if there is a bill needed tomorrow, you surely would need to take a look at how we are doing our job generally from time to time so that in the long run, as the general flow of legislation comes before you, you know whether you may entrust it to us and the extent to which you have to put peculiar safeguards or limitations in it. Senator NELSON. I pursue this because again I am concerned about the question of whether or not there are any assurances that if the government of the Virgin Islands and/or the Virgin Islands Cor- poration should ultimately receive this land under the law through disposition by GSA, I am curious to know whether there are any as- surances that they will, in fact, develop a careful, comprehensive plan for the best use and the best disposition of this valuable property. I think that under the GSA there is no requirement that a compre- hensive plan be submitted, but if the Virgin Islands Corporation se- cured some of this property and then wished to dispose of it the statute provides what the terms of the disposition are. If it is for LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS 15 commercial use GSA must be paid the going value of the property for commercial use. If it were for some other use an airport, they have other authority to dispose, as a gift, I believe, to a municipality. If it is for the pur- pose, which would not be here, a wildlife habitat, they could have it for nothing. If it is for a park purpose they would have to pay half the price, or something to that effect. So, GSA's authority, I think, under the circumstances, is only to comply with the statute and assure, if there is a commercial disposi- tion, that the Federal Government gets full pay for it, but this does not contemplate a careful development of the properties at all. It could be a miscellaneous disposition of the property in a fashion that was not in the benefit of the islands at all. Mr. KIRWAN. Mr. Chairman, first, as far as the comprehensive plan goes, I can assure you we would have the intention of both having the plan and actually developing it. I cannot assure you we will succeed because, among other things, we would have to get money from the Congress to do it; we might fail to. Second, however, the General Services Administration disposal route, of course you are correct, does not contemplate development or management or thoughtful long-term disposal at all, it is in lieu of that, so the property would either go to the General Services Admin- istration for immediate resale without regard to planning, without regard to end use, or alternatively it would go to some agency such as either Vicorp or the local government. I know of no third agency in the Virgin Islands with either the program, the money for the inten- tion of having the type of survey made that we have been speaking about and the type of thoughtful development taking place at least for a couple of years, at the end of which time quite possibly areas of this would in turn then be either sold or leased out to private enterprise. Senator NELSON. I take it that Interior is aware that there are 701 planning grant funds available from Mr. Weaver's Department for municipal and State agencies and whether it is available for a wholly owned Federal corporation I do not know, but there are planning funds available for this purpose. Mr. KIRWAN. Those particular funds, Mr. Chairman, are not avail- able to the corporation, but they are available to the local government and the local government has been successful in the last 2 years in °vaing a reasonable amount of such funds. Senator NELSON. That would leave a substantial amount of prop- erty if it were given, transferred to Vicorp, that did not have any provision for funds for planning purposes. Is that correct? Mr. KIRWAN. No, Mr. Chairman, we have our own money in Vicorp. Our difficulty with—not difficulty, our brush, our contact with the Congress where money and Vicorp are concerned is not, literally speaking, in order to get new money from the Congress to do this job, but to get the permission of the Congress which is given through the approval of the budget each year, through appropriations channels rather than substantive committee channels, for the corporation to use its own money which it already has in hand, so our problem is not to 0-et half a million dollars from Congress to do the job, it is to get the clearance from the Appropriations Committees concerned, to get their permission to use our own half-million dollars which we already have to do this job. 16 LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS • It is a real—we have to really get the permission. It is just as diffi- cult at times to get as money, but technically speaking, we do not need money, per se, we need permission from the Appropriations Com- mittees. Senator NELSON. I would like to have the record show and be clear that you can assure this committee that it is the intent of the Virgin Islands Corporation if GSA should dispose of part of this property to them, to seek the use of your own funds for a comprehensive plan for the orderly disposition of this property? Mr. KIRWAN. I not only can, Mr. Chairman' but our 1965 appro- priation request has already gone forward with that item in it. Senator NELSON. How many acres are involved in the Navy lands here? Mr. KIRWAN. Approximately 600. Senator NELSON. And under the law, if this is not a valid lease then all authority for the Department of Interior to participate at this stage has been terminated? This is now a Navy problem and from the Navy to the GSA and from GSA under the law, some disposition. Mr. KIRWAN. Mr. Chairman, the Department of Interior as such is completely out of the picture as of this date except for the limited ex- tent that we have a revocable permit from Navy for 125 acres of land where in turn we have given a subpermit to Vicorp which has given a subpermit to the College of the Virgin Islands and the College of the Virgin Islands, a wholly public institution, is in its second year of existence on the subject land. Except for this part of the Naval properties concerned the Department of Interior itself today has no role here. We are in the picture, so to speak, because of our close association with and responsibility for both the Virgin Islands Corporation on the one hand and the government of the Virgin Islands on the other, and I do not mean to imply that we are responsible for them in a sense that they are creatures or subordinate divisions of the Department, of course, they are not. But we are the only Federal agency in Washington with any direct responsibility with our continuing concern for these two agencies. But that is our only involvement today in the subject properties. Senator NELSON. But your interest continues even though there is a legal hiatus here in anticipation of the possibility that part of this property may go back to the islands and to Vicorp in which event you would have a direct legal interest of some kind? Mr. KIRWAN. No; our interest is in more than possibility, in the almost certainty that the properties will go to one or the other, but even when they do, we will not have that direct legal interest except through the two agencies I indicated. The Virgin Islands Corporation has been placed by the statute under the general oversight of the President or such individual as he may designate. He did designate the Secretary of the Interior, so we are involved there. The Secretary of the Interior is also Chairman of the Board and lastly, we perform all of the administrative or housekeep- ing functions for the corporation in Washington, including budgeting for it and justifying its budget. Senator NELSON. On page 15, the opening sentence above numeral 1. where you use the word "we," you are using that not as the Department of Interior but as V icorp ? LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS 17 Mr. KIRWAN. I am using that, Mr. Chairman, if I can—I do not wish to belabor the point, but if I can use the thought realistically instead of legalistically here, the Secretary of the Interior is charged by law with supervising the Governor of the Virgin Islands, he is also charged with supervising the Corporation, and as Chairman, which is a different hat, he is in charge of the day-to-day policy or the oversight of the Corporation. Therefore, when I do say "we," I mean both the Department of the Interior to begin with, but not only with regard to our own responsi- bilities but with regard to the de facto influence and cooperative rela- tionship we enjoy with both the Corporation and the local government. Senator NELSON. The first sentence "Any lease awarded as a result of public advertising would be entitled to complete credence." You are talking about leases or permits that have already been granted. You are not talking about something in the future? Mr. KIRWAN. Yes, Mr. Chairman. I am talking only about the subject 25 instruments that were terminated on August 15, 1963. Senator NELSON. All right. Do you intend to submit to the committee copies for the record of all the leases? Mr. KIRWAN. We will be glad to, sir. In particular those, since most of them are on standard form, it might be more feasible if we submitted a copy of the standard form and indicated in any case where a lease differed from the standard form, indicated the nature and ex- tent of the difference. Senator NELSON. I am concerned about how much goes into the record here for purposes of the full committee to examine. Would one standard form with some exceptions printed, not the whole lease, some exceptions printed Mr. KIRWAN. Yes, and I believe, Mr. Chairman, if we confined our- self to those divergencies from the standard form. It would only be such language as was found in the standard form, either more or less, that might be reasonably relevant to any of the points under discussion. We would be glad to submit those. Senator DOMINICK. Mr. Chairman, I am not quite sure that would be completely accurate because it is my understanding that some of these people have constructed wholly new buildings on their property which were not there originally and for which they received special permission to construct these buildings. There might be some provi- sions in those permits which would be applicable. Senator NELSON. I am wondering if, again, only for purposes of being sure we get everything into the record that ought to be there, but at the same time not too much duplication, that if it would be appropriate for some arrangement to get in the standard form and the exceptions that are pertinent and to be sure that any of the occu- pants who feel that there is a provision in the lease that has not been included that they want in, that that go in, too. Would that be acceptable? Senator DOMINICK. That would be fine. Mr. KIRWAN. Mr. Chairman, might we also submit for the record, the letter together with its attachments, from the Solicitor of the Department of the Interior addressed to you as acting chairman, stating to you the legal basis for many of the statements I have made today. Senator NELSON. Yes, and that will be included in the record. 18 LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS (The letter referred to is as follows:) DEPARTMENT OF THE INTERIOR, OFFICE OF THE SOLICITOR, Washington, D.C., October 25, 1963. 0-63-2011.16 Hon. GAYLORD NELSON, Acting Chairman, Subcommittee on Territories, Committee on Interior and Insular Affairs, U.S. Senate, Washington, D.C. DEAR SENATOR NELSON: This replies to the request made in your letter of October 22, for my views as to the validity of certain instruments "styled as 'leases' * * * which were a basis for occupancy and use prior to August 15, 1963," of certain Federal property, formerly known as the Marine Corps air facility and naval submarine base, located on St. Thomas, V.I. There have been no written opinions or rulings rendered by this Office on this subject except for approval of us of a letter of November 13, 1961, from Assistant Secretary John A. Carver, Jr., to Dr. Kenneth A. Bartlett, President, Virgin Is- lands Corporation, in which it is said that such leases are viewed with "dubiety" and that they are probably merely permits. In July of this year we orally advised that, in our opinion, the instruments were not valid as leases. We are happy to comply with your request to reduce our views to writing. The property in question, consisting of about 600 acres, was acquired by the United States in 1940 and 1941 for military purposes. Following acquisition, military improvements were placed on the property and it was, during World War II, operated as an active military base. In 1947 the Department of the Navy concluded that, "these installations are not required for military pur- poses during time of peace, but are required, or are likely to be required, in the event of military necessity or during a time of national emergency and, therefore, must be retained as a part of the ready and immediately available potential Military Establishment of the United States Navy." Accordingly, in recognition of the responsibilities of the Department of the Interior for the economic development of the Virgin Islands, the Department of the Navy transferred to the Department of the Interior "cognizance and control" of the property effective January 1, 1948. The instrument stated that— "This permit shall be for an indefinite term but shall be subject at any time hereafter to the right of the Navy Department, or higher military authority, to revoke this instrument in whole or in part, or as a temporary or a permanent measure, but it is the intention of the Navy Department that the right of revo- cation shall be exercised only in the event of military necessity or by reason of a national emergency." The instrument further provided that— "The Interior Department may lease or license various portions [of the prop- erty] to public, including Federal and territorial, or private agencies or persons, upon such terms as the Secretary may deem appropriate." A copy of the 1948 permit in enclosed (enclosure No. 1). The first instrument which carried the designation of "lease" was entered into on March 25, 1950, by this Department and the municipality of St. Thomas and St. John, a subdivision of the government of the Virgin Islands (enclosure No. 2.). It was supplemented by an agreement dated October 8, 1951 (enclosure No. 3). These instruments were revocable at any time by the Secretary. They "expressly agreed" that the municipality could sublease or license portions of the property. A few of the "leases" it made were for terms which have not yet expired. In June 1954 the Secretary of the Interior terminated the lease to the munici- pality and, effective July 1, 1954, delegated the administration of the property to the Virgin Islands Corporation (Vicorp). Arrangements for this administra- tion were formalized in a permit, effective that date (enclosure No. 4; 20:9 F.R. 7339). Section 7 thereof stated— "It is expressly agreed that the permittee [Vicorp] may lease or license to public or private agencies or organizations, or to individuals, the properties covered by this permit * * Vicorp entered into agreements, denominated leases, each of which contained a provision recognizing the Navy's right to revoke at any time. Many a these agreements were set forth on a standard form developed for the purpose (en- closure No. 4). LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS 19 By letter dated August 15, 1963 (enclosure No. 5), in response to this Depart- ment's letter of July 17 (enclosure No. 6), the Department of he Navy terminated the 1948 permit. Accordingly, the rights of all persons to use and occupancy under unexpired "leases" terminated on August 15, 1963. Property of the United States may be leased only by or pursuant to act of Congress (U.S. Constitution, art. IV, sec. 3, cl. 2; United States v. Nicoll, 27 Fed. Ca.s. 15879 (1826) ; 34 Op. Atty. Gen. 320 (1924) ; United States v. Gratiot 39 U.S. 526 (1840) ). The Department of the Navy was itself authorized to enter into leases with particular provisions (10 U.S.C., sec. 2667 and its predecessor, the act of Aug. 5, 1947, 61 Stat. 774), provided certain findings were made. It neither made such findings nor attempted to lease. No department or agency can delegate its leasing authority to another depart- ment or agency without specific congressional authority (17 Comp. Gen. 1054 (1938), 18 Comp. Gen. 262 (1938) ). The 1948 permit does not purport to attempt such a delegation. The Navy advised Interior in 1955 that no authority exists "whereunder this Department may authorize the Department of the Interior to outlease property under the jurisdiction and control of the Navy" (enclosures Nos. 8 and 9). No question exists as to the limitations on the Interior Department's rights under the 1948 permit. Interior acquired a temporary and instantly terminable management authority. Administrative responsibility remained with the Navy. The property could have been transferred to the administrative responsibility of the Interior Department only by a reorganization plan, a special act of Con- gress, or a transfer pursuant to the pertinent Federal property laws (i.e., the Surplus Property Act of 1944, and later the Federal Property and Administrative Services Act of 1949). No such transfer has occurred. One cannot convey a greater right or interest in real property than he holds ( Tiffany, "Real Property," 3d ed., sec. 59). Since this Department had only a revocable permit from the Navy, the occupants of the property could acquire no more than that. Furthermore, this Department cannot convey a leasehold interest unless author- ized by Congress. The Department of the Interior has authority to lease Federal property in many circumstances, e.g. section 31(a) of the Revised Organic Act of the Virgin Islands (68 Stat. 510, 48 U.S.C., sec. 1545( a) ) ; section 15 of the act of June 28, 1934 (48 Stat. 1275), as amended (43 U.S.C., sec 315m) ; section 10 of the act of August 4, 1939 (53 Stat 1196), as amended (43 U.S.C., sec. 347) ; section 1 of the act of February 25, 1920 (41 Stat. 437), as amended (30 U.S.C., see. 181) ; and section 1 of the act of March 12, 1914 (38 Stat. 305), as amended (48 U.S.C., sec. 301). Section 31(a) of the Revised Organic Act, supra, authorizes the Secretary of the Interior to lease or to sell U.S. property "under his administrative super- vision" in the Virgin Islands. The property involved here was originally un- der the administrative supervision of the Secretary of the Navy. Navy could use the property for any authorized purpose. Having no immediate need there- for, Navy made the property available to Interior, expressly retaining the pow er to recapture. Hence, Navy did not transfer "administrative supervision' to Interior, and the Secretary of the Interior did not acquire a sufficient interest in the property to lease or sell it under section 31(a). Vicorp could get no more from Interior than Interior had. A fortiori it could convey no more than it got. The "leases" it made were subject to a double Infirmity, the revocability of the permit from Navy to Interior and the revoca- bility of the permit it received from Interior. Its interest, so limited, was in- sufficient as "property" to support a lease. Although these instruments were invalid as leases, they were valid as revoca- ble permits. •A permit does not convey a property interest (Tiffany, "Real Prop- erty," 3d sec. 79: Thompson on "Real Property," secs. 710, 712). Therefore the permit to VICORP was not a disposal of property within the meaning of article IV, section 3, clause 2, of the Constitution and congressional authority was not thereby required. However, it is settled that revocable permits may properly be issued as a function inherent in the powers of the heads of Federal agencies (34 Op. Atty. Gen. 320 (1924), 30 Op. Atty. Gen. 470 (1915), 20 Op. Atty. Gen. 527 (1893), 19 Op. Atty. Gen. 628 (1890), 36 Comp. Gen. 561 (1957), and 22 Comp. Gen. 563 (1942) ) . We are aware that the courts have considered the leases in question and have not held them to be invalid. However, validity was never at issue and no judicial authority has held any of these leases to be valid. (Grammer v. Vir- 20 LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS gin Islands Corporation, 235 F. 2d 27 (1956), United States v. Blu,menthal 315 F. 2d 351 (1963), and United States v. Harvey, United States v. Gallagher, and United States v. Wermuth and Hotel Trade Winds, Civil Actions Nos. 35- 1959, 36-1959, and 37-1959 (unreported) ). It may be urged that officers and employees of the United States represented themselves as having the power to enter into genuine lease agreements but "it is enough to say that the United States is neither bound nor estopped by acts of its officers or agents in entering into an arrangement or agreement to do or cause to be done what the law does not sanction or permit (Utah Power & Light Co. v. U.S., 423 U.S. 389, 409 (1917). See also U.S. v San Francisco, 310 U.S. 16 (1940) and U.S. v. California, 332 U.S. 19 (1947) ). Your final request is for copies of documents between the Departments of the Navy and the Interior relevant to this matter. They are referred to above and enclosed herewith. Those numbered 1, 5, 6, 8, and 9 particularly respond to your request. Sincerely yours, FRANK J. BARRY, Solicitor. [Enclosure 1] PERMIT AND MEMORANDUM OF AGREEMENT This PERMIT and MEMORANDUM OF AGREEMENT, dated as of the first day of January 1948, is entered into between the Department of the Navy and the Department of the Interior, acting through the respective Secretaries, for the purposes, and to obtain the objectives, hereinafter more fully expressed. PURPOSES OF PERMIT The United States Government is the owner of military installations which are under the cognizance and control of the Navy Department, located at St. Thomas in the Virgin Islands, an insular possession of the United States. It has been determined by the Chief of Naval Operations that these installations are not required for military purposes during time of peace, but are required, or are likely to be required, in the event of military necessity or during a time of National Emergency and, therefore, must be retained as a part of the ready and immediately available potential military establishment of the United States Navy. The Interior Department recognizes that these installations and the attendant military activities have greatly contributed to the development of the civilian economy of the Virgin Islands generally and the Island of St. Thomas particularly, and that the discontinuance of the operation of these installations will be injurious to that economy. So that these installations may be kept in an operable condition in the event they should be required to be reactivated by reason of military necessity or during a time of National Emergency, the Navy Department recognizes that provision must be made for their maintenance and operation after attendant military activities have ceased. The Interior Department, pursuant to its responsibility to encourage and foster the improvement of the civilian economy of the Virgin Islands, urges the desirability of encouraging and fostering the commercial and productive utilization of these installations, because of the beneficial effect such utilization will have on the civilian economy of the Virgin Islands. In recognition of these factors, it is the purpose of this Permit and Memorandum, hereinafter referred to as the "Permit," to discharge, insofar as practicable, the respective responsibilities of the two departments. Pursuant thereto, there is hereby transferred from the Navy Department to the Interior Department, as of the first day of January 1948, the cognizance and control of these installations, subject to the terms, conditions, restrictions and under- standings herein contained, all as more fully hereinafter set forth. DURATION OF PERMIT This Permit shall be for an indefinite term but shall be subject at any time hereafter to the right of the Navy Department, or higher military authority, to revoke this instrument in whole or in part, or as a temporary or a permanent measure, but it is the intention of the Navy Department that the right of revo- cation shall be exercised only in the event of military necessity or by reason of a National Emergency. LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS 21 INSTALLATIONS COVERED BY PERMIT Snbject to the following general exceptions, the military installations covered by this Permit, and which are hereafter referred to in their entirety as "the in- stallations," are those formerly designated as the Marine Corps Air Facility and U.S. Naval Submarine Base, St. Thomas, Virgin Islands. The installations, comprised of buildings, piers, and other facilities, including utility systems, to- gether with a statement disclosing the condition thereof as of the date of this Permit, are shown in detail on Navy Public Works Drawings 10-34 and 10-35 and attached notes which are appended hereto and made a part hereof. It is recognized by the Navy and Interior DePartments that the Civil Aero- nautics Administration, pursuant to Executive Orders 9709 and 9797, dated March 29, 1946, and November 6, 1946, respectively, has determined that the facilities specified on Exhibit "A", attached hereto, constitute the minimum re- quirements for the maintenance of a communication facility at the Marine Corps Air Facility and that additional buildings, facilities, and equipment comprising a part of the Air Facility may be determined by the Civil Aeronautics Admin- istration to be necessary or reasonably necessary to the efficient operation of United States Aircraft and that, upon such determination, which shall be repre- sented by an official request therefor, such buildings, facilities, and equipment shall be relinquished to the Civil Aeronautics Administration. The Department of the Interior will provide electric power to the Civil Aeronautics Administra- tion at commercial rates currently charged in the vicinity and will permit the Civil Aeronautics Administration to use existing water and sewerage facilities without charge. RESPONSIBILITIES OF THE DEPARTMENTS (1) The Interior Department will assume full responsibility, except as other- wise provided by law, for maintaining the facilities in good repair, reasonable wear and tear excepted, and in such good condition that they may readily be re- turned to the Navy Department, should their return be called for. (2) The Navy Department shall have the right to enter the facilities at any time within regular working hours for the purpose of inspecting the condition thereof. (3) The Interior Department may lease or license various portions thereof to public, including Federal and territorial, or private agencies or persons, upon such terms as the Secretary of the Interior may deem appropriate. (4) The proceeds, if any, which the Interior Department may derive from the leasing, licensing, or operation of the properties in question shall be deposited in the Treasury of the United States, to the credit of miscellaneous receipts. (5) The Chief of the Bureau of Yards and Docks, the Director of the Division of Territories, the Administrator of the Civil Aeronautics Administration, and the Governor of the Virgin Islands, as an ex officio member, shall constitute an advisory board to confer from time to time in regard to the administration and operation of the installations. OCTOBER 2, 1947. [Enclosure 2] LEASE AGREEMENT J. A. KRUG, Secretary of the Interior. JOHN N. SULLIVAN, Secretary of the Navy. This agreement entered into this 25th day of March, 1950, between the United States, acting in this behalf by the Secertary of the Interior, hereinafter referred to as the "Secretary," and the Municipality of St. Thomas and St. John, herein- after referred to as the "Lessee". WHEREAS the installations formerly known as the Marine Corps Air Facility and the Naval Submarine Base at St. Thomas, Virgin Islands, have been trans- ferred by the Navy Department to the Interior Department for operation and maintenance under a revokable permit dated January 1, 1948, subject to the terms and conditions set out therein; and WHEREAS it is the intention of the Secretary that said property be used to the greatest extent possible for the benefit of the people of the Virgin Islands. 22 LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS Now, therefore, the parties hereto agree that the installations formerly known as the Marine Corps Air Facility and the Naval Submarine Base at St. Thomas. described more fully on Navy Public Works drawings 10-34 and 10-35 (except for ( a) those areas made available by the Interior Department to the Civil Aero- nautics Administration under permit and memorandum of agreement dated August 24, 1948; and (b) those areas withdrawn by the Navy Department from the jurisdiction of the Interior Department under Amendments dated October 27, 1949, and February 4, 1949) shall be leased to the Lessee in accordance with the following terms and conditions: (1) The Lessee agrees to pay as rental for the said premises the sum of $1 per year, payable yearly in advance. (2) The Lessee shall use said property to the greatest extent possible for the benefit of the people of the Virgin Islands. (3) The Lessee shall observe strict impartiality with respect to rates and serv- ices and shall not discriminate against any employee or applicant for employment because of race, creed, color, or national origin, and shall require identical pro- visions to be included in all subcontracts. (4) The Lessee shall, at its own cost and expense maintain said properties in good operating condition and effect such repairs, replacements, expansion, and improvement as may become necessary or desirable. (5) The Lessee shall maintain such books and accounting records as will clearly reveal operations and transactions arising out of the use of said property distinct from any other operations of the Lessee. "The Lessee shall make an annual audit of its operations and transactions arising out of the use of said property and shall report the results of such audit to the Secretary." The Secretary, or his authorized representatives, shall have access to the books and accounting records of the Lessee and may make such inspection or audit of such books and account- ing records of the Lessee as the Secretary deems to be necessary and the cost of such inspection or audit shall be paid by the Lessee. (6) In the event that the Lessee fails to maintain the property and make the necessary repairs, replacements, expansion, and improvement as provided in clause 3, the Secretary may do so and the Lessee shall reimburse the Secretary for the cost thereof on demand. ( 7) This Agreement shall continue in effect for a period coextensive with that of the revokable permit between the Navy and Interior Departments unless sooner terminated in accordance with this clause: Provided, That upon the failure of the Lessee fully to perform any part of this Agreement, to be determined by the Secretary, the Secretary may at his option terminate this Agreement by giving 60 days written notice to the Lessee: Provided further, That the Lessee may, if it finds itself unable to perform any part of this Agreement, terminate this Agreement upon 60 days notice to the Secretary. ( 8) Upon the expiration or termination of this Agreement, the Lessee shall return to the Secretary in as good condition as when received, reasonable wear and use, and Act of God excepted, all of the above described premises and prop- erty, together with all replacements thereof and additions thereto and the Sec- retary shall thereupon have the right immediately to reenter and take possession of said property and premises, subject to the right of the Lessee to remove its property and the property of its members from the premises within a reasonable time thereafter. (9) It is expressly agreed that the Lessee may sublease or license to public or private agencies or organizations, or to individuals, the properties covered by this Agreement; Provided, That no assigement or transfer of this Agreement shall be valid without prior consent by the Secretary in writing. In the event of any assignment or transfer without the consent of the Secretary, the Secre- tary shall have the right to terminate this Agreement immediately and without notice. In the event the properties covered by this Agreement revert for any reason to the Secretary, the Secretary will respect and be bound by the terms of any lawful outstanding leases or licenses theretofore entered into by the Lessee or its authorized agency. (10) This Agreement shall be subject to the terms and conditions of the above- mentioned revokable permit issued to the Interior Department by the Navy Department. (11) The Lessee shall save the United States harmless from any claim for damages which arises out of the operation of the above named property unless the claim accrues because of the negligent or wrongful act or omission of an em- ployee of the United States while acting within the scope of his employment. LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS 23 (12) No member of or delegate to Congress, or Resident Commissioner, shall be admitted to any share or part of this Operating Agreement, or any benefit which may arise therefrom unless it be made with a corporation for its general benefit. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed and sealed by their duly authorized officers as of the day, month, and year •cited above. Attest: HILDRETH BOND LOUIS SHULTERBRANDT Acting Government Secretary THE UNITED STATES By OSCAR L. CHAPMAN, Secretary of the Interior. Municipality of St. Thomas and St. John. MORRIS F. DE CASTRO, Governor. [Enclosure 3] SUPPLEMENT TO LEASE AGREEMENT DATED MARCH 25, 1950, BETWEEN THE UNITED STATES ACTING BY THE SECRETARY OF THE INTERIOR AND THE MUNICIPALITY OF ST. THOMAS AND ST. JOHN This Supplement to a Lease Agreement entered into this 8th day of October, 1951, by and between the United States of America acting by and through the Secretary of the Interior hereinafter referred to as the "Secretary" and the Municipality of St. Thomas and St. John, hereinafter referred to as the Lessee", WITNESSETH : WHEREAS the parties hereto did on March 25, 1950, enter into a certain Lease Agreement whereby the installations formerly known as the Marine Corps Air Facility and the Naval Submarine Base at St. Thomas, Virgin Islands, were leased to the lessee by the Secretary pursuant to a Permit and Memorandum of Agreement dated January 1, 1948, between the Secretary of the Interior and the Secretary of the Navy; and WHEREAS there were reserved from said Lease and Permit and Memorandum of Agreement (a) certain areas which had been made available by the Interior Department to the Civil Aeronautics Administration under Permit and Memo- randum of Agreement dated August 24, 1948, and (b) certain areas withdrawn by the Navy Department from the jurisdiction of the Department of the Interior under amendments to said Permit and Memorandum of Agreement of January 1, 1948, which amendments were dated February 4, 1949, and October 27, 1949; and WHEREAS, by letter dated September 5, 1950, the Department of the Navy did revoke said two amendments dated February 4, 1949, and October 27, 1949, to said Permit and Memorandum of Agreement dated January 1, 1948, and thus restored to the Secretary of the Interior the areas covered thereby; and WHEREAS it is the desire of the Secretary and the Lessee that said areas be included within the terms of said Lease Agreement: Now, Therefore, The Parties hereto agree as follows: 1. The Lease Agreement dated March 25, 1950, is hereby amended to include within the installations thereby leased to the Lessee the areas previously with- drawn from the installations which areas are described as follows: (a) Entirety of the former U.S. Naval Submarine Base as shown on Y and D Dwg. No. 10-35. (b) Areas designated "A", "B," and "C" within the former Marine Corps Air Facility (Bourne Field) as outlined on Y and D Dwg. No. 10-34 entitled "Map of Marine Corps Air Facility, St. Thomas, V.I. of U.S.A." attached to Amendment to Permit and Memorandum dated February 4, 1949, referred to above. (c) Buildings Nos. 112, 126, and 138 located at the former Marine Corps Air Facilities (Bourne Field) together with the right of ingress and egress thereto. (d) All that property, both real and personal, designated on "Inventory of Real and Personal Property located at St. Thomas, Virgin Islands, Transferred to San Jose Project" of which custody and possession was assumed by the Commanding officer, San Jose Project, St. Thomas, Vir- 24 LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS gin Islands, April 7, 1948, and the Supplemental Inventory dated Septem- ber 30, 1948, all attached to Amendment to Permit and Memorandum dated February 4, 1949, referred to above. (e) 84.37 acres as outlined in red and designated as Area "E" as shown on map of U.S. Marine Corps Air Facility, dated June 30, 1947, attached to Amendment to Permit and Memorandum of Agreement dated October 27, 1949, and located within the former Marine Corps Air Facility, St. Thomas, Virgin Islands, together with the improvements thereon. 2. The powerplant located on a portion of the property hereby included in the Lease Agreement shall be operated by Lessee for its own benefit subject to the following terms and conditions: (a) All power rate structures and schedules, approved by the Public Utilities Commission of the Municipality of St. Thomas and St. John under existing law of that Municipality, shall be so fixed as to provide adequate rates to allow for proper maintenance of the power plant in order that the Department of the Interior may return the properties to the Navy at the termination of the lease in as good condition as at the time of transfer, reasonable wear and tear excepted. (b) All power required by the Department of Defense up to the present capacity of the plant shall be supplied to the Department of Defense at cost which is herein defined as the cost of fuel, labor, supervision, and materials used in the production of power. (c) The Lessee shall have the right to increase the capacity of the present plant by the installation of additional cooling capacity, and addi- tional generating equipment, and may extend the plant to house the addi- tional generating equipment using a building of conventional construction. All additional units and equipment shall be designed to coordinate com- pletely with the present plant both electrically and physically. All plans and specifications shall be approved by the Secretary or his authorized representative prior to the commencement of installation or construction. (d) Title to all improvements and additions to the present plant shall rest and be in the Government of the United States. 3. Any portion of the property covered by the Lease of March 25, 1950, and this Supplement thereto may be withdrawn from the operation of said Lease and Amendment by the Governor of the Virgin Islands with the approval of the Secretary. The property so withdrawn shall be devoted to such use by the Government of the Virgin Islands as shall be approved by the Secretary. 4. The Lease dated March 25, 1950, and this Supplement thereto may be terminated or modified at any time if and to the extent so determined by the Secretary. Said Lease and this Supplement thereto shall also he terminated or modified if and to the extent that the Department of the Navy terminates or modifies the Permit and Memorandum of Agreement dated January 1, 1948, between the Secretary of the Navy and the Secretary of the Interior. In the event of termination of or of a modification which terminates the Secretary's right to lease the powerplant to the Lessee, the Secretary will initiate legisla- tion appropriate to compensate the Lessee for the costs actually incurred in Installing any additional equipment or structures. The Department of the Navy has agreed to comment favorably on appropriate legislation provided the com- pensation requested shall not exceed the cost of the Lessee's original investment less depreciation computed over a 20-year period on a straight-line basis. 5. The Department of the Navy has further agreed that in the event of term- ination or modification of the Permit and Memorandum of Agreement dated January 1, 1948, to such an extent that the Department of the Navy repossesses the site of the powerplant, it will grant to the Lessee the right to purchase the output of any additions to the plant installed by the Lessee, to the extent that such power is not required by the Department of Defense. The right to pur- chase shall continue for a time reasonably sufficient to permit the Lessee to install and place in operation new generating equipment in its own power plant sufficient to replace the additional capacity installed in the power plant now under lease. The power shall be purchased at rates in accordance with the regulations existing at the time the plant is repossessed by the Department of the Navy. 6. No member of or delegate to Congress, or Resident Commissioner, shall be admitted to any share or part of this Supplemental Agreement or any benefit which may arise therefrom unless it be made with a corporation for its general benefit. LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS 25 IN WITNESS WHEREOF, The Parties hereto have caused this Agreement to be signed and sealed by their duly authorized officers as of the day, month and year cited above. Attest: Attest: THE UNI112) STATES OF AMERICA. By DALE E. DOTY, Assistant Secretary of the Interior. MUNICIPALITY OF ST. THOMAS AND Sr. JOHN. By , Governor. [Enclosure 4] PERMIT SUBMARINE BASE AND AIR FACILITY This permit, effective the first day of July 1954, executed by the United States, acting in this behalf by the Secretary of the Interior, hereinafter referred to as the "Secretary," to the Virgin Islands Corporation, a Federal instrumentality created by the act of June 30, 1949 (63 Stat. 350, 48 U.S.C., 1952 ed., sec. 1407 et seq.), hereinafter referred to as the "Permittee": WITNESSETH : WHEREAS, the installations formerly known as the Marine Corps Air Facility and the Naval Submarine Base at St. Thomas, Virgin Islands, were transferred by the Navy Department to the Interior Department for operation and mainte- nance under a revocable permit dated January 1, 1948, subject to the terms and conditions set forth therein; and WHEREAS, by amendments dated February 4, 1949, and October 27, 1949, cer- tain areas were withdrawn by the Navy Department from the jurisdiction of the Interior Department; and WHEREAS, by a lease agreement entered into on March 25, 1950, the Secretary leased to the Municipality of St. Thomas and St. John all of the installations known as the Marine Corps Air Facility and the Naval Submarine Base except for the areas withdrawn by the aforesaid amendments and except for certain areas made available by the Interior Department to the Civil Aeronautics Admin- istration; and WHEREAS, by letter dated September 5, 1950, the Department of the Navy revoked the aforesaid amendments and restored the said areas to the jurisdiction of the Department of the Interior; and WHEREAS, by a supplement to the lease agreement of March 25, 1950, the Sec- retary leased to the Municipality of St. Thomas and St. John the areas thus restored to the jurisdiction of the Interior Department; and WHEREAS, by letter of June 23, 1954, the Secretary terminated the Lease Agreement of March 25, 1950, as supplemented, pursuant to paragraph 4 of the Supplement to the Lease Agreement, such termination to be effective July 1, 1954; and WHEREAS, it is the intention of the Secretary that the property be used to the greatest extent possible for the benefit of the people of the Virgin Islands: Now THEREFORE, The Secretary hereby grants to the Permittee a permit to use, occupy, and operate the installations formerly known as the Marine Corps Air Facility and the Naval Submarine Base at St. Thomas, described more fully on Navy Public Works Drawings 10-34 and 10-35 (except for (a) those areas made available by the Interior Department to the Civil Aeronautics Administration under permit and memorandum of agreement dated August 24, 1948, as supple- mented on October 17, 1952, and (b) the powerplant and related facilities made available to the Permittee under a permit of even date herewith and more fully described therein). THIS PERMIT is granted subject to the following terms and conditions: 1. The Permittee agrees to pay as rental for the said property the sum of $1.00 per year, payable in advance. 2. The Permittee shall use the said property to the greatest extent possible for the benefit of the people of the Virgin Islands. 3. The Permittee shall maintain the property in as good condition as when received and shall effect such repairs and replacements as are necessary to that end. In addition, the Permittee shall, in accordance with good management prac- 26 LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS tices, endeavor to restore the property as rapidly as possible to its condition on January 1, 1948: Provided, That in so restoring the property, the Permittee shall expend no more than the amount received in revenues from the operation of the property, less reasonable costs of administration, unless it obtains the prior approval of the Secretary in writing. 4. The Permittee shall submit to the Secretary quarterly reports showing revenue received and expenditures made, by general categories, in connection with the operation of the property. Such reports shall contain the informa- tion listed in Exhibit A which is attached hereto and made a part hereof. 5. This permit shall continue in effect for a period coextensive with that of the revocable permit between the Navy and Interior Departments unless sooner terminated in accordance with this paragraph: Provided, That the Secretary may, in his discretion, modify or terminate this permit at any time: Provided, further, That the Permittee may, if it finds itself unable to perform any part of this permit, terminate this permit, in whole or in part, upon 60 days notice to the Secretary in writing. 6. Upon the expiration or termination of this permit, the Permittee shall re- turn to the Secretary in as good condition as when received, reasonable wear and use, and Act of God excepted, all of the above described property, together with all replacements thereof and additions thereto, and the Secretary shall there- upon have the right immediately to reenter and take possession of the prop- erty, subject to the right of the Permittee to remove its property from the premises within a reasonable time thereafter. 7. It is expressly agreed that the Permitte may lease or license to public or private agencies or organizations, or to individuals, the properties covered by this permit: Provided, That except for such leases and licenses as may have been approved by the Secretary between July 1, 1954, and June 1, 1955, all such leases and licenses shall comply with the following terms and conditions: (a) General considerations for leases (I) Classes.—Leases may be of three classes: commercial, housing, and government. Commercial leases may be made covering buildings, facilities, and land, or any combination thereof, for industrial and/or other income-producing purposes under the direct control and management of the lessee. Leases for buildings used for multidwelling units (apartments) shall be classed as commercial. Housing leases shall be limited to existing detached or semidetached resi- dential units ( or structures easily adaptable to such purposes) for personal occupancy by the lessee and his immediate family. Government leases may be made with the Government of the Virgin Islands, the Government of the United States, or any of their subdivisions, covering build- ings, facilities, and land, or any combination thereof, for any lawful govern- mental purpose. (ii) Land.—Commercial, housing, and government leases may include land area, but should be limited to the minimum area necessary for the conduct of the activities contemplated or for the full enjoyment and protection of the leased premises. In general, unimproved lands should not be leased. However, small areas may be the subject of (and limited to) commercial and government leases where a positive showing is made, in the case of commercial leasing, that the lessee (a) will promptly develop and improve the land in such a manner and to such an extent as will contribute materially to the economy of the Island of St. Thomas, (b) will make a substantial investment in such improvements, and (c) will agree that upon termination of the lease all improvements will vest in the lessor, and, in the case of government leasing, that the property is required in connection with a lawful and necessary governmental function. (iii) Leases may be made with individuals, corporations, partnerships, or other lawful business entities. (iv) Lessee.—Commercial leases shall be made only after the lessee has shown to the satisfaction of the Virgin Islands Corporation that he (a) has a satisfactory personal and business reputation, (b) has the necessary qualifi- cations and experience to operate the particular business in an efficient and busi- nesslike manner, (c) has sufficient financial strength and backing to carry on the contemplated commercial venture, to make needed improvements, and to con- tribute materially to the economy of the Island of St. Thomas, and (d) intends himself to operate the leased premises during the entire term of the lease. LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS 27 No lease shall be made with any employee of the Virgin Islands Corporation, the Government of the Virgin Islands, the Government of the United States, or any of their subdivisions, except that this restriction shall not apply to the leas- ing to such an employee of a single residential unit for his personal occupancy. Howevek, such leases shall, at the option of the Lessor, be cancellable at any Hine after thirty (30) days of the date of termination of employment' with the gov- ernmental agency involved. (b) Lease terms All leases shall contain the following terms and provisions, as well as any others that may be necessary to protect the rights of the United States: (i) Secretarial Approval.—All commercial and government leases shall be subject to the approval of the Secretary of the Interior. (ii) Form.—All leases shall be in writing except for leases for housing or resi- dential units renting for less than $75.00 per month. (iii) Tenure.—Commercial leases for existing structures or facilities shall not exceed 20 years, except that in special cases, in the discretion of Virgin Is- lands Corporation, an option to renew for one additional 10 year period may be granted. Commercial leases for industrial uses shall not exceed five (5) years. Leases of unimproved land shall not exceed thirty (30) years, except that in special cases an option to renew for one additional ten (10) year period may be granted. Housing leases may be made on a month to month, or yearly basis, but no such lease shall be longer than three (3) years. The term of all government leases shall be for a period not in excess of one year beyond the period during which the facilities are under the control of the Virgin Islands Corporation. (iv) Rent.—Rent under all types of leases shall be comparable to rent charged for similar buildings and facilities available on the Island of St. Thomas. Commercial and government leases shall provide that rents shall be subject to renegotiation every ten (10) years. Bureau of the Budget Circular A-45, dated June 3, 1952, as promulgated by the Departmental Manual of Allowance for Quarters, Subsistence, and Services, issued August 7, 1952, as amended, shall govern the determination of rents for all properties occupied by employees of the Federal Government and any of its subdivisions. Commercial and government leases shall provide that rents shall be payable no less frequently than quarter annually in advance. Housing rents shall be payable monthly in advance. ( v) Assignment.—Any assignment of a lease must be approved in writing by the Secretary of the Interior. The proposed assignee must make the same show- ing as to personal and business reputation and financial resources as is required of original lessees. Upon a lessee failing in business, filing a petition in voluntary bankruptcy, making an assignment for benefit of creditors, etc., the lease shall then and there be terminated, and the premises shall immediately revert to the lessor. Subletting shall be forbidden unless the prior written consent of the Virgin Islands Corporation is obtained. (vi) Discrimination.—Provision against discrimination in use and in em- ployment based on race, creed, or color shall be included. (vii) Maintenance.—Commercial and government lessees must maintain the buildings and facilities and property in accordance with the standards set by the Department of the Navy in its annual inspections and in accordance with any requirements established by the Virgin Islands Corporation. (viii) Insurance.—Each commercial and government lessee shall maintain fire and extended coverage insurance to the fair and reasonable value of the leased property. (ix) Navy Permit.—Each lease shall contain a provision providing for the automatic termination of such lease in the event the Department of the Navy exercises its right to revoke, in whole or in part, the revocable permit of Janu- ary 1, 1948, pursuant to the following paragraph of the said permit: "This Permit shall be for an indefinite term but shall be subject at any time hereafter to the right of the Navy Department, or higher military authority, to revoke this instrument in whole or in part, or as a temporary or a permanent measure, but it is the intention of the Navy Department that the right of revoca- tion shall be exercised only in the event of military necessity or by reason of a National Emergency." 28 LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS (x) United States a Party.—Each lease shall be entered into in the name of the United States, acting by and through the Virgin Island Corporation. 8." No assignment or transfer of this permit or any part thereof shall be valid without the prior cOnSent of the Secretary in writing. In the event of any such assignment or transfer, the Secretary shall have the right to terminate this per- mit immediately and without notice. In the event the property covered by this agreement reverts for any reason to the Secretary, the Secretary shall respect and be bound by the terms of any lawful outstanding leases or licenses thereto- fore entered into by the Permittee or its authorized agency. 9. This agreement shall be subject to the terms and conditions of the above- mentioned revocable permit issued to the Interior Department by the Navy Department. 10. No member of or delegate to Congress, or Resident Commissioner, shall be admitted to any share or part of this agreement or any benefit which may arise therefrom unless it be made with a corporation for its general benefit. 11. Wherever the word "Secretary" is used in this agreement, it shall also mean his authorized representative, and whenever the terms "lease" or "lessee" are used, they shall be construed to include the terms "permit," "license," "per- mittee," or "licensee," as the case may be. IN WrrNESS WHEBEOP, I have hereunto set my hand as of the day, month, and year cited above. THE UNITED STATES, By (Sgd.) DOUGLAS McICA-r, Secretary of the Interior. August 29, 1955. Certified to be a true copy of the original, PALMER, A. AxTELL, Certifying Officer. EXHIBIT A The report required of the permittee by paragraph 4 shall contain the follow- ing information: Narrative statement: 1. Short résumé of operations 2. Maintenance completed 3. New developments 4. Difficult or unique problems of general interest 5. Other Listing of rentors and lessees: 1. Delinquents: (a) Name (b) Building, land, or water bill (identify) (c) Amount of delinquency (d) Date due 2. Cancellation of rental agreements: (a) Name ( b) House number (c) Date 3. New rental agreements: (a) Name (b) House number (c) Rental rate (d) Date Personnel: Appointed Per diem Statement of income and expense: Income: 1. Rentals: (a) Housing (b) Commercial leases (c) Other 2. Fees: (a) Airplane landings (b) Dock (c) Parking (d) Beach (e) Storage (f) Water sales LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS 29 Statement of income and expense—Continued Expense: Salaries and wages Materials and supplies Transportation Office expense Overhead: Net profit or loss [Enclosure 5] DEPARTMENT OF THE NAVY, BUREAU OF YARDS AND DOCKS, Washington, D.C., August 15, 1963. MT. JOHN J. KIRWAN, Acting Director, Office of Territories, Department of the Interior, Washington, D.C. DEAR MR. KIRWAN : The Secretary of the Interior, by letter of July 17, 1963, requested termination of the January 1, 1948, permit issued by the Department of the Navy to the Department of the Interior for the use and occupancy of the former Marine Corps Air Facility and Submarine Base located at St. Thomas, V.I. By separate correspondence, the General Services Administration has noti- fied the Department of the Navy that the reports of excess recently submitted by the Navy for the disposal of this same property could not be accepted, in view of the above permit which can be terminated only by the Navy Department or higher military authority. In view of these circumstances, the Assistant Secretary of the Navy (Installations and Logistics) has directed that this per- mit be terminated. Accordingly, the permit of January 1, 1948, between the Department of the Navy and the Department of the Interior, relating to the use and occupancy of the former Marine Corps Air Facility and Submarine Base, St. Thomas, V.I., is hereby terminated. This property is recaptured effective as of the date of this letter. Acknowledgment of this action is requested by the execution and return of the two extra copies of this letter which are furnished herewith. Pending a new attempt by Navy to report the above property excess to the General Services Administration, and the subsequent disposal of this property by that Administration, we proposed to issue a license to the Virgin Islands Cor- poration covering the use and occupancy of the land and improvements in question. This proposed license will be subject to termination by either Navy or General Services Administration at any time on 30 days' prior notice, to facilitate disposal action, and will authorize the licensee to issue sublicenses or permits, providing they are also subject to termination on not more than 30 days' notice. Sincerely, C. BITTENBRING III, Assistant Chief for Real Property Management. [Enclosure 6] JULY 17, 1963. HOD. FRED KORTH Secretary of the Navy, Pentagon Building, Washington 25, D.C. DEAR MR. SECRETARY: Staff representatives of our two departments have been In frequent contact on the subject of declaring excess and other steps looking toward disposal of the properties known as the Marine Corps Air Facility and the Naval Submarine Base, St. Thomas, V.I. After careful analysis, it is our conclusion that this transaction would be fa- cilitated and the interests of the United States would be best served if, prior to declaration of excess, the permit to this Department which became effective January 1, 1948, were to be canceled. Accordingly, we recommend and request that such action be taken in timely fashion. 25-147-64 3 30 LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS We recognize the necessity to work out interim permit arrangements for cer- tain third parties now occupying the premises. Our staff will be available to assist in this effort and to perform such services as may be necessary in con- nection therewith. Sincerely yours, (Signed) STEWART L. UDALL, Secretary of the Interior. [Enclosure 7] THIS AGREEMENT made this day of , by and be- tween the UNITED STATES OF AMERICA, hereinafter called the "LEssoR," acting by and through the VIRGIN ISLANDS CORPORATION, hereinafter called "Vicorp", and hereinafter called the "LESSEE", and his/its heirs, successors and assigns, as the case may be. WITNESSETH, that the LESSOR, in consideration of rents, covenants, and agree- ments hereinafter reserved to be paid and performed by the LESSEE, hereby does demise and let to the LESSEE, and the LESSEE has agreed to lease and take, and hereby does lease and take from the LESSOR, the following property located at the former , St. Thomas, V.1.: as delineated and set forth on Exhibit A, attached hereto and made a part hereof: Provided, That the LESSOR retains the right to the full use of all cisterns, water catchments (including roofs), tanks, pipes, lines, utilities, and other structures located on the leased premises which are part of the facilities of the former military properties. as well as access to them, whether above or below ground. To HAVE AND To HOLD the benefit, use, and possession of said demised premises for a term of ( ) years beginning on the date of approval of this lease by the Secretary of the Interior. 1. The LESSEE covenants and agrees: a. Use.—To use the demised premises for the purpose of and for no other purpose whatsoever. b. Rent.—To pay as rent for the demised premises the sum of ($ ) per annum, payable monthly in advance in twelve (12) equal installments of ($ ) each, at the office of the Manager, Development Department, Virgin Islands Corporation, St. Thomas, V.I. It is agreed by the parties hereto that the time and payment of each and all of such payments is of the essence of this agreement: Provided, That in the event the term of this lease shall be for a period of more than five years, the foregoing annual rent shall be for the first through the fifth year. The annual rental for the sixth through the remaining years of the term, up to and including the tenth year if the term hereof should be for ten years, shall be determined as follows: No sooner than one hundred and eighty (180) days and no later than ninety (90) days prior to the start of the sixth year, LESSOR and LESSER shall by mutual agreements in writing signed by both parties determine the sum to be paid annually as rent for the final portion of the term of this lease. In the event of the failure of the parties to reach mutual agreement with respect to rent prior to the said ninety (90) day period, the same shall be determined by a board of arbitration within the succeeding thirty (30) days, subject to the following terms and conditions: (1) Said board of arbitration shall consist of three persons, , one to be selected by the LESSOR, one by the LESSEE, and the third to be selected by the first two selected. (2) Said arbiters shall make independent findings in writing as to the fair annual rental under this lease for the entire final portion of the term of this lease: Provided, That in no event shall the fair rental value as de- termined by any of the members of said board of arbitration be less than the annual rental first above stated. (3) On the thirtieth (30th) day prior to the start of the said final portion of the term of this lease beginning with the start of the sixth year, or sooner by mutual agreement, the three arbiters shall meet with the authorized representatives of said LESSOR and LESSEE and present in separate sealed envelopes their findings as to the fair rental under the lease for the said final portion of the term. (a) The arbiters selected by the LESSOR and LESSEE shall each open the envelope containing his determination and read it aloud. LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS 31 (b) If the determinations as made by the arbiters selected by the LESSOR and LESSEE do not exceed each other by more than One Thou- sand Dollars ($1,000.00) per annum then, in that event, the average of the two shall be the rent to apply for the said final portion of the term of this lease and both parties agree to bound thereby. (c) If the difference in the determinations as made by arbiters selected by the LESSOR and LESSEE shall exceed One Thousand Dollars ($1,000.00) per annum then, and only in that event, shall the third arbiter open the envelope containing his finding. If the third arbiter's determination falls between the determinations made by the arbiters appointed by the LESSOR and LESSEE, then, and only in that event, the average of all three determinations shall be the rent to apply for the said final portion of the term of this lease and both parties agree to be bound thereby. If the third arbiter's determination is greater or less than the determina- tions made by both the arbiters appointed by the LESSOR and LESSEE then, in that event, the third arbiter's determination will be added to the average of the first two, and one-half ) of the said sum will be the rent to apply for the said final portion of the term of this lease and both parties agree to be bound thereby. It is understood and agreed between the parties hereto that the annual rent determined pursuant to the above provisions shall be apportioned and paid in the manner first above stated. re. Condition of Premises.—That the LESSEE has examined and knows the condition of the demised premises and accepts them as is, including the con- dition of the public halls, stairways, etc., located therein. d. Signs.—That the LESSEE shall not install any signs without the previous written consent of the LESSOR. e. Alterations.—That the LESSEE shall not make any alterations or additions (including permanent installations of trade fixtures, heavy equipment, etc.) to the demised premises without first submitting plans and specifications for the proposed changes to the LESSOR and then obtaining the written approval thereof by the LESSOR. f. Improvements.—That any permanent improvements to the leasehold made by the LESSEE, excepting "trade fixtures", shall be and remain the property of the LESSOR. g. Maintenance.—That the LESSEE will, at his/its own cost and expense, have and keep said demised premises in constant and good condition and repair, and at the end of the term provided herein, or sooner termination, shall return same to LESSOR in as good condition as received, reasonable wear and tear ex- cepted. Without limiting the foregoing, LESSEE also agrees that it will, at its own cost and expense, correct such defects of maintenance on the demised premises as VICORP, taking into consideration the written annual inspection summary of the United States Navy, or the LESSOR, may reasonably require. Such defects shall be corrected within three (3) months after VICORP has fur- nished to LESSEE in writing the provisions of said inspection summary relating to the demised premises, with such modifications as VICORP, in its discretion, may make. h. Repairs.—That the LESSEE will, at his/its own cost and expense and within ( ) days of approval of this lease by the Secretary of the Interior, accomplish the following repairs to the demised premises: i. Cotenants.—That the LESSEE realizes that other portions of said Building No. are or may be leased to other tenants, and specifically agrees that employees or agents of LESSOR shall have the right to enter the demised premises for the purpose of performing any work necessary for the further development of said building, or for the comfort or enjoyment of other tenants, including but not limited to the running of electrical cables and wiring and the installation of plumbing facilities through the demised premises, in such manner as not to unduly interfere with LESSEE'S operations. j. Excessive Noise, Etc.—That if any of LESSEE'S operations in the demised premises causes inconvenience to other occupants of the building due to excessive noise, odors, heat, etc., LESSOR may demand that LESSEE install whatever devices may be required by LEWIR to eliminate the objectionable factor. Any such remedial action must be begun within fifteen (15) days after written notice is given by LESSOR and must be completed within thirty (30) additional days, unless satisfactory evidence is presented to show that delay is occasioned by conditioned beyond the control of the LESSEE. 32 LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS k. Movement of Materials.—That in the movement of merchandise and mate- rials in and out of the demised premises, LESSEE will keep noise to a minimum and will not allow trucks to damage buildings or vegetation. 1. Fire Hazards.—That LESSEE shall maintain janitorial services which will preclude the possibility of fire hazard because of accumulations of material scraps, excessive dust, paper, debris, etc., caused by or resulting from the LESSEE'S operations in or upon the leased premises. And further, that LESSEE will promptly comply with all written recommendations made to him by the Fire Marshal of the Government of the Virgin Islands relating to fire prevention in the demised premises. Nondiscrimination.—That LESSEE and his/its employees shall not discrimi- nate because of race, religion, color, or national origin against any person by refusing to furnish such person any accommodation, facility, service, or privilege offered to or enjoyed by the general public. Nor shall the LESSEE or his/its employees publicize the accommodations, facilities, services, or privileges in any manner that would directly or inferentially reflect upon or question the accepta- bility of the patronage of any person because of race, religion, color, or national -origin. The LESSEE shall include and require compliance with a provision similar to the one contained in this paragraph in any subcontract made with respect to the operations authorized hereunder. Further, in connection with the performance of work under this lease, the LESSEE agrees not to discriminate against any employee or applicant for employ- ment because of race, religion, color, or national origin. The aforesaid provision shall include, but not be limited to, the following: employment, upgrading, demotion, or transfer; recruitment or recruitment advertising; layoff or ter- mination; rates of pay or other forms of compensation; and selection for training, including apprenticeship. LESSEE agrees to post hereafter in conspicuous places, available for employees and applicants for employment, notices to be provided by the Virgin Islands Corporation setting forth the provisions of this non- discrimination clause. The LESSEE further agrees to insert the foregoing provi- sion in all subcontracts hereunder, except subcontracts for standard commercial supplies or raw materials. n. Assignment or Subletting.—That LESSEE agrees not to assign or in any manner transfer this lease or any estate or interest therein without the previous written consent of the LESSOR, and further agrees not to sublet the premises or any portion thereof without such written consent: Provided, That in no event shall any use other than that provided for in paragraph (a) hereof be consented to by the LESSOR. O. Inspection.—That the duly authorized representatives of the LESSOR, V3CORP, or the Department of the Navy, shall have the right to enter upon the leased premises at all reasonable hours for the purpose of making an inspeestion. p. Right of Renentry or Termination.—That if the LESSEE shall fail to pay said rent in advance as aforesaid, or break or violate any of the within covenants, conditions, or agreements, and fail to comply therewith within fifteen (15) days after having written notice from LESSOR, and such notice having been given, this lease and the terms therein shall terminate at the option of the LESSOR as if such date were the date fixed for the termination of the term therein. Should LESSOR exercise its option in pursuance of this paragraph, LESSOR may reenter the leased premises, or any part thereof, either with or without process of law, using such force as may be necessary to do so, and remove any person or persons or chattels therefrom, without prejudice to any remedies which might otherwise be used for arrears of rent or preceding breach of covenant, and LESSOR shall have at all times the right to distrain for rent due, and have a valid and first lien upon all property of LESSEE as security for the payment of the rent herein reserved. q. Holding Over.—That in the event the LESSEE remains in possession of the demised premises after expiration of this lease and without the execution of a new lease, it shall be deemed to be occupying said premises as a tenant from month to month, subject to all the conditions, provisions, and obligations of this lease insofar as same are applicable to a month to month tenancy. r. Utility Services.—That the LESSEE shall make separate arrangements for utility services, including electricity and salt and fresh water supplies, and shall pay for same at prevailing rates. The maintenance of all plumbing lines, other than common use lines, and fixtures within the leased area shall be the responsi- bility of the LESSEE. Failure to comply with the LESSOR'S or other supplier's LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS 33 maintenance requirements for the plumbing system will be grounds for discon- tinuance of water service (fresh and/or salt) until corrected. s. Nonwaiver.—That one or more waiver of any covenant and condition by the LESSOR shall not be construed as a waiver of a further breach of the covenant or condition, and the consent or approval of the LESSOR to or of any acts by the LESSEE requiring the LESSOR'S consent or approval shall not be deemed to waive or render unnecessary the LESSOR'S consent or approval of any subsequent similar act by the LESSEE. t. Liability Insurance.—That the LESSEE agrees to assume full and complete responsibility for all liability to any person or persons, including employees, as a result of its control of the leased premises, and to hold LESSOR free and harm- less from civil or other liability of any kind during the time LESSEE is in control of the property pursuant to this lease. LESSEE shall, throughout the term of this lease, procure and maintain at its expense, with respect to its use of the property, third party bodily injury insurance of not less than $25,000 for any one person or $50,000 for any one accident. u. Fire Insurance.—That LESSEE will maintain fire and extended coverage insurance on all existing and future improvements to the leasehold, naming LESSOR as the assured, in an amount not less than eighty percent (80%) of the fair insurable value thereof as determined at least once every three years. All insurance provided for in this paragraph is solely for the benefit and protection of the LESSOR and in the event of destruction or injury to the premises by fire or otherwise, LESSEE shall have no right, title, interest, or claim in or to any of the proceeds of such insurance policies: Pro rided, That the LESSOR shall have sole and uncontrolled discretion in deciding whether, in the event of destruction or injury to the premises by fire or otherwise, the demised premises shall be reconstructed or repaired, as the case may be. If the demised premises are destroyed by fire, or other cause beyond the control of the LESSEE, so as to render the same partially =tenantable or partially unfit for the use or purpose for which same is hereby let, and are repairable within six (6) months, then in that event, this lease shall remain in full force and effect, but th'ere shall be an abatement in rent for such six (6) months in the proportion that the damaged portion of the demised premises bears to the whole of said premises. It is understood that any fire or extended coverage insurance with regard to trade fixtures, personal property, machin'ery, equipment, or supplies of the LESSEE'S in or about the leased premises shall be maintained solely at the discretion and expense of the LESSEE and shall be in addition to the insurance herein provided for. v. Insurance Generally.—That the insurance provided for in paragraphs (t) and (u) hereof shall provide that thirty (30) days' prior notice shall be given to the LESSOR in the ev'ent of cancellation of any policy required by such para- graphs by the insurer. Certificates of insurance or certified copies of each policy of insurance taken out pursuant to paragraphs (t) and (u) shall be deposited with 15 days after the approval of the lease with the LESSOR. LESSEE agrees that, not less than thirty (30) days prior to the expiration of any insurance required by this agreement to be carried by the LESSEE, it will deliver to the LEssoa a certificate of insurance or a certified copy of each renewal policy to cover the same risks. Each policy of such insurance shall contain an endorse- ment reading substantially as follows: "The insurer waives any right of sub- rogation against th'e United States, the Virgin Islands Corporation, or any officers or employees of either, which might arise by reason of any payment under this policy." In the event that the premises leased herein constitute only a portion of one building, and in the event that other portions of such building are also subject to lease, the LESSEES holding leases to any portion of such building may, by mutual agreement, jointly obtain the insurance required by this agreement and they may furth'er agree to share the cost thereof on a pro rata or other basis agreeable to the LESSEES. W. Personal Property and Damage.—That all personal property of any kind or description whatsoever in the demised premises shall be at LESSEE'S sole risk, and the LESSOR shall not be liable for any damage done to or loss of such per- sonal property or damage or loss suffered by the business or occupation of the LESSEE from any act or neglect of cotenants or other occupants of the building. Nor shall the LESSOR be liable for any damage occasioned or done by plumbing, gas, water, steam, or other pipes, or sewerage, or bursting, leaking, or running of any cistern, tank, washstand, water closet, or waste pipe in, above, upon, or about said premises, nor for damage occasioned by water being upon or coming through any roof, ceiling, skylight, trapdoor, or otherwise. 34 LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS x. Forfeiture.—That it is specifically understood that all the foregoing cove- nants and agreements, as well as other terms and conditions agreed to by LESSEE, are to be well and faithfully kept by LESSEE and that any failure by LESSEE to keep same will, at the option of the LESSOR, work a forfeiture of this lease, in accordance with the procedure set forth in paragraph (p), supra. y. Contingent Fees.—That no person or selling agency has been employed or retained to solicit or secure this lease upon an agreement or understanding for a commission, percentage, brokerage, or contingent fee, excepting bona fide em- ployees or bona fide established commercial or selling agencies maintained by the LESSEE for the purpose of securing business. For breach or violation of this warranty the LESSOR shall have the right to annul this lease without liability or in its discretion to require the LESSEE to pay, in addition to the rent provided for, the full amount of such commission, percentage, brokerage, or contingent fee. 2. The LESSOR does hereby covenant and agree that it has full right to lease the demised premises for the term aforesaid and that said LESSEE, upon payment of rent and the faithful performance of all the other covenants, conditions, and agreements of the lease shall peaceably and quietly enjoy the same for the full term hereof. 3. IT IS FURTHER EXPRESSLY UNDERSTOOD by the parties hereto that said demised premises are located in an area which is subject to severe drought during periods of limited rainfall, and that LESSEE assumes the risk of such condition. Nothing herein shall be construed to be a promise or guarantee on the part of the LESSOR that there will be water available at all times for the needs of LESSEE'S business. 4. IT IS FURTHER EXPRESSLY UNDERSTOOD by the parties hereto that the United States Navy is the owner of the demised premises covered by this agreement and that while said demised premises are now under the control of VICORP, acting for the Department of the Interior, the Department of the Navy or higher military authority has the authority to repossess them at any time upon demand. In view of this fact, the parties hereto agree that should the aforesaid right to repossess the demised premises or any part thereof, be exercised, this agreement shall thereupon cease and terminate as if the date of such repossession were the date otherwise fixed herein for termination and the LESSEE shall have no claim against the LESSOR for any damage of any kind suffered by the LESSEE because of repossession, but the LESSOR shall refund any unearned rent paid by the LESSEE. 5. IT IS FURTHER EXPRESSLY UNDERSTOOD AND AGREED that if LESSEE shall fail in business, file a petition in voluntary bankruptcy, make an assignment or other conveyance in trust for the benefit of its creditors, or after hearing and notice to it be adjudged bankrupt, or permit a final judgment or decree for debt to be entered against It and execution to issue and be levied upon LESSEE'S interest under this lease, or if a Receiver shall after hearing and notice to it be appointed for LESSEE'S property ard assets, then upon the happening of any such event the term herein shall then cease and determine, it being expressly understood and aereed that the covenant hereinbefore contained against the subletting of the premises or any portions thereof or the assignment of this lease by operation of law, shall apply as well as to the subletting of the premises or the assignment of this lease by the voluntary act of said LESSEE, and any voluntary act of LESSEE which would in any way legally operate to defeat its title to thiq lease and pass the same to any other person or corporation. may, if LESSOR So elects, operate as a termination of this lease and the same shall then be held for naught. 6. IT IS FURTHER EXPRESSLY UNDERSTOOD AND AGREED by the parties hereto that this lease must be approved in writing by the Secretary of the Interior or his authorized representative as a condition precedent to its validity. 7. No Member of or Delegate to Congress. or official of the United States. or any of its instrumentalities, or of the Government of the Virgin Islands. shall be admitted to any share or part of this agreement, or to any benefit that may arise therefrom, but this restriction shall not be construed to extend to this agreement if made with a corporation or company for its general benefit. • S. All notices sent or required to be sent hereunder must be by registered mail, return receipt requested. if addressed to the LESSOR, same shall be sent to the Manager, Development Department, Virgin Islands Corporation, Post Office Box 597, Charlotte Amalie, St. Thomas. Virgin Islands, or to such other place as LESSOR may hereinafter designate by registered mail, with a copy by regular mail to the President. Virgin Islands Corporation, Christiansted, St. Croix, Virgin Islands, U.S.A. If addressed to LESSEE, same shall be sent to , or to such other place as the LESSEE may hereinafter designate by registered mail. LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS 35 IN TESTIMONY WHEREOF, the parties herein have hereunto set their hands and seals on the day and year first above written. UNITED STATES OF AMERICA, Lessor, Acting by and through VIRGIN ISLANDS CORPORATION, By: KENNETH A. BARTLETT, President, Virgin Islands Corporation. : RICHARD J. HOLMBERG, Manager, Development Department, Virgin Islands Corporation. , Lessee, Approved: By: [Enclosure 8] Secretary of the Interior. U.S. DEPARTMENT OF THE INTERIOR, OFFICE OF TERRITORIES, Washington, D.C., February 4, 1955. Mr. W. W. BRUNSON, Head, Disposals Section, Operations and Legal Branch, Real Estate Division, Bureau of Yards and Docks, Department of the Navy, Washington, D.C. DEAR MR. BRUNSON : This will reply to your letter of October 25, 1954, (0-422/ EJJ : mr MD10/N1-1 Virgin Islands-7), concerning a proposed permit authoriz- ing the interim use by this Department of the former U.S. Naval Degaussing station, Hassel Island, St. Thomas, V.I. We have not yet determined precisely what means we wish to employ in mak- ing the property available for use by either public or private agencies in the 'Virgin Islands. We agree, however, that the proposed revocable permit might appropriately grant the use and occupancy of the degaussing station directly to this Department, rather than to the Government of the Virgin Islands. The proposed revocable permit attached to your letter of October 25 is en- tirely acceptable to us except for two particulars. First, I suggest that on pages 1 and 2, the references to the Office of Territories as the permittee and as the agency accepting the terms and conditions of the permit be struck, since only the Secretary of this Department Would have authority to accept the terms and conditions and the docuMent will thus need to be signed by him. Secondly, I note that there is no provision In the proposed revocable permit specifically authoriz- ing this Department to grant a lease or license to the property in question to public or private agencies. As you doubtless know, this Department has author- ity to use and occupy certain other Navy property in St. Thomas known as the Marine Corps Air Facility and U.S. Naval Submarine Base, under the terms of a permit and memorandum of agreement dated January 1, 1948. That permit provides, among other things, that "the Interior Department may lease or license various portions [of the property] to public, including Federal and territorial, or private agencies or persons, upon such terms as the Secretary of the Interior may deem appropriate." We suggest that the proposd permit regarding the degausing station might appropriately include the same or similar language. If modified in the manner suggested, we should be pleased to obtain the right to use and occupy the property in question under the terms described in your letter of October 25 and its attachment. Sincerely yours, WILLIAM C. STRAND, Director. [Enclosure 9] DEPARTMENT OF THE NAVY, BUREAU OF YARDS AND DOCKS, Washington, D.C., August 16, 1955. Mr. WILLIAM C. STRAND, Director, Office of Territories, Department of the Interior, Washington, D.C. DEAR SIR: This is in reply to your letter of February 4, 1955, relative to a pro- posed permit authorizing the use by your Department of the former Naval De- 36 LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS gaussing Station, Hassel Island, St. Thomas, V.I. In that letter, you requested a revision of the proposed permit in two particulars, i.e.: (1) Deletion of all references to "Office of Territories"; and (2) Inclusion of specific authority to lease or license the property to public or private agencies. This Department agrees that all reference to the "Office of Territories" should be deleted from the proposed permit. The permit may be revised also to spe- cifically authorize your Department to issue licenses or permits to public or private agencies for use of the property. There is no authority, however, where- under this Department may authorize the Department of the Interior to out- lease property under the Jurisdiction and control of the Navy. If agreeable to the Department of the Interior, the proposed permit will be modified accordingly. Sincerely yours, DAVID W. AGNEW. Senator WALTERS. Mr. Chairman, I wonder if he could tell us under how many of these leases they have built improvements? Senator NELSON. Did you wish to elaborate on that? Mr. KIRWAN. Mr. Chairman, I would say the 25 leases that we are talking about for the most part, and again I do not know of a single general statement to which there are not exceptions in this particular field, but for the most part these 25 instruments dealt with existing improvements, many of which have been markedly improved since the time they passed out of the Government's immediate control, so that you have everything from in a very few cases unimproved land, to cases where the improvement was leased and is today just about the way it was when it was leased, up to cases where the improvement at the time it passed out of Government day-to-day lands is the lesser part of the present improvements and that which was added to it today perhaps is even more so. The greater—more than half, in other words, has been added to it since the time of execution of the instru- ment. Senator NELSON. Does either the Interior or Navy have statistics on the value added in terms of capital investment? Mr. KIRWAN. No, Mr. Chairman first of all, of course, the premises have been in the hands of the other party. Secondly, value added would have to be a matter of evaluation if we are talking about value. Now, if we are talking about cost, I am not sure, but I would have no reason to believe that the lessees would not have adequate records, most of them are in business, so I suppose they have records to sup- port anything. So we would have to distinguish again on what one wanted to show between an expenditure, let us say for furniture to be removed by the lessee or trade fixtures or improvements that as a practical matter will be used up before the property would normally revert to the Govern- ment. anyway, and those expenditures made on capital betterments which are actually going to do the Government some good at the end of a given period of time when it. gets the building back. Senator NELSON. Has the Department of the Interior or Navy re- ceived any figures on what improvements have been made? Mr. KIRWAN. We have neither sought nor received such figures, Mr. Chairman. Senator NELSON. That is all the questions I have. Senator DOMINICK. Mr. Kirwan, I want to say this is an extremely sk;l1ful1 statement and I congratulate you on it. Mr. KIRWAN. I take it in the spirit that it is meant, Senator, and thank you. LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS 37 Senator DOMINICK. Tell me, how long have you been with the De- partment of the Interior? Mr. KIRWAN. I have been with the Department of the Interior since 1950, Senator Dominick. I have been in the Office of Territories since 1961. Senator DOMINICK. Were you present at all in the process of nego- tiating these leases or permits as you call them? Mr. KIRWAN. If you are using—by negotiating; no, sir. Absolutely. If you mean was I ever aware of any or had a brush with them earlier than 1961, the answer would be, "Yes." Senator DOMINICK. Tell me something about this naval permit to the Department. of the Interior. Was this a public document? Mr. KIRWAN. I am sure it was. Everything not classified and not privileged for some other reason is a public document. Senator DOMINICK. I think, Mr. Chairman, for the purposes of the record that we should include this permit in the record, among other reasons it contains a clause on the duration of the permit which I would like to read for the record. It says: This permit shall be for an indefinite term— and this is the permit from the Navy to the Interior Department— it shall be subject at any time hereafter to the right of the Navy Department or higher military authority to revoke this instrument in whole or in part or as a temporary or permanent measure, but it is the intention of the Navy Department that the right of revocation shall be exercised only in the event of military necessity or by reason of a national emergency. And that is the clause, Mr. Chairman, which pertains to the duration of the permit. The purposes of the permit are set out on page 1, and it says in here that the Interior Department recognizes that these installations and the attendant military activities have greatly contributed to the development of the civilian economy of the Virgin Islands and the, island of St. Thomas, particularly, and the continuation of these op- erations will be injurious to that economy. Then over on the last page of this permit, under subsection 3 of a caption entitled "Responsibilities of the Department," and I quote: The Interior Department may lease or license various portions thereof to public, including Federal and territorial, or private agencies, or persons, upon such terms as the Secretary of the Interior may deem appropriate. Now I would presume, Mr. Kirwan, that if this is a public body, not only this clause in connection with duration of the permit but also the clause on the power of the Interior Department to lease, must also have been available to people who received permits or leases? Mr. KIRWAN. This in its entirety is a public document, Senator Dominick, so it, together with every other record that either Navy or we have, absent classified material, was always before, in a theoretical sense, everybody. Senator DOMINICK. Now, in 1948 did not the Interior Department take action to issue long-term leases on this property? Mr. KrawArr. Beginning with 1948? Senator DOMINICK. Yes. Mr. KIRWAN. I know that it did beginning with 1950, Senator Dominick. I would have no reason to believe it did not as early as 38 LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS 1948, but I do not especially recall it. But whether it began to lease, it issued instruments holding themselves out to be leases, yes. I am sure it did. Senator DOMINICK. How long were the terms of those leases? Mr. KIRWAN. In at least one case a hundred years. I do not know if any exceeded that, Senator, but I doubt it. Senator DOMINICK. Were the rentals that were charged in that lease or leases as high as the subsequent ones in the late fifties? Mr. KIRWAN. Pardon; my counsel informs me that these leases were by the municipality and not the Department, but since the municipality is an agent associated with Interior I am not making a great point of it. But to answer your question, Senator Dominick, on a given piece of property, you mean? Senator DOMINICK. Yes. Mr. KIRWAN. I would say, Senator, that my recollection of what people have told me about those is that I would have no reason to think the rentals were higher, and my guess would be lower. It was earlier in time, among other things. Senator DOMINICK. Now, the only one of those leases that are still in effect as I recall, is the Texaco lease. Is that correct? Mr. KIRWAN. Between 1950 and 1951, Senator' one of which is Texaco and the other are two residences and the distillery which I mentioned before having the language of the Navy intent. Senator DOMINICK. Mr. Chairman, I think it would be helpful if we could have this permit from the Navy to the Interior Department dated January 1, 1948, included in the record. Senator NELSON. It will be done. Mr. KIRWAN. It is included in the record. It is an attachment which we requested earlier. Everything the Senator has asked be included was also part of our request. We asked that it be intro- duced in its entirety. Senator NELSON. All right. Senator DOMINICK. Before you wrote your letter to these lessees of August 15, 1963, did you have an opinion from the Solicitor in writ- ing concerning the validity of the cancellation? Mr. KIRWAN. Senator, if I can clarify the word "opinion," we had written—we first of all had a complete oral statement of the correct- ness of our views, but turning to writing, we had written evidence from the Solicitor of his concurrence in this conclusion a couple of years earlier. It was not in the form of an opinion but if by opinion you simply mean a written evidence of the Solicitor's conclusion the an- swer would be "yes." If you mean did he put it in the form of an opinion, which is the stylized manner within the Department of the Interior the answer would be, "No." Senator DOMINICK. Did he refer to these specific 25 leases that we have been talking about? Mr. KIRWAN. He referred to the category. We sought his views in dealing with 1 of the 25, and he made a general statement adver- ting to the nature of the one in such terms as it unmistakably applied to all. Senator DOMINICK. Now, Mr. Kirwan, I was also interested, as was the chairman, in your statements on pages 15 and 16, you said under LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS 39 No. 1, that any lease awarded as a result of public advertising would be entitled to complete credence. Now, when you refer to complete credence, are you talking about terms, the term of the lease? Mr. KIRWAN. By credence, Senator Dominick, I certainly do not mean to imply in any sense it was a lease or would ever be regarded as a lease. I simply mean it seems to me reasonable and appropriate that the Government grant to the party who obtained his lease as a result of direct advertising in the first place, a brandnew lease which would give him the lease for the first time in his life, a brandnew lease, iden- tical in all of its terms with the permit that was revoked on August 15. Senator DOMINICK. Now, wait a minute, Mr. Kirwan, you are walk- ing all around the bush here. What I want to know is, when you made this statement in here were you saying that you were going to have the Virgin Islands Corpora- tion or the Government ratify existing documents that these people hold occupancy under? Mr. KIRWAN. No, Senator. In our opinion there are no existing documents to be ratified. How- ever, what I did mean is that the Government would tender them new, for the first time, documents identical in terms with those instruments that were canceled on the 15th of August. Senator DOMINICK. And including a term of duration comparable or identical to the term that they now have, or with a Mr. KIRWAN. Identical rather than comparable. In other words, in those instances where the other party got his lease as a direct result of advertisement, and let me clarify when I say direct result. If an instrument was advertised to the public and the same terms were awarded to the high bidder, I would expect that now a brand new lease, identical in term to that one, would be offered the other party, without a 30-day cancellation clause. However, Senator, if there was a public advertisement on one set of terms and an award subsequently made on a very different set of terms I would not regard that as a direct result of advertising. Senator DOMINICK. Mr. Kirwan7 we have some people who are pretty vitally affected by this, and if I can get one I want a straight answer. Mr. KIRWAN. Do you want to take an example, Senator? Senator DOMINICK. Yes. Let me take Mr. Stanford, for example, of L'Escale, who has a lease on a gift shop at the airport. Would he receive an identical document to that, same rental, renegotiation terms, and duration, as he had before? Mr. KIRWAN. Mr. Stanford would fall squarely under point 2 on page 15, my answer to you would be, "Yes." The reason is not because he had a publicly advertised instrument, which he did not as far as i our files n Washington show, but rather because the very terms of the old instrument at this time permit a complete rental renegotiation. Therefore, in my opinion it is correct, it is logical, it is the fair thing to do to give him an instrument identical with the one he thought he had, except as the old instruments' very terms permit. Right now have a brand new rent renegotiation. Senator DOMINICK. Let me ask you this: That being the case, in your opinion, as you expressed it, why did you write a letter of Octo- 40 LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS her 2 saying that his document has been totally and completely can- celed "and you have nothing t all just now, you would be better off with a permit from Vicorp?" Mr. KIRWAN. Because my letter to Mr. Stanford which had the advantage of candor, directness, and usefulness to him stated exactly the circumstances existing then and they continue to exist today, Sena- tor Dominick. We would propose to do for him that which I outlined, but we are not presently able to do it and that is not the present situation. Senator DOMINICK. Well, again, coining back to the point that I made, can you tell Mr. Stanford who is here that he will get a lease on a renegotiated basis as far as rental is concerned with exactly the terms he had before. Mr. KIRWAN. I certainly cannot, Senator. I can say to you I be- lieve that would be a fair and equitable solution to this, it would be one that I would commend, one I would press for and one that I would recommend, and one, incidentally that I would expect to see happen. If you mean, Senator, can I assure that the owner of L'Escale, that every Federal agency who has a role to play here would see it the same way I do or our Department, of course, I cannot say that. Senator DOMINICK. Of course, this would be under the jurisdiction of one of two bodies over which you have no control. Mr. KIRWAN. Senator, if the property finally goes to the Virgin Islands Corp. or the government of the Virgin Islands, particularly, of course, more so if it goes to the corporation rather than the local government, it is unrealistic to imply that we do not have that type of suasion, that type of cooperation or relationship with them that makes us unable to, working with them, enable to carry out equitable and reasonable arrangements. Senator DOMINICK. Have you had any indication from Vicorp or the island government that they would honor these leases? Mr. KIRWAN. Senator, we start with the position that there are no leases through no fault of our own. We have not had any indication from the Virgin Islands Corp. because the question has never been posed to the corporation, it has never had the property, as to what it would do if it got the property except that it would act fairly and in the public interest. Senator DOMINICK. Well now may I say that your statement on pages 15 and 16 would indicate to most people, I believe on the committee, that the only ones out of the 25 that you would have any problems with reinstating would be the 6 listed. Mr. KIRWAN. Senator, reinstatement would not be our problem, it would be giving them brandnew instruments for the first time, but I do believe that that is a realistic evaluation of the only ones that would give us a problem with the disclaimer that we find nothing in the local files inconsistent with what is in our own. Our files here are not complete in Washington, but unless there is something unusual in local files, and I have no reason to believe there is, I do not see why any public body wanting to do the equitable. fair thing, would have a problem with any except these six, and I am passing no judgment as to what will happen to the six. When I say problem I don't mean I know the answers, no. I just mean I do not know what the answer is or should be yet. LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS 41 I do not believe anyone would have a problem with any other than these six, providing the other party sees the criteria given in 1, 2, or 3, the same way as the Government. By other party I am referring to the private party. Senator DOMINICK. Well, I must say I have concern because I have not yet gotten a "Yes" or "No" answer as far as I can see. Mr. KIRWAN. Senator, if you will rephrase the question I will be glad to attempt to answer. Senator DOMINICK. Well, I will try it again. -With the exception of the six listed on page 16 is it my understanding that you, as a, Director of Vicorp, and as the Acting Director of the Office of Ter- ritories Mr. KIRWAN. I am not a Director of Vicorp, Senator. Senator DOMINICK. I beg your pardon, I thought you were. You are an officer? Mr. KIRWAN. No my connection with the Virgin Islands Corpora- tion is: The Secretary of the Interior has entrusted to the Office of Territories the day-to-day carrying out of his responsibilities for and with the Corporation. That is the connection. Senator DOMINICK. All right, then, with your connection as the agent for the Secretary of Interior and as the Assistant Director for the Office of Territories, is my understanding correct that all except these six leases listed on page 10 would be redrawn in iden- tical terms as they now are and put into effect, on those. terms? Mr. KIRWAN. No, Senator, you would correctly understand that the Office of Territories—and I will go further and I will say the Secretary of the Interior because I have cleared with him realistically this point of view—the Department of the Interior would commend to anyone having both the power and the responsibility to act in this matter, that approach, and knowing our relationships with the en- tities that are identified we would have great confidence that we do in any other workaday matter that they would give great weight to our recommendations. I would not want to state it. differently than that. However, I do not know with certitude at this point that, indeed, these two agencies will be given the charge. I do not know with cer- titude whether any outside agencies, whether within an agency within control of the Government, might uot interpose an independent view that might upset or might make a difference in the ultimate working out, but I can say that the Department of Interior believes this is the correct way to proceed with regard to all of these leases. Senator Dompricx. Then what you are saying on pages 9 and 10 is that you hope it would work out in this general direction? Mr. KIRWAN. We both hope and have good reason to expect that unless someone frustrates us unexpectedly, it would work out this way. Senator DOMINICK. Most of your notices of cancellation that you gave said that they were entitled to retain occupancy subject to a 30- day cancellation, did they not? Mr. KIRWAN. We said they would be given new permits with the standard 30-day cancellation in. This is standard in every one of our revocable permits. 42 LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS Senator DOMINICK. This would apply, as I understand your testi- mony at this point, to these leases other than the six that are men- tioned here. These 30-day cancellation clauses. Mr. KIRWAN. Senator, today every one of the 25 is there by virtue of a revocable permit either written or expressed, until the day comes they are handed new instruments everybody is subject to 30-day can- cellation notice. If they are interested in them, it is an understatement to say I cannot speak for them, when they get new instruments, those instruments which will be leases will not be cancellable at all, they will run out their term. Senator DOMINICK. Now, Mr. Kirwan, apparently we are arguing back and forth as to what their document is or is not, or what you have done. I am not interested in—what I am talking about is the basic document under which they originally held occupancy. Mr. KIRWAN. The instrument itself, the one from us that is? Senator DOMINICK. Yes; that is correct. Did you ever make any effort to have the Navy, as such, ratify these documents? Mr. KIRWAN. We did not make an effort to ratify these particular documents, Senator Dominick. We attempted 1 year ago to get the Department of the Navy to issue a new single lease for one firm we wanted to bring in to make a substantial investment in the islands. It could have been; a year and a half instead of a year. The Navy told us they would not issue a lease because of the status of the property. However, we at no time went to the Department of the Navy and attempted to get them to so-call ratify these leases. In our view they were not leases with a minor technical effect, they were simply revocable permits that never did enjoy the benefit of being a lease. Senator DOMINICK. Mr. Kirwan, you said you were trying to regu- larize these documents and you were concerned over their nonvalidity. Now accepting that at face value as I, of course would, how did it happen that you did not go to the landlord to find out whether they would regularize them? Mr. KIRWAN. Because, we did not want to go in a posture, Senator Dominick, among other things, of asking first of all, admitting publicly that the Department of the Interior had not handled this matter for a decade or for 12 years in a competent, good, correct manner. That is the first thing. Second, we did not want to go to the Department of the Navy for an equitable settlement. If we went the Navy route we would have asked them to regularize all or none. We did not want to do that. We wanted to deal with these leases at the time on an equitable basis. We did not feel we had a minor technical deficiency to be corrected, but rather a problem that involved substance as well as form. Senat,r NELSON. You did not have any legal basis to go ahead and regulari,,e anything? Mr. KIRWAN. None whatsoever, Mr. Chairman. Senator DOMINICK. Now, why do you say you did not have any legal basis? Mr. KIRWAN. The Department of Interior never had an interest other than a revocable permit from Navy in the property, Senator Dominick. We do not even approach Interior leasing authority. LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS 43 Senator NELSON. I meant my statement to mean it is your position that you had no legal authority. I do not know whether you did or not? Mr. KIRWAN. Oh, every statement I make is based on what our counsel, the Solicitor of the Interior, tells us in the state of the law. Senator NELSON. I did not want the record to appear I stated you did not have legal authority. Mr. KIRWAN. That is right, sir. Senator DOMINICK. What did you mean by this subsection 3? Mr. KIRWAN. The effect we gave to that was that the Department, indicated it had no objection to such leases that we might be author- ized by law to make. We ourselves are not only unaware of any authority, we are aware we do not have statutory authority to lease. The Department of the Navy, however, would not necessarily know whether Interior had independently leasing authority or not. We read the 1948 permit as simply the Secretary of the Navy saying to the Secretary of Interior' as far as I am concerned you are free to enter into such leases, and I am paraphrasing here, such leases as you may have statutory authority to make, but you are going to have to find your statutory authority some place else. Senator DOMINICK. And your position is you have not statutory authority of any kind Mr. KIRWAN. Any kind relevant to the subject matter. That is right, Senator Dominick. We have, again, authority to lease the grazing lands, but we have no statutory authority we can reach with these properties. Senator DOMINICK. Did the Navy ever raise any objections to the improvements that were being placed on these properties? Mr. KIRWAN. Not to my knowledge, Senator Dominick. Navy, for example' protected itself by making clear to all, clear to us and then it is up to us to make it clear to those who hold occupancy in the chain from us, that it was entitled to take the property back at any time, there would be no damages and there would be no complica- tions. Within that framework the Department of the Navy never, to my knowledge, raised any question or any objection about the manner in which we managed it, except that they often expressed dissati,sfac- tion as to the state of repair and the state or readiness that we kept the property in, but I know of no instance where Navy said Senator DOMINICK. When did they express those objections? Mr. KIRWAN. Annually, Senator Dominick. Once a year the Yards and Docks makes an official inspection of the premises and then sends in a list of deficiencies which has been formidable in most years. Senator DOMINICK. Now, in page 5 of your statement you said that in 1955 the Navy in a letter relating to a negotiated parcel of land said that it was not able to delegate leasing authority to the Interior. Do you have a copy of that letter? Mr. KIRWAN. Yes; and it has already been introduced in the record as an attachment to our Solicitor's opinion Senator Dominick. Senator DOMINICK. Was this part of the 600 acres that we were re- ferring to before? Mr. KIRWAN. No; it is a parcel of land, an island shore. this particular plot of ground. We wrote to y and sal would like to have that island and develop it witl‘private subl sk ti) 44' 1$5. 100 -et,04 NOW 44 LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS in the same way we are doing under the 1948 permit the Navy lands. After all, in 1948, we continued, you gave us the right to lease the Navy properties in St. Thomas, the ones we are talking about here. Navy replied in 1955 and said, we have to refuse your request. We are with- out authority to delegate to another agency the right to lease basic Navy lands. So that while the parcel of land differed it was discussed by both Departments in the context of the 1948 permit and using the 1948 permit as the precedent for that which we sought. Senator DOMINICK. After 1955 the Interior Department continued to issue these documents to developers on this 600 acres of land did they not? Mr. KIRWAN. It did. In some cases by permit, in some cases by in- strument denominated lease. Senator DOMINICK. Is my understanding correct that you requested the Navy to revoke this permit? Mr. KIRWAN. That is right, on July 17 as I recall, Senator Dominick, the Interior Department asked Navy for the reasons given in my state- ment to revoke the permit. These reasons had nothing to do with the desire to strike down the instruments, although that was a foreseen consequence. Instead, it was based on a desire to tmencumber the land to permit it to move through normal channels into Vic,orp and the local government's hands. I might point out that if we had wanted to do what was implied we wanted to do, we would certainly have seen to it before May 23, when Navy with our urging tried to get rid of it once and for all, because then the door would have been closed to our doing that. Senator DOMINICK. On page 9 where you refer to the actions of the General Services Administration, you stated that the General Services Administration rejected Navy's excess declaration on the ground that it was encumbered by the 1948 permit to Interior. Do we have a copy of that in the record, that rejection? Mr. KIRWAN. No we do not have it on the record so far, Senator, what we do have in our possession and I suggest you may want the Department of the Navy to supplement this. What we have is simply the secondary source, namely the Department of the Navy saying to us, this is the fact, but the material, that which passed between GSA_ and Navy, the Department of the Navy itself, I am sure, would be able to furnish it. Senator DOMINICK. Was there any intimation in that secondary- document that you have that the GSA was concerned about the en- cumbrances of these documents denominated leases? Mr. KIRWAN. No, Senator, this happens to be enclosure No. 5 to the letter from the Solicitor already referred to earlier. If you wish I would read the sentence or the pertinent part. The answer is "No," they did not comment upon or enlarge upon the nature of these. Senator DOMINICK. Prior to August 19 had any of the occupants of these 25 leases been told that their right of occupany was in jeopardy? Mr. KIRWAN. Not to my knowledge. Pardon me, Senator, I would like to stand on not to my knowledge. I do not know they were not. Certainly I never told them, I never asked anyone to tell them and I do not know anyone told them. On the other hand, I do not know they didn't figure this out themselves or I don't know that if in prior years they may or may not have been told. LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS 45 So not to my knowledge is really the answer. Senator DOMINICK. Then it would be fair to say, would it not, that as far as the occupants are concerned they entered into these leases in good faith, they paid their rentals, they put in capital investments that were required and they put in substantially more than that in most cases. Mr. KIRWAN. That is a judgment, if you say they entered into it in good faith I can only say I don't know they did or did not. e, I can only go on the record, the record is just what it is. My own belief is that if we are dealing with 25 leases that what is true about the . psychological makeup of one and the degree of knowledge, the degree of sophistication is not true of another. I have no opinion on the extent of their good faith. Instead, as a Government servant I am re- quired rightly to go on the basis of the record. The record is just what it is here. The lessees held themselves out to be leases. I do not know the state of mind of either the parties representing the Government over a decade or the private parties. I may have private views but they would not be useful. Senator DOMINICK. Are you implying that they did not enter into these in good faith. Mr. KIRWAN. No what I am saying, Senator, is that most of these instruments are with what I regard as being knowledgeable competent business people for the most part I believe represented or often repre- sented by counsel. I do not really think the question here is so tricky, so esoteric, that a reasonable prudent businessman would not weigh, consider, and take into account a lot of these things. The fact that we did not pick up the cautionary Navy language. The fact there was no public bidding, he got his lease by a private negotiation. Now, my own feeling is, I note these things in passing. We are not dealing with widows an orphans and children and so on. On the other hand, I have found nothing in the file where anybody has COMO forward and said, I know that this is not a lease. I am going in any- way. All I can say is the papers are all innocuous, the papers are all signed, stamped, they hold themselves out to be leases. I have no official opinion on what the parties were thinking at various times. Senator DOMINICK. And in addition to the fact that these leases were signed by the Secretary of Interior they were also signed by Vicorp, I gather Mr. KIRWAN. Yes, well, again, remember five or six of them were by the local municipality. Some of them were signed by Vicorp as principal, most of them, however, were arranged by Vicorp and signed by the President but depend for their effectiveness upon the signature of the Secretary of the Interior because they were in the name of the United States rather than the name of the Corporation. But as I say there were about four variations there. Senator DOMINICK. All of them were signed by the Secretary of the Interior. Mr. KIRWAN. Not all of them. Senator Dominick, the ones en- tered into by the local municipality were not countersigned by In- terior. I am talking about 4 or 5 of the 25 we are talking about here. 25-147-64--4 46 LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS Senator DOMINICK. The ones that are under discussion right now generally speaking have been signed, or all have been signed by the Secretary of the Interior. Mr. KIRWAN. No, Senator, of the 25 that are under discussion right now either 18 or 19 have been signed by Interior. However, I do not put any significance in that, although Interior did not sign the ones in the early years. They were entered into with I would say Interior's constructive knowledge so I do not distinguish among them for that purpose. Senator knowledge, A good many of these, as you say, were put out on public bid, were they not? Mr. KIRWAN. Not a good many, Senator, several, but I would not say a good many. Our files here are not adequate on that but my best guess, and I say best guess because after going through these files during the week, my guess would be 6 or 7 or 8 maybe out of 25. Senator DOMINICK. Would you say that the big ones were put out on public bids? Mr. KIRWAN. As near as I can tell, the Gramboko and the Tropic Isle, and the L'Escale, three of them were not. The Beachcomber apparently was. The Caribbean was put out on a public bid but where the parties were not bidding on terms to be paid the Govern- ment, but on the amount of money to be paid to the creditors to a former corporation. You have some of the benefits of public bidding. .However, the Beachcomber, the Caribbean and the Surf side the answer would be, yes. The Tropic Isle, L'Escale, Virgin Islands Pleasure Boats, the an- swer would be no, no public bidding, and these to my mind are the seven or eight big ones. .. Senator DOMINICK. I have some vague recollection that the prop- erty on which all these hotels were located were covered in a pre- existing lease to someone who went bankrupt and that there was some- • thing like $1,000 a year rental and that all this property was in one lease. When this fellow went bankrupt you broke it up and issued sepa- rate leases, is that right? Mr. KIRWAN. No, not all of it, Senator, there was an earlier so- called Gallagher master lease that was broken up in the late 1950's, under circumstances that as far as I know were about as you say, but .again we are talking about an instrument of this same nature, a revocable permit that was never a lease, but it was, I would say as much or as little a lease as any of these other instruments. Senator DOMINICK. When you had these public bids how many bids (lid you get, do you remember? Mr. KiawAN. In the case of the Caribbean it is my recollection, Senator, four or five bids. In the case of the Beachcomber I believe we got a single bid. In the case of Tropic Isle I don't think it was advertised with regard to the present lease. • Senator DOMINICK. Would you say there was not very much interest shown in going ahead with this? Mr. KIRWAN. I would say there was very little advertising. I saw for the first time the solicitation and it. was local plus onet-Spanish- speakincr. paper over in Puerto Rico. If we were trying to move one of the large hotels on the island I cannot see our failure to adver- tise in the papers in Miami at all. LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS 47 Senator DOMINICK. Are you doing this today? Mr. KIRWAN. We have not authority to do any of these things, Senator. Senator DOMINICK. Is this part of the purpose that you have as far as the use of this land is concerned? Mr. KIRWAN. Certainly not. You asked me, though, did the paucity of bids received indicate a lack of interest. To me it indicated at least .a lack of adequate advertising. Senator DOMINICK. Now, the amount of required investment which was included in each of these leases varied, I gather, from lease to lease, idid it not? Mr. KIRWAN. In some cases it was none at all, in other cases there was a requirement that investment be in functional terms, not a money :statement, in other words, they would do a certain thing, but without a dollar sign. In other cases the result of investment which I regard as relatively modest was in the neighborhood of $5,000, $10,000, $15,000, •something in that order. Senator DOMINICK. Have those amounts been put in, have the terms .been lived up to? Mr. KIRWAN. I have no reason to believe they have not been, Sena- tor. Senator DOMINICK. You either know they have or have not. Mr. KIRWAN. I know they have given our normal bureaucratic way of doing business. They would invest this amount of money by 1958, I have nothing at the Washington level to indicate they failed to per- form. That gives us the normal assurance that they did. It does not rule out if I took a given case, went back 6 or 8 years' went down to the islands, I might to my surprise find they did not. But I would take for granted that the parties lived up to the terms of their agreement. Senator DOMINICK. Now, can I get an answer, did they or did they not put this amount of money in it and live up to the terms? Has there been any claim by the Interior Department they did not live up to the terms of their agreement? Mr. KIRWAN. Not in terms of putting the amount of money in it. It was to the lessees' benefit that they put in the amount of money. I say to the best of my knowledge and belief the parties would have -made the modest required investments required by the leases. Senator DOMINICK. Mr. Kirwan we can get along a lot faster if you will just answer my question. Will you answer the question as to whether the Interior Department ever said these people had not ful- filled the terms of their leases? Mr. KIRWAN. Senator, to answer you particularly the Interior De- partment as distinguished from the Virgin Islands Corporation was not charged with the day-to-day or year-to-year management of the property. I will say to the best of the knowledge and belief of our Department one step removed officially from lease management I be- lieve they lived up to the requirements of their leases. In that par- ticular regard. Senator DOMINICK. This permit from the Navy is to the Interior Department, it is not to the Vicorp. Mr. KIRWAN. That is right, but in turn in 1954, Senator, we gave a subpermit to Vicorp wherein we turned over the day-to-day man- agement of all of these properties to Vicorp and divested Interior of it to this extent. 48 LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS Senator DOMINICK. This is the action of the Interior Department. correct? Mr. KIRWAN. Right, sir. It is not the divestment of continuing responsibility, but it does mean that our knowledge of day-to-day dealing with the tenants is necessarily less because we have farmed it out to an agency for whom we are still responsible, but we do not handle the day-to-day details. Senator DOMINICK. Did the Vicorp ever tell the Interior Depart- ment that these investments had not been fulfilled? That is a simple. thing you can answer yes or no. Mr. KIRWAN. In the case I know of, Virgin Islands Pleasure Boats, it told us, yes. In the case of Caribbean Hotel. It stated they had made more investments at the time than we had permitted. 'ilbse- quently his investment was recognized and except for those two in- stances I do not recall—with regard to the present leases, I am not talking about cases where we would have closed out somebody for failure to perform. With the exception of those, I think that every lessee with the extent my knowledge can be perfected in Washington, every lessee has performed that part of his lease requirement. When I say, Senator, to the extent of the files in Washington, I am not trying to avoid your question; we just do not keep day-to-day tiles on these things. We are talking about a period of time long since gone, because no one has required anyone to put money into the premises in the last 4 or 5 years. Senator DOMINICK. Did you say in answer to a question of the chairman that you do not know how much money has been invested in these properties? Mr. KIRWAN. That is correct. Senator Dominick. We did not feel it relevant in turning to the question of the legal validity of the, leases. We do feel it probably is relevant when we come to the ques- tion of equitable relief of a given tenant, but we have never reached that question until I understood the committee wanted me to run ahead and decide how we would approach it in practice if we were ever faced with the opportunity and responsibility of dealing with it. Senator DOMINICK. Do you have any opinion as to whether this has been good for the economy of the islands or not? Mr. KIRWAN. Senator, on the one hand, to the extent any investment at all has been made, it cannot help but be good in that sense for the economy. On the other hand, to the extent that the executive department takes upon itself to dispose of Government property without authorization from the Congress, I believe it is doing something corrosive of a lot of things, including in the long run the local economy. For example, the way we have handled these leases over the past decade may make it harder as a practical matter for us to be entrusted with the sub base and the airfield tomorrow. If we do not get the sub base tomorrow because, in part, of the way this has been handled over the past decade, the local economy will lose more money because of lack of development of that base than it would have gotten from the small, piecemeal development of these individual properties over the past 10 years. Senator DOMINICK. These buildings were in pretty bad shape when you leased them, were they not? LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS 49 Mr. KIRWAN. Some I don't doubt were very bad; some were moder- •ately run down. For example, the buildings that are leased out to in- dustrial tenants on the sub base I have no reason to believe were in pretty bad shape. On the other hand, I do not doubt but that some of the hotels and perhaps the restaurants needed a great deal of rehabili- tation. I do not know that the rehabilitation was structural. I have no doubt they were in bad shape from the point of view of a house- keeper or somebody ready to open a business. Senator DOMINICK. Let me just go over a few points again and see if I can get short and clear answers. First of all, I gather that you never asked the Navy if they would ratify any of these documents? Mr. KIRWAN. We did not. Senator Dommicx. Secondly, I gather that your recommendations on pages 15 and 16 are recommendations only which you cannot say that you have the power to fulfill? Mr. KIRWAN. We cannot say as a legal matter we can fulfill them. We can say, knowing the facts, that they do represent the Department of Interior's official, thoughtful position, and knowing the identity of the parties who would have the legal right to deal with these ques- tions, we put them forward not as a pious expression of what we would like to see, but as that type of working out that we are reasonably con- dent we can bring about, unless unexpectedly prevented from 'doing so. Senator DOMINICK. Mr. Chairman, I want to say for the record that I have not had a chance to read the Solicitor's opinion, despite the fact that I understood that it was going to be furnished to all members .of the committee prior to this hearing. I also want to say that I have never had the opportunity of reading this Navy permit until just at this hearing, despite the fact that I understood we were going to be furnished copies of this by the Interior Department. So there may be further questions after the opportunity of going into these, but at this time I think it might be helpful in connection -with the statement of opinion that Mr. Kirwan has made to put into the record the letter from Mr. Kirwan to Mr. Stanford, L'Escale, dated 'October 2, 1963, in reply to the letter which Mr. Stanford had sent to Mr. Cramer. Senator NELSON. The letter will be received for the record. ,( The document referred to follows:) DEPARTMENT OF THE INTERIOR, OFFICE OF TERRITORIES. Washington, D.C., October 2, 1963. 'Mr. DONALD STANFORD, L'Escale, Inc., Harry S. Truman Airport, St. Thomas, V.I. DEAR Mn. STANFORD: MT. Robert Cramer has sent me a copy of your letter of September 16, 1963, since it refers in part to me. I will be writing to him at greater length on the subject, but wanted to take this opportunity afforded me to restate and clarify the action taken with regard to your instrument dated August 20, 1958, and approved by Mr. Fred Seaton. That instrument has been canceled. It is no longer in effect and has not been since August 15, 1963. Mr. Cramer is not suggesting that you give up the instrument dated August '20, 1958, in return for a permit now from Vicorp. He is suggesting, for your .own protection and self-interest, that since your old instrument of August 20, 1958, has been totally and completely canceled, and you have nothing at all just 50 LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS now, that you would be better off with a permit from Vicorp. It would at least regularize your presence on the property, fix the amount of rent to be paid. monthly. and so forth. I assume that Mr. Cramer, as a matter of policy, not law, has decided to charge you the same amount each month under the Vicorp permit— until further notice—as you had been paying under the old instrument dated* August 20, 1958. You mention that you are represented by counsel in Washington. I have not had the pleasure of a phone call or visit from him, so maybe you were speaking prospectively of engaging one. In any event. I would be glad to discuss this matter with him at any time, or with you for that matter upon any further trips. to the Virgin Islands. Sincerely yours, JOHN J. KIRWAN, Assistant Director. Senator MECHEM. Will Mr. Kirwan be here tomorrow? Mr. KIRWAN. At the pleasure of the committee. Senator NELSON. I take it you will be here throughout the hearings. Mr. KIRWAN. Certainly, Mr. Chairman. Senator NELSON. I take it anybody may be requested later or may offer rebuttal later on, either the occupants or the Department of Interior or the Navy. Senator DOMINICK. Mr. Chairman, I wonder if I could ask one more question here before we go on? I am not sure that I asked this question before. Did you have a specific legal opinion from the Solicitor's office on the validity of your notice of August 19 or August 18, 1963, to these lessees? Mr. KIRWAN. August 15. Senator DOMINICK. August 15; I beg your pardon. Mr. KIRWAN. We had the most solemn, most careful assurance from the Solicitor that our legal conclusions were exactly right years before we sent the August 15 letter. We had a written indication of that in 1961. We had the oral approval of that specifically before we took the step August 15. However, the Solicitor never saw any reason' and we agreed with him, to render an official opinion labeled such on the subject until requested by the committee. So that we had both oral and written assurance on the subject before; but for reasons that the Solicitor gave in his letter to the acting chairman, he regarded the subject as moot and therefore he never had been required to issue a formal opinion on this particular subject prior to the request received from the com- mittee. Senator NELSON. When you say you had a solemn statement from— Mr. KIRWAN. By that, Mr. Chairman, I mean that the Solicitor Senator NELSON. Years ago—about when do you mean by "years ago"? Mr. KIRWAN. I mean about once every 6 months we would get to- gether with the Solicitor or his representatives. We would agree that if the legal conclusions were as unmistakable, as clear cut and as inevitable as we feared, then many individual people would be un- fairly disadvantaged. It was noted that many people would poten- tially at least get hurt and that it was a serious matter and that it would be embarrassing the Department. It was in the face of all of these reasons why he would not want to come to this conclusion why the Solicitor, nonetheless, consistently came to this conclusion. Senator NELSON. But as I recall your sentence, you had notice from the Solicitor orally years ago, then in writing in 1961 LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS 51 Mr. KIRWAN. No; I would say that we had evidence both orally and in writing in 1961. Senator NELSON. Oh, you did not mean by saying "years ago" that some long time prior to 1961 there was oral notice from the Solicitor? Mr. KIRWAN. Since I only came to the Office of Territories in 1961, I was not in a position personally to know what the Solicitor's view was. I have no reason, though, to believe the Solicitor requested or let us say came to a conclusion that these were invalid prior to 1961. That is the first record we have of the view of the Solicitor. Senator DOMINICK. Mr. Chairman I think it would be helpful to members of the committee if we could get copies of this Solicitor's opinion with attachments. I do not think either ourselves or the staff have had an opportunity to review them. I think we could have the staff make up copies and get them to us. Senator NELSON. They will get them to each member of the sub- committee. Senator DOMINICK. Mr. Kirwan, were you ever present during any of the negotiations on these leases? Mr. KIRWAN. No, sir; I came to Territories after the last one was signed. The answer to your question is, "No." Senator DOMINICK. Not even working for the Department of the Interior. Mr. KIRWAN. Correct. Senator DOMINICK. You never participated in any of the negotia- tions at all? Mr. KIRWAN. Absolutely. Senator NELSON. Would you mind if I asked a couple of questions to follow up on that? One have you submitted for the record a listing of all the leases? Mr. One, We have not, but we would be glad to. Senator NELSON. I think the record ought to show a listing of all the leases, the date they were signed, and insofar as possible just a brief description to identify them. Mr. KIRWAN. I would be glad to. Senator NELSON. Plus the rental involved, and to the extent that you have the information whether they were negotiated or publicly let by bid. Mr. KIRWAN. Certainly. Senator NELSON. And identifying the business as I suggested. Mr. KIRWAN. Right. Senator NELSON. And whatever has been renegotiated. Mr. KIRWAN. Or the extent of renegotiation available. (The information requested is as follows:) DEPARTMENT OF THE INTERIOR, OFFICE OF TERRITORIES, November 13, 1963. Hon. GAYLORD NELSON, Acting Chairman, Subcommittee on Territories, Committee on Interior and Insular Affairs, U.S. Senate, Washington, D.C. DEAR SENATOR NELSON: This refers to the hearings held before your subcommit- tee on October 29 and 30 concerning the occupancy by private parties of the former Marine Corps air facility and naval submarine base in St. Thomas, V.I. Representatives of this Department were asked to provide certain additional information. We have made available to the committee certain of the documents which were requested, and the remainder are enclosed herewith. 52 LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS There is enclosed, first, a list of the 26 individuals or companies who are named as lessees on the instrument which gave rise to your inquiry. In a few instances the name of the lesses appears in parentheses, preceded by the name used to designate the leased premises. Also enclosed is a summary of the principal terms of each of the leases. This information indicates: 1. The name of the lessee and, if a corporation, the name of the person signing for the lessee. Also included is information concerning any assignments which have been approved in the Department of the Interior. 2.- The date of the instrument ( which, in the ease of instruments approved by the Secretary of the Interior, is the date of his approval). 3. The purpose for which the leased premises are used. 4. A brief description of the leased premises. 5. Rent charged. 6. Term. 7. The method by which the lease was entered. If the files available to us in Washington mnke clear that the lease was either negotiated or awarded as a result of a public advertisement, that fact is stated. If our files are not definite on this point, we have stated "Apparently negotiated." The files maintained by the Virgin Islands Corporation in St. Thomas contain detailed information on this aspect. We are asking that we be advised promptly if any lease which we have referred to as "Apparently negotiated" was in fact the direct result of ad- vertisement. In the event that our statements enclosed are incorrect on this -point, we shall advise you promptly. 8. The presence of absence of a provision concerning rent renegotiation, and any special restrictions upon the extent of renegotiation. We also enclose a copy of each of the leases. In most instances we have not duplicated the attachments, if any, because they are frequently cumbersome diagrams of the leased premises. In the event that you would find it useful to have the attachments in any case, please let us know and we will provide them. I have referred to "leases" and used leasing terminology in this letter, not- -withstanding this Department's position, of which you are aware, that the instruments in question constitute revocable permits. I have done this for the sake of convenience, and not because the Department doubts the correctness of that position. We shall be glad to provide such further information as you might find helpful. Sincerely yours, JOHN .T. KIRWAN, Assistance Director. (1) Arena, Inc. (2) Beachcomber Hotel (Allison Enterprises, Inc.) (3) Berne, Gerard. (4) Besabe Bakery. (5) Brammer Vee Link Belting, Inc. (6) Caribbean Hotel (Dowling). (7) Caribe Construction Co., Inc. (8) de Pina. Fran. (9) Francois' Hardware. (10) Gramboko Inn (Bay Corp.) (11) King, Owen (building No. 126). (12) King, Owen (building No. 138). (13) L'Escale. (14) McWhinney, Richard. (15) Maronna, Joseph P. (16) Matthewsons, Inc. 17) Oasis Beach Club Corp. (18) Reidarson, Marguerite. (19) Reliable Furniture Store. (20) S & P Corp. -(21) Sebastian, Gerald P. (22) Sunbilt Tropical Fruit Products, Ltd. (23) Surfside Hotel (William Crawford). (24) Texas Co. -(25) Tropic Isle Hotel (Allison Enterprises, Inc.) -(26) Virgin Islands Pleasure Boats (Harman & Clerk). LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS 53 ( 1) ARENA, INC. 1. Lessee: Arena, Inc., signed by Erwin Gross as executive Tice president. 2. Date: September 3, 1960. 3. Purpose: Operation of a bowling alley. 4. Premises: 3,074 square feet of building No. 133. 5. Rent: $108 per month. 6. Term: Until September 11, 1966. 7. Method: Apparently negotiated. 8. Renegotiation: Provided for in section lb. (2) BEACHCOMBER HOTEL ( ALLISON ENTERPRISES, INC.) 1. Lessee: Allison Enterprises, Inc., signed by Michael J. Resch. 2. Date: October 15, 1956. 3. Purpose: Guesthouse. 4. Premises: 0.69 acre, with improvements thereon. 5. Rent: First 5 years, $3,000 per annum; second 5 years, $3,600 per annum; and remaining years to be negotiated. 6. Terms: 20 years, with an option to renew for 10 years. 7. Method: Public advertisement. Mr. Resch was the only bidder. 8. Renegotiation: Provided for in section 1, with a $5,000 per annum ceiling. ( 3) BERNE, GERARD 1. Lessee: Gerard Berne (doing business as Nautilus Yacht Facilities). 2. Date: January 13, 1955. 3. Purpose: Building, maintaining, and renting boats, and private residence for lessee. 4. Premises: Former NCO beachhouse and surrounding one-half acre of land, 5. Rent: $100 per month. 6. Term: 10 years. 7. Method: Apparently negotiated. 8. Renegotiation: Provided for in section lb. ( 4 ) BESABE BAKERY 1. Lessee: Besabe Bakery, signed by Sanford G. Kelman. 2. Date: April 2, 1958. 3. Purpose: Bakery of food products. 4. Premises: 9,000 square feet of the former torpedo shop. 5. Rent: $315 per month. 6. Term: 10 years. 7. Method: Apparently negotiated. 8. Renegotiation: Provided for in section lb. (5) BRAMMER WEE LINK BELTING, INC. 1. Lessee: Brammer Vee Link Belting, Inc., signed by Irving Patron, president. 2. Date: October 3, 1958. 3. Purpose: Manufacture of industrial belting. 4. Premises: Building No. 109, consisting of 7,200 square feet. 5. Rent: $250 per month. 6. Term: 10 years. 7. Method: Apparently negotiated. 8. Renegotiation: Provided for in section lb. (6) CARIBBEAN HOTEL (DOWLING) 1. Lessee: William C. Dowling, Sr., and William C. Dowling, Jr., assignment to Coral Reef Properties, Inc., approved December 8, 1955. 2. Date: October 28, 1955. 3. Purpose: Hotel. 4. Premises: Building No. 53, formerly known as the dispensary. 5. Rent: First 5 years, $4,800 per annum; second 5 years, $6.000 per annum; and remaining years to be negotiated. 6. Term: 30 years. 54 LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS 7. Method: Advertisement, with bidders bidding a lump sum for the right to lease at the rental above specified. Lump sum to be distributed between Vicorp and creditors of bankrupt former lessee, pursuant to orders of the District Court of the Virgin Islands. ( 7 ) CARIBE CONSTRUCTION CO., INC. 1. Lessee: Caribe Construction Co., Inc., signed by Roger F. Moran. 2. Date: July 30, 1958. 3. Purpose: Storage of material and equipment, and office space for use in con- struction work. 4. Premises: 4,000 square feet of building SB-75. 5. Rent: $75 per month. 6. Term: 10 years. 7. Method: Apparently negotiated. 8. Renegotiation: Provide for in section lb. (8) DE PINA, FRAN 1. Lessee: Mrs. Fran de Pina. 2. Date: March 16. 1954. 3. Purpose: Residential. 4. Premises: 0.80 acre and four walls. 5. Rent: $18 per month. 6. Term: 25 years, with an option to renew for 10 years. 7. Method: Apparently negotiated. 8. Renegotiation: No provision. (6) FRANCOIS' HARDWARE 1. Lessee: Francois' Hardware, signed by Evan A. Francois. 2. Date: July 30, 1958. 3. Purpose: Storage. 4. Premises: 1,500 square feet of building No. 75. 5. Rent: $40 per month. 6. Term: 10 years. 7. Method: Apparently negotiated. 8. Renegotiation: Provided for in section lb. ( 10) GRAMBOKO INN (BAY CORP.) 1. Lessee: The Bay Corp., signed by Eleanor Heckert, secretary. 2. Date: November 29, 1957. 3. Purpose: Hotel. 4. Premises: Building No. 7, formerly known as Crown Bay Hotel. 5. Rent: First 3 years, $3,000; 4th to 13th years, $6,000; and remaining years to be negotiated. 6. Term: 23 years, from December 1, 1957. 7. Method: Negotiated. 8. Renegotiation: Provided for in section lb. ( 11) KING, OWEN ( BUILDING NO. 126) 1. Lessee: Owen King. 2. Date: November 28, 1951 (effective May 1, 1951). 3. Purpose: Not stated in lease, but premises are used as a studio, 4. Premises: Building No. 126. 5. Rent: $120 per annum. 6. Term: 10 years, with an option to renew (which has been exercised) for one additional 10-year period. 7. Method: Apparently negotiated. 8. Renegotiation: No provision. ( 12) KING, OWEN (BUILDING NO. 138) 1. Lessee: Owen King. 2. Date: June 7, 1951, effective July 1, 1951. 3. Purpose, : Storage. LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS 55 4. Premises: Building No. 138. 5. Rent: $60 per annum. '6. Term: 10 years, with an option to renew (which has been exercised) for one adidtional 10-year period. 7. Method: Apparently negotiated. S. Renegotiation: No provision. (13) L'ESCALE 1. Lessee: L'Escale, Inc., signed by Donald Stanford as president. 2. Date: August 20, 1958. 3. Puropse : Restaurant, cocktail lounge, and gift shop. 4. Premises: 1,800 square feet in airport terminal building. Z. Rent: $250 per month. 6. Term: 20 years. 7. Method: Negotiated. :8. Renegotiation: Provided for in section lb. (14) M'WHINNEY. RICHARD 1. Lessee: Richard McWhinney. 2. Date July 30, 1958. 3. Purpose: Engine repair shop and cabinetmaking. 4. Premises: 976 square feet of building No. 1. 5. Rent: $34 per month. 6. Term: 10 years. 7. Method: Apparently negotiated. 8. Renegotiation: Provided for in section lb. (15) MARONNA, JOSEPH P. 1. Lessee: Joseph P. Maronna. 2. Date: October 15, 1960. 3. Purpose: Providing tourist accommodations and operating a plant nursery. 4. Premises: 5.45 acres and six buildings. 5. Rent: $50 per month, subject to renegotiation in 1965. 6. Term: 10 years. 7. Method: Negotiated. Mr. Maronna formely held a 100-year lease from the St. Thomas Development Authority, at $300 per annum. He accepted the October 15, 1960, instrument as a substitute. 8. Renegotiation: Provided for in section lb. (16) MATTHEWSONS, INC. 1. Lessee: Matthewsons, Inc., signed by Justin M. MacCarthy, vice president. 2. Date: July 30, 1958. 3. Purpose: Manufacture of lace and other cloth items. 4. Premises: 7,000 square feet of building No. 1. -5. Rent: $122.50 per month. 6. Term: 10 years. 7. Method: Apparently negotiated. 8. Renegotiation: Provided for in section lb. (17) OASIS BEACH CLUB CORP. 1. Lessee: Oasis Beach Club Corp., signed by Edin Barbel Steele, as an officer of the corporation. '2. Date: July 30, 1958. 3. Purpose: Conducting a restaurant for the sale of food and beverages. 4. Premises: Eastern portion of the beach clubhouse at Lindbergh Bay (build- ing No. 165). 5. Rent: $50 per month. 6. Term: 10 years. 7. Method: Apparently negotiated. 8. Renegotiation: Provided for in section lb. 56 LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS (18) REIDARSON, MARGUERITE 1. Lessee: Mrs. Marguerite Reidarson. 2. Date: August 2, 1958. 3. Purpose: Manufacture, storage, and sale of local handcrafts. 4. Premises: 1,000 square feet of building No. 37, with certain surrounding land. 5. Rent: $40 per month. 6. Term : 10 years. 7. Method: Negotiated. 8. Renegotiation: Provided for in section lb. (19) RELIABLE FURNITURE STORE 1. Lessee: Reliable Furniture Store, signed by Grace I. Sparks. :2. Date:: September 3, 1960. .3. Purpose: Furniture warehouse. 4. Premises: 1,845 square feet of building No. 1. Z. Rent:: $71 per month. 6. Term:: 10 years. 7. Method.: Apparently negotiated. 8. Renegotiation: Provided for in section lb. (20) S. & P. CORP. 1. Lessee:: S. & P. Corp., signed by Samuel Stomberg. 2. Date: April 2, 1959. Z. Purpose: Manufacture of jewelry, electronic components, ballpoint pens, an& bamboo novelties. 4. Premises: 3,410 equare feet of building No. 1. Z. Rent:: $60 per month. 0. Term:: 11 years. 7. Method: Apparently negotiated. S. Renegotiation: Provided for in section lb. (21) SEBASTIAN, GERALD P. 1. Lessee: Gerald P. Sebastian; assignment to Gerald P. Sebastian, Inc., ap- proved januaryr17, 1961. 2. Date: July 30, 1958. Z. Purpose: Storage of perishable foods. 4. Premises: 1,520 square feet in building No. 1. Z. Rent: $55 per month. .6. Term:: 10 years. 7. Method: Apparently negotiated. S. Renegotiation: Provided for in section lb. (22) SUNBILT TROPICAL FRUIT PRODUCTS, LTD. 1. Lessee: Sunbilt Tropical Fruit Products, Ltd., signed by A. M. Brauer,. president. 2. Date: December 7, 1963. 3. Purpose: Not stated in lease, but premises are used for producing and selling- beverages. 4. Premises.: Former cold storage plant (building No. 66). 5. Rent: First 5 years, $75 per month; second 5 years, $100 per month; and third 5 years, $125 per month. B. Term: 5 years from March 29, 1954, with options to renew for two additional 5-year periods. 7. Method: Apparently negotiated. 8. Renegotiation: No provision. (23) SURFSIDE HOTEL (WILLIAM CRAWFORD) 1. Lessee: William Crawford. 2. Date:, November 20, 1954. 3. Purpose: Guesthouse. 4. Premises: Building No. 69 (formerly known as the chapel), building No. 72 4(a pumphouse), and 1.2 acres of land. LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS 57 Z. Rent: $225 per month. 6. Term: 15 years, with an option to renew for 10 years. -7. Method: Negotiated. Lessee held somewhat similar lease of June 2, 1953, with St. Thomas Development Authority, which resulted from public advertisement. 8. Renegotiation: No provision. (24) TEXAS CO. 1. Lessee: The Texas Co. (Puerto Rico) Inc.; assignment to Texaco Antilles, Ltd., approved September 12, 1961. .2. Date: April 9, 1952. 3. Purpose: Not stated in lease, but premises are used for storage and market- ing of petroleum products. 4. Premises: Tanks, fuel lines, buildings, and land. 5. Rent: $179 per month. 6. Term: 20 years, with an option to renew for 10 years. 7. Method: Apparently negotiated. .8. Renegotiation: No provision. (25) TROPIC ISLE HOTEL (ALLISON ENTERPRISES, INC.) 1. Lessee: Allison Enterprises, Inc., signed by Michael J. Resch. 2. Date: October 22, 1957. 3. Purpose : Guesthouse. 4. Premises: Building No. 52, former administration building. 5. Rent: First 5 years, $3,600 per annum; second 5 years, $4,800 per annum; and remaining years to be negotiated. .6. Term :1 20 years. 7. Method: Negotiated. 8. Renegotiation: Provided for in section 1B. (28) VIRGIN ISLANDS PLEASURE BOATS 1. Lessee: Harry E. Harman and Frederick E. Clerk; assignment from Clerk to Harman dated August 24, 1956; assignment from Harman to Virgin Islands Pleasure Boats (Peter Corson and William A. Wilson) approved September 23, 1959. :2. Date: September 28, 1954. 3. Purpose: Sightseeing boats, soft-drink stand, marine laboratory. 4. Premises: 21/2 acres of land. 5. Rent : $50 per month, or 5 percent of gross business, whichever is greater. .6. Term: 15 years, with an option to renew for 15 years. 7. Method: Negotiated. -8. Renegotiation: No provision. DEPARTMENT OF THE INTERIOR, OFFICE OF THE SECRETARY, Washington, D.C., November 18, 1968. _Hon. GAYLORD NELSON, Acting Chairman, Subcomnvittee on Territories, Committee on Interior and insular Affaiirs, U.S. Senate, Washington, D.C. DEAR SENATOR NELSON: Supplementing my letter to you of November 13, 1963, find enclosed two statements on the negotiation of leases for (1) L'Escale, Inc., Restaurant, and (2) the Tropic Isle Hotel. Sincerely yours, JOHN J. KIRWAN, Assistant Director. [Enclosure 1] L'ESCALE, INC. Reference was made to a purported advertisement of the restaurant in the -airport at St. Thomas in March 1955. Our Washington office files show nothing on this, but a file in St. Thomas shows that such an advertisement was forwarded to Vicorp's counsel in March of 1955 for his checking for legal sufficiency. We have no record of any further action -on this proposed advertisement, and do not know if it ever ran in the papers, or 58 LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS if it ran if any bids were either received or opened. A more complete check of all files in the Virgin Islands will probably give us such information. The one thing we do know is that no award of a lease was made on the basis of such advertise- ment, certainly not to Mr. Stanford or any predecessor in interest, and so the question is really not relevant to the present issue. The advertisement (if it ran), was for 1,000 square feet of space in hangar, and did not provide for any gift shop, nor did it convey any exclusive concession for food and liquor, nor any rights in a new terminal. Mr. Stanford has a lease for 1,800 square feet. the exclusive right to sell food and drink in the airport, and valuable rights in any new terminal to be built. This lease held by Mr. Stanford is dated August 20, 1958, and replaces one for less space entered into on November 6, 1956—or more than 1% years after the proposed advertisement. In any event, not only was the advertisement too long before the subsequent lease to Mr. Stanford to be controlling ( and on different terms) but he did not respond to the advertisement in any event, according to his own testimony. Thus he would have no standing or right to be negotiated with arising from an advertisement to which he did not respond. The fact that a facility may have been advertised in March 1955 on one set of terms, without success, has no relevance to the fact of Mr. Stanford's getting a negotiated lease on the same facility in November 1956 on different terms. [Enclosure 2] TROPIC ISLE HOTEL, BUILDING No. 52 Building No. 52, now the Tropic Isle Hotel, was offered for public bidding, date not specified, with bids to be opened October 31, 1956. Only one bid was received, from Messrs. Brewer and Stanford. Considerable delay was encountered in the entering into a lease with these gentlemen, notwithstanding their apparently having been the only bidders. The delay seems to have been due to complexities on the Government's side. In any event, on July 3, 1957, Mr. Brewer withdrew the bid, and that ended the attempt to lease building No. 52 by means of public bidding. On July 27, 1957, the local manager of the Development Department ( Vicorp ) Mr. Gray commended a Mr. Roger McCarthy to Vicorp's private attorney, Mr. Dillion, as being interested in leasing this building. The file shows that Mr.. McCarthy had been interested in the building at the time of its public advertise- ment in 1956, although he did not submit a bid at the time. Mr. Dillion then worked out a negotiated lease with Mr. McCarthy, without any public notice to other parties, but before it was signed, Mr. McCarthy, on September 17, 1957, notified Mr. Dillion that he had bought stock in Mr. Michael Resch's firm of Allison Enterprises, and that this firm would like to take over the proposed lease. Mr. Resch confirmed this on September 19, 1957. Lease with; Allison Enterprises was signed on October 31, 1957. Final terms were comparable to the bid received from Brewer-Stanford 1 year before. However, 1 whole year had elapsed. The withdrawal of the Brewer bid on July 3, 1957, left the Government completely free to readvertise- In any event, neither Mr. McCarthy nor Mr. Resch had any standing in the matter which would call for the Government to negotiate with them (even if there was authority to waive the rule of competitive bidding, which there was not), sinee neither party had bid on the property at the time it was offered. DEPARTMENT OF THE INTERIOR, OFFICE OF THE SECRETARY, Washington, D.C., November 20, 1963. Mr. STEWART FRENCH, Chief Counsel, Interior and Insular Affairs Committee, U.S. Senate, Washington, D.C. DEAR MR. FRENCH: In accordance with your telephoned request of November- 20, 1963, find set out below the information you requested on leases on Navy land' on St. Thomas. The Virgin Islands Corporation seeks the entire submarine base on St. Thomas, while the government of the Virgin Islands seeks the entire former air station. Further, however, Vicorp has also asked for as much of the air station, if any, as the local government might not succeed in obtaining. Therefore, while we- know that Vicorp wil get the entire submarine base ( if our request is approved LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS 59 by the Bureau of the Budget), we cannot be completely sure at this time where a given parcel of land at the air station will go to the local government or to Vicorp. However, I will proceed on the assumption that the local government will be successful in obtaining all of the air station. In this event, the following leases (keyed to our list supplied the committee on November 13, 1963) would be handled by Vicorp: (4) Besabe Bakery. (7) Caribe Construction Co. (9) Francois Hardware. (10) Gramboko Inn. (14) McWhinney, Richard. (16) Matthewsons, Inc. (19) Reliable Furniture Store. (20) S. & P. Corp. (21) Sebastian, Gerald P. (24) The Texas Co. (26) Virgin Islands Pleasure Boats. On the same assumption, the following leases would be handled by the local government: (1) Arena, Inc. (2) Beachcomber Hotel. (3) Berne, Gerard. ,(5) Brammer Vee Link Belting, Inc. (6) Caribbean Hotel. (8) de Pina, Fran. (11) King, Owen. (12) King, Owen. (13) L'Escale. (15) Maronna, Joseph P. (17) Oasis Beach Club Corp. (18) Reidarson, Marguerite. (22) Sunbilt Tropical Fruit. (23) Surfside Hotel. (25) Tropic Isle Hotel. Sincerely yours, JOHN J. KIRWAN, Assistant Director. DEPARTMENT OF THE INTERIOR, OFFICE OF TERRITORIES, November 21, 1963. Hon. GAYLORD NELSON, Acting Chairman, Subcommittee on Territories, Committee on Interior and Insular Affairs, U.S. Senate, Washington, D.C. DEAR SENATOR NELSON: This replies to your oral request for information con- cerning the legal authority of the Virgin Islands Corporation and the govern- ment of the Virgin Islands to enter into negotiated leases, and the authority they have to agree to rental terms which represent less than the fair market value of the property proposed to be leased. First, as to the Virgin Islands Corporation, the Corporation is authorized by section 4 (f ) of its Organic Act (48 U.S.C. 1407c (f) ). "To acquire, in any lawful manner, any property—real, personal, or mixed, tangible or intangible—to hold, maintain, use, and operate the same; and to sell, lease, or otherwise dispose of the same, whenever any of the foregoing trans- actions are deemed necessary or appropriate to the conduct of the activities authorized by this Act, and on such terms as may be prescribed by •the Cor- poration." The foregoing language constitutes the "program leasing authority" of Vicorp, that is, the power to enter into leases without public advertisement, in order to further the program of the Corporation. Among the authorized activities of Vicorp are at least two which are relevant in connection with the leasing of the former Navy property: "To encourage and promote the investment of private capital in industrial * * * commercial, or related enterprises, undertakings, or activities in the Virgin Is- lands * * *" (48 U.S.C. 1407b (b) ). 60 LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS "To encourage, promote, and develop, and to assist in the encouragement, pro- motion, and development of, tourist trade in the Virgin Islands" (48 U.S.C. 1407b ( e) ) . The leasing of Vicorp property, when the Corporation acquires title to it, for hotel purposes would appear to fall within both the above quoted authorized activities. Most of the remainder of the leases would appear to fall within the first of the two. The Federal statutes which require public advertising in connection with the disposal of Federal property uniformly exempt from their application disposals which are otherwise authorized by law. Section 4 (f ) constitutes such "other authority," and hence public advertisement is not required if the disposal is effected under that section. As noted, such disposals must advance the program of Vicorp, that is, must be within its authorized activities. On the basis of the foregoing considerations, we regard the negotiation of leases with those now occupying the Navy property to be within the legal authority of Vicorp. Section 4 (f ) does not, you will note, require that the fair market value of the property be obtained. It requires only that the sale or lease be "on such terms as may be prescribed by the Corporation." The Corporation thus has full dis- cretion to determine to what extent current market value must be obtained. Differently stated, it has full authority to defer to the equities of a given situa- tion, and to require consideration commensurate with these equities. Because the matter is within its discretion, the Corporation cannot be second-guessed, unless it errs so egregiously as to raise questions as to its good faith. Turning, then, to the government of the Virgin Islands, it too has, potentially, full authority to negotiate the terms of leases with current occupiers of the Navy property, and such terms could reflect less than the fair market value of the property leased. The current property disposal laws of the Virgin Islands require public advertisement and award to the highest bidder (31 VIC 235, 236), but the Legislature of the Virgin Islands has authority to enact new property disposal laws or, as would be more likely to be the case in this instance, special laws in special circumstances. Section 8(a) of the Revised Organic Act of the Virgin Islands (48 U.S.C. 1574 (a) ) provides that— "The legislative authority and power of the Virgin Islands shall extend to all rightful subjects of legislation not inconsistent with this Act or the laws of the United States made applicable to the Virgin Islands. * * a " This legislative power is very broad, having been termed "plenary" and having been analogized to "that habitually exercised by the legislature of a state." (See both the opinion of the Court and the dissent in Granville-Smith v. Gram; ville-Smith, 349 U.S. 1 (1955).) That the Virgin Islands Legislature would have authority to enact a law permitting the negotiation of leases with respect to any property which it owns is clear. It has often done so. Laws concerning the acquisition and disposal of a government's property are unquestionably "rightful subjects of legislation" by it. Because such laws, if they were drafted with a view to giving redress to those now occupying the Navy property, would not contain a requirement that consideration be at fair market value, no legal objection could be raised if the consideration charged were less than that amount. The Virgin Islands Legislature has authority to enact private relief bills, based upon equitable considerations. Legislation permitting continued occupancy at the Naval property upon payment of reasonable, but less than fair market, rental, would be within the legislature's powers and could not be effectively challenged. Please let us know if you have further questions concerning the foregoing. Sincerely yours, JOHN J. KIRWAN, Assistant Director. Senator NELSON. Now, I take it respecting those properties by which the lease or permit agreement were received as a consequence of a public bid that you have not asserted here that that changes the legal status of the occupant, vis-a-vis those which were negotiated? Mr. KIRWAN. That is right, sir. Senator Dommics. Mr. Chairman, excuse me, I did not understand that question or answer. Mr. KIRWAN. Senator Dominick, what I mean is that whether the instrument was arrived at as a result of direct public competitive bid- ding or by private negotiation would be immaterial as far as its LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS 61 status as a legal, binding valid lease. It had none, it is our position, apart from the method that was used in arriving at its terms. Senator NELSON. Therefore, I assume that the leases for any new permit arrangement, or lease arrangement if and when Vicorp or the Islands Corporation receives control, could be the basis for any renegotiation is an equitable one? Mr. KIRWAN. Exactly, only that. Senator NELSON. Then, just so it is clear in my own mind when you say that they should be given complete credence under item 1 on page 15- Mr. KIRWAN. I am not referring to the lease, Mr. Chairman, to im- ply that the instrument in any way was valid, I am simply saying its terms were arrived at in such a correct and laudable manner, that the terms of an instrument which was the first valid one ever given should be identical to the old one which never had any validity. Senator NELSON. IS it your position that since the basis for it is purely an equitable one that if the rental charge is unconscionable it should be perpetuated under Mr. KIRWAN. No, I am going on the position if it were publicly advertised the result by definition could not be unconscionable absent something we do not know. If an instrument were adequately de- scribed, if the premises were adequately described, adequately adver- tised, if there was a long enough period of waiting, if all of the usual things were found to be in order then I would say that whatever the term involved proved to be it could not be called unconscionable by definition. Senator NELSON. Therefore, you are saying that no matter what the rental basis is, that should not be, in your opinion, subject to renegotiation? Mr. KlltwArt. In the case of the publicly advertised prior instru- ments, that is correct. Senator NELSON. Then if I understand you correctly you are say- ing that if Vircorp gets some or all of this property through GSA, that Interior would exercise its good offices so to speak, to attempt to assure that equity was done in behalf of the present occupants? Mr. KIRWAN. Exactly, and it is neither more nor less than that. That is exactly our position. Senator NELSON. Is there any possibility that Interior Department may wish, for any purpose' to retain some of the properties or secure some of the properties itself? Mr. KIRWAN. Mr. Chairman, the Interior Department has neither the desire nor any reason to acquire any of these properties. I would say that the Interior Department might well like to work out itself the terms of what we would regard as equitable and correct adjust- ments to be made so that we would once, having done this, be in a position to be highly specific with regard to each instrument. It would be a process that would take, I would say, 6 weeks to 2 months. Once we had with regard to each and every lease worked up what our departmental position was, then that entire package would be as a practical matter available for the scrutiny, observation, evalua- tion of any interested party, following which time the Secretary of the Interior could commend it in its entirety to the Virgin Islands Corporation. 25-147-64 5 62 LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS Senator NELSON. Do we have any appraisals of the value of this property? Mr. KIRWAN. No, we do not, Mr. Chairman. We have always felt— we have never reached the stage in any of these things where we could do anything with an appraisal if we had it. We would be concerned with an appraisal of the property only in those instances, and they are the minority, where the general prin- ciples that I have stated here in my statement would not pertain. If the public bidding was the answer we would not need to know the answer, we would abide by the earlier results; that is, the results of bygone years on public bidding. If the instrument canceled on August 15 provided for full renegotiation again we would learn the value of the property only in our process of arriving at what rent to ask in the future. It would be inevitable for us to do that, but it would not come until the time came for us to make our rental demand. Senator NELSON. If, in the disposition of these properties, assum- ing again that the Virgin Islands government or the Vicorp receives it, if it, appeared perfectly clear that one or x number of any of these properties was not being put to the best use and, in fact, was interfer- ing with the development of the area on the island, and as a conse- quence Vicorp decided that they did not intend or did not wish to extend any lease, does the Vicorp or the government have the legal authority to make an equitable adjustment for any out-of-pocket loss? I do not mean loss of profit; out-of-pocket loss as a consequence of an investment. Do they have the power to make some adjustment for that? Mr. KIRWAN. The local government by definition would, Mr. Chair- man; Vicorp in my opinion, and it is subject to counsel if we are talking about money, would not. If we are talking about making available an alternative site out of other Vicorp lands over at the other end of the property, yes, it would enter into an exchange lease basis. I would say that if a party using land for marginal purposes and tying up a larger site had arrived at that lease through the public bidding route I would say we would be and should be stuck with it.. On the other hand, if they arrived at it through other than public bidding, we would at that point give consideration to the alternative uses of the site, among five or six factors. But if the equities were strong enough on the private side we would abide by even the dis- advantages to the government. If they were not that strong, then one of the factors to be taken into account would be highest and best use of the site, but only where the equities were not compelling. Senator MECHEM. I will reserve my questions. Senator DOMINICK. Mr. Chairman, No. 3 of the ones that are listed is the Virgin Island Pleasure Boats which I think you referred to in your testimony, which has the rent of $50 per month. Now, that lease, as I recall—if I am incorrect I hope you will correct me, but that lease provided that they could only use this property for boating purposes, was that not it? Mr. KIRWAN. No, they were to use it for glass-bottom boat rental, but they also were supposed to develop it for a marine laboratory and an aquarium and other water-related functions. Senator DOMINICK. And it was necessary for them, as I under- stand it, to have water in order to be able to operate, is this not true?' LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS 63 Mr. KIRWAN. Senator, you have touched upon what I think is per- haps the unhappiest and sorriest lease there. I think the conditions under which that—I am giving a personal judgment—but that is the last lease I would care to defend, and by defend I am referring to the rate obtained, the circumstances under which it was negotiated, and the purpose that it has never been put to in the 6 or 8 years that it has been in existence. It is my understanding, based I will say on hearsay, but it came from responsible sources and I credit them, that within a couple of years after the government leased that two and a half acres of land for $50 a month, another party came along and paid $40,000 for the leasehold interest alone. It seems to me this is again creating a rebuttal presumption that the United States did not obtain anything like the value for that site at the time it was leased. If this had been advertised I would have no complaint, I mean, that is the luck of the advertisement. But a lease that is negotiated, where the United States gets $600 a year, and where a few years later it changes hands at, I am told, about $40,000 where we are not dealing with significant improvements that would complicate it, to be an off- set, there it seems to me a rebuttable presumption is created that the United States did not get value received. there. Senator DOMINICK. Mr. Kirwan, I am not trying to defend any lease one way or another, I am simply trying to find out what the facts are. It is my understanding that the facts are that recently, in the process of making that fill, they dumped sand all over the dock and the entrance and there is no possible way of his even getting to the shoreline now, so he is sitting there with a lease which he cannot use, by operation of the Government. Mr. KIRWAN. First I do not know either way, Senator. I had not heretofore heard that complaint. Certainly the lessee, Virgin Islands Pleasure Boats has never written, phoned, or called us with that allega- tion. Senator DOMINICK. I have seen a copy of a letter to the Virgin Is- lands Corporation in which the man said he left in the morning and came back in the afternoon and there was 18 inches of sand over the entire cut, and his boat. Mr. KIRWAN. It must have been recently. The last time I was down in the islands this was not a problem, this did not come to my attention. I know this site has not been developed in the 8 years that it has been in the two ownerships, this man's predecessor and himself. There was to be a biology lab, a marine lab, and an aquarium there. This was a commitment, a part of the obligation of the lessee, it was never ful- filled. I do not know why—it could be that something has happened this summer that makes it impossible of fulfillment. I do not know either way. I know if so it is a novel because that did not exist before the last couple of months. Senator NELSON. When was that lease made for $50 a month? What date? Mr. KIRWAN. The lease itself was September 28, 1954. Senator NELSON. It was sublet, was it? Mr. KIRWAN. It was sublet September 1959, you had a 5-year lapse during which time the original party did not perform. He left it un- improved and at which point he subleased to another party for, I am 64 LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS told, $40,000. The other party since 1959 has also not performed in the sense of constructing these attractions that were to be placed on the premises. Senator NELSON. What evidence do we have that he paid $40,000 for it? Mr. KIRWAN. I do not have written evidence which is the sort of thing, Mr. Chairman, that I would want to develop before I make a positive recommendation with regard to any of these six, and let me hasten to say that although I have placed Virgin Islands Pleasure Boats on this listing for a number of reasons, of which this was one, I listed the other five for reasons that have nothing to do with the gross— the sort of grossness that I indicated here. So I am not implying that any of the other six are on that list because of any question of the sort that I have concerning this lease. But to answer your question, it is hearsay only on my part but if it did not come from a source I believe in a position to reasonably know I would not repeat it. I would still check into it myself, but I would not have repeated it publicly if I did not credit the source. Senator NELSON. And did I understand you to say that the original so-called lessee in 1954 did not perform in accordance with his agree- ment with Interior between 1954 and 1959? Mr. KIRWAN. The Washington file shows the extent of his obliga- tions which were to have constructed these buildings and opened these facilities. I know that he did not perform. Now, what I do not know, and this is the reason why at times Senator Dominick may think I take longer to answer than I should, what I don't know is, are there letters in the file in the islands where the man may have come in year after year and gotten an extension. Now, if he got an extension it was given by someone not authorized to give it. I know that, other- wise it would be in the Washington file. But I cannot rule out that one or another of our local managers may have given him some evi- dence in writing that he did not need to worry about it. I do not know he did, I am not implying that I know it, but I don't have it with me. I just mean that is the kind of thing I cannot be sure about. Senator NELSON. But in any event what was provided for in the original permit or lease Mr. lintwAx. Was not performed right. Senator NELSON. Then, in 1959, what date? Mr. KIRWAN. September 1959, the assignment from the first party to the second was approved by the Department of the Interior. Senator NELSON. And was there performance under that subpermit ? Mr. KIRWAN. Not in the respects to which I advert. Senator DOMINICK. Mr. Chairman, there are just a couple of ques- tions I am not quite clear on. What do you mean when you say that you will give these leases credence which permits genuine renegotiation of rent? What do you mean by genuine renegotiation? Mr. KIRWAN. Let me indicate what I had in mind. Take the case of the Beachcomber Hotel. Again, from the state of our Washington records I would say the Beachcomber Hotel, as a matter of fact, I did list it among the six, because it does not have genuine rent renegotia- tion within the next couple of years. Senator DOMINICK. The Beachcomber is not. Mr. KIRWAN. I say if I limited myself to our Washington record, I first listed it, because although it says rent can be renegotiated I believe it is in 1966, in fact, even though there are two pages worth of saying LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS 65 how they will both choose arbitrators and they will average the best guess of rent, and so on, there is an overriding provision that says in no case can the rent that they pick go higher than $5,000 a year. Well, this makes meaningless the whole procedure. It just means the most you can get no matter what the rate is is a nominal raise. At that point I would list it as not being entitled to the full equitable relief. In a phone call yesterday though I found that it would appear, again I am not sure, I have not seen it, but my present belief is that the very invitation to bid held out to the party bidding that he would not need to face real renegotiation in 1966. If this is the case, and I presently believe it is, then that is our hard luck, he was offered this benefit at the time he bid and we have no reason to hold it against him. But I use the word genuine renegotiation to mean not only the form but the substance of it has to be present. Senator DOMINICK. So you are not planning, then, on renegotiating through Vicorp or the Virgin Islands Corporation any of these rental terms except those which come up under their own terms right now or in the real near future? Mr. KIRWAN. No, Senator, under point 3 here SenatorDOMINICK. And under point 3, that is the one I was going to say. Mr. KIRWAN. Right. 'Senator Dommucs. Now, under point 3 what you are saying is that any lease which has a relatively short remaining life and which was not publicly advertitsed, would be given credence provided the Gov- ernment gets what you think is a fair rental in the process of doing this? Mr. KIRWAN. That is correct. Senator DOMINICK. And this would be based, I would presume,_ on the status of the improvements at this time as opposed to the time when the lease was entered into? Mr. KIRWAN. Senator, let me first say as a practical matter I do not think that it is going to be a hard one. Most of the leases as far as I know that fall in this category do not involve substantial betterments in any case, but to answer your question, I would say if the instru- ment provides that the United States gets title to the improvements, most of them do cross that bridge they say whether the United. States—whether title passes to the -United States when the improve- ment is made or not. I would say in that case if it did, and if it didn't, it didn't. It would depend on who owns the improvement, but I do not really believe that will be a problem in category three- type leases. Senator DOMINICK. And you will be present during the remainder of the hearing, Mr. Kirwan? Mr. KIRWAN. Certainly. Senator NELSON. It is 10 minutes to 12. Who is here representing the Department of the Navy? Captain BITTENBRING. I am, sir. Senator NELSON. Do you have a presentation to make? Captain BIT'rENBRING. I have no prepared statement, no sir. Senator NELSON. Would you identify yourself, please. Captain BIrrENBRING. I am Capt. Charles Bittenbring. Senator NELSON. What is your responsibility in the Navy—re- specting the matter before us? (66 LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS Captain BrrrErnmuNo. I am the Assistant Chief of the Bureau of Yards and Docks for Real Property Management. Senator NELSON. And the property under consideration here is 'within your direct jurisdiction? Captain BITTENBRING. Yes, sir. Senator NELSON. Did you wish to make any informal statement? Captain BITTENBRING. After hearing the questioning probably I could foreshorten some future questions by making a very brief nar- rative statement of what our position has been. Senator NELSON. Would you do that? STATEMENT OF CAPT. CHARLES BITTENBRING, USN, BUREAU OF YARDS AND DOCKS; ACCOMPANIED BY LAWRENCE WRIGHT, LLOYD SHAID, AND ABNER FRANK Captain BITrENBRING. You realize we utilized the property for operating purposes up to the time we permitted it to the Department of the Interior in 1948. At this time we concluded that we no longer had a peacetime need, but we did not proceed to dispose of the prop- erty because we at that time had a mobilization need. It is for this reason that we, in attempting to cooperate with Interior and their expressed desire to assist the economic development of the islands, agreed to furnish it to the Department of the Interior under permit. Later in the 1950's, as things changed, we concluded we no longer had a mobilization need for it and at that time we began to look into the possibility of disposing of it. These things, of course, take time, we processed it through the vari- ous steps that are required by statute and this year, as has already been stated, we declared it to GSA and received back from GSA the statement that they would not accept it with the outstanding permit. I think that, in brief, brings us up to where we are. Senator NELSON. Does your legal counsel take the position that the Navy does have the authority to cancel its arrangement with the Interior Department unilaterally at anytime? Captain BITiENBRING. The permit says we can revoke at any time. There is included therein a stated intent that we will not do this except in the case of a national emergency. But our position is that we had no intention to cancel or recapture for our own peacetime use, except in the case of a national emergency, but when it develops that we no longer have any use for it then we must proceed with the steps to dispose of it. So, this would be in accordance with all the intent of the administration and Congress. Senator NELSON. Did you consider the statement that you did not intend to recapture it except in the case of a national emergency to mean you did not intend to retake it for your own purposes? Captain BITTENBRING. Yes, sir, we considered this; but at the same time it became pretty much academic because there was no disagree- ment between us and Interior when it developed that we had to cancel in order to declare the property to GSA. As Mr. Kirwan has already stated, Interior concurred in this action and, in fact, requested it, so there was no disagreement. Senator NELSON. Do I understand you to say you do not feel that this statement respecting national emergency was any limitation on your authority to cancel? LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS 67 Captain BITTEN-BRING. No, sir it was no limitation on our authority. It was merely a declaration of intent. Senator NELSON. Do you have any elaboration you wished to make respecting the presentation of Mr. Kirwan as to its relationship with the Navy? Captain BITTENBRING. No, sir. Senator DOMINICK. Captain, did you ever object to the development that was instituted by the Interior Department on these properties? Captain BrITENBRING. No, sir, we would have had no official knowl- edge of the development. Our position was the property was per- mitted to Interior. They were operating it. We had no official knowledge of anything that was going on. Senator DomiNicK. Well now, when you say you had no official knowledge, surely you do not mean to tell me you did not know what was going on? Captain BITrENBRING. In what respect, Senator? Senator DomiNicii. The development down there on the basis of this various property. Captain BITTENBRING. We knew property was being developed, but we were not required to be aware of any terms or conditions between Interior and its permittees. Senator DomiNicK. You made a yearly inspection of the properties, did you not? Captain BITrENBRING. Yes, sir. Senator DomiNicic. So you would have had official notice at least from that yearly inspection as to what was being done on the property? Captain BITTENBRING. To an extent. You realize, of course, that our yearly inspections were merely to determine if the facilities that we had left there were being maintained or retained in a condition that we could utilize them again if we had to in the case of a national emer- gency. If there was an additional building constructed that was not in our way or did not harm us, this was of no consequence to us. Senator DomiNicx. Did you find that the buildings you had left had, in fact, been rehabilitated and placed in better condition than when you left them? Captain BITTENBRING. I would prefer not to give you a definitive answer, Senator. I have not reviewed the files completely. Generally it is my understanding that there were times when we were not as satisfied as we might have liked to have been with the condition of the buildings. I do not think this was ever so serious that we took any action toward canceling or complaining. But if you wish this we can review our records and give you a statement. Senator NELSON. These buildings were in pretty bad shape, were they not, in the fifties? Captain BITTENBRING. I would have to review the condition report. This was back in 1948. Senator DOMINICK. Now Captain, you never made any formal ob- jection to the development of these properties? Captain BITTENBRING. No, sir. Senator DOMINICK. Did you ever indicate to Interior that in order to declare these surplus that these leases or permits had to be canceled from the Interior to these other occupants? Captain BITTENBRING. No, sir. Not Interior's agreements with their parties no, sir. The only problem here was our permit to Interior. 68 LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS Senator DOMINICK. And the General Services Administration did not indicate to you that these occupants had to get off before the land could be declared surplus, did they? Captain BITTENBRING. I have the GSA letter here—I could read a portion. Senator DOMINICK. I have not seen it. Captain BrITENBRING. Here is what GSA said. Referring to the agreement, it says: That instrument provides for an indefinite term subject to the right of revoca- tion by Navy or higher military authority only in the event of military necessity or by reason of a national emergency, thereby precluding any disposal action at this time by GSA. So they referred only to the agreement between us and Interior. Would you like a copy of this in the record? Senator DOMINICK. I think we have it, from what Mr. Kirwan said. Captain BITTENBRING. I think Mr. Kirwan referred to our letter to Interior which referred to this, but I do not think you have a copy of this. Senator DOMINICK. Then I think we should have that in the record, Mr. Chairman. Senator NELSON. It will become part of the record. (The document referred to follows:) GENERAL SERVICES ADMINISTRATION, UTILIZATION AND DISPOSAL SERVICE, New York, N.Y., June 18, 1963. Subject: Former Marine Corps air facility, St. Thomas, V.I. (CARIB-2) ; former U.S. naval submarine base, St. Thomas, V.I. (CARIB-82). Capt. B. 0. ROESSLER, Area Public Works Officer, Caribbean, U.S. Naval Station, San Juan, P.R. DEAR CAPTAIN ROESSLER : Your reports of excess on the subject properties are unacceptable and are returned herewith. Both properties are subject to tthe terms of the permit and memorandum of agreement dated January 1, 1948, between the Department of the Navy and the Department of the Interior. That instrument provides for an indefinite term subject to the right of revocation by Navy or higher military authority only in the event of military necessity or by reason of a national emergency, thereby precluding any disposal action at this time by GSA. It is noted that your reports were unaccompanied by written descriptions of the properties, a requirement of GSA Regulation 8—IV--201.02. Reference to, maps is inadequate for this purpose and for the granting of easements. Written metes and bounds descriptions are required in both cases and should hereafter accompany all reports of excess real property. Sincerely yours, ALBERT WILSON, Chief, Real Property Division. Senator DOMINICK. On what grounds did you cancel the permit from the Navy to the Interior? Captain BITI'ENBRING. On the grounds that we had the authority and that this met with Interior's concurrence. There was no dis- agreement between us. Senator DOMINICK. Did you have any letter from your own counsel or solicitor on the right of revocation of this permit in the absence of a military or national emergency? Captain BITTENBRING. No sir, not to my knowledge. We did not have a written opinion, but all of our correspondence regarding this matter was looked at by our counsel and initialed by our counsel so in this sense I would say, yes, we had a concurrence. LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS 69 Senator DOMINICK. I think that is all I have. Senator MECHEM. Would Navy have had the authority to enter into these leases originally? Captain BITTENBRING. I would prefer to check that. I think we did have. We would have today. We would have the authority to lease but not to delegate to another Government agency to lease. Could I have Mr. Frank, who is our counsel, sit here at the table with us? Senator MECHEM. What steps do you have to take to declare prop- erty surplus? Captain BITTENBRING. First, we must decide within the Navy we have no further military need or use for it, then we screen it within the Department of Defense. We then declare it excess to GSA. Senator MECHEM. Is this something you are obligated to do by law, or is this discretionary on your part? Captain BITTENBRING. Well, these are within GSA regulations, sir. I am not sure—but specific steps of screening. Senator MECHEM. What I mean is do you have to review your prop- erty annually to determine whether it is surplus or not? And then report it if you find it surplus? Captain BITTENBRING. By law? Senator MECHEM. Yes, sir. Captain BITTENBRING. No, sir but we have a procedure within the Department of the Navy which is tied into our planning procedure which, in effect, requires the same thing. As we develop new projects, we also screen existing properties. Senator NELSON. So that I understand this—in reviewing your properties you, as a matter of internal routine, screen the Navy De- partment and other Defense agencies to see if they have a military need for it? Captain BrrTENBRING. That is right. Senator NELSON. When you turn it over to GSA they, under the law, are required to screen all Federal agencies to see if they have a use for it? Captain BIITENBRING. Yes, sir. Senator NELSON. And then they seek disposition, if there is no other use within the Government of the United States? Captain BITTENBRING. That is right. We have followed that pro- cedure. Senator MECHEM. But it is discretionary whether you determine property surplus or not? Captain BITTENBRING. Well, I am not sure I understand your ques- tion. Yes, if you mean can we retain a piece of property after we know we no longer need it or do you mean we must take a look at it on a certain date each year? There is no requirement that we must take a look at it once a year on a certain date, but we do have a procedure, which is tied in with our planning procedure and our utilization procedures, which effec- tively brings this up every time. So I would say, practically, the an- swer is "Yes." Senator MECHEM. But, you can declare it surplus or not. This is a matter of discretion? Captain BrrEENBRING. I would say, practically, yes. Senator MECHEM. Fine; those are all the questions I have. 70 LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS Senator DOMINICK. May I follow up on the question that was asked originally, Captain, whether you do have the power to lease. You do have it, I gather? Captain BITTENBRING. That is correct. Senator DOMINICK. Were you ever asked by the Department of the Interior to ratify these documents that we referred to as leases before? Captain BITTENBRING. To ratify these documents, no, sir. The only correspondence was that which Mr. Kirwan has previously re- ferred to, which was the 1955 exchange where they asked us a question about a similar or adjacent piece of property. Senator DOMINICK. Mr. Kirwan 's statement indicated you did not feel you had power to lease in there? Captain BITTENBIUNG. I do not think that was exactly the tenor of his statement. I think he indicated, as we indicated to him, that we did not have the authority to delegate to another Government department our authority to lease. We have the authority to outlease ourselves. Senator DOMINICK. SO, if there had been a question on the validity of the leases which had been issued by the Department, it would have been possible to regularize these by ratification by the Navy. Would this be correct? Captain BITTENBRING. I am not a lawyer, Senator, and the word "ratification" is something—to regularize somebody else's lease, I doubt it, but I would have to turn to my counsel on that. Mr. FRANK. I do not think it would have been possible. Captain BrrrENBRING. We have the authority to lease ours; whether we have the authority to let somebody else take an action, and then say, "Yes, we confirm it," I doubt it. Senator NELSON. For the stenographer, would you identify the counsel? Captain BITTENBRING. This is Mr. Abner Frank; he is a Bureau of Yards and Docks counsel. Senator NELSON. Are there any other questions? (No response.) Senator NELSON. Off the record. (Discussion off the record.) Senator NELSON. On the record. We will meet tomorrow morning at 9 o'clock, and would the staff advise the other members of the subcommittee? The first presenta- tion will be by Mr. Stanford. Captain BITTENBRING. Could I add a statement that just occurred to me, in further clarification, since I may not be here? You asked if we had the authority to lease the property and, when I said we did, this refers to our leasing of the property up until the time we deter- mined it to be excess. Our authority is to outlease nonexcess property. Now that we have determined that the property is excess, we no longer have the authority to lease. In other words, we have sort of written ourselves out of it. Senator MECHEM. What was the date of that determination? Captain BITTENBRING. It was in 1959 on one parcel, and 1962 on the others; but, I would have to get the exact dates. Senator NELSON. All right; the committee will stand in recess until 9 o'clock tomorrow morning. (Whereupon, at 12:10 p.m., the subcommittee recessed, to reconvene at 9 a.m., Wednesday, October 30, 1963.) LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS WEDNESDAY, OCTOBER 30, 1963 -U.S. SENATE, SUBCOMMITTEE ON TERRITORIES AND INSULAR AFFAIRS OF THE COMMITTEE ON INTERIOR AND INSULAR AFFAIRS, Washington, D .0 . The subcommittee met, pursuant to recess, at 9 a.m., in room 3112, New Senate Office Building, Senator Gaylord Nelson presiding. Present: Senators Nelson, Dominick, Mechem, and Walters. Also present: Jerry Verkler, staff director; Stewart French, chief counsel; and James Gamble, professional staff member. Senator NELSON. The subcommittee will be in session. Mr. Kirwan, I understand you wanted to elaborate briefly on your statement. Mr. KIRWAN. Yes, Mr. Chairman; yesterday Senator Dominick asked me if I would be surprised if the Beachcomber lease contained certain Navy—what we have generally been calling intention lan- guage. I told him I would be astounded if it did. Having checked the file to see whether or not it did, I wanted to say for the record this morning that both Senator Dominick and I were correct. He was correct in that, the language is there. I was correct in that I was astounded, so I wanted the record to show it before we passed in- evitably beyond that point. Senator NELSON. Mr. Cramer, President of the Virgin Islands Corporation. STATEMENT OF ROBERT CRAMER, PRESIDENT, VIRGIN ISLANDS CORPORATION; ACCOMPANIED BY MRS. RUTH VAN CLEVE, GENERAL COUNSEL OF VICORP Mr. CRAMER. Mr. Chairman and members of the committee, I have a formal statement which I believe is in your hands, and I would like to just briefly summarize it perhaps in a little different language but saying the same thing. Senator NELSON. We will have your formal statement put in the record at this point. (The document referred to follows:) PREPARED STATEMENT OF ROBERT P. CRAMER, PRESIDENT OF THE VIRGIN ISLANDS CORPORATION A better understanding of the present activities and future prospects of the Virgin Islands Corporation will be enhanced and perhaps clarified for this com- mittee by a brief review of its present enterprises and current developments affect- ing them. This involves also an abbreviated review of events of the recent past in order to have some historical perspective of our present situation. 71 72 LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS At the present time, and over the past several years, Vicorp has engaged in four principal business-type activities. Historically, the main emphasis of its opera- tion has been to support the sugar economy on the island of St. Croix. For this purpose Vicorp operates the only sugar grinding mill in the territory, producing a substantial proportion of the cane which justifies the mill's existence and pur- chasing the balance from some 111 private growers, the overwhelming number of whom represent clearly part time operators. As its second important activity, the Corporation generates and distributes practically all of the electrical energy used in the territory and is the only public utility performing this service. The power operation on the island of St. Thomas also includes a small salt water dis- tillation plant, the production of which is sold to the municipal government for distribution to the users. In addition to these large-scale operations, Vicorp has for several years acted as the agent for the Department of the Interior in managing certain properties of the Navy Department which were formerly used for defense purposes but which have been held in a standby status for approximately a decade. These properties include the Harry S. Truman Airport, formerly a Marine Corps facility, but now the only civilian airport on the island. Associated With this airfield are some adjoining lands, including a housing area and a number of sites on which old structures have been converted for commercial use, principally as tourist housing. Management of the airport itself includes concessions for the usual airport services, such as food and drink, commercial sales, and taxi accommodations. The other defense property consists of the naval submarine base located a short distance from the airport. Part of this area is occupied by the Corporation's power and salt water distillation plant. The balance is utilized for office space, some fuel storage capacity and minor activities of an industrial and public service nature. It has a high potential for light industry purposes. Among the matters receiving careful review in the early part of 1961 was the question of Vicorp's continued utility as an effective instrument for promoting the economic welfare of the territory. At that time, there were pending in the Con- gress one or more bills calling for the immediate termination of its corporate existence and the disposal of its assets. The Department of the Interior and the incoming members of the Virgin Islands Corporation Board of Directors recommended against this action as being premature, at least until there had been a reasonable opportunity to be- come familiar with the activities involved and to assess the best procedure for their continuance. This review and evaluation was continued over the follow- ing year through the medium of the quarterly meetings of the directors. In December of 1962 the Board, as its main item of business, adopted a resolution recommending the early dissolution of the Corporation and the transfer of its functions and its assets to the Government of the Virgin Islands. This con- clusion was based on a conviction that the local government was in a far more advantageous position to assess and meet local needs, that it was already per- forming many of the economic development functions that the Corporation might logically undertake, and that it had the capacity and the motivation to assume these responsibilities. This recommendation was transmitted to the Congress by the President as one of the elements of an omnibus bill relating to Virgin Islands affairs. The bill in question did not receive congressional action during the remainder of the 86th Congress and, during that perfod, the Corporation continued to review its 'activities and to act otherwise as a going concern performing essential func- tions for the territory. In the interim, however, the Navy Department deter- mined that there would be no future need for the airport as a military facility and Initiated procedures to dispose of it through the processes provided by the Federal Airport Act. While title 'has not passed to the local government yet, it is in process and will probably be accomplished in the near future. At the same time, Vicorp will be relieved of that facet of its activities. The Corporation has been acutely concerned for several years, as has the Congress, over the fact that the sugar industry of St. Croix has become an in- creasingly shaky enterprise. For a wide variety of reasons, including climatic factors and inadequate volume, the sugar-grinding activity of Vicorp has lost substantial amounts of money in 'all but 1 or 2 years. When Congress adopted the policy of deducting these losses from revenues otherwise due the territorial government in lieu of direct appropriations, the Board of Directors was com- pelled to face the issue as to whether it should continue to operate an enter- prise which returned low wages to principally alien workers and only benefited a relatively few substantial producers. After extended consideration the Board LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS 73 reached a decision that it would close the sugar mill after a 3-year period, dur- ing which it would attempt to find a substitute activity for the island. One of he steps taken to invite such an alternative enterprise was to offer for sale a portion of the lands owned by Vicorp and now utilized for cane produc- tion. This offer reserved the right to reject any or all bids and emphasized that the character of the proposed use would be a major consideration in their evaluation. Only two valid bids were received from private sources, the most favorable proposing to develop a citrus industry on the island. At the same time, however, the Government of the Virgin Islands exercised its statutory right to match the high bid and acquire the lands for its own use and management. In the end, the Board decided to reject all of the proposals and to investigate the possibility of introducing the citrus alternative under a lease which would retain the lands in Federal ownership. A lease proposal submitted by the Virgin Islands Citrus Corp. has been considered by the Board but no decision reached as to acceptance or rejection. In meeting the electric power requirements of the territory, Vicorp has been faced constantly over the past several years with the problem of providing ex- pansion capital to keep pace with a phenomenal increase in demand. His- torically such capital has been secured through borrowing from the Federal Treasury, as authorized in basic legislation. This procedure requires a congres- sional appropriation. During the last fiscal year, requests for such funds were included in budget submissions which were considered in extensive detail by the Appropriations Committees. Ultimately the appropriation was denied, the House committee stating expressly that it did not favor continued Federal financing and recommending strongly that the Vicorp power facilities be sold to the Govern- ment of the Virgin Islands. A. conference report later adopted by both Houses adhered to the House viewpoint To summarize these events, therefore, Vicorp now finds itself in a position of having decided to get out of the sugar business and is confronted with a con- gressional mandate to dispose of its power facilities in a particular manner. In addition, it will be relieved of responsibility for management of the airport and related facilities at such time as the process of transfer to the local government has been completed. Thus, three of its Major activities will have been liquidated within a relatively short period of time, certainly prior to the running of its statutory life in 1969. Notwithstanding these developments and unless the Congress should deter- mine that the Corporation should be terminated prior to the statutory date, the Corporation still has the duty assigned to it by Congress "to promote the general welfare of the inhabitants of the Virgin Islands of the United States through the economic development of the Virgin Islands." At the present time, there is a continuing need for pursuing this objective in the direction of further diversi- fication of economic endeavor. Although the historical attachment to sugar is gradually being dissolved by economic forces, there is as yet no assured sub- stitute to provide a decent level of income to the people of St. Croix. Similarly the prosperity which tourism has brought to St. Thomas requires support in the form of a stable industrial base as insurance against the possibility that the flow of vacationists might be cut off or diverted elsewhere. The properties now in Federal ownership in the submarine base site represent the most valuable single resource for the attraction of such an industrial base. In order to accomplish this objective, however, the kind of industry which would be most compatible with the St. Thomas situation requires incentive to locate there. It is my present feeling that merely making land available through the usual surplus property channels offers little assurance of this result. In short, the land must be under positive management, in the nature of an industrial park, possessed of sufficient authority and resources to develop its potential. For the remaining 51/r, years of its corporate existence, if such is to be the case, this seems to me an entirely proper and feasible role for Vicorp to play in the economic life of the Virgin Islands. Senator NELSON. You may proceed as you wish. Mr. CRAMER. Since the lease permit problem was handled at the Washington level I am not going to get into that, I am merely going to discuss a subject which was brought up yesterday and that was' the Virgin Islands Corporation interest in the subbase property. In order to get at that and put the total picture of Vicorp in perspmtive. I would like to review a little history. 74 LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS I think you all know in 1934 Vicorp was founded before the pri- vate Danish company running the sugar industry at that time went into bankruptcy, which put about 700 local native people out of work and the U.S. Government at that time came in to help out with the problem. Shortly after that we acquired the power of operation and during the course of our history we have taken on and shed various other things' including the Bluebeard Castle Hotel in St. Thomas. In 1954, Interior became agents to manage the Navy property and they put that burden onto the Virgin Islands Corporation. This included the Harry Truman Airport and the subbase in St. Thomas. In 1959, the charter was renewed by Congress for another 10 years to expire June 30, 1969. In December of 1962, the Board of Directors of Vicorp voted to -dissolve the corporation and to transfer its assets and functions to the local government. A bill was filed to this effect but no action was ever taken on it. In the meantime, four major things have happened to the Virgin Islands Corporation. Because we are now employing mostly aliens, that is to say in this last crop we brought up 700 aliens from the English islands, and in view of the fact that we usually lose about $300,000 annually, the board put 1,700 acres of sugar land out for bid with the hope of replacing the sugar industry. No decision on this has been taken as yet. No. 2, Congress did not give us any money this year for power and mandated that we turn the operation over to the local government. As a result of this we have declared the power operation surplus we have turned it over to the GSA, and suggested that they negotiate a favorable sale with the local government. No. 3, the Navy, as you 'Know from the discussion yesterday, de- clared the lands surplus, turned their land over to the GSA, and our hope is that this land that they have turned over will be split into thirds, about a 'third of it going to the College of the Virgin Islands, and a third going to the local government, that is the airport area, and the other third, the subbase, going to the Virgin Islands Corporation. The fourth item that has come to pass, of course, is the cancella- tion of the leases which is probably why we are here today. Now, if all of these developments mature but Congress still feels that the Vicorp should help with the economy of the Virgin Islands, the economic development, I am suggesting that Vicorp acquire the subbase and turn it into an industrial park. What we would like to do there is to set up sort of a miniature boot- strap like they have in Puerto Rico, a small fomento operation. I think, and I believe the Interior Department agrees with me, that this would be good for the islands. We could do it without asking Congress for any additional funds; it would turn into a self-sus- taining operation, and in 1969, when our charter expires, we could turn it over to the local government as a going concern. So that is really the statement that I wanted to present to you this morning, Mr. Chairman, to let you know where Vicorp stands at the present moment and what our future interests are. LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS 75 Senator NELSON. Thank you. Do you have any questions? Senator DOMINIC-K. I do. I do not know why I should be asking the questions, Mr. Cramer, but let me start. You said something which interested me, and that was that you were importing labor from other lands for the sugar plant, or for the sugar crop, or both? Mr. CRAMER. The sugar crop, the harvesting end of it. At the present time we do not have one American citizen, we do not have one local native who is actually cutting cane. It seems to be a job that is beneath them and so we must import and bring up by jet clipper and house and feed approximately 700 aliens in order to do this job. Senator DOMINICK. Then we are not really helping the unemploy- ment situation by the sugar crop, are we ? Mr. CRAMER. That is correct. Of course, we have no unemployment problem there, Senator. Our problem is underemployment. We have about, I believe, roughly 5,000 aliens working in St. Thomas to keep the economy going and about 4,500 in St. Croix. Senator DOMINICK. You mentioned as the second point the power situation and said that Congress had mandated that it be turned over to the local government. What did you mean by that? Mr. CRAMER. Well, we, as you know, asked for about $4 million to put a new 5,000-kw. turbine, steam operation, in St. Thomas, and put another 3,000-kw. diesel in St. Croix, plus some new distribution lines. As I understand it, the House passed this and then it got over to the Senate and the Senate turned the complete thing down. There was a compromise committee formed and the compromise was that we got nothing. In the process of that I can remember the chairman of the House committee stating very strongly that he felt that the Federal Government was no longer interested in putting money into the opera- tion down there, that the island had come along well enough and they had enough money to take over the power operation and run it them- selves. I assumed that the Senate group must have agreed with this because we got no money and we have a very, very serious, urgent problem of getting this unit for St. Thomas, so we will have blackouts next year. Senator DOMINICK. But there was no expression made by Congress anywhere, was there, that the system should be turned over to the local government? Mr. CRAMER. Yes, this is very strongly brought out in the House hearing. Senator DOMINICK. The House hearing? Mr. CRAMER. Yes, sir. Senator DomnsucK. Was any expiration made during the process of that presentation as to the possible sale to private industry? Mr. 'CRAMER. There was no discussion, to my recollection, in the House hearing. Senator Domimcs. I think for the sake of the record, and I may be wrong, Mr. Chairman, but I think that the money request was turned down on the ground there was no authorization. 76 LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS I have had some letters from people indicating that they would be glad to form a local co-op or whatever may be necessary in. order to take over the power and water system. Now do you think this would be possible? Mr. CRAMER. Well I believe, Senator, that the board of directors of the Virgin Islands Corporation have made a decision to turn it over to the local government and that is where the matter now stands. Senator DOMINICK. Do you think that the local government is capable of operating this? Mr. CRAMER. I am not too well acquainted with the local government, Senator. I would rather not make any judgment on their abilities or lack of abilities. Senator DOMINICK. Mr. Cramer, when did you become president of the Virgin Islands Corporation? Mr. CRAMER. November 1, 1962. Senator DOMINICK. And you actually lived down in St. Thomas; did you not? Mr. CRAMER. I lived in St. Thomas for 21/2 years and I have just moved to St. Croix this summer. Senator DOMINICK. But you do keep your residence in the Virgin. Islands? Mr. CRAMER. Yes, sir; I do live there. Senator DOMINICK. In the process of the controversy we seem to, have over this Navy property here, were you involved in any of the mechanics of this leasing proposition? In other words, were you connected with the Virgin Islands Cor- poration prior to 1962? Mr. CRAMER. I came with the Virgin Islands Corporation in July of 1961. Therefore, I had no previous dealings with the leases. Senator DOMINICK. Have you been one of the people who have been asked to check on the compliance with the terms of these leases by the occupants? Mr. CRAMER. Have I been- Senator DOMINICK. The compliance by the occupants with the terms of the leases. Mr. CRAMER. I have never been asked by the occupants about the terms of the leases, particularly. I suppose as President of the Cor- poration it has been my job to make sure that the occupants are com- plying with the terms of the leases. Senator DOMINICK. Do you know whether the local government has ever asked that the leases be canceled? Mr. CRAMER. No sir, I do not know that. Senator DOMINICK. Have you had any contact with the local govern- ment concerning these leases Mr. CRAMER. No sir. Senator DOMINICK. Did you live on the islands prior to 1961? Mr. CRAMER. No sir. Senator DOMINICK. So your knowledge of the condition of this- property, then, would be since 1961? Mr. CRAMER. Yes, sir. Senator DOMINICK. Have there been improvements made to these. properties since 1961? Mr. CRAMER. I think in some instances there have, and in others there have not been. LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS 77 Senator DOMINICK. In the ones where improvements were made were you asked for authority to make these improvements? Mr. CRAMER. Well, Senator' I might say in passing that since I have been president I do not believe there have been any improve- ments made, but I am acquainted with improvements that were made by them before that which were authorized by Mr. Holmberg who was then the manager of the development department. I do not mean to imply there have not been improvements made because I am sure from the time these people acquired the properties, I have seen pictures of what they used to look like and there have been tremendous improve- ments, of course, made. Senator DOMINICK. Were you consulted by the Office of Territories prior to the issuance of this cancellation letter of August 15 referred to by Mr. Kirwan yesterday? Mr. CRAMER. There have been discussions over a period of time on the cancellation of these leases, but Mr. Kirwan, of course, did not feel obligated to consult me as to whether he should write the letter. As you know he is my boss and I received a copy of the letter that he wrote to the lessees. Senator DOMINICK. Did you make any recommendations to the Office of Territories as to treatment that should or should not be given to the occupants? Mr. CRAMER. I believe at one time, Senator, that I wrote a letter to Mr. Kirwan, the assistant director of territories, suggesting that in view of the fact that these people had originally gotten their leases through the Interior Department any future dealings with them per- haps should be handled by the Interior Department rather than any other agency of the local or Federal Government. Senator DOMINICK. During the time you have been connected with the Virgin Islands Corporation have you had any particular com- plaints about the activities of the occupants of these leases? Mr. CRAMER. We have had a few complaints on a small number of them that they were not keeping their property up properly or they were allowing their garbage to accumulate or they were not really keeping the place neat and tidy as it should be. Senator DOMINICK. Have these complaints been handled by you? Mr. CRAMER. Yes, sir. Senator DOMINICK. Did you have any problem straightening them out? Mr. CRAMER. Well, we have two of our tenants who do not happen to be here—that is not why I am talking about them—who have been kind of nuisances and you have to keep after them all the time. Senator DOMINICK. Amongst the ones who are here, I presume you know the ones who are here? Mr. CRAMER. I think I know most of them at least, and I cannot recall any complaints on any of the ones who are present. Senator DOMINICK. Would you say that their leases have been good for the economy of the island? Their activities have? Mr. CRAMER. Yes, sir • I would answer that, "Yes." Senator DOMINICK. Mr. Cramer, have you received the impression that Congress would like to see the Virgin Islands Corporation out of existence? Mr. CRAMER.. I received just the opposite impression from the action that they have taken on what we have been attempting to do since I 25-147--64 6 78 LEASING OF NAVAL PROPERTIES IN THE VIRGIN ISLANDS have been down there, and that really was to get the corporation out of business. I had a very strong feeling and I believe that the board of directors, as I indicated, in December of 1962, felt that the Virgin Islands Corporation has really pretty much served its purpose and it ought to be liquidated either to private interests or to the local govern- ment or to both, but the Congress—some legislation was filed to liqui- date it in December of 1962, and never had any action taken by the Congress. As I understand it, the Congress is sort of split on this subject. Part of them feel it should be turned over to the local government and part feel that it should be put into the hands of private interests. Senator DOMINICK. Without being critical of you, let me say I share your viewpoint. Obviously it would seem to me that if the Virgin Islands Corpora- tion is going to acquire title to approximately a third of this land that this is a far cry from liquidating the Virgin Islands Corporation. Now, which third are you applying for? Mr. CRAMER. I am talking about the sub base which is fairly close to the town that already has the power and salt water distillation oper- ations in there. It has the garbage disposal operation of the local gov- ernment. It has a landing dock there where boats come in and unload produce and merchandise. It has a lot of small warehouses and a little bit of industry in there now so that it is really—it has a start in the direction of being an industrial park but it has not had very good guid- ance and the only reason we want to take it over is because we feel that we might be a little more effective in getting something like this started rather than the local government who might not be in as good a posi- tion as a Federal agency to get the thing going. Senator DOMINICK. Mr. Chairman, at one point we were to be fur- nished a map of this property so we could see the areas we are talking about. Did we ever get that map? Senator NELSON. I have not seen it. Mr. KIRWAN. I have maps available, Mr. Chairman and Senator, if you wish them? Senator DOMINICK. I think that would be helpful, Mr. Kirwan. This sublease, does that include the Gramboko Hotel? Mr. KIRWAN. Yes, sir; one is the Gramboko Hotel and the other one, two major ones, is Texaco. There are three or four other small ones. Senator DOMINICK. Would that be part of the reason why those two occupants were classified as being subject to renegotiation by Mr. Kirwan? Mr. CRAMER. I would certainly not want to speak for Mr. Kirwan, Senator. Senator DOMINICK. Would it be necessary to cancel those leases in order to make this an industrial park? Mr. CRAMER. No, sir; I do not think the leases—as I understand it, these leases are not really valid. If they are leases, and we will call them that, their cancellation or continuation would have nothing to do with our interest in the development as an industrial park. Senator DOMINICK. In other words, they could continue without in- terrupting the development of an industrial park? Mr. CRAMER. Even if we took them, you know, went in there and started this industrial park, we have no thoughts of using that build- ing, the Gramboko Hotel, for any commercial operation. CHART A GRAMBOKOLA HILL TN 2 35 • HAYPIECE HILL 3 E NISKY MORAVIAN MISSION 0•30Wri Th•eter 80PRO w PIT 4 86 Rod" MoK' 1, 0 - LEGEND • 1-- 4 on BLDG NO LOC • SAINT THOMAS IS. CHARLOTT FORMER W• le 20' CARIBBEAN SEA 0 Awwwwwwr SCALE IN AIMS INDEX OF STRUCTURES DESCRIPTIVE TITLE LOCATION MAP •;) ) LOC - DESCRIPTIVE TITLE 26 20 Z 20 3 4 8 ,0 12 13 16 17 IS 2. 22 23 24 25 26 27A 278 28 29A 798 290 32 33 34 35 36 37 38 40 42 46 0 7 48 49 50 51 • Sill 52 57 60 62 75 75 76 77 77 78 79 79 80 el et 80 82 C • 3 0-3 0-3 0 0-4 0-4 0-4 0-4 0-• D-3 • 4 0-4 0-4 D-4 C-4 E -5 C-4 8- I 8-I E-5 6-S 0-4 C-2 0-2 D-2 D-2 D-3 0-3 0-3 E E- E-5 C-3 D-3 D-5 0-5 C-4 0-3 D-4 0-3 0-2 0-2 E-3 E-3 E-2 E-2 C-4 (-5 0-3 C -4 0-2 C-2 D-1 0-2 C-4 C- C -1 0-3 C -3 0-4 A- 8- I A-1 BARRACKS NO 90,000 GA FRESH RATER RESERVOIR 20,537 GA SALT WATER RESERVOIR SAFETY SHOP B 0 0 ADMIN,STRATiON SLOG GENERAL STOREHOUSE UTILITY BUILDING FOUNDRY BUILDING PAINT SHOP BATTERY CHARGING S OVERHAUL PLANT TORPEDO STOP & WORK SHOP NET S BOOM DEPOT BLDG BARRACKS 801 WARHEAD MAGAZINE 141004 EXPLOSIVE MAGAZINE GENERAL STOREHOUSE TARGET STORAGE e REPAIR FLOG OUTDOOR THEATER PAINT SOIL STORAGE BLDG 1,000,000 GA FRESH WATER TANK PUBLIC WORKS SHOP 8 GARAGE FUEL OIL PUMP HOUSE FUEL OIL BOILER HOUSE FORMER Pw TIMEKEEPING OFFICE FORMER EDUCATIONAL CENTER SEPTIC TANK SIGNAL STATION DISPERSED TORPEDO MAGAZ NE SEPTIC TANK PUMPHOUSE FOR FRESH WATER CISTERN 30,000 GA FRESH WATER C STERN 20,000 GA FRESH WATER C STERN 67, 500 GA FRESH WATER cHSTERN '3,500 AL DIESEL OIL TAN', 27,000 BL FUEL OIL TANK • I SALT WATER PUMPHOUSE GARAGE & REPAIR SHOP 120 BL FUEL OIL TANK RECREATION CENTER FUSE a DETONATOR MAGAZ -NE I 2'-IT LUMBER STORAGE SHED FUSES DETONATOR MAGAZINE HIGH EXPLOSIVE MAGAZINE (2HT 61 FRESH WATER PUMP HOUSE HIGH EXPLOSIVE MAGAZINE IS BT (3 BTfl FRESH WATER PUMPHOUSE GARBAGE HOUSE TRANSFORMER BANK HIGH EXPLOSIVE MAGAZINE '$ets) B873) 3 • BUILDINGS OR STRUCTURES RETAINED FOR NAVY USE (UDT TNG FAD) BUILDINGS OR STRUCTURES FOR DISPOSAL US NAVY PROPERTY BOUNDARY LINE AREAS RETAINED FOR NAVY USE IUDT TNG FAC) 200 SO 200 400 600 AO 0 1000 FEET GRAPHIC SCALE 5 85 0-2 OSD - 4 87 0-4 90 0-4 91 0-4 92 0-4 93 0-4 94 0-S 95 E-3 97 0-2 98 0-3 ,23 0-4 126 0-3 128 0-• 129 E-5 130 E-5 131 0-3 134 C-3 '35 0-4 13S 0-4 137 C-4 138 C-3 141 C-3 42 0-3 143 0-4 144 0-4 145 C-3 o4GA 0-3 146 0-3 147 0-3 .50 0-3 151A 0-2 IS, 8 0-2 152 6-5 ISO E-2 154 E-5 155 C-4 .56 (-5 0-5 C-4 C-4 0-4 FRESH WATER PuIRPHOUSE TRANSFORMER HOUSE CHLORINATOR HOUSE GARBAGE HOUSE HEAT ExCHANSER PIED SPUD LOCKER FRESH WATER PUNIPHOOBE 30,000 GA FRESH WATER CISTERN OLD CATCHMENT AREA SARA HILL CATCHMENT AREA OEFUELING PUMPHOUSE FOR DIESEL OIL FLAB POLE DIESEL OIL PUMPHOUSE AQUA SYSTEM BOOSTER POMP PIT 10005A FRESH WATER CISTERN 58006* PUMP HOUSE FOR SIGNAL ST• SEETTC TANK 700 GA DIESEL OIL TANK 1500 SOO • 5000 5000 • 323 10,000 LUNE OIL TANK 5000 GA GASOLINE TANK • 11 WATER TRAP PIT FOR AQUA SYSTEM SENTRY SOX SEPTIC TANK TENDER PIER FINGER PIER A FINGER PIER II FINGER PIER C • MAD OR COR DESCRIPTION Of AMENDMENT OR CORR ECT *NS DATE APwo AMR CMAL APWO CARIBBEAN DEPARTMENT OF THE NAVY, BUREAU OF YARDS 6 00C ICS DRAWN CHECK SATISFArTOGy To OATGV.A, /filea, 0" DIR, REAL E.SATE DIVISION SUBMITTED DATE ASST FOR PL ANNi NG RE FORMER NAVAL SUBMARINE BASE SAINT THOMAS,. VIRGIN ISLANDS GENERAL DEVELOPMENT MAP REAL ESTATE DISPOSAL MAP APPROVED FOR 8000CKS DATE 5.5.43 VSOA.1.1.C.FA., APWO, CAR* SCALE AS SHOWN SHEET I OF I 8 0 DWG NO 964 259 • 25-147 0 - 64 (Face p. 78) No. 1 CHART B ‘;) 1.1111011•11•11110010.111. L.F_G END 151311.01NC, OR STRUCTURE 0411, 1ED 15sT NAVY IIIII 1:L010114G Ofk STRUC NM. 0%041D 5Y 07Ht11, —4044- ILDING RETAtlED 81 U.S .WAVY 7Z0 ksk,EA6) 1.3-..04,aaV PROPERTY 1301.0.1DARY Litit E °iv,/ E KOA.9 rA'./i17; 1t,,,CDAD BLDG No LOC INDEX OF STRUCT_UPES D SC",1 PTIVE T:7L F. 2 3 4 6 7 8 9 PI 12 14 16 21 22 24 37 41 42 43 44 45 47 46 51 52 55 56 57A 57 6 56A 586 59 60 HANGAR. EM NEAGH CLUB GENIENA'. G>T0f