Federal Capital Revolving Fund

What this funds

This account provides for the operation of the Federal Capital Revolving Fund (FCRF). The FCRF will finance the construction, renovation, and purchase of federally owned civilian real property assets. The corpus of the FCRF is proposed as mandatory funding in the President's Budget. A detailed discussion of the FCRF can be found in the Budget Process chapter of the In summary, the FCRF will create a mechanism that is similar to a capital investment budget but operates within the traditional scoring guidelines used for the Federal budget. Upon approval in an appropriations act, the FCRF will transfer funds to agencies to finance large-dollar real property purchases, renovations and construction. Purchasing agencies are then required to repay the FCRF using discretionary appropriations over a period of up to 15 years. As a result, large real property assets funded through the FCRF, which would otherwise require a large spike in appropriations, will no longer compete in the same way with annual operating and programmatic expenses for the limited funding available under tight discretionary funding levels. Instead, the annual cost to the agency and appropriations bill is one fifteenth of the project cost, smoothing out the impact on the annual appropriations process and eliminating the funding spike. This approach also has the benefit of allowing agencies to utilize the asset while making the repayments to the FCRF. Annual repayments made from future appropriations will incentivize project selection based on highest mission need and return on investment, including future cost avoidance. The repayments will also replenish the FCRF so that real property can The structure of the Federal budget and budget enforcement requirements can create hurdles to funding large-dollar capital investments. These types of investments are typically handled differently at the State and local government levels. Expenditures for capital investments are combined with operating expenses in the unified Federal budget. Both kinds of expenditures must compete for limited funding within the discretionary levels. Large-dollar Federal capital investments can be squeezed out in this competition, frequently forcing agency managers to make difficult decisions and turn to operating leases to meet long-term Federal requirements. These alternatives are more expensive than ownership over the long term because: (1) Treasury can always borrow at lower interest rates and (2) to avoid triggering scorekeeping and recording requirements for capital leases, agencies sign shorter-term, consecutive leases of the same space. For example, the cost of two consecutive 15-year leases for a building can result in the Government paying close to 180 percent of the fair market value of the asset--and more when taking into consideration the tenant build out costs necessary for occupancy. Alternative financing proposals typically run up against budget scorekeeping guidelines and the Recording Statute (31 U.S.C. ' 1501) that measure cost based on the full amount of the Government's

Extracted from General Services Administration, p. 15. Verbatim; nothing here is paraphrased.

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