Norton Announces Committee Passage of Her Bill Revoking SEC’s Independent Leasing Authority

WASHINGTON, D.C. – Congresswoman Eleanor Holmes Norton (D-DC) announced that the Committee on Transportation and Infrastructure today passed her Securities and Exchange Commission Real Estate Leasing Authority Revocation Act, which would revoke the independent real estate leasing authority of the Securities and Exchange Commission (SEC) and direct the Government Accountability Office to update its 2016 report on independent leasing authority.

"Thank you, Chair DeFazio, for passage of this important bill," Norton said. "It is inefficient, wasteful, and redundant to have the Securities and Exchange Commission involved in real estate decisions when GSA exists for that very reason," Norton said. "The SEC should focus on its core mission of protecting investors, maintaining fair, orderly, and efficient markets, and facilitating capital formation—not on real estate procurements, which are outside its expertise. Congress created this problem by granting the SEC leasing authority, and now Congress must fix it by revoking that authority. I look forward to House passage of this important bill."

Under the bill, the General Services Administration (GSA), the federal government's real estate arm, would handle SEC real estate procurements. Congress granted the SEC independent leasing authority in 1990, before Norton was in Congress. Since then, the SEC has wasted hundreds of millions of taxpayer dollars as it has stumbled through leasing mistake after leasing mistake.

Norton first introduced this bill in 2011, after the SEC engaged in an improper sole-source procurement of nearly one million square feet of leased space. Then-SEC Chairwoman Mary L. Schapiro promised in a congressional hearing that the SEC would allow GSA to handle its real estate procurements to avoid such issues in the future. However, the SEC subsequently vetoed a multi-million-dollar procurement completed on its behalf by GSA. The SEC then refused to document its concerns to Congress, and justified its actions using the leasing authority it had previously promised not to use. In September 2021, GSA entered into a headquarters lease for the SEC, and the SEC said it will use GSA in future real estate procurements, but Norton's bill would ensure the SEC uses GSA in the future.

Norton's markup statement, as prepared for delivery, follows.

Statement of Congresswoman Eleanor Holmes Norton

Markup of the Securities and Exchange Commission Real Estate Leasing Authority Revocation Act (H.R. 1468)

Committee on Transportation and Infrastructure

June 15, 2022

Chairman DeFazio, thank you for marking up this bill. This bill would revoke the independent real estate leasing authority of the Securities and Exchange Commission (SEC) and direct the Government Accountability Office to update its 2016 report on independent leasing authority in the federal government. While there are a number of federal agencies that have independent leasing authority, the SEC has a history of egregious real estate practices.

In May 2005, the SEC disclosed that it had unbudgeted costs of approximately $48 million for the construction of its headquarters near Union Station. In 2007, after moving into its headquarters, the SEC shuffled its employees to different office space at a cost of over $3 million without any cost-benefit analysis or justifiable rationale.

In 2010, the SEC conducted a deeply flawed and unsound analysis to justify the need for the SEC to lease 900,000 square feet and to commit over $500 million over 10 years, overestimating its space needs by over 300 percent. In addition, the SEC failed to provide complete and accurate information and prepared a faulty and backdated justification and approval after it had already signed the lease.

In August 2016, the General Services Administration (GSA) and the SEC entered into an occupancy agreement to authorize GSA to secure a new 15-year lease. In December 2016, GSA, with the approval of the SEC, submitted a prospectus to Congress for approximately 1.3 million square feet, which Congress approved in 2018. By July 2019, GSA had received final bids, resolved all protests and even selected a final bidder. A month later, the SEC canceled the occupancy agreement, citing concerns about the value of the purchase option that the SEC refused to document to Congress. The SEC effectively vetoed the entire, three-year long procurement process despite not having the authority or funding mechanism to exercise the purchase option without GSA's involvement.

Finally, after much back and forth between the two agencies, GSA entered into a lease for a new SEC headquarters in September 2021. The SEC says it will continue to have GSA do its leasing in the future, but the SEC's history of egregious leasing conduct, having squandered hundreds of millions of dollars, makes this bill still necessary.

These public blunders also risk undermining the reputation of GSA and the federal government among the developers and building owners that participate in federal lease procurements and ultimately driving up the costs of all GSA real estate procurements due to the threat of uncertainty.

It is time for Congress to return the SEC's leasing authority to GSA, the federal government's real estate arm. As the SEC has demonstrated over three decades, it is incredibly inefficient, wasteful and redundant to have the SEC involved in real estate procurements when GSA exists for that very reason. Like other federal agencies, the SEC would continue to have input and involvement in the real estate decision-making process, but GSA would have the ultimate authority.

I urge my colleagues to support this bill.

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