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Investment will only be made by retaining the feature of the cur- 

 rent law which grants a concessioner a property right which is 

 similar to that which it would have if it built a facility on private 

 land. How can anyone expect a company to build or renovate a 

 building or other substantial facility and then simply give it to the 

 government and pay high fees besides? 



When you buy a house, you hope if you maintain it correctly it 

 will appreciate in value. When the Hyatts and the Marriotts of the 

 world build a hotel, they are not only counting on the cash it will 

 generate for them, but also that they will likely be able to sell it 

 at market value in a number of years. This is true for any large 

 real estate investment. Without this residual value unless the cash 

 returns are extraordinarily high, the investment just won't cut it. 



Amortization of the value will not make the numbers work ei- 

 ther. This is why most concessioners are frustrated with the argu- 

 ments which you have heard before today that possessory interest 

 as it is called in the current law is anticompetitive and unneces- 

 sary. 



It is not anticompetitive to legislate that a business large or 

 small which invests in our Federal land should be paid fair market 

 value for that investment when it is time for that business to leave. 

 So long as the next holder is also assured a fair market value, it 

 will be able to obtain financing and predict a return, just like any 

 other purchaser of real estate or any other asset. 



H.R. 2028 attempts to recognize that such an interest is nec- 

 essary to encourage new investment and the purchase of existing 

 improvements. However, it fails to fashion a right which will 

 achieve these results. 



First, it is imperative that the government have the responsibil- 

 ity for the purchase of these assets in the first instance. How it ob- 

 tains the money to do so, most likely from the next operator, is the 

 government's business. 



Second, the concessioner must be paid fair value for these invest- 

 ments whether passed on to a new operator, closed, or taken by the 

 government for some other purpose. H.R. 2028 has only addressed 

 the first of these possibilities. And, third, the law must grant a 

 property right in terms which are sufficiently clear so that it can 

 be employed as security for a loan. 



It is also critical that a concessioner be able to transfer these 

 rights along with its contract without fear that the government will 

 attempt to take some of the value of the concessioner's business 

 away by trying to cut itself a better deal. So long as the transferee 

 has sufficient experience to fulfill the contract, the government 

 should honor its end of the bargain as well. 



The bidding process must be constructed to provide the agency 

 with sufficient flexibility to make sure that the best applicant will 

 emerge from the first round of bidding. The extraordinary empha- 

 sis on fees under H.R. 2028 will not produce the best operator, and 

 neither will a rigid system which requires each bidder to nec- 

 essarily satisfy every criteria loaded into a prospectus. 



The third goal is to promote the continuity of good service by re- 

 warding good performance. Although we believe that the current 

 law generally succeeds in this regard, we understand that Congress 

 wants to limit contract terms to 10 years, and that the 30-year con- 



