Federal taxpayers will pony up $125.2 million to lease Fort Worth’s new veterans clinic, though the building and land are projected to cost the private owners $70 million.
At first glance, the extra $55 million for the 20-year lease seemed a tad high, so Watchdog checked out the numbers to see whether public money was going to waste. The difference is nearly enough to buy five brand-new elementary schools in the Fort Worth school district — in today’s dollars — or to pay for a year’s worth of charity care at Cook Children’s Medical Center with $13 million left over.
But Veterans Affairs Department officials say the lease, over the long run, is slightly cheaper than the cost of ownership. They come to that conclusion using what they call the "net present value" of the lease — an inflation adjustment based on discounting the future value of money.
By the VA’s estimate, the lease payments will total $69,788,614.41 in adjusted dollars, making the cost of leasing a wash. "Based on the net present value analysis . . . leasing of the Fort Worth Clinic is actually cheaper than the $70 million construction estimate, and that’s without all the other intangible savings and flexibility you get from leasing," George Szwarcman, chief of real property service for the VA, said in an e-mail.
Two economists told Watchdog that the lease payments seem reasonable on the surface.
"You would have a tough time choosing from $100 a year from now and $75 right now," TCU economist John Harvey said. "What that means is that $100 a year from now to you is [worth] $75 to you right now. What [the VA is] saying is $70 million right now is same as $125 million spread out over 20 years. Those two are equivalent."
Economist Ray Perryman said that the VA’s discounted rate of 4.9 percent based on Treasury bonds seemed "a pretty decent average of what it’s been in the recent past."
Nevertheless, when the lease expires in 2029, the VA won’t have any ownership stake in the building. And such lease arrangements have been criticized by a government watchdog agency as a "pervasive and ongoing problem." Over time, such leases are generally more costly, even if lease payments "look cheaper" on balance sheets, according to a 2005 report by the Government Accountability Office.
U.S. Rep. Kay Granger, R-Fort Worth, wasn’t happy with the cost of the lease compared with the price of the building.
"If that’s true, I’m very disturbed about it, naturally," Granger said in an interview this month.
Local VA officials say they opted for a lease to get services to veterans more quickly. The department’s budget for construction projects is so competitive that lease deals are easier to get, said Jennifer Purdy, assistant director of outpatient services for the North Texas VA.