US Embassy London: Don’t Worry, Be Happy — New Digs Not Funded By Appropriated Funds

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— Domani 
Spero

The U.S. Ambassador to London Matthew Barzun used his new Tumblr to dispel possible misconceptions concerning the construction of the U.S. Embassy in London following reports of funding prohibitions under the FY2014 Omnibus:

I noticed a few news outlets this week reporting that funding for the construction of our new Embassy building may be removed. As this might cause concern among those excited and invested in the redevelopment of Nine Elms, I wanted to put minds at rest.

The new building project is being funded entirely by the proceeds of the sale of other U.S. Government properties in London, not through appropriated funds. This has always been the plan. The proposed Omnibus Spending Bill does not provide any new, additional, restrictions to that plan.

So, construction continues and each month we get closer to the opening day. In the meantime, every six months, the State Department will report to Congress on progress. Our shared future, in a new part of this great city, continues.

The above item is posted here: http://matthewbarzun.tumblr.com.

Photo via US Embassy London/Flickr

Photo via US Embassy London/Flickr

We should note that the State Department signed a conditional agreement with the real estate developer Ballymore to acquire a site in the Nine Elms Opportunity Area in Wandsworth for the construction of a new embassy back in oh, October 2008. That initial agreement was conditioned on the approval of the United States Congress and local planning authorities. In November 2009, the Department entered into an agreement to sell the Chancery in London, located in Grosvenor Square.  The sale is to Qatari Diar Real Estate Investment Company headquartered in Doha, Qatar.  Then Ambassador Robert Tuttle, President George W. Bush appointee from 2005-2009, led the search for a new site. The 2009 sale agreement with the Qatari company was signed by President Obama’s first appointee to London, Ambassador Louis B. Susman. In November 2013, President Obama’s second appointee to London, Ambassador Barzun presided the groundbreaking ceremony of the new U.S. Embassy in the Nine Elms neighborhood in London.

While the sale of the U.S. Embassy property in Grosvenor Square was widely reported, the selling price was not widely known.  The London Evening Standard in 2009 reported that the embassy building was sold to Qatari Diar — the property development arm of the Qatari royal family — for an estimated £500 million (The report also noted that the 225,000 sq ft building could be worth as much as £1 billion when developed).  According to news report quoting Adam Namm, then acting director of the Bureau of Overseas Buildings Operations (now current ambassador to Ecuador), the new embassy in London estimated to cost $1-billion would be “in the ballpark of the most expensive embassies we have built.”

The FY2014 Omnibus was signed into law by President Obama on January 17, 2014. The only reference to the U.S. Embassy in London that we could locate is under Sec. 7004 under Diplomatic Facilities (p.1148):

(e)(1) The limitation and reporting requirement regarding the New London Embassy contained in section 7004(f) of division I of Public Law 112–74 shall remain in effect during fiscal year 2014.

We dug up PL 112-74 to take a look. Here’s what it says:

(f)(1) None of the funds appropriated under the heading ‘‘Embassy Security, Construction, and Maintenance’’ in this Act and in prior Acts making appropriations for the Department of State, foreign operations, and related programs, made available through Federal agency Capital Security Cost Sharing contributions and reimbursements, or generated from the proceeds of real property sales, other than from real property sales located in London, United Kingdom, may be made available for site acquisition and mitigation, planning, design or construction of the New London Embassy.

(2) Within 60 days of enactment of this Act and every 6 months thereafter until completion of the New London Embassy, the Secretary of State shall submit to the Committees on Appropriations a report on the project: Provided, That such report shall include revenue and cost projections, cost containment efforts, project schedule and actual project status, the impact of currency exchange rate fluctuations on project revenue and costs, and options for modifying the scope of the project in the event that proceeds of real property sales in London fall below the total cost of the project.

So no appropriated funds and the funding prohibition in the proposed omnibus does not appear to be in the final version signed by the president. The reporting requirement remains the same at 60 days and every six months thereafter until the embassy is completed in 2017.

Now — if the cost of building a new one in London is about $1 billion and Congress did not and will not make any appropriation for its construction, then that sale price must have cost more than the estimated £500 million. Just an aside — the US Embassy in Iraq, the most expensive embassy we have built to completion todate was started in 2005 and was completed in 2008 at a total cost of $592 million. VOA reported cost of more than $600million, USAToday reported total cost of $700million and in June 2012, WaPo’s Walter Pincus reported cost at $700 million plus $115 million to upgrade.

In any case, two things can happen here: 1) total sale price covers all construction cost and new embassy debuts in 2017; 2) total sale price covers all construction cost of the new embassy but not potential technical/design adjustments or potential cost overruns. If #2 happens, Congress will, at least, have a 6-month notice. If Congress decides to pay expenses in excess of funds from sale, it has two more fy appropriation cycle to make funds available.  Or not. If that happens, the State Department will have to look for other sources of funding. It sits on an annual visa collection fees of over $3 billion, by the way, but that will need congressional approval. Also  Winfield House is on 12 acres of grounds in Regent’s Park, so there’s that.  The mansion reportedly only cost US taxpayers $1.00 when the USG bought it from American heiress Barbara Hutton after World War II. Of course, the mansion which serves as the ambassador’s residence is in the Secretary of State’s Register of Culturally Significant Property, so there’s that, too. Lots of ifs but that’s all potentially in the future, which should be far and away and uncomplicated unless you’re Doctor Who.

No, as far as we know … no, they’re not planning to auction you to pay for the new embassy.  But the groundbreaking just occurred a couple of months ago, so there’s a long ways to go.

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