The Bureau of Engraving and Printing has the newly minted legal authority to go ahead with a roughly $1.4 billion plan to build a new money printing facility in the Washington, D.C., area to replace its existing 105-year-old hulk on 14th Street.
Thanks to one sentence in the 1,165-page fiscal 2019 omnibus spending law covering nine Cabinet departments, including Treasury, the bureau’s existing ability to tap the deep pockets of the Federal Reserve are married with additional authority to buy land for and build the new plant.
The agency, which printed $233 billion worth of currency notes in 2018 at its two production plants, one in Washington and the other in Fort Worth, Texas, has “worked for more than 20 years to establish a smaller, more efficient manufacturing facility in the National Capitol Region,” Marty Grenier, the bureau’s deputy director and chief administrative officer, said in an email.
Proving the old axiom that sometimes it takes money to make money, building the new facility is expected to save the federal government over the next decade and beyond. According to Treasury and the BEP — whose website is “www.moneyfactory.gov” — it’s significantly cheaper to build the new plant rather than renovate the existing century-old building.
The Trump administration projects the move will save $579 million through fiscal 2028, with another $22 million saved in the following three years.
A 2017 bureau estimate put the price of renovating its main building and 80-year-old annex at $2 billion, largely because of costs involved in continuing printing operations throughout the construction process, which would involve shifting giant printing presses temporarily across 14th Street to the annex and then back to the main building. Also adding to costs would be reconstructing two buildings, each of which qualify for historic designation.
Backing out the $601 million saved by building a new facility would yield a revised cost estimate of roughly $1.4 billion, though ultimate outlays for the project are still unknown. The bureau would also reduce its space requirements by 28 percent and cut annual operating costs by $38 million, according to Treasury.
The project isn’t using any new appropriations from Congress. Since the agency’s chief customer, the Fed, foots the bureau’s bills, that’s all music to the ears of the central bankers. “The FRB supports this project,” Treasury officials wrote in their fiscal 2019 budget documents, using shorthand for the Federal Reserve Board.
Bureau officials don’t have a site picked out yet — a topic which will no doubt be of keen interest for the Maryland and Virginia delegations as well as Washington’s delegate, Democrat Eleanor Holmes Norton. “Now that we have a path forward, a project team will be assembled to initiate the next steps,” Grenier wrote.
A first step would be entering into an agreement with the General Services Administration to design and manage the project. An interagency agreement has not yet been reached, BEP spokeswoman Lydia Washington said in a separate email.
According to a 2018 Government Accountability Office report, the bureau wants the new facility to be in the Washington area because it would be costly to move the 400 to 500 trained production workers outside the area.
From the archives: How the appropriations process is supposed to work
One sentence to build it all
The omnibus provision states the following: “Beginning in fiscal year 2019 and for each fiscal year thereafter, amounts in the Bureau of Engraving and Printing Fund may be used for the acquisition of necessary land for, and construction of, a replacement currency production facility.”
House Republicans didn’t initially include the provision in the Financial Services spending bill that passed the chamber last year, but were ultimately persuaded by the Senate, which included it in a version that passed that chamber 92-6, and by the administration.
“They made a great, great case for why they needed to relocate, get some additional space for the facility, modernization and such,” said House Financial Services Appropriations Subcommittee ranking member Tom Graves of Georgia.
The Congressional Budget Office estimates no net impact on the budget over the next decade from the provision. That’s because since 1950, the bureau has financed administrative expenses through product sales, such as the currency notes it makes for the Fed; since 1977, the agency has been allowed to sell its dollar notes at higher prices to cover the costs of capital expenditures, such as buildings and equipment.
But as the GAO notes, that authority has only extended to building renovations or construction on land already owned by the bureau, not new construction on newly acquired land — until now. So the Fed is likely to fork over some $600 million less than it would have had to if the bureau instead embarked on the more costly renovation project.
And the bureau was unlikely to sit still and do nothing for much longer, given mushrooming costs of production in Washington, which are much higher than at the Fort Worth facility. The GAO report quotes 2016 data from the bureau showing that it costs 23 percent more to make a $1 note in Washington than in Fort Worth, and 7 percent more to make a $20 note.
When the Fort Worth facility started printing notes in 1990 it was anticipated it would take on 25 percent of the bureau’s production work. As the Washington facility has aged, Fort Worth’s share has grown to 60 percent.
Also, a renovated main building would have 530,000 square feet of office space, enabling Treasury to shift operations from some of its 15 leased facilities with about 1.9-million square feet in the downtown D.C. area. The annual cost of these facilities is $91.7 million.
According to the CBO, federal revenue would decline slightly over the next five years, but that the early loss would be made up in the latter half of the decade. That’s because it would temporarily cost more to produce currency given the potential disruption associated with the building project; the omnibus cost estimate assumes the BEP would raise its prices by $225 million over the next five years, with $125 million of that coming in fiscal 2019.
That’s still pocket change for the Fed, which generates so much income through its investments in U.S. Treasury securities, mortgage-backed securities and other holdings that it was able to transfer $65.4 billion to Treasury in 2018. That’s what was left on top of the $6.825 billion the Fed is allowed to keep on hand as surplus reserves.
The Fed had anticipated approval of new building construction since the language empowering the bureau to buy land was in the initial Senate fiscal 2019 Financial Services spending bill.
The central bank’s board in December had approved $956 million in calendar year 2019 payments to the bureau, mainly to print money.
But $60 million is earmarked to launch the new facility project. Most of that, $58 million, would go to GSA to cover costs for surveys, transportation and environmental studies, hire GSA’s construction and management contractors, develop construction bid documents and for overhead. Another $2 million would go to hire five contract employees at the bureau to provide contract oversight and to ensure the Fed’s requirements for bill production are met.
Kellie Mejdrich contributed to this report.