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with respect to their ability to finance this project at that time. In the case of most of the buildings erected on those air rights the railroad advanced moneys to finance the buildings, but at this time the railroad itself was in no position to finance a building for within a few months, if not already, it was receiving aid from the R. F. C. It was an outrageous misrepresentation to pretend that if the Government did not buy this property a building would be erected and the post office put out in the street.
In addition to other statements made before the committee, it was stated that if the Government's lease were permitted to expire, it could not obtain adequate space for the post office for less than $1,000,000 per annum. That was a pure misstatement of fact. The statement that in 1933 you could not rent the space in New York City required for the Grand Central post office station for less than $1,000,000 per annum is without basis in fact and there was no evidence whatever adduced to support such a statement.
Now, Senator Copeland introduced this bill, but he did not prepare it. He said the bill was placed on his desk, and that he did not know its origin. He introduced the bill without knowing what was in it. He did not draw the bill, and the Representative who introduced the bill said he did not prepare it. The Post Office Department said they did not prepare it, and the Treasury Department disclaimed any interest in the bill. They said it was done at the request of the Post Office Department. Now, of course, those who had the greatest interest in the bill were those who had that dying, expiring option, and it can be proven that they are the people who will participate in the purchase price of the property.
I have already mentioned the objections, the improper set-back restrictions and the restrictions in the deed with respect to the relocation of the building. There is further objection on the ground that the deed does not convey, in our opinion, a fee simple title to the premises. In the bill which authorized the purchase the Treasury was authorized to purchase the land and building, reserving to the railroad company a perpetual easement of subsurface rights to be defined in the instrument of conveyance. At the hearings it was specifically stated to the committee that it was intended to reserve for the railroad company its right to occupy the tracks as they then existed. However, the instrument as drawn does nothing of the kind. It purports to convey a fee simple title for the $9,000,000 but the Government hands back to the railroad company all of that portion of the land which lies below a point 42 feet above sea level, which happens to be the ceiling level of the train room underneath and which is about the level of the sidewalk on Forty-fifth Street. From that point to the middle of the earth, east, west, north, and south, there is a perpetual reservation to the railroad company, its successors and assigns, and also for the railroad company's lessees and licensees, as well as the railroad company's lessor, the New York & Harlem Railroad Co. In other words, the Government reconveys to the railroad company everything down to the middle of the earth.
Mr. Boylan. Do they reconvey it, or give them a permanent easement?
Mr. BROIDO. The deed says that they except that out of the grant. They except from the grant this permanent and perpetual easement to the railroad company, its successors and assigns, licensees, assignees,
and lessor, including the right to occupy for the purposes of all of these parties everything down to the middle of the earth and inclusive of everything within the boundaries of the property although at the present time the railroad only occupies a depth of approximately 20 feet for the express level of the railroad for the whole width of the property. Below that depth the railroad occupies nothing because the suburban level stops several hundred feet westward toward Vanderbilt Avenue. A large portion of that undersurface of the property would have a tremendous value in case the railroad extended its space for the suburban level, or it would have great value, for example, if it were excavated as a reserve storage space for the Lexington Avenue subway. I cannot presume to hazard guesses as to what it could be used for but we all know that undersurface areas in the Grand Central Terminal have tremendous rental value and that the railroad is receiving great sums annually from restaurants, newsstands and other tenants occupying the undersurface properties, but whatever the future value of the undersurface might be below the present express level the Government would not get any income from it.
The New York Central would get all the income. Nobody can say what uses engineers might discover for this undersurface of the property below the 20-foot depth 25 years from now and no one can say that this undersurface will not have a tremendous value either by way of income from the New Haven Railroad or for use by other parties. The act authorized, unless there was misrepresentation to the committee, a reservation to the railroad of the tracks as they then existed and there was no warrant whatsoever for permitting the drawing of an instrument or the acceptance of an instrument which, after conveying what purports to be the fee to the property to the Government for $9,000,000, reserves and excepts out of the grant all the rights in the undersurface from the sidewalk down to the center of the earth. You cannot even change a pier without obtaining permission. You have a situation here where you may say to the New York Central, “Gentlemen, will you be good enough to permit me to put a pier down”? The New York Central could say, "Yes; you can, so for as we are concerned, but we must ask the New Haven Railroad where the piers shall be placed."
Mr. BOYLAN. Do you mean to say that the Government would be helpless when it came to the removal of piers or underpinning of the building?
Mr. BROIDO. They could not. Mr. Boylan. Do you mean to say that the Government would be without recourse in case the railroad desired to change the piers under the building?
Mr. BROIDO. No, sir; you must take it the other way. Suppose the Government wanted to change the building. Mr. BOYLAN. That is the question I asked. Mr. Broido. No, sir; they could not change the piers without the consent of the United States Government, and the Government could not change the piers without the railroad's consent. The New York Central Railroad could not do that without the consent of the New Haven Railroad.
Mr. Boylan. Do you mean that the piers could be changed only by mutual agreement?
Mr. BROIDO. They could be changed by mutual agreement, but we cannot change them without the consent of the New Haven Railroad. Suppose the Government wanted to build a 40-story building there, and wanted to put in the necessary piers to support the building: The New York Central might say "0. K.", but the president of the New Haven might say, “I am sorry, but I do not agree to that."
Mr. BOYLAN. Is that exception set out in the deed?
Mr. BROIDO. No, sir; it is not mentioned in the deed; but the New Haven Railroad was not a party to the deed. It was not a party mentioned in the deed. They are other parties in interest who must be consulted. They are not parties to the transaction, and the Government has no control over them.
Mr. Boylan. You think the situation would be this: In case the Government decides to erect a different kind of building or higher building, or a building requiring greater pier support, you say the Government would be precluded from erecting the additional piers required.
Mr. BROIDO. I did not say it would be precluded, but there is nothing in the deed which would compel the New Haven Railroad to agree to it. I do not think that a private individual would buy property under those conditions.
We cannot assume that this property would always be required for post-office purposes and we must assume that the Government should only accept a deed which will give it a marketable title so that it could at some time convey the property to other parties. We all know that the Post Office Department is selling buildings formerly used for postoffice purposes. Within the last 60 days I have personally received from the office of the Procurement Division letters inviting me to make tenders on buildings formerly used for post-office purposes in various cities in the United States but which have now been abandoned. the time ever came when this Forty-fifth Street and Lexington Avenue property were not required the Government would have nothing to sell that any private person would buy for the only thing it would have to sell would be the possible rental value of the air-right development. It has no title to the undersurface that it can convey. The way the deed is drawn it would be exceedingly difficult for any purchaser to use the property for a large-scale development.
Mr. Boyer. Then anybody that wanted to put up a new building could erect additional piers, if they were going to build a new building?
Mr. BROIDO. I think they could do it but with difficulty, but that would materially increase the cost of a new building.
Mr. Boylan. There is nothing to keep them from doing it?
Mr. BROIDO. There is nothing that could compel the acquiescence of the New Haven; the New Haven has not signed any agreement in connection with the present transaction.
I will go further
Mr. TABER. Is there a copy of the New Haven agreement available?
Mr. BROIDO. Yes, that is exhibit no. 8.
Mr. BROIDO. I will tell you the status of it. It is on file in the bureau of franchises of the Transit Commission of the city of New York.
Mr. TABER. It is not recorded in the register's office?
Mr. BROIDO. I am not certain about that, but it was the basis of six or seven acts passed by the Legislature of the State of New York which authorized the Grand Central Terminal development. It was approved and is on file in the Board of Estimate and Apportionment of the city of New York, which gave to the New York Central Railroad the undersurface of the streets from Forty-second Street north upon the payment of a nominal consideration of $17,000 a year. It is on file in the sense that it is the subject of numerous acts of the legislature and numerous acts of the State of New York, and is a public document.
I hope I am not unduly keeping you. But this is a matter of great interest, and I have Mr. Heckscher here, and I would like him to be heard. I would like to have Mr. Heckscher speak while he is here.
Mr. WOODRUM. We will be glad to hear him briefly.
I would like you to concentrate on this as far as possible. The fact remains that the Government has made a contract.
Mr. BROIDO. That is correct.
Mr. WOODRUM. What the committee wants to know is why that contract should not be carried out. We will probably pass the question as to whether it was a good contract, or a good buy, or a wise decision to take it, under those circumstances, or whether the Government got a good bargain or was chiseled. If the Government has made a contract which is legally binding, that is one question. But if there are reasons why the Government's contract should not be carried out, that is the question we want you to answer.
Mr. BROIDO. That question is based on the assumption that the contract is legally binding.
My answer is that the only vital question is the value, and what misrepresentation was made to Congress which passed the bill, because I think misrepresentation was made, in the first place.
The second thing is whether the executive officer who endeavored to carry out the mandate of Congress exceeded his authority. If an executive officer accepts a contract or enters into a contract which unreasonably extends the meaning of an act of Congress and contravenes at many points the express declarations made to the committees of Congress which recommended the passage of the act, then I do not believe that such a contract is binding upon the Congress or that an executive officer so exceeding his authority, including an express instruction of the then President that the purchase would be subject to Congressional consideration, can bind the Congress and that the Congress under such circumstances need not appropriate the money required for the purchase.
I believe that there is here involved not only the question of this specific piece of property but a broad question of general public policy. Growing out of my study of this specific transaction it has become increasingly clear that a study ought to be made by Congress of the policy of the Post Office Department in buying air rights for the purpose of building post offices over railroad tracks and paying for such air-right privileges the value of the fee of the land which, in all of these cases, is being retained by the railroads. When you recall that there are hundreds of cities where this same thing might be done, and many cities where it is being done, it is easy to see that this study might result in a saving of tens of millions of dollars to the
Government. I confess that the function of this committee is perhaps limited to the question of this appropriation, but since this committee has done us the kindness to permit us to be here, we hope that this committee will not appropriate the money until some such study of the policy could be made. Nobody would be hurt if this money is not appropriated at this time; it bears interest, and the very people who are to get it are in large measure already indebted to the Government. This committee ought to ask the Congress or the Committee on the Post Offices and Post Roads to investigate this transaction, and as a result of its investigation complete a study once begun by Mr. Mead's committee, on the use of air rights for post-office purposes, although they did not touch this point, and lay down a policy for the Post Office Department with respect to air rights, so that the Government will not be compelled to pay out admittedly millions of dollars over the value of the property which it procures. If the Post Office Department continues to ask for and obtain the passage of acts for the purchase of land and buildings and then buys only air rights, there is going to be a legal question as to whether such a contract was authorized under the act in each case and if the Attorney General's office feels that that kind of a contract is authorized by such an act, Congress ought to revise the policy and in these cases enact the kind of an act which would permit the Post Office Department to buy or lease air rights and pay air-right value.
Therefore I feel that every opportunity ought to be afforded for a study to be made of that question, and a study much more extensive than could be made by this committee. I feel that I am perhaps imposing upon the committee now.
But we do know that the Interstate Commerce Commission, which Senator Copeland stated would be consulted in this matter, has an appraisal
filed showing that the value of this property is $5,000,000, and the Government is paying $9,000,000, plus interest.
Mr. TABER. Is there any evidence whatever of actual fraud in this matter?
Mr. BROIDO. Our position has been this. We have not had access to the Government records or to the records of the private parties. We have not been able to examine them under oath, and I believe there are in the hearings of the committees absolute misstatements of fact. I have written a brief, which is filed with the Treasury Department, holding that where a vendor makes a patent misrepresentation that that is tantamount to fraud, and that the contract can and should be rescinded.
I have felt that what this transaction requires is an investigation by Congress of these statements made to the committee, such as the foolish statement made to the committee that to lease the required space might cost a million dollars a year—that these things all required investigation under oath by competent counsel of a committee of Congress to get the facts.
Mr. Taber. There has been no agreement in connection with a million dollars a year?
Mr. BROIDO. None whatsoever. It was stated to the committee that when these leases expired that the Government would then have to pay a million dollars a year rent for equivalent space, but that is not the fact.