Office Space

Republican Attacks on a CFPB Office Renovation Don't Add Up


(Corrects first sentence to remove reference that in 2011, an older office building was the "best available" space for the Consumer Financial Protection Bureau to lease. The agency told Congress that it hasn't found documentation that it evaluated other office spaces at the time.)

When the U.S. Consumer Financial Protection Bureau opened in 2011, the government office space large enough to accommodate its thousand-plus employees that it moved into was a run-down concrete building on G Street near the White House that once housed the now-defunct Office of Thrift Supervision. The bureau’s director, Richard Cordray, has called the dark, musty structure a “dump.” The U.S. Department of the Treasury said the building, erected in 1976, was in need of “major renovations,” which the low rent reflected.

Three years later, the CFPB’s plans to fix up the place are under attack by Republicans who fought to block the agency’s creation and have tried since to weaken or kill it. Representative Jeb Hensarling of Texas, chairman of the House Financial Services Committee, decries the renovation as a “blatant waste” of public money. The CFPB says it will cost about $140 million; Republicans predict it will come to much more.

The U.S. General Services Administration is managing the project and intends to update the interior, fix the leaky roof, and upgrade the building to LEED Gold environmental standards. Hensarling and other opponents have latched onto a planned glass staircase, and a granite fountain, benches, and trees in the building’s public outdoor plaza as evidence of opulent excess. “It has become abundantly clear that it’s not 1700 G Street that needs an overhaul, but rather the entire structure of the CFPB,” Representative Patrick McHenry of North Carolina, chairman of the committee’s Oversight and Investigations Subcommittee, said in a July 2 press release.

The GOP members say their calculations show the renovation will cost $215.8 million, or $590 per square foot—more than double the CFPB estimate, and more than it cost per square foot to construct the lavish Bellagio Hotel and Casino in Las Vegas. These figures were picked up by newspapers and conservative websites, which ran them under headlines like “Elizabeth Warren’s Brainchild Builds HQ Costlier Than Trump Tower.” There’s just one hitch: Their numbers don’t add up.

At McHenry’s request, the inspector general of the Federal Reserve, the CFPB’s parent agency, prepared a report in June examining the project’s price tag. It said the job would cost an estimated $145.1 million for construction, construction management, and GSA fees. The report said the renovation covers 512,000 sq. ft., bringing the estimate to $283 per square foot. The renovation has since been scaled back to 503,000 sq. ft.

The Republican figures inflate the total price by tacking on $70.7 million for costs such as hiring movers and renting temporary offices to use during the construction. Those expenses aren’t typically included in calculating construction costs, says Randolph Harrell, executive vice president at the brokerage CBRE. “But it is a real cost,” he says.

Even with all of that packed onto the price, though, the grand total would still only reach about $421 per square foot, well short of the GOP’s $590. A Financial Services Committee spokesman says their calculations use a smaller footprint for the renovation than the GSA, but that explanation doesn’t account for all of the extra $169 per square foot. At the overstated $421, the project actually would cost less per square foot than the Bellagio ($482) and Trump Tower ($448) if adjusted for inflation to make the numbers comparable—something the GOP estimate doesn’t do.

The GSA has said the costs are in line with other government renovation projects, and the inspector general concluded the CFPB followed proper contracting procedures. The report did take the agency to task for not initially making a required “business case” to justify the renovation.

Republicans have cast the project as a misuse of public dollars in a time of tight budgets. “The CFPB is funded by the Federal Reserve, which happens to be taxpayer money,” Hensarling said in a February speech that denounced the renovation. But the Federal Reserve is self-financed, largely with income on securities such as government bonds, so the amount Congress needs to set aside for the office redo is precisely zero.

The bottom line: Republicans say the CFPB’s new office will cost more per square foot than the Bellagio. They need to check their figures.

Weise_190
Weise is a reporter for Bloomberg Businessweek in New York. Follow her on Twitter @kyweise.

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