______________________________ February 2, 1998 ______________________________ GSBCA 14422-RELO In the Matter of ARTHUR T. O'CONNOR Arthur T. O'Connor, New York, NY, Claimant. A. Thomas Park, Chief, Finance Division, Federal Highway Administration, Department of Transportation, Washington, DC, appearing for Department of Transportation. DeGRAFF, Board Judge. An agency can reimburse a transferred employee for temporary quarters subsistence expenses if the employee occupies temporary quarters. If an employee occupies quarters that eventually become permanent quarters, the agency can reimburse the employee for temporary quarters subsistence expenses if the employee shows that he or she initially intended to occupy the quarters only temporarily. Reimbursement for the expenses of purchasing a residence at a new duty station is limited to five percent of the purchase price of the residence. An agency can reimburse an employee for a rental car only if the agency determines that the use of some other method of transportation would not be more advantageous to the Government. Background In November 1996, the Federal Highway Administration (FHWA) issued a travel authorization to one of its employees, Arthur T. O Connor. The travel authorization explains that Mr. O Connor was making a permanent change of station from Cambridge, Massachusetts, to New York, New York. The authorization provides that Mr. O'Connor would travel to New York by privately owned vehicle, and does not provide that FHWA would reimburse Mr. O Connor for a rental car. The authorization provides that FHWA would reimburse Mr. O Connor for up to thirty days of temporary quarters subsistence expenses (TQSE) and for residence transaction expenses. Mr. O Connor owned a residence in Massachusetts. Because he believed that the FHWA might decide to close the New York office, he decided to renovate and then rent his Massachusetts residence. Mr. O Connor moved out of his Massachusetts residence so that renovations could begin and stayed with a relative from December 10, 1996, until January 5, 1997. From January 5 through 14, Mr. O Connor went to New York to look for a residence and the FHWA reimbursed him for that trip. Mr. O Connor returned to his relative s residence in Massachusetts and stayed there from January 14 through 18, 1997. In late November 1996, Mr. O'Connor applied by telephone for a mortgage through PHH Mortgage Services (PHH). In late December 1996, Mr. O Connor signed a mortgage application with PHH that identified the property to secure the loan as a cooperative apartment on East 78th Street in New York. By January 14, 1997, Mr. O'Connor and the owner of that apartment had agreed to a contract of sale and set a closing date of February 4, 1997. Mr. O Connor rented a car and began driving to New York on January 19, 1997. He spent the nights of January 19 and 20 in New Jersey, and reported for work in New York on January 21, 1997. At some time not established in the record, Mr. O Connor and the owner of the East 78th Street apartment verbally agreed that Mr. O'Connor could rent the apartment for $50 per day beginning on January 19, 1997. Mr. O'Connor moved into the apartment on January 21. PHH ordered an appraisal on the apartment and after the appraisal report was prepared on January 29, 1997, PHH informed Mr. O Connor that it could not place a mortgage at the adjustable interest rate that Mr. O'Connor had expected to receive. On February 6, Mr. O Connor moved half of his household goods out of storage in Massachusetts to the East 78th Street apartment. Apparently, he left the other half of his belongings at his relative's residence in Massachusetts, where he had previously taken them. On February 12, 1997, Mr. O Connor asked FHWA to extend his TQSE period for another thirty days. FHWA had earlier extended Mr. O Connor s initial thirty-day TQSE period to sixty days. He stated that this second extension was needed due to PHH s waiting until within weeks of closing to tell him that it would not place a mortgage with the adjustable interest rate that he had expected to receive. Mr. O Connor explained that the requirements for purchasing a cooperative apartment were time- consuming, and that he was looking for financing elsewhere and was coordinating his efforts with the owner, the owner s attorney, and the management of the apartment building. He stated that he believed that he would be able to close the purchase of the apartment by the end of February 1997, or by March 15, 1997, at the latest. Mr. O Connor rented the East 78th Street apartment until March 19, 1997, when he purchased it. On April 4, 1997, Mr. O Connor submitted a travel voucher to FHWA. He requested reimbursement for the temporary quarters meals expenses that he incurred from December 10, 1996, through part of the day January 5, 1997 ($26 per day from December 10 through 31, and $30 per day thereafter for a total of $699.50 for 26-1/4 days); part of January 14 through January 18, and January 21 through February 7, 1997 ($30 per day through January 18 and $80 per day thereafter for a total of $1,567.50 for 22-1/4 days); February 8 through March 9, 1997 ($80 per day from February 8 through 17 and $60 per day thereafter for a total of $2,000 for 30 days); and March 10 through 19, 1997 ($60 per day for a total of $600 for 10 days). He also asked to be reimbursed for $50 of dry cleaning expenses that he incurred between January 25 and March 18, 1997. Mr. O Connor did not make any claim for temporary quarters lodging expenses. Mr. O'Connor also asked to be reimbursed for the transaction expenses that he incurred in purchasing the East 78th Street apartment. On June 30, 1997, FHWA decided to reimburse Mr. O Connor $2,567 for meals and $50 for his dry cleaning expenses. FHWA reimbursed Mr. O'Connor the $26 per day he requested for December 10 through 31, 1996, and $30 per day for all other days, and this amounted to $2,300 less than Mr. O Connor had requested for his meals. FHWA explained that the $2,300 was in excess of the maximum allowance for meals and incidental expenses. FHWA reimbursed Mr. O Connor for some of the transaction expenses he incurred in purchasing the apartment, up to five percent of its purchase price. FHWA and Mr. O Connor discussed his reimbursable expenses after he received the FHWA s June 30, 1997 decision. On July 18, 1997, Mr. O Connor asked FHWA to reimburse him for lodging during temporary quarters that was unpaid on original voucher. Mr. O Connor stated that he was undecided on the eventual purchase of [the apartment] from the initial temporary occupancy in January, 1997. On September 15, 1997, FHWA decided that it should not have reimbursed Mr. O Connor any amount for TQSE. FHWA made this decision after discovering that Mr. O Connor s temporary residence in New York was the apartment that he eventually purchased to be his permanent residence. FHWA explained that, in its view, Mr. O Connor had not established that his intent was to occupy the apartment temporarily. FHWA attempted to help Mr. O Connor clarify his intent before making its September 15, 1997 decision, but FHWA was not satisfied that Mr. O'Connor intended to occupy the East 78th Street apartment temporarily. In its submission to us, FHWA also questioned whether it was appropriate to reimburse Mr. O Connor for the time he lived with a relative in Massachusetts before beginning his assignment in New York. In his submission to us, Mr. O Connor says that his original intent when he rented the apartment in New York was simply to find a place to live temporarily and to continue to look for permanent housing. He says that renting the apartment gave him time to determine if purchasing the apartment would be worth it, despite all the problems . . . . He also says that after PHH informed him that it could not place a mortgage at the adjustable interest rate he expected, he realized that his interest in the 78th St. unit was in serious jeopardy and he considered possibly contacting other lenders about adjustable interest rates or finding a non-cooperative apartment property. However, because of the demands of his new job and the lengthy and complex procedures involved in purchasing property in New York, there was no time to pursue these possibilities and he was boxed in and had to purchase the 78th Street apartment due to reasons (i.e. errors) beyond my control. Mr. O'Connor also complains that FHWA reimbursed him for only five percent of the transaction expenses he incurred in purchasing his residence in New York. In addition, he says that he had no choice but to rent a car to travel from Massachusetts to New York. Discussion FHWA correctly decided to reimburse Mr. O'Connor for five percent of his real estate purchase transaction expenses, and not to reimburse him for the use of a rental car to travel from Massachusetts to New York. FHWA's determination that it should have reimbursed Mr. O'Connor for only part of his TQSE is also correct. Transaction expenses Statute provides that when the Government transfers an employee from one permanent duty station to another in the interest of the Government, the Government will reimburse the employee for the expenses of purchasing a residence at the new duty station. Reimbursement is limited, however, to not more than five percent of the purchase price of the residence. 5 U.S.C. 5724a(a)(4)(B)(ii) (1994). FHWA acted in accordance with the statute when it reimbursed Mr. O'Connor for five percent of the purchase price of his residence in New York. Rental car The Federal Travel Regulation authorizes agencies to pay transportation costs of transferred employees in accordance with chapter 301 of title 41, Code of Federal Regulation. 41 CFR 302- 2.1(b) (1997). Chapter 301 permits an employee to use a rental car only when the agency determines that the use of some other method of transportation would not be more advantageous to the Government. 41 CFR 301-2.2(d)(4) (1996). FHWA determined that it was more advantageous for Mr. O'Connor to drive a privately owned vehicle from New York to Massachusetts, and did not authorize Mr. O'Connor to rent a car to make this trip. FHWA acted in accordance with the regulations when it decided not to reimburse Mr. O'Connor for his rental car. Temporary quarters subsistence expense According to statute and the Federal Travel Regulation, when the Government transfers an employee from one permanent duty station to another in the interest of the Government, the agency will pay the subsistence expenses that the employee incurs while occupying temporary quarters, provided certain requirements are met. 5 U.S.C. 5724a(a)(3) (1994); 41 CFR ch. 302-5 (1996). Reimbursement of TQSE must be justified in connection with the employee's transfer. 41 CFR 302-5.1. Temporary quarters can be located near either the old or the new duty station. 41 CFR 302- 5.2(d). Quarters are considered temporary if they are obtained from either private or commercial sources, for the purpose of temporary occupancy, after the employee vacates the residence that was occupied when the agency authorized the transfer. 41 CFR 302-5.2(c). If an employee occupies quarters that eventually become permanent quarters, the agency can still reimburse the employee for TQSE if, in the agency's judgment, the employee makes a satisfactory showing that he or she intended initially to occupy the quarters only temporarily. In exercising its judgment, the agency will look at the duration of any lease, whether the employee moved household furnishings into the quarters, the type of quarters, any expressions of intent by the employee, the employee's attempts to find permanent quarters, and the length of time the employee occupies the quarters. 41 CFR 302-5.2(c) (1996). The maximum daily rate that an agency can reimburse an employee for the first thirty days in temporary quarters located in the continental United States is the standard per diem rate paid to travelers in the continental United States. The maximum daily rate that an agency can reimburse an employee for succeeding days is three-fourths of the standard per diem rate. 41 CFR 302-5.4(c) (1996). Between December 10 and 31, 1996, the standard per diem rate was $26 for meals and incidental expenses. Between January 1 and March 19, 1997, the standard per diem rate was $30 for meals and incidental expenses. 61 Fed. Reg. 59185 (Nov. 21, 1996). Occupancy of temporary quarters for less than one whole day constitutes one full day of the eligibility period. 41 CFR 302-5.2(g). Mr. O'Connor stayed in temporary quarters when he moved in with a relative in Massachusetts, and FHWA appropriately reimbursed Mr. O'Connor for his meals from December 10, 1996, through January 5, 1997, and from January 14 through 18, 1997 (thirty-two days). The quarters that Mr. O'Connor occupied were owned by a private source, were temporary, and Mr. O'Connor began occupying those quarters after he vacated the residence that he occupied when the agency authorized the transfer. Mr. O'Connor's move from his residence was made necessary by his need to begin renovations, and Mr. O'Connor was making those renovations in connection with his transfer. It does not matter that the temporary quarters were near Mr. O'Connor's old duty station and not near his new duty station. The amounts that FHWA reimbursed Mr. O'Connor were appropriate for the first thirty days. For January 17 and 18, however, the maximum daily rate that FHWA should have used to reimburse Mr. O'Connor was three-fourths of the $30 per diem rate for meals. Therefore, FHWA overpaid Mr. O'Connor $15 for January 17 and 18, while he lived with a relative in Massachusetts. After learning that Mr. O'Connor was claiming reimbursement for TQSE when he was living in the apartment that eventually became his permanent quarters, FHWA correctly decided to try to determine whether Mr. O'Connor initially intended to occupy the apartment only temporarily. When Mr. O'Connor moved into the apartment, he had agreed upon a contract to purchase the apartment and expected to close the purchase in two weeks. He had made arrangements, he thought, with PHH to borrow money to purchase that apartment. There is no evidence that while Mr. O'Connor occupied the apartment he looked for other quarters, and it would have made no sense for him to do so, given that he had agreed to purchase the apartment. Approximately one week after he moved into the apartment, PHH told Mr. O'Connor that it could not make a loan with the adjustable interest rate that he expected. Mr. O'Connor recognized that he had an interest in the apartment and looked for ways to protect that interest. He considered looking for other quarters, but he did not do so. FHWA reasonably concluded that Mr. O'Connor did not make a satisfactory showing that he initially intended to occupy the apartment only temporarily. There was no written lease which might have helped the agency determine Mr. O'Connor's intent. Mr. O'Connor moved half of his household goods into the apartment. Presumably the apartment was suitable quarters for Mr. O'Connor, or he would not have agreed to purchase it. Most of Mr. O'Connor's statements that he intended to occupy the apartment only temporarily were made after FHWA rejected his claim. Balanced against his statements are his actions and the circumstances summarized in the preceding paragraph, which indicate that his initial intent was to purchase the apartment for his permanent residence. In FHWA's view, Mr. O'Connor's actions and circumstances outweighed the statements that he made after FHWA rejected his claim. The FHWA's view is reasonable. In summary, FHWA correctly determined to reimburse Mr. O'Connor for the TQSE he incurred in Massachusetts, although it slightly overpaid Mr. O'Connor. FHWA's determination that Mr. O'Connor did not make a satisfactory showing that he intended to occupy the apartment temporarily is reasonable, and so FHWA does not have to reimburse Mr. O'Connor for any expenses he incurred in New York. _______________________________ MARTHA H. DeGRAFF Board Judge