Answer: "Budget scoring" is a term that refers to the act of measuring federal spending obligations against amounts appropriated. Under the Anti-Deficiency Act, no agency can obligate the Government to pay more than the amount appropriated to it by Congress. The Office of Management and Budget (OMB), House and Senate Budget Committees, and Congressional Budget Office collaborate on the rules that govern this scoring process. OMB guidelines require that obligations be made for the “full economic cost” of an action at the time an obligation is made. For leases, actions are divided into “capital leases,” which OMB views as equivalent to the purchase of an asset for the purposes of budgeting; and “operating leases” which are leases under which the asset is used for a period of time that does not contain or imply the risks of ownership.
When the Government purchases a capital asset – defined by OMB as land, structures, equipment or intellectual property that have an estimated life of two years or more – scorekeeping requires that the Government budget for the entire cost of that asset (“asset cost”) in the fiscal year in which it is purchased.
For operating leases, funds are “scored” (or obligated) in the year in which the budget authority is first made available in the amount necessary to cover the Government's legal obligations. The specific capital/operating lease rules are contained in OMB Circular A-11, Appendices A and B, (revised in July 2003), (http://www.whitehouse.gov/omb/circulars/a11/current_year/a11_toc.html). If these criteria are not met, then the lease will be scored for budget purposes as a “capital lease” and an amount equal to the “asset cost” (entire cost of the asset”) must be budgeted-for in the first year (recorded up-front) of the lease.
Budgetary scoring impacts two areas of this project. The first is the ground lease itself. There is no scoring associated with a USC Title 10 Section 2667 Ground Lease as long as the installation gets fair market value for the land as in-kind consideration or cash. The second area where scoring applies is if there is any federal leasing of space in the new building(s). The OMB criteria (see A-11 reference above) help the government determine whether the project is really just federal construction in disguise—in which case it would be put in on the books as a capital lease—or whether it really is just an operating expenditure of the federal government like anything else that it would lease, in which case they would account for it as an operating lease.
Although the installation does not guarantee occupancy of space in any new building(s), in order to avoid capital lease treatment, we need to make sure that we sever the ground lease for this project from any potential lease-back, and that when we do the lease-back, it complies with all the operating lease scoring rules. For this reason, although developers do not have to be experts in scoring, it would be helpful for them to have some knowledge of the scoring process and to be familiar with Appendix B of Circular A-11.