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War stories about base closings.

Trying to put a closed base to good use is far from simple for local officials hoping to contain the economic fallout from an exodus of military personnel.

Prisons appear to be a good redevelopment strategy for some. But if that won't fly with the local taxpayers, then colleges, air fields and retirement communities might be worth a shot.

Imagine for a moment that you sit on the economic development board of a small community in the suburbs of a major metropolitan city. You just heard the news that your local Army hospital is on the list of military installations to be closed.

Built during the 1940s, the building is too old to be used as a modern-day hospital, but some other options have been floated by interested parties with their eye on the property.

A Christian college wants the buildings and surrounding real estate. A medical group wants to use it as a ward for tuberculosis patients. The wife of the President of the United States is calling because she wants the base reused for a children's project. A proposal has been received from a group wanting the land for a nudist colony.

You are responsible for deciding the optimal reuse strategy for the former military hospital. Your desire, of course, is to minimize the damage to the local economy and shore up any hemorrhaging of jobs that might result. Which option do you choose?

If these proposals sound far-fetched, you'll be surprised to learn they were the real choices facing Phoenixville, Pennsylvania, back in the early 1970s, says Daniel Baer, former head of the Phoenixville Chamber of Commerce.

In the end, the government gave part of the base to Valley Forge Christian College and another portion to a local school system and a third parcel to the county government. As part of the deal, each of the three entities had to maintain their portion of the property, which included buildings and recreational facilities ranging from a golf course to a pool.

"It brought no industry to Phoenixville," says Baer. The college didn't have a lot of dollars to work with and the government agreed that the college, and the other users of the base, would become partially vested in the property with each passing year and fully vested after 30 years. The new ownership passed quietly from the government to the new users without their extending a dime of purchase money.

Two decades later, the maintenance has become too much for the college. The grounds of the former Army hospital are littered with junk cars. Birds fly in and out of broken windows, according to community activist Karen Flagg.

"It's fallen into such a disgraceful condition," she complains. "Buildings are vacant at one end with windows missing, and at the other end, they have married couples living in |dorms~ there."

Asbestos has been a problem for the college and the school system, too, which has spent about $70,000 to remove the substance from its base buildings.

Flagg got involved with the old base when she set out to find a way for her township to reclaim a parcel to use as a park. In the process, she learned something most mortgage bankers already know--sometimes, you don't want to take a property back.

In the case of this particular Army hospital, the federal government doesn't want to foreclose, even though the college isn't maintaining the property, because of an asbestos removal bill estimated at $750,000, according to a source familiar with the property.

"The government hasn't required Valley Forge Christian College to meet the obligations of the mortgage because they don't want to step in and take it |the base~ back," charges Flagg.

Then, former chamber of commerce official Baer, Flagg and the rest of Phoenixville got a shock. "All of the sudden we found out the college has a price tag on the piece of land we gave them free, and they have someone who wants to pay a couple million dollars for it," Baer says.

The prospective buyer was a local developer who wanted to redevelop the base into a retirement community and to bring back the recreational facilities that had fallen into disrepair.

But the retirement deal fell through when the county announced plans to use its parcel for a homeless shelter, according to another local activist, Galloway Morris, who has tried unsuccessfully to convince the federal government to let his historical vehicle club use base buildings for a museum.

Meanwhile, the Army Corps of Engineers is investigating the area, looking for old insecticides, PCBs and transformers, buried oil tanks and lead. Surprisingly, Morris says that the rundown condition of the base hasn't affected property values in the immediate area.

A good number of the properties surrounding the base were not high-end homes to begin with, he explains. But the prices of homes that look out over what was once the psychiatric ward have been hurt by their view--the ward's brick buildings are connected by wooden walkways that have been left to the elements for decades.

College officials won't talk about the former base and will only say they no longer plan to sell. Although a current enrollment figure at the college was not available, a reference guide to colleges put the fall 1991 enrollment at 422 students.

The local school district also took over a portion of the old base property, using it for a school bus maintenance operation and for office space. After discovering a portion of their parcel contained toxic waste, the school district split that part off and deeded it back to the federal government.

Perhaps, after all this, the nudist colony is starting to look as if it may actually have been the better choice.

Consider this. The Bureau of Labor Statistics says a nudist colony (assuming it had a hotel) would generate 58.8 jobs for every $1.5 million spent. A college or university, by contrast, would generate 52.1 jobs for the same $1.5 million.

The problems facing Phoenixville are much the same troubles that communities across the nation have faced and will face in the years ahead, as the military confronts its new mandate from Congress and the administration to dramatically downsize its real estate holdings.

The past as prologue?

What have been the economic consequences for communities when bases have been closed in the past? A 1990 study conducted by the Pentagon's Office of Economic Adjustment (OEA) concluded that new jobs more than replaced the loss of former civilian jobs at the bases closed between 1961 and 1990.

A total of 158,104 civilian jobs now located on former bases have replaced 93,424 former civilian Department of Defense (DoD) and contractor jobs, the 1990 study says.

But the study did not count as lost jobs the military jobs that were not replaced after a base closing, something that may significantly affect regional economies.

"Military personnel...are not recorded in the local employment or work force statistics. The relocation of military personnel represents a regional income loss but not |a~ direct employment loss to the area," the Pentagon stated in its study.

Many former bases today house educational facilities. More than 160,000 students attend colleges, technical schools or high school vocational programs on bases closed two decades ago.

Office industrial parks and plants now produce goods and services at 75 of the 100 bases the DoD examined. Forty-two of the former bases are now municipal or general aviation airports.

What's behind these Pentagon statistics? A closer look at the communities hit by base closings in the 1960s and 1970s shows some are clearly better off, while others still seem to be struggling.

A nice clean industry

In 1978, Kincheloe Air Force Base in Sault St. Marie, Michigan, closed down. The area's rural setting had always drawn tourists looking for outdoor adventure, but tourism alone couldn't sustain the local economy.

By 1982, unemployment among the 30,000 residents in the surrounding Chippewa County area ran upwards of 23 percent, up from the 18.4 percent unemployment rate in 1977, the year before the base closed, according to Kathy Noel, executive vice president of the Chippewa County Economic Development Corporation.

"Anytime there is a large closure, whether it's a plant closure or a base closure, those employees laid off feel the pinch first," says Noel. Next, the area came to realize how often the millions of dollars spent by base employees turned over in the local economy, when car dealers and restaurants began going under.

Then, the community found a nice, clean industry that would bring 600 jobs to the county--prisons.

The prison idea came from a public-private partnership, a base-conversion group that convinced the federal government to leave behind not only the 43 buildings on the base, but everything inside them as well, including desks and typewriters.

"Virtually all they had to do then was put up a double fence around the area and they had their |first~ prison," says John Campbell, director of the Eastern Upper Peninsula Regional Planning Commission. "We had a lot of water and sewer, a lot of electric power and a lot of land.

"Locally, at first, there was quite a lot of opposition to putting that first prison in," Campbell recalls. A state policy mandating that prisons be constructed in the areas from which they drew prisoners also had to be overcome.

But soon, businesses and residents began to see the benefits of being a prison town. The prison's security, maintenance, administrative and finance jobs were among the highest paying around. Even the local college cashed in by offering classes to inmates.

Per capita income in the county rose from $5,345 in 1979 to $10,864 in 1990. The assessed tax base increased from just below $1 million in 1970 to $7 million in 1980 to $21 million in 1990, Noel says.

Today, Chippewa County is home to five correctional facilities, each of which brought in 600 jobs, says Noel. The unemployment rate in 1990 had dropped to 9.7 percent.

"Fifteen years later," she says, "I don't think anyone would debate that it |the base closing~ was the best thing for the area."

Where did everybody go?

When Glasgow Air Force Base in Valley County, Montana, closed in the late 1960s, the military moved 8,000 people off the base in three months. At the time, the population in the nearest town, Glasgow, was 7,000.

Today, the town's population still hasn't recovered. Only 5,500 people call greater Glasgow home. "Right away we lost a third of our population," recalls Manson Bailey, Jr., former director of the Valley County Development Council.

Located 250 miles from the nearest large city, Billings, Montana, the base sees average daily below-zero lows in January and temperature spikes of up to 100 degrees in late summer.

The assets left behind by the Air Force included 360 acres of land, runways, hangars, the base headquarters, petroleum storage, taxiways and housing for 2,500 people, some of which was completed after the base was deactivated.

Over the years, the town and county attempted a variety of public and private uses for the isolated base. "There was a prototype family training center for low-income and unemployed |people~ from a six-state area that lived on the base," says Bailey. The federal government ran the center, and it could house 200 families at a time.

There were government manufacturing contracts for work on Army material, including for 105mm shells and netting camouflage. The base became a maintenance and supply depot for the ABM system, until the SALT II treaty washed out the program.

"All of these uses proved to be like a sea anchor on the tax base of the county," says David Skramstad, a local developer whose firm finally bought the 1,223 on-base, single-family and multi-family housing units from the Government Services Administration in 1987.

After the deal closed in 1989, the residential portion of the base reopened as the St. Marie Retirement Community, in the newly named town of St. Marie, Montana. The St. Marie community reuses a portion of the base that includes the commissary, grocery and theater.

Skramstad, director of marketing and community relations for the project's owner, Valley Park, Inc., in St. Marie, says it will take until 1996 to fully sell the project.

Local mortgage lenders have backed the project by agreeing to fund the condominium loans needed to sell the units. "Using it |the former base~ to bring in retirees, who bring with them a savings portfolio and few demands on police or fire, is the way to go," says Skramstad.

James Hanson, president of Valley Bank in Glasgow, says that when the developers asked him to finance the first unit they sold, he thought, "Why would I want to finance just one unit?" and turned down the deal. But Valley Park persisted by selling units on contract and reselling the contracts at a discount that gave investors a 16 percent to 20 percent yield, Hanson recalls.

"In spite of that, 200 units are sold," says Hanson. Now the bank sees the community as a good risk and is working on a deal to resell the loans into the secondary market.

"It's |the project is~ still a diamond in the rough. We think there's enough people |living~ out there, that we see it on the rise. St. Marie isn't going to disappear," he says.

What Hanson and others originally may have overlooked when they first turned down the St. Marie deal is the project's appeal to military retirees as an oasis of serenity and safety in an increasingly violent world. "I had a Realtor tell me yesterday," says Hanson, "The thing I forget is its safety. We take for granted our safety here."

Lessons learned

Are there lessons that can be learned from the experiences of communities surrounding former bases?

Two groups, in particular, have carefully studied past conversions of bases into airports, industrial parks, schools, hospitals and recreational areas. Business Executives for National Security (BENS), a Washington, D.C. foundation working toward the closure of unneeded military bases, conducted a year-long study of 24 communities affected by a 1991 round of base closures. The study looked at the communities' strategies for recovery, gauged their successes and analyzed their ongoing problems.

The National Commission for Economic Conversion and Disarmament (known as ECD) compared the bases closed in the 1960s and 1970s to the military bases slated to close in the 1990s.

Both groups raise questions about the Pentagon's optimistic viewpoint on base closings, articulated in the study cited earlier. "There are several things they left out," says BENS Policy Analyst Keith Cunningham. Some such unanswered questions include: "How long did it take to replace jobs? What quality were the jobs?"

The "new" jobs figure cited by the Pentagon does not factor out pre-existing jobs that simply moved onto the base from the surrounding local community, ECD study authors Catherine Hill and James Raffel point out.

Hill and Raffel stress other faults with the study, as well. The Pentagon's study looked at only 100 of the hundreds of bases the military has closed. Furthermore, the study did not consider the wage levels for the replacement jobs, they add.

Is it possible, based on past experience, to isolate the types of bases that will cause the most economic disruption when shut down? "There are no firm guidelines, but there are indicators |that closed~ depots and shipyards are going to hit the real estate market in their areas the hardest," says Cunningham.

Unfortunately for the communities nearby, these same storage or depot facilities, along with testing grounds and arsenals, tend to have the most environmental problems, according to the ECD study.

And while bases tend to be self-contained units because military personnel tend to shop at on-base grocery and discount stores, closures do hurt some off-base businesses, particularly fast-food restaurants and car dealerships. Significantly, you can add the local real estate market to the economic casualty list, if the base has little or no on-base housing, the experts say. Communities near air bases will be especially vulnerable to declining real estate prices, Cunningham says.

"Many bases are, in fact, small towns that provide their inhabitants with housing, schools, shops, recreational facilities and medical facilities. Military personnel are likely to spend much of the money on the base at its exchange and commissary, whose goods are procured by military regional logistic suppliers," Hill and Raffel conclude.

"Nevertheless, often by sheer weight of their payrolls, bases can play a crucial role in local economies, particularly in smaller communities where they are a major employer," she adds.

Both studies suggest that successful redevelopment of base sites closed in today's environment will be more difficult than it has been in past decades, but it is still possible. In fact, some of the evidence collected by ECD actually implies redevelopment may be easier now because the bases to be closed tend to be located near valuable urban land, such as the now-closed 100-acre Truman Annex in Key West, which sits on land valued in the millions.

More than 50 percent of the bases closed in the 1960s and 1970s were in rural areas, while only 34 percent of the bases already picked for closure to date are in rural areas.

Bases located in urban areas tend to feel the pinch of lost jobs less because they are in wealthier areas, Hill and Raffel say. Conversely, bases in rural areas tend to be located in poorer communities where the consequences of losing military and civilian jobs are felt more severely.

"In a county with a thousand people, the loss of 100 jobs is considerably more significant for the region than the loss of 100 jobs would be in a county with a population of 100,000," Hill and Raffel say.

Recent closures

In seeking to come up with a viable redevelopment plan for a closed facility, most of the communities in the BENS study concentrated on one of three plans: maintaining federal ownership, developing a civilian airport or attracting an educational facility. Parks, retirement communities, housing and aviation maintenance were other options.

Which redevelopment plans worked best? Which were the least successful? These are difficult questions to answer with any uniform degree of certainty. But the most common redevelopment strategy involved getting another federal agency to set up shop at the base.

"This might seem to be an excellent option for a closed base, but there can be dangerous consequences," the BENS study states. "Few communities can successfully lure a federal facility. Moreover, the prospect of continuing federal budget cuts makes the long-term viability of this option fragile."

Converting existing air bases into civilian airports is another popular strategy used by communities facing a base closure. Of the 16 bases with active military airfields in the BENS study, 10 plan to redevelop the land into a civilian airport.

The civilian airport idea is popular for several reasons. It uses existing structures such as runways, has the potential to create a large number of high-quality jobs and looks like a simple and inexpensive option.

Not so, warns BENS. "A community will only realize these benefits if the airport is successful. As many of the communities studied have already discovered, developing an airport is neither cheap nor easy," the study concludes.

Educational facilities are part of the redevelopment plans for three of the bases in the BENS study. "Military bases tend to have the large areas of land necessary for a major campus, and on-base housing can easily be converted into dormitories and staff housing. Educational facilities also produce high-skill and high-paying jobs," BENS found.

Red tape and toxic waste

Communities starting out on the base redevelopment path might be surprised by another finding in the BENS study. The most significant obstacles to redevelopment of bases are government bureaucracy and infighting, environmental issues and jurisdictional battles.

Once a base closure becomes final, other federal agencies get the first shot at redevelopment during a "long and unfair" process, BENS notes. "For example, decision-making |regarding~ the bases selected for closure in the 1991 round has been underway for more than two years, and only one decision--for Moffett Field NAS |in California~--has been finalized," the study concludes.

"Endless red tape and the need to wade through several layers of federal agencies represent the most common source of frustration for communities," the BENS study states.

All of the bases in the BENS study suffer from some degree of environmental troubles. Nine of them made the Environmental Protection Agency's National Priority List, the most serious and dangerous classification in the Superfund ranking system. In all, the tab for cleaning up the surrounding environment at all the bases closed by the military will likely run $100 billion, according to estimates from Physicians For Social Responsibility. The military itself puts the bill at $25 billion.

Before the Pentagon can turn over a base, dangerous pollution must be cleaned up. Communities that want to develop a contaminated base have to work under long-term leases while waiting for that cleanup to occur. Other communities have tried chopping a closed base into parcels to separate the contaminated land from land that's free of toxic waste and leasable, Cunningham says.

The squeeze on schools

And similar to the circumstances created when an industrial plant closes, a base closing can create havoc in the local school system. In areas where large numbers of military dependents attend public schools, the federal government provides funding called impact aid to replace the property taxes that the federal government doesn't pay.

The number of military children in a school system can grow or shrink rapidly when a base closes or expands. "Those systems can go from a system of 4,000 kids to one that has 900 kids in six months," says National Association of Federally Impacted Schools Executive Director John Forkenbrock.

When enrollment declines, school systems must cut back on teachers, usually keeping tenured, higher-paid teachers and letting go newer, lower-paid teachers, thus raising per-pupil salary costs. Enrollment declines can also leave school districts with more facilities than they have the tax base to support.

What happens then? "The property values tend to drop, much like they have in Seattle, where Boeing" has laid off workers, says Dr. William Bainbridge, president and CEO of School-Match, a nationwide school system ranking service that monitors school systems' quality.

The reverse can be just as bad, says Forkenbrock. When bases are closed, the military personnel are usually transferred somewhere else. Those on the receiving end sometimes have massive numbers of children coming in. That leads to facilities problems, additional staff hiring and questions of how to pay for it in an era of tax hike moratoriums.

"We're seeing realignments in the United States, and we're seeing massive infusions of kids from Europe," says Forkenbrock. The Fort Hood, Texas, school system, for instance, has grown by 1,600 children in the last 18 months.

A final common obstacle to redevelopment is one many mortgage bankers can take a lead in preventing--local infighting. Many of the bases that are about to be closed are in urban areas, surrounded by more than one jurisdiction.

"Unless communities start working together immediately, these ambiguities can lead to damaging turf battles among the interested governments. Such disputes delay planning and can cause problems in applying for federal aid," the BENS study warns.

The ECD study, predicts that redeveloping bases in the 1990s will be more difficult than past redevelopment.

"Communities hosting bases that will close in the 1990s will have access to far fewer federal economic development grants than did their historical counterparts," the ECD study notes. "The enormous structural problems confronting the economy today also promise to make base redevelopment considerably more difficult."


* The President approves or disapproves of all or part of the Commission's report.

* The President sends the report to Congress, if approved. If the President disapproves of the report, the Commission resubmits another report.

* Congress must consider the report without amendment. Lawmakers have 45 legislative days or until they adjourn (the earlier of the two) to enact a joint resolution of disapproval. Unless such a resolution clears both houses, the Commission's recommendations will be adopted.

Dona DeZube is a freelance writer based in Columbia, Maryland, who last wrote for Mortgage Banking about Hurricane Andrew.
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Title Annotation:problems with base redevelopment
Author:Dezure, Dona
Publication:Mortgage Banking
Date:Sep 1, 1993
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