SPEAKERS CONTENTS INSERTS
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[H.A.S.C. No. 1067]
NATIONAL DEFENSE AUTHORIZATION ACT
FOR FISCAL YEAR 2000H.R. 1401
OVERSIGHT OF PREVIOUSLY AUTHORIZED PROGRAMS
COMMITTEE ON ARMED SERVICES
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTH CONGRESS
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MILITARY INSTALLATIONS AND FACILITIES SUBCOMMITTEE HEARINGS
DIVISION BMILITARY CONSTRUCTION AUTHORIZATIONS
JULY 1, 1999
ECONOMIC DEVELOPMENT CONVEYANCES AND THE REUSE OF FORMER U.S. MILITARY INSTALLATIONS
U.S. House of Representatives,
Committee on Armed Services,
Military Installations and Facilities Subcommittee,
Washington, DC, Thursday, July 1, 1999.
The subcommittee met, pursuant to call, at 2:03 p.m., in room 2212, Rayburn House Office Building, Hon. Mr. Hefley (chairman of the subcommitte) presiding.
OPENING STATEMENT OF HON. JOEL HEFLEY, A REPRESENTATIVE FROM COLORADO, CHAIRMAN, MILITARY INSTALLATIONS AND FACILITIES SUBCOMMITTEE
Page 3 PREV PAGE TOP OF DOC Mr. HEFLEY. The committee will come to order. Earlier this year, in April, the President and the Secretary of Defense announced the intention of the administration to submit legislation to Congress to amend the existing statutory framework governing the economic development conveyance (EDC) process for real property of military installations closed or realigned pursuant to the base closure laws. These announcements attracted a lot of interest, both here in Congress and in the communities across the country, which are still struggling to put closed military based into productive and viable economic reuse. The administration submitted the necessary legislation, but regrettably, just prior to consideration by the Committee on Armed Services of H.R. 1401, the National Defense Authorization Act for Fiscal Year (FY) 2000.
After consultation with the members of this subcommittee, I was not comfortable that we had a basis on which to make a reasoned decision on a complicated matter in such a short period of time. As a result, the recommendations of the Subcommittee on Military Installations and Facilities, which Mr. Taylor and I presented to the full committee, did not include this proposal. We simply did not know enough about the proposal to be comfortable moving forward, and there was a division of opinion among members about the wisdom of the legislation.
In the meantime, our colleagues in the Senate chose to move forward with the legislation as part of the defense authorization bill. Our colleague on the full committee, the gentleman from Alabama, Bob Riley, offered and then withdrew a variation of the Administration's proposal during the full committee markup. The gentleman from Arkansas, Asa Hutchinson, continued to offer a similar amendment on the House floor. I want to express my appreciation to both of these members, who are here this afternoon, for their willingness to withhold offering those amendments to give the subcommittee the time to examine thoroughly this proposed change in the law. This will be an issue in the conference on the defense authorization bill. We need to examine the proposal in detail, and that is why we are here today. I made a pledge to both these gentlemen that we would have a hearing and we would have it before we went to conference.
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It seems to me we are faced with two competing and very compelling public policy interests. From a fiscal perspective, one of the effects of the Administration's proposal is that receipts from the sale of real property, already well below the assumptions that were made at the outset of the Base Realignment and Closure (BRAC) process, would be further diminished. At the margins, for the duration of the current BRAC process and certainly if there is a future BRAC process, that would increase the demand for direct appropriations. The question is whether the federal taxpayer would be asked to pay more for base closures than would otherwise be the case. From an economic development perspective, we need to do everything we can to accelerate the reuse process so that communities can move on after the closure of major military -- closure or realignment of military installations. We can and should streamline the process. The question is whether this legislation, absent any change in the area of environment remediation, can truly speed economic redevelopment. There is a public policy trade-off here, and I hope the hearing today can provide an answer to those questions.
Mr. Taylor, I would yield to you for any comments you would like to make.
[The prepared statement of Mr. Hefley can be found in the appendix.]
STATEMENT OF HON. GENE TAYLOR, A REPRESENTATIVE FROM MISSISSIPPI, RANKING MEMBER, MILITARY INSTALLATIONS AND FACILITIES SUBCOMMITTEE
Mr. TAYLOR. Thank you, Mr. Chairman. I appreciate you calling this hearing. I think it is safe to say that Congress was given a very bad set of assumptions when they made the decision to have the three rounds of base closure. They were told by someone that the properties would be sold and had some value. They were never told of the incredible cost of cleaning up those properties, which to date has been $13 billion, and I do not think they have fully comprehended the economic hardship that would be placed upon the communities involved, in particular the individuals who worked at those installations.
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I think it is further complicated by, at least in the instance that I'm the most familiar, the Mississippi Army Ammunition Plant. There is certainly some hesitancy to continue to pay companies millions of dollars a year to baby-sit empty buildings.
I think we are now going to hear from these gentlemen a series of proposals to maybe come up with a better plan. But I would certainly hope this committee and all members of Congress would keep this in mind in the future, that base closure to date has been a money loser for our Nation. It has caused terrible hardship for both the communities and the individuals involved. It has taken communities that used to be pro-national defense and, much like a lover that has been left behind, they are now angry at the military and encourage their members to vote against the defense budget. Maybe something good can come out of all of this, and I more than welcome our colleagues today, I want to hear what they have to say, but I have got to say, Congress having been burned so many times on this issue, I have got to take somewhat of a jaundiced eye to any further proposals at this point.
Thank you, sir.
[The prepared statement of Mr. Taylor can be found in the appendix.]
Mr. HEFLEY. Thank you, Mr. Taylor. We have got a number of panels today, and before I recognize the members who are seated at the table, I want to take care of some housekeeping items.
I ask unanimous consent that statements prepared for the record by Representatives Ken Calvert, Bob Matsui of Californiaboth of California, I will sayJerry Weller of Illinois, and William Dellahunt of Massachusetts and Anne Northrup of Kentucky be included in the record. I further ask unanimous consent that a statement by Thomas O. Markham, Executive Director of the Lowery Redevelopment Authority in the State of Colorado, be included for the record.
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Without objection, so ordered.
[The prepared statements of Mr. Calvert, Mr. Matsui, Mr. Weller, Mr. Dellahunt, Mrs. Northrup and Mr. Markham can be found in the appendix.]
Mr. HEFLEY. Our first panel today consists of five members of the House with a deep interest in this legislation. I am grateful, as I said earlier, for the cooperation of Bob Riley and Asa Hutchinson to work with the subcommittee so that members can have a clear body of evidence on which to draw when they make a decision on this legislation in conference.
Also today, I am pleased to have the additional insights which Jerry Lewis, Sam Farr, and Harold Ford will provide.
This is a diverse group, but it is one that has shared a number of common problems.
Bob, as a member of the committee, let us begin with you, and then we will go from there.
So, I yield to Bob Riley.
By the way, without objection, your full statements will be put in the record. We are going tobecause of the number of people we have testifying today, we are going to operate on the clock, and all of you know how that works.
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So, thank you very much.
STATEMENT OF THE HON. BOB RILEY, A REPRESENTATIVE FROM ALABAMA
Mr. RILEY. Thank you, Mr. Chairman.
Mr. Chairman, as you know, this is a very important issue to me and the residents of Alabama.
Initial budget estimates for BRAC 1988 and '91 assumed that the Department of Defense (DOD) would receive approximately $4.1 billion, with a ''B'', dollars in revenue from the sale of closed military bases. As of today, I would like to tell the committee that we have received whopping 2.4 percent of what we estimate. I think Mr. Taylor is right. We have taken in less than $100 million when at one time we expected 4.1 billion, and that's 62 of the 78 installations closed with BRAC.
During this same period of time, we have spent over $20 billion of United States (U.S.) taxpayer funds on programs to assist Russian soldiers and other aid programs to help us get through the cold war with that adversary and make the transition from communism to capitalism. I am not here to suggest that we should eliminate funding for Russian programs but, rather, to inject some common sense and fairness into the BRAC process. If we are going to help Russian soldiers adjust to life after the cold war, don't we have at least the same obligation to assist our own communities which are now feeling the pain of post-cold war down-sizing?
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Mr. Chairman, as you are aware, during the House Armed Services Committee markup of H.R. 1401, I offered an amendment that would have conveyed BRAC property at no cost to the 18 communities still in the process of negotiation with the Department of Defense. Specifically, my proposal would have allowed the Secretary of Defense to convey property to communities of the local reuse authority at no cost. In return, communities which received property would have been required to invest any proceeds from the sale or lease of BRAC property into the continued economic development of the BRAC property.
Mr. Chairman, this is an issue of just fundamental fairness. Base closures can have a disastrous effect on communities. In my own congressional district, my largest county may lose two out of every five jobs as a result of the closure of Fort McClellan. In my humble opinion, the current process hinders the successful redevelopment of closed military facilities.
The Clinton administration has touted the fact that 48 percent of the jobs lost from the BRAC process have been replaced. I would ask the committee to take a good look at those bases where these new jobs have been created. I think you will be surprised at the results. At BRAC installations that have not received the no-cost economic development conveyance or a public benefit conveyance (PBC), only 44 percent of the jobs lost have been recovered. Conversely, at BRAC installations which have received either a no-cost EDC or a PBC, a remarkable 80 percent of the jobs have been recreated.
Mr. Chairman, the distribution of military property through a no-cost or low-cost conveyance is not a new concept. In fact, prior to the establishment of BRAC, a no-cost or low-cost conveyance of property was often standard procedure.
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The track record for communities that have benefitted from a PBC or an EDC have been quite impressive. Eglin Air Force Base in Alexandria, Louisiana, received a no-cost conveyance and to date has created over 1,500 jobs, which is more than double the amount of civilian employment that existed prior to the closure of the base.
Sawyer Air Force Base in Michigan received a rural no-cost conveyance and to date has created nearly 900 jobs, which is more than the 788 civilian jobs that were lost in the closure of the facility.
Pease Air Force Base in Portsmouth, New Hampshire, received a no-cost aviation public conveyance. This has led to the establishment of a trade fort that has created over 1,900 jobs, nearly five times the 400 jobs that were lost to the closure of the facility.
Under the present system, BRAC communities are required to negotiate the conveyance of property with DOD. With the wide-ranging criteria for property distribution that has been established over the past few years, no DOD land conveyance is ever the same. In fact, oftentimes, large cities receive a no-cost PBC while rural and medium-size communities are forced to pay fair market value. For example, Glenview Naval Air Station in Chicago was given a no-cost aviation public benefit conveyance through the Federal Aviation Administration (FAA).
Similarly, Fort McClellan, located in Calhoun County, Alabama, with no working air field, a county-wide population of just over 100,000, which disqualifies the county from receiving a rural no-cost conveyance, will be forced to pay fair market value for its military base. Now, maybe I am missing something here, but when we have gotten to the point that a city like Chicago gets a no-cost conveyance and a small community like Anniston, Alabama, with a population of 27,000, has to cough up millions, there seems to be something very wrong. By providing a no-cost EDC to BRAC communities, we can establish a consistent and fair Federal policy that will once and for all eliminate the disparities of the current system.
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Mr. Chairman, many of the communities like Anniston, Alabama, have been very supportive of the services over the years, and I believe that my proposal is one small way for the Department of Defense to give something back to those communities who helped American win the cold war. Mr. Chairman, we have an opportunity to put an end to this madness in the upcoming conference. As you know, the Senate has accepted an amendment offered by Senator Warner that is virtually identical to my proposal.
I appreciate your willingness to hold hearings on this important issue and hope that today's hearings will provide you with an understanding of the difficulties that a major base closure like Fort McClellan can have on a small community. Later on this afternoon, you are going to have an opportunity to hear testimony from two of my constituents on this matter. I would like to personally welcome Mayor Gene Stedham and Chris Waddle and thank them for being here today. Mr. Chairman, I am sure that you will find that their testimony will be as compelling and thoughtful as I do.
Again, let me thank you for working with me on this matter, and I yield back the balance of my time and look forward to your questions.
[The prepared statement of Mr. Riley can be found in the appendix.]
Mr. HEFLEY. Thank you, Mr. Riley. Let us go now to the Chairman of the Defense Appropriations Subcommittee on the Appropriations Committee, Mr. Jerry Lewis.
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STATEMENT OF THE HON. JERRY LEWIS, A REPRESENTATIVE FROM CALIFORNIA
Mr. LEWIS. Thank you very much, Mr. Chairman and Mr. Taylor and my colleagues.
I want you to know at the beginning that, when we first had base closure before the Congress, I was one of those members who voted no on the base closure provision, not because I did not see that there was sense to our examining where we had been with these based but because one of mine, Norton Air Force Base, was very likely to be on the closure list. It was obvious to me that it would be, and frankly, that was a vote for my constituents, since I couldn't separate that base out, but by way of history, at one time, a fellow by the name of Harry Shepard was the congressman from our region. For 28 years he served in the Congress, and during half of time, on the Appropriations Committee, he served as the Chairman of the Subcommittee on Military Construction (MILCON). Now, he had that responsibility all through the big war.
California and our region had lots of military as a result of that. Certainly, a piece of it was reflective of the fact that the Pacific was a part of that war, but nonetheless, Norton, George, Edwards, Twenty-Nine Palms, Fort Irwin, all those bases developed over time. It was pretty apparent we were going to be impacted by base closure. No district in the country was quite impacted like ours.
March, just to our south, was closed and is now partially a reserve base, Norton Air Force Base was closed, but I could never even imagine that a basea fighter base, known as George Air Force Base, would be on the list, as well, but both of those major based, Norton and George, were on the first base closure round some 10 years ago. The results of that experience for our communities were nothing short of disaster.
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As of this moment, Norton is in my congressional district but services people who affect both George Brown's district and my own. At the time of closure, there were some 10,000 employees at the base, military and civilian. They were serviced by endless other thousands who were interrelated with the base. As of this moment, there are 2,300 employees at that facility. Indeed, it is very, very clear that the disaster continues for the entire community, and our lack of understanding of what base closure was all about at the time is reflected in the experience of this community.
So, 10 years later, the economy still is essentially in a hand-basket as a result of base closure, and our inability to communicate effectively with the force involved has had a dramatic effect, an ongoing effect upon the economy, as well. A no-cost transfer of the entire base would relieve the community in a significant way. As of this moment, that base just sits there and is a useless asset for the community because of an inability to realistically measure the values that reflect the economy that surrounds that community.
I might mention, insofar as George Air Force Base is concerned, there has been some progress in recent years, the last couple of years, regarding possibilities for use of that facility. A portion of the base was transferred to provide for a facility for a Federal prison. When that transfer was made, the prison portion or parcels that were involved ended up taking away rail lines that were very important to the economic development and future of the remainder of the base.
That problem was not thought through, in my judgement, carefully. As a result of it, there's a huge expense to the local community to try to replace those rail facilities so commercially it can become a viable item. These two bases are a reflection of perhaps the worst that we have been about. It just plain has not worked, and this committee is attempting to address the reality of these circumstances.
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I could go on for a long time, Mr. Chairman, but indeed, if you want an illustration of how base closure should not work in the future, how it has not worked in many instances in the past, testimony regarding these bases are a part of your record, and I appreciate very much your taking the time to review these circumstances with us, and we look forward, in my other responsibilities, to be as helpful as I can, in any way that I can, with your work.
So, thank you.
[The prepared statement of Mr. Lewis can be found in the appendix.]
Mr. HEFLEY. Thank you, Jerry. It is very important that we hear these specific stories of how it has worked in your particular cases, and so, we will hear more of that as we go through.
I apologize, but we all know we have to live with this, and I think this would be a good time to break, go do the vote, and get back as quickly as we can, so we do not keep people waiting any longer than they have to.
We stand in recess.
Mr. HEFLEY. Mr. Farr, we will turn it over to you, and proceed.
Page 14 PREV PAGE TOP OF DOCSTATEMENT OF THE HON. SAM FARR, A REPRESENTATIVE FROM CALIFORNIA
Mr. FARR. Well, thank you very much, Mr. Chairman.
You have my printed statement, and I would like to also submit some letters from our local communities in support of the Senate version, with some modifications, and I would like to submit that for the record, wherever that record may be.
[The information referred to can be found in the appendix.]
Mr. Chairman, I am so interested in this issue that I'm now on the MILCON appropriations committee, and I want towe reported the bill out this morning, and we really look forward to working with you. It has been a good relationship between the members of our committee in a bipartisan fashion and the members of your committee.
I am in Congress, I think, because of BRAC. We had the largest base in the United States closed in the smallest economic region. We had a base that was 27,000 acres. That is the size of the City of San Francisco, and it had about 27,000 people on it in a community of about 150,000 total. So, we lost about a fifth of our population. They got up and left and left the city behind, and you would think that that would be easy to just convert. Unfortunately, it is not, and it is so difficult that I decided I was going to run for Congress to make sure that the conversion became one that was in the community's desire.
Seven years later, we still have not conveyed a lot of the base. I have thought a lot about it, because I think, as policy-makers, what we are concerned about is how to make this process work. Unfortunately, I think we do not think outside the Federal box, and we talk about, well, this process ought to allow for reimbursement to the Federal Government. But remember the taxpayer out there, who you and I represent, is not just paying taxes to the Federal Government.
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At the same time they are paying their Federal income taxes, they are paying their state income taxes, and if you have a local, and I have looked at the number of communities, the number of taxpaying agencies that are involved with just this one base.
We have the county government, the city government, seven city governments, park districts, water districts, airborne districts, sewage districts, garbage districts, community college districts, school districts, transit districts, association of all the governments districts. So, you have a lot, and those are all tax-using and tax-levying entities. So, we have a lot of taxes that are being paid and a lot of governments that are receiving those taxes.
Now, what the policy here is that we have said, when we close bases through the process created by BRAC, by congressional action, that we've made a determination that this property is of no value to the Federalto the military. And then we turn around and say it is no value to us, but however, you local communities are going to have to pay for it. You are going to have to pay as much as we think it is worth. We are going to go out and think it is worth a lot, because our responsibility to reimburse BRAC.
So, what you have done isit is no value to the Federal Government, but it is all of the sudden a huge cost that the Federal GovernmentThat these local communities have to come up with, and that dispute that goes on about how you are going to value the propertyI mean the difficulty with the military property is they never build to local building standards.
Page 16 PREV PAGE TOP OF DOC We had a hospital built during the Vietnam war, state-of-the-art hospital in America, military built it, seven stories high, biggest building in the whole area. BRAC closed it. There were hospital needs in a growing state like California. There was not one hospital entity, private, publicall of them would love to have the building, but it didn't meet California earthquake standards, therefore could not be used as a hospital. It was too expensive to retrofit it.
So now it is a Federal office building for military purposes, because you cannot really unload that building. You are going to have to keep it in Federal ownership to get around the local zoning problem or building code problem.
So, what happens is, why we are having so much cost, it is not just clean-up cost from unexploded ordinancesand we haveyou know, we have contaminated aquifers, we have unexploded ordinances, we have lead-based paint, we have asbestos, we have motor pool things, we have sand dunes where all thewhere the rifle ranges were.
All of those have a different technology for cleanup, very expensive cleanup. And then you determine what is the value of this property, and the value is based on some future effort. The message to the private sector is, this property has a lot of problems. But from Washington's standpoint, they think, well, this property is worth a lot, because it is out there in Monterey Bay in California and property values are higher there. So, we have been disputing for seven years, until just recently, finally came to a conclusion of what the value of that property is.
Nonetheless, the communities really do not have the resources to pay for it. And if it is really about economic conversion, we could have had activity on there, where there were property taxes paid, sales taxes paid, income taxes paid to the Federal Government and so on that could be derived from that property if it had not been so complicated and so much in limbo.
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So, my plea to this committee is that we have to change it. I would love to rewrite the whole BRAC process, because I think that there is a lot of complications in it. But we are dealing with the cards that we are dealt, and the card is that we have an option to improve public policy, Federal policy on this. I am here to advocate to this committee that we have got to come up with something like the Senate language on this side. I would hope that the language that you would adopt would bewould not be as restrictive as the Senate languages on the uses, on the economic uses. I think you could broaden the definition a little bit greater, but for God's sake, we have to do something, because we are not really making money for the Federal Government, and let me just tell you how cumbersome it is.
We have dozens of different offices, across two or three Federal agencies, plus three or four state agencies that create a process that is so convoluted that just getting those meeting of the minds and getting on one page takes years, and all of that time is cost. It works at cross purposes. There is in-fighting that goes on in department agencies or disputes over the authority.
An example is the DOD office onwe havejust look at these agencies that have to do with it. DOD Office on Environmental Security has one set of rules relating to base cleanup. The Army Office of Environment, Safety, and Occupational Health has another set of rules, as does the Army Office of Installations, Logistics, and Environment. These rules differ from the U.S. EPA rules, which differ from the set of rules with California State EPA and the California Environmental Health Agency. Another example is that the Army offices at the Pentagon have signed off, on an EDC for Fort Ord, but the local Army BRAC office signed off on a competing PBC.
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So, the same piece of land now has two different entities giving it two different privileges. The military refuses to correct the mistake, the difference between the Washington message and the local message, and it has left the local government sort of left holding the bag and told, well, you figure it out. So, what happens is this process goes on and on and on, and it costs everybody, including the Federal Government and all the agencies involved, a great deal of money, and I think thatand I am an advocate in this in the MILCON appropriations committee, as well.
I think we can be smarter about how we transfer land and that we can get back a better benefit than this cumbersome idea that there is only value for the Federal Government in this transfer. I urge you to adopt language that would allow for the EDC transfer.
Last, let me just say that the only saving graceand I really haveI am involved with BRAC every day. There is 28,000 acres. You cannot imagine how many buildings and entities want these.
The tragedy as a politician is that I get calls every day from families saying, you know, my daughter, my son is sleeping on the street, and we are driving by all of those homes, 2,000 apartments, but all boarded up, why can't you just allow these people to live in those places?
So, we are giving, I think, a negative message by a process that we have created here. We have got to make it simpler, but if it were not for the two entities that reallysort of civilian entities to get involvedone is the Economic Development Administration. They have provided one of the best resources for communities, to help them pull it together, and the other is the Office of Economic Adjustment. They get it. The OEA really gets it, and they know that they best thing for DOD is to rid itself of excess property and to do it quickly and to do it cleanly.
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Thank you very much.
[The prepared statement of Mr. Farr can be found in the appendix.]
Mr. HEFLEY. Thank you, Sam. We appreciate your work on the MILCON, on the appropriations, but I will point out, however, that this year, unlike in previous years, weyou appropriated for 25 projects that were not authorized in our authorization bill, and I think, in the future years, that we need to work a little closer than that. We do not this year have a mirror billshave two mirror bills as we have had in the past.
Mr. FARR. Well, we will work on that. Remember, though, that we also camethe Administration came in wanting to split the baby and only give us half the money for MILCON projects, and we refused to accept the Administration's proposal, and we funded MILCON exactlywe kept under our cap, but we funded it at last year's levels.
So, we have doubled the amount of money that the Administration wanted in the MILCON appropriation.
Mr. HEFLEY. You had less money than we did and appropriated 25 projects that we did not, and those have to be authorized before they go into effect. So, you might tell members who ask you about it don't send out your news releases yet, because some of those are a long ways from getting done.
Mr. FARR. We can tell them to work with the authorizers and hope that we get them authorized.
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Mr. HEFLEY. You can do that.
The gentleman from Arkansas, Mr. Hutchinson.
STATEMENT OF ASA HUTCHINSON, A REPRESENTATIVE FROM ARKANSAS
Mr. HUTCHINSON. Thank you, Mr. Chairman, and I want to thank you for your gracious cooperation in conducting this hearing and for the dialogue that we had on the House floor.
You have heard a lot about this today, and I want to relate the problems in my district and how it affects the base closure in Fort Chaffee. In my home town of Fort Smith, Arkansas, the former Army post of Fort Chaffee was closed in the 1995 round of base closures, and the community reuse authority has been working with the Department of Defense to negotiate an acceptable purchase price, but it appears that, if the property is transferred at current market value, the purchase price and necessary clean-up cost will exceed the expected revenues generated from the redevelopment, and a number of unique characteristics of the property make redevelopment a very costly endeavor.
Fort Chaffee is located near Barlene, a small town outside of Fort Smith, and so, it is, in essence, a rural area, but it is in a metropolitan statistical area, so it does not qualify for some of the economic development assistance, and we only hadI think it was around 300 jobs, a minimal number of civilian jobs that were closed.
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The biggest problem is that Fort Chaffee has over 700 buildings that must be demolished in order to encourage development. The buildings date from World War II erain fact, Elvis Presley had a haircut in one of those buildingsand they contain a significant amount of asbestos and lead. This hazardous material must be removed before the buildings can be demolished.
The projected cost of the entire project is $22 million. Because the lead and asbestos do not pose an immediate threat to the safety of the community, and will not until the buildings come down, the Fort Chaffee Public Trust has been unsuccessful in finding Federal funds through the Environmental Protection Agency (EPA) to help with this effort. Other infrastructure needs that must be addressed before the property is ready for reuse total another $10.6 million. So, there is obviously little incentive to pursue a redevelopment plan if the public trust is unable to recoup the cost of purchasing and restoring the property. Not only that problem, but the Department of Defense has the responsibility for maintaining those buildings until the time of the transfer. So, there are enormous costs both for the Government but also for the redevelopment authority.
The Fort Chaffee Public Trust plans to submit an economic development conveyance application to the Department of Army at the end of July. It is unlikely that will be approved, for the reasons I stated, that there are a minimum amount of civilian jobs that were lost in the closure. If the application is rejected, the trust will be forced to negotiate the purchase price, further delaying the transfer of the property.
Another issue worth noting is that, even when the Corps of Engineers completes its analysis of the fair market value of the property, this information will only be shared with the Army and not with the public trust. If the public trust economic development conveyance application is rejected and we are forced to enter into negotiations with the Army, then we will be negotiating blindly. This process is unfair.
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The Department of Defense has made the determination that the time, manpower, and expense associated with negotiating an acceptable purchase price with local communities in many cases costs more than revenue generated by the sale of the property. Secretary Cohen recently proposed that the law be amended to allow the DOD to transfer property at no cost in situations where they believe it would be economically advantageous to the department. In exchange for the free transfer, the community in question would have to use the land for job-generating economic development.
Here in this case, you have got the buildings, you have got the asbestos, you have got the maintenance, you have got the difficulty of negotiating a value of the property, and the fact that, whatever value is assessed, the development trust cannot purchase it at that. Because the cost of demolition and the infrastructure that has to be put into the property in order to make it feasible to develop it makes it prohibitive. This is an example of a circumstance where a no-cost transfer would be appropriate but the current law does not allow it. It would be beneficial to the government. It would certainly be beneficial to the community. It would create the jobs that is the whole object of the process that we are going through. For that reason, I would very much solicit the help of this subcommittee to assist in changing that law. With that, I was delighted to withdraw the amendment that was offered, but we do hope that you can provide the assistance that we need, as well as the other members and my colleagues have testified to about today, and I thank the Chair.
[The prepared statement of Mr. Hutchinson can be found in the appendix.]
Mr. HEFLEY. Thank you, Mr. Hutchinson. That is very helpful.
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The gentleman from Tennessee, Mr. Ford.
STATEMENT OF THE HON. HAROLD FORD, JR., A REPRESENTATIVE FROM TENNESSEE
Mr. FORD. Thank you, Mr. Chairman.
I said to my good friend, Mr. Hutchinson, who represents a district not far from mine in Memphis, that I still get my hair cut where Elvis got his hair cut.
I thank the Chairman and Mr. Taylor and Mrs. Fowler. Looking at all of my colleagues with these blue suits on, it is good to see somebody not wearing a blue suit and someone who looks a lot better and a lot smarter than those of us on this panel, even on this committee.
Mr. HEFLEY. She is on the committee to dress up this committee.
Mr. FORD. Mission accomplished, and I say to all of my colleagues on the Democratic side, thank you for the opportunity to talk a little bit about the challenges we are facing back in Memphis at our defense distribution depot, which was ordered to be closed in 1995 by the BRAC commission, by the Base Realignment and Closure Commission.
The depot eventually closed in 1997, and we lost about 1,300 civilian jobs. Since that time, we have created, like most communities, a depot redevelopment authority, which is a Tennessee municipality founded by the City of Memphis and our county, Shelby County. Quite frankly, they have done a good job at obtaining commitments from the private sector and the public sector to help redevelop this property. The depot site includes more than 5 million square feet of warehouses and more than 100 buildings that can be redeveloped into a light manufacturing or high-tech logistical center.
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Since the Administration's announcement regarding the economic development conveyances proposal, which as we all know would authorize the Secretary of Defense to convey this property at no cost, provided that the local development authority agrees that the proceeds from any sale or lease of such property shall be used to support the economic redevelopment of the installation. The U.S. Corps of Engineers at Mobile, Alabama, Mr. Riley, as well as our Defense Redevelopment Authority (DRA), have negotiated in good faith a $4 million price for the sale of the property. Provided this initiative does not get adopted, we are prepared to move forward with that $4 million price, Mr. Chairman.
I support the Administration's efforts. I am concerned a little bit by this 10-year plan that they have put forward. In fact, the Memphis DRA has already contracted for more than $4 1/2 million in improvements, and our city has committed to $3 million to build a new police precinct there in the area. The DRA plans to implement these plans regardless of what happens with this no-cost proposal. My concerns with the no-cost proposal, as I said, is that it would require the local development authority to invest 100-percent of their net proceeds over the first 10 years in the facility.
In Memphis, the DRA forecasts that it will complete its mission of filling the 5 1/2 million square feet significantly before this 10-year mark. Our DRA would like to be able to sell the facility, pay back the $20 million city and county bonds used to finance the necessary improvements, and split the net sales proceeds with the city and county governments which created the DRA. The only way for the Defense Redevelopment Authority to put the depot on the property tax roll is to sell it to private investors. However, this 10-year requirement would seriously handcuff the DRA in their efforts to convert quickly the depot into a revenue-generating property.
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Once again, Mr. Chairman, I appreciate the opportunity to testify. I appreciate your willingness and all the committee members' willingness to hold this hearing. I am hopeful that we can get the relief we need in order to continue with the progress that is being made down in the Ninth District in Tennessee, and with that, I say thank you.
[The prepared statement of Mr. Ford, Jr., can be found in the appendix.]
Mr. HEFLEY. Thank you very much. Thank all of you for your testimony, and if you can stay with us just a few more minutes, we will see if the members have questions. Mr. Taylor?
Mr. TAYLOR. Mr. Chairman, in addition to the remarks of the gentleman today, I would like the record to reflect that Congressman Dellahunt has been pestering the dickens out of me on behalf of his installation. I hope the record would reflect that.
Mr. HEFLEY. He does have a statement in the record.
Any further questions?
Mr. TAYLOR. No, sir.
Mr. HEFLEY. Mr. Snyder.
Mr. SNYDER. No questions. Thank you, Mr. Chairman.
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Mr. HEFLEY. No questions. Mrs. Fowler.
Mrs. FOWLER. I want to thank the witnesses for appearing here to testify, and I particularly want to thank our colleague, Mr. Riley, who, as a member of this committee, has really been working hard on this complex issue and has done his district a very great service by his efforts. I think it was due to your efforts that we have all agreed to pursue this and look further into it. But I just want to make my little statement for the record here, too, because as he noted and as each one of you has noted, there is really an issue of fairness here.
We have got a situation in Jacksonville, Florida, similar to what I have been hearing from the members here today, and I heard Mr. Lewis earlier say no one ever believed George Air Force Base would be put on the list. Well, back in 1992, my predecessor, Representative Charlie Bennett, never believed that Cecil Field would be put on the list, the only master jet base on the east coast, and lo and behold it was and, in 1993, was closed, 17,000 acres and 8,000 jobs, and so, it iswell, it will be closed the end of this year. BRAC closed it down, and we are going through that process, but we have got an unusual situation in Jacksonville, Florida, in that we are a consolidated city/county.
So, this base that sits 12 miles out from the metropolitan area is classified as being in an urban area, because our city limits go out to the county line. Now, you know, we have got a city that is 600 square miles, butand this is out in the middle of nowhere, but it does not fit under the definition of rural, because we were forward-thinking back in 1969 and have a consolidated government.
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So, we are being penalized because of this, and we are consideredCecil Field is considered not eligible for rural conveyance, even though it is located in one of the least-developed parts of our county. Our Cecil Field Redevelopment Commission has been told now that $57 million in improvements will have to be made in order to fully utilize that part of the base that is going to be developed for industrial activity. The bulk of these improvements would go on the property, which is about 8,300 acres that is associated with EDC charges.
Now, we all know $57 million is a large amount of money for any jurisdiction to have to come up with, especially when you have lost a major economic engine like Cecil Field. So, if you add a conveyance fee on top of that 57 million, then it is a really daunting challenge.
So, I just want to say that I share the concerns that have been expressed by the members today. I look forward to working with our chairman and our members to see if we cannot work out some solution that will help our counties across this country, and cities, that are dealing with this and see cannot we come up with something that will help all of us to continue to have good economic development in each of our areas.
Thank you, Mr. Chairman.
Mr. HEFLEY. Thank you, Mrs. Fowler, and for whatever it is worth, the Chairman of this committee thinks that was a terrible mistake to close Cecil Field. It is one of the few places anywhere in the country where you had air space for training where you could get directly to without worrying with any air traffic controller outside the facility or anything. You just went and trained and came back, and we closed it, and I do not know what they were thinking, but I understand the problem you have.
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Mr. MCHUGH. The other place you could do that, Mr. Chairman, was Plattsburg Air Force Base, which was not on the list, actually, but the commission closed it anyway. So, in an effort at full disclosure, I want the record to show that, like the gentle-lady from Florida and all of our friends here at the front table, I have a very direct and parochial interest in this. It is like being a brother or a sister in arms if you have been through the battle. It gives you a certain perspective and understanding that, sadly, in this case, helps all of us recognize what, under the best of circumstances, is a very, very troubling, trying process.
My friend from California talked about how he works on BRAC issues every day. I imagine that is something that most of us can say, and it is not that we regret the opportunity to be helpful. It is just that, at some point, there has to come an end, and clearly, as has been suggested here today, that end could be greatly facilitated by the proposal that we have before us. I don't think the objective of BRAC was to ever have the United States military conduct a lawn sale, where they literally sell the lawn. The objective was to try to curtail operating costs, and there is nothing inconsistent that I can see in this proposal with that very worthy objective.
So, I want to thank all of you today for helping us to focus on this very important issue. Let me also associate myself with the words of Ms. Fowler with respect to my appreciation to the Chairman for taking what is a very serious question and, as he always does, looking at it in a very measured, reasonable way, and I look forward to working with you further, Mr. Chairman, and hopefully resolving this in an equitable and a workable fashion.
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Mr. HEFLEY. Thank you, Mr. McHugh. Mr. Thompson.
Mr. THOMPSON. Thank you, Mr. Chairman, and thank you for holding this hearing today. I want to thank my colleagues who came out to speak on behalf of something that I believe is a real major issue. I lived through one of these, albeit not as a Member of Congress, but I had a base in my then-state senate district closed, on Mare Island Naval Shipyard in Vallejo and Salano County. That closure meant the loss of $500 million annually in economic loss to one county in my district. It was a nuclear base and employed a lot of highly-paid civilian employees, and had it not been for the upswing in the economy, that part of California would still be suffering greatly. But it still is suffering trying to deal with bringing these properties back on-line and making it economically beneficial to not only the area but to the entire state. So, I'm very much in favor of making sure that this conveyance issue can be resolved in a manner that allows us to be reuse these facilities and do it as expeditiously as possible.
Mr. HEFLEY. Thank you, Mr. Thompson.
We do not want to keep you forever, because we know you have other commitments, too, and you have done a great job of making the case, and we appreciate that. Let me ask a couple of quick questions, if I might.
Do any of you in your districtsor even if you don't have in your districts, how would you respond to the situationof the communities that have purchased the property, that have put out the money and have purchased the property under the present system that we are operating on now, and all of a sudden, they see us giving these away and they come back and say, wait a minute, we want a refund.
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Mr. RILEY. Mr. Chairman, if I can address thatand you and I have had this discussion before, but I think when we have a failed policy, I think we have to treat it almost like we would an Internal Revenue Service (IRS) code or a change in tax policy. When we cut the capital gains tax from 28 to 20, we did not go back and make it retroactive.
I think we have to look at it now. What we anticipated would happen with the BRAC process did not happen. Now we have awe have the opportunity to look back in hindsight and see the problems that were created by this, and we have an opportunity to fix them. I do not think we can go back and solve all of the problems that were created over the last few years, but that certainly should not mean that we extend a failed policy forward.
Mr. FARR. Mr. Chairman, I think there has got to be a cut-off point. I think where the transfer has been made and payment has been made, then it ought to be cut off, but for ongoing and future negotiations, you have sort of three classes. You have property that has been done, payment has been made, you have property that is in negotiation right now, and you have property that will be in negotiation. Those properties that are in negotiation are probably the ones most affected by it, because the others are already done. I think you have to think about how to deal with that, and I know, in our situation, we anticipated this discussion and wrote into the contract of sale that, if Congress changed the law, we would revisit the value.
Mr. FORD. I wanted to just repeat, we have been in negotiations with the Corps of Engineers at Mobile, Alabama, and have reached agreement, Congressman Riley and Mr. Chairman, of $4 million, as I said in my opening comments. So, we are prepared to move forward with that. We prefer not to, but we are prepared to move forward if we have to. So, I am not in the situation that my colleagues here are, but I do not want to be in that situation.
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Mr. RILEY. You have to also remember, Mr. Chairman, we are talking about a relatively few bases left. Out of the 87 bases or whatever it was, 67 have already been completed. We are basically talking about 18 to 20 bases that are left.
Mr. HEFLEY. Mr. Taylor.
Mr. TAYLOR. I wonder if you gentlemensince we often hear the buzz-word on the House floor that we don't need a one-size-fits-all policyand I will throw the analogies of some extremely expensive real estate at Governor's Island, New York. It's an island owned by the nation for a couple of hundred years at the foot of Wall Street. It has got a nine-hole golf course on it. It has got some beautiful old historic buildings. You can imagine what that piece of property would be worth in the eyes of some real estate developer.
There are also bases way the heck out in the boonies where, when the base closed, it was the major source of income for the town. So the town really has no revenue, and most of the businesses are moving away from the loss of the base. So, you have two extremes.
How would you propose that we, in those instances where we have high-priced real estate and with the declining defense budgetI did not hear anyone saying that the Department of Defense is over-budgeted. I think all of us hear the horror stories of the kids who are living in sub-standard barracks and do not feel like their military spouses are being treated properly, medical care, etcetera, etcetera. Would you be willing to have a tiered system where the Nation still retains the right to sellshould there be another round of base closures, and this member will not vote for one, but should there be another one and should it involve some high-priced real estate, where we reserve the right to sell those properties?
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Mr. RILEY. Gene, I think you are going to have some testimony on that in a moment from the people who actually do this every day. I think what you're going to hear is that it is more expensive to keep that property up, it is more expensive to go through the administrative process, to keep the staff, to go through the negotiationsthey are actually losing money. Again, what we anticipated to get out of the BRAC process, $4 billion, we ended up with 100 million. We have a full complement of folks over at DOD that do this every day for a living.
So, I think, if we are going to make this proposal, I think we have to seriously look at making it for all bases, because if not, we are going to have to maintain this bureaucracy that deals with it every day.
Mr. HEFLEY. Mr. Farr.
Mr. FARR. What I understand happens in an EDCand you will have testimony on it. Michael Houlemard, the director of our reuse authority, is an expert on this area, but the EDCthe Government still retains an equity interest in the property. So, if the property does well, we get awe're a silentkind of a silent partner in there. We get a share of the revenue derived from it. That is what is so exciting about this, is you get it into the economic stream faster, and you use the full potential of the community to use that resource for whatever.
It may be a more passive one. You sold the golf course at Fort Ord. We directed by congressional action. This committee, your committee, did it, and you know, everybody complained, well, we are not getting enough money for the golf course or the military needs this golf course. We protected the interests of the military in the fee structure, so that they can play golf at $25, which is pretty unusual in an area wherePebble Beach gets $300and the golfthe people that bought it put in millions of dollars of improvements. There is not a soldier out there that says this course is not a better course and services are better than it was when it was under military jurisdiction. So, eitherin that case, it was sold, but in most cases, what you can do is you just retain an equity interest.
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If the property does well, the Government gets back a percentage of how well we do, and that is the wayhow we do that can be explained to you by the people sitting behind me, but that is what the EDC does. We are not just giving this property totally. We are just giving it at the outset. You do not have to buy it, but with your economic development on it, we will get back a share of the success of the property.
Mr. HEFLEY. Mr. Snyder.
Mr. SNYDER. I was just going to make a comment, Mr. Chairman, in answer to your question. Kind of the flip side of that would beI disagree with my ranking member. I think the benefits of BRAC rounds have been shown and that we would benefit from another round or two, as you and I have discussed, but my guess is that we would never get another round of BRAC passed by the Congress without having this kind of provision in it. We would then have the situation, with having the new bases, having this no-cost provision and Mr. Farr still trying to negotiate part of Fort Ord down the line. I mean I think that would be even a worse unfairness than the one that you all just discussed.
Mr. HEFLEY. I want to say thank you very much for our panel. We appreciate it, and you have done an excellent job. Thank you.
Our second panel this afternoon will provide the position of the Department of Defense, and I want to welcome to the subcommittee once again Randall Yim, Deputy Under Secretary of Defense for Installations, and I might note that he has just recently celebrated his 25th wedding anniversary. We had to schedule this whole hearing based around that, because we wanted him to stay married. We are glad you are here, we are glad that you are still married, and we will turn it over to you, Mr. Secretary.
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You know the clock deal, but we do not want to restrict you. We want you to take the time you need to make your case.
STATEMENT OF RANDALL YIM, DEPUTY UNDER SECRETARY OF DEFENSE FOR INSTALLATIONS
Mr. YIM. Thank you very much, Mr. Chairman, and I know that my spouse probably wanted to submit a written statement of appreciation of the committee's setting of this hearing to accommodate our 25th. We had a wonderful time, by the way. Thank you very much.
Good afternoon, Mr. Chairman and Congressman Taylor and members of this committee. Let me begin by thanking all of you for your strong and very welcome support for our military department's programs, as reflected in the authorization act proposals, and let me particularly thank the Chairman for his decades of leadership in this area.
I cannot hope to be here today to match the eloquence of the Members of Congress, but I am pleased to be here before you to testify on behalf of continuing our tradition of taking care of our people and our communities that have supported our military for those so many decades. What we are proposing here is evolutionary, not revolutionary. The department is proposing to continue our trend of providing our communities with enhanced economic recovery opportunities following our difficult and very painful decisions to close or down-size our military installations. We strongly believe that our investment in our communities and in our people who have supported our military for decades is sound public policy and, most importantly, the right thing to do.
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Now, I know some of you are thinking, why in the world is the Department of Defense, who is over here at Congress all the time asking for money, bringing forth a proposal to forego potential revenue streams and why is this department coming over here proposing to, quote, ''fix'' something, namely our base reuse process, when we have been trumpeting various base reuse success stories to justify our request for additional BRAC authorization. I think the answer is very straightforward. The department and the services always have and always will take care of its own. By that I mean, the people and the communities that have supported our military through thick and thin and have undertaken many sacrifices to allow us to fulfill our missions, investing in our people and our communities before, during, and after the time of our need, is part of our military tradition. These traditions have served us well in our recruitment, in our public support and contribution to our missions, and it is important that we not lose sight of these traditions when we focus on the monetary bottom line.
We have brought to this committee and to Congress many programs who were not just money bottom-line oriented and represent sound public policy. When we close bases or relocate missions, we assist our displaced employees through re-education, through training programs, through relocation assistance, priority placement. When we conduct these A-76 studies for out-sourcing or competitive sourcing, we insist on rights of first refusal in these contracts. We encourage wage and pension protection, and we assume these burdens and costs even though we are helping people to not directly continue in military service because we have that tradition of taking care of the people before, during, and after the time of their service to our country. We believe we have a similar obligation to assist our people by assisting the communities in which these people, our people, live and work and those communities which have supported us during our times of need.
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We will save over $14 billion from our first four rounds of base closure and an estimated $5.7 billion per year after 2001. These savings have come at the expense of the people in the communities that have supported our military over these years. Local communities have lost over 107,000 civilian jobs, and these are typically high-paying ones, since 1988 as a result of our down-sizing and realignment decisions. These jobs were an economic engine of extremelyof enormous power for these communities, and these communities contributed in many ways to our mission, from building roads, schools, utility systems, to making educational and business and consumer and recreational opportunities readily available for our military. Some communities even went so far as to give us the property for free. We have an obligation to help mitigate the impacts caused by our base closure decisions.
We are saving much more from these decisions than we would ever hope to recoup from protracted actions to maximize revenue from sale of our closed properties, and by allowing our communities to use a portion of our savings, a portion of our savings to reinvest in new economic activity and creating new jobs, we know that we are going to be serving good public purposes. Our legislative proposal, supported by Congressman Riley and the Senate, is an investment. We view it as an investment, not a give-away, and a continuation of the tradition of taking care of our people before, during, and after our time of need.
Now, why are we here after six years? When we first obtained legislative authority for economic development conveyances in 1993 as a result of the prior amendmentsand we have had success with the current statutes and regulations. The current process is not broken, but it can and should be better, and really, contrary to popular belief, the department does listen. It listens to the concerns raised for our people and our communities, not asking us for a hand-out but a hand in overcoming the problems that they have experienced firsthand, working in the trenches to rebuild these economic engines and to create the jobs, and when we listened, we discovered a couple of things.
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First, we have lost our focus from the 1993 legislation authorizing EDCs, which was first and foremost to quickly dispose of excess property and to create jobs. We are neither as quick as we should be and we must be, and we are interjecting ourselves into complex real estate and local planning decisions, areas which are clearly not within our core competencies, for evaluation processes which attempt to substitute our judgement about job creation for the judgement of the local communities and local elected officials.
Second, precisely because of the complexity of the local decisions that are involved, we have defaulted to a cumbersome, time-consuming bureaucratic process to fulfill the letter but not the intent of the law. We require these lengthy appraisals of, quote, ''estimated fair market value,'' almost impossible to determine with any precision in most base closing settings. There is not a willing buyer or seller in these deals. There is a lack of comparables. We have very speculative assumptions about absorption rates, highest and best use, complicated by our own Federal property reservations, the clean-up liabilities, the delays in transfer of beneficial occupancy.
We have homeless assistance needs. We have public benefit conveyances, substantial cost to integrate these properties which have been historically independent in the regional infrastructure systems. Then we require this ritualized negotiation dance to justify discounts from the speculative valuation based upon equally speculative assumptions about job creation, future unknown tenant activity, and project this economic activity out for 40 years, even though we know that our assumptions really lose validity after about five years, and from this protracted and contentious and fundamentally inexact, quote, ''science'' of estimating fair market value, then we usually arrive at an economic deal that returns far, far less, but the worst part of it is that we do not end it there. Because of the speculative nature of these appraisals and the assumptions underlying these appraisals, we enter into these revenue-sharing transactions and tie payments to future economic activity such as reaching certain net revenue projections and we require security provisions and release clauses for specific parcels of lands. We ignore or we discount the value-added the communities make to these properties from their own activities after transfer, after closure, and we enforce these release clause provisions on them to limit their ability to transfer properties. We force ourselves into continuing monitoring and business relationships with those communities even though we wanted out of this property management headache. Let me assure you that the local communities probably want our involvement in their business even less than we want to be involved in that type of business. So, we create enormous transaction costs during and after our negotiations, really for little positive gain, and while absorbing these transaction costs, we also lose sight of the opportunity costs. If I can indulge, I would like to continue a bit with my statement, sir.
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Mr. HEFLEY. Surely.
Mr. YIM. We need to listen when these communities tell us how hard it is to get quality businesses interested in military base properties. We need to listen when they tell us that these opportunities have a limited and short shelf life. We cannot respond if they cannot respond within commercially reasonably time-frames at commercially competitive prices, quality companies and quality jobs go elsewhere, and typically, they go to private sector developers who can respond more quickly but who may not share the same public purpose objectives as our local communities and local officials. Time and time again, communities have come to the Department of Defense to request that we expedite our decisions, complete our negotiations, get on with the show, so that we can realize the real opportunity presented by real companies with real money and real jobs. These concerns have not decreased since 1993.
With the better economy, we have more, not less competition between the private and public sector for these quality companies, and we have to stay the course. We cannot just put uptake the quick hit of putting up a warehouse. The communities need sustainable jobs, good high-tech quality jobs, not just the quick hit, and we have that obligation to help them. I know that, if you are listening to some of these communities, some of them have encountered more problems than either they or we anticipated. These communities took a chance with the department. They stepped out boldly after 1993, and they used these new and untested EDC mechanisms. They agreed to speculative appraisals and assumptions about future economic activities and costs, and they lost. Not because of a lack of confidence or a lack of dedication, because of this very speculative nature of those original assumptions. If we can help those communities by putting them on a part with those who we help with this new legislation, I think that we should and we must.
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So, let me quickly outline what our legislation does and does not do. It would extend the current law authorizing no-cost transfers for rural areas to all communities regardless of that very difficult and bizarre, I will use that word, bizarre distinction of rural and urban classifications. Specifically, it would authorize the Secretary of Defense to transfer property to these recognized local redevelopment authorities without consideration provided for properties used for job creation and, further, that the proceeds from the property are usedreinvested in the economic redevelopment of or related to the installation. To ensure that the communities who are currently negotiating EDCs so we do not put them off track when they have a real live tenant, we propose that the legislation be retroactive back to April 21. The date that we made this announcement of our push. And finally, in fairness, we wish to give the department the authority to modify already executed economic development conveyances if the communities can demonstrate changed economic circumstances and, as a result of that, they need additional help for job creation.
Our proposal would not change the existing requirements to screen property for other Federal uses by other Federal agencies, for conveyances such as parks or airports or ports, the public benefit conveyance process. It would not change the communities' requirements to address homeless assistance needs, in cooperation with the Department of Housing and Urban Development. It would not change our policy that EDC property must be used for long-term job creation, not just temporary job creation from construction projects to a purely housing project.
Now, we know there is financial impacts. I know that we will lose some future revenue as a result of this legislation. We have been as transparent as possible to the General Accounting Office (GAO) and to this committee about our estimated revenue impacts. Let me emphasize that our proposed legislation does not require that we renegotiate all deals down to zero. It gives us the authority, under changed economic circumstances, to do what is right, and if and only we renegotiated everything down to zerothat is, from our standpoint, the worst economic effect to us from a monetary standpointwe would lose, in today's dollar, about $210 million between fiscal years 2000 and 2043.
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Now, we cannot project precisely what we would lose in revenues from pending EDCs, because those have not been negotiated, but I think it is roughly on that same order of magnitude. But we really have much more to gain, and savings from base closures are more than significant enough to absorb this potential lost revenue without much effect. By sharing with the communities, we are really going to give a kick-start with them.
We care about these communities, but let me close with one other thing. There is another financial impact, and I know that Congressman McHugh has been very aware of this, that has us equally if not more concerned. Let me begin by saying no one cares more about our soldiers, sailors, airmen, and marines than the Department of Defense and military services. No one. An unintended but possible consequence of our no-cost conveyance legislation could be a reduction in the amount of reimbursement to our commissaries and other morale, welfare, and recreation (MWR) programs, since under the existing BRAC statutes, the services are required to reimburse these MWR non-appropriated fund accounts from proceeds from the sale of base property. Now, I looked at it very carefully, sir, and I cannot quantify the financial impact of these no-cost EDCs on MWR or commissary programs or really even truly say there will be an impact, because there could be no impact whatsoever. We are not eliminating all revenues from the disposal of our base property by this proposed legislation. Some transactions thatonly transactions that meet our test for an economic development conveyance would qualify for this no-cost deal.
Some property is going to continue to be sold. Some will be leased. Some will be retained by Federal entities, and some of that could be retained to continue to support MWR activities. But if revenueand if revenues are generated, the services typically prioritize repayment to the NFA accounts, the MWR accounts, and the services have flexibility to look at other ways to make those accounts whole. They routinely add money to their budgets to fund recreational facilities, child-care things, and that is because we care about our people.
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There is no disputeand I am not going to sugar- coat itthat this legislation increases the potential that MWR programs will not be fully reimbursed. I fully recognize that I am talking about the money of our soldiers, sailors, airmen, and marines. During the regulation process, Mr. Chairman and Mr. McHugh, I commit, as we try to implement this legislation, if we receive it, I am committed to work through these issues and arrive at the proper balance, because what we are talking about, fundamentally, is a balance. We know we are going to lose revenues. We know that most of this revenue lost, by the way, is going to be received between 2005 and 2043, given the extended payment terms that we typically have of these EDCs and the common characteristics that really minimizes any payments in the early years. The vast majority of our BRAC obligations, as highlighted by GAO, occur before 2005. So, we are going to be losing most of the revenue after we have already incurred and paid for most of our BRAC obligations.
So, if you balance that potential lost revenue against our tradition of taking care of our people and our communities before, during, and after our time of need, we concluded that it is good public policy, the right thing to do to proceed with this no-cost investment. So, I urge you please to support our proposed legislation. I think it is good public policy, and I stand ready to answer your questions to the best of my ability.
[The prepared statement of Mr. Yim can be found in the appendix.]
Mr. HEFLEY. Thank you, Mr. Secretary. Mr. Taylor.
Mr. TAYLOR. Mr. Yim, how would you respond to the cynic that says you all have made your mind? You are going to close bases anywhere you can and you are now going to solicit the support of local governing authorities in high- rent neighborhoods who may not be thinking in terms of national defense but who do see a short-term cash cow by closing Pensacola Naval Air Station? No telling how many acres of beautiful waterfront property on Pensacola Bay. Eglin Air Force Baseno telling how many acres of beautiful waterfront property on the Gulf of Mexico, etcetera, etcetera.
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The nation is not making anymore waterfront property. A lot of it belongs to the military. Most city councilmen are much more concerned about fixing potholes. Seeing to it that people have sewage and water, fire protection, police protection than national defense. So, suddenly, this whole effort becomes sort of a deal with them to enlist their support to close more bases.
Mr. YIM. Congressman, I do not think that any community welcomes the closure of a military base. There is so many ramifications of that, and the economic hit is a great one. The military bases have tremendous spill-off effects on the local economy.
We close military bases becausefundamentally on military value criteria. We believeas you know, I still have the stripes on my back from pushing for additional BRAC authorization. I understand the debate about it, but we believe at the department that we need it. We need it because of military value reasons, military mission requirement reasons, and one of the certainly not intended consequences of that painful decision is that we impact the communities there.
Now, there are some properties that are located in wonderful locations. There are some properties that would be used for housing developments, for example, and would return some high value. The department has had a longstanding policy that conveyances for housing projects, because it does not create long-term jobs, it is only temporary construction jobs, would not qualify for our economic development conveyance package unless it was related, with a straight-face relationship, to job creation.
Page 43 PREV PAGE TOP OF DOC So, I think some of the waterfront property that you are talking about and some of our Navy bases, if they are going to be used for those big-hit housing projects, they simply would not fall within the ambit of the legislation. So, I believe that we are acting with the military mission, our war-fighters' needs in mind when we come to Congress and ask for additional base closures. We would pursue this economic development conveyance course even if we knew that there was no chance that we would get additional base closures. We believe it is the right thing to do.
Mr. TAYLOR. What was the returnI had asked the question yesterday. What was the return to the taxpayers for the loss of the naval station at Staten Island?
Mr. YIM. In Governors Island? That actually, sir, was notthat special legislation there was passed by Congress in 1997 to authorize the transfer of Governors Island, actually to sell it at fair market value. So, that did not fall within the ambit of the BRAC process. Actually, because it was special legislation, it does not trigger the types of economic redevelopment tools that we have available under the BRAC process. So, thatI agree with you, that appears to be very, very valuable property. I think someas I have read some of the press reports after a meeting yesterdaythey dispute that because of some of the carrying costs of maintaining property that has beautiful habitat.
Environmental carrying costs, for example, often outstrip the development potential, because it limits the development potential. So, I think there is a controversy about it, but it would not be affected one way or another by this particular proposal.
Page 44 PREV PAGE TOP OF DOC Mr. TAYLOR. What would you guess something like Treasure Island is worth out in San Francisco Bay?
Mr. YIM. I know California, and I know Treasure Island. That really is a jewel out there, and the community is looking at various proposals out there, one of them being a housing unit. If it was used for housing, that would be of enormous value to the San Francisco area, given its location. If it was used for other job-generation uses, it would not have that same type of value. That really illustrates, I think, the problem, is that we sometimes substitute our idea of what the highest and best use is for that of the local community. That is why we lead to appraisals that are not consistent with what our local elected officials want to do and what they feel is best for their community in terms of job creation. So, I acknowledge, that is beautiful property. I would love to have that for no cost myself if I could form an Local Reuse Authority (LRA), a Randall Yim LRA, and get that, but that is not the point.
Mr. TAYLOR. Mr. Yim, if I mayand I am going to use that community, in particular, because I remember as a teenager the attitude of that community to the Vietnam war. It would be my hunch that, during the Vietnam war, people were elected to the San Francisco city council and their position on the war probably became a campaign issue. It would be my hunch that the San Francisco city council, if given the opportunity to shut down every single base in San Francisco, would have done so during that war. If you threw in the added bonus that they get the property and get to sell it on top of that, then we would have woken up as a nation giving away hundreds of millions of dollars worth of properties to a city council that just decided they do not want to have a base anymore. How would you respond to that? I mean they are thinking short-term. We have to think long-term.
Page 45 PREV PAGE TOP OF DOC Mr. YIM. One thing that I have learned living in California for a good portion of my life is that there is a tremendous diversity in people, and it is very hard to say thatto make a broad-scale generalization about that. I actually grew up in Vallejo, where Congressman Brady was, and I saw the impact on that community ofthe value of Mare Island to that community. My father ran a gas station in Vallejo that served the people who lived and worked on that base. So, when a base closes, even in an area as diverse and with the economic up-side as the San Francisco Bay area, which it clearly does, there is still tremendous economic dislocation.
Treasure Island, in all likelihood, is going to be retained for something like recreation or park purposes, because it is such a valuable island. It may have other developments associated with that, too, but the community fundamentally, because they supported the military, should fundamentally, when the military leaves, have the right to determine the reuse. I think what we are proposing with this legislation is give them help when they want to use that for job creation purposes. If they were taking Treasure Island, as an example, purely as a park, they could get that under additional statutes, under existing statutes for no cost as a public benefit conveyance for recreational purposes. If they wanted to make an airport or a port out of Treasure Island, we already allow them to take that property down at no cost under a public benefit statute. If they want to do a job-creation use of Treasure Island, then I think that we should help them.
Mr. TAYLOR. So, what you are telling me is under no circumstances do you see this becoming a mechanism for local governing authorities to start trying to close down bases, thinking short-term, and we end up in a situation where the nation is losing more bases or losing more valuable bases than it really wants to, where the decisions are made not so much on the military viability of a base but whether or not the local city council wants the property.
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Mr. YIM. That actually has happened, Congressman. There have been some communities that actually did not adamantly oppose BRAC decisions and a bit solicited the BRAC decisions. That is certainly a rare occasion, but that is not the determinative factor for the Department of Defense.
The Department of Defense has always hadand in any future BRAC, I could not envision that changingmilitary value being the dominant criteria. That is why the BRAC commissions accepted over 88 percent of the department's recommendations in the '95 base closure rounds, because we focused on military value rather than other factors, and I expect that to continue.
Mr. TAYLOR. Thank you, Mr. Chairman.
Mr. HEFLEY. Thank you, Mr. Taylor. Mr. Snyder.
Mr. SNYDER. Thank you, Mr. Chairman. I just wanted to ask, Mr. Secretary, do you have any comments about the Senate language and any specific changes there, or are you satisfied with the Senate language? Does it have sufficient flexibility?
Mr. YIM. The Senate version, the version proposed by Congressman Riley, and the version that we have proposed are really remarkably similar. They are virtually similar.
The Senate version, we take issue with a few provisions. One, they continue to make the distinction between rural and non-rural economic development conveyances. Under our version, because we are proposing that all communities, if they qualify for an EDC, regardless of their rural or non-rural classification, be transferred the property at no cost, we do not see the need to go through that rural step, that rural test. I think that is unnecessary. There are some minor, minor differences, also, but we do not have major problems with the Senate version.
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We, of course, prefer our version, under kind of a pride of authorship, but seriously, that is really not it, and I should not have said that. Really, our versionand the reason I think they are all remarkably similar is that we spent quite a bit of time trying to forge a consensus with the services on the nature of the language so that we could bring forward to this committee, bring forward to Congress a consensus from not only the department but the services that this was sound public policy. That is why I think the Senate version, Congressman Riley's, and ours are remarkably similar.
Mr. SNYDER. Thank you, Mr. Chairman.
Mr. HEFLEY. Mr. Buyer?
Mr. BUYER. Thank you, Mr. Chairman. I am going to give the proposal a great deal of scrutiny, because I am not going to judge it and say good sound public policy is to give away treasury assets, and that is what we are talking about here. Whether it is property that is described by Mr. Taylor in California or you could even say, under a future BRAC processtake Fort Story, located at the mouth of the Chesapeake. Virginia Beach would love to have Fort Story. Any developer would love to have that. You can go around the country, different properties, but then there are also places where nobody will want it.
I have a base in my district, Grissom, which was realigned to a reserve base. It was the first rural no-cost transfer, and it is not like the district down in Charleston, South Carolina, with the closure of a naval base where they had a lot of different infrastructure and things to be able to handle that. So, DOD did show the compassionate side and helped the community, but just because there is a rural no-cost transfer does not mean that that is the answer.
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Part of theI think that the cooperation between the Air Force and the community, the Federal, state, local, private partnership has gone very well, but it does not mean there are not hurdles, even though there is a no-cost transfer. What I do want to bring to your attention and I have shared with many of my colleagues and I would like to have entered into the recordone of the roadblocks to developing property has been the transfer of property, real estate. We havefor example, there are four properties, a golf course, you have got some otherthe commissary and some other facilities. It has taken, on average, 882 days to transfer a deed. Now, I practiced real estate law. I do not know how many people would sit around and wait for their deed. Most people do not have the patience for 60 days on the transfer of real property, let alone to go in excess of 850 days.
[The information referred to can be found in the appendix.]
I would like your comment on how we can improve the time period here on the transfers of real estate.
Mr. YIM. We hope that this legislation is a step forward, Congressman. Certainly, it is not just purely the negotiations over the value that have hindered the transfer of real property. The servicer have correctly pointed out that, often, the communities are not in a position to accept the property, they do not want to accept the property right away, or environmental issues prevent the transfer of title. We have a prohibition on the transfer of fee-simple title in our properties under the Federal Superfund statute until the clean-up remedies are in place and demonstrated to be operating correctly. The operative words of the language are until, quote, ''all remedial actions have been taken,'' which is not interpreted to mean when the last ounce of contamination is pulled out of the ground but when the actions are put in place and there is some confidence that we have the problem under control.
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So, that has been the long pole in the tent, to use an overused metaphor, that has delayed the actual transfer of title, but what we can do, short of transferring title, is enter into long-term leases in anticipation of those events occurring. What I think that this legislation does is shorten up the time that we spend sequentially fighting about valuations, makes clear what theif there is going to be any balloon associated with such long-term leases, to cover the cost of acquisition of the property. Our proposal would say none or minimize that balloon type of payment associated with the lease. We believe that we can bring in real jobs, real quality companies, with real money, under those long-term lease devices in a shorter period of time thanwithout waiting for title to be transferred. People are now getting a little bit more familiar with these long-term deeds in furtherance of conveyance. Everyone would love to have the deed in their hand and be able to hold the title, but I think the banks and lenders and title insurers are getting more comfortable now. If we can reduce the debt services so that they are notyou have a deed, you pay monthly rent, and then, oh, by the way, you are going to have to then amortize as a portion of that lease the acquisition price, if you eliminate that I think that our communities can be very competitive about bringing in people quicker.
Mr. BUYER. Thank you, Mr. Chairman.
Mr. HEFLEY. Thank you. Mr. McHugh.
Mr. MCHUGH. Very briefly, Mr. Chairman.
Mr. Secretary, let me thank you for your comments and concerns about the MWR piece of this provision. As you very kindly, graciously noted, both the Chairman and I do have some questions as to what this policy may or may not do with respect to those very important programs. I certainly trust your analysis that the department does, indeed, have the interest of our men and women in uniform at heart in all matters and in certainly this one, but as you know, these are not the best of times for MWR funding, and we certainly want to try to avoid making that anymore difficult. So, I look forward to working with you on that.
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I am not certain I agreed with everything my friend from Indiana said. I am not certain I do not either, but I do certainly share his concerns about the very basic fact that, in the redevelopment of any facility, conveyance is an important piece but it is not the only piece.
With respect to the complications involving title, Plattsburg, for example, lost out on a very substantial manufacturing opportunity. Fortunately for that community, it did locate just outside the base, but the exchange of title was very problematic. I agree with my friend, Mr. Buyer, that we need to take a better and harder look at those kinds of questions. To the extent that this policy could alleviate some of that makes me even more interested in it, but if I might, let me just ask a question.
As I understand it, under the current conveyance policy, for rural conveyance to occur, no-cost conveyance to occur, there are basically three criteria that must be met. It must be a rural area, by definition. The closure must have impacted what I have called severe financial distress, and the last, as I understand it, is that there has been a demonstration of inability or difficulty in recovery. I presume the objective there, if the day after the closure occurred, some manufacturing plant came and located 30,000 jobs, that places the no-cost conveyance into question. Am I kind of on point with that understanding?
Mr. YIM. For the rural, that is correct.
Mr. MCHUGH. Well, if I mightand let me preface this last comment by saying I have no complaints about the department's handling of Plattsburg. I am being very parochial here, but it is the only experience I have. I pray to God it is the only one I ever get. They are going through this process, but what does concern me are unsubstantiated rumors that are pretty prevalent in this town on just about any issue, that Plattsburg's conveyance, certainly meeting the first two criteria, without question, could in some way be hindered because that communityand at the time, I believe, it was the fastest-closed base from decision on the list to actual closure in the history of the process. I may be wrong be wrong, but happened pretty damn quick, but because the community and the reuse agency, authority has worked so hard and has pieced together two jobs here, three jobs here, 20 jobs here and now have a total in several hundred, that somehow that may cause this conveyance to become clouded.
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Let me extend the parochial to the general. I do not think it was the intentor I do not think it should be the intent to cloud rural no-cost conveyances and bring them into question because the community happens to have done a very creative and good job in trying to fill in the hole that the United States military left. So, Plattsburg is my interest, but putting my specific interest aside, I think that is something we have to look at to ensureand again, I understand the overall intent there, and I don't necessarily disagree with it.
I think you have got to have some kind of demarcation that understands the difference between 20,000 jobs coming paying 50 grand a daya year versus bringing in a veterinary office and a couple of back-room phone-call seats. So, if you would keep that in mind, I would appreciate it.
Mr. YIM. I will.
Mr. MCHUGH. Thank you very much.
Mr. HEFLEY. Thank you. Mr. Reyes.
Mr. REYES. Thank you, Mr. Chairman.
Welcome, Mr. Secretary, and I understand you have been appointed to the Southwest Border Economic Development Initiative?
Page 52 PREV PAGE TOP OF DOC Mr. YIM. Yes, I have.
Mr. REYES. We are looking forward to working with you, those of us that represent border communities. We have a GAO hearing next week. I do not know if you are planning on coming to El Paso, but if you are not, we certainly would welcome a visit.
Mr. YIM. Thank you very much.
Mr. REYES. I have got a couple of areas that are of concern. In transferring or acquiring these former military bases and passing them on to the municipality or the local government, has there been any thought given to unforeseen issues such as environmental, perhaps polluted ground that subsequently becomes very expensive to clean up, environmental issues like that?
Mr. YIM. Well, certainly, the department, the services retain the obligation to conduct environmental cleanup regardless of the base closings, closed or not, and even after the closure decision has been made, we have that obligation under Federal and state statutes to clean up after our activities that caused environmental damage, and the departments budget that and are committed to do that. What happens is that sometimes unforseen events occur that are right in the middle of a development process.
For example, you are digging a trench line to put in a utility system and somebody just hits a pocket that does not show up on any records that was a burial site for certain oil cans or drums, for example, and you have a problem. The communities, under this proposal, actually then would have more funds available to them to handle certain problems like this, even though they may be later reimbursed by the Federal Government for those clean-up activities. It may give them the ability, because they didn't have to put all their cash out in paying for the property, to have some money available to handle contingencies that almost inevitably occur on facilities, but by and large, environmental clean-up responsibility is the obligation of the Federal Government and is not affected by this proposal.
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Mr. REYES. So, then, regardless of the length of time that has passed, as long as it is tied in and part of the existence of that military facility, then it would be a liability to the Federal Government.
Mr. YIM. Yes. Now, that is easy for me to say, and there is a lot of complicating issues of that. We may have disputes about what is the clean-up standard that is going to be achieved by the Federal Government, exactly what time is that going to occur. We have disputes about asbestos and lead-based paint, as one of our other Members of Congress had previously testified to, because for example, the department and the regulatory agencies do not require us to remove asbestos if it is in a non-friable state, but of course, with those buildings that are being demolished, we are going to make it into a friable state, and there is a clean-up obligation associated with it. So, it is easy to say that the obligation to clean up remains with the Federal Government. The interpretation of that in the front line can often lead to disputes between the community, has led to disputes between the community and the services.
Now, if the communities have additional funds available to them because we are not forcing them to pay for the property, the perhaps they have greater ability to handle some of those environmental clean-up costs that are not going to be paid for by the Federal Government.
Mr. REYES. Well, it would seem to me that that would be a big and overriding concern to any community to forfeit that obligation by the Federal Government. I was thinkingin our area, I was thinking more along the lines of contamination of the water table, because in the El Paso region, water is a big issue, and with the number of bosuns that there are in our region, it is not inconceivable that there could be some kind of environmental issue dealing with a whole water table contaminant. So, that is a big concern.
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Mr. YIM. Let me be clear. The proposal does not relieve the Department of Defense or the services of any of our statutory clean-up obligations. That is not the intent of the proposal. We are not trying to get out of our legally-required obligations to clean this property. We do have some disputes about the level of cleanup, the timing of cleanup, etcetera, and potentially the additional revenues available to the community.
Mr. REYES. Thank you, Mr. Chairman.
Mr. HEFLEY. Mr. Underwood.
Mr. UNDERWOOD. Thank you, Mr. Chairman, and I want to -- first of all, I want to thank our friend from Alabama for introducing this piece of legislation. I think it is a source of relief to many communities. I understand all the policy dimensions and the different discussions on it.
I always find it ironicyou know, Mr. Chairman, you and I sit on both the Resources and the Armed Services Committee. In one committee, we are always trying to find ways to get the local communities to have as much access into Federal property, and sometimes in the other committee, we are trying to eliminate that local access, and sobut it is still Federal Government, and it is still local communities and trying to find ways to help them.
In the discussion of this particular approach, this economic conveyance, there has also beenas whether this is really the major impediment for lots of property transfers, and then you have outlined another one, which is environmental concerns, and I am trying to figure out, in the totality of the conveyances that are beingare in the pipeline, what is the relative weight in terms of conveyances that are being held up because of negotiations over price or negotiations over finding the appropriate value of the property versus environmental problems versus what another area, another entire area, which seems to me to be kind of a bureaucratic morass and trying to understand how local communities can deal with all the various services that are involved.
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Mr. YIM. This is an extremely complex deal to put together, to effectuate the transfer.
Mr. UNDERWOOD. Well, you have two minutes.
Mr. YIM. Some of the services believe that the environmental issues have been the major hinderance in the timing of the ability to transfer the property quickly, and I think that there is quite a bit of validity in that. However, there is a substantial amount of time that we spend fighting with communitiesand I am using the word ''fighting'' deliberatelyfighting with communities about value and generating a lot of hard feeling with the communities that have supported the military. We do not share our appraisals with them. We tend to do it sequentially so that we get ours, they get theirs, we do not show them ours, then we start negotiating. As some of the members indicated, it takes a significant amount of time.
In parallel, environmental cleanup is occurring, and the Navy and some of the services have said, well, the communities alsothey just do not want to accept the property, we could act quickly, they are not ready to accept it. And because I worked on the community side also, before I came to this position, I know that some of the reasons we did not accept is because we could not afford the carrying costs of that property because the services were asking too big of a price. And so, we let them carry the property for us until we had a real live tenant available to come in there and we had our funding and our bonding in place to be able to pay the infrastructure costs necessary to bring the property on-line. So, it is very difficult for me to say one is dominant over the other because so many things happen in parallel, but I believe and I think some of our community reps will testify that the failure to consummate negotiations quickly has been a major hinderance in the process.
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Mr. UNDERWOOD. Okay, but in the process of negotiating an appropriate price or in the case where maybe it is clear that an economic conveyance can already be given -- and since everyone is giving a parochial example, I will give my own from Guam.
Originally, working with the Navy, there were some 2,800 acres that were not contiguous, and so, the Navy had originally suggested one plan could be presented by the LRA, but then, once that was presented, the Navy, further on down the line, changed its mind, and we ended up having to submit some 20-plus plans. So, in that particular instance, it seems like, for some reason that we have yet to figure outand there may be a legitimate reasonit is the way that they were carrying it out, as opposed to price or the environment, and I hope that, you know, we can work on those kinds of issues as we work on the environmental issues and the economic conveyance issues.
Thank you very much.
Mr. HEFLEY. Thank you, Mr. Underwood. The bells have gone off again. Can you wait?
Mr. YIM. Yes, sir.
Mr. HEFLEY. We will be as quick as we can. This is part of a 15-minute vote, then we will have a five-minute vote, but once this vote is over, we can make the other vote and be right back.
Page 57 PREV PAGE TOP OF DOC Mr. YIM. Thank you very much.
Mr. HEFLEY. Thank you. The committee stands in recess.
Mr. HEFLEY. The committee will come back to order.
Secretary Yim, with any luck, we should have a couple of hours now, so we should be able to finish this, hopefully finish the whole hearing by that time, if we have no more interruptions. Since there is nobody else here, I will go ahead and ask my questions, if I might.
It is my understanding that 11 of the 18 negotiations on EDCs that are set to open shortly are installations that were closed in prior, earlier rounds of the process. What accounts for the slowness of getting into negotiation? Is that the community's fault? Is it our fault? And if it is the community's fault, then we may not be speeding up anything anyway, but what is the reason for that?
Mr. YIM. I think that we all under-estimated just how complex of a real estate deal this is. These pieces of propertythe local officials are not land developers, to a large extent, and now we are dealing with property that has inadequate infrastructure, has zoningbuilding code violations. The buildings often are a negative asset because they were designed for military purposes and not easily adaptable to civilian uses. The roadway systems are designed to ensure security on a base, not to link the base to outside regional systems. So, you have to deal with much more than the confines of the base. You have to try to plug thiswhat had been a donut hole in the local community's planning process because it was a Federal enclave into now a larger regional grid. You have got to overcome the stigma associated with some of these properties because they, unfortunately, have contamination associated from our industrial activities. You want to try to bring people in to continue similar uses, and so, you have problems of allocation of environmental responsibility if they are continuing the same type of industrial activities that led to the prior contamination. I think we alland I mean the communities, I mean the Department of Defense and servicesunder-estimated how just tough of a deal this is to do.
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So, I hate to ascribe any fault to it. That is why the communities, I think, are reluctant sometimes to take over the property. That is why the services complain, well, you know, we are not holding up this deal, the communities just do not want to do it. Well, they cannot afford to do it. They do not have their ducks lined up to do it, and I actually can sympathize with that.
On the other hand, the environmental regulators, which are independent of the department, independent of the communities, they have their job, and so, they want to have their processes followed, and it is a complex problem when you have ground water contamination overlaid with soil contamination overlaid with perhaps radioactivity because of radium dials or some of our military activities. We create odd problems as the military. In the civilian sector, we do not have to deal with unexploded ordinance impeding a private sector development. That is a unique military problem to deal with. So, I think it's a combination of all these factors.
If we can change the price structure so that we do not have to have that uncertainty hanging over the community's head that they are going to add all this value to the property by zoning and putting this infrastructure in placewhat we actually did to them sometimes in the early rounds is we counted that in our appraisals. So, we really double-counted the activities that they added, value to the property, in our appraisals. The appraisers said great, now the property is worth twice as much and you have the privilege of paying us twice as much, and they justifiably were upset about that.
So, I think it is a mix of all that. This does not solve everything. I am not trying to present to you, Mr. Chairman, that this is the be all, end all to speeding up base closure. We have got to work through those environmental issues. We are very bureaucratic in the Department of Defense. I acknowledge that. So are local communities. I mean local government is not the most streamlined decision-making process either, and I say that because I have represented a lot of local communities, also. The same frustrations that developers or people have with us developers have with local communities. So, there is plenty of blame to go around on this, but it is not blame. It is complex.
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Mr. HEFLEY. One of the aspects of the Riley proposal is that you would expand the permissible uses and include housing, education, recreation. How do you respond to that? I think you have spoken to that already, but let us hear again how you respond to that.
Mr. YIM. We never intended our list in our legislation to be an all-inclusive list. We wanted to use that list as illustrative of the type of expenditures that we feel would befall within the definition of on the installation or related to the installation. Now, the only theoretical concern I have with Congressman Riley's language is that expenses for housing and education could be interpreted to do away with the public benefit conveyances for education, for example, and we certainlyI do not think it would. I am not too concerned about that. We are not intending to eliminate the public benefit conveyance process. So, I think we could accommodate that.
Mr. HEFLEY. You were here when Mr. Ford testified, and Mr. Ford raised a concern about that 10-year thing. How would you respond to that? Are you all receptive in some cases to lessening that period of time?
Mr. YIM. The 10-year provisionand sometimes we just pick arbitrary time-frames and that is our best judgement. That is honestly what we were doing. What we were looking at, as I saidwe were trying to forge a consensus among the services so that we could get solid support before we brought this before Congress. Now, there was a lot of concerns that, if we did not impose some sort of period of time where the communities had to invest the property, that they were just going to take it and build new admin centers or something unrelated to our purpose, which was stimulating job creation at that base we were leaving, where we were affecting the people associated with that base, and sometimes we enter into deals for 40 years, we have participation agreements for 40-some-odd years. There is no science behind the 10 years. It was a consensus position of Office of the Secretary of Defense (OSD) and the services that that was a reasonable period of time to require reinvestment into the community.
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Mr. HEFLEY. Mr. Secretary, you indicated that previously-agreed EDCs might be renegotiated at the department and validate a change in economic circumstances. That phrase, as a matter of law, seems rather vague to me. What precisely do you mean by that, and what criteria would the department use to determine such a change in economic circumstances?
Mr. YIM. We definitely have our work cut out for us to make that firmer in regulation, to implement this. This is what our intent is, as we discussed with the services. A lot of the assumptions leading to the deals on value, on price, put in economic forecasts, and I mentioned that we sometimes forecast that out 40 years, and those assumptions just proved to be wrong. If those type of things occurred, not just because the world has changed or the dates have changedthat is not a changed economic circumstanceit is are the fundamental underlying assumptions, economic assumptions that supported a particular price negotiationwere those changed? If they were and they just proved to be wrong, then, in fairness, we should take a look at them.
Mr. HEFLEY. There has been a lot of data presented to the subcommittee, and much of it by the DOD, suggesting that significant economic recovery is taking place overall in communities affected by base closure. Presuming that much of the economic recovery is the result of the overall strength of the economy, why is there an additional need to accelerate no-cost conveyances of viable property?
Mr. YIM. One of the pieces of data that I think shocked me when I looked into this is what we have had a very robust economy and we have had reuse successes, but the rate of reuse, even though it is good, is actually not as good as it should be given the pace of the economy. In essence, the economic development that has occurred at our military bases has lagged behind the robust nature of our economy. It has been good, but it did not keep pace. It really should have been better, and I think that reflects not only the complexity of the dealit is not just the cost, the complexity of the deal, the reluctance of people to walk onto military bases and use that property because they had problems of getting possession, environmental issues, all those other things, but we did pretty good, and you know that I said that, as we were looking for additional BRAC, that there are a lot of base reuse success stories, and there really are. They really are out there, but I think that it should have been better given how well the economy has been.
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Mr. HEFLEY. I think that is all the questions I have at this point. Mr. Riley, do you have questions?
Mr. RILEY. Yes. Thank you, Mr. Chairman.
First I want to thank the Secretary for great work. You make a very compelling argument, great job with your testimony. I want to thank you for all the work that your staff has done with my office, and I certainly appreciate that. One of the things that one of my staffers just brought upI apologize for being late being backis why we put an educational conveyance in here. One of the things that concerns me, as long as you have this educational conveyance, assume we do convey that to an educational entity, years later they decide to leave the community. Rather than that property then being transferred back to the local reuse authority, it would go to the Department of Education, which gets us into another further complication. That is one of the reasons that we made this a part of our language. So, if you do want to do something with the educational conveyance, that is fine, as long as, if and when they determine they no longer need it, it would revert back to the community.
Mr. YIM. I think that is one way to deal with it. The argument that we hearand we are sensitive to not overriding all public benefit conveyancesparticularly applies to ports and airports, where people feel that, well, that may not be the most attractive redevelopment opportunity, but there is a need to retain that type of asset, once we lose it we would never be able to reconstitute it. And so, some of the proponents of public benefit conveyances wanted to be sure that we were not changing that screening process. So, I think those are issues that we need to work with. A lot of people20 years from now, the Department of Education (Ed) probably does not want this property reverting back to them anyway.
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Mr. RILEY. Exactly.
Mr. YIM. So, I think that I would be very sensitive about that.
Mr. RILEY. Well, let me thank you again for all the cooperation, and thank you for your testimony today, and I look forward to working with you.
Mr. HEFLEY. Mr. Taylor, do you have any further questions? If there are no other questions, Mr. Secretary, we appreciate you being here, and you made your case very well.
Mr. YIM. Thank you very much.
Mr. HEFLEY. Thank you very much. For the third panel today, the subcommittee is pleased to have the views of David Warren, Director of Defense Management Issues for the General Accounting Office, and Barry Holman, the Associate Director of Defense Management Issues for GAO.
Mr. Warren, I guess we will start with you.
STATEMENT OF DAVID WARREN, DIRECTOR, DEFENSE MANAGEMENT ISSUES, GENERAL ACCOUNTING OFFICE; BARRY W. HOLMAN, ASSOCIATE DIRECTOR, DEFENSE MANAGEMENT ISSUES, GENERAL ACCOUNTING OFFICE
Page 63 PREV PAGE TOP OF DOC Mr. WARREN. Thank you, Mr. Chairman, Mr. Taylor, members of the subcommittee. We are pleased to be here today to discuss DOD's proposal to amend the laws affecting the transfer of property of closed military bases. The proposal would promote the economic redevelopment of affected communities by transferring the property to those communities without consideration. Under the proposal, the affected communities receiving the economic development conveyance would receive property at no cost. Currently, economic development conveyances are available at below fair market value and at no cost to rural communities.
You asked that we focus our comments on the likelihood that the proposed legislation would expedite the property transfer process and the expected financial consequences to DOD. First, with regard to expediting the transfer process, the proposed legislation would provide an opportunity to expedite the communityI am sorryto expedite the process by alleviating such things as fair market value property negotiation issues. It would also likely alleviate the frustrations and administrative burdens the community and DOD have experienced. I think that has already been discussed to some extent. I think it is a real problem.
However, it is not clear that the legislation would uniformly shorten the timeframe that the propertyfor the property transfers. Our prior work shows that the community's ability to accept the property transfers in a timely fashion and also to deal with environmental clean-up considerations are the primary factors that determine the pace of property transfers, and I think there has also been some discussion around that. Service officials explain that the key factor affecting the pace of the property transfer is whether the local reuse authorities have agreed-upon reuse plans in place. So, if the plans are not there in order to decide how the property is going to be used, delays will occur.
Page 64 PREV PAGE TOP OF DOC Regarding the financial consequences, DOD will lose revenue if the property amendment is enacted. The proposed legislation would directly impact 23 pending or anticipated economic development conveyances and would allow up to 26 existing economic development conveyances to be renegotiated if the Secretary determines that such modification is necessary as a result of change in economic circumstances. DOD would likely forego the revenue of the 23 economic development conveyances that are either in the negotiating stage or expected to be submitted after April 21, 1999.
The extent of the loss of the revenues for these properties is not known because they, in fact, have not been negotiated, therefore there is a number not out there. DOD estimates that it would lose about $218 million between fiscal years 2000 and 2043 if all agreements were renegotiated as no-cost conveyances. Approximately 40 percent of those, or $87 million of this revenue, would be lost between fiscal years 2000 and 2005. The remaining revenue would be lost between fiscal years 2006 and 2043. That is about $131 million. Finally, the department projects that the proposed legislation will avoid about $12 million in cost that otherwise would not be incurred in maintaining the bases prior to transfer. We agree that these types of costs will be avoided.
In summary, the proposal involves a trade-off between recouping the value of surplus property and providing communities enhanced opportunities for economic recovery. The trend in recent years regarding BRAC-related properties has been to move towards providing assistance to communities. That concludes my statement, and we would be happy to answer any questions that you might have.
[The prepared statement of Mr. Warren can be found in the appendix.]
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Mr. HEFLEY. Mr. Holman, do you have anything to add to that?
Mr. HOLMAN. Not a separate statement, Mr. Chairman.
Mr. HEFLEY. Okay. Mr. Taylor.
Mr. TAYLOR. Mr. Warren, I am going to use the for instance of the Mississippi Army ammunition plant, which has, in my opinion, been grossly under-utilized since its closure in 1990 or so. In that instance, the Army Material Command let a contract for the maintenance to company X, and they were paid a very substantial amount of money, I think anywhere from six to nine million dollars to watch over the building.
They gave that same company the marketing license. In my mind, it was more profitable for that company to baby- sit the building than to market it. Marketing required more work, going out and hustling customers, getting people in to see the plant, maybe doing some work to improve the plant. The part of me that wants to help Mr. Riley says, well, based on that horrible experience, maybe we ought to be out of the reuse business altogether, as a Nation.
On the flip-side, it almost seems like a cop-out that we have had a failed policy. And rather than trying to fix it and make some money on selling what, in that instance, was a $600 million National asset full of $300 million of state-of-the-art milling machines and forges and presses and all those things you need to make things, that we are copping out and just going to turn it over to local governing authorities, in one instance a county of about 35,000 people, or two smaller cities of about 10 to 12 thousand people, which obviously are not going to have the sort of resources that the United States of America has.
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Is it your opinion that the nation has done an adequate job or even a fair job of marketing those things we had? Because it is not my opinion that we have done a good job, and that this is going from one extreme of not doing a good job of marketing those things we had to sell and just saying, well, we are going to wash our hands of it and give it away. Whether it is a plant in the middle of nowhere, or whether it is Treasure Island, Governors Island, 20 feet of waterfront property at Eglin Air Force Base in FloridaI mean 20 miles of waterfront property at Eglin Air Force Base in Florida.
Mr. WARREN. I think, going all the way back to 1988, I think people really believed that there were going to be opportunities to sell property. I think that they went in with a good faith feeling that that was going to happen, but then, once they got into the actual implementation of that plan, they found that the very types of things that have been discussed here at the hearing already caused huge impediments to making that occur, and again, deciding, you know, what it might be and how that property might be used. I do not think anybody really estimated the degree of environmental pollution that existed on these military bases and how difficult that was going to be in terms of not only cleaning that up and cleaning it up to the point that they could make a satisfactory transfer of property. I think, for those reasons, they attempted to carry the policy through into the '91 round, again made a good faith effort to say that there ought to be opportunities to achieve land sales in that round. Then I think, when they added the experience of the '88 round and the '91 round together, they came to the conclusion that land sales were not going to be as plentiful and as easy as originally estimated. That, in turn, I think, led to the prior amendment in 1993, which created the economic conveyance process. Now, while that has had some success in terms of expediting the process, in terms of creating streams of revenue from the property, I think people again are at a point questioning whether or not that has, in fact, done all the things that they wanted to do or hoped to do in terms of creating streams of revenue from the property.
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I would also add, as you mentioned earlier, what our work has shown is that these areone size does not fit all. These are very individual cases that have to be dealt with regarding the circumstances of the individual bases that are being closed and in question. Some are much easier to accomplish a land sale or an economic conveyance, whichever you are trying to do. Others are very difficult.
One that comes to mind that I dealt with very early on in this process was the Jefferson Proving Ground. It is a very nice piece of property, but unfortunately, 80 to 90 percent of it is just filled with ordinance that had been fired virtually since about 1941. So, how do you clean that up to a point where, even in part, you might be able to get a park service to take it over or perhaps someone to buy it. So, I think it is a progression and a learning process that has got us to where we are today.
Mr. TAYLOR. Going back to my analogy of the company continues to give six to nine million dollars a year, apparently in perpetuity, if they do not market it and they set the rental rates, which means they can set the rental rates to a point that is beyond what the market will bear, so they are, in effect, rewarded for failing or not succeeding, My question is was anyone ever rewarded for succeeding in the whole base closure process? Was there ever a transition that was done so well that the Nation said to the company that did it or the entity that did it, you did that so well we want you to take Anniston and market it now, we want to give you a bonus for good work. Rather than rewarding people in Mississippi for not marketing, is there even one instance where you rewarded a company or an entity for doing a good job and said we want to make other opportunities available to you? Do you know of any instances?
Page 68 PREV PAGE TOP OF DOC Mr. WARREN. Well, the arms program versus the program for the sale of base closure property is a little bit different. There are clearly some successes in the base closure process.
Mr. TAYLOR. How did you reward the successful companies? How did you try to make that the standard? Is there even one instance where you said you did that so well we are going to take you down to Anniston, we are going to take you to Alameda, where a couple of facilities closed, we want you to be the model?
Mr. WARREN. As it relates to the base closure process, I think the vehicle for doing that was the sharing of lessons learned.
Mr. TAYLOR. This is a capitalist society, and I truly believe, if you start rewarding people for doing the right thing, they will do the right thing more often. I mean that is what capitalism is all about. Is there even one instance where someone did it right where the Nation said, okay, you did that so well we want you to take this on the road and do it again?
Mr. WARREN. If I am understanding in terms oftypically, the local reuse committees handle this.
Mr. TAYLOR. We both know there have been cottage industries created for the purpose of dipping into these funds and trying to market facilities.
Mr. WARREN. Right.
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Mr. TAYLOR. Did any of them do it so well that, as a nation, we made it a policy say, okay, guys, go do it here, go do it there?
Mr. WARREN. Not that I am aware of.
Mr. HOLMAN. We really have not looked at the individual reuse committees or the consultants they use. We certainly know that there have been communities that have done quite well in attracting industries to those communities.
I think there is probably a slight difference between what may be taking place at the Mississippi Ammunition Planta slightly different situation than closing a base completely and turning it over to the community. As I understand it, that Mississippi baseI believe, as a facility, contractors are maintaining it and bringing tenants in, preserving that facility, so if at some point in the future the government needs to useit is a little bit different situation, and we have not looked at that type of situation in some time, but clearly, in the base closure, closing the property and turning it over toor attempting to turn it over to the local reuse authority, really the emphasis is on that previous authority, local municipality, whichever organization, you know, working to develop a reuse plan, and they are using consultants or whatever, come forward with a good plan, then will sell it to the government, and effect the transfer of the property. Again, clearly, I think there have been some success stories on that, though, and we have seen a lot of testimony to that.
Mr. TAYLOR. Was there ever one entity that was tasked with making these facilities available, either selling them or giving to the localI have dealt with the Army Material Command. I am not pleased with what I saw. Did the Navy have a similar program? Did the Air Force have a similar program? Was it one entity, or was it each branch of the service required to getto dispose of their properties?
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Mr. WARREN. It was basically done on a service-by- service basis and then decentralized from that standpoint; it was not typically run from a central office. The bases that had responsibility, the local commander, so to speak, the people in charge for the negotiation of those agreements were responsible. Now, there was overall uniform guidance, and again, there were lessons learned sessions, and people got together and worked to share ideas to how can we do this better.
Mr. TAYLOR. Did some branches of the service have a better track record than others in disposing of their properties, noticeable?
Mr. HOLMAN. That is not something that we have really looked at, comparing the services in terms of how well they have done.
Mr. TAYLOR. I hope you understand where I am trying to get. We have had a policy that failed. Did anybody in the past six, seven years ever try to make it work? Did anyone ever reward success? Did anyone ever say this is working, so let us take what the Navy did in whatever town and make it the model? I am not so sure that people tried very hard to make this policy work.
Mr. WARREN. I think there were a lot of efforts.
Mr. TAYLOR. There was so much money to be made in dragging it out, by the contractors, who got paid whether they succeeded or not.
Page 71 PREV PAGE TOP OF DOC Mr. HOLMAN. I think you have a panel coming after us with the National Association of Installation Developers (NAID). That is an organization, I think, that has tried to work with communities over the years to try to identify the problems that have existed, to work with DOD to effect changes that were needed. I think, among that group, they have tried to identify, you know, some of the best practices. I think perhaps they can speak to that, give you some of the things that have worked and have not worked.
Mr. WARREN. They put togetheronce they discovered that environmental was a problem, they put together a fast- track program to try to resolve environmental issues at all bases, and that was done on a DOD-wide basis. They found that one of the things that was holding up transfer to the property, again, was clearing the environmental problems up. They could not provide the deeds. So, what they did was propose that they could transfer through leases so that economic redevelopment could start. That was done, and I believe that was done in 1995. So, they were looking for best practices as they went through the learning process on what was holding up the transfer and ultimate economic reuse of the base, but perhaps not in a way precisely as you are describing.
Mr. TAYLOR. Thank you, Mr. Chairman.
Mr. HEFLEY. Mr. Riley.
Mr. RILEY. Thank you, Mr. Chairman. Mr. Warren, you made some assumptions a moment ago about the amount of money that you expected that might be recovered over the next three to four, five years. I wonder how you come to those type conclusions, because I am not too sure thatwhen I look at this list and I look at all of the people on this list that have already gotten a one-dollar conveyance or a no-cost conveyance, how do you look at the remaining bases and come up with the kind of numbers you did. Because even, and I take Fort McClellan, because I know a little more about it now. I am sure that you had some estimates for that particular body, but as of today, we do not know how much is going to the justice department, we do not know how much is going to an educational conveyance. I do not see how you could legitimately come up with any kind of logical number based on the assumption that none of these bases today know what will ultimately happen with the property.
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Mr. WARREN. For those where the agreements have not yet been reached, you know, our position is we do not know. So, I agree with you fully. For those group of EDCs that have been negotiated and, under this proposed legislation, could eventually be renegotiated, we worked with the Department of Defense and looked at their records regarding potential streams of revenue that could be created as a result of the existing set of agreements and worked with them to come up withand I think we are in agreement on thiswhat the potential revenues would be. Now, I do not know if you are familiar, but I will repeat if you are. Each of these have a lot of different nuances with regard to how that revenue would be generated. I would be the first to say that there isclearly, that is an estimate, butand again, in working with the department, they felt that this was the best number to put out, given the vagaries that exist in each of those EDCs that are out there. So, I would agree with you that that is not a hard number. I would not want to sit here and say that it is a hard number.
Mr. RILEY. That is the main thing that I hope this panel understands, is that we started out with abasically, a $4 billion block of property out there. As of today, we have taken in less than $100 million. We have got 18 to 20 properties remaining. I think, if you look back at the track record and compare that to what we may receive, I have to think it would be substantially less than your estimates.
Mr. WARREN. Again, we do not have an estimate for the future properties, and I agree with you, I would not want to speculate on that. All we do know is that there are some very valuable properties out there. Tustin, which is located in Orange County, for example, is one that has been talked about as having a very high economic value, and in fact, that is one that is in negotiation. You have a huge number on the Department of Defense. I think they are up somewhere around $200 million as an appraisal, and the community is somewhere down around $2 million as an appraisal, and again, you are quite right, I am sure those numbers will come a lot closer together before this is all over.
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Mr. RILEY. Well, based on prior experience, I would assume or I would estimate that the $2 million will probably more in line with what the Department of Defense ends up with, rather than the 200 million. Thank you, Mr. Chairman.
Mr. HEFLEY. Thank you, Mr. Riley. Mr. Warren, you have mentioned some of the impediments to doing this quickly, environmental and others. Do you have any suggestions for streamlining the process short of doing what the department is suggesting?
Mr. WARREN. Well, let me say first, again, I would not be sure that the department's proposal would necessarily shorten the process. The only suggestion that we can have from our work and what we found, it was critical for the department and the affected communities to work very closely together and have a very open and candid dialogue about their various positions so that they can move as quickly as possible to a resolution on these issues. What we found in the very early rounds in 1988, when some of our staff were out talking, I remember the team coming back and sayingI believe this was at Eakerthey said, well, thisyou know, this was the first time that the military members and the local reuse community had actually sat down together and talked, was during our visit. Now, they have progressed a long way from that point in time. So, I think what I would suggest is to heighten that spirit of partnership as much as possible to get us to a quicker end, but it is not an easy process, and it is just not easy, and I think there were a lot of misconceptions about how easily this could be done when the base closure process was started.
Mr. HEFLEY. Well, you can tell from the committee, while there is a lot of support for the department's idea, there is also a lot of concern, and we have been very critical, I think, of the erosion of the revenues generated from land and other property sales during the BRAC process. We have tried to move in that direction for years, since 1993. You have had an opportunity to take it and review the DOD's fiscal calculations relative to this proposal. How accurate do you think their estimates are, and how legitimate is the concept of significant savings? Mr. Riley raised this issue just a moment ago, and I am not sure I got the whole answer.
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Mr. WARREN. Significant savings with regard to the overall BRAC process or toas it relates to this
Mr. HEFLEY. From cost avoidance.
Mr. WARREN. Oh, the cost avoidance? Yes, they are estimating about $12 million in cost avoidance as a result of this. I would have a couple of observations on that. We did have a chance to take a quick look at those numbers. They are not budget-quality numbers as they were described to us. They were initial estimates that were taken from local command officials. So, we would expect those to change. It is possible they could go up, but typically during the budget review process, you will see, typically, those numbers will come down.
The other point that I would make, if you do have to renegotiate the other 26 EDCs that are currently in place, there will be some amount of resources that will have to be spent to do that. In other words, that is an action that has already been complete. If it is reopened, there will be a resource investment to do that. Now, I assume that will be done from existing staff that are already in place, working these issues, but nonetheless, that will be a resource requirement they will have to face.
Mr. HEFLEY. Any other questions, Mr. Taylor, Mr. Riley?
Thank you very much, Mr. Warren, Mr. Holman. We appreciate your being here.
Page 75 PREV PAGE TOP OF DOC Our last panel this afternoon will provide some perspective on the base reuse issue from the local community perspective. I want to welcome to the subcommittee the Mayor of Anniston, Alabama, the Honorable Gene Stedham; Chris Waddle, Past President of the Anniston/Calhoun County Council of Unified Leadership; Michael Houlemard, Executive Officer of the Fort Ord Reuse Authority; and Jeffrey Simon, Board President of the National Association of Installation Developers.
Mr. Riley, do you know anybody on this panel that you would like to further introduce before we begin?
Mr. RILEY. Thank you, Mr. Chairman. I would just like to take this opportunity to welcome two good friends of mine and two people who are intimately familiar with this process, the Mayor of Anniston and a good friend of mine, Chris Waddle, for taking the time to come up and sit through this hearing today. I know the Mayor, I think, has a flight out at seven o'clock, so we are trying to make arrangements to get you back over there in time. So, without further ado, I will look forward to your testimony, and thank you again so much for being here.
Mr. HEFLEY. Mr. Mayor, we will begin with you. So, you may proceed.
STATEMENT OF HON. GENE STEDHAM, MAYOR OF THE CITY OF ANNISTON, ANNISTON, ALABAMA
Mayor STEDHAM. Mr. Chairman and distinguished subcommittee members, let me thank you for the opportunity to appear today. In just 91 days, Fort McClellan, Alabama, will be no more, and for the first time in more than 80 years, my community finds itself without an Army presence contiguous to its corporate limits. In fact, the military presence in my city goes back to 1898 in a slightly different area called Camp Shook. In 1917, of course, we had Camp McClellan and later became Fort McClellan, Alabama.
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To me, the base closing is a very personal thing. I have listened to the testimony here today very attentively, and my concern, very simply, is how do we cope with the loss of almost 40 percent of the jobs in our area? We are, if not the smallest, one of the smallest MSRs in this country, and unfortunately, we have a few too many people that will not let us get a rural conveyance.
Since the closing of Fort McClellan was announced in the BRAC process, I have worked with and talked with a number of other agencies throughout the country facing the same thing we are. Fort McClellan is a unique base, and I guess all military bases are unique by their nature. Fort McClellan is primarily a school base, rather than a training base. It was the home of the Chemical Corps, the home of the Military Policy Academy, the home of the National Polygraph Institute, and at one time was the home of the Women's Army Corps. So, we do not have any large hangers or wide open spaces like you would find in an air base, nor do we have any facilities like we find at a port that are readily available for industrial and commercial development.
I have carried a number of industrial developers and industrial leaders to the base to try to get their interest there. To this point, I have received very little, if any, concrete interest in the development of that base. The reason being is because land is readily available throughout most of northeast Alabama at a very reasonable price and sometimes very close to the interstate highway system. When we are looking at Fort McClellan, of course, is the redevelopment process that will involve basically infrastructure. The military has taken their savings up front, and I suspect even since 1991, when they first made the BRAC list, there has been only maintenance. Before that, it was emergency nature.
Page 77 PREV PAGE TOP OF DOC My concerns are very simply that my town has 26, 27 thousand people, my total budget annually is $27 million, Alabama has a unique system of city-county government, and in our particular area, we have a weak county, strong city government. That means my county cannot issue bonds, cannot pass tax, cannotactually, they are deprived of any revenue from their own initiative and must go through the state legislature. So, as the largest city in Calhoun County, in our area there, it falls mostly on the City of Anniston to take a look and see what we can do to actually market this base.
Do not misunderstand me, sir. It is a beautiful base. It sits in the foothills of the Appalachian Mountains. That in itself can detract from its marketability since the cost of construction on very hilly terrain is quite expensive. The infrastructure at my base, very simply, there is we have a waste-water treatment facility that has a capacity of 2.2 million gallons per day. Unfortunately, when it was constructed, the storm drain system on the base is common with the waste-water treatment facility. So, anytime it rains, we pass the fluid through into nearby Cane Creek. It is not a simple matter of two different systems joining. It is simply that we have one common system to both. With our recent rains, quite often we have reached nine and even 10 million gallons per day. The Alabama Department of Environmental Management will not permit a city to do that. We would be fined daily on that basis. So, without increasing the capacity, we must find some way to at least meet the environmental concerns there. There are ways, of course, it can be done, perhaps withholding ponds and this type thing, and talking to the utility people there, they have great concerns in our area there.
That is only one of the minorand I say minorproblems we have. The infrastructure of that base will not support industry. We have only one large building that probably could be developed maybe into some type of semi-heavy industry. What we have had the most interest in the base since it was announced in BRAC '95 has been one of the things I have heard mentioned here today.
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We have had a great deal of interest in the educational conveyances on that base. Most of these are not new installations, nor new jobs. They simply want to relocate, maybe, into a little different facility, perhaps a little larger expansion.
Congressman Riley is correct. It changes almost on a daily base as far as the Department of Justice, who will maintain some type of presence there. And with the educational conveyances, which just this week I understand some of those were agreed to by the Department of Education, even though the local use authority had declined that request and recommended by a resolution formally passed and sent to them that these not be honored because they are simply relocation of existing facilities and created very few, if any, new jobs.
In short, Mr. Chairman, our problem is very simple. Our ox is being gored, and we are very much concerned about who has the capability of getting into this fray and turning it around so that we can recover not only some of the jobs we are losing but also lessen the economic impact on the people in our community who have virtually developed their business around the fact that they were there to serve the military. We took great pridewe are talking about generations of our citizens grew up with the military. We took the people there, and they were integrated fully into our community in every aspect, from cultural, from charitable, and even into our churches and our synagogues. So, it is a blow to our people. In fact, most of the people there did not believeand some today still do not believe that the base is going to be closed at the end of September.
I think, in my judgement, based on my experience, the problem with the BRAC process is it is one process, and regardless of the type of base you are dealing with, the guidelines and the rules and the regulations are precisely the same. We received a great deal of help from the Office of Economic Adjustment, and I have no complaint with the military authorities at Fort McClellan. They have been most receptive and amenable to requests for information we make. We are asking a small city to get into the process of developing real estate and the process to market industrial property, and we will do the best job we can do, of course, but we are limited. Obviously, we are not ruled by the definitions that BRAC uses, but obviously, we are ruled, because the three surrounding counties have no industrial base and have a total population of less than 20,000 in each of the three counties around us.
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Mr. Chairman, my plea is thatdo not make us pay twice for the property. Do not make us try to reach some type of a long-term agreement on some type of an educational or some type of an economical development plan and then come back and expect us to pay under the process once some type of purchase arrangement is made. We simply do not have those resources, and I do not see them forthcoming from anywhere else.
So, my concern is great. My request to this panel and to the Congress is to simply help us obtain this property, and if we can obtain some or all of this property at no cost, then certainly we will move to develop it. But we have found that, although Congress, in its wisdom, has amended the BRAC process several times, that when we ask for a lease in furtherance of conveyance, because we had a real legitimate, bona fide establishment that would employ between 200 and 300 people, we were told that, yes, it is permitted, but it is not mandated, and that is not our policy, you will have to wait. So, we lost these particular jobs. So, the process is probably flawed to the extent that it is one process for all bases, whether it is an Air Base, a Naval Base, an Army, whether it is located in a true metropolitan area or an area somewhat similar to ours.
So, again, Mr. Chairman, I want to be very brief, I know the day is long and the hour is long, and of course, I will be receptive to any questions, but again, I thank you for the opportunity to be here. Thank you, sir.
[The prepared statement of Mayor Stedham can be found in the appendix.]
Mr. HEFLEY. Thank you, Mr. Mayor. You did an excellent job of making your case. I see why you are the Mayor of Anniston and the good people of that community have elected you. I think sometimes you probably wonder why you sought that job, however.
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Mayor STEDHAM. Yes, sir.
Mr. HEFLEY. I would say that your Congressman has done an excellent job of carrying your case. In fact, he has been on my back unmercifully about this, and he is the original impetus for us having this series of hearings this afternoon. So, you both deserve a lot of credit. Mr. Waddle, since it is the same area, would you like to continue?
STATEMENT OF CHRIS WADDLE, PAST PRESIDENT, ANNISTON/CALHOUN COUNTY COUNCIL OF UNIFIED LEADERSHIP
Mr. WADDLE. I would be happy to. Mr. Chairman, I am told this mike is dead and I should use this one. Apparently this one is a victim of the Base Realignment and Closure Process.
Mr. HEFLEY. We might convey that to you cheap.
Mr. WADDLE. I certainly would not pay for it, Mr. Chairman. Chairman Hefley, Congressman Taylor, Congressman Riley, thank you for inviting our testimony. We feel as though we represent the civilian grassroots support for all of America's military installations.
To place us in your mind, Anniston and Calhoun County in northeast Alabama are near Birmingham and near Atlanta and darn near perfect, as we like to say, kept that way because we make Atlanta and Birmingham stay about an hour's drive away from us. We are here today to determine how all the places like ours can stay perfect and how they can bolster America's economic strength from what is often a semi-rural domain.
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Anniston region spent 82 years working for the nation's military improvement. We nestle in the southern Appalachians, and in World War I, the artillery gunners found they could fire their rounds up in our green velvet- covered hills, and they patiently swallowed up those rounds without complaint these many years. The War Department moved to buy that acreage back then for what was to become Fort McClellan, and at first, they made the deal, and then, being government, of course, it took a while to close it, so the corn crops had grown up, and the farmers said, well, now, wait a minute, you are going to have to pay us another third of what the bid price was, and the citizens of Anniston got out and passed the hat and raised that difference and paid that out of their own pocket. We have shared the burden ever since, and I do not want you to get us wrong. Economic benefit consistently has returned that initial investment. So, we are not here to grown and moan and hold our tin cup because the gravy train has left us.
On the contrary, when Yankee troops hobbled their horses in Civil War plantations in the south, the calvary was also fertilizing our pastures. We know how we benefitted. It is the devastation to the boots and to the shoes as we face withdrawal of those troops that we seek to avoid. The modern military economy represented an advantage to towns like ours, but there was often a price to pay. Anniston Army Depot is also in our county. The depot refits tanks, but it also stores more than 7 percent of the Nation's leaking and dangerous nerve agent-laden missiles. That is going to be incinerated on site.
So, there is an economic benefit from that plant but a tremendous sacrifice. Not many communities would like a chemical-filled incinerator in their back yard.
Frankly, our local economy over-depended on the military budget. In hindsight, we too narrowly allowed that to define our growth, and we were lulled by patriotism into a delay of diversification. Oddly, though, entrepreneurship is what we do best. That is why we are here today to seek the direct conveyance of McClellan's land.
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If the Government will give the community the land, to say it in plain language, we are the kind of stewards who will repay it many times over in added value to the economy. The same economic principle of capitalism, as you referred to it, Congressman Taylor, works when there is incentive and when there is the means to grow. It should apply evenly to every community across the nation. In our case, we are much more industrialized since that time we had to pass the hat to pay for the corn crops. We were founded on the heavy metals industry after the blue coats had pulled out following the Civil War.
The fertilizer in reconstruction was the financial investment of a northern general who was named Tyler, and he met and he liked a southern businessman in the metal works named Sam Noble, who had the industrial know-how, and the merger of one man's means and another man's incentives lives on in the culture. He wrote a strategic growth plan based on consensus and called for more industrialization, and by the way, a copy of that is filed in my extended remarks. This is a region ready to move up, and it is only the disposition of the vacant land of Fort McClellan that is the key.
Also in my pre-filed statement, I point out the Pentagon has made conveyance much more convenient and lenient for urban locations. I have stood on the tarmac at Glenview Naval Air Station, often mentioned today, and I can see why Chicago would have no trouble moving in there, but my ruralsemi-rural community is at a comparative disadvantage. In the other extreme, the totally out-of-the-way places that get a zero cost conveyance naturally have nothing to give away. Near perfect Anniston, as I referred to it, sits in the middle, as always, with 16,000 more people than would allow us to qualify for free conveyance.
Page 83 PREV PAGE TOP OF DOC We thought about asking 16,000 people to pull up and step over the county line, but I think it makes more sense in national policy fairness for Congress to simplify the BRAC rules. Washington should give these former garrisons to the local governments when they are declared surplus. We have the incentive, Congressman Taylor, we have the willingness, we have the know-how to earn a return on that investment, and the fee that we are going to pay is going to be indirect, but it will be far more value that we can generate from strategic land use than the Pentagon could hope to receive in fee-simple transfer.
I have great admiration for Deputy Under Secretary Yim, and in his statement today, I thought he showed extraordinary candor in the problemsand he spoke from the Government's sideof the problems that local communities are having with just an expanding rigmarole in this process.
On the General Accounting Office's position, I had a little difficulty following why it is better to maintain what must be costing more to operate the current system than it would be if we had direct conveyance. The military spent more money in the opening minutes of the conflict in Kosovo, at $2 million per cruise missile, than the entire value of this BRAC property abandoned by the Army in Alabama. The moral reward of our Balkan effort was very great, on the other hand, and I do not criticize it. Yet, the true return on direct conveyance of BRAC properties would outstrip that importance, I think.
The passage of this measure means greater wealth- building, but it also means doing the right thing in America, where our own communities patriotically have supported military bases. We fight with our economy and not just with guns and bullets, and my testimony is that the nation can best serve its own interests now by conveying the economic means for us to wage peace in towns like mine. Thank you, Mr. Chairman.
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[The prepared statement of Mr. Waddle can be found in the appendix.]
Mr. HEFLEY. Thank you, Mr. Waddle. Do I hear a motion that we encourage 16,000 Calhoun County residents to move?
Mr. WADDLE. Well, we can go back and ask for volunteers, since we are in the all-voluntary military concept, Mr. Chairman.
Mr. HEFLEY. I suspect, back when those fields were being fertilized, you had a lot of volunteers, although they were wearing blue uniforms.
Mr. WADDLE. They moved up further north, I believe.
Mr. HEFLEY. Mr. Houlemard.
STATEMENT OF MICHAEL HOULEMARD, EXECUTIVE OFFICER, FORT ORD REUSE AUTHORITY
Mr. HOULEMARD. Mr. Chairman, distinguished members of the committee, I am Michael Houlemard. I am the Executive Director, Executive Officer, to be more precise, of the Fort Ord Reuse Authority.
It is a privilege to be before you today and to comment on benefits from enacting no-cost transfers of former military installations to local reuse authorities. In particular, in 1994, the State of California created the Fort Ord Reuse Authority to implement civilian reuse of the former Fort Ord installation. The Army down-sized the installation by 97 percent under BRAC 1991, and we consider that a closure. In fact, as Congressman Farr entertained earlier, it is probably the largest closure of that particular round. Now, eight years later, the property has yet to transfer, in part for environmental reasons and in part for the processing reasons associated with economic development conveyances.
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As a consequence, our community is still waiting to find a way to replace the $1 billion in our local economy that was taken away as a result of that closure. In that same time period, we have found that the cost associated and the investment required to redevelop the installation substantially outweigh the perceived underlying value of the property. In fact, I will talk about a half-a-billion dollars of investment just to be able to reuse this property the way it has been designed by our local community.
As with the case with most, if not all, former installations, and as you have heard from Congressman Farr and Secretary Yim and others, the road, water, sewer, power, communications, and storm drains do not meet our local code. In addition and beyond this, they are seriously degraded and require substantial investment to meet just the minimal needs of an urban community. The abandoned buildings, as you have heard, contain asbestos and lead paint and require millions, tens of millions of dollars to abate and remove. In addition to this, all of us in local communities are expected to carry on with obligations that the Federal Government entertains and leaves with the property, including the conservation and maintenance of property forand conserving property for endangered species.
In our view, there is a very good reason why the Federal Government decided this was a good installation to close. The costs are significant, and it was no longer economically feasible. We estimate that it will cost about $500 million, and in my written remarks, all of you have a graphic that describes those costs. They range from in the range of $100 million just to configure the roads to integrate them with existing roadways adjacent to the base. In most cases, we believe that the Federal Government is leaving behind installations that carry substantial risks.
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In the case of former Fort Ord, despite the remediation activities of the U.S. Army to date, which exceeds $200 million, there is still ordinance and explosives and other contaminants and other potential constraints to economic reuse. Clearly, this will frustrate and discourage investor interest where the perceptions and reality of contaminant danger and liability exist. At the current time, the possible existence of ordinance and explosives is delaying about 90 percent of our property. Now, we would love to have it, and if we had had the process of a no-cost in place, we would have been able to receive a substantial amount of that property earlier and have some enjoyment of the property while the clean-up was still in place. Absent the no-cost, we were not able to do that.
Some parcels in our economic development conveyance may never, ever be able to be used for their designated purpose, despite the fact that this is what we were informed of under current regulations. This uncertainty clearly threatens our local community reuse and affects our community-wide appreciation for base reuse. No-cost EDC would abrogate some of the risk associated with such properties, while eliminating the need for reevaluation and further evaluation and analyses in these circumstances where there are uncertain and unpredictable variables. We also feel that a no-cost option allows a significant opportunity for coordination between Federal, state, and local disposition, reuse, and environmental planning. The fact that there are sequential rather than concurrent planning in some cases also contributes to the extended time of transfers, and as a result of a no-cost, we have that variable out of the way early. It affords all of the agencies the opportunity to work together. We believe it is an absolute shame that there are more than 2,000 units of housing remaining vacant at the former Fort Ord eight years after the announced closing.
Page 87 PREV PAGE TOP OF DOC Well, we never asked for Fort Ord to be closed. In fact, the Monterey community fought very hard to keep the installation open. However, nine years after the initial announcement that the base would be on the list, we are faced with this half-a-billion dollars of infrastructure cost that would enable conversion to civilian uses. Conveying the property through a no-cost EDC to the local community will ensure that revenues generated from the sale of the property will be reinvested in the property and make it available to us at an earlier date. As a result, it will stabilize our local economy, as well as the regional economy, contribute to the state and the nation in many ways. In our particular case, where our reuse plan was approved more than two years ago and transfers could have occurred immediately, we would have saved at least those two years and potentially more. Thank you for this opportunity to comment.
[The prepared statement of Mr. Houlemard can be found in the appendix.]
Mr. HEFLEY. Thank you very much. Mr. Simon.
STATEMENT OF JEFFREY SIMON, BOARD PRESIDENT, NATIONAL ASSOCIATION OF INSTALLATION DEVELOPERS
Mr. SIMON. Thank you, Mr. Chairman. Good afternoon, Mr. Chairman and members of the committee. My name is Jeffrey Simon. I am the President of the National Association of Installation Developers, NAID. Despite a long sit, it is probably appropriate that I be the wrap-up speaker, as I will speak for many people and many places. NAID is an organization that was begun in 1978 and consists of more than 325 members who are cities, towns, counties, communities of all kinds, airport authority, private development companies, non-profits, and other professionals involved in military property and in military base redevelopment.
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I personally am extremely aware of how critical this hearing and the topics being discussed here are today, having been involved in the redevelopment of closed military properties since the mid-'70s in Massachusetts, dealing with the closures that occurred at that time, and then, as the director for four years of the Fort Devens redevelopment, also in Massachusetts. I spend my time now working with the Morgan Stanley Real Estate Fund, working with private developers and local redevelopment authorities on the challenges of redeveloping closed bases. I know that time is short here and the words have been long, and I have left the more elaborate written remarks with you for your consideration. However, I would like to briefly make a couple points.
First, NAID strongly supports both the proposal passed by the Senate and the proposal submitted to you by Secretary Yim. No-cost EDCs have existed and been utilized very effectively by rural communities, and you have heard about some of those today. All communities, urban or rural, and those caught, as you head the Mayor talk about, in a definitional no-man's land, should have the same opportunity.
Second, the negotiation process of sales to local redevelopment authorities is now protracted, difficult, and adversarial, not to mention expensive for both sides. These proposals will help to diffuse that and to make this process work, speed the recovery from the local economic devastation of a base closing. A survey of our membership put the average negotiation time that would be saved just by the legislation being discussed here today at about 18 months, not counting the time needed for environmental issues.
Third, here is what a typical base consists of from the redevelopment point of view. One, buildings that do not meet local codes but that do have asbestos and lead paint. Two, high marketing costs due to the perception and, in many cases, the reality of environmental contamination. Three, utility systems that are inadequate, poorly maintained, under-sized, as you heard the Mayor talk about, and which do not connect to any local systems at all. Fourth, roads that do not connect to local roads and that are often not built to local minimum standards. Last, land use patterns that were appropriate for military use but that are totally inadequate for civilian use. Because of thisand I think, frankly, as Mr. Taylor pointed out very early in this hearingthe vastly over- estimated projections of income to the Federal Government from the sale of these properties has not materialized. DOD has come to understand, however, that the primary financial return to the Government from closing under- utilized military installations would come not from the sale of the properties but from the savings in operations and maintenance. This truth is perhaps the most important principle that I hope we will be able to consider and remember in discussions of how this legislation will affect the finances of the Federal Government. It logically follows from that, therefore, that the greatest savings to the Government will come from the fastest disposition of the properties, which also, ironically, works to the benefit of the communities. Fast disposition allows fast recovery.
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Fourth, the new provisions would give the Secretary the authority to modify existing EDC agreements to provideprovided that certain criteria are met. This section of both proposals is incredibly important to our members.
NAID is an organization that draws its life blood from the experience of its members on working bases, primarily that have already been closed. Our members need help now on their existing efforts. It is NAID's strong hope that the committee will strongly and actively put redevelopment and recovery ahead of the all too easy maxim that a deal is a deal, recognizing that the costs and the difficulties in good faith have been greater than anyone imagined.
Last, we hope that the committee would direct the services to look at the very best practice across the entire Department of Defense spectrum and to adopt that practice with consistency and efficiency across all of the services. This would eliminate the current situation where one service may claim that an action being requested by an LRA is not allowed when another service has and continues to undertake the very same action. We at NAID who have had many years of experience dealing with the difficult problems of redevelopment are firmly convinced that the expanded authority conferred in both proposals concerning EDCs would be one of the most beneficial tools available to local communities, and we respectfully urge the committee to approve.
I appreciate the opportunity to be here today and, on behalf of all of our members, thank the committee for its consideration.
[The prepared statement of Mr. Simon can be found in the appendix.]
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Mr. HEFLEY. Thank you, Mr. Simon.
I do not think we will be much longer, but it is 25 minutes till six, and Mr. Mayor, we want to be respectful of your needs here. When do you need to get out of here to catch your plane?
Mayor STEDHAM. In about 10 minutes.
Mr. HEFLEY. In about 10 minutes. Let me ask, are there any questions of the MayorMr. Waddle, are you in the same
Mr. WADDLE. No, sir, I am traveling separate.
Mr. HEFLEY. Are there anywould you trust him, Mr. Mayor, to represent you or not?
Mayor STEDHAM. Well, all right.
Mr. HEFLEY. Are there any questions of the Mayor? You are welcome to stay as long as you would like, but we also want you to be able to leave when you want to. Are there any questions of the Mayor, Mr. Taylor?
Mr. TAYLOR. Thank you, Mr. Chairman. Mr. Mayor, I thought I heard you to say that you were not in favor of a one-size-fits-all solution.
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Mayor STEDHAM. I am sorry. What was your statement, sir?
Mr. TAYLOR. In talking about the needs unique to your community, I thought I heard you say that you were not in favor of a one-size-fits-all solution. That you recognize that marketing a base, say, in Anniston, Alabama, might be vastly different than, say, if the Jackson Barracks in Chalmette, Louisiana, near New Orleans were made available through base closure.
Mayor STEDHAM. What I said, sir, was the problem, in my judgement, as far as my relationship and my understanding and my dealing with the BRAC process is that there was one BRAC, regardless of what was being closed, whether it was a military or air base or Navy base, and obviously, the concerns on those are all separate.
Mr. TAYLOR. Well, while I have the opportunityand obviously, we in no way want to detract from the great job your current Congressman has done. I had the privilege of sitting next to your previous congressman, Glenn Browder, as he literally bled for your community over a period of years to also work to keep that installation open, and both of them have done a remarkable job for your community, and both of them, I hope, get the respect they deserve back home for the job they did. I have no further questions, Mr. Chairman.
Mr. HEFLEY. Mr. Riley?
Mr. RILEY. Mr. Chairman, just a comment. Mr. Mayor, I know you have got to go. I think Chris is going to stay the night. I just want to tell you, you know, when I tried to select someone to come up today, I really tried to find someone that would bring the passion that we needed to this argument. You did that, you did it very effectively, and I just want to tell you how much I appreciate your statement, what you said today, and at least from my point of view, I thought you made just a brilliant case, and it is going to be amazing to me if everyone on this panel does not agree.
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Mayor STEDHAM. Well, I was speaking extemporaneously and not from notes.
Mr. RILEY. Well, you speak from the heart, and it has much more effect, and that is exactly what I hoped you would do, and you did a great job. So, thank you for being here.
Mayor STEDHAM. Thank you for inviting me.
Mr. HEFLEY. Mr. Mayor, I believe that is all the direct questions we have of you. You may stay or slip out at your wishes.
Mayor STEDHAM. Thank you, sir. With your permission, I shall depart.
Mr. HEFLEY. Mr. Taylor, do you have questions of the other witnesses?
Mr. TAYLOR. No, Mr. Chairman. I just want to compliment them on the points they have made. I understand where they are coming from, having suffered a similar circumstance.
I just want to make sure that, as much as base closure sounded like a great idea at the time, they did miss the cost ofthe $13 billion cost of cleaning up those sites before they gave them away. They grossly over-estimated the value of those properties. I would just hopeI will make this perfectly clear, and as I said to your Congressman on the House floorthat, in our rush to solve this problem, we do not create a whole series of new problems. That is my only reluctance at the moment in trying to fulfill your request.
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Mr. HEFLEY. Mr. Reyes.
Mr. REYES. No, Mr. Chairman, I do not have any questions. I do want to apologize to the panelists that we have got so many things going on that I tried to get back here sooner but I just was not able to, but I did read your testimony and appreciate your observations and your viewpoints. They are very helpful, at least from my perspective. So, thank you, Mr. Chairman.
Mr. HEFLEY. Mr. Taylor.
Mr. TAYLOR. Mr. Houlemard, I have got to tell you, having just gotten on this committee with the chairman this year and realizing the horrible shortfall we have in housing for our troops, and particularly family housing, that to hear the number that 2,000 houses are sitting idle is just horrible, and I certainly understand where you are coming from, but it just shows just a horrible lack of planning on somebody's part.
Mr. HEFLEY. You are absolutely right about that. Mr. Riley.
Mr. RILEY. Let me make one statementor one question. I know everyone is tired, but Mr. Simon, you made a statement a moment ago that kind of struck me. You said, based on your analysis, it takes approximately 18 months to go through this process rather than if you had a no-cost. Can you give me some idea of what your study also shows happens to that property in a year-and-a-half of sitting vacant?
Page 94 PREV PAGE TOP OF DOC Mr. SIMON. Well, I can tell you what happens to it particularly in New England, sir. It goes downhill quick, and I cannot imagine that, whether it is Fort Ord or Anniston, Alabama, quite frankly, that while there may not be the snow that we have, you probably have your own elements to deal with.
Second, in relation to the first part of your question, I would respond in two ways, first to point out that, when Michael was speaking, he put that 18-month period that I talked aboutin his case, he mentioned it was two years. During that time, what happens is that the appraisal process starts, and that begins with a very, very contentious meeting where you try and work with appraisers to get some common basis. The appraisal is done, then you fight over the appraisal for a while. Then the appraisal starts working its way up the chain. You go through various levels of approval or disapproval, and during all of that time, you are quite right, the property just deteriorates, to say nothing of just sitting being unused when it could be used.
I remember vividly, when I would drive up to New Hampshire, seeing the very first base that was closed under this process, Pease Air Force Base, years ago. You would go around the corner on the main interstate and you would see hundreds and hundreds of housing units just sitting there vacant, day after day, year after year, and it just seems to me, quite frankly, that if you can accept the premise that the savings comes from operations and maintenance, then get out of the business as quick as you possibly can.
Mr. RILEY. I think that, more than anything, I hope that what this legislation doesand I understand the gentleman's concerns about opening up a Pandora's box where naval air stations or whatever that has great beach-front property may want to actively pursue the development of that property at the expense of what is best for DOD.
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On the other handand I think that is one of the reasons I think we do need a one policy fits all here, because as long as we end up in a negotiating process, we are going to do something materially disastrous to a local community, because as someone testified a moment ago, we have got an appraisal at $2 million and one at 200 million.
Well, it is going to take a while to be able to iron that out or to be able to come to any kind of just conclusion, and during that time, no matter what base it is, no matter what the value of that property, it is going to continue to deteriorate. As that happens, I think the community is going to lose in the long run, I think the state will, ultimately I think the Federal Government.
Mr. HEFLEY. Thank you, Mr. Riley. Mr. Simon, Representative Fordand you were here, I believe, when he testified early on in the afternoon, Representative Ford?
Mr. SIMON. Yes.
Mr. HEFLEY. He raised the problem concerning the requirement to reinvest in infrastructure for a 10-year period as it affects redevelopment in Memphis. Are you aware of other similar situations, and what would your association's view be on changing the administration's proposal in the manner that Mr. Ford suggested?
Mr. SIMON. Could you clarify what his suggestion was for me? Was he suggesting doing away with the 10-year requirement?
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Mr. HEFLEY. Maybe shortening the 10-year requirement.
Mr. SIMON. That is what I thought. He mentioned three or four years, something like that?
Mr. HEFLEY. Five or something.
Mr. SIMON. Yes. I think that our association, frankly, would not have any problem with that. I think that reducing the amount of time when you have restrictions on the property is all productive to the reuse of the property. Now, implicit in that is my own assumption that, after that time, what the LRA does with the proceeds is up to the LRA, not that it goes back to the Federal Government. Is that how you are interpreting it as well? Anytime you can have less restrictions on a property, rather than more restrictions, as any of you members who have done real estate will tell you, just makes the property easier to develop, and quite frankly, as someone who spends his time dealing with private investment capital right now, all those kinds of restrictions worry the private investment dollar, when you are already looking at UXO and environmental contamination and, as Michael pointed out, issues that you just do not have to deal with anywhere else. So, I think we would support that.
Mr. HEFLEY. Mr. Simonor anyone else who would like to answer thiswhat are the principle problems faced by local communities as it relates to the environmental clean-up issue, and what impacts do environmental issues have the negotiations with the DOD for reuse?
Page 97 PREV PAGE TOP OF DOC Mr. WADDLE. In Anniston, the development absolutely essential to us is the building of a bypass, for which the Congress has generally provided money, the State some matching money, and it is critical to our development of this property and to the economic future of the entire community, and it is absolutely at a standstill, because the path would take it right through that place where I said the World War gunners fired their rounds, and it is lead- contaminated. Until it is cleaned up, we are stuck. So, certainlyand I understood Secretary Yim to point out that the requirement to clean up the environment remains with the Government, and that is essential. We could not give that up.
Mr. Chairman, could I respond to an earlier question that you had and that Mr. Taylor had?
Mr. HEFLEY. Surely.
Mr. WADDLE. This problem of the one size fits all you put it a different way in your question at the outset of the day about what do you do about those communities who have already paid for their land and is there a central fairness issue, and fairness begins where you find it, has got to start somewhere. It is a fundamentally unfair system. Will it be more fair if we kind of stop like a deer frozen in the headlights and maintain what we are doing, which is unfair to places like my community, or do we begin to be fair by creating equal footing, providing direct conveyance, and I believe the logic favorswe do have to make a change in order to achieve the fairness, and it is not so much a one-size- fits-all plan, Congressman Taylor, it is how do we give everybody an equal chance, an equal start. I think you only do that by the Riley amendment.
Page 98 PREV PAGE TOP OF DOC Mr. HOULEMARD. Mr. Chairman, on your question about environmental issues, we of the Fort Order Reuse Authority think you have opened up a very broad question, because the issues associated with environmental cleanup are probably innumerable, but there are five major ones that affect us. I think the first is assuring that there is a strong connection between how the remedial work, the clean-u activity, and the reuse plan are tied. That is an important piece, and that issue does not always work well, because the remedial actions and the environmental cleanup tend to work on one side and reuse planning tends to work on another side. That is left to the reuse agency.
The second item that is important would be the ability to apply the best available technology to cleanup. We have discussed this with the Department of Defense, and they have been willing to work with new technologies. They have even formed panels to look at new technologies for how cleanup works, particularly as it relates to ordinance and explosives, where the ability to detect enables the ability to remove, and so, the best available technology is important, particularly when local communities are concerned about health and safety issue.
There is another question about uniform processing. Depending upon the contaminant and whether it is listed, there tends to be a great deal ofI would call it disjunction. That is the only word I can think of, and I am not sure it is one, but there is not uniform processing depending upon the contaminant that is involved. Ordinance and explosives is processed one way. The chemical contaminants are processed another way. Landfill contaminants are done another way. They have different processes, and different contaminants are acknowledged, but as far as we are concerned, more uniform processing means more certainty in what we can expect for how the property is transferred, how the environmental work will proceed.
Page 99 PREV PAGE TOP OF DOC That brings up a fourth issue that has to do with coordination of agencies, because different agencies recognize different contaminants as being something that needs to be processed. The end result is the agencies do not always agree on the process, they do not always agree on what should be listed, nor do they agree on the levels of cleanup that are required, and that confusion amongst agencies often results in significant delays for the local folks who want to use the property.
Finally, I guess the biggest issue, one that you face probably every day with respect to environmental clean-up issues, is funding. It is a very expensive process, it will continue to be an expensive process, and to the extent that funds are not available, even no-cost EDCs will continue to be problems with local communities.
Mr. SIMON. Mr. Chairman, I have two quick comments. One, I am embarrassed to say that I forgot to acknowledge Congressman Riley's amendment, which we appreciate in our organization and support, and the fact that I do not have the full text is the only thing that kept me from including it at the beginning, but all of our members really appreciate your efforts.
On the environmental question, three very quick points. One, I agree completely with Michael's statement on new technologies. This is a field that is changing very, very quickly. I have had personal experience with two different situations where a new technology on a closed military base could accomplish the same standard, the clean-up standard, at literally half the cost.
Second, and hand in hand with that, is privatizing the cleanup. I believe very strongly that there are a number of instances around the country that you can look at where privatization of the cleanup done by or through the local redevelopment authority can work faster and cheaper. Jim Meadows from the Presidio is about to undertake a huge cleanup out in California, and I think it will be an interesting one to watch from particularly that point of view, and last, there are a proliferation of new insurance products in this field that just have not been available to those of us trying to do this before.
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It is difficult for the Federal Government to figure out how the insurance aspect of this really relates, but quite frankly, the only alternative to some kind of risk analysis that is insurable is the situation that we have today, where the cleanup is so clean that there is never a chance of a liability coming back, and that, frankly, works to no one's benefit, because we can never get to that level of certainty.
Mr. HEFLEY. I asked Secretary Yim earlier the question regarding DOD indicating that previously-agreed EDCs might be renegotiated if the department can validate a change in economic circumstances, and as I said then, that phrase seems a little vague to me, and Mr. Yim explained, from his viewpoint, how he thought it would be implemented, but do any of you have views on that subject, particularly, Mr. Simon?
Mr. SIMON. I briefly alluded to it in my remarks, but when Congressman Farr was talking about the three different categories of basis, the one that he left out were bases that have concluded EDCs, in many instances have actually made some payments but are having an awfully hard time keeping up with both payments or release requirements which require that a certain proportion of a saleof every sale be paid to the service. I would just go back to the statements that were made before, particularly by the GAO individuals, who talked about the fact that the costs of redevelopment have just turned out to be a lot higher than any of us thought, and there are so many choices for development to occur today, globally, quite frankly, that in order to attract the attention of the development community to the bases, which is where we want it, we need to do everything that we possibly can.
I think that relief, Mr. Chairman, of agreements that were entered into, admittedly voluntarily and in good faith but just have turned out to not be correct, is an admission that the policy just needs changing in that respect, as well, and that we need to get that development going. So, I would hope that you would look at it in that light, that it was people of goodwill acting on the information that they had, but quite frankly, our information, collectively, was faulty.
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Mr. HEFLEY. Are there any questions from anyone on the committee? Mr. Riley, do you have any closing comments you would like to make?
Mr. RILEY. Mr. Chairman, thank you very much. I just want to thank all of the panelists for your testimony. I appreciate you taking the time. I know it has been a long day for you, so I will not belabor the point, but I think we need to go back to the old adage, as far as DOD and BRAC is concerned. First, you do no harm. I am not too sure we can say that in the past.
I think that should be our marching orders from here on. If we are going to sincerely try to help these communities, the first thing we have to do is do no harm to their ability to redevelop, and I think the best way we can do that is allow all of them the opportunity to take that property, as expeditiously as possible, use it to the best economic development of that community. Thank you, Mr. Chairman.
Mr. HEFLEY. Mr. Riley, we appreciate your tenacious pursuit of this, and you have led this series of panels that we have had this afternoon. I, frankly, think this is one of the better hearings that we have had in a long time. I hope the committee would agree with me, and if there is nothing further, we stand adjourned.
[Whereupon, at 5:56 p.m., the subcommittee was adjourned.]
A P P E N D I X
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