Dialing Up Free Enterprise & Dialing Back the Command Economy
By: Mackenzie Andersen
Tags: Entrepreneurship, History, Philosophy, Culture, Economic Development

The redevelopment of Loring, was strategically planned and involved massive amounts of federal and state aid, while the transference of the real estate properties at Cutler Navy Base was a fly by night operation, arranged by a special congressional delegation to the Navy, and the Maine State Legislature, which left the base without assets or local authority to raise revenue through property taxes.

A significant difference in the fates of WCRA and Loring is the way that expensive-to maintain military property was handled. In the case of Loring:

As it began its work, the Loring Development Authority recognized that something needed to be done to keep the base from deteriorating. The State of Maine could not afford the millions of dollars needed to protect and maintain the buildings on the base. The Authority and Maine’s politicians lobbied for federal assistance. Loring pioneered a 10-year caretaker agreement with the Air Force. The base went into “caretaker status” after residual operations phased out with its subsequent closure. Caretaker status meant federally-funded security and limited maintenance to keep base facilities in “mothballed” condition. How Regions Adjust to Base Closings: The Case of Loring AFB Ten Years After Closure, 2005

Federal base closure rules qualify economic development organizations “in one form or another” to present proposals for the use of the base. It is possible to obtain the property for no or very little cost. The main stipulations for that opportunity is that proceeds of sales or rental of property be used for economic development at the former installation and that public agencies or private non-profits provide vital public services such as education, health care, homeless services, parks and recreation, law enforcement, prisons, self-help housing and transportation.

The Maine Legislature got around the requirement that proceeds of real estate revenue be invested in the former base located in Cutler, Maine, by first chartering the base as a municipal corporation serving as an instrument of the State. In accordance with DOD rules, the Washington County Redevelopment Authority was to serve as an economic development instrument of conveyance from the DOD, but the economic development of the base was clobbered by what happened next.

Based on history to date, it is reasonable to conclude that The Washington County Development Authority was created solely for the purpose of receiving the property from the federal government and then giving it to a newly created private non-profit, Cutler Development Corporation, which in turn sold the real estate to a private developer and the proceeds were split by the surrounding towns and nothing was invested in the base, which was then promptly forgotten about by the Maine Legislature which still claims the Authority as its instrument.

According to hearsay, the WCRA gave the real estate to the non-profit Cutler Development Corporation. If the Cutler Development Corporation had purchased the property from the Navy, it would have been required to pay fair market value as the corporation did not meet the requirements for a no-cost conveyance. If WCRA had sold the real estate to the Cutler Development Corporation, it would have been required to invest the proceeds in the base, but a gift is not a sale and so there were no proceeds required to be invested in the base.

In an economic development model that inverts conventional wisdom, the combined actions of the Authority and the corporation depleted the base of capital resources needed for development.

Instead of investing concentrated wealth in the economic development zone on the theory that it will trickle down to benefit the surrounding region, in the Cutler case, its resources were taken out from under in order to sell the real estate and distribute the cash among the towns of the surrounding region, without involving a job-creation initiative. The well considered report on the Loring Base explains how the loss of military jobs affects an entire region. Was Cutler an exception? Were there no job lost in the closure of the Cutler Navy Base? Why was the instrument of conveyance used to transfer military property to civilian use left with fewer financial resources than a conventional municipality has to maintain and develop its assets?

A Tale of Two City-States

In contrast the Loring Development Authority was the agent that sold the real estate to private businesses, re-investing the proceeds in the base.

In July 2001, the Air Force transferred 2,805 acres out of a total 12,000 acres of base property to the LDA at no cost through an economic development conveyance….The Loring transfer, besides being the largest military base transfer at the time, allowed the LDA to sell the property to businesses instead of leasing it, as it had been doing. The remaining 21 acres were transferred to the U.S. Fish and Wildlife Service to establish the Aroostook National Wildlife Refuge. How Regions Adjust to Base Closings: The Case of Loring AFB Ten Years After Closure, 2005.

A View from Sunrise County Economic Council

In 2015, I was aware that BRAC closure rules gave first priority to local organizations and so I wrote to the Sunrise County Economic Council and asked this question: “When the Cutler military base closed down did any of the economic development organizations in Washington County bid on it or was the state the only one? I received this answer:

The Cutler Base closure was a very interesting process. Because of the usual transition of surplus military property (if I remember correctly it is other branches of service first, then federal government, state government, local government, then other organizations), the State created the Washington County Development Authority (WCDA; a quasi-governmental agency) as a local entity who could receive the property directly from the military The WCDA was able to then give the property to the Cutler Development Corporation (CDC) which was a local development corporation created to assist the town and local area with dealing with the issues caused by a base closure. The CDC sold the property to a developer and the bulk of the funds from the sale were shared between the towns that made up the CDC. There have been issues at the base, and development has not gone as planned. The base has two segments — commercial and residential. The commercial side has recently been granted back to the WCDA and they are considering options for possible reuse of facilities.

My correspondent did not remember correctly, or else she was not informed correctly. The following is from the Military Base Reuse Handbook:

The community in the vicinity of an installation is defined as the political jurisdiction(s), other than the State, that comprise the LRA for the installation. If no LRA is formed at the local level and the State is serving in that capacity, then the community in the vicinity of the installation is deemed to be the political jurisdiction(s) in which the installation is located. Public agencies and private nonprofit organizations Public agencies and private non-profit organizations are often eligible for one of several public benefit conveyance programs that make surplus properties available at up to a 100-percent discount of fair market value. Surplus military property may be conveyed to these public agencies and private non-profits to provide vital public services such as education, health care, homeless services, parks and recreation, law enforcement, prisons, self-help housing and transportation.[1] [1] https://www.hudexchange.info/resources/documents/MilitaryBaseReuse.pdf

On the other hand my correspondent was correct as specially negotiated rules were arranged for the Cutler Base by the powerfully connected .

A Trip to Washington to Change the Rules

In 2000 The Bangor Daily News reported that Senator Olympia Snowe supported by Maine’s Congressional Delegation introduced federal legislation to transfer two hundred sixty acres of coastal real estate including 22 administration buildings, 61 units of base housing, and a variety of recreational facilities, garages, a concrete dam and a freshwater reservoir that the Navy no longer needed to a local reuse authority composed of the towns of Cutler, East Machias, Machias, and Machiasport.

The BDN article is no longer available on line. However at the time I read the article in 2015 I thought that what occurred was not being reported accurately. The articles of incorporation of the Cutler Development Corporation can be downloaded from the Secretary of State website. Cutler selectman, David Eldrige and Machias selectman, Kenneth Bucket Davis were the two incorporators, listed as private individuals without mention of an official relationship to the towns.

Maine’s congressional delegation to Washington D.C. included Senator Olympia Snowe (R), Senator Susan Collins (R), and Representatives John Baldacci (D) and David Allen(D), who met with Navy Secretary Richard Danzig to discuss plans for the Cutler Naval Base. Danzig assured the delegation that he made the final call on whether the Navy will transfer all military personnel from Cutler.

The Secretary of the Navy is subordinate to the Secretary of Defense. BRAC Base Closure Rules grant authority to the Secretary of Defense to transfer real property and personal property to the redevelopment authority for consideration at or below the fair market value. A reduced or no cost conveyance can be authorized when it is determined to be necessary to support economic development and when DOD could show that other transfer authorities were insufficient. The Washington County Redevelopment Authority was the instrument of conveyance, supposedly under the rubric of economic development.

The delegate to Washington negotiated a special act of legislation H.R.4205 — Floyd D. Spence National Defense Authorization Act for Fiscal Year 2000, which authorized the conveyance of the Cutler Military Base to civilian use, changing the priority for instruments of conveyance.

General BRAC closure rules grant priority to local economic development conveyances (EDC). H.R.4205 — Floyd D. Spence National Defense Authorization Act for Fiscal Year 2000 allows for the property to be conveyed to “to the State of Maine, or a subdivision or agency thereof”, changing the priority of transfer conveyance from a local authority to a state authority and from any type of organization to a government organization.

The Washington County Development Authority was left without assets and as an instrument of the state it lacks the authority to collect property taxes. The statute authorizes the base to raise money through issuing bonds but as the Authority is an instrument of the state, it must have the bonds issued through the state, and so what is said about it is really quite confusing since the media never mentions its statutory status.

In 2014 the expensive to maintain commercial property was given back to the base by a private developer, As written in WASHINGTON COUNTY ANNUAL REPORT July 1, 2014-June 30,2015, The volunteer board of WCRA petitioned the Legislature for a bond to maintain the property and develop the base and the Legislature shelved the request to the next session.

No further news was found until this story in February 2020. There is at least one business at the Washington County Redevelopment Authority and the owner seems very gung-ho. The business is over one hundred years old. I am glad the Authority has found one so enthusiastic.

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Timeline of Four Corporations Chartered by Special Acts of Maine Legislation 1998–2005

Because of the complexities involved with environmental clean up and other federal involvement, the transformation of Loring took a longer time between base closure and the establishment of a commerce park, which happened gradually throughout the time that the KRDA and the Washington County Redevelopment Authority were chartered as corporations by the Maine Legislature.

Kennebec Regional Development Authority, was chartered by the Maine Legislature in 1998, hosting the first business park, aptly named First Park. It is the only business park that is not chartered as an instrument of the state, instead the region of municipalities have become the instruments of KRDA”s corporate board, thanks to an act of the Maine Legislature.

Washington County Redevelopment Authority was chartered in 2001 in the state’s poorest county, coincidentally around the same time that property was being transferred to The Loring Redevelopment Authority, using a starkly different method of transfer.

Midcoast Regional Redevelopment Authority was chartered in 2005 in Maine’s wealthiest county.