Military Base Closures: Progress in Completing Actions from Prior Realignments and Closures
Released: 2002-04-05T00:00:00

Letter

Background

To enable the Department of Defense (DOD) to close unneeded bases and realign others, the Congress enacted base realignment and closure (BRAC) legislation that instituted base closure rounds in 1988, 1991, 1993, and 1995. A special commission established for the 1988 round made recommendations to the Committees on Armed Services of the Senate and House of Representatives. For the 1991, 1993, and 1995 rounds, special BRAC Commissions were set up to recommend specific base realignments and closures to the president, who in turn sent the commissions’ recommendations and his approval to the Congress. The four commissions generated 499 recommendations—97 major closures and hundreds of smaller base realignments, closures, and other actions. Of the 499 recommendations, 451 required action; the other 48 were modified in some way by a later commission. DOD was required to complete its realignment and closure actions for the 1988 round by September 30, 1995, and for the 1991, 1993, and 1995 rounds within 6 years from the date the president forwarded the recommended actions to the Congress. Property disposal and environmental cleanup actions, however, were allowed to continue beyond the 6-year period.

DOD reported that, as of September 30, 2001, it had taken all necessary actions to implement the recommendations of the BRAC Commissions for the four rounds. As a result of these actions, DOD estimates that it has reduced its domestic infrastructure by about 20 percent and saved billions of dollars in the process. DOD calculates its net savings by deducting the costs necessary to implement BRAC actions from the savings accrued by realigning or closing bases. These accrued savings include savings that occur during the budget year that a BRAC decision is implemented as well as the estimated cost avoidances during future years—costs that DOD would have incurred if BRAC actions had not taken place. Some of the savings are one-time (e.g., canceled military construction projects), but most represent an avoidance of recurring spending (e.g., personnel reductions). Eliminating or reducing recurring base support costs at closing and realigned bases is a major component of BRAC savings. Savings are realized through a number of actions, such as terminating physical security, fire protection, utilities, property maintenance, accounting, payroll, and a variety of other services that have associated costs linked specifically to base operations. Over time, the value of the recurring savings has become the largest and most important portion of BRAC’s overall savings. DOD reports these savings estimates to the Congress as part of its annual budget requests. The avoidance of other one-time, but not-yet-programmed, costs also may be significant over time, but they are not easily captured or reported.

Once DOD no longer needs BRAC property, it is considered excess and is offered to other federal agencies. As shown in figure 1, any property that remains is then considered surplus and is disposed of through a variety of means—initially by transfers to states and local governments for public benefit purposes and, thereafter, for economic development purposes (commonly referred to as “economic development conveyances”) and negotiated or public sales. Under public benefit transfers, local redevelopment agencies can acquire property for such purposes as schools, parks, and airports for little or no cost. In 1993, BRAC legislation was amended to provide local redevelopment authorities with BRAC property at or below fair market value or without cost to promote economic recovery in areas affected by closures. DOD was required to transfer property for economic development to communities in rural areas at no cost. Later, these provisions were replaced with others that allowed no-cost property transfers to local redevelopment authorities for job generation or lease back to the federal government. Consequently, local redevelopment authorities have usually sought to obtain property at no cost and, failing that, pursue it through negotiated sales.

The economic impact on communities near base realignments and closures has been a long-standing source of public anxiety. Because of this concern, DOD included “economic impact” as one of eight criteria that it used for making BRAC recommendations in the last three rounds. Although it did not play as large a role in initial BRAC deliberations as did other criteria and was not a key decision factor, “economic impact” was of such sufficient importance that DOD components were required to estimate the impact of their recommendations.

We have reported on base closure implementation issues on several occasions. Although many of our reports have been limited in scope, focusing on concerns raised by individual members of Congress on closure-related actions at a specific location, our first comprehensive report addressing DOD-wide closure issues (e.g., the magnitude and precision of cost and savings estimates, the progress of environmental cleanup and property transfer, and the latter’s impact on communities and their recovery) was issued in December 1998. In that report, we concluded that the closure process was generating substantial savings, although the savings estimates were imprecise; most former base property was still awaiting transfer to other users; and most communities surrounding closed bases were faring well economically in relation to national economic indicators. Subsequent reports issued in July and August 2001 updated closure-related implementation data and reaffirmed the primary results of our prior work. In our July 2001 report, for example, we noted that DOD’s net BRAC savings estimates, while imprecise, had not only remained substantial but also were higher than projected earlier. In August 2001, we reported that most BRAC-affected communities were continuing to recover from the impact of base closures and were doing well economically in terms of key U.S. economic indicators. Furthermore, we noted that while progress was being made, over one-half of unneeded former base property had not yet been transferred.

BRAC Net Savings Are Substantial but Imprecise

Through fiscal year 2001, financial data show that DOD generated an estimated $16.7 billion in net BRAC savings from the four rounds, an increase of $2.5 billion from its fiscal year 1999 estimate, and expects additional annual recurring savings of $6.6 billion beginning in fiscal year 2002, an increase of $1 billion. Although they have fluctuated over time, as projected costs and savings arising from the BRAC actions have changed, the net savings estimates have remained substantial. In addition to our analyses, studies by other federal agencies, such as the Congressional Budget Office (CBO), the DOD Inspector General, and the Army Audit Agency, have shown that BRAC savings are real and substantial. However, because they are based on cost and savings projections that are not precise, net savings should be viewed as a rough approximation of the likely savings. The estimates are imprecise because the military services have not regularly updated their savings projections. Furthermore, DOD has not incorporated into its estimates all costs, including reported cumulative federal government expenditures of about $1.5 billion incurred by agencies to assist communities affected by the BRAC process. On the other hand, estimated net savings could be viewed as greater than reported by DOD if one considers, for example, that many environmental-related costs attributed to the closures would have likely occurred, but probably at a slower pace, even if the bases had remained open. Also, closures avoid future, but not yet programmed, recapitalization costs on unneeded facilities.

BRAC Net Savings Estimates through Fiscal Year 2001 Have Increased $2.5 Billion

DOD’s fiscal year 2002 budget request and supporting data show that BRAC net savings estimates have increased in recent years. DOD data show savings estimates of about $16.7 billion through fiscal year 2001—an increase of about $2.5 billion from that reported in the fiscal year 1999 budget request. As figure 2 shows, DOD’s data indicate that, in 1998, the cumulative net savings estimates surpassed the costs incurred to implement BRAC actions, and the net savings have grown from that point.

In preparing net savings estimates, DOD deducts the costs of implementing BRAC actions for the four closure rounds (e.g., personnel and equipment relocation and environmental cleanup) from the estimated savings (e.g., cost avoidances such as base operational costs that would have occurred without BRAC action) to project net savings. Table 1 summarizes the cost and savings estimates through fiscal year 2001 for the four BRAC rounds as presented in the budget-related documentation for fiscal years 1999 and 2002.

As table 1 illustrates, our comparative analysis of BRAC budget submissions and supporting data for fiscal years 1999 and 2002 shows that the estimated net savings increase of $2.5 billion through 2001 was due to a combination of decreased costs ($909 million) and increased savings ($1,613 million) estimates.

A significant portion of the estimated cost reduction resulted from delays in planned environmental cleanup through 2001, leading to a decrease of $379 million in reported environmental costs during that time period. However, expected environmental costs beyond 2001 are now $3.5 billion rather than the $2.4 billion estimate reported in fiscal year 1999. At the same time, our analysis shows that overall environmental costs remain within the range of prior program estimates that we reported on in 1996.A significant portion of the increased savings estimate is attributable to (1) an underreporting of $925 million in savings accrued from the 1991 closure round and (2) the inclusion of a $381 million savings estimate for two Air Force bases—McClellan Air Force Base, California, and Kelly Air Force Base, Texas—which was not included in the fiscal year 1999 submission. Additional details regarding the increase in projected net savings through fiscal year 2001 and the rationale for revisions are included in appendix II.

Estimated Annual Recurring Savings Have Increased $1 Billion

In addition to the revisions made to cost and savings estimates through fiscal year 2001, DOD revised its annual recurring savings estimate for fiscal years 2002 and beyond. DOD’s data now show that DOD will accrue an expected $6.6 billion in annual recurring savings for the four BRAC rounds—an increase of approximately $1 billion from its fiscal year 1999 estimate. This increase is attributed to adjustments in the inflation rate, changes in the implementation of BRAC actions at specific locations, and underreported savings by the Navy, as explained below: About $470 million of the $1 billion increase in expected annual recurring savings is primarily a result of changes in the reporting base year (from fiscal year 1999 to fiscal year 2002), which resulted in 3 additional years of inflation.

About $366 million of the increase is due to overall estimated savings updates for specific BRAC actions made by the military services since fiscal year 1999. The Army updated its savings estimates for 24 BRAC actions on the basis of revisions submitted by Army major commands and in response to a 1997 Army Audit Agency report that recommended specific adjustments for audited BRAC actions. The Navy revised its savings estimate for the Navy Medical Research Institute, Bethesda, Maryland, because of changes to planned implementation actions at the facility. Finally, the Air Force’s reported savings estimates rose as a result of updates for BRAC actions at McClellan Air Force Base, California, and Kelly Air Force Base, Texas, in its fiscal year 2000 and 2001 requests.

Another $208 million of the increase is the result of underreported estimated savings in the Navy’s 1991 BRAC round. Because the Navy received an appropriation for the 1991 BRAC round in fiscal year 1998, 1 year after the last year of implementation, it reported some, but not all, of the recurring savings in that additional year. Consequently, about $208 million ($183 million plus an adjustment for inflation) was not included in DOD’s reported annual recurring savings.

Other Government Studies Also Show Substantial BRAC Savings

In addition to our analyses, studies by other federal agencies, such as CBO, the DOD Inspector General, and the Army Audit Agency, have shown that BRAC savings are real and substantial and are related to cost reductions in key operational areas as a result of BRAC actions. The following are examples: In a July 1998 report, CBO reported substantial BRAC savings, even though it found some imprecision in DOD’s costs and savings estimates. CBO stated its belief that DOD’s estimate of $5.6 billion in annual recurring savings at that time was reasonable, given that the Budget Office’s estimate was about $5 billion annually.

In a May 1998 report on more than 70 closed or realigned bases during the 1993 BRAC round, the DOD Inspector General found that BRAC savings could potentially reach $9.2 billion.

In a July 1997 report on BRAC costs and savings, the Army Audit Agency concluded that savings after full implementation would be substantial for ten 1995 BRAC round sites that it had examined.

Precision of Cost and Savings Estimates Is Limited

While the net savings from BRAC activities are clearly substantial, savings and cost estimates used by DOD to calculate the net savings at its BRAC- affected bases are imprecise. Despite DOD guidance directing the military services to periodically update their savings estimates, the services have not done this. Furthermore, DOD has not included all costs associated with BRAC closures in its estimates. For example, the estimated costs exclude some federal government costs related to BRAC implementation and expected environmental costs beyond 2001. The omission of these costs has the effect of overstating net savings estimates. On the other hand, net savings could be viewed as understated if one considers the broader implications of BRAC on the DOD budget. For example, while the costs incurred for the environmental cleanup of BRAC bases is recorded as a BRAC cost, DOD asserts that many of these costs would have been incurred anyway had the closing bases remained open. In this regard, it could be argued that the net costs incurred by DOD are overstated and that net savings would thus be increased.

BRAC Savings Estimates Are Not Updated Periodically

The results of our prior and current work show that the military services have not updated their savings estimates periodically, thereby contributing to imprecision in overall BRAC estimated net savings figures. Because closure or realignment actions may vary from the original plans, it is important for the services to review and update these estimates periodically to increase their accuracy. Moreover, DOD guidance to the services emphasizes the importance of frequent updates and directs them to update estimates in their annual budget submissions.

Since our last review in 1998 of the services’ efforts to update their estimates, the Army has increased the frequency and scope of its updates. As discussed previously, it updated savings estimates for 24 BRAC actions in its fiscal year 2000 budget request and an additional 6 in its fiscal year 2001 budget request. The Navy, on the other hand, has revised the savings estimate for only one of its BRAC actions since 1998. Consistent with our previous reporting in 1998, Army and Navy officials told us they revise estimates only when there are substantive changes to BRAC decisions that warrant such revisions. While the Air Force does not routinely revise its savings estimates from the initial estimates established by the various BRAC commissions in rendering their decisions, it did, however, update its estimates for McClellan Air Force Base, California, and Kelly Air Force Base, Texas, in its fiscal year 2000 and 2001 budget requests.

Service officials have cited a number of reasons for not routinely updating savings estimates from BRAC closures and realignment. They acknowledged that updating savings has not been a high priority and that, instead, the emphasis in preparing the annual budget lies in estimating costs—not savings. They told us that updating savings estimates is a labor- intensive process and could be costly because no systematic approach exists for the process. A fundamental limitation in DOD’s ability to identify and track savings from BRAC closures and realignments is DOD’s accounting systems, which like other accounting systems, are not oriented toward identifying and tracking savings. The services develop savings estimates when they create their initial BRAC implementation budgets and report them in DOD’s BRAC budget justifications. Because the accounting systems do not track savings, however, updating these estimates would require a separate tracking method or system.

In those instances in which the services did update savings estimates, the process for updating estimates varied among them, and they were unable to provide us with adequate documentation to permit us to independently validate the basis for the revised estimates. Army officials told us that their major commands provided estimate revisions during their funding request briefings with the Army Budget Office. Similarly, Navy commands submitted revised estimates to the Naval Engineering Facilities Command when a significant change was warranted. The Air Force, on the other hand, did not require its commands to submit updated estimates—instead, it formed a special team to arrive at savings estimates for the McClellan Air Force Base and Kelly Air Force Base submissions.

BRAC Costs Are Not Comprehensive

BRAC costs are not comprehensive because they do not include certain costs related to BRAC activities that are incurred either by DOD or by other governmental agencies. However, while their inclusion would reduce BRAC overall net savings, their impact would be marginal.

First, DOD’s calculation of one-time estimated net savings do not include BRAC-related economic assistance costs, most of which are incurred by federal agencies other than DOD. As of September 30, 2001, federal agencies had reported expenditures of about $1.5 billion (an increase from the $1.1 billion in our 1998 report) to assist BRAC-affected communities and individuals for such purposes as base reuse planning, airport planning, job training, infrastructure improvements, and community economic development.

About $568 million was provided by the Department of Commerce’s Economic Development Administration to assist communities with infrastructure improvements, building demolition, and revolving fund loans.

About $405 million was provided by the Federal Aviation Administration to assist with converting former military airfields to civilian use.

About $218 million was provided by the Department of Labor to help communities retrain workers who have lost their jobs because of closures.

About $270 million was provided by DOD’s Office of Economic Adjustment to help communities plan and implement the reuse of BRAC bases.

Second, DOD’s calculation of estimated annual net recurring savings beyond 2001 does not include expected environmental costs of about $3.5 billion. Because these costs would be spread over many years, however, they would provide only a marginal reduction in the annual recurring savings estimates.

Savings May Be Greater Than Estimated

DOD’s difficulty in providing precise estimates is further complicated by the fact that certain actions it undertakes in the BRAC process could produce other savings that are not captured in its net savings estimates. For example, the inclusion of BRAC environmental cleanup costs in calculating net savings has the effect of overstating costs (and understating net savings for DOD) if one considers that DOD has reported previously that it would have incurred many of these costs even if the BRAC bases had remained active facilities. DOD acknowledges, however, that environmental costs under the BRAC process may have been accelerated in the short term, and may have been more costly because of more stringent regulatory requirements. However, the marginal difference is not easily quantified. A similar case can be made for military construction activities. DOD has expended significant funds (an estimated $6.6 billion through fiscal year 2001) on military construction at receiving bases under the BRAC process. Although they are difficult to quantify, over time DOD would have likely incurred these and other costs under its facilities capital improvement initiatives if the closing bases would have remained open.

Transfer of Unneeded BRAC Property Is Only Partially Completed

As a result of the BRAC process, DOD designated about 518,500 acres of property at BRAC-affected installations as unneeded. Forty-six percent of the acreage has been scheduled to go to federal entities, and most of the remainder will go to nonfederal entities; the disposition of less than 1 percent of the property has not yet been decided. However, as of September 30, 2001, less than half of the unneeded property—42 percent— had been transferred to these entities, and according to plans, it will take many years for DOD to transfer all of its unneeded property. Nearly half of the 236,400 acres designated for federal use has been transferred while about one-third of the 279,900 acres intended for nonfederal use, such as local authorities or private entities, has been conveyed; and the disposition of less than 1 percent (2,200 acres) has not yet been decided. While delays in property transfer are due to many factors, the primary one in most instances has been related to environmental cleanup. In the interim, DOD is using several techniques, such as leasing, to get property into the hands of users more quickly for further reuse while awaiting the transfer of property titles.

Designation of Unneeded BRAC Property Is Nearly Finished

DOD has made considerable progress in completing the designation of unneeded BRAC property for federal or nonfederal use. As of September 30, 2001, DOD had about 2,200 acres, or less than 1 percent of the total unneeded BRAC property, left to designate. This was a reduction from the 98,000 acres (21 percent of the total unneeded property) that we reported in 1998.

According to DOD documentation, about 46 percent, or 236,400 acres, of the total unneeded BRAC property is slated to go to federal entities, including other services within DOD. (See fig. 3.) About 54 percent, or 279,900 acres, is designated to go to nonfederal entities.

As shown in figure 4, most of the property (81 percent, or 191,700 acres) remaining within the federal government is to be transferred to the Department of the Interior’s U.S. Fish and Wildlife Service and Interior’s Bureau of Land Management. About 16 percent (37,300 acres) will go to other federal recipients, including the Bureau of Indian Affairs, and the Bureau of Prisons. DOD is also retaining some of the property (7,500 acres) for use by other services and DOD agencies.

DOD can dispose of BRAC property to nonfederal entities through public benefit transfers (for such purposes as airports, education, parks and recreation, and homeless assistance), economic development conveyances, and market (advertized) or negotiated sales. Depending on the transfer method used, DOD may or may not receive consideration for the property. For example, property transferred for a public benefit can typically be at no cost or a discounted cost. With the enactment of the National Defense Authorization Act for Fiscal Year 2000, all BRAC-affected communities became eligible to receive property at no cost for economic development. However, with the enactment of the National Defense Authorization Act for Fiscal Year 2002, DOD is to seek fair market value for property transferred from bases recommended for closure or realignment in the BRAC 2005 round. The act also authorizes property transfers without consideration if circumstances warrant.

As of September 30, 2001, economic development conveyances were the most common method used to transfer property to nonfederal entities. (See fig. 5.) They accounted for about 114,900 acres (41 percent) of the acres slated for nonfederal use. Public benefit transfers accounted for 73,100 acres (26 percent), and market/negotiated sales accounted for 9,700 acres (3 percent).

Transfer of Unneeded BRAC Property Is Less Than Half Completed

Although DOD has plans to transfer nearly all of its unneeded BRAC property, as of September 30, 2001, it had actually transferred less than half of the 518,500 acres designated for federal or nonfederal reuse. As shown in table 2, about 42 percent, or 219,600 acres, of the planned property transfers have been completed.

While the amount transferred is a significant improvement over the 14- percent transfer figure that we reported in our December 1998 report, DOD still has 298,900 acres of unneeded property left to transfer. Of this amount, nearly 60 percent, or 174,600 acres, is slated to go to nonfederal entities. Most of the untransferred property comes from the last closure round in 1995, although about 33 percent, or 98,700 acres, stems from the earlier BRAC rounds.

The military services expect to complete the transfer of most of the remaining unneeded acreage by 2007. The Air Force’s property transfer schedule showed that transfers to federal entities and most nonfederal entities would be completed by 2005 and 2006, respectively. However, one parcel at McClellan Air Force Base, California, is not slated for transfer until 2016 because of significant unanticipated environmental cleanup issues. The Navy’s property transfer schedule indicated that transfers to federal entities and nonfederal entities would be finished by 2007. The Army’s property transfer schedule showed that many property transfers would be completed by 2006; however, transfers beyond 2007 were anticipated at Fort McClellan, Alabama; Fort Meade, Maryland; Fort Wingate, New Mexico; and the Sierra Army Depot, California. Furthermore, the Army has not established expected transfer dates for property on a few bases where unexploded ordnance is a cleanup issue. These properties include Camp Bonneville, Washington; Fort McClellan, Alabama; Fort Ord, California; and the Savanna Army Depot, Illinois.

Most Property Transfer Delays Are Due to Environmental Cleanup Issues

Our analysis of former bases with untransferred acreage and our discussions with military service officials show that, while there are several reasons for delays in transferring property to other users, including other federal entities, environmental cleanup-related issues are predominant. Environmental cleanup has been a long-standing concern in the BRAC program—one that has been not only costly and challenging for DOD but also frustrating for intended users of the property. While DOD has already spent an estimated $7 billion through fiscal year 2001 on BRAC environmental-related actions, DOD expects to spend an additional $3.5 billion beyond 2001 to complete its cleanup work.

Environmental Cleanup Is Impeding Property Transfer

In analyzing impediments to property transfers, we looked at all 51 BRAC bases with 500 or more acres of property that as of September 30, 2001, had yet to be transferred to another military service, a federal agency, or a nonfederal entity. These bases had a total of 291,447 untransferred acres, representing almost 98 percent of the untransferred BRAC acreage. Service officials cited environmental cleanup concerns—an issue at 40 of the 51 bases—as the primary reason for property transfer delays. Because base property is normally subdivided into various parcels for transfer and reuse purposes, a base may have several reasons for property delays. At 27 of the 51 bases, environmental cleanup was ongoing on some parcels while 9 bases were awaiting regulatory approval for transfer on other parcels. Officials at 10 bases cited difficulties in either establishing the extent of cleanup required for transfer or deciding on the ultimate reuse of the property. On a more limited scale, at six Army bases, delays stemmed from the difficult challenge, in terms of both time and money, of cleaning up unexploded ordnance. Service officials also cited that reaching agreement with other federal agencies in the transfer of property has been a difficult and tedious process.

Environmental Cleanup Costs Continue beyond 2001

As of September 30, 2001, DOD had spent an estimated $7 billion on actions related to BRAC environmental cleanup, and it estimates it will spend about $3.5 billion beyond 2001 to complete the cleanups. As shown in figure 6, the Air Force is expected to bear the largest burden of future costs.

DOD’s current cost estimate of $3.5 billion to complete the cleanup after 2001 is $1.1 billion higher than reported in fiscal year 1999. Service officials attribute the growth to several factors, including delays in planned environmental cleanup schedules, increased costs as requirements have become more refined, and more stringent cleanup standards at bases where reuse plans have changed. While post-2001 costs are expected to rise, the total estimated BRAC environmental cleanup cost, which is now set at about $10.5 billion, has remained relatively stable over time. In 1996, for example, the total environmental costs were projected at about $11.3 billion and about $9.6 billion in 1998.

The out-year estimates, however, are still subject to change because the extent of the remaining cleanup required at some bases is uncertain. In particular, the cost of cleaning up unexploded ordnance at several former bases has been and continues to be difficult to estimate. For example, at former Fort Ord, California, the estimated $306 million needed to complete unexploded ordnance cleanup is likely to change because the location and concentration of all unexploded ordnance is still being investigated. A similar situation exists at Camp Bonneville, Washington, where, according to Army officials, the current $73 million cost estimate is likely too high, depending on the extent of cleanup agreed upon by environmental regulators and the Army. Aside from unexploded ordnance, the discovery of other hazardous materials can dramatically change cleanup cost estimates. For example, at McClellan Air Force Base, California, the more than $600 million estimate is likely to rise because recent cleanup actions have uncovered about 100 buried and forgotten drums of materials, some of which contained plutonium waste. According to Air Force officials, it is too early to tell how many more drums will be unearthed and what cleanup actions will be required in those areas where they are found. However, one estimate states that another 1,000 barrels may be buried. Under the Air Force’s worst-case scenario, the remaining environmental cleanup cost estimate at the base would increase to about $1.5 billion.

Considering the magnitude of the expected out-year environmental costs, the Congress has recently expressed concern over the cost accuracy and amount of funding devoted to DOD’s BRAC environmental cleanup efforts. The Military Construction Appropriations Act of 2002, contained a general provision that directed DOD to accurately reflect the cost of environmental cleanup activities in its future BRAC budget submissions. According to the conference report, this was based on the fact that Navy and Air Force budget requests for fiscal year 2002 were far below the level needed to meet urgent obligations. As a result of what it termed inadequate programming and budgeting decisions by these two services, the Congress found it necessary to provide both services with additional funding (about $80.5 million for the Navy and $20 million for the Air Force) in fiscal year 2002 to complete mandated cleanups. Furthermore, the conferees directed the Navy and Air Force to allocate all unobligated balances from previous BRAC appropriations to address additional cleanup funding shortfalls.

DOD Is Using Several Methods to Expedite Property Reuse or Transfer

Recognizing delays in the transfer process, DOD has resorted to several methods to make unneeded property more readily available to future users for reuse purposes. They include leasing; the so-called “early transfer authority” which facilitates the deeding of property under a transfer authority; and no-cost economic development conveyances. These methods have created benefits for both DOD as well as affected users. By getting property into the hands of users sooner, DOD is able to reduce its expenses (e.g., caretaker costs). At the same time, users have the opportunity to put the property to quicker productive reuse (e.g., creating jobs and stimulating economic growth).

Long-Term and Interim Leasing Can Expedite Property Reuse

The military services are using long-term and interim leasing to get property into the hands of communities while awaiting final transfer. Long-term leases are issued when deeds cannot be obtained immediately—usually because of environmental cleanup issues. These leases, commonly referred to as “leases in furtherance of conveyance,” are usually provided to the expected ultimate transferee after the service has issued a final disposal decision for the BRAC property, and they can extend for many years. The Air Force, for example, has entered into 55- year leases at several of its former bases. Interim leases are short-term leases that make no commitment to the lessee for future use or transfer, and they are usually used in cases where the service has not yet made a final disposal decision.

Leasing can provide advantages for both the services and lessees. It may allow the military services to reduce their operation and maintenance costs for BRAC property before final transfer by allowing the lessee to assume more of these responsibilities. It also allows the services to keep base utilities and infrastructure operational, thereby saving them and the lessee the expense of having to restart these services. Community officials stated that lease terms of 25 years or greater are advantageous because financial institutions are more willing to lend funds to lessees to finance their reuse and redevelopment efforts. Leasing also allows lessees to redevelop closed bases without assuming the risks of property ownership. As shown in table 3, the Air Force has leased more property (in terms of acreage) than the Army or the Navy.

Two of the BRAC-affected sites we visited had leases in place while awaiting property transfer. At the former Loring Air Force Base, Maine, the Air Force in April 1997 negotiated a 55-year lease with the local reuse authority for 3,600 acres on the base. Reuse authority officials told us that the lease has allowed them to take on several expected long-term tenants and generate revenue for further redevelopment and reuse. At the same time, the lease also helped the Air Force reduce its base operation and maintenance costs. In April 2001, 2,800 of the 3,600 acres were transferred to the reuse authority, and the Air Force is retaining the remaining acreage as environmental cleanup proceeds. At the former Charleston Naval Shipyard, South Carolina, the Navy leased several properties to the local reuse authority while cleaning up the land to meet environmental standards. The reuse authority initially offered tenants short-term, 5-year interim leases, but these were modified to 30-year terms when it was assured that these tenants would become the eventual property owners.

Early Transfer Authority Can Accelerate Property Transfer and Reuse

Recognizing that environmental cleanup has often delayed the transfer of BRAC property, the Congress in 1996 enacted the so-called “early transfer authority” provision, which allowed property to be transferred before all necessary cleanup actions had been completed. For DOD to exercise this authority, however, certain conditions must exist, including the following: The property must be suitable for transfer for the intended use.

The agency must submit the terms of the transfer for a 30-day public written comment period.

The transfer of the property must not substantially delay any cleanup actions.

The deed must contain necessary restrictions on the use of the property to protect human health and the environment, ensure no disruption of remedial actions, and provide that all cleanup actions will be taken as approved by the appropriate regulatory agency.

The agreements must have the concurrence of the governor of the state where the property is located.

In terms of cost, DOD retains the responsibility for funding the environmental cleanup, regardless of whether it is performed by DOD or the user.

A primary advantage of using the early transfer authority is that it makes property available to the future user as soon as possible, thus allowing environmental cleanup and redevelopment activities to proceed concurrently. This can save time and cost and provide users with greater control over both activities. Furthermore, it provides communities with the means to quickly put property into productive use, create jobs, and generate tax revenue. The Navy estimates that use of the early transfer authority has shortened the time required to transfer property by at least 4 months and, in one case, up to 54 months. According to an Air Force official, early transfers helped to transfer property sooner than conventional methods, and in one case saved the property recipient over $100,000 in loan interest costs.

While early transfer authority can benefit all parties, it has not yet been exercised widely within the BRAC process. According to service officials, several factors have worked against its application, such as community adversity to taking risks, the absence of ready-to-implement reuse plans, the lack of support from state and local regulators, changes in intended property reuse, and distrust of DOD. Furthermore, exercising the authority may require DOD to commit more funds, in the short term, than what is available to meet environmental cleanup requirements. It appears that early transfer authority’s use is an evolving process; service officials told us that they expect greater application as users and other parties become more familiar with its potential advantages. Table 4 provides a list of locations where early transfer authority has been exercised through fiscal year 2001, including those locations where a deeded transfer has been completed.

DOD also uses economic development conveyances, which are designed to create jobs and promote economic activity, to transfer unneeded BRAC property to users. In 1993, BRAC legislation was amended to provide local redevelopment authorities with BRAC property at or below fair market value or without cost to promote the economic recovery of areas affected by closures. DOD was required to transfer property for economic development to communities in rural areas at no cost. Subsequently, the National Defense Authorization Act for Fiscal Year 2000 included a provision that required all economic development conveyances to be no- cost. It also permitted existing economic development conveyances to be modified to no-cost agreements if certain conditions were met. According to the conference report accompanying the act, the purpose of the provision was to support permanent job creation. Service and community officials told us that the effect of the provision has been to eliminate delays resulting from prolonged negotiation over the fair market value of BRAC property and to accelerate economic development and job creation. More recently, the National Defense Authorization Act for Fiscal Year 2002 stipulates that DOD “shall seek to obtain” fair market value for property transferred from bases recommended for closure or realignment in the BRAC 2005 round. It also authorizes property transfers without consideration if circumstances warrant. DOD has not yet developed policy guidance for implementing these provisions.

As of September 30, 2001, DOD had 61 economic development conveyances in place. Of these, 28 were implemented as no-cost agreements following enactment of the National Defense Authorization Act for Fiscal Year 2000, and 9 previously negotiated conveyances were modified to no-cost conveyances as allowed in the act. Appendix III provides a listing by location of the 61 economic development conveyances in effect.

Although DOD has not quantified the overall impact of no-cost economic development conveyances in terms of facilitating faster transfers and improving economic activity, the reuse authorities and DOD officials we interviewed agreed that their use generally has benefited both parties. Negotiations between DOD and reuse authorities over fair market property values, which were often highly contentious, have essentially been eliminated, thereby accelerating the transfer process in many cases. According to officials from several communities we visited, funds raised to pay DOD for BRAC properties could now be used to invest in reuse and redevelopment efforts. And, as DOD officials pointed out, DOD has been able, in some cases, to reduce its maintenance costs at BRAC bases because of faster transfers.

Most Communities Are Continuing to Recover from the Economic Impact of BRAC

While some communities surrounding closed bases are faring better than others, our analyses of key economic indicators and visits to select communities show that most are continuing to recover over time from the initial economic impact of base closures. Overcoming the negative economic impact of base closures or realignments on local communities, including the loss of perhaps thousands of jobs, has long been a concern for their citizens, as well as members of Congress. Despite the difficulties of transition, local community officials attributed their recovery to a number of factors, including a strong national economy, diversified local economies, and the redevelopment of former base property, all of which play key roles in unemployment rates and income levels. According to recent economic data, a majority had unemployment rates for the 9-month period ending September 30, 2001, that were lower than the national average and had annual per capita income growth rates that exceeded the national average during 1996 through 1999. Furthermore, a majority of the communities had lower unemployment and higher per capita growth rates than when we last reported these figures in December 1998. Our work at six selected base closure sites showed that the surrounding communities were recovering from BRAC, although the transition had not necessarily been easy. Many community officials credited the strong economy at the time and diversified economic activity in their region as key to their economic recovery.

Several Factors Play Key Roles in Community Recovery from BRAC

Various officials in surrounding communities affected by BRAC cited the strong national and local economies as key reasons why their communities were able to avoid economic devastation and find new areas of economic growth after a closure or realignment of a nearby military base. Officials also pointed to government assistance and base development, among other factors. (See fig. 7.) Although optimistic about the continued economic recovery of their communities, some local officials were concerned that the recent downturn in the national economy could hinder continued economic recovery.

Officials from BRAC communities have stressed the importance of having a strong national economy and local industries that could soften the impact of job losses from base closures. Since the 1991 recession, and until the recent slowdown, the economic performance of the United States has been robust. Officials from rural communities surrounding Fort McClellan, Alabama, for example, told us that the strong national economy during the 1990s helped to mask the worst effects of the base closing, but as the economy has slowed in recent months, the area is beginning to feel the full effects of the Fort McClellan closure.

Officials also point to diversification of the local and regional economy as key factors in easing economic recovery. For example, officials from urban communities surrounding the former Charleston Naval Shipyard Complex, South Carolina, believe they are better able to absorb the job losses from the base closure because their diversified economies provide a wider range of job and business opportunities. In a January 1998 report, we examined defense-related spending trends in New Mexico and the relationship between those trends and New Mexico’s economy. We reported that, although defense-related spending had declined in the state, the state’s gross product and total per capita income had increased and that this economic growth might be due to efforts to diversify the economy to counter the loss of defense jobs.

Officials also pointed to other economic forces at work in their region during the closure period that affected recovery efforts. For example, according to officials from communities surrounding Loring Air Force Base, Maine, a potato blight in the early 1990s adversely affected the potato-related industry—a significant revenue producer for the county and the state—and, in turn, slowed down the regional economy. Another event that adversely affected the regional economy was the enactment in the early 1990s of a Canadian law that allowed the Province of New Brunswick to apply a provincial sales tax on goods entering Canada from Maine. These fees forced many Canadian shoppers to remain at home rather than cross the border into Maine to shop, thereby ending most Canadian commerce in Aroostook County, where the former Loring Air Force Base was located.

An area’s natural and labor resources also can help economic recovery. The rural areas we visited, where agriculture has historically dominated the economy, have benefited from their efforts to diversify. For example, Beeville, Texas (Chase Naval Air Station), and Merced County, California (Castle Air Force Base), where farming or ranching have long prevailed, have been recently aided by an expanding prison industry. In Blytheville, Arkansas, where Eaker Air Force Base closed, the growing steel industry, which was attracted to the area in late 1980s, in part because of its access to the Mississippi River, has benefited the community. While the extent of economic recovery varies in each of these communities, economic diversity has provided a broader basis for long-term growth.

Leadership and teamwork among participants at the federal, state, and local levels are essential to reaching agreement on key issues, such as property transfer, base reuse, and environmental cleanup, all of which can promote economic recovery. The lack of agreement can prolong the cleanup and transfer of property. In Charleston, South Carolina, reuse authority officials told us that state officials have been very supportive of their redevelopment efforts, both in terms of financial assistance and other efforts.

Publicizing base redevelopment efforts and goals within the community and outside the community is a key strategy for attracting industry and helping communities gain confidence in recovering from the closure. For example, Charleston Naval Complex Redevelopment Authority’s recent marketing efforts helped it to enter into an agreement with a British firm specializing in the packaging and shipping of machine and engineering products to move its world headquarters to the former base. Charleston officials also said that the positive efforts of the surrounding community governments to work together to recover from the shipyard closure helped the community to regain confidence quickly.

To help communities successfully transform closed bases into opportunities, federal agencies have provided areas affected by closed or realigned bases with about $1.5 billion since 1988 in direct financial assistance. This assistance has come in several forms, including planning grants to help develop the property, training grants to provide new skills for the workforce, and grants for base infrastructure improvements. A 1997 study requested by the Department of Commerce’s Economic Development Administration and prepared by a Rutgers University research team concluded that federal financial assistance succeeded in aiding job creation and economic recovery from base closures and defense downsizing.

The redevelopment of base property is widely viewed as an important component of economic recovery for BRAC-affected communities. While not the only determinant of economic recovery for surrounding communities, it can, nevertheless, be an important catalyst for recovery efforts. Base closures make buildings and land available for new uses, which can generate new economic activity and new jobs. DOD data show that, as of October 2001, over 79,000 jobs, or about 62 percent of the nearly 130,000 jobs lost at major base closures from the prior rounds, had been replaced—an increase from the 36 percent recovery rate reported in 1998. (See app. IV for further details on jobs lost and created at major BRAC bases.) Closed bases can have various impacts on the recovery process. For example, DOD data show that when the Charleston Naval Shipyard Complex closed in 1996, more than 6,000 civilian positions were lost. Charleston redevelopment officials told us that since 1996 they have attracted some 80 tenants and more than 4,200 new jobs to the former base. Further, for the 1996-2000 period, overall employment in the Charleston metro area has risen by about 20 percent, or over 45,000 jobs. However, a closed base can also hinder economic recovery. At Fort Ord, California, for example, officials stated that the poor condition of the base’s infrastructure has slowed the economic redevelopment of the base. They estimate that area communities will have to spend $500 million to demolish unusable buildings and replace the base infrastructure to support tenants.

Most BRAC-Affected Communities’ Economic Indicators Compare Favorably with National Averages

Selected economic indicators for BRAC-affected communities in the United States compared favorably with national averages. We used unemployment rates and real per capita income growth rates as broad indicators of the economic health of those communities where base closures occurred. We identified 62 communities involving 88 base closures in which government and contractor civilian job loss was estimated to be 300 or more.

Unemployment Rates Compare Favorably with National Average

Our analysis of annual unemployment rates for the 9-month period ending September 30, 2001, indicates that the rates for most of the 62 BRAC- affected communities compare favorably with the national average. (See fig. 8.) During this period, 44 (71 percent) of the 62 communities affected by base closures had unemployment rates below the average 9-month national rate of 4.58 percent. For all BRAC-affected communities with a higher-than-average calendar year 2001 unemployment rates through September 2001, only three—Merced County, California (Castle Air Force Base); Mississippi County, Arkansas (Eaker Air Force Base); and Iosco County, Michigan (Wurtsmith Air Force Base)—had double-digit rates of 13.7 percent, 13 percent, and 10.2 percent, respectively. Appendix V provides additional detail on the average unemployment rates for the 62 communities.

The unemployment situation for most of the 62 communities affected by BRAC closures has improved since we last reported on them in 1998. We found that 41 of the 62 communities (66 percent) had lower unemployment rates for the first 9 months of 2001 than they had for the same 9-month period in calendar year 1997. About 26 percent (16 communities) had higher unemployment rates, and for the remaining communities (5 communities, or about 8 percent), the rates were the same.

Growth Rates of Average Annual Real per Capita Income Compare Favorably with National Average

As with unemployment rates, annual real per capita income growth rates for BRAC-affected communities compared favorably with national averages. From 1996 through 1999, 53 percent, or 33, of the 62 areas had an estimated average real per capita income growth rate that was at or above the average of 3.03 percent for the nation. Seven communities (11 percent) had average annual per capita growth rates that were in close proximity to the national average, while the remaining 22 communities (35 percent) were below the national average growth rate. (See fig. 9.) Appendix VI provides additional detail on the average annual real per capita income growth rates for the 62 communities.

Most of the communities affected by BRAC closures had higher per capita income growth rates than they were when we last reported on them in 1998. In 1998, we reported on the growth rates from 1991 through 1995 of average annual real per capita income for 49 communities affected by the 1988, 1991, and 1993 BRAC rounds. Our 2001 analysis of the growth rates for these same communities shows that for 42 of the 49 communities (86 percent), the rate increased; for 6 communities (12 percent), it decreased; and for 1 community (2 percent), it remained the same.

In general, the six communities we visited had experienced an initial economic disruption, followed by recovery after base closure. During revisits to communities surrounding two closed bases that we had studied in 1998, we found that these communities were recovering but were still having some problems. Less tangible, but harder to correct, were the social losses—such as the cultural diversity of military personnel and their families—that resulted from the departure of base personnel. Through our visits to all six communities, we learned about each community’s unique process of drawing on local and regional strengths to adjust to job losses associated with base closures. Additional details about the sites we visited during this review are found in appendix VII.

Conclusions

With the closure and realignment actions from the prior closure rounds now complete, questions remain about the extent of savings generated by the BRAC process. Although we believe that net savings from the four closure rounds are substantial, we recognize that they are based on cost and savings estimates that are imprecise and that the military services have not updated these projections on a regular basis. The periodic updating of cost and savings estimates is not only a good financial management practice but also one that strengthens DOD’s budgeting process by helping to ensure that correct assumptions are made about expected reductions in base operating costs. We recognize that accounting systems are more oriented to tracking expenditures than savings and that practical limitations may exist in fully accounting for all changes in savings estimates over time. At the same time, it is important for the services to have some means for periodically, systematically, and consistently updating their savings estimates where closure and realignment actions vary over time from original plans. Without a sound process in place to improve the accuracy of the estimates, the process becomes subject to criticism and the subsequent erosion of credibility.

While DOD continues the lengthy process of transferring unneeded property from former military bases to other users and as communities continue recovering, DOD still has more than half of its unneeded property left to transfer. As property remains in its inventory, DOD continues to incur property-maintenance-related costs, and future users are not afforded the full opportunity to redevelop and reuse former base properties. By using early transfer authority, the department has the potential not only to accelerate the transfer process and benefit future users, but also to save money in many cases. Yet, the authority has not been widely used since it became available in 1996.

Recommendations for Executive Action

As part of the new base realignment and closure round scheduled for 2005, we recommend that the under secretary of defense for acquisition, technology, and logistics, in consultation with the under secretary of defense (comptroller and chief financial officer), develop (1) a Defense- wide systematic approach for the periodic updating of initial closure savings estimates and (2) an oversight mechanism to ensure that the military services and components update such estimates in accordance with the prescribed approach.

We also recommend that the secretary of defense encourage the secretaries of the military services to work with communities impacted by the base closure process to expand the use of the early transfer authority in those cases where the department can accelerate the transfer of unneeded former base property and/or save money.

Agency Comments

In commenting on a draft of this report, the deputy under secretary of defense (installations & environment) concurred with the recommendations. His comments are included in this report as appendix IX.

We are sending copies of this report to the appropriate congressional committees; the secretaries of defense, the army, the navy, and the air force; the directors of the Defense Logistics Agency and the Defense Information Systems Agency; and the director, Office of Management and Budget. We will also make it available at www.gao.gov and to others upon request.

Please contact me on (202) 512-8412 if you or your staff have any questions concerning this report. Key reports related to base closure implementation issues are listed in appendix VIII. Additional contacts and staff acknowledgments are provided in appendix X.

Appendix I: Scope and Methodology

To determine the magnitude of the savings from the four base realignment and closure (BRAC) rounds, we reviewed the Department of Defense’s (DOD) annual BRAC budget submissions for the four closure rounds and interviewed BRAC and financial officials from the military services and the Office of the Secretary of Defense. To ascertain the extent to which cost and savings estimates have changed over time, we compared the data contained in DOD’s fiscal year 2002 BRAC budget submission and related documentation with similar data in DOD’s fiscal year 1999 submission, which was the latest budget document available when we produced our last comprehensive report on BRAC issues in December 1998. Through this comparison, we identified where major changes had occurred in the various costs and savings categories within the BRAC account and sought a rationale for the changes.

To gain a sense of the accuracy of the cost and savings estimates, we relied primarily on our prior BRAC reports and reviewed Congressional Budget Office, DOD, DOD’s Office of Inspector General, and the service agencies’ audit reports. We also reviewed the annual military service budget submissions for fiscal years 2000 through 2002 to determine how frequently changes were made to the cost and savings estimates. Where revisions were made, we sought out the rationale the services used in making the revisions. We examined available documentation in an effort to independently verify the adequacy of the basis for the revisions. Where documentation was unavailable, we interviewed service officials to obtain their justifications for the changes. In assessing the completeness of the cost and savings data, we reviewed the component elements considered by DOD in formulating overall BRAC costs and savings estimates. Because DOD did not include in its estimates federal expenditures to provide economic assistance for communities and individuals affected by BRAC, we collected these data from the Department of Labor; Federal Aviation Administration; Economic Development Administration, Department of Commerce; and DOD’s Office of Economic Adjustment. We further reviewed the cost estimates for environmental cleanup activities beyond fiscal year 2001 because they have the effect of reducing the expected annual recurring savings for the four rounds.

To determine the progress made by DOD in transferring unneeded base property to other users, we reviewed BRAC property disposition plans and actual property transfers as of September 30, 2001, and compared them with similar data presented in our December 1998 report. To assure that we were using the most reliable data available, we validated, on a limited basis, the data contained in various databases and reconciled discrepancies when they arose. We also categorized the property disposition data into the various transfer methods (e.g., economic development conveyances) used for property transfers to gain a sense of the predominant method being used. With regard to the untransferred acreage, we sought to determine the primary impediments to property transfer by examining 51 former bases with a combined untransferred acreage of about 291,447 acres as of September 30, 2001, or about 98 percent of the total untransferred BRAC property. We also collected data and obtained the military services’ views on the use of the so-called “early transfer authority” in which property can be transferred under certain conditions before an environmental cleanup remedy is in place. Furthermore, we collected data on the use of no-cost economic development conveyances to transfer property and stimulate its reuse. Finally, because leasing is used as an interim measure to make property available to users while awaiting property transfer, we also collected data related to leased property.

To assess the economic recovery of communities affected by the BRAC process, we first performed a broad-based economic assessment of communities where more than 300 civilian jobs were eliminated during the prior closure rounds. In performing our assessment, we used unemployment and real per capita income growth rates as measures to analyze changes in the economic condition of communities over time and in relation to national averages. We chose to use unemployment and real per capita income as key performance indicators because (1) DOD used these measures in its community economic impact analysis during the BRAC location selection process and (2) these measures are commonly used by economists in assessing the economic health of an area over time. While our assessment does provide an overall picture of how these communities compare with the national averages, it does not necessarily isolate the condition, or the changes in that condition, that may be attributed to a BRAC action. In this regard, we also visited the surrounding communities affected by six major closures to (1) enhance our understanding of the relationship between base closures and local communities and (2) provide a close-up picture of how base closure affected these communities. Those visits included the former military bases at Castle Air Force Base, California; Fort Ord, California; Charleston Naval Shipyard, South Carolina; Chase Naval Air Station, Texas; Fort McClellan Army Base, Alabama; and Loring Air Force Base, Maine. These visits gave us a mix of Army, Navy, and Air Force sites across various BRAC rounds; two of the areas we visited—Castle Air Force Base and Chase Naval Air Station—were areas that we visited during our 1998 review. These repeat visits were designed to gain a sense of the progress being made, since our last visits, by the communities surrounding these former bases.

We performed our review from March 2001 through February 2002 in accordance with generally accepted government auditing standards.

Appendix II: Revisions to BRAC Cost and Savings Estimates

As shown in table 5, DOD has increased its net savings estimate through 2001 for the prior four BRAC rounds from about $14.2 billion in fiscal year 1999 to about $16.7 billion in fiscal year 2002—a $2.5 billion increase. The increase in net savings is due to a combination of lower-than-expected BRAC implementation costs through the 2001 time frame and an increase in the estimated savings accruing during that same time period. Net savings estimates are calculated by deducting expected costs from expected savings generated from the BRAC process.

Estimated Costs through Fiscal Year 2001 Have Decreased

DOD cost estimates through fiscal year 2001 for implementing the four BRAC rounds have decreased by about $909 million—from about $22.9 billion to $22 billion—from fiscal year 1999 to fiscal year 2002. Our analysis of the data shows that most of the reported decrease is attributed to lower reported operation and maintenance costs (about $381 million) and environmental costs—about $379 million—through fiscal year 2001. About 50 percent, or $189 million, of the reported reduction in costs within the operation and maintenance account is attributable to the Air Force, and most of that reduction resulted from reported decreased expenses at McClellan Air Force Base, California, and Kelly Air Force Base, Texas. Most, or $297 million, of the environmental cost reduction is attributable to the Navy. According to Navy officials, some of this amount is due to delaying some planned environmental cleanup actions to after 2001. It does not imply that overall environmental costs have decreased, since DOD has increased its post-2001 environmental cost estimate to about $3.5 billion—an increase of about $1.1 billion over the $2.4 billion reported in fiscal year 1999.

In addition, estimated revenues generated from land sales, property leases, and other reimbursements have increased significantly from $121 million to $336 million from fiscal year 1999 to fiscal year 2002, thereby raising the offset to BRAC program cost estimates. According to the Air Force, its increased revenues resulted from the reporting of nearly $95 million in reimbursements received for fiscal year 1997 from the city of Chicago, Illinois, for the cost of moving an Air National Guard unit from O’Hare International Airport to Scott Air Force Base, Illinois, and from increased proceeds from BRAC land sales and property leases. The Army and the Navy reported about $50 million and $25 million, respectively, in additional BRAC-related revenue from reimbursements, land sales, and leases since the fiscal year 1999 budget request.

Estimated Savings through Fiscal Year 2001 Have Increased

DOD’s estimate for savings that accrued through fiscal year 2001 for the four BRAC rounds have increased by about $1.6 billion to $38.7 billion from 1999 to 2002. Our analysis shows that $925 million (nearly 60 percent) of the increase resulted from DOD’s miscalculations in recording its savings estimate for the 1991 BRAC round. The $925 million underreporting of savings was a result of two errors. First, the Navy inadvertently omitted some estimated savings (about $183 million) for fiscal year 1998 from one of its 1991 BRAC round subaccounts. Because these savings were recurring, in nature, and were also omitted in subsequent years through fiscal year 2001, the error was compounded, resulting in an underreporting of $760 million. Second, estimated recurring savings for all military services were improperly adjusted for inflation for fiscal years 1998 through 2001, resulting in an additional $165 million reporting error. When combined, these errors constitute the $925 million underreported savings error through fiscal year 2001.

In addition, another $381 million (about 24 percent) of the increase was attributable to increased savings estimates in the Air Force BRAC operation and maintenance subaccount at two of its bases—McClellan Air Force Base and Kelly Air Force Base. Prior to fiscal year 2000, Air Force officials told us they had not submitted savings estimates for these two bases in its budget documentation because of uncertainties in the workload status of the depots at these locations. Air Force officials told us that they had subsequently prepared this estimate after the fiscal year 1999 budget submission. We were unable to independently validate the basis for these estimates because the Air Force could not provide us with adequate supporting documentation.

Appendix III: DOD’s Use of Economic Development Conveyances

As of September 30, 2001, DOD had 61 economic development conveyances in place. (See table 6.) Prior to April 21, 1999, DOD obtained consideration from most communities surrounding a BRAC base for property transfers for economic development purposes. As a result, only 9 of the 33 such transfers issued prior to April 21, 1999, were initially no-cost and they were obtained by communities in rural areas. The remainder was provided under negotiated terms. Subsequently, the National Defense Authorization Act of Fiscal Year 2000 contained a provision that allowed for no-cost conveyances for all BRAC communities after April 21,1999, and for the modification of previous conveyances to no-cost under certain circumstances. As a result, 28 additional conveyances have been provided at no cost and an additional 9, previously approved prior to April 21, 1999,were later modified to no-cost in accordance with the terms of the act.

Appendix IV: Civilian Jobs Lost and Created at Major BRAC Locations during the Prior Four BRAC Rounds

The closure or realignment of military bases creates job losses at these facilities, but subsequent redevelopment of the former bases’ property provides opportunities for creating new jobs. In 1998, we reported that only 36 percent (49,000) of the more than 135,000 jobs lost because of BRAC actions had been replaced. The number of jobs lost was derived from estimates made during the BRAC decision-making process for each round. As of October 31, 2001, DOD reported that 129,649 jobs were lost at major BRAC locations, of which about 62 percent (79,740 jobs), had been replaced at these sites. The figures do not include jobs lost or created in the areas surrounding the realigning or closing bases. Over time, the number of jobs created will increase as additional redevelopment occurs. As a result, the recovery rate, which provides a rough indicator of how base reuse is contributing to the economic recovery of BRAC-affected communities, will also rise. The data presented in table 7 do not include the job losses that may have occurred elsewhere in a community, nor do they capture jobs created from other economic activity in the area.

Appendix V: Average Unemployment Rates of BRAC-Affected Areas Compared with the U.S. Average Rate

As figure 10 shows, 16 (67 percent) of the 24 BRAC-affected localities situated west of the Mississippi River had unemployment rates less than the U.S. average rate of 4.58 percent during January through September 2001. The other eight locations had unemployment rates greater than the U.S. rate.

As figure 11 shows, 28 (76 percent) of the 38 BRAC-affected localities situated east of the Mississippi River had unemployment rates that were less than the U.S. rate of 4.58 percent during January through September 2001. The other 10 locations had unemployment rates that were greater than the U.S. rate.

Appendix VI: Average Annual Real per Capita Income Growth Rates of BRAC-Affected Areas Compared with the U.S. Average Rate

As figure 12 shows, 12 (50 percent) of the 24 BRAC-affected localities situated west of the Mississippi River had average annual real per capita income growth rates that were greater than the U.S. average growth rate of 3.03 percent during 1996 through 1999. The other 12 locations had rates that were below the U.S. average rate.

As figure 13 shows, 21 (55 percent) of the 38 BRAC-affected localities situated east of the Mississippi River had average annual real per capita income growth rates that were equal to or greater than the U.S. average growth rate during 1996 through 1999. The other 17 locations had rates that were below the U.S. average rate.

Appendix VII: Case Examples of Community Impacts and Recovery from BRAC

During our review, we visited communities near the former military bases at Chase Naval Air Station, Texas; Castle Air Force Base, California; Fort Ord, California; Loring Air Force Base, Maine; Charleston Naval Shipyard, South Carolina; and Fort McClellan Army Base, Alabama. Our visits to communities surrounding the Chase Naval Air Station and Castle Air Force Base were designed to see what progress they had made since our last visits to them in 1998; the remaining visits during this review were with our initial contacts. In general, local officials told us that their communities were recovering from the impacts of base closure and they were optimistic about the future. At the same time, they pointed to the considerable difficulties, frustrations, and losses that their communities experienced as they adjusted to the loss of military jobs, the redevelopment of base property, and the recent declining national economy. The economic impact on and recovery of specific communities within a region encompassing a closed base can vary—widely in some cases—because of such factors as proximity to the base and the business diversity within the community. For example, officials in Seaside, California (which abuts the former Ft. Ord) told us that the base closure caused significant economic problems for the community (e.g., closing of local businesses) and that these problems continue to hinder recovery. In the neighboring city of Monterey, however, officials told us that the impact was less severe because the city had a more diverse local economy and was less dependent on the base.

Community Impacts Resulting from the Closure of Chase Naval Air Station, Texas

In 1998, we visited the communities surrounding the former Chase Field Naval Air Station, Bee County, Texas, and found that they were recovering economically from the base closure. We revisited Bee County and found that these communities continued their recovery but were still having some problems. Table 8 shows how the closure of Chase Field Naval Air Station in February 1993 affected the surrounding communities and activities, as indicated by local officials during our visits in 1998 and 2001.

According to local officials, the most important factor contributing to economic recovery from the base closing was the decision of the Texas Department of Criminal Justice to locate a prison complex on the former air base. The medium-security prison, completed in 1994, occupies less than one-third of the former base and employs about 1,200 people. Without this prison and another prison complex built earlier and adjacent to the former base, local officials believe Beeville would not have survived as a community. According to a DOD Office of Economic Adjustment October 2001 report, 1,153 new jobs, or 120 fewer than reported in 1998, were created at the former naval air station. At the time of our visit in June 2001, the former air station had only one tenant, who maintains the facility instead of paying rent under a negotiated 10-year lease agreement with the reuse authority.

Community Impacts Resulting from the Closure of Castle Air Force Base, California

We visited the communities surrounding the former Castle Air Force Base, Merced County, California, in 1998 and found that they were recovering economically from the base closure. We revisited Merced County in 2001 and again found that these communities continued their recovery, although they still were experiencing some problems. Table 9 shows how the closure of Castle Air Force Base in September 1995 affected the surrounding communities and activities, as local officials reported during our visits in 1998 and 2001.

According to local officials, the closure of Castle Air Force Base had an immediate adverse effect on the unemployment rate, housing costs, and per capita income. However, within several years these negative aspects were overcome. Although the strong national economy helped in this recovery, Merced County’s continuing growth is primarily a result of three factors. First, a new federal prison now occupies a portion of the former air base and employs 200 individuals. Second, real estate sales have begun to increase because a new University of California campus is expected to open in the fall of 2004 and eventually serve 25,000 students. Finally, many Bay Area residents are purchasing more affordable homes in Merced County and commuting a longer distance to their jobs.

On October 31, 2001, DOD’s Office of Economic Adjustment reported an increase of 566 new jobs (from 1,881 to 2,447) as a result of the redevelopment of Castle Air Force Base from 1998 to 2001. At the time of our visit in July 2001, Cingular Wireless was the largest tenant on the former air base and employed 1,200 people at its call center. In addition, the 42 other tenants employed about 310 individuals. However, later that month, Cingular announced that it was cutting 400 jobs at its Castle site because the number of calls and the size of the workforce had outgrown the center’s space.

Other Communities Recovering from Varied Impacts

Our visits to communities surrounding four other major base closures showed that recovery was occurring, although not without difficulty. The impacts of the closures that officials conveyed to us are shown in table 10 and included initial economic disruption caused by the news of impending closure; loss of population; decreasing business revenue leading some businesses to shutdown; a drop in real estate markets and a rise in rental property vacancies; declining school enrollments; and social losses felt in the communities from the departure of active, educated military personnel and families. For example, two school districts (Limestone and Presque Isle) surrounding the former Loring Air Force Base, Maine, lost 300 to 400 students and 150 to 200 students, respectively, after the base closed. In the city of Weaver, a bedroom community hit hard by the closing of Fort McClellan, Alabama, the population dropped by 200 people to about 2,700 after the base closed in 1999. But there were some positive effects as well at the communities we visited. (See table 10.) For example, local grocers in communities surrounding the former Loring Air Force base benefited from new business from military retirees, who now shop in their stores because the base commissary closed. Furthermore, the early prediction of a 20 to 25-percent loss in economic activity in this same area never materialized, helped partially by the establishment of a Defense Finance and Accounting Service facility, which now employs over 300 people on the former base.

Appendix VIII: Key Reports Related to Base Closure Implementation Issues

U.S. General Accounting Office. Military Bases: Closure and Realignment Savings Are Significant, but Not Easily Quantified. GAO/NSIAD-96-67. Washington, D.C.: April 8, 1996.

Appendix X: GAO Contacts and Staff Acknowledgments

GAO Contacts

Acknowledgements

In addition, Nancy Benco, Jane Hunt, David Keefer, Don Kennedy, Michael Kennedy, Tom Mahalek, Charles Perdue, Bob Poetta, James Reifsnyder, Thaddeus Rytel, and Arnett Sanders contributed to this report.