Changing national security needs and DOD’s recognition that its base structure was larger than required led to a decision to close numerous military bases around the country. Consequently, the Congress enacted base realignment and closure (BRAC) legislation that instituted base closure rounds in 1988, 1991, 1993, and 1995. The authority under this legislation has expired. Property disposals resulting from base closures and realignments are governed by various base closure and realignment laws and other laws relating to the disposal of surplus government property, homeless assistance, and environmental concerns. Once property is no longer required by a federal agency to discharge its responsibilities, the property is declared excess to that agency and then offered to other federal agencies to satisfy their requirements. If no other agency has a requirement for the property, it is declared surplus to the federal government. At that point, the Federal Property and Administrative Services Act of 1949 authorizes disposal through a variety of means such as public or negotiated sale and transfers to states and local governments for public benefit purposes such as education, public health, recreation, airport, wildlife conservation, and historic monuments. In addition, the base closure legislation authorizes surplus real property from closing bases to be transferred to local redevelopment authorities under economic development conveyances for economic development and job creation purposes. To use this authority, however, requires a showing that economic development and job creation cannot be accomplished under established sales or public benefit transfers. As shown in figure 1, local reuse authorities generally seek surplus property under one of the public benefit transfer authorities first because these can be no-cost acquisitions, then through economic development conveyances because these can be no-cost or no-initial cost acquisitions, and lastly through negotiated sale because they can negotiate the terms and do not have to compete with other interested parties. Any surplus property that remains is available for sale to the general public. (See app. II for a more detailed discussion of the laws and regulations affecting the base closure process.) At the beginning of the base closure process, DOD expected that land sales would help pay for the costs of closing bases. However, given national policy changes and recent legislation that emphasize assisting communities that are losing bases, DOD no longer expects significant revenue from land sales. The information contained in this report focuses on the September 1995 status of property disposal plans at 23 of 30 major installations recommended for closure by the 1993 closure commission unless more recent data was provided. (See fig. 2.) The 23 bases were selected because DOD considered these bases the major closures and assigned on-site base transition coordinators to them as of January 1994. Although we previously reported on the status of major base closings in the 1988 and 1991 rounds, this report provides information on those rounds to give an overall perspective on implementation of the closure recommendations. Opportunities for private parties to purchase surplus real property at closing bases, while not precluded, are limited by the disposal process. DOD, federal, state, and local interests are considered before surplus property is made available for public sale to private parties. Accordingly, DOD looks to a community’s reuse plan and gives preference to its wishes when making disposal decisions. Land sales for all BRAC closures totaled $179.2 million as of March 1996. Two property sales have been completed from the 1993 round, one for $1.1 million for 111 family housing units at Niagara Falls Naval Facility, New York, and the other for $428,000 for 2.2 acres of land at Homestead Air Force Base, Florida. A community’s reuse plan recommends how surplus base property should be developed, and the military services generally base their disposal decisions on these plans. Developing reuse plans and developing and implementing service disposal plans can be a lengthy process. In some cases, this means that readily marketable properties may (1) deteriorate as they sit idle; (2) decline in value as negotiations drag on should a sale ever occur; and (3) drain resources from the services, as activities such as protection and maintenance are continued. As we reported earlier, only 4 percent of the surplus property was planned for public sale in the 1988 and 1991 closure rounds. In 1993, the amount of property planned for market sale dropped to about 1 percent. Less than half of that property is planned for public sale. The low percentage of land sold to the public is a result of the disposal process, which allows communities to plan the reuse of most base property. Communities are requesting surplus property predominately through no-cost public benefit transfers or economic development conveyances. The economic development conveyance was established by law in response to President Clinton’s Five Point Program to revitalize base closure communities, announced in July 1993. Section 2903 of title XXIX of the National Defense Authorization Act for Fiscal Year 1994 established the basis for the economic development conveyance. The new mechanism is a special tool created to enable communities to act as master developers by obtaining property under more flexible finance and payment terms than previously existed. For example, a community can request property at less than fair market value if it can show the discount is needed for economic development and job creation. Regulations promulgated by DOD to implement title XXIX also give local communities the authority to recommend the land use of surplus property, taking into consideration feasible reuse alternatives and notices of interest from homeless assistance providers. The services consider these reuse plans when making their disposal decisions. However, they are not obligated to follow the reuse plans, nor is a community granted the authority to make disposal decisions. The disposal of property by public benefit transfer or economic development conveyance rather than sale reduces the immediate economic return to the government. For example, the golf course at Myrtle Beach Air Force Base is to be conveyed through a public benefit transfer to the city of Myrtle Beach. By doing so, the government relinquished the opportunity to sell the property for $3.5 million to a private developer who intended to continue to use it as a public golf course. Surplus property may deteriorate and lose value as it sits idle. DOD can avoid such results by disposing of surplus property as promptly as possible. However, before any sale can occur, DOD must consult with the state Governor and the heads of local governments to consider any plan for the use of the property by any concerned local government. The disposal process can be time consuming and the services have let property sit idle for several years while services and communities developed land use plans or negotiated a purchase. During this time, properties have deteriorated and their value declined. That decline represents lost revenue should a sale ever occur. An example of housing that has deteriorated for more than 2 years, while the Air Force and the local reuse authority negotiated a sale, is Myrtle Beach Air Force Base. During negotiations, two appraisals were conducted. The property’s value decreased significantly from the first appraisal to the second. According to an Air Force official, a major cause for the decrease in the property’s appraised value was its deterioration. Family housing at the base is shown in figures 3 and 4. In addition, the director of the local reuse authority cited the need for significant upgrades to the houses to make them habitable. Deterioration also occurred to 1,271 family housing units at Mather Air Force Base. The housing has been vacant for over 2 years as the Air Force and the local reuse authority negotiate the terms of the sale. During this time, a number of units were damaged by inclement weather, vandalism, and thefts. In December 1995, a major storm felled 40 trees in the housing area damaging roofs and flooring. Since May 1995, 76 air-conditioning units have been stolen from the housing area. As an Air Force official noted, one of the reasons for the appraisal value’s decline from the first to the last appraisal was the property’s deterioration. The various forms of deterioration of family housing at the base are shown in figures 5, 6, 7, and 8. In instances where surplus property is sold through a negotiated sale, as opposed to a public sale, the federal government may not be getting the highest monetary return possible for the surplus real property. When communities cannot obtain property through either a public benefit transfer or an economic development conveyance, they often seek the property through a negotiated sale, maintaining that the property will be used to fulfill a public use such as affordable housing. According to federal regulation, negotiated sales of surplus property to state and local governments for a public benefit use are to be based on estimated fair market value. Even so, the federal government may lose revenue if the property is resold at a price above what the state or local government paid for it. To avoid this loss, the regulation requires that the conveyance documents resulting from the negotiated sales to public agencies contain an excess profits clause. This clause entitles the federal government to receive all subsequent sales proceeds that exceed the purchase price and other specified costs allowed to the state or local government if the property is sold within a specified time period. According to the Director of the Air Force Base Conversion Agency, the specified period is based on the time that it will take the housing to be absorbed into the market. In the case of the Mather housing, the local reuse authority states it will take about 10 years for the property to be absorbed, while pursuing a 3-year excess profits clause in the sales contract. In January 1995, both the General Services Administration and the Air Force concurred that the interest of the federal government would not be protected by a 3-year excess profits clause. This issue remains unresolved. The government also may lose revenue when the estimated fair market value of surplus property declines during protracted negotiations. At Myrtle Beach, the Air Force has been negotiating the sale of 777 units of family housing for over 24 months, although a private party offered to purchase them even before they were declared surplus. The reuse authority has offered substantially less than the $11.1 million offer once made by a private party. In both cases, the property’s use would remain the same—housing.