Good morning, Mr. Chairman and members of the Committee. My name is Jeffrey Simon and I am the President of the National Association of Installation Developers, "NAID."

NAID is an organization that has existed since 1978 and consists of more than 325 members who are cities, counties, communities, airport authorities, private development companies, nonprofits, and other professionals who are involved in the reuse of closed military properties and facilities. NAID is the leading public service organization engaged in the closure and redevelopment of military installations. We offer comprehensive education and expertise to our members and to many communities, and we are committed to helping to achieve an effective federal property disposal process which results in successful property reuse. Thus we are very aware of the importance of the Economic Development Conveyance (EDC) policy, which is the subject of this hearing today. No-cost EDCs have existed and been utilized very effectively by a number of rural communities to convert a major economic loss into a new and expanding business opportunity. Without no-cost EDCs many conversions of closed facilities would have been impossible or greatly delayed.

Some historical information might be helpful. The Department of Defense (DoD) advised Congress at the state of the BRAC process in the late 1980's that it would be able to generate substantial revenue from the sale of properties at closed bases. This optimistic projection did not materialize and by the early ‘90s a lot of time and a tremendous amount of federal money was spent trying to determine the value of these special use and unique properties and buildings. The negotiation process of sales to Local Redevelopment Authorities (LRAs) was also protracted and difficult, not to mention expensive for both sides. By the mid-’90s, DoD realized that in fact these properties were difficult properties to develop with many unusual and unexpected costs to the private sector. Some of the specific problems have included:

1.) Buildings that do not meet local building codes and require substantial retrofit to bring into compliance;

2.) High marketing costs due to the perception, and reality in many cases, of environmental contamination;

3.) Utility systems that are inadequate, poorly maintained and do not connect to any local

systems;

4.) Roads that do not connect to local roads and are often not built to local minimum standards;

5.) Land use patterns that were appropriate for military use but are totally inadequate for civilian use.

For some time now, DoD has understood that the primary financial return to the government from closing underutilized military installations would come from savings in operations and maintenance and not from the sales of the properties.

It logically follows, therefore, that the greatest savings to the government will come from the disposition of the properties as fast as possible. This expansion of no-cost EDCs contained in the 2000 National Defense Authorization Act (S-1059), as passed by the Senate, is completely consistent with that line of reasoning, and will greatly facilitate the prompt disposition of properties and facilities at closed military installations.

The pertinent language, found in Section 2821, Subtitle C, Defense Base Closure and Realignment, of S-1059 continues and expands the authority of the Secretary to transfer at no cost certain property of closed or realigned military facilities to Local Redevelopment Authorities. Although no-cost EDCs have existed in the law since 1994, the authority has been limited to rural communities. The current language of S-1059 expands this authority to include all installation properties, wherever located, if the proceeds from the sale or lease of the redeveloped property are used to pay for the costs of economic redevelopment of the property.

As is apparent from the list of eligible expenditures, the intention of the new language is to include any expense reasonably related to the planning, redevelopment, and marketing of the installation property. With this authority the Secretary can transfer installation property at closed or realigned military facilities to an LRA at no cost, provided any revenue resulting from the sale or lease by the LRA to a developer is used to pay for one or more of the stated economic redevelopment expenses. No-cost EDCs can only be transferred to LRAs, which are defined in existing law as the local government agency having land use jurisdiction of the property. NAID strongly supports this very important modification of the law and urges the House Committee to approve it as well.

A few examples of rural no-cost EDCs which have been highly successful and of vital importance to the outcome of the redevelopment include:

Limestone, Maine -- Loring Air Force Base

On April 4, 1997, the Air Force transferred 3,700 acres at the former Loring AFB to the Loring Development Authority (LDA) of Maine as a no-cost rural area EDC.

In addition, there is an agreement between the LDA and the Air Force for the long-term support of the Loring Commerce Centre, which reflects the following terms: (1) the Air Force is committed to spending up to $3 million per year for security and maintenance through the year 2004; (2) this Air Force commitment is contingent on the LRA showing some level of success in its redevelopment efforts; (3) the Air Force contribution is subject to annual appropriations from Congress; and (4) the LDA does not immediately default if the LDA performance indicators slip for a year. The Loring Commerce Center is being actively marketed by the LDA. The anchor tenant is a Defense Accounting & Finance Service Center in the former hospital building that will eventually employ 550 people. Its current employment is 340 persons. The Job Corps program on-site has 131 employees and serves 400 students in the former residential and classroom facilities. Also the Sitel Corp. Is building a division for call centered operations and will employ 350 people. More than 900,000 square feet of the Loring complex is currently occupied, and there are 1,100 persons working or residing on-site. The millions of dollars of private investment and payroll is a very significant revenue source for federal, state and local governments.

Peru, Indiana -- Grissom Air Force Base

In late May 1996, the Air Force approved its first rural area EDC transfer for 900 acres at the former Grissom AFB to the Grissom Redevelopment Authority. The Authority immediately resold 150 acres involving the golf course, the hospital, and the photo lab, with the proceeds reinvested back into the redevelopment effort. Another 200 acres within the EDC area will be made available for a new State prison. This will create 500 new jobs. The Authority has attracted a food processing firm and a banquet caterer to locate at the former base facilities, but has also leased 129,000 sq. ft. to Cost Plus World Market, a California based retailer of imported goods. The space will be used as a distribution center and will employ up to 300 people.

Marquette County, Michigan -- K.I. Sawyer Air Force Base

In the first phase of a larger rural area EDC transfer, the Air Force deeded 54 acres of land in January 1997, to the K.I. Sawyer Base Conversion Authority. The EDC transfer also included easements for electrical lines and a railroad spur to the property. The Air Force also released 78 acres of land previously leased from the State of Michigan. This isolated 132-acre former weapons storage compound was made available for the construction of a new $28 million high tech saw mill, which will employ over 80 people, at the former K.I. Sawyer Air Force Base. The no cost EDC greatly enhanced the redevelopment of Sawyer.

The private investment which is generated over time at these facilities is substantial both in terms of creating governmental tax revenue and the important human quality of new, sustainable employment.

Potential Savings to Local Communities from the Expanded EDC Authority

Having made the argument that expedited property conveyances will greatly enhance the commercial redevelopment of the installations, it is also important to note the kinds of savings that could have accrued to local communities if the expanded EDC authority had existed at the time various military installations had been closed. The following is a brief set of examples:

California

Long Beach Naval Hospital — converted to Long Beach Town Center retail at a negotiated price of $8,600,000.

Mather Air Force Base, Sacramento — converted to Mather Public Airport for negotiated price of $7,933,750.

George Air Force Base, Victorville — converted to Southern California International Airport for a purchase price of $28 million.

Colorado

Lowry Air Force Base, Denver — Lowry Redevelopment Authority will convert the property to mixed-use commercial and residential use for a negotiated price of $32.5 million.

Florida

Naval Training Center, Orlando — the McCoy Family Housing Annex has negotiated a purchase of a portion of the center property for $1,850,000.

Texas

Carswell Air Force Base, Fort Worth — Westworth Redevelopment Authority negotiated a purchase price of $3.2 million for land to be used for residential and commercial development with a public golf course.

South Carolina

Myrtle Beach Air Force Base, Myrtle Beach — Orlando NTC Housing negotiated a price of $1.85 million for property that supports 668 housing units.

While the savings available to local communities may not the primary reason to expand the no-cost EDC policy, it is a very important benefit which cannot be ignored and indeed should be given serious consideration in adopting this policy. If EDCs have been of great significance to redevelopment of rural properties, there is no reason to believe that this authority could not be used just as effectively for the business conversion of any closing installation. The economic needs of any community facing the shutdown of a major employer are certainly just as great whether the community is rural or urban. The language adopted by the Senate is reasonable and productive. It maintains the existing protections and requirements but permits the EDC authority to be utilized in a wider array of opportunities.

Existing requirements to screen the property for use by other federal agencies are still applicable. Moreover, the new provision would only be applicable to conveyances after April 21, 1999, the date of DoD’s announcement of the proposed legislation. This ensures that current negotiations for EDC transfers will continue.

In addition, the new provision would give the Secretary the authority to modify existing EDC agreements provided all of the following criteria are met:

a.) the modification is necessary to achieve rapid economic revitalization and replacement of lost jobs;

b.) the modification does not require the return of payments or in-kind consideration;

c.) the modification is necessary to generate additional employment opportunities; and

d.) the modified EDC is subject to all of the same requirements as those granted under the new authority.

For further clarification, the Senate Armed Services Committee added instruction to the Secretary urging, "...the Secretary to apply the most stringent criteria in exercising this authority to ensure only those communities with the greatest needs benefit." This language, however, raises a substantial ambiguity. There are no standards to guide the Secretary’s discretion and terms like, "stringent criteria" and "greatest needs benefit" are not specific enough to be very helpful. It seems to us that there is sufficient oversight of this process that the Secretary should be permitted to have unfettered discretion. NAID would recommend that this language be deleted.

There is another matter that needs clarification and that concerns how properties that are currently being purchased, utilizing future payments, will be dealt with under the new law. It is unclear if the future obligated payments would be waived, which would be consistent with the intent of the new legislation. This is the interpretation that would be supported by NAID and is the only fair method of treating communities that have already consummated property acquisitions. This should be clarified in the language of the bill.

We at NAID, who have had many years of experience dealing with the sometimes very difficult problems of government property redevelopment are firmly convinced that the expanded authority conferred in S-1059 concerning EDCs, would be one of the most beneficial tools available to local communities in their efforts to re-energize a threatened economy, and would greatly expatiate the operational and maintenance savings for the federal government.