Military Base Closures: Progress in Completing Actions from Prior
Realignments and Closures (05-APR-02, GAO-02-433).		 
                                                                 
Through military  base realignment and closures rounds in 1988,  
1991, 1993, and 1995, the Pentagon significantly reduced its	 
domestic infrastructure and freed up needed dollars for 	 
high-priority programs. By the end of last round in fiscal year  
2001, the Department of Defense (DOD) had closed or realigned	 
hundreds of bases, generated savings, and transferred unneeded	 
property to other users. The communities surrounding the former  
bases continue to recover economically from the closures.	 
Congress recently authorized another round of base realignments  
and closures beginning in 2005. DOD has saved  $16.7 billion	 
through fiscal year 2001, and expects to save $6.6 billion in	 
annually in future years. Although DOD plans to transfer nearly  
all of the 518,500 acres of unneeded base property to federal and
nonfederal users, it has completed only some of the transfers.	 
Environmental cleanup is the primary impediment to conveying the 
remaining property titles. The military services are using early 
transfer authority and leasing to make property available for	 
reuse sooner. Although successful redevelopment of base property 
plays a key role in the economic recovery of neighboring	 
communities, broader regional economic growth also is important  
to the process. Two economic indicators--the unemployment rate	 
and average annual real capita income growth rate--show that most
communities are doing well compared with average U.S. rates,	 
despite delays in the transfer or reuse of former base property. 
But questions remain about some communities' ability to sustain  
their economic recovery over time, particularly in light of the  
recent downturn in the national economy.			 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-02-433 					        
    ACCNO:   A02969						        
  TITLE:     Military Base Closures: Progress in Completing Actions   
from Prior Realignments and Closures				 
     DATE:   04/05/2002 
  SUBJECT:   Base closures					 
	     Base realignments					 
	     Military cost control				 
	     Property						 
	     Economic development				 
	     Economic indicators				 

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GAO-02-433
     
Report to the Honorable Vic Snyder, House of Representatives

United States General Accounting Office

GAO

April 2002 MILITARY BASE CLOSURES

Progress in Completing Actions from Prior Realignments and Closures

GAO- 02- 433

Page i GAO- 02- 433 Military Base Closures Letter 1

Results in Brief 2 Background 4 BRAC Net Savings Are Substantial but
Imprecise 8 Transfer of Unneeded BRAC Property Is Only Partially Completed
16 Most Communities Are Continuing to Recover from the Economic

Impact of BRAC 28 Conclusions 36 Recommendations for Executive Action 37
Agency Comments 37

Appendix I Scope and Methodology 39

Appendix II Revisions to BRAC Cost and Savings Estimates 42

Appendix III DOD?s Use of Economic Development Conveyances 45

Appendix IV Civilian Jobs Lost and Created at Major BRAC Locations during
the Prior Four BRAC Rounds 47

Appendix V Average Unemployment Rates of BRAC- Affected Areas Compared with
the U. S. Average Rate 50

Appendix VI Average Annual Real per Capita Income Growth Rates of BRAC-
Affected Areas Compared with the U. S. Average Rate 53

Appendix VII Case Examples of Community Impacts and Recovery from BRAC 56
Contents

Page ii GAO- 02- 433 Military Base Closures Appendix VIII Key Reports
Related to Base Closure Implementation

Issues 62

Appendix IX Comments from the Department of Defense 64

Appendix X GAO Contacts and Staff Acknowledgments 67

Tables

Table 1: DOD?s Cost and Savings Estimates through Fiscal Year 2001 for the
Four BRAC Rounds 10 Table 2: Actual Transfers of Unneeded BRAC Property, as
of

September 30, 2001 20 Table 3: Leased BRAC Acreage, as of September 30, 2001
24 Table 4: Use and Status of Early Transfer Authority at BRAC Bases

through Fiscal Year 2001 27 Table 5: Cumulative Cost and Savings Estimates
through Fiscal

Year 2001 for the Prior Four BRAC Rounds as Reflected in DOD?s Budget
Requests and Documentation for Fiscal Years 1999 and 2002 42 Table 6: DOD?s
Use of Economic Development Conveyances 45 Table 7: Civilian Jobs Lost and
Created at Major Base Realignments

and Closures during the Prior Four BRAC Rounds, as of October 31, 2001 47
Table 8: Community Impacts Resulting from the Closure of Chase

Naval Air Station, Texas, as Reported in 1998 and 2001 57 Table 9: Community
Impacts Resulting from the Closure of Castle

Air Force Base, California, as Reported in 1998 and 2001 58 Table 10:
Reported Community Impacts Resulting from Base

Closures for Communities Not Visited in 1998 60

Figures

Figure 1: DOD?s Usual Procedures for Transferring Property 7 Figure 2:
Cumulative BRAC Cost and Savings Estimates through

Fiscal Year 2001 9 Figure 3: Planned Disposition of Unneeded Property 17

Page iii GAO- 02- 433 Military Base Closures

Figure 4: Planned Transfers to Federal Agencies 18 Figure 5: Planned
Transfers to Nonfederal Entities 19 Figure 6: DOD?s Estimated Environmental
Cleanup Cost at Base

Closure Sites After Fiscal Year 2001, as of September 30, 2001 22 Figure 7:
Factors Affecting Economic Recovery from Base

Closures 29 Figure 8: Average Unemployment Rates of 62 BRAC- Affected

Communities Compared with Average U. S. Rate for January- September 2001 34
Figure 9: Calendar Years 1996- 99 Average Annual per Capita

Income Growth Rates of BRAC- Affected Areas Compared with U. S. Average 35
Figure 10: Comparison of Unemployment Rates of 24 BRACAffected Locations
West of the Mississippi River 51 Figure 11: Comparison of Unemployment Rates
of 38 BRACAffected Locations East of the Mississippi River 52 Figure 12:
Comparison of Average Annual Real per Capita Income

Growth Rates of 24 BRAC- Affected Locations West of the Mississippi River 54
Figure 13: Comparison of Average Annual Real per Capita Income

Growth Rates of 38 BRAC- Affected Locations East of the Mississippi River 55

Abbreviations

BRAC base realignment and closure CBO Congressional Budget Office DOD
Department of Defense

Page 1 GAO- 02- 433 Military Base Closures

April 5, 2002 The Honorable Vic Snyder House of Representatives

Dear Mr. Snyder: Through base realignment and closure rounds in 1988, 1991,
1993, and 1995, the Department of Defense expected to significantly reduce
its domestic infrastructure and provide needed dollars for high- priority
programs such as modernization. With the conclusion of the 6- year
implementation period of the last round in fiscal year 2001, the department
has closed or realigned hundreds of bases, has generated savings from these
actions, and is in the process of transferring unneeded base property to
other users. At the same time, the communities surrounding the former
defense bases continue the lengthy process of recovery from the economic
impact of the closure process. Our last comprehensive report on the
implementation of base closure decisions was issued in December 1998. 1 In
that report, we concluded that the closure process was generating
substantial savings (although the savings estimates were imprecise), most
former base property had not yet been transferred to other users, and most
communities surrounding closed bases were faring well economically in
relation to key national economic indicators. In a July 2001 report and
August 2001 testimony, we updated our closure implementation data and
reaffirmed the primary results of our prior work. 2

While the Congress recently authorized another round of defense base
realignments and closures beginning in 2005, many in the Congress continue
to have questions about the implementation of the prior rounds. Some in
Congress have raised concerns about the adequacy of the department?s
accounting for the costs and savings associated with closure decisions and
the economic impact on communities affected by the closures and their
ability to recover. Others have expressed the view that

1 See U. S. General Accounting Office, Military Bases: Status of Prior Base
Realignment and Closure Rounds, GAO/ NSIAD- 99- 36 (Washington, D. C.: Dec.
11, 1998). 2 See U. S. General Accounting Office, Military Base Closures:
DOD?s Updated Net Savings Estimate Remains Substantial, GAO- 01- 971
(Washington D. C.: July 31, 2001) and Military Base Closures: Overview of
Economic Recovery, Property Transfer, and Environmental Cleanup, GAO- 01-
1054T (Washington D. C.: Aug. 28, 2001).

United States General Accounting Office Washington, DC 20548

Page 2 GAO- 02- 433 Military Base Closures

all prior round actions should be completed before the introduction of any
new rounds.

As requested, this report further updates the status of the four prior
rounds of defense base realignments and closures at the conclusion of the 6-
year implementation period associated with the 1995 round. It addresses (1)
the magnitude of the net savings accruing from the prior four closure rounds
and the impact of remaining closure- related costs on future savings, (2)
the department?s progress in transferring unneeded base property to other
users, and (3) the economic recovery of communities affected by base
closures.

In performing our work, we used our December 1998 status report on prior
realignments and closures as a baseline for assessing the department?s
progress in completing prior round actions. First, we examined the
department?s recently reported net savings estimates and the rationale for
estimate revisions over time. Second, we compared data on actual unneeded
property transfers with earlier data and sought out the reasons for transfer
delays. Finally, we reviewed key economic indicators (e. g., unemployment
rates and real per capita income growth) for communities affected by the
closure process and visited select communities to assess the overall
recovery process. Further details on the scope and methodology for our work
are described in appendix I.

The Department of Defense has generated substantial net savings from the
prior four closure rounds and expects those savings to grow on an annual
basis. Our analyses have consistently affirmed that the net savings for the
four closure rounds are substantial and can best be depicted as cost
avoidances in specific operational areas. On the basis of our analysis of
defense budget documentation for fiscal year 2002, the Department has
accrued an estimated $16.7 billion in savings through fiscal year 2001, an
increase over prior estimates. The department also expects to gain an
estimated $6.6 billion in annual recurring savings thereafter- up $1 billion
over estimates made in fiscal year 1999. The increase is attributed to
adjustments in the inflation rate, changes in the planned implementation of
base realignment and closure actions at specific locations, and the
department?s underreporting of estimated savings. At the same time, our
reviews have found that the department?s savings estimates are imprecise and
should be viewed as rough approximations of the likely savings. Our analysis
indicates that the imprecision stems primarily from the military services?
failure to periodically update overall savings estimates, despite
departmental guidance to do so. Because closure or realignment Results in
Brief

Page 3 GAO- 02- 433 Military Base Closures

implementation actions may vary from the original plans, it is important for
the services to review and update these estimates periodically to increase
their accuracy. Also, the estimates do not include a cumulative $1.5 billion
cost incurred by the federal government to assist communities affected by
the closure process or $3.5 billion in environmental costs expected beyond
fiscal year 2001. The inclusion of these costs would have only a limited
impact on cumulative long- term savings. Furthermore, although estimated
environmental costs have fluctuated over time and remain subject to change,
the total expected costs of about $10.5 billion are still within the range
of the projected costs estimated in 1996. 3

Although the department has plans in place to transfer nearly all of the
518,500 acres of unneeded base property to federal and nonfederal users, it
has only partially completed the property transfers. As of September 30,
2001, it had transferred about 42 percent of the total 518,500 acres- an
increase from the 14- percent transfer rate reported in 1998. The primary
impediment to transferring the remaining property involves environmental
cleanup, which could take many more years to complete as a condition for
conveying property titles. The military services are using several
mechanisms, such as the early transfer authority 4 and leasing, to make
property available sooner to communities and others for reuse. While the
early transfer authority can be beneficial to all parties, it has not yet
been widely used. It appears that its use is an evolving process. Service
officials told us that they expect greater use of this authority as users
become more familiar with its potential advantages.

While some communities surrounding closed bases are faring better than
others, most are continuing to recover from the initial economic impact of
base closures. The economic impact on and recovery of specific communities
within the region of a closed base can vary because of such

3 See U. S. General Accounting Office, Military Base Closures: Reducing High
Costs of Environmental Cleanup Requires Difficult Choices, GAO/ NSIAD- 96-
172 (Washington D. C.: Sept. 5, 1996).

4 The Congress enacted a so- called ?early transfer authority? provision in
September 1996 legislation to allow property to be transferred before all
necessary cleanup actions have been taken. However, certain conditions must
exist for the department to exercise this authority. For example, the
property must be suitable for transfer for the intended use, transfer of the
property must not delay any cleanup actions, and the governor of the state
where the property is located must approve the transfer. The advantage of an
early transfer is that the property is made available under an economic
development or other disposal authority to the future user as soon as
possible to allow for concurrent environmental cleanup and redevelopment
activities.

Page 4 GAO- 02- 433 Military Base Closures

factors as their proximity to the base and the business diversity within the
community. While the short- term impact can be very traumatic, several
factors, such as the strength of the national and regional economies, play a
role in determining the long- term impact of the closure process. While the
successful redevelopment of base property can also play a role in the
process, broader regional economic growth may also be key to economic
recovery. Two economic indicators- the unemployment rate and average annual
real per capita income growth rate- show that the majority of communities
are doing well compared with average U. S. rates, despite delays in the
transfer or reuse of former base property. As of September 30, 2001, of the
62 communities surrounding major base closures, 44 (71 percent) had average
unemployment rates lower than the U. S. rate, as reported by the Department
of Labor?s Bureau of Labor Statistics. In addition, the average unemployment
rate decreased for 41 of the 62 communities (66 percent) since 1998. In
terms of average annual real (adjusted for inflation) per capita income
growth rates, 33 (53 percent) of the affected communities had rates equal to
or higher than U. S. rates for 1996 through 1999, and another 7 (11 percent)
were close to the average. Of the rest, the rates of only three (5 percent)
were significantly lower than the U. S. rate and none had negative rates. In
addition, the per capita income growth rates increased for 42 of the 49
communities (86 percent) since we last reported them in 1998. Our visits to
communities surrounding six major base closures showed that they were
recovering, although not without difficulty and challenges. Overall, while
our analysis showed that the general economic trend for most communities was
favorable, questions remain about some communities? ability to sustain their
economic recovery over time, particularly in light of the recent downturn in
the national economy.

This report contains recommendations for executive action designed to (1)
improve the Defense Department?s accuracy in reporting estimated savings
generated from the next congressionally authorized round of base closure and
realignment rounds beginning in 2005 and (2) accelerate property transfers
and/ or save the department money through the expanded use of the early
transfer authority. In commenting on a draft of this report, the department
concurred with our recommendations.

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
Background

Page 5 GAO- 02- 433 Military Base Closures

1995. 5 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. 6 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. 7 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

5 The 1988 round was completed under the Defense Authorization Amendments
and Base Closure and Realignment Act (P. L. 100- 526, as amended). The last
three rounds were completed under the Defense Base Closure and Realignment
Act of 1990 (P. L. 101- 510, as amended).

6 The number of recommendations may vary depending on how they are
categorized. In this report, the recommendations include closures,
realignments, disestablishments, relocations, and redirections. In a
closure, all missions carried out at a base either cease or relocate, while
in a realignment, a base remains open but loses and sometimes gains
missions. ?Disestablishments? and ?relocations? refer to missions; those
disestablished cease operations, while those relocated are moved to another
base. ?Redirections? refer to cases in which a BRAC Commission changes the
recommendation of a previous commission.

7 The 1995 BRAC round recommendation to close family housing units on Fort
Buchanan, Puerto Rico, was not implemented because the DOD Appropriations
Act for Fiscal Year 1999 (P. L. 105- 262) authorized the secretary of
defense to retain all or a portion of the units in support of the U. S. Army
South?s relocation from Panama to Fort Buchanan.

Page 6 GAO- 02- 433 Military Base Closures

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. 8 Consequently, local redevelopment authorities have usually
sought to obtain property at no cost and, failing that, pursue it through
negotiated sales.

8 With the enactment of the National Defense Authorization Act for Fiscal
Year 2002 (P. L. 107- 107, sec. 3006 {a}), DOD ?shall seek to obtain? fair
market value for property transfers at installations recommended for closure
or realignment after January 1, 2005. The section also provides for property
transfers without consideration, if circumstances warrant. DOD has not yet
developed policy guidance for implementing this section.

Page 7 GAO- 02- 433 Military Base Closures

Figure 1: DOD?s Usual Procedures for Transferring Property

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. 9 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. 10 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

9 See GAO/ NSIAD- 99- 36. 10 See GAO- 01- 971 and GAO- 01- 1054T.

Page 8 GAO- 02- 433 Military 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.

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. 11 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.

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.

11 In terms of constant fiscal year 2001 dollars, the $16.7 billion net
savings estimate and the $6.6 billion annual recurring savings estimate are
$16. 7 billion and $6. 4 billion, respectively. BRAC Net Savings

Are Substantial but Imprecise

BRAC Net Savings Estimates through Fiscal Year 2001 Have Increased $2. 5
Billion

Page 9 GAO- 02- 433 Military Base Closures

Figure 2: Cumulative BRAC Cost and Savings Estimates through Fiscal Year
2001

Source: Our analysis of DOD?s data.

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. 12 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.

12 While cost estimates are routinely updated and tracked in financial
accounting systems, they are based on obligations and not actual outlays,
thereby adding a degree of imprecision to the actual costs and the basis for
savings projections.

Page 10 GAO- 02- 433 Military Base Closures

Table 1: DOD?s Cost and Savings Estimates through Fiscal Year 2001 for the
Four BRAC Rounds

Dollars in millions Fiscal year 1999

budget request and supporting documentation

Fiscal year 2002 budget request and supporting documentation Total

change

Costs through fiscal year 2001 $22,881 $21,972 $( 909) Savings through
fiscal year 2001 37,066 38,679 1, 613

Net savings through fiscal year 2001 14,185 16,707 2, 522

Note: Figures are adjusted for inflation. Source: Our analysis of DOD?s
budget requests for fiscal years 1999 and 2002 and supporting documentation.

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. 13 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.

13 See GAO/ NSIAD- 96- 172.

Page 11 GAO- 02- 433 Military Base Closures

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. 14 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.

14 These 24 BRAC actions include the Army Aviation Troop Command, Baltimore
Publication Center, Bayonne Military Ocean Terminal, Detroit Arsenal,
Fitzsimons Army Medical Center, Fort Buchanan, Fort Chaffee, Fort Dix, Fort
Greely, Fort Holabird, Fort Hunter- Liggett, Fort Lee, Fort Pickett, Fort
Ritchie, Fort Totten, Minor Fort Dix, Minor Army Forces Command, Minor Fort
Lewis, Oakland Army Base, Red River Army Depot, Savanna Army Depot, Seneca
Army Depot, Sierra Army Depot, Stratford Army Engine Plant, and Tri Service
Project Reliance. Estimated Annual

Recurring Savings Have Increased $1 Billion

Page 12 GAO- 02- 433 Military Base Closures

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. 15 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. 16

 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. 17

While the net savings from BRAC activities are clearly substantial, savings
and cost estimates used by DOD to calculate the net savings at its
BRACaffected 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

15 See Congressional Budget Office, Review of the Report of the Department
of Defense on Base Realignment and Closure (Washington D. C.: July 1, 1998).
16 See Department of Defense, Office of the Inspector General, Audit Report:
Cost and Savings for 1993 Defense Realignments and Closures, Report No. 98-
130 (Washington D. C.: May 6, 1998).

17 See U. S. Army Audit Agency, Base Realignment and Closure: 1995 Savings
Estimates,

Audit Report AA97- 225 (Washington D. C.: July 31, 1997). Other Government
Studies

Also Show Substantial BRAC Savings

Precision of Cost and Savings Estimates Is Limited

Page 13 GAO- 02- 433 Military Base Closures

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.

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. 18

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 laborintensive
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. 19 The services develop savings

18 The Air Force reported no savings for McClellan Air Force Base and Kelly
Air Force Base prior to fiscal year 2000 because of uncertainties regarding
the performance of the bases? depot workloads.

19 See GAO/ NSIAD- 97- 11. BRAC Savings Estimates Are

Not Updated Periodically

Page 14 GAO- 02- 433 Military Base Closures

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 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.
BRAC Costs Are Not

Comprehensive

Page 15 GAO- 02- 433 Military Base 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.

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. 20 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.

20 See Department of Defense, The Report of the Department of Defense on
Base Realignment and Closure (Washington, D. C.: Apr. 1998). Savings May Be
Greater Than

Estimated

Page 16 GAO- 02- 433 Military Base Closures

As a result of the BRAC process, DOD designated about 518,500 acres of
property at BRAC- affected installations as unneeded. 21 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. 22 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.

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.

21 The unneeded acreage does not include property at the Pueblo Chemical
Depot, Colorado, and the Umatilla Chemical Depot, Oregon, because it will
not be available for further disposition until the chemical demilitarization
mission at these bases is completed.

22 In this report, ?transferred property? refers to property that has been
deeded to another user; it does not include leased property. Transfer of
Unneeded

BRAC Property Is Only Partially Completed

Designation of Unneeded BRAC Property Is Nearly Finished

Page 17 GAO- 02- 433 Military Base Closures

Figure 3: Planned Disposition of Unneeded Property

Source: Our analysis of DOD?s data.

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. 23

23 In addition, DOD is retaining an additional 343, 000 acres at closing and
realigning bases for reserve component use. Most of this acreage is property
at several Army bases, including Fort Hunter Liggett, California; Fort
Chaffee, Arkansas; Fort Pickett, Virginia; Fort Dix, New Jersey; and Fort
McClellan, Alabama.

Page 18 GAO- 02- 433 Military Base Closures

Figure 4: Planned Transfers to Federal Agencies

Source: Our analysis of DOD?s data.

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

Page 19 GAO- 02- 433 Military Base Closures

73,100 acres (26 percent), and market/ negotiated sales accounted for 9,700
acres (3 percent).

Figure 5: Planned Transfers to Nonfederal Entities

Note: Numbers may not add because of rounding. Other conveyances include
reversions to state or local government entities and legislation mandating
specific unneeded property disposition.

Source: Our analysis of DOD?s data.

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. 24

24 As discussed later, an additional 49, 291 acres are in use by others
through interim or longterm leases pending other actions that would permit
title transfer. Transfer of Unneeded

BRAC Property Is Less Than Half Completed

Page 20 GAO- 02- 433 Military Base Closures

Table 2: Actual Transfers of Unneeded BRAC Property, as of September 30,
2001 Acres to federal entities

Acres to nonfederal

entities Undetermined Total

Planned 236,400 279,900 2, 200 518,500 Transferred 114,300 105,300 219,600
Percent of planned 48 38 42 Not transferred 122,100 174,600 2, 200 298,900

Source: Our analysis of DOD?s data.

While the amount transferred is a significant improvement over the 14percent
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.

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 Most Property Transfer

Delays Are Due to Environmental Cleanup Issues

Page 21 GAO- 02- 433 Military Base Closures

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.

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.

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.
Environmental Cleanup Is

Impeding Property Transfer Environmental Cleanup Costs Continue beyond 2001

Page 22 GAO- 02- 433 Military Base Closures

Figure 6: DOD?s Estimated Environmental Cleanup Cost at Base Closure Sites
After Fiscal Year 2001, as of September 30, 2001

Dollars in millions

Source: Our analysis of DOD?s data.

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. 25 For example, at
former Fort Ord, California, the estimated $306 million needed to complete

25 Two former Army bases- Fort Ord, California, and Camp Bonneville,
Washington- are expected to require most of the funding needed to complete
unexploded ordnance cleanup.

Page 23 GAO- 02- 433 Military Base Closures

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.

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 DOD Is Using Several

Methods to Expedite Property Reuse or Transfer

Page 24 GAO- 02- 433 Military Base Closures

opportunity to put the property to quicker productive reuse (e. g., creating
jobs and stimulating economic growth).

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 55year 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.

Table 3: Leased BRAC Acreage, as of September 30, 2001 Service Interim
leases Long- term leases Total

Army 923 5,982 6,905 Navy 7,727 2,883 10,610 Air Force 1, 899 29,877 31,776

Total 10,549 38,742 49,291

Source: Our analysis of DOD?s data.

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 Long- Term and Interim Leasing

Can Expedite Property Reuse

Page 25 GAO- 02- 433 Military Base Closures

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.

Recognizing that environmental cleanup has often delayed the transfer of
BRAC property, the Congress in 1996 enacted the so- called ?early transfer
authority? provision, 26 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.

26 National Defense Authorization Act for Fiscal Year 1997 (P. L. 104- 201,
sec. 334). Early Transfer Authority Can

Accelerate Property Transfer and Reuse

Page 26 GAO- 02- 433 Military Base Closures

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.

Page 27 GAO- 02- 433 Military Base Closures

Table 4: Use and Status of Early Transfer Authority at BRAC Bases through
Fiscal Year 2001

Installation Acres Status of transfer a

Naval Shipyard, Mare Island, Calif. 3, 568 Pending Naval Air Station,
Memphis, Tenn. 1,862 Complete Naval Air Station, Agana, Guam 1,799 Complete
Tooele Army Depot, Utah 1,621 Complete Guam Naval Activities/ Public Works
Center, Guam 1,507 Complete Naval Air Station, South Weymouth, Mass. 1, 452
Pending Fleet Industrial Supply Center, Oakland, Calif. 529 Complete Grissom
Air Force Base, Ind. 201 Complete Griffiss Air Force Base, N. Y. 179
Complete Mather Air Force Base, Calif. 163 Complete Wurtsmith Air Force
Base, Mich. 149 Complete Fleet Industrial Supply Center Annex, Alameda,
Calif. 147 Complete Naval Air Station, Louisville, Ky. 142 Pending Griffiss
Air Force Base, N. Y. 132 Pending Naval Training Center, San Diego, Calif.
51 Complete Lowry Air Force Base, Colo. 27 Future Fitzsimons Army Medical
Center, Colo. 17 Pending Lowry Air Force Base, Colo. 17 Complete a
?Complete? refers to property that has been transferred to the new user;
?Pending? refers to property that is in the process of being transferred;
and ?Future? refers to property that is planned for early transfer
authority.

Source: Our analysis of DOD?s data.

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 nocost. 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 Economic Development

Conveyances Can Accelerate Property Transfer and Reuse

Page 28 GAO- 02- 433 Military Base Closures

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.

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 Most Communities

Are Continuing to Recover from the Economic Impact of BRAC

Page 29 GAO- 02- 433 Military Base Closures

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.
27 Many community officials credited the strong economy at the time and
diversified economic activity in their region as key to their economic
recovery.

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.

Figure 7: Factors Affecting Economic Recovery from Base Closures

27 During our review, we visited communities near the former military bases
of 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. We had previously
visited two of these areas- Chase Naval Air Station and Castle Air Force
Base- in completing our 1998 report. Several Factors Play Key

Roles in Community Recovery from BRAC

Page 30 GAO- 02- 433 Military Base Closures

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. 28 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.

28 See U. S. General Accounting Office, Defense Spending and Employment:
Information Limitations Impede thorough Assessments, GAO/ NSIAD- 98- 57
(Washington D. C.: Jan. 14, 1998).

Page 31 GAO- 02- 433 Military Base Closures

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

Page 32 GAO- 02- 433 Military Base Closures

research team concluded that federal financial assistance succeeded in
aiding job creation and economic recovery from base closures and defense
downsizing. 29

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.

29 See Rutgers University et al., Defense Adjustment Program Performance
Evaluation

(New Brunswick, N. J.: Nov. 1997).

Page 33 GAO- 02- 433 Military Base Closures

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. 30 We identified
62 communities involving 88 base closures in which government and contractor
civilian job loss was estimated to be 300 or more. 31

Our analysis of annual unemployment rates for the 9- month period ending
September 30, 2001, indicates that the rates for most of the 62 BRACaffected
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.

30 Ideally, to assess how the local communities fared after each BRAC round,
we would need economic information on how those communities would have fared
without each BRAC round compared with how they have fared since the BRAC
program began. Because we did not have these baseline data, we compared the
national averages for unemployment and real per capita income as a benchmark
to assess how well the communities have fared. This comparison does not
isolate the economic effects of a base closure from the factors of other
economic events occurring in a particular region.

31 One of the limitations of our approach to selecting communities is that
some areas may have been the receiving location for DOD realignments and may
have gained jobs. For example, we included St. Mary?s County, Maryland,
because of the closure of Navy facilities at St. Inigoes, Maryland, in the
1993 BRAC round. However, in the 1995 round, the area gained jobs at the
Patuxent River Navy facilities because of the relocation of Navy activities
from the Washington, D. C., metropolitan area. Despite these gains, the
communities we selected for our analysis lost a significant number of DOD
jobs. Most BRAC- Affected

Communities? Economic Indicators Compare Favorably with National Averages

Unemployment Rates Compare Favorably with National Average

Page 34 GAO- 02- 433 Military Base Closures

Figure 8: Average Unemployment Rates of 62 BRAC- Affected Communities
Compared with Average U. S. Rate for January- September 2001

Note: Each of these 62 communities, from all four BRAC rounds, lost an
estimated 300 or more government and contractor civilian jobs.

Source: Our analysis of the Department of Labor?s data.

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.

Page 35 GAO- 02- 433 Military Base Closures

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. 32 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.

Figure 9: Calendar Years 1996- 99 Average Annual per Capita Income Growth
Rates of BRAC- Affected Areas Compared with U. S. Average

Note: Each of these 62 communities, from all four BRAC rounds, lost an
estimated 300 or more government and contractor civilian jobs.

Source: Our analysis of the Department of Labor?s data.

32 Average annual real per capita income rates for 2000 were not available
for analysis during our review. Growth Rates of Average

Annual Real per Capita Income Compare Favorably with National Average

Page 36 GAO- 02- 433 Military Base Closures

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. 33 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.

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

33 The per capita income estimates used at the time were available only
through 1995. Therefore, we did not analyze per capita income for 13
communities that were affected only by the 1995 BRAC round. Conclusions

Page 37 GAO- 02- 433 Military Base Closures

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.

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 Defensewide
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.

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. Recommendations for

Executive Action Agency Comments

Page 38 GAO- 02- 433 Military Base Closures

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.

Sincerely yours, Barry W. Holman, Director Defense Capabilities and
Management

Appendix I: Scope and Methodology Page 39 GAO- 02- 433 Military Base
Closures

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 Appendix I: Scope and Methodology

Appendix I: Scope and Methodology Page 40 GAO- 02- 433 Military Base
Closures

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.
1 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

1 The impact areas for the communities were defined by using accepted
standard definitions for metropolitan and nonmetropolitan statistical areas
and reflected the impact areas used in the 1995 BRAC round.

Appendix I: Scope and Methodology Page 41 GAO- 02- 433 Military Base
Closures

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

Page 42 GAO- 02- 433 Military Base Closures

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.

Table 5: Cumulative Cost and Savings Estimates through Fiscal Year 2001 for
the Prior Four BRAC Rounds as Reflected in DOD?s Budget Requests and
Documentation for Fiscal Years 1999 and 2002

Dollars in millions Fiscal year 1999 budget request and supporting
documentation

Fiscal year 2002 budget request and supporting documentation Total change
Costs through fiscal year 2001

Military construction $6,566 $6,638 $72 Family housing 93 92 (1)
Environmental 7,337 6,958 (379) Operations and maintenance 7,984 7,603 (381)
Military personnel- permanent change of station 175 139 (35) Estimated land
revenues (121) (336) (215) Other 847 877 30

Subtotal costs (through fiscal year 2001) $22,881 $21,972 (909) Savings
through implementation period

Military construction $965 $965 $0 Family housing- construction 177 177 0
Family housing- operations 658 652 (6) Operations and maintenance 10,583
11,142 559 Military personnel 5,229 5,229 0 Other 4,601 4,591 (10)

Subtotal savings (through implementation period) $22,213 $22,756 $543 Post-
implementation savings (through fiscal year 2001) a $14,853 $15,924 $1,071
Subtotal savings (through fiscal year 2001) $37,066 $38,679 $1,613 Net
cumulative savings (through fiscal year 2001) b $14,185 $16,707 $2,522

Note: Totals may not add because of rounding. a These savings begin the year
after the implementation period for each BRAC round, are cumulative
estimates through fiscal year 2001, and are usually based on estimated
recurring savings during the last implementation year for each round. b Net
cumulative savings consist of total savings less total costs through fiscal
year 2001.

Source: Our analysis of DOD?s budget- related documentation for fiscal years
1999 and 2002.

Appendix II: Revisions to BRAC Cost and Savings Estimates

Appendix II: Revisions to BRAC Cost and Savings Estimates

Page 43 GAO- 02- 433 Military Base Closures

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.

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 Estimated Costs

through Fiscal Year 2001 Have Decreased

Estimated Savings through Fiscal Year 2001 Have Increased

Appendix II: Revisions to BRAC Cost and Savings Estimates

Page 44 GAO- 02- 433 Military Base Closures

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

Page 45 GAO- 02- 433 Military Base Closures

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.

Table 6: DOD?s Use of Economic Development Conveyances Period Location Terms
of

payment Acres

Before April 21, 1999 Seneca Army Depot, N. Y. Negotiated price 9, 081
George Air Force Base, Calif. Negotiated price 1, 860 Orlando Naval Training
Center, Fla. Negotiated price 1, 576 Mare Island Naval Shipyard, Calif.
Negotiated price 1, 412 Glenview Naval Air Station, Ill. Negotiated price 1,
029 Vint Hill Farms, Va. Negotiated price 678 Fort Benjamin Harrison, Ind.
Negotiated price 604 Lexington- Bluegrass Army Depot, Ky. Negotiated price
570 Sacramento Army Depot, Calif. Negotiated price 380 Gentile Air Force
Station, Ohio Negotiated price 164 Detroit Arsenal, Mich. Negotiated price
153 Newark Air Force Base, Ohio Negotiated price 57 Long Beach Naval
Hospital, Calif. Negotiated price 31 Army Material Technology Laboratory,
Mass. Negotiated price 30 Long Beach Naval Shipyard, Calif. Negotiated price
30 Fort Devens, Mass. Negotiated price a 3,623 McClellan Air Force Base,
Calif. Negotiated price a 3,072 Kelly Air Force Base, Tex. Negotiated price
a 2,085 Philadelphia Naval Shipyard/ Station, Pa. Negotiated price a 1,181
Lowry Air Force Base, Colo. Negotiated price a 821 Mather Air Force Base,
Calif. Negotiated price a 774 Norton Air Force Base, Colo. Negotiated price
a 575 Myrtle Beach Air Force Base, S. C. Negotiated price a 429 Carswell Air
Force Base, Tex. Negotiated price a 382

Appendix III: DOD?s Use of Economic Development Conveyances

Appendix III: DOD?s Use of Economic Development Conveyances

Page 46 GAO- 02- 433 Military Base Closures

Period Location Terms of payment Acres

Loring Air Force Base, Maine Rural no- cost 3, 861 Tooele Army Depot, Utah
Rural no- cost 1, 662 Eaker Air Force Base, Ark. Rural no- cost 1, 447
Letterkenny Army Depot, Pa. Rural no- cost 1, 400 KI Sawyer Air Force Base
II, Mich. Rural no- cost 1, 065 Grissom Air Force Base, Ind. Rural no- cost
828 Wurtsmith Air Force Base, Mich. Rural no- cost 508 KI Sawyer Air Force
Base I, Mich. Rural no- cost 146 Presque Isle (Part of Loring), Maine Rural
no- cost 36 After April 21, 1999

Fort McClellan, Ala. No- cost 9, 378 Cecil Field Naval Air Station, Fla. No-
cost 8, 295 Fort Ord, Calif. No- cost 7,589 Fort Chaffee, Ark. No- cost 5,
261 Reese Air Force Base, Tex. No- cost 2, 946 March Air Force Base, Calif.
No- cost 2,849 Guam Naval Activities/ Public Works Center, Guam No- cost 2,
725 Fort Pickett, Va. No- cost 1,675 Griffiss Air Force Base, N. Y. No- cost
1, 649 Chase Field Naval Air Station, Tex. No- cost 1, 570 Alameda Naval Air
Station, Calif. No- cost 1, 406 Charleston Naval Base, S. C. No- cost 1, 368
Memphis Naval Air Station, Tenn. No- cost 1,312 Ogden Defense Distribution
Depot, Utah No- cost 1, 003 Plattsburgh Air Force Base, N. Y. No- cost 929
Red River Army Depot, Tex. No- cost 765 Bayonne Military Ocean Terminal, N.
J. No- cost 652 Fitzsimons Army Medical Center, Colo. No- cost 344
Warminster Naval Air Warfare Center, Pa. No- cost 297 San Diego Naval
Training Center, Calif. No- cost 281 Agana Naval Air Station, Guam No- cost
248 Indianapolis Naval Air Warfare Center, Ind. No- cost 163 Louisville,
Naval Ordnance Station, Ky. No- cost 142 Philadelphia Defense Personnel
Support Center, Pa. No- cost 86 Annapolis Naval Surface Warfare Center, Md.
No- cost 44 New York (Brooklyn) Naval Air Station, N. Y. No- cost 28 New
London Naval Underwater Systems Center, Conn. No- cost 15 Fort Holabird, Md.
No- cost 14

a These nine economic development conveyances were modified to a no- cost
basis as authorized in the provisions of the National Defense Authorization
Act for Fiscal Year 2000. Source: Our analysis of DOD?s data.

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

Page 47 GAO- 02- 433 Military Base Closures

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. 1 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.

Table 7: Civilian Jobs Lost and Created at Major Base Realignments and
Closures during the Prior Four BRAC Rounds, as of October 31, 2001

Major base Estimated jobs lost Estimated jobs created Recovery (percent)

Alameda Naval Air Station and Naval Aviation Depot, Calif. 3,228 2,076 64.31
Army Materials Technology Lab (Watertown), Mass. 540 1,061 196.48 Barbers
Point Naval Air Station, Hawaii 618 28 4.53 Bayonne Military Ocean Terminal,
N. J. 2,015 252 12.51 Bergstrom Air Force Base, Tex. 927 1,984 214.02
Carswell Air Force Base, Tex. 869 541 62.26 Castle Air Force Base, Calif.
1,149 2,447 212.97 Cecil Field Naval Air Station, Fla. 995 596 59.90 Chanute
Air Force Base, Ill. 1,035 1,723 166.47 Charleston Naval Complex, S. C.
6,272 3,339 53.24 Chase Field Naval Air Station, Tex. 956 1,153 120.61 Eaker
Air Force Base, Ark. 777 991 127.54 El Toro Marine Corps Air Station, Calif.
979 252 25.74 England Air Force Base, La. 682 1,834 268.91 Fitzsimons Army
Medical Center, Colo. 1, 612 2,169 134.55 Ft. Benjamin Harrison, Ind. 1,050
815 77.62 Ft. Devens, Mass. 2, 178 2,288 105.05 Ft. McClellan, Ala. 2,156
559 25.93

1 The number of reported civilian positions lost decreased by 5, 610 (from
135,259 to 129, 649) from 1998 to 2001 because of adjustments in the
Griffiss Air Force figures and the omission of Fort Dix, the Aviation Troop
Command, and Fort Greely from the 2001 report. Appendix IV: Civilian Jobs
Lost and Created

at Major BRAC Locations during the Prior Four BRAC Rounds

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

Page 48 GAO- 02- 433 Military Base Closures

Major base Estimated jobs lost Estimated jobs created Recovery (percent)

Ft. Ord, Calif. 2,835 1,135 40.04 Ft. Pickett, Va. 245 182 74.29 Ft.
Ritchie, Md. 1, 373 108 7.87 Ft. Sheridan, Ill. 1,681 0 0. 00 Gentile Air
Force Station, Ohio 2,804 1,828 65.19 George Air Force Base, Calif. 506
1,085 214.43 Glenview Naval Air Station, Ill. 389 3 0. 77 Griffiss Air Force
Base, N. Y. 1,341 1,874 139.75 Grissom Air Force Base, Ind. 792 735 92.80
Guam Naval Complex, Guam 2,193 549 25.03 Homestead Air Force Base, Fla. 136
622 457.35 Hunters Point Annex Naval Shipyard, Calif. 93 425 456.99
Indianapolis Naval Air Warfare Center, Ind. 2,196 1,574 71.68 Jefferson
Proving Ground, Ind. 387 122 31.52 Kelly Air Force Base, Tex. 10,912 4,444
40.73 K. I. Sawyer Air Force Base, Mich. 788 1,045 132.61 Letterkenny Army
Depot, Pa. 2, 512 578 23.01 Lexington Army Depot, Ky. 1, 131 838 74.09 Long
Beach Naval Complex, Calif. 4,487 200 4.46 Loring Air Force Base, Maine 1,
311 1,010 77.04 Louisville Naval Surface Warfare Station, Ky. 1, 435 1,018
70.94 Lowry Air Force Base, Colo. 2, 275 1,357 59.95 March Air Force Base,
Calif. 997 572 57.37 Mare Island Naval Shipyard, Calif. 7, 567 1,548 20.46
Mather Air Force Base, Calif. 1, 012 3,514 347.23 McClellan Air Force Base,
Calif. 8, 828 6,124 69.37 Memphis Defense Distribution Depot, Tenn. 1,289
573 44.45 Memphis Naval Air Station, Tenn. 250 112 44.80 Myrtle Beach Air
Force Base, S. C. 784 917 116.96 Newark Air Force Base, Ohio 1,760 1,050
59.66 Norton Air Force Base, Calif. 2, 133 1,853 86.87 Oakland Naval
Complex, Calif. 2,834 838 29.57 Ogden Defense Distribution Depot, Utah 1,105
611 55.29 Orlando Naval Training Center, Fla. 1,105 1,131 102.35 Pease Air
Force Base, N. H. 400 4,367 1,091.75 Philadelphia Defense Personnel Supply
Center, Pa. 1, 485 300 20.20 Philadelphia Naval Complex, Pa. 8, 119 2,268
27.93 Plattsburgh Air Force Base, N. Y. 352 881 250.28 Presidio of San
Francisco, Calif. 3,150 1,980 62.86 Reese Air Force Base, Tex. 1,238 138
11.15 Red River Army Depot, Tex. 386 186 48.19 Sacramento Army Depot, Calif.
3, 164 101 3.19 San Diego Naval Training Center, Calif. 402 48 11.94 Savanna
Army Depot, Ill. 436 62 14.22

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

Page 49 GAO- 02- 433 Military Base Closures

Major base Estimated jobs lost Estimated jobs created Recovery (percent)

Seneca Army Depot, N. Y. 273 944 345.79 Sierra Army Depot, Calif. 374 262
70.05 Staten Island Naval Station, N. Y. 1,001 0 0. 00 Stratford Army
Engineering Plant, Conn. 1, 400 111 7.93 Tooele Army Depot, Utah 1,942 819
42.17 Treasure Island Naval Station, Calif. 454 59 13.00 Tustin Marine Corps
Air Station, Calif. 348 2 0. 57 Vint Hill Farms Station, Va. 1,472 344 23.37
Warminster Naval Air Warfare Center, Pa. 2, 311 398 17.22 Williams Air Force
Base, Ariz. 728 2,200 302.20 Wurtsmith Air Force Base, Mich. 690 587 85.07

Total 129,649 79,740 61.50

Source: Our analysis of DOD?s Office of Economic Adjustment data as of
October 31, 2001.

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

Page 50 GAO- 02- 433 Military Base Closures

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. Appendix V: Average Unemployment Rates of

BRAC- Affected Areas Compared with the U. S. Average Rate

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

Page 51 GAO- 02- 433 Military Base Closures

Figure 10: Comparison of Unemployment Rates of 24 BRAC- Affected Locations
West of the Mississippi River

Source: Our analysis of the Department of Labor ?s data.

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

Page 52 GAO- 02- 433 Military Base Closures

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.

Figure 11: Comparison of Unemployment Rates of 38 BRAC- Affected Locations
East of the Mississippi River

Source: Our analysis of the Department of Labor ?s data.

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

Page 53 GAO- 02- 433 Military Base Closures

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. Appendix VI: Average Annual Real per
Capita

Income Growth Rates of BRAC- Affected Areas Compared with the U. S. Average
Rate

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

Page 54 GAO- 02- 433 Military Base Closures

Figure 12: Comparison of Average Annual Real per Capita Income Growth Rates
of 24 BRAC- Affected Locations West of the Mississippi River

Source: Our analysis of the Department of Commerce?s data.

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

Page 55 GAO- 02- 433 Military Base Closures

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.

Figure 13: Comparison of Average Annual Real per Capita Income Growth Rates
of 38 BRAC- Affected Locations East of the Mississippi River

Source: Our analysis of the Department of Commerce?s data.

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

Page 56 GAO- 02- 433 Military Base Closures

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.

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. Appendix
VII: Case Examples of Community

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

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

Page 57 GAO- 02- 433 Military Base Closures

Table 8: Community Impacts Resulting from the Closure of Chase Naval Air
Station, Texas, as Reported in 1998 and 2001 Overview

Bee County, Texas, and the surrounding counties are generally rural;
agriculture and ranching are local industries. The largest sectors in Bee
County are now state and local government, trade, and services.

As we reported in 1998 What we found in 2001

January- September 1997 unemployment rate of 6.1 percent. Average real per
capita income growth (1991- 95) of 0.5 percent.

Sales of expensive items, such as automobiles, dropped. Automobile
dealerships had to reduce staff and some businesses closed, including high-
end clothing stores, a discount department store, an automobile dealership,
a local janitorial service, a tortilla factory, and about four convenience
stores.

Real estate values in the residential market declined, and housing in the
$75,000+ range was stagnant.

Many military families that had brought a range of life experiences to the
community moved.

Skilled workers commuted long distances to other bases or were retired,
unemployed, or underemployed or no longer resided in the area.

January- September 2001 unemployment rate of 5 percent. Average real per
capita income growth (1996- 99) of 2.59 percent.

Sales of expensive items, such as new automobiles, remained low while used
automobile sales increased.

New motel, theatre, and water treatment plant built, while one of two large
grocery stores closed. New hospital wing added to accommodate a significant
increase in hospital patients treated. County sales tax revenues increased
slightly.

Real estate values in the residential market increased; new home building
growth for homes was in the $100,000+ range.

Evening enrollment at community college was 75 percent lower without the
military presence.

Skilled workers continued to commute long distances to other bases. Source:
Discussions with DOD, state, local, and business officials and our analysis
of the Department of Commerce?s data.

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.

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

Page 58 GAO- 02- 433 Military Base Closures

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.

Table 9: Community Impacts Resulting from the Closure of Castle Air Force
Base, California, as Reported in 1998 and 2001 Overview

Merced County, California, is a rural area largely dedicated to agriculture
and related industries. Much of its labor force?s seasonally employed in
farming and canning. Even during seasons of ?full employment,? the
unemployment rate remains high, around 14 percent; during the off- season,
the rate can rise from 19 to 22 percent. The area is home to a large
immigrant population. a

As we reported in 1998 What we found in 2001

January- September 1997 unemployment rate of 15 percent. Average real per
capita income growth (1991- 95) of negative 0.8 percent.

Real estate values in Atwater dropped 25 to 30 percent, partly because the
federal government purchased houses of departing military personnel and
placed them on the market. New housing construction stopped.

Atwater schools lost enrollment, as well as tax base. The Atwater elementary
school district had to reduce budget and staff, canceling some programs.

Local businesses had to reduce staff; some closed, and some changed
ownership. Several small businesses shut down, including restaurants,
insurance vendors, and dry cleaners.

The community lost the military families, who contributed to local
organizations, such as churches and hospitals.

January- September 2001 unemployment rate of 13.7 percent. Average real per
capita income growth (1996- 99) of 2.32 percent.

Housing starts have increased significantly over the last 2 years partly due
to the Bay Area families? taking advantage of affordable residential
housing, and to real estate speculation from an announced new university
campus expected to open in 2004. Average home prices increased from $114,
000 to $140, 000.

Atwater population increased 9.6 percent from 1996 to 2000. Merced county
population increased by 4.5 percent over the same period.

Many closed businesses, such as restaurants and other services, have not
been replaced. There are vacant buildings throughout Atwater.

Former skilled Castle workers continue to commute more than 4 hours a day,
round trip, to the Bay Area, while others no longer reside in the area. a
Many Hmong immigrants from Laos, recruited and trained by the United States
to conduct rescue

missions and guerilla activity during the Vietnam war, migrated to the
United States after the war to escape persecution. India?s Punjabi began
immigrating to California after World War II and settled largely in rural
areas.

Source: Discussions with DOD, state, local, and business officials and our
analysis of the Department of Commerce?s data.

According to local officials, the closure of Castle Air Force Base had an
immediate adverse effect on the unemployment rate, housing costs, and
Community Impacts

Resulting from the Closure of Castle Air Force Base, California

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

Page 59 GAO- 02- 433 Military Base Closures

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.

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.
Other Communities

Recovering from Varied Impacts

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

Page 60 GAO- 02- 433 Military Base Closures

Table 10: Reported Community Impacts Resulting from Base Closures for
Communities Not Visited in 1998 Limestone, Caribou, Presque Isle, Caswell,
Fort Fairfield, and Van Buren, Maine Overview

The former Loring Air Force Base, which closed in 1994, is located in the
town of Limestone in Aroostook County, Maine. Aroostook County is a rural
county located in the northeast corner of Maine bordering Canada and covers
6,672 square miles. The area is largely dedicated to lumber and paper
production and the cultivation of such crops as potatoes, broccoli, and
peas. Unemployment rates for Aroostook County dropped from 8. 5 percent for
January- September 1997 to 3. 9 percent in the same 9- month period in 2001.
Average real per capita income growth rose from 1 percent in 1991- 95 to 2.9
percent in 1996- 99.

Impact of closure on community

 Limestone school district lost 300 to 400 students, resulting in a loss of
federal and state funding. Presque Isle schools lost 150 to 200 students.

 Many military retirees left the area because the base hospital closed.

 Retail businesses such as car dealerships closed. Other businesses, such
as construction and general supply companies, were hard hit.

 Ethnic and social diversity contributed by military personnel and their
families disappeared.

 Real estate markets dropped 20 to 30 percent during the first 3 years
after the closing announcement.

 Loss of economic activity was not as severe as initially expected.

 Establishment of Defense Finance and Accounting Service facility on former
base provided additional jobs.

Charleston and North Charleston, South Carolina Overview

The Charleston Naval Shipyard, which closed in 1996, is located in the city
of North Charleston, South Carolina. Comprising 3 counties, Berkeley,
Charleston, and Dorchester, the Charleston metropolitan region covers 3,163
square miles and has a population of 549, 000. Major employers include the
Medical University of South Carolina, the Charleston Air Force Base, and the
U. S. Navy. The largest business sectors are services, retail and wholesale
trade, and government. Unemployment rates for the metropolitan area dropped
from 4. 5 percent for January- September 1997 to 3. 2 percent for the same
9- month period in 2001. Average real per capita income growth rose from 1.9
percent for 1991- 95 to 3.4 percent for 1996- 99.

Impact of closure on community

 Economic impact on the area was not nearly as severe as expected. While an
economic recovery plan expected recovery in 5 years, it took only 2.

 Car sales dropped initially.

 Rental property vacancies rose.

 Revenues from military personnel were lost. For example, the city of
Charleston saw a drop in sales taxes after the base closed, but it has since
recovered.

 The closure was an impetus for the formation of a regional alliance of
affected communities- the alliance raised over $8 million from the public
and private sector for business recruiting purposes.

 Establishment of Navy space warfare facility on the former base brought in
highly paid and highly skilled jobs.

 New high tech businesses are moving to the region.

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

Page 61 GAO- 02- 433 Military Base Closures

Anniston, Weaver, and Jacksonville, Alabama Overview

Fort McClellan, which closed in 1999, was located in the city of Anniston in
Calhoun County, Alabama. Calhoun County covers 609 square miles and has a
population of 112,000. The top employers include the Anniston Army Depot and
a regional medical center. The largest business sectors include retail trade
and service industries. Unemployment rates for Anniston remained the same-
5.2 percent- for January- September 1997 and for the same 9- month period in
2001. Average real per capita income growth declined from 2.1 percent for
1991- 95 to 1.3 percent for 1996- 99.

Impact of closure on community

 Population declined. For example, Weaver?s population dropped by 200
people to about 2,700 after the base closed in 1999.

 Sales tax revenues were lost.

 Students left, resulting in a reduction of $8,000 to $10,000 in state
school funding.

 Calhoun County lost population from 1999 to 2000, the only county in the
state to do so.

 Rental property vacancies increased significantly after closure.

 An off- base shopping area lost many small businesses and has not been
replaced.

 Barbershops and clothing stores closed in Anniston.

 Military personnel and dependents, who brought diversity and were involved
in the community, left.

 Some military retirees moved out of the area because of loss of services;
but many retirees remained in the area, thereby increasing local community
business activity that was formerly done on the base when it was active.

Monterey, Del Rey Oaks, Seaside, and Marina, California Overview

Fort Ord, which closed in 1994, covers approximately 44 square miles, and
lies within Monterey County, California, in the cities of Del Rey Oaks,
Seaside, and Marina. Major employers include Dole Fresh Vegetable Company,
the County of Monterey/ Salinas, the Department of Defense, and Tanimura &
Ante, Inc., a company that prepares crops for market. Monterey County?s
economy consists of four primary sectors: tourism, agriculture,
environmental technologies, and education. Unemployment rates for Salinas, a
community near the former base, dropped from 10.3 percent for January-
September 1997 to 9.2 percent for the same 9- month period in 2001. Average
real per capita income growth dropped from 3. 4 percent for 1991- 95 to 1. 6
percent for 1996- 99.

Impact of Closure on Community

 35,000 military personnel and civilians left the area when the base
closed.

 Secondary business in nearby communities, such as dry cleaners and grocery
markets, reported declines in sales.

 The loss of military families living off base created housing and
apartment surpluses, which took time to recover.

 Employment growth slowed for1990- 95, but recovery followed thereafter.

 From 1990 to 1999, retail sales in the city of Marina grew by 23 percent.
In contrast, the county retail sales grew by 50 percent and state retail
sales by 41 percent.

 Acquisition of the former base?s golf course by the city of Seaside has
brought in much needed revenue.

 Acquisition of the former base?s airport for the city of Marina has been a
success.

 Two former base housing areas for the city of Monterey have been
redeveloped and are fully utilized.

 Seven educational institutions have or will soon have facilities on the
former base; California State University (Monterey Bay) has completed $60
million in renovations and has a student population of 2,400; enrollment is
expected to rise to 12,500 over the next 15 years.

 Defense Finance and Accounting Service facility was established by
renovating the former base hospital. Source: Discussions with DOD, state,
local, and business officials and our analysis of the Department of
Commerce?s data.

Appendix VIII: Key Reports Related to Base Closure Implementation Issues

Page 62 GAO- 02- 433 Military Base Closures

U. S. General Accounting Office. Military Base Closures: Overview of
Economic Recovery, Property Transfer, and Environmental Cleanup. GAO- 01-
1054T. Washington, D. C.: August 28, 2001.

U. S. General Accounting Office. Military Base Closures: DOD?s Updated Net
Savings Estimate Remains Substantial. GAO- 01- 971. Washington, D. C.: July
31, 2001.

U. S. General Accounting Office. Environmental Liabilities: DOD Training
Range Cleanup Cost Estimates Are Likely Understated. GAO- 01- 479.
Washington, D. C.: April 11, 2001.

U. S. General Accounting Office. Military Base Closures: Unexpended Funds
Raise Questions About Fiscal Year 2001 Funding Needs. GAO/ NSIAD- 00- 170.
Washington, D. C.: July 7, 2000.

U. S. General Accounting Office. Military Base Closures: Potential to Offset
Fiscal Year 2000 Budget Request. GAO/ NSIAD- 99- 149. Washington, D. C.:
July 23, 1999.

U. S. General Accounting Office. Military Bases: Status of Prior Base
Realignment and Closure Rounds. GAO/ NSIAD- 99- 36. Washington, D. C.:
December 11, 1998.

U. S. General Accounting Office. Military Bases: Review of DOD?s 1998 Report
on Base Realignment and Closure. GAO/ NSIAD- 99- 17. Washington, D. C.:
November 13, 1998.

Congressional Budget Office. Review of the Report of the Department of
Defense on Base Realignment and Closure. Washington, D. C.: July 1, 1998.

Department of Defense, Office of the Inspector General. Audit Report: Cost
and Savings for 1993 Defense Base Realignments and Closures. Report No. 98-
130. Washington, D. C.: May 6, 1998.

Department of Defense. The Report of the Department of Defense on Base
Realignment and Closure. Washington, D. C.: April 1998.

U. S. General Accounting Office. Defense Infrastructure: Challenges Facing
DOD in Implementing Reform Initiatives. GAO/ T- NSIAD- 98- 115. Washington,
D. C.: March 18, 1998.

U. S. Army Audit Agency. Base Realignment and Closure 1995 Savings
Estimates.

Audit Report AA97- 225. Washington, D. C.: July 31, 1997. Appendix VIII: Key
Reports Related to Base

Closure Implementation Issues

Appendix VIII: Key Reports Related to Base Closure Implementation Issues

Page 63 GAO- 02- 433 Military Base Closures

U. S. General Accounting Office. Military Bases: Lessons Learned from Prior
Base Closure Rounds. GAO/ NSIAD- 97- 151. Washington, D. C.: July 25, 1997.

Congressional Budget Office. Closing Military Bases: An Interim Assessment.

Washington, D. C.: December 1996. U. S. General Accounting Office. Military
Base Closures: Reducing High Costs of Environmental Cleanup Requires
Difficult Choices. GAO/ NSIAD- 96- 172. Washington, D. C.: September 5,
1996.

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 IX: Comments from the Department of Defense

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Appendix IX: Comments from the Department of Defense

Appendix IX: Comments from the Department of Defense

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Appendix IX: Comments from the Department of Defense

Page 66 GAO- 02- 433 Military Base Closures

Appendix X: GAO Contacts and Staff Acknowledgments

Page 67 GAO- 02- 433 Military Base Closures

Barry W. Holman (202) 512- 8412 Mark A. Little (202) 512- 4673

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. Appendix X: GAO
Contacts and Staff

Acknowledgments GAO Contacts Acknowledgements

(350059)

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