Military Base Closures

Observations on Legislative Proposal for No-Cost Transfer of Surplus Property Gao ID: T-NSIAD-99-215 July 1, 1999

Proposed legislation before Congress would amend the base closure law and promote the economic development of affected communities by transferring property to them without consideration. Affected communities receiving property under an economic development conveyance (EDC) could receive that property at no cost if certain conditions were met. Currently, EDCs are available at or below fair-market value and at no cost for rural communities. The proposal involves a trade-off between recouping the value of surplus property and giving communities an opportunity to hasten their economic recovery. GAO found that the proposed legislation could speed the EDC process. The Defense Department, however, would lose revenue if the proposed amendment is enacted.

GAO noted that: (1) the proposed legislation provides an opportunity to expedite the economic development conveyance (EDC) process; (2) it would likely alleviate the frustration and burden communities and DOD experience in negotiating agreements; (3) in some instances, the elimination of lengthy negotiations over fair market value issues might have expedited property transfers; (4) however, it is not clear to what extent the legislation would uniformly shorten the timeframe for property transfers; (5) GAO's prior work also shows that other factors, such as communities' abilities to accept property transfers in a timely fashion and environmental cleanup considerations, are the primary factors that determine the pace of property transfers; (6) the legislation would impact 23 pending or anticipated EDCs; (7) however, the amendment would also allow up to 26 existing EDCs to be renegotiated if certain conditions are met; (8) DOD will lose revenue if the proposed amendment is enacted; (9) DOD would likely forgo revenue from the 23 EDCs that are either in the negotiating stage or expected to be submitted on or after April 21, 1999; (10) the extent of lost revenue for these properties would not be known until final agreements are reached; (11) the proposed legislation would also allow the Secretary of Defense to approve changes in prior agreements based on determinations of changes in economic circumstances; (12) DOD estimates that it would lose about $218 million between fiscal year (FY) 2000 and 2043 if all agreements are renegotiated as no-cost conveyances; (13) approximately $87 million, or 40 percent, of this revenue would be lost between FY 2000 and FY 2005, and the remaining revenue would be lost between FY 2006 and FY 2043; and (14) the Department projects the legislation will avoid about $12 million in costs that otherwise would be incurred in maintaining the closed bases prior to transfer.

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