Base closings: the last roundup - includes related article on Small Business Administration loans for defense-related companies

Nation's Business, April, 1996 by Michael Barrier

It may have been the worst thing to happen to Chambersburg, Pa., since 1864, when the Confederate army burned the place down--a fate suffered by no other Northern town during the Civil War. This time, at least, Chambersburg had plenty of company.

Last summer, President Clinton reluctantly accepted the recommendation of the fourth and final Defense Base Closure and Realignment Commission that 79 military installations around the country be closed. Since the first round of closings, in 1988, about 100 major military installations have been closed or designated for closing, along with 350 minor installations.

The 1995 recommendation called for 26 more installations to be "realigned"--in effect, downsized. The most recent closings and Realignments are expected to cost 94,000 civilian jobs as they are completed over the next few years.

The commission's final recommendation took effect Sept. 28, when Congress failed to overturn it. The president and Congress could only accept or reject--not modify--the commission's recommendations within a period set by statute.

Chambersburg was among the communities hit with a realignment. A city of around 17,000 in south-central Pennsylvania, it is home to the Letterkenny Army Depot, a World War II-vintage ammunition-storage and weapons-maintenance facility that has a civilian work force of more than 3,000. Letterkenny has been the largest employer in Franklin County.

(Letterkenny has fewer than 50 military personnel--an unusually small number. The direct military contribution to a local economy is typically limited, however, because so much activity and spending are confined to the base.)

The realignment, which will leave Letterkenny with its storage function, will cut the civilian work force by more than two-thirds.

Chambersburg and its fellow fourthround victims are fortunate in one way, though. Since the base-closing process began in 1988, the Pentagon has become much better at minimizing the adverse impact of closings and realignments by streamlining the process of opening a closed base to development.

"Communities that are recently on the list are going to benefit from the labor pains" that other communities have experienced, says Paul E. Taibl, director of economic-security programs for Business Executives for National Security, a Washington, D.C.-based group that promotes better management of defense dollars.

As the Defense Department helps communities adjust to base closings, says Tom Shea, a project manager in the Pentagon's Office 0f Economic Adjustment (OEA)' "small-business development plays a key role---because that's where the jobs are created, through small-business formation."

The adjustment efforts aren't necessarily weighted toward small business--"We don't tell [communities] what to do, at all," Shea says---but experience so far suggests that a community that works toward a redevelopment mix of small and large companies can wind up economically healthier than it was before a base closed.

"We haven't gone backwards," says Mayor Katy Podagrosi of Rantoul, Ill. The city of about 17,000 not only survived the closing of Chanute Air Force Base (as detailed in "New Mission," November 1994) but is prospering, partly because small companies have gotten involved in the facility's redevelopment.

Chanute's closing was announced in 1988, and the base closed as a military installation five years later. Rantoul lost 1,035 civilian jobs in the closing, but new jobs began to replace them as the base wrapped up its business. The city has added roughly 1,200 jobs on the former base properties and 1,300 more off the base. "We recovered within 18 to 24 months," says Ray Boudreaux, Rantoul's director of aviation and re-use development.

More than 50 businesses--ranging in size from up to 400 employees down to small firms with just one or two employees---have moved onto the former base.

Communities might consider seeking out small businesses as essentially transitional tenants in the early stages of a base's redevelopment, says Brian O'Connell, executive director of the Alexandria, Va.-based National Association of Installation Developers, which works with investors and community groups in finding new uses for former military property.

Small-business incubators--buildings that house a cluster of start-ups that share services--are another sensible use of former military facilities, says Shea. He sees Letterkenny as a prime possibility for an incubator site.

What might seem to be a plus for towns like Chambersburg--that their bases, unlike Rantoul's, will be realigned rather than closed--can actually be a mixed blessing. Robert G. Zullinger, retiring chairman of F&M Trust Co., a Chambersburg bank, and head of the county government's committee on base re-use, suggests that a realignment can be harder to deal with than an outright closing when, as at Letterkenny, military operations continue on part of the facility. Ammunition will still be stored on about 13,000 of Letterkenny's more than 19,000 acres; about 6,000 acres will be available for development.