Operators brace for base closings; unemployment, downturn in business would follow in wake of Clinton's plan

Nation's Restaurant News, April 5, 1993 by Richard Martin

Unemployment, downturn in business would follow in wake of Clinton's plan

Restaurants near military bases targeted for closure or cutback by the Clinton administration are bracing for the retreat of their armed-forces clienteles in economic wars of attrition that could vanquish scores of the eateries.

While some defense-town restauranteurs see brighter futures in long-range conversion schemes for the shuttered bases, others worry that a trickle-down loss of millions of defense dollars could suck the life out of hospitality businesses before the abandoned sites can be recycled.

The closure of two large naval facilities in Charleston, S.C., would have "a dramatic effect" on hotels and restaurants run by Deco Corp. of Charleston, according to company president Jim Palassis. He predicted "a downturn in business of perhaps 50 percent, not to mention the unemployment it's going to cause."

Blaming the White House for seeming contradictions in its two-track goal of economic stimulation and defense budget reduction, Palassis said, "You're trying to create jobs, and then you turn around and do this; it just doesn't make sense."

Nationwide, more than 220,000 jobs would be affected by Defense Secretary Les Aspin's proposal to phase out 31 major military installations, shrink 12 others and shut or scale back 122 smaller facilities. The base closings and revampings would result in a projected savings of $3.1 billion per year starting in 2000.

But restaurants whose cash flows depend on the military presence in their towns could be big losers if the list of proposed closures is approved by Congress this summer. Adding to the worries of restaurateurs are prospects for widespread layoffs in off-base service businesses that would curtail away-from-home meal spending by remaining civilian populations.

"It's got to hurt us," said George Proferes, founder of the seven-unit Waffletown chain based in Virginia Beach, Va., which is near the targeted Norfolk Naval Aviation Depot, the world's largest naval facility. "If you see two servicemen," Proferes added, "there are seven or eight [economically related civilians] behind them that we get revenues from."

Leading the list of states that would be hardest hit by the defense diet is California, which already has been hammered in the recession by the loss of some 800,000 jobs. The state is expected to incur the direct and indirect loss of up to 65,000 more jobs from a total of nine proposed base closures and 18 other facility reductions.

Sharp cuts would also come in Virginia, South Carolina, Pennsylvania, Florida and other states, where the binge of budget cutting would cost workers at and near targeted bases their jobs -- and, thus, their discretionary dining incomes.

"If your base is on the list and you're an owner or manager of a restaurant, you can expect to take a real hard hit," said Keith Cunningham, an analyst with Business Executives for National Security, a Washington-based think tank that studied the economic ripple effect of the closures of 24 of the 27 bases ordered shut by the Bush administration in 1991.

Pointing to potentially displaced on-base work forces as a guide to the severity of the closures, Cunningham said his group's study found that one service-sector job in the local community is lost for every two jobs eliminated in a base shutdown.

But the losses are four times worse -- meaning two off-base jobs are lost for every one on-base worker eliminated -- when a military facility has little or no barracks capacity and its personnel are housed in the local community or when a base has an exceptionally large civilian work force, as in Charleston.

"The restaurants there are going to take a real beating," predicted Cunningham, whose research shows that one-fourth of Charleston's schoolchildren have parents who work at its two naval facilities. "I don't know a restaurant that can take a 25-percent hit and stay in business," he said.

Sharing Charleston's predicament are such California cities as Sacramento, whose potentially targeted McClellan Air Force Base has 23,000 civilian workers, and Vallejo, where civilian workers at the Mare Island Naval Shipyard help the base pump a now-threatened $399 million a year into the local economy.

In Monterey County, Calif., where the phase-out of Fort Ord that began in 1991 will cost the local economy an estimated $1 billion a year, further losses would come from the closures of the Presidio of Monterey and the relatively small defense language school there.

"If they close the Presidio and the language school, probably 20 percent of the employed population will be affected immediately, giving us one of the highest unemployment rates in America," said Monterey restaurateur Ted Balestreri, a former National Restaurant Association president.

Balestreri is less concerned about his flagship Sardine Factory and his other restaurants than he is about simpler, mom-and-pop eateries that may not survive long enough to enjoy the long-term economic gains predicted from the proposed conversion of Fort Ord to a university campus and the likely development of afforadable housing at other abandoned military sites. "No doubt about it, [the local defense cuts] will be a boon to the economy in the long run," he said, "but you're talking many years down the line, and I don't know how the small businesses are going to survive that long."