Acquiring property at a former military base: The process and the law

Real Estate Issues, Apr 1994 by Gsottschneider, Richard K, Hicks, Jimmy E, Donohoe, Jeffrey S

The reduction in United States military forces has resulted in an increased number of base closings nationwide. While many of these bases have excellent facilities suitable for a variety of different uses, most real estate professionals and developers do not understand the complex process or laws which influence the acquisition of property at a closed military installation. Also, the federal government originally had unrealistic expectations of market value when it planned the closure of these bases. Current efforts are underway to soften these expectations and to improve communications.

This article briefly outlines the process used to plan for the redevelopment of closed military facilities. It also discusses the key players involved in the reuse of a base, the relevant laws and the opportunities former military bases represent to real estate professionals and their clients.

BACKGROUND

Since 1988 over 200 military bases across the United States have been designated for closure by the federal government. Also, realignment, which may involve closing a portion of a base, has been recommended for an additional 152 military facilities. Not since the period from 1964 to 1977, when almost 100 military bases were closed, has the country experienced such a major retrenchment of federal real estate holdings.

This current round of military base closings was initiated in 1988 with the enactment of Public Law 100-526. The law created the Secretary of Defense's Commission on Base Realignment and Closure (BRAC) and charged the commission with preparing a list of domestic bases for closure and realignment. In 1988, under BRAC, 86 military bases were recommended for closure and 59 were designated for realignment.

In 1990, Congress enacted Public Law (PL) 101-510 which created an independent five-year Defense Base Closure and Realignment Commission. Under this new law the commission was required to conduct public hearings to review a list of base closures and realignments recommended by the secretary of defense and to review any proposed changes the commission might make in the list. In addition, PL 101-510, which is entitled the Defense Base Closure and Realignment Act of 1990, required the commission to meet in 1991, 1993 and 1995 to consider additional base closure recommendations prepared by the secretary of defense. Currently the commission is working on the 1995 closure list.

In 1991, the commission recommended 34 base closings and 48 realignments. The 1993 commission recommended an additional 130 bases for closure and 45 for realignment. Once military bases have been officially designated for closure, the federal property disposal process is initiated. While the process has been criticized by some as cumbersome and excruciatingly slow, understanding of the requirements of federal laws and regulations is necessary for those interested in acquiring property at closed military facilities.

MAJOR PLAYERS

Several organizations play a major role in any public or private sector effort to acquire property at a former military installation. Historically, the General Services Administration (GSA) has been the federal government's real estate arm. Over the years, in accordance with the Federal Property and Administrative Services Act of 1949 and the Surplus Property Act of 1944, the GSA has developed procedures and regulations for the disposal of federal property. Under existing GSA regulations, the disposal of surplus federal property follows a specific path. First, surplus federal property is made available to federal agencies including other branches of the military; if a property is not selected by a federal agency, then it is made available for acquisition to state, county and local governments. Property not acquired directly by a governmental organization is offered for sale through a sealed bid or public auction.

Under the Defense Base Closure and Realignment Act of 1988, GSA authority for disposing of property at closed and realigned military installations has been delegated to the secretary of defense. This new law requires that property be disposed at "fair market value", but the federal/state screening process of surplus property still is followed. All proceeds from the sale or lease of property must be deposited in a special base closure account that can be used for expenses associated with closing military installations across the country. It should be noted that this provision is a significant change from base closure procedures used in the 1960s and 1970s when many closed military bases often were turned over to local and state governments for as little as $1.

A third major group involved in the redevelopment of closed military facilities are local and/or state reuse organizations. Most of these groups are financially supported, in part, by funding from the Office of Economic Adjustment (OEA), an agency of the Department of Defense. With OEA funding and assistance, communities impacted by base closings are involved in preparing plans to reuse the buildings and land at former military installations. Many of these organizations also become involved in marketing base facilities to developers or companies interested in creating new employment opportunities. These organizations also have access to specialized resources and information (such as existing operating/maintenance costs and building specifications) that may be useful for a developer considering property acquisition.