The Midcoast Regional Redevelopment Authority A Pragmatic View

SUMMARY When you strip away the hyperbole and subterfuge that surround the redevelopment of the Brunswick Naval Air Station you find the same old model that was used to address redevelopment of the Loring Air Force Base in Limestone. After 16 years and the expenditure of over $70 million of taxpayer funds the most you can say about Loring is that about 300 precarious private sector jobs have been created and exist only because of the continued subsidy by the Loring Development Authority. The Midcoast Regional Redevelopment Authority (MRRA) is on course to repeat this disaster and make the $70 million spent at Loring seem like chump change. Like Loring, the Brunswick model is built on a base of sand. With false premises and much hoopla the MRRA is rapidly turning itself into a developer and insuring its longevity with leases rather than sales in direct violation of what was the intent of the legislation and that was to convert the land to private use. In the process it is denying the town of Brunswick tax revenue and saddling the taxpayers of Maine the cost of unnecessary and dubious studies which already reach into the $millions.

INTRODUCTION
Following our involvement in World War II the Town of Brunswick ceded a large portion of its Commons to the federal government for the construction and development of the Brunswick Naval Air Station. In the ensuing years the town grew and the air station became a natural fixture in the life of Brunswick. Base residents and other Navy personnel were part of the Brunswick community, their children went to Brunswick schools and navy personnel were a part of Brunswicks life. The honeymoon ended in 2005 when the announcement came that the base would close in 2011. The State stepped in to lead the way in planning for the ultimate departure of the navy and mitigate its impact on the local communities. So far, this effort has produced more promises than results and its direction based on unsupportable assumptions. The following study takes a more pragmatic approach and avoids a repetition of the failure of the BNASs predecessor, the Loring Air Force Base. Planning is an inexact science. Most plans that fail have an unattainable objective and their proponents lack the foresight or experience to recognize they have bitten off more than they can chew. They ignore the skeptics, downplay the obvious negatives and hang on to their optimism long after the obvious has occurred to everyone else. Damn the torpedoes, full speed ahead may inspire patriots in arms but, building the impossible dream on a foundation of sand does not inspire taxpayers. This futile search is exactly what has and continues to plague the Midcoast Regional Redevelopment Authority. This paper is intended to demonstrate that the objective was illusory, the planning faulty, if not fraudulent, and the methodology planned and to be employed will do more harm than good.

REDEFINING THE PROBLEM

It began with an impossible goal, to replace, and even outdo, the behemoth that is the military. Though only one quarter the size of the town in which it existed, it represented all that you would expect in the worlds greatest military, overkill in every respect. How, and particularly why, would you want to replace it. Brunswick survived before it came and could survive as well after it left. As a politician however, you would relish the opportunity to dream, with someone elses money. And this is what is happening. Enter the politicians and bureaucrats, lulled into euphoria by their own dreams and supported by their faithful consultants, eager to tell them what they wanted to hear as they banked their fees and charges at the expense of the taxpayer. They sallied forth to put their dreams to paper oblivious to the few who attempted to bring them back to earth. The following are the expected results of the full development of the plani Employment y Airport Operations and Aviation Business 3,200 y Education 1,000 y Professional Office 4,400 y Community Mixed Use 2,200 y Business & Technology Industries 2,600 y Resort/Conference/Golf 400 Total Total Wages y All Industries 13,800

$726,950,000

It is time for a reality check. The Brunswick Naval Air Station is a military installation. For the most part, it is self contained, bears little relation to any civilian enterprise and what nonmilitary support it requires is intended for and restricted to the needs of the military. To quote the MRRAs own reuse plan As Maines second largest employer, BNAS employs 4,863 military and civilian personnel, including; 713 officers, 3,493 enlisted personnel and 657 civilians. The air station provides over $187 million to the local economy, including $115 million in salaries, $38 million in contracts and material purchases and $34 million in medical purchases. The remaining 1637 of the approximately 6500 person population of the base are military dependents of which approximately 300 or so are school age children. Lets examine these figures. The $115 million in salaries has to come from either that earned by the military, or the combination of the military and civilian payrolls. It cannot come from the civilian payroll alone as that would require each of them to earn over $175,000 per year. It might be safe to assume it is a combination because the difference between including and excluding civilian employees is not significant. This can also be supported by the fact that most of the civilian employees are in service type jobs that pay less than professional or production jobs. If you use the average and consider only the military portion the payroll number reduces to $95 million. The military provides its members and their dependants with nearly all services at reduced prices. These include uniforms, commissary items and the services of banks, post office, service station and recreation. Therefore, there is little, if any need to spend their income in the local economy. As a conservative estimate let us assume that the amount of the military payroll spent on the local economy is 10% that would amount to $9.5 million.

Let us assume that of the $38 million in material and contract purchases 3/4 is material and 1/4 are contracts. This is reasonable as the military has its own resources to perform its tasks. Normally, contracts are about half labor and half material which would mean the labor component of this figure is under $5 million. If the military has to contract out services such as construction and maintenance it could be assumed the labor cost is higher than the usual service jobs, say $35,000 per year. This equates to about 135 jobs. It is difficult to convert $34 million in medical purchases to jobs but safe say the figure is generated totally by military personnel as it would be difficult to obtain detail figures on what civilian employees paid to hospitals, clinics and physicians and dentists. It would be relatively easy to determine what the navy paid out since it is the military that pays the medical costs of servicemen and their dependants. Given the usual complaints about the high cost of medical care and the inability to obtain appointments and the waits, it would be difficult to claim that the loss of this small market to local medical services would be anything but positive. The actual picture is now becoming clearer. The total number of jobs that will be lost when the base shuts down is about 792 (657+135) and the dollars lost to the community about $25 million ($20 million + $5 million). But these will be lost only to the Brunswick area. The military units will have moved to Jacksonville, Florida and elsewhere and the jobs have not been lost, they have just moved away. As has happened at Pease, Loring and all of the other areas where bases have closed, the vast majority of those who were unemployed as a result, like the camp followers of old, they have left the area and the communities that supported these bases have already adjusted to their departure. This process has been going on in Brunswick since the announcement of the closing. Businesses have been shuttered, houses have been vacated and the remaining survivors are adjusting to serving a smaller market, ergo, there really is no problem. So why are we spending millions of taxpayers dollars to try to bring jobs to Brunswick? How many jobs can the facilities accommodate other than government or non-profit education? Good questions.

THE REAL PROBLEMS

Unlike the armies of old, the present day military requires semi-permanent facilities to perform their mission, support their operations and attract and retain an all volunteer force. When it packs up and leaves an area, the majority of these facilities are left behind and it is those facilities that the politicians see as the magnet to attract funds to feed their egos and reward their supporters. As recently as March 27, 2010, the Executive Director of the MRRA acknowledged the loss of the BNAS will strip the area of 6500 jobs. I guess if you are trying to attract other peoples money you have to make the problem tougher and your solution more desirable youve got to exaggerate a little. Compounding the problems of reuse of base facilities are five significant factors. y The most valuable facilities (hangers, runways) are designed for specific uses y None of the facilities are designed and built to civilian building codes y Family housing is owned by a private company while the land on which they are built is owned by the government y All of the property is contiguous and not set out in surveyed saleable plots. y No transfers can occur until the hazardous waste problem is solved

Until land ownership is transferred to an organization that can sell it and the plots are surveyed and registered with the registrar of deeds, the properties can only be leased, not sold. In either case, the process is ripe for fraud and abuse. Since the establishment of the MRRA there have been more meetings in executive session than anyone can remember, most of which were claimed to involve confidential discussions with potential lessees. A company planning to come to Brunswick would only covet anonymity if they were trying to negotiate a sweetheart deal they wouldnt want their competitors to get wind of. This type of activity does not breed confidence on the part of the public who will ultimately foot the bill. Tables 1 and 2 are the results of a study of the potential employment of each of the buildings still available after the MRRA, the federal, state and town governments and educational institutions have been given the other buildings under the public conveyance option. You will note the difference of 185 jobs when you eliminate the aircraft specific facilities that have been the focus of the MRRAs aborted honeymoon with Oxford Aviation. It must be remembered that the vast majority of military personnel were air crews and support on a 24/7 schedule not likely to be duplicated in the private sector. By the time the navy will have finally left in May of 2011, the area will have completely adjusted to its departure. The population will have been reduced by about 6000. Except for the relocation of the Southern Maine Community College, whatever Bowdoin College elects to do with its parcel, the militarys development of its facilities and town occupation of its buildings the place will be a ghost town. Then of course there is the MRRA and the facilities it needs to maintain an already antiquated infrastructure and mount its effort to peddle mostly old buildings that were not built to code or a very high standard and whose access will have to be modified to meet the Americans with Disabilities Act. With a large segment of the market gone and natural growth stymied by the current economic situation and the states penchant for high taxes, regulation and general discouragement of entrepreneurship the only carrot the MRRA can offer are subsidies that foster and encourage competition with local businesses. The other is to subsidize businesses the state favors that would not otherwise be commercially viable. In other words, the MRRA will follow the model of its failing predecessor, the Loring Redevelopment Authority. The actions of the MRRA will have a profound impact on Brunswick, in particular its small business community. A prime example is Building 750 the Transient Visitors Quarters. The building is, in essence, a 248 room motel, purported to be in good condition. Does the town need and can it support a 248 room motel? Ask the hotel and motel owners of Brunswick who are already fighting the town over its subsidies to an out of state developer to build a 48 room inn on Maine St. These owners are facing tough times and a 40% occupancy rate and barely keeping their heads above water. What will happen to them and their approximately 670 rooms when the MRRA wants to add 37% more capacity to an already underutilized market? The states congressional delegation is attempting to retain the military commissary that services a number of retired military in the Brunswick area. Retention of this service will remove yet more of the facilities from the stock the MRRA have to lease or sell. Given the Obama administrations distaste for anything military they are not likely to prevail, particularly after our Senators opposition to some of the administrations programs. Even if they do, the quid pro quo will likely be even more undesirable. The remainder of the buildings lend themselves to small entrepreneurial enterprises such as auto repair, day care and legal and professional office space. For these to be viable individual employers must look at location, access to their markets and the market size itself. Shoemakers,

haberdashers, dentists, barbers, lawyers and the like all require some form of space to conduct their business but most of all they require clients and customers, without which they will not survive. For example, Brunswicks population supports 1 shoe repair facility. That would mean it would need to add perhaps another 15,000 people to support a second. The same argument can be made for every other entrepreneur or business. The MRRA cannot wait the generations it will take for the area population to grow, if ever, sufficiently to warrant these additional occupations to utilize the facilities in its stock. So how will it entice occupants to materialize? It will repeat exactly what the Town of Brunswick itself has done with the Maine Street Station. It will entice existing businesses whether from Brunswick or elsewhere with below market lease rates, a repeat of the Loring model. The MRRA and its predecessor the Brunswick Redevelopment Authority have now been in existence 5 years, have already spent millions of dollars and not one single private sector job has been created. So, what was the alternative and is it still feasible today? In a detailed analysis sent to the MRRA in 2009 the following advice was offered. In any choice scenario, the planner always has the opportunity to do nothing. When the government asks what can we do to mitigate the impact of the base closure? a response could be, When you leave, leave it the way you found it. As an economic entity the Brunswick Naval Air Station represents sunk costs. What is there was the consequence of a perceived military necessity that has served its purpose and is no longer needed. If it were owned by a private enterprise they would sell it for its salvage value that would include the value of the land and write off the rest. But no, it belongs to the federal government and the federal government doesnt do that. It gets the state to accept its white elephant, warts and all.

THE TOUGH DECISIONS

A change in the way the military operates has left the community with two significant problems. These are the response to the loss of military dependent children in the local school system and the vacancy of a large number of family houses formerly occupied by military families. The latter is compounded by the already stated fact that many of the houses are owned by a private company but sit on land still owned by the government. Given that there was to be a significant loss in the student population and that smaller schools have been shown to encourage better student performance the education leadership of Brunswick chose to tear down an existing building they let fall into disrepair and to build a bigger new school. Construction of that school is already under way. It should be ready for many of the students who will no longer attend it in the 2011-2012 school sessions. In addition to the 702 family houses that are owned by Balfour-Beatty on land that is still owned by the government, there are an unknown number that the government has agreed to buy from BNAS military personnel who purchased homes and are being transferred as a result of the closing. This large number of houses thrust on the market in a very short time is having a devastating effect on the housing market and the value of existing occupied housing. Currently, Balfour-Beatty has selected a private bidder for the housing it owns and rented to military personnel. While it is finalizing this sale, it is attempting to rent these units to private individuals. It cannot sell them as traditional housing because it does not own the land they sit

on. Of the 646 units, 573 are in Brunswick and the remaining 73 are in Topsham. Based on a conservative estimate the value of these houses is approximately $70 million with $6 million being the value of the land. This is a federal government problem. The government should not be able to foist this problem on the State of Maine through the MRRA or on the Town of Brunswick, except for their share of all of the governments problems. Nor, should the government saddle Balfour-Beatty with a loss when they sold the houses based on one set of conditions of risk and then increased the risk by abandoning the original premise of the sale. At the least, the government should negotiate a buy-back and reduce the problem to solely a government one. Everyone must share in the cost of government. If the government tries to dump 646 houses on the market in Brunswick only the Brunswick area will suffer the cost through lower property values, and there is no market in this area for that many house unless the government creates one. One can only imagine where the government would find 646 families to give the houses to and what the occupants will do for a living. The only responsible answer is to do what the government did at Pease AFB in New Hampshire and that is what has been suggested for the remainder of the buildings. That is, put them out for bid on condition the bidder would remove the houses, salvage whatever they could and return the land to its original condition. Topsham and Brunswick would be charged the market value of the land and given an extended period to pay for it. The final act would be to repeal the bill that created the MRRA, thank the members and return the land owned by the government to the towns of Brunswick and Topsham. The state should turn its attention to doing the same with the Loring Redevelopment Authority. Table 1-Private Sector Employment Potential Building Sq. Ft. Bldg. Use Employee Note
252 583 26 27 78 6 55 221 294 250 744 585 81 51 5,100 Auto Repair 19,380 Bowling Ctr. 6,496 Child Care Family 7,862 Services Golf Club 3,040 House 166,335 Maint. Hanger 11,000 1,600 64,350 184,400 134,640 13,610 7,000 5,000 Police Thrift Shop Warehouse Maint. Hanger Bach. Enl. Qtrs. Chapel Crimp Facility Haz. Wste. Facil. Potential 4 20 2 Shifts 3 20 5 75 17 24/7 3 7 50 24/7 Leasing 10 Co. 2 Non Profit 4 4

Other Pot. Use

Office Bldg.

Lt. Mfg. Office Bldg.

Lt. Mfg.

Museum Lt. Mfg.

538 24 53 751 750 54 21 20 201 5 25 31 555 584 226 590

5,292 Service Sta. Personnel 10,000 Sup. Public Wks. 10,000 Off. 2,500 Child Care Transient 115,000 Qtrs. Appl. Instr. 30,000 Bldg. 4,975 Child Care Commun. 25,871 Facil. 9,425 Restaurant 163,454 Hanger 16,658 Fitness Ctr. 15,054 Navy Lodge 6,400 Storage Public Wks 7,200 Shop 2,560 Sea Cadets 8,000 Transp. Maint. 1,062,202

6 2 Shifts 12 16 6 20 24/7 15 5 16 24 2 Shifts 30 10 2 Shifts 7 Days 16 24/7 3 12 5 8 428 Office Bldg. Office Bldg. Lt. Mfg. Office Bldg.

Lt. Mfg. Office Bldg. Lt. Mfg.

Table 2-Private Sector Employment Potential W/O Aviation Specific Facilities Building Sq. Ft. Bldg. Use Employee Note Other Pot.
252 583 26 27 78 55 221 294 585 81 51 538 5,100 Auto Repair 19,380 Bowling Ctr. 6,496 Child Care 7,862 Family Services Golf Club 3,040 House 11,000 1,600 64,350 13,610 7,000 Police Thrift Shop Warehouse Chapel Crimp Facility Haz. Wste. 5,000 Facil. 5,292 Service Sta. Potential 4 20 2 Shifts 3 20 5 17 24/7 3 7 2 Non Profit 4 4 6 2 Shifts Office Bldg. Lt. Mfg. Lt. Mfg. Use

Office Bldg.

24 53 751 54 21 20 201 25 31 555 584 226 590

10,000 Personnel Sup. Public Wks. 10,000 Off. 2,500 Child Care Appl. Instr. 30,000 Bldg. 4,975 Child Care 25,871 9,425 16,658 15,054 6,400 Commun. Facil. Restaurant Fitness Ctr. Navy Lodge Storage Public Wks 7,200 Shop

12 16 6 15 5 16 24 2 Shifts 10 2 Shifts 7 Days 16 24/7 3 12 5 8 243

Office Bldg.

Office Bldg. Office Bldg.

2,560 Sea Cadets 8,000 Transp. Maint. 298,373

Lt. Mfg. Office Bldg. Lt. Mfg.

Final Report-Brunswick Naval Air Station-Business Plan by Economics Research Associates Nov. 13,

2007