Military Base Closures: Socioeconomic Impacts

Military Base Closures:

Socioeconomic Impacts

name redacted

Analyst in Natural Resources and Rural Development

February 7, 2012

Congressional Research Service

7-....

www.crs.gov

RS22147

CRS Report for Congress

Prepared for Members and Committees of Congress

Military Base Closures: Socioeconomic Impacts

Summary

The most recent Base Realignment and Closure (BRAC) Commission submitted its final report to

the Administration on September 8, 2005. Implementation of the BRAC round was officially

completed on September 15, 2011. In the report, the commission rejected 13 of the initial

Department of Defense recommendations, significantly modified the recommendations for 13

other installations, and approved 22 major closures. The loss of related jobs, and efforts to replace

them and to implement a viable base reuse plan, can pose significant challenges for affected

communities. However, while base closures and realignments often create socioeconomic distress

in communities initially, research has shown that they generally have not had the dire effects that

many communities expected. For rural areas, however, the impacts can be greater and the

economic recovery slower. Early planning and decisive leadership from officials are important

factors in addressing local socioeconomic impacts from base realignment and closing. Drawing

from existing studies, this report assesses the potential community impacts and proposals for

minimizing those impacts.

For additional information on the BRAC process, see CRS Report RL32216, Military Base

Closures: Implementing the 2005 Round, by (name redacted); and CRS Report RL33766,

Military Base Closures and Realignment: Status of the 2005 Implementation Plan, by (name redact

ed).

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Military Base Closures: Socioeconomic Impacts

Contents

Background...................................................................................................................................... 1

Community Economic Impact Analyses.......................................................................................... 1

Planning for Economic Redevelopment .......................................................................................... 4

Environmental Cleanup ................................................................................................................... 5

Contacts

Author Contact Information............................................................................................................. 6

Congressional Research Service

Military Base Closures: Socioeconomic Impacts

Background

To better confront the military demands of a post-Cold War world, as well as to reduce costs of

maintaining excess military infrastructure, Congress authorizes the Department of Defense

(DOD) to realign or close military bases.1 Following an examination of its military forces and

installations, the department compiles a list of recommended Base Realignment and Closing

(BRAC) actions. This proposed list of base closures and realignments is presented to an

independent BRAC Commission, which reviews the proposed actions and sends the list to the

President with any recommended changes. After the President reviews and approves the list, it is

sent to Congress. The recommended list is automatically enacted unless Congress passes a joint

resolution disapproving the list as a whole and sustains it over a potential presidential veto.

Following the actual base closings and realignments, the DOD carries out an environmental

remediation plan to enable the conveyance of surplus federal land to other entities.2

Four separate BRAC rounds were initiated in 1988, 1991, 1993, and 1995.3 In total, 97 bases

were closed or realigned under these rounds. By 2001, the DOD had implemented the

recommendations from the previous rounds, although significant environmental remediation and

asset transfers remain unfinished in many of the affected communities. Congress authorized a

fifth round of military base realignments and closures for 2005 through the National Defense

Authorization Act of 2002 (P.L. 107-107). A primary objective of the 2005 BRAC round was

“joint activity”—integration and realignment of cross-service functions in such areas as

industrial, supply and storage facilities, technical, training, headquarters, and support activities.

The list of recommended actions to achieve these objectives was presented to the BRAC

Commission on May 13, 2005. The report became law on November 10, 2005.

Community Economic Impact Analyses

Small-area economic impact analysis can be a difficult and imprecise undertaking. Assumptions

and supporting statistical reasoning can lead to predictions that are, in hindsight at least,

inaccurate. For example, multiplier effects—measures of the rate at which a direct effect (e.g.,

base job losses) creates indirect effects—are central elements in estimating the socioeconomic

impact of a base closing or realignment. If, for example, one assumes that a base job has a large

indirect employment multiplier (e.g., 2.5-3.0), then for each direct job lost, employment indirectly

related to the base job within some defined geographic area is also predicted to be lost. Similarly,

an income multiplier allows one to estimate the total income generated by a military base and the

resulting income loss or gain within a region. Assumptions about the extent to which base

incomes are spent within a particular community can lead to very different assessments of the

impacts from the loss of that income.

1

10 U.S.C. Section 2687 authorizes the Base Realignment and Closing (BRAC) process for military installations at

which at least 300 civilian personnel are authorized to be employed, or the realignment of any military installation

where at least 300 civilian personnel are authorized to be employed and where it is intended to reduce the work force

by more than 1,000 or by more than 50% of the number of civilian personnel authorized to be employed at the

installation.

2

For a detailed examination of the BRAC process, see CRS Report RS22061, Military Base Closures: The 2005 BRAC

Commission, by (name redacted) and (name redacted).

3

Military bases were also closed between 1960 and 1987, but not under the BRAC process as authorized by Congress.

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Military Base Closures: Socioeconomic Impacts

A shift to a smaller employment multiplier will show a much reduced total employment loss from

closure. Using data from military base closings between 1971 and 1994, one 2001 study

estimated multipliers of less than one and concluded that employment impacts were mostly

limited to the direct job loss associated with military transfers out of the region. On average, the

study found that per capita income was little affected by the closures.4 Base closings in

communities that have been declining economically for some time, however, may produce

impacts different from (and possibly more severe than) those of base closings in communities

where growth and economic diversification are more in evidence.

The relative strength or weakness of the national or regional economy also can strongly influence

the magnitude of community effects from base closure or realignment and the length of time for

economic recovery. Evidence from earlier base closures suggests that the impacts can be less than

expected because, unlike many other major employers, military bases may be relatively isolated

economic entities, purchasing base needs outside the community and spending income at the base

rather than in the local community.5

Local communities are also concerned about the fiscal impacts borne by local governments,

especially rural governments. Revenue from property taxes, sales tax, licenses and permits, and

state and federal aid is influenced by population gains and losses. With population loss, and

related changes to local income, base closures can affect the ability of local governments to raise

revenue and support existing services. Similarly, with significant population increases, a

community may find greater demand for public services (e.g., transportation, schools, public

safety, water and sewerage) without the necessary revenue to support the additional demand.

Even where increased revenue can contribute to mitigating the impact of base expansion, the

planning and adjustment costs impose other burdens on communities and residents.

Local government expenditures and services can also be affected by closure and realignment,

depending on the extent to which the military base is integrated into the community’s fiscal

planning. Here as well, statistical assumptions can lead to significant differences in estimated

impact. For example, an economic development analyst estimated that the closure of Hanscom

Air Force Base would mean the loss of about $200 million in defense contracts to

Massachusetts’s firms. Another analysis estimated the same losses at $3 billion.6 A review of

impacts on local government revenue and expenditures, however, generally confirmed that these

impacts were, like those impacts affecting the economy, not as severe as had been originally

projected.7

The announcements of previous BRAC Commissions have been greeted in affected communities

and elsewhere by significant concern over the potential consequences of closing or significantly

4

Mark A. Hooker and Michael M. Knetter, “Measuring the economic effects of military base closures,” Economic

Inquiry, 39(4), 2001.

5

D. Daicoff, D. D. McCluggage, C. K. Warriner, and R. R. Olsen, “Economic impact of military base closings,” Arms

Control/Disarmament Agency/E-90, I and II (Washington, D.C: U.S. Arms Control and Disarmament Agency, April

1970); D. A. MacKinnon, “Military base closures: Long range economic effects and implications for industrial

development,” American Industrial Development Council Journal 13(3), 1978; T. Muller, R. Hansen, and R. A.

Hutchinson, The Local Economic and Fiscal Impact of New DOD Facilities: A Retrospective Analysis (Bethesda, MD:

Logistics Management Institute, 1991).

6

Matt Viser, “Analyst: Don’t overestimate impact of Hanscom closure,” Boston Globe, April 3, 2005.

7

M. Hattery and R. Koch, “The fiscal impacts of base closures: Insights for rural local governments,” Government

Finance Review, April 1995.

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Military Base Closures: Socioeconomic Impacts

realigning a military installation. Military bases in many rural areas, for example, provide an

economic anchor to local communities. Even where the local and regional economy is more

diversified, military bases provide a strong social and cultural identification that can be shaken by

the announcement that a base is closing or being downsized. Not only can there be an immediate

impact from the loss of military and civilian jobs, local tax revenues also can decline, leaving

counties and communities less able to provide public services. School districts with a high

proportion of children from military families can experience significant declines in enrollment.

With these effects can come related reductions in state and/or federal funding. With the

importance given to joint service activity in the 2005 BRAC round, some bases saw their

functions moved to other bases. Other bases, however, are expanding and creating impacts on

schools, housing, traffic, and local government services (e.g., Fort Belvoir, Virginia).8 DOD’s

Office of Economic Adjustment identified 20 locations where expected growth as a result of force

realignments in FY2006-FY2012 would adversely affect surrounding communities.9

Communities have until September 15, 2011, to implement the changes specified in the BRAC

Commission Report.10 While it is predictable that communities will react to news of a base’s

closing with concern and anxiety, evidence from past BRAC rounds shows that local economies

are, in many cases, more resilient after an economic shock than they expected. Some worst-case

scenarios predicted for communities did not occur, perhaps because they were based, in part, on

assumptions about economic multipliers, the perceived versus actual role of a base in the local

economy, and over-generalization from individual cases where there was significant economic

dislocation. Many communities that developed a comprehensive and realistic plan for economic

redevelopment were able to replace many of the lost jobs and restore lost income. The DOD

programs for assisting communities with base redevelopment (e.g., the Office of Economic

Adjustment) have also played a role in mitigating some of the effects of base closure and/or

realignment. Some communities came to regard the closing as an opportunity for revitalizing and

diversifying their economies. Other communities found they were in stronger economic shape

after several years than they thought possible on first learning their bases were closing.11

Coping with the closure in the short term and revitalizing communities over the long haul can,

nonetheless, be daunting tasks. Not all communities recover, and for those that do, the recovery

can be uneven.12 The Government Accountability Office (GAO) found that many communities in

8

Fort Belvoir in Fairfax County, Virginia, is one of the largest recipients of new personnel. Over 23,000 military,

federal civilian, and private contractors were expected to relocate to the area by 2011. Major housing and retail space

construction is occurring, and traffic congestion is expected to become a significant issue on the area’s already

congested roads. Discussions among local officials have suggested that legal challenges to the relocation in the absence

of major road improvements are a possibility. See Center for Regional Economic Competiveness, Assessing the Impact

of BRAC in the Northern Virginia Workforce Investment Board Region, July 2007. A summary of the report can be

accessed at http://www.dcmilitary.com/homesonthemarket/Exec_Summ_No_VA_BRAC.pdf.

9

See Governmental Accountability Office (GAO), Defense Infrastructure: DOD Funding for Infrastructure and Road

Improvement Surrounding Growth Installations, GAO-08-602R, April 2008.

10

As specified in the BRAC Commission Report, this date is six years following the signing of the Report by President

George W. Bush.

11

See Office of Economic Adjustment, Economic Transition of BRAC Sites. Department of Defense, August 2009.

Report available at http://www.oea.gov/index.php?option=com_docman&task=cat_view&gid=337&Itemid=33.

12

The Government Accountability Office (GAO) has monitored the BRAC process since 1988. Part of that effort has

been to assess how communities fared since a base was closed or realigned. Using data on the number of jobs

recovered, unemployment rates, and per capita income, the GAO concluded that nearly 70% of jobs lost to base

closings between 1988 and 1995 had been recovered by 2004. See Government Accountability Office, Military Base

Closures: Updated Status of Prior Base Realignments and Closures, GAO-05-138, January 5, 2005, at

http://www.gao.gov/new.items/d05138.pdf.

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Military Base Closures: Socioeconomic Impacts

2005 were still recovering from prior closures. Rural areas in particular can find the loss of a base

and the revitalization of their communities especially difficult challenges.13 The effects on

individuals can also vary. For example, persons who lose jobs in a closure may not have the kinds

of skills needed by the economic activity generated by the redevelopment. Individuals may

relocate to other regions where the jobs they find may not match the wages of the jobs lost.

Significant environmental cleanup costs from toxic elements at military installations can delay the

transfer of the base to local authorities and limit the kinds of redevelopment options available to a

community.14

Planning for Economic Redevelopment

In some respects, a closed military base shares similarities with other closed industrial facilities

such as steel mills, oil refineries, or port facilities. Research and previous economic development

experience suggest that converting a closed military base into a source of new competitive

advantage is a major community effort. Some bases closed in earlier BRAC rounds have been

successfully redeveloped into manufacturing facilities, airports, and research laboratories

(e.g., Charleston, SC). Bases also may hold certain advantages for redevelopment that are not

shared by other industrial sites. Pricing for the closed bases might be steeply discounted and

liability for environmental protection indemnified. Federal grants and incentives also exist to aid

community redevelopment efforts.15

Once a base is slated for closing, consideration of property transfer mechanisms, the extent of

environmental cleanup necessary, and a realistic base reuse plan for the transferred property

become central elements in organizing the economic development process. Establishing a Local

Redevelopment Authority (LRA) with power to assume ownership of the transferred land is a

necessary initial step in the economic redevelopment process. The LRA must be approved by the

DOD before property can be transferred. The DOD’s Office of Economic Adjustment (OEA) is a

resource available to communities seeking assistance in managing the impact of a base closing or

realignment.16 The OEA awards planning grants to communities and also provides technical and

planning assistance to local redevelopment authorities. By 2002, a cumulative $1.9 billion in

DOD and other federal funds had been expended to assist communities affected by base

13

In counties where military bases closed between 1969 and 1988, two-thirds of the communities regained as many

civilian jobs as were lost. However, rural (i.e., non-metropolitan) base-closing counties lost more than twice as large a

proportion of total county employment through civilian on-base job cuts as did metro base-closing counties. See Peter

L. Sternberg and Thomas D. Rowley, “A comparison of military base closures in metro and nonmetro counties,”

Government Finance Review, October 1993.

14

For a discussion of the particular issues surrounding environmental cleanup on military bases, see Governmental

Accountability Office, Military Bases Closures: Overview of Economic Recovery, Property Transfer, and

Environmental Cleanup, GAO-01-1054T, August 28, 2001, at http://www.gao.gov/new.items/d011054t.pdf; and CRS

Report RS22065, Military Base Closures: Cleanup of Contaminated Properties for Civilian Reuse, by (name red

acted).

15

In response to protracted negotiations over property values in many communities, Congress created the “No Cost

Economic Development Conveyance” and a “No Cost Rural Economic Development Conveyance” to convey the bases

to local redevelopment authorities at virtually no cost. (National Defense Authorization Act of 2000, P.L. 106-65). The

2005 BRAC legislation requires the Department of Defense to seek fair market value for the property, but does permit

the Secretary to convey the bases at no cost for economic development.

16

For a list of Local Redevelopment Authorities (LRAs) that have been recognized by the Secretary of Defense as of

2009, as well as contact information for the LRAs, see DOD’s Office of Economic Adjustment website at

http://www.oea.gov/oeaweb.nsf/LRA?readform.

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Military Base Closures: Socioeconomic Impacts

closures.17 Other sources of federal assistance may also be available to assist communities in

recovering from a base closure.18

Given the variance in the economic conditions of the local area and the usable facilities left

behind, there is no single template for redeveloping a closed military base. One generality that

might be applied to almost all cases, however, is that the sooner economic redevelopment can

begin after base closure, the better for local communities. Base closure can be economically

difficult for a community, but closure with a long lag in which the closed base is essentially a hole

in the local economy can be worse. While many factors can delay the economic redevelopment of

a closed base, the most common may be the need for environmental cleanup of the closed

property.

Environmental Cleanup

Except for limited circumstances, property from a closed military base must be cleaned of

environmental contamination before being transferred for redevelopment. The degree of cleanup

and the timetable for completion, however, is left to DOD which operates under the

appropriations authorized by Congress. Because of the extent of contamination and magnitude of

costs involved once funds are allocated, the process of environmental cleanup can be lengthy.19 A

complicating factor in the cleanup process can be the different levels of cleanup that might be

completed. As of FY2009, 88% of sites from bases closed in prior BRAC rounds (so-called

Legacy BRAC sites) that were not contaminated with munitions had been readied for transfer to

local development authorities.20 Approximately 54% of the sites from the 2005 BRAC that were

not contaminated with munitions have now been readied for transfer to local development

authorities. For sites with munitions contamination, 68% of Legacy BRAC sites and 33% of 2005

BRAC sites had been readied for transfer at the end of FY2009.21 Land intended for use as

housing or schools, for example, must be cleaned to a greater degree than land intended for

industrial use. DOD, however, is not legally required to clean land past the point needed for

industrial use. Sites that have been cleaned to DOD’s satisfaction and readied for transfer to local

authorities, may not have actually been transferred. When a community desires an ultimate land

use that would require a greater level of cleanup than that done by DOD, this may result in a

property being left vacant until either another use is found or until additional cleanup is done.

In general, previous base closures suggest that communities face many specialized challenges, but

there is little strong evidence that the closing of a base is the definitive cause of a general

economic calamity in local economies.22 On the other hand, rural areas could experience

17

Government Accountability Office, Military Base Closures: Updated Status of Prior Base Realignments and

Closings, GAO 05-138, January 5, 2005.

18

CRS Report RS22184, Military Base Closures: Redevelopment Assistance Programs, by (name redacted).

19

Government Accountability Office, Military Base Closures: Opportunities Exist to Improve Environmental Cleanup

Cost Reporting and to Expedite Transfer of Unneeded Property. GAO-07-166, January 2007.

20

A site is a single parcel of land. A military installation can have multiple sites, some of which may have been

cleaned, with others still in the process of cleanup.

21

Data on site clean-up is provided in an annual report to Congress, Defense Environmental Programs Annual Report

to Congress, May 2010.

22

A study by the RAND Corporation of the effect on communities of three base closures in California (Castle Air

Force Base, George Air Force Base, and Fort Ord) found that the impacts, while not benign, were also not of the

magnitude that many had feared. The study, however, could be faulted on the grounds that the research was done

(continued...)

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Military Base Closures: Socioeconomic Impacts

substantially greater and longer-term economic dislocation from a base closing than urban and

suburban areas. Rural areas with less diversified local economies may be more dependent on the

base as a key economic asset than urban/suburban economies. Communities where bases are

recommended for significant expansion can also find the effects of growth a major challenge.

Over the five- to six-year phasing out of a base, however, environmental cleanup, successful

property transfers to a local redevelopment authority, and widespread community commitment to

a sound base reuse plan have been shown to be crucial elements in positioning communities for

life without a military installation.

Author Contact Information

(name redacted)

Analyst in Natural Resources and Rural

Development

/redacted/@crs.loc.gov, 7-....

(...continued)

before the base closures were completed, and thus the impact was understated. See M. Dardia, K. F. McCarthy, J.

Malkin, and G. Vernez, The Effects of Base Closures on Local Communities: A Short Term Perspective (Santa Monica:

RAND Corporation, 1996). The full report is accessible at http://www.rand.org/content/dam/rand/pubs/

monograph_reports/2009/MR667.pdf.

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