Revitalizing Base Closure Communities and Community Assistance

DEPARTMENT OF DEFENSE

Office of the Secretary

32 CFR Parts 90 and 91

RINs 0790-AF61 and 0790-AF62

Revitalizing Base Closure Communities and Community Assistance

AGENCY: Department of Defense, DoD.

ACTION: Interim final rule; amendments.

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SUMMARY: The interim final rule amendment promulgates guidance required

by Section 2903 of the National Defense Authorization Act for Fiscal

Year 1994. This guidance clarifies the application process and the

criteria that will be used to evaluate an application for property

under this section.

DATES: This document is effective October 26, 1994. Any pending written

request for economic development conveyances, pursuant to

Sec. 91.7(e)(5), will be subject to the terms and conditions of this

rule amendment. Comments on this amendment must be received by December

27, 1994.

ADDRESSES: Comments should be forwarded to the Office of the Assistant

Secretary of Defense for Economic Security, Room 3D814, The Pentagon,

Washington, DC 20301.

FOR FURTHER INFORMATION CONTACT:

Robert Hertzfeld, telephone (703) 604-5690.

SUPPLEMENTARY INFORMATION:

A. Summary of Amendment

In response to public comments regarding the interim final rule

implementing Title XXIX of the National Defense Authorization Act for

FY 1994 published in the Federal Register on April 6, 1994 (59 FR

16123), the Department of Defense is amending the Rule to:

1. Delete section 91.7(d) and the accompanying ``Market Test.''

2. Establish the requirements for an Economic Development

Conveyance (EDC) application for real property in a revised section

91.7(e).

3. Establish criteria that will be used to evaluate EDC

applications in a revised section 91.7(e).

4. Provide guidance for greater flexibility on the compensation to

the Federal Government for property conveyed under an EDC in a revised

section 91.7(e).

The scope of the following amendment is limited to the real

property conveyance section of the rule Secs. 91.7 (d), (e), and (f),

and not the entire April 6, 1994, interim final rule. A final rule

addressing all of the elements of the interim final rule will be

published in early 1995. The Department of Defense will also publish a

guidebook describing the base conversion process.

B. Background

On July 2, 1993, President Clinton announced a major new policy to

speed the economic recovery of communities affected by base closures or

realignments. The President requested that Congress provide additional

authority to expedite the reuse of closing military bases. Congress

agreed, and passed this new authority, Title XXIX of the National

Defense Authorization Act for FY 1994.

Section 2903 of Title XXIX gave the Secretary of Defense the

authority to transfer property to local redevelopment authorities at or

below fair market value. The Department of Defense implemented this

authority by creating an additional tool for local communities to help

foster economic development through the creation of a new form of

conveyance, referred to as the ``Economic Development Conveyance ''

(EDC). Under an EDC, the Department may transfer property to a Local

Redevelopment Authority (``LRA'') at or below estimated fair market

value for purposes of economic development. (Property may also be

transferred under a series of other existing public benefit

conveyances.)

On April 6, 1994, (59 FR 16123), the Department of Defense

published an interim final rule that provided base closure communities

with guidance on how to use the new authority. During the public

comment process, the Department of Defense learned that some of the

procedures contained in the interim final rule may be impractical and

not assist in reaching the rapid economic redevelopment goals. As a

result, they are being revised by this amendment.

Specifically, the interim final rule established a ``market test''

or ``market survey'' as a precondition to any EDC. This approach was

designed to help determine whether immediate private development of a

property was possible by advertising its availability and soliciting

private interest. Many comments suggested that private developers would

not spend the time and money necessary to prepare a detailed expression

of interest until after a community redevelopment plan was approved, if

at all. Additionally, the interim final rule was perceived to encourage

private developers to ``cherry-pick'' valuable parcels for private

sector sales and leave the less attractive parcels for the community

redevelopment. This effort was said to be inconsistent with proper

planning methods and not in the long-term interest of enhancing local

economic recovery.

With the assistance of comments received during the public comment

period of the interim final rule, the Department of Defense has been

persuaded that such solicitation is unlikely to be fruitful unless and

until the local community provides the necessary investment and

infrastructure for development: zoning, public utilities, etc. As a

result, the Department is eliminating the ``market test'' and creating

with this Amendment a new process for an EDC that will consider such

information, as addressed by the local redevelopment plan.

The interim final rule also prescribed procedures and guidelines

for recoupment of value by the Federal Government if and when net

proceeds were realized by development. Based upon experience since its

publication and public comment, the Department of Defense is persuaded

that greater flexibility is needed in this area.

C. Discussion

The interim final rule amendment being published today addresses

some of the concerns raised by affected communities and others. This

amendment eliminates the ``market test'' requirements, includes a new

application and review process for an EDC, and establishes criteria to

evaluate the applications as a substitute for the ``market test.''

Greater flexibility is given to the Military Departments and the

communities to negotiate the terms and conditions of the EDC. A

detailed application, including the approved community redevelopment

plan, will now be the basis for a determination of whether or not an

LRA will be eligible for an EDC. The application and review process

will also be used to help determine the terms and conditions of such a

conveyance.

This Amendment is an intermediate step before the April 6, 1994,

interim final rule is reissued as a final rule.

What is an Economic Development Conveyance (EDC)?

An EDC is a new process for transferring real property to a Local

Redevelopment Authority (LRA) to help spur local economic development

and job creation. An EDC may be with or without initial payment or with

only partial payment at time of transfer, may be at or below the

estimated fair market value of the property, and allows for negotiated

terms and conditions of payment (consideration) to the Department of

Defense. These negotiations must be fair and reasonable to both parties

and strike a balance between compensation to the Federal taxpayer and

the need for the EDC to spur redevelopment. The EDC offers LRAs an

additional tool to use in the acquisition of former military base

property.

When should an EDC be used?

The Federal Property and Administrative Services Act (FPASA) of

1949 (40 U.S.C. 484) and airport public benefit authorities (49 U.S.C.

47151-47153) allow for public benefit transfers to units of government

or non-profit institutions that maintain the use of property for a

public purpose including, but not limited to, parks, public health,

education, aviation, historic monuments, and prisons. Transfers of

property under public benefit transfers must be in accordance with the

sponsoring Federal agency regulations. The FPASA also allows for

negotiated sales at fair market value to public entities for public

purposes or direct sales through a public bid process.

The EDC should be used when the LRA wants to obtain property for

job generating purposes and it is not practicable to pay fair market

value at the time of transfer. However, the EDC is not intended to

supplant other Federal property disposal authorities and cannot be used

if the intended land use can be accomplished through another authority

unless unusual circumstances are presented that demonstrate that the

needed economic development and job generation cannot occur under the

other allowable federal transfer authority.

Surplus Federal Property Transfer Methods Available to LRAs

----------------------------------------------------------------------------------------------------------------

Type of property, Federal agency with Statutory and regulatory

purpose, or method Transfer type\1\ authority FMV discount authority

----------------------------------------------------------------------------------------------------------------

Public Airport Approved........ Federal Aviation 100%............ 49 U.S.C. Secs. 47151-

Conveyance. Administration. 47153, 41 CFR 101-

47.308-2

Public Benefit

Conveyance Categories:

Historic Monument... Approved........ Department of the 100%............ FPASA Sec. 203(k)(3), 41

Interior. CFR 101-47.308-3

Education........... Sponsored....... Department of Education. Up to 100%...... FPASA Sec. 203(k)(1), 41

CFR 101-47.308-4

Public Health....... Sponsored....... Department of Health and Up to 100%...... FPASA Sec. 203(k)(1), 41

Human Services. CFR 101-47.308-4

Public Park or Sponsored....... Department of the Up to 100%...... FPASA Sec. 203(k)(2), 41

Recreation. Interior. CFR 101-47.308-7

Non-Federal Approved........ Department of Justice... 100%............ FPASA Sec. 203(p)(1), 41

Correctional CFR 101-47.308-9

Facility.

Port Facility....... Sponsored....... Department of 100%............ FPASA Sec. 203(q)

Transportation.

Shrines, Memorials, Sponsored....... Department of Education Up to 100%...... 41 CFR 101-47.308-5

or Religious Uses or Department of Health

[only as part of and Human Services.

another public

benefit

conveyance]\2\.

Homeless Assistance Sponsored....... Department of Health and Up to 100%...... 42 U.S.C. Sec. 11411,

[Public Health]\3\. Human Services. FPASA Sec. 203(k)

Other Specific

Conveyance Categories:

Power Transmission Approved........ Military Department..... None............ SPA Sec. 13(d), 41 CFR

Lines. 101-47.308-1

Housing for Requested\4\.... Military Department..... Up to 100%...... URARPAPA Sec. 218, 41

Displaced Persons. CFR 101-47.308-8

Wildlife Approved........ Department of the Up to 100%...... 16 U.S.C. Sec. 667b-d

Conservation. Interior.

Federal-Aid or Other Sponsored....... Department of 100%............ 23 U.S.C. Secs. 107, 317

Highways [to Transportation.

States].

Widening of Public Approved........ Military Department..... Up to 100%...... 40 U.S.C. Sec. 345c

Highways or Streets.

Negotiated Sale......... Sale............ Military Department..... None............ FPASA Sec. 203(e), 41

CFR 101-47.304

Public Sale............. Sale............ Military Department..... None............ FPASA Sec. 203(e), 41

CFR 101-47.304

Economic Development Approved........ Military Department..... Up to 100%...... NDAA 94, Title XXIX,

Conveyance. Sec. 2903

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\1\Public benefit and other specific conveyances are typically either approved or sponsored by the authorized

Federal agency. In approved transfers, the Federal agency must grant its approval but property conveyance is

accomplished by the Military Department. In sponsored transfers, the Military Department assigns the property

to the Federal agency, upon request, and the Federal agency is responsible for conveyance of the property to

its recipient.

\2\Property for shrines, memorials or other religious purposes is eligible for public benefit conveyance (PBC)

only as part of a parcel transferred under another PBC mechanism.

\3\42 U.S.C. Sec. 11411 designates uses for homeless assistance as a specific public health category under FPASA

Sec. 203(k) and gives priority to such uses when considering PBCs.

\4\When the activities of a Federal agency result in the displacement of persons from their housing, the Federal

agency may request surplus property for replacement housing. Transfer of property is directly from the

Military Department to an eligible State agency.

ACRONYMS

CFRCode of Federal Regulations

FMVFair Market Value

FPASAFederal Property and Administrative Services Act, 40 U.S.C. Sec. 483 et seq.

LRALocal Redevelopment Authority

NDAA 94National Defense Authorization Act for Fiscal Year 1994, P.L. 103-160

SPASurplus Property Act, 50 U.S.C. App. Sec. 1622(d) and 49 U.S.C. Secs. 47151-47153

U.S.C.United States Code

URARPAPAUniform Relocation Assistance and Real Property Acquisition Policies Act of 1970

Who Can Receive an Economic Development Conveyance?

An LRA is the only entity eligible to receive property under an

Economic Development Conveyance. An LRA should have broad-based

membership, including, but not limited to, representatives from those

jurisdictions with zoning authority over the property. The Secretary of

Defense shall officially recognize an LRA for planning and/or

implementation through the Office of Economic Adjustment. Consequently,

applications submitted by entities other than LRAs will not be

considered.

When should an application for an Economic Development

Conveyance be made?

First, an LRA must be organized and a redevelopment plan created.

The Department of Defense's Office of Economic Adjustment can provide

guidance and technical and financial support in these efforts. Once a

redevelopment plan has been developed and adopted, the LRA can then

submit an EDC application to the Military Department responsible for

the property. The application should be submitted by the LRA after

consultation with the Military Department which shall establish a

reasonable time period for submission of the application.

The LRA always has the option of acquiring property under the FPASA

and thus it may not be necessary to complete an application for an EDC

within the stated timetables. LRAs can discuss the various transfer

options with the Military Department.

How much property should be included in an Economic

Development Conveyance application?

The EDC should be used by LRAs to obtain large parcels of the base

rather than merely individual buildings. The income received from some

of the higher value property should be used to offset the maintenance

and marketing costs of the less desirable parcels. In order for this

conveyance to spur redevelopment, large parcels must be used to provide

an income stream to assist the long-term development of the property.

Why is an application necessary?

This Amendment to the interim final rule prescribes that an

application be prepared by an LRA as the formal request for property,

to better assist the Military Department in considering requests for

property under the Economic Development Conveyance (EDC). This

information also will provide the basis for the Military Department to

respond to its obligations under Title XXIX, taking into account the

best community-based information on the proposed conveyance action. A

great deal of information necessary for an application is readily

available to the LRA through the community planning process and

supported through existing DoD technical and financial resources.

Beyond the standard planning information collected to date, LRAs

should incorporate a business and development component into their

overall base reuse planning process as a basis for receiving and

managing the real property. This supplemental effort will assist LRAs

in identifying necessary implementation resources and establish a

community-based proposal for the Military Department's consideration.

The Military Departments and the Office of Economic Adjustment will

continue to work closely with the affected LRA to ensure that an

adequate planning effort is undertaken.

What must an application contain?

The application should explain why an EDC is necessary for economic

redevelopment and job creation. The application should contain the

following elements.

1. A copy of the adopted Redevelopment Plan.

2. A project narrative including the following:

--A general description of property requested.

--A description of the intended uses.

--A description of the economic impact of closure on the local

communities.

--A description of the financial condition of the community and the

prospects for redevelopment of the property.

--A statement of how the EDC is consistent with the overall

Redevelopment Plan.

3. A description of how the EDC will contribute to short- and long-

term job creation and economic redevelopment of the base and community,

including projected number, and type, of new jobs it will assist in

creating.

4. A business and development plan for the EDC parcel, including

such elements as:

--A development timetable, phasing plan and cash flow analysis.

--A market and financial feasibility analysis describing the economic

viability of the project, including an estimate of net proceeds over a

fifteen-year period, the proposed consideration or payment to the

Department of Defense, and the estimated fair market value of the

property.

--A cost estimate and justification for infrastructure and other

investments needed for the development of the EDC parcel.

--Local investment and proposed financing strategies for the

development.

5. A statement describing why other authorities--such as negotiated

sale and public benefit transfers for education, parks, public health,

aviation, historic monuments, prisons, and wildlife conservation--

cannot be used to accomplish the economic development and job creation

goals.

6. If a transfer is requested for less than the estimated fair

market value--with or without initial payment at the time of transfer--

then a statement should be provided justifying a discount. The

statement should include the amount and form of the proposed

consideration, a payment schedule, the general terms and conditions for

the conveyance, and projected date of conveyance.

7. A statement of the LRA's legal authority to acquire and dispose

of the property.

Additional information may be requested by the Military Departments

to allow for a better evaluation of the application. LRAs are

encouraged to use site information available from the Military

Departments, including maintenance and caretaking expenses.

What criteria will be used to make a determination on the

application?

After receipt of an application for an EDC, the Secretary of the

Military Department will determine whether an EDC is appropriate to

spur economic development and job creation and examine whether the

terms and conditions proposed are fair and reasonable. The Military

Department may also consider information independent of the

application, such as views of other Federal agencies, appraisals,

caretaker costs and other relevant information.

The following criteria and factors will be used, as appropriate, to

determine whether a community is eligible for an EDC and to evaluate

the proposed terms and conditions of the EDC, including price, time of

payment and other relevant methods of compensation to the Federal

Government.

Adverse economic impact of closure on the region and

potential for economic recovery after an EDC.

Extent of short- and long-term job generation.

Consistency with the overall Redevelopment Plan.

Financial feasibility of the development, including market

analysis and the need and extent of proposed infrastructure investment.

Extent of State and local investment and level of risk

incurred.

Current local and regional real estate market conditions.

Incorporation of other Federal agency interests and

concerns, and applicability of, and conflicts with, other Federal

property disposal authorities.

Relationship to the overall Military Department disposal

plan for the installation.

Economic benefit to the Federal Government, including

protection and maintenance cost savings and anticipated consideration

from the transfer.

Compliance with applicable Federal, State, and local laws

and regulations.

What are the guidelines for determining the terms and

conditions of consideration?

The individual circumstances of each community and each

base mean that the amount and type of consideration may vary from base

to base. This amendment gives greater discretion and flexibility to the

Military Departments to negotiate with the LRA to arrive at an

appropriate arrangement. Due to the circumstances of a particular site,

the base's value may be high or low, and the range of the estimated

present fair market value may be broad or narrow. Where there is value,

the Department of Defense has an obligation under Title XXIX of the

National Defense Authorization Act for FY 1994 to obtain consideration

within the estimated range of present fair market value, or to justify

why such consideration was not realized.

Taking into account all information provided in the EDC

application and any additional information considered relevant, the

Military Department will contract for or prepare an estimate of the

fair market value of the property, which may be expressed as a range of

values. The Military Department shall consult with the LRA on valuation

assumptions, guidelines and on instructions given to the person(s)

making the estimation of value.

As stated above, the EDC application must contain a

statement that proposes general terms and conditions of the conveyance,

as well as the amount and type of the consideration, a payment

schedule, and projected date of conveyance. After reviewing the

application, the Military Department has the discretion and flexibility

to enter into one of two types of agreements:

1. Consideration within the estimated range of present fair market

value, as determined by the Secretary of the Military Department. The

Military Department can be flexible about the terms and conditions of

payment, and can provide financing on the property. The payment can be

in cash or in-kind, and can be paid at time of transfer or at a time in

the future. The Military Departments will have the discretion and

flexibility to enter into agreements that specify the form and amount

of consideration and ensures that consideration is within the estimated

range of fair market value at the time of application. Such methods of

payment could include: participation in the gross or net cash flow,

deferred payments, mortgages or other financing arrangements.

2. Consideration below the estimated range of fair market value,

where proper justification is provided. If a discount is found by the

Secretary of the Military Department to be necessary to foster local

economic redevelopment and job creation, the amount of consideration

can be below the estimated range of fair market value. Again, the terms

and conditions of payment will be negotiated between the Military

Department and the LRA.

(a). Justification. Proper justification for a discount shall be

based upon the findings in the business and development plan contained

in the EDC application.

Development economics, including absorption schedules and

legitimate infrastructure costs, would provide a basis for such

justification. The ability to pay at time of conveyance or to obtain

financing would not be a proper justification, since payment terms and

conditions can be negotiated.

In negotiating the terms and conditions of consideration

with the LRA, the Secretary of the Military Department must determine

that a fair and reasonable compensation to the Federal Government will

be realized from the EDC. Where property is transferred under an EDC at

an amount less than the estimated range of fair market value, the

Military Department shall prepare a written explanation of why the

consideration was less than the estimated range of present fair market

value.

D. Executive Order 12866

It has been determined that these amendments are a significant

regulatory action. The amendments to the rule raise novel policy issues

arising out of the President's priorities.

E. Regulatory Flexibility Act

This rule amendment is not subject to the Regulatory Flexibility

Act (5 U.S.C. 601 et seq.,) because the amendment will not have a

significant economic impact on a substantial number of small entities.

The primary effect of this amendment will be to reduce the burden on

local communities of the Government's property disposal process at

closing military installations and to accelerate the economic recovery

of the relatively small number of communities that will be affected by

the closure of nearby military installations.

F. Paperwork Reduction Act

The Rule amendment is not subject to the Paper Reduction Act

because it imposes no obligatory information requirements beyond

internal DoD use.

List of Subjects in 32 CFR Parts 90 and 91

Community development, Government employees, Military personnel,

Surplus Government property.

PART 90--REVITALIZING BASE CLOSURE COMMUNITIES

1. The authority citation for 32 CFR part 90 continues to read as

follows:

Authority: 10 U.S.C. 2687 note.

Sec. 90.4 [Removed and Reserved]

2. Section 90.4(a)(1)(iii) is removed and reserved.

3. Section 90.4(b) is revised to read as follows:

Sec. 90.4 Policy.

* * * * *

(b) In implementing Title XXIX of Public Law 103-160, it is DoD

policy to convey property to a Local Redevelopment Authority (LRA) to

help foster economic development and job creation when other federal

property disposal options cannot achieve such objectives. Conveyances

to the LRA will be made under terms and conditions designed to

facilitate local economic redevelopment and job creation, and may be

made at less than fair market value, with proper justification.

* * * * *

PART 91--REVITALIZING BASE CLOSURE COMMUNITIES--BASE CLOSURE

COMMUNITY ASSISTANCE

4. The authority citation for part 91 continues to read as follows:

Authority: 10 U.S.C. 2687 note.

4A. Section 91.4 is revised to read as follows:

Sec. 91.4 Policy.

It is DoD policy to convey property to a Local Redevelopment

Authority (LRA) to help foster economic development and job creation

when other federal property disposal options cannot achieve such

objectives. Conveyances to the LRA will be made under terms and

conditions designed to facilitate local economic redevelopment and job

creation, and may be made at less than fair market value, with property

justification. This regulation does not create any rights and remedies

and may not be relied upon by any person, organization, or other entity

to allege a denial of any rights or remedies other than those provided

by Pub. L. 103-160, Title XXIX.

Sec. 91.7 [Removed and Reserved]

5. Section 91.7(d) is removed and reserved.

6. Sections 91.7 (e) and (f) are revised to read as follows:

Sec. 91.7 Procedures.

* * * * *

(e) Economic Development Conveyances

(1) Section 2903 of Public Law 103-160 gives the Secretary of

Defense the authority to transfer property to local redevelopment

authorities for consideration in cash or in kind, with or without

initial payment or with only partial payment at time of transfer, at or

below the estimated fair market value of the property. This authority

creates an additional tool for local communities to help spur economic

opportunity through a new real property conveyance method specifically

designed for economic development, referred to as the ``Economic

Development Conveyance'' (EDC).

(2) The EDC should only be used when other Federal property

disposal authorities for the intended land use cannot be used to

accomplish the necessary economic redevelopment.

(3) Before making an EDC, the Military Department must prepare an

estimate of the present fair market value of the property, which may be

expressed as a range of values. The Military Department shall consult

with the Local Redevelopment Authority on valuation assumptions,

guidelines and on instructions given to the person(s) making the

estimation of value, but shall be fully responsible for completion of

the valuation.

(4) A Local Redevelopment Authority (LRA) is the only entity able

to receive property under an Economic Development Conveyance. An LRA

should have broad-based membership, including, but not limited to

representatives from those jurisdictions with zoning authority over the

property. The Secretary of Defense shall officially recognize an LRA

for planning and/or implementation through the Office of Economic

Adjustment.

(5) A properly completed application will be the basis for a

decision on whether an LRA will be eligible for an Economic Development

Conveyance. An application should be submitted by the LRA after a

Redevelopment Plan is adopted by the LRA. The Secretary of the Military

Departments shall establish a reasonable time period for submission of

the EDC application after consultation with the LRA. The Services will

review the applications and make a decision whether to make an EDC

based on the criteria specified in paragraph (e)(7) of this section.

The terms and conditions of the EDC will be negotiated between the

Military Departments and the LRA. Bases in rural areas shall be

conveyed with no consideration if they meet the standards in paragraph

(f)(3) of this section.

(6) The application should explain why an EDC is necessary for

economic redevelopment and job creation.

In addition to the elements in paragraph (e)(6) of this section,

after Military Department review of the application, additional

information may be requested to allow for a better evaluation of the

application. The application should contain the following elements:

(i) A copy of the adopted redevelopment plan.

(ii) A project narrative including the following:

(A) A general description of property requested.

(B) A description of the intended uses.

(C) A description of the economic impact of closure on the local

communities.

(D) A description of the financial condition of the community and

the prospects for redevelopment of the property.

(E) A statement of how the EDC is consistent with the overall

Redevelopment Plan.

(iii) A description of how the EDC will contribute to short- and

long-term job creation and economic redevelopment of the base and

community, including projected number, and type of new jobs it will

assist in creating.

(iv) A business and development plan for the EDC parcel, including

such elements as:

(A) A development timetable, phasing plan and cash flow analysis.

(B) A market and financial feasibility analysis describing the

economic viability of the project, including an estimate of net

proceeds over a fifteen-year period, the proposed consideration or

payment to the Department of Defense, and the estimated fair market

value of the property.

(C) A cost estimate and justification for infrastructure and other

investments needed for the development of the EDC parcel.

(D) Local investment and proposed financing strategies for the

development.

(v) A statement describing why other authorities--such as

negotiated sale and public benefit transfers for education, parks,

public health, aviation, historic monuments, prisons, and wildlife

conservation--cannot be used to accomplish the economic development and

job creation goals.

(vi) If a transfer is requested for less than the estimated fair

market value (``FMV''), with or without initial payment at the time of

transfer, then a statement should be provided justifying the discount.

The statement should include the amount and form of the proposed

consideration, a payment schedule, the general terms and conditions for

the conveyance, and projected date of conveyance.

(vii) A statement of the LRA's legal authority to acquire and

dispose of the property.

(7) After receipt of an application for an EDC, the Secretary of

the Military Department will determine whether an EDC is needed to spur

economic development and job creation and examine whether the terms and

conditions proposed are fair and reasonable. The Military Department

may also consider information independent of the application, such as

views of other Federal agencies, appraisals, caretaker costs and other

relevant material. The Military Department may propose and negotiate

any alternative terms or conditions that it considers necessary.

(8) The following factors will be considered, as appropriate, in

evaluating the application and the terms and conditions of the proposed

transfer, including price, time of payment and other relevant methods

of compensation to the Federal Government.

(i) Adverse economic impact of closure on the region and potential

for economic recovery after an EDC.

(ii) Extent of short- and long-term job generation.

(iii) Consistency with overall Redevelopment Plan.

(iv) Financial feasibility of the development, including market

analysis and need and extent of proposed infrastructure and other

investments.

(v) Extent of State and local investment and level of risk

incurred.

(vi) Current local and regional real estate market conditions.

(vii) Incorporation of other Federal agency interests and concerns,

and applicability of, and conflicts with, other Federal property

disposal authorities.

(viii) Relationship to the overall Military Department disposal

plan for the installation.

(ix) Economic benefit to the Federal Government, including

protection and maintenance cost savings and anticipated consideration

from the transfer.

(x) Compliance with applicable Federal, State, and local laws and

regulations.

(f) Consideration.

(1) For conveyances made pursuant to section 91.7(e), Economic

Development Conveyances, the Secretary of the Military Department will

review the application for an EDC and negotiate the terms and

conditions of each transaction with the LRA. The Military Departments

will have the discretion and flexibility to enter into agreements that

specify the form, amount, and payment schedule. The consideration may

be at or below the estimated fair market value, with or without initial

payment, in cash or in-kind and paid over time. An EDC must be one of

the two following types of agreements:

(i) Consideration within the estimated range of present fair market

value, as determined by the Secretary of the Military Department.

Payments must be made to ensure consideration is within the estimated

range of fair market value at the time of application.

(ii) Consideration can be below the estimated range of fair market

value, when proper justification is provided. The amount of

consideration can be below the estimated range of fair market value, if

the Secretary of the Military Department determines that a discount is

necessary for economic redevelopment and job creation.

(2) The amount of consideration paid in the future shall equal the

present value of the agreed-upon fair market value or discounted fair

market value. Additional provisions may be incorporated in the

conveyance documents to protect the Department's interest in obtaining

the agreed upon consideration. Also, the standard GSA excess profits

clause, appropriately tailored to the transaction, will be used in the

conveyance documents to the LRA.

(3) In a rural area, as defined by this rule, any EDC approved by

the Secretary of the Military Department shall be made without

consideration when the base closure will have a substantial adverse

impact on the economy of the communities in the vicinity of the

installation and on the prospect for their economic recovery. The

Secretary of the Military Department concerned will determine if these

two conditions are met based on all the information considered in the

application for an Economic Development Conveyance. Specific attention

will be placed on the business and development plan submitted as part

of the EDC application and the criteria listed in section 91.7(e)(8)

will be used.

(4) In those instances in which an EDC is made for consideration

below the range of the estimated present fair market value of the

property--or if the estimated fair market value is expressed as a range

of values, below the lowest value in that range--the Military

Department shall prepare a written explanation why the estimated fair

market value was not obtained. Additionally, the Military Departments

must prepare a written statement explaining why other Federal property

transfer authorities could not be used to generate economic

redevelopment and job creation.

* * * * *

Dated: October 20, 1994.

L.M. Bynum,

Alternate OSD Federal Register, Liaison Officer, Department of Defense.

[FR Doc. 94-26504 Filed 10-25-94; 8:45 am]

BILLING CODE 5000-04-M