James T. Berger (June/July 09)
While colleges and universities are notable for their abilities to attract business development, research, and industry, military bases - working with industrial development commissions, chambers of commerce, and state and local agencies - have become equally adept at developing major opportunities for the private sector. In many cases, military bases are located in population centers where there also are clusters of colleges and universities. Other factors, such as labor force pools, attractive land and development costs, superior schools, and transportation systems make military bases a strong focus for major business development activity.
Helping to fuel economic development around bases is the American Recovery and Reinvestment Act of 2008, as well as the emphasis on homeland security in the post 9/11 era. It's not only the big defense contractors who benefit from development around bases - some $55 billion in U.S. Department of Defense spending goes to small businesses, according to The New York Times.
Why the Attractiveness?
"The availability of high-quality skilled employees is one of the key drivers that makes development around bases so attractive," says Joseph D. Cavolick, a Northbrook, Illinois-based specialist in helping businesses select relocation sites. Cavolick is a graduate of West Point and has managed over 35 moves in the Midwest and throughout the world. He has been particularly active in the Lake Bluff, North Chicago, and Waukegan, Illinois, areas where the Great Lakes Naval Station forms a core of business activity.
"A major source of workers are the spouses of service personnel. This is an excellent built-in labor force," says Cavolick. "Many of them have young children and are looking for work opportunities near the base." Another major employment segment are the retired military personnel. "These people often want to remain close to the base and also possess the necessary security clearances," he says. "It makes for an ideal transition into the private sector." Other factors include land costs, schools, and transportation systems.
Enhanced Use Lease Program
Another major engine driving economic development near military bases is the federal government's Enhanced Use Lease (EUL) program. EUL is a method for funding construction or renovations on military property by allowing private developers to lease underutilized property, with rent paid by the developer in the form of cash in-kind services. Currently, EULs are used by the Department of Defense, as well as other government agencies. The developer is granted a long-term lease, as many as 50 years, and is able to make improvements to the property, which can then be leased at market rates to any interested tenants. Under EUL, federal control over the leased property is ceded to the private developers, though the federal agency retains limited rights over developers' actions.
An example of the EUL program is the development around the U.S. Coast Guard's Air Station in Elizabeth City, North Carolina. This is one of the busiest air stations in the Coast Guard system and operates missions as far away as Greenland, the Azores, and the Caribbean. In addition, the Support Center complex houses Aviation Technical Training Center. Private-sector development near the base includes two 80,000-square-foot hangars by DRS Technologies, Each hangar can house four C-130 Hercules aircraft. All service and modification work for the Coast Guard's entire C-130 fleet is done at the Elizabeth City base.
A Telephonics Corporation communications facility also will make use of the EUL program - an initial 20-year lease at 19 cents per square foot and two 10-year options for a 22,000-square-foot center. Other major economic development activity connected with the Coast Guard base, according to Wayne Harris, director of the Albemarle Economic Development Commission, includes an $18 million rescue pool to train swimmers and the replacement of the base dormitory.
Tom Barber, Telephonics' vice president of programs, logistics engineering, and support, says, "The Coast Guard is a key customer of ours, and we wanted to be as close as possible. As it turns out we became adjacent to them at the opposite side of the airfield. We made the decision [to locate there] for a number of reasons. We wanted to enhance our customer interface, we wanted to make sure communications lines were good so that we would be able to provide the service they needed not only to meet contract specifications but to meet their expectations as well. We wanted to shorten the supply chain, reduce our repair turnaround time."
Offutt AFB, Nebraska
Offutt Air Force Base near Omaha, Nebraska, the headquarters of the U.S. Strategic Command (STRATCOM), has become a huge economic driver to the entire Omaha area. According to the Greater Omaha Chamber of Commerce, the combination of Offutt, STRATCOM, and related private businesses had a $2.2 billion impact on Omaha last year and represented 5 percent of the metro area's overall economy.
Chamber officials report that the number of military and defense contractors surrounding the base tripled to 3,600 since 2002. A key reason for this was the merger of two missions at Offutt, the space mission and STRATCOM, according to Ned Holmes, a retired Air Force officer who works for the chamber to develop military business. He says the 9/11 terrorist attacks resulted in a significant expansion of STRATCOM's national security role, as well as managing the nation's space assets and military operations in cyberspace.
The military presence also has a major impact on other aspects of the greater Omaha community. "The expansion of the number of base missions has had a major positive impact on our education system," says Holmes. "We have a good, healthy, vibrant public school system - one of the best in the country. There are more than 14 colleges and universities in the greater Omaha area and many have career tracks or degree programs that line up well with the military missions." He points out the civilian work force is comprised of 10,000 to 12,000 non-military workers, 20,000 military dependents, and an additional 10,000 retired military.
Development is not limited to the obvious aerospace defense contractors. Sharing in the growth are consulting firms like the Omaha office of Booz Allen Hamilton, which set up its business near Offutt, starting in 2003 with a 12-person office and $190,000 in contracts. As of 2008, it had $52 million in contracts and the office has grown to 150 employees. "It's a wonderful place to do business," says Bryan Quint, a principal in Booz Allen's Omaha office. "I think you're only seeing the tip of the iceberg."
In addition to the economic development sphere near the base, a second major industrial park is being developed south of the base. "In developing this property south of the base, we are working with the state of Nebraska to provide needed roadways and access gates to the base," says Holmes.
Hill AFB, Utah
Also having a major impact on its local economy is Hill Air Force Base in northern Utah, adjacent to the municipalities of Clearfield, Roy, Sunset, and Layton, 29 miles north of Salt Lake City. The Hill AFB footprint has 23,000 military and civilian employees and is the sixth-largest employment entity in Utah.
A new initiative near the base involves 500 to 550 acres of underutilized property. Sunset Ridge Development Partners, a consortium of three companies, is allowed to lease the land long-term. In exchange, the base will receive free replacements for older buildings in that area. This creates a win-win situation because the military gets no-cost buildings worth some $350 million and the nearby cities will share in the tax revenues and new job growth benefits. Phase One of this project involves 180 acres of three- to eight-story buildings near the Hill Aerospace Museum. It involves two hotels, plus rental and office space. "We anticipate 10,000 new jobs in phase one," says Darrin Wray, a project manager.
Other phases will be constructed over the next 15 to 25 years, according to Jeff Edwards, president and CEO of the Economic Development Corporation of Utah. "This development is part of the Enhanced Use Lease program. The ground belongs to the Air Force and through the EUL program it is made available to private development," he says. "We look at the base as a strong economic development tool for us. It not only helps the Air Force update its facilities but provides an attractive spot for some existing and new players that would benefit from being close to the base."
As with Offutt, there is an educational component to the industrial development anchored by Hill AFB. "Right next door to the base is Weber State University, a regional university," says Edwards. "This provides a great source of education for base personnel as well as providing workers to the civilian side of the work force."
• In the Baltimore, Maryland- Washington, D.C., region, Brad S. McDearman, executive vice president of the Economic Alliance of Greater Baltimore, says the information technology growth in the area "will continue to be strong given the military expansion that is expected to come with the planned Base Realignment and Closure (BRAC) process, which will add jobs concentrated around Fort Meade and Aberdeen Proving Ground, both major installations in Maryland." Game design company Breakaway Ltd. changed it corporate focus when it located near the Maryland bases; it stopped making games for entertainment to focus on simulations for the military. Douglas Whatley, founder and CEO of the company, believes location is a major factor in attracting government business. "We are an easier choice, because we could just, you know, pop down for a meeting," he says.
• The Philadelphia Navy Yard, a new facility an the site of an old Navy base, is becoming a national center for engineering and manufacturing innovation. The focus is a partnership with the Naval Surface Warfare Center's Ship Systems Engineering Station in Philadelphia. "We have the potential to be a future Silicon Valley in the power and energy field," says Patricia Woody, head of the machinery research and engineering department of the Navy unit. "So much is going on in the power and energy fields around the world." Her department includes 1,200 to 1,500 engineers and technical staff in such areas as increasing fuel efficiency, reducing pollution, and designing advanced propulsion systems. Woody believes the planned innovation center at the Navy Yard will create the nation's biggest cluster of research and manufacturing in those fields.
• According to a newly released study on the New Jersey megabase that includes McGuire Air Force Base, Fort Dix, and the Naval Air Engineering Station Lakehurst, major new industrial development will come from the military concentration. Military and state and local government officials have held high-stakes discussions over their shared future in recent years. The purpose of the $300,000 study, funded primarily by the Department of Defense, was to explore the pros and cons of maintaining these bases and to plan for joint land use that will result in improved communications and coordination. "We want to keep the military here," says Brandi Bartolomeo, project manager at PS&S, an engineering firm that worked on the study. "It's a huge boost for the economy of New Jersey. And now we have a road map to move forward." More than 22,000 civilians work on the three bases, and more than $500 million in construction is already underway at the bases with more investment on the way.