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Army Cost Experience: Fort Monroe

Fort Monroe Federal Area Development Authority

April 28, 2008

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Today’s DiscussionToday’s Discussion

Analyze the Army’s $15 million budget requirements

Financial implications for FMFADA

Next steps on financial analysis

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Army Cost ExperienceArmy Cost Experience

In June 2007, the Army reported that it budgets $15 million annually to maintain the Fort

The $15M figure has not been reviewed and analyzed to date

But it has been incorporated into prior fiscal analyses

Previous analyses indicated that new tax dollars would cover only 44 to 53% of annual operating costs

• Note: No other revenues assumed such as base rent from tenants

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A Detailed LookA Detailed Look The Army base operations budget is divided between

administrative buildings and family housing.

Of the $15 million, $12.2M is for admin buildings and $2.7M for family housing.

O&M Program Item FY2007Budgeted

Administrative Buildings Maintenance & Repairs 5,800.0$ Engineer Civilian pay and equipment maintenance 2,200.0$ Utilities 4,200.0$ Subtotal Administrative Buildings 12,200.0$

Army Family Housing Maintenance & Repairs 1,800.0$ Engineer Civilian pay and equipment maintenance 400.0$ Utilities 500.0$ Subtotal Army Family Housing 2,700.0$

Grand Total 14,900.0$

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Key Insight on Army’s CostsKey Insight on Army’s Costs

The bulk of the Army’s costs are to support buildings.

Building costs will transfer to third parties (e.g., FMFADA tenants and partners).

Here’s how the Army’s FY2007 costs might be allocated:

Cost AllocationsO&M Program Item Third Parties FMFADA/City of Hampton

Percent Dollars Percent Dollars

Administrative Buildings Maintenance & Repairs 70.0% 4,060.0$ 30.0% 1,740.0$ Engineer Civilian pay and equipment maintenance 50.0% 1,100.0$ 50.0% 1,100.0$ Utilities 80.0% 3,360.0$ 20.0% 840.0$ Subtotal Administrative Buildings 69.8% 8,520.0$ 30.2% 3,680.0$

Army Family Housing Maintenance & Repairs 100.0% 1,800.0$ 0.0% -$ Engineer Civilian pay and equipment maintenance 100.0% 400.0$ 0.0% -$ Utilities 100.0% 500.0$ 0.0% -$ Subtotal Army Family Housing 100.0% 2,700.0$ 0.0% -$

Grand Total 75.3% 11,220.0$ 24.7% 3,680.0$

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Cost Burden to FADA/City of HamptonCost Burden to FADA/City of Hampton

Taking the Army’s cost experience, FMFADA’s and the City of Hampton’s combined cost burden would be approximately $3.7M annually.

Operating costs would include:

• Roads, sidewalks, street lights, and grounds maintenance (public rights-of-way)

• Open space and recreational facility maintenance

• Maintenance of beaches, moat, and breakwaters

• Environmental oversight and monitoring

• O&M costs for buildings dedicated to public works and public safety uses

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Financial ImplicationsFinancial Implications

On the one hand…

The cost to FMFADA to maintain Fort Monroe may be significantly less than previously assumed once third party operation and maintenance of buildings is accounted for.

On the other hand…

The Army spending for repair and replacement projects may be understated:

• Difference in standards (federal versus local)

• Change in use triggers greater requirements

• Army budget constraints

Funding a plan for capital projects benefiting the public may require annual expenditures for:

• Direct annual subsidy

• Bonds/debt service

• Reserve set asides

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In-progress – Financial ModelsIn-progress – Financial Models

BAE is well underway to prepare a comprehensive look at the financial performance of Fort Monroe after transfer:

• Bottom-up budget for operating costs

• Use current cost experience of City of Hampton and other local agencies and institutions

• Preliminary scoping of services

Revenue and expense model

Capital projects budget and financing options