Thursday, January 21, 2010

Are we stuck in the middle of a Navy-Laurelwood game of chicken?

This is a fair question in light of our reading of the Government Accountability Office's May 2009 report (GAO-09-352) on privatized military housing, especially as we are now within 100 days of the expiration of the Department of Navy's "in-lease" (i.e. military-use portion of a 52-year housing contract) of its pact with Laurelwood Homes LLC and the potential startup of unimpeded civilian access to one of our nation's biggest military weapons bases.

There is no dialogue specific to Laurelwood housing in GAO-09-352, but we point readers' attention to a few interesting GAO findings:
  • Military housing constructed before 1996 is inferior
  • Some installation commanders interviewed by the GAO expressed reservations to private developers about having civilians living in military privatized housing (p. 25, footnote 11)
  • The DoD's housing privatization goal was to minimize its role in operating military family housing (renting the Laurelwood homes to civilians will increase Earle's role in managing a new population of 1,200-plus civilian tenants and add millions of dollars of cost to the DoN...and hundreds of millions more to our communities)
  • Credit rating agency (i.e. Moody's, S&P) downgrades of military housing bonds, especially during the 2009 market downturn, will make loans for military housing contractors more expensive and difficult to come by and these military partners to reserve more cash to cover liabilities
  • The percentage of military housing projects below the desired 90% occupancy might be grossly understated (30% in 2009, down from 36% in 2006) because the military includes non-military tenants in its data (i.e. military bachelors, civilian contractors, civilians); in short, privatization does not work as argued by the U.S. Military

Our fourth bullet point, about credit ratings, may seem complicated, but brings us to our headline question of whether Monmouth County residents (and those who live nearest to NWS Earle, in particular) are simply in the middle of a game of chicken that has the Department of Navy and Laurelwood Homes, LLC staring each other down.

The findings in GAO-09-352 suggest as much, considering that NOPE understands that Laurelwood (and perhaps the Navy itself) will need to secure millions of dollars of third-party financing for road construction, security fence rentals and home improvements, to name a few upfront costs. In addition, any insurer insane enough to insure 300 townhomes in the middle of a powderkeg will probably charge Laurelwood a massive premium to cover the potential for accidents and endangerment to civilian tenants over the 30-year rental period on a weapons depot. Logistically, can Laurelwood even GET insurance for civilian rentals?

Considering the Department of Navy has shown zero willingness to engage in a fair buyout process (we already know that in 2002 the DoN foolishly signed away its right to void the contract, so NOPE's early proposal for voiding the deal in the nation's best security interest is out the window), we are only left to speculate that the DoN is playing chicken with Laurelwood in hopes of driving down the buyout price.

Perhaps a skillful bargaining measure on the DoN's part, but one that surely upsets the neighbors of NWS Earle like us, who are left to fear that DoN leadership has lost its mind and has zero regard for the well-being of its longstanding neighbors surround the base, nor for national security and the interests of service members stationed at NWS Earle.

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