1. 0 The Future of Military Housing Privatization Bob Helwig, Deputy Director Office of the Secretary of Defense Housing & Competitive Sourcing Office PHMA – January 22, 2007 Bob Helwig, Deputy Director Office of the Secretary of Defense Housing & Competitive Sourcing Office PHMA – January 22, 2007

2. 0310-0480056-MCL 1 Overview Reaching the 2007 Goal Privatization After 2007 The Great Privatization Debate Managing the Privatized Portfolio The Year Ahead

3. 0310-0480056-MCL 2 Awarded Privatization Projects # of Units Privatized Fiscal Year –Award Date 68,208 1,000 4,744 404 26,100 186,000+ 42,163 142,000 112,715

4. 0310-0480056-MCL 3 Over 87% of existing U.S. inventory will be privatized by 2010 –- 90% of families will draw allowances (private sector + privatized) –- 10% of families in government owned or leased housing > 195K Privatized ~ 65K Govt Owned A Changing Ownership Structure

5. 0310-0480056-MCL 4 * 55 Projects- As of January 2006

6. 0310-0480056-MCL 5 * 55 Projects- As of January 2006

7. 0310-0480056-MCL 6 * 55 Projects- As of January 2006

8. 0310-0480056-MCL 7 Privatization After 2007 Family Housing Unaccompanied Housing Lodging Overseas Housing Enhanced Use Leasing Expanding the Use of the Privatization Principles

9. 0310-0480056-MCL 8 The Great Privatization Debate Enactment of MHPI – 1996 OMB Director Raines Memo – 1997 Budget Cap Eliminated – 2003 New OMB Circular A-11 - 2005 New Credit Model – 2005 New OMB Director’s Memo – 2005 The 2007 Goal

10. 0310-0480056-MCL AuthorityAppropriation Direct Loan Conveyed Units Differential Lease Payments Equity None $3M $5M $6M Construction Cost $40M Private Sector Mortgage (based on 400 new units) $30M Developer Equity $4M Development Gap $6M Financial Development Gap

11. 0310-0480056-MCL 10 Early Housing Privatization Principles (When Life was Easy) Ensure Valid Housing Requirements Leverage Appropriations by 3 to 1 Long-Term Costs better/equal Milcon Ensure Competition Fix Enlisted Problem First

12. 0310-0480056-MCL 11 OMB Director’s Memo A New “Raines Memo” –Issued 2 Aug 05 –Meant to supplement the 25 Jun 97 Raines Scoring Memo “Guidance on the Use of Limited Liability Partnerships and Corporations in Military Housing” –Applicable to “Co-Owned LLC” Structures To Complete the President’s Management Initiative: –LLCs Approved until 30 Sep 10 –LLC’s Approved for Barracks Privatization –After 2010 LLC’s Scored Under “Traditional Rules” “Purely Private” entities scored under Raines Reporting DOD Privatization Plans to OMB

13. 0310-0480056-MCL 12 New Credit Scoring Rules From One “bucket” to Four Starting with the FY06 “Cohort” of Credit Deals (Projects Including Direct Loans or Loan Guarantees) –Projects are Evaluated based upon Four Factors (Project Characteristics) Location Financial Occupancy Housing Quality –Each Project Receives a Numerical Score and is Classified into One Credit Classifications –Each Classification has Risk and Recovery Rates –Adjusted Annually in Credit Model Complications and Debates

14. 0310-0480056-MCL 13 Managing the Privatization Portfolio Implementing the Financial and Business Structure to move: –From Asset Ownership and Control to Management of Real Property and Contract Interests –From Assignment of Occupants to Referral of Tenants –From Seeking Appropriations in the Budget to Monitoring Investments and Outstanding Debt –From Contracting for Construction Projects to Partnering in Housing and Community Development

15. 0310-0480056-MCL 14 The Changing Portfolio Integrated Projects Projects at Joint Bases Projects Expanding due to Realignment or Increased Recruitment Restructured Projects with Reduced Requirements

16. 0310-0480056-MCL 15 Why Project Integration? Private Sector Business Efficiency Compliance with the 33% and 45% investment limitations under 10 U.S.C. 2875 Rich Project, Poor Project Problem –Requires Approval by the Limited Partner –Higher Approval Depends on the Nature and Terms of the Restructuring

17. 0310-0480056-MCL 16 Business Process Initiative (BPI) Identify Roles and Responsibilities Budget Preparation Project Approval Project Funding Budget Re-Estimates Accounting and Reporting

18. 0310-0480056-MCL 17 DOD and Extra-DOD Oversight PEP Report and Portfolio Management System Housing Choices Survey Office of Management and Budget Government Accountability Agency Congressional Committees –New SAC Committee Report Tracking Project Maintenance and Funding in Reinvestment Accounts

19. 0310-0480056-MCL 18 The Year Ahead Meet 2007 Goal Promulgate Housing Manual Promulgate BPI Expand Privatization Principles Implement Housing Choices Study Define Barracks Problem and Plan Solution Enhance Privatization Professionals

20. 19 Are There Any Questions?