bae Army Cost Experience: Fort Monroe Fort Monroe Federal Area Development Authority April 28, 2008

bae Today’s Discussion  Analyze the Army’s $15 million budget requirements  Financial implications for FMFADA  Next steps on financial analysis

bae Army 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

bae A 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.

bae Key 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:

bae Cost 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

bae Financial 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

bae In-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