[Federal Register Volume 59, Number 206 (Wednesday, October 26, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-26504]


[[Page Unknown]]

[Federal Register: October 26, 1994]


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DEPARTMENT OF DEFENSE

Office of the Secretary

32 CFR Parts 90 and 91

RINs 0790-AF61 and 0790-AF62

 

Revitalizing Base Closure Communities and Community Assistance

AGENCY: Department of Defense, DoD.

ACTION: Interim final rule; amendments.

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SUMMARY: The interim final rule amendment promulgates guidance required 
by Section 2903 of the National Defense Authorization Act for Fiscal 
Year 1994. This guidance clarifies the application process and the 
criteria that will be used to evaluate an application for property 
under this section.

DATES: This document is effective October 26, 1994. Any pending written 
request for economic development conveyances, pursuant to 
Sec. 91.7(e)(5), will be subject to the terms and conditions of this 
rule amendment. Comments on this amendment must be received by December 
27, 1994.

ADDRESSES: Comments should be forwarded to the Office of the Assistant 
Secretary of Defense for Economic Security, Room 3D814, The Pentagon, 
Washington, DC 20301.

FOR FURTHER INFORMATION CONTACT:
Robert Hertzfeld, telephone (703) 604-5690.

SUPPLEMENTARY INFORMATION:

A. Summary of Amendment

    In response to public comments regarding the interim final rule 
implementing Title XXIX of the National Defense Authorization Act for 
FY 1994 published in the Federal Register on April 6, 1994 (59 FR 
16123), the Department of Defense is amending the Rule to:
    1. Delete section 91.7(d) and the accompanying ``Market Test.''
    2. Establish the requirements for an Economic Development 
Conveyance (EDC) application for real property in a revised section 
91.7(e).
    3. Establish criteria that will be used to evaluate EDC 
applications in a revised section 91.7(e).
    4. Provide guidance for greater flexibility on the compensation to 
the Federal Government for property conveyed under an EDC in a revised 
section 91.7(e).
    The scope of the following amendment is limited to the real 
property conveyance section of the rule Secs. 91.7 (d), (e), and (f), 
and not the entire April 6, 1994, interim final rule. A final rule 
addressing all of the elements of the interim final rule will be 
published in early 1995. The Department of Defense will also publish a 
guidebook describing the base conversion process.

B. Background

    On July 2, 1993, President Clinton announced a major new policy to 
speed the economic recovery of communities affected by base closures or 
realignments. The President requested that Congress provide additional 
authority to expedite the reuse of closing military bases. Congress 
agreed, and passed this new authority, Title XXIX of the National 
Defense Authorization Act for FY 1994.
    Section 2903 of Title XXIX gave the Secretary of Defense the 
authority to transfer property to local redevelopment authorities at or 
below fair market value. The Department of Defense implemented this 
authority by creating an additional tool for local communities to help 
foster economic development through the creation of a new form of 
conveyance, referred to as the ``Economic Development Conveyance '' 
(EDC). Under an EDC, the Department may transfer property to a Local 
Redevelopment Authority (``LRA'') at or below estimated fair market 
value for purposes of economic development. (Property may also be 
transferred under a series of other existing public benefit 
conveyances.)
    On April 6, 1994, (59 FR 16123), the Department of Defense 
published an interim final rule that provided base closure communities 
with guidance on how to use the new authority. During the public 
comment process, the Department of Defense learned that some of the 
procedures contained in the interim final rule may be impractical and 
not assist in reaching the rapid economic redevelopment goals. As a 
result, they are being revised by this amendment.
    Specifically, the interim final rule established a ``market test'' 
or ``market survey'' as a precondition to any EDC. This approach was 
designed to help determine whether immediate private development of a 
property was possible by advertising its availability and soliciting 
private interest. Many comments suggested that private developers would 
not spend the time and money necessary to prepare a detailed expression 
of interest until after a community redevelopment plan was approved, if 
at all. Additionally, the interim final rule was perceived to encourage 
private developers to ``cherry-pick'' valuable parcels for private 
sector sales and leave the less attractive parcels for the community 
redevelopment. This effort was said to be inconsistent with proper 
planning methods and not in the long-term interest of enhancing local 
economic recovery.
    With the assistance of comments received during the public comment 
period of the interim final rule, the Department of Defense has been 
persuaded that such solicitation is unlikely to be fruitful unless and 
until the local community provides the necessary investment and 
infrastructure for development: zoning, public utilities, etc. As a 
result, the Department is eliminating the ``market test'' and creating 
with this Amendment a new process for an EDC that will consider such 
information, as addressed by the local redevelopment plan.
    The interim final rule also prescribed procedures and guidelines 
for recoupment of value by the Federal Government if and when net 
proceeds were realized by development. Based upon experience since its 
publication and public comment, the Department of Defense is persuaded 
that greater flexibility is needed in this area.

C. Discussion

    The interim final rule amendment being published today addresses 
some of the concerns raised by affected communities and others. This 
amendment eliminates the ``market test'' requirements, includes a new 
application and review process for an EDC, and establishes criteria to 
evaluate the applications as a substitute for the ``market test.'' 
Greater flexibility is given to the Military Departments and the 
communities to negotiate the terms and conditions of the EDC. A 
detailed application, including the approved community redevelopment 
plan, will now be the basis for a determination of whether or not an 
LRA will be eligible for an EDC. The application and review process 
will also be used to help determine the terms and conditions of such a 
conveyance.
    This Amendment is an intermediate step before the April 6, 1994, 
interim final rule is reissued as a final rule.
     What is an Economic Development Conveyance (EDC)?
    An EDC is a new process for transferring real property to a Local 
Redevelopment Authority (LRA) to help spur local economic development 
and job creation. An EDC may be with or without initial payment or with 
only partial payment at time of transfer, may be at or below the 
estimated fair market value of the property, and allows for negotiated 
terms and conditions of payment (consideration) to the Department of 
Defense. These negotiations must be fair and reasonable to both parties 
and strike a balance between compensation to the Federal taxpayer and 
the need for the EDC to spur redevelopment. The EDC offers LRAs an 
additional tool to use in the acquisition of former military base 
property.
     When should an EDC be used?
    The Federal Property and Administrative Services Act (FPASA) of 
1949 (40 U.S.C. 484) and airport public benefit authorities (49 U.S.C. 
47151-47153) allow for public benefit transfers to units of government 
or non-profit institutions that maintain the use of property for a 
public purpose including, but not limited to, parks, public health, 
education, aviation, historic monuments, and prisons. Transfers of 
property under public benefit transfers must be in accordance with the 
sponsoring Federal agency regulations. The FPASA also allows for 
negotiated sales at fair market value to public entities for public 
purposes or direct sales through a public bid process.
    The EDC should be used when the LRA wants to obtain property for 
job generating purposes and it is not practicable to pay fair market 
value at the time of transfer. However, the EDC is not intended to 
supplant other Federal property disposal authorities and cannot be used 
if the intended land use can be accomplished through another authority 
unless unusual circumstances are presented that demonstrate that the 
needed economic development and job generation cannot occur under the 
other allowable federal transfer authority.

                           Surplus Federal Property Transfer Methods Available to LRAs                          
----------------------------------------------------------------------------------------------------------------
    Type of property,                          Federal agency with                      Statutory and regulatory
   purpose, or method     Transfer type\1\          authority           FMV discount            authority       
----------------------------------------------------------------------------------------------------------------
Public Airport            Approved........  Federal Aviation          100%............  49 U.S.C. Secs. 47151-  
 Conveyance.                                 Administration.                             47153, 41 CFR 101-     
                                                                                         47.308-2               
Public Benefit                                                                                                  
 Conveyance Categories:                                                                                         
    Historic Monument...  Approved........  Department of the         100%............  FPASA Sec. 203(k)(3), 41
                                             Interior.                                   CFR 101-47.308-3       
    Education...........  Sponsored.......  Department of Education.  Up to 100%......  FPASA Sec. 203(k)(1), 41
                                                                                         CFR 101-47.308-4       
    Public Health.......  Sponsored.......  Department of Health and  Up to 100%......  FPASA Sec. 203(k)(1), 41
                                             Human Services.                             CFR 101-47.308-4       
    Public Park or        Sponsored.......  Department of the         Up to 100%......  FPASA Sec. 203(k)(2), 41
     Recreation.                             Interior.                                   CFR 101-47.308-7       
    Non-Federal           Approved........  Department of Justice...  100%............  FPASA Sec. 203(p)(1), 41
     Correctional                                                                        CFR 101-47.308-9       
     Facility.                                                                                                  
    Port Facility.......  Sponsored.......  Department of             100%............  FPASA Sec. 203(q)       
                                             Transportation.                                                    
    Shrines, Memorials,   Sponsored.......  Department of Education   Up to 100%......  41 CFR 101-47.308-5     
     or Religious Uses                       or Department of Health                                            
     [only as part of                        and Human Services.                                                
     another public                                                                                             
     benefit                                                                                                    
     conveyance]\2\.                                                                                            
    Homeless Assistance   Sponsored.......  Department of Health and  Up to 100%......  42 U.S.C. Sec. 11411,   
     [Public Health]\3\.                     Human Services.                             FPASA Sec. 203(k)      
Other Specific                                                                                                  
 Conveyance Categories:                                                                                         
    Power Transmission    Approved........  Military Department.....  None............  SPA Sec. 13(d), 41 CFR  
     Lines.                                                                              101-47.308-1           
    Housing for           Requested\4\....  Military Department.....  Up to 100%......  URARPAPA Sec. 218, 41   
     Displaced Persons.                                                                  CFR 101-47.308-8       
    Wildlife              Approved........  Department of the         Up to 100%......  16 U.S.C. Sec. 667b-d   
     Conservation.                           Interior.                                                          
    Federal-Aid or Other  Sponsored.......  Department of             100%............  23 U.S.C. Secs. 107, 317
     Highways [to                            Transportation.                                                    
     States].                                                                                                   
    Widening of Public    Approved........  Military Department.....  Up to 100%......  40 U.S.C. Sec. 345c     
     Highways or Streets.                                                                                       
Negotiated Sale.........  Sale............  Military Department.....  None............  FPASA Sec. 203(e), 41   
                                                                                         CFR 101-47.304         
Public Sale.............  Sale............  Military Department.....  None............  FPASA Sec. 203(e), 41   
                                                                                         CFR 101-47.304         
Economic Development      Approved........  Military Department.....  Up to 100%......  NDAA 94, Title XXIX,    
 Conveyance.                                                                             Sec. 2903              
----------------------------------------------------------------------------------------------------------------
\1\Public benefit and other specific conveyances are typically either approved or sponsored by the authorized   
  Federal agency. In approved transfers, the Federal agency must grant its approval but property conveyance is  
  accomplished by the Military Department. In sponsored transfers, the Military Department assigns the property 
  to the Federal agency, upon request, and the Federal agency is responsible for conveyance of the property to  
  its recipient.                                                                                                
\2\Property for shrines, memorials or other religious purposes is eligible for public benefit conveyance (PBC)  
  only as part of a parcel transferred under another PBC mechanism.                                             
\3\42 U.S.C. Sec. 11411 designates uses for homeless assistance as a specific public health category under FPASA
  Sec. 203(k) and gives priority to such uses when considering PBCs.                                            
\4\When the activities of a Federal agency result in the displacement of persons from their housing, the Federal
  agency may request surplus property for replacement housing. Transfer of property is directly from the        
  Military Department to an eligible State agency.                                                              
                                                                                                                
ACRONYMS                                                                                                        
                                                                                                                
CFRCode of Federal Regulations                                                                                  
FMVFair Market Value                                                                                            
FPASAFederal Property and Administrative Services Act, 40 U.S.C. Sec. 483 et seq.                               
LRALocal Redevelopment Authority                                                                                
NDAA 94National Defense Authorization Act for Fiscal Year 1994, P.L. 103-160                                    
SPASurplus Property Act, 50 U.S.C. App. Sec. 1622(d) and 49 U.S.C. Secs. 47151-47153                            
U.S.C.United States Code                                                                                        
URARPAPAUniform Relocation Assistance and Real Property Acquisition Policies Act of 1970                        

     Who Can Receive an Economic Development Conveyance?
    An LRA is the only entity eligible to receive property under an 
Economic Development Conveyance. An LRA should have broad-based 
membership, including, but not limited to, representatives from those 
jurisdictions with zoning authority over the property. The Secretary of 
Defense shall officially recognize an LRA for planning and/or 
implementation through the Office of Economic Adjustment. Consequently, 
applications submitted by entities other than LRAs will not be 
considered.
     When should an application for an Economic Development 
Conveyance be made?
    First, an LRA must be organized and a redevelopment plan created. 
The Department of Defense's Office of Economic Adjustment can provide 
guidance and technical and financial support in these efforts. Once a 
redevelopment plan has been developed and adopted, the LRA can then 
submit an EDC application to the Military Department responsible for 
the property. The application should be submitted by the LRA after 
consultation with the Military Department which shall establish a 
reasonable time period for submission of the application.
    The LRA always has the option of acquiring property under the FPASA 
and thus it may not be necessary to complete an application for an EDC 
within the stated timetables. LRAs can discuss the various transfer 
options with the Military Department.
     How much property should be included in an Economic 
Development Conveyance application?
    The EDC should be used by LRAs to obtain large parcels of the base 
rather than merely individual buildings. The income received from some 
of the higher value property should be used to offset the maintenance 
and marketing costs of the less desirable parcels. In order for this 
conveyance to spur redevelopment, large parcels must be used to provide 
an income stream to assist the long-term development of the property.
     Why is an application necessary?
    This Amendment to the interim final rule prescribes that an 
application be prepared by an LRA as the formal request for property, 
to better assist the Military Department in considering requests for 
property under the Economic Development Conveyance (EDC). This 
information also will provide the basis for the Military Department to 
respond to its obligations under Title XXIX, taking into account the 
best community-based information on the proposed conveyance action. A 
great deal of information necessary for an application is readily 
available to the LRA through the community planning process and 
supported through existing DoD technical and financial resources.
    Beyond the standard planning information collected to date, LRAs 
should incorporate a business and development component into their 
overall base reuse planning process as a basis for receiving and 
managing the real property. This supplemental effort will assist LRAs 
in identifying necessary implementation resources and establish a 
community-based proposal for the Military Department's consideration. 
The Military Departments and the Office of Economic Adjustment will 
continue to work closely with the affected LRA to ensure that an 
adequate planning effort is undertaken.
     What must an application contain?
    The application should explain why an EDC is necessary for economic 
redevelopment and job creation. The application should contain the 
following elements.
    1. A copy of the adopted Redevelopment Plan.
    2. A project narrative including the following:

--A general description of property requested.
--A description of the intended uses.
--A description of the economic impact of closure on the local 
communities.
--A description of the financial condition of the community and the 
prospects for redevelopment of the property.
--A statement of how the EDC is consistent with the overall 
Redevelopment Plan.

    3. A description of how the EDC will contribute to short- and long-
term job creation and economic redevelopment of the base and community, 
including projected number, and type, of new jobs it will assist in 
creating.
    4. A business and development plan for the EDC parcel, including 
such elements as:

--A development timetable, phasing plan and cash flow analysis.
--A market and financial feasibility analysis describing the economic 
viability of the project, including an estimate of net proceeds over a 
fifteen-year period, the proposed consideration or payment to the 
Department of Defense, and the estimated fair market value of the 
property.
--A cost estimate and justification for infrastructure and other 
investments needed for the development of the EDC parcel.
--Local investment and proposed financing strategies for the 
development.

    5. A statement describing why other authorities--such as negotiated 
sale and public benefit transfers for education, parks, public health, 
aviation, historic monuments, prisons, and wildlife conservation--
cannot be used to accomplish the economic development and job creation 
goals.
    6. If a transfer is requested for less than the estimated fair 
market value--with or without initial payment at the time of transfer--
then a statement should be provided justifying a discount. The 
statement should include the amount and form of the proposed 
consideration, a payment schedule, the general terms and conditions for 
the conveyance, and projected date of conveyance.
    7. A statement of the LRA's legal authority to acquire and dispose 
of the property.
    Additional information may be requested by the Military Departments 
to allow for a better evaluation of the application. LRAs are 
encouraged to use site information available from the Military 
Departments, including maintenance and caretaking expenses.
     What criteria will be used to make a determination on the 
application?
    After receipt of an application for an EDC, the Secretary of the 
Military Department will determine whether an EDC is appropriate to 
spur economic development and job creation and examine whether the 
terms and conditions proposed are fair and reasonable. The Military 
Department may also consider information independent of the 
application, such as views of other Federal agencies, appraisals, 
caretaker costs and other relevant information.
    The following criteria and factors will be used, as appropriate, to 
determine whether a community is eligible for an EDC and to evaluate 
the proposed terms and conditions of the EDC, including price, time of 
payment and other relevant methods of compensation to the Federal 
Government.
     Adverse economic impact of closure on the region and 
potential for economic recovery after an EDC.
     Extent of short- and long-term job generation.
     Consistency with the overall Redevelopment Plan.
     Financial feasibility of the development, including market 
analysis and the need and extent of proposed infrastructure investment.
     Extent of State and local investment and level of risk 
incurred.
     Current local and regional real estate market conditions.
     Incorporation of other Federal agency interests and 
concerns, and applicability of, and conflicts with, other Federal 
property disposal authorities.
     Relationship to the overall Military Department disposal 
plan for the installation.
     Economic benefit to the Federal Government, including 
protection and maintenance cost savings and anticipated consideration 
from the transfer.
     Compliance with applicable Federal, State, and local laws 
and regulations.
     What are the guidelines for determining the terms and 
conditions of consideration?
     The individual circumstances of each community and each 
base mean that the amount and type of consideration may vary from base 
to base. This amendment gives greater discretion and flexibility to the 
Military Departments to negotiate with the LRA to arrive at an 
appropriate arrangement. Due to the circumstances of a particular site, 
the base's value may be high or low, and the range of the estimated 
present fair market value may be broad or narrow. Where there is value, 
the Department of Defense has an obligation under Title XXIX of the 
National Defense Authorization Act for FY 1994 to obtain consideration 
within the estimated range of present fair market value, or to justify 
why such consideration was not realized.
     Taking into account all information provided in the EDC 
application and any additional information considered relevant, the 
Military Department will contract for or prepare an estimate of the 
fair market value of the property, which may be expressed as a range of 
values. The Military Department shall consult with the LRA on valuation 
assumptions, guidelines and on instructions given to the person(s) 
making the estimation of value.
     As stated above, the EDC application must contain a 
statement that proposes general terms and conditions of the conveyance, 
as well as the amount and type of the consideration, a payment 
schedule, and projected date of conveyance. After reviewing the 
application, the Military Department has the discretion and flexibility 
to enter into one of two types of agreements:
    1. Consideration within the estimated range of present fair market 
value, as determined by the Secretary of the Military Department. The 
Military Department can be flexible about the terms and conditions of 
payment, and can provide financing on the property. The payment can be 
in cash or in-kind, and can be paid at time of transfer or at a time in 
the future. The Military Departments will have the discretion and 
flexibility to enter into agreements that specify the form and amount 
of consideration and ensures that consideration is within the estimated 
range of fair market value at the time of application. Such methods of 
payment could include: participation in the gross or net cash flow, 
deferred payments, mortgages or other financing arrangements.
    2. Consideration below the estimated range of fair market value, 
where proper justification is provided. If a discount is found by the 
Secretary of the Military Department to be necessary to foster local 
economic redevelopment and job creation, the amount of consideration 
can be below the estimated range of fair market value. Again, the terms 
and conditions of payment will be negotiated between the Military 
Department and the LRA.
    (a). Justification. Proper justification for a discount shall be 
based upon the findings in the business and development plan contained 
in the EDC application.
    Development economics, including absorption schedules and 
legitimate infrastructure costs, would provide a basis for such 
justification. The ability to pay at time of conveyance or to obtain 
financing would not be a proper justification, since payment terms and 
conditions can be negotiated.
     In negotiating the terms and conditions of consideration 
with the LRA, the Secretary of the Military Department must determine 
that a fair and reasonable compensation to the Federal Government will 
be realized from the EDC. Where property is transferred under an EDC at 
an amount less than the estimated range of fair market value, the 
Military Department shall prepare a written explanation of why the 
consideration was less than the estimated range of present fair market 
value.

D. Executive Order 12866

    It has been determined that these amendments are a significant 
regulatory action. The amendments to the rule raise novel policy issues 
arising out of the President's priorities.

E. Regulatory Flexibility Act

    This rule amendment is not subject to the Regulatory Flexibility 
Act (5 U.S.C. 601 et seq.,) because the amendment will not have a 
significant economic impact on a substantial number of small entities. 
The primary effect of this amendment will be to reduce the burden on 
local communities of the Government's property disposal process at 
closing military installations and to accelerate the economic recovery 
of the relatively small number of communities that will be affected by 
the closure of nearby military installations.

F. Paperwork Reduction Act

    The Rule amendment is not subject to the Paper Reduction Act 
because it imposes no obligatory information requirements beyond 
internal DoD use.

List of Subjects in 32 CFR Parts 90 and 91

    Community development, Government employees, Military personnel, 
Surplus Government property.

PART 90--REVITALIZING BASE CLOSURE COMMUNITIES

    1. The authority citation for 32 CFR part 90 continues to read as 
follows:

    Authority: 10 U.S.C. 2687 note.


Sec. 90.4  [Removed and Reserved]

    2. Section 90.4(a)(1)(iii) is removed and reserved.
    3. Section 90.4(b) is revised to read as follows:


Sec. 90.4  Policy.

* * * * *
    (b) In implementing Title XXIX of Public Law 103-160, it is DoD 
policy to convey property to a Local Redevelopment Authority (LRA) to 
help foster economic development and job creation when other federal 
property disposal options cannot achieve such objectives. Conveyances 
to the LRA will be made under terms and conditions designed to 
facilitate local economic redevelopment and job creation, and may be 
made at less than fair market value, with proper justification.
* * * * *

PART 91--REVITALIZING BASE CLOSURE COMMUNITIES--BASE CLOSURE 
COMMUNITY ASSISTANCE

    4. The authority citation for part 91 continues to read as follows:

    Authority: 10 U.S.C. 2687 note.

    4A. Section 91.4 is revised to read as follows:


Sec. 91.4  Policy.

    It is DoD policy to convey property to a Local Redevelopment 
Authority (LRA) to help foster economic development and job creation 
when other federal property disposal options cannot achieve such 
objectives. Conveyances to the LRA will be made under terms and 
conditions designed to facilitate local economic redevelopment and job 
creation, and may be made at less than fair market value, with property 
justification. This regulation does not create any rights and remedies 
and may not be relied upon by any person, organization, or other entity 
to allege a denial of any rights or remedies other than those provided 
by Pub. L. 103-160, Title XXIX.


Sec. 91.7  [Removed and Reserved]

    5. Section 91.7(d) is removed and reserved.
    6. Sections 91.7 (e) and (f) are revised to read as follows:


Sec. 91.7  Procedures.

* * * * *
    (e) Economic Development Conveyances
    (1) Section 2903 of Public Law 103-160 gives the Secretary of 
Defense the authority to transfer property to local redevelopment 
authorities for consideration in cash or in kind, with or without 
initial payment or with only partial payment at time of transfer, at or 
below the estimated fair market value of the property. This authority 
creates an additional tool for local communities to help spur economic 
opportunity through a new real property conveyance method specifically 
designed for economic development, referred to as the ``Economic 
Development Conveyance'' (EDC).
    (2) The EDC should only be used when other Federal property 
disposal authorities for the intended land use cannot be used to 
accomplish the necessary economic redevelopment.
    (3) Before making an EDC, the Military Department must prepare an 
estimate of the present fair market value of the property, which may be 
expressed as a range of values. The Military Department shall consult 
with the Local Redevelopment Authority on valuation assumptions, 
guidelines and on instructions given to the person(s) making the 
estimation of value, but shall be fully responsible for completion of 
the valuation.
    (4) A Local Redevelopment Authority (LRA) is the only entity able 
to receive property under an Economic Development Conveyance. An LRA 
should have broad-based membership, including, but not limited to 
representatives from those jurisdictions with zoning authority over the 
property. The Secretary of Defense shall officially recognize an LRA 
for planning and/or implementation through the Office of Economic 
Adjustment.
    (5) A properly completed application will be the basis for a 
decision on whether an LRA will be eligible for an Economic Development 
Conveyance. An application should be submitted by the LRA after a 
Redevelopment Plan is adopted by the LRA. The Secretary of the Military 
Departments shall establish a reasonable time period for submission of 
the EDC application after consultation with the LRA. The Services will 
review the applications and make a decision whether to make an EDC 
based on the criteria specified in paragraph (e)(7) of this section. 
The terms and conditions of the EDC will be negotiated between the 
Military Departments and the LRA. Bases in rural areas shall be 
conveyed with no consideration if they meet the standards in paragraph 
(f)(3) of this section.
    (6) The application should explain why an EDC is necessary for 
economic redevelopment and job creation.
    In addition to the elements in paragraph (e)(6) of this section, 
after Military Department review of the application, additional 
information may be requested to allow for a better evaluation of the 
application. The application should contain the following elements:
    (i) A copy of the adopted redevelopment plan.
    (ii) A project narrative including the following:
    (A) A general description of property requested.
    (B) A description of the intended uses.
    (C) A description of the economic impact of closure on the local 
communities.
    (D) A description of the financial condition of the community and 
the prospects for redevelopment of the property.
    (E) A statement of how the EDC is consistent with the overall 
Redevelopment Plan.
    (iii) A description of how the EDC will contribute to short- and 
long-term job creation and economic redevelopment of the base and 
community, including projected number, and type of new jobs it will 
assist in creating.
    (iv) A business and development plan for the EDC parcel, including 
such elements as:
    (A) A development timetable, phasing plan and cash flow analysis.
    (B) A market and financial feasibility analysis describing the 
economic viability of the project, including an estimate of net 
proceeds over a fifteen-year period, the proposed consideration or 
payment to the Department of Defense, and the estimated fair market 
value of the property.
    (C) A cost estimate and justification for infrastructure and other 
investments needed for the development of the EDC parcel.
    (D) Local investment and proposed financing strategies for the 
development.
    (v) A statement describing why other authorities--such as 
negotiated sale and public benefit transfers for education, parks, 
public health, aviation, historic monuments, prisons, and wildlife 
conservation--cannot be used to accomplish the economic development and 
job creation goals.
    (vi) If a transfer is requested for less than the estimated fair 
market value (``FMV''), with or without initial payment at the time of 
transfer, then a statement should be provided justifying the discount. 
The statement should include the amount and form of the proposed 
consideration, a payment schedule, the general terms and conditions for 
the conveyance, and projected date of conveyance.
    (vii) A statement of the LRA's legal authority to acquire and 
dispose of the property.
    (7) After receipt of an application for an EDC, the Secretary of 
the Military Department will determine whether an EDC is needed to spur 
economic development and job creation and examine whether the terms and 
conditions proposed are fair and reasonable. The Military Department 
may also consider information independent of the application, such as 
views of other Federal agencies, appraisals, caretaker costs and other 
relevant material. The Military Department may propose and negotiate 
any alternative terms or conditions that it considers necessary.
    (8) The following factors will be considered, as appropriate, in 
evaluating the application and the terms and conditions of the proposed 
transfer, including price, time of payment and other relevant methods 
of compensation to the Federal Government.
    (i) Adverse economic impact of closure on the region and potential 
for economic recovery after an EDC.
    (ii) Extent of short- and long-term job generation.
    (iii) Consistency with overall Redevelopment Plan.
    (iv) Financial feasibility of the development, including market 
analysis and need and extent of proposed infrastructure and other 
investments.
    (v) Extent of State and local investment and level of risk 
incurred.
    (vi) Current local and regional real estate market conditions.
    (vii) Incorporation of other Federal agency interests and concerns, 
and applicability of, and conflicts with, other Federal property 
disposal authorities.
    (viii) Relationship to the overall Military Department disposal 
plan for the installation.
    (ix) Economic benefit to the Federal Government, including 
protection and maintenance cost savings and anticipated consideration 
from the transfer.
    (x) Compliance with applicable Federal, State, and local laws and 
regulations.
    (f) Consideration.
    (1) For conveyances made pursuant to section 91.7(e), Economic 
Development Conveyances, the Secretary of the Military Department will 
review the application for an EDC and negotiate the terms and 
conditions of each transaction with the LRA. The Military Departments 
will have the discretion and flexibility to enter into agreements that 
specify the form, amount, and payment schedule. The consideration may 
be at or below the estimated fair market value, with or without initial 
payment, in cash or in-kind and paid over time. An EDC must be one of 
the two following types of agreements:
    (i) Consideration within the estimated range of present fair market 
value, as determined by the Secretary of the Military Department. 
Payments must be made to ensure consideration is within the estimated 
range of fair market value at the time of application.
    (ii) Consideration can be below the estimated range of fair market 
value, when proper justification is provided. The amount of 
consideration can be below the estimated range of fair market value, if 
the Secretary of the Military Department determines that a discount is 
necessary for economic redevelopment and job creation.
    (2) The amount of consideration paid in the future shall equal the 
present value of the agreed-upon fair market value or discounted fair 
market value. Additional provisions may be incorporated in the 
conveyance documents to protect the Department's interest in obtaining 
the agreed upon consideration. Also, the standard GSA excess profits 
clause, appropriately tailored to the transaction, will be used in the 
conveyance documents to the LRA.
    (3) In a rural area, as defined by this rule, any EDC approved by 
the Secretary of the Military Department shall be made without 
consideration when the base closure will have a substantial adverse 
impact on the economy of the communities in the vicinity of the 
installation and on the prospect for their economic recovery. The 
Secretary of the Military Department concerned will determine if these 
two conditions are met based on all the information considered in the 
application for an Economic Development Conveyance. Specific attention 
will be placed on the business and development plan submitted as part 
of the EDC application and the criteria listed in section 91.7(e)(8) 
will be used.
    (4) In those instances in which an EDC is made for consideration 
below the range of the estimated present fair market value of the 
property--or if the estimated fair market value is expressed as a range 
of values, below the lowest value in that range--the Military 
Department shall prepare a written explanation why the estimated fair 
market value was not obtained. Additionally, the Military Departments 
must prepare a written statement explaining why other Federal property 
transfer authorities could not be used to generate economic 
redevelopment and job creation.
* * * * *
    Dated: October 20, 1994.
L.M. Bynum,
Alternate OSD Federal Register, Liaison Officer, Department of Defense.
[FR Doc. 94-26504 Filed 10-25-94; 8:45 am]
BILLING CODE 5000-04-M