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

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

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

3. 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

4. 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.

5. 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:

6. 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

7. 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

8. 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