THE PLAN

In every military base closure a regional Government Reuse Agency (GRA) was established not only to minimize the impact of massive job loss, but also to develop and implement a plan for reuse of the facilities. Each of the regional GRA’s seeks and receives funding; this funding encompasses grants, joint venture capital, selling/leasing of land, and the issuance of various types of bonds. The site specific plans for military base reuse call for many different expenditures such as:  staff salary, promotional materials, public relation functions, advertising, market research, capital improvements to the infrastructure of each base area (e.g., road improvements, utility systems, water and sewer improvement), demolition and other construction. The redevelopment agencies associated with each former military base are seeking funding to further individual projects.

Each agency is empowered to sell, lease, repair and otherwise control the base property. In all instances various infrastructure improvements must be made to create a development that will attract private industry to locate within the former military base area.

The focus of infrastructure investment has been undertaken by the CMB Regional Center and its investment partnerships for several reasons. The challenges for the former military base communities to rebuild or reinvent their economy are many.

Each former military base has the unique challenges of old military infrastructure that is not up to current standards. Asbestos and other hazardous materials are found on all former military bases. Many times, demolition is the first step towards infrastructure improvement.

Infrastructure is the backbone of any community development. It is the foundation upon which all economic activity and job growth are based. Infrastructure costs are the single largest impediment to creating jobs and increasing regional productivity in any community development plan.

Infrastructure installation or improvement creates a challenge in the financing strategy. How can the communities and development agencies match the timing of infrastructure improvement needs with the availability of funding sources to pay for these improvements? In a typical former military base reuse scenario, infrastructure needs arise well before there are any available funding sources. Specifically, economic development officials must meet the challenge of synchronizing planned infrastructure improvements with the available funding for such improvements.

CMB and the Regional Development Agencies are using CMB investment capital to assist in balancing several factors that influence both the timing of infrastructure requirements and available revenues to fund them. CMB funds are used in the following manner to address the challenges stated above:

The use of CMB capital allows the infrastructure to be phased and costs to be spread out so that reuse and new development activities can financially support the planned improvements.

The use of CMB capital allows the infrastructure project to get started and combined with conventional development fees, lease income, land sales and other revenue sources to continue the infrastructure building.

Once the infrastructure is built new companies bring new jobs and can apply conventional land-based financing mechanisms to build structures on the newly built infrastructure.

Once new construction takes place the Government agencies have the availability of tax increment revenue to fund a portion of the infrastructure.

The use of CMB capital allows the Government Agencies to fund the required local matching component of Federal and State grants and loans thus increasing the capital available to be spent on infrastructure building.

As pointed out above, there are several ways to fund infrastructure. However rarely, if ever, is private sector investment or conventional financing used to fund infrastructure unless the infrastructure construction is tied to a specific project as well as a public revenue stream. In other words, the financing for infrastructure, the backbone of economic growth and job creation, is always the responsibility and challenge of the governmental bodies of each community or development agency. In former military base reuse, the high level of infrastructure investment necessary simply cannot be allocated among the eventual users, as the burden is heavily allocated to the public at the beginning of any development.

The types of financing for infrastructure are as outlined above. However, each type of financing has one unique constraint. That constraint is timing. Revenue sources such as tax increment financing, Mello-Roos bonding, grant revenues, or shared land based allocation of cost all require a period of time to begin paying the costs of infrastructure.

The CMB plan is to assist in this critical area of community development by providing time or “bridge financing” until the actual revenues start to flow from those traditional sources of financing outlined above. As an example, tax increment financing of infrastructure or TIF is dependant upon the increase in tax basis after development. This is a significant and effective source of financing for infrastructure. However, the up-front funds have to come from somewhere, as it takes time for this revenue stream to build.

The CMB Regional Center and the CMB investment partnerships business plan is simple. CMB, as an investment vehicle for foreign nationals to acquire a permanent visa, is mandated by law to “increase regional productivity” and to create ten new American jobs per investor. CMB partnerships enter into six year term interest only loan agreements with the Government agencies or base master redevelopers. The CMB funds are combined with public and private funds to build a project. The strategic partnership of the former military base redevelopment agencies and CMB allows CMB capital to be bridge financing providing the up-front capital for infrastructure building. This investment strategy can take the form of:  providing required matching funds for state and federal grants or by CMB funding large amounts of the required infrastructure investment capital allocable directly to local governments, local reuse agencies, and private entities. The positive affect of this early stage financing is to jump start the activity of infrastructure construction, improvements or repair when no other funding sources are available. The timing and resources necessary to complete each project will vary depending on the nature of the project. Some of the projects are one-time events with a single participant, while other projects are essentially ongoing within the entire former military base reuse plan of the redevelopment agency. There may be many parties involved in implementing a particular financing plan.

The bottom line is this early financing of infrastructure investment begins the chain reaction of economic development that causes significant new employment for a long period of time. Without the basic core infrastructure no jobs exist. It is now, in our economic times, that this same approach to job creation has become a Presidential and Nation wide buzz word. “Infrastructure.” The President and Congress are allocating billions for infrastructure building because it creates jobs! CMB has focused on infrastructure building since its first successful job creating investment in 1998. The CMB Regional Centers will continue to use the same business structure and model for job creating investments.