Does Cox Have a Better Idea...
The following article from the Orange County Business Journal is reproduced with the approval of the OCBJ. The articles are published electronically here as a public service. The OCBJ supports the conversion of El Toro to a commercial airport. Statements made by the authors do not necessarily reflect the views of the El Toro Airport Info Site Team.
Published March 9, 1998
Does Cox Have a Better Idea?
By PETER BRENNAN
Christopher Cox says he has a better idea about El Toro: Sell it to the private sector and let it decide if El Toro should be a commercial airport. "The property should be sold no matter what it's planned for," said Rep. Cox. "We should sell the property for the benefit of taxpayers."
While the Marines plow ahead with their mission of disposing of El Toro as expeditiously as possible, and while both sides in the contentious airport debate pull the legal and political levers prescribed by the base-closing process, Cox's idea raises bigger questions. Just who does El Toro belong to? How much is it worth? Should the U.S. Treasury or U.S. taxpayers reap the benefits of this asset? Should the county share in, or enjoy all of, the benefits?
Perhaps not surprisingly, because Cox's idea would move the base closing into uncharted territory, none of the parties involved in the process, including the Pentagon, have been quick to embrace it.
Airport proponents sound the most critical. Bruce Nestande, president of the pro-airport Citizens for Jobs and the Economy, said that while he likes the idea of privatization, and while he believes an airport is clearly the highest and best use for the land, he is concerned that Cox's plan would render a commercial airport unfeasible. "If it goes to bid, you will preclude an airport going in there because no one will assume the liabilities," Nestande said.
Nestande said it might make sense, though, to study the possibility of having the county lease the airport to a private operator after it would take title to the base. However, that procedure would forego the windfall that the federal government, the county, or both could receive in an outright sale.
Estimates of El Toro's land vary from several hundred million dollars to as much as $2 billion. The value of the base as an airport has been estimated at several billion dollars -- the roughly $10 billion cost of a new airport, discounted for upgrades needed at El Toro.
Privately some persons have suggested that Cox's plan is a shrewd maneuver by the Republican lawmaker to avoid being enmeshed in a local controversy that has bitterly divided his pro-airport constituents in Newport Beach and anti-airport constituents in south county. By saying "let the market decide," Cox doesn't have to take a contentious stand.
But Cox's actions suggest he's more serious than that. In recent months Cox has lobbied fellow Congressman and the Pentagon about putting El Toro on the sales block. And Cox said that two private parties -- British Airports Authority (a corporation that runs private airports in Great Britain) and Airport Group International, a consortium formerly associated with Lockheed -- "have already expressed an interest in becoming involved in the El Toro process."
Cox said he has also spoken with Orange County CEO Jan Mittermeier, airport supporters including George Argyros and airport opponents about his idea. All have said they will consider the idea, Cox said, although he acknowledged that he's yet to get an endorsement.
Last August Cox rounded up fellow OC congressmen Dana Rohrabacher, Ed Royce and Ron Packard and sent a letter signed by all of them to Orange County CEO Jan Mittermeier, asking that as much of the land as possible be transferred to private ownership. Cox has also been prodding Congressional leaders regarding El Toro. Last July, Floyd Spence, R-South Carolina, chairman of the House's National Security Committee and Robert Livingston, R-Lousiana, chairman of the House's Appropriation Committee, sent a letter to Defense Secretary William Cohen. They wrote: "Based on current land values, the sale of all or most of the 4,700-acre property could generate significant revenues for the Base Closure Fund, thus reducing the demands on other defense spending for our nation's armed forces.
If DoD were to make a gift of the property, however, the Base Closure Fund would be denied this revenue." A non-committal reply came in November, not from Cohen but from Navy Secretary John Dalton. He told the congressman that the Navy won't determine how much it will sell the base for until after it completes its environmental impact statement. Dalton said in his letter that the laws give the military the flexibility to give the base for free for an airport and other portions could be sold below fair market value. He also noted it could be sold at a public sale at market value.
There seems little question that Cox's plan would be the best deal for the U.S. Treasury, if the federal government decided to keep the proceeds from a sale that could generate close to $1 billion or possibly much more. On the other hand, Cox said it is possible Orange County might be able to keep the proceeds, too.
For those who argue in favor of an El Toro commercial airport as a boost for Orange County's economic development, there's a drawback to the Cox plan even if it resulted in a private airport. That's because the private airport's landing fees and other expenses would have to reflect the cost of buying the site.
An airport that was deeded for free by the Marines to Orange County -- as envisioned in the current planning process -- would have a much lower cost structure. This would enable Orange County to pass on the savings in lower landing fees and the like, making the airport attractive to use.
CEO Mittermeier said it is premature to consider selling El Toro, but that it is an option. She pointed out that developers would be reluctant to buy a property without entitlements so that they know what the property will be zoned for. "At this moment, they would be buying a pig in a poke," said Mittermeier. She said the Board of Supervisors might consider selling it as an option once the re-use is officially determined and an agreement on the transfer has been reached with the Marines.
In practice, the military base closures around the country have resulted in few sales to the private sector, but rather transfer of the bases to local redevelopment agencies. The reason is that laws for base closures have changed since the 1980s when the military tried to get the highest price possible.
In 1994, a close ally of President Bill Clinton, Arkansas Sen. David Pryor, sponsored a 1994 amendment that changed the focus of base closures from selling to the top bidder to creating employment opportunities. The sale of property is not even listed as one of President Clinton's five principal points for transferring bases into civilian hands. "While it would be nice to get money on the table, that's only one of the considerations," said Dave Larson, project manager for El Toro at the Department of Defense's Office of Economic Adjustment, which helps communities affected by base closures.
Furthermore, President Clinton during the 1996 election campaign often promised communities economically distressed by base closures that the federal government would transfer the land for free. In the case of El Toro, it's debatable whether Orange County is severely affected by the base's closure, which will result in the loss of 5,689 jobs, including 979 civilian positions. Some believe Orange County, where unemployment in January was 3.1%, can adequately adjust to the loss of these jobs and that the federal government should get the highest price possible for El Toro.
Congressmen Cox, Livingstone and Spence pointed out that the Marines spent nearly a billion dollars transferring their operations from El Toro to Miramar Naval Air Station in San Diego. Selling the base could help recoup some or all of these costs. Cox said the federal government has the legal authority to sell the land to the private sector and he doesn't anticipate proposing any new laws.
If the federal chooses not to sell the base, Cox said Orange County should consider selling it once it obtains title to the land. "If the federal government is willing to forego a billion or so asset, we (Orange County) should sell it," said Cox.
Cox counters skeptics of his private-sale plan with both ideological and evidential arguments. He noted that only one major airport, has been built in the last 20 years in the U.S, and that one, Denver, was an economic fiasco. He suggested that it's time to let the private sector do better.
Cox also noted that while the U.S. has not embraced private airports, they have gained credibility elsewhere in the world, notably in Britain (where they are operated profitability), Germany and Australia.
Cox gets a little warmer reception from opponents of the airport. While the airport opponents haven't been debating Cox's proposal, "If he thinks that will be helpful, that's something we'll be interested in," said Paul Eckles, executive director of the El Toro Reuse Planning Authority.
But Nestande said he doesn't see the federal government deviating from its current process of turning the land over to the county. He welcomes a debate on the issue. "Privatization could be a case at El Toro, but you should understand the consequences," he said.