Military spiffing up its housing

• Plans for privatizing military housing (graphic)

By Dan Nakaso
Advertiser Staff Writer

This 1950s military house at 1802-B Porter Ave. on Hickam Air Force Base is among the older units designated for renovation as part of the military-wide housing upgrade plans. Cory Lum • The Honolulu Advertiser For developers The Army has tentatively scheduled an August forum to provide developers and others with information on its Schofield Barracks and Fort Shafter housing privatization project. The project will be the largest housing privatization project on the island — with the potential scope of more than 8,000 units at six locations. The forum is tentatively set for Aug. 28-29. More information will be posted on the Army's Residential Communities Initiative Web site — rci.army.mil.

"It's hot and it's smelly," said Simmons, Hickam Air Force Base's assistant housing chief. "And there's probably lots of varmints running around."

But by spring of next year, Hickam officials hope to see private construction crews renovating Unit 1802-B and hundreds of others, as well as building new houses.

The $100-million-plus project will involve a total 1,356 units — more than half of Hickam's 2,658 homes — and is part of a new wave of military home construction that will begin on O'ahu at Hickam.

The project — with even bigger ones expected by the Navy and Army on O'ahu — has attracted interest from dozens of local and Mainland developers. But they're cautious. As at other bases around the country, the developers would be committed to maintaining and managing the homes for 50 years despite the possibilities that enlistments might fall some day and bases could close.

The projects are part of the Defense Department's efforts to upgrade all of its inadequate homes by 2007, and that means accelerated military construction for O'ahu. But the Defense Department has not studied whether local economies such as Hawai'i's will benefit more from the new system than they would have under the old process, in which developers got a big payday at the end of a project.

"The Army's supposed to be defending our country and not worrying about building houses. That's what we do," said Harry Saunders, president of O'ahu operations for Castle & Cooke. "But even we're struggling with trying to get our arms around it and understand exactly how it's going to work and how we're going to get our money after 50 years."

Military construction projects have been going on for years on O'ahu, and the new plan won't result in an explosion of construction money, said Bruce Coppa, executive director of the Pacific Resource Partnership, the market recovery program of the Hawai'i carpenters' union and its union contractors.

But, Coppa said, "It does bring a steady flow of work repairs and maintenance for 365 days a year. That's a damn good service contract."

Hickam's project will be followed by Navy construction and renovations of 1,948 homes around Pearl Harbor and the Army's 10,500 units at Schofield Barracks, Wheeler Army Airfield, Helemano Military Reservation, Fort Shafter, Tripler Army Medical Center and Aliamanu Military Reservation.

The work is possible because of new thinking since 1996 by the Pentagon to divert officer and enlisted housing allowances into developers' hands so they can get projects launched sooner. Under the old system, the Department of Defense estimates it would take 30 to 40 years — at a cost of $30 billion — to upgrade the 168,000 military homes around the country that have been deemed "inadequate."

"New housing construction was totally dependent on Congress appropriating funds for each individual project," said Chris Hunt, executive vice president of El Paso, Texas-based Hunt Building Corp., which has built more than a dozen military housing projects on O'ahu under the old financing plan.

"It came down to politics and who could get the funds appropriated for their districts and bases," Hunt said. "The result was that every base was neglected, some more than others."

Instead, individual military bases from Maryland to Washington are now diverting millions of dollars in housing allowances to private developers, who in turn are building state-of-the-art homes designed to improve the quality of life for millions of service members and keep military families in the military.

Developers used to get a lump-sum payment after the work was finished and left the military to run the development.

Under the new plan, they would get a 50-year stream of income in the form of housing allowances — as long as their homes are occupied.

So the developers have an incentive to build attractive neighborhoods that provide military families with upgraded housing.

In 1998, Lackland Air Force Base in San Antonio became the first base to be renovated under the new process when Landmark Organization Inc. of Austin, Texas, began work on 420 units.

"When my family and I arrived at Lackland, we were surprised to see the home where my wife lived as a kid over 30 years ago still standing," said Lt. Col. Gordy Green. "Replacement of this housing is long overdue."

In Hawai'i, a handful of developers are expected to make bids on the Hickam deal, which is scheduled to be signed by November.

But some, such as Schuler Homes, have decided to pass on the project.

"It's a fairly complicated concept and you have to have the right players involved — from maintenance to management — to make it work," said Mike Jones, Schuler's Hawai'i division president. "It's like unwinding a ball of string when you don't know what's in the middle. Everybody wants to see a few people do it first and see how it works."

Some developers who have worked on the military's 14 privatized projects so far on the Mainland consider Hawai'i a relatively safe bet to enter into a 50-year arrangement with the military.

They have spent $100,000 and more researching each project to look at such things as the political climate, the local costs of construction, the labor market and the likelihood for base closures.

"Obviously Hawai'i, with its very large military presence, is going to see some pretty considerable activity in terms of privatization," said Hunt, whose company has worked on five military housing projects on the Mainland under the new model.

"One thing that makes it attractive to the big players in the business is that the projects are going to be large there, and nobody thinks that the Army, the Navy, the Marine Corps or the Air Force is going to leave Hawai'i," he said.

Since the Military Family Housing Privatization Initiative came to life in 1996, every branch of the military has handled its housing projects differently.

Each base has the authority to fine-tune its contracts with developers, maintenance and management companies.

Even then, many issues are left unsettled, creating some measure of uncertainty for developers who sign on for the projects.

The Hickam project, for instance, doesn't specify who will own the houses at the end of the 50 years — or what will happen to them if the base should close before then.

"We're smart, but we're not that smart," said Faye Hirono, the head of the Air Force privatization effort for the Pacific Air Forces. "Fifty years is a long time, and a lot can happen."

Reach Dan Nakaso at dnakaso@honoluluadvertiser.com or 525-8085.