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The Honolulu Advertiser
Posted on: Tuesday, February 11, 2003

Privatization of Navy homes to boost economy

By William Cole
Advertiser Military Writer

The Navy is the latest of the military services in Hawai'i to initiate a massive housing privatization effort that's expected to speed the number of homes being built and pour millions of dollars into the economy.

Congressional approval was given last month for the repair or replacement of about 2,000 Navy homes and other facilities as part of the first phase of the project.

Family housing at Halsey Terrace, Radford Terrace, Moanalua Terrace, Hokulani and McGrew Point is included in the initial round of the public-private venture, or PPV. Officials expect the agreement to be signed next year; construction would take several years after that.

The Navy also expects to privatize Marine Corps family housing in a maximum of two phases that would start with contracts being signed in 2006 and 2007. The Marine Corps has more than 2,300 homes.

"The public-private venture will be a significant boon for the Hawai'i economy," said Brad Davis, the PPV manager for the Pacific Division of Naval Facilities Engineering Command. "We're accelerating the construction of housing, and this will result in hundreds of millions of dollars pumped into the Hawai'i economy during the next 10 to 12 years for the Navy-Marine Corps project alone."

The next step will be to see how much developer interest there is in the plan. A request for proposals will be issued in April.

The Army last August launched its housing privatization effort for 7,700 homes on O'ahu, a plan the service figures is worth at least $100 million a year. Hickam Air Force Base, meanwhile, is seeking to privatize 1,356 units — more than half of the base's 2,658 homes.

The projects are part of the Defense Department's efforts to upgrade all of its inadequate homes by 2007.

Under the Navy privatization effort, a limited liability company will be created with a private entity that would then be responsible for replacement, renovation, maintenance and operation of government housing over a period of 50 years. The Navy will contribute $25 million in cash and lease the land to the LLC.

In addition to accelerating the timeframe for replacement of the older housing, the Navy expects to get more houses for the buck.

During the first phase, 961 homes will be demolished and be replaced with approximately 906 homes. Another 942 homes will be repaired.

"It will be better organized — we're not dependent on the military construction (financing) process to have projects authorized and appropriated one year at a time," Davis said. "That budget process is streamlined."

The project is separate from a Navy plan to consolidate facilities by redeveloping Ford Island and adding up to 420 family-housing units, bachelor-enlisted quarters, office space, restaurants, shops and a Military Aviation Museum of the Pacific on the historic landmark.

Additionally, the Navy broke ground last fall on Ford Island on a 140-unit housing project for junior enlisted sailors.

The family homes — along with about 40 existing homes — are expected to be privatized in a future phase, Davis said.

Davis said the privatization project will not represent as drastic a change in housing improvements comparatively speaking because some other services have not had a replacement program as "robust" as the Navy.

From 1997 to 2001 the Navy has spent $280 million to repair or replace an average of 340 homes per year, Davis said. With privatization, Navy families who live in military housing will receive Basic Allowance for Housing — something they do not now see — which then would be used to pay rent.

Privatization will mean an improvement in quality of life with new homes being built faster, Davis said. For developers, meanwhile, "we'll be realizing a significant amount of construction in a relatively short period of time. That's a benefit."

Reach William Cole at wcole@honoluluadvertiser.com or 525-5459.