[Federal Register Volume 62, Number 244 (Friday, December 19, 1997)]
[Rules and Regulations]
[Pages 66523-66527]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-33109]
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DEPARTMENT OF DEFENSE
Office of the Secretary
32 CFR Part 175
[DoD Instruction 4165.67]
RIN 0790-AF62
Revitalizing Base Closure Communities and Community Assistance
AGENCY: Department of Defense, Office of the Deputy Under Secretary of
Defense (Industrial Affairs and Installations).
ACTION: Final rule.
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SUMMARY: This rule establishes procedures for implementing section 2837
of the National Defense Authorization Act for FY96 concerning the
Federal Agency leaseback of property transferred to Local Redevelopment
Authorities (LRAs) at installations approved for closure or
realignment, and informs communities affected by base closure of these
procedures.
EFFECTIVE DATE: December 19, 1997.
FOR FURTHER INFORMATION CONTACT:
Jennifer Atkin, Base Closure and Community Reinvestment Office, 400
Army-Navy Drive, Suite 200, Arlington, VA 22202, telephone (703) 604-
2400.
SUPPLEMENTARY INFORMATION:
Regulatory History and Background Information
DoD published a proposed rule on February 21, 1997 (62 FR 7966)
implementing section 2837 of the National Defense Authorization Act for
FY96 (Pub. L. 104-106). Public comments were accepted until April 22,
1997. This final rule addresses the comments received on the proposed
rule.
Discussion of Public Comments
During the public comment period, the Department received over 40
public comments from 14 sources, including numerous LRAs. The comments
are summarized generically below. Changes that have been made to the
rule in response to public comments are noted. The comments fall into
eight broad categories including:
Federal Tenant Procurement Authority
Many comments requested that the rule revise the provisions
regarding what services a Federal tenant may pay for and how the
services can be obtained. Examples include: (1) The rule should
authorize LRAs to charge Federal leaseback tenants a Common Area
Maintenance Fee; (2) the rule should authorize Federal tenants to sole
source for ``landlord'' services; and, (3) the rule should require
Federal tenants to pay for services if the Agency paid for the services
when it owned the property (note: this would only apply to existing
Federal tenants rather than agencies relocating to the site).
Response: The Federal Government cannot pay for municipal services
that are provided by a locality to its population using tax revenues.
Doing so would, in effect, result in a taxing of the Federal
Government. But, as evidenced by numerous Supreme Court Cases
interpreting the Supremacy Clause of Article VI of the United States
Constitution, States cannot tax the Federal Government. With respect to
other services, Federal tenants can only pay for those services that
are a requirement of the Federal Government. Paying a Common Area
Maintenance Fee could result in the Federal tenant paying for services
that are above and beyond what is needed to use the property being
leased. For those services that are necessary, the leaseback authority
does not remove the Federal Government's responsibility to abide by
existing procurement laws. As a result, such services must be acquired
using existing procurement laws and regulations. In some circumstances,
a sole source contract may be allowable.
Leaseback Transfer Approval/Rejection Authority
Out of concern that prospective Federal tenants will reject an
LRA's request for a leaseback transfer with virtually no justification,
some comments requested that the rule establish criteria that would
have to be
[[Page 66524]]
met for a Federal Agency to reject a leaseback in favor of property
ownership. Other comments suggested that an arbitration or grievance
process be established or that the General Services Administration
(GSA) should be assigned the task of approving leaseback requests.
Response: The Federal Property and Administrative Services Act of
1949 gives Federal Departments and Agencies priority on the use of base
closure and realignment property. This ``right of first refusal'' to
obtain ownership of property is unchanged by the leaseback authority.
As a result, DoD does not have the legal authority to require a Federal
Department or Agency to give up the right of ownership in favor of a
leasehold interest. However, if a leaseback is requested by an LRA, the
Department urges Federal Agencies to give serious consideration to
leasing the property from the LRA instead of pursuing ownership through
a Federal-to-Federal transfer.
Process For Securing Another Federal Tenant
The proposed rule specified that if the Federal Tenant no longer
requires use of the property before the expiration of the lease term,
the remainder of the term may be satisfied by the same or another
Federal Agency for a similar use. The rule stated that GSA would assist
in identifying interest in the property. Comments raised by the public
requested that this process be clarified to include how GSA will screen
for another user and how long GSA will have to secure another tenant.
Response: Section 175.7(k)(10(vi) has been amended to provide more
guidance on how a replacement tenant would be identified by GSA. The
rule also stipulates that GSA would have only 60 days in which to find
a new tenant.
Valuation and Consideration
Numerous public comments addressed the issue of determining value
for the leaseback property and setting the level of consideration. The
comments included: (1) The value of leaseback property should be set at
zero; (2) consideration for the leaseback property should not be due
until after the Federal tenant vacates; (3) consideration for leaseback
property should be set at zero; and, (4) the rule should define how
value will be determined for a stand-alone leaseback.
Response: The leaseback authority requires the Department to
determine the fair market value of the property before transfer. As a
result, the value of the leaseback property cannot be preset through
regulation. The rule does allow, however, for flexibility with respect
to payment terms. Consideration can be in cash or in kind, and can be
paid up front, over time, or when the Federal tenant vacates the
property, as long as the amount of consideration (or formula for
determining the amount of consideration) and the schedule for payment
are agreed upon before the property is transferred. The value of
leaseback property being transferred under an Economic Development
Conveyance (EDC) will be determined in accordance with existing EDC
valuation procedures. Property being conveyed as a stand-alone
leaseback will be valued based on the proposed reuse.
Federal Tenant Improvements
Several LRAs expressed concern that the proposed rule allows a
Federal tenant to repair, improve, and maintain the property at its
expense without the approval of the LRA. The comments stated that
without requiring a Federal tenant to consult with the LRA, alterations
made to the property could be inconsistent with the community's plans
for ultimate use of the property.
Response: The Department agrees with the comments that were
submitted and has revised the rule to require Federal tenants to
consult with the LRA before making repairs and improvements.
Insurance
A few comments requested that the rule require Federal tenants to
obtain insurance for property leased back from an LRA in the same way
that LRAs are required to have insurance for property leased from DoD.
Response: Requiring Federal tenants to obtain insurance is
unnecessary because the Federal Government is self insured.
Leaseback Compatibility With Other Conveyance Regulations
Comments received from another Federal Agency raised concerns that
a leaseback transfer may be incompatible with a public benefit transfer
(PBT) when the leaseback property is located within the PBT property.
For example, for leaseback property located within or adjacent to
property being conveyed via a PBT, the public benefit grantee may not
be the LRA--the recipient of the leaseback property. In addition, if
leaseback property is located within or adjacent to PBT property, the
Federal Agency's use of the property may be incompatible with the
public benefit use (e.g. obstructing airspace near a public airport).
The comment recommended that the rule require the Military Departments
to consult with the Federal sponsoring Agency if the property to be
transferred under the leaseback authority is within or adjacent to PBT
property.
Response: Property needed by another Federal Department or Agency
is either transferred using the Federal-to-Federal transfer process or
it is transferred to an LRA and then leased back to the Federal entity
under the leaseback authority. The use of the property is the same
regardless of the transfer method. The Department does not consult with
Federal sponsoring Agencies when using a Federal-to-Federal transfer,
so the rule has not been changed to require consultation when using a
leaseback. In some cases use of a leaseback transfer rather than a
Federal-to-Federal transfer could actually be more beneficial if the
property is located within or adjacent to PBT property because the
leaseback rule allows the property to be transferred to another entity
(e.g. an airport authority) and provides a guarantee on the future use
of the property.
Legality of a Lease/Leaseback Arrangement
One comment stated that, contrary to the provisions of
Sec. 175.7(k)(7) of the proposed rule, it is legally impossible to have
a leaseback without first deeding the property to the LRA. The letter
stated that if a Federal Agency needs access to the property before a
deed can be issued, the Military Department can allow the Agency access
without first going through a leasback transaction. The letter also
stated that non-DoD Federal agencies would refuse to enter into lease/
leaseback arrangement.
Response: The Department's legal counsel indicates that a lease in
furtherance of conveyance/leaseback transaction is allowable if a deed
transfer cannot yet be accomplished. But, the Department acknowledges
that in some circumstances other options may be available to provide a
Federal Agency access to the property including the use of a permit.
Statement of Determination and Certifications
Executive Order 12866, ``Regulatory Planning and Review''
It has been determined that this rule is not a significant
regulatory action as defined under section 3(f)(1) through 3(f)(4) of
Executive Order 12866.
Public Law 95-354, ``Regulatory Flexibility Act'' (5 U.S.C. 601)
It has been determined that this rule will not have a significant
economic
[[Page 66525]]
impact on a substantial number of small entities.
Public Law 104-13, ``Paperwork Reduction Act of 1995'' (44 U.S.C.
Chapter 35)
It has been certified that this rule does not impose any reporting
or recordkeeping requirements.
List of Subjects in 32 CFR Part 175
Community development, Government employees, Military personnel,
Surplus Government property.
Accordingly, 32 CFR part 175 is amended to read as follows:
PART 175--[AMENDED]
1. The authority citation for 32 CFR part 175 continues to read as
follows:
Authority: 10 U.S.C. 2687 note.
2. Section 175.3 is amended by adding a new paragraph (l) to read
as follows:
Sec. 175.3 Definitions.
* * * * *
(l) Similar use. A use that is comparable to or essentially the
same as the use under the original lease.
3. Section 175.4, Sec. 175.5, and Sec. 175.6 are revised to read as
follows:
Sec. 175.4 Policy.
It is DoD policy to help communities impacted by base closures and
realignments achieve rapid economic recovery through effective reuse of
the assets of closing and realigning bases-more quickly, more
efficiently, and in ways based on local market conditions and locally
developed reuse plans. This will be accomplished by quickly ensuring
that communities and the Military Departments communicate effectively
and work together to accomplish mutual goals of quick property disposal
and rapid job generation. This regulation does not create any rights of
remedies and may not be relied upon by any person, organization, or
other entity to allege a denial of any rights or remedies other than
those provided by Title XXIX of Public Law 103-160, Public Law 103-421,
or Title XXVII of Public Law 104-106.
Sec. 175.5 Responsibilities.
(a) The Deputy Under Secretary of Defense (Industrial Affairs and
Installations), after coordination with the General Counsel of the
Department of Defense and other officials as appropriate, may issue
guidance through the publication of a Manual or other such document
necessary to implement laws, Directives and Instructions on the
retention or disposal of real and personal property at closing or
realigning bases.
(b) The Heads of the DoD Components shall ensure compliance with
this part and guidance issued by the Assistant Secretary of Defense for
Economic Security and the Deputy Under Secretary of Defense (Industrial
Affairs and Installations) on revitalizing base closure communities.
Sec. 175.6 Delegations of authority.
(a) The authority provided by sections 202 and 203 of the Federal
Property and Administrative Services Act of 1949, as amended (40 U.S.C.
483 and 484) for the utilization and disposal of excess and surplus
property at closing and realigning bases has been delegated by the
Administrator, GSA, to the Secretary of Defense by delegations dated
March 1, 1989; October 9, 1990; September 13, 1991; and, September 1,
1995.\1\ Authority under these delegations has been previously
delegated to the Secretaries of the Military Departments, who may
delegate this authority further.
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\1\ Available from the Base Closure and Community Reinvestment
Office, 400 Army Navy Drive, Suite 200, Arlington, VA 22202, email:
base__reuse@acq.osd.mil''
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(b) Authorities delegated to the Deputy Under Secretary of Defense
(Industrial Affairs and Installations) \2\ by Sec. 174.5 of this
chapter are hereby redelegated to the Secretaries of the Military
Departments, unless otherwise provided within this part or other DoD
Directive, Instruction, Manual, or Regulation. These authorities may be
delegated further.
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\2\ A Deputy Secretary of Defense memorandum of May 15, 1996,
``OUSD (Acquisition and Technology) Reorganization'' disestablished
the office of the Assistant Secretary of Defense for Economic
Security and established the office of the Deputy Under Secretary of
Defense (Industrial Affairs and Installations). Copies are available
from the Base Closure and Community Reinvestment Office, 400 Army
Navy Drive, Suite 200, Arlington, VA 22202, email:
base__reuse@acq.osd.mil''
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4. Section 175.7 is amended by revising paragraph (a)(13)(i) and
paragraph (d)(3)(i), by reserving paragraph (j) and by adding paragraph
(k) to read as follows:
Sec. 175.7 Procedures.
(a) * * *
(13) * * *
(i) In unusual circumstances, extensions beyond six months can be
granted by the Deputy Under Secretary of Defense (Industrial Affairs
and Installations).
* * * * *
(d) * * *
(3) * * *
(i) In the event there is no LRA recognized by DoD and/or if a
redevelopment plan is not received from the LRA within 15 months from
the determination of surplus under paragraph (a)(13) of this section,
(unless an extension of time has been granted by the Deputy Under
Secretary of Defense (Industrial Affairs and Installations)), the
applicable Military Department shall proceed with the disposal of
property under applicable property disposal and environmental laws and
regulations.
* * * * *
(k) Leaseback of real property at base closure and realignment
sites. (1) Section 2905(b)(4)(c) of Public Law 101-510, 10 U.S.C. 2687
note (BRAC 1990), as added by section 2837 of Public Law 104-106, gives
the Secretary of Defense the authority to transfer real property that
is still needed by a Federal Department or Agency to an LRA provided
the LRA agrees to lease the property back to the Federal Department or
Agency in accordance with all statutory and regulatory guidance. The
purpose of this authority, hereinafter referred to as a ``leaseback,''
is to enable the LRA to obtain ownership of the property pursuant to
the BRAC process while still ensuring that the Federal need for use of
the property is accommodated.
(2) Subject to BRAC 1990 and this part, the decision whether to
transfer property pursuant to a leaseback rests with the relevant
military department. However, a military department may only transfer
property via a leaseback if the Federal entity that needs the property
agrees to the leaseback arrangement.
(3) If for any reason property cannot be transferred pursuant to a
leaseback (e.g., the relevant Federal Agency prefers ownership, the LRA
and the Federal entity cannot agree on terms of the lease, or the
military department determines that a leaseback would not be in the
Federal interest), such property shall remain in Federal ownership
unless and until the relevant landholding entity determines that it is
surplus pursuant to the Federal Property Management Regulations.
(4) If a building or structure is proposed for transfer under this
authority, that which is leased back to the Federal Department or
Agency may be all or a portion of that building or structure.
(5) The leaseback authority may be used at all installations
approved for closure or realignment under BRAC 1990.
(6) Transfers under this authority must be to an LRA.
(7) Transfers under this authority may be by lease in furtherance
of conveyance or deed. A lease in furtherance of conveyance is
appropriate only in those circumstances where deed transfer cannot be
accomplished because the requirements of the Comprehensive
Environmental Response,
[[Page 66526]]
Compensation, and Liability Act (CERCLA) (42 U.S.C. 9601, et seq.) for
such transfer have not been met. The lease in furtherance of conveyance
or accompanying contract shall include a provision stating that the LRA
agrees to take title to the property when requirements for the transfer
have been satisfied.
(8) The leaseback authority can be used to transfer property that
is needed either by existing Federal tenants or by Federal Departments
or Agencies desiring to locate onto the property after operational
closure. The Military Department that is closing or realigning the
installation may not transfer property to an LRA under this authority
and lease it back unless:
(i) The Military Department is acting in an Executive Agent
capacity on behalf of a Defense Agency that certifies that a leaseback
is in the interest of that Defense Agency; or,
(ii) The Secretary of the Military Department certifies that a
leaseback is in the best interest of the Military Department and that
use of the property by the Military Department is consistent with the
obligation to close or realign the installation in accordance with the
recommendations of the Defense Base Closure and Realignment Commission.
(9) Property eligible for a leaseback is not surplus because it is
still needed by a Federal entity. However, notwithstanding that the
property is not surplus and that the LRA would not otherwise have to
include such property in its redevelopment plan, the LRA should include
the proposed leaseback of property in its redevelopment plan, taking
into account the planned Federal use of such property.
(10) The terms of the LRA's lease to the Federal entity should
afford the Federal Department or Agency rights as close to those
associated with ownership of the property as is practicable. The
requirements of the General Services Acquisition Regulation (GSAR) (48
CFR Part 570) are not applicable to the lease, but provisions in the
GSAR may be used to the extent they are consistent with this part. The
terms of the lease are negotiable subject to the following:
(i) The lease shall be for a term of no more than 50 years, but may
provide for options for renewal or extension of the term at the request
of the Federal Department or Agency concerned. The lease term should be
based on the needs of the Federal entity.
(ii) The lease, or any renewals or extensions thereof, shall not
require rental payments.
(iii) The lease shall not require the Federal Government to pay the
LRA or other local government entity for municipal services including
fire and police protection.
(iv) The Federal Department or Agency concerned may be responsible
for services such as janitorial, grounds keeping, utilities, capital
maintenance, and other services normally provided by a landlord.
Acquisition of such services by the Federal Department or Agency is to
be accomplished through the use of Federal Acquisition Regulation
procedures or otherwise in accordance with applicable statutory and
regulatory requirements.
(v) The lease shall include a provision prohibiting the LRA from
transferring fee title to another entity during the term of the lease,
other than one of the political jurisdictions that comprise the LRA,
without the written consent of the Federal Department or Agency
occupying the leaseback property.
(vi) The lease shall include a provision specifying that if the
Federal Department or Agency concerned no longer needs the property
before the expiration of the term of the lease, the remainder of the
lease term may be satisfied by the same or another Federal Department
or Agency that needs property for a similar use.
(A) Prior to exercising this option, the Federal tenant shall
consult with the LRA concerned or other property owner if the property
has been conveyed by the LRA to another entity in accordance with
Sec. 175.7(k)(10)(v) of this part.
(B) If the Federal tenant decides to exercise this option after
consulting with the LRA or other property owner, it shall notify the
appropriate General Services Administration regional office that the
property is available for use by a Federal Department or Agency. The
General Services Administration regional office shall have 60 days from
the date of notification in which to identify a Federal Department or
Agency to serve out the term of the lease and to notify the LRA or
other property owner of the new tenant. If the regional office does not
notify the LRA or other property owner of a new tenant within 60 days
from the date of notification, the property is available for use by the
LRA or other property owner.
(C) If the Federal tenant decides not to exercise this option after
consulting with the LRA or other property owner, the property is
available for use by the LRA or other property owner.
(vii) The terms of the lease shall provide that the Federal
Department or Agency may repair and improve the property at its expense
after consultation with the LRA.
(11) Conveyance to an LRA under this authority shall be in one of
the following ways:
(i) Lease back property that will be conveyed under an Economic
Development Conveyance (EDC) shall be conveyed as part of the EDC in
accordance with the existing EDC procedures and
Sec. 175.7(k)(11)(ii)(B)(4). The LRA shall submit the following in
addition to the application requirements outlined in Sec. 175.7(e)(5):
(A) A description of the parcel or parcels the LRA proposes to have
transferred to it and then to lease back to a Federal Department or
Agency;
(B) A written statement signed by an authorized representative of
the Federal entity that it agrees to accept a leaseback of the
property; and,
(C) A statement explaining why a leaseback is necessary for the
long-term economic redevelopment of the installation property.
(ii) Leaseback property not associated with property to be conveyed
under an EDC shall be conveyed in accordance with the following
procedures:
(A) As soon as possible after the LRA's submission of its
redevelopment plan to the DoD and HUD, the LRA shall submit a request
for a leaseback to the Military department. The Military Department may
impose additional requirements as necessary, but at a minimum, the
request shall contain the following:
(1) A description of the parcel or parcels the LRA proposes to have
transferred to it and then to lease back to a Federal Department or
Agency;
(2) A written statement signed by an authorized representative of
the Federal entity that it agrees to accept a leaseback of the
property; and,
(3) A statement explaining why a leaseback is necessary for the
long-term economic redevelopment of the installation property.
(B) The transfer may be for consideration at or below the estimated
present fair market value. In those instances in which the property is
conveyed for consideration below the estimated present fair market
value, the Military Department shall prepare a written explanation of
why the estimated present fair market value was not obtained.
(1) In a rural area, the transfer shall comply with
Sec. 175.7(f)(5).
(2) Payment may be in cash or in-kind.
(3) The Military Department shall determine the estimated present
fair market value of the property before transfer under this authority.
(4) The exact amount of consideration, or the formula to be used
[[Page 66527]]
to determine that consideration, as well as the schedule for payment of
consideration must be agreed upon in writing before transfer under this
authority.
Dated: December 15, 1997.
L.M. Bynum,
Alternate OSD Federal Register Liaison Officer, Department of Defense.
[FR Doc. 97-33109 Filed 12-18-97; 8:45 am]
BILLING CODE 5000-04-M
