Monday, March 17, 2008

The Mess at Moody Continues

It’s been a while since we’ve reported on the housing woes at Moody AFB, Georgia. As you’ll recall, the installation was part of a DoD program to “privatize” base housing, which was aimed at saving money and providing better quarters for military personnel and their families.

Back in 2004, the Air Force awarded a contract to American Eagle Communities to build 605 housing units at Moody. The Connecticut-based developer accumulated more than $3 billion in military housing contracts--mostly at Army and Air Force installations—despite the firm’s history of financial problems. American Eagle was supposed to complete the Moody project before the expected arrival of 2,000 additional airmen (and their families) by 2009.

To no one’s surprise (save the Air Force contracting community), American Eagle’s housing projects quickly fell behind schedule and ran into severe financial problems. By early 2006, the developer was in default on the contract. Local contractors never received payment for their work; bond holders for the development grew nervous, and a Georgia judge ordered the project shuttered. To date, American Eagle has produced only four new housing units for Moody AFB.

Making matters worse, the Air Force was apparently lax in its oversight of the failed project. Georgia Senator Saxby Chambliss criticized the service last week for not taking “decisive action” when the housing effort faltered.

Mr. Chambliss noted that Army and Navy installations had similar problems with American Eagle, but those issues were addressed within months. He said the Air Force didn’t respond to the Moody crisis until last year—almost 18 months after the developer defaulted on its contract. As Air Force Times reports:

Chambliss, who spoke during a hearing of the Senate Armed Services readiness and management support panel Wednesday, said his research indicated American Eagle was in technical default of the contract in March 2006, but the Air Force did not notify anyone that there were problems until the latter part of 2007. He referred to the project as a “disaster.”


William Anderson, assistant Air Force secretary for installations, environment and logistics, noted that bond holders were told about the problems early on, but said he would have to get back to the senators with an exact timeline.

“It appears actions were taken at the appropriate time,” he said.

“I’ll have to respectfully disagree with you on that,” Chambliss said. “To allow something like this to happen, where the developer goes 3½ years without performing, accumulates $30 million in debt, and owes $7 million to contractors ... and doesn’t deliver a single home ... seems to me that either the process we have on the part of the Air Force is either defective, or the process was not followed.”

As we’ve noted before, privatized housing effort is but one part of the “out-sourcing” mania that’s gripped DoD since the late 1990s. Under the guise of saving money, the Pentagon has hired contractors to perform services and functions once handled by the military. In some cases, out-sourcing has been a success, but other attempts at privatization have been disastrous.

To be fair, some private housing projects have been a success, particularly in high-cost-of-living areas where young military personnel can’t afford steep rent or mortagage payments. Under those circumstances, privatized housing can be a godsend, allowing troops and their families to live in new quarters, at a cost equal to their monthly housing allowance.

But in terms of living costs, Valdosta, Georgia hardly compare with Southern California, the Washington, D.C. area, or Manhattan’s Upper West Side. In fact, the median home price in Valdosta (located eight miles from Moody) is only $117,000. It would have been far cheaper to provide incentives for incoming airmen to buy a home. Even junior enlisted members can afford the average monthly payment on a $120,000, 30-year mortgage ($719.00 a month).

Instead, the Air Force plowed ahead with the wrong solution in the wrong location, and at the wrong time. At last report, the service was trying to restart its failed housing projects, by attracting new developers and contractors. But that takes time, and there’s no way the Moody project will be ready for the expected influx of newly-assigned airmen.

Instead of throwing more money down the drain, the Air Force (and its members) would be better-served by encouraging home ownership with a buy-back guarantee when the member moves on. A similar program already exists for civil service employees, and there’s no reason that type of approach wouldn’t work at Moody, and other bases where housing privatization has failed, and failed badly.

In the interim, Senator Chambliss—and the taxpayers--deserve a better explanation as to why the Air Force was slow to react when the Moody project went belly up.


OldSarg said...

The problem isn't so much "privatization" as it is having inexperienced building development specialist. The AF would have been better served by having an outside organization such as HUD, or USDA Rural Development manage the development.

davod said...

I do not know the answer is helping the troops to buy homes.

I have seen to many military friends stuck with a house on posting.

Unknown said...

Davod--That's why any home-buyer program at Moody (or other bases) should include the same "buy back" provision provided to civil service employees.

Sarg--I agree with your observation; the AF has virtually no experience in real estate development, and they were over their heads from Day One. Making matters worse, it appears that some contracting officials (and wing commanders) were reluctant to report problems with these developments. That's why the problem at Moody festered for so long, and the base is now facing a housing crisis.

HSNormal said...

I detect a trend