Fitch: Impact of Proposed U.S. Military Realignment Will Vary

NEW YORK -- (BUSINESS WIRE) -- Fitch believes the proposed military cuts could be negative for some localities and neutral for others while possibly creating opportunities for a few. The Pentagon proposal to close domestic bases is part of a broader reorganization of the military projected to save $487 billion over 10 years. Most of the proposed closures are slated to affect Army and Marines bases. We expect this proposal to meet with significant challenge in Congress in this election year.

If approved by Congress, the greatest negative impact could be felt in rural communities where bases represent a large portion of the population. One example is in Geary and Riley counties in Kansas. Fort Riley straddles these counties and has approximately 25,000 residents. The counties as a whole have some 105,000, according the most recent census. The Army estimates that Fort Riley contributes $2.2 billion to the Central Flint Hills Region, of which over $1.4 billion is in salaries.

We would expect a smaller financial impact on larger communities with greater population and business independence from the local base. According to the 2010 census, Fort Belvoir in Fairfax County, VA had a population of 7,100, while the county had a population of just over 1 million. Fairfax County's proximity to Washington, D.C. and thriving commercial interests make it independent of the base. For example, Tysons Corner is the largest suburban business district in the nation, with 25,700,000 square feet of office space.

Population is expected to have less of an impact on cities or regions if the base's location is attractive for redevelopment. Marine Corps Base Camp Pendleton is a prime example. It covers 200 square miles of land, including 17.5 miles of Pacific shoreline in San Diego County. The base's population is large at 60,000, but San Diego County is home to over 3 million.

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The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.

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