Report

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Executive Summary

A 2013 report by the Island County Economic Development Council lauds the Naval Air Station Whidbey Island in Washington State as “four times the size of the next nearest employer” in the region. It argues that the Navy’s contributions to the local economy include $726 million in annual payroll, $44 million in retirement and disability payments, and $18 million in health care payments. Another study for the Washington Economic Development Commission found that in FY 2009 the Navy gave Island County companies $130 million in contracts. All these studies, however, are outdated and incomplete. They highlight the benefits of Naval operations but say nothing about the costs. This study examines the myriad costs that thus far have been invisible for public scrutiny and action. Among the biggest:

  • Public Costs – Navy personnel and their families use the same services as other businesses on Island County, but if they live or shop on the base they are exempt from local taxation. That means that other residents wind up underwriting a significant part of the Navy’s presence. For example, the County is losing an estimated $5.7 million per year in sales and property taxes that it would otherwise collect from employees of an equivalently sized private industry.
  • Opportunity Costs – Compared to private sector jobs, Navy jobs yield relatively small economic impact. The conversion of existing Navy jobs to civilian jobs would create 3,909 additional jobs (beyond the converted jobs), expand the economy by $503 million, and generate $153 million more in taxes (mostly to state and local government). The loss of military pay and benefits would bring down net labor income by $78 million, but this is more than compensated for through expanded proprietor income, rents, and tax revenues.
  • External Costs – The Naval Air Station’s largest program—training pilots to fly “Growler” aircraft—has exposed more than 11,000 residents to harmful levels of noise. An economic assessment model used to assess every high-noise project in the United Kingdom suggests that the health costs to Island County residents are currently $2.8 million per year, and will grow to $3.3 million if the Growler program expands as planned. Additionally, the program has depressed property values by $9.8 million thus far, and this damage will almost certainly grow as that program expands as planned.

Altogether, over the period 2010 and 2021, these invisible costs to Island County will be about $122 million. While the Navy understandably wants to discount or dismiss these costs, state and local decision-makers would be remiss not to give them serious consideration. Public officials should seek to minimize them by pressing the Navy: to begin serious conversion planning; to pay the County at least $5.7 million per year in “payments in lieu of taxes” (PILOT); to increase the Navy’s level of local contracting; to modify the Growler program (perhaps by moving its training to a less populated area); and to compensate victims of adverse Growler noise or toxic chemicals impacts. Whatever the Navy does in the future, Island County also needs to refocus its economic development efforts on diversifying its economy and reducing its dependence on ultimately unreliable streams of federal spending.

 

View the full report – Invisible Costs-NASWI