The Army, for the first time in history, plans to obtain a $400 million mortgage to build a model base and town for its new light-infantry division at Fort Drum, N.Y., officials disclosed yesterday. The mortgage payments would run about $50 million a year, they said.
"We're trying to privatize to realize savings in both construction time and costs," Army acting comptroller Harry M. West III said in detailing the new financing strategy to The Washington Post.
In addition to getting the base built faster and cheaper, West said that using private funding rather than government money up front would avoid adding significantly to the federal deficit and straining the Army's tight budget. The Army would pay off the $400 million over 24 years, and then would own the base and its accompanying town for 29,000 military personnel and dependents, he added.
The financing scheme has widespread backing within the Pentagon, West said, and is expected to be forwarded to the White House Office of Management and Budget next week.
If approved, the Army's congressional allies will propose adding language to the fiscal 1986 military construction bill authorizing the service to seek the $400 million in the private market.
The Army is moving out on the financing plan at the same time that its concept of building five new light divisions from existing forces is under challenge by the Pentagon's manpower office.
An internal memo from manpower director Lawrence J. Korb argues that future defense budgets might not have room for such innovations. The Army estimates that putting a light division at Fort Drum would cost $1.2 billion. The next-highest estimate, to put a light division in Alaska, is $300 million to $400 million.
Army leaders contend that most of the money earmarked for the five divisions -- four active and one reserve -- would have to be spent even if they are not created. They add that their plan to turn to private industry to finance, build and maintain Fort Drum's light-infantry complex would avoid putting a big bulge in the federal deficit and future Army budgets.
The 10,000-member light division, compared with the 16,000 soldiers in a regular unit, as well as its special equipment designed for ease of airlift, make it ideal for confronting threats in distant places, Army leaders feel.
West said that soundings in the financial markets indicated that giant investment and construction companies stand ready to write a mortgage for the Army in which the federal government would be virtually guaranteeing repayment. He said the Army hopes to obtain a mortgage with an interest rate far below what a home buyer would pay. The idea is to commit to a low rate but agree to move it up or down with the consumer price index, he said.
West said that Prime Minister Margaret Thatcher of Britain has had success in leaving it to private investors to fund big projects rather than deepening the public debt with further government borrowing. "Transferring public debt helps the deficit," West said.
If Congress authorizes this "first" for the Army, he said, the service will go to giant investment houses and construction companies for both short- and long-term construction money for Fort Drum. He mentioned Morgan Stanley & Co. and Salomon Brothers of New York as the type of investment houses that might be interested, although no commitments have been made, he said. Pension funds are another possible source of private financing, he added.
Under the Army plan, the mortgage holder would obtain no special tax breaks, a condition designed to head off the kind of objections Congress has raised to the Navy's leasing of ships.
If all goes well, the Army would sign the mortgage and start construction of facilities for the light-infantry division at Fort Drum by spring. The barracks, office, training areas, motor pools and most of the 4,700 housing units would be completed in three years on 300 of the 103,000 acres at the fort, located in northwestern New York.
"We seldom go out and build a new division post," West said, "and it will be as good as we can make it from a training standpoint. The Army intends to make this a model installation for soldiers and their families, as well as saving time and cost."