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Other Budget Issues

Last Updated: 3/13/2015
Budget Issue: Consolidated headquarters complex
Program: Military Department
Finding or Recommendation: Approve Governor's January budget proposal for $8.8 million to purchase land for a consolidated headquarters complex for the California Military Department (CMD). Direct CMD to report at hearings on the prospects of receiving federal funds for the project and what it is doing to secure such funds before approving future phases of the project.
Further Detail


The California Military Department (CMD) is responsible for the command and management of the California Army and Air National Guard. To support the operations for a force of about 23,000 personnel, the department maintains a headquarters in Sacramento, 115 armories, maintenance facilities, training sites, and aviation centers throughout the state. The Governor’s budget proposes $160 million for CMD in 2015-16, which is an increase of 2 percent from the current-year level of funding. Of this amount, $48 million is from the General Fund with the remainder mostly from federal funds.

Currently, CMD headquarters staff are divided between three leased buildings in the Sacramento region. These three leased buildings have a total of 137,500 square feet. According to the department, the location and the condition of these buildings present several challenges. For example, the distance between these buildings can make coordinating activities amongst the different staff difficult. In addition, the buildings currently do not meet security requirements set forth by the U.S. Department of Defense, such as having a certain amount of land in between their entry ways and the parking lots and walls with a certain thickness. In order for CMD to receive federal money for headquarters operating expenses (such as utilities), these security requirements must be met. However, the department has received a waiver from the federal National Guard Bureau (NGB) that allows them to obtain federal funds for operating expenses despite not meeting the security requirements. While CMD could potentially continue to lease its current facilities indefinitely, it is unclear how long NGB will continue to grant the waiver to CMD. Currently, the department receives roughly $500,000 annually in federal funds for operating expenses. In addition, by staying in the leased facilities, CMD would be subject to future increases in lease prices.

In view of the above concerns with the existing leased facilities, the Legislature provided $1 million in 2006-07 for CMD to acquire a purchase option for 30 acres of land at Mather Field in Sacramento County. (A purchase option is a mechanism used to reserve land for future purchase, in order to prevent others from buying the land.) The proposal was to use the land to build a new 322,600 square foot consolidated headquarters building that would house all headquarters staff and meet federal security requirements. The estimated total cost of the project at that time was $98.5 million—with $34.4 million provided by the state and the remaining $64.1 million provided by the federal government. New CMD construction has historically always had a substantial federal funding component. However, funding in the federal budget for military construction has declined since 2006-07. In fact, the current federal budget includes no Army National Guard military construction funding for California. As a result of the decline in federal funding, the consolidated CMD headquarters project has never moved beyond securing the land purchase option, which is set expire on June 30, 2016.

Governor’s Proposal

In order to help move the CMD headquarters project forward, the Governor’s budget proposes $8.8 million from the General Fund to purchase the 30 acres of land at Mather Field that are currently reserved. The administration proposes to build a 285,600 square foot facility on this land at an estimated cost of $113 million, which would be fully paid for by the state with lease revenue bonds. Funding for design and construction of the proposed facility would be requested in future budget proposals. After adjusting for inflation, the total cost of the project is about $17 million less than the initial cost estimate from 2006. Since stationing needs have changed over the years, the new facility proposed would be about 37,000 fewer square feet than the facility proposed in 2006.

LAO Assessment

Proposed Facility Generally Consistent With Prior Legislative Action. The Governor’s proposal is generally aligned with the Legislature’s prior action to begin the process for CMD to have a consolidated headquarters that will meet federal security requirements and streamline operations. Moreover, owning its own headquarters will insulate CMD from potential future increases in lease prices. We also note that the land that has been selected for purchase is ideal for CMD needs as it is next to a military air force base and the Office of Emergency Services, an office with whom CMD collaborates extensively. In addition, finding another similar plot of land in Sacramento County could be difficult in the future.

Federal Funds Could Be Available in the Future. While no federal funds are currently available for the project, federal funds could become available in the future if the federal budget outlook or federal priorities change. The availability of such funds could significantly reduce the cost of the project to the state. For example, if the federal government were to contribute 65 percent of project costs in the future—equivalent to the portion originally assumed—it would reduce state lease revenue debt payments by $114 million.

LAO Recommendation

Given that the site proposed for the consolidated CMD headquarters is ideal and the land purchase option is set to expire, we recommend the Legislature approve the Governor’s proposal to purchase the land. However, before approving future phases of the project, we recommend that the Legislature direct CMD to report at hearings on the prospects of receiving federal funds for this project and what the department is doing to secure such funds.