Boston Globe -- NorthWest section
Sunday, April 3, 2005

Analyst says Hanscom losses are uncertain

By Matt Viser, Globe Staff

A financial adviser to the four towns surrounding Hanscom Air Force Base has
cautioned against overestimating the financial impact of its potential
closing, an assessment that has surprised some of the local officials who
hired him and who want to present the best possible case for keeping the
base open.

Richard Paik, of Bonz and Company, told a meeting of the Hanscom Area Town
Selectmen's organization on March 24 that closing the base would mean the
loss of about $200 million in defense contracts to Massachusetts firms. He
said that he could not determine the number of jobs that would be lost due
to the closure. "Let's not get too terrified and think everything will go
down the tubes if the base closes," said Paik, who is part of a team hired
by the officials to evaluate what the closing of the base would mean to the
area.

At the same time, the Massachusetts Defense Technology Initiative, chaired
by Governor Mitt Romney and Senator Edward M. Kennedy, for months has been
claiming that the base's closing would take 30,220 jobs and $3 billion from
the local economy, figures used to bolster the argument to Pentagon
officials that the base is worth keeping open.

A spokesman for the Defense Technology Initiative said this week that $3
billion figure was accurate and represented not only the loss of defense
contract revenue but the impact the base closing would have on the economy
at large.

Paik's analysis doesn't take into account the number of jobs that would be
lost. "The answer to how many jobs will be lost, I don't know," Paik said at
the March 24 meeting. "And there's really no way of knowing."

The US Department of Defense is considering a list of possible bases to
close, and military specialists have said that Hanscom is a prime target for
either shuttering or downsizing. Local officials from Bedford, Concord,
Lexington, and Lincoln have fought for the base to stay open, but they have
also hired Sasaki Associates, a Watertown-based consultant, to analyze the
base's infrastructure and advise them on what to do if the base closes.

Paik, the financial adviser, is part of that team, which was hired through a
$156,000 grant from the federal government.

Paik could not be reached for comment, but Fred Merrill, the project manager
for Sasaki, downplayed the differences in the assessments last week in an
interview, saying they were not trying to dispute the Defense Technology
Initiative's figure.

"We have the same general numbers. It's just how you define them," Merrill
said.

Still, Paik's statements concerned many at the March 24 meeting. Several
area officials took Paik aside after his presentation to dispute his
figures. After talking with the officials, Paik said he was planning to meet
with representatives from the Defense Technology Initiative to compare their
assessments with his.

The concern of officials over Paik's assessment illustrates the importance
they have placed on presenting the most convincing arguments available on
why the base should be kept open and the sensitivity they feel over even the
slightest suggestion that closing the base will not be catastrophic. It also
shows how difficult it is to predict far-reaching financial implications.

In an interview last week, Sara Mattes, a Lincoln selectwoman and chairwoman
of the Hanscom area group, downplayed the differences between the two
assessments.

"I'm not going to quibble over the numbers," said Mattes. "Regardless, we
know that the impact is going to be huge."

Paik analyzed defense contracts that were distributed through Hanscom in
2003. He found that of the $3.3 billion that went out, about $800 million,
or 25 percent, went to Massachusetts-based firms. A large bulk of the funds
that went to Massachusetts about $600 million went to Lincoln Labs and
MITRE, two companies that Paik expects will stay in Massachusetts even if
Hanscom is closed. So, he says, only about $200 million would be lost if
Hanscom were closed.

He also argues that since 75 percent of the defense contracts distributed by
Hanscom went to out-of-state companies, Massachusetts businesses could still
reap the benefits of military money even if the base was shut down.

"Obviously location is not a factor in getting these contracts," Paik told
the Hanscom area selectmen. "Proximity is not what drives it."

A study done in September for the Defense Technology Initiative focuses less
on the defense contracts themselves and more on the jobs they generate. The
study, done by the University of Massachusetts' Donahue Institute, estimates
that the military contracts generate nearly 10,000 jobs. In addition, the
study said, there are 4,150 military and civilian employees on the base who
earn $342 million a year.

The study estimates that those 14,150 residents generate $1.6 billion and
17,000 jobs for the local economy by spending money on things like cars,
homes, and shopping.

All told, with jobs, military contracts, and indirect spending factored in,
the study says Hanscom's closure would take away $3 billion and 30,220 jobs.
The study also estimates that if the Army's Soldier Systems Center in Natick
closed, $254 million and 3,000 jobs would be lost, which has led state
officials, including Romney and Kennedy, to claim that closing
Massachusetts' military bases would take $3.3 billion and 33,000 jobs from
the state's economy.

The study does not, however, account for development potential of the site
if the base closes. In some cases, communities that have lost military bases
ended up better off in the long run. Cort C. Boulanger, spokesman for the
Massachusetts Defense Technology Initative, which commissioned the UMass
report, stood by the $3 billion figure as "an accurate representation of the
economic impact," but he also said that it was just an estimate.

"But regardless of this report or that report, we know there's a significant
economic impact here, and it will have a profound effect on the local
defense technology industry," Boulanger said in an interview last week.

Michael D. Goodman, an author of the UMass study, declined to comment
specifically on Paik's analysis, but he said that by not considering how
many jobs would be lost, Paik is underestimating the economic impact.

"We did four months of intensive work, compiled dozens of interviews, and we
obtained information from both military bases," Goodman said. "I think we're
talking about an apples to oranges comparison here, and obviously we stand
behind our analysis."

Some local officials have suggested that in the long run, it won't matter
what the estimates say.

"If it turns out that someone overestimated to make the case for keeping the
base, so be it. So what?" said Sheldon Moll, a Bedford selectman and a
member of the area officials group. " I'm just as concerned about job loss,
whether it's $3 billion or $2 billion or $200,000."

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