Fort Worth leaders rally city's economy for climb out of the warm bath of cold war.

FORT WORTH, Tex. -- This city has survived the closing of its packing houses, the collapse of the oil industry, the failure of many of its financial institutions, and a plunge in real estate values.

But can it survive peace?

Mayor Kay Granger believes her city, tied for decades to the defense industry, will overcome even the end of the cold war.

"I remember when the packing houses closed on the north side," said the first-term mayor. "People were wringing their hands and they said that this was the end of Fort Worth."

It wasn't, she said, noting that since their demise the former packing houses have become the historic stockyards -- a popular attraction in the downtown convention and tourist business.

"We've faced this before and came back stronger," she said.

But this time, the challenge is greater.

The city's debt burden is high and the outlook for its economy generally stagnant. And, like dozens of other U.S. cities, it faces not only cutbacks in federal contracts that fund high-paying defense jobs but also the elimination or downsizing of military bases that have for years been stable parts of the economy.

Just outside Fort Worth, the military plans to close Carswell Air Force Base, which now contributes an estimated $700 million a year to the local economy.

Absorbing the Blows

City officials expect a long and bumpy ride. "it is going to be a series of impacts over a series of years," the mayor said. "It's not going to all be felt at once."

Finance Director Judson Bailiff said the true impact of the base's closing will come after 1993, when the majority of operations is moved to another base in the Strategic Air Command. At that point, any exodus could begin affecting property values -- which control the city's main source of tax revenues.

"By that time, the impact will be felt," he said. "It could have a positive impace, depending on what is done with that property."

The city is already at work on that. Before the federal government included Carswell earlier this year in its list of bases to be closed, Ms. Granger said five task forces were already studying how the air base can be converted to minimize the economic loss.

The military families will have to leave, but the city wants to keep the base's hospital open -- the free and low-cost care they can get there is a major attraction for the some 140,000 military retirees in the region.

"I've got great expectations for Fort Worth, but it's not going to be easy," said morris Matson, first vice president at AMBAC Indemnity Corp. and a Fort Worth councilman. "We are challenged."

Ironically, it was the strong links to Carswell and the aerospace industry that helped insulate Fort Worth from the declines brought on by the double oil recession of the 1980s.

"They weren't as affected because they were less concentrated in the energy industry," said Peter D'Erchia, senior vice president at Standard & Poor's Corp.

However, he said the Fort Worth economy has a broader base to fall back on than it did in 1986 when the last oil price collapse hit.

"For them, it's going to be a great challenge," said Mr. D'Erchia.

In Texas, a state historically tied to defense, cities from El Paso to Killeen to San Antonio have long had stronger economies because of the presence of the military.

Now that economic support is looking shaky.

"It's maybe not so stable anymore," said Barbara Flickinger, vice president and manager of Far West ratings for Moody's Investors Service. "We've always felt that if a military base was the only game in town, there was still some risk."

The Nation Picture

Clearly, not every city will lose. As the U.S. Defense Department closes some bases in money-saving moves, other bases will grow as operations are tranferred. Fort Hood in Killeen, Tex., is expected to gain 13,450 jobs that way.

"The closings and downsizings could have a material impact on the local economies of the base sites, and eventually could alter outstanding bond ratings for affected local governments," Standard & Poor's Corp. said in a special report earlier this year.

Nationally, base closings are expected to eliminate nearly 80,000 military jobs and 37,000 civilian jobs. Beyond those numbers, analysts say the impact will have a ripple effect on other sectors of the economy, such as the real estate market.

"Typically, a base closing will be felt for three to five years," said Robert Durante, a vice president at Standard & Poor's and author of the report on base closings. "At Carswell, the impact will be felt in the first three years."

He said the most obvious impact at first will be on the loss of sales taxes when retail spending drops. Later, property tax collections will be affected as military families and others directly affected by base closings move away. Finally, there will be a loss as contractors who depended on bases are forced to lay off employees, move, or close.

"Sometimes it's a positive and not a negative," Ms. Flickinger said. "It depends on the individual case."

In fact, some cities that are losing military operations could gain diversity by using the closed bases to attract different industry. Standard & Poor's said a Defense Department study has found that sinc 1961 many local governments have profited in the wake of base closings.

The study found that in the past 30 years, 158,104 jobs were created at former bases, which more than replaced 93,424 jobs lost when the bases closed. Further, the Defense Department said that 75 former bases were converted to industrial or office parks, while another 42 were being used as municipal facilities.

For instance, after the U.S. Army closed the Raritan Arsenal in Edison, N.J., the area lost 2,610 military and civilian jobs. Located in affluent Middlesex County, the land did not remain unused for long. Today, the area has become an industrial and office park employing 13,100 people.

However, until recently, the closing of bases -- particularly large ones like Carswell -- has not occurred in large numbers. Further, the brainstorming of city officials often produces similar ideas, such as converting a former air field to a commercial aircraft maintenance center.

But Moody's Ms. Flickinger says that identical ideas are not always a bad thing, adding, "That's okay if three different places in California have the same idea, as long as they are not too close together."

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