Under Development – Making an Economic Engine from a Closed Military Base

Summer 2011
The 1.7-mile extension of 36th Street will enable the Port to open nearly 150 acres adjacent to the runway for development of new facilities, resulting in the creation of approximately 8,000 new jobs in aerospace and air logistics.

If the Department of Defense (DOD) needs to close or realign military bases as it did in the 1990s and 2005, the communities affected by the closings and the DOD itself can look to the former Kelly Air Force Base in San Antonio, Texas, as a model. The base is now the Port of San Antonio and serves as a prime example of how cooperation at all levels of government and partner­ships with the private sector can turn a potential catastrophe into a vigorous economic engine.

The Kelly story is so compelling that in the last year alone, the International Economic Development Council hon­ored the Port with its 2010 Real Estate Redevelopment & Reuse Award for cities with populations greater than 500,000. In addition, the Association of Defense Commu­nities, an organization that helps communities affected by base closings, named the Port the 2010 Redevelopment Community of the Year.

Kelly had been in existence since the dawn of military aviation and functioned as a repair and maintenance depot and a training center. In 1943, training was moved else­where, but repair and maintenance continued at the base. Over the years, Kelly became the largest single employer in San Antonio and it came as a shock when in 1995 the Air Force announced its closure.  

Port San Antonio Headquarters

Over the next 15 years, building projects at the Port are projected to total $2.5 billion.

At that time, the only things certain were that the com­munity would have millions of square feet of old buildings and about 1,880 acres of land that did not have zoning, dedicated streets or utility easements. What was uncer­tain was what would happen to its 19,000-person workforce. The site was turned over to Greater Kelly Development Authority, later called Port San Antonio. When Texas set up this port authority, it made no public funds available, saying it would have to be run like a private business.

Creating an Income Stream

Bruce Milller CEO Port San Antonio

Bruce Milller

“Our predecessors at the Port set the stage for our ability to function suc­cessfully today,” said Bruce E. Miller, president and CEO of the Port of San Antonio. “A military base is supposed to close in one to two years; then the military wants to get out. Here, our predecessors got a delay in the base closing, permitting a transition of five to six years.”

That delay gave those running the Port time to figure out and execute its plan, with the help of the Air Force. The maintenance, repair and overhaul depot, known as an MRO, was operat­ed by military personnel, but aircraft always need maintenance and repair. Why not use government contracts to turn the work over from the military to private companies? That way, the Air Force could complete the base clos­ing and private companies could hire local workers. During this time, the newly arrived companies could solicit corporate work to supplement and eventually replace the government contracts.

Boeing, Pratt & Whitney and Lock­heed Martin won the original con­tracts. “This gave the Port the time it needed,” said Miller. “The buildings stayed in production, people were hired and the Port created an income stream.”

Port San Antonio exterior view

Today, 70+ well-diversified employers at Port San Antonio provide direct jobs to approximately 14,000 people.

As Kelly closed, the Port’s growth continued. The initial aerospace employers grew from three to 14 companies. Today, 70+ well-diver­sified employers at the Port provide direct jobs to approximately 14,000 people and generate $4.23 billion in regional economic activity each year. The news gets better: firms like Core Design Completions, North America’s largest outfitters of custom interiors for private aircraft, has opened shop here and in the past year has in­creased its space for hangars, offices and shops by 100,000 square feet. Boeing will bring a 787 Dreamliner, the new commercial airliner, here for finishing work soon. Six more Dream­liners will come to the Port over the next year. The Port is also growing as a logistics platform because of its strategic location in North America and its access to the Mexican mar­ketplace.

Tradeoffs Bring More Growth

At the time that Kelly was closed, the Air Force continued to use space scattered around the former base.

Boeing facility at Port San Antonio

Boeing was among the initial aerospace employers that helped Port San Antonio create an income stream during the base closure process. Boeing will bring a 787 Dreamliner, the new commercial airliner, here for finishing work soon. Six more Dreamliners will come to the Port over the next year.

In 2007, it amended its leaseback agreement, transferring 21 smaller properties to the Port in exchange for Building 171, a 450,000-square-foot structure. This allowed the military to consolidate its people at the Port and from other locations. The Air Force brought in an additional 3,000 people from around the country to work in Building 171. Amending the agreement helped the Port develop road infrastructure, expand access to the joint-use runway at the airport it shares with Lackland Air Force Base and construct new buildings to ac­commodate future business growth.

Port San Antonio is involved in another project that is certain to spur its growth as well. The state, city, Texas Department of Transportation and Port are working together to extend a street called 36th Street at the Port. It is a 1.7-mile extension to the road. The total project will cost $40 million, including $15 million of federal stimulus money. This new ex­tension will enable the Port to open approximately 150 acres adjacent to the runway to develop new facilities with direct ramp access for aero­space and logistics customers, which in turn will create about 8,000 new jobs in aerospace and air logistics.  

Partnering for Workforce Development

Before aerial view of Kelly AFB and after aerial view of port San Antonio

Photos courtesy of U.S. Air Force. Port projects include development of 400 acres for Kelly Town Center, a mixed-use project that will add office, residential, retail, hotel and restaurant options at the Port. Kelly Town Center also encompasses about 80 acres of historic properties — including former officer quarters from the 1920's that will be incorporated into the new project.

What attracted the original aerospace companies to the Port and to San Antonio, besides the opportunity to profit from government contracts, was that the Port of San Antonio sits in a prime location with an airport, rail port, three interstates and a port. But the biggest draw to San Antonio for the private employers, according to Miller, is the quality of the workforce in and around San Antonio. How could the Port and the city assure that its workforce would continue to rank highly, as people grew old and retired?

For the Port, one of its strongest commitments is to a partnership in workforce development. The Port works closely with the local commu­nity college, which has one campus at the Port. One of the key areas of involves developing aerospace skills in its students. Programs like this will help the region keep a highly skilled workforce into the future.

History and the 24/7 Environment

CEO Miller and the Port are keenly aware that many of today’s workers want to live, work and play in a highly attractive 24/7 environment. Therefore, at the heart of Port San Antonio, 400 acres are being transformed into the Kelly Town Center — a vibrant, high density, mixed-use development that will add office, residential, retail, ho­tel and restaurant options at the Port.

Options for private developers include Lindbergh Park, a 45-acre site at Kelly Town Center where up to one million square feet of offices can be developed to meet the needs of the military, federal government and vendors who require special secured facilities. Kelly Town Center also en­compasses about 80 acres of historic properties — including former officer quarters from the 1920’s that will be incorporated into the new project.

“Over the short term at the Port, the private developer has not had much of a role to play,” said Miller, “but over the long haul, the developer has a very important part to play. We ourselves are a full-service real estate company and we have devel­oped several million square feet of space. However, we have very shallow pockets so we are looking to bring in private developers.”

Building projects at the Port over the next 15 years are projected to total $2.5 billion, including the town center that could bring up to 21,000 additional jobs to the region, for a potential employment base of 25,000 people by 2025.