An ambitious project at the Armed Forces Retirement Home’s Washington campus could close the agency’s budget gap and perhaps one day roll back the drastic rent increase that has roiled the homes population the past few months.
Some fuzzy math a few years back left the agency that runs the homes in Gulfport, Mississippi, and Washington, D.C., with a sizable deficit. Taxpayers have been kicking in $22 million a year through congressional appropriations to make up the difference.
Now, a new leader has taken over with a mandate to make the AFRH self-sufficient.
Starting next year, the AFRH, the executive branch agency that owns the homes and the campuses they are part of, will start phasing in a rent increase that over the next three years will push the maximum a veteran pays in the independent living wings of the homes to $3,054 a month.
President signs bill
The increase is part of the military funding bill that President Donald Trump signed Monday at Fort Drum in New York.
That bill also has a provision to try to keep veterans in the home if they can’t afford the increase.
“A resident of the Armed Forces Retirement Home as of September 30, 2018, may not be removed or released from the Retirement Home after that date based solely upon the inability of the resident to pay the amount of any increase in fees applicable to residents of the Retirement Home that takes effect on October 1, 2018,” the bill says. “The Chief Operating Officer of the Armed Forces Retirement Home shall take all actions practicable to accommodate residents of the Retirement Home who are impacted by the fee structure applicable to residents of the Retirement Home that takes effect on October 1, 2018, including through hardship relief, additional deductions from gross income, and other appropriate action.”
Robert Guenther, who said his credit card debt probably will make the home unaffordable after the increase, said he’s unsure what the provisions mean but he’s afraid it might mean the amount of the increase he can’t afford will be added to his debt.
Gulfport has rooms for 530 veterans, and about 86 percent, or 440 rooms are occupied. D.C. has the same number of rooms, which are significantly smaller than Gulfport’s, but only 346, or 56 percent, of them are filled. More could be leaving.
Some residents say they’ve never been told exactly how the increase was calculated other than it was based on actual cost.
“We’ve asked,” said Robert Guenther, who said he’ll likely have to leave the home because of the increase. “We’ve asked for the actual figures but we haven’t seen them.”
Residents are guaranteed to have at least $400 a month left from their income after paying rent under the new plan. The old minimum was $150 a month.
“We looked at numbers 10 ways to Sunday,” said Chief Executive Officer Stephen Rippe. “We looked at each and every bill we had to pay.”
Guenther is looking at his own numbers, trying to figure the expenses that the home doesn’t pay, right down to the cost of dental floss.
But the rent increase won’t be enough to erase the need for the $22 million taxpayers have been kicking in.
New chief is on board
So, Rippe has begun an aggressive plan to turn 80 acres of AFRH-Washington’s 272-acre campus into a mixed use development. He has quite an incentive to push that development. His predecessor, Dr. Timothy Kangas, was fired because he wasn’t “on board with this new direction.”
“My charter when I was sent over here along with Travis Smith,” said Rippe, “was to think out of the box and figure out creatively how we could close that gap and not have to ask our taxpayers for $22 million a year.”
Rippe doesn’t know exactly what will be built on the land in Petworth, a mostly residential neighborhood of about 20,000 people in D.C.’s northwest quadrant, about three miles north of the White House. But he is quite excited about the possible return on what should be a hot property — the median home price in that Zip Code was $625,000 last year.
“Essentially we are going to create in this part of Washington, D.C., a brand new city, which is going to to be vibrant and part of our community,” said Rippe. “And the reason this is so important to Gulfport, that is going to be a huge revenue stream for us that is going to be used to close the $22 million appropriation and over time enrich our trust fund, which is going to ensure the financial viability of the Armed Forces Retirement Homes into the future.”
It’s not a new idea. The master plan that included the development was approved in 2008, just in time for the real estate bubble to burst.
At that time, it wasn’t a pressing issue. The trust fund fed by a 50-cents-a-month deduction from active duty military paychecks and the fines and forfeitures assessed for bad or illegal behavior was flush.
Where the money went
Then the AFRH decided to demolish and rebuild the 50-year-old Scott Building at a cost of about $88 million.
“They did the back of the envelope calculations, said we can build this building, deplete the trust fund, but we have enough coming in to be able to build it back up over time,” said Rippe. “But fines and forfeitures went down. So all of a sudden we’re running a deficit.
“The services got smaller,” he said. “And I’m the last one, being a retired military officer, to say I want to increase that source of revenue because that means more soldiers, airmen, Marines and sailors are getting in trouble.”
So, he is scouring the D.C. campus scraping up savings and divining for revenue streams, such as the development. It was supposed to bring in about $10 million a year in 2008, said Travis Smith, who is in the Defense Department’s Deputy Chief Management Office. Rippe said they’ll have a better idea of how much AFRH can expect when the proposals come in. The deadline is Sept. 20.
But there are smaller savings and other money the homes were leaving on the table, Rippe said.
No more sweetheart deals
There are eleven buildings known as quarters on the D.C. campus.
Quarters One was once a U.S. territory that hosted presidents. Now, AFRH and the foundation that runs Lincoln Cottage, the presidential summer home on a breeze-catching piece of land much higher than the White House, have a revenue sharing agreement for events held there. The foundation will pay when it uses the front lawn for tents for events. AFRH will start charging for weddings held at the chapel.
In all there are 11 quarters, including one that was the 5,500-square-foot home of a previous administrator, who paid $2,460 a month. A civilian family will move in and pay $5,100, Rippe said.
“We’re going to triple our revenue on these 11 sets of quarters by renting them out at market rate,” he said.
The AFRH will get another $637,000 from the Department of Veterans Affairs for 300 parking spaces.
Without asking, Rippe said, it received a proposal for the 237,000-square-foot Grant Building, which has been empty for 17 years. Another building is leased by the Creative Minds Public Charter School. Two nearby schools want to build athletic fields on the campus.
Neighbors also want walking trails.
“We’re creating streams of revenue that will benefit the Armed Forces Retirement Homes as a whole,” he said. “My personal hope is as we drive down expenses and increase revenue, I told you we have a cost-based fee structure. You have to be kind of careful about saying this, but my goal is to drive down our fees, not increase our fees.”
Age limit could be lowered
Next year in Congress, he said his team will try to have the age of eligibility lowered from 60.
“I’d like to get a younger population of residents in their 50s,” he said.
He also wants to get reimbursed from Tricare, the DOD’s health care insurance plan, and Medicare. Residents can deduct the fees they pay for that insurance when their monthly income is computed to determine their rent. However, the homes aren’t reimbursed by those plans for the cost of health care the homes provide. Rippe said AFRH spends about $20 million a year on that care.
No savings, or revenue, is too small, Rippe said.
“You have to be careful not to say, ‘Well, it’s a $64 million a year budget so what difference does $20,000 make?’” Rippe said. “It makes a big difference.”
One idea floated in the master plan that is off the table is privatization of the homes.
“We’ve gotta eat the elephant one bite at a time and we’re getting ready to take on an enormous development project here that’s going to benefit us into the future,” said Rippe. “It’s to our advantage to be a sovereign federal agency, an independent federal agency, when we do that. I think for now, we’re going to stick with what we have here.”