Original Date: 09/15/1997
Revision Date: 01/18/2007
Information : Cafeteria Lease to Detroit Diesel
Prior to being included in the BRAC 1993 decision, Tooele Army Depot (TEAD) had undertaken a major multimillion dollar upgrade program to its manufacturing complex. The newly constructed building complex opened in January 1992 as the Consolidated Maintenance Facility (CMF). During construction of this facility, the Tooele Post Restaurant Fund borrowed more than $300 thousand from the Army/Air Force Civilian Welfare Fund to modify and equip a cafeteria to provide food service for the facility. The BRAC 1993 decision eliminated TEAD’s maintenance mission and, as a result, the CMF was closed to maintenance operations in October 1994. The undepreciated value of the cafeteria facility (including modifications and equipment) supported with Non- Appropriated Funds (NAF) at the time of closure, was $395 thousand. TEAD’s Post Restaurant Fund was obligated to continue making a $1,600 per month loan payment to the Civilian Welfare Fund.
As part of the BRAC action, the CMF was transitioned to the city of Tooele and then transferred to Detroit Diesel in July 1996. Since it was modified with NAF funds, the cafeteria area was excluded from the transfer negotiations. It was recognized that the TEAD Post Restaurant Fund owned the cafeteria and its contents, even though it was integral to the CMF. Detroit Diesel did not want to purchase the cafeteria which left TEAD with the following options: reopen the food service to support Detroit Diesel and cover the loan payment; remove the equipment and sell it to commercial vendors; or lease the equipment to a commercial vendor to provide Detroit Diesel food service.
The Army denied the request to reopen the food service in support of Detroit Diesel citing a conflict with commercial vendor availability. Resale of equipment would only recoup about 25% of the original acquisition value, and not cover the amount of the NAF loan. This left the only viable option of a third party lease of the equipment and facility which would enable TEAD to recoup the loan value without loss. In pursuing this option, two open houses were held to advertise the potential lease arrangement which attracted interest from 15 companies. As a result, TEAD’s contracting office negotiated a five-year lease to purchase agreement in June 1997, which included escalating lease payments starting at $2,500 per month for the first year. This more than covered the $1,600 loan payment with the additional funds going to support the Civilian Welfare Fund. Detroit Diesel fully supported this approach and provided initial cleaning, maintenance, trash collection, and utilities.
The end result was a successful arrangement for all parties concerned. The Detroit Diesel facility retained an operating cafeteria to support the workforce, a local company was able to set up operation with very little initial investment, and the Tooele Post Restaurant Fund was able to develop a cash flow which more than covered its committed monthly loan payment.
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