Legislature(2001 - 2002)
02/28/2002 08:08 AM House STA
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 498-WHITTIER PRIVATE PRISON [Contains discussion of HB 497, SB 336, and SB 231] Number 2595 CHAIR COGHILL announced the final order of business, HOUSE BILL NO. 498, "An Act expressing legislative intent regarding privately operated correctional facility space and services; relating to the development and financing of privately operated correctional facility space and services; authorizing the Department of Corrections to enter into an agreement for the confinement and care of prisoners in privately operated correctional facility space; and providing for an effective date." Number 2580 REPRESENTATIVE JOHN HARRIS, Alaska State Legislature, explained that the House Finance Committee is the sponsor of HB 498, carrying the bill for the City of Whittier, and that he, as a House Finance Committee member, was presenting the bill. He told members that the City of Whittier seems to be "pretty unanimously in support of the private prison in Whittier." He said this bill is similar to one the legislature took up last year involving the [proposed] Kenai facility and also pertaining to Delta Junction. He noted that both those communities had voted not to support the concept. REPRESENTATIVE HARRIS informed members that his staff member, John Manly, and the City of Whittier's mayor, Ben Butler, were present to testify and answer technical questions. He also indicated representatives were present from Cornell [Companies]. Number 2472 CHAIR COGHILL said the discussion between private versus public [facilities] was necessary. He told the sponsor that he would like to move the bill out at this hearing, but would allow time for "what happens in the course of discussion." Number 2458 REPRESENTATIVE HAYES asked Representative Harris if this was a "single-site/source" contract bid, similar to that used in the past. REPRESENTATIVE HARRIS answered that this bill would authorize the City of Whittier to enter into a competitive bid situation; his understanding was that the city has begun that process already, through its local city council. REPRESENTATIVE HAYES asked whom the competitive bid is against. Kenai entered into a competitive bid process, he noted, before the law was changed for it to be a single site. He said that again a competitive situation has been initiated [in the case of Whittier] before a law has been passed, to his belief, to allow it. REPRESENTATIVE HARRIS responded by clarifying his previous statement. He indicated other communities had been given the opportunity to show interest, or disinterest, regarding having a privately operated prison facility. The city council of Whittier adopted an ordinance that authorized them to negotiate with the State of Alaska, and the legislature has "paid attention and listened to what they have to say." Representative Harris said the competitive part of this is being dealt with at the local level, rather than the state level. He suggested that perhaps the [testifiers from] the City of Whittier or Cornell [Companies] could better answer the question. Number 2283 BEN BUTLER, Mayor, City of Whittier, testified that the City of Whittier began by following the Kenai prison issue fairly closely. When Kenai voted against having a prison, Mr. Butler said, "we" thought it was an excellent opportunity for Whittier to have economic development and, at that point, made phone calls inquiring what steps to take. Public hearings were held and mailings were sent out to inform the residents of Whittier, he told members. He mentioned a resolution made at the beginning, stating that [the city] wanted to do this. He also mentioned an ordinance and entering into negotiations with "an outfit." MR. BUTLER, regarding the competitive bid process, said four RFQs [requests for qualifications] were sent out; two of them were sent back. He continued as follows: Instead of the City of Whittier doing it itself, we actually had an outside building consultant look at it, an auditor look at it, and one Whittier resident look at it. And so that kept it out of the council's hands. They reviewed the two responses that we got, and they actually rated one higher than the other one, and the council agreed with them and took that proposal from there. Number 2215 MR. BUTLER told the committee the City of Whittier had sent around a petition or letter of interest so that the state would know [its residents wanted the prison]. He said there were "110 ballpark votes" in the city's last election, September 2001. Furthermore, he told the committee that he had before them 85 signatures in support of the prison. The previous Tuesday, Mr. Butler said, the city council had adopted an ordinance to enter into a contract with Cornell [Companies], by a vote of 7-0. MR. BUTLER remarked, "The town is behind this. We need jobs in Whittier. Whittier is slowly drying up. The road has been a nice thing, but the road has allowed access in and out, and some people have moved out." He stated his feeling that having a prison in Whittier would add value back to the road, thereby alleviating Whittier's present economic problems. CHAIR COGHILL mentioned doing some preliminary reading regarding the number of beds, starting - to his belief - at 820 to 850 beds and jumping to 1,200. He asked how that happened, if there was an economic consideration involved. MR. BUTLER explained that the lower number of beds was cost- prohibitive; the higher number made more economic sense to justify the project. CHAIR COGHILL asked Mr. Butler if he felt the process that he'd describe to [the committee] "kind of answers this whole source question." MR. BUTLER said yes. CHAIR COGHILL clarified that he had just asked for an answer that would come from Mr. Butler's perspective. He acknowledged Representative Hayes's previous question and said he would address it as well, because "we have to look at it from the state's perspective." MR. BUTLER continued: Part of the things that we were very concerned about in the City of Whittier is the fact that this had already been done twice, in two different communities in the state. So we wanted to make sure that everything was above the board, that it was a clean process, and that there was nothing that might concern the state as far as the process we went through. Number 2082 REPRESENTATIVE HAYES offered his concern that this legislature has tried a single-source bid process twice. He stated that he did not understand how [the City of Whittier] could go through any type of process when the only community authorized to do anything at that time was Kenai. Number 2063 REPRESENTATIVE JAMES responded that she has looked at "what the plans are." She said it appears to her that whether or not [the prison] is constructed, and who will construct it, is the business of Whittier. She continued: They're going to sell the bonds to do this, and it will be contingent upon whether they get [an] opportunity for the state to contract, to use it once you have it. And, of course, it won't go forward, if the state doesn't agree to use that. I would hesitate to say, from what Representative Hayes's concern is, that we - the state - should initiate this, necessarily, and say, "Does anybody want to build a private prison anyplace in this state? Please come forward and give us your opportunity." I think that if there were someone, they would be here. And this is really Whittier asking us, ... "If we do this, will you do that?" That's just my personal understanding of that. But there's one thing I wanted to say here that impresses me: ... the writing that I've read, it's even better than Kenai, in the fact that the management of the culturally appropriate treatment of the prisoners - which many will be Alaska Natives - and the support for the Alaska Natives for this facility is very impressive to me. And it was impressive to me in Kenai, but I can understand why they lost that one with the large, boroughwide vote. So I have no discomfort with this process going forward. I do also share just a little bit of concern. I have a question on this, and my question to you is: Have you considered that or seen any evidence ... that the larger it is, the more or less effective it might be in accomplishing the goals, which we had hoped to do? And I really believe the goal is mostly the culturally sensitive management of this facility, when probably the bulk of these people will be Alaska Natives. Number 1918 MR. BUTLER indicated he doesn't foresee any problems with a larger facility of 1,200 [beds]. The available land is away from the populated area of town, he noted. CHAIR COGHILL offered that some of the language is very specific about "culturally sensitive." Number 1896 REPRESENTATIVE FATE said he, too, had a concern. He explained that he has been questioned about this by other development authorities who felt that there would be no legislation because of the "noncompetitiveness" - that it didn't go out to bid. They were under the impression the Department of [Public] Safety was going to do an expansion program, he said, and expected that if there were going to be any private prisons in the area, there would be some RFPs [requests for proposals]. Representative Fate said he is not against this [bill], but wants it understood that there may be other [communities] in the state that may have the same interest, but that are under a different impression as to what the process and procedure is. Number 1838 REPRESENTATIVE WILSON told [Mr. Butler] she appreciated the process that [Whittier] went through, including the amount of information given to everyone in the community. She indicated Ketchikan and Wrangell had been interested in a prison, although the process they went through was "the opposite" of the one Whittier followed. She said [Wrangell] wanted economic development; its process started with the mayor and proceeded before getting input from the community. She said she appreciated the bidding process as well. REPRESENTATIVE WILSON said she feels strongly that everyone in the state has watched what has happened, and if other communities wanted to step forward, they had sufficient time to do so. She mentioned that both Ketchikan and Wrangell decided against having a prison. She described as "difficult" the process of getting the community involved and supplying it with the pros and cons. She expressed appreciation that [the City of Whittier] had done that before coming before [the legislature]. MR. BUTLER responded that [the City of Whittier] wanted to be sure it had full community support, which he'd understood was one of the major concerns of the state. He specified that [the City of Whittier] did not want it to be an issue that only the council approved of, and that would have to come up to a vote. Number 1705 REPRESENTATIVE CRAWFORD remarked that he is an ironworker by trade and is interested in construction. He noted that he has been to Whittier a number of times and doesn't think there is much infrastructure there regarding electrical generation and water and sewer systems. Consequently, he said, the city would have to add to its capacity considerably; he asked who would pay for that. He asked Mr. Butler if [the city] was planning to do a project labor agreement in that regard. MR. BUTLER answered as follows: As far as the infrastructure needs of the town goes, we have, of course, [Chugach] Electric that goes to Whittier, so we have plenty of power coming through the tunnel. And I'm more than happy to sell the power, so that's not an issue. As far as the water and sewer goes, though, ... entering in the contract with Cornell, they will have onsite sanitation and onsite water. We, of course, have plenty of water around Whittier; we have our wells in Whittier that produce more water than we could ever use. They're only at 80 feet deep. And, of course, on the property that's being bought - [that] the prison will be built on - it has the ability to have well water there, too. So it would not be the city paying the bill for that; it would actually come out of the total cost of building the project. REPRESENTATIVE CRAWFORD said he'd worked on the tunnel and was not aware that [Chugach Electric] had that capacity without having to add to [the existing infrastructure]. He asked, "What's been the discussion?" MR. BUTLER answered that there hasn't been a lot of discussion with [Chugach Electric] on that note. He mentioned the tunnel being open and the other tunnel attached to "the road to Whittier, ... where the pipelines used to go through for the U.S. government." He said "we" don't foresee that there would be any problem getting more power into Whittier if there were insufficient power. Number 1555 REPRESENTATIVE CRAWFORD asked about medical care and places for families to stay when they come to visit [prisoners]. MR. BUTLER replied that [the City of Whittier] acknowledges that although there is some housing available, it is probably insufficient; however the city is located close to Girdwood and as close to Anchorage as Wasilla and Eagle River. He also said [a prison] would give Whittier the chance to build additional housing if there is a need for it. He indicated currently Whittier's housing is a 14-story building that has vacancies because of a decrease in population, from approximately 300 in the 1990 [U.S. Census] to 182, according to the state. Number 1484 REPRESENTATIVE STEVENS noted that he was in favor of HB 498 but would have to leave this committee hearing, because of another commitment, before a vote was taken. He clarified that he appreciated the efforts of the community of Whittier, saying he believed that it had done "everything right," including attaining the signatures of its residents. He asked about Whittier's prospects for economic development, jobs, and "the impact on keeping that tunnel open." Number 1405 MR. BUTLER responded as follows: Right now, with the tunnel opening up, the railroad pulling out, with the government tank farm that we used to have in Whittier that probably supplied 35 family-type jobs, Whittier doesn't really have any jobs besides a tourism-related economy. Of course, during construction it will be union, and so if there's people in there that belong to a [labor] union, ... or other crafts, they'll be able to get onto that - and maybe general laborers. And as far as once it's actually built and up for operations, of course, there'll be correction officers there that will have to be certified through a state level. ... But there will also be janitorial jobs, ... kitchen jobs, laundry jobs, and things like this. But as long as the citizens of Whittier can qualify for [them], they'll have the opportunity to get those jobs. Truly, Representative [Stevens], that's what we are looking for: we are looking for jobs. Once the tunnel was open, we kind of thought that that might help spur things on. Actually, it's kind of slowed things down for us over there. The year that we had the free road, we had our best year ever. And the way that the city can gauge that is through the sales tax. The next year, when the road was actually tolled - when we went back down to, basically, pre- tunnel days, train days - ... it really affected us. ... Unfortunately, the gains that we got from the tunnel were just short-lived: they were for one year. And, hopefully, right now, for example, there's not the justification of [the Department of Transportation & Public Facilities] to keep the tunnel open for seven months out of the year, more than 68 hours a week. So it's less than 10 hours a day. It's actually hurt us: ... the restaurants have closed this winter; there's no dinner traffic; the people are not coming in because of the hours of operation of the tunnel. And so we anticipate that with the opening of a privately [run] prison in Whittier, ... that would give the ability to the state to open it longer. In fact, we've been in conversations with Commissioner Joseph L. Perkins of the Department of Transportation & Public Facilities, who stated that we could probably -- right now, during the summertime, it's open 17 hours a day, and he would not see any reason why we could not do the same with the prisoners there, in order to accommodate the three shifts that would work at the prison. Number 1220 CAROLYN ALLEN, Member, Whittier City Council, testifying via teleconference, told the committee the attitude of the residents and the city council towards building a private prison in Whittier is a positive one. She indicated residents have stated that they depend upon the income generated from Whittier's limited tourist season of approximately 110 days. For example, because of the [terrorist attacks on the East Coast on September 11, 2001], the tourist industry is expecting a decline [in visitors], which does not bode well for Whittier. MS. ALLEN said the tunnel's opening has not generated the economic stimulus that was projected. She said she believes the citizens of Whittier, as a whole, are excited about the proposal of the prison, which would provide year-round stimulus for Whittier's depressed economy. She explained that it would create year-round employment opportunities, which would provide incentive for new businesses to come to Whittier. Furthermore, Ms. Allen said she believes it would also provide better access to businesses and the homes of Whittier's residents, because of the extended tunnel hours. MS. ALLEN told the committee she has never seen a community as united on a project as Whittier is regarding [the proposed prison]. She concluded by saying, "I would encourage your positive attitude toward the approval of House Bill 498." Number 1055 FRANK SMITH, Citizen Activist, testifying via teleconference, said he found the previously stated testimony to be enlightening. He indicated he had spoken to some committee members the previous week and to the City of Wrangell Chamber of Commerce, which had invited him to speak. Mr. Smith stated that he has been involved in criminal justice issues for about 30 years. He explained that he is an Alaskan who is presently living in Kansas because of "elder care issues," but will be back in Juneau "next week." Number 0968 MR. SMITH mentioned previous testimony [that day on HB 314] regarding permanent fund dividends (PFDs) and the Peace Corps. He said 414 people are registered to vote in Whittier, even though there are only 192 residents, with dozens of those being school children. Mr. Smith stated his concern that [Whittier] is a welfare community. According to the city's web site, he noted, the state has given [Whittier] $100 million to build a tunnel to draw business to the city. MS. SMITH said the state, not the city, will be liable for the bonds [necessary to build a prison]. He mentioned "another $100 million to build this prison - a prison which is logistically infeasible." He opined that it would be impossible to staff the facility. He said prison wages are barely above fast-food wages, and the notion that people would drive all the way from Anchorage or Girdwood to work [in a prison located in Whittier] is ludicrous. He remarked, "The state can't supply workers from Seward, in a much larger and more accessible community." MR. SMITH reiterated that the big issue is "more welfare." He said the city residents don't want to pay tunnel fare and are comforted by the assumption that if the prison is built, they won't have to pay tolls. Mr. Smith depicted [Whittier] as a small community where everyone lives in the same building. MR. SMITH suggested the only reason the committee was considering [HB 498] at this hearing was because Cornell [Companies] had "massaged this in many ways," through [Whittier's] city council as well as other city councils. He referred to Representative Wilson's mention of Wrangell's previous consideration of a prison. He noted that 72 percent of the people in Wrangell voted against it, and 74 percent of people in Kenai voted against one as well. He reiterated that it was not a feasible project. He referred to Mr. Butler's testimony about involving the community and said: In fact, this wasn't a competitive bid process. On a Freedom of Information Act request, I got documents that indicated Frank Pruitt [consultant for Cornell Companies] massaged this thing all the way from the start, from early October, when Kenai turned it down, to the extent that he even told them on October 30 who they should send their bid proposals to. MR. SMITH concluded that "this is just immense welfare," worse than the [failed] Delta barley [project], the Point MacKenzie dairy, and the MarkAir air terminals. He stated, "There's no justification for spending this kind of money when, in fact, it costs half as much to keep [Alaskan] people in Arizona [in prisons], and we're about to open 400 beds in Anchorage." He said this is a "take or pay" proposition: if the prison sits empty, without a single prisoner ever being in it, the state is going to "be on the hook for 1,200 beds, for at least five years." CHAIR COGHILL suggested that Mr. Smith send in written testimony. Number 0758 MARION DYE, Member, Whittier City Council, testifying via teleconference, said she has lived [in Whittier] for the past several years and has witnessed a steady decline in population, revenues, and economic growth. She said she believes that the building of the private prison would be a stimulus for economic development there. She indicated the opening of the tunnel did not give [Whittier] what it had expected, but has added to the problem of economic growth. She said she hoped for "favorable decisions" from [committee members]. Number 0630 MAKO HAGGERTY, testifying via teleconference, told the committee that he did not have any financial interest in this issue, but has been "watching the private-prison industry for a number of years." He issued a warning to the City of Whittier that inviting Cornell [Companies] into its community is not a prudent idea. He stated his opposition to HB 498 and to private, for- profit prisons. Mr. Haggerty said the issue was taken to vote in the Kenai area last October, and the private, for-profit prison project was defeated by approximately 3-1. He said he wondered what it would take to get "these guys" [Cornell Companies] out of [Alaska]. MR. HAGGERTY cautioned that this project would be extremely expensive. He agreed with Mr. Smith that there are "too many red flags," such as transportation to Whittier, housing for those working at the prison, and the number of beds for which the state would be responsible. He recommended that the state take a look at the governor's proposal. He also mentioned a proposal by Senator Lyda Green. Both proposals, he said, deserve a fair hearing. Number 0351 MATT ROWLEY, City Manager, City of Whittier, testifying via teleconference, characterized Whittier as "the gateway of Prince William Sound." He said, "We were afforded a wonderful opportunity with the opening of the Anton Anderson Memorial Tunnel." Regarding the tunnel, he referred to the testimony of Mr. Butler and said tolls and scheduling, for example, have hindered, rather than enhanced, Whittier's ability to develop economically. MR. ROWLEY said Whittier realizes the importance of bringing Alaska's inmates back into the state, as well as the dollars currently leaving the state to support [those prisoners]. He said "we" see the Whittier prison as being a "win-win" situation because it would benefit both the state and the economy of Whittier. He noted that the City of Whittier is looking at the prison to provide a "stable, long-term anchor tenant of Whittier." He mentioned that employment, increased sales tax and property tax, and development of support industries are benefits that Whittier expects to see over time. Number 0170 MARGOT KNUTH, Strategic Planning Coordinator, Office of the Commissioner - Juneau, Department of Corrections, pointed out to the committee that the bill would authorize the single largest contract in the State of Alaska's history, with a cost of $985 million, not including an adjustment for inflation; therefore, she said, it should be carefully considered. MS. KNUTH stated her appreciation of the legislature's interest and recognition that Alaska needs more prison beds within the state - a message that the administration has been trying to bring forward for several years. She said the recognition this year is timely, because 1,200 beds are needed in Alaska. She noted that the governor has a five-part plan to address corrections issues, which includes whether a measure provides for safety, comprehensibly meets statewide and regional needs, is consistent with best correctional practices, involves community participation, and is cost-effective. TAPE 02-21, SIDE A Number 0011 MS. KNUTH, [in regard to expansion of] jails and prisons within the state, mentioned that HB 497 and SB 336 are the governor's bills. She explained, "The big difference between this bill and the governor's proposal is that the governor's proposal recognizes that we need beds regionally, as well as prison beds." She stated that a private or public prison in Whittier that provides 1,200 beds would not alleviate the need for jail beds, especially in Fairbanks and Bethel - both overcrowded facilities. She explained that people need to be close to the court where their judicial proceedings are held; just as inmates can't be transported from Arizona to court hearings in Fairbanks or Bethel, prisoners cannot be transported from Whittier to Fairbanks or Bethel. Number 0155 MS. KNUTH noted that in addition to the aforementioned bills, Senator Lyda Green [had introduced] SB 231, and a similar bill [introduced by] Representative Harry Crawford recognizes statewide needs. Ms. Knuth encouraged the committee to consider those pieces of legislation. She noted that the Department of Corrections had compiled a new portfolio indicating its needs statewide, which she would make available to committee members. MS. KNUTH mentioned factors considered by the Department of Corrections when choosing a location for a prison or facility. She distributed a handout to the committee members that included factors shared with all of the communities that have expressed interest in having a prison built. She said Representative Crawford previously "touched on some of the concerns that the Department of Corrections is going to have." The main [concern], she said, is whether the infrastructure of the community is able to provide the services necessary for the facility. Number 0348 MS. KNUTH noted that there is a special concern that certain areas of Whittier are within avalanche zones, which should be considered when picking a site. She said she had heard that one area under consideration was within an avalanche zone. She said a feasibility study needs to be done. She told the committee that it took the community of Delta Junction over two years after it had the authorizing legislation to conduct a feasibility study and conclude that [the project] was not financially feasible. She remarked, "The upshot of what happened in Delta Junction was, they were sued by the private provider that they had contracted with, and they finally settled that litigation, and they owe $1 million because they did not, I think, do their homework upfront." She continued: Whittier has done some of the first steps in their homework assignments, but they have not gone far enough to know whether it is a feasible site. One needs to know whether it can be done at all, and then whether it can be done cost-effectively. And the state would suggest that that should be done before the authorization is given, because of the amount of money that then gets to be expended after the authorization is granted. My heart goes out to the citizens of Delta Junction for the amount of pain that they went through and for the amount of expenses that they incurred, only to discover that it wasn't going to happen in their community. The state would just as soon not see that happen to Whittier. Number 0575 MS. KNUTH cautioned that there are a couple of problems with the legislation, the most pervasive being a lack of specificity. Normally, when proposals are put forward asking to spend millions of dollars, Ms. Knuth explained, a degree of specificity regarding the cost is set out in legislation. She continued as follows: This bill - as did the Kenai bill and as did the Delta Junction bill - only has an expression of legislative intent that the daily cost of care that the state will pay to the City of Whittier [will] be approximately $89-91, in current dollars. There's no expression of how much the facility should cost, what the capital costs are. And the idea of this prison has been with us for ... at least four years, and in that time, we still don't know what the proposed capital cost is. MS. KNUTH noted that HB 53 was the legislation that authorized both a private prison in Delta Junction and the construction of a new jail in Anchorage. She continued: That new jail in Anchorage is going to open 31 days from today. It's a $56-million facility. It was planned, it was developed, it was constructed, [and] it's going to open. And we still don't know what the specifics are for this proposal for the private prison. I find that a matter for some concern. Reality depends upon knowing what the various steps are - what the plan is. And I think ... before the legislature authorizes $985 million of the state's money to be given to a project that it should know what it's getting for the money. Number 0705 MS. KNUTH pointed to Section 2, paragraph (b) of [HB 498]. She suggested that the following language be deleted [beginning on line 23, through line 27]: The procurement requirements of this subsection are satisfied if the City of Whittier in exercising its powers under AS 29.35.010(15) for procurement of land, design, construction, and operation of a facility, follows its municipal ordinances and resolutions and procurement procedures. MS. KNUTH explained: If this were a project that the City of Whittier is undertaking at its own financial risk, then I believe it would be appropriate for this body to grant it the freedom and the discretion to select the party that will be performing the work, in whatever way meets its local needs. When, however, the State of Alaska is asked to enter into a 25-year contract that secures the payments of all of the bonds and will provide the cost-of-care figure for 25 years, then I think the State of Alaska and the people of ... Alaska have an interest in how that contract is entered into. Number 0765 And we have a state procurement code that this body has given a great deal of thought to, and has decided is the best way to ensure that the state is getting good value for its money. And so, it would be appropriate for that state procurement code to apply in this situation. The only alternative that seems viable to me would be to not require the state to enter into that 25-year lease and, instead, as we do in Arizona now with CCA [Corrections Corporation of America] -- we are essentially month-to-month tenants there, and if an issue comes up that we have a concern about how our inmates are treated, we have the freedom to move to a different facility and to go to a different provider. That freedom is what gives the State of Alaska the power to make sure that our prisoners are taken well care of, and that we have oversight of how things are being done. Number 0923 So, I believe that either one or the other is appropriate: either the state gets to leave and put its prisoners elsewhere - and that gives the private prison the motivation for satisfying our needs and performing at the standards that we need - or else let the state's procurement process, which goes to the value for the money, be abided by. I think that any inquiry would show that what the City of Whittier has done in its procurement process is, it has satisfied itself that it's found a partner it is happy doing business with. And I support that; I think that's their purview and that's appropriate. But it doesn't tell us whether it's a partner that will be good for the State of Alaska, and that's the next step. And both of those need to be satisfied: they need to be happy, and the State of Alaska needs to be happy. Number 0949 CHAIR COGHILL told Ms. Knuth she had given the committee "a lot to chew on." He said Cornell [Companies] had been "raked over the coals" and was a "player working with Whittier," and that he wanted to give them time to testify. He asked if anyone present in the room would be unable to come back to testify at the next hearing to be scheduled for HB 498; there was no response. Number 1042 SUSAN BURKE, Lawyer, Gross and Burke, told the committee that she was representing Cornell Companies. She indicated Frank Prewitt [a consultant for Cornell Companies] was also in the room to answer questions. CHAIR COGHILL, in consideration of time, asked Ms. Burke if she would be able to return for the next hearing [on HB 498]. As a follow-up to Ms. Burke's affirmative response, he said he thought it would be good to have a comparison of "what the state said and how Whittier and you have had that discussion." Number 1126 MS. BURKE addressed Representative Hayes's question regarding how Whittier can do this, when only Kenai is authorized under the existing legislation. She said there are two levels of contracting: the first would be a 25-year contract between the state and the City of Whittier, by which the state would procure a prison facility and operating services from the City of Whittier; the second would be between the City of Whittier and the private prison operator. Ms. Burke remarked, "And those would be for a period of maybe five years each." She explained, "After the first five years, they would have to go out [to] another competitive process to procure the operating services." That contract, she noted, is governed by the City of Whittier's procurement procedures, whereas the first contract is governed by the state's procurement code, which doesn't apply to contracts that the state enters into with municipalities. Therefore, there is no current prohibition against a sole-source contract between the state and any municipality in the state. REPRESENTATIVE HAYES said he appreciated [Ms. Burke's answer]. Number 1237 MS. BURKE disagreed with testimony regarding the state's being obligated to pay the bonds: That is absolutely not the case. These are revenue bonds. The statute is absolute on issuing revenue bonds by municipalities. It's crystal clear: the full faith and credit of the State of Alaska is not pledged to repay those bonds. The only source of revenue to pay the bonds off is the revenues that would come to Whittier from the State of Alaska under the contract. But it's not a question of the state being obligated to pay the bonds. And the prospective bondholders are absolutely made aware of this, and they take the risk that something could happen and those revenues might not be forthcoming. Number 1298 MS. BURKE referred to Ms. Knuth's comment regarding the inability of the state to move to a different provider because there would be a 25-year contract between the state and the City of Whittier. Ms. Burke said there is no question that the state would be obligated to the City of Whittier to use that facility; however, she noted that there is a specific provision in [HB 498] that would provide that if the Department of Corrections is not satisfied with the service of the City of Whittier's provider, at any time during the 25 years, no matter who that provider is at the time, the state can direct the City of Whittier to terminate that contract. The City of Whittier would then have to find a replacement [provider]. Number 1379 REPRESENTATIVE WILSON recalled previous testimony suggesting that pay for the guards would be low. She indicated she had "asked that question the other day," and that the answer was they would start at the same pay [rate] that the regular guards currently starting out receive. [Because of the lateness of the hour, the testifiers available to answer questions were asked to return at the next scheduled hearing on HB 498. HB 498 was held over.]
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