Legislature(2003 - 2004)
04/01/2003 08:01 AM House STA
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* first hearing in first committee of referral
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+ teleconferenced
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HB 134-CORRECTIONAL FACILITY EXPANSION [Contains discussion of SSHB 55] CHAIR WEYHRAUCH announced that the next order of business was HOUSE BILL NO. 134, "An Act authorizing the Department of Corrections to enter into agreements with municipalities for new or expanded public correctional facilities in the Fairbanks North Star Borough, the Matanuska-Susitna Borough, Bethel, and the Municipality of Anchorage." Number 1683 REPRESENTATIVE BILL STOLTZE, Alaska State Legislature, sponsor of HB 134, told the committee the unfortunate reality Alaska faces is the need for more prison beds. [The legislature] has different options for how to solve this need. He credited Senator Lyda Green for her work on the Senate side on the issue. He remarked, "I'm pushing the bill on this side to assist her effort and [have] become attached to it since then." REPRESENTATIVE STOLTZE said the bill covers expansion [of prison beds] in several areas of the state, including Anchorage, Fairbanks, Bethel, and the Matanuska-Susitna area, which will have the major expansion. Probably receiving the most attention will be the Sutton expansion, he predicted, saying a facility there is the right facility in the right place, and is supported by the public. He said he thinks that through the healthy process of competition with the private prison industry, the [Department of Corrections (DOC)] has done a good job of reducing costs and putting together a good proposal, including documentation of how it can be accomplished. REPRESENTATIVE STOLTZE noted what the number of beds for each facility would be as follows: Sutton, 1,250; Anchorage, 200; Fairbanks, 80; and Bethel, 120. The spaces added in Anchorage would be leased by the federal government, by U.S. Marshals. That would be federal money providing Alaskan jobs, he added, and would make the current Anchorage facility more efficient. Number 1874 REPRESENTATIVE STOLTZE referred to a color-copy handout [compiled by DOC]; the first page shows where the facilities are located. He pointed to the "Inmate Population Statistics" [top of page 2], which shows that by the year 2007, the total will be 5,500. Referring to [the "Institution Activity 1997-2002" chart on the bottom of page 2], which shows admissions, transfers, and the average daily count, he indicated that is what the debate centers around with regard to private-versus-public prison initiatives. He clarified that the competition is in regard to housing people. He complimented DOC for lowering costs in construction, which lowers the fiscal note. He mentioned a proposed committee substitute (CS) [unspecified version]. Number 2080 CHAIR WEYHRAUCH said the options regarding prisons are as follows: SSHB 55, which would authorize the construction of a private prison in Whittier; HB 134, the bill now being presented by Representative Stoltze, supporting expansion of existing facilities; and "the do-nothing option." He commented that there is a lot of confusing information on the issue, including some scare tactics that are not credible. He said one thing that isn't clear to him is the economic impact on the state. He requested from Representative Hawker [one of two sponsors of SSHB 55] and Representative Stoltze a holistic view of how all the options overlay, in order for the committee to decide the best policy option for the state to consider. REPRESENTATIVE STOLTZE opined that those are legitimate concerns. Number 2207 REPRESENTATIVE HOLM said he has visited jails, and each room is no more than 8 by 12 feet. He noted that the plans show a cost of $110,000, $135,000, and $155,000 per bed. Saying it doesn't take that much concrete to build a room. He added, "I don't know, given out particular financial circumstance, that we need to be building the Taj Mahal to house prisoners." He said he is uncomfortable with this kind of expense. He asked Representative Stoltze to comment. REPRESENTATIVE STOLTZE responded that he knows that the private sector has expensive costs, as well. He deferred further comment to the deputy commissioner of DOC. Number 2355 PORTIA PARKER, Deputy Commissioner, Office of the Commissioner - Juneau, noted that the $155,000 is for the Bethel expansion project. She explained that the cost of doing construction in that rural area is higher. The Anchorage extension will be federally funded; it won't affect the general fund or the fiscal note. The Fairbanks facility is more expensive at $135,000. She explained that the per-bed costs include the cost of the entire facility. In response to a question by Chair Weyhrauch, she clarified that the per-bed cost covers the cost of the construction only for the entire facility, not the operating costs, for example. Number 2434 JERRY BURNETT, Director, Administrative Services, Department of Corrections, added that the per-bed cost also includes the cost of design, utilities, and new fencing - "all the soft and hard costs of construction." CHAIR WEYHRAUCH surmised, "To the turnkey." MR. BURNETT concurred. He commented that the plan is similar to one used in other places in the U.S. Number 2467 REPRESENTATIVE HOLM asked Mr. Burnett if he would provide the committee with a square-foot cost. CHAIR WEYHRAUCH asked if the standard for the industry is per square-foot or per bed. MS. PARKER answered both. Number 2500 REPRESENTATIVE BERKOWITZ asked for comparisons of construction costs in Alaska with the following: elsewhere in the country, a private office building in Anchorage, and some of the University construction. MR. BURNETT said the cost of construction is just over $400 per square foot. REPRESENTATIVE LYNN remarked that a decent residential home in Anchorage, not including the garage, costs about $100 per square foot. MR. BURNETT offered to produce the numbers that Representative Berkowitz had previously requested. He noted that the plan for Alaska was based upon a 35 percent higher cost than similar projects built in the Lower 48. Number 2586 CHAIR WEYHRAUCH asked if it is correct to assume that a policy issue implicit in [HB 134] is that a larger correctional facility is much more economic than building smaller facilities in many parts of the state. REPRESENTATIVE STOLTZE answered in the affirmative. He noted that the state already owns the land and that the plans are "in a site that's not going to be contentious." REPRESENTATIVE BERKOWITZ commented that "class A" office space costs $200 to $300 per square foot to construct. He asked what added elements in a prison would cause the costs to go up. MR. BURNETT replied that there are a number of specialized materials used in a prison facility such as automatic doors, special prison toilets and showers, hardware that has to be very durable, and solid concrete walls versus sheetrock, for example. Number 2665 CHAIR WEYHRAUCH noted that a policy question which the legislature must address is whether to house prisoners in Alaska or Outside. He questioned at what point "critical mass" is reached and a decision must be made. REPRESENTATIVE STOLTZE remarked that the Arizona facility seems to have value as an "escape valve" now; however, it can't meet Alaska's needs regarding bookings. He said much shorter-term [inmates] are being sent to the Arizona facility. Predicting that it won't be much longer before that facility won't be able to meet Alaska's needs, he mentioned the added cost of transferring prisoners back and forth. Number 2743 REPRESENTATIVE BERKOWITZ said one problem he has always had about sending prisoners Outside is that it means exporting capital; dollars are not circulating within the economy. He asked if any analysis has been done regarding the cost to the state's economy because of the Arizona facility when the "multiplier effect" is included. REPRESENTATIVE STOLTZE answered, "I don't know that number. I know the one on the face is $20 million, and that certainly multiplies that." He opined that there's a point at which the value of the state's having its own institutions must be considered. REPRESENTATIVE BERKOWITZ said that's what he was suggesting. CHAIR WEYHRAUCH reiterated that the policy decision is in regard to the economic benefit to the state of building a prison in Alaska, whether it's public or private. REPRESENTATIVE STOLTZE said he wants to see the jobs in the state. He posited that it is probably better in the long term for the state to own its own facility. Number 2851 REPRESENTATIVE BERKOWITZ said the state might be putting $20 million into Arizona right now; however, if the investment were put into Alaska - even if [running its own prison] was, on the surface, more expensive - the state would be getting some kind of return, based on property and corporate taxes and the benefit to the municipalities. He asked that those calculations be included in the analysis he'd requested previously. Number 2881 MR. BURNETT referred to an economic impact assessment [included in the committee packet] that was prepared for the Matanuska- Susitna Borough by Northern Economics Inc. REPRESENTATIVE STOLTZE remarked that he has tried not to dwell on things that benefit the Matanuska-Susitna ("Mat-Su") Borough; he opined that the issue is a larger, statewide concern. Number 2910 REPRESENTATIVE SEATON asked Representative Stoltze, "Are you including booking facilities in the Mat-Su at all, or is this strictly older facilities?" REPRESENTATIVE STOLTZE mentioned Mat-Su and said there is a pre- trial facility not too far from there. He said, "The Anchorage facility is the more appropriate function for the Anchorage area, and the Bethel facility also performs that function." He added that the Sutton facility is a longer-term facility. MR. BURNETT, in response to a request for clarification from Representative Seaton, stated, "One thing that an Outside facility cannot economically handle is short-term prisoners and pre-sentence prisoners." TAPE 03-34, SIDE B Number 2981 MR. BURNETT indicated transportation costs for sending prisoners to an Outside facility are greater than the savings from [holding them in Alaska]. He said he has been working on trying to do an accurate analysis "to get a number which is the maximum at any point we could economically send out." He mentioned some data-quality issues and specific sentence times. He said currently his best estimate is about 1,500 inmates who may meet long enough sentence requirements to send Outside. He said some [inmates] have mental illness or other health or behavioral reasons why they can't be sent. He noted that at some point, the state is spending more money to send [inmates] Outside. He added, "It would make little sense to send someone to Arizona for a 4-month sentence, and right now we've [been] sending people that have a 14-month sentence." MS. PARKER clarified that the state is getting to where it doesn't have a lot of options to send additional inmates to Arizona and still have it be cost-effective. She noted that an effort is made to consolidate the number of transports [for purposes of saving money]. Regarding the Bethel and Fairbanks expansions, she said, "Those are almost 90 to 100 percent pre- sentence." The prisoners being transported out of Bethel for hearings in superior court or additional court appearances, for example, have to be transported right back because they haven't been sentenced yet. Number 2839 CHAIR WEYHRAUCH asked why the Anchorage facility, but not the Bethel facility, is federally funded. MS. PARKER explained that the U.S. Marshals requested the capacity in Anchorage, where most of their federal detainees are. She said [the state] has a contract [with the U.S. Marshals] to supply 80 beds at a per-diem rate; however, that takes up space in a state correctional facility. She noted that the federal detainee number is expected to increase from 120 to about 200, which is why [the U.S. Marshals] are going through the federal government to request additional funds to add on to the Anchorage jail. Number 2789 REPRESENTATIVE SEATON said he has heard that the state transfers [inmates with] medical problems to Arizona when possible, because it is less expensive to treat them there. He inquired about the distance to medical facilities from Sutton, for example, versus Anchorage. REPRESENTATIVE STOLTZE responded that the Sutton facility is probably within 15 minutes of the Palmer facility for Valley Hospital, where a $80-million to $90-million hospital expansion is underway. He noted that the other option [is the proposed private prison facility] in Whittier, which is farther from Anchorage and requires a trip fraught with more potential delays than a trip on the expressway between Palmer and Anchorage, or from Sutton to downtown Palmer. REPRESENTATIVE SEATON said DOC has said its prisoner base is [in] Anchorage; therefore, all the other locations would be away from that base. He said he is trying to figure out the amount of time that will be necessary to transfer [prisoners] for court appearances, for example. He said although he is not opposed to this project, he is trying to look at the overall policy regarding where the majority of Alaska's prison housing should be sited. One consideration is this, he noted: that which is economical to build may not be economical to operate. Number 2620 MR. BURNETT reminded Representative Seaton that the facility in Sutton would primarily be used for long-term, stable prisoners, so the transportation in and out would be less frequent. He also noted that it would be sited next to a medium-security and a minimum-security facility; therefore, some of the staff could be used mutually. He noted that an Alaska State Trooper attachment and a court are in Palmer, a few minutes away. Number 2566 REPRESENTATIVE SEATON said he'd like to see an analysis of where the prison population is being generated and how many times transports are necessary. He predicted that what may happen, because of the growth of the prison population, is that Alaska may soon be sending [inmates] back to Arizona, and Alaska will be stuck with the shorter-term prisoners who can't be transported back and forth from Arizona. Number 2433 REPRESENTATIVE HOLM asked for clarification of the difference in needs between pre-sentence and pre-trial prisoners as it pertains to duration of time and the facility, for example. MR. BURNETT responded that pre-trial [prisoners] are clearly short-term, but couldn't answer whether there is a difference in the facility use between the two. He said pre-sentence [prisoners] typically are still awaiting sentence after a criminal proceeding; that wait is usually short-term, and long- term custody has not yet been determined. In response to a follow-up question by Representative Holm, he explained that pre-trial [prisoners] have a "higher need." For example, he noted that the people coming in are often unstable and a higher security level is needed. Also, there are booking needs. REPRESENTATIVE STOLTZE offered his belief that more attention is given to a pre-trial [prisoner] than at any other level. Number 2407 MS. PARKER remarked that there are prisoners in Anchorage and Fairbanks who are there for 16 to 18 months awaiting trial and sentencing. She added, "So, you try not to move them, because you know we're going to have to move them right back." REPRESENTATIVE STOLTZE, based on the 15 "ride-alongs" that he has done, said the higher level of staffing is necessary. He explained, "These guys are drugged up or hopped up, and they don't want to go in through that first locking door." He added that he has seen some "pretty wild and wooly scenes." Number 2353 REPRESENTATIVE HOLM returned to the subject of cost of construction. He asked, "Who's the fox that's watching the hen house?" He opined that the State of Alaska has a tendency to overbuild, that it has been give a lot of free license by architects and engineers who get more [money] the bigger the structure is. He asked who the watchdog is for the people of Alaska. He opined that the state needs to be building adequate buildings, protecting its population, and incarcerating appropriately; however, it doesn't need to be building the finest facilities man can possibly build. Number 2268 CHAIR WEYHRAUCH remarked that he knows inadequate building methods have resulted in the state's having infrastructure, maintenance, and repair bills that don't get funded later on. He said it's a conundrum. MR. BURNETT said any construction that the state does will involve a competitive bid situation. He noted that DOC came up with the $135,000 per-bed cost at its first consideration, based on standard construction estimates and working with [the Department of Transportation & Public Safety (DOT&PF)]. He referred to a blueprint [hanging on the wall] provided by one of the largest private prison companies, and he said [the department] would like to find ways to build cheaper [than the cost proposed for the plan in the blueprint]. REPRESENTATIVE HOLM said that is the answer he wanted to hear. MR. BURNETT said the department's facility person has been tasked with looking at better and cheaper ways to build. MS. PARKER added, "And we've directed them not to go out and redesign, [but] to look at what's working in other areas of the country. This company's also built for ... prisons and for ... a lot of state facilities." She said the department doesn't want anything above and beyond the absolute needs of the facility, but is looking for a good facility at the lowest possible cost. Number 2156 REPRESENTATIVE STOLTZE said he is willing to cut corners on prisoner comfort, but not on personnel safety. Number 2138 REPRESENTATIVE BERKOWITZ asked what alternative to "hard beds" the department may be exploring. For example, he listed the following: ankle bracelets, house arrests, "soft beds," and "Nygren." MS. PARKER responded that when the current administration came in, there were plans already in place for using electronic monitoring. She mentioned a classification process whereby the probation officer works with the central classification to determine the appropriate [conditions of release], including electronic monitoring and being released into [community residential care] (CRC) and halfway houses. She said the department is implementing that to the greatest extent it thinks possible while still protecting the public. REPRESENTATIVE BERKOWITZ asked, "Did you tell me what percentage of prisoners are on this sort of alternative?" MS. PARKER, with input from Mr. Burnett, provided the following estimates from last week: 168 on electronic monitoring, 730 in community residential care, and 4,000 on probation and parole. REPRESENTATIVE BERKOWITZ noted that those numbers are under direct supervision of the department. He asked what percentage are in hard beds and what percentage aren't. MR. BURNETT replied that of the people in direct supervision of the department, less than half are in hard beds at this time. REPRESENTATIVE BERKOWITZ asked if the department has had significant problems with those who aren't. MS. PARKER offered his understanding that Representative Berkowitz was asking about those people who are considered to be in the custody of the department, including those in electronic monitoring, CRCs, halfway houses, and institutions. She said, "The percentage in our institutions would be much higher." She added, "Community residential centers - same as a halfway house." Number 1950 DEVON MITCHELL, Debt Manager, Treasury Division, Department of Revenue, in response to a request by Chair Weyhrauch to describe his job and how he can be helpful to the committee on this issue, revealed that he is currently working on the $461 million general obligation to the state that was authorized November 5, 2002. Noting that the state bond committee is charged with monitoring the state's credit, he said the issue presently being discussed by that committee - in addition to other proposals to build additional prison space - impacts the state's credit. He explained: This particular proposal would have ... three municipal entities issuing lease revenue bonds that would be backed by a revenue stream that would be provided by the general fund of the state. And so, as such, if you were a person interested in buying these pieces of paper, you're going to look at where the money comes from, follow it right back to the general fund, and that's where I would be of some assistance to the committee, if you had questions on ... that front. CHAIR WEYHRAUCH asked Mr. Mitchell if he has done any comparative analysis regarding the state's indebtedness because of its use of a private prison facility Outside, or in regard to the proposed private prison in Whittier or the prison construction proposed in HB 134. MR. MITCHELL responded that the state has not incurred any debt for the Arizona facility because it is contract-based. The two proposals presently in the legislature [HB 134 and SSHB 55] will have fiscal impact. He noted that there are some constraints in the legislation related to the private facility [SSHB 55] that are of concern. First, there isn't a dollar amount identified for the capital portion of [SSHB 55]; thus there is a concern that this leaves a lot of leeway for a city like Whittier to try to interpret it. Also, [SSHB 55] has a minimum required term on the financing of 25 years, which also is a concern to the department. MR. MITCHELL offered the background that the states in aggregate are in a negative period right now regarding credit ratings. Approximately half are looking at downgrades or have been downgraded, he said, because there is an imbalance between spending and revenues by about $100 billion across the states due to a decline in the economy and the reliance of people on capital gain receipts that have "gone away." He said, "The State of Alaska, I believe, is quite fortunate to be able to maintain our credit ratings with our upcoming sale." He noted that the State of Alaska is much more stable; however, any additional use of the state's credit needs to be carefully considered. REPRESENTATIVE BERKOWITZ asked, "Have you analyzed the numbers for the Arizona facility at all?" MR. MITCHELL answered no. CHAIR WEYHRAUCH said he doesn't know if anyone present has done so, but that information is available in the SSHB 55 file. Number 1750 REPRESENTATIVE BERKOWITZ mentioned Arizona and $20 million. He indicated that [the State of Alaska] is paying for the profits, as well as the Arizona taxes. He mentioned [paying] "above and beyond the operating costs." He added, "And that number, to me, would be interesting." CHAIR WEYHRAUCH told Mr. Mitchell it is good to know he is available as a resource. REPRESENTATIVE SEATON mentioned state bonds and revenue bonds as the two ways of financing a facility. He asked, "Is your analysis that if an equal amount was spent on these, is there a difference in the impact upon the state's bond rating or on its credit rating from those two different sources?" MR. MITCHELL asked whether Representative Seaton was referring to the two proposals before the legislature. REPRESENTATIVE SEATON answered yes. He added, "To make it easy, just think of them as being the identical amount of money, if we don't have the amount specified in the Whittier one. ... What I'm trying to do is figure out if ... you think that there's going to be a different influence from revenue bonds with the municipalities, or state bond indebtedness." MR. MITCHELL responded that he believes the current proposals have a fairly similar financing mechanism; it would either be Whittier with a private prison issuing debt or, "with this bill, the other municipalities." He said: If your question is, would I ... personally be more comfortable if it was the State of Alaska issuing the debt, I'd say yes, because it's the State of Alaska's credit and, as such, who knows it better? A municipality doesn't know the State of Alaska like the State of Alaska knows the State of Alaska. The reading analysts that are going to look at the credit are the folks that I deal with on a fairly regular basis. If your question was, is there a cost difference in the credit prospectus, I think this is going to be state supported obligation, and so that means that each year the legislature's going to come in and say, "Are we going to appropriate money to continue to have that building in wherever to house prisoners" - recognizing that there's some additional things that might happen to you besides losing that prison if you fail to appropriate. So there is an essentiality issue and an ability to use your facility, and so that's a consideration when these folks are looking at this. Obviously, the case has been made that we have a clear need for ... prison space in the state of Alaska. And so, I think there is an essentiality otherwise. Number 1540 REPRESENTATIVE SEATON asked, if there were two set of bonds being issued, whether one of those two sources would have a lower interest rate. MR. MITCHELL replied that he'd tend to argue that because of name recognition, a State of Alaska issuance would produce a lower interest rate than a City of Whittier issuance would, even though the credit is fundamentally the same. He added, "It would be incremental." Number 1470 REPRESENTATIVE BERKOWITZ asked if there is a difference between rates, generally, on revenue versus general obligation bonds. MR. MITCHELL answered yes. He explained that the state's general obligation bond rating is "Aa-Aa2." He added: The type of ratings that we ... achieve with state- supported obligations, like what's being considered, are in the A1, "A-plus" category. And so there's an additional cost, which, depending on the market you're in, would range -- ... well, 20 to 25 basis points would be the additional cost of not putting your full faith and credit on the line. Number 1410 JOHN DUFFY, Manager, Matanuska-Susitna Borough, thanked the committee for addressing overcrowded prisons and Representative Stoltze for sponsoring HB 134. He said the Matanuska-Susitna Borough, the cities of Palmer and Wasilla, and their local chambers of commerce support HB 134. He explained that the borough believes investing in expansion of its existing publicly owned and operated facilities is the most appropriate approach to relieve overcrowding of those facilities. He said HB 134 will allow prisoners to be closer to their families and support network, thereby increasing the chances of rehabilitation; Alaskans will benefit from increased jobs and business opportunities, state funds will be invested in Alaskan communities, and a multiplier effect from these investments will allow those communities to develop their infrastructure when it's based on local economies. MR. DUFFY returned to the economic impact assessment, page 3-3, and asked members to look at tables [3-1 and 3-2] at their leisure. He remarked, "We identified the economic impact with each facility, as well as the entire economic impact throughout the state." He gave examples showing that approximately $250 million would be generated during the construction phase, as well as $73 million generated in sales and services throughout the state during the operation phase. Number 1253 MR. DUFFY reported that the borough has adequate health care facilities. He reiterated Representative Stoltze's earlier mention of an upcoming expansion of a [hospital] facility by building a 76-bed facility, with the ability to expand to 130 beds. He said there is a district court facility in Palmer, as well as other support systems near the Sutton facility. [HB 134 was held over.]
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