Legislature(2003 - 2004)
04/27/2004 09:02 AM Senate FIN
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE BILL NO. 65
"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."
This was the third hearing for this bill in the Senate Finance
Committee.
Co-Chair Wilken explained that this bill would authorize the
Department of Corrections to enter into 25-year lease agreements
for additional State correctional beds with the Matanuska-Susitna
(Mat-Su) Borough, the Fairbanks North Star Borough, Bethel, and the
Municipality of Anchorage.
Co-Chair Green, the bill's sponsor, expressed that for more than
four years, she has been advocating for the construction of new
prisons in the State. Discussions have occurred regarding both
public and private operated facilities. Contrary to most
discussions that place private and public facilities in competition
with each other, this legislation would provide an opportunity to
construct new facilities in the State without advocating for one
side or the other. No expansion would occur were the current
competitive situation to continue. Some facilities in the State
operate at one hundred percent capacity on an on-going basis, and
were this to continue, it could present "a crisis" and a "dangerous
situation."
AT EASE 10:10 AM / 10:11 AM
Co-Chair Green moved to adopt the Version 23-LS0392\C as the
working document.
Co-Chair Wilken objected for explanation.
Co-Chair Green explained that Version "C" would expand the bill's
title to include private prisons in the City of Whittier, provided
the State could not provide the service at the same or lower cost.
In addition, the bill's title would also be expanded to provide
consideration to the City of Dillingham and Kodiak's jails.
Co-Chair Green pointed out that the bill would also provide a
termination date of July 1, 2009 as specified in the bill in
Section 1 on page two, lines six and nine. By this time, the
Commissioner of the Department of Corrections must authorize
construction of the facilities on the public side. Subsection (2)
of Section 1 would allow for an increase in the maximum number of
beds that could be constructed in the Mat-Su Borough facility.
Co-Chair Green noted that new language referencing a third party
contractor for a prison facility in the City of Whittier has been
added as reflected by the entirety of Section 2, beginning on page
three, line five. She specified that the City of Whittier prison
construction must be authorized by July 1, 2006. She also noted
that before the project could be awarded to a third party, a
feasibility study must be conducted in order to affirm that the
State could not perform these services for the same or lesser
amount. Section 2 would also mandate that a competitive bid process
be implemented when awarding the City of Whittier prison facility
project to a third party and that the City of Whittier must adhere
to the State procurement process for the acquisition of land,
design, construction, and operation of the facility. Furthermore,
the Commissioner must approve the facility design before entering
into an agreement. Approval of design, efficiency, safety measures,
and building standards is necessary as there is always the chance
that a facility constructed by a borough or city might, "in a short
period of time be turned over to the State."
Co-Chair Green also noted that the Whittier prison would be limited
to approximately 2,200 beds. Language in Section 2, subsection (4)
on page four, beginning on page 15 is identical to language in HB
55-CORRECTIONAL FACILITIES pertaining to the agreement with the
City of Whittier.
Co-Chair Green noted that Section 3, on page four, beginning on
line 23 is also new language. It would specify that, in regards to
the construction of a prison facility in the cities of Dillingham
and Kodiak, the State would match the expenditure of the local
entity by issuing a certificate of participation (COP).
Co-Chair Green pointed out that new Section 4, located on page
five, beginning on line 11, would provides further parameters
regarding the State's COP agreement with the cities of Dillingham
and Kodiak. The anticipated annual operating costs associated with
providing the additional beds at each facility are specified in
Section 4, line 24.
Co-Chair Green pointed out that language in Section 6, on page six,
line six repeals language that the Legislature approved
approximately six years prior regarding the Kenai facility, which
was not furthered.
Co-Chair Green stated that the difficult aspect of developing the
Department of Corrections "draft" fiscal note, dated April 27, 2004
[copy on file] was that while most fiscal notes reflect new
expenses, the Department was required to factor out expenses
associated with housing inmates outside of the State. This is
further explained in the fiscal note analysis. Inmates who are
currently housed in Arizona would be housed within the State as of
the year 2009, and as a result, that $13 million expense must be
removed from the total $43 million expense in order to compare
figures. The resulting $27 million net expense would better reflect
the true cost of increasing the number of in-State beds. In
addition, some prison facilities in Palmer might be closed and
operations moved to a new facility. This would "allow for a better
management" of funds.
Co-Chair Green urged the Committee to realize that each new "tough
on crime" bill approved by the Legislature would further increase
the State's prison population. In addition, each new State Trooper
and new State prosecutor would also increase the number of those
who might be incarcerated. One area that is also authorized in the
bill, but that was not thoroughly discussed, is the expansion of
the federally funded Municipality of Anchorage jail. The City of
Seward is also interested in requesting that its number of beds be
increased.
Co-Chair Green commented that a forthcoming amendment would address
a technical error in the bill and a separate amendment would
address Alaska police standard certification requirements for
prison guards as this issue is not currently addressed in the bill.
Co-Chair Wilken removed his objection.
There being no further objection, the Version "C" committee
substitute was ADOPTED as the working document.
Amendment #2: This technical amendment changes $1,500,000 to
$2,000,000 to correct a drafting error in Section 4, line 14 on
page five of the Version "C" committee substitute.
Co-Chair Green moved for adoption.
There being no objection, Amendment #2 was ADOPTED.
MARC ANTRIM, Commissioner, Department of Corrections, informed the
Committee that, while this "compromised" legislation would not
provide all the remedies that are desired, both the Department and
Governor support its passage as the need for additional prison
"housing is so great." He detailed the growth in prison population
numbers, as reflected in the Department's chart titled "Inmate
Population Statistics" [copy on file], and commented that there is
no indication that the increasing prison population trend would
change. Were the current rate of prison population increase and the
current circumstances to continue, it is anticipated that half of
State's inmate population would be housed outside of the State.
DEE HUBBARD, Resident of Sterling, testified via teleconference
from Anchorage and applauded the efforts exerted in the development
of the committee substitute, specifically the inclusion of
procurement code language and the inclusion of the Kodiak and
Dillingham jail components. She urged the Committee to consider the
addition of Statute language, as adopted by other states, regarding
private prison contract monitoring, compliance auditing, use of
force guidelines, contract enforcement and fines, and emergency
notification plans to include such things as who would be
responsible for expenses associated with searching for an escaped
inmate. These types of things should be incorporated into State
Statute. She could provide pertinent information to the Committee
in these regards.
Co-Chair Green asked Ms. Hubbard to provide the information to her
office.
LINDA FREED, City Manager, City of Kodiak, testified via
teleconference from Kodiak and thanked the bill's sponsor for
providing the City the opportunity to participate in the
development of the committee substitute. The focus of her testimony
would be the financing of the City's proposed jail facility. She
noted that the City currently operates the jail on a contractual
basis with the State in an old contractor's office/garage building
that was built in the 1940s. The building, which also houses the
City's police department, is unsafe and expensive to operate. The
City has committed to constructing a new 20 or 22-bed jail
facility, probably at the same site, at an estimated cost of up to
$3.5 million. The City "already subsidizes the operation" of the
current jail facility even though the contract with the State is in
effect. The proposed 50-50 State/local match that would be required
to construct the new State jail facility would exceed the City's
fiscal ability. However, construction would be possible were the
City able to secure a three million dollar bonded indebtedness. The
City has made a commitment to the bill's sponsor "that they are
willing to bond and pay for the construction costs of the facility
up front." At the current four-percent interest rate, a three
million dollar twenty-year bond indebtedness annual payback would
be $220,745. Therefore, the request is that the State would assist
the City in finding "a mechanism" through which the City could
"construct a new jail for the State of Alaska" and assist the City
in satisfying the bonded indebtedness debt "up to a maximum of
three million dollars."
TC KAMAI, Chief of Police, City of Kodiak Police Department,
testified via teleconference from Kodiak regarding the difficulties
the City faces in operating the current aging and "deplorable"
facility; particularly in regards to meeting the standards required
by the State contract. He likened the escalating annual maintenance
expenses of the facility "to putting band-aids on an open wound."
The jail must be replaced.
Senator Olson asked regarding the jail's incarceration statistics.
Chief Kamai responded that the monthly occupancy rate of the 16-bed
facility is 80-percent. This morning the jail held 13 individuals.
Senator Olson asked for a total number per year.
Chief Kamai responded that the jail houses an average of 1,200 to
1,300 incarcerations per year.
SENATOR GARY STEVENS thanked the bill's sponsor for including
community jails in the committee substitute. Though his experience
as a former City of Kodiak Mayor, he could attest to the condition
of the City jail, the oldest jail in the State. He stressed the
timeliness of this legislation, as the City is moving forward with
its plans to replace the jail with a multi-public safety building.
He applauded the City's willingness to commit to paying up-front
for the building, and supported the City's request that the State
commit to assisting with the building's associated bond service.
PHIL SHEALY, City Manager, City of Seward, testified via
teleconference from Seward and shared that the City supports the
committee substitute's "comprehensive package to address
correctional facility needs in the State for years to come."
However, the one missing component is that of addressing the
State's maximum-security facility needs. Therefore, he requested
that expansion of the City of Seward's Spring Creek Prison be
considered in that regard.
WILLARD DUNHAM, City Council Member, City of Seward, testified via
teleconference from Seward and reminded the Committee that, while
the Spring Creek facility can currently house 350 inmates, the
building and the site were designed to allow for an expansion
ability to house 700. He noted that this could be accomplished for
a reasonable amount. Therefore, he requested that this facility be
added into the feasibility study language. He also stated that the
facility currently houses 500 inmates and site expansion is
required. The Department of Corrections would support the expansion
of maximum-security improvements at the site.
SFC 04 # 96, Side A 10:38 AM
Mr. Dunham noted that the bonds that were sold to support the
construction of this facility would be paid off in the year 2006,
and, in light of the current interest rate level, he stressed that
this would be a good time to reissue those bonds. Another valid
reason to expand the facility is the fact that Seward is the site
of the Alaska Vocational & Technical Institute, which could provide
training for correctional officers and inmates. Therefore, he urged
the Committee to include the community of Seward in the bill as he
assured the Committee that the City would be willing "to assist the
Department on all fronts." The only thing negative about the bill
is the fact that the City of Seward' prison facility is not
included.
Senator G. Stevens agreed that the Spring Creek facility should be
considered in this legislation as it is the only maximum-security
facility in the State and has been designed for expansion. The
facilities currently incorporated into the bill are medium security
or lower, and pre-sentencing facilities. He therefore urged that
the facility be included.
Co-Chair Green noted that further amendments would be forthcoming.
Co-Chair Wilken ordered the bill HELD in Committee for further
consideration.
[Note: SB 65 was re-addressed later in the meeting.]
RECESS 10:41 AM / 4:04 PM
SENATE BILL NO. 65
"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."
[Note: This bill was heard earlier in the meeting.]
Co-Chair Wilken noted that the bill was again before the Committee.
Amendment #3: This amendment inserts new language into the bill
title on page one, line one, following "An Act." The amended
language would read as follows.
An Act relating to correctional officers, parole officers, and
probation officers;…
In addition, the bill inserts new bill sections into the bill on
page one, following line twelve, as follows.
Section 1. AS 18.62.290(2) is amended to read:
(2) "correctional officer" means a person
(A) appointed by the commissioner of corrections
whose primary duty under AS 33.30 is to provide custody, care,
security, control, and discipline of persons charged or
convicted of offenses against the state or held under
authority of state law; or
(B) employed in a correctional facility in this
state whose primary duty is to provide custody, care,
security, control, and discipline of persons charged or
convicted of offenses or held under authority of law;
Sec. 2. AS 18.65.290(5) is amended to read:
(5) "parole officer" means a person appointed by the
commissioner of corrections or employed by a correctional
facility in this state to perform the duties of supervising
the parole of prisoners under AS 33.16;
Sec. 3. AS 18.65.290(7) is amended to read:
(7) "probation officer" means a person appointed by the
commissioner of corrections or employed by a correctional
facility in this state to perform the duties of a probation
officer under AS 33.05.
New Text Underlined [BRACKETED TEXT DELETED]
Other changes resulting from this amendment are: deleting "$14,600"
and replacing it with "$11,600" on page two, line 25; deleting
"sec. 4" and replacing it with "sec. 7" on page four, line 29;
deleting "sec. 4" and replacing it with "sec. 7" on page five, line
nine; and deleting "sec. 3" and replacing it with "sec. 6" on page
five, line 14 and on page five, line 31.
Co-Chair Green moved to adopt the amendment. She noted that this
amendment would incorporate standards into the bill pertaining to
staff training and certification. In addition, she noted that the
amendment would also present a technical change to correct the
annual maximum allowable lease payment per bed at a new prison
facility.
Senator Dyson asked whether State statutes currently contain
adequate screening procedures or training for prison chaplains as
there was a recent news report regarding inappropriate conduct of a
State prison chaplain.
MARK ANTRIM, Commissioner, Department of Corrections, responded
that even were more stringent screening in place, "there are still
bad people" and bad things could happen. The Department supports
the prison chaplaincy program. Furthermore, he shared that the
chaplain in question had more than twenty years of experience and
had been highly recommended.
Senator Dyson asked whether the Department might require any
additional statutory authority in regards to the prison chaplain
program.
Commissioner Antrim responded no.
There being no objection, Amendment #3 was ADOPTED.
Co-Chair Green noted that Amendment #4 would not be offered as its
contents were embodied in Amendment #3.
Amendment #5: This amendment deletes the word "and" in the bill's
title on page one line three.
In addition, the bill's title is further amended to read, on page
one, line four, as follows.
Anchorage and the City of Seward; relating to the development
and financing of privately operated correctional….
Furthermore the amendment also inserts a new subsection into the
bill on page two, line five as follows.
(5) Seward - expansion of the existing Spring Creek
Correctional Center by up to 144 beds.
Senator B. Stevens moved to adopt Amendment #5, at the request of
Senator Gary Stevens.
Co-Chair Wilken objected for explanation.
Senator B. Stevens read the amendment.
Senator Gary Stevens explained that the City of Seward's Spring
Creek Correctional Facility is the most logical locale for a
maximum-security facility expansion, as it is currently the only
maximum-security prison in the State and, as it was designed for
expansion, it would be the most economical choice.
Co-Chair Green suggested that the amendment be changed to further
reflect the distinction between a public and private correctional
facility.
Co-Chair Wilken stated that the language in Amendment #5 should be
reworked.
Amendment-to-Amendment #5: This friendly amendment to the amendment
changes the originally proposed language as follows.
The language "and the City of Seward;" is inserted into the bill's
title on page one, line four, following the word "Anchorage".
In addition, for consistency purposes, the words "City of" is
inserted before the word "Seward" in new subsection (5) being
offered. This language would read as follows.
(5) City of Seward - expansion of the existing Spring Creek
Correctional Center by up to 144 beds.
Co-Chair Wilken moved to amend Amendment #5.
Senator Olson suggested that consideration be given to including
the City of Kotzebue prison facilities in the legislation.
Co-Chair Wilken asked that Senator Olson consider presenting that
issue as a separate amendment.
There being no objection, the Amendment to Amendment #5 was
ADOPTED.
Co-Chair Wilken offered a motion to adopt Amendment #5, as amended.
There being no objection, Amendment #5, as amended, was ADOPTED.
Amendment #6: This amendment deletes all material in Section 4,
page five, lines 13 through 17 and replaces it with the following
language.
MUNICIPAL JAIL FACILTIES. (a) Each of the following projects
is approved to receive $3,000,000 of the proceeds of
certificates of participation authorized under sec. 3 of this
Act, on the condition that the municipality, in which the
project is located, provides all funds over this amount needed
for the upgrade, expansion or replacement of the jail
facilities.
In addition, language in Section 4, subsection (a)(2) on page five,
line 21 is amended to read as follows.
existing 16-bed facility with a new facility up to 22 beds.
New Text Underlined [BRACKETED TEXT DELETED]
Senator B. Stevens moved to adopt Amendment #6.
Co-Chair Wilken and Co-Chair Green objected
Senator B. Stevens explained that the effect of this amendment
would be to increase the amount of the Certificate of Participation
(COP) from two million to three million dollars. In addition, he
noted that any expenses above this amount to upgrade, expand or
renovate a facility would be borne by the municipality. The effect
of this language would be to remove the State match language.
Senator B. Stevens continued that the amendment would also provide
a technical change to qualify that the current 16-bed Kodiak
Community Jail would be replaced with up to a new 22-bed facility.
Co-Chair Green stated that the original proposal would have
required a 50-percent State/municipality match with a total
projected per facility maximum of four million dollars. She noted
that upon further review, it was determined that construction for
proposed new jail facilities would cost less than four million
dollars. Therefore, the legislation was changed to specify a State
maximum expenditure of two million dollars and a local maximum
expenditure of $1.5 million. With the understanding that the local
municipality would use these funds to construct a new jail, the
State would sign a contract specifying that it would be responsible
for the operating costs of the facility on a long-term basis.
Co-Chair Green continued that historically when a State/local
participation agreement is in place, more participation on part of
the local entity has been required. Therefore, in this situation,
the State, and in particular, the Legislature, has agreed, "to be
more generous" in its participation commitment. She stated that the
goal is to make local jail facility projects affordable and
incorporate local participation.
Co-Chair Green appreciated the local community representatives'
comments regarding their willingness to improve their local prison
facilities; however, she asserted that the intent of this
legislation was to have local participation and have the State
assist in providing funding without burdening the State. She
advised that the funding streams for the local prison enhancements
would be "a different funding stream" than normally utilized for
prisons "when entities go to bond" and arrange "for the State to do
the lease/purchase on the other facilities." She warned that
careful consideration must be applied to this endeavor as other
communities might come forward and ask that the State construct
prison facilities in their communities with limited local
participation. She stressed that while this would be a Committee
policy call, the intent would be to not have a State commitment
that "we cannot afford."
Co-Chair Wilken understood that were the existing language in
effect, the community of Dillingham would be required to provide at
least $1.5 million toward construction of a new jail. Were
Amendment #6 adopted, the State's obligation would be three million
dollars and the City of Dillingham would be responsible for any
expense above the three million dollar amount.
Co-Chair Green concurred.
Co-Chair Wilken understood, therefore, that were the project to
cost three million dollars or less, the community would receive the
facility "au gratis."
Co-Chair Green affirmed. In addition, she stated that adoption of
the amendment would also require further changes in the committee
substitute in that the $4,000,000 amount specified in Sec. 3, lines
28 and 30 on page four must be changed to $6,000,000. She
reiterated that adoption of this amendment would serve to increase
"State exposure."
Commissioner Antrim noted that he could not comment in regards to
the amendment, as it is not in his field of expertise.
Senator G. Stevens appreciated Co-Chair Green's comments regarding
the affordability of the project and the local participation issue.
He stressed that the City of Kodiak would be willing to provide the
upfront costs of constructing a new 22-bed, $3.5 million jail;
however, he voiced that the City would appreciate knowing what base
level the State would commit to in regards to the debt service as
the City would be obligating to bond the total project and pay any
associated expenses above that specified amount. He noted that the
annual debt payment is projected to be approximately $220,000 per
year for the duration of the bond. In addition, he stated that
separate, annual operating costs would be associated with the
project. He reminded the Committee that the City is currently
paying approximately $3,000 more, annually, than what the State is
contributing for the current Kodiak jail. In conclusion, he
stressed that, "there is a disinclination for the City council" to
invest "that much money into a State jail."
Senator Hoffman stated that since consideration is being given to
changing the language regarding the capacity of the Kodiak jail to
be "up to 22-beds," he would consider proposing that similar
language be applicable to the Dillingham jail.
Co-Chair Wilken asked that that component of the amendment be
addressed after the portion of the amendment dealing with the
financial arrangement is rectified.
Senator Hoffman suggested that the amendment be divided.
Co-Chair Wilken noted that a separate amendment addressing the
Dillingham jail could be submitted for consideration.
Co-Chair Green asked regarding the process undertaken by the
Department of Corrections for projecting operating costs for local
jail facilities; specifically whether the contracts were developed
on a cost per day basis. It would be in the best interest of the
State to keep local facilities viable.
Commissioner Antrim responded that each local contract is developed
on an annual basis, based on a variety of factors for each
community. While the Department does have negotiating abilities;
this ability is subject to Legislative appropriation. He also noted
that, "any increases awarded to this program over the years has
been done so proportionately" to the original level, and that, "in
some cases, there was not a lot of rational basis for some of those
figures."
Co-Chair Green asked the Commissioner whether other communities
might come forward with a request for inclusion, were this language
adopted.
Commissioner Antrim responded that this could be possible.
Co-Chair Wilken declared that were this amendment adopted, the
State might "have three million dollar jails all over State."
Senator B. Stevens offered a motion to withdraw the amendment.
There being no objection, Amendment #6 was WITHDRAWN from
consideration.
Co-Chair Wilken ordered the bill HELD in Committee in order to
further consider this and other amendments.
[NOTE: This bill was addressed later in the meeting.]
SENATE BILL NO. 65
"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."
[Note: SB 65 was heard two times previously in this meeting.]
Co-Chair Green reminded the Committee that, earlier in the meeting,
an amendment had been offered but withdrawn from consideration that
would change the bill's language regarding the State's and local
entity's financial commitment regarding the construction of new
jail facilities in Kodiak and Dillingham.
Co-Chair Wilken clarified that the referenced amendment is
Amendment #6.
Amendment #6: This amendment deletes all material on page five,
Section 4, lines 13 through 17 and replaces it with the following
language.
MUNICIPAL JAIL FACILTIES. (a) Each of the following projects
is approved to receive $3,000,000 of the proceeds of
certificates of participation authorized under sec. 3 of this
Act, on the condition that the municipality, in which the
project is located, provides all funds over this amount needed
for the upgrade, expansion or replacement of the jail
facilities.
In addition, language in Section 4, subsection (a)(2) on page five,
line 21 is amended to read as follows.
existing 16-bed facility with a new facility up to 22 beds.
New Text Underlined [BRACKETED TEXT DELETED]
TOM BOUTIN, Deputy Commissioner, Department of Revenue and
Spokesman, State Bond Committee, commented that that he had never
"seen State debt issued with a kicker from any entity" be it a
municipality or any other. The fact that a municipality would be
contributing something akin to "a credit enhancement or money for a
State project" would not be a matter of consideration to the State
Bond Committee or the Department of Revenue, as he understood that
all of these projects would constitute a State lease debt.
Co-Chair Green interjected that rather than this amendment
pertaining to State lease/purchase debt, it would apply strictly to
the operating expenses associated with the Kodiak and Dillingham
jails.
Co-Chair Wilken understood that the amendment would pertain to
construction costs of the facilities as opposed to the operating
costs.
Co-Chair Green understood "that the payment the State makes is for
operating costs."
Mr. Boutin responded that the entirety of the projects specified in
the Version "C" committee substitute would qualify for State lease
debt and therefore would be rated on the State's credit. "Whether a
leased project is a capital lease or an operating lease relies upon
financial accounting standards for Rule 13." Therefore, he
considered all the projects as State lease debt and that some of
the projects have "a credit enhancement of a municipality kicking
in some money." He reiterated that he had never seen this done,
"anywhere in the nation" or the State of Alaska. This does not mean
that it "is a bad thing," but he opined that attorneys would be
required "to craft" the language, as, were a municipality to use
their general obligation ability to fund their portion of the
money, the project would be considered "part of the security for
the debt and there "would have to be a clear segmentation so that
the general obligation of the municipality didn't run to the part
of the project that the municipality was funding."
Co-Chair Wilken voiced that, under the bill's current language, the
State would provide, upfront, a two million dollar capital grant
with an expectation of a $1.5 million grant being forthcoming from
the municipality. Amendment #6 would change the language to provide
three million dollars in State funding with no expectation of local
match funding.
Senator B. Stevens stated that the amendment would establish a
three million dollar ceiling on the State's participation in the
municipality's construction of a local jail, and that any cost
above that would become the responsibility of the municipality. He
pointed out that in Section 3, subsection (a) of the bill, page
five, lines one and two, the total rental obligation of the State
on an annual basis would be limited to $400,000. He stated that
this might be the issue that Co-Chair Green is referring to when
"saying that the maximum obligation that the State would be on the
line for would be the $400,000 and the municipality would be
responsible for the reimbursement for the debt retirement of three
million."
Mr. Boutin replied that currently there is no financial structure
like that available. Continuing, he re-emphasized that this would
be recognized as State lease debt, which is rated on the State's
credit. He stated "the State's credit would be the principle
enhancement, but he reiterated that "the project itself is always
part of the credit" in order to provide the bond holders with the
ability, "in the event of a non-appropriation," to take over a
portion of the project.
Senator B. Stevens recalled that the question regarding the rewrite
of the original language is whether Amendment #6 would require the
monetary amount to be increased to $6,000,000 in Section 3 on page
four, line 27 and the $4,000,0000 amount on line 30 of that same
section to be increased to $8,000,000.
Co-Chair Green concurred.
Mr. Boutin replied that it would require a linear change.
Senator B. Stevens understood therefore that were $3,000,0000
specified for each of the Kodiak and Dillingham projects, the total
amount required would be $6,000,000. The total cost of the
financial commitment would not exceed $8,000,000.
Mr. Boutin shared that one of the three financial rating agencies
has expressed that the State should not commit to a maturity lease
debt term exceeding 15-years.
Senator B. Stevens asked whether the City of Kodiak or the State
would repay the bond debt reimbursement.
Ms. Freed stated that, due to the fact that this is a State jail
operated by the City of Kodiak, the premise is that the City of
Kodiak would bond for the total construction costs through the
City's general obligation bonding capacity with the understanding
that the State would repay the debt service up to a maximum of
three million dollar total construction costs. She clarified that
the City would be responsible for any construction expense beyond
the three million dollar amount.
Senator B. Stevens expressed that this clarifies the issue.
Co-Chair Green understood the City of Kodiak's position. However,
she shared that historically when a local entity bonds for a
project, a State lease/purchase agreement is in place that
specifies that the city would own the building until the debt is
paid. Continuing, she stated that this arrangement would differ in
that, while the City of Kodiak or Dillingham would secure the bond
and agree to pay anything beyond the State's three million dollar
obligation, when the project were paid off, the City would own the
facility. She expressed therefore, that there are two funding
mechanisms in this bill, as, with the exception of the Kodiak and
Dillingham jails, the State would own the facilities.
Co-Chair Green asked whether the current jail facilities in
Dillingham and Kodiak are counted against the State's credit
rating.
Mr. Boutin responded in the negative. He reiterated that, as
written, all the projects in this bill would be recognized as State
debt, regardless of whether or not the lessee owns the facility at
the end of the lease term. Continuing, he stated that this could
result in meeting one of four criteria in Rule 13 in which the
lessee, not the leasor, "is on the hook." Therefore, he concluded
that regardless of whether the City of Kodiak utilizes its GO bonds
to fund the construction of the jail facility, the bill, as
drafted, revolves around State lease debt.
Co-Chair Wilken understood that this is because of the Certificates
of Participation specified in the bill.
Mr. Boutin responded that this is because the lease term clearly
meets one of four criteria for financial accounting standards for
Rule 13.
SFC 04 # 97, Side A 05:37 PM
Co-Chair Green recalled that during a conversation she had with the
Standard & Poor credit rating company regarding what constituted
State debt, they had asked what the State is doing to house State
prisoners. She informed them that the State is paying to have them
housed in a facility in Arizona. They responded that the
construction of a prison within the State to house those same
prisoners would not be counted against the State bonding capacity
because its operating money that is currently being spent and which
"would be spent in the future." Therefore, she suggested that since
the State is currently housing prisoners in Kodiak and Dillingham
that this would constitute "only an addition to the current
facility." She stressed that more bed space has been identified as
being necessary in Kodiak and, therefore, the State would only be
paying for an increase of six beds at that facility. She asked
therefore whether the "replacement facility " term is the
determining factor in regards to whether the State should simply be
paying for six new beds.
Mr. Boutin responded that were the State to address this situation
in a manner similar to that of housing prisoners in Arizona, then
the Certificate of Participation language, lease language, and bond
proceeds should not be components of the bill. He stated that were
the City of Kodiak to utilize GO bonding to build a facility that
would be open to housing any entities' prisoners, then, he would
agree that it would not be considered State debt.
Co-Chair Wilken asked the relationship of this discussion to
Amendment #6.
Senator B. Stevens responded that the issue being discussed is
"embodied in the bill itself;" whereas the amendment would simply
serve to change numbers in the bill. He explained that the adoption
of Amendment # 2 served to increase the amount of the proceeds of
the certificates of participation. This would again be amended by
the adoption of Amendment #6. However, Mr. Boutin's testimony has
served to address issues embodied in the body of the bill rather
than relating to Amendment #6.
Co-Chair Wilken understood that Amendment #6 would allow the State
to issue certificates of participation to build an under-three
million dollar jail anywhere in the State were one desired by the
municipality, with no local contribution requirement. Continuing,
he stated that the Version "C" committee substitute states that the
State would assist a municipality to build a $3.5 million facility
of which the local municipality responsibility would be $1.5
million.
Co-Chair Wilken concluded therefore, that were amendment #6
adopted, there would be $3 million jails being constructed
everywhere in the State.
Senator B. Stevens responded that the Amendment raises a question
in regards to Section 3, page five, lines two and three, which
specifies a $6,000,000 limit on the total COP payment. He therefore
understood that the language in Amendment #6 would require an
additional change in that regard as the $6 million dollar amount
would only provide funding for the Kodiak and Dillingham projects.
Co-Chair Green agreed that the $6 million amount should be
increased to allow that any other municipality wishing to pursue a
new jail facility be provided for, as she declared, were no local
match participation required, this would be very "attractive" to
many communities.
Senator Hoffman countered that the bill's language specifically
identifies to which communities the proposal would apply.
Senator Hoffman requested that consideration be provided to
dividing one portion of the Amendment into two parts: one to
address language in Section 4 Subsection (1) and the other to
address Section (4) Subsection (2) as affected by Amendment #6.
Co-Chair Green argued that the costs associated with these jails
has not been calculated on an "up to" a certain number of beds
basis, but rather that the costs were calculated to specifically
reflect the costs associated with a 22-bed Kodiak facility and a
25-bed Dillingham facility. Therefore, she stated that she would
concur were the intent to express the entirety of the expenses in a
per bed manner.
Senator Hoffman pointed out that were the amendment adopted, the
details relating to the Kodiak and Dillingham jails would not be
consistent as one would specify "up to" a certain number of beds
and the other would not.
Co-Chair Wilken ordered Amendment #6 to be divided into Amendment
6A and 6B.
Amendment #6A: This amendment deletes all material on page five,
Section 4, lines 13 through 17 and replaces it with the following
language.
MUNICIPAL JAIL FACILTIES. (a) Each of the following projects
is approved to receive $3,000,000 of the proceeds of
certificates of participation authorized under sec. 3 of this
Act, on the condition that the municipality, in which the
project is located, provides all funds over this amount needed
for the upgrade, expansion or replacement of the jail
facilities.
Co-Chair Wilken asked whether this amendment could result in there
being three million dollar jails constructed all around the State
in the years to come.
Commissioner Antrim voiced that this is "a valid concern" in that
the State would be financing their construction. In addition, he
reminded that this amendment applies to local rather than State
jail facilities.
Co-Chair Wilken stated therefore that the State would be required
to pay to have State prisoners held in that local facility.
Commissioner Antrim affirmed that the basis of the community jail
program is that the State contract with the local entity to hold
State prisoners.
Co-Chair Wilken asked whether the cost per prisoner differs from
community to community based on the local economics.
Commissioner Antrim affirmed that operating costs are a factor in
the amount paid.
Co-Chair Green informed "that every other community jail is a city
jail: the State did not build them, the State pays operating costs,
and should not have to build non-State owned facilities."
Senator B. Stevens stated that Amendment #6A would simply serve to
change the ceiling embodied in the bill. In response to the
argument that the State would be building $3 million jails all over
the State, it could be argued that the State would be building $3.5
million jails all over the State of which $2 million would be paid
for by the State. Therefore, he opined that the amendment would not
change what is embodied in the bill with the exception of the
required match and the level to which the State would participate.
Co-Chair Wilken remarked that the issue pertains to local
participation.
Co-Chair Green reminded that the original estimates for
constructing the Kodiak and Dillingham jails were approximately
$3.5 million. The State's two million dollar commitment, which she
declared lowered local participation to less than half of the total
amount, was considered "very, very generous." While it could be
argued that increasing the amount to three million dollars would
not be significantly more, that increase would negate the
requirement for the local participation. She voiced concern that
this amendment "keeps this section from working."
Senator B. Stevens moved to adopt Amendment #6A.
Co-Chair Green objected.
A roll call was taken on the motion.
IN FAVOR: Senator B. Stevens
OPPOSED: Senator Dyson, Senator Hoffman, Senator Olson, Senator
Bunde, Co-Chair Green, and Co-Chair Wilken
The motion FAILED (1-6)
Amendment #6A FAILED to be adopted.
Amendment #6B: This amendment amends language in Section 4,
subsection (a)(2) on page five, line 21 to read as follows.
existing 16-bed facility with a new facility up to 22 beds.
New Text Underlined [BRACKETED TEXT DELETED]
Senator B. Stevens moved to adopt Amendment #6B.
Co-Chair Wilken and Co-Chair Green objected.
Co-Chair Green would be willing to work with the Department of
Revenue and the various involved communities to develop the proper
language pertaining to this section.
Senator Dyson asked Co-Chair Green to summarize her concern.
Co-Chair Green explained that the calculations pertaining to the
costs of the facilities are based on a total bed count rather than
an up-to bed count scenario. The concern is that were no additional
beds added when constructing a new Kodiak jail, the State would be
required to pay the amount stated in the bill that pertains to the
larger number.
Commissioner Antrim affirmed that the numbers denoted in the bill
are precise numbers.
Amendment to Amendment #6B: This amendment to the amendment adds
the words "up to" before "25-bed facility" in Section 4, Subsection
(a) (1) on page five, line 19 that pertains to the Municipality of
Dillingham.
Senator Hoffman moved to adopt the amendment-to-the-amendment.
Co-Chair Wilken objected.
Senator B. Stevens pointed out that language in Section 1, page
two, lines three through 30 is consistent with the language
proposed in the amendment to the amendment.
A roll call was taken on the motion.
IN FAVOR: Senator B. Stevens, Senator Bunde
OPPOSED: Senator Hoffman, Co-Chair Green, Senator Dyson, and Co-
Chair Wilken
ABSENT: Senator Olson
The motion FAILED (2-4-1)
The motion to adopt the Amendment-to-Amendment #6B FAILED to be
adopted.
AT EASE: 6:00 PM / 6:01 PM
Due to Committee confusion regarding the subject of the previous
roll call vote, Co-Chair Green moved to rescind the Committee
action.
There being no objection, Committee action on the Amendment-to-
Amendment #6B was RESCINDED.
Senator Hoffman moved to adopt the Amendment-to-Amendment #6B.
Co-Chair Wilken objected.
A roll call was taken on the motion.
IN FAVOR: Senator B. Stevens, Senator Hoffman, and Senator Olson
OPPOSED: Senator Bunde, Senator Dyson, Co-Chair Green, and Co-Chair
Wilken
The motion FAILED (3-4)
The action to adopt Amendment-to-Amendment #6B FAILED.
Amendment #6B was again before the Committee.
Co-Chair Wilken maintained his objection to Amendment #6B.
A roll call was taken on the motion.
IN FAVOR: Senator B. Stevens and Senator Bunde
OPPOSED: Senator Hoffman, Senator Dyson, Co-Chair Green, and Co-
Chair Wilken
ABSENT: Senator Olson
The motion FAILED (2-4-1)
Amendment #6B FAILED to be adopted.
Co-Chair Wilken ordered the bill HELD in Committee.
| Document Name | Date/Time | Subjects |
|---|