Legislature(2001 - 2002)
04/09/2001 01:39 PM House FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE BILL NO. 149
An Act relating to correctional facility space and to
authorizing the Department of Corrections to enter into
an agreement to lease facilities for the confinement
and care of prisoners within the Kenai Peninsula
Borough.
Co-Chair Mulder noted that the Subcommittee had met to
discuss HB 149 and the proposed committee substitute, 22-
LS0436\R, Luckhaupt, 4/03/01, resulted from the
Subcommittee's work.
Representative Hudson MOVED to ADOPT the work draft as the
document before the Committee. There being NO OBJECTION, it
was adopted.
REPRESENTATIVE CHENAULT, the sponsor of the bill, spoke in
support of the proposed committee substitute. He noted that
there had been modifications made to the original bill.
Co-Chair Mulder stated that the bill would provide some
certainty in relationship to the size, scope and costs of
the project. The status quo in Arizona was $65 dollars a
day. In order to provide a comparable facility in Alaska,
the cost would be approximately $135 a day. Recognizing
that this would result in additional costs, the State wanted
to make sure that jobs would be well paying, the care would
be comparable, and that the Borough was satisfied with the
proposal. He stated that it was anticipated that the cost
would be 20% less than the average in all-State facilities,
ranging somewhere around $89 dollars per day. The per diem
cost excludes the contracts outside the State. He pointed
out that it would be 18 - 20 percent below the State rate.
Representative Lancaster referred to the level of care
compared to Arizona. Co-Chair Mulder felt that the level of
care and custody would be comparable.
Representative Lancaster understood that the site had not
yet been selected. Representative Chenault stated that the
site selection would not hinder the project. Co-Chair
Mulder noted that there is a tentative contract signed at
this point. He noted that he was comfortable with the
numbers and emphasized that there was support from the Kenai
Borough.
TIM NAVARRE, PRESIDENT, KENAI PENINSULA BOROUGH ASSEMBLY,
discussed the Boroughs participation in the site selection.
He stressed that the majority of the Kenai Assembly favors
the site at Wildwood.
Representative Hudson questioned if there had been a public
process to discuss concerns. Mr. Navarre noted that a
resolution had been adopted. The landowner brought the
consideration before the public and the Assembly. There
were no objections to the request for qualification (RFQ),
the competitive bid process award. He noted that there have
been three hearings and that the Planning Commission has a
hearing scheduled. The issue will be back before the
Assembly on April 17, 2001.
Co-Chair Mulder noted that there have been some questions
regarding the bid process. Mr. Navarre stated that there
were four bids on the RFQ and an evaluation team to evaluate
the proposals. He stated that the top two proposals tied.
The team recommended a meeting with the Assembly in
Executive Session. The Assembly was unanimous in its
selection. After 30 days, there was no objection to the
process. He reiterated that the process had been fair and
equitable.
Representative Harris asked if Mr. Navarre was comfortable
that $89 dollars a day per bed could be achieved. He asked
if the majority of local residents were comfortable with a
private prison. Mr. Navarre affirmed the price. He added
that some locals would prefer a State institution, however,
felt that the public would be satisfied with a private
facility as long as the mitigation issues had been "flushed
out" to assure adequately trained staff at a comparable
wage. At that point, the citizens would support the prison.
Representative Harris questioned if this would be a pilot
project. He asked if there would be an open bidding process
that would allow unions and local companies to participate.
Mr. Navarre stressed that the Borough supports the use of
local union labor.
Representative Hudson noted that there would be a State
lease amortized over time and questioned if there would be a
tax benefit for the Borough to have a private versus State
facility. Mr. Navarre responded that negotiations are open
for lease acquisition. The Borough would own the building,
but it could be sold to the State of Alaska after 20 years.
There is a Borough ordinance that projects over $10 million
dollars would receive a 50% percent break discount on
property tax. He added that there could be some low
interest loans. He stated that the Borough has agreed to
take less in lieu of taxes.
In response to a question by Representative Lancaster, Mr.
Navarre discussed liability. He noted that liability has
two issues:
· The building and revenue bonds; and
· Prisoner escape.
If the State defaulted, the lenders would be responsible.
Then the investors could end up with the facility and
prisoner security would then be negotiated. The final
contract would require insurance to indemnify.
CRAIG PERSSON, PUBLIC SAFETY EMPLOYEES ASSOCIATION,
FAIRBANKS, testified in opposition to HB 149. He spoke in
support of minimal hiring and training standards equal to
the Department of Corrections.
JAMES PRICE, (TESTIFIED VIA TELECONFERENCE), KENAI,
testified in opposition to the legislation. He stressed
that the Borough would be responsible for financial support.
He stated that it was premature to say that the public
supported the concept, as there have not been any public
hearings to date. He recommended that there is a need for a
feasibility study and that the project should not move
forward without that study, as it would not be in the best
interest of the public or the State.
Vice-Chair Bunde asked if Mr. Price would oppose a public
financed prison in that area. Mr. Price commented that
there would be better "safe guards" with a public State
prison. He noted that he would not be opposed to a public
prison.
Representative Harris suggested that Page 3, Section 3,
addressed Mr. Price's concern.
RICHARD VAN HATTAN, (TESTIFIED VIA TELECONFERENCE),
PRESIDENT, CORRECTIONAL OFFICERS BARGAINING UNIT, KENAI,
testified in opposition to the legislation. He pointed out
that the intent was to save the State money. He stressed
that the legislation limits the contract to a third party in
the Kenai Peninsula. He believed that there would be more
support if it was not limited to a third party.
Mr. Van Hatten did not think it was fair to compare the cost
of running a prison in Kenai to one in Nome. He pointed out
that the Department of Corrections is currently having
difficulty obtaining qualified personnel. He did not think
it would be possible to hire qualified people with the
lowered standards. Mr. Van Hatten thought that issues such
as the sewage treatment and the water service were
questionable.
DWIGHT NISSEN, (TESTIFIED VIA TELECONFERENCE), DELTA
JUNCTION, identified his concern with the $19 dollars a day
difference, the $5.5 million dollars with no guarantee that
the rate would stay. He added that the whole State should
be consulted if the citizens of Alaska want prisons to
become private industry.
ROY GILBERTSON, (TESTIFIED VIA TELECONFERENCE), MAYOR, DELTA
JUNCTION, voiced concern that the State of Alaska currently
has an obligation to the City of Delta Junction. He pointed
out that the State needs to help Delta Junction get out from
under the lawsuit currently pending because of HB 53.
Representative Hudson asked what was pending. Mr.
Gilbertson explained that there was a lawsuit filed against
the City of Delta Junction. The property has never been
available at Fort Greeley and they were not able to go
offsite. The City is suing for funds in the amount of $2.4
million dollars. He requested that these costs be taken
care of.
Representative Davies asked if the City of Delta Junction
could build an 800-bed facility under the $89 dollar terms
proposed in HB 149. He asked if they would be interested in
doing that and would it eliminate the lawsuit. Mr.
Gilbertson responded that it could be built, however, was
not sure of the support.
Co-Chair Mulder noted that testimony had been taken from
Delta Junction. He observed that there had not been any
consensus for a facility to be built there. He noted that
the lawsuit is the greatest concern. Co-Chair Mulder noted
that financial relief could not be provided within the
confines of the legislation. Co-Chair Mulder advised that
he would speak with Senator Stevens about the debt concern
for the City of Delta Junction. Mr. Gilbertson interjected
that Cornell is a participant in the lawsuit against the
City of Delta Junction because of Allvest, Inc., and noted
that they would appreciate any help they could get.
DAVID KATZEEK, JUNEAU, spoke in support of the legislation.
He pointed out that rehabilitation reduces recidivism. He
addressed the amount that the State of Alaska currently
spends on sending their prisoners to Arizona.
TAPE HFC 01 - 77, Side B
Mr. Katzeek stressed the hardship of sending Alaska Natives
to Arizona where they cannot benefit from the support of
their families for rehabilitation. He felt that the State
of Alaska would benefit from the legislation. He emphasized
that money flows to other states.
Representative Davies shared the speaker's concern in
regards to moving prisoners out of State, but stressed that
the legislation would replace the smaller State operated
prisons with one large private facility in Kenai. He
inquired if the legislation would result in additional
rehabilitation treatment.
Mr. Katzeek believed that the bill would be the first step.
He acknowledged that a community effort was needed to
address the issues of concern. He stressed that if the
facility is located in Alaska, it will require a community
effort in getting involved.
MAKO HAGGERDY, HOMER, stated that he disagreed with Mr.
Navarre. He stated that only 40 percent of the local
residents want a private prison and that 60 percent feel
that it is the State's responsibility to house and care for
prisoners. He acknowledged the need to return prisoners to
the State of Alaska and recommended the removal of the third
party debate. He believed that the third party contractors
have complicated the issue.
ALFRED MCKINLEY, SR., ALASKA NATIVE BROTHERHOOD, JUNEAU,
spoke in support of bringing the prisoners back to the State
of Alaska. He observed that building the facility would
provide jobs and infrastructure for the State. He asked if
the State of Alaska could be reimbursed for medical
expenses.
Representative Croft questioned if the federal government
would be paying for the Native inmate medical costs. Mr.
McKinley thought that the federal government would reimburse
the State for Native medical expenses. Co-Chair Mulder
pointed out that the State currently does not receive
reimbursement.
BARBARA HUFF-TUCKNUS, DIRECTOR, LEGISLATIVE AND GOVERNMENTAL
AFFAIRS FOR THE TEAMSTERS UNION, JUNEAU, pointed out that
this is a philosophical issue and one that needs to be
debated. She stressed that the legislation would address
issues regarding bringing the prisoners back to the State of
Alaska. Ms. Tucknus noted for the record that the
construction issue should be addressed and asked for
assurance that the construction of the building would be a
union project and that jobs would be brought back to the
State of Alaska.
Representative Whitaker referred to the Department of
Corrections "Cost of Care" sheet. He commented that the
numbers indicate that the State is spending an additional
$12 million dollars per year. The legislation indicates
that the State is spending an additional $7.7 million
dollars per year. Co-Chair Mulder advised that the number
was $7 million dollars.
Representative Whitaker asked if it was in the State's best
interest to spend an additional $7.7 million dollars per
year for the next 20 years. Co-Chair Mulder stated that the
issue was whether it was better to bring the prisoners home
or not.
Representative Croft MOVED to ADOPT Amendment #1. [Copy on
File]. Co-Chair Mulder OBJECTED.
Representative Croft commented that the amendment would
provide for a competitive process between anyone that would
like to be a part of that bidding process. He acknowledged
that it was complicated. He noted that he had rewritten
Section 2. The amendment would "holdout" for each area the
price of $89 million dollars. Representative Croft admitted
that there is a thread of concern regarding the way the bill
is approaching the project. He agreed that it is
appropriate that the prisoners come home. He stated that
Amendment #1 would open up a competitive bidding process.
Co-Chair Mulder reiterated his objection. He stated that if
it works in Alaska, there is greater potential down the
road. He stated that the first focus would be further
marketing. He added that the project would be a venture
opportunity for Kenai. There is concern in providing
culturally relative activities. He pointed out the letter
of support from the Alaska Federation of Natives (AFN).
Co-Chair Mulder commented that it would be less than the
State alternative. He asked at what price is it worthwhile
to bring our inmates home. The Kenai Borough is satisfied
that they will be able to track those people.
Representative Davies spoke to the issue of culturally
appropriate care. The State system has not been either in
the way of or prohibiting the culturally active care for the
inmates. He stressed that the fundamental problem is with
alcohol treatment.
Representative J. Davies asked, "What does it mean to bring
the prisoners home". The legislation will bring the
prisoners from out of state to Alaska, but what about the
prisoners that are spread throughout the State and not near
their support structures. He noted his support for the idea
that other areas throughout the State bid. He voiced his
concern that the proposal had been subjected to the
competitive pressures of the market place.
Co-Chair Williams commented that the legislation would be
good for the State. He acknowledged that it would be good
to get the prisoners closer to their family areas; however,
local areas are often hesitant to discuss building prisons.
He projected that the State is going to need more prisons.
Representative Hudson voiced his support for the Kenai
Prison project. He pointed out that one facility already is
located in that area. He suggested that it would be
"special" to have a pre-sentencing facility and a prison
facility with "special" programs for the inmates. He
reiterated that that legislation is the "right way to go".
He noted that he opposed Amendment #1.
Representative Whitaker asked the process that lead to the
proposal. Co-Chair Mulder replied that the Kenai Assembly
was contacted by KNA with the idea and asked for a sole
source. The Borough said no and went out for an RFQ. They
received four responses back. The full assembly made the
single selection. The process has been ongoing for one
month.
Representative Whitaker stated that it is clear that the
Borough followed a procedure, which was appropriate. He
questioned, however, the procedure that the State has
followed in the process. He noted that this is a matter of
public trust and that the State should be cautious.
Representative Croft expressed that the Kenai Peninsula
Borough did a great job for what they had been asked to do
as a borough. They were not representing the State's
interest; they represented Kenai's interests. Page 11 lists
what the points were awarded for and that none of those
points encompass any aspect of costs. He did not question
Kenai's choice of a partner; however, that differs from the
State determining who is the best and the cheapest. Kenai
will contract with the State for beds. The Legislature must
make sure that the process is competitive.
Representative Croft stressed that this is "sole sourcing".
He spoke to the advantages to competition. He emphasized
that this is "government defining what might be the right
price". He did not know if the partnerships could happen in
other areas.
TAPE HFC 01 - 78, Side A
Representative Croft stated that the fundamental problem
with the legislation assumes that South Central is "home".
The amendment would allow all other areas to bid. The
amendment would bring competition to State government.
Vice-Chair Bunde noted that people throughout the State do
not want to have prisons in their area. There will be
opportunities to have more prisons located in other places
of the State in the future if this one works.
A roll call vote was taken on the motion.
IN FAVOR: Davies, Moses, Croft, Whittaker
OPPOSED: Harris, Hudson, Lancaster, Bunde, Williams,
Mulder
Representative Foster was not present for the vote.
The MOTION FAILED (4-6).
Representative Croft MOVED to ADOPT Amendment #2. [Copy on
File]. Representative Croft explained that the amendment
would add the language:
"This applicability section does not affect the
authority of the commissioner of Corrections to
designate the correctional facility to which a prisoner
is assigned" to Page 3, Line 16."
There being NO OBJECTION, the amendment was adopted.
Representative Croft MOVED to ADOPT Amendment #3. [Copy on
File]. Co-Chair Mulder OBJECTED for the sponsor's
explanation.
Representative Croft explained that the amendment would
insert the language:
"But including the capital costs for construction of
the facility, including debt service" to Page 2, Line
3."
Co-Chair Mulder WITHDREW his OBJECTION.
Representative Davies MOVED to ADOPT Amendment #4. [Copy on
File]. Co-Chair Mulder OBJECTED.
Representative Davies commented that he was concerned about
the standards contained in the committee substitute,
specifically the capitalization and the per diem costs. He
assumed that the State would be 10% above for construction.
He referenced Page 2 of the Amendment, which indicates the
per diem rate if 18% was saved over the State's costs.
Representative J. Davies noted that until the capitalization
costs are known, the State does not know how much money
would be left on the table. He requested that the Committee
determine the numbers before awarding the contract.
Co-Chair Mulder stated that the amendment addresses the work
and deliberations of the Subcommittee. He commented that
the State's interest is to "get the best deal possible",
while at the same time providing for a comparable level of
care and the culturally relevant programs. Understanding
that fact, if the State achieves a 10% savings, then that is
considered a "good deal". He argued that the spreadsheet
provided by Department of Corrections numbers could be
questioned into eternity.
Co-Chair Mulder advised that the Subcommittee determined the
closed comparison with the Anchorage facility, which costs
about $135 dollars per day. He suggested that it would
amount to approximately a 30% savings. He believed that was
sufficient to base bringing the inmates home. He reminded
members that there is a desire for economic activity on the
Kenai Peninsula and the concept would provide good paying
jobs.
Representative Croft advised that Amendment #4 was the "flip
side" to Amendment #1. He voiced concern with the process
that is being established. He believed that there should be
a process of determining what the price should be
competitively. He stated that there needs to be a market
place comparison including the ethics of business.
Otherwise, those numbers should be "rigorous".
Representative Croft stated that there has been a
superficial discussion regarding the issue and he believed
that the Committee had not chosen the "best" number.
Co-Chair Williams advised that two numbers are known. He
reiterated that people in Alaska are concerned with the
costs; however, they want to get the prisoners back to
Alaska and the facility built. Co-Chair Williams surmised
that where ever the facility is built, it will be full as
soon as it is completed. He believed that other facilities
would need to be built in the near future.
Representative Davies emphasized that most of these
prisoners belong in treatment programs and not in prisons.
He reiterated that the process has not been a competitive
one. He questioned why there has not been greater House
Finance Committee scrutiny for the State of Alaska.
A roll call vote was taken on the motion.
IN FAVOR: Davies, Moses, Croft, Hudson
OPPOSED: Harris, Lancaster, Whitaker, Bunde, Williams,
Mulder
Representative Foster was not present for the vote.
The MOTION FAILED (4-6).
Representative Davies WITHDREW Amendment #5. [Copy on
File].
Representative Croft MOVED to ADOPT Amendment #6. [Copy on
File]. Co-Chair Mulder OBJECTED.
Representative Croft stated that the amendment would add
language to Page 2, Line 7, after "index,":
"It is also the intent of the Legislature that the
Department of Corrections not sign any agreement for a
private prison until the litigation regarding the Delta
prison has been finally resolved".
Representative Croft believed that the language of the
amendment would provide the State with a "clean slate"
before moving forward.
Co-Chair Mulder suggested that the amendment would confuse
two separate issues. He maintained that Cornell, Inc., has
no interest in Allvest, Inc. and has no interest in the
lawsuit. It is purely Allvest, Inc. that has the lawsuit
with Delta Junction. The issue is not tied to Kenai.
Representative Harris agreed that the issues are separate
and did not think that the legislation should be tied
together. He spoke in support of resolving the litigation
and believed that the amendment could "kill" the proposed
bill.
Representative Lancaster asked if the State was named in any
of the lawsuits. Co-Chair Mulder replied it was not.
Representative Whitaker asked if Section 4 repealed the
agreement with Delta Junction, would the State be held
harmless. Co-Chair Mulder stated the State would be held
harmless. He understood the relationship that Cornell,
Inc., and Allvest, Inc., had in Delta Junction, was that the
contact between Delta and Allvest, Inc., existed. Cornell,
Inc., had an option to operate the facility. They were not
a signer on that contract.
Representative Whitaker questioned if all parties including
Delta would hold the State harmless. Co-Chair Mulder
replied it would because the State was not a signer on that
contract.
Representative Croft discussed that there is a relationship
with that entity. He stated that whether Cornell was
involved or not was not important, as it was only intent
language. Before the new operations are started, there must
be clarification.
A roll call vote was taken on the motion.
IN FAVOR: Davies, Moses, Croft, Whittier
OPPOSED: Harris, Hudson, Lancaster, Bunde, Williams,
Mulder
Representative Foster was not present for the vote.
The MOTION FAILED (4-6).
Co-Chair Mulder noted the fiscal notes by Department of
Revenue and Department of Corrections.
Co-Chair Mulder MOVED to report CS HB 149 (FIN) out of
Committee with individual recommendations and with the
accompanying fiscal notes. There being NO OBJECTION, it
was so ordered.
CS HB 149 (FIN) was reported out of Committee with
"individual recommendations" and with a fiscal note by the
Department of Revenue and a note dated 3/22/01 by Department
of Corrections.
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