Legislature(2001 - 2002)
03/13/2001 08:01 AM House STA
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 149-PRIVATE PRISON IN KENAI Number 1874 CHAIR COGHILL announced that the next order of business would be 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." Number 1920 REPRESENTATIVE MIKE CHENAULT came forward to speak as sponsor of HB 149. He noted that progress toward a private prison in Delta Junction has been stalled for several years. Meanwhile, Alaska is spending more than $20 million to house many if its prisoners in Arizona. He thinks it is time to bring those dollars back to Alaska and help to diversify the economy here. The project proposed in HB 149 would provide work for Alaskans. Number 2030 DALE BAGLEY, Mayor, Kenai Peninsula Borough, testified by teleconference. He said the prison project proposed in HB 149 is important to those on the Kenai Peninsula. It is a big construction project, creates 300 permanent jobs and many more secondary jobs, and would add a fourth strong industry to the region's economic diversity. The Kenai Borough assembly and administration both support the project. There have been many public hearings as part of a competitive Request for Quotes (RFQ) process. "There has been some opposition, but by and large, there has been strong support for this prison project," he said. CHAIR COGHILL asked Mr. Bagley to characterize the opposition. MR. BAGLEY said the majority of the opposition he has heard has dealt with the private/public prison issue. The question the borough has been asking the public is, "If the legislature wants a private prison built somewhere in Alaska, shouldn't the Kenai Peninsula try to do that?" Most of the opposition has come from people who do not support the concept of a private prison instead of a public one. CHAIR COGHILL asked him to describe the RFQ process. MR. BAGLEY said the borough followed the RFQ process because although the Department of Corrections has been helpful, the borough didn't "have a lot of the nuts and bolts that we needed to do a Request for Proposals (RFP) process." So the borough developed this RFQ process instead. There were four responses, which were narrowed down to two through an administration selection committee. Then the assembly listened to presentations by the finalists. The Cornell/Kenai Native Association proposal was the one the assembly selected. The process took two months, and Mr. Bagley said he thought it was a good one. CHAIR COGHILL wanted to know how much money the municipality has put into it. MR. BAGLEY said the assembly appropriated $150,000, and he thinks about $50,000 of that has been spent so far. Number 2232 REPRESENTATIVE STEVENS asked Mr. Bagley what advantages he sees in having a private prison. MR. BAGLEY said he was willing to let others debate the private/public issue. He has heard that private prisons are less expensive while allowing the Department of Corrections to have a great deal of control over what happens to those prisoners. Number 2284 REPRESENTATIVE JAMES recalled that a few years ago, the Seward Community had expressed interest in expanding the Spring Creek Correctional Center there. She asked if anything had been heard from Seward since then. MR. BAGLEY said the RFQ process did not limit the location to the Kenai area, but allowed it to be any place in the Kenai Peninsula Borough [which includes Seward]. Those in Seward were aware of the opportunity and did not submit a proposal. He added that he had heard talk of expansion at Spring Creek, and he thought it would be great if that were to happen, too. He said there is a desire for a strong prison industry on the Kenai Peninsula. Number 2373 REPRESENTATIVE CRAWFORD wanted to know why the decision was made to have a for-profit prison instead of a nonprofit one. REPRESENTATIVE CHENAULT said it was decided three years ago with House Bill 53 that the state would look at funding a private prison rather than a public one. He recalled that projected cost savings were the main reason for that decision. REPRESENTATIVE CRAWFORD said he thought the same cost savings could be realized from a privately operated prison without it being a for-profit institution. He wondered why the consortium that has put together the proposal [in HB 149] had decided to take the for-profit approach. REPRESENTATIVE CHENAULT said he could not answer for the consortium, but assumed that the decision was made because the consortium is made up of private businesses, and that they are in business to make money. CHAIR COGHILL asked if that was part of the discussion when the Kenai Borough came up with the RFQ process. MR. BAGLEY said it was not, and that this is the first time he has heard that brought up. CHAIR COGHILL said that would be part of the discussion, and that those who are participating in the discussion might want to keep it in mind. Number 2475 REPRESENTATIVE CRAWFORD asked what the prison would cost. REPRESENTATIVE CHENAULT said he did not know the exact dollar amount, but that he thought the prison would cost between $60 million and $80 million. CHAIR COGHILL apologized for not having a fiscal note ready, and said the committee would have it before making a decision on HB 149. Number 2531 REPRESENTATIVE JAMES observed that HB 149 has a referral to the Finance Committee. CHAIR COGHILL said that was a good point, and referred to his earlier comment about the Finance Committee being the place where the number crunching goes on. Number 2621 MARGOT KNUTH, Assistant Attorney General, Office of the Commissioner, Department of Corrections, came forward to testify. She explained that several years ago, HB 53 authorized both a jail replacement project in Anchorage and a private prison in Delta Junction on the Fort Greely site. She said the current bill, HB 149, is virtually identical to the part of HB 53 that authorized the Commissioner of Corrections to enter into a lease with the City of Delta Junction. However, HB 149 includes a provision that repeals the authorization for the prison at Delta Junction. MS. KNUTH read from a letter by the governor to Mr. Bagley in which the governor said that the legislature's intent in HB 53 was to develop a private prison at the Fort Greely site. "The state has been working to do so ever since," she read. "There is no doubt that any change of focus or development of a new private prison plan will involve legislative action." She thought that was what Mr. Bagley was alluding to when he said that the Department of Corrections has been able to provide only limited assistance to them. That is because in HB 53, the administration was directed to work with the community of Delta Junction, and they are doing so to this day, Ms. Knuth said. MS. KNUTH said the other issue the governor addressed in his letter to Mr. Bagley was that early on, his administration had developed an approach to prison expansion based on five principles. Those five principles, discussed in conjunction with HB 53, were: Protecting the public safety, addressing statewide and regional needs, consistency with best correctional practices, community participation through government-to- government transactions, and cost-effectiveness. "We must use those principles when we're looking at any proposals to expand existing facilities or create new facilities," Ms. Knuth said. MS. KNUTH noted that when Governor Knowles signed HB 53, he called it a good first step in addressing the needs of the state. At that time he had submitted legislation proposing expansion of the correctional facilities in Bethel and in Sutton. "We have very urgent need to expand the jail at Bethel and also the jail at Fairbanks," she said. "Those two facilities have been ... our weak links in trying to resolve overcrowding problems. The prison, albeit at Delta Junction or at ... Kenai, will not solve the problems that we have of overcrowding in our jails." MS. KNUTH explained that very different populations are served by jails and by prisons. "A jail is where you're holding pre- trial people or people who have very short sentences; it's for misdemeanants," she said. "It's not economical to send somebody to a facility that is either several hundred or several thousand miles away if the amount of time that they can spend is only going to be three days and then you have to bring them back." She told the committee that Alaska needs to address not only its prison needs, but also its local jail needs. Number 2871 MS. KNUTH said a second item of concern is "the vagueness of the terms that are in this legislation [HB 149]." For the Anchorage jail proposal, the legislation specified a dollar amount for the capital project and how much could be spent per bed. House Bill 149 is virtually identical to the one for Fort Greely except that it is silent in that regard. "It's unusual in this state to suggest that a commissioner of department ... is going to be authorized to enter into a transaction where no dollar figures are specified," she said. "It would be more traditional and I think it would set the transaction up for greater success if we were to have very clear guidance on what the cost of the project is to be ..." TAPE 01-20, SIDE B Number 0001 MS. KNUTH also sought clarification about operating costs. "Is the payment that is anticipated ... meant to be just for the lease of the space, which is what the state is accustomed to doing, or is it anticipated that the 20-year lease is going to include the cost of operating the facility?" she asked. MS. KNUTH went on to describe Internal Revenue Service limitations. For the bonds that are being sold to be tax- exempt, a private operator cannot be involved in the project for a period longer than five years. The Kenai proposal includes using property owned by the Kenai Native Association. The Native association's status as either a for-profit or a nonprofit corporation makes a difference in whether the bonds that are involved are tax-exempt or not, she said. Also, there are financial consequences if the transaction is structured as partnership between KNA and the Borough of Kenai or if, instead, the Borough of Kenai enters into a long-term lease with KNA for the use of the land. "These are factors that can have a very significant impact on the cost of the transaction and so I think the vagueness that surrounds the proposal at this point is understandable but should be addressed," she said. MS. KNUTH noted that HB 53, which dates back to 1998, included both the Anchorage jail project (which was set out in fairly traditional, specific terms) and the Fort Greely proposal. Construction of the Anchorage jail is now 65 percent complete and the jail is scheduled to open a year from now. "I believe that part of the reason for that success is because the parties knew what the transaction was that was being contemplated and there was a meeting of minds and an agreement on it," she said. "Unfortunately, the prison proposal at Delta Junction is still in just the planning stages, and ... we still don't have a clear understanding of what that proposal was." Number 2797 CHAIR COGHILL challenged that characterization, saying that the community in Anchorage was more unanimously supportive of the project there than was the community of Delta Junction. MS. KNUTH concurred that an important factor in the success of a project is the community's willingness to embrace it and go forward. "I agree with you entirely on that," she said. Number 2777 REPRESENTATIVE FATE volunteered that the mayor of Delta Junction two days ago had told him that they considered that project "kaput," and no planning is being done at this time. Number 1751 REPRESENTATIVE JAMES read from HB 159, "The agreement to be entered into ... is predicated on and must provide for an agreement between the Kenai Peninsula Borough and a private, third-party contractor under which the private third-party contractor constructs and operates the facility by providing for custody, care, and discipline services for persons held by the commissioner of corrections under authority of ... law." She thought all of that has to be determined and that "it would come down to a daily bed rate. It sounds to me ... like they're leasing the whole thing." REPRESENTATIVE JAMES pointed out that numbers are available for what each of the correctional facilities currently is costing. She also noted that the interest rate usually is adjusted to reflect whether the bonds are tax-exempt or taxable, so that the cost is similar. She agreed with Representative Faith that the Delta Junction project has been the topic of more community discussion than has the Kenai project. REPRESENTATIVE JAMES, speaking from her perspective as an accountant, said the difference between nonprofit and profit does not necessarily mean the cost goes up or down. A for- profit undertaking has an incentive to keep costs down so that there is a profit. Number 2578 CHAIR COGHILL expressed concern about time constraints, noting that a confirmation hearing was scheduled to begin. He suggested that Ms. Knuth respond to Representative James' concerns, after which the committee would turn its attention to the confirmation hearing. Number 2503 MS. KNUTH said she did not have all of the answers to Representative James' questions, but she noted that the Department of Revenue has advised the Department of Corrections that tax-exempt bonds are considerably cheaper for the state, and that that was a factor in the Anchorage jail project. She did not think the issue of cost was resolved by the daily bed rate. Bonds issued by the Borough of Kenai can only be for capital costs. She thought that capital costs for the Kenai project needed to be separated from the operating costs. REPRESENTATIVE JAMES said she is philosophically opposed to state-owned properties within a municipality because there is no property tax derived from them. That did not seem fair to the local community. If there is no property tax, there can be some savings -- but that comes out of the borough. CHAIR COGHILL suspended testimony, stating his intent to return to the discussion of HB 149 following the confirmation hearing. HB 149-PRIVATE PRISON IN KENAI Number 1304 CHAIR COGHILL redirected committee attention to 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." Number 1284 REPRESENTATIVE HAYES expressed a desire to hear from Delta Junction before taking action on HB 149, which would change a law specific to that area. CHAIR COGHILL said that was an excellent point. He then indicated concern about hearing from those who had come to testify that day. Number 1216 ALFRED McKINLEY, SR., Executive Committee Member, Grand Camp, Alaska Native Brotherhood (ANB), and delegate to the Central Council of Tlingit-Haida Indians of Alaska, came forward to testify. He summarized resolutions passed by the ANB Grand Camp and the Tlingit-Haida Central Council related to HB 149. He said it is immaterial to them where the prison is built or whether it is a nonprofit or for-profit enterprise so long as it is in Alaska. "Our people are unique people," he said. Alaska Natives have a culture that is different in the way it handles conflicts and discipline. It is important to keep Alaska Native prisoners in Alaska rather than sending them to Arizona where they are picking up undesirable habits and behavior from outsiders. It is important for them to be where they can be visited. "If you don't visit your people who are in prison, they'll ... think you don't care for them and they'll say, 'To heck with the world!'" he said. CHAIR COGHILL asked Mr. McKinley If he saw the central issue as having the facility in Alaska where the inmates can be visited. MR. McKINLEY confirmed that was the Native organizations' primary concern. He expressed hope that work can start right away and that the project can be completed. Number 0692 CHAIR COGHILL said he thought the committee was in agreement with Mr. McKinley about the importance of visiting prisoners, as family ties and cultural ties are important to rehabilitation. Number 0591 RICHARD SEGURA, President and CEO, Kenai Native Association, came forward to testify in support of HB 149. The prison proposed in HB 149 would be built on Kenai Native Association property. But more important to him personally and as an Alaska Native is the disproportionate percentage of Alaska Natives incarcerated. "We're not making any excuses," he said. "We have a problem with substance abuse and alcohol, and it's something that is a sad legacy for us to leave to our children." The Kenai prison proposed in HB 149 has the support of Native leaders throughout the state, including those of the Alaska Federation of Natives, all of the regional corporations, and many of the smaller native and village corporations and tribes. "We have a personal stake in this as a people," he concluded. "We want to help ourselves. If we don't, nobody else is going to do it." CHAIR COGHILL asked Mr. Segura how he sees HB 149 helping to do that. MR. SEGURA observed that many of the state rehabilitation programs don't seem to be working. One prisoner who had been held in Arizona told him, "They want us to heal, but they don't give us the means to do that." Mr. Segura acknowledged that there are some good programs, but said he thinks many of them are not geared culturally to Native needs. The Cook Inlet Tribal Council is interested in putting together a Native task force to address these issues and try to institute some programs. He added that having the prison on Native land may not be very important to many people, but to Native people, it is. It is also important that "it's in Alaska, it's home." CHAIR COGHILL affirmed that one of the key issues was keeping Alaska prisoners at home, and that the Native culture issue is an important one. Number 0155 REPRESENTATIVE HAYES wanted to better understand the benefit of the prison to the Native corporation. "Are you leasing out the land to the state, the private company? How did your land get selected to be the site for the new prison?" MR. SEGURA explained that the Native corporation, a for-profit entity, saw the prison as a business opportunity and contacted Cornell Companies, Inc. [the potential prison provider] and the Department of Corrections and "things just evolved from there." TAPE 01-21, SIDE A Number 0001 REPRESENTATIVE JAMES commented that she is very concerned about the high percentage of Native Alaskans in the prison population. "You're absolutely right," she told Mr. Segura. "We can't fix it without you. We can help, but you have to guide us." CHAIR COGHILL again emphasized that the State Affairs Committee's job is to make a policy decision, leaving to other committees the issues related to bonding and financing. Number 0189 MAKO HAGGERTY, of Homer, who identified himself as "a concerned citizen of the Kenai Peninsula and of Alaska," testified by teleconference that he is opposed to HB 149. "If you could just eliminate 'private' and build a prison, that's fine," he said. "But a private prison ... is going to cause more problems than what it's supposed to solve." He said his objections to private prisons include that statistics do not bear out that private prisons save any money, they're not accountable to the community, and they are run for profit and not for rehabilitation. In addition, he said, private prisons do not pay their employees well and there is a high rate of staff turnover. Private prisons have failed in other states, and the private prison industry in the United States is rife with problems. He called it an "outrage" that so many Alaskans are incarcerated in Arizona and does not object to building a prison, but does not think a private prison is the way to go. "I think the legislature really needs to look at building a public facility," he said. Number 0554 MARVIN WIEBE, Senior Vice President, Cornell Companies, Inc., came forward to testify. He said the firm is happy to have been selected to partner with the Kenai Peninsula Borough in working with the Kenai Native Association, and that he was available to answer questions. CHAIR COGHILL asked him to describe the qualifications of the Cornell Companies. Number 0626 MR. WIEBE said Cornell began in 1990, not as an operator of prisons, but with their design, building, and financing. The founder, David Cornell, decided to get into operation and bought a company that had operated secure correctional facilities on a for-profit basis. That company had been in business since 1977 and was the first private operator of a secure facility for the State of California and for the federal Bureau of Prisons. Cornell has since acquired a variety of other companies and won many projects through a competitive bid process, negotiated many contracts, and currently operates about 14,450 beds in a total of 72 facilities. Many of those are juvenile facilities. Cornell also operates halfway houses in Alaska and elsewhere. "The company is committed not only to intervene early on where people don't go to prison but also in the transition out of prison which is a critical phase," he said. MR. WIEBE said the institutional part of the company (in terms of prison beds) represents about 40 percent of the business. The rest is divided between juvenile facilities and those for adults who are coming out of prison. The juvenile division dates back to 1973, and other providers that are now part of the company have long histories going back nearly three decades. Cornell is the third-largest provider of these kinds of facilities in the United States today. Number 0791 REPRESENTATIVE STEVENS asked Mr. Wiebe to comment on allegations about rehabilitation not occurring in a private prison, employees not being paid well, and there being a high rate of turnover. MR. WIEBE noted that every company is different. He said: I'm not saying that private prisons haven't had some difficulties. "Anecdotally, you can come up with lots of illustrations both on the public sector and the private sector. Corrections is a very tough business, and we applaud and support not only those who are in privatization with us, but also the efforts of the departments of corrections. ... Cornell as a company has tried to set itself apart by really putting out time and energy and money into doing a quality job .... We understand that there has to be retribution. We understand that there has to be punishment and incapacitation, but we recognize, too, that ... 90 percent of [the inmates] come back. There needs to be some program of rehabilitation, of making a change in what's happening ... MR. WIEBE said the three highest priorities at Cornell are accountability, competency development, and community safety. He said: There has to be accountability for inmates, accountability to acknowledge that they've done something wrong and that they owe something back to the community... Then we've got to give them resources, vocational programs, a variety of skills, as well as cognitive behavioral therapies and other treatment programs that change how they think is the second major component. And the third [priority] is community safety. If communities aren't safe, if we let people out in the community and people are injured, we're going to not operate any longer. Number 1055 REPRESENTATIVE STEVENS said he appreciated the comments on rehabilitation but would like responses on employees' pay and the rate of staff turnover. MR. WIEBE said that during the startup time of a facility, there typically is higher turnover. "Believe me, not everyone is cut out to be a correctional officer or to work with prisoners, and so there is a winnowing out that goes on," he said. But after a couple of years, Cornell facilities become very stable in their staffing. "Our staff are paid competitive wages, but frankly, they may not be paid as highly as government workers sometimes are, particularly on the benefits side. Our benefits are commensurate with the private sector," he said. Number 1145 CHAIR COGHILL said it had been his intention to move HB 149 out of committee that day, but "I just don't feel like we have scratched as far as we want to scratch on this." Number 1206 REPRESENTATIVE CRAWFORD asked Mr. Wiebe the amount of investment Cornell intends to make and the rate of return they intend to make from that investment. CHAIR COGHILL said that was a good question for the committee but its discussion would require more time than the four minutes remaining. Number 1262 REPRESENTATIVE WILSON said she saw something very special that the Native community could gain from the prison plan. She asked Mr. Wiebe if he felt Cornell could work with the Native community in a way that would work their culture into a rehabilitation program that would have apparent results. MR. WIEBE replied, "I know we can do it ... because we're doing it all over ... the country." CHAIR COGHILL invited testimony from anyone who would not be able to come next time. Number 1359 DANIEL BROWN, of Juneau, introduced himself as a full-blooded Tlingit, directly descended from the people of Glacier Bay and a lifelong resident of Alaska. He said he has "seen what happens at all different levels in Alaska" as a Village Public Safety Officer in Holycross, as a 25-year member of the International Union of Operating Engineers, and as a teacher at Dzantik'i Heeni Middle School. MR. BROWN said it is unconstitutional to take a rural resident who has committed a crime out of the village and out of state. "I'm strongly for privatization and I'm also strongly for having you guys build a prison here in Alaska," he said. "I think the best thing for Alaska is to bring [its] people back and to work with the people that are willing to work with them and to make [the prison] a strong asset within the community ... [and] keep our funds in Alaska." Number 1464 FREDERICK BELL, of Juneau, began his testimony by stating, "I'm one of those inmates you guys are talking about and I was in the facility down there in Arizona. Personally, I think they should bring all the boys home that are down there." He alluded to abuse issues and described an intimidating personal experience with a "shakedown" in March of 2000. MR. BELL said he had been active in the Native culture club there, and felt it had helped him a lot. He wanted to assure that inmates would have that type of opportunity. The problem in Arizona was, "They'd offer it to us, and then it was taken away," he said. "From week to week it would change." CHAIR COGHILL said he thought the consistency could be managed a little better if the prison were closer to home. Number 1622 REPRESENTATIVE HAYES said he would like to hear from somebody in Delta Junction about whether they are out of the picture as far as building a prison, and he volunteered to find someone to testify next week.
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