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.