HOUSE BILL NO. 498 "An Act expressing legislative intent regarding privately operated correctional facility space and services; relating to the development and financing of privately operated correctional facility space and services; authorizing the Department of Corrections to enter into an agreement for the confinement and care of prisoners in privately operated correctional facility space; and providing for an effective date." Representative Harris, Sponsor, testified in support of HB 498. He explained that the legislation (known as the Whittier prison bill) was introduced because the city of Whittier has been concerned about economic development in their area. He observed that there have been previous attempts at the private prison concept in other areas of the state. These attempts failed during public votes. The residents of the city of Whittier seem to be overwhelmingly in support of the process and facility. The city is in close proximity to Anchorage. BEN BUTLER, MAYOR, CITY OF WHITTIER testified in support of HB 498. He observed that the city of Whittier followed the Kenai proposal. The city is looking for ways to diversify its economy. The city held public hearings and sent mailers to residents to make sure that they were aware of the proposal. The city received 85 (out of 100) signatures on the petition [in support of the prison]. The proximity to Anchorage makes Whittier a good location. There is plenty of land for the project. A competitive bid procurement process has been followed. He discussed the procurement process, which utilized a private billing contractor, CPA firm and a local resident to review the Request for Qualifications (RFQ) sent by the city of Whittier. There were two respondents out of four. The city accepted the recommendation from the group that reviewed the proposals. In response to a question by Representative Croft, Mayor Butler explained that the city has signed a contract with the private contractor (Cornell Corrections, Inc.) Representative Croft asked for more information regarding the selection of Cornell Corrections Inc (Cornell). He asked if there was competitive criterion on costs. Mayor Butler stated that cost was considered. Representative Croft asked for the criteria used by the subcommittee. Mayor Butler responded that he would provide the evaluation forms that were used. Representative Lancaster questioned why the proposal was changed from an 800 to 1,200-bed proposal. Mayor Butler noted that economy of scale was the major factor; plus the fact that the state has indicated that there is a need for 1,200+ beds in the state. Representative Lancaster questioned what would be the result of the passage of the legislation. Mayor Butler explained that there would be an intergovernmental agreement with the Department of Corrections, the city of Whittier and the selected contractor. Representative Hudson questioned why the community would want to encourage the existence of a prison in its vicinity. Mayor Butler pointed out that the facility would not be located in the most attractive part of town. He stressed the need to encourage economic prosperity and provide jobs in Whittier. Most jobs are seasonal. The city lacks an economic base. Opening the prison could also result in lower fares through the tunnel. Representative Whitaker asked for further details regarding the competitive procurement process. Mr. Butler explained that the City of Whittier sent out a RFQ to five different correctional companies. Of the five: one did not respond at all; two stated that they did not want to participate; and two responded. Their Anchorage attorneys set up an evaluation team to review the two responses. The group evaluated both proposals and came back to the city Council with a recommendation, which was adopted. He noted that Cornell Corrections, Inc. and CCA responded to the RFQ. Representative Croft observed that the legislation states: In the agreement with the City of Whittier, the commissioner of corrections shall require that the city procure one or more private third-party operators through a competitive procurement process. The procurement requirements of this subsection are satisfied if the City of Whittier in exercising its powers under AS 29.35.010(15) for procurement of land, design, construction, and operation of a facility, follows its municipal ordinances and resolutions and procurement procedures. Representative Croft asked for more information regarding the city's procedures. Mayor Butler responded that there are requirements for competitive solicitations and competitive bids with time allocations for bid proposals. Their attorneys followed the municipal code. Representative Croft expressed concern that the legislation only requires the city to follows their normal process. Co-Chair Mulder spoke in support of the city of Whittier's competitive bid procurement process. He felt that the city's procurement process would reflect state requirements. Representative Hudson observed that the city of Whittier has authority to issue bonds and questioned the city's history. Mayor Butler noted that the city has never issued bonds. Representative Hudson questioned how the 1,200-bed limit was reached. He noted that the state is underwriting the bond. Mayor Butler clarified that there is no added cost with the land. The facility would be located on railroad land under city control. The city has a 105-year lease with the railroad for the land. The railroad does not object to the proposal. TAPE HFC 02 - 67, Side B  Representative Hudson noted that the city aught to own the land. He suggested that the legislature should be able to transfer railroad land to the city of Whittier. Co-Chair Mulder clarified that the problem with railroad land exists throughout the state of Alaska. There are several hotels that have been built on railroad land that are similar in nature, in that a private company owns them and they are leased. Representative Hudson pointed out that the railroad is getting money [from those situations]. He questioned if the railroad would receive money from the land the prison would sit on. Co-Chair Mulder acknowledged that the railroad would not receive money for the land. Representative Hudson explained that he raised the question because the railroad will not receive money and questioned why the land should not be transferred to the city. He noted it legislature could transfer the land within the bill. Mayor Butler explained that the city has attempted to receive non-essential railroad lands. He stressed that Whittier is a railroad town. He maintained that having to lease or get permission from the railroad [for land use] has stifled economic growth. The city would very much like to have nonessential railroad lands deeded to the city of Whittier. Representative Hudson stated that he would like to see something positive happen for the city of Whittier. He pointed out that the city of Whittier would have the responsibility. [This would be offset] by the possibility that there would be greater usage of the tunnel, which would decrease costs and increase access to the town. The state has spent millions of dollars to provide access. He stressed that he would like to see [the prison] become an asset of value and the leasing of the land to be included as part of the pay back. He maintained that the state aught to provide [the city] some remuneration for the value of the land. Mayor Butler responded that the city would welcome any action on land transfers. Co-Chair Mulder pointed out that [land transfers] would require a second bill because of the questions raised as to whether the transfer is an appropriation. He did not believe a land transfer would constitute an appropriation. Representative Lancaster questioned how the number of 1,200 beds was derived. Mayor Butler explained that the bed count was partially the economy of scale; to make the dollar amount that the state put on it work. The Department of Corrections needs 1,200 beds to cover the prisoners in out- of-state facilities and the additional beds needed in other facilities. Co-Chair Mulder pointed out that the Governor's proposal calls for 1,260 beds. He observed that the Governor's plan states that it hopes to bring the Arizona prisoners home through the development of those beds. He noted that prisons are a little like roads: "you don't necessarily build them for today or even tomorrow, but [for] five - ten years down the line." Representative John Davies observed that the city of Whittier entered into a contract and questioned under what terms they could "walked away from" the contract. Mayor Butler assured Representative Davies that the city included escape clauses. [The city could break the contract] if the bill does not go through or the Department of Corrections does not sign an agreement, without liability. Co-Chair Mulder pointed out the need for broad public support. Mayor Butler noted that the city of Whittier held public hearings. The city also circulated a petition in support of the prison. The opposition to the proposal is from outside sources. He maintained that no one in Whittier is against the project. The only opposition is from the Public Safety Employees Association (PSEA) union. The PSEA has sent flyers against the prison to the citizens of Whittier. He maintained that the flyers have helped the city of Whittier's battle because the citizens of Whittier are not union employees. They are people that are out of jobs or do not have the benefits of a year around job. The city has not responded to the union's flyers. Representative John Davies stressed concern that a new prison does not prevent needed beds from being built in Fairbanks. In response to a question by Vice-Chair Bunde, Mayor Butler observed that the city has not had a project the size of the prison, with the exception of the road. He observed that persons that opposed the road construction now support the prison proposal. Mayor Butler reiterated that there is support for the project in the community. He acknowledged that there have been concerns by citizens, who wanted to make sure their concerns were addressed in the contract and the procurement process. He estimated that 85 - 90 percent of the residents support the prison. He stressed that the town is ready to grow and wants the economic prosperity that the project would bring. He noted that 110 people voted in the last election. He received 85 signatures on the petition [in support of the prison]. Representative Lancaster questioned if there would be a negative affect on the tourism industry. Mayor Butler did not anticipate any negative affects on the tourism industry. Representative Hudson questioned if a dollar return to the city of Whittier had been estimated. Mayor Butler explained that the city would receive approximately $200 thousand dollars from the prison company select, in recognition of the impact to the town. The city can include the prisoner count in their municipal assistance and revenue sharing calculations. The city of Whittier's municipal assistance and revenue sharing would be increased from $26 thousand dollars to $85 thousand dollars. The city estimates it would receive a total of $300 - $350 thousand dollars with the additional growth in sales taxes, property taxes, etc. Mayor Butler responded to questions by Representative Hudson. He noted that the tunnel cost is dependent on volume. The city has 17 hours a day access through summer; winter is less than 10 hours a day. If the prison were opened the tunnel would be opened 17 hours a day, year- round. Increased volume could reduce the cost of using the tunnel to $5 dollars; the cost is dependent on volume. He acknowledged that Whittier does not have the capability to handle all the housing needed to facilitate the prison in Whittier. The city is 20 minutes from Girdwood and 45 minutes from Anchorage. He added that the prison would stimulate housing and allow the community to develop. The railroad owns the vast majority of the land, which inhibits development. They would also be able to count prisoners for federal census. Representative Harris asked if the Alaska Federation of Natives had been involved. Mayor Butler noted that they had not addressed the Council, but are working with Cornell. to offer programs that benefit the Native community for rehabilitation. Close to 40 percent of the prisoners out-of- state is Native. In response to a question by Representative Harris, Mr. Butler observed that Cornell would enter into a project/labor agreement with the unions. The project would be built with union labor. FRANK PREWITT, CONSULTANT, CORNELL CORRECTIONS, INC. provided information to the Committee. He observed that under current state law the Department of Corrections could buy services directly from a private company through the competitive bid process. The Department of Corrections can also buy beds through another government entity, which have purchased their beds through their own bid process. The disadvantage of the first option is the state's power of eminent domain. The state can build a prison where and whenever it wants and solicit a private company to manage it. The state can also solicit private companies to build and operate prisons that they own; thereby avoiding problems of deferred maintenance and other problems associated with ownership. The problem is that when a state builds a prison, or buys the service from a private company, the local public process is generally circumvented. The Administration has argued that the disadvantage of the Whittier process is that the state does not control where the prison is built and who builds and operates the prison. Mr. Prewitt pointed out that the Department of Corrections does not have to buy the service unless it meets the state's standards, conditions and requirements. State requirements are met through the intergovernmental agreement that would be negotiated between the city of Whittier and the Department of Corrections. If the standards and conditions can't be met then the prison simply doesn't happen. The state's needs are apparent. Standards are not unique. Mr. Prewitt maintained that the advantage of the proposal [contained in HB 498] is that the local community has a choice and has chosen to participate. He emphasized that it is unusual for the state to establish community support. Mr. Prewitt observed that there are five prison bills before the legislature that represent two different approaches. Two of the bills seek to establish the Administration's plan. He asserted that the Administration's plan does not return prisoners from Arizona. He maintained that the Whittier plan would return prisoners, provide in-state flexibility and help control the Department of Corrections' operating budget. Mr. Prewitt observed that the Administration would spread 1,269 beds throughout the state for a total capital cost of $239 million dollars. He noted that a couple of years ago the state's per capita daily average was $111 dollars. At $111 dollars a day per inmate the state's plan would increase the department's budget by $50 million dollars, not including debt service. He estimated the combined capital and operating per diem rate at over $150 dollars a day per bed. The Whittier plan adds the same amount of beds for $110 million dollars with a combined capital and operating cost of $89 - $91 dollars per day, which is the legislative ceiling. This does not include major medical, some of the Department of Corrections' administrative costs, or prisoner transportation, but none of these costs are likely to exceed $15 dollars a day. He concluded that the difference is $150 dollars a day per bed [under the Administration's plan] and $105 dollars a day per bed [Whittier plan]. Both plans are designed to meet state and national standards. He observed that the Administration's plan provides jails and prison services under one roof and intentionally avoids the economy of scale by duplicating programs and services throughout the state. He stressed that jails are meant to hold prisoners from the point of arrest through sentencing or appeal and sometimes for short-term misdemeanor offenders (as long as 12 months, usually less). Jails are meant to have safe and secure confinement: no thrills, no programs. He maintained that long-term misdemeanants and felons should be transferred. Most state and federal offenders are transferred to central prisons that are designed to meet the security and program needs of those defenders. It is at the end of the sentence, a year or so before release, that long- term prisoners transfer back to their communities, to pre- release facilities. There are community residential centers in Bethel, Nome, and Anchorage. Pre-release centers are designed to help felons to reintegrate into their communities through a supervised program. He asserted that the Administration's plan swims against affordable practice. Affective prison programs have to have access to mental health services, adult education, vocational training, and substance abuse services. All of the resources go through private sector contracts and employees of the Department of Corrections. Resources are in limited supply in many Alaskan communities. Duplicating programs for offenders in regional facilities throughout the state is inefficient, cost prohibitive and ineffective because it is difficult to maintain quality control and program continuity without resources. He maintained that it is more efficient and effective to house long-term prisoners in larger centralized prisons near communities that have abundant resources. A 12,000 bed is about one-half the size of these types of facilities around the nation. It is twice the size of the proposed expansion of the Spring Creek Correctional Center. He maintained that Whittier would be a modest size prison that would capture the economy of scales that are necessary to sustain cost effective programs. Mr. Prewitt maintained that there has been an impasse for the last seven years. He asserted that the contract to send prisoners out-of-state was never meant to be a long-term plan for the state of Alaska. It was intended to be a stopgap measure. Representative John Davies asked why it is not appropriate to send prisoners out-side the state if it is appropriate to send them to a centralized long-term facility. Mr. Prewitt acknowledged that there are some benefits to retaining prisoners in-the-state in order to have access to families and friends. He noted that it is cheaper to travel from Bethel to Anchorage than from Bethel to Arizona. He noted that if cost were the only factor that it would make sense to keep prisoners outside. Some of the best programs are delivered in Arizona. There is also a cultural issue for the Native offenders, which account for 40 percent Alaskan offenders in Arizona. Mr. Prewitt summarized that the issue is whether there is support for a regional expansion plan, where correctional services are duplicated throughout the state; or to limit regional services to jail and pre-release services and develop larger facilities closer to the resources or programs. He asserted that the impasse has created one of the worse situations in corrections that he has seen. Mr. Prewitt referred to the number of days that facilities are over capacity. The system is operating at 108 percent over its maximum capacity. He claimed, "bad things happen" with overcrowding. Mr. Prewitt stated that the question is not whether beds are needed in the state. The question is where and what types of beds are needed. The state has an overabundance of medium custody inmates. The state wants to add 270 medium security beds in Palmer. TAPE HFC 02 - 68, Side A  Mr. Prewitt maintained that the department needs all 1,200 beds proposed by the Whittier plan, but emphasized that more beds are needed throughout the state. Bethel is filled with pretrial offenders. Youthful offenders need to be separated from adult offenders. There is a large waiting list for youthful offender beds. The Whittier prison does not assume to meet all of the state's needs. It is difficult to determine what the regional demand is. Mr. Prewitt referred to sentenced versus un-sentenced offenders. Anvil Mountain, Nome is a 100-bed facility. He observed that on a particular day Anvil Mountain had 42 sentenced offenders and 61 un-sentenced offenders. He maintained that any long-term sentenced felons should be in a large facility with adequate programs. Mr. Prewitt acknowledged the difficulty of determining statewide bed demand, but stressed the difference in cost between a medium security bed (Whittier Plan) and a bed in South-central operated by the state of Alaska. The combined average daily operating costs for the Wildwood Correctional Center and the Kenai Correctional Center is $89 dollars a day, which includes inmate programs, administrative and support, and statewide indirect less major medical. He compared the Department and Whittier Plan costs. The Department of Corrections would supply 473 medium security beds for a capital cost of $94.5 million dollars. The Whittier Plan offers 12,000 beds for $110 million dollars. If you amortize the state's cost over the 25 years proposed by the Whittier Plan there would be a combined daily operating/capital cost of $125 dollars a day per bed. The Whittier Plan's combined operating/capital costs would be $89 - $91 dollars a day. The Whittier Plan may not solve all the Department of Corrections' needs, but it would return $118 million dollars to the to Alaska economy; create over 1,000 jobs; and require the purchase of materials associated with operations for a 25 year period. He noted that 1,200 prisoners can "eat a lot of potatoes" and consume a lot of contract services. The plan would mitigate the state's exposure to prison overcrowding. The state was relieved from court oversight based on the state's commitment that the overcrowding conditions were resolved. The Whittier Plan would return prisoners to Alaska and add value to the tunnel. Mr. Prewitt spoke to overrepresentation of Natives in Alaska state correctional systems. Seven percent of the male population in Alaska is Alaskan Native men, yet they represent 37% of the prison population. There is a crisis in that population. The Department has not offered services specifically for Alaska Native offenders. The proposed facility hopes to break the cycle of recidivism, which predominately concerns alcohol, by allowing the Native community access to the facility and development of programs. There is a teaming agreement between Cornell and the Alaska Native Brotherhood. He maintained that Cornell is a treatment-oriented company and stressed that there will be a commitment to the Native community, which allows an open door policy to the degree that it doesn't compromise security. The difference between a private and public facility is flexibility. There are only a certain amount of programs that can exist under the $89 dollar a day rate, but they hope to supplement Native programs through the help of the Native community and organizations. HB 498 was heard and HELD in Committee for further consideration.