SB 141 - PROCUREMENT: CONTRACTS/SUBCONTRACTS CHAIRMAN KOTT announced the only order of business today is Senate Bill No. 141, "An Act relating to construction contracts and subcontractors; relating to design-build construction contracts; and providing for an effective date." ANNETTE KREITZER, Legislative Assistant to Senator Loren Leman, Alaska State Legislature, came before the committee to present the sponsor statement. She explained that Senator Leman introduced this bill at the request of the Department of Transportation and Public Facilities. She asked Jeremy Kerr to make his presentation. Number 0139 JEREMY KERR, Student Intern for Senator Loren Leman, Alaska State Legislature, came before the committee. He informed the committee that SB 141 was introduced at the request of the Department of Transportation and Public Facilities (DOT/PF) to give the department greater flexibility in contracts known as design-build. A design-build contract is one in which the owner, in this case the state, chooses a contractor that will build and design a project. He cited the Whittier tunnel as an example of this. The more typical contract is one in which the owner picks a design, and then the contractor builds according to that design. Current law states that construction contractors must list the subcontractors they plan on using within five days of the award of a contract. Because of the nature of design-build contracts, it is not always possible for the contractor to have identified the necessary subcontractors. For example, a construction contractor building a ferry may suddenly realize they need to change the propulsion system, and thus would need to change subcontractors in order to meet the requirements of that new propulsion system. This bill gives flexibility to DOT/PF to allow design-build contractors to provide subcontractor information at a later date. This bill also contains protections in that requested subcontractor changes by the primary contractor must be in writing. He noted that the bill will only affect state contracts. Number 0281 MS. KREITZER pointed out that the House Labor and Commerce Standing Committee amended the bill, adding new Sections 7 and 8. Senator Leman had no objection to that amendment because he understood that the amendment was not controversial and the Administration supported this amendment. However, Senator Leman was contacted by Mr. Springer, Executive Director, Associate General Contractors (AGC), regarding problems with Section 3. The language in Section 3 [page 2, lines 19-26] was put in at the request of the Alaska Professional Design Council. Senator Leman believes that this language makes no substantive changes to the law and merely provides clarity. The language in Section 3 would not increase or decrease the design-build contracts that the state would contract to do. Section 3 is not a make-or-break issue on this bill. Number 0416 REPRESENTATIVE ROKEBERG said there was some misunderstanding in the House Labor and Commerce Standing Committee. He asked Representative Murkowski to review that section for the record to ensure that has been addressed. REPRESENTATIVE MURKOWSKI explained that when this bill was presented in the House Labor and Commerce Standing Committee there really wasn't much discussion about the initial portion of the bill. She recalled that most of the controversy or discussion centered around Sections 7 and 8. It was only at the end of the hearing that the House Labor and Commerce Standing Committee heard some brief testimony about what the "meat" of the bill actually does. She noted that she had some concerns with Section 2, which deals with adding or replacing a listed subcontractor. She understood, as had been explained to her in the House Labor and Commerce Standing Committee, that a subcontractor could be removed from a list based on written documentation provided by the contractor; essentially a note would go to the procurement officer saying that a subcontractor was to be removed. Upon asking whether there was any appeal process, it was confirmed that there is no such process. She was concerned about how that process specifically worked, and therefore she spoke with Mark O'Brien and Dennis Poshard from DOT/PF. Both Mr. O'Brien and Mr. Poshard confirmed how that process works. She explained that the subcontractor will always have a cause of action against the prime contractor in that case. Therefore, Representative Murkowski said her concerns were addressed and she no longer has any problem with Section 2. REPRESENTATIVE ROKEBERG asked Ms. Kreitzer whether that would be a correct interpretation. MS. KREITZER answered yes. CHAIRMAN KOTT asked Representative Rokeberg to explain the rationale for a memorandum dated April 27, 1999, which was distributed to committee members. REPRESENTATIVE ROKEBERG said that the memorandum drafted by Donald W. McClintock III, Attorney of Ashburn and Mason, was in response to a request made by Representative Rokeberg to legislative counsel regarding the issue of local and special legislation and its constitutionality. He explained that he requested and received an opinion from Teresa Bannister, Legislative Counsel, Legal Services, Legislative Affairs Agency, regarding the issue of local and special legislation and its constitutionality. At that time, she could not give or was not comfortable giving a definitive statement on this issue. Therefore, Representative Rokeberg requested that the House Labor and Commerce Standing Committee receive additional opinions which resulted in the memorandum from Ashburn and Mason. Representative Rokeberg said that he did not want to adopt or advocate for the adoption of Section 7 in the House Labor and Commerce Standing Committee meeting until he was satisfied that it could not be considered local or special legislation. He informed the committee that the memorandum from Ashburn and Mason was delivered to Ms. Bannister. Upon Ms. Bannister's review of this opinion and her own research, she concluded that it was not local or special legislation. However, Ms. Bannister indicated that it wasn't bulletproof. At that time, Representative Rokeberg said he felt comfortable recommending to the House Labor and Commerce Standing Committee that Section 7 be adopted. Therefore, he wanted to enter the opinion of Ashburn and Mason into the record as it was not done in the House Labor and Commerce Standing Committee. REPRESENTATIVE KERTTULA asked whether the committee could obtain a copy of Ms. Bannister's original memorandum. REPRESENTATIVE ROKEBERG replied that Ms. Bannister's memorandum was issued to him personally. He said he would prefer not to distribute Ms. Bannister's memorandum because she verbally moved on her opinion. He offered to provide Ms. Bannister's memorandum to Representative Kerttula, but not for the record. REPRESENTATIVE GREEN asked Ms. Kreitzer whether she has had any response from Senator Leman on Sections 7 and 8. MS. KREITZER answered that Senator Leman is neutral on the addition of Sections 7 and 8 to the bill. She noted that the language "The adoption by a municipality" in Section 7 did pose a question which was directed to Ms. Bannister. Section 7 does apply to more than Delta Junction due to the way that section is written. Ms. Kreitzer didn't know whether that is problematic for this committee. Number 0941 DAVID ROGERS, Representative, City of Delta Junction, testified in support of Sections 7 and 8. The amendment basically means that the public procurement process undertaken by the City of Delta Junction over the last several months - which included two public meetings, one public hearing and much discussion in the community - satisfies the requirements of HB 53 [HB 53, LEASE-PURCHASE CORRECTIONAL FACILITIES, Twentieth Legislature]. He explained that, among other things, HB 53 authorizes the state to enter into an agreement with Delta Junction to lease prison facilities as long as the prison is operated by a private, third-party vendor selected by a process that is similar to the procedures established in AS 36.30, the state procurement code. Similar isn't defined in HB 53. MR. DAVID ROGERS indicated that this process started competitive by preference and concluded by necessity, in his opinion, with an ordinance - adopted on a 6-1 vote - authorizing a sole source contract to design, build and operate, for the first five years, a private prison in Delta Junction. He noted that subsequent contracts would be awarded by competitive bid. He reminded the committee that these types of decisions are typically made behind closed doors by government employees. Typically, there are no public discussions or votes by elected, multi-member bodies representing the affected population as there were in the Delta Junction situation. Nevertheless, some people have raised concerns about the process; there is a lawsuit brought by citizens of the community pending. While one can definitely second guess any of the assumptions and conclusions, Mr. David Rogers believed they had done it right and arrived at a good decision for Delta Junction. He indicated that the decision provides Delta Junction with its best, and maybe only, shot at success. This amendment will effectively ratify the [City of Delta Junction's] process, resolving some of the most significant questions about that process. Hopefully, this amendment will allow the city to get started as soon as possible. RICK JOHNSON, Member, Delta Junction City Council, informed the committee that he is a 25-year resident of Delta Junction, who has raised his family, has a small business and teaches school in Delta Junction. Mr. Rick Johnson noted that he was one of the city council members elected last October when the City of Delta Junction chose to turn over the city council in order for some new council members to review this large issue. He read the following testimony: Last winter the city council brought the question of the private prison project to Delta Junction voters. Once again, they [Delta Junction voters] said that we should proceed and that is what we are trying to do. Delta Junction is going to be in a world of hurt when Fort Greely closes, unless this base is reused. Our best shot for economic reuse of the base is the prison project. The prison is controversial in our community and there is a vocal opposition. But they [those opposing the prison] have been in the minority both times. Both changes in Section 7 of this bill are designed to help the city with the goals set out in HB 53 last year and I quote: "to take advantage of the unique opportunity to use surplus military facilities on a road system that are becoming available through the United States' Army's realignment of Fort Greely's mission; to prevent and ameliorate economic hardship in the Delta region occasioned by the realignment, relieve overcrowding of existing facilities within the state, and the extensive use of out-of-state correctional facilities to house Alaska inmates." The legislature's intent was to provide economic redevelopment relief to Delta Junction by seizing the unique opportunity of using the abandoned buildings left after the realignment of Fort Greely. At the same time it applies to a matter of statewide concern because capitalizing on this unique opportunity will have a positive impact on the state by returning prisoners to the custody of Alaska. The city is under tremendous time pressure to move this project forward for timely completion to even have a chance of realigning or aligning the prison project with the closure of Fort Greely. These pressures include the need to begin the landfill construction and permitting this summer to handle the demolition that will be needed for a major conversion project. Survey work has to be done to begin the process of land transfers. Most importantly, we [the City of Delta Junction] have to demonstrate to the Army that we have a viable plan to proceed because without it we cannot. If the reuse plan is not in acceptable form by January of 2000, then the opportunity to seek an economic development transfer for this project will be gone. If the prison is not ready to operate by July of 2001, the jobs in Delta Junction will be gone and our families will suffer. To meet this schedule, Delta must select our design-build and initial operations contractor now. This amendment will keep the project on track. For the state, that means the goals of economic redevelopment and in-state prison, our prisoner housing can be met; and for Delta Junction, that means our community can survive the base's closure. I would like to thank you for helping us to meet this challenge. CHAIRMAN KOTT asked Mr. Rick Johnson whether he said there were two city councils, a previous one and a new one, that have reviewed [the prison issue]. MR. RICK JOHNSON said there was a council before this committee last year which lobbied for support for HB 53. The community elected and turned over that council. He clarified that the Delta Junction City Council consists of seven members, of which three new members were elected for the regular term of office. When the new council members took office, they reviewed this issue and the City Council arrived at its current position with regard to the prison issue. CHAIRMAN KOTT asked Mr. Rick Johnson whether, prior to that turnover, there was a vote by the public. MR. RICK JOHNSON replied yes. In further response to Chairman Kott, he informed the committee that there was one vote and the community supported the proposed use of Fort Greely as a prison facility by a 62 percent margin. In response to Representative Rokeberg, Mr. Rick Johnson stated that the second vote was a majority as well, however the margin was maybe only 55 percent. REPRESENTATIVE MURKOWSKI inquired as to whether the second vote was an identical vote. MR. RICK JOHNSON answered yes it was, although the wording was a bit different. He recalled that the language of the second vote was more specific. He indicated that others could speak to that question. REPRESENTATIVE GREEN asked Mr. Rick Johnson whether the election of the three new members was between the two votes on the prison. MR. RICK JOHNSON said that the election was between the two votes. REPRESENTATIVE GREEN mentioned that legislators have been getting a lot of public opinion messages (POMs) stating objection to Section 7. Representative Green surmised that these people want the prison, but they don't want the "sole-sourcing." He asked Mr. Rick Johnson whether that was ever an issue in any of these votes. MR. RICK JOHNSON replied no. Number 1468 REPRESENTATIVE ROKEBERG read from a POM received from a Delta Junction citizen which said: "This law, if passed, sends the message that one can just alter the original plan by just adding a clause that benefits whoever stands to gain." He asked Mr. Rick Johnson what that person is talking about. MR. RICK JOHNSON commented that he thought it was a political statement. There is a minority of constituents in the Delta Junction area that are taking this position; to the degree that this section helps remediate their concerns, he said "we" are in support of it. REPRESENTATIVE GREEN noted the vote went from 62 to 55 percent. He indicated that he has received [POMs] that are running about three to one against the situation brought up in the bill. He asked Mr. Johnson whether he has an explanation for that; is there just a vocal minority? MR. RICK JOHNSON said that he truly believes that they are just a vocal minority. REPRESENTATIVE KERTTULA asked why there is a need to speed up this process. MR. DAVID ROGERS suggested that the testimony of Brian Rogers and Jim DeWitt will discuss the process and the reasons for the decision, which may put the situation in perspective. Number 1604 BRIAN ROGERS, Advisor to the City Attorney, City of Delta Junction, testified via teleconference from Fairbanks. He said that he would go through the process beginning with the passage of HB 53. In August, the state awarded a contract to Rise Alaska to review the feasibility of a state contract for a private prison in Delta Junction. Following that award, the city decided that it needed some additional advising, which is when he started working for the city. Mr. Brian Rogers explained that he basically helped the city determine how to respond to the multiple demands of the state, the state's contractors and the military. There was an election in October. At that point, the city council wanted to make sure people understood what the city was getting into. Therefore, the city worked with the state on the feasibility study process to try to make sure that the issues that people needed to consider regarding the impacts of a private prison on the city and the city's economy were understood. That led to the issuance, in January, of the feasibility study report by Rise Alaska. A large public hearing occurred in January. At that public hearing, representatives of the state, the military, the city and state contractors basically presented [the feasibility study]. He noted that the hearing was prior to a public vote as to whether the city should proceed. MR. BRIAN ROGERS said that the public vote was a yes. Therefore, he was told to go ahead and work on a request for proposals (RFP) that would allow the city to procure both the design-build and the operations contract. There was review regarding whether there was the need for one RFP for construction and one for operations or a single RFP for construction and operations. The [city] looked for those with experience in writing RFPs for private prisons. From that search Richard Crane was identified and brought on, with the consent of the state, to assist the city in drafting the RFP. During February, Mr. Crane was working on the schedule for the RFP while Mr. DeWitt and Mr. Brian Rogers were trying to decide whether it made more sense to proceed with one or two RFPs. They [Mr. DeWitt and Mr. Brian Rogers] made a recommendation on the RFP process to the city council, which voted in early March to proceed with a single RFP for construction and operation because the issues were so interwoven. At the same time, Mr. Crane revealed a schedule which caused [Mr. DeWitt and Mr. Brian Rogers] to rethink the whole process which was headed to issuance of an RFP. Mr. Crane's schedule made it clear that the overall objective of the city council, which was to have a prison open by the time Fort Greely was realigned in July 2001, would not be achieved. Frankly, going the full RFP process doesn't meet that deadline. The full RFP process would conclude about nine months too late, which is nine months without jobs for residents between the closure of the base and the opening of the prison. MR. BRIAN ROGERS informed the committee that all along the objective has been to make this a seamless transition. Mr. Brian Rogers said that, from the beginning, he knew that this was a complex procurement with substantial unknowns which would make an RFP difficult, especially since the process with the military is a moving target. From the outset, there was substantial public support and substantial public opposition for a private prison in Delta Junction. Therefore, there was the knowledge that whatever route was chosen the city could face litigation. Mr. Crane's schedule indicated that in order to be open in 2001, construction needed to commence beginning in the construction season in 2000. In order to do that, some demolition work was necessary over the winter. That demolition work required a new landfill to be completed by September/October of 1999. Under Mr. Crane's schedule, the RFP couldn't be awarded in time to do that landfill work. That time trigger forced review as to whether there is a basis for a sole source procurement since an RFP does not achieve the procurement objective of a July 2001 opening. That is a legal decision that the city council ultimately made. Mr. Brian Rogers said that [the city] entered into settlement discussions with Allvest and Delta Corrections Group, and the city began drafting a sole source procurement. He informed the committee that there was a public process with two city council meetings and a hearing. He emphasized that the drafts for the sole source were posted on the city's web site. Number 1884 JIM DeWITT, City Attorney, City of Delta Junction, testified via teleconference from Fairbanks. He said Mr. Brian Rogers touched on the time constraints which was a contributing factor in the sole source determination. As Mr. David Rogers said in his comments, the language of Sections 7 and 8 effectively ratifies what the city has done. In addition to the time constraints that Mr. Brian Rogers described, there were resource constraints, complexity issues and a host of other limits and constraints which are outlined in the city ordinance 99-04. Mr. DeWitt believed that Mr. David Rogers has copies of that list for those interested. MR. DeWITT explained that in order to have land and buildings available for a private prison, the City of Delta Junction has to comply with applicable federal law. The [federal] government would want a reuse plan, an economic development plan and an application for an economic development conveyance (EDC). Furthermore, if one wants to take possession of the property before the deed is issued, a lease and furtherance of conveyance, which is a very substantial amount of paper, is necessary. The City of Delta Junction can't handle such a task on its own. Therefore, whether by sole source or by competitive proposal, the vendor - the builder/operator - of the private prison is going to have to assist the city in that process. All of those things have to happen before land is available for any purpose other than to walk around and investigate. MR. DeWITT noted, as Mr. Brian Rogers pointed out, that to have that land available in a timely fashion, it needs to be surveyed this year. The RFP process simply did not permit that. The creation of the private prison is also going to pose new burdens on the city's infrastructure: a new school, new city services, and other city resources are going to be required. The city does not have the finances to undertake those expansions, and therefore the city would have to look to a successful proposer or sole source vendor to provide assistance for those as well. Mr. DeWitt pointed out that the military still operates Fort Greely and will continue to do so until July 13, 2001. Therefore, whether by RFP or sole source, there will have to be very close cooperation between the vendor and the Army as well as the City of Delta Junction. There will also have to be close coordination with the State of Alaska, Department of Corrections. He emphasized, "It is difficult to impossible to write an RFP to direct that level of cooperation." This project will also require financing. The financing has to be bridged between construction financing and permanent financing. Furthermore, the various types of cash flow generated by the private prison also makes preparation of an RFP extremely complex. He informed the committee that there are known environmental conditions which include lead-based paint and asbestos-containing materials. That has implications for the cost of remodeling and the disposition of the demolished materials which is related to the landfill that Mr. Brian Rogers described. MR. DeWITT pointed out that Allvest had a significant role in HB 53 and it also had a prior written agreement with the Delta-Greely Community Coalition. Allvest threatened the city with legal action to preserve rights it claimed under that written agreement. Mr. DeWitt said that he believes, as he believed the city council believes, that the city would have won that lawsuit. However, this is an instance of the lawsuit being the problem as opposed to the outcome of the lawsuit being the problem. The city has neither the time nor the resources for the lawsuit. If the city prevails, that resolution would come too late to allow the seamless transition with minimal economic impact. The resolution from the lawsuit could possibly come too late to allow the city to acquire the property from the Army in the first place. With regard to Richard Crane's RFP process and the time line associated with it, Mr. Crane proposed to give interested proposers 60 days to assemble the information in order to prepare their proposals. That time frame was too short. No one can identify all of the issues, all the problems and associate costs with each of them on a fixed price bid in 60 days. The city would have been faced, in a competitive RFP process, with repeated demands for additional time to prepare and the threat of protest and litigation if that time wasn't granted. Therefore, Mr. Crane's proposal to have a contract in place by September or October was fairly optimistic, and perhaps even unrealistic under the circumstances. MR. DeWITT explained that taking all of those factors into account, the city examined the State of Alaska's regulations implementing the sole source statutes. Those regulations impose five requirements for a sole source determination. First, the competitive procurement has to be found to be not practicable. He hoped that he and Mr. Brian Rogers' testimony has illustrated that isn't the case; there was no way to make competitive procurement practicable. Second, the sole source contract has to be found reasonable under the circumstances. He believed that an examination of the settlement agreement with the Delta Corrections group and Allvest, exhibit A of the ordinance, will demonstrate that it is imminently reasonable under all the circumstances. Third, the sole source contract has to be in the city's best interest. He believed that had been shown. He indicated that examination of exhibit A, the settlement agreement, would reveal that the city was able to obtain the concessions it needs in order to make this process work. Fourth, the decision may not be arbitrary or capricious. He assured the members of the committee that this was not an arbitrary or capricious decision, but rather a painful and difficult decision. The decision involved evolving from a strong preference, if not overwhelming preference, for a competitive process to the conclusion that the only chance to make this project work would be by sole source procurement. Lastly, the decision cannot be prompted by corruption. As Mr. Brian Rogers has described, this was an intensely public process; there is nothing resembling corruption in any aspect of this. He acknowledged that it is controversial in the City of Delta Junction. However, there has been a vote and the process is as clean as the city and he could make it. He submitted that it is worthy of the committee's ratification. CHAIRMAN KOTT announced that the committee would now hear from Ms. Bannister regarding the Ashburn and Mason memorandum. REPRESENTATIVE ROKEBERG requested that Ms. Bannister come up to discuss the Ashburn and Mason memorandum dated April 27, 1999. He reiterated the scenario which led to Ms. Bannister's response to the Ashburn and Mason memorandum. He understood from staff that, after reviewing the Ashburn and Mason memorandum, Ms. Bannister felt more comfortable. He stressed that he wanted to make sure that the record is clear on Ms. Bannister's opinion and how that fact pattern took place. Number 2308 THERESA BANNISTER, Attorney, Legislative Legal Counsel, Legislative Legal and Research Services, Legislative Affairs Agency, stated, "At that time, I thought it had a better chance than maybe I do today. But I expressed that to you; that I thought it had a chance of being successful." REPRESENTATIVE ROKEBERG asked Ms. Bannister whether she recalled having a change of opinion after reading the Ashburn and Mason memorandum. MS. BANNISTER recalled that the Ashburn and Mason memorandum did bring up some more details which seemed to alleviate some of her concerns. In further response to Representative Rokeberg, Ms. Bannister agreed with his characterization of her comments, that [the language] wasn't "bulletproof" but better than before. She also agreed with Representative Rokeberg that the Baxley v. State decision lent stronger support to it not being held as local and special legislation. REPRESENTATIVE CROFT asked whether Ms. Bannister could put her current thoughts regarding whether this violates the special legislation in some sort of memorandum for him. He requested that the memorandum include how the Baxley v. State opinion works. REPRESENTATIVE ROKEBERG said the reason he didn't share the memorandum was that he thought it would be confusing. He indicated that he could provide copies of Ms. Bannister's memorandum. REPRESENTATIVE GREEN asked Ms. Bannister whether she has read any dissenting opinion, that this might be a violation of the single- subject rule. MS. BANNISTER replied she can't disclose whether something has been submitted to her without the permission of the person who submitted it to her. REPRESENTATIVE ROKEBERG turned to Section 8 of the bill which was inserted in the House Labor & Commerce Standing Committee. TAPE 99-50, SIDE B REPRESENTATIVE ROKEBERG noted that one of the sponsors had indicated that Section 8, the retroactive clause, is not necessary. He also requested the opinions of Ms. Bannister and Mr. DeWitt regarding whether a local ordinance in Delta Junction would suffice to replace Section 8. Number 0019 MS. BANNISTER replied it is arguable. If it went before a court, the court would say that the statute is operating prospectively by ratifying what occurred in the past. A better approach would be making it retroactive, so that it is clear to everyone that it is operating back to March 17. REPRESENTATIVE ROKEBERG asked Ms. Bannister whether a subsequent ordinance would suffice, so that a retroactive provision wouldn't be necessary. MS. BANNISTER answered that is possible. She commented that even doing what was done before would be alright, however that might cause problems due to any contracts that [the City of Delta Junction] has already done. She then stated that it wouldn't really be an issue. Ms. Bannister concluded by saying that it is possible for an ordinance, enacted after this bill is enacted, to suffice without using the retroactivity clause. REPRESENTATIVE ROKEBERG directed the same question to Mr. DeWitt. MR. DeWITT stated that he isn't qualified to answer the retroactivity question as a pure question of law. However, the practical effect is to inject another two to four weeks of delay in a process that is already seriously time bound. He said, "The council, I assume, would be willing to adopt it again, if that were necessary. I don't understand that there's a retroactivity problem here. Certainly, if a court had it in front of it, I think a court would deem the ordinance valid or invalid." Mr. DeWitt noted that the legislature here is being asked to interpret its own prior decision under HB 53. He concluded, "So, I would think not. I don't pretend to expertise in the area. Again, though, we're time bound. I have concerns about anything that injects additional requirements of time." Number 0132 REPRESENTATIVE CROFT asked Mr. DeWitt what claims were made by Allvest, referring to testimony that there had been a settlement. MR. DeWITT replied that Allvest had drafted a complaint. The lawsuit threatened was over the city's refusal to honor the prior commitment with the Delta-Greely Community Coalition. Mr. DeWitt specified that he didn't want to overstate the importance of that lawsuit as a motive for the overall settlement agreement, but it was one reason it got on the table. REPRESENTATIVE CROFT referred to page 6 of the ordinance that Delta-Greely enacted, "It says here, 'Allvest has made clear to the city that if the city proceeds to an RFP process, Allvest will seek judicial relief on several grounds.' So, it was essentially, 'If you seek any other bidder besides us, we'll sue?'" MR. DeWITT replied, "Any other bidder for the builder, as distinct from the operator. I don't understand Allvest to ever have claimed that HB 53 gave it the right to operate, only the right to be the builder." REPRESENTATIVE CROFT pointed out this ordinance says [the city] strongly disputes the claim and believed it would prevail on the merits. Therefore, Representative Croft understood [Mr. DeWitt and the city] to believe that was a meritorious position on Allvest's part. MR. DeWITT affirmed that. He recognized that the attorney for Allvest would almost certainly disagree. However, Mr. DeWitt said that he was not seriously troubled. He said that he was much more troubled by the costs of defending that lawsuit and by the delay that lawsuit would cause. Number 0213 REPRESENTATIVE CROFT referred to the portion of the ordinance that lists "best cases of time lines." Representative Crane understood that in February, or possibly March, the city faced the decision of whether to do an RFP or do this sole source. At some point in that time frame, Mr. Crane's opinion regarding the time line came out. Representative Croft asked when exactly the council first got Crane's opinion that it is 60 days. MR. DeWITT replied that it was sent to him, but he didn't have that exact date. He offered to provide that date via fax. REPRESENTATIVE CROFT said that from Mr. Brian Rogers' testimony, he understood the receipt of Mr. Crane's time line to be about February or March. MR. DeWITT said he believed it was late February. REPRESENTATIVE CROFT referred again to the ordinance, which lists "best case with RFP, September or maybe early October; best case with a sole source, April." He noted that the city wasn't going to make that April sole source. MR. DeWITT agreed, adding, "Perhaps May." REPRESENTATIVE CROFT asked Mr. DeWitt whether the date of the vote on this by the city council was March 30. MR. DeWITT affirmed that. Number 0279 REPRESENTATIVE CROFT referred to the "October or September date." He asked, "If Crane was right about a 60-day time, why wouldn't that be more like a - if it was late February or early March, early April early May for, under Crane's estimate." MR. DeWITT offered to send Mr. Crane's chronology, which would provide a better answer than he could provide. "He [Mr. Crane] laid out intervals to develop and evaluate the terms and conditions of the RFP, obtain approval ... with the State of Alaska, develop standards to evaluate the RFP, evaluate the RFP, negotiate the contract, issue the notice of intent to award, let the statutory time go by, and then award." Mr. DeWitt explained that the 60-day evaluation amounts to approximately a third of that total time, and as previously stated, may very well have been too short. REPRESENTATIVE CROFT noted the almost five-month difference between the two estimates, "May, June, July, August and part of September." He asked whether it is that sort of time frame that is being discussed, in reference to doing a competitive bid or doing a sole source. MR. DeWITT replied that the answer is yes and no. He agreed that would be the case when reviewing the calendar intervals. However, the practical effect would be the loss of the 1999 construction season which caused the most consternation and alarm, for himself and Mr. Brian Rogers. He explained that the field surveys could not have been performed nor could the process of getting the land filled. Furthermore, he noted that even the applications for the economic development conveyances would have necessarily been set over to the year 2000. "So, yes, it's calendared. No, because of the loss of the construction season. The real delay was closer to 12 months." Number 0363 REPRESENTATIVE CROFT referred to the city ordinance, page 6, which says the total delay might be in the range of 14 to 18 months, depending on appeals to the Alaska Supreme Court from a suit from the sole source recipient of the contract. He asked, "How do we know whether foremost in the council's mind was this 14 to 18 month delay, based on a suit you didn't think had merit, or based on this distinction between the RFP and sole source process?" MR. DeWITT answered, "I can't speak for the city council as a whole, Representative, but ... I think I can infer that all of these were issues that went into the city council's consideration, because they're all set out in the ordinance. It is a mix of criteria. You've identified two of the eight or nine that are in there." Number 0428 LANE McCOTTER, Director of New Business Development, Management and Training Corporation, testified via teleconference from Ogden, Utah, where his company is headquartered. His company operates ten private prison facilities for several states with about 7,200 beds under contract in Utah, Texas, Arizona and California. The company has followed this project for more than a year, and was greatly interested in bidding on it. Mr. McCotter explained that the company had hoped for a level playing field under the procurement code, and for an opportunity to compete, along with other private vendors, for this 800-bed facility. The company is very disappointed that this is probably not going to happen. He concluded by saying, "And we just wanted to state that we felt we were fully qualified to finance, design, and operate this private facility for the State of Alaska and Delta Junction." REPRESENTATIVE GREEN asked Mr. McCotter whether their capabilities were made known to the City of Delta Junction. MR. McCOTTER replied that the Management and Training Corporation had certainly tried to do that. Last year, when HB 53 was first passed, the company began trying to pursue getting in position for the RFP. Three "corporate people" were sent to Alaska to look at the area in order to gain information. Initially, the company was directed to a project manager who he believes was Sara Walker (ph) with a company called Rise Alaska, which had performed a feasibility study. The Management and Training Corporation received copies of that feasibility study. Later, the company was directed to Mr. DeWitt and his law firm, and to the web site for this project. MR. McCOTTER informed the committee that initially, the Management and Training Corporation was told that this project would be out as an RFP as early as March of 1999. Therefore, the Management and Training Corporation contacted Mr. DeWitt's office and was told that it would probably be a while because there were other things going on. Later, the Management and Training Corporation was informed that there was a partnership between Delta Junction and a particular private vendor, Cornell [Corrections, Incorporated], who he believed had bought out Allvest. The company was further informed that the private vendor had offered a large sum of money to the City of Delta Junction for this contract and thus the project would probably not proceed to an open bid. Therefore, the Management and Training Corporation basically closed its files on this project because it felt that there was no longer a level playing field and the company would not be able to compete for this project. Number 0579 REPRESENTATIVE GREEN asked Mr. McCotter whether, in their evaluations, the company was able to come up with a reasonable operating cost, or was it too superficial at the time of review? MR. McCOTTER agreed that it was too superficial. The company had contacted Mr. DeWitt's office to try to receive some answers, he said, in order to do preliminary work in anticipation of an RFP. However, the company was never able to get enough information to put together even a bid estimate. REPRESENTATIVE GREEN asked whether Mr. McCotter had heard the discussion today regarding the time frame. He also asked whether Mr. McCotter agreed with the tightness of the decision-making process now. MR. McCOTTER affirmed that he had heard that discussion. He stated that if the RFP was complete, with all the necessary information, Mr. Crane's estimate of 60 days would certainly be well within the time frame for a company such as the Management and Training Corporation to put together an appropriate response to that bid. REPRESENTATIVE CROFT inquired about Mr. McCotter's firm. MR. McCOTTER clarified that the company is the Management and Training Corporation which has been in business for many years. The Management and Training Corporation is probably most well known, throughout the nation, for its Job Corps side of the house. The Management and Training Corporation has been involved in Job Corps for 20-30 years, and is the largest private vendor of the federal government in Job Corps and running Job Corps centers. In 1987, the company viewed private prison operations as a natural bridge to get into, because the company was already running residential centers. Therefore, the Management and Training Corporation added the security component and obtained its first contract for the State of California, a 400-bed facility that the company still operates. A few years later, the company opened its first facility in Arizona. Currently, the Management and Training Corporation has a number of facilities in Texas and the company also operates a 400-bed facility in the State of Utah. MR. McCOTTER informed the committee that he has only been with the Management and Training Corporation since July of last year. Prior to that, he was in the public sector. He reviewed his background in corrections. For the past 14 years, he was the Director of the Texas Department of Corrections, and then he was the Director of the New Mexico state prison system for four years. In 1991, he became the Director of the Utah Department of Corrections. He pointed out that he left public corrections in 1997, after six and a half years with the State of Utah. Number 0710 REPRESENTATIVE JAMES asked Mr. McCotter to explain his earlier comment that a private vendor had offered a large sum of money to the City of Delta Junction for this contract. MR. McCOTTER explained that the Management and Training Corporation was waiting for the RFP to come out. Initially, the information on the web site indicated that the RFP was anticipated in March of 1999, however that did not occur. From time to time, the company would try to contact various entities, including the Department of Corrections and Mr. DeWitt's office, in order to obtain answers to questions that had arisen as well as to obtain information regarding when that RFP could be expected. Those attempts were made so that the company could begin putting together preliminary information. Mr. McCotter informed the committee that about two or three weeks ago the company heard from various sources, which he couldn't identify, that stated this project would probably not go out to [competitive] bid now. Furthermore, sources said that Cornell Corrections had offered a large sum of money, on the order of $500,000, in a settlement to the City of Delta Junction. Therefore, Cornell Corrections had a partnership with the City of Delta Junction, and this project would be a "sole source." So, the Management and Training Corporation focused its efforts elsewhere. REPRESENTATIVE MURKOWSKI returned to the time line. She referred to Mr. McCotter's statement that a couple of weeks ago he learned that the RFP wouldn't be coming out and the city would be looking to a sole source. She asked whether, up to that point in time, the information from the web site or elsewhere still indicated there would be an RFP forthcoming. MR. McCOTTER answered that the company thought there would be an RFP forthcoming. The company continued to monitor the web site, as it was told to do because additional information would be forthcoming on this project. At that point, the company felt that there would still be an RFP for which it could offer a competitive bid. However, just two or three weeks ago the company was told that [an RFP] would probably not be the case. Number 0818 REPRESENTATIVE MURKOWSKI asked Mr. McCotter whether the Management and Training Corporation had learned that by viewing the web site or from elsewhere. MR. McCOTTER informed the committee that, basically, there have been no changes on the web site for quite some time. The company had contacted various people that it thought might have some knowledge of when the RFP could be anticipated. He reiterated that information received from various sources indicated, "that it [the project] would probably be a 'sole source' because of the agreement, or some kind of a settlement offer, that had been offered between the City of Delta Junction and Allvest and Cornell Corrections. And there was a sum of money involved, probably somewhere around $500,000." CHAIRMAN KOTT asked Mr. McCotter how long the Management and Training Corporation has been in corrections. MR. McCOTTER answered that the Management and Training Corporation has been involved in corrections since 1987 when it contracted its first facility with the State of California. REPRESENTATIVE ROKEBERG inquired as to whether the Management and Training Corporation has ever bid on any RFPs in the State of Alaska. MR. McCOTTER replied no. Number 0896 REPRESENTATIVE CROFT asked whether there have been any RFPs for private prisons in the State of Alaska. MR. McCOTTER stated that he was in public corrections until July 1997, and therefore didn't have the background to answer that question. REPRESENTATIVE GREEN asked Mr. McCotter whether he has or has had operations in Palmer in the Job Corps site. MR. McCOTTER stated that presently the Management and Training Corporation has ten contracts in corrections for the states of California, Arizona, Texas and Utah. Mr. McCotter specified that the company has no operations in Alaska. Number 0984 ROY GILBERTSON, Mayor, City of Delta Junction, testified via teleconference from Delta Junction. He stated that when the city council came on, after the turnover, it was faced with the possibility of a lawsuit with (indisc.). He noted that he was on the city council at that time and opposed to the prison. The lawsuit led to the settlement to develop a "sole source." Mayor Gilbertson mentioned that he wasn't very aware of Mr. McCotter until after the "sole source" was almost completed. CHAIRMAN KOTT asked whether Mayor Gilbertson is a recent electee to the position of mayor. MAYOR GILBERTSON replied yes and informed the committee that he was elected in October of last year. REPRESENTATIVE GREEN acknowledged that some time has been lost in determining that there probably should be a sole source and now the committee is being pushed hard to accept this. He asked Mayor Gilbertson why there was a three-month gap from the time it looked like something was going to have to be done and the present time. Number 1142 MAYOR GILBERTSON explained that when the city council came on in October the RFP was about eight months old and they decided to go for another RFP in February which led to the passage of a resolution. The passage of the resolution led to the threat of a lawsuit which has progressed to the present situation. REPRESENTATIVE GREEN recalled testimony that this issue began with a popular vote of about 62 percent in support which decreased to 55 percent. Representative Green indicated that his office has received a lot of POMs in opposition to this issue with a margin of two or three to one. Testimony has claimed that those are a group of dissidents. He inquired as to Mayor Gilbertson's view on that. MAYOR GILBERTSON replied that the last advisory vote resulted in a tie with a vote of 486 to 486. In that vote, approximately 53 percent of the city voted in support of the prison, while [47] percent voted in opposition to it. Since that vote, he has received several calls from people saying that the last vote was not on the prison, but rather on the reuse of Fort Greely. Mayor Gilbertson said that he wasn't sure how another vote, taken today, would go. REPRESENTATIVE JAMES informed everyone that her POMs, telephone calls, and letters do not have the same skew as Representative Green. She assessed, from what she has heard, that support and opposition is split in half. She asked if that was what Mayor Gilbertson was indicating. MAYOR GILBERTSON commented that the 50-50 split would be a fairly close assumption. Number 1286 REPRESENTATIVE MURKOWSKI expressed some concern about the momentum around the issue. Perhaps, everyone is not "on top of the steam roller" at this point. With regards to the sentiments of the community, Representative Murkowski didn't think the committee wanted to tell the people in Delta Junction what is best for them. She indicated that she is seeking a degree of comfort in that what is happening in Juneau is a good thing for those people working and living in Delta Junction and for Alaska as a whole. MAYOR GILBERTSON stated that Delta Junction definitely needs the jobs; Fort Greely is being realigned and the city will lose about 100 jobs. A lot of work has been done by the seven-member city council, all volunteers. He pointed out that he was so overtaxed with paperwork that it has been hard to keep up with this process. He realized that the latest fast track occurred in an attempt to stave off the lawsuit, and get this bill to go through. In the mean time, he has received more calls from people that are against it. This places Delta Junction in a difficult situation, because it is such a small community and this is a big deal for the community. REPRESENTATIVE CROFT inquired about the tie vote and whether it encompassed more than the city. MAYOR GILBERTSON explained that it was a vote in the outlying area, which is approximately three times the population of the City Delta Junction. He feels that it is an overall community project, so the outlying area was welcomed to be a part of the advisory vote. He said that within the city limits it was 53 percent for it and 47 percent against it. Number 1453 REPRESENTATIVE CROFT wondered whether the total area was tied, including those within the city limits, or whether it was just those outside the city limits. MR. GILBERTSON clarified that the vote within the city was 118 against it and 188 for it. Outside the city limits the vote was 397 to 397. MAYOR GILBERTSON in response to Chairman Kott, answered that his position and the city council positions are elected positions. CHAIRMAN KOTT related his understanding that the city council almost unanimously supports the project. He asked Mayor Gilbertson whether the issue of a private prison was an issue during his election for mayor. MAYOR GILBERTSON replied yes. CHAIRMAN KOTT surmised then that during his election, citizens knew his position on this issue before voting him in. Chairman Kott also surmised that citizens knew the position, on the prison issue, of those elected to the city council. MAYOR GILBERTSON replied yes to both questions. REPRESENTATIVE GREEN pointed out that the committee has been told that the City of Delta Junction would be economically strapped if there was not a seamless transition. In other words, it would be problematic if the people working at the base were out of work for as much as five or six months, if the committee chose to take the competitive bid route. He asked Mayor Gilbertson how many people work at the base. MAYOR GILBERTSON stated that 271 people work at the base. Number 1626 REPRESENTATIVE GREEN asked Mayor Gilbertson how many people might stay there after the base closes. He noted that he has heard that many are near retirement and may not seek new employment. MAYOR GILBERTSON acknowledged that some will be retiring. He informed the committee that approximately 55 positions will be retained after the realignment. REPRESENTATIVE GREEN wondered whether there has been any talk in the community with regards to the Pogo mine. MAYOR GILBERTSON replied yes. REPRESENTATIVE GREEN stated his understanding that there may be a couple hundred jobs available with the mine. MR. GILBERTSON said that currently there are approximately 47 to 60 people working on the mine and about 20 working for the mine within Delta Junction. Number 1706 REPRESENTATIVE KERTTULA returned to the comments about a $500,000 payment made to the city and asked whether that was part of the settlement. MAYOR GILBERTSON explained that the $500,000 will come in over a two-year period to help offset the attorney fees of the city. The city will receive $62,500 quarterly which equates to $20,833 a month. REPRESENTATIVE KERTTULA asked whether that was a part of the settlement on attorney's fees. MAYOR GILBERTSON replied that it was part of the settlement to help the community to be able to bear the cost of doing this. REPRESENTATIVE KERTTULA asked, "Doing what?" MAYOR GILBERTSON reiterated that it would help bear the cost of the attorney and consulting fees. He mentioned that so far the city's attorney fees and consulting fees on this project have summed about $185,000. Thus far, the city has received $50,000 in a grant from the Department of Community & Regional Affairs. The city will have to bear the remainder of the fees on their own, except for the $20,833 a month from Allvest - providing this project proceeds. Number 1802 REPRESENTATIVE JAMES inquired as to the source of revenue that the City of Delta Junction has to operate on ordinarily. MAYOR GILBERTSON responded that the only thing Delta Junction has presently is some money in lieu of taxes from the state. Last year the city operated on a budget of $130,000, but this year the city's budget is a little higher. He stated that Delta Junction does not have a tax base, although there is some help from the revenue sharing program. REPRESENTATIVE JAMES asked Mayor Gilbertson whether he felt a bit overwhelmed in having to deal with his normal duties as mayor and this issue. MAYOR GILBERTSON commented that the State of Alaska and the Department of Corrections would have to come on board in order for this project to proceed. Number 1931 K. LESLIE KIRK, retired Colonel, Fort Greely, informed the committee that he retired in 1984 and has lived in Delta Junction ever since. He noted that he has been involved with real estate and has an understanding of it. He also has also been teaching at the University of Alaska. He mentioned that he became involved with the Concerned Citizens of Delta Junction who were against the prison after the first vote. MR. KIRK turned to the votes on this issue. He informed the committee of a meeting held on January 7, 1998, or January 8, 1998, at which Allvest gave a presentation. At that meeting, Mr. Kirk inquired as to how it would be determined what the people want. The response was, "Well, we'll know." He posed the question again and "they" said that the only way to determine what the people want is to have a vote. However, "they" said there wasn't time for a vote. Others indicated the need for a vote as well. Finally, "they" agreed to have a vote, but specified that the vote would have to be held on [January] 17th, in 10 days. Upon the conclusion of that meeting "they" agreed to delay the vote for about a month. On [January] 15th, the next Thursday, there was another open session during which people received a brochure saying there would be a vote in two days, on Saturday January 17th, and that people must be registered to vote. Mr. Kirk noted that was kind of a surprise, he had no idea what the ballot would say. Still, he, as unorganized as anyone, went to vote. Ironically, he saw an older couple being allowed to register, on the spot, before voting. He said, "That's interesting, this is not an official state vote anyway, so we went ahead and did this." MR. KIRK informed the committee that 640 voted in support of the prison and 397 in opposition. Later, Mr. Kirk requested the numbers of people who registered to vote at the same time they voted. He was told that 122 registered to vote at the same time they voted. "That's quite a difference." He also asked, "'I want to know how many said, no, that were allowed to register before they voted.' It was zero." With regard to whether there was a difference between the vote, he pointed out that the question was whether the city should continue to investigate Allvest. He said that people were told to vote yes if they didn't know, because there would be another chance to vote. During the second vote, people were not allowed to register to vote at the same time they voted which resulted in quite a difference. "In essence, what I'm really saying is we have over 500 and I think we have much more than the majority now that's saying that they do not want to have a prison in Delta Junction. It's growing all the time." MR. KIRK said that there are quite a few reasons for the growing opposition to the prison. First, the Pogo mine is coming in and providing free training for the people that are going to be working there. Furthermore, the ballistic missile sight has been narrowed down to two locations: Healy and Fort Greely. He mentioned that he has personally spoken with those investigating this, who say that Healy doesn't have an airfield while Fort Greely does. Therefore, Fort Greely is more of a prospect than Healy. He also mentioned that, from his information, those investigators came out to Fort Greely in March in order to test the land and the ground to make sure the missiles would be able to be carried. There were also indications that they wanted 250 sets of quarters, housing, because they have some people coming in. He commented that the missile sight will be located at a former missile site. MR. KIRK turned to the question that arose regarding what would happen if Delta Junction did not have a prison. He assured the committee that Delta Junction is not going to dry up and blow away. TAPE 99-51, SIDE A Number 0001 MR. KIRK continued. He indicated that upon review of the permanent fund list, it was discovered that 663 people had moved out [of Delta Junction], including soldiers at Fort Greely, in the last five years. In that same period of time, 667 people have moved into Delta Junction. He discussed the influx of people in Delta Junction which he said was not associated with the prison. There is also an influx of Russians. Mr. Kirk commented, "Our headquarters in the Army said if this happens and it brackets it up, the Army will reactivate Fort Greely." MR. KIRK informed the committee that the people in Delta Junction are concerned about Allvest's tactics. The reason the folks in Utah were not getting any place in 1998 was because on November 4, 1997, the coalition signed an agreement with Allvest to deal only with them on prison activity. On November 16, 1997, a referendum to that extent was signed and later a contract was signed. The contract was illegal because [the coalition] did not have the authority to sign it. He emphasized that the residents of Delta Junction are very concerned about this and whether the community wants to do business with Allvest. Number 0224 MR. KIRK referred the committee to page 4 of the agreement between Allvest and the city. The agreement states that the contractor shall pay the city an initial payment of ground lease rent in the amount of $500,000. The agreement further states that the contractor will pay $450,000 to expand the size of city hall, as well as $2 million for the housing of Fort Greely. This amounts to $3 million that the city could use. He indicated that this a big temptation. "Do you think their getting bought off?" With regard to the housing, Mr. Kirk pointed out that there are 262 units of housing. When the number of units is divided into the $2 million the result is $7,000 per house which he indicated is not much. Again, Mr. Kirk asked if the city council was bought off. However, he stated that the city council members are good people. He surmised that Allvest offered the city $3 million and said it would not provide that money without the prison. The city was facing bills and attorney's fees; that would be a difficult decision. MR. KIRK addressed the question regarding how many jobs would be created. There are 250 civilian jobs at Fort Greely, 55 positions would remain because of the nuclear power plant at Fort Greely. He noted that the residents of Delta Junction do not have the expertise in corrections. Mr. Kirk determined that the prison will create 50 jobs at the lowest level for which people in the area would qualify. He pointed out that the city has to sign a contract for over $100 million to do this, to provide Allvest with the opportunity to make money. Theoretically, the prison was coming in to replace those jobs lost with the realignment of Fort Greely, but it does not replace that many. MR. KIRK informed the committee that when the new council came in October, it was clear that Roy Gilbertson opposed the prison. All three new council members opposed the prison, until one member changed his mind. He restated his earlier discussion regarding the denial of some to vote. Many people are not registered to vote in Delta Junction. The only government in Delta Junction is the city which represents 18 percent of the community. Therefore, the city government had to speak for the entire community. MR. KIRK turned to SB 141. He said that this legislation would effect more than just Delta Junction. He pointed out that this is a design-build construction contract. Companies which could perform such would have to be fairly large. This will effect the small builder who he indicated would not be able to compete. Therefore, all the small builders in Alaska would be impacted. Mr. Kirk recommended that this legislation be dropped; legally it is not sound. Furthermore, it does not make sense to have a bill to legalize something that has been accomplished illegally. Mr. Kirk emphasized that is not the government he fought for. He referred to a letter to the editor from Michael Frarrar (ph) that should be in the Daily News Miner which he offered to provide to the committee. Mr. Frarrar's (ph) letter says that the city, when it signed the contract, was aware that it was breaking state procurement laws and city codes and would have to change the laws to accommodate this. Therefore, SB 141 was created. He said that SB 141 would allow municipal governments and state agencies to sole source projects to be designed and built by a single contractor. Therefore, many state projects could be obtained through "wining and dining." He discussed the competitive bid process that saved the people of Alaska 5 percent on the Fairbanks court house project. Mr. Kirk suggested having a competitive bid for the prison in Delta Junction. He pointed out that HB 53 said that Delta Junction "may" have a private prison. Mr. Kirk strongly recommended that SB 141 be found illegal and thrown out. He believed that with the other things happening in Delta Junction a prison is not necessary. Number 0864 DENNIS POSHARD, Legislative Liaison/Special Assistant, Office of the Commissioner, Department of Transportation and Public Facilities, came before the committee to testify. He noted that his testimony would be limited to Sections 1-6 of the bill. As pointed out by the bill sponsor's staff earlier, this legislation was introduced at the department's request in order to fix some statutory problems with the current procurement process. The legislation was intended to remove the requirement of a contractor to list all subcontractors in the case of design-build contracts where it is not feasible. Furthermore, the legislation would provide a mechanism for a contractor to remove or add a subcontractor when determined by the department to be in the state's best interest. With regards to Section 3 of SB 141, the AGC would like Section 3 to be deleted. Section 3 was added in order to address concerns of the Alaska Professional Design Council. Mr. Poshard said that the department does not have any preference as to whether Section 3 remains or not because the department's objectives would be met with or without Section 3. In conclusion, Mr. Poshard pointed out that this legislation passed from the Senate with a 20-0 vote. Number 1030 RON LORENSEN, Attorney, Simpson Tillinghast Sorensen and Lorensen, came before the committee to testify. Another potential bidder, the Corrections Corporation of America (CCA), requested that Mr. Lorensen provide the corporation and the committee with his firm's views on constitutional questions relating to Sections 7 and 8. Mr. Lorensen informed the committee that he has been in private practice for the last eight years. Prior to that, Mr. Lorensen was the Deputy Attorney General for Alaska in the 1980's. Prior to that, Mr. Lorensen was Assistant Attorney General for five years. He pointed out that he has in excess of 15 years of direct public law experience. Therefore, he has had much exposure and experience with constitutional, municipal and public law questions as well as public policy issues. MR. LORENSEN identified three constitutional law issues which arise from the proposal to add Sections 7 and 8. Firstly, Mr. Lorensen believed that there is a substantial single subject problem with the bill. The problem is highlighted by the testimony of the sponsor's representative and the DOT/PF representative. The purpose of the bill, to correct certain problems existing in the procurement code for design-build contracts, is not connected to what is happening in Delta-Greely. Mr. Lorensen suggested that the title of the bill is not connected enough to what Section 7 and 8 would do. Section 7 attempts to amend Section 4 of Chapter 15 of SLA 1998 which addresses only the operation and contracting for the operation of a correctional facility. Therefore, an amendment to that provision within the scope of a bill that is aimed at construction and design-build is outside the single subject rules. MR. LORENSEN identified the second legal issue as a substantive due process issue. Mr. Lorensen suggested that Section 7 is not rationally related to its purpose. Furthermore, he would argue that it would be irrational for the legislature to do what Section 7 proposes. Section 7 discusses validating a requirement for contracting for operation of a prison facility by adopting a design-build ordinance. He stressed that the connection is not close enough between the subject and the manner in which it is dealt with. Therefore, it is a substantive due process violation. MR. LORENSEN identified the third concern as special legislation. Legislation is not necessarily impermissible if it meets certain standards that the courts have articulated. He pointed to Baxley v. State in which the Alaska Supreme Court determined that yes the legislation may be special, but it is permissible due to the purposes of the legislature, the fact that those purposes were articulated, and that those purposes were valid. In this situation, the legislation does not articulate the purposes. Furthermore, it is not clear that the purposes are valid. Mr. Lorensen said, "In other words, to validate a procurement process that is flawed and so as a result, there is substantial issue as to whether or not here you have special legislation - whether it meets the fair and substantial relationship test to the purposes of the legislature." He said that it is difficult to say that Section 7 would further the purposes articulated in Section 4 of last year's bill, HB 53. Therefore, the special legislation concern is raised. If Mr. Lorensen is correct, then it [Section 7] is struck on that basis. Number 1482 MR. LORENSEN recalled the testimony from another potential bidder, the Management and Training Corporation, who expressed disappointment in not having the opportunity to participate in a RFP process. A large part of what Section 4 called for in HB 53 was a level playing field without anyone having a head start. As it has turned out, one entity did receive a head start and now the playing field is such that other participants are not even allowed to start. Mr. Lorensen commented that clearly the testimony has indicated that big money is at stake. He doubted that the payments being offered by Allvest are being offered from its charitable nature. Mr. Lorensen said that whatever the cost of operation is under this contract will not be born by Delta Junction, those costs will be born by the state. The legislature through payment of the annual operational costs, the per diem costs, will bear the costs. Therefore, Delta Junction will receive some substantial financial benefits from this deal with Allvest, without worrying about the per diem cost. He reiterated that the per diem cost will be passed on to the legislature. He believed that the legislature's purpose, last year, in calling for competition was to assure that a reasonable and fair price would be obtained for the per diem cost of administering prisoners. Mr. Lorensen did not believe that anyone is currently in a position to say that by doing a sole source, a reasonable and fair price will have been obtained. It is unknown what competition, which drives prices down, would have forced, which is ultimately to the detriment of the state and its citizens. Number 1654 REPRESENTATIVE JAMES asked Mr. Lorensen whether the Corrections Corporation of America is the same place that Alaska houses its prisoners in Arizona. MR. LORENSEN deferred to Jerry Reinwand who indicated that the Corrections Corporation of America is the same place that Alaska's prisoners are housed in Arizona. REPRESENTATIVE JAMES asked Mr. Lorensen whether there would be any advantage to having a design-build contract and the first five years of operations. She asked Mr. Lorensen whether, in a design-build contract, the operations should have some voice in the design and construction. MR. LORENSEN said that he was not qualified to answer. However, Mr. Lorensen indicated that the Department of Corrections would have the capacity and expertise to provide the necessary input in evaluating design-build contracts, irrespective of Delta Junction. REPRESENTATIVE JAMES referred to Mr. Lorensen's comment that the money given to Delta Junction from Allvest would be paid for by the state because the state is ultimately the payer of everything. Representative James understood that the reuse would be given to Delta Junction and Delta Junction would be the owners of the facility. Therefore, if there is any other facility leftover from the construction of a prison that would be left to the city to manage. Is that correct? MR. LORENSEN said that he did not know. He commented that he would not be surprised if that were the case. Mr. Lorensen clarified that his comment was in reference to the flow of payments between Allvest and Delta Junction with respect to the construction operation of the facility. REPRESENTATIVE JAMES said that she also understood if the scenario she described was not the case, then Delta Junction would not be needed and the state could enter into a contract and take over the reuse of the facility. Is that correct? MR. LORENSEN agreed that was probably correct. Number 1772 REPRESENTATIVE GREEN inquired as to what would happen to the permission saying that the conditions on the sole source bidding had been satisfied, if this legislation passed and action was brought forth. Would that be placed in jeopardy? MR. LORENSEN said that he believed that whether that exemption is valid and permissible would be what the litigation would be about. If the court were to throw it out, the entire arrangement would probably be thrown out. REPRESENTATIVE GREEN posed the scenario in which this legislation passed this legislative session and work began on the facility and there was litigation. If things were built before litigation, who would be responsible for that amount of work? MR. LORENSEN declined to venture a guess. The further this progresses the more difficult it becomes to unravel. He indicated it would be a legal question as to whether it would be a substantial justification for changing the rules about procurement. REPRESENTATIVE ROKEBERG asked Mr. Lorensen whether the substantive due process issue was connected to the single subject rule. MR. LORENSEN said that he did not mean to connect the two. However, in a particular situation there may be a connection. Mr. Lorensen clarified that the connection is whether the legislation is rationally related to the purpose for which the legislature passed the legislation. In this situation, he would argue that there is no connection between this provision and the underlying requirement to do procurement consistent with the procurement code. REPRESENTATIVE KERTTULA asked whether Mr. Lorensen believed that the previous legislation, HB 53, would supply the necessary justification to overcome the reason for special legislation in this case. MR. LORENSEN stated that it would have to be part of the analysis to review the purpose of the initial legislation because Section 7 proposes to amend the original legislation. Therefore, there would need to be a connection between the initial purposes of the legislation and the amendment. Mr. Lorensen reiterated that it is not clear to him that connection exists. Number 1944 GARY DAMRON, Legislative Liaison, Public Safety Employees Association, testified via teleconference from Anchorage. He informed the committee that in 1994 and 1995, prisoners began to be transported to Florence, Arizona to a private facility operated by Corrections Corporation of America. Initially, there were 300 prisoners there. He indicated that he is one of the people responsible for transporting the prisoners. It costs approximately $5 million per year to transport those prisoners to Arizona. Currently, there are about 750 prisoners in the Florence, Arizona facility. The current out-of-state contractual obligation for that operation is almost $21 million by the House's proposed budget this year. He pointed out that would be a 400 percent increase while the population has only increased by 100 percent in Arizona. He noted that is based on a sole source contract. MR. DAMRON did not believe sole source contracting for any state service should occur unless there is a valid and justifiable reason. In the case of Delta Junction, there have been problems. Firstly, there were no other bidders allowed. Two bidders have come forward today that expressed interest in the project. Secondly, the sole source contract provides that there be no corruption. Mr. Damron believed that this process has been corrupt from start to finish. He noted that Allvest threatened a lawsuit against the City of Delta Junction which only has an annual budget of $180,000 while Allvest earns $13 million in its halfway house beds for Alaska. The city probably had a legitimate fear which probably added to the corruption of the process. Mr. Damron pointed out that this contract was entered into, in December 1997 with the Base Realignment and Closure Commission (BRAC), without any input at that time from the city council or public hearings. He believed that the contract was made before the first public hearing which further illustrates that there was not a proper forum. REPRESENTATIVE GREEN asked whether a contract entered into under duress would be legal. REPRESENTATIVE MURKOWSKI said that it is a defense. REPRESENTATIVE GREEN expressed concern that two avenues of potential grief have already been discussed. The bill could be determined to be mute and later the entire contract could be found to be illegal. REPRESENTATIVE CROFT commented that this situation is gray and seems to have elements of duress as well as elements of just settling a difference in opinion. REPRESENTATIVE ROKEBERG stated that it is quite common to settle disputes if there is a chance for economic loss or opportunity which is not illegal. Number 2210 DIANA KASSIE FRARRAR testified via teleconference from Delta Junction. She informed the committee that she has been an artist and resident of Delta Junction since 1955. She noted that her husband, Michael Frarrar, works at Fort Greely. She also noted that she has attended town meetings since the idea of private prisons was introduced. Ms. Frarrar said that, at the time, it was indicated that time was of the essence because there is a small window of opportunity. However, over a year and a half later the legislature still needs to be convinced that actions must be taken now or there is no deal. Ms. Frarrar informed the committee that as of today, the Army has not approved the reuse plan. If the City of Delta Junction and the state would put as much effort for a RFP as is being put forth to sole source this project, things would be ready if and when the Army approves the reuse plan. She noted that the original coalition recognized, by the BRAC Commission, as the local reuse authority was not an elected board and had no authority granted by anyone. The coalition was appointed by boards that existed in the area such as the Chamber of Commerce and the Farm Board. There were some members that were elected to their respective boards and then arbitrarily appointed to serve on the coalition. She discussed the problems with such a coalition. Ms. Frarrar said that the current city council, with the settlement with Allvest, has vastly improved the position of the City of Delta Junction if it has to have a prison. With regard to duress, she believed it played a part. The words lawsuit and litigation have been thrown out by Allvest from the beginning. In conclusion, Ms. Frarrar did not believe that this legislation served the purposes of Alaskans, and therefore it should not be considered. The committee took an at-ease from 3:34 p.m. to 4:20 p.m. LAMAR COTTEN, Deputy Commissioner, Department of Community and Regional Affair (DCRA), came before the committee to testify. He stated that DCRA has been working with Delta Junction since the 1995 announcement that the base would be closed in March of 2001. As of last year with the passage of HB 53, the community has primarily reviewed the option of a prison. The state's role has primarily been to help the community work through the BRAC laws, Department of Conservation issues, et cetera. TAPE 99-51, SIDE B Number 0001 MR. COTTEN continued. With that in mind, the administration [Administration] does not object to the efforts by the legislature to amend HB 53 with Section 7 of SB 141. This remains an issue that the commissioner of the Department of Corrections may choose to proceed with. He thinks if the commissioner does choose to proceed and if the bill passes, the stage is again set for the state to negotiate a contract and to enter in an intergovernmental agreement. He believed the state would still have a lot of work in front of it and a lot of decisions to make before anything was officially signed. He noted that Marjorie Vandor, Assistant Attorney General, Governmental Affairs Section, Civil Division, Department of Law, is available to answer any legal questions. REPRESENTATIVE JAMES asked with whom the Department of Corrections would be entering into a contract. MR. COTTEN responded that the department would be entering into a contract with the City of Delta Junction. Number 0067 REPRESENTATIVE JAMES further asked whether the City of Delta Junction needed an arrangement with somebody first in order to enter into a contract. MR. COTTEN replied that was the intent of HB 53. REPRESENTATIVE JAMES understood then that the city would have to find someone and then [the city] would enter into a contract with the state. MARJORIE VANDOR, Assistant Attorney General, Governmental Affairs Section, Civil Division, Department of Law, explained that, under HB 53, with the city owning the facility it would be presumed that [the city] would have to build the facility ahead of time. The operations were made an issue, separately, in the bill last year. REPRESENTATIVE MURKOWSKI referred to the Delta Junction Ordinance which mentions the requests of the Department of Law for some guidance on this sole source. The ordinance says that the State of Alaska, she assumed that reference was to the Department of Law, on two occasions has declined to specifically address the issue of a sole source contract. She read Section 9.3 of the ordinance as follows: Both the attorney general and Legislative Affairs Agency have been asked to address the ambiguities regarding sole source. The attorney general and his opinion dated February 18, 1999 declined to elaborate on whether HB 53 required the city to follow competitive RFP process. ... The [Legislative] Council opined in February 25, 1999, that a sole source determination meeting the requirements of the state procurement code and regulations might be permissible under HB 53. REPRESENTATIVE MURKOWSKI noted that she has asked whether there have been any opinions from the Department of Law other than the opinion that was provided to Representative Rokeberg because she has not seen any. She asked whether those opinions have been provided, with regards to sole source, and are those opinions available. MS. VANDOR replied that the one opinion that is referenced was written by the Attorney General himself. She did not recall any request to do a written opinion on any particular sole source contract. As stated earlier, when this sole source was entered into the Attorney General had stated on the record through Mr. Cotten that he had concerns with it. However, there is no formal written opinion on it at this time. REPRESENTATIVE MURKOWSKI understood then that there is apparently an opinion dated February 18, 1999, which declined to discuss the sole source issue as well as a second opinion dated February 25, 1999, saying sole source contracts might be permissible. Therefore, Representative Murkowski assumed that there are at least two opinions. MS. VANDOR assumed that one opinion must be from the Legislative Affairs Agency, which she is not aware of. The other opinion is a response from the Attorney General dated February 18, 1999, but she did not have a copy with her. She believed there is a separate issue related to the sole source contract. REPRESENTATIVE MURKOWSKI requested a copy of that opinion. She expressed concern and asked, "Why are we not seeing the written opinion?" REPRESENTATIVE GREEN asked if Ms. Vandor was saying that she recalled that the Attorney General had questions with this. MS. VANDOR clarified that the Attorney General had stated on the record that he had concerns with this particular sole source contract that was entered into at the end of March. She reiterated that there is no formal written opinion regarding that. Number 0270 REPRESENTATIVE GREEN pointed out that the committee had heard from [Ms. Bannister] who originally had some concern, but after reading another outside opinion felt that maybe it was okay. He asked what happens if the bill passes as it is and later it is discovered that there is a problem with what was done. MS. VANDOR responded that she thinks it is two different things. She believed Ms. Bannister was speaking to whether this amendment to the bill would be in violation of the single subject rule and various other bill rules in the constitution. She pointed out that Section 7 is amending HB 53 explicitly. In the Department of Law's opinion, HB 53, even if it were considered to be special and local legislation, would be deemed to be proper use of that under the constitution. She said this is through the test that a general law would not be applicable. She said: With that particular bill, on the sections that enacted the Fort Greely parts - Fort Greely and its closure is unique to that area .... There was much legislative discussion and debate on that as to the goals that were intended by allowing a prison to be built there, allowing the Department of Corrections to enter into an agreement to have a private prison there and to do it on a government-to-government basis with the city itself. So, there's an awful lot of back-up there that's very unique .... We think even if HB 53 were challenged as being an improper, special, or local legislation, it is just the type that is considered to be when a general law is not applicable. And, of course, as Mr. Lorensen said, and I think every attorney will, only the court can rule whether a general law would have been proper there. No one else can do that. But there is the test set out, and that's the reasonable basis test. The goal and the reasons and the whole due process, equal protection which we think was met with [HB] 53. MS. VANDOR believed the issue is whether or not the analysis has to be gone through again with Section 7 in order to make it specifically fit into that category of not being special legislation, when really a bill is being amended that is believed to satisfy the criteria. REPRESENTATIVE GREEN recalled that Ms. Vandor said that intent would be a big issue in trying to determine either what was meant or what finally happened. He asked whether Ms. Vandor felt that this [SB 141] would meet the intent of the Administration. MS. VANDOR stated that a better question would be whether it [SB 141] meets the intent of the legislature. In other words, does SB 141 adhere to what the legislature meant in passing HB 53 and what the legislature meant by the procurement procedures to be followed. She said this is clarifying, in our [the department's] opinion, that the process used that has been set out in Section 7 satisfies what was meant by "similar procedures" for the operating contract in HB 53. She believed it relates to that. Ms. Vandor believed part of the problem to be whether the legislature is properly interpreting what was intended by the legislature. She indicated that the bill before the committee would let the department know if the legislature feels the process used by the city to enter into this contract satisfies what is similar and intended. REPRESENTATIVE GREEN expressed concern with the press release from last year, although he realized the issue to be a legal issue now. With regard to Ms. Vandor's comments that intent is a large part of this issue, Representative Green read the following quote from the Governor: Another cornerstone to this undertaking is that a competitive bid process be used to select the operator facility and that there be a level playing field between the competitors for the contract. REPRESENTATIVE GREEN specified that the aforementioned quote was referring to this legislation, HB 53, of just a year ago. He was concerned that somehow an abrupt turn has been taken. He clarified that he was inquiring as to whether the Administration and, perhaps, the Department of Law now have the same concern since he understood Ms. Vandor to be asking the legislature what it really meant. Representative Green said, "I think we [the legislature] meant, at the time, what the governor thought we meant." Number 0511 MS. VANDOR offered to check with the Administration on that. REPRESENTATIVE GREEN commented that the committee is having a hard time getting a legal opinion which has led to reviewing the intent. Therefore, he was trying to offer that as part of the intent. REPRESENTATIVE KERTTULA stated that although it wasn't part of the original legislation, if it's now necessary to amend it that would seem to speak to the intent. She asked Ms. Vandor whether there has been any background research into the legislative intent. MS. VANDOR informed the committee that she has reviewed it. However, she couldn't really say that [the intent] was always drawn from comments by legislators versus comments by people that were testifying. She seemed to recall that "similar procedures," as to whether it had to be substantially similar or merely similar, was something that was amended several times as the bill progressed. She noted that it was definitely toned down with the final version. Number 0580 REPRESENTATIVE KERTTULA asked Ms. Vandor whether she recalled any mention of a sole source contract possibly being allowed. MS. VANDOR replied yes. She pointed out, as she had during hearings on HB 53, that the concept of a competitive process is utilized first when referring to procedures under the state procurement code. She stated, "It doesn't mean that you may not end up at sole source, but there are procedures to get there." REPRESENTATIVE ROKEBERG asked whether the issue in SB 141 is should the legislature amend HB 53 to allow a sole source contract, in these peculiar circumstances, in order to qualify for the BRAC reuse plan and meet the intent and purpose of the legislature. He recalled that language in HB 53 specifically prohibited sole source contracting. The purpose and intent of HB 53 was to provide for the private facility in Delta Junction. Therefore, the decision now is whether to amend it in order to allow for sole source contracting under the circumstances. Is that the correct issue? MS. VANDOR answered that she is not prepared to say that's the issue as the Department of Law sees it. From the department's view, the department's legal concern would rest with whether or not this bill clears up the ambiguity of what was intended by "similar procedures" in the original bill. She said it is ambiguous when terms like "similar process to the state procurement code," which does allow for a sole source at a certain stage, are utilized. Ms. Vandor said, "This, we believe, is allowing for an ordinance on a design-build contract passed when ... an entity, a city, is operating a facility extraterritorially .... That that will satisfy the requirements and the process intended in [HB] 53." She didn't think she could speak to more than that, from a legal standpoint. Number 0747 REPRESENTATIVE ROKEBERG asked Mr. Vandor why Section 7 was needed; is it to clear up the ambiguity? MS. VANDOR stated that was her understanding. REPRESENTATIVE JAMES recalled that when HB 53 was passed last year, the issue of how the contracting would be done was not dealt with. House Bill 53 simply said that a process similar to the procedures established in AS 36.30 should be used. She pointed out that the procedures established in AS 36.30 do allow for a single source contract in some instances. Representative James said that it seems that Delta Junction, in its process and time restraints, could have concluded by reading AS 36.30 that a sole source contract is acceptable. Therefore, she identified the question as whether in the circumstances that Delta Junction faced, it was acceptable to do a sole source contract. She said, "The attorney advice that I've heard, not directly to me, but that 'Yes' we believe it fits that." She informed everyone that she interpreted Section 7 to merely say that the choice of a sole source contract is acceptable. Or is other language necessary? She understood that the language was suggested by the Department of Law in order to make it perfectly clear, with regards to the intent of HB 53. REPRESENTATIVE JAMES referred to Chapter 15, SLA 1998 which reads as follows: The commissioner of Corrections shall require in the agreement with the City of Delta Junction, that the City of Delta Junction procure the private third-party operator through a process similar to the procedures established in AS 36.30 (state procurement code). REPRESENTATIVE JAMES asked whether Ms. Vandor agrees that language allows a sole source contract in certain circumstances. MS. VANDOR replied yes. REPRESENTATIVE JAMES said her question was whether or not Section 7 was being inserted in order to make it perfectly clear that this does allow it. Number 0937 MS. VANDOR stated that, all the other issues aside, it is the position of the Department of Law that this would clear up that ambiguity. REPRESENTATIVE KERTTULA asked: if the procurement code was being met as it is, would an entity have to verify or at least ask that a company could not meet a deadline before it was determined that there was such a delay that other companies would have to go to sole source contract. MS. VANDOR stated that it is the standard procurement procedure to rule out that there are others that could provide the service or product. REPRESENTATIVE GREEN referred to a letter from Margaret Pugh, Commissioner, Department of Corrections, to the Senate Finance Standing Committee. In the letter, Ms. Pugh stated that she assumed the legislature shared her opinion that the operation of the prison would be put out to a fair competitive bid. In a letter to the House Rules Standing Committee, Ms. Pugh stated that the committee substitute does allow for a competitive bid process for which she was pleased because following the competitive process is good government. Representative Green surmised from Commissioner Pugh's statements and the Governor's statements, he quoted earlier, that they were thinking all along that this was going to be a competitive bid process, not a sole source. Number 1046 MS. VANDOR said she believed that is truly what they testified to at the time. REPRESENTATIVE GREEN asked Ms. Vandor whether the Commissioner and the Governor have changed their minds since then. MS. VANDOR replied, she did not know. MR. COTTEN commented that the picture that Brian Rogers, David Rogers, and Jim DeWitt have painted is the basis for the legislature to not object to what the amendment could do. This is a picture of complexity, deadlines and uncertainty which is in the context of a small community. Furthermore, the indication is that this may be the only opportunity for this community to have an economic base. Mr. Cotten said, "It seems to me what they're arguing is that it had gone through a very detailed analysis, a very open process to try to figure out what they can do to survive as a community and nothing has come up except a prison." Moreover, the deadlines and the other issues facing the community seem to have left the community in its current position. REPRESENTATIVE CROFT asked Ms. Vandor what the cite is for the regulations that provide this exception, the defining regulations under AS 36.30. MS. VANDOR replied that it should be "2AA C12" up near the three hundreds. She indicated that she would need to check to be sure. REPRESENTATIVE CROFT said that is good enough. Number 1163 REPRESENTATIVE MURKOWSKI said she is hung up on the time line. She referred to testimony from Mr. McCotter in Utah who said that up until just a few weeks ago there was the assumption that there was still going to be an RFP on this. Furthermore, Representative Green's comments regarding the legislative intent also seem to point to an assumption that there was going to be a competitive bid. She was concerned that, perhaps, the assumption of a competitive bid was followed until so much time had elapsed that there was a realization that the city had to go sole source. Representative Murkowski wondered whether that could have happened. Number 1222 MR. COTTEN said he was not sure he could characterize it that way. He believed the community honestly tried to walk through a very complicated process. He didn't believe that anyone was intentionally trying to delay the process. He pointed out that, as an issue, the community of Delta Junction has never dealt with anything this complex. Furthermore, what has been dumped in front of the city, BRAC law, is something that is very convoluted; in his mind, BRAC law still has not proven to be successful anywhere. Mr. Cotten said he is personally sympathetic to the city's situation, and therefore he gives the city a lot of credit for having the patience to try to put up with both the process and the people. REPRESENTATIVE GREEN asked, "If this amendment hadn't been added, where would we be?" MS. VANDOR reiterated that the opinion of the Attorney General is not completed. She believed if it was found that this sole source agreement was in violation of the process set out in HB 53, there were other avenues that could have been taken. One avenue could have been to take a step back and do some sort of solicitation to see what was out there through another public hearing process, or to completely start over and issue the RFP. She indicated that there is almost always a means to fix a procurement by starting over, if it was determined that the sole source entered into was found to be not properly done under HB 53. Number 1368 REPRESENTATIVE GREEN noted that the committee has heard testimony regarding concerns which surround a time certain in 2001 that you have to start backing up from, as far as this transition. He pointed out that one of the major issues is the construction of the pit. He asked if it is possible to get the RFPs out so that the contract can continue with whoever is digging the pit. Therefore, time wouldn't be lost. He asked if allowing things to proceed concurrently would create more problems legally. MS. VANDOR stated that she could not speak for the city attorney regarding the city's options under that circumstance. However, there is always an emergency procurement, which has similar standards to sole source with the health safety and welfare aspect thrown in, when something becomes a true emergency. She mentioned that she has seen procurement cases which have been pieced-meal out. In other words, something is continued while an agreement regarding the amount of the contract or whether it will continue will be decided later in order to remedy an earlier wrong. REPRESENTATIVE JAMES expressed appreciation for Mr. Cotten's explanation of the dilemma of small communities. She said, "And they're out there making these kind of agreements, and having these obligations of things to do, being threatened to being sued, of which they have no money to even represent that." She asked whether that is an important part of the city's frustration in trying to get this thing going. MR. COTTEN guessed that could play into it. He commented that as a small community with a limited tax base, he was sure the community probably always has its eye on its pocketbook. Number 1564 MS. VANDOR pointed out that because this is a BRAC closure, there will be certain types of contracts and willing contractors who are going to just want to do a certain part of the contract and not be guaranteed of getting the whole contract. She felt that access to the fort is probably a very important criteria for a contractor to get. REPRESENTATIVE KERTTULA inquired as to the current status of the agreement with the military. MR. COTTEN said that he believed the military's intent is to decrease the staff to a skeleton force of around 55 of both military and civilian personnel in March of 2001. He mentioned his belief that part of the problem is that very few places have done a base closure; the rules and the dates have a habit of changing. Number 1694 DON McCLINTOCK, Attorney at Law, Ashburn and Mason, testified via teleconference from Anchorage. He informed the committee that he is testifying on behalf of Delta Corrections Group and Allvest, the contractors with the City of Delta Junction on this project. He noted that he had been asked to address some legal points raised on the actual drafting of Section 7 of SB 141. MR. McCLINTOCK referred to the issue of single subject legislation under Article II, Section 13, of the constitution. He said that the level of review for that is very deferential. He cited Suber v. Alaska State Bond Commission and indicated that for a court to step in and strike a bill for a violation of the single subject rule, there must be a substantial and plain violation; the test basically resolves doubts in favor of validity. The general test is that the bill need only embrace one general subject or idea that is connected or related in some sort of logical, "popular understanding" way. This bill, SB 141, deals with designing construction aspects as well as some procurement issues. He summarized by saying that he basically agrees with everything Assistant Attorney General Vandor said on the subject: one has to review HB 53 in order to understand Section 7. This is a unique project with multiple goals which are set forth in the statement of intent in HB 53. He pointed out that one of the goals is preserving the economic vitality of this region. There was also an intent to facilitate bringing prisoners back to Alaska and this was one vehicle that would accomplish both goals. Therefore, it [SB 141] does meet the requirement by the fact that it is a unique matter. He pointed to the Baxley case as an example in which the supreme court determined the amendments to four North Star leases to be unique and have a general impact on the state at large. MR. McCLINTOCK turned to the issue of substantive process. He said that doctrine is one that is not of much threat to legislation that has passed. The supreme court said that a substantive due process violation, if established, can only stand if these actions are so irrational or arbitrary or so lacking in fairness as to shock the universal sense of justice. Clearly, that does not apply here. He indicated the goal of Section 7 is to deal with the factual realities that this is one year after HB 53 was passed. He noted that it should be clear on the record, that the city started off very vigorously trying to pursue a competitive procurement. In bringing in the consultant, Richard Crane, the city arrived at the realization that it was out of time. The city realized that if it was going to meet the BRAC deadlines and get the project going, it had to proceed quickly, and it did. Those findings are set out, in detail, in the city's ordinance. REPRESENTATIVE CROFT asked whether Mr. McClintock drafted the settlement agreement between Allvest and the City of Delta Junction. MR. McCLINTOCK stated that he and Mr. DeWitt drafted it. REPRESENTATIVE CROFT also wondered whether they drafted the ordinance. MR. McCLINTOCK specified that was under the control of Mr. DeWitt and the city council. Number 2078 REPRESENTATIVE CROFT noted that the ordinance discusses a number of reasons for needing to go to sole source. One reason was timing and the other was the threat of the lawsuit from Allvest. He wondered whether there was a complaint drafted, but not filed. MR. McCLINTOCK clarified that there was not a complaint filed against the City of Delta Junction nor had there been a demand letter delivered to Delta Junction. He stated: Mr. DeWitt and the City of Delta Junction were quite aware that Allvest, because it had earlier reached a contract with the ... Delta-Greely Community Coalition for the development of the prison, maintained that it had certain contract rights that it wanted honored; but it had not reached that point. One of the things the city wanted to do, in proceeding with this, is to remove any of those claims, which is one of the things that they (indisc.) negotiate for. REPRESENTATIVE CROFT asked Mr. McClintock whether a complaint was drafted. MR. McCLINTOCK replied yes. He stated that it was never shown or shared with anyone other than his client. REPRESENTATIVE MURKOWSKI turned to the language of Section 7, she appreciated the direction that language attempts. She referred to Mr. McClintock's mention of still having to meet the five requirements of sole source. She expressed concern with the part of Section 7 that allows the municipality, if it adopts this ordinance, to proceed with the sole source route. She indicated the need to continue that statement by saying one can do that if it's warranted or justified under the procurement accord. As it is left now, it is wide open and allows a municipality to the adopt an ordinance for this. She asked if, regardless of any ordinance that a municipality is going to adopt, a municipality would still have to meet those five criteria for a sole source. MR. McCLINTOCK said: The (indisc.) of this drafting is whether you want to leave the timing and the future of the progress of this project in your hands and the hands of the legislature by giving your endorsement basically to what has happened. ... As opposed to putting in language that (indisc.) would put it back into the purview of the court and let the judge decide. And that is one of the practical impacts of this language, is that the decision as to whether the procurement process met the procurement code is ... a factual scrutiny. It's one that you would have to go in a court hearing, (indisc.) the process, try it in front of the judge and then the judge would apply the law to the facts and say, "Yes that process has (indisc.) met the code. Or it did not." ... If you add language like that to Section 7, you essentially have about that process to go again and I think one of the reasons for Section 7 is to say, you know, we reaffirm the original goal of the HB 53. We understand the problems that Delta Junction has entered into, as a second-class municipality, to take on a project that's basically unprecedented for it, and probably any other city of its size. We've looked at the ordinance they passed and ... heard the testimony of what they've gone through and we believe that that ordinance is sufficient to meet HB 53 as a means to bring this project on track. TAPE 99-52, SIDE A Number 0001 MR. McCLINTOCK added that it is his position and Delta Correctional Group's position that the ordinance that was passed did meet the requirements of the state procurement code and it was a (indisc.) process. He commented that this basically removes that question from further examination in order to allow an endorsement of this project proceeding, on track and on time. Number 0118 PATRICK SCHLICHTING testified via teleconference from Delta Junction. He indicated he would read from a letter he has provided and then would relate some experience he has with contracting. Mr. Schlichting expressed concern with the provisions in SB 141 which address sole source [contracts] and the retroactive aspect of it. If that remains, he wanted the committee to vote against these bills. He commented that the legislation appears to be on a fast track at the 11th hour of this session and represent, in part, the interests of one very specific interest group - the Delta Corrections Group. The beneficiary of the inserted language into SB 141 is Allvest. The inserted language would eliminate competition for the construction and operation of a privately operated prison at Fort Greely. Allvest threatened the Delta Junction City Council with a lawsuit if the council followed city and state procurement codes. The city, mandated by an advisory vote to pursue the construction and operation of a prison, was forced to accept the deal with Allvest or lose that opportunity. The Rise Alaska report referenced competitive bids as a requirement, while the consequence of the city's vote has yielded the opposite. MR. SCHLICHTING emphasized that the wisdom of "your predecessors" guaranteed "us" with statutes requiring open competitive bids in order that the best, fairest, and most economical deal could be reached. Mr. Schlichting said he thought that the dealings between the city and Allvest - also known as Delta Corrections Group - would be sorted out by the legislature or possibly the judiciary branch. Provisions in SB 141 are very alarming because it seems that the process can be manipulated. He requested this be corrected; level the playing field and allow for competitive bidding. This needs to be a requirement as stated in Alaska procurement code. Mr. Schlichting said that there is time for competitive bidding - the window of opportunity is wider than being portrayed by the backers of the clauses inserted into these bills. The United States Army is not leaving Fort Greely for two more years. He pointed out that Allvest, through its parent company, "St. Johns (ph) Investments," ranked number 7 (indisc. -- coughing) most money spent for lobbying the recent state legislature. Mr. Schlichting asked for a no vote on any bill that needs special consideration to work around existing statute. He stated, "Dispel my suspicions that the legislative process works best for those with money ...." Furthermore, it seems wrong to use the the legislature, with the retroactive provision of SB 141, to solve a legal matter. There needs to be a separation of powers as provided in the state constitution. In conclusion, Mr. Schlichting urged the committee to oppose SB 141 if this language remains. MR. SCHLICHTING informed the committee that he has worked as an area engineer and delivery order manager for Brother Route (ph) Service Corporation owned by Halliburton (ph) Company. The [Brother Route (ph) Service Corporation] has contracted with the Army. He explained that only in instances of change orders, such as for additional quantities, was the company allowed to use a sole source [provider]. In his opinion, Delta Junction's process with sole sourcing is not similar to that seen with other companies. Further, he indicated that Delta Junction's process is an abuse of sole source. Number 0452 WAYNE CARPENTER, a general contractor and 25-year resident of Delta Junction, testified via teleconference from Delta Junction. Mr. Carpenter said he wanted to address the time line and his belief that through this entire process there was never an intent - on the part of Allvest, a few people in Delta Junction, and in the legislature - to ever let this become a fair and competitive proposal process. Beginning back in November of 1997, members of "our" coalition [Delta-Greely Community Coalition] signed an agreement with Allvest to deal exclusively with Allvest for a prison at Fort Greely. In December of 1997, it was announced to the community that there was a company which wanted a proposal to the table and a prison to Delta Junction. Mr. Carpenter commented, "They neglected to tell us about the fact that they'd already signed an exclusive agreement to deal exclusively with Allvest." In January, there was a vote. He noted that much discussion centered around what the vote should be about. He said, "They told us ... it would be for informational purposes only; that anything that we did at that vote wouldn't really affect us going ahead and looking at the possibilities of using Greely as a prison site, and other types of proposals that might hit the table also." MR. CARPENTER said, at that time, he felt that it was imperative for the city to look around and see if there were other companies that would come to the table. He informed the committee that the two companies mentioned at this hearing were discussed over and over at various meetings. In addition, Mr. Carpenter said he was in touch with "Seva Jennings (ph)" from the East Coast, a $40 million per year prison company which has 12 or 14 correctional facilities in the East. Mr. Carpenter said he would fax this company's letters of intent to participate in this process which where "literally rejected." He noted there are a great deal of people in this room [Delta Junction Legislative Information Office] who saw copies of those letters which he attempted to present to the coalition in January and February of 1998. The present coalition members did not want to see the letters nor did they want to discuss any of the information Mr. Carpenter had gathered about Mr. Weimer's (ph) company and past dealings in the Anchorage area. Therefore, Mr. Carpenter believed that there was never any intent on the part of certain coalition members, certain legislators, and Allvest to have an RFP process. He informed the committee, "But luckily, between April of '98 and October of '98, people were so put off by the process that when election time came, the pro-prison council was 'dumped out on their ears.' And I mean, literally, 60/40 [vote] they were put out of office." That election resulted in the election of some new city council members who wanted to take a careful look at this. Mr. Carpenter related that they [the new city council members] said that the process will not move forward unless it's a fair and competitive RFP. MR. CARPENTER continued saying: That brings us to February of this year when certain members that have testified down there today are telling us that the city was unprepared to deal with this, ... they had to do something. The truth is the city was -- there was so much pressure put on the city council to deal with Allvest and Allvest only. You've heard about the lawsuit, you've heard about the landfill having to be built this summer and there's a lot of misinformation out there. And I just want to say that we feel that the city has been shoved around, people in this community have been shoved around, and we need a fair proposal process. Number 0810 CHAIRMAN KOTT announced the committee would next hear from Commissioner Pugh of the Department of Corrections. He pointed out that Representative Green had brought forward some issues suggesting that, during the debate on this particular issue dealing with the prison in Delta-Greely, the Administration or perhaps the department was under the assumption that the bid would go out competitively. REPRESENTATIVE GREEN provided some background to Commissioner Pugh. They have requested legal opinions as to whether or not "we're getting ourselves sideways with this amendment" which has been made to SB 141. He indicated the amendment made in the House Labor and Commerce Standing Committee would retroactively allow the requirements of the procurement code for this particular issue to have been satisfied. Representative Green indicated the attorney opinions were divided. Then there was discussion regarding the intent meant when HB 53 was passed last session. Representative Green noted he had quoted Commissioner Pugh from some minutes from the Senate Finance Standing Committee and the House Rules Standing Committee. Referring to the Senate Finance minutes, Representative Green said, "'She (Commissioner Pugh) had said she assumed the legislature shared her opinion that the operation of the prison would be put out to a fair competitive bid.'" Referring to the House Rules minutes, Representative Green said, "'She (Commissioner Pugh) stated that the committee substitute does allow for a competitive bid process. She said she is pleased because following a competitive process is good government.'" He commented that such dialog indicates to him that both the Administration and the legislature were of the opinion, at least at that time, that they were speaking of a competitive bid rather than a sole source. However, now there is some thought that perhaps sole source would be understandable, as long as the competitive bid procurement record is followed. Representative Green stated, "And we're having some difficulty. How can it be procurement code guidelines saying you need to have competitive bid, and yet it's okay if you go sole source 'cause that's essentially the same thing, and it's kind of a mess." Number 0988 MARGARET PUGH, Commissioner, Department of Corrections, came before the committee to answer questions. She requested the additional presence of an assistant attorney general, with the committee's permission. Commissioner Pugh apologized for not attending the first portion of this hearing, noting she had been in another meeting, and had been called out of that meeting to join this hearing. REPRESENTATIVE GREEN summarized, "What do you consider was the intent when [HB] 53 was passed?" COMMISSIONER PUGH responded that her understanding corresponded to the quotes Representative Green had read. She said, "I assumed that, that my opinion of competitive bid was what everybody was agreeing upon; that that's what the amendment to the bill meant last year." Commissioner Pugh believed that over time, the opinion of the City of Delta Junction, with regard to how it would prefer to go about a procurement, has changed. Therefore, the city has brought this amendment before the legislature to make a decision regarding whether or not that would be the way to go. Number 1080 CHAIRMAN KOTT asked whether Commissioner Pugh could address the Administration's position, when HB 53 passed last year, with regard to this project going out for a competitive bid. COMMISSIONER PUGH indicated that Representative Green had, probably, fairly represented the Administration's position. She said that the Administration assumed that HB 53, with the "may" language meant [a competitive bid process]. REPRESENTATIVE JAMES noted that prior to the commissioner's arrival the committee had discussed the language in HB 53, relating, "'Procure the private third-party operator through a process similar to the procedures established in AS 36.30,' which does under certain circumstances allow sole source contract (indisc.--coughing) when the conditions suggest it." Representative James believed that at that time, at least the Administration had the position that there would be a competitive bid for this project. However, she did not know if there are any quotes from legislators expressing the same position as the Administration. She questioned whether it is possible that the circumstances facing the City of Delta Junction, changed the options such that the city was in a time crunch, and therefore decided that it should do a sole source. She noted that a sole source is available under AS 36.30, if the circumstances are correct. Representative James asked, "Couldn't it be assumed that the language that's in House Bill 53; that, given that opportunity to go sole source, ... they believed that they had the right to do that and their legal advice from their attorney?" Number 1203 COMMISSIONER PUGH deferred to the Department of Law. MS. VANDOR understood Representative James' question to be regarding whether it was reasonable for them [the city] to decide that sole source was one of the options under AS 36.30. She said that would be reasonable because that is part of the code. REPRESENTATIVE ROKEBERG asked for Commissioner Pugh's best estimate of the demand for bed space (indisc.) classified prisoners circa July 1, 2001. He explained, "That is to say, the need for the 800 beds contemplated by HB 53, and where we'd be regarding the Cleary [consent decree] caps and so forth, but for ... those 800 beds, and is there any alternative on the horizon?" COMMISSIONER PUGH explained that the Administration first put forth an expansion bill several years ago, before the Fort Greely prison became a possibility and then more of a reality, because of the growth in the prison population. Currently, Alaska has very nearly 800 prisoners in a private prison in Arizona. While the [prison population] growth has slowed, Commissioner Pugh noted that this is the first time in 10 years there has been slower growth. Therefore, she did not anticipate that to remain the case. Although she did not have projections for that time frame with her, she indicated that the prison population would have increased yet again by 2001. Number 1320 REPRESENTATIVE ROKEBERG asked Commissioner Pugh how the state is doing in terms of the Cleary caps; he understood it has inched up a little bit, although it is currently at a plateau. COMMISSIONER PUGH answered that today the state is at 97 percent system-wide and is only overcrowded at the Cook Inlet Pre-Trial Facility. She noted this is bearing in mind the 771 prisoners in Arizona. REPRESENTATIVE ROKEBERG questioned, "Is the Florence (ph), Arizona Correctional Corporation of America contract, a sole source contract? Or do you have the ability to expand and contract that on a per diem basis?" COMMISSIONER PUGH responded it is on per diem basis, but she did not know the circumstances of this most recent contract. REPRESENTATIVE ROKEBERG questioned whether it was [a competitive] bid or sole source. COMMISSIONER PUGH answered that [the state] put out bids. She believed that only one bid was received. However, she said she would have to check on those circumstances and could provide that information. REPRESENTATIVE ROKEBERG mentioned earlier testimony, "that there was like a 400 percent budget increase for out-of-state contracts ..." which he did not believe to be accurate. CHAIRMAN KOTT confirmed there were no additional questions for Commissioner Pugh and the committee would return to teleconference testimony. Number 1446 RUSSELL BOWDRE testified via teleconference from Delta Junction. He commented that if this is special interest legislation, there should be a decision as to whether it is good for Delta Junction. He contended that this legislation [SB 141] is not good for Delta Junction because it intends to validate an illegal and very bad contract his city was coerced into signing with Allvest. "The contract is contested on legal points and should be decided in court, not fixed by special interest legislation." Mr. Bowdre asked, "Do we all have the privilege of changing the law after purposely and knowingly violating it?" He pointed out that Allvest lobbied for HB 53 last year and never contested the competitive bid section of it. He noted that he had been present at many of the hearings. Mr. Bowdre asked whether the legislature is prepared to waste the state's money in a battle to the supreme court for this issue and this corporation. Many have joined together in the suit to void this contract because it is a very bad business deal for the city and community. Obviously, the lawsuit is legitimate or this legislation, with its retroactive clause, would not be before the committee. "This is a gross misuse of our legislature by special interests." MR. BOWDRE turned to the loss of jobs in the [Delta-Greely] community. For those who wish to remain in the area, there will be business and support to the industries built around Pogo [mine]. Furthermore, there is a very strong possibility of a refinery being built in the Delta area which will provide good jobs that pay very well. Mr. Bowdre said, "I encourage you to please scrutinize your bills and ... pass good bills, but ... please do not be made perpetrator, judge, jury and executioner for special interests." In conclusion, Mr. Bowdre expressed the need to return to the business of legislating good laws that represent the people of the state; forget about these special interests altogether. Number 1595 REPRESENTATIVE GREEN referred to the Pogo mine project and asked whether Mr. Bowdre had any idea when those jobs would become available to the Delta Junction area. MR. BOWDRE responded that those jobs are slowly becoming available now. He estimated that there are approximately 60 people currently working at the Pogo mine and 20 more are being trained. Mr. Bowdre commented that it is a slow positive build-up. He added, "There are opportunities -- like at Fort Greely whether you were told there were gonna be 55 jobs left up there. Well, in a sense that's true - there's gonna be 55 jobs in public works labor, but there's gonna be 31 more in CRTC (Cold Regions Test Center) plus subcontractors and test people coming in. That was a very misleading answer that you got on that question." Number 1655 CARMEN CARPENTER testified via teleconference from Delta Junction. She believed that the advisory polls that took place in Delta over the last two years were flawed. She understood that the first advisory vote was taken after the commitment to Allvest was made. After that, the propaganda started circulating. The second vote was very slanted to the prison in that people were told that voting for the prison would be a vote for reuse, while voting against the prison would likely result in no reuse. Furthermore, the vote was flawed because it didn't take into consideration a very large and growing part of Delta's population. Ms. Carpenter indicated the need to accommodate newcomers to Delta who are awaiting citizenship status and who obviously could not vote. She understood that the newcomers are, for the most part, against the prison coming to town. Even with the aforementioned flaws, the yes vote did not obtain the large majority of which they speak. She informed the committee, "With 1,080 vote[s] counted, the yes voters won by 70 votes. So [with] an issue of such political consequences for possibly many years to come, there has to be an overwhelming majority, and this is a far cry from one, from that." Number 1789 MICHAEL KINGSTON testified via teleconference from Delta Junction. Mr. Kingston informed the committee that he works for the Cold Regions Test Center at Fort Greely. He further informed the committee that although, on paper, he is going to Fort Wainwright, he is actually staying in Delta and working at Bolio Lake. With regard to Section 7 of SB 141, Section 7 seems to favor one group and one company only. This type of legislation can, and I feel will, lead to more corruption by big business. He implored the committee to stop Section 7 of this bill. He indicated that this prison will greatly hurt Delta. Number 1850 MARY ELLEN LUCAS testified via teleconference from Delta Junction. Ms. Lucas informed the committee that she too works for the Cold Regions Test Center. She said that there are more than 55 jobs remaining at Fort Greely. She noted, "Our own station in itself will have over 30 personnel remaining and working on Fort Greely. We'll be occupying different buildings, some down at the Bolio Lake facility, which is 10 miles away." She expressed concern with retroactive laws. "You can't allow people to break the law and not be accountable for their actions." With regard to the issue of time lines, when the coalition signed the agreement there were two years. Furthermore, the coalition knew that it was breaking the sole source laws. Ms. Lucas believed it to be morally reprehensible to pass a law in order to make an exception to a law after the original law was broken. She indicated that this could set a very dangerous precedent. Number 1938 SAM DIGHTON testified via teleconference from Delta Junction. Mr. Dighton said that he has been disappointed from the very beginning. However, if there has to be a prison, it should be by the competitive bid process. He informed the committee that from the testimony on HB 53, to which he listened, it was clear that the competitive bid was to be taken into account. Mr. Dighton commented, "This whole thing's been about Allvest from the very beginning. The coalition showed it's a lobby from them from the very beginning. To me it's very suspicious, Representative [Mulder] has been a spearhead on this thing all through last year, with his wife being a paid lobbyist for Allvest. Something doesn't seem right there to me." He believed that there could be no better example for the need for a competitive process than to look at Allvest and the way they've handled this. Mr. Dighton believed this [the prison] will hurt the spirit of Delta which doesn't need it [the prison] because the mine and other things will offset [the jobs lost through the realignment of Fort Greely]. Number 2018 DEAN WILLIAM CUMMINGS, a lifelong and second-generation Alaskan, testified via teleconference from Delta Junction. He urged the committee to strike the clauses in SB 141 that allow the city and private prison to enter into a sole source contract. He agreed with Ms. Lucas that passing a law in order to legalize a broken law sets a very bad precedent. Furthermore, the notion that the [Delta-Greely] community will cease to exist without this prison is extremely false. He informed the committee that the majority of the private prison jobs will have a projected pay rate of $11 per hour with some of the service jobs paying even less. One cannot raise a family in this community on such a salary without some sort of government assistance which doesn't benefit the [Delta-Greely] community or the state. He predicted that the millions of dollars made on the prison will go to the owners and even out of this state. MR. CUMMINGS informed the committee that there are several other solid opportunities to enhance the local economy. First, there is a gold mine just north of town. The Pogo company has already started development and, this month, will be begin a mile-long tunnel underground to one of the richest veins of gold ever discovered. Currently, the Pogo company employs at least 84 people and also boosts several local businesses with associated revenue. "This is just the tip of this project." Furthermore, there are 22 other major mining companies with claims in the immediate area. He identified the second opportunity as the ballistic missile defense system. He informed the committee that recent developments indicate that Fort Greely is a solid contender as a site for this ballistic missile defense system. This ballistic missile defense system will bring 280 high tech jobs with salaries ranging from $50,000 to $130,000 yearly. There will also be National Guard and Military Police stationed in the area. He identified the third opportunity as a refinery, which is being developed by a local corporation to assist in the overload of North Slope 1. He said that the refinery will provide several jobs with oil and pipeline type salaries. He turned to the fourth opportunity; there are military indications that Fort Greely will be needed by the Army for further Arctic testing due to recent threats against world peace. In conclusion, Mr. Cummings stressed that unethical means are not necessary to maintain a viable economy in Delta Junction. Number 2160 SHELLIE MATHEWS, Member, Citizens for Positive Reuse, testified via teleconference from Delta Junction. She informed the committee that she is a business owner in Delta Junction. She echoed prior comments regarding the time constraints on this matter. She pointed out that the legislature was not bullied into making a decision on subsistence. On that matter, the legislature received for an extension. Ms. Mathews indicated that the time frame on the prison is not that critical and with a viable plan in process in the year 2001, an extension could be obtained. MS. MATHEWS informed the committee that the Citizens for Positive Reuse is the group that initiated the lawsuit regarding the illegal sole source agreement between Allvest and the City of Delta Junction. She noted that the Citizens for Positive Reuse are being referred to as a minority living out on the fringe as well as dissidents, however that is hardly the case. She explained that while only seven people are listed as plaintiffs in the lawsuit, Citizens for Positive Reuse is supported by a large diverse population. In January, over 500 people voted in opposition to the prison which was a 12 percent increase over the first opinion poll. She emphasized, "Every time that we have a vote, what we vote on is not what we get. The more information that people get, the more they turn against this terrible project. Many more now oppose the proposed prison because of this sole source agreement forced on us by threats from Allvest-Cornell." MS. MATHEWS noted that about 80 percent of Delta Junction's population lives outside of the city limits. Therefore, most of the population does not have a vote or voice in city business. The lawsuit is the only avenue available for those outside the city limits. Ms. Mathews emphasized that Sections 7 and 8 were specifically written to silence citizens' voices and grant special favors to a specific company which seems to be a gross violation of the governmental system of checks and balances. She questioned the legality of such an act. Ms. Mathews urged the committee to remove Sections 7 and 8 from SB 141 and allow the citizens to have a voice. Ms. Mathews pointed out that there is a bigger question looming today and that is the process of the law. Number 2345 NANCI RUTHSCHILD-KENNEDY testified via teleconference from Delta Junction. She noted that she has faxed the committee letters which relate her opposition to the prison. She found Sections 7 and 8 offensive. Attempts to make a rule to change one that has already been violated is not an appropriate message to send about how government works. Ms. Ruthschild-Kennedy said that it was inconceivable to her that this legislation would even be considered for passage. As her letter states, the city didn't have a business plan and still doesn't have a business plan to determine if it would be economically feasible for the city to run such a project. She asked, "Why are we pushing laws when we don't even know we can do it?" MICHELLE TRAINOR testified via teleconference from Delta Junction. She requested that the committee not approve nor send SB 141 to the floor, particularly in its current form. Currently, there is a lawsuit in progress in Delta Junction. If a legal question exists, it should be allowed to move through the due process of the law. She stated, "Furthermore, if at the time of the signing of the contract in question, the group stated with full knowledge that they were indeed infringing on the law, the Alaskan legislature should allow this due process law to move forward unhindered." Ms. Trainor commented that tailoring a law to protect a private interest from a lawsuit sets a precedent and it will only be a matter of time before others request the same protection citing this legislation. TAPE 99-52, SIDE B MS. TRAINOR said that the current city council inherited this and intended to go to a competitive bid to ensure that Delta Junction and the vicinity received the best for the money. However, the city council was coerced by Allvest, with the threat of lawsuit, to go for a sole-bid. Therefore, the amended SB 141 merely appears to be another mandate to help protect the interests of Allvest. Number 0033 BILL JOHNSON, 47-year resident of Delta Junction, testified via teleconference from Delta Junction. He informed the committee that he works for the Division of Forestry and is an adjunct faculty member for the University of Alaska. Furthermore, Mr. Johnson noted that he is also one of the plaintiffs in the lawsuit against the City of Delta Junction, Cornell Correction, Incorporated, Allvest and Delta Corrections Group. He finds this blatant attempt to change the existing process of procurement under state law very offensive. The complaint asks that the best deal be arrived at for the citizens of Delta Junction and the state. He believed the best deal to follow the existing law. The Allvest people are not contesting the fact that the laws have been broken instead they are just going to change those laws. That's the ends justifying the means. MR. Bill JOHNSON mentioned that some members may have been told that the lawsuit or opposition will be eliminated if the bill is passed. However, that is not necessarily the case. He explained that the case involves five points and this addresses one of them. There may be a new claim that comes out of this dealing with the constitutional issues as Mr. Lorensen already discussed. In addition, a petition to overturn Ordinance 99-04 is circulating in Delta Junction. The petition needs 43 signatures and he did not doubt those signatures would be obtained. He noted that the petition has a 90-day time line, which means it will be submitted in mid-July. At which time, the city will have to vote on whether or not to overturn the ordinance, which can't happen before 45 days. Therefore, it will be before the middle of August before this petition process plays out. Again, the intent of SB 141 may not be effective as other things are going on. Number 0159 P.R. MILLER testified via teleconference from Delta Junction. He informed the committee that he was a member of the [Delta-Greely Community Coalition] coalition for a year. After he left the coalition, he discovered that BRAC had established that there would no longer be a coalition unless a major contractor came into the area by March 15, 1996. After sending out six letters to civilian prisons, two organizations came to look. One determined that it didn't have any business in the prison business in Alaska. The other came up with a proposal, which meant the coalition would exist for another two years. Then [INRC], a daughter of the coalition came in. MR. MILLER turned to contracts. He noted that he has done much work with contracts and the federal government. Although all contracts are open for bid, sometimes the contracts are only-source or sole source. The problem is once there is a request for proposal bid there are 90 days in which to solicit another bid before going to a single source. At that time a bid can either be accepted or rejected, or a proposal that both sides can live with can be developed. Mr. Miller pointed out that he is not one of the concerned citizens; he just wants to see something happen. Number 0354 MR. RICK JOHNSON came before the committee again to give closing comments. He reminded everyone that he was representing the Delta Junction City Council. There is no denying that a lot of people in the community are opposed to this piece of legislation and the idea of a prison. The legal issues are real and as a city council member he has been inundated with the complicated and convoluted legal issues. The city has racked up a tremendous bill for legal and consulting fees in an attempt to keep it understandable and workable. The city is at the end of a four-year process. In 1995, BRAC decided to close Fort Greely and the 250 civilian jobs and 400-500 military jobs began to leave. In two years that process will terminate. He explained that for two years after the announcement of the closure of Fort Greely, the community searched for an anchor-tenant - a tenant that the military said was necessary to make a reuse plan work. An anchor-tenant couldn't be found. MR. RICK JOHNSON stated, in reference to CCA, he was told that CCA only wanted to do a design-build construction. Mr. Rick Johnson was led to believe that CCA was not interested in a project. Furthermore, he, a very active person in city politics, had never heard of the other company mentioned. MR. RICK JOHNSON stated, in that four year period of time, there have been two votes. In both votes the majority of the community members said that they wanted a prison. He further mentioned that he was elected by over a 60 percent margin after sending a letter to his constituents stating that he supported the prison. An individual was also elected that is opposed to the prison as well. Three members, all business people, were elected. He suggested that the three members were elected to make decisions based on good judgement. Mr. Rick Johnson, as an elected representative, said his mandate is clear - the community wants a prison. After the first of the year, there was a vote on a city resolution to seek an RFP. A consultant, Mr. Crane, was hired to do the RFP, but the consultant said there was no time for an RFP. The consultant also identified the problems which would prohibit meeting the schedule. The city's consultants agreed with that. After serious and long deliberations/negotiations, the sole source contract was arrived at. The bottom line was, if the city went to the RFP process, there probably wouldn't be the option for a prison. MR. RICK JOHNSON addressed the legislation before the committee, which is seen by many as an opportunity to clarify the original intent of HB 53. But, in light of the lawsuit, there is a good chance that there won't be a prison anyway just because of the time frame and time in court. In two years there is a federal mandate for Fort Greely to be completely realigned. The numbers heard today indicate that there isn't a whole lot of solid information out there on what is or isn't going to happen, but he guaranteed the committee that come July of 2000 the post will have its lights turned out. He acknowledged that the lights might be turned on again, but nobody can say for sure. As an elected official, he has to deal with what is real. He reiterated that his mandate is clear - pursue the prison concept. Number 0649 REPRESENTATIVE GREEN asked Mr. Rick Johnson whether there is any possibility for the earthwork, which has to be done this summer, to be done at the same time the actual RFP is being processed. If that could be done, then the construction which needs to begin in 2000 could occur. Representative Green also asked whether anyone has talked with Senator Ted Stevens regarding the firmness of the closure date for the fort. MR. RICK JOHNSON first addressed the dump site. He explained that the dump site is very expensive and the city does not have the money to do it. He informed the committee that Allvest, as part of the negotiated agreement, is willing to fund the construction [of the dump site]. Therefore, he believed Representative Green's suggestion is worthy of consideration. MR. RICK JOHNSON turned to the question of how firm the closure date is. He noted that the city council was invited to a hearing with Senator Stevens and his staff. During that hearing, Senator Stevens stated emphatically that the deadline is firm. The city is already working on an extension beyond the BRAC deadline. He indicated that the fort was to have been realigned in 1997. During the aforementioned hearing, Senator Stevens expressed concern about where the money will come from to keep the post "warm" after 2001 when the city is to take over the fort. He reiterated that the city doesn't have the money to keep the fort "warm;" it will have to be put to work. Number 0812 REPRESENTATIVE JAMES commented that it's hard to find a community who wants a prison. As a state legislator, she is excited to find a community who has voted a couple of times and supports a prison. She asked Mr. Rick Johnson whether he received any legal advise that indicated a sole source contract, with the pending conditions, was allowed under HB 53. MR. RICK JOHNSON replied yes. The city's attorney believes that the city has the legal standing to do this. REPRESENTATIVE JAMES asked Mr. Rick Johnson whether it's true that the city's attorney believes that Section 7, although it offers clarity, isn't needed to protect the city. MR. RICK JOHNSON answered that although he hasn't spoken directly with the city's attorney, he knew that the city's attorney does support it [Section 7] as it clears up the ambiguity. There have been hours and hours of discussion on the meaning of "similar." Number 0938 MR. DAVID ROGERS specified that he's not authorized to speak for the city's attorney. However, he said that Mr. DeWitt believes that Section 7 is very defensible. REPRESENTATIVE JAMES stated she was led to believe that was the case as well. Therefore, Section 7 doesn't change the law, it only clarifies the law. REPRESENTATIVE MURKOWSKI said, regardless of what happens with Section 7, it sounds like there are other issues that directly affect the prison. She cited the petition mentioned earlier as an example. She asked Mr. Rick Johnson what is plan "B." MR. RICK JOHNSON replied when Allvest stepped forward and became the proposed anchor-tenant, the city was sealed into a process of legal challenges because there are people who do not want a prison in the community. Mr. Rick Johnson deferred to the attorney. Number 1086 REPRESENTATIVE MURKOWSKI asked Mr. Rick Johnson, as a city council member, if Section 7 falls through, what is the next step. MR. RICK JOHNSON stated that he cannot speak for the council on that because it has not discussed it. MR. DAVID ROGERS stated that plan "B" would be the next topic of discussion, when that day comes. REPRESENTATIVE MURKOWSKI said: "So, no contingency plan as yet." MR. RICK JOHNSON replied that would be correct. That doesn't leave the city without recourse, however. It's not for a lack of want or desire; the city council members are just very busy with meetings on BRAC and BRAC-related issues. With regards to the referendum, the city council is discussing whether there should be another vote. He is very confident that the city would support the deal with Allvest. Number 1207 MR. BRIAN ROGERS, in response to Representative Murkowski's question regarding a contingency plan, said he and the city attorney have reviewed the alternatives. He indicated agreement with Representative Murkowski that there are a number of places that the process could go off track and not meet the deadline. If it goes off track now, his advise to the city council would have to be it is not possible to meet a July 2001 deadline. Furthermore, there would be a period of economic disaster and the city should seek to amend SB 101 relating to disasters and the disaster relief fund. REPRESENTATIVE JAMES asked Mr. Rick Johnson whether those who filed the lawsuit live in the city. MR. RICK JOHNSON replied that after reviewing the list he found that one of the seven did live in the city. REPRESENTATIVE JAMES commented that it was very gracious to give a vote to the folks who weren't in the city when it was a city operation. One of the things citizens of Alaska must learn is that in order to have a voice, they must be a government. She pointed out that the Delta Junction area has resisted a borough organization for a number of years and they [Delta Junction] didn't want to become a government until there was an opportunity to make a decision as a government. Representative James stated: The question that you've asked each time, for a vote of the people, has been a little different wording - which that makes a lot of sense because you want to be sure that you're trying to get the point out there. If you were to put it out there to get three out of five, what other questions are you going to ask that's any different than what you've already asked. MR. RICK JOHNSON replied, speaking as a duly elected official, he would vote to put before the city voters the language that they [the city council] voted on themselves. CHAIRMAN KOTT recalled that Mr. Bill Johnson indicated there is a petition being circulated which would repeal the city ordinance. He asked Mr. Rick Johnson whether there is something to that process that might suggest looking toward a plan "B." Number 1407 MR. RICK JOHNSON responded yes. He explained that due to the time frame, the aforementioned referendum would supplement or supplant that question. "It would be the city ratifying exactly what they hoped to overturn." REPRESENTATIVE GREEN asked Mr. Rick Johnson whether another vote would be confined to the city, or would it be open to the area affected. MR. RICK JOHNSON replied that this particular vote, as a result of the legality of the question, would be in the city proper. The petition circulated addresses only the city because it is a legally recognized entity. Number 1480 MR. BILL JOHNSON noted that the vote was 397 to 397 outside the immediate city, within the city it was 118 to 188, which is 53 percent. People keeping saying that it was won by a large majority, which is not so. With regard to the notion of an "anchor tenant," there is no mention of such until December 1997, after Allvest and the coalition signed an exclusive agreement. He said the draft plan that was put forth by their [the coalition's] consultants listed three options: minimal reuse, moderate use and industrial reuse. Industrial reuse, even without the prison involved, was discussed as probably the worst of the three options. With regard to the vote of 53 percent that said yes, that was definitely a vote for an RFP process. MR. BILL JOHNSON turned to the issue of a contingency plan. He indicated that several people came up with plan "B." He emphasized there's mining in the area, the richest gold strike in the world. Furthermore, the area has ballistic missiles and the potential of Arctic testing and a refinery, and so on. He said he took offense with Mr. Roger's comment about disaster aid because the people don't believe they need it. Mr. Johnson referred to the building of a dump site. The dump site would require millions of dollars to handle lead and asbestos which DEC and EPA will have to approve. He informed the committee that the dump site could be constructed in two to three weeks and could even be done in the winter. He explained that one can build cells and add more cells along, and therefore that doesn't have to be started on immediately. Number 1741 REPRESENTATIVE CROFT said, "Essentially Councilmen Johnson is right, with 397 to 397 - that's a tie outside the city; 188 to 118 ... in a city vote that's 62 percent, when you combine it with the greater area, it gets this 53 [percent to] 47 [percent]." Therefore, Representative Croft didn't believe that anybody is lying; rather different numbers are being spotlighted. Representative Croft clarified that those numbers are from the second vote in breaking it out between the greater area and the city. He said he doesn't have the numbers on the first vote, however he heard it was approximately 63 percent. REPRESENTATIVE ROKEBERG asked what was the time frame on both those votes. REPRESENTATIVE CROFT responded October 1998 for the first vote, and January or February of 1999 on the second vote. REPRESENTATIVE ROKEBERG asked whether the votes were concurrent with the city council elections in October. UNIDENTIFIED SPEAKER replied no. REPRESENTATIVE ROKEBERG indicated that was a third election. UNIDENTIFIED SPEAKER replied yes it was. Number 1837 REPRESENTATIVE ROKEBERG said the legal opinion states that on the first issue regarding single subject, that's not a problem except the question portion of it is a problem. With regard to the legal opinion on the issue of special legislation, he said, "Leaning towards okay but without the entire factual situation, I cannot predict whether this part of the text would be met." Number 1911 REPRESENTATIVE GREEN asked Mr. Rick Johnson whether he is familiar with the Delta Junction-Fort Greely Prison Feasibility Workgroup. MR. RICK JOHNSON replied that he is. REPRESENTATIVE GREEN read [from the Delta Junction-Fort Greely Prison Feasibility Workgroup] the following, "recognition or legal requirements can be satisfied but the best correctional practices cannot be fully achieved at Fort Greely." MR. RICK JOHNSON informed the committee of his personal thoughts as follows: Is it perfect, no. Is it okay, yes and it can be. Even ... Rise Alaska, that put that together agree that it can be, but the IGA (intergovernmental agreement) will be the vehicle that's used to address those inadequacies and those inadequacies will be thoroughly reviewed - we want a safe prison. In fact I'll stand before this [House] Judiciary [Standing] Committee and say that I will do everything I can to stop this project if it is not going to be a safe one. But I throughly do believe that, in working with the state, I believe the state wants a safe prison - our community wants a safe prison. Allvest, I believe, wants a safe prison. We will maximize the reuse of Fort Greely to the best that we possibly can. Is it a new construction, no and I don't think the state wants to pay for that and I know we can't afford it. So what is the win-win here, I think we're getting real close to it to the best that we possibly can. The committee stood at-ease from 6:36 p.m. to 7:00 p.m. CHAIRMAN KOTT closed public testimony. Number 2168 REPRESENTATIVE MURKOWSKI said she would like to address a noncontroversial amendment which deletes Section 3. She then referred to two letters from the AGC, who had some concern with this language and the broad authority that is given to the commissioner in the design-build construction contract process. She mentioned that she spoke with the executive director of the AGC about his concerns. She also mentioned that the executive director of the AGC spoke with the sponsor about removing this section. Furthermore, she understood that the Design Council has no objection to deleting Section 3 from the bill. Representative Murkowski recalled that Dennis Poshard, DOT/PF, said this was not critical to the bill. Therefore, she didn't believe that they will have any objections to removing it. Representative Murkowski moved to adopt Amendment 1 which would delete Section 3. REPRESENTATIVE GREEN objected; he was not sure he understood Amendment 1. REPRESENTATIVE MURKOWSKI explained that if Section 3 was deleted, the language would revert back to the old language of AS 36.30.200 subsection (c), which is the intent of Amendment 1. Sec. 3. AS 36.30.200(c) is amended to read: (c) When the commissioner of transportation and public facilities determines that it is advantageous to the state, a procurement officer may issue a request for proposals requesting the submission of offers for a design-build construction contract [TO PROVIDE CONSTRUCTION IN ACCORDANCE WITH A DESIGN PROVIDED BY THE OFFEROR]. The request for proposals must [SHALL] require that each proposal submitted contain a single price for the entire design-build construction contract [THAT INCLUDES THE DESIGN/BUILD]. REPRESENTATIVE GREEN removed his objection. There being no further objection, Amendment 1 was adopted. Number 2390 REPRESENTATIVE ROKEBERG offered a conceptual Amendment 2 which deletes Section 8, the retroactivity clause. CHAIRMAN KOTT recognized that Representative Green objected. REPRESENTATIVE ROKEBERG noted that Section 8 was put in by the House Labor and Commerce Standing Committee after hearing testimony which was predominantly from the supporters of Section 7. TAPE 99-53, SIDE A Number 0001 REPRESENTATIVE ROKEBERG continued. He stated that after hearing the testimony today, from the folks of Delta Junction, he is concerned about what they perceive to be underhanded legislative action that does something that they may find unethical. It might be in the best interest of the committee, the legislature and everyone involved to remove that section, especially since there have been indications that section isn't necessary. He believed that there will be discussions regarding Section 7 and allowing the due process portions of the law to take their course; therefore, he feels Section 7 just clouds the issue if left in. Number 0128 REPRESENTATIVE CROFT indicated that they were objecting to it having a retroactive effect; therefore, it depends on what the effect is of the committee deleting the retroactive clause. If it still applies to the ordinance that was passed, effective March 30, then the committee is still having a retroactive effect and the complaints of the citizens of Delta Junction are still accurate. If it means that it does not apply retroactively and only applies prospectively, then it doesn't help the situation. At least with the retroactivity clause the committee was clear about what it is doing, which was going back and retroactively sanctioning something that had happened before. He indicated that some legal opinions have shown that without Section 8 it would still happen, because it is still retroactive; at least with it, it is clear. He stated that the committee should probably remove Sections 7 and 8. The committee needs to be very clear, because a court could very well understand removal of the retroactivity portion to mean that it was only meant to apply prospectively and had nothing to do with the ordinance that was passed. REPRESENTATIVE JAMES disagreed with Representative Croft's assessment of the issue. She believed that Section 7 doesn't do anything except clarify what they can already do; therefore, there is no need to say that it's retroactive to March 17th because the same authority is already in Section 4, Chapter 15 of SLA 1998. She agreed with the sponsor of the amendment, that Section 8 is distressing to the folks who think the committee is making some retroactive law. Therefore, Representative James supported the removal of Section 8. REPRESENTATIVE CROFT withdrew his objection. He specified his understanding that it does not apply to the March 30, 1999, contract, and only applies to things after the effective date, which would be immediately after it is passed. Number 0371 REPRESENTATIVE ROKEBERG stated that he appreciates the analysis of Representative James; it is right on point. He referred to the testimony of Mr. DeWitt who thought that if the city is required to undertake a readoption of another ordinance, it may delay their activities two to three weeks. He proposed that it would be the City of Delta Junction's decision. He pointed out that all the committee is doing with this legislation is facilitating the ability of Delta Junction to either construct a private prison or not. It is the city's decision. All this provision does, Sections 7 and 8, is allow the city to proceed. Therefore, he believed that removal of Section 8 would help the issue as opposed to harm it. CHAIRMAN KOTT stated that there being no further objection, conceptual Amendment 2 is adopted, and thus Section 8 is deleted. REPRESENTATIVE CROFT made a motion to adopt Amendment 3, which deletes Section 7. REPRESENTATIVE ROKEBERG objected to Amendment 3. REPRESENTATIVE ROKEBERG made a motion to adjourn. Upon discussion, he removed his motion to adjourn. REPRESENTATIVE JAMES objected to Amendment 3. REPRESENTATIVE ROKEBERG renewed his motion to adjourn. There being no objection, the motion to adjourn was carried.