CS FOR HOUSE BILL NO. 498(FIN) am "An Act expressing legislative intent regarding privately operated correctional facility space and services; relating to the development and financing of privately operated correctional facility space and services; authorizing the Department of Corrections to enter into an agreement for the confinement and care of prisoners in privately operated correctional facility space in the City of Whittier; giving notice of and approving the entry into and the issuance of certificates of participation for the upgrade, expansion, and replacement of a certain correctional facility in the City of Bethel; giving notice of and approving the entry into lease- financing agreements for that project; and providing for an effective date." This was the first hearing for this bill in the Senate Finance Committee. JOHN MANLEY, Staff to Representative Harris, testified that Representative Harris has been acting as the lead proponent of this legislation in the House Finance Committee because the facility would be located in his district. Mr. Manley read a statement into the record as follows. This bill authorizes construction of a government-owned and privately managed one-thousand bed prison at Whittier and a 96-bed expansion of the Yukon-Kuskokwim Correctional Center in Bethel. That was the Governor's number one priority in his bill. For the past eight years, we have sent thousands of prisoners and millions of dollars to Arizona, displacing Alaska jobs and losing economic benefit of spending those dollars in Alaska. Our eight-year experience with private prison services in Arizona has been a tremendous success and there's no reason we cannot duplicate the success in Alaska. As you're aware, we have tried this private prison concept in South Anchorage, Delta Junction, and last year in Kenai. The difference this year is we have a community that's done its homework and wants the project. In over 12 hours of testimony before the House and Senate, not a single resident of Whittier has testified against the prison. Eighty percent of the registered voters have actually signed a petition urging the City [of Whittier] to move forward on the project. As you know, Whittier is only 50 miles by highway from Anchorage-approximately the same commuting distance as the Mat-Su Valley. Whittier's proximity to Anchorage goods, services and human resources, as well as its deep-water port, and abundant utility infrastructure, makes the site both cost effective and feasible. This bill will create over 325 union construction jobs, 228 temporary indirect construction jobs, 225 permanent prison and jail jobs, and over 200 permanent indirect jobs. At least that's what we're estimating. Mr. Manley referenced a handout that lists the comparative capital and operating costs of the Governor's statewide expansion plan to the Whittier facility plan [Copy on file.] He continued reading his statement. This bill will allow prisoners to return home from Arizona to a prison that is situated near the program resources necessary for effective rehabilitation and to provide relief to regional jails by allowing sentenced felons to be transferred out of regional jail beds. AT EASE 9:52 PM / 10:00 PM Senator Green indicated she had a concern with this legislation and requested the bill be held until the following day to allow her an opportunity for further consideration. Senator Ward "moved Committee Substitute House Bill number 498…" Co-Chair Kelly interrupted, noting that a witness was present and waiting to testify. Senator Ward continued, "…I hate to do that, but I do move Committee Substitute House Bill number 498 Finance amended out of Committee with individual recommendations and accompanying notes." Senator Hoffman objected. MARGO KNUTH, Commissioner, Department of Corrections, testified to the concerns of the Administration regarding this legislation. She pointed out this bill proposes the construction of a private prison that would entail a 25-year contract for 1,000 beds at a cost of $32 million annually. She stressed that this bill "targets one portion of our population-the need for prison beds," but leaves unmet the regional need for jail beds and community jail beds. She therefore, remarked that this legislation does not provide an economical proposal. She explained that 100 bed expansions would be necessary for both the Fairbanks facility and the Mat-Su Pre-Trial facility, and additional expansions would also be needed in other locations to create beds to house inmates awaiting trial and inmates serving short sentences. She noted it is not economical to transport prisoners from remote areas to a centralized location. Ms. Knuth asserted the process of gaining approval for the proposed facility has not been open and competitive as established in the State's procurement code. She suggested a cost-based competitive process is integral to insuring that the State is receiving "the most bang for its buck." Ms. Knuth spoke to concerns of establishing Whittier as the location of a private prison facility. She informed that the local population is approximately 190 people and that the community lacks the proper infrastructure to operate a 1,000-bed prison. She listed fire protection, police protection, utility services, secondary employment, housing for employees and families, as some of the infrastructure necessary. Ms. Knuth remarked that the Governor's proposed "regional approach" legislation and other legislation sponsored by Senator Green are in the better interest of the State of Alaska. AT EASE 10:05 PM / 10:15 PM DEE HUBBARD, Resident of Sterling, testified via teleconference from an off-net site in Sterling about her efforts to place a question before Kenai area voters as to whether the residents would support a private prison facility in that community. She pointed out the voters in the Kenai election rejected such a proposal, as have voters in Wrangell in a separate election. Ms. Hubbard surmised that Cornell Corrections of Alaska, Inc. "went shopping" for a community to support the construction of a private prison facility for the company to operate. She pointed out the absence of a significant competitive bidding process and detailed a letter sent by the company to the City of Whittier, which the City utilized almost verbatim in an ordinance adopted on November 5, 2001. She continued describing other events demonstrating that a competitive bidding process has not been employed. Ms. Hubbard warned of the economical costs to the State as a result of a binding contract with Cornell Corrections whereby the State would be obligated to pay the company for beds not housing State prisoners. She furthered that the company could transfer inmates from other states to fill these empty beds and thus collect additional fees. FRANK SMITH testified via teleconference from an off-net site in the State of Kansas that he has followed this legislation as it has progressed through the Legislature. He was troubled because "practically half the statements" made by proponents of a private prison in Alaska, "have been nonfactual." He reiterated that the process has not been competitive and indicated he has obtained many documents proving this. He noted a competitor of Cornell has offered to construct the same facility for $17 million less than the amount Cornell proposes. Mr. Smith remarked that the City of Whittier is a poor location for any type of prison as it is "unstaffable" and the infrastructure is "dismal" as there are no sewer facilities. He furthered that the facility would be built next to a tank farm, thus raising environmental concerns. Mr. Smith referenced a front-page article in the Wall Street Journal detailing the "troubled recent history" of Cornell Corrections [copy not provided]. Mr. Smith surmised the only reason the Legislature is considering this bill is because of campaign contributions received by a few legislators. Co-Chair Kelly interjected that it is inappropriate to testify about campaign contributions. Mr. Smith apologized and spoke of prison riots due in part to under-trained and low paid correctional officers, asserting that the operations of Cornell Correctional of Alaska, Inc. is "unprofessional". SFC 02 # 98, Side B 10:24 PM Mr. Smith urged the Committee to reject this legislation. Senator Leman requested the witness' affiliation. Mr. Smith replied he is a citizen activist, an author of a recently written chapter on Native Americans in private prisons for a Canadian publisher, as well as an opinion article in the Anchorage Daily News and is involved in research and service provision in criminal justice for 30 years, including running programs in the Palmer Pre-Trial facility and the Sutton prison. He emphasized he has no financial interest in the outcome of this legislation. AT EASE 10:26 PM / 10:31 PM RICHARD VAN HATTON, 16-year correctional officer for the State of Alaska, and President, Correctional Officer Chapter of the Public Safety Employees Association, testified via teleconference from an off-net site that every public vote on this matter has been defeated by a wide majority. He stated the City of Whittier is a poor choice for such a facility as it would be unable to provide security in the event it was needed. Senator Ward called for the question on the motion to report the bill from Committee. Senator Green objected and pointed out the Committee has not discussed the certificates of participation, the sole source process, the actual costs of the project in addition to the amounts indicated in the fiscal notes, as well as other concerns. She remarked that a financial obligation of this magnitude warrants further hearings. Senator Olson noted that although he has heard testimony in opposition to this bill from witnesses who do not live in Whittier. He asked if a resident of Whittier could testify as to the adequate infrastructure. BEN BUTLER, Mayor, City of Whittier, testified in Juneau that the infrastructure issue has been researched and it has been determined that electrical power is available through a new power line installed in the Whittier Tunnel. He informed that the City currently utilizes 14 percent of available power and that the prison facility would utilize half the total available power. He continued that natural gas is now supplied to the community and ample water is available. He said no new roads would be constructed, thus road maintenance costs would not increase. He pointed out that septic treatment would be conducted on site and that these expenses are included in the proposed costs of the facility. He expressed, "we have a pretty good fire department in Whittier," noting state of the art fire equipment is stationed at the Whittier Tunnel and that an emergency plan would be employed by the prison facility. Mr. Butler detailed the process whereby the city government issued a request for proposals (RFP) on a private facility to be located in Whittier after the ballot initiative for such a facility in the Kenai area failed. He asserted that this process was deemed by legal advisors to be comparable to State-issued RFPs. Mr. Butler emphasized that no Whittier residents have voiced opposition to this legislation. He stated the intent to add value to the State from the Whittier Tunnel by diversifying the economy in Whittier. Senator Wilken was concerned with large fiscal note and the legal opinion issued by the Division of Legal and Research Services. He questioned the construction of a 1,000-bed prison in a community of 190 residents. A roll call was taken on the motion to report the bill from Committee. IN FAVOR: Senator Ward, Senator Austerman, Senator Hoffman, Senator Leman, Co-Chair Donley and Co-Chair Kelly OPPOSED: Senator Olson, Senator Wilken, and Senator Green The motion PASSED (6-3) CS HB 498 (FIN) am MOVED from Committee with $165,500 fiscal note #3 from the Department of Corrections and zero fiscal note #4 from the Department of Revenue.