SENATE BILL NO. 65 "An Act authorizing the Department of Corrections to enter into agreements with municipalities for new or expanded public correctional facilities in the Fairbanks North Star Borough, the Matanuska-Susitna Borough, Bethel, and the Municipality of Anchorage." This was the third hearing for this bill in the Senate Finance Committee. Co-Chair Wilken explained that this bill would authorize the Department of Corrections to enter into 25-year lease agreements for additional State correctional beds with the Matanuska-Susitna (Mat-Su) Borough, the Fairbanks North Star Borough, Bethel, and the Municipality of Anchorage. Co-Chair Green, the bill's sponsor, expressed that for more than four years, she has been advocating for the construction of new prisons in the State. Discussions have occurred regarding both public and private operated facilities. Contrary to most discussions that place private and public facilities in competition with each other, this legislation would provide an opportunity to construct new facilities in the State without advocating for one side or the other. No expansion would occur were the current competitive situation to continue. Some facilities in the State operate at one hundred percent capacity on an on-going basis, and were this to continue, it could present "a crisis" and a "dangerous situation." AT EASE 10:10 AM / 10:11 AM Co-Chair Green moved to adopt the Version 23-LS0392\C as the working document. Co-Chair Wilken objected for explanation. Co-Chair Green explained that Version "C" would expand the bill's title to include private prisons in the City of Whittier, provided the State could not provide the service at the same or lower cost. In addition, the bill's title would also be expanded to provide consideration to the City of Dillingham and Kodiak's jails. Co-Chair Green pointed out that the bill would also provide a termination date of July 1, 2009 as specified in the bill in Section 1 on page two, lines six and nine. By this time, the Commissioner of the Department of Corrections must authorize construction of the facilities on the public side. Subsection (2) of Section 1 would allow for an increase in the maximum number of beds that could be constructed in the Mat-Su Borough facility. Co-Chair Green noted that new language referencing a third party contractor for a prison facility in the City of Whittier has been added as reflected by the entirety of Section 2, beginning on page three, line five. She specified that the City of Whittier prison construction must be authorized by July 1, 2006. She also noted that before the project could be awarded to a third party, a feasibility study must be conducted in order to affirm that the State could not perform these services for the same or lesser amount. Section 2 would also mandate that a competitive bid process be implemented when awarding the City of Whittier prison facility project to a third party and that the City of Whittier must adhere to the State procurement process for the acquisition of land, design, construction, and operation of the facility. Furthermore, the Commissioner must approve the facility design before entering into an agreement. Approval of design, efficiency, safety measures, and building standards is necessary as there is always the chance that a facility constructed by a borough or city might, "in a short period of time be turned over to the State." Co-Chair Green also noted that the Whittier prison would be limited to approximately 2,200 beds. Language in Section 2, subsection (4) on page four, beginning on page 15 is identical to language in HB 55-CORRECTIONAL FACILITIES pertaining to the agreement with the City of Whittier. Co-Chair Green noted that Section 3, on page four, beginning on line 23 is also new language. It would specify that, in regards to the construction of a prison facility in the cities of Dillingham and Kodiak, the State would match the expenditure of the local entity by issuing a certificate of participation (COP). Co-Chair Green pointed out that new Section 4, located on page five, beginning on line 11, would provides further parameters regarding the State's COP agreement with the cities of Dillingham and Kodiak. The anticipated annual operating costs associated with providing the additional beds at each facility are specified in Section 4, line 24. Co-Chair Green pointed out that language in Section 6, on page six, line six repeals language that the Legislature approved approximately six years prior regarding the Kenai facility, which was not furthered. Co-Chair Green stated that the difficult aspect of developing the Department of Corrections "draft" fiscal note, dated April 27, 2004 [copy on file] was that while most fiscal notes reflect new expenses, the Department was required to factor out expenses associated with housing inmates outside of the State. This is further explained in the fiscal note analysis. Inmates who are currently housed in Arizona would be housed within the State as of the year 2009, and as a result, that $13 million expense must be removed from the total $43 million expense in order to compare figures. The resulting $27 million net expense would better reflect the true cost of increasing the number of in-State beds. In addition, some prison facilities in Palmer might be closed and operations moved to a new facility. This would "allow for a better management" of funds. Co-Chair Green urged the Committee to realize that each new "tough on crime" bill approved by the Legislature would further increase the State's prison population. In addition, each new State Trooper and new State prosecutor would also increase the number of those who might be incarcerated. One area that is also authorized in the bill, but that was not thoroughly discussed, is the expansion of the federally funded Municipality of Anchorage jail. The City of Seward is also interested in requesting that its number of beds be increased. Co-Chair Green commented that a forthcoming amendment would address a technical error in the bill and a separate amendment would address Alaska police standard certification requirements for prison guards as this issue is not currently addressed in the bill. Co-Chair Wilken removed his objection. There being no further objection, the Version "C" committee substitute was ADOPTED as the working document. Amendment #2: This technical amendment changes $1,500,000 to $2,000,000 to correct a drafting error in Section 4, line 14 on page five of the Version "C" committee substitute. Co-Chair Green moved for adoption. There being no objection, Amendment #2 was ADOPTED. MARC ANTRIM, Commissioner, Department of Corrections, informed the Committee that, while this "compromised" legislation would not provide all the remedies that are desired, both the Department and Governor support its passage as the need for additional prison "housing is so great." He detailed the growth in prison population numbers, as reflected in the Department's chart titled "Inmate Population Statistics" [copy on file], and commented that there is no indication that the increasing prison population trend would change. Were the current rate of prison population increase and the current circumstances to continue, it is anticipated that half of State's inmate population would be housed outside of the State. DEE HUBBARD, Resident of Sterling, testified via teleconference from Anchorage and applauded the efforts exerted in the development of the committee substitute, specifically the inclusion of procurement code language and the inclusion of the Kodiak and Dillingham jail components. She urged the Committee to consider the addition of Statute language, as adopted by other states, regarding private prison contract monitoring, compliance auditing, use of force guidelines, contract enforcement and fines, and emergency notification plans to include such things as who would be responsible for expenses associated with searching for an escaped inmate. These types of things should be incorporated into State Statute. She could provide pertinent information to the Committee in these regards. Co-Chair Green asked Ms. Hubbard to provide the information to her office. LINDA FREED, City Manager, City of Kodiak, testified via teleconference from Kodiak and thanked the bill's sponsor for providing the City the opportunity to participate in the development of the committee substitute. The focus of her testimony would be the financing of the City's proposed jail facility. She noted that the City currently operates the jail on a contractual basis with the State in an old contractor's office/garage building that was built in the 1940s. The building, which also houses the City's police department, is unsafe and expensive to operate. The City has committed to constructing a new 20 or 22-bed jail facility, probably at the same site, at an estimated cost of up to $3.5 million. The City "already subsidizes the operation" of the current jail facility even though the contract with the State is in effect. The proposed 50-50 State/local match that would be required to construct the new State jail facility would exceed the City's fiscal ability. However, construction would be possible were the City able to secure a three million dollar bonded indebtedness. The City has made a commitment to the bill's sponsor "that they are willing to bond and pay for the construction costs of the facility up front." At the current four-percent interest rate, a three million dollar twenty-year bond indebtedness annual payback would be $220,745. Therefore, the request is that the State would assist the City in finding "a mechanism" through which the City could "construct a new jail for the State of Alaska" and assist the City in satisfying the bonded indebtedness debt "up to a maximum of three million dollars." TC KAMAI, Chief of Police, City of Kodiak Police Department, testified via teleconference from Kodiak regarding the difficulties the City faces in operating the current aging and "deplorable" facility; particularly in regards to meeting the standards required by the State contract. He likened the escalating annual maintenance expenses of the facility "to putting band-aids on an open wound." The jail must be replaced. Senator Olson asked regarding the jail's incarceration statistics. Chief Kamai responded that the monthly occupancy rate of the 16-bed facility is 80-percent. This morning the jail held 13 individuals. Senator Olson asked for a total number per year. Chief Kamai responded that the jail houses an average of 1,200 to 1,300 incarcerations per year. SENATOR GARY STEVENS thanked the bill's sponsor for including community jails in the committee substitute. Though his experience as a former City of Kodiak Mayor, he could attest to the condition of the City jail, the oldest jail in the State. He stressed the timeliness of this legislation, as the City is moving forward with its plans to replace the jail with a multi-public safety building. He applauded the City's willingness to commit to paying up-front for the building, and supported the City's request that the State commit to assisting with the building's associated bond service. PHIL SHEALY, City Manager, City of Seward, testified via teleconference from Seward and shared that the City supports the committee substitute's "comprehensive package to address correctional facility needs in the State for years to come." However, the one missing component is that of addressing the State's maximum-security facility needs. Therefore, he requested that expansion of the City of Seward's Spring Creek Prison be considered in that regard. WILLARD DUNHAM, City Council Member, City of Seward, testified via teleconference from Seward and reminded the Committee that, while the Spring Creek facility can currently house 350 inmates, the building and the site were designed to allow for an expansion ability to house 700. He noted that this could be accomplished for a reasonable amount. Therefore, he requested that this facility be added into the feasibility study language. He also stated that the facility currently houses 500 inmates and site expansion is required. The Department of Corrections would support the expansion of maximum-security improvements at the site. SFC 04 # 96, Side A 10:38 AM Mr. Dunham noted that the bonds that were sold to support the construction of this facility would be paid off in the year 2006, and, in light of the current interest rate level, he stressed that this would be a good time to reissue those bonds. Another valid reason to expand the facility is the fact that Seward is the site of the Alaska Vocational & Technical Institute, which could provide training for correctional officers and inmates. Therefore, he urged the Committee to include the community of Seward in the bill as he assured the Committee that the City would be willing "to assist the Department on all fronts." The only thing negative about the bill is the fact that the City of Seward' prison facility is not included. Senator G. Stevens agreed that the Spring Creek facility should be considered in this legislation as it is the only maximum-security facility in the State and has been designed for expansion. The facilities currently incorporated into the bill are medium security or lower, and pre-sentencing facilities. He therefore urged that the facility be included. Co-Chair Green noted that further amendments would be forthcoming. Co-Chair Wilken ordered the bill HELD in Committee for further consideration. [Note: SB 65 was re-addressed later in the meeting.] RECESS 10:41 AM / 4:04 PM SENATE BILL NO. 65 "An Act authorizing the Department of Corrections to enter into agreements with municipalities for new or expanded public correctional facilities in the Fairbanks North Star Borough, the Matanuska-Susitna Borough, Bethel, and the Municipality of Anchorage." [Note: This bill was heard earlier in the meeting.] Co-Chair Wilken noted that the bill was again before the Committee. Amendment #3: This amendment inserts new language into the bill title on page one, line one, following "An Act." The amended language would read as follows. An Act relating to correctional officers, parole officers, and probation officers;… In addition, the bill inserts new bill sections into the bill on page one, following line twelve, as follows. Section 1. AS 18.62.290(2) is amended to read: (2) "correctional officer" means a person (A) appointed by the commissioner of corrections whose primary duty under AS 33.30 is to provide custody, care, security, control, and discipline of persons charged or convicted of offenses against the state or held under authority of state law; or  (B) employed in a correctional facility in this state whose primary duty is to provide custody, care, security, control, and discipline of persons charged or convicted of offenses or held under authority of law; Sec. 2. AS 18.65.290(5) is amended to read: (5) "parole officer" means a person appointed by the commissioner of corrections or employed by a correctional facility in this state to perform the duties of supervising the parole of prisoners under AS 33.16; Sec. 3. AS 18.65.290(7) is amended to read: (7) "probation officer" means a person appointed by the commissioner of corrections or employed by a correctional facility in this state to perform the duties of a probation officer under AS 33.05. New Text Underlined [BRACKETED TEXT DELETED] Other changes resulting from this amendment are: deleting "$14,600" and replacing it with "$11,600" on page two, line 25; deleting "sec. 4" and replacing it with "sec. 7" on page four, line 29; deleting "sec. 4" and replacing it with "sec. 7" on page five, line nine; and deleting "sec. 3" and replacing it with "sec. 6" on page five, line 14 and on page five, line 31. Co-Chair Green moved to adopt the amendment. She noted that this amendment would incorporate standards into the bill pertaining to staff training and certification. In addition, she noted that the amendment would also present a technical change to correct the annual maximum allowable lease payment per bed at a new prison facility. Senator Dyson asked whether State statutes currently contain adequate screening procedures or training for prison chaplains as there was a recent news report regarding inappropriate conduct of a State prison chaplain. MARK ANTRIM, Commissioner, Department of Corrections, responded that even were more stringent screening in place, "there are still bad people" and bad things could happen. The Department supports the prison chaplaincy program. Furthermore, he shared that the chaplain in question had more than twenty years of experience and had been highly recommended. Senator Dyson asked whether the Department might require any additional statutory authority in regards to the prison chaplain program. Commissioner Antrim responded no. There being no objection, Amendment #3 was ADOPTED. Co-Chair Green noted that Amendment #4 would not be offered as its contents were embodied in Amendment #3. Amendment #5: This amendment deletes the word "and" in the bill's title on page one line three. In addition, the bill's title is further amended to read, on page one, line four, as follows. Anchorage and the City of Seward; relating to the development and financing of privately operated correctional…. Furthermore the amendment also inserts a new subsection into the bill on page two, line five as follows. (5) Seward - expansion of the existing Spring Creek Correctional Center by up to 144 beds. Senator B. Stevens moved to adopt Amendment #5, at the request of Senator Gary Stevens. Co-Chair Wilken objected for explanation. Senator B. Stevens read the amendment. Senator Gary Stevens explained that the City of Seward's Spring Creek Correctional Facility is the most logical locale for a maximum-security facility expansion, as it is currently the only maximum-security prison in the State and, as it was designed for expansion, it would be the most economical choice. Co-Chair Green suggested that the amendment be changed to further reflect the distinction between a public and private correctional facility. Co-Chair Wilken stated that the language in Amendment #5 should be reworked. Amendment-to-Amendment #5: This friendly amendment to the amendment changes the originally proposed language as follows. The language "and the City of Seward;" is inserted into the bill's title on page one, line four, following the word "Anchorage". In addition, for consistency purposes, the words "City of" is inserted before the word "Seward" in new subsection (5) being offered. This language would read as follows. (5) City of Seward - expansion of the existing Spring Creek Correctional Center by up to 144 beds. Co-Chair Wilken moved to amend Amendment #5. Senator Olson suggested that consideration be given to including the City of Kotzebue prison facilities in the legislation. Co-Chair Wilken asked that Senator Olson consider presenting that issue as a separate amendment. There being no objection, the Amendment to Amendment #5 was ADOPTED. Co-Chair Wilken offered a motion to adopt Amendment #5, as amended. There being no objection, Amendment #5, as amended, was ADOPTED. Amendment #6: This amendment deletes all material in Section 4, page five, lines 13 through 17 and replaces it with the following language. MUNICIPAL JAIL FACILTIES. (a) Each of the following projects is approved to receive $3,000,000 of the proceeds of certificates of participation authorized under sec. 3 of this Act, on the condition that the municipality, in which the project is located, provides all funds over this amount needed for the upgrade, expansion or replacement of the jail facilities. In addition, language in Section 4, subsection (a)(2) on page five, line 21 is amended to read as follows. existing 16-bed facility with a new facility up to 22 beds. New Text Underlined [BRACKETED TEXT DELETED] Senator B. Stevens moved to adopt Amendment #6. Co-Chair Wilken and Co-Chair Green objected Senator B. Stevens explained that the effect of this amendment would be to increase the amount of the Certificate of Participation (COP) from two million to three million dollars. In addition, he noted that any expenses above this amount to upgrade, expand or renovate a facility would be borne by the municipality. The effect of this language would be to remove the State match language. Senator B. Stevens continued that the amendment would also provide a technical change to qualify that the current 16-bed Kodiak Community Jail would be replaced with up to a new 22-bed facility. Co-Chair Green stated that the original proposal would have required a 50-percent State/municipality match with a total projected per facility maximum of four million dollars. She noted that upon further review, it was determined that construction for proposed new jail facilities would cost less than four million dollars. Therefore, the legislation was changed to specify a State maximum expenditure of two million dollars and a local maximum expenditure of $1.5 million. With the understanding that the local municipality would use these funds to construct a new jail, the State would sign a contract specifying that it would be responsible for the operating costs of the facility on a long-term basis. Co-Chair Green continued that historically when a State/local participation agreement is in place, more participation on part of the local entity has been required. Therefore, in this situation, the State, and in particular, the Legislature, has agreed, "to be more generous" in its participation commitment. She stated that the goal is to make local jail facility projects affordable and incorporate local participation. Co-Chair Green appreciated the local community representatives' comments regarding their willingness to improve their local prison facilities; however, she asserted that the intent of this legislation was to have local participation and have the State assist in providing funding without burdening the State. She advised that the funding streams for the local prison enhancements would be "a different funding stream" than normally utilized for prisons "when entities go to bond" and arrange "for the State to do the lease/purchase on the other facilities." She warned that careful consideration must be applied to this endeavor as other communities might come forward and ask that the State construct prison facilities in their communities with limited local participation. She stressed that while this would be a Committee policy call, the intent would be to not have a State commitment that "we cannot afford." Co-Chair Wilken understood that were the existing language in effect, the community of Dillingham would be required to provide at least $1.5 million toward construction of a new jail. Were Amendment #6 adopted, the State's obligation would be three million dollars and the City of Dillingham would be responsible for any expense above the three million dollar amount. Co-Chair Green concurred. Co-Chair Wilken understood, therefore, that were the project to cost three million dollars or less, the community would receive the facility "au gratis." Co-Chair Green affirmed. In addition, she stated that adoption of the amendment would also require further changes in the committee substitute in that the $4,000,000 amount specified in Sec. 3, lines 28 and 30 on page four must be changed to $6,000,000. She reiterated that adoption of this amendment would serve to increase "State exposure." Commissioner Antrim noted that he could not comment in regards to the amendment, as it is not in his field of expertise. Senator G. Stevens appreciated Co-Chair Green's comments regarding the affordability of the project and the local participation issue. He stressed that the City of Kodiak would be willing to provide the upfront costs of constructing a new 22-bed, $3.5 million jail; however, he voiced that the City would appreciate knowing what base level the State would commit to in regards to the debt service as the City would be obligating to bond the total project and pay any associated expenses above that specified amount. He noted that the annual debt payment is projected to be approximately $220,000 per year for the duration of the bond. In addition, he stated that separate, annual operating costs would be associated with the project. He reminded the Committee that the City is currently paying approximately $3,000 more, annually, than what the State is contributing for the current Kodiak jail. In conclusion, he stressed that, "there is a disinclination for the City council" to invest "that much money into a State jail." Senator Hoffman stated that since consideration is being given to changing the language regarding the capacity of the Kodiak jail to be "up to 22-beds," he would consider proposing that similar language be applicable to the Dillingham jail. Co-Chair Wilken asked that that component of the amendment be addressed after the portion of the amendment dealing with the financial arrangement is rectified. Senator Hoffman suggested that the amendment be divided. Co-Chair Wilken noted that a separate amendment addressing the Dillingham jail could be submitted for consideration. Co-Chair Green asked regarding the process undertaken by the Department of Corrections for projecting operating costs for local jail facilities; specifically whether the contracts were developed on a cost per day basis. It would be in the best interest of the State to keep local facilities viable. Commissioner Antrim responded that each local contract is developed on an annual basis, based on a variety of factors for each community. While the Department does have negotiating abilities; this ability is subject to Legislative appropriation. He also noted that, "any increases awarded to this program over the years has been done so proportionately" to the original level, and that, "in some cases, there was not a lot of rational basis for some of those figures." Co-Chair Green asked the Commissioner whether other communities might come forward with a request for inclusion, were this language adopted. Commissioner Antrim responded that this could be possible. Co-Chair Wilken declared that were this amendment adopted, the State might "have three million dollar jails all over State." Senator B. Stevens offered a motion to withdraw the amendment. There being no objection, Amendment #6 was WITHDRAWN from consideration. Co-Chair Wilken ordered the bill HELD in Committee in order to further consider this and other amendments. [NOTE: This bill was addressed later in the meeting.] SENATE BILL NO. 65 "An Act authorizing the Department of Corrections to enter into agreements with municipalities for new or expanded public correctional facilities in the Fairbanks North Star Borough, the Matanuska-Susitna Borough, Bethel, and the Municipality of Anchorage." [Note: SB 65 was heard two times previously in this meeting.] Co-Chair Green reminded the Committee that, earlier in the meeting, an amendment had been offered but withdrawn from consideration that would change the bill's language regarding the State's and local entity's financial commitment regarding the construction of new jail facilities in Kodiak and Dillingham. Co-Chair Wilken clarified that the referenced amendment is Amendment #6. Amendment #6: This amendment deletes all material on page five, Section 4, lines 13 through 17 and replaces it with the following language. MUNICIPAL JAIL FACILTIES. (a) Each of the following projects is approved to receive $3,000,000 of the proceeds of certificates of participation authorized under sec. 3 of this Act, on the condition that the municipality, in which the project is located, provides all funds over this amount needed for the upgrade, expansion or replacement of the jail facilities. In addition, language in Section 4, subsection (a)(2) on page five, line 21 is amended to read as follows. existing 16-bed facility with a new facility up to 22 beds. New Text Underlined [BRACKETED TEXT DELETED] TOM BOUTIN, Deputy Commissioner, Department of Revenue and Spokesman, State Bond Committee, commented that that he had never "seen State debt issued with a kicker from any entity" be it a municipality or any other. The fact that a municipality would be contributing something akin to "a credit enhancement or money for a State project" would not be a matter of consideration to the State Bond Committee or the Department of Revenue, as he understood that all of these projects would constitute a State lease debt. Co-Chair Green interjected that rather than this amendment pertaining to State lease/purchase debt, it would apply strictly to the operating expenses associated with the Kodiak and Dillingham jails. Co-Chair Wilken understood that the amendment would pertain to construction costs of the facilities as opposed to the operating costs. Co-Chair Green understood "that the payment the State makes is for operating costs." Mr. Boutin responded that the entirety of the projects specified in the Version "C" committee substitute would qualify for State lease debt and therefore would be rated on the State's credit. "Whether a leased project is a capital lease or an operating lease relies upon financial accounting standards for Rule 13." Therefore, he considered all the projects as State lease debt and that some of the projects have "a credit enhancement of a municipality kicking in some money." He reiterated that he had never seen this done, "anywhere in the nation" or the State of Alaska. This does not mean that it "is a bad thing," but he opined that attorneys would be required "to craft" the language, as, were a municipality to use their general obligation ability to fund their portion of the money, the project would be considered "part of the security for the debt and there "would have to be a clear segmentation so that the general obligation of the municipality didn't run to the part of the project that the municipality was funding." Co-Chair Wilken voiced that, under the bill's current language, the State would provide, upfront, a two million dollar capital grant with an expectation of a $1.5 million grant being forthcoming from the municipality. Amendment #6 would change the language to provide three million dollars in State funding with no expectation of local match funding. Senator B. Stevens stated that the amendment would establish a three million dollar ceiling on the State's participation in the municipality's construction of a local jail, and that any cost above that would become the responsibility of the municipality. He pointed out that in Section 3, subsection (a) of the bill, page five, lines one and two, the total rental obligation of the State on an annual basis would be limited to $400,000. He stated that this might be the issue that Co-Chair Green is referring to when "saying that the maximum obligation that the State would be on the line for would be the $400,000 and the municipality would be responsible for the reimbursement for the debt retirement of three million." Mr. Boutin replied that currently there is no financial structure like that available. Continuing, he re-emphasized that this would be recognized as State lease debt, which is rated on the State's credit. He stated "the State's credit would be the principle enhancement, but he reiterated that "the project itself is always part of the credit" in order to provide the bond holders with the ability, "in the event of a non-appropriation," to take over a portion of the project. Senator B. Stevens recalled that the question regarding the rewrite of the original language is whether Amendment #6 would require the monetary amount to be increased to $6,000,000 in Section 3 on page four, line 27 and the $4,000,0000 amount on line 30 of that same section to be increased to $8,000,000. Co-Chair Green concurred. Mr. Boutin replied that it would require a linear change. Senator B. Stevens understood therefore that were $3,000,0000 specified for each of the Kodiak and Dillingham projects, the total amount required would be $6,000,000. The total cost of the financial commitment would not exceed $8,000,000. Mr. Boutin shared that one of the three financial rating agencies has expressed that the State should not commit to a maturity lease debt term exceeding 15-years. Senator B. Stevens asked whether the City of Kodiak or the State would repay the bond debt reimbursement. Ms. Freed stated that, due to the fact that this is a State jail operated by the City of Kodiak, the premise is that the City of Kodiak would bond for the total construction costs through the City's general obligation bonding capacity with the understanding that the State would repay the debt service up to a maximum of three million dollar total construction costs. She clarified that the City would be responsible for any construction expense beyond the three million dollar amount. Senator B. Stevens expressed that this clarifies the issue. Co-Chair Green understood the City of Kodiak's position. However, she shared that historically when a local entity bonds for a project, a State lease/purchase agreement is in place that specifies that the city would own the building until the debt is paid. Continuing, she stated that this arrangement would differ in that, while the City of Kodiak or Dillingham would secure the bond and agree to pay anything beyond the State's three million dollar obligation, when the project were paid off, the City would own the facility. She expressed therefore, that there are two funding mechanisms in this bill, as, with the exception of the Kodiak and Dillingham jails, the State would own the facilities. Co-Chair Green asked whether the current jail facilities in Dillingham and Kodiak are counted against the State's credit rating. Mr. Boutin responded in the negative. He reiterated that, as written, all the projects in this bill would be recognized as State debt, regardless of whether or not the lessee owns the facility at the end of the lease term. Continuing, he stated that this could result in meeting one of four criteria in Rule 13 in which the lessee, not the leasor, "is on the hook." Therefore, he concluded that regardless of whether the City of Kodiak utilizes its GO bonds to fund the construction of the jail facility, the bill, as drafted, revolves around State lease debt. Co-Chair Wilken understood that this is because of the Certificates of Participation specified in the bill. Mr. Boutin responded that this is because the lease term clearly meets one of four criteria for financial accounting standards for Rule 13. SFC 04 # 97, Side A 05:37 PM Co-Chair Green recalled that during a conversation she had with the Standard & Poor credit rating company regarding what constituted State debt, they had asked what the State is doing to house State prisoners. She informed them that the State is paying to have them housed in a facility in Arizona. They responded that the construction of a prison within the State to house those same prisoners would not be counted against the State bonding capacity because its operating money that is currently being spent and which "would be spent in the future." Therefore, she suggested that since the State is currently housing prisoners in Kodiak and Dillingham that this would constitute "only an addition to the current facility." She stressed that more bed space has been identified as being necessary in Kodiak and, therefore, the State would only be paying for an increase of six beds at that facility. She asked therefore whether the "replacement facility " term is the determining factor in regards to whether the State should simply be paying for six new beds. Mr. Boutin responded that were the State to address this situation in a manner similar to that of housing prisoners in Arizona, then the Certificate of Participation language, lease language, and bond proceeds should not be components of the bill. He stated that were the City of Kodiak to utilize GO bonding to build a facility that would be open to housing any entities' prisoners, then, he would agree that it would not be considered State debt. Co-Chair Wilken asked the relationship of this discussion to Amendment #6. Senator B. Stevens responded that the issue being discussed is "embodied in the bill itself;" whereas the amendment would simply serve to change numbers in the bill. He explained that the adoption of Amendment # 2 served to increase the amount of the proceeds of the certificates of participation. This would again be amended by the adoption of Amendment #6. However, Mr. Boutin's testimony has served to address issues embodied in the body of the bill rather than relating to Amendment #6. Co-Chair Wilken understood that Amendment #6 would allow the State to issue certificates of participation to build an under-three million dollar jail anywhere in the State were one desired by the municipality, with no local contribution requirement. Continuing, he stated that the Version "C" committee substitute states that the State would assist a municipality to build a $3.5 million facility of which the local municipality responsibility would be $1.5 million. Co-Chair Wilken concluded therefore, that were amendment #6 adopted, there would be $3 million jails being constructed everywhere in the State. Senator B. Stevens responded that the Amendment raises a question in regards to Section 3, page five, lines two and three, which specifies a $6,000,000 limit on the total COP payment. He therefore understood that the language in Amendment #6 would require an additional change in that regard as the $6 million dollar amount would only provide funding for the Kodiak and Dillingham projects. Co-Chair Green agreed that the $6 million amount should be increased to allow that any other municipality wishing to pursue a new jail facility be provided for, as she declared, were no local match participation required, this would be very "attractive" to many communities. Senator Hoffman countered that the bill's language specifically identifies to which communities the proposal would apply. Senator Hoffman requested that consideration be provided to dividing one portion of the Amendment into two parts: one to address language in Section 4 Subsection (1) and the other to address Section (4) Subsection (2) as affected by Amendment #6. Co-Chair Green argued that the costs associated with these jails has not been calculated on an "up to" a certain number of beds basis, but rather that the costs were calculated to specifically reflect the costs associated with a 22-bed Kodiak facility and a 25-bed Dillingham facility. Therefore, she stated that she would concur were the intent to express the entirety of the expenses in a per bed manner. Senator Hoffman pointed out that were the amendment adopted, the details relating to the Kodiak and Dillingham jails would not be consistent as one would specify "up to" a certain number of beds and the other would not. Co-Chair Wilken ordered Amendment #6 to be divided into Amendment 6A and 6B. Amendment #6A: This amendment deletes all material on page five, Section 4, lines 13 through 17 and replaces it with the following language. MUNICIPAL JAIL FACILTIES. (a) Each of the following projects is approved to receive $3,000,000 of the proceeds of certificates of participation authorized under sec. 3 of this Act, on the condition that the municipality, in which the project is located, provides all funds over this amount needed for the upgrade, expansion or replacement of the jail facilities. Co-Chair Wilken asked whether this amendment could result in there being three million dollar jails constructed all around the State in the years to come. Commissioner Antrim voiced that this is "a valid concern" in that the State would be financing their construction. In addition, he reminded that this amendment applies to local rather than State jail facilities. Co-Chair Wilken stated therefore that the State would be required to pay to have State prisoners held in that local facility. Commissioner Antrim affirmed that the basis of the community jail program is that the State contract with the local entity to hold State prisoners. Co-Chair Wilken asked whether the cost per prisoner differs from community to community based on the local economics. Commissioner Antrim affirmed that operating costs are a factor in the amount paid. Co-Chair Green informed "that every other community jail is a city jail: the State did not build them, the State pays operating costs, and should not have to build non-State owned facilities." Senator B. Stevens stated that Amendment #6A would simply serve to change the ceiling embodied in the bill. In response to the argument that the State would be building $3 million jails all over the State, it could be argued that the State would be building $3.5 million jails all over the State of which $2 million would be paid for by the State. Therefore, he opined that the amendment would not change what is embodied in the bill with the exception of the required match and the level to which the State would participate. Co-Chair Wilken remarked that the issue pertains to local participation. Co-Chair Green reminded that the original estimates for constructing the Kodiak and Dillingham jails were approximately $3.5 million. The State's two million dollar commitment, which she declared lowered local participation to less than half of the total amount, was considered "very, very generous." While it could be argued that increasing the amount to three million dollars would not be significantly more, that increase would negate the requirement for the local participation. She voiced concern that this amendment "keeps this section from working." Senator B. Stevens moved to adopt Amendment #6A. Co-Chair Green objected. A roll call was taken on the motion. IN FAVOR: Senator B. Stevens OPPOSED: Senator Dyson, Senator Hoffman, Senator Olson, Senator Bunde, Co-Chair Green, and Co-Chair Wilken The motion FAILED (1-6) Amendment #6A FAILED to be adopted. Amendment #6B: This amendment amends language in Section 4, subsection (a)(2) on page five, line 21 to read as follows. existing 16-bed facility with a new facility up to 22 beds. New Text Underlined [BRACKETED TEXT DELETED] Senator B. Stevens moved to adopt Amendment #6B. Co-Chair Wilken and Co-Chair Green objected. Co-Chair Green would be willing to work with the Department of Revenue and the various involved communities to develop the proper language pertaining to this section. Senator Dyson asked Co-Chair Green to summarize her concern. Co-Chair Green explained that the calculations pertaining to the costs of the facilities are based on a total bed count rather than an up-to bed count scenario. The concern is that were no additional beds added when constructing a new Kodiak jail, the State would be required to pay the amount stated in the bill that pertains to the larger number. Commissioner Antrim affirmed that the numbers denoted in the bill are precise numbers. Amendment to Amendment #6B: This amendment to the amendment adds the words "up to" before "25-bed facility" in Section 4, Subsection (a) (1) on page five, line 19 that pertains to the Municipality of Dillingham. Senator Hoffman moved to adopt the amendment-to-the-amendment. Co-Chair Wilken objected. Senator B. Stevens pointed out that language in Section 1, page two, lines three through 30 is consistent with the language proposed in the amendment to the amendment. A roll call was taken on the motion. IN FAVOR: Senator B. Stevens, Senator Bunde OPPOSED: Senator Hoffman, Co-Chair Green, Senator Dyson, and Co- Chair Wilken ABSENT: Senator Olson The motion FAILED (2-4-1) The motion to adopt the Amendment-to-Amendment #6B FAILED to be adopted. AT EASE: 6:00 PM / 6:01 PM Due to Committee confusion regarding the subject of the previous roll call vote, Co-Chair Green moved to rescind the Committee action. There being no objection, Committee action on the Amendment-to- Amendment #6B was RESCINDED. Senator Hoffman moved to adopt the Amendment-to-Amendment #6B. Co-Chair Wilken objected. A roll call was taken on the motion. IN FAVOR: Senator B. Stevens, Senator Hoffman, and Senator Olson OPPOSED: Senator Bunde, Senator Dyson, Co-Chair Green, and Co-Chair Wilken The motion FAILED (3-4) The action to adopt Amendment-to-Amendment #6B FAILED. Amendment #6B was again before the Committee. Co-Chair Wilken maintained his objection to Amendment #6B. A roll call was taken on the motion. IN FAVOR: Senator B. Stevens and Senator Bunde OPPOSED: Senator Hoffman, Senator Dyson, Co-Chair Green, and Co- Chair Wilken ABSENT: Senator Olson The motion FAILED (2-4-1) Amendment #6B FAILED to be adopted. Co-Chair Wilken ordered the bill HELD in Committee.