Legislature(2003 - 2004)

04/01/2003 08:01 AM House STA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HB 134-CORRECTIONAL FACILITY EXPANSION                                                                                        
[Contains discussion of SSHB 55]                                                                                                
CHAIR WEYHRAUCH  announced that  the next  order of  business was                                                               
HOUSE  BILL  NO.  134,  "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."                                                                                                 
Number 1683                                                                                                                     
REPRESENTATIVE  BILL STOLTZE,  Alaska State  Legislature, sponsor                                                               
of  HB 134,  told the  committee the  unfortunate reality  Alaska                                                               
faces is  the need for more  prison beds.  [The  legislature] has                                                               
different  options for  how  to  solve this  need.   He  credited                                                               
Senator Lyda Green for her work  on the Senate side on the issue.                                                               
He remarked,  "I'm pushing the  bill on  this side to  assist her                                                               
effort and [have] become attached to it since then."                                                                            
REPRESENTATIVE STOLTZE said the  bill covers expansion [of prison                                                               
beds]  in  several  areas  of  the  state,  including  Anchorage,                                                               
Fairbanks,  Bethel, and  the Matanuska-Susitna  area, which  will                                                               
have the major expansion.   Probably receiving the most attention                                                               
will be  the Sutton  expansion, he  predicted, saying  a facility                                                               
there is the right facility in  the right place, and is supported                                                               
by  the public.    He said  he thinks  that  through the  healthy                                                               
process  of competition  with the  private  prison industry,  the                                                               
[Department  of  Corrections  (DOC)]  has  done  a  good  job  of                                                               
reducing costs  and putting together  a good  proposal, including                                                               
documentation of how it can be accomplished.                                                                                    
REPRESENTATIVE STOLTZE  noted what  the number  of beds  for each                                                               
facility would  be as  follows:   Sutton, 1,250;  Anchorage, 200;                                                               
Fairbanks, 80;  and Bethel, 120.   The spaces added  in Anchorage                                                               
would  be leased  by the  federal government,  by U.S.  Marshals.                                                               
That would  be federal  money providing  Alaskan jobs,  he added,                                                               
and would make the current Anchorage facility more efficient.                                                                   
Number 1874                                                                                                                     
REPRESENTATIVE   STOLTZE  referred   to   a  color-copy   handout                                                               
[compiled by DOC]; the first  page shows where the facilities are                                                               
located.  He  pointed to the "Inmate  Population Statistics" [top                                                               
of page 2], which shows that by  the year 2007, the total will be                                                               
5,500.  Referring to [the  "Institution Activity 1997-2002" chart                                                               
on the bottom of page  2], which shows admissions, transfers, and                                                               
the average  daily count,  he indicated that  is what  the debate                                                               
centers  around  with   regard  to  private-versus-public  prison                                                               
initiatives.  He  clarified that the competition is  in regard to                                                               
housing  people.   He  complimented  DOC  for lowering  costs  in                                                               
construction,  which lowers  the  fiscal note.    He mentioned  a                                                               
proposed committee substitute (CS) [unspecified version].                                                                       
Number 2080                                                                                                                     
CHAIR  WEYHRAUCH  said  the  options  regarding  prisons  are  as                                                               
follows:   SSHB 55, which  would authorize the construction  of a                                                               
private prison in Whittier; HB  134, the bill now being presented                                                               
by  Representative  Stoltze,  supporting  expansion  of  existing                                                               
facilities;  and  "the do-nothing  option."    He commented  that                                                               
there is a  lot of confusing information on  the issue, including                                                               
some scare  tactics that  are not  credible.   He said  one thing                                                               
that isn't clear to him is the  economic impact on the state.  He                                                               
requested  from Representative  Hawker  [one of  two sponsors  of                                                               
SSHB 55]  and Representative Stoltze  a holistic view of  how all                                                               
the options  overlay, in  order for the  committee to  decide the                                                               
best policy option for the state to consider.                                                                                   
REPRESENTATIVE   STOLTZE  opined   that   those  are   legitimate                                                               
Number 2207                                                                                                                     
REPRESENTATIVE HOLM said  he has visited jails, and  each room is                                                               
no more than 8  by 12 feet.  He noted that the  plans show a cost                                                               
of $110,000, $135,000,  and $155,000 per bed.   Saying it doesn't                                                               
take that  much concrete  to build  a room.   He added,  "I don't                                                               
know, given  out particular financial circumstance,  that we need                                                               
to be building the Taj Mahal to  house prisoners."  He said he is                                                               
uncomfortable   with   this   kind   of  expense.      He   asked                                                               
Representative Stoltze to comment.                                                                                              
REPRESENTATIVE STOLTZE  responded that he knows  that the private                                                               
sector  has  expensive  costs,  as well.    He  deferred  further                                                               
comment to the deputy commissioner of DOC.                                                                                      
Number 2355                                                                                                                     
PORTIA PARKER, Deputy Commissioner,  Office of the Commissioner -                                                               
Juneau,  noted that  the  $155,000 is  for  the Bethel  expansion                                                               
project.   She explained that  the cost of doing  construction in                                                               
that  rural area  is higher.    The Anchorage  extension will  be                                                               
federally funded; it won't affect  the general fund or the fiscal                                                               
note.   The  Fairbanks facility  is more  expensive at  $135,000.                                                               
She  explained that  the per-bed  costs include  the cost  of the                                                               
entire facility.   In response to a question  by Chair Weyhrauch,                                                               
she  clarified that  the  per-bed  cost covers  the  cost of  the                                                               
construction  only for  the entire  facility,  not the  operating                                                               
costs, for example.                                                                                                             
Number 2434                                                                                                                     
JERRY BURNETT,  Director, Administrative Services,  Department of                                                               
Corrections, added that  the per-bed cost also  includes the cost                                                               
of design,  utilities, and new fencing  - "all the soft  and hard                                                               
costs of construction."                                                                                                         
CHAIR WEYHRAUCH surmised, "To the turnkey."                                                                                     
MR. BURNETT concurred.  He commented  that the plan is similar to                                                               
one used in other places in the U.S.                                                                                            
Number 2467                                                                                                                     
REPRESENTATIVE HOLM  asked Mr.  Burnett if  he would  provide the                                                               
committee with a square-foot cost.                                                                                              
CHAIR WEYHRAUCH  asked if  the standard for  the industry  is per                                                               
square-foot or per bed.                                                                                                         
MS. PARKER answered both.                                                                                                       
Number 2500                                                                                                                     
REPRESENTATIVE  BERKOWITZ asked  for comparisons  of construction                                                               
costs in Alaska with the following:   elsewhere in the country, a                                                               
private office building in Anchorage,  and some of the University                                                               
MR. BURNETT said  the cost of construction is just  over $400 per                                                               
square foot.                                                                                                                    
REPRESENTATIVE LYNN  remarked that  a decent residential  home in                                                               
Anchorage, not including the garage,  costs about $100 per square                                                               
MR. BURNETT  offered to produce  the numbers  that Representative                                                               
Berkowitz had previously  requested.  He noted that  the plan for                                                               
Alaska  was based  upon a  35  percent higher  cost than  similar                                                               
projects built in the Lower 48.                                                                                                 
Number 2586                                                                                                                     
CHAIR WEYHRAUCH  asked if it is  correct to assume that  a policy                                                               
issue  implicit  in  [HB  134]  is  that  a  larger  correctional                                                               
facility is  much more economic than  building smaller facilities                                                               
in many parts of the state.                                                                                                     
REPRESENTATIVE  STOLTZE answered  in the  affirmative.   He noted                                                               
that the state  already owns the land and that  the plans are "in                                                               
a site that's not going to be contentious."                                                                                     
REPRESENTATIVE BERKOWITZ  commented that  "class A"  office space                                                               
costs $200 to  $300 per square foot to construct.   He asked what                                                               
added elements in a prison would cause the costs to go up.                                                                      
MR.  BURNETT  replied that  there  are  a number  of  specialized                                                               
materials  used in  a prison  facility such  as automatic  doors,                                                               
special prison toilets and showers,  hardware that has to be very                                                               
durable, and solid concrete walls versus sheetrock, for example.                                                                
Number 2665                                                                                                                     
CHAIR  WEYHRAUCH   noted  that   a  policy  question   which  the                                                               
legislature must address is whether  to house prisoners in Alaska                                                               
or  Outside.   He questioned  at  what point  "critical mass"  is                                                               
reached and a decision must be made.                                                                                            
REPRESENTATIVE STOLTZE  remarked that the Arizona  facility seems                                                               
to have  value as an "escape  valve" now; however, it  can't meet                                                               
Alaska's  needs regarding  bookings.   He said  much shorter-term                                                               
[inmates] are  being sent  to the  Arizona facility.   Predicting                                                               
that it won't  be much longer before that facility  won't be able                                                               
to  meet  Alaska's   needs,  he  mentioned  the   added  cost  of                                                               
transferring prisoners back and forth.                                                                                          
Number 2743                                                                                                                     
REPRESENTATIVE  BERKOWITZ  said one  problem  he  has always  had                                                               
about  sending  prisoners  Outside  is that  it  means  exporting                                                               
capital;  dollars are  not circulating  within the  economy.   He                                                               
asked if  any analysis has  been done  regarding the cost  to the                                                               
state's  economy  because  of  the   Arizona  facility  when  the                                                               
"multiplier effect" is included.                                                                                                
REPRESENTATIVE STOLTZE  answered, "I don't  know that number.   I                                                               
know  the one  on the  face is  $20 million,  and that  certainly                                                               
multiplies that."   He opined that  there's a point at  which the                                                               
value  of  the  state's  having  its  own  institutions  must  be                                                               
REPRESENTATIVE BERKOWITZ said that's what he was suggesting.                                                                    
CHAIR WEYHRAUCH reiterated that the  policy decision is in regard                                                               
to the  economic benefit  to the  state of  building a  prison in                                                               
Alaska, whether it's public or private.                                                                                         
REPRESENTATIVE  STOLTZE said  he wants  to  see the  jobs in  the                                                               
state.   He posited that it  is probably better in  the long term                                                               
for the state to own its own facility.                                                                                          
Number 2851                                                                                                                     
REPRESENTATIVE  BERKOWITZ said  the  state might  be putting  $20                                                               
million into Arizona  right now; however, if  the investment were                                                               
put into  Alaska - even if  [running its own prison]  was, on the                                                               
surface, more  expensive - the  state would be getting  some kind                                                               
of return, based on property  and corporate taxes and the benefit                                                               
to  the municipalities.    He asked  that  those calculations  be                                                               
included in the analysis he'd requested previously.                                                                             
Number 2881                                                                                                                     
MR. BURNETT  referred to an economic  impact assessment [included                                                               
in the committee packet] that was prepared for the Matanuska-                                                                   
Susitna Borough by Northern Economics Inc.                                                                                      
REPRESENTATIVE STOLTZE  remarked that he  has tried not  to dwell                                                               
on things that benefit  the Matanuska-Susitna ("Mat-Su") Borough;                                                               
he opined that the issue is a larger, statewide concern.                                                                        
Number 2910                                                                                                                     
REPRESENTATIVE  SEATON  asked  Representative Stoltze,  "Are  you                                                               
including booking  facilities in  the Mat-Su at  all, or  is this                                                               
strictly older facilities?"                                                                                                     
REPRESENTATIVE STOLTZE mentioned Mat-Su and  said there is a pre-                                                               
trial facility not  too far from there.  He  said, "The Anchorage                                                               
facility  is  the more  appropriate  function  for the  Anchorage                                                               
area, and the  Bethel facility also performs that  function."  He                                                               
added that the Sutton facility is a longer-term facility.                                                                       
MR.  BURNETT, in  response to  a request  for clarification  from                                                               
Representative  Seaton,  stated,  "One   thing  that  an  Outside                                                               
facility cannot  economically handle is short-term  prisoners and                                                               
pre-sentence prisoners."                                                                                                        
TAPE 03-34, SIDE B                                                                                                            
Number 2981                                                                                                                     
MR. BURNETT indicated transportation  costs for sending prisoners                                                               
to  an  Outside  facility  are  greater  than  the  savings  from                                                               
[holding them in Alaska].  He  said he has been working on trying                                                               
to do an accurate analysis "to  get a number which is the maximum                                                               
at any point we could economically  send out."  He mentioned some                                                               
data-quality  issues  and  specific  sentence  times.    He  said                                                               
currently his best  estimate is about 1,500 inmates  who may meet                                                               
long enough sentence requirements to  send Outside.  He said some                                                               
[inmates]  have  mental illness  or  other  health or  behavioral                                                               
reasons why  they can't be  sent.  He  noted that at  some point,                                                               
the state is  spending more money to send [inmates]  Outside.  He                                                               
added, "It  would make  little sense to  send someone  to Arizona                                                               
for  a  4-month sentence,  and  right  now we've  [been]  sending                                                               
people that have a 14-month sentence."                                                                                          
MS.  PARKER clarified  that  the  state is  getting  to where  it                                                               
doesn't  have a  lot of  options  to send  additional inmates  to                                                               
Arizona and still  have it be cost-effective.  She  noted that an                                                               
effort  is made  to  consolidate the  number  of transports  [for                                                               
purposes of  saving money].   Regarding the Bethel  and Fairbanks                                                               
expansions, she  said, "Those are  almost 90 to 100  percent pre-                                                               
sentence."   The prisoners  being transported  out of  Bethel for                                                               
hearings in  superior court or additional  court appearances, for                                                               
example, have to  be transported right back  because they haven't                                                               
been sentenced yet.                                                                                                             
Number 2839                                                                                                                     
CHAIR WEYHRAUCH  asked why  the Anchorage  facility, but  not the                                                               
Bethel facility, is federally funded.                                                                                           
MS.  PARKER  explained  that  the  U.S.  Marshals  requested  the                                                               
capacity  in Anchorage,  where most  of  their federal  detainees                                                               
are.    She said  [the  state]  has  a  contract [with  the  U.S.                                                               
Marshals] to  supply 80  beds at a  per-diem rate;  however, that                                                               
takes up space in a state  correctional facility.  She noted that                                                               
the federal detainee  number is expected to increase  from 120 to                                                               
about 200,  which is  why [the U.S.  Marshals] are  going through                                                               
the federal government  to request additional funds to  add on to                                                               
the Anchorage jail.                                                                                                             
Number 2789                                                                                                                     
REPRESENTATIVE SEATON said he has  heard that the state transfers                                                               
[inmates  with]  medical  problems   to  Arizona  when  possible,                                                               
because it  is less expensive to  treat them there.   He inquired                                                               
about  the  distance  to  medical  facilities  from  Sutton,  for                                                               
example, versus Anchorage.                                                                                                      
REPRESENTATIVE  STOLTZE responded  that  the  Sutton facility  is                                                               
probably  within 15  minutes of  the Palmer  facility for  Valley                                                               
Hospital, where  a $80-million to $90-million  hospital expansion                                                               
is underway.   He noted  that the  other option [is  the proposed                                                               
private  prison  facility] in  Whittier,  which  is farther  from                                                               
Anchorage and requires a trip  fraught with more potential delays                                                               
than a  trip on the  expressway between Palmer and  Anchorage, or                                                               
from Sutton to downtown Palmer.                                                                                                 
REPRESENTATIVE  SEATON said  DOC has  said its  prisoner base  is                                                               
[in] Anchorage; therefore, all the  other locations would be away                                                               
from that base.   He said he  is trying to figure  out the amount                                                               
of time that will be  necessary to transfer [prisoners] for court                                                               
appearances, for example.  He said  although he is not opposed to                                                               
this  project,  he  is  trying  to look  at  the  overall  policy                                                               
regarding where  the majority of  Alaska's prison  housing should                                                               
be sited.   One consideration is  this, he noted:   that which is                                                               
economical to build may not be economical to operate.                                                                           
Number 2620                                                                                                                     
MR. BURNETT  reminded Representative Seaton that  the facility in                                                               
Sutton would  primarily be used for  long-term, stable prisoners,                                                               
so the  transportation in  and out  would be  less frequent.   He                                                               
also noted that  it would be sited next to  a medium-security and                                                               
a minimum-security  facility; therefore, some of  the staff could                                                               
be  used  mutually.    He  noted that  an  Alaska  State  Trooper                                                               
attachment and a court are in Palmer, a few minutes away.                                                                       
Number 2566                                                                                                                     
REPRESENTATIVE SEATON said he'd like  to see an analysis of where                                                               
the  prison population  is  being generated  and  how many  times                                                               
transports are  necessary.   He predicted  that what  may happen,                                                               
because of  the growth of  the prison population, is  that Alaska                                                               
may soon  be sending [inmates]  back to Arizona, and  Alaska will                                                               
be   stuck  with   the  shorter-term   prisoners  who   can't  be                                                               
transported back and forth from Arizona.                                                                                        
Number 2433                                                                                                                     
REPRESENTATIVE HOLM asked for clarification  of the difference in                                                               
needs  between   pre-sentence  and  pre-trial  prisoners   as  it                                                               
pertains to duration of time and the facility, for example.                                                                     
MR.  BURNETT responded  that  pre-trial  [prisoners] are  clearly                                                               
short-term, but couldn't answer whether  there is a difference in                                                               
the  facility  use  between  the   two.    He  said  pre-sentence                                                               
[prisoners]  typically  are  still   awaiting  sentence  after  a                                                               
criminal proceeding;  that wait is usually  short-term, and long-                                                               
term  custody has  not yet  been determined.   In  response to  a                                                               
follow-up  question by  Representative  Holm,  he explained  that                                                               
pre-trial  [prisoners] have  a "higher  need."   For example,  he                                                               
noted that the  people coming in are often unstable  and a higher                                                               
security level is needed.  Also, there are booking needs.                                                                       
REPRESENTATIVE STOLTZE offered his  belief that more attention is                                                               
given to a pre-trial [prisoner] than at any other level.                                                                        
Number 2407                                                                                                                     
MS. PARKER  remarked that  there are  prisoners in  Anchorage and                                                               
Fairbanks who  are there for 16  to 18 months awaiting  trial and                                                               
sentencing.   She added, "So, you  try not to move  them, because                                                               
you know we're going to have to move them right back."                                                                          
REPRESENTATIVE  STOLTZE, based  on the  15 "ride-alongs"  that he                                                               
has done,  said the higher  level of  staffing is necessary.   He                                                               
explained,  "These guys  are drugged  up or  hopped up,  and they                                                               
don't want to  go in through that first locking  door."  He added                                                               
that he has seen some "pretty wild and wooly scenes."                                                                           
Number 2353                                                                                                                     
REPRESENTATIVE  HOLM   returned  to   the  subject  of   cost  of                                                               
construction.  He  asked, "Who's the fox that's  watching the hen                                                               
house?"   He opined that  the State of  Alaska has a  tendency to                                                               
overbuild,  that it  has  been  give a  lot  of  free license  by                                                               
architects  and engineers  who get  more [money]  the bigger  the                                                               
structure is.   He asked  who the watchdog  is for the  people of                                                               
Alaska.  He  opined that the state needs to  be building adequate                                                               
buildings,   protecting   its   population,   and   incarcerating                                                               
appropriately;  however,  it  doesn't  need to  be  building  the                                                               
finest facilities man can possibly build.                                                                                       
Number 2268                                                                                                                     
CHAIR  WEYHRAUCH  remarked  that  he  knows  inadequate  building                                                               
methods  have  resulted  in the  state's  having  infrastructure,                                                               
maintenance, and  repair bills  that don't  get funded  later on.                                                               
He said it's a conundrum.                                                                                                       
MR.  BURNETT  said any  construction  that  the state  does  will                                                               
involve a competitive  bid situation.  He noted that  DOC came up                                                               
with the $135,000 per-bed cost  at its first consideration, based                                                               
on  standard   construction  estimates  and  working   with  [the                                                               
Department  of  Transportation &  Public  Safety  (DOT&PF)].   He                                                               
referred to a blueprint [hanging on  the wall] provided by one of                                                               
the  largest   private  prison  companies,   and  he   said  [the                                                               
department] would  like to find  ways to build cheaper  [than the                                                               
cost proposed for the plan in the blueprint].                                                                                   
REPRESENTATIVE HOLM said that is the answer he wanted to hear.                                                                  
MR.  BURNETT  said  the department's  facility  person  has  been                                                               
tasked with looking at better and cheaper ways to build.                                                                        
MS. PARKER  added, "And  we've directed  them not  to go  out and                                                               
redesign, [but] to  look at what's working in other  areas of the                                                               
country.  This  company's also built for ... prisons  and for ...                                                               
a  lot of  state facilities."   She  said the  department doesn't                                                               
want  anything  above  and  beyond  the  absolute  needs  of  the                                                               
facility,  but is  looking  for  a good  facility  at the  lowest                                                               
possible cost.                                                                                                                  
Number 2156                                                                                                                     
REPRESENTATIVE  STOLTZE said  he  is willing  to  cut corners  on                                                               
prisoner comfort, but not on personnel safety.                                                                                  
Number 2138                                                                                                                     
REPRESENTATIVE BERKOWITZ  asked what  alternative to  "hard beds"                                                               
the  department may  be exploring.   For  example, he  listed the                                                               
following:   ankle  bracelets, house  arrests,  "soft beds,"  and                                                               
MS. PARKER  responded that when  the current  administration came                                                               
in,  there  were plans  already  in  place for  using  electronic                                                               
monitoring.   She mentioned a classification  process whereby the                                                               
probation  officer  works  with  the  central  classification  to                                                               
determine  the  appropriate  [conditions of  release],  including                                                               
electronic   monitoring  and   being  released   into  [community                                                               
residential  care]  (CRC)  and  halfway houses.    She  said  the                                                               
department is implementing that to  the greatest extent it thinks                                                               
possible while still protecting the public.                                                                                     
REPRESENTATIVE BERKOWITZ asked, "Did  you tell me what percentage                                                               
of prisoners are on this sort of alternative?"                                                                                  
MS. PARKER, with  input from Mr. Burnett,  provided the following                                                               
estimates from last  week:  168 on electronic  monitoring, 730 in                                                               
community residential care, and 4,000 on probation and parole.                                                                  
REPRESENTATIVE  BERKOWITZ  noted  that those  numbers  are  under                                                               
direct supervision of  the department.  He  asked what percentage                                                               
are in hard beds and what percentage aren't.                                                                                    
MR. BURNETT replied  that of the people in  direct supervision of                                                               
the department, less than half are in hard beds at this time.                                                                   
REPRESENTATIVE  BERKOWITZ   asked  if  the  department   has  had                                                               
significant problems with those who aren't.                                                                                     
MS.   PARKER  offered   his  understanding   that  Representative                                                               
Berkowitz was asking about those  people who are considered to be                                                               
in the custody  of the department, including  those in electronic                                                               
monitoring, CRCs,  halfway houses,  and institutions.   She said,                                                               
"The percentage in  our institutions would be much  higher."  She                                                               
added,  "Community  residential  centers  -  same  as  a  halfway                                                               
Number 1950                                                                                                                     
DEVON MITCHELL,  Debt Manager,  Treasury Division,  Department of                                                               
Revenue, in response to a  request by Chair Weyhrauch to describe                                                               
his  job and  how he  can  be helpful  to the  committee on  this                                                               
issue, revealed that he is  currently working on the $461 million                                                               
general obligation to  the state that was  authorized November 5,                                                               
2002.   Noting  that the  state  bond committee  is charged  with                                                               
monitoring the state's credit, he  said the issue presently being                                                               
discussed by that  committee - in addition to  other proposals to                                                               
build additional prison  space - impacts the state's  credit.  He                                                               
     This   particular  proposal   would   have  ...   three                                                                    
     municipal  entities issuing  lease  revenue bonds  that                                                                    
     would  be backed  by  a revenue  stream  that would  be                                                                    
     provided by the general fund of  the state.  And so, as                                                                    
     such, if you  were a person interested  in buying these                                                                    
     pieces  of paper,  you're going  to look  at where  the                                                                    
     money comes from,  follow it right back  to the general                                                                    
     fund, and  that's where I  would be of  some assistance                                                                    
     to  the committee,  if you  had questions  on ...  that                                                                    
CHAIR  WEYHRAUCH   asked  Mr.  Mitchell   if  he  has   done  any                                                               
comparative analysis  regarding the state's  indebtedness because                                                               
of its use of a private  prison facility Outside, or in regard to                                                               
the   proposed  private   prison  in   Whittier  or   the  prison                                                               
construction proposed in HB 134.                                                                                                
MR. MITCHELL responded  that the state has not  incurred any debt                                                               
for the Arizona  facility because it is contract-based.   The two                                                               
proposals presently in the legislature  [HB 134 and SSHB 55] will                                                               
have fiscal impact.  He noted  that there are some constraints in                                                               
the legislation  related to the  private facility [SSHB  55] that                                                               
are of  concern.  First,  there isn't a dollar  amount identified                                                               
for the  capital portion  of [SSHB 55]; thus  there is  a concern                                                               
that this leaves a lot of leeway  for a city like Whittier to try                                                               
to interpret it.  Also, [SSHB  55] has a minimum required term on                                                               
the  financing of  25  years,  which also  is  a  concern to  the                                                               
MR. MITCHELL offered the background  that the states in aggregate                                                               
are  in a  negative period  right now  regarding credit  ratings.                                                               
Approximately  half  are  looking  at  downgrades  or  have  been                                                               
downgraded,  he  said,  because there  is  an  imbalance  between                                                               
spending and  revenues by  about $100  billion across  the states                                                               
due to  a decline in  the economy and  the reliance of  people on                                                               
capital  gain receipts  that have  "gone  away."   He said,  "The                                                               
State of  Alaska, I  believe, is  quite fortunate  to be  able to                                                               
maintain our  credit ratings with  our upcoming sale."   He noted                                                               
that  the State  of  Alaska  is much  more  stable; however,  any                                                               
additional  use  of the  state's  credit  needs to  be  carefully                                                               
REPRESENTATIVE BERKOWITZ  asked, "Have  you analyzed  the numbers                                                               
for the Arizona facility at all?"                                                                                               
MR. MITCHELL answered no.                                                                                                       
CHAIR WEYHRAUCH said  he doesn't know if anyone  present has done                                                               
so, but that information is available in the SSHB 55 file.                                                                      
Number 1750                                                                                                                     
REPRESENTATIVE BERKOWITZ  mentioned Arizona and $20  million.  He                                                               
indicated that [the  State of Alaska] is paying  for the profits,                                                               
as well as  the Arizona taxes.  He mentioned  [paying] "above and                                                               
beyond the operating costs."  He  added, "And that number, to me,                                                               
would be interesting."                                                                                                          
CHAIR  WEYHRAUCH told  Mr.  Mitchell it  is good  to  know he  is                                                               
available as a resource.                                                                                                        
REPRESENTATIVE SEATON mentioned state  bonds and revenue bonds as                                                               
the  two ways  of  financing  a facility.    He  asked, "Is  your                                                               
analysis that if  an equal amount was spent on  these, is there a                                                               
difference in the  impact upon the state's bond rating  or on its                                                               
credit rating from those two different sources?"                                                                                
MR. MITCHELL  asked whether  Representative Seaton  was referring                                                               
to the two proposals before the legislature.                                                                                    
REPRESENTATIVE SEATON answered yes.   He added, "To make it easy,                                                               
just think of them as being  the identical amount of money, if we                                                               
don't have  the amount  specified in the  Whittier one.  ... What                                                               
I'm trying  to do  is figure  out if ...  you think  that there's                                                               
going to  be a  different influence from  revenue bonds  with the                                                               
municipalities, or state bond indebtedness."                                                                                    
MR.  MITCHELL responded  that he  believes the  current proposals                                                               
have a  fairly similar  financing mechanism;  it would  either be                                                               
Whittier with a private prison  issuing debt or, "with this bill,                                                               
the other municipalities."  He said:                                                                                            
     If your  question is,  would I  ... personally  be more                                                                    
     comfortable if it  was the State of  Alaska issuing the                                                                    
     debt, I'd say  yes, because it's the  State of Alaska's                                                                    
     credit  and,  as   such,  who  knows  it   better?    A                                                                    
     municipality doesn't know the  State of Alaska like the                                                                    
     State  of  Alaska  knows  the State  of  Alaska.    The                                                                    
     reading analysts that  are going to look  at the credit                                                                    
     are  the folks  that I  deal with  on a  fairly regular                                                                    
     If your  question was,  is there  a cost  difference in                                                                    
     the  credit prospectus,  I think  this is  going to  be                                                                    
     state  supported obligation,  and  so  that means  that                                                                    
     each year the  legislature's going to come  in and say,                                                                    
     "Are we going to appropriate  money to continue to have                                                                    
     that  building  in  wherever   to  house  prisoners"  -                                                                    
     recognizing  that there's  some additional  things that                                                                    
     might happen to  you besides losing that  prison if you                                                                    
     fail  to  appropriate.   So  there  is an  essentiality                                                                    
     issue  and an  ability  to use  your  facility, and  so                                                                    
     that's a consideration when these  folks are looking at                                                                    
     this.  Obviously,  the case has been made  that we have                                                                    
     a  clear need  for ...  prison  space in  the state  of                                                                    
     Alaska.   And  so,  I think  there  is an  essentiality                                                                    
Number 1540                                                                                                                     
REPRESENTATIVE  SEATON asked,  if  there were  two  set of  bonds                                                               
being  issued, whether  one of  those  two sources  would have  a                                                               
lower interest rate.                                                                                                            
MR.  MITCHELL replied  that he'd  tend to  argue that  because of                                                               
name  recognition, a  State of  Alaska issuance  would produce  a                                                               
lower interest rate than a  City of Whittier issuance would, even                                                               
though  the credit  is fundamentally  the  same.   He added,  "It                                                               
would be incremental."                                                                                                          
Number 1470                                                                                                                     
REPRESENTATIVE BERKOWITZ  asked if there is  a difference between                                                               
rates, generally, on revenue versus general obligation bonds.                                                                   
MR.  MITCHELL  answered  yes.   He  explained  that  the  state's                                                               
general obligation bond rating is "Aa-Aa2."  He added:                                                                          
       The type of ratings that we ... achieve with state-                                                                      
     supported  obligations, like  what's being  considered,                                                                    
     are in  the A1, "A-plus"  category.  And so  there's an                                                                    
     additional cost, which, depending  on the market you're                                                                    
     in,  would range  -- ...  well, 20  to 25  basis points                                                                    
     would be the  additional cost of not  putting your full                                                                    
     faith and credit on the line.                                                                                              
Number 1410                                                                                                                     
JOHN  DUFFY,  Manager,  Matanuska-Susitna  Borough,  thanked  the                                                               
committee for  addressing overcrowded prisons  and Representative                                                               
Stoltze for  sponsoring HB  134.   He said  the Matanuska-Susitna                                                               
Borough,  the  cities of  Palmer  and  Wasilla, and  their  local                                                               
chambers  of commerce  support HB  134.   He  explained that  the                                                               
borough believes investing in expansion  of its existing publicly                                                               
owned and  operated facilities is  the most  appropriate approach                                                               
to  relieve overcrowding  of those  facilities.   He said  HB 134                                                               
will allow prisoners  to be closer to their  families and support                                                               
network,  thereby  increasing   the  chances  of  rehabilitation;                                                               
Alaskans   will  benefit   from  increased   jobs  and   business                                                               
opportunities,   state  funds   will  be   invested  in   Alaskan                                                               
communities, and a multiplier effect  from these investments will                                                               
allow  those communities  to  develop  their infrastructure  when                                                               
it's based on local economies.                                                                                                  
MR. DUFFY returned  to the economic impact  assessment, page 3-3,                                                               
and  asked members  to  look at  tables [3-1  and  3-2] at  their                                                               
leisure.   He remarked, "We  identified the economic  impact with                                                               
each facility, as  well as the entire  economic impact throughout                                                               
the state."   He  gave examples  showing that  approximately $250                                                               
million  would be  generated during  the  construction phase,  as                                                               
well as  $73 million generated  in sales and  services throughout                                                               
the state during the operation phase.                                                                                           
Number 1253                                                                                                                     
MR.  DUFFY reported  that the  borough has  adequate health  care                                                               
facilities.    He  reiterated  Representative  Stoltze's  earlier                                                               
mention  of an  upcoming expansion  of a  [hospital] facility  by                                                               
building a  76-bed facility,  with the ability  to expand  to 130                                                               
beds.  He  said there is a district court  facility in Palmer, as                                                               
well as other support systems near  the Sutton facility.  [HB 134                                                               
was held over.]                                                                                                                 

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