Southern Utah News Articles
Top Stories for September 23, 2009
The good, the bad, and the ugly of the new jail
What’s the good, the bad, and ugly about Kane County’s plan for a new jail and sheriff’s office? Will the new jail be a boon, or will it bankrupt our county? This article discusses why this major capital improvement project may be good, bad, or even ugly for local taxpayers, businesses and families.
About three years ago, the Taxpayer Association of Kane County started following the development of the jail project, realizing it could have a major impact on our property taxes. At our request, the county hired the Center for Public Policy and Administration at the University of Utah to complete a fiscal study of four options for dealing with the overcrowding of our current jail. The results of this study indicated that a 200 bed jail that would house 140 state inmates, along with our Kane County inmates, would pay for itself and have little or no negative impact on the county budget and property taxes. In comparison, the options of building either a smaller jail or a larger one, both would end up costing local residents a significant increase in property taxes.
In 2008, Kane County and the Taxpayer Association collaborated in a series of public meetings throughout the county where citizens were able to look at the numbers and issues at hand. At the end of these meetings, the vast majority of attendees voted, in a survey, for the 200 bed jail option because it would have the least negative fiscal impact on our county.
What’s good about this 200 bed jail that the county plans on building? We do need a new jail because our old one is dangerously overcrowded. Building an addition to our old jail located in the middle of downtown Kanab is not a viable option. Also, taking advantage of the opportunity to house state prisoners will give us the money needed to construct and operate the new facility.
If Kane County stays within the parameters set by the CPPA fiscal study, then the jail should pay for itself and perhaps even earn revenue for our county. These CPPA parameters include the total cost of the project, how it is financed, and the amount of state inmate revenue the new jail will generate.
What about the fear that having state prisoners in our community will cause problems? The Taxpayer Association completed an interview survey of people living in both Garfield and Beaver Counties where similar large jails are located. We found no significant complaints about any problems associated with their jails, inmates, or family members of inmates. In fact, many people commented on the positive aspects of the jail, saying that they provided employment and that often the inmates provided valuable community services, such as helping with parades and public events and washing and waxing people’s cars for $5.
Based on these positive fiscal projections for a new 200 bed jail by the CPPA fiscal study, and the results of the community meetings, the Taxpayer Association then decided to publicly support the project. The Kane County Public Safety Facility Ad Hoc Committee subsequently recommended the 200 bed jail option, and the Kane County Commissioners voted to build the new jail. The Kane County Commissioners had paid $10,000 for the CPPA fiscal study and were ready to put the project in action.
What happened next? Over 2009 things have gotten muddy. The county has spent much of this time trying to get funding for the project, with limited success. Apparently, the fact that Kane County has a low population and small tax base hasn’t helped. Also, the fact that Kane County government’s financial situation is not as healthy as it could be has made getting a loan more difficult.
Earlier this summer, the county was able to obtain partial financing from a state agency, the Community Impact Board (CIB). The total of this is $7.5 million at 2.5% interest for a term of 20 years. This is an excellent loan, but covers only a portion of the money needed to build the jail.
There is still a bit more good news before we get to the bad and the ugly. In a recent meeting with Deputy Sheriff Tracy Glover, he told Taxpayer Association officers that the county has a shot at getting a loan from the United States Department of Agriculture at a low rate, similar to the CIB’s. If the balance of the required funds is obtained by this kind of loan, then the jail may end up doing even better than paying for itself.
There is more good news. Glover also explained that we may also be able to house up to 160 state inmates rather than 140, and that this extra revenue can be used to pay for the jail perhaps even ahead of schedule. Glover went on to explain that he is personally committed to obtaining jail project financing that will not end up burdening local taxpayers.
Now for the bad news. There are risks to local taxpayers associated with this jail project. If the county does not comply with the parameters of the CPPA study, then there is no guarantee that local taxpayers won’t take a big money hit to build this large jail. First, there is a risk that the State of Utah may lower the inmate reimbursement rates, thus causing Kane County to receive less revenue than expected. The state has done this before, and they may do it again.
Next, the jail may end up costing us more than the $15 million projected by the county and the CPPA to build. Last, but not least, the county may end up financing this jail at a higher than expected interest rate and for a longer period of time, thus driving up the total cost of funding the jail.
The bottom line is that if revenues are lower than expected and the jail cost is higher than projected, then who do you suppose is going to pay the difference? Our guess is that it will be the businesses, families and property owners in Kane County.
Now for the ugly news. Our Kane County Commissioners have voted for a county bond resolution approving the issuance of tax-exempt municipal bonds in the amount of up to $10.5 million to cover the cost of the jail facility. Borrowing this amount of money increases the estimated cost of funding the jail from $15 million to $18 million.
Even worse, the commissioners have written into the draft of the Final Bond Resolution the acceptable maximum terms for these bonds in a range that is way more expensive than that projected in the CPPA study. In the proposed resolution, the commissioners are willing to offer to sell bonds at the rate of up to 8.5% interest for a fixed rate and up to 14% for a variable rate of interest, and these bonds may be financed for up to 35 years. In contrast to these expensive loan terms, the CPPA fiscal study parameters simply called for borrowing money at 5% for a period of only 20 years.
How does this proposed Final Bond Resolution affect the cost of the new jail facility? The CPPA fiscal study projected that the total debt service for financing the jail would be $24 million, and the loan would be paid off in 20 years. The Final Bond Resolution would allow Kane County to buy bonds at a much more expensive rate. An 8.5% bond where we are paying interest for 35 years will cost us a total of about $54 million when added to the cost of the CIB loan that we’ve already obtained. A 14% variable interest bond plus the CIB loan will cost us $74 million over 35 years.
Why would our county commissioners pay $10,000 for a fiscal study from the University of Utah, and then deviate from the results of this study? After basing their decision to build this jail on the CPPA study, our Kane County Commissioners have drafted a county bond resolution that is significantly more expensive than the parameters of the fiscal study they paid for.
Local taxpayers need to be concerned that if the three Kane County Commissioners do decide to vote for the current draft of this Final Bond Resolution, and then go ahead with issuing bonds at a high interest rate for 35 years...then the total debt service of the new jail could be two or three times as much as the amount projected by the CPPA study. If this happens local businesses and property owners will most likely be required to carry the tax burden of this expensive jail financing for decades to come.
What can you do as a taxpayer, family or business to see that our commissioners do not obtain exorbitant financing for the new jail? First, you can write to the Kane County Commissioners, 76 N. Main, Kanab, UT 84741 and tell them what you think. Second, you can attend the Public Hearing on this proposed Final Bond Resolution on September 28 at 4 p.m. at the county offices, 76 North Main, Kanab. At the hearing, you will be able to voice your concerns about the effects of these high cost bonds on the families and businesses of Kane County.
Last, but not least, you can join the Taxpayer Association of Kane County by e-mailing firstname.lastname@example.org
We’ll send you updates on this jail issue as it progresses. The mission of our organization is to keep life affordable in Kane County. Working together we can make a positive difference in how our county is being run.