Decal fee raise said short for prison

About $100 million needed for lockup, lawmakers told

A proposed $2 fee increase on license plate decals would likely not cover the costs to build a new, roughly $100 million prison, an official from the Bureau of Legislative Research told lawmakers Tuesday.

The Legislature would instead need to approve an increase of about $2.50 or $3 to pay for bond financing for the prison, depending on what funding timeline is chosen, said Richard Wilson, the bureau's assistant director of research.

Wilson presented the report to a joint meeting of the House and Senate State Agencies Committee less than a month after the Board of Corrections approved asking the Legislature to fund construction of the facility.

"You would need really somewhere between $2.50 and $3 to do this project, and that's if you do it now," Wilson told reporters after the meeting. "If you do it a year or two from now, the forecast is that those interest rates are going to increase."

The chairman of the prison board said in an interview that he is confident in the estimates presented to the board, but has directed a committee to review the figures as soon as possible.

Prison officials have said they plan to ask the Legislature during the upcoming session to approve funding for the new prison because of overcrowding in the state's existing facilities. A new building has been estimated to cost between $75 million and $100 million to construct and another $19 million a year to operate.

The board voted last month to ask for funding for the new facility using the additional fees on decals.

Wilson said that the state sells about 2.67 million decals per year, which would generate $5.34 million with a $2 fee increase. If the state used a 20-year bond, it would require an annual cash flow of $6.72 million or about $2.52 per decal.

If the state used a 15-year bond on the $100 million, it would require an annual cash flow of $8.17 million or about $3.06 per decal, he said.

A spokesman for the Department of Correction said the investment bank Stephens Inc. worked with the Arkansas Development Finance Authority to determine how much of an increase would be needed to support the bond issue.

Mike Carraway, the assistant director of administrative services at the department, said in an email that the department already received $1.50 of the $2.50 fee assessed with the purchase of all license plate decals. A new 30-year bond issue would generate around $94.8 million in construction funds, which would cover all of the payment obligations under the bond, he said.

Benny Magness, the chairman of the Board of Corrections, said he recognized a "conflict" with the bureau's numbers but that he stood by the board's figures.

"I'm really pretty confident in Stephens having the correct [estimates]," Magness said.

Magness said the board makes funding requests but doesn't normally decide how the money should be raised. He said he'd be willing to consider other funding options if the Legislature doesn't want to raise decal fees.

"That doesn't concern me; what concerns me is that we have to build a prison. We have to build a new prison whether I like it or anybody else likes it. I know the arithmetic, and I know what we're facing every day," Magness said.

Sen. Eddie Joe Williams, R-Cabot, said he has not heard from a single legislator who supports raising the license plate fees to pay for the new prison. He said he wanted to learn more about using existing facilities, including old school buildings, to house additional inmates.

Williams said he asked the bureau to study several aspects of the prison system, including outsourcing guards and other staff and other "Plan B" alternatives to building a new facility. He said the committee would meet every month until the legislative session to discuss the topic.

"There is no way that we can responsibly address this issue in 60 or 90 days, starting in January, the new session," Williams told reporters. "So we're going to do the groundwork here."

Metro on 08/20/2014

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