Experts Weigh In on the Pros and Cons of What AB 109 Means to Public-Private Partnerships

Signed by California Governor Jerry Brown less than a year ago in April 2011, assembly bill (AB) 109, the realignment process that is shifting low-level, nonviolent offenders from the state prison and parole system to county jails and probation departments only took effect a few months ago. While it is far too early to decide if this is a success or failure, it is clear that one of the major challenges will be for counties to identify long-term funding sources for these new responsibilities. What is also becoming more prevalent are public-private partnerships (P3) where government and private industry collaborate on a project — which is funded and operated through both entities — and which provide tremendous opportunities for both.

Correctional News recently sat down with four individuals from a variety of firms — Nick Warner, managing partner at Warner & Pank LLC, a government relations and legislative advocacy firm in Sacramento, Calif.; Peter Sukalo, vice president, justice group director for the Tutor Perini Corporation Building Group, of which Redwood City, Calif.-headquartered general and engineering contractor Rudolph and Sletten, Inc., is part of; Richard Worthington, president and COO of The Molasky Group of Companies, a real estate development and management firm based in Las Vegas, Nev.; Jeff Bradley, vice president, global justice program director, for HDR Architecture in Dallas, Texas; and Buddy Johns, president of CGL/Capital Solutions, a planning, design, facility finance and management firm based in Atlanta, Ga. All were candid in their thoughts about realignment as it relates to P3 projects and how their companies are and may be affected and benefited.

Q: Please tell me what your firm’s thoughts are on realignment in California?

Warner: I think it’s difficult. I think that if anybody — whether it’s a legislator, journalist, sheriff, chief probation officer or a county supervisor — tells you with certainty that this is going to be dismal failure or a smashing success is premature in their judgment. We are four months into the biggest correction shift the nation has probably ever seen. There are reasons to think counties can do it better and there are reasons to think we can get buried by this. The Supreme Court ruled that we shall reduce our prison population by 35,000 people. You can say you don’t like this, but it’s not that easy. It is 30 years in the making.

Johns: Realignment simply means opportunity. The demand for the beds is there regardless of whether the offenders are housed in the state system or the county systems. The simple fact is that there is a need and we believe that realignment is a step in the right direction to begin to solve problems to fill that need. Unfortunately, it puts significant demands on counties that were already—in most cases—stressed. However, it also includes many more stakeholders, both public and private, to be able to have the input, means and ability to help with solutions. Instead of the state having to take one giant step, all of us can take many little baby steps.

Sukalo: Rudolph and Sletten is supportive of any state of California process that provides additional project opportunities to the construction industry and helps create construction jobs. With the loss of the majority of the CDCR projects due to the state budget cutbacks, we are hopeful that additional state funds will be diverted to the counties to support the AB 900 projects that are in need of funding. Another potential funding solution to support much needed state/county correctional projects could come from private developers. Several private developers are currently well-positioned to finance, design/build, and lease back correctional facilities via a public-private partnership. Under this solution, operational responsibility can be retained by state and local government.

Worthington: AB109 and the governor’s Plan for realignment has already transferred approximately 13,000 inmates to local county responsibility as a result of federal lawsuits, overcrowding within the state’s correctional system and persistent state budget shortfalls. The Molasky Group of Companies is committed to helping the state of California and various communities in California go beyond the prison system as legislated. Our development solutions offer economic alternatives for counties that create jobs, support public safety and prepare inmates for release with programs designed to reduce recidivism.

Bradley: We leave the politics to the politicians and administrators. Times change and in our business, architects need to be dynamic to perform. We feel for the counties, but HDR can help them with any challenges they may face from realignment. We have a great 34-year history with CDCR and the counties and are presently doing very large important projects for both entities. This market is cyclical in nature with different forces and issues causing those changes. This shift comes at a challenging economic time for the entities and together we can help them resolve their challenges.

Q: How will California’s realignment issue help companies such as yours?

Worthington: We can serve as a partner to governmental entities in California and provide services/expertise in financing, design, developing, constructing and delivering turnkey operational facilities at extremely attractive terms. The Molasky team has significant experience in successful public-private partnerships with federal, state and local governmental entities in the design, construction and financing of numerous facilities totaling in excess of 2 million square feet and having an aggregate value of nearly $1 billion. Partnering with us can afford agencies the ability to significantly mitigate numerous risks associated with project delivery ranging from eliminating project cost overruns and alleviating agencies of significant coordination efforts, to saving the agency valuable taxpayer dollars through the efficient acquisition of needed facilities.

Johns: I believe that many private companies can benefit from the long-term impact of realignment. This process is likely to get many needed projects off the drawing board and into the ground. We and all the service providers to the justice and correction market will benefit from the likelihood of projects getting started.

Warner: There is no benefit to my firm, but it does challenge us to find and seek solutions to deal with the challenges presented by realignment. We are interested in pursuing every possible opportunity for counties to improve their current situation both to handle new offenders and to make sure we don’t fall on the same lawsuits and liabilities the state has. We are involved in helping put groups together that can aid counties and in the education process with counties that are understanding how to use P3. And, we’re involved with state representatives to see if there are any legal barriers to using P3. Our interest is to look under every stone to deliver resources to counties so we can handle this realignment.

Q: What do you see as the pros and cons of realignment from your perspective?

Johns: The pros and cons are completely different based on an individual’s perspective. I would assume that the larger counties must have a significantly longer list of cons than most other stakeholders. That is the unfortunate outcome of such a significant change. The real pros will not be seen for many years, but hopefully a closer contact with the communities and family and a focus on re-entry programming will help end the cycle and reduce recidivism.

Worthington: This is a difficult time for the state of California and certainly for many counties as they weigh the options for developing properties and managing inmates through a newly established community-based correctional system. The positives that may come from realignment is the heavy focus on community-based corrections that will be necessary in order for realignment to work successfully. Hopefully investments made today in realignment will result in lower recidivism, better public safety outcomes and more effective rehabilitation for lower risk, lower level offenders.

Bradley: The counties will need help with financing and we are very experienced with that part of project delivery as well. HDR has a large experienced team of P3 experts, including real estate analysts, financial planners and economists to help them with these issues. We have done P3 projects for decades allowing our experience and assets to help the states and counties meet their needs. We help them meet their challenges by providing P3 advisory services, P3 design delivery, site planning, master planning, projection studies, design (both architectural and in-house engineering specialties), financial planning and program management.

Sukalo: California counties currently have the option of using the design/bid/build or design/build project delivery method to build their correctional facilities. Rudolph and Sletten plans to work directly with the counties that are selected to receive AB 900 funding to assist them with selecting the best process for delivering their project. We intend to introduce the counties to a P3 delivery option that will work well for both the private developer and public operator. The state of California Department of General Services’ (DGS) current P3 contract language makes it difficult for private developers to secure financing for State P3 projects.

Q: Will realignment be a boon or bust?

Bradley: The taxpayers end up paying the bill whether people are housed at the state or county level. The officials and laws determine just where they will be housed. This will give some counties an opportunity to update, renovate and improve safety in older facilities. I would think it would benefit the design, financing and construction industry — and the modernized institutions improving the safety for both staff and inmates.

Worthington: We believe that the realignment process will be another opportunity for real estate companies such as ours to partner with state and local government to find solutions to create needed capacity at the local level for these new inmate populations. The better suited firms will have the requisite skills and experience to deliver turn-key facilities as time is of the essence for the realignment process to be successful.

Sukalo: In our opinion, any process that helps deal with California’s inmate population challenges and creates additional project opportunities and construction jobs would be considered a positive outcome for California and our construction industry.

Q: What P3 projects or efforts is your company/firm currently involved with in the correctional arena?

Warner: Anything can happen in this environment. I don’t think there is going to be enough AB900 funding to address the need. So we’re going to have to find alternative creative ways to fund not just more jail beds, but better jail beds. By that, I mean mental health facilities inside county jails, health facilities inside county jails. There’s not enough state money.

Sukalo: Counties throughout the nation are evaluating public/private partnerships as a potential alternative project delivery method for much needed court and jail facilities. We are exploring teaming arrangements with P3 developers, justice architects and subcontractors to pursue P3 correctional projects.

Worthington: Our firm has done several public-private-partnership correctional projects in Nevada that were very successful projects for the state and county clients we assisted. The Molasky Group of Companies would also like to assist California as offender/inmate populations realign from the state prison system to the county level for lessor sentences and inmates approaching the end of their sentences. We have been in contact with various law enforcement and public safety officials, lawmakers and policymakers throughout the state for the last several years looking for ways to deliver cost-effective solutions to assist with the overcrowding problems in California.

Bradley: We are working with two foreign government project teams for P3 prison work right now. And we are talking with multiple state correctional systems. We also are involved in several very large domestic county jail P3 projects. We recently completed the design documents and construction documents in just five-and-a-half months for CDCR’s $512 million, 1,722-bed, 1.2 million square foot health care facility in Stockton, Calif. HDR is also designing 13 very specialized correctional health care facilities for CDCR at three different prisons, as well as a 200-bed prison hospital for Illinois DOC. And we are about to open a 435,000-square-foot jail in Raleigh N.C.

Additionally, we were awarded by the Kuwaiti Government in 2010 the 3 million square foot, 6,250-bed Kuwait Correctional Complex in a global competition.