Are negotiations underway between the owner, Corrections Corporation of America and the State of Minnesota? How much is the closed Prairie Correctional Facility in Appleton worth?
The answer to the first question appears to be no, while finding the answer to the second is more complex--and CCA's current price tag may butt against a little-known state law passed in 2014.
UPDATE August 19: About 20 minutes after this post was published, the West Central Tribune published Forum Communications political reporter Don Davis' article, Dayton not interested in Appleton prison purchase. [end update]
Rumors of negotiations
Earlier this summer, Representative Tim Miller, R-Prinsburg, told a town hall meeting in Appleton that CCA lobbyists met with the governor's office and made an offer to lease the Prairie Correctional Facility "for $6 million to $8 million a year, and to sell it for $99 million. The lease payments could be used toward the purchase price, according to Miller," Tom Cherveny reported in the West Central Tribune.
More from Cherveny's Appleton option' to reopen western Minn. private prison stays the course:
Miller said the opposition continued to ignore the fact that the corporation had offered the state an option to purchase or lease to own, and that the state would have operated the prison with union employees.
Corrections Corporation of America had offered to lease the facility for $6 million to $8 million a year, and to sell it for $99 million. The lease payments could be used toward the purchase price, according to Miller.
Appleton attorney Brian Wojtalewicz questioned the $99 million purchase price when Corrections Corporation of America is paying property taxes based on a $15 million value. Miller said that's the offer the corporation put on the table. Negotiations between the state and the company are not in the Legislature's hands.
While there was opposition to the prison legislation, Miller said there was also some progress. There was sentiment in the Senate in favor of purchasing the facility. And, the governor's office had met with lobbyists for Corrections Corporation of America to discuss the offer, he said.
The article--verified as accurate by two acquaintances who attended the town hall--raised a series of basic questions about the offer. With yesterday's announcement by the federal government that it will be phasing out private prisons, the notion of purchasing the prison was back in the West Central Tribune. Veteran reporter Carolyn Lange writes in Lawmakers speculate price of Appleton prison could drop with federal phase-out of private facilities:
News Thursday that the federal government intends to phase out use of privately owned prisons has renewed questions about the future of the privately owned prison in Appleton.
During the last year Corrections Corporation of America and officials from Appleton and Swift County launched a campaign to persuade the state to lease—or buy—the prison to ease overcrowded state prisons.
That proposal was opposed by Gov. Mark Dayton and a variety of political, religious and community groups who oppose for-profit prisons.
But there's speculation now that the Appleton prison may be available at a bargain price after CCA's stock prices plunged about 35 percent a few hours after the announcement by the Department of Justice.
The action by the federal government will likely put "downward pressure" on the price of the Appleton prison, said Sen. Lyle Koenen, DFL-Clara City.
"That puts us in a good negotiating position," said Rep. Tim Miller, R-Prinsburg.
Oh? In the earlier article, Miller asserted that the legislature had no role in negotiations, so it looks like Miller is indulging his proclivity for wanting to have things any number of ways depending on the audience and situation (more on that with regard to the prison in a bit).
Some basic questions (and answers) about "the offer"
Earlier, Bluestem had attempted to contact the governor's office, two state agencies, the Chief Fiscal Analyst of the Minnesota House Fiscal Analysis Department, a CCA staff lobbyist and contract lobbyists while consulting other sources in an attempt to learn more about the offer mentioned in the first article (and reported again in Thursday's article).
Our questions were basic in reporting terms, looking for the when of the meeting with the governor's office, the who of those attending the meeting, the how this offer was calculated and how it was conveyed (written or oral) and the like.
While the CCA lobbyists did not answer emails or voice messages, the Department of Corrections and the Department of Administration (which manages government property) both were unaware that an offer was on the table.
The office of senator Ron Latz, who convened the prison population task force, was not aware of the offer.
According to administration Press Secretary and Senior Communications Advisor Matt Swenson, Dayton's chief of staff Jamie Tincher met with a CCA lobbyist (or lobbyists) at their request. While Swenson offered few details about the meeting, it concurs with Minnesota Public Radio's Brian Bakst reporting in Dayton sounds off on prison, PolyMet, MNsure and more:
Reopening a western Minnesota prison. In no uncertain terms, the governor said he would veto a bill with traction in the House to reopen a private prison in western Minnesota under some level of state control.
Dayton said he’s not comfortable with the push to resume sending inmates to the Prairie Correctional Facility in Appleton — at least not yet.
“I’m told they want $100 million to buy it. Then we have to rehab it and operate it. Hugely expensive. And I certainly don’t support this private corporation being authorized or leasing the facility to them or paying to have them to come back and do it with all the problems they brought before,” Dayton said.
According to Swenson, Dayton's knowledge of the $100 million price tag comes from this single meeting with Tincher.
While advocates for reopening the prison took this press conference statement as a hopeful sign, a review of the press conference footage (unavailable online, as it was removed with other press conference footage that was found to be non-compliant with the state's Americans with Disabilities Act [ADA] policy) reveals that Bakst's account is accurate--and Dayton doesn't seem particularly happy with the added expenses that would follow a hypothetical purchase.
We also contacted nonpartisan House staffer Bill Marx,the Chief Fiscal Analyst of the Minnesota House Fiscal Analysis Department , who responded in two emails. Bluestem received the first on July 15:
The bill that had a hearing in the House and was moved to the Ways and Means Committee (HF 3223) directed the state to rent the Appleton facility. So the fiscal note on that bill did not address the value of the facility. The fiscal note is attached - there may be items of interest.
Then the House Public Safety portion of the Supplemental Appropriations bill that went to the Supplemental Budget bill conference committee. contained language (copied below) that directed the commissioner of corrections to negotiate a contract to purchase or lease to own the facility. That language did not become law. I am not aware of any estimate that we had for the cost of purchasing the facility. Our fiscal analyst who works with Public Safety issues is not in the office today. . . .
I have talked with several more legislative staff about the value of the Appleton prison.The taxable market value is $14 million, as you stated.Our fiscal analyst who works with Public Safety issues says he heard a $90 million number at one time but has seen no documentation of that and only heard the number once. He says he is aware of no discussion of what the state might pay if the state purchased the facility.If the prison were operating the taxable value might be considerable higher than $14 million. Do you have any way of getting county tax information from a time when the prison was operating?
When reviewed in tandem with the Department of Corrections and the Administrative Services being unaware of any offer, it appears that no active negotiations are underway, however pro-prison folks might spin it.
How much is that prison in the window?
A review of available sources about the value of the prison while it was operating suggests that $99 million or $100 million may be a steep price for the facility. According to bipartisan legislation passed in 2014 and signed by the governor, no state agency (with the exceptions of the DNR, MNDOT and BWSR), the University of Minnesota and MnSCU may pay not over ten percent of the appraised value of real property. Assessed, appraised and "carrying value" are not equivalent terms.
The highest assessed value that we were able to find in news reports is based on Swift County tax information that was challenged by CCA. In 2009, the Morris Sun Tribune reported in Appeal likely on valuation of Appleton prison:
A $20 million difference of opinion in the market value of a privately owned prison in Appleton could end up in court.
The Swift County assessor set the 2009 value of the property at $42.9 million.
A representative of the Corrections Corporation of America told the Swift County Board of Appeal and Equalization on Tuesday the property should be valued at $23.7 million.
The board, which is comprised of the members of the regular Board of Commissioners, denied a request to lower the property values. . . .
Unlike residential property values that are set each year, Swift County and the prison have agreed to go through the complicated process every three years to establish a three-year schedule for the valuations.
During the last round in 2006, the prison filed an appeal in court and then the two sides negotiated an agreement, said Giese. The county spent about $5,000 in legal fees.
The commissioners are hoping a similar smooth scenario takes place this time.
In 2003, a different approach was used. At that time, each entity hired appraisers and attorneys and negotiated an agreement without court intervention.
Ironically, that method cost the county about $125,000 in legal fees.
Giese said it's actually easier to negotiate an agreement once an appeal has been filed in court, than doing it outside the boundaries of the court. Also, he said, when an agreement is negotiated during a court appeal, the settlement is binding.
In 2006 the property value of the prison was set at $24 million. In 2007 it was $28 million and in 2008 it was set at $32 million.
Although prison populations are decreasing and the prison is currently at 55 percent capacity, during the last three years it's been at about 98 percent capacity, said Giese. That historical data was used to determine the 2009 rate.
In short, when the prison was operating at near-capacity, it was assessed at $42.9 million, though CCA thought it was worth quite a bit less. An anti-privatization website created by the Private Corrections Working Group, includes subsequent news coverage in its Minnesota Hall of Shame page (we have broken the copy into block paragraphs to make it more readable, but have not changed the content)
June 21, 2012 West Central Tribune
The market value of the privately owned Prairie Correctional Facility in Appleton — its prison beds empty for nearly 2½ years — has been reduced by $7.5 million to a new value of $14 million.The reduction was approved Tuesday night by the Swift County Board of Equalization.
But even that large reduction may not be enough to prevent the prison’s owner, Corrections Corporation of America, from seeking even greater tax relief by means of an appeal to the state. “They left, we hope, content enough not to appeal to the state board of equalization,” said Swift County Auditor Byron Giese. Assistant County Assessor Wayne Knutson had said the prison property should be valued at $22.5 million.
The Corrections Corporation of America said it should be valued at $10 million.[bold added] The Swift County Board of Equalization members agreed that the value of the empty prison should be reduced and members compromised with a market value of $14 million. It’s not known if Corrections Corporation of America will accept that $14 million valuation or if it will stage another appeal.
The $14 million valuation is a far cry from the $42.9 million the county assessor valued the property at in 2010. That rate was also later reduced during a court appeal and binding negotiation — a process in which the county and Corrections Corporation of America has engaged ever since the 1,600-bed prison opened in 2001. “They have appealed every single time,” said Giese.
March 17, 2010 West Central Tribune
A tentative three-year tax agreement reached with the Corrections Corporation of America will mean lost revenues for Swift County, especially in 2011. Property taxes will likely increase to make up for a decrease in revenue that the Prairie Correctional Facility in Appleton had generated in the past, said Swift County Auditor Byron Giese.
The prison, which closed in February, had appealed its $42.9 million valuation last fall, triggering a series of negotiation sessions. Following a closed meeting Tuesday, the Swift County Board of Commissioners approved a three-year deal that assumes the prison will remain empty in 2011 and hopeful that it will reopen in 2012, said Giese.
The first part of the agreement includes a reduction in the 2009 valuation from $42.9 million to $32 million for the 2010 payable taxes. That translates into a loss of $50,000 in tax revenue to the county this year, which Giese said will have to come out of the county budget. “It’s something we have to deal with. It’s not insurmountable,” he said.
Harder hit is the city of Appleton that will see $250,000 less in revenue. The Lac qui Parle Valley School District will have a decrease of $40,000 because of the lowered valuation of the prison, and the state will get $60,000 less Giese, said. The 2010 valuation, for taxes payable in 2011, will be lowered to $17.5 million.
The financial impact on tax revenues for the local entities hadn’t been calculated with that low valuation. “Everyone will have to live with it and move forward,” Giese said. He said property taxes may have to increase 3 to 4 percent on each parcel to make up for the lost prison revenue: “Local taxpayers will pay more.”
In the final phase of the three-year plan, the 2011 valuation for taxes payable in 2012 would increase to $21.5 million. “We’re anticipating that, hopefully, it’ll be open again,” said Giese, explaining why the valuation is scheduled to increase at that time. Corrections Corporation of America, which has other empty prisons in the system, has assured the county that reopening the Appleton prison is their number one priority.
“It’s not good for any of us to have this thing closed,” Giese said. The board did express concern, however, that if the prison opens its doors again in a few months with the lower valuation that the county “could look like we have egg on our face,” said Giese. “But it would be a good thing to have it back open.”
The tax plan was approved on a 4-1 vote, with Chairman Richard Hanson casting the lone no vote. Commissioners Gary Hendrickx, Joe Fox, Doug Anderson and Pete Peterson voted for the plan, which still must get final approval from Corrections Corporation of America and the courts.
Another concern with the closed prison is the effect it will have on the 2010 Census. Ten years ago the facility had 1,400 prisoners that counted toward the county’s population. The population of a community is a factor in obtaining such things as federal aid. Giese said if the prison opens and the population increases in the future, the county could appeal the census count.
The one bright spot financially for the county is that a $200,000 annual tax abatement that was part of the prison’s economic development incentive has expired after 10 years, said Giese.
The carrying cost of the prison in CCA's most recent annual report (2015) is $17,961,000 (F-20). Carrying value reflects the purchase price of property.
Why buy or lease?
Those who oppose re-opening the prison by and large look to sentencing and probation reform, as well as expansion of alternative programs like the Challenge Incarceration Program (CIP) to reduce Minnesota's prison population.
Those who seek to re-open the prison see incarceration as an economic development tool (jobs, jobs, jobs) as well as serving a need. Sometimes the narrative of Swift County as the bottom of the pack for unemployment got a bit counterfactual, as in Tom Cherveny's article, Economic tipping point triggers campaign for Appleton state prison:
With assistance from the Upper Minnesota Valley Regional Development Commission, the city of Appleton assembled these numbers a few years ago looking at the economic impact of the prison and its closing:
365 the number of jobs the prison once provided the regional economy
86 the number of lost jobs experienced directly in Appleton.
$13,760,000 The dollar value multiplier of what the loss of jobs meant annually in economic activity for the community.
$500,000 The amount of property taxes the facility pays to the city of Appleton. The taxes would be lost were the state to purchase the facility.
$800,000 The approximate total property taxes paid by the facility including the city, county and school district.
$50,000 The monthly utility bill the facility paid the city of Appleton when it was operating at full capacity.
$300,000 The amount of local government aid the city of Appleton lost annually when the prison closed. Inmates had been counted as part of the city's population in calculating LGA.
90 The number of students the local schools lost when the prison closed.
$586,620 The estimated loss in pupil aid that resulted with the loss of students.
Representative Miller made the economic argument when he issued a statement reacting to Governor Dayton's promised veto:
"The Governor's Office is not leading on this issue, especially considering a commissioner has said that we have an overcrowded prison crisis. Months ago he proposed spending $140 million for new prison beds and that proposal was taken off the table after the Appleton prison was found to be a viable option. It's time for Governor Dayton to finally address this crisis by supporting the re-opening of the Prairie Correctional Facility and providing hundreds of good-paying union jobs to unemployed Swift County residents."
However, faced with other audiences, Miller changed his tune, championing criminal justice reform over jobs in his district, while seeming quite sincere about it. At a forum about sentencing reforms and the Appleton prison that was held by Miller's colleague Rep. Raymond Dehn, DFL-Minneapolis, the Prinsburg Republican said:
I totally hear what you’re saying about prison population reform, basically people who don’t belong in prison, and I agree. If someone doesn’t belong in prison, and not by my definition, but if people don’t belong in prison, I don’t want that to happen. If that means reducing the number and that means Appleton doesn’t open, then I’m 100% for it.
Here's the video clip of the moment, courtesy of The Uptake:
Funny how we don't hear that sort of talk out here in the district from Miller, but perhaps truth is a Foursquare app for the freshman legislator.
He does seem to stretched it a bit about those negotiations when talking to his constituents, so maybe his work with the Barn theater came in handy in North Minneapolis.
For an earlier post about the value of the prison, check out Probably didn't read Art of the Deal: Miller a-okay with buying $15 million prison for $99 million.
Photo: Tim Miller (left) tells participants in a North Minneapolis town hall that if the prison population can be reduced, he's 100 percent against reopening the private prison in Appleton, while Jeff Backer, R-Browns Valley, looks on. Screenshot via The Uptake (above); the private prison in Appleton (below).
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