Once again, there are developers at work trying to acquire the 700-acre state prison complex in Draper for commercial and residential development. Proponents of moving the prison claim that now is the time to relocate as interest rates and construction costs are low, and economic development benefits high.
The fact is, those wanting to move the prison would benefit much more than would taxpayers. Now is not the time to move the prison for myriad reasons, most notably that the state lacks the ability to pay relocation costs. In addition, such a move wouldn't solve the decade-old problem of prison overcrowding because the current plan envisions a prison replacement with only eventual expansion.
In short, this proposal is a classic "solution looking for a problem."
In 2005, then-Gov. Jon Huntsman commissioned a study that put the cost of building a new prison at $471 million. At the time, the land was considered undervalued at about $93 million. However, since then, property values in the area have fallen significantly, due primarily to the recession.
It's a buyer's market in real estate, and the developers pitching this move know this. The net cost to taxpayers would likely be in the neighborhood of $400 million.
Where, exactly, would this money come from? In past years, the state could rely on some federal funding. Today, desire to reduce the federal deficit likely makes that a dead end.
There really are only two sources of financing for relocation: taxes or borrowing. The Legislature is unlikely to increase taxes, but is most likely to cut spending in other areas while allocating the "savings" to prison relocation. Issuing bonds, or debt, is the most likely funding solution. Yet, once designated "Best Managed State," Utah now ranks third in debt by size of government. Only Delaware and Maryland carry more debt.
While Utah has been sheltered from debt solutions in the past, the Legislature is increasingly relying on bonds to fund projects. Utah now uses about 87 percent of its bonding capacity, which is 2 percent higher than what our past state treasurer recommended as safe, and probably 7 percent over what is safe in today's financial environment.
Our constitutional borrowing limit is directly tied to property values, and even though Utah is better off than most of the country, our unemployment rate is still 2Â½ times higher than pre-recession levels and real wages have not increased. Debt solutions are the primary reason why other states are in fiscal trouble, and Utah appears to be falling into the same debt trap.
The 2005 study also indicated that "a fully developable site" won't be available for five to seven years or, if the move were undertaken now, between 2017 and 2019. The current proposal includes an ability to expand, but these costs are not reflected in the relocation. In other words, Utah will still need to determine when, where, and how to pay for any increase in the prison population between now and 2019.
Economic benefits from such a plan should favor all parties equally. Unfortunately, Utah taxpayers are left holding the bag with this particular relocation plan. If developers were given the option to buy the prison and grounds for the replacement cost of $471 million, they would take a pass.
Likewise, taxpayers should pass on an offer of $100 million because there is little economic benefit to them in borrowing and spending money to relocate the prison.
Chris Stout is a Salt Lake City-area accountant and the Democratic candidate for state treasurer.