Utah defends and explains early low estimates for new state prison

(Rick Egan | The Salt Lake Tribune) Paul Edwards Deputy Chief of Staff, and Executive Director Kristin Cox discuss the prison development budget, during a news conference in the Governor's Conference room, Thursday, February 1, 2018.

State leaders explained and defended Thursday their early low public cost estimates for the new state prison — which has grown from $550 million four years ago to $692 million now, and may go higher.

The Governor’s Office and legislative leaders called a Capitol news conference Thursday in the wake of news reports of rising prison construction costs and a Salt Lake Tribune story about how officials never previously disclosed the early cost estimate of $860 million — raising questions of whether prices were low-balled to win support of the public and rank-and-file lawmakers.

State officials on Thursday distributed a timeline of various official cost estimates through the years, what each did and did not contain, and reasons for escalations.

It said the $860 million estimate came in 2016 — a year after the Legislature voted to move the prison based on Prison Relocation estimates that put the building costs at $547 million to $683 million, not including the price of the land and preparation.

It said that higher $860 million estimate was part of work to figure all potential future needs. “This initial programming is common practice and usually exceeds anticipated budgets,” according to the timeline released by the state.

Jim Russell, director of the Division of Facilities and Construction Management (DFCM), said that estimate was based on the cost of other prisons nationally, and was the highest of several early estimates. He said they were pared down as officials figured the size and type of prison they desired.

(Rick Egan | The Salt Lake Tribune) Sen. Jerry Stevenson talks about the prison development budget, during a news conference in the Governor's Conference room, Thursday, February 1, 2018.

Sen. Jerry Stevenson, R-Layton, co-chairman of the Prison Relocation Commission, added, “There were some big numbers thrown out there [early]. We felt like they weren’t right for us. They were compared to prisons being built around the country, and that’s why we landed on the numbers we landed on.”

Russell said estimates were cut down because “this prison is unique.”

He added, “You will not find another one like this in the country and probably the world where you have this many inmates together, both male and female, with all classifications. There’s efficiency in that…. So there’s not an equal benchmark out there. That’s why estimates have been a little subjective and all over the place.”

Once the site was selected and better projections could be made about site costs, including adding roads and utilities, DFCM revised its estimate to $760 million, Russell said. The estimate using national benchmarks was at $860 million.

The timeline that state officials provided said, “The Legislature’s original 2015 $550 million appropriation was intentionally set close to the lowest existing estimates,” in part to prevent a “creep in the scope of the project.”

It added that estimate “was largely intended to cover the cost of the land and buildings, but not unknown site-specific costs.”

When the state chose to move the prison near the Salt Lake City International Airport, the site lacked roads and basic utilities. Officials said that added $154 million to costs.

Also through the years, the prison was projected to have 4,000 beds or more. That number has been reduced to 3,600 now — as officials from the Governor’s Office and legislative leaders predict that new prison reforms will reduce recidivism.

However, Russell has cited Department of Corrections projections that 4,000 prison beds will be needed by 2022 — just one year after scheduled completion of the new prison.

Corrections confirmed that projection last week.

Russell said construction will be configured so that the new prison could be expanded later but acknowledged when pressed that that would be more expensive than building a larger prison now.

Construction of a 4,000-bed prison could cost $60 million-$70 million more than the $692 million now estimated, based on DFCM’s earlier calculations.

Russell was quick to point out, however, that all the numbers are estimates. “When we get bids in we’ll have a much better idea.” Large pieces of the project are supposed to go out to bid this summer or fall.

(Rick Egan | The Salt Lake Tribune) Rep. Brad Wilson talks about the prison development budget, during a news conference in the Governor's Conference room, Thursday, February 1, 2018.

Officials said construction prices have risen, adding more to costs. House Majority Leader Brad Wilson said that “if we had anticipated inflation at the level” seen in recent years, “we would have not believed we could build this prison for $692 million,” the current estimate. He praised officials for holding costs to that.

The state timeline said the current estimate is “a 19.5 percent reduction from the highest estimates. The current estimate is only $9 million more than the upper range of the original estimates, even though it also includes site-specific costs when the 2015 estimates did not.”

Kristen Cox, executive director of the Governor’s Office of Management and Budget, said current estimates are just estimates — and true costs will not be known until contracts are awarded. The timeline said the administration may need to ask for more money in 2019 because of rising labor and material costs.

Paul Edwards, deputy chief of staff to Gov. Gary Herbert, said despite the high costs of the prison, it is helping to fuel “unprecedented economic development.”

“It could be that the prison relocation will provide one of the greatest returns we have ever seen from a state investment,” he said.

Edwards said it will convert 700 acres at the current Point of the Mountain prison site into part of the growing Silicon Slopes high-tech area, and the new prison is bringing roads and new utilities that are attracting new development near it — including development by Amazon. He said together, the changes may create 30,000 jobs.

“None of this is justification for allowing continued misunderstanding about a complex process, nor is it pretext for unjustified cost overruns,” he said. “Our administration is committed to landing this project on time and on budget.”

Herbert did not appear at the joint press conference. Edwards said he is on a limited schedule as he recovers from recent kidney stone surgery, and doctors have urged him to avoid crowds because of a weakened immune system.