When the Alabama Corrections Institution Finance Authority (ACIFA) increased the project price cap for a new prison in Elmore County from $623.6 million to $975 million, State Rep. Steve Clouse (R-Ozark), the former House General Fund budget committee chairman, had the same reaction shared by many to the sudden and significant changes.
"Yeah, it was sort of a sticker shock there," Clouse told 1819 News. "Obviously, we've got some issues with inflation."
According to a resolution passed by ACIFA on Wednesday afternoon, the over $350 million increase is "due to circumstances beyond the control of the Authority or ADOC ... which could not have been reasonably anticipated."
According to Clouse, original cost estimates in 2021 for the projects were about $675 million for the Elmore County prison and $625 million for the Escambia County prison. The projects were funded with $400 million in federal American Rescue Plan Act (ARPA) funds, $135 million from the state's General Fund, and up to $785 million in possible bond sale proceeds.
"I think they'll probably have to go back to the drawing board a little bit here," Clouse said.
The bond sale last summer by the state to fund the construction of the two mega-prisons managed to raise only $509 million.
"When the Finance Department went to the market on the bonds, they were only able to sell $509 million," Clouse said. "There is capacity there for another $276 million worth of bonds to be sold to try to make up the difference. It's not a good environment for long-term bonds right now. That's the main reason why we weren't able to sell the entire $785 million at that time because with interest rates going up like they have for investors, it can be more advantageous to get some type of short-term instrument instead of having to tie your money up for a 30-year bond. That has only gotten worse in the last year-and-a-half here on interest rates, so I'm not sure exactly when it would be advantageous to go back to the bond market here. It may take a couple more years to be able to do that as far as bonding capacity."
State Rep. Chris England (D-Tuscaloosa) said on social media on Thursday that "actual prison construction hasn't even started yet, but we are already up to a billion dollars."
"We haven't even started talking about paying for the second prison yet," England said. "Add this to the billion dollars we are spending on a prison healthcare contract. This is not sustainable."
A spokesperson for Gov. Kay Ivey didn't return a request for comment.
Alabama Finance Director Bill Poole told the Associated Press on Wednesday that the change was needed after inflation and design alterations increased cost projections.
Poole said the initial cost estimate was "based on very early design."
"We've increased, for instance, the education and vocational space. There have been other scope and parameters that have changed. Inflation has had a significant impact on construction costs, as is seen across all economic sectors," Poole told the AP.
Other changes in the resolution include an increase of about $4 million in the design-phase sum from $42 million to $46 million. The resolution also included an approximately four-month increase to the initial final completion date from 1,382 to 1,506 days following a notice to proceed with design phase work issued by ACIFA. The Elmore County Prison was previously estimated to be completed sometime in 2026.
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