Once again, there are developers at work trying to acquire the 700-acre Utah State Prison Complex in Draper for commercial and residential development. The proponents of moving the prison claim that now is the time to relocate as interest rates are low, construction costs are low and economic development benefits are high.
The fact is that those wanting to move the prison benefit much more than would the taxpayers. Now is not the time to move the prison for myriad reasons — most notably since the state lacks the ability to pay for relocation costs. In addition, such a move doesn't solve the decade-long problem of prison overcrowding, as the current plan calls for a prison replacement with eventual expansion.
This proposal is a classic "solution looking for a problem" scenario. In 2005, then-Gov. Jon Huntsman Jr. commissioned a study that indicated the cost to build a new prison would be $471 million. At the time, the land was valued at about $93 million, which was considered to be undervalued. However, since that time, property values in the area have decreased significantly — due primarily to the recent economic downturn.
It's a buyer's market in real estate and the developers pitching this move know this, meaning that any move benefits the developers and not the people of Utah. 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 funding from the federal government. Given the desire to reduce the federal deficit, that source is likely a dead end. There really are only two sources of financing for relocation: taxes or borrowing.
The Legislature is unlikely to increase taxes but most likely to cut spending in other areas while allocating the "savings" to relocation. Issuing bonds, or debt, is the most likely funding solution. Utah, having enjoyed status as our country's "best-managed state" in the past, now ranks third in debt by size of government. Only Delaware and Maryland carry more relative debt. While Utah has been sheltered from debt solutions in the past, the state Legislature is increasingly relying on bonds to fund projects.
Utah 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 2.5 times higher than pre-recession levels — and real wages have not increased.
Debt solutions are the primary reason why other states are in trouble fiscally, 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, in terms of a move now, between 2017 and 2019. The current proposal calls for the 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 pass.
Likewise, taxpayers should pass on an offer of $100 million because there is little economic benefit in borrowing and spending money to relocate the prison.
Chris Stout is a Salt Lake City area accountant and the Democratic candidate for Utah State treasurer in 2012.
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