Prison utilities move forward with new contract

POINT MACKENZIE — A private company working to bring water and wastewater services to the Goose Creek Correctional Center has received a loan from a state corporation.

The Alaska Industrial Development and Export Authority announced Friday that, in partnership with Wells Fargo Bank, it would provide $16.8 million to Valley Utilities LLC for the project.

The prison project has been a collaboration between the state and Mat-Su Borough. The borough is building the facility and plans, over time, to sell it to the state through lease payments. Valley Utilities is working in a separate capacity to provide fresh water and treat the prison’s sewage. That side of the deal has run into controversy with the Borough Assembly, but never enough controversy to derail it.

The borough’s head of purchasing, Russ Krafft, said that from the start Valley Utilities had been required to provide financing for the project.

Krafft said that the fresh water side of the project is all but finished and is already providing water to the site, which contractors are using to test the facility’s plumbing. The sewage side is the more expensive part and where the wrangling over financing comes in.

The plan had been to fund the sewage treatment plant through private means. Interest rates would therefore have been something on the order of 8 percent — much higher than what the state usually gets when it sells bonds.

Those costs would then have been passed on to the state through its contract with Valley Utilities. Krafft said the state, at least at first, was willing to pay that interest rate.

“At the last hour, the state said ‘no.’ They were unwilling to assume eight percent money on that,” he said.

The state, he said, requested AIDEA take a look at the project. This new deal drops the interest rate down to 4 percent. But, Krafft said, either way it made no difference to Valley Utilities, which is to be paid based on its costs to provide the services.

“Valley Utilities doesn’t make any additional money regardless of who does the financing,” Krafft said.

Nor, he said, is the change of much consequence to the borough. In fact, the negotiations between AIDEA, Valley Utilities and the state don’t really even involve the borough at this point.

“We haven’t had a lot of access to the information as to what this deal really is and, frankly, we don’t need it, because we’re not a party to it anymore,” Krafft said.

The main beneficiary, as far as he can tell, is really the state, since it will be paying less for sewer service.

“What this does is it saves the state of Alaska and the taxpayers of Alaska 4 percent on $20 million over the life of the bonds,” Krafft said.

But the contract still won’t be a cheap one. Krafft has said at previous meetings that at the Goose Creek Correctional Center, the state will be paying 10 times the rate it pays at the Hiland Mountain Correctional Center in Eagle River for sewer and water.

The prison project as a whole, he said, is moving along on schedule. The other utilities — power, fiber optic cables and natural gas — were in place long ago.

The prison will be a 1,536-bed facility the state says will allow it to stop contracting for prison services with companies in the Lower 48.

The plan is to have the facility built by late fall of 2011, which is just slightly sooner than the borough had anticipated.

Contact Andrew Wellner at andrew.wellner@frontiersman.com or 352-2269.