Thursday, February 28, 2013

Senate Pres Could Profit From Prison Relocation

Posted By on February 28, 2013, 10:39 AM

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A bill passed favorably out of committee Wednesday to create a special board to consider the economic worth of relocating the Utah State Prison in Draper and developing the land underneath it. --- The bill would allow Senate President Wayne Niederhauser, R-Sandy, to assign three senate members to that group, which raises ethical concerns, considering that Niederhauser operates a holding company that owns more than 30 acres of undeveloped property near the prison that could increase considerably in value if the board decides to move the prison.

The price tag for relocation of the prison could cost taxpayers up to $600 million, says Sen Scott Jenkins, R-Plain City, who discussed his Senate Bill 72 on Wednesday. He says the costs could be offset by a combination of operational savings at the new prison of $17 million to $20 million annually, plus the value of the land—at as much as $140 million after development—tax increments and deferred-maintenance-costs savings.

The bill would create a Prison Land Management Authority, a special body that would research whether relocating the Draper prison is economically feasible and, if so, take requests for proposals from private-sector contractors on relocating the prison and developing the 690 acres it occupies in southwestern Salt Lake County. 

The authority would include members of the Governor’s Office of Economic Development, construction and real-estate industries and three Utah House representatives appointed by the Speaker of the House and three state senators appointed by Senate President Niederhauser. Jenkins' bill would create strong protections against conflicts of interest, keeping members of the authority from serving if they stood to gain financially through relocation of the prison or development on the prison site.

Jenkins, however, acknowledged there was nothing in the bill addressing a conflict of interest on the part of Niederhauser, who would pick three senators for the authority and who also has financial interests in developments adjacent to the Draper prison site.

“I was not aware of that,” Jenkins said, when he heard about Niederhauser’s ownership of property near the prison.

According to corporation documents from the Utah Department of Commerce, Niederhauser is a manager in a company called GMMN Holdings, LLC. That same company owns 23 acres of undeveloped property in Bluffdale, roughly four miles from the Draper prison. The company also has residential properties both developed and undeveloped in a subdivision adjacent to the undeveloped 23 acres. Niederhauser did declare the land on his conflict-of-interest disclosure form.

According to Buzz Welch, director of the master’s program of real estate development at the University of Utah and executive director of the university’s Ivory Boyer Real Estate Center, property even four miles away from the prison will see a “huge upswing in value” if the prison is relocated and replaced with a major commercial development. That does raise concerns, he says, that Niederhauser would be too closely tied to the prison relocation plan.

Niederhauser says he doesn’t see a conflict of interest pertaining to the prison-relocation effort because he believes the properties will be developed and sold before the prison is relocated.

“I haven’t even thought about how the prison might affect us, because prison relocation is so far down the road,” Niederhauser says. “We’ll be done and won’t own any property in that area by the time that happens.”

Niederhauser says he’s owned property in the Bluffdale area for the past decade. His company had developed roughly 75 acres before the recession hit and stalled everything in 2008. He says his company has only just begun developing the last 25-to-35 acres since 2012. He hopes to finish developing the lots and expects to have them sold by the end of 2014.

“I don’t think we’ll get any benefit from that housing project because prison relocation is at least two years away,” Niederhauser says.

But Niederhauser also has other close ties to the prison project. A group called Point West Ventures, consisting of real-estate and commercial developers and other individuals, formed in 2010 to lobby specifically for the relocation of the Draper prison so the land underneath could be unlocked for development.

Point West Ventures lists Al Mansell of Mansell & Associates as one of the members of its “government relations” team. Corporation documents from the Utah Department of Commerce currently list Niederhauser as a director of Mansell & Associates.

Mansell himself was a former Utah state senator and former senate president. When he retired, he handpicked Niederhauser to take over his legislative seat.

Not only has Niederhauser’s business partner lobbied for the relocation, but SB72-sponsor Jenkins also confirmed to City Weekly that Point West Ventures was one of eight private-sector groups that submitted information to Jenkins and the Prison Relocation and Development Authority (PRADA) during 2012. PRADA was created by the Legislature in 2012 to study costs and benefits of relocating the prison; Jenkins was a member and used that experience for his bill this session.

Mansell interacted with PRADA and provided them with information regarding the risks and potential economic benefits of the prison-relocation proposal.

Niederhauser stresses that he would not stand to personally profit through Mansell & Associates if the prison were relocated, but does agree his close association with Mansell could be a conflict of interest.

“It is a conflict of interest, and for that reason I have stayed away from that issue,” Niederhauser says. “I’ve not tried to influence PRADA or influence Scott Jenkins’ bill; it's best that I just stay away from that.”

But under Jenkins’ SB72, Niederhauser won’t be able to stay away from his duty in appointing senators to the Prison Land Management Authority. Niederhauser says that, unfortunately, he can’t get around his own conflict of interest but says such things are unavoidable in a citizen-run Legislature.

“I don’t make a living being a legislator, and I don’t think the people want me to make a living being a legislator and, consequently, all of us have conflicts of interest and we try to deal with them the best way possible, by declaring all of our conflicts,” Niederhauser says.

The bill creating the Prison Land Management Authority, based on input from groups like Point West Ventures, cleared the Senate Judiciary Committee on Wednesday, but not without plenty of skepticism from members of the committee, as well as members of the public who spoke against the bill at an earlier hearing.

Jesse Fruhwirth, a former City Weekly reporter and current activist with the SLC Prison Divestment Campaign, questioned the profit motives of the relocation plan and said the upfront taxpayer expenses made the bill comparable to an “Obama stimulus program.”

Sen. Lyle Hillyard, R-Logan, was also skeptical during the Wednesday committee hearing.

“I’ve only been [at the Legislature] 33 years, but I cannot remember a time that I’ve ever seen a project proposed that we were going to fund [in part] with savings in the program, where the money developed,” Hillyard said. He was doubtful savings alone could offset the costs and worried about the new prison authority having to revert to tax increments, which would potentially divert county property taxes to help fund the project.

“Before we step foot on this ice, I want to know how deep the water is,” Hillyard said.

University of Utah Ivory Boyer Real Estate Center Director Welch says that as for the need to move the prison, it’s a no-brainer.

“Anyone with two eyes in front of their face could understand that for the last 25 years, that’s absolutely been the wrong use for that property,” Welch says of the prison. Welch says the market has already decided that relocation and redevelopment should happen, but says that the public perception of insider dealing could sidetrack the project.

“The infrastructure around the prison for retail, office, industrial, hotel and other types of commercial business is relatively mature and will drive the right developments on the prison site,” Welch says, while adding a caution to the project’s potential. “As long as you don’t get into a good ol’ boys situation … then I think you should be fine.”

For more updates from the Hill, follow @EricSPeterson on Twitter

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