After hearing of several options regarding the pending expansion of the county jail during a special meeting on June 26, the San Benito County Board of Supervisors approved the project that will ultimately cost $25,016,394. Of that, the state will fund $20,053,000. Construction could possible begn in late August, after the state has held several required meetings to formally award their portion of the funding.
“Once county counsel and staff are ready to proceed, the awarding of the bid will need to be agendized in order for the board to grant the winning bid in accordance with state statutes,” Louie Valdez, county analyst, noted in an email. “I am unable to provide an approximate timeline as to when that might happen.”
In 2007, the state awarded the county $15.053 million for the construction in order to assist with overcrowding and lack of programming space at the jail on Flynn Road, east of Highway 25 and west of the Hollister Municipal Airport. In 2011, the county was re-awarded the money under more favorable terms. Since that time, work has been progressing on the design of the facility. However, due to extreme price escalation within the construction industry as a whole, and to a greater degree within the detention segment, what was once a $13 million facility became a $17 million facility, according to county staff. An additional $5 million of pass-through AB109 funds was approved by Community Corrections Partners to make up that difference and the project proceeded to the bid process. After a contractor pre-qualification process, bidding began on May 16.
Of the eight prequalified construction firms, five submitted bids. The low bidder realized, however, that it had made a mistake and withdrew its bid. Sletten Construction Company submitted the second lowest bid of $20,139,852. Even though the bid exceeded the project estimate by nearly $3 million, it was determined to be in line with several other bids, indicating that it was a fair price.
Before supervisors voted on June 26, Valdez explained four options for the board’s consideration. One would change the scope of the project; another would cancel it; the third would set up a re-bidding process; and the last would move forward with the project.
Valdez explained that under option No. 1 that if the board decided it wanted a change of scope, a number of points needed to be considered, the first being that the project timeline could be pushed back from 12 to 18 months, which was determined by market forces and other factors. Costs could increase up to $1 million. There might be additional, unforeseen, costs, he noted, and there could be an overall cost for bidders and the county because of the time and effort to come up with new bids and reviewing them. Lastly, he said the state could deny a scope change.
“This would be due to the competitive grand award funding process that the $15 million the county has received,” Valdez said.
He explained what option No. 2, the cancellation of the project, entailed. The first big hit would be that the county would lose the $15 million awarded to it by the state and there would be no recovery of money already spent.
“At this point, approximately $1.5 million in staff time, resources to be dedicated, legal review, technical review all cost money, so we would not be able to recover that,” Valdez said. “And we will have a loss of all county in-kind costs. There would also be the loss of opportunity to improve the overall county infrastructure. A building of this nature would obviously add value to the facilities and to the operations of the sheriff from an infrastructure perspective. And, of course, there is the risk of a lack of statutory compliance with regard to government code requirements that counties must follow in order for incarceration requirements.”
Valdez went on to explain what would happen under option No. 3 if the board decided to reject all bids and re-bid the project. The timeline would increase because the entire process would have to begin anew. It would also be impossible to know how many companies would even want to participate because of a number of factors, including an increased cost to come up with new bids.
“There would be an increased cost to the county, as well,” he said. “The cost of the project could go up. An increase of all the consulting time, those fees will increase. Time dedicated to this project will have to be taken away from other projects. We will have no recover of staff time if we re-bid this process. It will be a new dedication of staff time again.”
As time goes on it would not be unreasonable to assume the cost of the project would increase because of a reduction in available resources, Valdez said. The fourth option would be to proceed with the project. In that case, he said, there would be a few internal logistical steps first.
“There is a requirement to cancel approximately $10 million in the General Fund reserves in fiscal year 2017/18 budget,” he said. “There is board authorization that would need to occur to the county administrator’s office to contract with KNN Financial to identify the most appropriate source of debt financing. We’ll need to do the transfer of $1 million from our Enterprise Funds to defer the costs of construction management, that’s Vanir (Construction).”
After a number of other steps, Valdez said there would be a need to codify the board decision in the budget by updating the schedules that are applicable to the project. Joe Paul Gonzalez, the county auditor, said that once the decision is made to go forward with the project, and if the board decided to do so, a debt capacity study would be conducted to come up with estimates of what the county could expect to pay in debt service for a loan of $9.2 million over 20 or 30 years.
“At a 3 percent rate, the payment would be $612,000 a year,” he said. “The CCP (Community Corrections Partners) has already committed to $250,000 of debt service, so the county General Fund would be on the hook to pay $362,275 annually for the next 20 years.”
If the loan were, instead, for 15 years, the annual payments would be $752,000, whereas CCP’s portion would remain the same at $250,000, according to Valdez. With impact fees, the General Fund would pay about $500,000 a year.
“The decision to move forward means you have to incorporate that into your budget,” he continued. “That’s the first item of business you would need to deal with, the passage of the budget, and then the board would direct staff to pursue a debt capacity study and options for debt financing.”
Supervisor Anthony Botelho said he felt that it was best to move forward because the timing was right and that the coujnty should choose the 30-year financing option to allow flexibility and perhaps pay down the debt faster, if it is able to do so.
“This is a great opportunity for our county to bring in some state money for a project,” he said.
When asked if he had any thoughts about seeking additional opportunities to fund the project, Sheriff Darren Thompson said he was dedicated to finding revenue through re-purposing the space already available.
“I would not be doing that in a bubble, but it would be in partnership with this board that those opportunities would be evaluated together to make sure they were beneficial,” he said.