Prison developer CoreCivic says it will decide if it will compete for the $900 million project based on ‘the specific requirements’ of the solicitation.

The state executive now tasked with devising a plan to finance a $900 million jail on Oahu worked for years as a registered lobbyist for CoreCivic, which is a prison developer that lobbied for years to try to get the state to move forward with the Oahu jail project.

State Budget Director Luis Salaveria was registered as a lobbyist for CoreCivic until the end of last year, but said in an interview Wednesday he did not participate in the company’s push to get the state to issue a request for proposals to build the new jail.

But state Ethics Commission records show CoreCivic spent hundreds of thousands of dollars on payments to a half-dozen lobbyists in Hawaii in recent years, in part to press the state to move ahead with building a new Oahu jail.

Oahu Community Correctional Center.
Prison developer CoreCivic has been trying for years to get the state to solicit proposals from companies to build a new jail on Oahu, and a former CoreCivic lobbyist is now leading the state effort to develop a financing plan for the project. (Cory Lum/Civil Beat/2021)

John Sabas, a longtime Hawaii lobbyist for CoreCivic, said Wednesday he has introduced CoreCivic executives to lawmakers as part of a years-long effort to convince the state to finally put the jail project out to bid.

“As we’ve made our rounds (at the Legislature), we’ve made it real clear to them that we’re willing and able to help design, build, even finance the new OCCC when they’re ready to do it, but we’ve been trying to push them to get an RFP (request for proposals) out for some time now,” Sabas said.

Sabas said CoreCivic would rather not operate the new jail, and said as much to both lawmakers and to the public worker unions in Hawaii. “But we can design, we can build, and we can finance it, so we’re hoping they can take another step forward.”

Those kinds of arrangements where developers both finance and build a project for a government entity are often called public-private partnerships, or P3 agreements.

CoreCivic, formerly known as Corrections Corporation of America, specializes in financing and building such projects under a program it calls its “real estate-only model.” The company says it can speed construction and reduce construction costs for governments by 25%.

But Salaveria said that during his tenure with CoreCivic, “there’s never been any specific ask to the administration when I was lobbying for them to do some kind of P3 arrangement.”

Salaveria said his work as a lobbyist for CoreCivic involved Hawaii’s contract to house prison inmates at CoreCivic’s Saguaro Correctional Center in Eloy, Arizona. Hawaii paid more than $33.6 million last year to house inmates at Saguaro, and currently holds 872 prisoners there.

According to filings with the State Ethics Commission, CoreCivic paid Salaveria a total of slightly more than $43,100 for his lobbying work from 2019 to 2022.

Salaveria now heads the state Department of Budget and Finance, and he briefed Senate President Ron Kouchi and members of the Senate Ways and Means Committee on Kauai on Sept. 15 on possible ways to finance OCCC and other correctional facilities.

He did so because lawmakers asked the administration to look at different financing approaches other than the traditional practice of issuing general obligation bonds to borrow money for construction funding, Salaveria said.

“We’re just laying out options,” Salaveria said.

Two of the three financing options outlined by Salaveria would involve having a developer finance and build the new facility, which the state would then lease or buy back from the developer.

The third option involves a mechanism called a certificate of participation, which is a less common type of government financing than general obligation bonds.

Those financing strategies are in play “because the state is strapped for cash,” said Tommy Johnson, director of the state Department of Public Safety in a recent briefing for the Hawaii Correctional System Oversight Commission.

Ryan Gustin, director of public affairs for CoreCivic, said in a written statement that “our decision to submit a proposal for any potential opportunity to provide solutions in Hawaii will depend on the specific requirements of the procurement.”

“We offer a unique solution used by several of our partners where we call on our four decades of experience to design, finance and construct a secure facility that is fully staffed and operated by our government partners,” he wrote.

As for CoreCivic’s lobbying in Hawaii, Gustin wrote that “because our customers are government bodies, lobbying allows us to educate them about the types of solutions we provide and to stay current on issues that affect our ability to best serve our partners.”

Luis Salaveria, director of the state Department of Budget and Finance, with Gov. Josh Green at a briefing on the state budget last year. Salaveria is developing financing options for the new jail, a project his former client CoreCivic has been promoting. (David Croxford/Civil Beat/2022)

Salaveria said he has not consulted with CoreCivic about the possible financing plans being developed by his department or asked if the company would be interested in participating in such a plan.

Johnson told the Hawaii Correctional Systems Oversight Commission on Sept. 21 it will be up to Gov. Josh Green to approve a financing plan, which Salaveria will then finalize and submit to lawmakers for their consideration.

Members of the Senate Ways and Means Committee who heard the presentation on Kauai “were excited about Salaveria’s innovative proposals,” according to a news release issued by the Senate after the briefing.

“As the State looks to transfer risk and liabilities while minimizing our debt service, alternative financing mechanisms will help sustain essential programs and services,” the press release said.

However, Salaveria told senators on Kauai that “the state does not currently have the legal expertise to execute the contractual agreements necessary to realize the full benefits of alternative financing mechanisms,” according to the news release from the Senate.

Robert Harris, executive director of the Hawaii State Ethics Commission, said state law limits what former government officials can do when they leave government service and take jobs in the private sector.

But Hawaii does not generally limit what actions government employees can take that might affect their former employers in the private sector.

For example, Hawaii Revised Statutes 84-18 prohibits state employees from working on a contract proposal while in government, and then leaving the state and immediately going to work helping a contractor to bid on that same contract, Harris said.

Those “post-employment restrictions” limit the activities of former state workers for a year after they leave government.

But there are few restrictions on company executives or lobbyists who go to work for government and then become involved in matters that affect their former private sector clients or employers.

If a government employee has a continuing investment or ties to a private entity that has business before the government, that could present a conflict of interest under Hawaii law. But Salaveria said he has no financial interest in CoreCivic or his former lobbying firm, which is called SanHi Government Strategies.

There is an argument to be made the state benefits when people with private sector expertise join government, “but from an appearance perspective it can look suspect, and it really would be incumbent to make sure that they’re acting on behalf of the state, not on behalf of a former client,” Harris said.

Camron Hurt, program manager for Common Cause Hawaii, described the arrangement involving Salaveria and CoreCivic as “unethical, at best.”

He said Salaveria had to have known CoreCivic has been aggressively pursuing the jail project in Hawaii, and “he’s clearly going to look out for his organization that he’s familiar with, that he has a relationship with.”

The financing package for the project is critical because the state could end up paying considerably more money under a lease agreement for a new jail than the state would pay if it simply financed the project on its own as it now routinely finances new schools and other public facilities, he said.

“It’s par for the course, and when citizens say there is a corruption issue, and they say there is a transparency issue, and they say they do not trust the state government, you need not look any further than what you have right here,” Hurt said.

The jail project to replace the aging and overcrowded Oahu Community Correctional Center in Kalihi has been stuck in the talking and planning stages for more than a decade, and a P3 deal has been contemplated for years.

It is expected to be one of the most expensive public works projects in state history, and the cost of the project is one reason it was delayed for so long.

The state has already spent nearly $10 million just planning the new jail, and corrections officials have been seeking another $25 million for planning, design and procurement to hire a developer to build the project.

Former Gov. David Ige became an early supporter of using a public-private partnership model to finance the jail, saying the new facility would be so expensive that the Legislature might never agree to fund it.

At the time Ige estimated the jail would cost $150 million to $200 million to build. But earlier this year Johnson estimated the cost today will be $900 million, and warned that cost will escalate by 8% to 12% each year the project is delayed.

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