John Hult, South Dakota Searchlight
PIERRE – Lawmakers peppered the Department of Corrections secretary with questions on Wednesday morning about the growing gap between initial and current price points for two new state prisons.
Secretary Kellie Wasko told lawmakers that the state will have a “guaranteed maximum price” in November for the men’s prison. Barring a legal victory by the local opponents to the prison project who’ve sued the state over site selection, the prison will be built on an undeveloped patch of cropland in Lincoln County. It would replace the oldest areas of the state penitentiary in Sioux Falls.
Regardless of the location, the proposed 1,500-capacity prison would be the costliest state-funded capital project in South Dakota history.
The cost keeps changing, though. The current estimate sits at $567 million, Wasko told the budget-setting Joint Appropriations Committee on Wednesday. The Bureau of Finance and Management told the same committee earlier this session that the cost could grow to $700 million.
The initial projection, as presented in 2022 by an architecture and engineering firm called DLR in a facilities review, was $338 million.
The new 288-capacity women’s prison in Rapid City, meanwhile — for which there’s already been a groundbreaking to relieve overcrowding at the existing women’s prison in Pierre — had $60 million set aside last year by lawmakers. On Wednesday, Wasko presented a project cost of $87 million.
Taken together, the cost estimates for the projects have swollen from an initial $398 million to $654 million – a 64% increase.
Lawmakers push back on budget
Both figures caught the attention of Rep. John Mills, R-Brookings, who ultimately offered the lone “no” vote on a bill to further fund the women’s prison project.
The DLR report served as the basis for two years of discussions on the new prisons. The report says new prisons are needed to manage South Dakota’s growing inmate population and the safety of staff at the 143-year-old state penitentiary in Sioux Falls, and Mills said he agrees.
That doesn’t mean he’s ready to accept a price tag hundreds of millions of dollars higher than the report’s estimates.
“I remain very concerned about the costs,” Mills said. “I believe they’re highly inflated.”
Wasko said more than once during the hearing that “DLR is not a construction company,” and stressed that the current figures came from designers and construction managers who are closer to what will become the final products.
With an assist from State Engineer Stacy Watters, Wasko explained that DLR based its costs on inflation rates from 2021, and that further price hikes were tied to subsequent inflation.
“When we actually tracked the integrated record inflation from ’21, ’22, ’23 and ’24, we were closer to seven and a half to 8%,” Watters told the committee.
Mills wasn’t satisfied, though. He noted that the state of Nebraska is also building a new prison with 1,500 beds at a cost of $350 million.
“What explains the difference between ours at $567 (million)?” Mills said.
Wasko told Mills she’d spoken with the project manager for that prison to prepare for Wednesday’s hearing, and she said one major difference is in the security level of the inmates who will be housed in the Nebraska facility. That campus is only partially for maximum security inmates, and includes medium-security areas and a 600-bed “camp.”
Higher-security inmates require costlier security measures on the construction side, Wasko said.
“We are doing a multi-custody facility, which we house at our highest custody level, because those are the beds that are lacking right now,” she said.
She also pointed out that Nebraska’s site is very near electricity, water and sewer lines, that all the building materials are available within 50 miles of the site, and that their cells are precast and will be “stacked like Legos.”
“I would think that all those things would be available to us,” Mills said. “They do precast in Sioux Falls.”
The “infrastructure and trade demands” in South Dakota are “significantly different,” Wasko said.
Sen. Jim Bolin, R-Canton, wanted assurances that the “guaranteed maximum price” presented in November would mean that the general contractor would “eat” any overruns.
Watters and Wasko said the November guarantee would mean just that.
Rep. Tony Venhuizen, R-Sioux Falls, questioned the $39 million the DOC committed to a consultant for the design of the prison. He noted that the South Dakota State Capitol lifted its design from Montana to save money.
“I don’t know what we pay these people an hour, but if we pay $500 an hour, $39 million would employ 38 people for an entire year,” Venhuizen said.
Watters told Venhuizen that at least a dozen people are working on the design full-time, and that the contract runs three and a half years.
Women’s prison adjusted to shave off costs
The committee did not vote to allocate funding to the men’s prison project on Wednesday, though it’s expected to this week. When it does, it will deposit money into an incarceration construction fund, where it will build interest until construction of the men’s prison begins, sometime in 2025.
That interest could add around $5 million to the bank for the project. That “incarceration construction fund” currently sits at about $366 million.
The women’s prison project in Rapid City has begun spending its state funds already, having broken ground last year. Last year’s lawmakers offered $60 million for that project, but the costs have grown there, as well.
For construction alone, one price point presented last year stood at $75 million, which Wasko said prompted the DOC to shave costs by adjusting the roof materials used for two buildings. That brought the costs down to $72 million.
“The only option to get under $60 million would have been to remove one of the housing units,” which Wasko said wouldn’t work, because the women’s prison in Pierre is so overcrowded that it can no longer offer programming or classes to inmates.
The new facility will free up space for programming, as well as for a mothers-and-infants program for inmate moms.
The total $87 million price tag includes the purchase price for the land in Rapid City and for design, she told the committee.
The committee ultimately voted to fund the women’s prison project, but not before a handful of lawmakers mentioned the importance of keeping an eye on costs. Senate Bill 50 would pull $20.8 million from the incarceration construction fund for use in the women’s prison project, put $20.8 million back into the fund for future use, and allocate $2.4 million in federal American Rescue and Recovery Act dollars for water and sewer infrastructure.
Before casting his vote against that funding, though, Mills argued that the committee ought to ask some difficult questions about the ballooning costs.
DLR may not be a construction company, Mills said, but that doesn’t mean the figures from its report are to be taken lightly when state dollars are on the line.
“Architects don’t stay in business if their numbers are wrong,” Mills said.