Key data:
Here are the numbers to help you make your decision on the county’s proposal to borrow $110 million to build a new jail:
Amount borrowed: $ 110,000,000
Annual Interest Cost: $ 4,950,000 (Based on 4.5% coupon)
Total interest cost over 30 year bond term: $ 148,500,000
Total Whatcom County Incarceration Expense:
1998 (actual): $ 4,996,850
2017 (budget): $ 14,501,238
Avg. Annual Whatcom County Incarceration Expense Increase, 2006 to 2016: 5.6%
Avg. Annual Whatcom County Sales Tax Revenue increase, 2006 - 2016: 2.02%
Projected Annual Incarceration Expense:
(including bond interest and jail expense inflation of 5.6%)
2028: $ 30,568,242
2038: $ 49,124,000
2048: $ 81,120,169
The graph at left shows the result of jail costs increasing by 5.6% per year funded by sales taxes that are only increasing by 2% per year – a massive funding gap which, by the time the bond is paid off in 2048, will be almost $60 million. The only way to cover this funding gap is to either further raise taxes or to cut other areas of county expenditures.
Commentary:
I’ve spent my 30-year career as a plant, division, and business unit controller. Evaluating capital projects was about 25% of my job. As a taxpayer in Whatcom County, I would like the county administration to be properly evaluated and held accountable. So as a public service, I’ve put together these projections of county jail expenses and sales tax revenues for the 30-year term of the debt the county administration is proposing we taxpaying citizens approve.
All the figures I’ve used are authoritative – see end notes for references and links. County jail expense figures are from the county’s website. They are actual audited figures up to 2015, and from 2016 to 2018 I used the county’s budget figures. I calculated the average annual increase in actual jail expense from 1998 to 2016 - that number is 5.6%, which is about twice the rate of inflation. I used that 5.6% rate of increase and projected from 2019 to 2048. Similarly, I calculated the average jail sales tax increase using actual figures for Whatcom County from the Washington Department of Revenue. From 2006 to date, the period the last jail sales tax has been in place, revenues have increased at 2.02% per year. I used this rate of increase to project sales tax revenue on the proposed jail tax from 2019 to 2048. Finally, I used crime figures from the FBI, and population data from the U.S. Census and the state Office of Financial Management. All my data and projections are available in tabular form on request. I’d be happy to review them with anyone who has an interest.
Since 1998, the county’s incarceration expense has increased at over twice the rate of inflation. It was just under $5 million in 1998, but the county budget projects it will be just under $15 million by 2018. Our incarceration costs will have tripled in twenty years. However, crime has decreased in absolute terms – from 2,261 incidents in 1998 to 1,192 incidents in 2015. After factoring in population increase, the crime rate, measured in incidents per thousand population, has gone from 14.1 in 1998 to 5.7 in 2015. That is a reduction of 60%! I am not an expert in criminal law or incarceration, but I do know numbers – and it seems to me that when crime is 40% of what it was twenty years ago, yet we are spending 300% more on incarceration, Houston, we have a problem. How is it possible that jail expenses are high and increasing at a time when crime is down? Further, it doesn’t appear the county has made any attempt to reduce costs - except by deferring maintenance on the existing jail - or explain why incarceration costs have increased so much relative to inflation. This jail tax proposal requires a detailed audit.
In the face of this fiscal and statistical paradox, instead of trying to reduce expenses to a reasonable level, the county proposes increasing our expenditures by locking us into a massive expansion of capital costs and the attendant facility and transportation charges. They have already signed a $7.1 million contract with an out-of-state consultant (DLR) to design a Cadillac jail. They have purchased land on LaBounty Rd. for $6.1 million, which appears to be about four times the assessed value.
To finance this new jail they propose a tax increase that will use 100% of the available taxing authority for Public Health and Safety – leaving precisely zero for fire, EMS, emergency preparedness, addiction counseling, or public health nurses – it will all go to building up the incarceration-industrial complex in our county – and even that won’t be enough to cover these grandiose spendthrift plans. The county plan suggests we spend as much on annual bond interest every year for the next 30 years as our entire cost of incarceration in 1998 - just under $5 million per year.
Extrapolating the numbers over the term of the proposed bond, using actual rates of jail expense inflation (5.6%) and actual sales tax revenue inflation (2.02%), reveals a horrifying outcome: County taxpayers will be on the hook for $15 million in 2018, ten years later, by 2028, that amount will have doubled to over $30 million, and by the time the bond is paid off, jail expenses will be running at over $80 million per year! This is the power of compound interest, a calculation our county’s administration does not appear to have any familiarity with or understanding of.
Rarely have I seen such an extreme case of fiscal irresponsibility as the current proposal for a new jail. If we allow the sheriff and executive and County Council to have their way, this project will bankrupt our county. It really is that bad.
The Remaining Hurdle:
Our county government needs to get voter approval for the tax increase. This is where you, the voter, come in. Please vote for fiscal sanity. Please vote NO.
Sources:
Financial Data: Whatcom County Finance Dept.
Audited Annual Reports 1998-2015; Budgets for 2016 to 2018.
Link: http://www.co.whatcom.wa.us/Archive.aspx?AMID=37
Jail Proposal from Whatcom County New Jail Facility Use Agreement
Link: http://www.whatcomcounty.us/1966/New-Jail-Facility-Use-Agreement
Crime Statistics: FBI Uniform Crime Reporting Statistics
Link: http://www.ucrdatatool.gov/Search/Crime/Local/RunCrimeJurisbyJuris.cfm
Jail Planning and Contract Information: Whatcom County Executive “New Jail Information”
Link: http://wa-whatcomcounty.civicplus.com/446/New-Jail-Information
Sales Tax Revenues – Washington State Dept of Revenue
Link: https://fortress.wa.gov/dor/efile/statistics/localtax
Population Data: Washington OFM:
Link: http://www.ofm.wa.gov/localdata/what.asp
Prepared as a Public Service by David M. Camp, cpa WA Licence # 30879
Underlying data available in tabular form: email david@highwaterconsulting.net
This article is copyright by the author under Creative Commons Licence CC BY 3.0 – Share with attribution.
Comments by Readers
Doug Karlberg
Sep 11, 2017David, thank you for your excellant work. You have done the taxpayers an incredible favor.
You have experiance with this type of finacial analysis, so I have a question. Why did the County not due a similar analysis? (or maybe they did) Shouldn’t any 100 million dollar investment include this type of analysis to make a prudent investment?
Thanks again.
David Camp
Sep 11, 2017Doug - thanks! Yes this type of analysis should be prepared (in much more detail than my 50,000 ft. overview) for every such capital project. I don’t know if it was prepared in this instance - but I think the problem here is more managerial and philosophical. Bureaucracies can morph into self-justifying entities and continue merrily along if we let them. In private industry, the discipline is in maintaining profitability in the face of competition. IN government, fiefdoms can grow and metasticize as long as no one is holding their feet to the fire. This is what our Councillors are supposed to be doing, right? But our politicians are often pleasers who go along to get along and this is a problem.
Tip Johnson
Sep 12, 2017Looks like they will need to fill it up fast with the most profitable prisoners. Oh wait! Then their operating expense go up?
Doug Karlberg
Sep 12, 2017Thanks David. I think the CFO for the Couty shoud come on this site a provide us with a critique of your analysis. Are your facts correct, and your analysis using accepted methodology. If the County cannot do this, then we should vote no.
Without this sort of analysis, then this looks like either gross negligence, or the County is hiding the truth from us.
David Camp
Sep 13, 2017Doug - I’d like to see the operating budget the County has prepared for this project. Not just the capital budget - this is the cost to build the jail, and this is available online. But I can;t find anywhere an operating budget which shows how the County proposes to operate their proposed new jail - what are the staffing levels, transportation costs, etc. over the term of the bond they want us to approve. Perhaps it exists! ENquiring minds want to know!
And this thing is a pig in a poke - yes the County is insulting us by pretending that the tax increase is for public safety and divvying it up among the local governments while downplaying the fiscal nightmare their proposed new white elephant of a jail is in reality.
Ryan M. Ferris
Sep 27, 2017Thank you for this excellent article. Here are some other thoughts I have on this issue:
First, I would like to thank Joy Gilfilen to introducing me to theories on mass incarceration and especially Michelle Alexander’s book “The New Jim Crow” which I think everyone in America should read.
When I have analyzed this issue in the past, I find evidence that most arrests and bookings in Whatcom County are driven by DUI and DV cycles. This research has led me to the conclusion that we simply have over criminalized both DUI and DV in America. I find that conclusion popular with no one, so I rarely mention it. The level of violent crime in Whatcom County is comparatively low. In WA state, crime in Bellingham is comparable to crime rates in Redmond or Bellevue. One can see this as a triumph of law enforcement protection of all types we are afforded in Whatcom County: Border, State Patrol, County, City law enforcement. But certainly, we have much lower crime rates than Yakima, WA and other cities nationwide like Richmond, CA. Such low crime rates may also be a triumph of gentrification, strong Health, Education, Government employment in Bellingham. Poverty correlates highly with crime. Just ask those of us that grew up in Oakland, CA.
Among the other demographic factors, WA state’s population is trending older[1] [2]. Current growth in WA outside of Seattle is really being filled out by retirees and ex-urbans; groups that aren’t crime prone themselves, but may demand high levels of security. In truth, Seattle is the magnet for youth and employment. Most of the rest of WA state is decidely not. Universities like WWU are very “middle class”. Bellingham is not Long Beach, Oakland, or even Tacoma. But if we were to put in a major coal port with routes to Asia and connecting rail, that could change.
I don’t believe our urban planners today have software that allows for simulations of growth, crime and crimnogenic [3] effects. The ability to simulate whether a dollar spent on library infrastructure vs. the same dollar spent on criminal justice infrastructure will lead to more or less crime depends upon crimnogenic effects[3]. But I have never seen any comparative calculations or simulations of such expenditures.
I continually point out to others that Whatcom County is one of the few counties that ships GF-S revenue back to the state. We run in the black. Most of the rest of the state does not with the largest exception King County who ships the rest of the state $2.4B each year so that Pierce, Snohomish, and others can finance their “Law and Justice” infrastructure. Whatcom County ships the rest of state 10M - 30M of excess GF-S revenues each year because apparently we could never save this in a capital infrastructure fund. Thus are we forced to borrow to fund capital infrastructure projects while still having GF-S revenues in the black.[4]
The real risk of municipal or regional bonding is that unforseen economic circumstances will result in a failure of our ability to make the payments. Bonds markets have been a mess since 2007. [5] There are indications they are recovering. But there are still risks to municipal assets like pension funds if we lose while playing the global bond market. Is your city or county pension worth that roulette table? Municipal and County Bankrupticies are no longer improbable [5][6]. So every long term bond we make is part of a global economic system that could seek our assets in the event of a county bankruptcy.
My final thoughts in 2015 on the jail issue and on the criminalization in modern society were as dark as my upbringing in east Oakland. Obviously, we moved here to escape embedded narcotics trafficking, crime, violence. But as a society, we shouldn’t commit vast sums of public money and policies in the name of our safety that end up increasing crime and violence. We should make sure we don’t do that. My home city has literally spent billions on law enforcement, jails, crime prevention in Oakland over the years. It is never really clear if the expenditures have led to improvement or just more crime, poverty, and racial tension.
[1] OFM on Population : http://www.ofm.wa.gov/trends/population/fig302.asp
[2] One method of looking at the challenges of our current population is to type the words “Memory Care Facilities” into your context driven Google Search. I count 17 ‘memory care facilities’ with 10 minutes of downtown Bellingham. One has to wonder if a persistent increase in brain degenerative diseases is a sign o f an influence that is effecting cognition and behavior for all ages.
[3] See Todd Clear ”Why America’s Mass Incarceration Experiment Failed” and ”Imprisoning Communities: How Mass Incarceration Makes Disadvantaged Neighborhoods Worse”
[4] See Table 1 http://www.ofm.wa.gov/fiscal/pdf/county_expenditures_revenues.pdf
[5] https://www.forbes.com/pictures/ejii45efkm/the-5-biggest-municipal-bankruptcies-in-u-s-history/#2e2b6fdf1c76
[6] http://www.pbs.org/newshour/updates/municipalities-declared-bankruptcy/
Joy Gilfilen
Sep 29, 2017This is a brilliant piece of financial analysis. Thank you, David. I have not seen any such kind of analysis by the County. Nor is there any valid justification for this tax, for the expansion of the facility. There is only fear-mongering fed by mismanagement and neglect by the administration. There is no solid fiscal research that backs up their demands for more tax money…and this tax is certainly not for the benefit of the taxpayers.
Facts have now repeatedly shown that there is NO NEEDS ASSESSMENT, - even if the Executive lies about that. There is no fiscal accounting done that assesses or analyzes the taxpayers rate of return over time on the rising costs of incarceration. Why not? It is a massively losing proposition. Jails cause poverty…they do not work over the long term. That has been proven over and over again.
It benefits the Executive Branch to not disclose in full transparency the real costs of incarceration that expand exponentially when we factor in social costs to the families and inmates. nationally it goes up by a factor of 11x. (National costs of incarceration claimed by the government was $80 Billion, but goes up to $1 Trillion when adding in the periphery costs. That is a $920 Billion underreporting impact on the taxpayers who foot the bill one way or another.) This does not include the impact of privateering. (See the video I did on this at www.restorativecommunity.com).
To illustrate why we are in such a mess…why the County gets away with fiscal irresponsibility, it is important to understand how it happens, so we can fix it.
The Executive Branch, run by oldsters and old school politics and philosophies of punishment first, not innocence first. It has been driven by an old industry business model into false actions. It is like living in the dark ages with an old King’s court…controlled by a royal Court of LAW - not a court of JUSTICE.
Think about it…Barbara Brenner, Pete Kremen, Kelli Linville, Jack Louws (and his Dad Jack), Wendy Jones, some of our Police Chiefs and judges…...all these guys have been in political or bureaucratic authority one way or another for pver three decades in Whatcom County. The youngest “good old boy” politician is the Sheriff who was brought in back in 1998 to Blaine and then appointed into office - and he wants his new Sheriff’s office and big plantation style prison-like fancy regional jail facility to run.
I would like to focus on the Prosecutor’s kingdom right now…for he is truly in charge of the legal position of this county in ways I truly did not understand. David McEachran ultimately controls the entire legal world in Whatcom County. He was elected over 44 years ago and has reigned supreme not just in prosecuting people, but in being the corporation of Whatcom County’s top legal advisor.
He has affirmed this (to me personally and to others in meetings) when talking with him in several different venues. This means that by default he protects the County corporation against the people. Yes, he said so. He protects the County corporation against all lawsuits, and he brings lawsuits against the people (at his whim). I say at his whim, because he controls the inflow of people into the jail. He controls (be virtue of his power to say yes or no to all requests…the investigations, searches, he decides what police caused deaths will be investigated, he decides if something ethical goes before the Council, he oversees Public Disclosure Complaints, AG complaints, or any violations of law that are brought against the County. He has a seemingly unlimite supply of prosecutorial lawyers and sheriff’s investigators at his beck and call. He writes or oversees the writing of all our sales tax initiatives, laws, proposals and rules, and then even approves what goes in the voters pamphlet pro and con.
Most people have no idea the control he has to deteremine who wins or loses in court, in business, in civil rights…he is like a king living inside a self-protected cloaking device. And if people cross him, they can lose severely.
I did not know any of this when I started investigating what was wrong with business in Whatcom County. I could not see it for it is hidden behind closed doors of authority. It was not until I started discovering that his word is like God. People shrivel up when the County behaviors are challenged. He can testify under oath, and just because he says so people believe it is true.
I was stunned to watch how the state authorities protect the County authorities…from the PDC, the AG, the State Auditors. I found out they are all corporations…they work for each other…not for the taxpayers. In fact, the whistleblowers, taxpayers, anyone arrested or accused - we are on our own against “the system”. Even the Incarceration Prevention and Reduction Task Force, the County Council, any Public Defender - if they buck the Prosecutor they lose favor and power.
So certainly when any citizen tries to get justice they are at an immense disadvantage.
This is part of why it is critical that the Taxpayers say NO to this Tax. If it passes, the authorities controlled by the Prosecutor can do whatever they want.
It is time for true justice reform, and to force accountability back into our systems. Fourty years of one person in charge of legal matters, backed up thirty years of entrenched authrotitarian power has skewed our justice sytem to the point that it is not accountable to facts, trends, needs assessments, fiscal analysis, or any sense of true honor.
This justice system is living above the law…above the constitution. Taxpayers are supposed to be the top of the organization, and instead we are living on the bottom rung. It is time for the tides to turn. Vote NO on this sales tax, and lets start putting our people to work, not into the jail to prison pipeline, nor into tax bondage.
This is a video I did, based on many people’s research, on how the jail industry has gotten out of control…and how it feeds the self-destructive privateeering industry. I am sad to report that this is the state of affairs in Whatcom County. It is truly time to change course. http://restorativecommunity.com/no-bigger-jail-discover-privateering/