Prison financing targeted in suit

California's $7.9 billion prison construction package came in for its first legal attack Wednesday when an activist group filed a lawsuit in Sacramento saying the plan's financing mechanism violates the state constitution.

In seeking an injunction to block Assembly Bill 900, Taxpayers for Improving Public Safety charged that the state's use of lease-revenue bonds to fund virtually all of the deal is illegal because there is no dedicated stream of money to pay off the obligations.

"Lease-revenue bonds must contain a revenue-generating mechanism," group spokesman Matt Gray said at a Capitol press conference. "AB 900 clearly does not. Prisons do not make money. They do not generate money. It's not like a toll bridge (where) the tolls would pay off the bonds."

A hearing on an injunction sought by Gray's group is set for Sept. 10 in Sacramento Superior Court.

The spokesman for the state Department of Finance said the bill, which passed a Legislature controlled by Democrats and was signed into law by Republican Gov. Arnold Schwarzenegger, is on firm legal ground.

Some three cases involving state and local projects dating back 65 years ignited lawsuits that eventually made their way to the California Supreme Court, spokesman H.D. Palmer said. Use of revenue bonds in each matter was upheld by the state's high court, even though there was no specific cash flow to retire the bonds, according to Palmer.

"The Public Works Board, if it's in the case of correctional facilities or other state buildings, holds the title, and each of the individual departments essentially pays rent," Palmer said. "Usually, the lease runs for 25 years or so."

AB 900 passed the Legislature on April 26 and Schwarzenegger signed it May 3. It seeks to build 40,000 new prison beds and add 13,000 county jail beds to state and local correctional systems that are massively overcrowded. It became law amid actions still pending in federal courts that could result in early release orders for tens of thousands of inmates.

Despite the bill's passage, the legislation has come under fire from inmates rights lawyers and has drawn doubts from the federal judges themselves. The lawyers and the judges have questioned whether the legislation will have any meaningful effect on overcrowding and the unconstitutional conditions the courts have found in prison medical and mental health care delivery.

With a federal three-judge court set to schedule hearings on overcrowding for the fall, Republican Assemblyman Todd Spitzer of Orange, a strong AB 900 supporter, said the suit appears to him to be designed to hold up progress on new prison construction to influence the panel to order early inmate releases.

"We know we're up against the clock," Spitzer said.

AB 900's author, Assemblyman Jose Solorio, D-Santa Ana, said the use of lease revenue bonds to build prisons is "a longstanding and accepted practice in our state ... so I'm hopeful the courts will side with us on this."

The lawsuit drew support from one important prison constituency, however. California Correctional Peace Officers Association spokesman Ryan Sherman said the union that represents 31,000 front-line prison cops is even thinking about assisting the plaintiffs.

Sherman called AB 900 a "scam perpetrated on the public" by Schwarzenegger "to hoodwink the federal judiciary into believing that this administration is doing something to resolve the overcrowding and understaffing crisis in California."

"Anything that would help to stop that, we think is a good thing," Sherman said.

The union says the bill will put its members in danger because the new construction is not tied to filling officer vacancies that number more than 2,000. In addition, the CCPOA is opposed to the bill's provisions that would transport some 8,000 inmates out of state. The union has already filed suit to stop such transfers, saying the moves undermine their job protections guaranteed under the state constitution.

California over the past decades has built as many as 11 prisons using lease-revenue bonds, the plaintiffs acknowledge in their lawsuit.

"It just hasn't been challenged," Gray said of the practice. "It's a very expensive endeavor to jump into, to fund a lawsuit, especially when you have to face the deep pockets of the state."

Steve Sanders, the West Sacramento attorney representing Gray's taxpayers group, said the state Supreme Court cases cited by the state may not apply to prison building because they stemmed from local government projects mandated by Sacramento. Prison construction, Sanders said, "is an issue where the state itself mandated this upon itself" and thereby requires a public vote on any bond funding.

About the writer:

• The Bee's Andy Furillo can be reached at (916) 321-1141 or afurillo@sacbee.com.