With $50 million spent already, state hires new consultant to restart prison planning

By John Hult

SIOUX FALLS — A $729,000 consultant contract will be added to the roughly $50 million South Dakota has already spent on a stalled prison construction effort. 

State officials signed a contract this week to pay a consultant to repeat and update a $323,000 prison facilities report that has framed three years of discussions on the state’s correctional needs.

The contract with Phoenix-based Arrington Watkins is just the latest deduction from a $62 million pool of money spent down to less than a fifth of its original size to prepare for a now-paused Lincoln County prison project.

On Thursday, Apr. 3 representatives with the Gov. Larry Rhoden administration acknowledged that taxpayers will be out most of that money unless lawmakers vote to revive the controversial project — or a scaled-down version of it — during a July special legislative session.

About $50 million of the money is already gone. It was spent to secure land, design a campus, and secure a stake in the electrical, water and sewer infrastructure that would’ve been necessary to house and care for 1,500 inmates. The state’s under contract to spend millions more, but has paused that work.

The state could “claw back” some of that $50 million, but Lt. Gov. Tony Venhuizen said the administration knew there could be “significant costs” to shifting course.

“We’re doing what we can to reduce that, but it could be a considerable amount, and that’s something we have to consider as we move forward,” Venhuzen said after a meeting of the Project Prison Reset work group at the South Dakota Military Heritage Alliance.

The state based its earlier decision to pursue an $825 million facility largely on the recommendations of a 2022 report from the Omaha-based DLR Group. Lawmakers rejected that idea in February.

That report outlined the state’s correctional system deficiencies and recommended a host of potential solutions. The lawmakers most skeptical of the Lincoln County prison proposal repeatedly cited that report’s lower men’s prison price estimate, as well as its smaller-scale alternative prison construction options. 

The forthcoming Arrington Watkins report will ask the same sorts of questions. Ryan Brunner, the Rhoden adviser who serves as his point person on prison issues, said Thursday that eight members of the work group reviewed the contract before the state signed it.

The state is also preparing to release a request for information, Brunner said, seeking interest from any landowners who might be willing to sell their property to the state for prison projects.

Work performed based on old report

After the meeting, Venhuizen said the work group would use the Arrington Watkins report and any interest gleaned from the land-seeking notice to decide where to go next on prison construction.

The DLR suggested a 1,300-bed men’s prison, but affixed a far smaller price tag than the one lawmakers were presented with last November. 

Under the direction of the Department of Corrections, a 2022 summer study group endorsed a 1,500-bed facility. 

Initial 2023 design contracts for that facility, partially redacted versions of which were given to South Dakota Searchlight by the DOC last month, put the top price at $450 million — roughly in line with DLR Group’s estimates. An amended contract soon pushed that figure higher. A contract amendment in April of 2024 put the “not to exceed” price at $740 million. 

That figure was not offered during a legislative Appropriations Committee the following month, though. At that meeting, and another legislative meeting later that summer, lawmakers were told that the “guaranteed maximum price” would come in November. 

By the time that $825 million number arrived, the state had already spent millions to design the facility, drill test bores for a possible geothermal energy system, and to scan for cultural artifacts and wetlands.

The state continued to sign contracts for the Lincoln County prison project into early 2025. The $825 million guaranteed price expired in March.

Lawmakers who’d hoped to move forward with the project warned their compatriots that the price would only grow through inaction. 

Michelle Jensen, one of the Lincoln County landowners who sued the state over the prison plan, offered a different perspective in her public testimony to the work group on Thursday.

Jensen noted that a final decision from the state Supreme Court in that lawsuit could come after the July special session. 

The remedy for financial losses in Lincoln County, Jensen said, should have been for the state to “stop spending money out there if you know it’s a thing that might not happen.”

Jensen also suggested that the state could sell the land. 

The DOC transferred about $8 million to the Office of School and Public Lands to obtain the title to the 320 Lincoln County acres upon which it had hoped to build its prison. The land had passed into the ownership of the state Office of School and Public Lands years ago when the owners died without heirs or a will. 

On a roadside viewing of the property Wednesday afternoon, Brunner told the work group that the state only needed half the property for the prison, and that the other half was reserved for possible future use.

Federal funding could still benefit state, but only near Lennox

Brunner sounded a hopeful note Thursday on a $10.5 million contract with the city of Lennox for a sewer line. 

The line’s not in the ground yet, even though Lennox has collected the money. 

Funding for all but $500,000 of that contract came from the federal American Rescue Plan Act of 2021. The ARPA dollars had to be obligated to a water or sewer infrastructure project by Dec. 31, 2024.

Had the prison project gone forward, Lennox would’ve been in line for $50,000 monthly payments from the state. Those monthly payments would amount to less than $30 per person for each of the people — inmates and staff — who’d have used the prison’s toilets, sinks and showers. 

“It’s not that much different than your household sewer bill,” Brunner reasoned on Thursday. “And so we don’t start paying that until we actually start running sewage.”

If the work group picks a site within 10 miles of Lennox in any direction for any other prison project, Brunner said, the state will still get something from that investment.

“If you’re within 10 miles of Lennox, it’s possible we could run that line to it,” Brunner said.

The state also entered into agreements with Southeastern Electric Cooperative and South Lincoln Rural Water to pay for portions of upgrades planned by the respective utility providers. The state has paid for some of its stake in those projects. Brunner said the state could still pull out of a substation project, since the station has yet to be placed and could move to another location. 

Reprinted with permission from South Dakota Searchlight.