Governor’s Office of

Douglas A. Ducey Matt Gress

Strategic Planning and Budgeting
Governor 1700 West Washington, Suite 600, Phoenix, Arizona 85007 Director
(602) 542-5381 • FAX: (602) 542-0868

MEMORANDUM

DATE: February 25, 2020

TO: Patrick Ptak, Communications Director
FROM: Matt Gress, Director
RE: Arizona Department of Corrections, Rehabilitation, and Reentry (ADCRR)
Bed Management Strategy

Background

In an effort to address staffing shortages and enhance overall officer safety, the Executive has evaluated the
current situation at the Florence and Eyman prison complexes and recommends the following changes:

 vacating and closing the Florence Prison (with the exception of the Globe unit), eliminating 3,702 State-
operated beds;
 moving existing staff from the Florence prison to the Eyman prison to fill vacant positions; and
 partnering with a third party that will manage and operate 4,193 beds for the State, providing a net
increase of 491 beds.

It is in the intent of the Executive that Arizona county jails be utilized for a portion of these beds. To the extent
additional beds are needed, the State will consider other options.

The closure of the Florence prison complex will not require the termination of any current ADCRR employees.
The Eyman prison complex, also located in Florence, will be able to absorb the majority of employees that
currently work at the Florence complex. In particular, the Executive intends that Florence complex Correctional
Officers will be transferred to the Eyman complex, helping to eliminate the latter facility’s high Correctional
Officer vacancy rate, which poses safety and security risks to staff and inmates.

The additional staff from the Florence prison will allow the Eyman complex to become fully staffed, eliminating
the Correctional Officer II vacancy rate and providing inmates with better access to programs and other services
in a safe environment. Safe, improved, and consistent access to programming opportunities will allow inmates
to receive the support and education they need in order to reform and become productive members of society.

Cost of Bed Management Strategy, Net Savings

The financials for this initiative involve a series of offsetting cost increases, decreases, and avoidances. Savings
are produced from the elimination of non-staff Florence expenditures including healthcare and inmate food
contract population reductions; operating costs; and a decreased utilization of overtime. Cost increases result
from contracting for additional bed space at a projected cost of $75 per bed per day. Finally, offsetting facility
replacement costs and avoided healthcare fines are used to project the impact of this investment and the
potential costs avoided as a result of deploying this bed management strategy. Combining project costs with
facility replacement cost avoidances alone produces a projected savings of $273.6 million over a three-year
budget window. When avoided healthcare fines are also included, the three-year projected savings increases to
$324.0 million. (Please see Appendix 1 for more information.)

Cost of Building Renewal or Replacement

Using the Arizona Department of Administration’s (ADOA) Facilities Condition Index (FCI), the Florence prison
would fall into the “Complete Replacement” category. The index is calculated based on Deferred Maintenance
needed divided by Full Replacement Value. For Florence, this calculation is 66.1% ($151.8 million divided by
$229.7 million). Any building beyond the 60% threshold warrants full replacement. The closure of the Florence
prison will remove $151.8 million in known building renewal needs at the aged facility, allowing ADC to prioritize
building renewal projects at other complexes.

Given that the FCI recommends full replacement, the Executive estimates the cost of replacing the beds at
Florence at a cost of $110,000 per bed. This equates to a total replacement cost of $404.7 million for 3,679 beds.
(Please see Appendix 1 for more information.) The Executive estimate of $110,000 per bed is based upon an
ADOA study from 2017. It is possible that $110,000 per bed is lower than actual current construction costs.
Recent construction of 3,600 new beds in Utah cost the state approximately $800 million or $222,222 per bed
(Locklear, Michael. “New Utah prison may cost $100 million more than original estimates.” KUTV).

Healthcare Cost Avoidances

The Court is ordering ADCRR to demonstrate compliance with numerous healthcare performance
measures by March 1, 2020 or show cause by June 15, 2020 as to why $100,000 fine per Performance
Measure (PM), per prison complex, should not be imposed. The previous fine amount per measure per
location was $1,000.

OSPB is still evaluating the potential financial exposure of this order. ADCRR understands that only 14
PMs of the 44 will be subject to the $100,000 fine. As such, OSPB estimates the penalties for non-
compliance at Florence and Eyman to be approximately $1.4 million per month or $16.8 million
annually. Systemwide, the cost could be as high as $2.2 million per month or $26.4 million annually.
(Please see Appendix 1 for more information.)

The closure of Florence will allow Centurion to move healthcare employees currently serving at the Florence
prison to Eyman, allowing the vendor to achieve an entirely filled staffing model at the Eyman complex (see
Appendix 2). By fully staffing all medical positions, ADCRR believes that all Performance Measures can be
brought into compliance.

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APPENDIX 1

Arizona Department of Corrections

Florence, Eyman Consolidation Cost Model

Florence Closure Savings FY 2021 FY 2022 FY 2023

Overtime $ 12,000,000 $ 24,000,000 $ 24,000,000
Healthcare Population Reduction $ 11,350,000 $ 22,700,000 $ 22,700,000
Food $ 2,400,000 $ 4,800,000 $ 4,800,000
Operating Costs $ 4,500,000 $ 9,000,000 $ 9,000,000
Attrition Savings $ - $ 3,000,000 $ 4,000,000
Florence Closure Savings $ 30,250,000 $ 63,500,000 $ 64,500,000

Florence Open Unit Costs

Keep Globe Open $ (1,550,000) $ (3,100,000) $ (3,100,000)
Florence Open Unit Costs (1,550,000) (3,100,000) (3,100,000)

Net Savings 28,700,000 60,400,000 61,400,000

Florence Contract Beds (3,500 * 365 * $75) $ 47,900,000 $ 95,800,000 $ 95,800,000

Kingman 97% Capacity (210 beds) $ 1,410,400 $ 1,410,400 $ 1,410,400
Red Rock 97% Capacity (60 beds) $ 1,493,600 $ 1,493,600 $ 1,493,600
Red Rock (24 Beds) $ 131,400 $ 131,400 $ 131,400
System Capacity County Beds (400 * 365 * $75) $ 11,000,000 $ 11,000,000 $ 11,000,000
Private Bed Cost $ 61,935,400 $ 109,835,400 $ 109,835,400

Net Cost $ 33,235,400 $ 49,435,400 $ 48,435,400 $ 131,106,200

Full Replacement Costs for Florence

$ (134,896,667) $ (134,896,667) $ (134,896,667) $ (404,690,000)
Full replacement cost of Florence = $404 million

Net Impact After Accounting for Florence Replace Savings $ (101,661,267) $ (85,461,267) $ (86,461,267) $ (273,583,800)

Healthcare Fine Avoidance $ (16,800,000) $ (16,800,000) $ (16,800,000) $ (50,400,000)

Net Impact After Replacement & Fine Avoidance $ (118,461,267) $ (102,261,267) $ (103,261,267) $ (323,983,800)

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APPENDIX 2