State finds $1 million in budget for Delta Junction debt

Posted: Tuesday, June 04, 2002

JUNEAU (AP) -- In a lean budget year, lawmakers still managed to find $1 million to pay the costs of an out-of-court settlement for the city of Delta Junction.

The money will allow the city to end a dispute with Allvest Inc., and Delta Corrections Corp. to resolve a $1.1 million breach of contract dispute.

The dispute stemmed from an abortive attempt to locate a private prison at Fort Greely in 1998. The city previously paid $100,000 to the company.

''As far as the city is concerned, this will settle our obligation with the prison people and we are moving on from here,'' said Pete Hallgren, Delta Junction city administrator.

Rep. John Harris, R-Valdez, added the funds to the state's capital budget that was approved in the closing hours of a special session.

Harris is a member of the House Finance Committee and has been a proponent of a failed attempt to locate a private prison in Whittier. Delta Junction is in his district.

Under terms of the deal, Delta Junction would receive a 20-year, no-interest loan from the state. The city would forfeit $50,000 from municipal assistance revenues it receives annually from the state.

Lawmakers approved the project despite a session filled with calls from Republicans to hold the line on state spending.

Alaska faces a $826.7 million budget deficit this year that is anticipated to grow to $963 million by the next fiscal year, according to the state Department of Revenue.

Harris defended the payment as a way to help out the city after several events made the private prison unfeasible.

''They are getting a better deal then they would at a bank. However, it is a loan that they have to repay,'' Harris said.

Lawmakers added a provision that would write off the debt if the city decides to join an organized borough.

Sen. Gary Wilken, R-Fairbanks, has urged unincorporated areas such as Delta Junction to form boroughs in an effort to shoulder some of the costs of government services.

Wilken said he had insisted that the incentive be added to any deal in the past.

''This I thought was a way to draw them to the altar,'' Wilken said.

The capital budget now goes to Gov. Tony Knowles for consideration. Knowles spokesman Bob King said the governor will consider the merits of the proposal before acting.

Knowles has line-item veto power that would allow him to delete the payment without vetoing the entire budget.

''Here you have a million dollar item that appeared with no discussion. We don't know what the justification is,'' King said.

Delta Junction faced a July 1 deadline to pay the settlement or face the prospect of being in default. The city had a recourse note on the amount which would have obligated it to pay, said Hallgren.

Allvest, which operated in Delta Junction as Delta Corrections Group, successfully pitched the prison project to the city in 1998. Under the plan, Delta Corrections Corp. would have operated a prison built by the city on lands made available when Fort Greely realigned.

But in early 1999, after elections had changed the complexion of the Delta Junction City Council, the city rescinded the contract that would have made Delta Corrections the recipient of the prison without competitive bids. Allvest sued, claiming breach of contract.

The settlement agreement called for the city and the company to attempt to get $3 million from the federal government. The city was in line to receive funds in conjunction with the National Missile Defense system.

But the money could not be used for the settlement, so the agreement allowed the city and company to agree to a $1 million settlement, Hallgren said.

Allvest was the largest provider of halfway house beds in Alaska. The company is owned by Bill Weimer, who could not be reached for comment.

Weimer's company will not immediately see the money. The company has at least one injunction against it for a lawsuit brought by five women who were sexually assaulted at the Cordova House in Anchorage.

The women won a $1.2 million judgment against the company in Superior Court in Anchorage and that judgment has not been paid, said attorney Brent Von Gemmingen.

''We'd like to see Allvest comply with the court order,'' Von Gemmingen said.

In the injunction, the plaintiffs accused Weimer of hiding Allvest money with various entities to avoid payment. Weimer had until June 1 to deposit $1.7 million into a court registry while the case continues. The case is now before the state Court of Appeals.

The injunction orders the city of Delta Junction to deposit the money it owes to Delta Corrections Group into that court account.

Von Gemmingen said the company also owes about $3 million from another lawsuit, casting doubt on whether the five women he represents will receive payment.

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