The Two Rivers Regional State and Federal Support and Detention Facility in Hardin is almost ready to be occupied, but is without a contract with the state to house state inmates.
As told by state and city of Hardin officials Tuesday, the history behind Hardin's empty, 464-bed prison hinges on one enormous -- and expensive -- misunderstanding.
Officials from the southeast Montana town and its economic development arm, Two Rivers Authority, told the state Corrections Advisory Council they had a gentlemen's agreement with Montana to house state inmates at the privately run prison.
But former State Corrections Director Bill Slaughter, current agency officials and lawmakers on the council said they never had such an agreement and never envisioned the prison as part of the state's correctional system.
"We didn't sign any contracts with this group; There are no e-mails or promises," Slaughter said. "I don't know what to tell you. I was actually surprised they were under construction."
The council, headed by Lt. Gov. John Bohlinger and comprised of lawmakers and others with interests in Montana's criminal justice system, acts only as an advisory group to the Department of Corrections. The committee does not have the authority to change state law or approve prison contracts with Two Rivers.
Hardin city officials worked with a Texas consortium to build and finance the $27 million prison. It was completed this summer and promoted as a way to bring 100 new jobs to the economically depressed town at the edge of the Crow Indian Reservation.
The prison needs about 250 inmates to make enough money to open its doors and begin to repay the millions needed to build it, Hardin officials said.
Michael Harling, one of the Texas financers of the project, said in an interview after the meeting that the financing package includes enough money for the prison to sit empty until May of 2009. After that, the prison would be nearing a financial crisis.
But by not repaying its bonds until then, the prison would technically be in default on its debt.
But state and federal officials have said they don't need any of the prison's 464 beds -- and state law forbids the prison from housing out-of-state prisoners, according to a recent opinion by Attorney General Mike McGrath.
The Two Rivers Authority and the city of Hardin have since sued the state, asking a Helena judge to throw out McGrath's opinion.
The city-owned prison was built without a single contract, Hardin City Attorney Rebecca Convery told the committee, because they were told the state wouldn't enter into contracts with a prison that wasn't yet built.
Paul Green, a Hardin businessman who worked at the city's economic development branch several years ago when the prison was in the planning stage, said he met with Slaughter then and walked away feeling like the state would fill the prison if the city built it.
"While there is a need, (Slaughter) said they can't sign a contract with a facility that isn't built yet," Green said.
But Slaughter and Diane Koch, a Corrections Department lawyer, said the only way the state ever contemplated using the prison was to temporarily house local felons after they'd been convicted and were on their way to other state facilities.
The state has contracts with every county jail in Montana to hold felons until the state has room for them elsewhere.
"It would be maybe five or 10 inmates," Koch said, "not enough to fill a 464-bed facility."
Sen. Trudi Schmidt, D-Great Falls, a member of the advisory council, sits on the eight-member panel that helps draft the Department of Correction's budget.
She asked Two Rivers and Hardin officials why they didn't come to the panel's meetings in 2005 when lawmakers were crafting the agency's two-year budget.
"I guess I'm wondering why the city of Hardin never knew what was going on in the Legislature," she said.
Schmidt and others also questioned just what kind of detention center the Hardin prison is.
Montana has one private prison in Shelby that houses mostly state inmates under a contract with the state. The state also has contracts to house inmates at regional prisons in Glendive and Great Falls.
Those prisons were built and owned by the counties and also function as county jails.
The Hardin prison is not a purely private prison like Shelby facility, nor is it the Big Horn County jail, said Greg Smith, executive director of the Two Rivers Authority.
The county does not support the prison, he said in an interview after the meeting.
Convery told the panel that the prison is city-owned, but will be privately-run by a for-profit company for at least the next two years. If so, it is the only entity of its kind in the state. The authority sought out-of-state inmates after state and federal officials said they didn't need the space.
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