When the administration of Gov. Pat McCrory extended private prison maintenance contracts last year over the objections of senior prison officials, McCrory officials said the private maintenance would save the state $1 million a year.
A study submitted to the General Assembly by top prison officials had concluded that private maintenance would result in “no significant savings” for taxpayers, but State Budget Director Lee Roberts criticized that study as flawed.
Months before the contracts were extended, however, prison officials sent the report to the Governor’s Office for approval. A senior McCrory administration official reviewed and edited the study now labeled incomplete. The governor’s office now says they never saw a final version of the report and did not give their approval.
Pam Walker, spokeswoman for the Department of Public Safety, said that prison officials felt they did their due diligence and stand by their report.
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Secretary of Public Safety Frank Perry had suggested late last year that Roberts review the report.
“He did respect and accept Lee’s analysis,” Walker said.
The three contracts at issue, which are the subject of an FBI inquiry, are held by The Keith Corp. of Charlotte, where McCrory was mayor for 14 years. The owners, Graeme Keith Sr. and Graeme “Greg” Keith Jr., are friends of McCrory’s and have contributed $12,000 to the governor’s political committee.
Private prison maintenance has been a disputed subject at the legislature for years. In 2011, the General Assembly ordered prison officials to submit a report comparing private versus public prison maintenance.
Prison officials compared the three prisons maintained by The Keith Corp. with three virtually identical prisons maintained by state employees.
When the report was complete, it was sent to the governor’s office for approval, which is standard procedure for all executive branch reports sent to the legislature.
An exchange then ensued between Deputy Commissioner of Prisons Joe Prater and Chloe Gossage, McCrory’s policy director.
Gossage asked Prater for more information and data to support the conclusions, including the insertion of a table that would compare maintenance costs for each of the six prisons over a three-year period.
“This will provide transparency in how the costs per square foot were calculated,” Gossage wrote in a comment on the report draft.
Prater made the requested changes and submitted the report to legislative leaders in May 2014.
Days before the report was sent to the legislature, prison officials on several occasions emailed the governor’s office for the report to be approved so it could be sent to the legislature.
Gossage did not return phone calls for comment. McCrory spokesman Josh Ellis confirmed that Gossage provided feedback on the report.
“She asked DPS to provide additional information to support their findings,” Ellis said in an email. “She did not review the department’s methodology or independently confirm the department’s findings.”
Ellis said Wednesday that the governor’s office did not see the final version of the report and did not approve it. Prison officials sent the final report to the General Assembly incorporating Gossage’s suggested changes.
The report’s conclusions were unwelcome news to Graeme Keith Sr. and other privatization boosters: Private maintenance did not lead to significant savings.
The report also said that the most important considerations can’t be measured in dollars and cents: the safety and security concerns intrinsic to high-security facilities, such as smuggling contraband, control over tools and inappropriate interactions with inmates.
In October 2014, McCrory convened a meeting in Charlotte with the Keiths and four prison officials, including Secretary of Public Safety Frank Perry and Prater, who wrote a memo recounting the meeting.
According to the memo, Graeme Keith Sr. told prison officials and McCrory that he “had given a lot of money to candidates running for public office and it was now time for him to get something in return.”
McCrory has said he did not hear those remarks. Keith has called the Prater memo a “misrepresentation.”
At Perry’s suggestion, McCrory then asked budget director Roberts to examine whether private or public maintenance was cheaper.
Roberts said his review was different from that conducted by the governor’s office: “They don’t have the time or the ability to review technical matters.”
In December, Roberts said his budget office analysis showed the state would save $1 million a year. (Keith had said the annual savings were $413,000.)
Roberts arrived at the higher figure because he used the square-footage calculation favored by Keith and because he included factors that he said the prison system did not add to its own costs: rent, human resources, pensions and retiree health care.
The Keith Corp. used gross square feet – the area of all buildings on the prison grounds.
Prison officials used net square feet. The prisons maintained by The Keith Corp. have empty gravel-floored 30,000-square-foot buildings. The buildings, roughly 6 percent of the total square footage, were to house inmate-staffed factories, but the plans were shelved during the economic downturn.
The three prisons staffed by state employees have functioning factories that must be maintained: a woodworking and upholstery factory, a sewing plant and a packaging plant. Prison officials subtracted the square footage of the empty buildings when comparing the costs of private maintenance versus maintenance by state employees.
Roberts said gross square footage is the correct measurement because the contract contains gross square feet: “If the prison people wanted to use net square footage, they should have modified the contract.”
Walker, the DPS spokeswoman, said they hope to come up with an improved method of analysis in the future.
“It’s not all about the dollars, but operational and security issues are also important to consider,” she said.
Joseph Neff: 919-829-4516