County faces possible lawsuit over jail bids
by CHRIS ROGERS
The Winona County Board voted unanimously yesterday to pursue an increased sales tax to fund the county’s $28 million new jail. This kicks off a long process to approve raising sales taxes for the jail, and the final decision will be up to voters in a referendum tentatively slated for November 2022.
The county needs some way to pay back the $28 million in debt it will incur to fund the new jail, construction of which is set to begin next week. The default option would be to increase property taxes, but using sales tax revenues to pay back the debt is an alternative county leaders find appealing.
“From a county finance point of view it makes total sense,” Winona County Administrator Ken Fritz told the County Board. Funding the roughly $1.5 million per year jail debt payments would require a 3 percent increase in property taxes, compared to just a 0.23 percent increase in sales tax. That is because the amount of sales taxes collected in the county is much higher than the amount of property tax the county currently levies.
In terms of the impact for citizens and businesses, the county estimates that, for a $150,000 home, an additional $29 per year in property taxes would be needed to fund the jail debt, compared to an extra 25 cents of sales tax on every $100 spent. The property tax impact would be a little more pronounced for businesses — an extra $437 a year on a $1 million commercial or industrial property — and farms — an additional $75 on a $500,000 farm under homestead exclusion.
A sales tax increase would raise local sales taxes from 7.375 percent to 7.605 percent. Wisconsin’s sales tax is 5.5 percent.
County officials believe the sales tax will be less noticeable for taxpayers. Plus, with a sales tax, out-of-town visitors will help fund the jail, rather than solely local property owners, they noted.
“There’s a potential to affect businesses, but especially with tourism, that means part of the burden would be shifted to people visiting Winona,” County Board member Chris Meyer said.
“Those [visitors] are all people who come into the county who would potentially be, unfortunately, utilizing this [jail],” County Board member Steve Jacob said. Compared to property taxes that charge farms a lot for a service they use infrequently, he added, “It seems like a much more fair way to pay for the jail.”
To approve the sales tax, the County Board first needs special legislation passed by the Minnesota Legislature. The County Board vote on Tuesday directed the County Attorney’s Office to draft a request for that legislation in spring 2022, and county officials said Sen. Jeremy Miller and Rep. Gene Pelowski have pledged to support it. The bigger hurdle comes in fall 2022, when the county would submit a ballot question to voters: Do they want to raise sales to fund the jail? If approved, the sales tax would take effect in 2023.
“I feel like it’s worth pursuing,” Meyer said. “And there will be a referendum, so if there’s a public outcry against it, there is an opportunity for people to express their will.”
“It’s hard to support any tax, but the incentive with this tax is that the better the economy does, the better the payback is and the sooner the jail would be paid off,” Jacob said.
The county already has a half-cent-on-every-dollar sales tax to fund road repairs. Approved on a 2016 split vote, opponents argued that sales taxes are regressive — that poor people pay a larger share of their income in sales taxes compared to rich people because they spend more of their money — and that it would drive consumers to neighboring Wisconsin businesses with lower taxes.
County faces jail bid protest, potential lawsuit
The county is also facing a potential lawsuit, officials said, over its handling of bids for the construction of the new jail. The complaint stems from the county’s decision to disqualify a company that had the lowest bid on a portion of the supplies for the jail. The County Board met in closed session with attorneys on Tuesday to “discuss threatened litigation” regarding the bid protest.
One of two companies vying for a contract to supply jail cells, Alabama-based Cornerstone Detention had the lowest bid: $4.55 million, over $1 million under the county’s budget and $127,000 less than its competitor. Under state law, local governments are required to accept the lowest bid from a “responsible bidder.” As long as a contractor meets the minimum requirements, governments must go with the lowest price.
In an initial bid tabulation at the County Board’s August 31 meeting, it appeared Cornerstone Detention had won the bid, but at some point county officials ruled that Cornerstone did not meet the specifications, and they rejected its bid. “Market & Johnson will have to explain it, but upon looking at those [specifications], it was determined that the second lowest bidder met those requirements and [Cornerstone] did not,” County Administrator Ken Fritz said in an interview. Fritz declined to comment on what the reason for rejecting Cornerstone’s bid was, citing advice from attorneys and the potential litigation.
Market & Johnson, Inc. is the county’s construction manager for the jail project. Market & Johnson Project Manager Tyler Schulz did not respond to an interview request.
Cornerstone Detention owner Mitch Clayborn said the county never told him why the bid was rejected either. Clayborn said his company trucked a sample jail cell up to Winona for county officials to see. It was a slightly different style of cell from what the jail designs had originally envisioned. “We spent a half a day with them, let them kick the tires so to speak … Then we got an email from the architect that they didn’t like them, our cells, for some reason, but they didn’t give us any particulars,” he said. Later on, county officials told Cornerstone that it could bid on the project after all. “We went through the process, and bid the project, and we were low. Then they’re not going to award us the job, and told us we didn’t meet the specifications, but they didn’t give us the specifics,” Clayborn said. “It’s just not right, and we’re saving the taxpayers money,” he added. He said he hopes the county will grant his company the contract.
Assistant County Attorney Alex Thillman advised the County Board during a closed session on Tuesday. Thillman and County Board Chair Marcia Ward declined to comment on the basis for rejecting Cornerstone’s bid. Both said the board would take some action regarding the bid protest at the County Board’s next meeting later this month, but declined to say what that action would be.