APRIL 2008: RURAL DEVELOPMENT
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PRISONTOWN
MYTH
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But travel a few blocks away from Ontario’s downtown, and
you will find abject poverty: dilapidated shanties, rusted-out
cars and trailers parked amid towering piles of old tires and
garbage. Before the prison opened in 1991, Malheur County was
one of the poorest counties in Oregon. Today it is the poorest,
with 21% of the county’s residents living in poverty.
The prison brought jobs, but it did not bring prosperity.
OREGON EXPANDED ITS PRISON system dramatically during the
1990s, partly because of national trends toward stricter
sentencing and partly because of the state’s defining
tough-on-crime law, Measure 11, which passed in 1994 and
established mandatory minimum sentences for violent criminals.
Since 1990, Oregon has built seven correctional facilities and
more than tripled the budget of the Department of Corrections
(DOC). Oregon already spends a larger percentage of its general
fund on prisons than any other state, and that expense could
grow as voters this fall consider stiffer new sentencing laws
that could again swell the prison population.
During the prison boom of the 1990s, the DOC was able to
overcome local resistance by touting the economic benefits to
municipalities struggling to recover from the downfall of
Oregon’s natural resources economy. For those
communities, a prison where the median wage is $3,849 per month
is seen as a prize rather than a burden.
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But recent research shows that prisons are not effective tools
of rural economic development. A phalanx of researchers from
the University of Colorado at Denver, Pennsylvania State
University, Washington State University, Ohio State University
and the Washington, D.C., nonprofit organization The Sentencing
Group analyzed data from across rural America and concluded
that prisons do not significantly improve employment rates,
poverty rates or median incomes. No studies have focused solely
on Oregon, but based on economic statistics from Umatilla and
Malheur counties, the Oregon counties that rely most heavily on
prisons, these conclusions hold true there as well.
The national studies cite a number of problems with using
prisons to boost economies. First, prisons do not pay local
taxes. Second, they rarely if ever purchase goods and services
locally, and while they sometimes try to hire locally, they do
not always succeed because of union requirements that
promotions must be based on seniority. Third, prison employees
tend not to live near their place of employment, preferring to
settle in outlying areas and commute. For example, 62% of the
employees from the Ontario prison don’t live in Oregon
but next door in Idaho, where property taxes and home prices
are lower.
Finally, prisons supply inmate laborers at low or no cost,
taking jobs away from the local community.
In addition to those specific shortcomings, there is the
broader notion of “opportunity costs,” the cost of
pursuing one choice rather than another. The idea is that
operating large prisons in small, remote towns requires so much
accommodation that it crowds out other opportunities that might
lead to clusters of related, competing businesses propelling
each other to innovate and expand. In other words, there is
nothing entrepreneurial about a prison economy.
Academic researchers aren’t the only ones re-evaluating
the economic promise of prison expansion. Max Williams,
director of the Oregon Department of Corrections who was
appointed by Gov. Ted Kulongoski in January 2004, says it is a
misnomer to think of prisons as an engine of economic
development.
“We are not a profit center,” says
Williams. “We are a cost center. We’re taking tax
dollars that could be spent on a whole variety of things, and
we’re spending them on prisons.”
This is a significant reversal for the DOC, which
promoted prisons as catalysts of development during the
prison-building frenzy of the past 20 years. Williams says he
would prefer to spend less money on prisons and more on
“evidence-based” solutions to crime. But the
DOC’s steps toward reining in spending on prisons are
jeopardized by the looming prospect of two prison initiatives
on the ballot in November.
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Both initiatives would increase spending on corrections. The
more expensive measure, backed by Republican activist Kevin
Mannix, would set up mandatory prison sentences for first-time
property and drug criminals, adding a projected 4,000-6,000
inmates to Oregon’s prison system at an annual cost of
$128 million to $200 million. There currently are 13,500
inmates in the state. Legislators reacted to that imposing
price tag by cobbling together an alternative measure that
would focus on punishing repeat offenders and expanding drug
treatment programs. Their less-expensive alternative would
still add about 1,400 new inmates at a cost of $52 million
annually.
If both initiatives pass, the one that receives the most votes
will become law. If history repeats itself, the odds are with
Mannix. More than 150,000 Oregonians signed the petition to put
Mannix’s measure on the ballot, and the state’s
voters have a history of embracing tough anti-crime
measures.
It’s unclear exactly how the state would house the flood
of prisoners that would accompany the Mannix initiative, but
the DOC would have to move quickly to make room; new prisoners
could start pouring into the system next March. The DOC owns
undeveloped property in White City, outside of Medford, and has
preliminary plans to build a 2,000-bed prison in Junction City.
But the department’s construction plans were based on
forecasts that did not consider the thousands of extra inmates
that would result from harsher sentencing laws.
THE OREGON STATE PENITENTIARY was built in Portland in 1851
and relocated to Salem in 1866, where it remained the
state’s only major prison for 100 years. Other facilities
were built to supplement the penitentiary’s mission, but
with the exception of a forest work camp in Tillamook,
Oregon’s prisons were confined to Salem until 1985, when
the Eastern Oregon Correctional Institution opened in
Pendleton.
Then came the great expansion: the Powder River Correctional
Facility was completed 350 miles east of Salem in Baker City in
1989, followed by a barrage of prisons named after bodies of
water rather than towns: Mill Creek, Columbia River, Shutter
Creek, Snake River, Two Rivers, Coffee Creek and Warner Creek.
With the opening of the Deer Ridge Correctional Institution in
Madras last October, Oregon’s prison industry has grown
to 14 facilities, 13,500 inmates, nearly 5,000 jobs and a DOC
budget of $1.26 billion. The state now spends more on prisons
than on higher education.
As the new prisons were built, wages in rural Oregon
stagnated. So it’s not surprising that rural communities
have embraced prisons and the jobs they bring.
“There’s not a lot of industry knocking at your
door in these rural areas,” says Oregon Employment
Department regional economist Dallas Fridley, who tracks North
Central Oregon. “Given the isolated nature of some of
these communities, there may not be that many options for
development beyond a prison.”
State economic development specialists were intimately
involved in DOC’s selection process. A brochure sent by
the DOC to Madras residents in 2002 prior to the construction
of the Deer Creek prison promoted jobs, training and business
opportunities. The DOC commissioned economic impact studies to
win over local officials with promises of jobs and economic
development. But it has not studied whether those promises have
been kept.
Employment and income numbers indicate that Oregon’s
massive investment in prison expansion has brought local gains
that are modest at best. The rural counties that gambled
biggest on large prisons after the passage of Measure 11,
Malheur and Umatilla, have continued to struggle. In Malheur
County, non-farming jobs have increased slightly since the
completion of the Snake River prison, but wages have been
sluggish. Malheur County has the state’s highest poverty
rate, its lowest median income, and is 31st out of 36 Oregon
counties in earnings per job.
The situation also looks grim in Umatilla, where the main
street through downtown features boarded-up storefronts, vacant
lots, run-down $25-a-night motels and sprawling trailer lots in
varying stages of decay. In Umatilla County, state jobs grew
after the Two Rivers prison opened in 2000, but private sector
jobs fell and wages have held flat. The 430 employees of the
Two Rivers Correctional Institution, by far the largest
employer in the City of Umatilla, spend money locally, but the
prison does not. Of the $56.6 million that DOC spent to
purchase goods and services for its prisons in 2007, only
$29,928, or .05%, went to Umatilla businesses.
Local purchasing figures are only slightly higher in Ontario,
an agricultural center for potatoes and onions. Mark Nooth,
superintendent for the Snake River prison, explains that the
facility’s hands are tied when it comes to supporting
local business.
“We’re too big,” Nooth says. “We serve
9,000 meals a day. Local businesses can do a portion of it, but
we need someone who can handle the whole thing.”
Statewide, just 42.5% of the goods and services used in
prisons are purchased from Oregon companies.
Then there is the matter of prison labor. In 1994, the same
year Oregon voters passed Measure 11, they also approved
Measure 17, which requires inmates to work a 40-hour week. As a
result, Oregon prisoners work inside and outside of their
facilities, cleaning parks, sorting mail, printing business
cards, building cabins and making telemarketing calls for
private companies, including Timeline Industries and National
Marketing Solutions.
At the Eastern Oregon Correctional Facility in Pendleton,
inmates produce the Prison Blues brand of jeans for the Array
Corporation, a division of Portland-based Yoshida Group. In
Ontario, minimum-security inmates sort potatoes bound for the
Ore-Ida factory and spruce up the Four Rivers Cultural Center,
the location of the Ontario Chamber of Commerce. In Umatilla
inmate crews work at the Finley Butte Landfill and unload rail
cars for CRL, a subsidiary of the Denver-headquartered Broe
Group.
Larry Clucas, Umatilla’s city manager, frequently hires
inmate crews. “Yeah, they’re jobs that might have
been taken away from somebody,” he says, “but
realistically they probably wouldn’t have gotten
done.”
That may be true for menial tasks, but prisoners also fill
jobs that might otherwise provide meaningful income. In
Umatilla and Ontario prison laborers helped expand the prison
to make room for more inmates, a project that might otherwise
have been filled by well-paid construction workers working for
an Oregon contractor.
DOC director Williams emphasizes that Oregon Corrections
Enterprises, which oversees prison work programs, studies each
contract to make sure jobs are not being taken from the
community. He also points out that, while prisons do not pay
taxes, they do pay a negotiated portion of the costs to expand
utilities, which often enables municipalities to do needed
upgrades to sewage systems and other infrastructure. But the
most important asset the DOC brings to communities where the
prisons are built, Williams argues, is the employees.
“We’ve been able to win communities over by the
way we run our facilities and the people we hire,” he
says.
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PRISON EMPLOYEES MAKE good money, especially in comparison to
what other jobs pay in Ontario and Umatilla. Rather than just
scrambling to pay the bills, there are some prison workers with
entrepreneurial leanings and discipline who are able to save
enough capital to go into business for themselves.
Ron Rouse worked for the Ontario prison for 17 years, starting
at $1,500 per month and working his way up through step
increases and promotions to nearly $6,000 per month, enough to
support a family of five children, a nephew, plus a “kid
from the neighborhood who came to stay with us and never
left.”
Rouse and his wife, Sandra, worked two jobs for two years and
poured their savings into building a Gandolfo’s Deli
franchise in Ontario to serve the lunch crowd from the prison,
as well as shoppers who cross from Idaho to Oregon to avoid
paying sales tax. They plan to open seven sandwich shops over
the next seven years.
Rouse says the entrepreneurial spirit is not unusual among his
friends from the prison. Other prison employees raise cattle,
run service companies and invest in rental properties.
“There’s so much talent to pull from the prison,
and it brings so many new things into the community, it’s
just phenomenal,” says Rouse.
Tony Shaver is another example. He was one of the first 75
people hired to work at Snake River, doubling his salary. That
was in 1991, when it was a small minimum-security facility.
Since then the prison has vastly expanded, and Shaver has
increased his earnings in sync, enabling him to buy six rental
houses as well as his own house in New Plymouth, Idaho.
After 16 years on the job, Shaver bought a local business in
the north end of town, TRS Plumbing. “I always had ideas,
but I never had the means,” he says. “The prison
gave me the means.”
But business is slow, Shaver admits. “I went from
earning $4,200 a month to no income,” he says.
“It’s a good thing my wife works.”
Unfortunately, Shaver’s business is located on the
opposite side of town from a Home Depot that is better
positioned to snag shoppers flowing in from Idaho. In that
regard, Shaver may be a victim of the same prison economy that
allowed him to start his business. Studies show that the
tendency of prison employees to make good money and drive great
distances to work has not escaped the attention of big-box
retailers, which have followed new prisons into rural America,
often to the detriment of locally owned businesses.
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FOR EVERY REMOTE TOWN in Oregon that got a prison during the
1990s, there is another that did not. One municipality that
tried to bring in a prison several times only to lose out to
Ontario and Umatilla was Boardman, in Morrow County. In 1989,
when the DOC was trying to locate the prison that eventually
was built in Ontario, Morrow County’s unemployment
rate was 16.5%, the highest in Oregon.
“Our economy was in tough shape,” recalls Gary
Neal, general manager of the Port of Morrow. “We thought
it might be a good fit to create some good-paying jobs. But
folks didn’t want a prison. We heard that loud and clear.
At the time I was disappointed. But I just went on and looked
for the next opportunity.”
Rather than floundering after failing to attract a prison,
Morrow County’s economy has steadily improved,
particularly at the sprawling industrial properties of the Port
of Morrow, which is now Oregon’s second-largest port. Two
gas-fired power plants run cooperatively by Portland General
Electric and Avista pump out power. Two major factories broke
ground last fall: a Pacific Ethanol plant that is
Oregon’s first fuel refinery and a joint venture
involving R.D. Offutt and the Japanese food company Calbee to
make potato snacks for Japanese consumers. Portland-based
Greenwood Resources is spending $35 million on a new sawmill
and a dry kiln to produce sustainably harvested timber. The
Tillamook County Creamery Association has invested $100 million
in Morrow County and will soon have the capacity to make twice
as much cheese here as in Tillamook County. There are two
parcels of land leased out to speculating biofuel companies, a
staging area for wind turbines and a proposed NASCAR track that
could draw thousands of racing fans. It adds up to about 1,000
new jobs on port property created since Boardman lost out to
Ontario for a prison.
It is impossible to know whether the lack of a prison helped
spur the diversification of the Port of Morrow. Furthermore, it
would be a stretch to describe Boardman — population
3,500 — as a boomtown, with just two real estate
companies, one grocery store and a median home price of about
$100,000. But jobs are being created in Boardman and clusters
are forming in the specialty food and renewable energy sectors.
Private employment grew by 27% from 2000 to 2006. During that
same period, neighboring Umatilla County, home to two large
prisons, lost 1,460 jobs in the private sector.
In 1989, Umatilla County had a higher median household income
than Morrow County, $23,207 to $22,944. By 2005, Morrow
County’s median income had jumped to $43,776, well ahead
of Umatilla County’s median of $39,003.
The income numbers are far lower in Malheur County, which beat
out Boardman in the contest to host Oregon’s largest
prison. Local leaders in Ontario say they do not regret
welcoming the prison and the stable jobs it brought. But they
acknowledge that the prison did not solve the ingrained
problems that stem from the downfall in agricultural jobs and
generational poverty.
With that in mind, they are freeing up agricultural land
for development, hoping to attract new businesses —
preferably a large employer that pays as well as the prison,
but one that is different from the prison. They nearly
succeeded in 2003, when Gov. Kulongoski traveled to Ontario to
announce the impending arrival of an innovative biorefinery to
be built by Treasure Valley Renewable Resources. But the deal
fell through before construction began, and Ontario’s
search for new jobs continues.
“We’ve got huge parcels of land, we’ve got
tax benefits, and we’ve got people who are looking for
work,” says Jim Jensen, a former president of the Malheur
Bell phone company and the director of Malheur County Economic
Development Department. “We need to attract new companies
to the area so we can raise the bar.”
After 17 years of living with the prison, Ontario is left
looking beyond the facility to find the answer to its economic
troubles. As Oregon considers pouring even more money into
prisons, turning more rural communities into prison towns, the
question remains: Is it worth it?
Have an opinion? E-mail feedback@oregonbusiness.com
Current Issue | DEC 08 |
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 The boxer rebellion Keeping employee spirits up in a downturn Next: A meth map Trimming the office party without cutting the fun |
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 Out of the frying pan |
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