Penny wise or pound foolish?

County's jail expansion is a clever way to use reserve funds to generate income

At first glance, Jackson County's jail expansion project seems irresponsible. The county is making cuts in key services — libraries, the Extension Service, even the Sheriff's Department itself — to balance its budget while spending millions to build new jail beds. But a closer look reveals the jail project as a savvy investment that will pay for itself and then provide a modest but steady income to the county.

The county's budget situation has been reported in detail in this newspaper, and county officials have spent considerable time explaining their rationale for avoiding the disasters that threaten other counties after the loss of federal timber subsidies.

Jackson County has built up reserves, but that money will not last forever. If the county dips into its rainy-day fund to balance its budget every year, eventually the money will be gone. That's why the Budget Committee decided to cut spending rather than continue to drain the reserves.

Those reserves earn interest — about 1.5 percent. But the jail expansion project will return about 10 percent on the investment because the county will rent most of the new jail beds to the federal government to house prisoners awaiting trial in Medford's federal court.

Renting 55 of the 60 new beds will generate about $2.2 million a year in income to the county. County Administrator Danny Jordan says the money will pay off the cost of the expansion project in six to seven years. At that point, the bed rental becomes a source of revenue to the county's general fund, which supports county services.

The strategy is the same being employed in the county's larger health and human services building project: Use reserve funds to construct a building that will house all the services now scattered in rented space around the county, renting space to state agencies. The rental income will pay off the construction costs and then become an income stream.

Yes, the county could have spent the $10 million cost of the jail expansion project on county services instead. Jordan says $10 million would cover the current shortfall in the budget for 17 months. But then the money would be gone, and the budget cuts would have to be made anyway.

Rather than put off the inevitable, county leaders decided to invest some reserve funds now — money that will be paid back — in exchange for future income to the general fund.

The net income from the jail project will be about $1.5 million a year. That won't solve the county's overall financial problem. But generating income is better than draining the rainy-day fund dry.

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