Speculative Prisons in Texas

(The Prison State of Texas, Part II)
ICE, USMS, and BOP all have contracts and agreements with county governments – most of them impoverished – that then subcontract the prison business to private prison companies in return for a small percentage of the per diem payments. Many of the immigrant prisons are financed by revenue bonds with lease-purchase contracts. They are revenue bonds rather than general obligation bonds because rather than being secured by the “full faith and credit” of the issuer, they are sold to investors based on assurances that the bonds will be paid through revenues generated by the projects the bonds finance, namely prisons. Revenue bonds aren’t issued by governments but by public corporations established by governments – in the Texas case, public facility corporations – that typically exist solely for the purpose of issuing revenue bonds. But rather than having these public facility corporations own the prisons, the corporation, which exists only on paper, leases the prison back to the local government. As it pays the lease, the government is also buying the prison from the corporation, and will own it when the bonds mature – usually in 15-20 years. The government entity usually enters into an agreement with a federal government agency or corrections institute from another state. Under this agreement or contract, the local government agrees to take responsibility for the care of inmates provided by the federal agency, and then the local government immediately turns around and signs a subcontract with the private operator to assume its prison responsibilities. When the bond comes to term, the local government will own the prison and the bond investors will have earned high, tax-exempt interest for 15-20 years. During this time, the commissioners’ court will, by way of contract with the private operator, receive a small fee – usually $1-3 per inmate per day – from the private operator. One problem is that after 20 years of occupancy, the prison building depreciates so it may be of little or no value when the county assumes ownership. Another problem is that there is a federal agency like ICE or USMS doesn’t provide any guarantee that it will provide any number of inmates over any period. The agency simply signs an intergovernmental agreement, which states that the county is authorized to receive federal prisoners. Because there is no guarantee that prisoners will be placed once the prison is open, most immigrant prisons are what are known in the prison trade as “speculative prisons.” Texas Counties and Prison Debt Data from the Texas Bond Review Board shows that 18 Texas counties are financing prisons through revenue bonds based on lease-purchase agreements. At a time when the state of Texas had finally started to stabilize its prison population, local governments were incurring more prison debt. The amount of prison debt outstanding rose from $573.7 million in FY 2007 to $622 million in FY 2008, “a substantial $48.4 million increase.” That 8 percent increase came following a 41 percent increase between fiscal years 2006 and 2007. Over the past ten years there has been a nearly six-fold increase in county prison debt in Texas.
Next: High Per Capita Debt Shows Long-Term Commitment to Prison Business