Tuesday, September 1, 2009

Unpredented Per Capita Prison Debt in Texas

There are 18 Texas counties with project revenue bonds for prisons that are financed through lease-purchase agreements. These are among the poorest and most sparsely populated counties in the nation.
Many of these sponsor prisons and detention centers for immigrants under agreements with ICE, USMS, and BOP. Others typically are county jails and detention centers that were constructed with the intent of attracting inmates from other state jurisdictions, other states, and USMS. The counties with the largest prisons are those that have immigrant inmates, notably Willacy and Reeves.
In most of these prison-town counties, the hosting town, usually the country seat, has become a prison town – where the detention center or prison is the primary single source of employment and revenue.
Another measure of the centrality of imprisonment in the life of these Texas communities is the per capita debt from prison bonds.
When it comes to per capita public debt, Texas is a leader on two counties. It has the lowest per capita tax debt in the nation – meaning that the tax burden from state taxes is the lowest in the country. At last count – according to 2004 census figures – Texans had a per capita state-tax burden of only $1,368.
But, because of the recent proliferation of public bond-financed privately run prisons, these 18 counties have per capita debt burdens from lease-purchase contracts that far exceeds the per capita burden from either state or tax-backed debt.
The main reason for this is that the prisons are usually located in the most sparsely populated counties.
Hudspeth County, which hosts a USMS immigrant prison, has only 3,240 inhabitants spread over 4,572 sq. miles – less than one person per square mile. Yet it has incurred a prison debt of $21.8 million for a private prison for USMS-custody immigrants, which is run by the Shreveport, La.-based Emerald Corporation.
According to the Texas Bond Review Board, this revenue debt translates into a per capita prison debt of $6,636. The $21.8 million in outstanding revenue debt doesn’t include the $18.8 million in debt service that Hudspeth County will pay until the bonds mature in 2025.
The per capita prison debt exceeds the county’s annual per capita income --$9,549 – which is one of the lowest in the nation. One-third of the families in this border county lives under the poverty line.
And Hudspeth County is hardly the exception among prison communities in Texas. Reeves County, which owns a Bureau of Prisons immigrant prison operated by GEO Group, has a per capita prison debt of $8,224. Like Hudspeth County, Reeves County is mostly open expanses of highland desert, with five people for every square mile. One quarter of its families lives in poverty, yet there is a $92 million prison debt.
Deep in South Texas, Willacy County, like Hudspeth County, ranks as one of the poorest counties in the country, with an annual per capita income of $9, 421. Raymondville, its county seat, hosts the largest ICE immigrant detention center, which is operated by Management & Training Corporation (MTC). The Texas Revenue Review Board says that Willacy County residents face a per capita debt ratio from $130.6 million in outstanding prison bonds of $7,755.
When entering into these prison-financing deals, Texas county governments are assured that there is no financial liability. If the public facility corporation issuing the debt cannot pay off the bonds, it will be the bondholders who will take the hit not county residents.
It is true that the government and its residents don’t face any direct liability if there is a default, but there are costs and risks. If there is a default, the bond issuing capability of the government will likely suffer, since its bonds will be downgraded (meaning both that investors will be harder to find for its municipal bonds and that the interest rates for these bonds will increase.”
This is the case with Reeves County, whose bond ratings dropped to junk bond status after it was unable to meet payments in 2003 when the beds in a newly constructed prison were empty and again in 2006 when there was uncertainty if Reeves County and another West Texas county, Garza County, would win new contracts with the Bureau of Prisons for holding “criminal aliens.”
The 18 Texas counties with prison bonds are not the only Texas localities that private prisons. All the major private prison corporations have taken advantage of Texas as the country’s most receptive state for private prisons. Corrections Corporation of America, MTC, and Cornell Companies, for example, both own and operate immigrant prisons for the Bureau of Prisons.
Photo/Tom Barry: Dilapidation in Sierra Blanca, prison town and county seat of Hudspeth County.

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