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Grayson Commissioners sidestep voters with privatization scheme

The Herald Democrat reported ("Grayson County Jail to be run by private company," July 13) last week that Grayson County commissioners will negotiate a deal with Southwestern Correctional LLC to build and operate a new 747-bed private jail. This decision by the commissioners means Grayson voters will be denied the opportunity to put the issue of jail expansion to a vote.  By deciding to negotiate a deal with Southwestern Correctional, commissioners ignored calls for a bond election by Grayson Sheriff J. Keith Gary, Sherman Mayor Bill Magers, Former Grayson County Commissioner Carol Shea, Former Grayson County Democratic Party Chair Tony Beaverson, the Combined Law Enforcement Association of Texas, and dozens of Grayson residents.

Grits for Breakfast did an excellent job covering the proposed Grayson Privatization scheme offered up by County Judge Drue Bynum (see links at the bottom of this post), and he argues compellingly that the over-reliance by Grayson Judges on pretrial detention continues to unnecessarily fill the county jail and fuel the perception that a larger facility is needed. (The numbers as of June 1, 2009 show 51% of inmates in Grayson County Jail are pretrial detainees).

Judge Bynum was trying to sell Grayson residents a larger facility than the county needed for its inmates, arguing that a private company would need the extra space to profit from incarceration and offset the county's per diem rate. In spite of the cost-saving rationale offered by Bynum, it doesn't seem that Grayson County was made a very good first offer by Southwestern Correctional.

From the Herald Democrat article (July 13th):

The deal presented Monday by the Southwestern staff said the county will pay between $32.50 and $46.50 per inmate housed per day, depending upon variables including the percentage of beds filled, income from the jail phone system and other fees and income. It could also depend on the final negotiations between the county and Southwestern.

So Southwest Correctional's current proposal doesn't even guarantee 6% cost savings from the county's current per diem of $49.35. And as Grits contributed:

Whether the county or a private contractor operates the facility, it still must meet minimum standards set by the Texas Commission on Jail Standards, so it won't be any cheaper to operate (except to the extent that a private company pays its employees less than deputies make - a marginal benefit at best in the scheme of things that's wiped out if the company takes a profit).

And what happens if Grayson isn't able to contract with outside jurisdictions, or if prisoners don't make expensive phone calls to their families? County tax payers would end up paying for construction and operation costs in addition to Southwest Correctional's profit through increased per diem rates

Sheriff Gary presented commissioners with a less expensive, less risky alternative to privatization before they made a decision.  The Herald Democrat (July 13th):

"The best, safest, most economical option is an expansion of the existing jail in downtown Sherman, near the courtrooms it serves. I have reviewed the 2002 plan, and with some updating and modernization it can service our needs. Ironically, it can actually be downsized slightly if you decide that you prefer to limit the number of federal prisoners in our jails as I have been required to do during the last several years," he told commissioners.

Sheriff Gary was called on to oppose privatization by the Combined Law Enforcement Association of Texas (CLEAT), which called on him to, "stop the takeover of the county jail by a company out of Louisiana." CLEAT continued in a press release, "Private county jails are a bad idea for the citizen-taxpayer, a bad idea for the deputies and even a bad idea for the prisoners detained there. These fast and loose privatization deals never work out well for the local citizens who are left holding the bag."

Amen.

As Grits mentioned, it seems increasingly likely that counties could have trouble filling extra beds with state inmates, because TDCJ's population is declining and forecasted budget deficits will force Texas lawmakers to put corrections costs under a microscope. That may leave federal contracts as the only revenue target for private contractors, and those contracts are likely to be a bit more competitive with planned state prison population reductions across the United States. If Southwestern Correctional eventually decided to cancel its contract with Grayson, the county would be held responsible for the cost and operation of the facility, as its public facility corporation would be the bond holder.

For a quick dissection of public facility corporations, see Bob's post.

Counties have been sucker-punched by the effects of large private prison contract cancellations before. In 2003, the north-Texas town of Littlefield had its tax and revenue obligations downgraded (October 24, 2006, Yahoo.comas a result of the city's weakened financial position after a pullout of the Texas Youth Commission's prisoners. Fitch ratings agency wrote:

"If the city had to levy an interest and sinking fund tax to meet detention center related debt obligations, officials estimate that the overall tax rate would have to double over the current operations and maintenance tax rate, which Fitch believes would be extremely difficult to impose.”

In my judgment, Judge Bynum seems aware of the risk of financing the facility with a Public Facilities Corporation. He skirted a question about the riskiness of using public facility corporations to finance private jails when asked by a former Grayson County commissioner who would be responsible for the bond if the enterprise failed. Bynum said, "the bondholder" would be responsible. Bynum's answer strikes me as less than straightforward, as Grayson County and its tax payers would essentially be saddled with the debt if the new county jail beds aren't filled.

Check out these other sources for background:

Herald Democrat

Grits: