In a fascinating and disturbing example of what can go wrong when a locality finances a speculative prison, the Fitch ratings agency has downgraded the City of Littlefield's bond rating after the city's GEO-operated Bill Clayton Detention Center lost its contract to hold Idaho prisoners, and has subsequently been dumped by the private prison corporation.
According the Ad Hoc News article ("Littlefield, - Fitch Downgrades Littlefield, TX' COs to 'BB'; Outlook Negative," August 24th)
Fitch Ratings has downgraded to 'BB' from 'BBB-' the rating on Littlefield, TX's (the city) outstanding $1.3 million combination tax and revenue certificates of obligation (COs), series 1997, and removed the ratings from Rating Watch Negative. The CO's constitute a general obligation of the city, payable from ad valorem taxes limited to $2.50 per $100 taxable assessed valuation (TAV). Additionally, the COs are secured by a pledge of surplus water and sewer revenues. The Rating Outlook is Negative.
The downgrade reflects events related to the operation of the city's detention center facility, which accounts for the majority of outstanding debt (which was not rated by Fitch but is on parity with the series 1997 bonds). To the surprise of city officials, Idaho announced their plans to leave the Littlefield facility in January 2009, citing the need to consolidate all of its out-of-state prisoners into a larger facility in Oklahoma. In addition, the detention center's private operator, the Geo Group, unexpectedly announced termination of their agreement to manage the facility effective January 2009. The move to leave Littlefield by the Geo Group is significant, given that the established private operator had made sizable equity investments in the detention center reportedly totaling approximately $2 million. In the past, the ability of the Geo Group to quickly replace prisoners with little disruption in operations, as well as their investment in the Littlefield detention center were cited as credit strengths.
The article isn't quite accurate in saying Idaho's decision to remove prisoners from the facility was a surprise. The decision followed the suicide of Idaho prisoner Randall McCullough, who killed himself after the GEO Group held him in solitary confinement for more than as a disciplinary measure. McCullough's death followed the tragic death of Idaho prisoner's Scot Noble Payne a year prior at GEO's Dickens County Correctional Center. After Noble Payne's suicide, a subsequent investigation revealed squalid conditions and the Idaho Department of Corrections Health Director called the GEO prison the worst facility he'd ever seen.
Still, the outlook for Littlefield isn't good. According to the Ad Hoc News article,
On Dec. 9, 2008, Fitch placed the series 1997 bonds on Rating Watch Negative, reflecting the city's active pursuit of various alternatives to remedy the situation and possibly resolve it within the next several months. Funds to repay debt service on detention center COs through August 2010 had been identified through available city funds as well as a debt service reserve fund. The city indicated to Fitch in May 2009 that it was in negotiations with another established jail operator (the operator) to assume management of the Littlefield facility and that the operator was attempting to secure an agreement with a federal agency to house prisoners. Resolution or near resolution of this agreement was expected by August 2009. However, the operator has yet to secure a prisoner agreement and the timing for resolution remains uncertain.
Littlefield's story should be a cautionary tale for other cities and counties considering floating debt to finance a private prison corporation. We'll keep you posted on how this story develops. In the meantime, see our previous coverage of the Bill Clayton Detention Center:
Idaho Cancels Contract with GEO's Bill Clayton Prison, Nov. 6, 2008
Idaho Removes Some Prisoners from Texas Private Prisons, Oct. 15, 2008
AP on Idaho Inmates in Texas Private Prisons, Sept. 24, 2008
It has only been about two weeks since the Montgomery County scandal regarding budget shenanigans providing an under the table contract for The GEO Group to open a new psychiatric hospital to shadow the County jail. However, the jail is in the news again, this time because of reports from the counsel of R. Allen Stanford ("Stanford feels the heat in Conroe cell," Houston Chronicle, July 27):
"Lawyers for R. Allen Stanford want him moved from a private prison in Montgomery County because there's no air conditioning, and at times no lighting, in the cell he shares with up to 10 other inmates... [he] has been held at Joe Corley Detention Facility in Conroe since he was arrested and brought to Texas from Virginia last month. He and other Stanford executives are accused of running a multi-billion dollar fraud through an offshore bank and a Houston financial services firm. He has pleaded not guilty. Although other defendants are free on bail, a Houston federal judge ordered that Stanford remain in custody, saying he is a flight risk. In court filings, attorney Dick DeGuerin says the cell Stanford shares was without power for part of last week when temperatures topped 100 degrees and 'has been without air conditioning for at least a week. There are no windows for light or ventilation and the conditions are intolerable."
Another report claimed one of Stanford's cellmates is an elderly diabetic and another man has a heart condition, each person spending a "week in total darkness" and in the Texas heat without air conditioning (or presumably fans if the electricy is off) ("Stanford in the dark," WaToday.com.au, July 28). Additionally, local weather reports for Conroe, TX have only reported three days this month where temperatures have broken 100 degrees, so these allegations of temperatures going higher than 100 last week were most likely exaggerated. Below is the observed temperatures in Conroe for the week prior:
While the temperatures were below 100, the added factors of no electricity and high population cells would certainly add to the heat. The GEO Group did not comment on the condition of the facility, so there was no indication that the problems have been solved. Since The GEO Group plans to open a psychiatric hospital in this very same city, citizens and skeptics hope that they will fix the existing problems before creating a facility that will create more problems.
Via Grits' excellent post ("Geo Group secretly snagged forensic psych hospital contract in budget conference committee," July 11), we find out that the GEO Group has won a contract for a new state psychiatric hospital in Montgomery County, through it's medical subsidiary GEO Care.
Here's how the Dallas Morning News's Emily Ramshaw ("Troubled prison firm's deal for new psychiatric hospital raises questions," July 11) starts that paper's Saturday story on the scandal,
A private prison company's history of filthy conditions, sexual abuse, suicides and riots in some of its Texas lockups isn't stopping the state from paying it $7.5 million to run a new psychiatric hospital near Houston.
Lawmakers inserted an earmark into the state budget to fund the future Montgomery County facility starting in 2011. But they said they didn't know until this week that the county had selected the GEO Group to operate it, although GEO lobbyists were pushing for it as early as February.
The new facility came as a post-session shock to mental health advocates, who acknowledge the need for it. But they say they weren't informed about it and never would have signed off if they knew Florida-based GEO was operating it.
Mental health advocates are rightly pissed off about what appears to be an allocation of money behind closed doors and without Department of State Health Services requesting the funding.
"Why would we want to use an entity that hasn't had a stellar reputation?" asked Monica Thyssen, children's mental health policy specialist with Advocacy Inc. "If the process had been more transparent, there probably would have been other state officials who would've said, 'I don't know if GEO is the best use of state dollars.' "
GEO officials, who run more than 50 facilities in the United States, including five mental health facilities in Florida, declined to comment, saying in an e-mail that they don't discuss "specific business development efforts and/or contracts."
Grits proposes an interesting theory on why the GEO Group may have been pushing so hard for the psychiatric contract in Montgomery County:
UPDATE: A commenter points out that Montgomery County commissioners last year made a conscious decision to substantially overbuild their jail beyond current needs on the assumption that the facility, to be run by the Geo Group, would make enough profit from immigration detention to "spare taxpayers additional costs." One supposes that immigration detention is no longer paying the bills if the county and Geo are seeking to use the Montgomery County Jail for competency restoration beds! I wonder if that's the facility they're talking about?
Clearly, if the state agency, mental health advocates, and elected officials were unaware of this contracting process, it should be reviewed. We'll keep you posted.
Two former guards at the GEO Group's troubled Val Verde Correctional Center have been indicted on separate charges, according to an article in the Del Rio News-Herald ("Jailers jailed," May 20th),
Two former jailers recently became guests of the facility where they once worked, after one of them was arrested for burglarizing the home of a friend and the other allegedly tried to smuggle a bottle of cheap wine and love letters to an inmate.
Cristela Ramirez, 20, no address available, was arrested following an indictment on a charge of burglary of a habitation, and Bertha Alicia Martinez, 25, Lot 10 Cerezo St., was arrested on a felony charge of prohibited substances and items in an adult or juvenile correctional or detention facility, investigators with the Val Verde County Sheriff’s Office said.
Read some the previous Texas Prison Bid'ness coverage of the Val Verde Correctional Center:
- GEO Val Verde Guard Sentenced in Prisoner Assault Case, November 25, 2008
- GEO Guard Charged with Smuggling Marijuana into Val Verde, March 28, 2008
Val Verde Protest Video, March 10, 2008
Problems Haunt Val Verde Correctional Center, November 20, 2007
Idaho to Send Inmates to Scandal-Ridden GEO Private Jail, July 11, 2007
What's Not Happening at the Val Verde Jail, August 20, 2007
Mysterious Illness Leaves Two Dead at Val Verde Correctional Center, August 10, 2007