Prison lease information stokes concerns about cost to state

Prison lease information stokes concerns about cost to state

By MARY SELL, Alabama Daily News

Recent information about prison company CoreCivic’s agreement with the state to build two large facilities is renewing concerns among some about the cost and state funding priorities.

On April 2, Bloomberg News reported on bank Barclay’s plans to be an underwriter for CoreCivic.

The story included a report from CoreCivic to potential investors that said ADOC’s revenues are provided by the Legislature.

“This will include budgeting for all of ADOC’s obligations under the new lease agreements,” it said.

“…ADOC has discretion over how to spend the appropriation provided by the Legislature and has covenanted in the lease to prioritize lease payments above all other obligations to the extent permitted by law.”

2021 03 31 – CoreCivic Alabama Investment Presentation.pptx

Carla Crowder, executive director of the Alabama Appleseed Center for Law and Justice, recently listed some of her organization’s concerns from the report.

“The ADOC and CoreCivic are sharing much more detailed information with investors than with lawmakers or the people of Alabama,” Crowder told Alabama Daily News.

“… And what they are sharing fails to assuage any of our initial fears about the expense of these leases crowding out funding for policies and programs that would make the state safer,” she said. “It shows that CoreCivic will jump to the front of the line in getting paid for these leases, ahead of correctional facility staffing, ahead of medical and mental health care costs, ahead of rehabilitation and programming services for incarcerated people.”

Department representatives on Tuesday afternoon countered that assertion, pointing to lease agreements, which have been online since February, that say prioritization won’t negatively impact ADOC’s ability to comply with constitutional or statutory obligations, court orders or obligations under law.

“In fact, the leases are structured in such a way that they will enhance the ADOC’s ability to provide medical and mental health services, expand programming space to accommodate rehabilitation, and create new staffing efficiencies,” Kristi Simpson, ADOC deputy to the chief of staff and interim spokesperson, said Tuesday. “That is the entire purpose of the Alabama Prison Program – to improve our infrastructure and transform the state’s correctional system from the ground up. And we are able to do this in an anticipated net-zero transaction…”

The report said the estimated cost of the Elmore County prison is an estimated $508.3 million. The Escambia County site is an estimated $266.5 million. Their construction timeline is about 42 months. Combined, they’ll house about 7,000 inmates. Payments on the 30-year leases would begin in late 2024.

CoreCivic owns or manages 73 sites. One of its key partners is Montgomery-based Caddell Construction.

The CoreCivic report says a“non-appropriation event” at one site would be considered a non-appropriation event at both. Meanwhile, the state will not lease, construct “or otherwise utilize any other correctional facility if doing so would result in the effective replacement” or reduction in use of a CoreCivic site.

But ADOC again pointed to lease agreement information that says the state can pursue other facilities for purposes different from what CoreCivic will provide, including housing female inmates, addressing crowding issues or complying with constitutional and legal obligations.

The state will also reimburse CoreCivic for certain pass-through expenses, such as property taxes.

In September, Gov. Kay Ivey announced that three new men’s prisons would be built in Elmore, Bibb and Escambia counties. BL Harbert was selected to build the Bibb County facility.

In January, Alabama Daily News reported that lawmakers learned the projected total lease payments were expected to be $94 million the first year and increasing each year thereafter. The total cost over 30 years for the three prisons is estimated at slightly more than $3 billion. Ivey had previously said $88 million was the annual ceiling on the leases.

Ivey and the ADOC have repeatedly said the leases would be paid for through the shuttering of most of the state’s current dilapidated prisons. The governor’s lease plan comes after lawmakers tried but failed in several sessions to pass a proposal for new state-owned prisons. The ADOC was sued in December by the U.S. Department of Justice over conditions in men’s prisons, the latest in the ADOC’s legal problems regarding treatment of inmates.

On Monday, Kristi Simpson, ADOC deputy to the chief of staff and interim spokesperson, said cost-efficiencies will be realized through streamlined staffing, modern facility design and other efficiencies.

“As a result, the ADOC does not expect the need to request additional appropriations for the lease payments,” she said.

“As costs increase year over year because of inflation, so do the cost-efficiencies created by the Alabama Prison Program,” Simpson said. “These cost-efficiencies generated through this procurement model are also indexed and are expected to outpace the annual cost of the lease. This provides for an anticipated net-zero transaction beginning with the first lease payment, with greater savings expected in later fiscal years.”

Simpson said there are extreme potential circumstances – such as a large natural disaster – accounted for in the lease that could increase the annual lease payment. This is not expected; however, these costs would be spread out to reduce impact.

“There are also potential circumstances that could decrease the annual lease payment, such as a failure on behalf of CoreCivic to meet their facility maintenance or lifecycle replacement obligations,” Simpson said.

Some lawmakers have complained about Ivey’s process getting to this point in the lease agreements, which have largely excluded them.

Sen. Greg Albritton, R-Range, is the Senate General Fund budget committee chairman. He expressed frustration Monday about getting lease information indirectly.

“This information has been requested from the governor by the House and Senate and we have not received it in this detail,” Albritton said.

Meanwhile, the 2022 General Fund budget, already passed by the House, is now in Albritton’s committee.

“If I wasn’t concerned about this, I could have had my work on (the budget) out and finished,” he said. “The resources we have are temporary in nature and this obligation is very long term. I’ve got to look at it.”

This fiscal year, ADOC received $544 million from the General Fund. It’s the second largest expenditure, after Medicaid.

Albritton said he’s also concerned about the potential cost of closing a dozen or so existing prisons.

“We’ve got to do something with these buildings, whether we tear them down or try to do something else with them,” he said.