June 29 (Bloomberg) -- Linda Janes says she tried to consider every circumstance when Ohio set out in February to sell five prisons. Charged with getting the best deal, she even insisted that the buyer engage in “hot pursuit of escapees.”
Janes, chief of staff for the department that runs the state’s lockups, led a team of about 20 officials from three agencies and Governor John Kasich’s office that met “pretty constantly for two months straight” to prepare a request for proposals due this week. Members toted laptops with project-management software and spreadsheets, spelling out requirements for bidders in a 115-page document.
U.S. prisoners in private facilities have increased 82 percent during the past decade to 129,336 at the end of 2009, according to the U.S. Bureau of Justice Statistics. As Ohio closes an $8 billion budget deficit, it’s trying something no other state has: selling prisons to raise an estimated $200 million and seeking offers for the buyer or another company to operate them.
“This is a new approach; no one’s really evaluated it,” James Austin, former director of the Institute on Crime, Justice and Corrections at George Washington University and president of the JFA Institute, a Washington-based corrections-consulting company, said in a telephone interview.
Take the Ill
Janes’s team wanted provisions for reclaiming a prison if an operator didn’t work out. They sought to avoid situations such as Arizona’s allowing companies to reject sick inmates, sticking the state with the bill.
“We probably learned from some other folks’ mistakes and then went and enhanced our language to make sure we didn’t wind up in that same bind in Ohio,” Janes, 44, said in a telephone interview from Columbus.
Opponents, including the American Civil Liberties Union and leaders of the prison guards’ union, say the state won’t get a fair value or enjoy projected savings.
“Everyone always thinks that this is going to be the time that private prisons work,” Mike Brickner, director of public policy for the ACLU of Ohio, said in an interview. “The model itself is just bad.”
Ohio is offering three packages for five facilities on 696 acres that hold a combined 6,100 inmates and 1,200 staff. Bidders may buy prisons, operate them with 20-year contracts with an annual per-diem payment from the state, or both.
At the North Central Correctional Institution in Marion, a 16-building complex about 50 miles (80.5 kilometers) north of Columbus, Tami Tharp, a barbering instructor, said she doesn’t know what to expect.
The prison barber shop has 22 chairs and photos of inmate “graduating classes” on the wall -- 99 percent of inmates pass their barber’s exam, she said. Tharp said she hopes a new owner recognizes the value of paying for such a training program should the prison be sold.
Five vendors have toured the prisons, Janes said, including Corrections Corp. of America Inc. and Geo Group Inc. of Boca Raton, Florida, which together generated $2.95 billion in revenue last year, according to company filings. Steve Owen, a spokesman for Nashville-based Corrections Corp., and Pablo E. Paez, a spokesman for Geo Group, declined to comment on the Ohio deal because bidding hasn’t closed.
The industry’s growth during the past three decades belies opponents’ arguments, Owen said in a telephone interview from Tennessee.
“If we don’t operate safe, secure facilities, and we don’t provide the cost savings that are expected, there’s no reason for government to continue to partner with our industry,” Owen said.
Still, Democratic lawmakers, including Representative Matt Lundy of Elyria, question whether Ohio is making a wise move.
“The buyer wins and the taxpayers lose when we sell in the middle of a recession,” Lundy said during press conference last month, calling the move “a yard sale.”
Selling assets for “one-time” money is a mistake, Louisiana Treasurer John Kennedy said. He opposed a plan by Republican Governor Bobby Jindal to sell three prisons to raise $90 million, a proposal the Legislature didn’t approve.
“A junkie can sell his TV or his stereo or his iPod and generate money for his next fix,” Kennedy, also a Republican, said in a telephone interview from Baton Rouge, Louisiana. “But if he’s going to ever get well, he needs to face his addiction.”
Ohio’s alternative is closing prisons and sending thousands of inmates out of state, said Gary C. Mohr, director of the Department of Rehabilitation and Correction.
Mohr worked for three decades in the state correctional system and spent the past 5 1/2 years in the private-prison industry, most recently as managing director for Corrections Corp. Janes is handling the bids to avoid ethical questions, he said.
Ohio’s private lockups will be part of a “a blended system” with the same standards as state institutions, Mohr said. Ohio law requires private prisons to produce savings of at least 5 percent compared with a comparable public facility.
An April study by the Arizona Corrections Department concluded that the daily per-capita cost for medium-custody private facilities was $53.02, higher than the state cost of $48.42 after adjustments for medical payments. Unlike private contractors, the state “is required to provide medical and mental health services to inmates regardless of the severity of their condition,” the report said.
A 2008 report by the Florida Office of Program Policy Analysis and Government Accountability said the state didn’t “ensure that the private prisons house inmates requiring comparable levels of health and mental-health care.”
Paying a Premium
A study by Cleveland-based Policy Matters Ohio this year questioned the accuracy of state calculations for its two privately operated prisons, which are among those for sale. The savings appear to fall below 5 percent in some years, and taxpayers may have paid more to run Lake Erie Correctional Facility in Conneaut in fiscal 2006 and 2007 than had state run it itself, the study said.
In its new deal, Ohio will use the actual cost to run prisons to determine savings, while preventing the “cherry-picking” of inmates, Mohr said.
Good intentions won’t be enough, the ACLU’s Brickner said.
“You can put as many safeguards as you want, but it’s never going to change that singular fact that private prisons have to make money, and they will cut corners and skirt around the rules as much as they possibly can,” he said.
Mohr pledged that Ohio would be well served.
“I’ve been in most correctional systems in the United States, and I understand that there can be issues,” Mohr said. “I am not going to allow those issues to be apparent in this state.”
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