Bond Investors Get the Jailhouse Blues

Abutting a cotton gin and surrounded by fields, the sprawling Irwin County Detention Center in Ocilla, Ga., resembles a complex of industrial warehouses. It has 1,200 beds and enough inmates to fill just half of them. It’s the latest on a growing list of private jail failures in the country.

County officials issued $55 million in bonds in 2007 to help a real estate developer double the size of an existing jail so it could house inmates from overburdened state corrections departments and federal agencies, such as U.S. Immigration and Customs Enforcement and the U.S. Marshals Service. The plan promised to bring jobs and prosperity to this impoverished rural county of about 9,500. With small-town lockups facing growing competition from larger private corrections companies, the revenue didn’t materialize nor did the debt payments. On Feb. 29 bondholders forced the developer into a Chapter 11 bankruptcy days before the county was set to sell the jail for $1.6 million in back property taxes.