BRADENTON, Fla. - The Glades Correctional Development Corp. in south Florida defaulted on debt issued to build a county jail pending an exchange of its tax-troubled bonds.
The GCDC did not make its full interest payment on March 1, according to a notice filed by the trustee, UMB Bank NA, on the Municipal Securities Rulemaking Board's EMMA filing system.
The corporation, which has been in default for several years, issued $33 million of tax-exempt first mortgage revenue bonds in 2006 to build a 440-bed jail on behalf of Glades County.
Robert DeMann, chief deputy for corrections with the Glades County Sheriff's Office, said Tuesday that the full debt service payment was not made because the funds were not available.
Last month, the GCDC told bondholders in a notice that the Internal Revenue Service had determined that its bonds violated the private activity use test of the IRS code because more than 85% of the jail's inmates were federal detainees.
The IRS said the bonds must be exchanged for taxable debt.
"It is anticipated that the refunding and mandatory bond exchange will take place in April or May of 2017," UMB's notice on EMMA said.
Most of the federal detainees at the Glades County's lockup are inmates held at the request of U.S. Immigration and Customs Enforcement.
Low occupancy rates, largely because of a decrease in ICE detainees, resulted in the jail's first bond payment default in March 2015.
A majority of bondholders agreed to enter a forbearance agreement in November 2015, allowing jail officials to use funds in the reserve account to cover operating deficits. The agreement expired Oct. 1, 2016.
The inmate population has risen since last fall because of an increase in ICE detainee requests.
The lockup had an average monthly occupancy rate of 37.3% between Nov. 30, 2015 and Sept. 30, 2016, according to a report filed on EMMA by the Glades County Sheriff's Office.
Occupancy levels rose to an average 54.5% in October-November 2016.
Last month, occupancy at the jail was over 80%, according to DeMann.
An acceleration of detainment activity is producing market value improvements for municipal jail financings and should accelerate the restructuring of distressed projects, Municipal Market Analytics said in a default report Friday.
