Break-in damages indebted, vacant private jail in Texas

Register now

A vacant private detention center in Southeast Texas that still carries $9.5 million of bond debt was damaged by intruders who stole copper wiring and appliances, according to the county sheriff and disclosure notices.

Newton County Sheriff Billy Rowles said the intruders last fall took brass locks, water meters, air conditioning compressors, generators, and copper wiring.

“It’s been broken into a couple of times, and every time it’s been broken into, we’ve caught them,” Rowles said. “We just got lucky the first time. Within the last few months, thieves stole a year’s supply of tires that I had stored there — $16,000 worth of tires — and they stole copper wiring.”

The three men who were arrested were booked into Newton County’s 14-bed jail, which is county funded and operated.

Financed with bonds from the conduit Newton County Public Facilities Corp., the private lock-up has been vacant since 2012 when it lost a contract to hold inmates from Harris County, according to disclosure notices filed on the Municipal Securities Rulemaking Board’s EMMA web site.

“It is unclear to what extent the theft will impact the ability to operate or reopen the facility in the future,” according to the April 15 disclosure from trustee U.S. Bank National Corp., which also noted that the facility was insured.

The detention center was operated by Community Education Centers until May 1, 2012. CEC notified the bond holders that it was losing money and would terminate the contract.

The 872-bed, medium security facility made a partial interest payment in 2013 and missed its interest payment on March 1, 2017, according to a notice for that event.

Under terms of the agreement, Newton County was to make rental payments from revenues derived from operation of the facility. As with most for-profit detention centers, the county pledged no taxes.

The original 300-bed facility was financed in 1990 with $10.3 million of certificates of participation bearing 9.375% coupons underwritten by the firm Prager, McCarthy & Lewis, according to the official statement. At the time, operators had no contracts to house prisoners from other jurisdictions.

The corporation refinanced the facility $14.3 million of tax-exempt lease revenue bonds in 2002, underwritten by Herbert J. Sims & Co. and Municipal Capital Markets, according to disclosures on EMMA.

Bonds scheduled to reach final maturity March 1, 2019 bore yields of 8.2%.

Newton County, the easternmost in Texas, is one of several across the state that have seen speculative detention centers fail.

Earlier this month, S&P Global Ratings withdrew its junk-bond ratings from the Fannin County Public Facility Corp., Willacy County Public Facility Corp., West Texas Detention Facilities Corp. in Hudspeth County, and Garza County Public Facilities Corp.

Analysts said they were unable to obtain information from the private operators of the detention centers or some of the federal agencies that used the facilities. Scant information on the facilities could be found on the EMMA site.

For reprint and licensing requests for this article, click here.
Junk bonds Texas
MORE FROM BOND BUYER