DALLAS — The West Texas town of Littlefield raised $6 million to pay bond debt Thursday by auctioning a private prison that stood empty for nearly two years.
The sale of the Bill Clayton Detention Center to a private company leaves the town with more than $3 million in debt. The town, located near Lubbock, expects to continue paying the outstanding bonds through taxes levied on its water and sewer system.
With only 5,700 residents, Littlefield had struggled to service the bonds, which represent the bulk of the town’s debt.
The buyers placed their offer as a confidential bidder and asked to remain anonymous until the 30-day period for settling the sale is complete, according to Jef Conn, a real estate specialist for Coldwell Banker Commercial Rick Canup Realtors.
The five-pod facility was built in 2000 by private developers on a 30-acre site with financing by the town. The City Council hoped to gain jobs through the Geo Group, which was to contract for inmates.
The complex has five one-story, air-conditioned buildings made of concrete block with a brick veneer and pitch-seamed metal roofs. The buildings are behind a strengthened perimeter of double fences with an electronic shaker detection system and eight video surveillance cameras. The fence encloses about 10 acres. The facility also has a freestanding gymnasium, maintenance shed, armory, and parking lot.
Conn said that a buyer with a plan to contract for inmates would obtain a turnkey operation that would save them the cost of building a new facility and waiting for it to be completed and inspected.
The 383-bed facility held inmates from Idaho before that state in January 2009 canceled its contract with the Geo Group, which, in turn, canceled its contract with Littlefield.
The prison cost the city its investment-grade BBB-plus from Fitch Ratings in 2006. Prospects for servicing that debt resulted in a negative outlook in May on the credit, now BB-plus.
The private prison debt of $9.97 million represented 77% of Littlefield’s $13 million overall debt. Certificates of obligation of $1.1 million issued for the facility in 1999 mature in 2019, and a 2001 refunding of $8.9 million matures in 2031. Annual prison debt service for the town was $235,000 per year, or half of the city’s total debt service.
The Littlefield prison is one of several that has suffered from a business slump as Texas and other states have tried to reduce incarceration rates to save revenue.
Between June 2008 and June 2009, the total inmate population in local jails across the United States fell by 2.3% as the number of available inmate beds grew by 2.9%, according to the Bureau of Justice Statistics. That was the first decline in incarceration since the survey began in 1982.