Prison operator abandons municipal detention center as inmate numbers drop – BNN Bloomberg

(Bloomberg) — The operator of an Arizona prison camp that has about $24.7 million in municipal debt says operating the facility has become too expensive amid declining inmate numbers.

Bondholders were notified Wednesday that LaSalle Corrections has severed ties with the San Luis Regional Detention Center after the number of inmates dropped significantly last year, according to a filing with the Municipal Security Rulemaking Board. The facility is currently not generating enough revenue to cover both debt service on the bonds and operating costs, the filing said.

“Given the low population numbers, we cannot sustain this operation at this time,” Chief Financial Officer Tim Kurpiewski said in the announcement of the non-renewal. “Additionally, with the election approaching, this could also play a critical role in the facility's use, but we won't know that until November.”

Representatives from LaSalle Corrections, including Kurpiewski, did not respond to requests for comment. San Luis city officials also did not respond.

LaSalle said it is losing $400,000 a month under the contract with San Luis, adding that the detention center must house at least 600 inmates to break even. The 718-bed facility, which houses detainees under contract with U.S. Immigration and Customs Enforcement and the U.S. Marshals Service, has not met that quota since May 2023, the non-renewal notice said. Nearly $3 million in operating and maintenance costs incurred by LaSalle remained unpaid due to insufficient project revenue as of Aug. 1.

The San Luis Facility Development Corp. issued $26 million in bonds in 2014 to refinance outstanding debt that was originally used to finance the construction and equipment of the correctional facility in 2005, bond documents show.

A security in the series traded at an average price of 85 cents on the dollar on Wednesday, representing a yield of about 14 percent, about 1,277 basis points higher than benchmark bonds, according to data compiled by Bloomberg.

The facility's ability to stay afloat and generate revenue depends on incarceration rates, as federal agencies like ICE pay per bed occupied.

“The continued demand for the beds in the project is based on the assumption that the demand for prison space will continue to exceed the supply of available space,” the issuer said in the risk factors section of the 2014 bond documents. “However, due to economic, social and political factors, it is impossible to predict whether this assumption will be correct.”

Detention centers like San Luis once benefited from former President Donald Trump's initiative to arrest and then deport illegal immigrants. The outcome of this year's presidential election could again affect the number of detainees in these facilities – Vice President Kamala Harris has announced that she will sign a tough border security bill that her rival Trump had opposed.

The San Luis-based detention center is located in southwest Arizona on the U.S.-Mexico border. Last week, ICE Chief of Staff Michael Lumpkin met with LaSalle executives to “discuss detention center operations and the agency's commitment to providing a healthy, safe and humane environment for detainees,” according to a press release.

– With support from Martin Z. Braun.

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