Nashville-based Corrections Corporation of America is looking to lend a privatized hand to cash-strapped state governments by purchasing state prisons in exchange for long-term 20-year operating contracts.
According to The Huffington Post, CCA is committing $250 million to the bold new strategy: Instead of building its own prisons or managing extant public corrections facilities, the company is now buying up state-owned properties under the auspices of alleviating budget shortfalls. Last year, CCA purchased Conneaut, Ohio's Lake Erie Correctional Institution for a cool $72.7 million.
But like any bait and switch, the deal isn't without its caveats: (1) Prisons purchased by CCA must be assured by state governments that the facility "operate at a minimum of 90 occupancy," and that CCA be paid at that 90 percent rate regardless of the prison's real occupancy (so much for the efficiency of "free" markets); and (2) such deals work out to greater taxpayer expense than if the prison remained under state control.
State officials have argued that selling and outsourcing the prison will generate $3 million in cost savings each year. But a report from Policy Matters Ohio calculated that selling the Lake Erie prison would actually cost more in the long term than if the state continued to own the property and pay off the construction bonds. That's because the state has to pay Corrections Corporation of America a $3.8 million annual ownership fee for housing state prisoners, in addition to the prisoner per-diem costs laid out in the contract.
According to the report, the prison sale would cost taxpayers $11 million more over the next 20 years than if the state would have continued to own the prison.
"A closer look shows that this deal has the potential to be a net loser for taxpayers right off the bat," the report notes.