Around the Nation
5:30 pm
Sat November 5, 2011

Who Benefits When A Private Prison Comes To Town?

Originally published on Sun November 6, 2011 7:24 am

Federal and state officials are increasingly contracting private companies to run prisons and immigration detention centers.

Critics have long questioned the quality of private prisons and the promises of economic benefits where they are built. But proponents say private prisons not only save taxpayers money, but they also generate income for the surrounding community.

In 2004, officials in Hardin, Mont., agreed to a deal for a private prison to be built in town. The idea was that the county would pay for the prison and the state or federal government would fill it. Hardin would get tax revenues, new jobs and economic benefits while a private prison company would run the place and get a cut of the profits.

The Two Rivers Regional Detention Facility, a 464-bed $27 million private prison, was completed in 2007. Since then, the facility has remained empty and unused because the builder never landed a contract with the state or federal government for inmates.

In 2009, the facility made national news when, in an attempt to recoup the money it had spent on the facility, the town offered to do something almost no other town in America was willing to do — house prisoners from Guantanamo Bay.

That didn't happen, but it's a testament to how desperate Hardin is to fill the prison, get it up and running, and create jobs for the town.

Another Town, A Different Prison

About 1,500 miles south of Hardin in Karnes County, Texas, you find a very different story.

Last year, the county agreed to let a private prison company build a new 600-bed immigrant detention center there. It wasn't a tough vote because the company, GEO Group, already had one facility in Karnes County it built in 1998.

"They have been tremendous corporate partners with the county and the people here in Karnes County," former Karnes County Judge Alger Kendall says.

Each year, Kendall says, GEO Group gives the county $4,000 for school scholarships and $6,000 for maintenance and upkeep of the city's courthouse.

GEO Group also gives money to the local Rotary Club, Toys for Tots, the Little League, Relay for Life and other local organizations and events, he says. And the people who work at the facility also help feed the local economy.

"I mean, that employment translates into other money being spent in the county," he says.

When the detention center is complete, Karnes County is banking on 140 new jobs and $150,000 in tax revenue.

The Economics Of Private Prisons

David Shapiro says that promise of jobs and tax revenue is eerily similar to what some officials in Hardin said back in 2004.

Shapiro, a staff attorney for the American Civil Liberties Union National Prison Project, is the author of a new ACLU report that's critical of the private prison industry.

Shapiro says it's possible a town could reap some small economic benefits from a private prison, but it may not bring the larger economic boost the county is hoping for.

"That's what the empirical evidence has shown ... and there are various theories for why that may be the case," Shapiro tells weekends on All Things Considered guest host Laura Sullivan.

The presence of a prison might actually squeeze out other businesses that could bring greater benefits than the prison itself, he says. Also, many of the jobs created by a private prison don't actually go to people in the community.

The bigger problem, he says, is that state and federal taxpayers — who in the end are paying for these prisons — aren't getting the most value for their money.

To cite just one example, he says, last year the Arizona auditor general found that it actually might be more expensive to hold Arizona prisoners in private, for-profit facilities than in public ones.

Despite these findings, the state has plans to award contracts for 5,000 more private prison beds.

The safety and security of private prisons is another concern. Shapiro says some studies have found that the level of violence is actually higher in private prisons.

"Private prisons have incentives to make money [and] to cut costs," he says. "One of the ways they do that is by slashing pay for staff, which leads to much higher rates of turnover."

That high rate of turnover and guards who lack the experience to properly respond to situations like escape attempts is dangerous, Shapiro says.

The savings from those cost cuts do not get passed on to the state, he says.

Shapiro's report criticizes both GEO Group and the Corrections Corporation of America, the two biggest private prison corporations in the country.

GEO Group declined to comment, but the Corrections Corporation of America said in a statement from spokesman Steve Owen that the report "does not enter the realm of credible discussion."

In the statement, he called the report "an exceedingly thin, old mix of dated news, willful bias and unfounded opinion. It's being advanced by a familiar cast of industry critics and is blind to our industry's many benefits."

The Prison Business

Despite the criticism private prisons face, as an industry they do very well. They make money, a little for some of the towns where they're built and a lot for shareholders and investors.

"This is an investment that we talk with investors about on a regular basis as a good idea," investment analyst Tobey Sommer tells Sullivan.

Sommer, director of equity research at SunTrust Robinson Humphrey in Tennessee, says both CCA and Geo Group made more than $1 billion each last year and their CEOs took home multimillion-dollar bonuses.

The recession could actually make them more money, Sommer says. With budgets stretched thin, states might look to private prisons to house and secure even more inmates. Only 10 percent of all inmates in the U.S. are housed in private prisons, he says, so that other 90 percent could be seen as an opportunity for growth.

But not everyone sees opportunities for long-term growth.

"Crime rates are declining, the prison population is declining, and many states, in large part motivated by the economic downturn, are realizing that they can't keep building their way out of the problem," says Michele Deitch, who teaches criminal justice at the Lyndon B. Johnson School of Public Affairs at the University of Texas.

Deitch says the new growth market for prison companies is immigrant detention, like the facility in Karnes County. New prisons, possibly for state inmates, like the one in Hardin, Mont., are on the decline.

The continuing flow of prisoners from the state isn't what it used to be, Deitch says, because of new treatment models and other alternatives to prison.

But Sommer says, while an empty prison just off Main Street could be a problem for Hardin or any other town, it's not a problem for the private prison industry, especially for companies hoping to fill those beds with immigration detainees.

"That enables kind of last-minute purchasing by their customers," he says, "so as a need arises, from a state or federal customer, Corrections Corporation can say 'I've got a facility with 1,000 beds available for you.'"

And right now, it has one ready. It just has to turn the lights on.

Copyright 2013 NPR. To see more, visit http://www.npr.org/.

Transcript

LAURA SULLIVAN, HOST:

It's WEEKENDS on ALL THINGS CONSIDERED from NPR News. Guy Raz is away. I'm Laura Sullivan.

In south central Montana, about an hour north of the Wyoming border, there's a small town called Hardin with a big story.

BRETT THOMAS-DEJONGH: Well, if you were driving into town, you'd see some convenience stores and you'd get on the main drag and you'd see some, you know, restaurants and an old hotel.

SULLIVAN: This is Brett Thomas-DeJongh.

THOMAS-DEJONGH: There's one stoplight, and I always seem to have to stop there.

(SOUNDBITE OF LAUGHTER)

SULLIVAN: He's the former editor of Hardin's local paper, the Big Horn County News. And he says back in 2004, a Texas company that builds and operates private prisons came to town.

THOMAS-DEJONGH: Came up and said, hey, these private prisons are a win-win.

SULLIVAN: Here's how it works: The county pays to build a prison.

THOMAS-DEJONGH: We'll build it, so we win.

SULLIVAN: And the state or federal government fills it.

THOMAS-DEJONGH: Yeah. If you build it, they will come.

SULLIVAN: Hardin gets tax revenues, new jobs, economic benefits. The state or federal government gets a place to put all those inmates they don't have room for. And the private prison company runs the place and gets a cut of the profits.

THOMAS-DEJONGH: If you build it, they will come. And that's been sort of the joke all the time, is that they did that. But people are just waiting.

SULLIVAN: They're waiting for the inmates. Because Hardin's 464-bed, state-of-the-art private prison - built in 2007 at a cost of $27 million, guaranteed to bring jobs and tax revenue to the town - is still, to this day, empty. And now, it's reportedly costing the town almost $10,000 a month just to keep the grass cut and the lights on.

(SOUNDBITE OF MUSIC)

SULLIVAN: That's our cover story today: the economics of private prisons - a multi-billion dollar business. Critics question the quality of private prisons and the promised economic benefit. But proponents say private prisons not only save taxpayers money, they generate income for the surrounding community. We take a fresh look at the money behind it all.

Essentially, the prison in Hardin, Montana, is empty because the builder never landed a contract with the state or federal government for inmates. By 2009, the town was desperate to remake the money it had spent on the facility. It made national news when it offered to do something almost no other town in America was willing to do: house prisoners from Guantanamo Bay.

THOMAS-DEJONGH: I think that just shows you to what length people were willing to go to fill it up.

SULLIVAN: There's not a whole lot you can do with an empty prison.

THOMAS-DEJONGH: If you're not going to get prisoners, then you have to explore other options and...

SULLIVAN: Brett Thomas-DeJongh says someone suggested turning it into a paintball park.

THOMAS-DEJONGH: Another one, they had reality show producers express interest in the Hardin jail, like, you know...

SULLIVAN: They wanted to fill it with prisoners themselves, and film the whole thing.

THOMAS-DEJONGH: And that didn't happen. I think...

SULLIVAN: The prison? It's still empty. In fact, these days, it's just sort of become an embarrassment. Local officials didn't even want to talk to us about it.

THOMAS-DEJONGH: That's why it's a sore spot. I think it seems to them, like, no matter what they do, they can't win.

SULLIVAN: About 1,500 miles south of Hardin, Montana, in Karnes County, Texas, you find a very different story.

What's the most popular place to go in Karnes County?

ALGER KENDALL: Well, that's a tough question. Most people meet around the coffee shop.

SULLIVAN: Alger Kendall was a judge there last year, when he was part of the committee that voted to let a private prison company build a new 600-bed immigrant detention center in town. It wasn't a tough vote. The company GEO Group already has one facility in Karnes County built it in 1998.

KENDALL: They have been tremendous corporate partners with the county and the people here in Karnes County.

SULLIVAN: Each year, Kendall says, GEO Group gives the county $4,000.

KENDALL: For school scholarships.

SULLIVAN: Six-thousand dollars.

KENDALL: For maintenance and upkeep of our courthouse. Our courthouse is over 100 years old.

SULLIVAN: GEO Group gives money to the Rotary Club, Toys for Tots, Little League, Relay for Life. In fact, Alger Kendall says...

KENDALL: Oh here, a couple of weeks ago, I was in the local store...

SULLIVAN: And one of the people who worked at the prison walked in.

KENDALL: And bought a couple of packages of diapers for his kids. I mean, that employment translates into other money being spent in the county.

SULLIVAN: For its new immigrant detention center? Karnes County is banking on 140 new jobs. And most importantly...

KENDALL: It could translate up to $150,000 worth of taxes.

SULLIVAN: That's a lot of money for a small county in Texas. So, two different towns, two different stories.

DAVID SHAPIRO: You know, if you look back to 2004, in Hardin, when that deal, that prison deal, was first being put together, what people in that town were saying then is eerily similar to what some leaders in Karnes County are saying now.

SULLIVAN: David Shapiro is a staff attorney with American Civil Liberties Union National Prison Project. He's the author of a new report put out by the ACLU that's critical of the private prison industry. He says it's possible a town could reap some small economic benefits from a private prison, but it may not bring the larger economic boost most towns are hoping for.

SHAPIRO: That's what the empirical evidence has shown or at least suggested. And there are various theories to why that may be the case. It may be that prisons squeeze out other businesses that could actually bring greater benefit. And in many cases, many of the jobs that are created by a private prison don't actually go to people in the community. Not everyone in the immediate community is able to be a correctional officer.

SULLIVAN: But the bigger problem, he says, is that state and federal taxpayers who are in the end paying for these prisons aren't getting the most value for their money.

SHAPIRO: To cite just one example, last year, the Arizona auditor general found that it actually may be more expensive to hold Arizona prisoners in private, for-profit facilities than public ones. You know, another claim the private prison industry makes is that they provide safe, secure facilities. And the evidence is mixed on this. But there certainly is empirical support and studies that have found that the level of violence is actually higher in private prisons.

SULLIVAN: Why? Why would that be?

SHAPIRO: Well, private prisons have incentives to make money, to cut costs. And one of the ways they do that is by slashing pay for staff, which leads to much higher rates of turnover. To be a correctional officer and to respond to the situations that arise in a prison, you need to have experience. And not having that experience can be dangerous.

I mean, you know, we were talking about Arizona. There was an escape recently from the Kingman facility there, an absolutely brutal escape. And there was an audit of that facility by the Arizona Department of Corrections. And it found that staff were green across all shifts. It found that they didn't respond to alarms that would go off regularly. And obviously, that may have contributed to the escape.

SULLIVAN: If you work in a - if you're a correctional officer in a private prison or a correctional officer in a state prison, which is the better job? Who pays more?

SHAPIRO: Generally, it's better to be at a state prison. You tend to have higher pay, better benefits, which can promote greater professionalism. But let me just be clear about one thing, though. Just because these private companies are slashing pay and slashing benefits for their workers doesn't mean that those economic savings are passed on to the state.

SULLIVAN: We wanted to interview both the companies David Shapiro criticized in his report, GEO Group and the Corrections Corporation of America. They're the two biggest private prison corporations in the country. GEO Group declined. The Corrections Corporation sent a statement from its spokesman Steve Owen. He said: This stale report does not enter the realm of credible discussion. It's an exceedingly thin old mix of dated news, willful bias and unfounded opinion. It's being advanced by a familiar cast of industry critics and is blind to our industry's many benefits.

Despite the criticism private prisons face, as an industry, they do very well. They make money, a little for some of the towns where they're built, like Karnes County, Texas, and a lot for shareholders and investors. Just ask an investment analyst.

If somebody comes to you and says, I'm looking for a good solid investment. I want to make some money. Are you going to say to them, yeah, private prisons, this is a good investment?

TOBEY SOMMER: Absolutely. This is an investment that we talk with investors about on a regular basis as a good idea.

SULLIVAN: Tobey Sommer is director of equity research at SunTrust Robinson Humphrey in Tennessee. He says both the Corrections Corporation and Geo Group made over 1 billion dollars each last year. Their CEOs took home multimillion dollar bonuses. And Tobey Sommers says the recession could actually make them more money.

SOMMER: Roughly half of their inmates that they house currently come from state customers. And state budgets have been so hit by the recession. And as a result, they may look to either Corrections Corp or GEO to satisfy that need and house those inmates.

SULLIVAN: In Florida, officials have announced plans to hand over prisons in 18 counties to private prison companies, and Ohio just became the first state to sell one of its facilities to a private company. But private prisons still only house 10 percent of all inmates in the United States. Tobey Sommer calls that opportunity.

SOMMER: So if you can look at that compliment to that 10 percent, that 90 percent and think that more of those might be privatized, then that's a significant opportunity.

SULLIVAN: But not everyone sees opportunities for long-term growth. Michele Deitch teaches criminal justice at the Lyndon B. Johnson School of Public Affairs at the University of Texas.

Crime rates are declining, the prison population is declining, and many states, in large part motivated by the economic downturn, are realizing that they can't keep building their way out of the problem.

Deitch says the new growth market for prison companies is immigrant detention for facilities like the one in Karnes County. But new prisons possibly for state inmates, like the one in Hardin, Montana, those are on the decline.

MICHELE DEITCH: So in Texas, we've closed a prison for the first time in - probably in history, and we've started looking to alternatives and to treatment models and such. So the continuing flow of prisoners from the state isn't what it used to be.

SULLIVAN: But investment analyst Tobey Sommer says while an empty prison just off Main Street could be a problem for Hardin or any other town, it's not a problem for the private prison industry, especially for private prison companies hoping to fill those beds with immigration detainees.

SOMMER: That enables kind of last-minute purchasing decisions by their customers. So as a need arises, from a state or federal customer, Correction Corp can say, I've got a facility with 1,000 beds available for you.

SULLIVAN: Hmm. And they have one ready. They just have to turn the lights on.

Correct. Transcript provided by NPR, Copyright NPR.