by Daniel A. Rosen |
The construction of two massive new prisons in Alabama, to be built privately but leased and operated by the State corrections department, has hit financial roadblocks that may lead to the plan’s demise. As of May, 2021, every element of the financing for the two new mega-prisons slated to hold 7,000 beds had fallen apart.
British bank Barclays Capital originally committed to underwrite about $850 million in municipal bond offerings for the two new prisons being built by CoreCivic (formerly Corrections Corporation of America). The debt was being issued by the Wisconsin-based Public Finance Authority (PFA), and co-managed by KeyBanc Capital and Stifel, on behalf of a shell company owned by CoreCivic. Every one of those financiers has now abandoned the project in the face of mounting public pressure and criticism.
Barclays wasn’t finding much investor interest, and pulled its funding after vocal criticism from a range of activists and the termination of its membership in the American Sustainable Business Council. That organization and its partner, the Social Venture Circle, announced they would refund Barclays membership dues over the bank’s role in the financing scheme.
The Business Council has never kicked out a member, said co-founder David Levine. “This was a big move on our part,” he said. Both groups in a statement said they “refuse to perpetuate mass incarceration, systemic racism, and human rights abuses through the offering” of the bonds.
The Business Council’s board chair, MaryAnne Howland, also said “We abhor the hypocrisy represented here and renounce the continued investment in the broken, unjust system of incarceration in this country.”
Other groups opposed to the deal created significant headwinds too. Alabama activists from Communities Not Prisons and Alabama Students Against Prisons teamed up with national organizers like Presente.org, Worth Rises, Fight Toxic Prisons, Justice Capital, and Candide Group to fight the project and its financing. In mid-April, 43 business leaders, investors, and activists urged banks and investors “to refuse to purchase securities…whose purpose is to perpetuate mass incarceration.”
In 2019, Barclays had pledged along with numerous other banks that it would no longer provide funding for private prison companies. But because the Alabama financing was arranged through a shell corporation called Government Real Estate Solutions – owned wholly by Tennessee-based Core Civic – Barclays rationalized that they’d simply be the underwriters on PFA’s behalf, and not directly financing CoreCivic. The bank initially averred that “the commitment we made in 2019 not to finance private prison companies remains in place.”
The thinly-veiled structure of the deal clearly wasn’t fooling proponents of corporate responsibility.
“Barclays’ commitments to the public need to mean something, and its attempt to quietly finance a mega private prison project in Alabama was indefensible, and a betrayal of the public trust. At this point, Barclays should finally understand that the private prison industry is toxic to governments, financial institutions, and the public at large,” said Matt Nelson, Presente.org’s Executive Director.
“We stand with the activists, business leaders, and investors vehemently opposed to any efforts to develop and build two prisons in Alabama,” said Isaac Graves of the Social Venture Circle.
Governor Kay Ivey announced in February of 2020 her plan to lease three new prisons, two of which were those being built by CoreCivic with the British bank’s underwriting. The state signed contracts to lease the prisons for 30 years – paying rent and all other expenses to operate the sites: staffing, food, medical, utilities, and other costs.
Alabama officials had said the deal would allow it to improve conditions within the prison system as a whole. Kristi Simpson, a corrections department spokesperson, said the CoreCivic prisons will “better accommodate inmate rehabilitation and improve the quality of life for all those who live and work in them.”
Critics say this rationale ignores the larger problems of over-incarceration, racial disparities, and CoreCivic’s track record. “Right now Alabama incarcerates people at a 50% higher rate than the rest of the country,” said Morgan Duckett, a leader of Alabama Students Against Prisons. And while about one-fourth of the state’s population is black, African Americans represent over half of Alabama’s prisoners, according to the Prison Policy Initiative.
The state’s own Auditor, Jim Zeigler, also says the plan is “fatally flawed and is a 30-year mistake.”
Zeigler went on to explain his objections: “State taxpayers will be on the hook for rent payments starting at $94 million a year, and going up to $106 million a year. The total rents paid over 30 years will be about $3.6 billion. At the end of that time, the state will own equity in the prisons of exactly zero.” There is also some question, he said, of the Governor’s authority to enter into the contract without the Legislature’s approval. Zeigler further noted in an op-ed that CoreCivic has a “record of abuse and mismanagement.”
The Governor said in a statement: “To be abundantly clear, these are not private prisons – they will be run by the state. As the sole operator and tenant, the [Alabama Department of Corrections] will be contractually obligated to make lease payments…for the full term of the bonds.”
CoreCivic also issued a statement in response to the cancellation of financing, saying: “The reckless and irresponsible activists who claim to represent the interests of incarcerated people are in effect advocating for outdated facilities, less rehabilitation space and potentially dangerous conditions for correctional staff and inmates alike.”
With Barclays withdrawal in mid-April, the Wisconsin-based PFA and co-manager KeyBanc also exited the deal. Governor Ivey said then she intended to pursue new financing, noting she was still “fully committed” to the project.
Now that co-manager of the bond issue Stifel has also abandoned the offering, it’s unclear whether CoreCivic’s construction of the facilities will go forward at all. According to Bloomberg, as of May 10th, Stifel’s Senior Vice President, Joel Jeffrey, said the transaction had been totally “withdrawn from the market.
Alabama’s prison system is badly in need of reform. In December of 2020, the U.S. Department of Justice sued Alabama over dangerous prison conditions there, alleging a failure to protect inmates and excessive force by guards, and calling the state “deliberately indifferent” to serious problems.
US Attorneys spent over a year and a half negotiating with Alabama to address several longstanding issues in prisons. But state corrections officials failed to agree to changes, and federal officials “determined that constitutional compliance cannot be secured by voluntary means,” according to the suit. The complaint notes that “Alabama’s prisons for men are now more overcrowded than in 2016, when the United States initiated its investigation.”
Nine Alabama prisoners were killed by their peers in the first six months of 2020, according to the suit. Violence is fostered by overcrowding and unsanitary conditions, according to the Justice Department. Suicide rates are also high, with 15 prisoner deaths in 15 months recently. And mental health treatment in general is plagued by “severe and systematic inadequacies,” according to one federal Judge who ordered injunctive relief in 2019.
At the time DOJ filed its suit, Governor Ivey expressed disappointment but said the state would move forward with plans to “reimagine and rebuild” the prison system through the construction of new prisons. That plan may now be in serious doubt unless the state can secure financing for these privately-built prisons.
Activists continue to have other ideas for reform as well. “This prison project was an outrageous misuse of funds,” said Andrea James, Executive Director of the National Council for Incarcerated and Formerly Incarcerated Women and Girls. “The billions of dollars that Governor Ivey tried to channel to CoreCivic should be spent to support local communities, including investment in jobs, education, and healthcare. Elected officials on all levels need to understand people want resources for reimagining communities disrupted by decades of investment in prisons.”
Sources: altoday.com, mynbc15.com, bloomberg.com, NPR.org, Forbes.com, wisconsinexaminer.com.
Originally written for Prison Legal News.