British bank Barclay’s LPC will finance two prison lease contracts signed by Gov. Kay Ivey, according to Alabama State Auditor Jim Zeigler.
Zeigler says Barclays agreed to raise $634 million toward the private construction of two prisons, one in Elmore County and one in Escambia County, Alabama. Ivey signed contracts Feb. 1 to lease the two prisons for 30 years and is expected to sign a third contract with a different firm for a prison in Brierfield, Alabama, in Bibb County.
Zeigler, who is a vocal opponent of the prison lease plan, says promoters of the plan “were forced to go outside the United States because U.S. banks that do this type lending decided they would no longer finance the private prison business.”
Two years ago, banking giants Bank of America, JPChase, and Wells Fargo announced they would no longer finance private prisons because of problems in the private prison business. Zeigler says the Ivey prison lease plan is “fatally flawed and is a 30-year mistake.”
“State law limits this type of contract to one year. That means the state will have to renegotiate the one-year contract 29 times. That is a risky way to do business,” Zeigler said.
“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. No equity will be built at all. The state would then have to start over with a new plan to pay for those then 30-year-old prisons. This is a 30-year mistake,” Zeigler said.
Zeigler says the debt would be to a shell corporation totally owned by Tennessee private prison operator CoreCivic — Government Real Estate Solutions of Alabama Holdings LLC.
The prisons would be built and maintained by CoreCivic, but the state of Alabama would pay the 30 years of rent plus all other expenses – staffing, food, medical, utilities, and all other expenses.
Zeigler says the Alabama Department of Corrections has “overstepped its authority by agreeing to something that can be done only by the state legislature.”
“The Department of Corrections has agreed to prioritize the prison lease payments above all other obligations. Only the state legislature can legally do that.”
Zeigler says he has attorneys looking at the prison lease contracts and is considering challenging them in court. “The Ivey administration is moving forward daily with this flawed, costly plan. A court challenge appears to be the only way to block it,” Zeigler said.
