CCA offers $50 million for Marion County Jail

May 19--The nation's largest operator of private prisons has offered to buy the Marion County Jail for $50 million.

Under the proposed terms of the deal, Corrections Corporation of America, or CCA, would pay that amount for 21 buildings and 36 acres at the jail site in northwest Ocala.

The facility would then be leased back to the County Commission for 20 years.

Over that time, CCA would pay property taxes on land that is currently not taxed. At the end of the lease, the jail and the property would revert to county ownership.

County officials and the company are discussing the amount of the lease payments and other terms of the deal, said Shawn Hubbick, the county's property manager.

It's unclear when the proposal will be further vetted by the County Commission.

The bidding closed on March 28, with CCA being the only company to respond.

County officials allotted 50 days to evaluate the offer. That window would have closed on Saturday. But the commission voted earlier this month to extend that time frame for another 90 days.

A deal with CCA could inject a massive amount of revenue into county coffers at a time when the County Commission is mulling new taxes.

Commission Chairman Carl Zalak has led a task force of county officials and elected officials and staffers from the cities across Marion County in studying the uses of a new local sales tax.

Commissioners also have received a five-year strategic plan from Sheriff Chris Blair that under most conditions includes property tax increases if the sales tax is not passed and implemented.

That fresh revenue would pay for new deputies, including additional personnel at the jail, and equipment that Blair maintains is much needed.

CCA spokesman Steve Owen said it would be premature to comment since the company was still in talks with Marion County.

"More broadly," he added in an email, "we have over 30 years of providing a wide range of quality solutions to our government partners, and welcome the opportunity to partner with Marion County."

Zalak on Monday agreed the offer was significant but said many questions remain.

He also reiterated the board's position that the county has no desire for anyone other than the Sheriff's Office to operate the 1,924-bed jail.

"It's simply a real estate transaction," Zalak said.

Zalak said he could see both sides of the offer. On one hand, a deal would bring an immediate infusion of $50 million. According to documents, the county has demanded that the winning firm pay up within 30 days of the bid being accepted.

Selling the jail also would bring tax revenues from property that is not now taxed, including a small offsite parcel where K-9 deputies are trained.

County property records peg the taxable value of the entire Sheriff's Office complex at $24.6 million.

It's unclear how much of that was related to the sheriff's headquarters facility, which is excluded from the deal.

County Property Appraiser Villie Smith's office did not have the tax data pertaining to just the jail and its related buildings immediately available on Monday. But applying the current tax rate to the whole Sheriff's Office complex would bring in about $440,000 a year.

On the other hand, Zalak noted, the county would no longer own the property, and thus lose control over it.

It's also unclear, the commissioner added, what the sales proceeds could be used for.

The newer parts of the jail were part of a $29 million expansion of the facility, financed with sales tax revenue from a local levy that Marion County voters passed in 2002.

"We're going to have a discussion on it and look at it," Zalak said. "I don't know what we're going to do until we have that discussion.

"Once you start taking each layer of the onion off, it gets a little complicated."

Blair declined to comment on the proposal, said sheriff's spokesman Capt. Jimmy Pogue.

Pogue said it would be premature to do so because the County Commission had not formally submitted the details of the offer to Blair.

But sheriff's officials have attributed a recent vote by jailers to unionize to staff uncertainty over the future of the jail.

The issue of selling the jail first arose back in January, when Commissioner Stan McClain posed it at the commission's annual strategic planning session.

McClain at the time said he got the idea while touring the facility with CCA executives last September, during the board's feud with Blair over the Sheriff's Office budget.

What McClain said he learned during that visit was that CCA had reorganized into a Real Estate Investment Trust, or REIT.

The IRS approved that for CCA in January 2013.

Becoming a REIT permits companies that derive the bulk of their revenue from income-producing real estate holdings to claim tax breaks.

Most REITs, for example, do not pay corporate income taxes, provided they adhere to the federal government's requirement to dole out at least 90 percent of their annual taxable income as shareholder dividends. The shareholders are then taxed for the gains on their investment.

CCA bills itself as the owner-operator of the fifth-largest prison system in the country, trailing only the federal government and three states.

According to its annual report for 2013, the company currently owns or controls 53 correctional facilities and manages another 16 government-owned prisons in 20 states and the District of Columbia.

That list includes five Florida facilities, with the Citrus County Jail among them.

The company has the capacity to house 86,000 inmates, and reported that about 13,000 of its beds were empty at the end of last year.

But CCA, its report shows, is on an expansion drive, highlighted by one bold proposal in 2011.

That year, the company purchased a state prison in Ohio for nearly $73 million, in what CEO Damon Hininger called "the first of its kind transaction," Forbes magazine reported in February 2013.

A year earlier the Huffington Post had reported that, following the Ohio transaction, the company subsequently wrote to 48 other states that it was interested in buying prisons under something called the "Corrections Investment Initiative."

As an example, CCA wrote in its own annual report that late last year it struck a deal to lease a 2,304-bed California prison CCA owned to the state for a minimum of three years.

CCA fixed the rent at $28.5 million annually over the first three years and added that it would impose yearly inflation adjustments capped at 2 percent.

The company said it agreed to be responsible for repairs and maintenance as well as taxes and property insurance, including up to $15 million in improvements at no additional cost to the state, while all other costs and operations at the facility belonged to the state.

"The lease of this facility provides California an immediate solution to help reach its population capacity goals, and exemplifies our ability to react quickly to our partners' needs with innovative and flexible solutions that make the best use of taxpayer dollars," the CCA report said.

"We intend to pursue additional opportunities like those with the (California Department of Corrections and Rehabilitation) to lease prison facilities to government and other third-party operators in need of correctional capacity."

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Contact Bill Thompson at 867-4117 or [email protected].

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