Cell-Out Arizona Exclusive, Part II: Arizona For-Profit Prison Costs Rose14%; Now Guarantee 100% Occupancy
by cell-out-arizona on Aug. 03, 2012, under AFSC, Arizona, Arizona Department of Corrections, Corrections Corporation of America, GEO Group, Management and Training Corporation, private prison, Privatization
In Part I, we revealed that state officials have known for some time that proposed for-profit prisons will not save the state money. We referred to a state law, now partially repealed, that requires for-profit prison corporations to demonstrate cost savings during the competitive bidding process before a contract is awarded.
But once they’re built, the law does not provide any penalty for failure to actually save the state money. So in essence, the for-profit prison corporations can promise us the moon, but there’s nothing to ensure that they will deliver on those promises.
And indeed, they haven’t. Cost comparison studies have consistently shown that Arizona is losing money on private prisons—an average of $3.5 million per year, according to an AFSC analysis.
The cost of a private prison contract is calculated through the “per-diem payment.” This is the amount that Arizona agrees to pay the corporation to house one prisoner for one day. But contracts with for-profit prison operators are renegotiated or amended regularly, often annually. And those per-diem rates invariably increase.
An analysis of the state’s three oldest private prison contracts, (1) With GEO Group for Florence West, (2) With GEO Group for Phoenix West, and (3) with Management and Training Corporation (MTC) for Marana Community Correctional Treatment Facility, shows that the per diem rates for regular (non-emergency) beds in these facilities increased an average of 13.9% since the contracts were awarded, as demonstrated in the chart below.
These records, obtained through a public records request, also show that these contracts were more recently amended to promise 100% occupancy of these private prisons.
Beginning in 2008 with Phoenix West, the Arizona Department of Corrections (ADC) began working out new agreements in which the corporations agreed to a lower per-diem payment for ‘emergency beds’ (intended to temporarily absorb system overflow), from an average of $30.46 to $10.00 for Florence West and Phoenix West and from $25.10 to $12.60 for Marana.
In exchange for this concession, Arizona agreed to a guaranteed 100% occupancy for all the beds in all three facilities, including the much more expensive “rated beds.” The average per diem rate for these beds is $49.07.
In the cases of the two GEO prisons (Phoenix and Florence West), a 2010 amendment later lowered the guaranteed occupancy for the emergency beds to 95%, but left in place the 100% occupancy rate for the more expensive rated beds.
Amendment 14 for Marana (signed on June 6, 2011) has an additional, more interesting provision. The documents refer to a “dispute” between the Department of Corrections and for-profit operator MTC as to whether or not the 5-year contract renewal was done in a timely manner (ADC says yes, MTC apparently said no). The negotiated settlement of this dispute consolidates 450 rated beds with 50 emergency beds into a total of 500 rated beds. These 500 beds will carry a guaranteed occupancy of 100% at a rate of $49.03 per prisoner, per day.
What’s more, this agreement was applied retroactively to October 6, 2010, effectively erasing all but three months of the reduced emergency bed per diem in the previous amendment (from July 2010). It also guaranteed that Arizona would continue to pay about three times as much for the emergency beds. In essence, ADC is handing over four years’ worth of extra money to keep MTC happy.
How much money? In the July 2010 contract amendment for the facility, the state had bargained the emergency beds down to a $12.60 per diem. Now they will be paying $49.03 per diem for the same beds. Which means that MTC is raking in an extra $36.43 per prisoner, per day. Multiply by 50 such beds, and MTC will make additional profits of $664,847.50 per year– a total of $2,659,390 through the remainder of the contract, which expires in October of 2013. Not bad!
Allow us to pause here to remember that MTC is the corporation whose negligence led to the horrific escapes from the Kingman prison in the summer of 2010, resulting in the murder of a couple vacationing in New Mexico. Yeah, that MTC.
Perhaps unsurprisingly, it appears that Arizona is looking to cut MTC loose, at least from managing the Marana prison (they still manage two units at Kingman, for which they have a guaranteed occupancy rate of 97%). The final component of this contract amendment is an agreement that Arizona will buy the Marana prison back from MTC in October of 2013 for the tidy sum of $150,000. You can insert your own jokes about ‘short sales’ here.
But once they’re built, the law does not provide any penalty for failure to actually save the state money. So in essence, the for-profit prison corporations can promise us the moon, but there’s nothing to ensure that they will deliver on those promises.
And indeed, they haven’t. Cost comparison studies have consistently shown that Arizona is losing money on private prisons—an average of $3.5 million per year, according to an AFSC analysis.
The cost of a private prison contract is calculated through the “per-diem payment.” This is the amount that Arizona agrees to pay the corporation to house one prisoner for one day. But contracts with for-profit prison operators are renegotiated or amended regularly, often annually. And those per-diem rates invariably increase.
An analysis of the state’s three oldest private prison contracts, (1) With GEO Group for Florence West, (2) With GEO Group for Phoenix West, and (3) with Management and Training Corporation (MTC) for Marana Community Correctional Treatment Facility, shows that the per diem rates for regular (non-emergency) beds in these facilities increased an average of 13.9% since the contracts were awarded, as demonstrated in the chart below.
| Facility/Unit | Initial Per Diem | Current Per Diem | Increase, in Dollars | Percent Increase |
| Phoenix West | $43.77 | $49.28 | $7.49 | 17.9% |
| Florence West, DUI | $49.55 | $55.79 | $6.24 | 12.6% |
| Florence West, RTC | $39.95 | $44.98 | $5.03 | 12.5% |
| Marana | $43.54 | $49.03 | $5.49 | 12.6% |
| AVERAGE INCREASE | $6.06 | 13.9% | ||
These records, obtained through a public records request, also show that these contracts were more recently amended to promise 100% occupancy of these private prisons.
Beginning in 2008 with Phoenix West, the Arizona Department of Corrections (ADC) began working out new agreements in which the corporations agreed to a lower per-diem payment for ‘emergency beds’ (intended to temporarily absorb system overflow), from an average of $30.46 to $10.00 for Florence West and Phoenix West and from $25.10 to $12.60 for Marana.
In exchange for this concession, Arizona agreed to a guaranteed 100% occupancy for all the beds in all three facilities, including the much more expensive “rated beds.” The average per diem rate for these beds is $49.07.
In the cases of the two GEO prisons (Phoenix and Florence West), a 2010 amendment later lowered the guaranteed occupancy for the emergency beds to 95%, but left in place the 100% occupancy rate for the more expensive rated beds.
Amendment 14 for Marana (signed on June 6, 2011) has an additional, more interesting provision. The documents refer to a “dispute” between the Department of Corrections and for-profit operator MTC as to whether or not the 5-year contract renewal was done in a timely manner (ADC says yes, MTC apparently said no). The negotiated settlement of this dispute consolidates 450 rated beds with 50 emergency beds into a total of 500 rated beds. These 500 beds will carry a guaranteed occupancy of 100% at a rate of $49.03 per prisoner, per day.
What’s more, this agreement was applied retroactively to October 6, 2010, effectively erasing all but three months of the reduced emergency bed per diem in the previous amendment (from July 2010). It also guaranteed that Arizona would continue to pay about three times as much for the emergency beds. In essence, ADC is handing over four years’ worth of extra money to keep MTC happy.
How much money? In the July 2010 contract amendment for the facility, the state had bargained the emergency beds down to a $12.60 per diem. Now they will be paying $49.03 per diem for the same beds. Which means that MTC is raking in an extra $36.43 per prisoner, per day. Multiply by 50 such beds, and MTC will make additional profits of $664,847.50 per year– a total of $2,659,390 through the remainder of the contract, which expires in October of 2013. Not bad!
Allow us to pause here to remember that MTC is the corporation whose negligence led to the horrific escapes from the Kingman prison in the summer of 2010, resulting in the murder of a couple vacationing in New Mexico. Yeah, that MTC.
Perhaps unsurprisingly, it appears that Arizona is looking to cut MTC loose, at least from managing the Marana prison (they still manage two units at Kingman, for which they have a guaranteed occupancy rate of 97%). The final component of this contract amendment is an agreement that Arizona will buy the Marana prison back from MTC in October of 2013 for the tidy sum of $150,000. You can insert your own jokes about ‘short sales’ here.
