(Bloomberg) -- An operator of an Arizona detention center with about $24.7 million of municipal debt outstanding says the facility has become too cost prohibitive to keep open amid a drop in the number of inmates housed there.
Bondholders were told Wednesday that LaSalle Corrections moved to cut ties with the San Luis Regional Detention Center after its inmate population dipped significantly over the past year, according to a notice filed with the Municipal Security Rulemaking Board. The facility isn’t currently generating sufficient revenue to cover both debt service on the bonds and operational costs, according to the disclosure.
“Currently with the low population levels we cannot sustain this operation,” Chief Financial Officer Tim Kurpiewski said in the notice of non-renewal. “Also, as the election looms this may also play a critical role in the use of the facility, but we won’t know that until November.”
Representatives for LaSalle Corrections including Kurpiewski didn’t respond to requests for comment. Officials from the city of San Luis also didn’t respond.
LaSalle said it was losing $400,000 a month under the contract with San Luis, adding that it needs the detention center to maintain a population of at least 600 inmates to break even. The 718-bed facility, which houses detainees on behalf of the US Immigration and Customs Enforcement and the US Marshals Service, hasn’t met that quota since May 2023, according to the non-renewal notice. Nearly $3 million of operating and maintenance costs incurred by LaSalle remained unpaid due to insufficient project revenues as of Aug. 1.
San Luis Facility Development Corp. issued $26 million of bonds in 2014 to refinance outstanding debt that originally financed the construction and furnishing of the correctional facility in 2005, according to bond documents.
One security from that series traded on Wednesday at an average price of 85 cents-on-the-dollar or a yield of about 14% — roughly 1,277 basis points more than benchmark bonds, according to data compiled by Bloomberg.
The facility’s ability to stay afloat and generate revenue is depends on incarceration rates because federal agencies like ICE pay per bed filled.
“The continuing demand for the beds in the project is predicated on the assumption that demand for jail space will continue to exceed the supply of available space,” the issuer said in the risk factors section in the 2014 bond documents. “However, due to economic, social, and political factors, it is impossible to predict whether this assumption will hold true.”
Detention centers like San Luis once benefited from former President Donald Trump’s push to detain and then deport undocumented immigrants. The outcome of this year’s presidential election could once again affect the amount of detainees filling these facilities — Vice President Kamala Harris has vowed to sign a strict border security bill that her rival Trump had opposed.
The San Luis-based detention center is located in the southwest corner of Arizona along the US-Mexico border. Last week, ICE Chief of Staff Michael Lumpkin met with leaders from LaSalle to “discuss detention operations and the agency’s commitment to providing healthy, safe and humane environments for those in custody,” according to a press release.
--With assistance from Martin Z. Braun.
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