RAYMONDVILLE — Bond holders are apparently demanding Willacy County pay off the $68.8 million debt remaining on the former “tent-city” prison.
Today, commissioners are expected to enter into an agreement with a national prison operator for the “operations and management” of the facility.
Commissioners also are expected to sell off the bonds, ridding the county of the debt.
In 2006, the county sold $60 million in bonds to investors represented by Michael Harling, a financer with Municipal Capital Markets Group in Dallas.
In a financial statement issued in February, the bond holders apparently urge the sale of the facility, suggesting it be used as a detention center amid heightened interest in such facilities.
President Trump’s push to deport undocumented immigrants convicted of crimes has apparently driven interest in the facility, County Judge Aurelio Guerra has said.
“Because the project can be used as a detention facility and federal governmental demand for such facilities is expected to increase, the opportunities to secure a recovery for the holders of the bonds have recently increased,” the bond holders write. “The trustee has in the past several days received multiple unsolicited expressions of interest from potential purchasers of the project.”
In the financial statement, the investors are calling the bonds.
“The trustee received a direction from the holders … authorizing and directing the trustee to declare the principal of the bonds to be immediately due and payable,” according to the statement.
The bond holders state the county’s sale of the facility would help them recover their investment.
“The trustee expects to shortly enter into a binding contract for sale of the project, which is anticipated to result in a substantial recovery for the holders of bonds once closing occurs and may resolve currently outstanding litigation and insurance claims,” the bond holders wrote.
If the facility is sold, it will be placed on the tax rolls, generating property taxes for the county and other taxing entities.
But big questions surround the deal.
“There are so many unanswered questions. Is this temporary? What’s the county getting?” asked Sheriff Larry Spence, a former board member of the Willacy County Local Government Corporation, which oversees the facility. “I just hope they look at it thoroughly and make the right decision and get us through this financial crunch.”
Standard & Poor’s Global Ratings has downgraded its long-term rating on the revenue bonds from CC to CCC+, according to the financial statement.
“According to S&P, the downgrade reflects their view that the current shortfall of pledged revenues on the bonds could lead to a potential default by December 2017,” the bond holders write, adding Standard & Poor’s “had incorrectly applied their ‘special tax bond’ criteria to the bonds.”
In case of default, the bond holders, who assume any risk, would have the right to take possession of the 53-acre property, Guerra has said.
Following the February 20, 2015, riot, Standard & Poor’s placed the Willacy County Local Government Corporation on CreditWatch, according to the financial statement.
The bond holders state their trustee withdrew $468,645 from the debt service reserve to complete a June 1, 2016 interest payment of $2.6 million.
“S&P will follow up with the WCCC management within the next 90 days to determine the impact on S&P’s ratings,” the bond holders wrote.
According to the financial statement, the bond holders continue to discuss the repairs to a 1,000-bed concrete housing unit damaged in the inmate uprising that destroyed much of the facility in February 2015.
The facility’s 10 tent-like domes, also damaged in the riot, will be removed.
“Holders … are continuing to analyze the economics of repairing the hardened structure and demolition of the (tent) structures,” the bond holders wrote. “The super majority of bond holders are also continuing to analyze potential opportunities to populate the project with inmates.”
So far, the prison’s insurance company has agreed to pay about half of a request for business interruption insurance.
An insurance company has agreed to pay $16.3 million of a $35.3 million claim covering 12 months of business interruption.
Today, commissioners are expected to approve the “execution of operations and management agreement for the Willacy County detention facility.”
County commissioners have not disclosed the name of the company that plans to reopen the site of the former Willacy County Correctional Center.
The detention center is expected to create 300 to 400 jobs, County Commissioner Henry De La Paz has said.
The agreement would come two years after an inmate uprising led to the prison’s closure, plunging this farming area into financial crisis.
The closure of the 3,000-bed prison, which paid the county for every inmate it housed, led to 400 employee layoffs, slashing a third of the county’s $8.1 million general fund budget.