More January Woes for CCA
It appears that CCA has encountered more January contractual woes with Arizona's announcement to phase out the housing of their out-of-state inmates as of March 9th. This announcement comes during a time of budget crisis within the state. There has been talk of Arizona wanting to lease out nine of their ten prisons to private companies in an attempt to reduce cost. Ending out-of-state prisoner housing is another way to reduce expenditures on their prison system, since as of today there has not been an official bid to buy any of their nine prisons up for auction.
CCA president, Damon Hininger, had this to say about the recent decision by Arizona to stop housing their inmates out-of-state: "Although, we are disappointed with the proposed budget's indication to eliminate utilization of out-of-state prison capacity, we understand our partner's fiscal concerns in a very difficult budgetary environment and will work with them to ensure a smooth transition back into the Arizona state system" (Pueblo Chieftain).
This move by Arizona would mean that the state is not renewing the contracts of CCA's Huerfano County Correctional Center in Colorado as well as the Diamondback Correctional Facility in Oklahoma. The two contracts end March 8th and May 1st, respectively (Marketwire). These contract cancellations mark the third of their kind so far this month, following suit behind the Bureau of Prisons' ending CCA service to the California City Correctional Facility.
If these sort of cancellations continue much longer, the next ten years do not look so bright for CCA. Below I show what this month, extrapolated over the next decade, would do to CCA revenues.
| - $553 million | for the contract cancellation of the California City Facility |
| + $306.5 million | for the renewal of the Cibola county contract |
| - $565 million | for the cancellation of both Huerfano and Diamondback |
| - $811.5 M | total lost this month in contracts over the next 10 years |
This large loss of revenue over the next decade might explain the drop in the company's stock, placing them at the position they were in the first part of September of last year (Yahoo! Finance). As of now, the company's stock has fallen $4.53 since the markets opened for the new year.
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| Image via Costore |
Not only does this mean a drop in revenue for CCA, it also means a large loss of jobs for those employed Huerfano County Correctional Center. The facility will close until further notice, meaning 188 people are out of their jobs come April in an unfriendly job market (Pueblo Chieftain).
So what does all this mean for Arizona? With this incoming influx of inmates, it will likely increase demand on their current auction of 90% of their prison system. With more beds able to be filled in-state, it would mean more money is available to bidders from per-diem rates — the largest source of income for prison companies. Sure, before companies could buy one of Arizona's facilities, but without enough inmates to fill them to capacity (since they had some out of state), who would want to buy them? This being said, if CCA takes over a few or all of Arizona's facilities up for auction, there stands a good chance that this loss of $811.5 million over the next decade will reverse itself — although it will take some large dollar dealings to turn the tides. The budgetary situation with Arizona continues to intrigue me and I will continue to follow the developments and relay them back here.
Posted by Andrew Strong at 22 January 2010, 9:04 AM 
Categories: Colorado,CCA,Arizona,legislation,Oklahoma
Tags: contracts CCA Arizona private prisons
Categories: Colorado,CCA,Arizona,legislation,Oklahoma
Tags: contracts CCA Arizona private prisons
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