Two Private Lockups Short on Debt Payments in Texas

DALLAS - Two private detention facilities in Texas failed to make full debt payments due in February, according to disclosures filed Feb. 2.

Maverick County Public Facility Corp. paid the interest due on its $42.3 million of revenue bonds issued in 2007 but did not pay the $1.4 million principal, according to trustee UMB Bank.

"There are insufficient funds in the project fund to transfer to the bond fund to pay the Feb. 1 principal payment," the trustee said.

After the Feb. 1 interest payment, UMB Bank will have $3.7 million in the debt service reserve, $707,547 in the project rental fund, and $215,491 in the project operating fund, the bank said.

Several previous events of default have occurred and are continuing under the indenture, according to the trustee.

"The county continues to intercept project revenues, which constitutes a violation of the county's obligations under the lease," the disclosure notice said. "The county has then remitted funds to the trustee to cover the required monthly debt service deposits along with additional funds that it requisitions back for payment of operating expenses."

Under the terms of the lease, all project revenues must be delivered directly to the trustee and are to be used to pay rental payment deposits first, prior to using the revenues to pay project operating costs and expenses, the trustee said.

Maverick County has been operating the jail since the GEO Group ended its operating agreement on Nov. 1, 2013.

"Since that time, the county sheriff has been operating the project and has informed the trustee that the county has advanced a portion of its own funds to pay various operating costs and expenses," according to the notice.

Maverick County on the Texas-Mexico border has its county seat in Eagle Pass.

According to the Eagle Pass Business Journal, the board of the PFC voted Jan. 29 to terminate the financial advisory contract of Roberto R. Rodriguez and Southwestern Capital Markets Inc.

In Central Texas, the Burnet County Public Facility Corp. failed to make a full interest payment on $35.4 million of bonds used to build a detention facility in 2008, according to the trustee U.S. National Bank Association.

The payment due Feb. 1 was $1.26 million, but the issuer paid only $327,700, according to the notice.

The Internal Revenue Service has challenged the tax exemption on the jail's bonds.

In March 2014 Burnet County took over operation of the jail after Southwestern Correctional ended its contract. The private company has operated the 586-bed facility since 2008, when it first opened.

County leaders and the PFC sought another operator, but negotiations fell apart, according to local news reports.