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Collins Center a Report on Prison Bonding 2011

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Collins Center / Florida TaxWatch Special Report | April 2011

A Billion Dollars and Growing:
Why Prison Bonding is Tougher
on Florida’s Taxpayers Than on Crime

Center for $mart Justice

April 2011 | 1

Executive Summary


ver the past 15 years, the state of Florida has increasingly turned to the use of lease revenue bonds to fund the
construction of new prison facilities. Little known and
not well understood by taxpayers, this funding approach
has saddled future generations of Floridians with over a billion
dollars in debt without appreciably increasing public safety. This
report explores the unprecedented growth in the prison system
that triggered the use of bonding, the genesis and history of the
use of bonding to finance prison construction, and what Floridians can and should do to curtail the use of prison construction
Key sections of the report include:
n An analysis of the exponential growth of Florida’s prison
population in the past 30 years resulting from “tough on
crime” policies that have done little to increase public
safety and concomitantly have created the need to build a
large number of new prison facilities to accommodate that
n A description of the increasing use of lease revenue bonds
over the past 15 years to pay for building new prisons, and
the impact of those decisions on the taxpayers of Florida.
n An analysis of why bonding is a problem that citizens
should be concerned about, because:
•	 It denies them a voice in the decision-making process
since lease revenue bonds, unlike general revenue bonds,
do not require voter approval;
•	 it obscures the true cost of prison system growth since
full construction costs are not included in the yearly
budgets, but are found only in little-known government
•	 it makes it difficult for citizens to understand the implications or to weigh the benefits of criminal justice policies
enacted by the Legislature over the years;
•	 it has created, and will continue to create, significant
long-term debt for taxpayers; and
•	 it allows policymakers to avoid addressing the root
causes of prison growth and to sidestep financial responsibility for their policy decisions by pushing the problem
into the future.
Among the findings detailed in the report:
n	 The total number of inmates in Florida’s prisons grew
from just under 20,000 in 1980 to 102,000 in 2010 – an 80
percent increase over 30 years.
n	 In that same period, public spending on prisons has increased from $169 million1 to about $2.4 billion.
n The exponential increase in the prison population in recent
years cannot be explained by increasing crime rates, since
crime rates have steadily declined in the past 20 years.
2 | April 2011

n	 Florida leads the nation in incarceration rates and stringency in law and sentencing, making its criminal justice
system the most punitive of the 50 states as measured by
more than 40 variables, such as average prison sentences,
life imprisonment, and prison conditions.
n	 Forty-three percent of the total cost of prison construction
and expansion between 2006 and 2010 was paid for by issuing lease revenue bonds.
n	There is currently $721.7 million in prison bonding debt
outstanding requiring future payments of approximately
$1 billion when debt service and interest payments are
Finally, the report outlines some of the policy choices in
Florida that have led to the increases in the prison population. It
describes the wide range of criminal justice reforms undertaken
in other states that are successfully reducing prison populations
and saving significant money without endangering public safety.
It recommends:
n Florida’s legislators seriously review the criminal justice
policies and practices which have contributed to the growth
of the prison system over the past two decades and have
financially strangled the state.
n Florida join the ever-growing number of states undertaking a broad range of criminal justice policy reforms led
predominantly by conservatives who understand that highly
punitive and incarceration-heavy penalties even for minor,
non-violent crimes are unsustainable.
n	Implement a moratorium on any new bonding to build
prisons until the Governor and Legislature fully disclose to
the public all costs created by the use of prison bonding and
give citizens a voice in determining whether they want to
pay for criminal justice policies that result in the growth of
the prison system without increasing public safety.



lorida’s prison population has increased significantly over
the past three decades. The total number of inmates in
Florida’s prisons grew from just under 20,000 in 1980 to
more than 102,000 in 2010.2 With this growth has come
growth in public spending on prisons. In 1980, the Corrections
budget was $169 million annually. By FY2010-11, it had jumped
to nearly $2.4 billion annually. Furthermore, the returns from a
public safety perspective have diminished over the past decade,
even as costs have accelerated.
Annual operations are only part of the overall expense for
Florida’s prisons. Constructing new prison capacity – or capital
investment–to accommodate the state’s growing population is
a far more significant burden for taxpayers. To fund the cost
of prison construction while meeting the constitutional requirement to balance the state budget, Florida, like many states, has
resorted to a complicated system of borrowing through issuing
lease revenue bonds – certificates of debt issued by government
or other public entities to raise money. Lease revenue bonding
has become a common means to achieve a balanced state budget.
However, it is not well understood by the general public even as
it obligates them to considerable debt well into the future.

Since 1995, Florida has issued approximately $825 million
in bonds to finance prison construction. As of June 30, 2010, the
state owed $721.7 million in bond debt for prison construction.
Future payments, including interest, on these bonds will total approximately $1 billion.3 This debt will be a cost to taxpayers for
years to come.
Lease revenue bonds have become popular with elected officials because they provide a way to build more prisons without
raising taxes. Because these bonds do not require approval by the
voters and are not part of the state’s annual budget, the practice
obscures significant portions of corrections costs. Furthermore,
these bonds make it possible for legislators to put off hard
choices necessary to address the underlying causes of growth in
the prison population, leaving that problem for those who follow.
With an unprecedented number of people now in prison and a
serious and long recession continuing to constrain Florida’s fiscal
resources, Florida must look for ways to ensure public safety
at lower cost. Alternatives do exist. Successful reforms being
implemented across the nation have enhanced public safety while
saving taxpayer dollars.
April 2011 | 3

The Growth of
Florida’s Prison System


lorida has the nation’s third largest prison system with
approximately 102,000 inmates.4 This population has
been growing for decades, and only in recent years has it
seen a slight decline. However, according to estimates by
the Florida Legislature’s Office for Economic and Demographic
Research (EDR), the prison population will increase 2.2 percent
by fiscal year 2015-16.5 The influx of new prisoners will require
additional prison construction.

The state currently operates 147 correctional facilities, including “major institutions” (i.e., traditional prisons), work camps,
work release centers, and road prisons. There are 63 Correctional
Institutions, including seven private correctional facilities6; 46
work and forestry camps, 33 work release centers/facilities, and
five road prisons.7 The budget for the Department of Corrections
exceeds $2.4 billion.

Why Has This Happened?

In the 30 years from 1980 to 2010 Florida’s prison population
increased from 20,000 to 102,000. The state’s population nearly
tripled during that period, but that growth cannot explain the
nearly ten-fold increase in the prison population.
The graph below illustrates the disparity between Florida’s
total population growth and the state’s prison population growth
from 1970 to 2010.

Correctional Institutions are prisons with fences,
razor wire or ribbon, electronic detection systems,
perimeter towers with armed correctional officers
and/or officers in roving perimeter vehicles. These
facilities are divided into seven levels of security
ranging from minimum-custody facilities to maximum-custody facilities.
Work/Forestry Camps are minimum- to mediumsecurity custody facilities. Inmates are usually
transferred to a work camp after completing part
of their sentences at a correctional institution and
demonstrating satisfactory adjustment. Their jobs
include cleaning up roadways and right-of-ways,
grounds and building maintenance, painting, building construction projects, moving state offices,
and cleaning up forests. Eleven (11) percent of the
prison population resides in work camps.
Work Release Centers (WRC) house communitycustody inmates who are participating in community
work release with paid employment in the community, and minimum-custody inmates serving in
a support capacity for the center (such as in food
services and laundry). They must be within two or
three years of their release date, depending on their
job assignment. Sex offenders may not participate in work release or center work assignments.
Inmates must remain at the WRC when they are not
working or attending programs such as Alcoholics
Anonymous. Approximately 3 percent of the prison
population is enrolled in WRCs.

Source: Florida TaxWatch based on data from the Florida Legislature’s
Office of Economic and Demographic Research and the Florida Department of Corrections.

If population growth cannot account for the rapid increase in
the prison population, the incidence of crime does not explain it
either. The graph on page six shows that while crimes rates have
fluctuated over time, there has been a general decline in index
crimes since the late 1980’s while the prison population rate has
increased dramatically.8
4 | April 2011

Road Prisons house minimum- and medium-custody inmates, most of whom are part of community
work squads and perform highway road work. Other
jobs include support services to state agencies,
such as collecting recycling materials and moving
furniture. Less than 1 percent of the prison population is housed in road prisons.

The Growth of Florida’s Prison System
Florida’s Crime
Steadily Declined


Index Crimes per 100,000 Population



..n " ..


Florida TaxWatch based on data from the Florida Legislature’s Office of Economic and Demographic Research and the
Florida Department of Law Enforcement.

Beginning in 2007, the number of both violent crimes and
non-violent crimes has been declining as shown below. However,
these declines have not led to greater declines in incarceration.
Violent Crimes	

Non-Violent Crimes



% Change
from Prior


% Change
from Prior





















Source: EDR February 2011 Criminal Justice Estimating Conference.

In fact, Florida arguably leads the nation in incarceration rates
and stringency in law and sentencing, making it the most punitive
of the 50 states as measured by more than 40 variables, including
average prison sentences, life imprisonment, and prison conditions.9 A report issued by the Florida TaxWatch Government Cost
Savings Task Force for FY 2011-12 clearly states the problem:
“The increase in the prison population was achieved by an increasing rate of incarceration. Policy choices dictated that result.
The rate of incarceration is the percent of people that Florida
locks up in state prisons. It has jumped from .13 percent to .54
percent. Forty years ago, the rate of incarceration was one quarter
of what it is today.”10

Florida, like many states, has made a series of purportedly
“tough on crime” policy decisions over the past 20 years that
have driven increases in incarceration. Those increases have led
to dramatic increases in costs. Policy decisions contributing to
that growth include the elimination of parole and the adoption of
policies lengthening both sentences and the period of incarceration; widespread use of very short state prison sentences in lieu
of community-based alternatives (e.g., jail, probation, treatment,
electronic monitoring); and state prison incarceration for technical probation violations.
Perhaps the most significant factor is the trend toward determinate, or “mandatory minimum,” sentencing brought about
by the public’s fear of crime and the corresponding desire of
politicians to pander to those fears for the sake of not appearing
to be “soft on crime.” Sentencing laws such as the “85 percent
rule,” which mandates that inmates must serve 85 percent of their
sentences before release, and other mandatory minimum sentencing policies, such as “10-20-Life” for offenses in which a firearm
is involved, have combined to balloon the prison population and
keep inmates there longer, thereby necessitating more prison beds
(i.e., more prison construction).
For instance, the number of people sentenced to prison under
10-20-Life has increased each year since 1999. According to the
most recent data for FY2009-10, nearly 1,500 offenders were
sentenced under this policy with 13 percent receiving a mandatory sentence of at least 25 years.

April 2011 | 5

The Growth of Florida’s Prison System

lO-20-Ufe Admissions



n Feb. 2007 – 15,000+ new inmates by FY 2012-2013



n Oct. 2007 – 26,000+ new inmates by FY 2012-2013



Other factors contributing to Florida’s growing prison population include the increasing use of year-and-a-day (366-day)
sentences (The percentage of prisoners receiving those sentences
has grown from 8.8 FY2001-02 to 17.7 percent in FY2006-07.);
increasing admissions due to “technical” probation violations;
overcrowding of county jails; and a growing number of new
felonies on the books.11 In recent months, the percentage of the
population in prison under these circumstances has leveled off,
but these factors remain a serious challenge to the long-term
reduction of the prison population.

How Are Decisions About Prison Construction
and Expansion Made?

Funding decisions for Florida’s prisons begin with the
Criminal Justice Estimating Conference (CJEC), which includes
professional staff from the Office of Economic and Demographic
Research (EDR), the Executive Office of the Governor, the Senate, and the House of Representatives. As required by statute,
the conference meets at least twice a year to analyze official
information relating to the criminal justice system. Based on
these analyses, the estimating conference issues official state
projections, including forecasts of future prison admissions, civil
commitments, and population. Projections for new prison beds
are based on projections of the growth in incarceration based on
historical performance. Once a year, projections are also made for
the state’s community supervision needs.12
Using CJEC’s estimates, the Department of Corrections
(DOC) develops and updates an annual comprehensive correctional master plan to project the number of prison beds needed
for the next five-year time period. Planning for future prison
construction has proven difficult due to frequent revisions by the
CJEC of the projected prison population. The CJEC projections
are updated two to three times per year based on newly available
information, such as monthly prison admissions.

6 | April 2011

For example, between February 2007 and February 2009,
the CJEC revised its prison population estimates for Fiscal Year
2012-13, each time concluding with widely different figures:

n Feb. 2008 – 33,000+ new inmates by FY 2012-2013
n Feb. 2009 – 48,000+ new inmates by FY 2012-2013
The most recent projection of prison admissions and releases
from EDR’s revision of the criminal justice estimating conference from February 2011 is shown below. It reflects a declining
prison population through 2012-13, followed by steady increases
through FY2015-16.


End of Year

FY 10-11




FY 11-12




FY 12-13




FY 13-14




FY 14-15




FY 15-16





Source: Florida Office of Economic and Demographic Research, February

Utilizing the most recent projected population information
from EDR, the Department of Corrections creates and presents
its budget request to the Governor and the Legislature. It includes a list of facilities needed for the department’s activities
for the upcoming fiscal year. In preparing the 2010-11 request,
the department calculated operating costs per inmate at $19,477
and the capital costs per bed at $52,627.13 However, if the most
up-to-date forecast data were used, operating costs per inmate
would have increased to $19,761, an increase of 1.5 percent from
FY2009-10, and capital cost per bed would have increased to
$53,541, which is an increase of 1.9 percent from FY2009-10.14
The appropriations process, which includes the Governor
and the Legislature, determines which of the requested facilities
need to be funded, and these decisions can vary widely from the
Department’s initial request. After the Legislature authorizes financing to the appropriate state agency to build or expand prison
facilities, the Florida Correctional Finance Corporation issues the

Prison Construction Bonding


ver the past 15 years the State of Florida increasingly
has turned to the use of lease revenue bonds as a mechanism to fund the construction of new prison facilities
in the state. Little known and poorly understood by
taxpayers, this funding approach has saddled future generations
of Floridians with more than $1 billion dollars in debt without
appreciably increasing public safety.

What is the History of Lease Revenue Bonding for
Prison Construction and Expansion?

As early as the 1980’s, states that could not meet the costs of
building prisons turned to general obligation bonds backed by
the full faith and credit of the state to offset current-year costs.
A bond “is a formal borrowing arrangement in which a transferable certificate represents the debt. The holder of the bond may
sell it, in which case the liability is owed to the new owner.”14
Voter approval to issue general obligation bonds is required in
many states, including Florida. In California, a law firm (Orrick)
claimed credit for devising a new financing mechanism, “lease
revenue bonds,” which were first used to finance not just prisons,
but offices, schools, transit and a wide variety of other infrastructure needs.
A lease revenue bond, also called a lease-rental bond, is a
municipal bond that can also be floated by states and is defined
by the Municipal Securities Rulemaking Board (MSRB)16 as:

Bonds whose principal and interest are payable exclusively
from rental payments from a lessee. Rental payments are
often derived from earnings of an enterprise that may be
operated by the lessee or the lessor.
Traditionally, lease revenue bonds were issued to build projects that generated revenue to pay off obligations. Such projects
include “toll roads, bridges, hospitals, parking facilities, recreational projects, telephone systems and colleges.”17 Unlike these
projects, prisons do not generate any revenue. To cover prisons, a
new iteration of revenue bonds had to be devised.
As Forbes described this to investors:
The difference between traditional revenue bonds and lease
revenue bonds is one of mechanics. Traditional revenue
bonds fund construction of a facility that actually generates
revenue for use in debt repayment. Since prisons don’t generate any revenue, the crafty state treasurers had to figure
out a way to create some.
Here’s what they came up with: The state creates an entity
or agency to build the prison. The agency floats bonds to
the public to cover construction of the facility. The agency
then leases the right to use the completed prison to the state.
The state pays the entity lease payments. The entity uses
the lease payments to service the bond debt. Essentially,
April 2011 | 7

Prison Construction Bonding
the state takes money from one pocket (the general fund
appropriations to the prison system) and puts it into another
pocket (the agency created for the facility), and then the
agency distributes the money to the bondholders.18
The entity created for this purpose is typically a not-for-profit
organized for the sole purpose of acting as the lessor under lease
purchase agreements. It issues the tax-exempt lease revenue
bonds. The prison that is financed in this manner is then “leased”
to a state agency charged with the responsibility of seeking appropriations each year in amounts to cover the debt service.
Orrick improved on this approach in the 1990’s, once again
initiating the effort in California. There it developed Certificates
of Participation (COP’s), which are defined by MSRB as:
A form of lease revenue bond that permits the investor
to participate in a stream of lease payments, installment
payments or loan payments relating to the acquisition or
construction of specific equipment, land or facilities.
COP’s can be used both by states and by private prison companies, which have used them to build prisons “on spec” – on
the assumption that states would continue to need more prisons.
As with traditional lease revenue bonds for building prisons, the
payments are made by the annual appropriations for “rent” and
the investors who own bond certificates receive a share of the
Thus, for every prison built with COP’s, the state must pay
both the capital costs (principal) and interest on the principal.
This concept is similar to taking out a home mortgage and paying back the principal and interest over time. Forbes reports
that in addition to Florida and California, other states active in
this financing technique include New York, Texas, Alaska and

How Has Florida Used Lease Revenue Bonds to
Fund Prison Construction?

Until 1993, Florida avoided borrowing to build state prisons
and instead used fixed capital appropriations of general funds
(i.e., cash, pay-as-you-go) to build and expand scores of prison
facilities. Bonding to finance prison construction arose in connection with the state’s decision to privatize the design, construction, and operation of prisons in an effort to reduce costs. The
first privatized prison, South Bay Correctional Facility, opened in
1997. Just two years earlier, the Legislature created the Correctional Privatization Commission “for the purpose of entering into
contracts for the design, construction, and operation of private
prisons in Florida” with operation costs of at least seven percent
less than the state.20
The Correctional Privatization Commission was soon involved
in financing the construction of these prisons. Initially, the commission was charged with securing financing with the vendors
8 | April 2011

who would build and operate the prisons. The vendors used Certificates of Participation (COP’s) to finance the prisons they were
building, with each prison project subject to its own stand-alone
financing, and the state making the lease payments out of general
funds. By then, COP’s were widely used to finance the building
of schools. The Florida Supreme Court ruled that COP’s did not
run afoul of the Florida Constitution’s Article VII requiring voter
approval of debt. They concluded that because, technically, any
year’s lease payments under a COP could be cancelled by the
Legislature, it was not a definitive legal agreement and thus could
not be considered “real debt.”21 By 1996, six prisons had been
constructed with bond financing. All but one were private. The
commission continued to finance and oversee this process until
its demise.
Corruption scandals beginning in 1999 eventually put an end
to the Corrections Privatization Commission. Two prominent
scandals arose due to a lack of oversight and a fragmentation
among decision makers. The first scandal was in 2002, when the
commission head resigned “amid a state ethics probe in which
he ultimately was fined $10,000. That investigation concluded
he was profiting from business relationships with prison contractors outside his role as privatization director.”21 Then in 2006,
a former commission head “pleaded guilty to embezzling more
than $200,000 from a maintenance fund set up for privately run
institutions. He was sentenced to 33 months in federal prison.”22
With the demise of the Corrections Privatization Commission
in May 2004, the job of overseeing private prison contracts was
taken up by the newly created Bureau of Private Prison Monitoring, housed in the Department of Management Services (DMS).
The job of issuing COP’s and serving as the lessor lies within
the Florida Correctional Finance Corporation, which was created
by the original Privatization Commission and is housed under the
Division of Bond Finance of the State Board of Administration.
Initially, this entity did not have an oversight role. However, once
the commission was dissolved, the Division of Bond Finance
continued its original role but also stepped in to oversee one
aspect of this fragmented system.
Between FY2006-07 and FY2009-10, the Florida Legislature appropriated a total of $716,956,421 to the Department
of Corrections for construction and expansion expenses. This
figure includes both “pay-as-you-go” appropriations for prison
construction costs and rental costs, but does not include the debtservice (or interest payment) obligations on past prison construction borrowing. If debt-service obligations are included, the total
figure reaches nearly $1.5 billion. Today, $1 billion is still owed
on outstanding bonds and corresponding debt service payments.24

Prison Construction Bonding
As the figure below shows, Florida taxpayers spent more than
$100 million on prison construction or expansion each year since

Construction Costs for Pubflc and PrlwIe
Correctional Facilities In Florida (FY lOO6/07- FY


Source: Florida Department of Corrections (August 2010).


2006 and 2010, bonding of prison construction and
expansion in Florida comprised of an unprecedented 43 percent
of the total funding for prison construction and expansion.26
In 2009, the Division of Bond Finance combined all existing COP’s (and all new COP’s) into a Master Lease Purchase
Agreement (already being used by school districts financing
with COP’s), which introduced more transparency into the total
amount of debt incurred and the payment responsibilities of the
state. It also added COP debt to the annual Debt Affordability
Report because, even if technically COP debt is not debt, in all
practical respects it must be treated as such. If the state defaulted
on making the lease payments, its credit rating would suffer, and
future debt would be incurred at higher rates.
Under the Master Lease Purchase Agreement, authorized by
Chapters 944, 287 and 255, Florida Statutes, Department of Management Service leases facilities from the Florida Correctional
Finance Corporation. COP’s are issued and the rent payments
made by the Department of Management Service and the Department of Corrections are equal to the principal and interest on the
bond. The rent payments for these facilities are subject to annual
appropriation by the Florida Legislature. Under a Master Lease
structure, which cross-collaterizes all of the projects, the Legislature is required to appropriate “all or nothing” for annual rent
Prior to FY 2009-10, there have been a total of six series of
COP’s issued and $350.6 million in principal was outstanding,
which has funded seven private correctional facilities.27

How Does the Process Work?

The entire system of determining the need, funds, and financing of prison facility construction and expansion is a fragmented
process involving several entities, none of which are ultimately
accountable. The prison bonding system currently involves all of
the following entities:
n The Criminal Justice Estimating Conference, which
includes senior staff from the Governor’s Office and the
n The Department of Corrections
n The Governor
n The Legislature
n The Bureau of Private Prison Monitoring, housed in the
Department of Management Services
n The Florida Correctional Finance Corporation and the
Division of Bond Finance under the State Board of
While these entities work together at different steps in the
bonding process, these steps are largely independent from one
another and no one actor is consistently involved throughout the
entire process.
As mentioned, the Department of Corrections submits a request for prison facility funding based on its projected needs but
does not have a direct role in deciding which facilities to will be
built, whether they will be public or private, or how they will be
financed. Those are all ultimately decisions made by the Legislature.
It is also important to highlight the fragmentation of contract
oversight for the construction and operation of new prison facilities. Currently, the contract management of public and private
prisons is housed under different agencies. DOC has oversight
of public prisons. The Bureau of Private Prisons (housed under DMS) has oversight responsibility for private prisons. The
Department of Management Services (DMS) issues requests
for proposals for contract bids to find vendors to operate and
construct private prisons. The Department of Corrections has a
third-party role, typically helping to evaluate the contract proposals. However, DOC has no formal role in this process and has no
oversight of the private prisons once opened, despite the fact that
all inmates in private prisons remain the responsibility of DOC as
wards of the state.
In recent years, there has been increased oversight by the Division of Bond Finance, which stepped up to play an informal yet
important advisory role in oversight by enhancing the transparency of bonding. As mentioned previously, the Division of Bond
Finance implemented the practice of combining all bond-related
financial obligations into a Master Lease Agreement rather than
reporting it on a project-by-project basis, so that state officials
and the public at least can find the true amount of outstanding
debt created by prison construction and expansion in the yearly
reports published by the Florida Division of Bond Finance.28
April 2011 | 9

Prison Construction Bonding
Many Players in Prison Bonding


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Private Prisons
Bureau of Private Prison Monitoring,
housed in the Department of Management Services

10 | April 2011


Public Prisons
Department of Corrections

Prison Construction Bonding
Unfortunately, little has been done to create continuity of oversight or, at a minimum, a check-and-balance system for the bonding process, from the creation of prison population projections to
the breaking of ground. Without proper communication between
and oversight of entities involved in the process, the current system produces skewed decision-making and incoherent results.
The public safety system in Florida has been criticized as disjointed and lacking coherent accountability, oversight, and transparency. Former secretaries of the Department of Corrections as
well as staff have complained that they have had alarmingly little
oversight of or control over the decision to bond facilities, which
facilities to build, or the process generally despite their responsibility to construct and operate public facilities and provide for the
needs of inmates.
“There is a lack of coordination with many separate and distinct players who feel compelled to keep their own counsel,” said
former Department of Corrections Secretary Jim McDonough of
the current bonding system. “This is a great system for everyone
to point at the other guy when something goes wrong. The Department of Correction’s role in this process is to take the blame.”

To What Extent are Lease Revenue Bonds
Currently Used for Prison Construction?

Following authorization of the Master Lease Purchase Agreement by the Legislature in 2009, $337 million in additional
COP’s were issued. Of these, $62.5 million were Series 2009B
and $274.5 million were Series 2009C. The Series 2009C Certificates were “Build America Bonds,” authorized by Congress
through the American Recovery and Reinvestment Act. For
these certificates, the federal government will pay Florida a cash
subsidy equal to 35 percent of the interest payable. This financing replaced “pay-as-you-go” funding or planned general revenue
appropriations providing budget relief for the state.
The Legislature authorized the construction of 17 state facilities with this financing in the 2009 General Appropriations Act,29
all of which will be constructed and operated by DOC. This
single General Appropriations Act obligated taxpayers to nearly
$340 million in new debt.

Bonded Prisons in Florida


Mixed Financing
(Cash & Bonds)


Moore Haven

Mayo – Annex



Suwannee – Annex

Re-Entry Center

Lake City – Youth
Offender Facility

Lancaster – Special
Housing Unit

Gadsden Re-Entry


Liberty Work Camp

Baker Re-Entry

South Bay

Franklin Work

Sago Palm


Cross City Work

Blackwater River

Santa Rosa Work
Okeechobee Work
New River Work
Lowell Reception

The authorized construction schedule approved by the 2009
Legislature was based on prison population estimates from April
2009 that showed the inmate population would grow to 111,836
by FY2011-12. However, since then, new projections of prison
population have declined to 101,833 inmates by FY2011-12,
which has created an excess capacity situation. Although these
facilities have been allocated funds for construction, the actual
construction schedule has been delayed and the funds to operate these prisons will not be requested until the beds are needed.
However, the bonds to finance this construction have already
been issued and sold, obligating taxpayers despite this changing

Of the authorized facilities, seven projects were fully financed
through bonding, and 10 were financed through a combination of
bonding and general revenue funds. Of all the prison facilities in
Florida, there are six bonded public correctional facilities; 10 facilities financed by a combination of bonding and general revenue
funds; and seven privately-run, publicly-bonded prison facilities.30 These numbers reflect a significant increase in the use of
lease revenue bonds to fund prison construction and expansion.

April 2011 | 11

Prison Construction Bonding


Est. Completion


Mayo CI – Annex






Suwannee CI –






Lowell Reception






Liberty Work Camp






Work Camp






Cross City
Work Camp






Santa Rosa
Work Camp






Work Camp






New River
Work Camp






Lancaster CI Special Housing Unit






Gadsden Re-Entry


Oct -12




Re-Entry Center






Re-Entry Center






Santa Fe Work
Release Center *






Lake City Work
Release Center *






Kissimmee Work
Release Center *






Hollywood Work
Release Center *












12 | April 2011

General Revenue

Prison Construction Bonding
The 2010 Legislature appropriated approximately $50 million
for lease-purchase payments for the existing and new facilities.
While the 2010 Legislature did not authorize any additional
correctional facility debt, it did appropriate $72.4 million in debt
service, including $35.6 million in interest. The outstanding debt
initiated by the 2009 Legislature when it authorized two bonds
series (2009B and 2009C) for prison construction represents a
significant recurring financial commitment of the state for decades to come.
The Department of Corrections is asking the 2011 Legislature
for a base budget of $72.4 million in recurring general revenue
for its facilities lease-purchase program and another $13.7 million for major repairs, renovation, and improvements of existing
correctional facilities. The only additional capacity issue in the
agency’s legislative budget request is $4.6 million for planning
and construction of a Mental Health Unit at Lowell Correctional
Institution in Marion County.
On March 15, 2011, the Department of Corrections announced
that it was closing six correctional facilities in an effort to consolidate program resources.32 The closing of three prisons and three
other correctional institutions highlights that the need to construct
additional prisons was overstated.

Should Taxpayers Be Concerned About Bonding?

Easy access to investment capital allowed the commitment of
thousands of new prison beds that will cost billions of dollars to
operate over the coming decades while blurring the balanced budget requirement intended to keep Florida fiscally stable. At this
point, the debt-service payments for the lease-purchase financing
arrangements will very quickly result in much higher actual costs
to the taxpayers.
As of June 2010, $721.7 million of prison debt and $12.7 million of juvenile justice debt was outstanding,33 requiring future
payments of approximately $1 billion when debt service and
interest payments are combined.34
At current projections of inmate populations and related
construction requirements, these debts are likely to increase if
prison lease revenue bonding continues to be used to fund prison
construction. The cost could total an additional $109 million by
the end of Fiscal Year 2015-16.35 It is unclear how much of this
taxpayer cost will be financed though bond obligations and how
much will be pay-as-you-go, especially during difficult fiscal

April 2011 | 13

•The Way Forward


s Governor Rick Scott’s Law and Order Transition
Team Review and Report clearly stated, “Lawmakers
can face prison growth with vision and courage, as they
are in the majority of states, or they can borrow the
problem away [through bonds for prison construction]. Thus far,
in Florida, the solution has been to borrow – by floating bonds for
the construction and expansion of prisons. At this point the state’s
future financial obligations for prison construction exceed $1 billion. This is precisely the wrong way to address prison growth.”
Essentially, bonding the cost of prison construction has
obscured both the near- and long-term costs of failing to make
needed policy changes. Unfortunately for the taxpayers of
Florida, by avoiding the hard but necessary choices required to
change the criminal justice system, our state leaders have added
more finance charges associated with the cost of prison construction on top of the enormous costs that are already associated with
failing to properly address the problem of prison growth. Our
political leaders are forfeiting our present and future by authorizing the underwriting of these costs as if the public debt was an
open-ended credit card. However, the bill to taxpayers will come
due when these political leaders have moved on and no longer
can be held accountable.
14 | April 2011

If lawmakers continue to build more prisons as a result of
their failure to address antiquated and ineffective criminal justice
policies, they should at least muster the courage to deal with the
financial implications of their choices by raising taxes and appropriating money in the annual state budget for any new prison
construction or expansion they support. Lease revenue bonds
only exacerbate the costs and allow legislators to perpetuate
failed policies.

How Are Other States Dealing With The Issue?

Armed with extensive analysis and clear understanding of the
drivers of prison growth, states around the country have enacted
“smart justice” reforms, like changing sentencing policies instead
of expanding prison capacity. While Florida was borrowing hundreds of millions to expand capacity, Texas was enacting sentencing reform to save billions. Since 2008, states like Mississippi,
South Carolina, and Arkansas have enacted Texas-style proven
reforms that save money and enhance public safety. Meanwhile,
Florida continues to pay millions of taxpayer dollars to bondfinance on prison construction and billions of taxpayer dollars for
the Department of Corrections in operating expenses, yet continues to do nothing to reduce the long-term costs of prison growth.

The Way Forward

It is often said that “things are bigger in Texas.” There is no
doubt that this statement applies to the state’s prison system.
However, elected officials and policymakers in Texas realized
that bigger was not necessarily better. Despite spending billions
of dollars to add more than 100,000 new prison beds between
1985 and 2005, Texas prisons remained overcrowded.36 In 2007,
an official state projection estimated that 17,000 prisoners would
be added to the system within five years. To accommodate the
increase, Texas would need to build three new prisons immediately and three or four more prisons over the next four years. The
cost would be $523 million to build and operate them in the fiscal
2008-09 biennium, with additional spending needed for each
inmate at a cost of $40 per day, or $14,600 per inmate per year.
At this point, Texas officials decided the status quo was unsustainable, so they developed a comprehensive strategy based on a
data-driven reexamination of each part of the corrections system
and a careful cost-benefit analysis of corrections expenditures.
This new strategy came to be known as “justice reinvestment”
and seeks to find the most effective way to spend limited resources in order to protect and improve public safety.
What Texas discovered was that the correctional system was
overwhelmed by prisoners who could receive alternative treatment to incarceration, which could result in significant cost savings to the taxpaying public and preserve precious resources for
the incarceration of dangerous, violent offenders. More specifically, Texas learned that there were approximately 5,500 prisoners in its correctional system who have been convicted of multiple DUI’s; more than 50,000 drug offenders – most of whom are
non-violent or first-time offenders; and large numbers of mentally
ill offenders who would be better served in community-based
mental health facilities.
Before the end of its 2007 legislative session, Texas enacted
a package of criminal justice policies based on justice reinvestment that was designed to prevent the predicted prison population
growth and save $443 million. This package worked to improve
rehabilitation rates for people in prison with $241 million reinvested to expand the capacity of community-based treatment of
substance abuse and mental illness and diversion programs, and
enacted parole reforms to enhance the use of parole for low-risk
offenders. The Texas justice reinvestment strategy resulted in an
immediate savings of $210.5 million for fiscal years 2008 and
2009, and decreased the state’s prison populations by 1,257 in


Like Florida, Mississippi struggled with an ever-increasing
prison population and the burgeoning costs associated with this
trend. To curb the upward spiral, Mississippi enacted a series of
sentencing reforms with bipartisan support that have resulted
in a fundamental shift in its prison population trends. In 2008,

Mississippi lawmakers approved SB 2136, which permits all
nonviolent offenders to become eligible for parole after serving
25 percent of their sentences. A few months after this legislation
went into effect, the projected prison population growth was revised downward and Mississippi’s prison population has steadily
declined. In 2009 Mississippi’s prison population decreased by
1,233 inmates. From Dec. 31, 2008 to Jan. 1, 2010, the prison
population declined by 5.4 percent.38 By modifying its sentencing
laws and adjusting correctional practices that govern how long
a person is imprisoned, Mississippi effectively halted its surging
rate of incarceration.

South Carolina39

South Carolina’s correctional population almost tripled during
the past 25 years, reaching nearly 25,000 in 2009 at significant
financial cost to state taxpayers. Since 1983, state spending on
prisons increased by more than 500 percent to $394 million. All
the while, South Carolina’s crime rate remained high. According
to the FBI’s Uniform Crime Report, South Carolina was the state
with the highest violent crime rate in the nation in 2008, an unforApril 2011 | 15

The Way Forward
tunate distinction it held for the previous seven years. A study by
the Pew Center on the States found several key factors driving the
state’s prison growth:
n Sentencing policies showed an increase in admissions of
inmates for prison terms of fewer than 18 months
n The number of persons in prison for non-violent offenses,
mostly drug and property crimes, rose dramatically. At one
point, 49 percent of inmates were being held for non-violent
n Increasing numbers of South Carolina offenders on parole
and probation were being sent back to prison for breaking
the rules of their release, not for committing new crimes.
n The South Carolina Board of Paroles and Pardons substantially cut the rate at which it released inmates who were
eligible for parole.
In 2008, the South Carolina Legislature established the Sentencing Reform Commission, which included members of the
state Legislature, Judiciary, and the Department of Corrections.
Lawmakers tasked the commission with finding ways of controlling the costly increase in the prison population. For nearly
a year, the commission held more than a dozen hearings and
numerous workgroup meetings to analyze data and reach consensus on recommendations. For the most part, the conclusions were
similar to those in Texas, such as increasing the property value
threshold from $1,000 to $2,000 for all felony property crimes
and making all property crimes below $2,000 misdemeanors.
However, one recommendation was
written with South Carolina’s approximately 3 million taxpayers squarely in
mind. It called for requiring an accurate fiscal impact statement in advance
of any legislative action that would
establish a new criminal offense or that
would amend the sentencing provisions
of an existing criminal offense. Taxpayers, who ultimately foot the bill for incarceration, would be assured someone
was looking out for their interests. The
prison population in South Carolina declined by 235 between 2008 and 2009
– a one percent change in a year..40

16 | April 2011

Other State Initiatives

In addition to Texas, Mississippi, and South Carolina, at least
18 other states have enacted criminal justice reforms designed to
reduce costs and increase public safety. They are Alabama, Arizona, California, Colorado, Connecticut, Georgia, Indiana, Kansas, Kentucky, Louisiana, Michigan, Missouri, Nebraska, New
York, North Carolina, Ohio, Pennsylvania, Vermont, and Virginia.
Traditionally, criminal justice reform has been mischaracterized
as reflecting “liberal” political leanings; however, the voices calling for smarter approaches now includes prominent conservative
policy-makers, activists, and commentators. Conservatives, such
as Pat Nolan at Prison Fellowship, Grover Norquist at Americans
for Tax Reform, and others have formed a partnership known as
Right on Crime to serve as a clearinghouse for conservatives to
lead the way in justice reform. As the group notes on its website:
“Conservatives are known for being tough on crime, but we must
also be tough on criminal justice spending. That means demanding more cost-effective approaches that enhance public safety.”
Florida has been lagging behind, locked into antiquated
concepts that are now as out-dated as they are unsupportable.
Florida’s political leadership has barely paid lip-service to the
notion of improving public safety at affordable costs. In 2008, for
example, the Florida Legislature passed a law that would have
created a correctional policy advisory council to study and address criminal justice policies driving growth. However, instead
of convening the council and getting to work as states like Texas
did, Florida held fast to existing criminal justice policies and then
borrowed its way out of the problem the following year. Instead
of being a hold-out state, Florida should be moving in the direction of other states to address what is driving the growth, rather
than just borrowing and building.


Some Straight-forward Recommendations
n Florida’s legislators should seriously review the state’s criminal justice policies and practices which
have contributed to the growth of the prison system over the past two decades and have financially
strangled the state. There is no lack of good information and reports that outline what needs to be
done. For instance, the Collins Center’s Statewide Justice Summit Report, the Florida TaxWatch
December 2010 report, and the Governor’s own Criminal Justice Task Force all have made serious
recommendations including specific proposals for sentencing reform, time-served (the so-called 85
percent rule), changing probation practices, and increasing community-based sanctions.41
n Florida should join the ever-growing number of states undertaking a broad range of criminal justice
policy reforms shown to reduce the prison population while ensuring public safety. These are led
predominantly by conservatives who understand that highly punitive and incarceration-heavy
penalties even for minor, non-violent crimes are unsustainable.
n There should be a moratorium on any new bonding to build prisons until the Governor and Legislature fully disclose and discuss with the public all costs generated by prison bonding. Taxpayers
should have a voice in whether they want to pay for criminal justice policies that result in the growth
of the prison system without increasing public safety.

April 2011 | 17

Adjusted for inflation based on the Consumer Price Index, this
amount is equal to $447 million in today’s dollars.
Florida’s 1980 inmate population was 19,692 as of June 30, 1980
according to the Department of Corrections website, www.dc.state. (retrieved December 6, 2010). Its 2010
inmate population was 102,440 as of September 30, 2010 according to
the Criminal Justice Estimating Conference, 10/19/09, Office of Economic
and Demographic Research, The Florida Legislature Florida Department
of Corrections.
Florida Division of Bond Finance, State Board of Administration,
“2010 Debt Affordability Report”, December 2010. http://www.sbafla.
Florida Office of Economic and Demographic Research, “Criminal
Justice Estimating Conference”, Feb. 21, 2011.
These private facilities include: Moore Haven CF (1995); Bay CF
(1995); Lake City CF – Youth Offender facility (1997); Gadsden CI (1997);
South Bay CF (1997); Graceville CF (2008); and Blackwater River CF
Department of Corrections, “2008-09 Annual Statistics.” Available at:
Florida Department of Law Enforcement, Understanding Florida’s
UCR Data, available online at:
getdoc/685508bc-ce34-4423-b867827ed0dc6fac/datahistory.aspx -.
Index crimes are an accurate gauge of a state’s security as it measures
eight categories of crimes, which include murder, non-traffic manslaughter, forcible rape, robbery, assault, burglary, larceny, motor vehicle theft,
and arson. These data are listed by the Florida Department of Law Enforcement’s (FDLE) in its Uniform Crime Report (UCR). These crimes are
reported to the FDLE primarily by local police departments and sheriff’s
offices. Only these crime categories are reported due to the differences in
local report-writing policy, training received by officers on report writing,
and the discretion exercised by individuals at every step of the crime
reporting process.
Kutateladze, Besiki, “Measuring State Punitiveness in the United
States,” (abstract).
Florida TaxWatch, “Report and Recommendations of the Government Cost Savings Task Force for FY2011-12,” December 2010.
Office of Economic and Demographic Research, “Criminal Justice
Estimating Conference”, March 2, 2011.
216.134, Florida Statute
Florida Department of Corrections, “Agency Annual Legislative Budget Request for Fiscal Year 2011-12,” 2010. Florida uses the Consumer
Price Index to measure future construction costs. Criminal Justice Impact
Conference, February 2010.
Florida Office of Economic and Demographic Research, “Criminal
Justice Impact Conference Report,” March 2, 2011.
Finkler, Steven A. Financial Management for Public, Health, and
Not-for-Profit Organizations, 2nd Ed. Pearson Prentice Hall, Upper Saddle
River, New Jersey. 2005.
Definition adopted from Zane B. Mann, publisher, California Municipal Bond Advisor.
Anderson, Alex. “Hiding Out In Prison Bonds”, Forbes Tax Advantaged Investor, October 22, 2008.
Anderson, Alex. “Hiding Out In Prison Bonds”, Forbes Tax Advantaged Investor, October 22, 2008.
OPPAGA, Report 02-27: “Correctional Privatization Commission
Improved Management of South Bay Contract; More Savings Possible”;
Chapter 93-406, Laws of Florida.
Florida v. School Board of Sarasota County, 561 So.2d 549 (Fla.
“Palm Beach County corrections officers arrested on drug and
bribery charges,” Palm Beach Post, 2/11/10. Available at: http://www.

18 | April 2011

Florida Division of Bond Finance, State Board of Administration,
“2010 Debt Affordability Report,” December 2010. http://www.sbafla.
com/bond/pdf/publications/DAR2010.pdf. Florida State Board of Administration, “Annual Financial Information and Operating Data for the
Correctional Privatization Commission Certificates of Participation and
the Florida Department of Management Services Certificates of Participation,” November 30,2009.
Florida Division of Bond Finance, State Board of Administration,
“2010 Debt Affordability Report,” December 2010. http://www.sbafla.
Those private correctional facilities are Bay, Blackwater River, Gadsden, Graceville, Lake City, Moore Haven, and South Bay.
Florida Division of Bond Finance, “Amended and Restated Master
Lease Agreement with Option to Purchase between State of Florida
Department of Management Services and Florida Correctional Finance
Corporation,” State Board of Administration, February 2009.
Appropriations for the lease-purchase payments are found in the
Department of Corrections (DOC) portion of the budget and Section 13 of
the General Appropriations Act.
Publically-run bonded corrections facilities: Okeechobee; Demilly;
Sago Palms; Gadsden Re-Entry Center; Baker Re-Entry Center; Everglades Re-Entry Center. Ten mixed financing: Mayo CI- Annex, Suwannee
CI –Annex; Lowell Reception Center, Liberty Work Camp; Franklin Work
Camp; Cross City Work Camp; Santa Rosa Work Camp; Okeechobee
Work Camp; New River Work Camp; and Lancaster CI- Special Housing
Unit. Seven bonded private prisons: Moore Haven CF, Bay CF, Lake City
CF – Youth Offender facility, Gadsden CI, South Bay CF, Graceville CF,
and Blackwater River CF.
Florida Department of Corrections, “Annual Bed Capacity Report,”
December 21, 2010. Florida Division of Bond Finance, State Board of
Administration, “2010 Debt Affordability Report,” December 2010. http://
Royse, David, News Service Florida, DOC Announces Plan to Close
Three Prisons, March 15, 2011. Available online at:
Florida Division of Bond Finance, State Board of Administration,
“2010 Debt Affordability Report”, December 2010. http://www.sbafla.
Official household count 7,174,800 was used for the calculation
(Florida Office of Economic and Demographic Research, “Population
and Demographic Estimating Conference,” February 11, 2011). Florida
Division of Bond Finance, State Board of Administration, “2010 Debt
Affordability Report,” December 2010.
Estimate based on February 11, 2011 CJEC projections and capital
cost per inmate annually: 1,669 more inmates projected by 2015-16 (Feb.
11, 2011 CJEC) and $65,328 per inmate in capital costs annually (Feb.
11, 2011 CJEC). Therefore, 1,669 * $65,328 = $109,032,432 by the end of
Testimony of Texas State Representative Jerry Madden’s testimony
before the U.S. House of Representatives Subcommittee on Crime,
Terrorism, and Homeland Security, May 11, 2010. Available at:
PEW Center on the States “Prison Count 2010”, Issue Brief April
Pew Center on the States, “South Carolina’s Public Safety Reform:
Legislation Enacts Research-based Strategies to Cut Prison Growth and
Costs,” Issue Brief, June 2010. Available at www.pewcenteronthestates.
org/uploadedFiles/PSPP_South Carolina_brief.pdf?n=5221.
Pew Center on the States, “South Carolina’s Public Safety Reform:
Legislation Enacts Research-based Strategies to Cut Prison Growth and
Costs,” Issue Brief, June 2010.
Florida TaxWatch, “Report and Recommendations of the Government Cost Savings Task Force for FY2011-12,” December 2010.

About the Report
The Collins Center for Public Policy commissioned Florida
TaxWatch to examine the cost to taxpayers of bonding prison

About the Authors
This Report was written by Katie Hayden, Florida TaxWatch
Research Analyst with the assistance of Linda Mills, Deborrah
Brodsky, and other Florida TaxWatch Research Staff under the
direction of Robert E. Weissert, Esq., Vice President for Research
and published by Dominic M. Calabro, President and CEO.

About the Collins Center for Public Policy
Florida Gov. LeRoy Collins’ legacy of uncompromising integrity
in government and business continues at the Collins Center for
Public Policy. Established in 1988 by distinguished Floridians who
envisioned the need for an independent entity to find impartial
solutions to controversial problems, the Collins Center is known
as a think tank with muddy boots. With offices in Miami, Tallahassee, and Tampa Bay, our mission is to find smart solutions
to important issues facing the people of Florida and the nation.
We are independent, nonpartisan, nonprofit and passionately
committed to lasting results. To learn more about the work of the
Collins Center please visit

About Florida TaxWatch
Florida TaxWatch is a nonpartisan, nonprofit research institute
that over its 31-year history has become widely recognized as
the watchdog of citizens’ hard-earned tax dollars. Its purpose
is to provide the citizens of Florida and public officials with high
quality, independent research and education on government revenues, expenditures, taxation, public policies, and programs. The
three-pronged mission of Florida TaxWatch is to improve taxpayer value, government accountability, and citizen understanding
and constructive participation in their government.
Through its Center for $mart Justice, Florida TaxWatch is
actively engaged in a coordinated effort with key partner organizations to bring smart, reasonable, and commonsense justice
reform to Florida that will enhance public safety through proven
cost-effective measures. We believe Florida can save hundreds
of millions of taxpayer dollars while reducing crime, improving
public safety, ensuring offender accountability, and enhancing
Florida’s workforce. To learn more about Florida TaxWatch justice
reform efforts and recommendations please visit our website at

April 2011 | 19


TaxWat. .

For more information contact:

For more information contact:

Thomas M. Arthur
Director of Collins News and Information

Daniel B. Krassner
Vice President of Communications

Miami | Tampa Bay | Tallahassee


20 | April 2011



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