Story Published:
Nov 18, 2009 at 6:52 PM MST
Story Updated:
Nov 18, 2009 at 7:15 PM MST
BILLINGS - The Hardin jail was financed through $27 million dollars in private revenue bonds sold on the open market.
Ron O'Donnell, the President and CEO of Stockman Asset Management said revenue bonds are often used to pay for municipal projects like toll roads and water meters. Voter approval is not needed.
"Historically jails have to go the revenue route," O'Donnell said. "Typically because taxpayers are going to say, 'We don't want it in our back yard.'" Bond holders get their money back when the projects start making money. The Hardin jail bond promised investors big returns. For every $1 million dollars invested, bondholders were told they'd see $73,000 dollars every year and more than $2 million dollars over the 30-year life of the bond. But so far, the jail hasn't made a dime and neither have investors.
"No interest is being paid to any of the bond holders," O'Donnell said. "There's no income coming in to make the payments."
So where did the $27 million dollars go? Documents obtained by KULR-8 show Hale Mills Construction of Houston, TX, received the majority, $19.8 million dollars for the construction of the facility. Municipal Capitol Markets, the group that sold the bond to investors received $1.6 million dollars.
A portion of that money went to Geisler Smith Associated out of North Carolina. They wrote the feasibility study, ultimately convincing many bond holders to invest in the project. Civigenics was the jail's operator. Since the jail sat empty for the last 2 years, they say they haven't made a dollar. In fact, they've lost money.
The remaining $5.5 million dollars are unaccounted for. O'Donnell says that money was probably put in a reserve fund to make payments on the bond.
"From my understanding (and) research they've already zeroed the reserve fund," he said. "So they've already used it because there was no revenue to make the first 3 or 4 interest payments."
The Bloomberg Finance System that tracks these types of payments shows no sign of the payments. TRA could have paid, but it's not recorded. So where did the $5.5 million dollars go? We asked TRA's Treasurer. He sent us an email on Tuesday saying, "We're working on getting answers to your questions."
Minutes of TRA meetings show bond holders have "hinted at selling" the jail to recoup their losses, but TRA Vice President Al Peterson, said that probably wouldn’t happen.
"I believe the bond holders realize that they're better off waiting for a little while and trying to recoup the full amount of their funding rather than put it on a fire sale and take half the funds," he said. "The talks (with bond holders) have been very pleasant. We're all on the same page and that's that we want to get this jail opened as a detention center."
The closest TRA was to meeting that goal was just a few months ago when they nearly had a contract with the controversial company American Police Force.
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