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Crossroads Correctional Center

Crossroads Correctional Center outside Shelby is operated by CoreCivic, a private prison contractor.

Though no one would discuss specifics at the time, the governor’s office and a private prison operator were negotiating before and during last month’s special legislative session about a potential deal to generate about $30 million to help fill Montana's budget hole.

The possible deal with CoreCivic, operator of the Crossroads Correctional Center in Shelby, was a key point of contention during the special session called to deal with an anticipated $227 million shortfall in the state budget.

Emails obtained through a public records request show that offers were made and countered through emails and phone calls between CoreCivic and the office of Gov. Steve Bullock, a Democrat.

It was unclear during the session, which ran Nov. 13-15, whether Bullock was discussing anything specific with CoreCivic.

Bullock never said directly if he would be willing to accept roughly $30 million — which the state had paid into an escrow account to possibly purchase the prison when Montana's contract with CoreCivic expired in mid-2019 — in exchange for extending the contract.

A senior adviser to the governor said last week the most recent offer Bullock presented to CoreCivic was turned down because the length of the contract extension was not long enough.

It’s not clear at this point if a deal will be worked out going forward.

Republican lawmakers said they first hatched the idea of accepting money from the account when CoreCivic approached them before the special session, saying the company had trouble getting traction with the governor to discuss what would happen with their contract when it expired in mid-2019. The existing contract has the option for two five-year extensions.

Since 1999, Montana has contracted with CoreCivic to run Crossroads, which houses about 660 prisoners. The state has paid a $9.17 per-prisoner per-day facility use fee into a fund that can be tapped at the end of the contract to go toward the cost of buying the prison. The use fee is in addition to about $64 the state pays per-prisoner per-day under an operating agreement.

Democrats did not support any deal, with opposition ranging from concerns over the ethics of private prison operations and CoreCivic using the state’s financial crisis for its own gain.

Republicans countered that it was a good way to access $30 million to help the state out when it needed funds desperately and that the Shelby prison has a lower cost-per-prisoner-per-day than the state prison in Deer Lodge, $117.16 a day in 2016.

The ultimate outcome of the special session included $76 million in cuts to state agencies, about $94 million in fund transfers and charging a fee on some State Fund accounts to bring in $30 million. That leaves about a $27 million anticipated hole if revenues continue to come in as predicted and lower than amounts from which the state budget was built.

A bill passed during the special session creates an account for any money from a deal with CoreCivic. The first $15 million of anything the state gets would go the fire suppression account and the rest could be used to offset cuts to state spending.

Eric Stern, a senior adviser to Bullock, said Friday in an email that the governor spoke with Damon Hininger, the chief executive officer of CoreCivic, on the eve of the special session. Stern said Bullock told Hininger he felt using the state’s situation to leverage a new contract was not appropriate.

“Then followed some conversations directly between the governor’s office and CoreCivic about a temporary extension, when the special session was upon us and it was clear that money to pay for the fire season was going to be hard to come by,” Stern wrote.

“CoreCivic indicated we could have the $30 million if we’d extend the contract for a period from six months to 10 years. We offered to extend six months and CoreCivic did not accept," he wrote.

Emails between Hininger and Tom Lopach, the governor’s chief of staff, on Nov. 15 at 5 p.m., about eight hours before the session wrapped up, show other details of CoreCivic's counter-proposal at that point, including:

• A one-time payment from CoreCivic of $32.7 million. According to the email, the company originally proposed a payment of $29 million, based on the total facility-use fee the state had paid to date. The governor’s office had proposed the $32.7 million, which includes money the U.S. Marshal’s service had also paid for people it housed at the prison.

• A five-year renewal to 2024. Crossroads’ agreement had a base term of 20 years, which expires Aug. 31, 2019, with two five-year renewal options. CoreCivic had proposed an initial extension for both options, to 2029. The state would retain its right to buy the facility at any time, as well as retain its current termination rights.

• Eliminating the per diem rate. The state had proposed eliminating the facility-use fee, which it had paid in addition to a per diem rate. The use fee, according to the email from Hininger, has been used for maintenance, capital expenses and property taxes. In eliminating the daily-use fee and blending the two per diems into one rate of $72.50, the state would see no additional annual costs, Hininger wrote.

Emails show that Lopach and Hininger spoke the morning of Nov. 15, the last day of the session.

“As I mentioned, the governor is interested in the proposal you suggested based on the following terms,” Lopach wrote, which would include the state receiving $32.7 million from the building account, extending the contract just six months past its current end date, to Dec. 31, 2019, and having a contract for a $64.73 daily rate, which would eliminate the $9.14 daily rate that had gone into the building account.

That’s the deal CoreCivic turned down.

Before the session, Bullock told a group of Montana television stations on Oct. 31 he hadn't seen a specific proposal and didn't want to explore that route.

An email from Quinn Holzer, operations director for the Legislative Fiscal Division, on Oct. 11 says “Crossroads has been in talks with the executive regarding the re-negotiation of the contract.” Holzer said this week he didn't mean to imply CoreCivic and Bullock had met directly and that his information about a possible deal came from Mark Baker, a lobbyist for CoreCivic.

“It was my understanding that CoreCivic had been reaching out to the executive branch, attempting to open lines of communication. However, to my knowledge, there was not a specific proposal or a draft from which any re-negotiations would be made. I only know that CoreCivic was actively trying to open lines of communication,” he wrote.

Holzer works for the legislative branch, and legislators cannot renegotiate contracts for the state; only Bullock can do that.

On Nov. 1, Bullock’s budget director Dan Villa said a deal with CoreCivic wasn’t an option in the eyes of the governor's office, saying it would conflict with the goal of a series of bills passed during the last legislative session aimed at reducing the number of people in jail.

“We don’t see the wisdom of ignoring all of the work done through justice reinvestment. We want fewer people in prison, we want to spend less on hard beds. We’re not giving those a second to work but rather extending a contract for 10 years. There just isn’t wisdom in that,” Villa told Lee Newspapers.

An email from Nov. 9 shows that Hininger spoke with Lopach the night before and made an initial proposal then.

When asked Nov. 10 about any potential deal, Bullock's office did not directly answer, emailing a statement that said:

"What the governor proposed earlier this week is the result of weeks of discussions with Republican and Democratic legislators. ... The governor has put forth a reasonable solution that honors the 'a third, a third, a third' approach legislators on both sides of the aisle have said they are comfortable with. These proposals do not jeopardize our ability to negotiate the best terms for a long-term contract and get the best deal for Montana taxpayers."

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State Bureau reporter for The Independent Record.

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