The Sayre Industrial Authority’s lawsuit against CoreCivic, which owns four private prison facilities and several prisoner reentry program sites in Oklahoma, alleges that the company breached its contract with the city by failing to pay nearly $1 million in “impact fees” owed to the city based on the number of prisoners held at the North Fork Correctional Facility in Sayre since August 2016.
In 2004, CoreCivic took over the inmate phone system from the city, and agreed to pay the “impact fees” in lieu of the money the city was getting from fees associated with prisoner phone calls.
In the late 1990s and mid-2000s, the city entered into agreements with CoreCivic, formerly known as Corrections Corporation of America, in an effort to provide economic development and jobs for its residents in exchange for incentives, guarantees and promotion of the facility to lawmakers.
But the relationship between the two appears to have soured since the Oklahoma Department of Corrections began leasing the facility in 2016, as the lawsuit points out CoreCivic’s hundreds of millions in annual revenue contrasted with the financial struggles of people in the Sayre area.
“The loss of the income attributable to the Impact Fees has been burdensome for the City of Sayre. The City of Sayre is one of a number of small communities in the State of Oklahoma still struggling with the economic downturn, in particular the downturn in the oil and gas industry, which has a heavy presence in Beckham County,” the suit states. “Meanwhile, CCA is receiving $37.5 million from its lease of Northfork with the State of Oklahoma.”
The facility, built in 1998, once held prisoners sent there from mostly California, but it closed in 2015 after the state pulled its inmates from the facility. It was reopened about six months later after the Oklahoma Department of Corrections entered into a five-year $37.5 million agreement with CoreCivic to lease the 2,400-bed facility.
Prior to the facility being completed in 1998, the Sayre Industrial Authority entered into agreements with Corrections Corporation that required the city to, among other things, help promote the facility, provide incentives to the company for the project, and obtain bond financing for the project in the event the company wanted the city to purchase the facility.
“The SIA contributed substantial economic resources to develop Northfork in concert with CCA,” the lawsuit, filed Jan. 30 in Beckham County, states, “and has provided additional economic resources over the years to CCA as Northfork has expanded, including but not limited to agreements regarding utility service to the facility and the like.”
Under the 1998 contract between the city and Corrections Corporation, the city retained the right to provide telephone services for the inmates housed at North Fork and was entitled to any profits from the fees charged to inmates making phone calls.
“In other words, SIA was obligated to commit substantial financial resources to develop Northfork under the Amended Acquisition and Construction Agreement, which CCA ultimately obtained ownership of and was entitled to all revenue derived from operation of Northfork except the revenue generated by the inmate telephone system under the Residential Services Contract,” the lawsuit states.
However, in 2004, Corrections Corporation and the city amended that deal, allowing Corrections Corporation to operate the inmate phone system and take any phone usage fees. In exchange, the company would pay the Sayre Industrial Authority monthly “impact fees” based on the average daily number of prisoners held at the then-1,400-bed facility. Under that agreement, the company would pay the city a maximum of $36,000 per month.
When the prison expanded to more than 2,400 beds in 2008 the agreement was again amended, requiring the company to pay up to $68,000 per month.
Under the contract, Corrections Corporation would not have to pay the city impact fees if any federal, state or local authorities determined that the collection of inmate phone commissions or any profits or revenue from the operation of an inmate phone system were illegal or restricted.
The fees were paid to the city until about December 2015, when California removed its inmates from North Fork, the suit states.
After the Oklahoma Department of Corrections agreed to lease and re-open the facility in 2016, Sayre sent CoreCivic an invoice for July for $36,000 in impact fees.
That invoice, and other monthly invoices sent to the company later, were rejected.
Jonathan Burns, public affairs director for CoreCivic, said the company does not comment on pending litigation. However, in a letter to the city from CoreCivic included in the lawsuit filing, a company attorney stated that because CoreCivic does not have unrestricted rights to inmate phone revenue at the facility since it is being leased by the Department of Corrections, the company is not obligated to make the payments.
“The State of Oklahoma prohibits CoreCivic from receiving any inmate phone commissions during the term of the State’s lease of the Facility,” a letter from Jean Shuttleworth, assistant general counsel for CoreCivic states. “Consequently, per the express terms of the Agreement, no impact fees are payable to the City.”
Matt Elliott, spokesman for the Oklahoma Department of Corrections, said DOC installed its own phone system at North Fork after it entered into the lease agreement with Core Civic.
However, the lawsuit states that the North Fork lease contract between DOC and CoreCivic does not restrict the company from collecting inmate telephone use fees, and therefore the impact fees are still required to be paid.
As of January, the Sayre Industrial Authority estimated that it was owed $902,000 by CoreCivic.
A phone message left for the Sayre Industrial Authority was not immediately returned Wednesday.
As of Monday, 2,261 prisoners were being held at North Fork, according to the Oklahoma Department of Corrections.
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