Unfair Trustee Proposal & Heavy Financial Losses Forces Maverick County to Cease Operations at Maverick County Detention Center
By: Jose G. Landa, Eagle Pass Business Journal, Inc. Copyright 2015
Maverick County Commissioners Court unanimously approved to give 30 days, notice to UMB Bank as Trustee of the $43 Million Bondholders and the U.S. Marshal’s Service of its decision to cease operations of the Maverick County Detention Center, owned by a Texas non-profit corporation called Maverick County Public Facility Corporation which is an instrumentality of Maverick County, due to the continuing heavy financial losses being sustained by Maverick County during the past 21 months since taking over the detention center after the withdrawal of The GEO Group, Inc. on October 31, 2013 and the failure to negotiate a fair working agreement with the Trustee and Bondholders on the continued operation of the detention center at its special meeting held on Friday, July 17, 2015.
Despite Maverick County Commissioners Court and Sheriff Tom Schmerber’s best efforts to operate the controversial detention center in order to save over 120 jobs in the community, the continuing monthly financial losses falling on the shoulders of Maverick County’s General Fund and its taxpayers was too large to turn around the financial viability of the 625 Bed detention center.
Maverick County Judge David R. Saucedo called the meeting and Agenda Items Nos. 3 and 4 to order, requesting to go into Executive Session to consult with Legal Counsel Woody Wilson.
Judge Saucedo announced Commissioners Court would be going into Executive Session to discuss agenda item No.3 regarding the proposal as prepared by UMB Bank as trustees for the bondholders of the series 2007 A-1 and series 2007 A-2 revenue bonds and agenda item No.4 regarding the continued operation of the Maverick County Detention Center by Maverick County Sheriff including but limited to the trustee indenture agreement with UMB Bank and the lease agreement with Maverick County Public Facility Corporation and any matter related thereto.
Upon returning into Open Session, Judge Saucedo asked if there were any motions for agenda item No. 3.
Maverick County Commissioner Precinct 2 Rosy Cantu motioned: “My motion will be judge, to reject the proposal of the Trustee (UMB Bank) on behalf of the bondholders,” said Cantu.
Commissioner Precinct 4 Roberto Ruiz seconded the motion. The motion was approved unanimously.
Under Agenda Item No.4, Judge Saucedo asked if there was a motion.
Commissioner Ruiz made the motion: “My motion is to advise Maverick County Sheriff Tom Schmerber to cease operations of the Maverick County Detention Center and to give 30 days notice to the Maverick County Public Facility Corporation and give notice of said action to the bondholders and to the United States Marshal’s office” said Ruiz. Commissioner Cantu seconded the motion.
Judge Saucedo stated: “I just want to make mention, as difficult this decision has been for us, I want to thank you Sheriff and your administration for everything you did. We all know it was not our responsibility to do this, but you went out there and tried your best to save jobs. Unfortunately, we have a disagreement with the bondholders. I don’t feel what they are offering is correct for us to be able to accept. We have a responsibility to the taxpayer before anybody else. When you use taxpayer money, you have to protect those interests.”
“Unfortunately, the proposal that was given to us makes it very difficult for us to continue on and make it work. At this juncture, we don’t have anything in place that would entice Maverick County to want to continue the operation of that facility,” added Judge Saucedo.
Commissioner Ruiz stated: “This comes with a strong recommendation from our financial advisor Raul Villasenor, and that the bondholders are not being fair with Maverick County. Their reply was more arrogant from their point of view and the Maverick County Sheriff Department had bent over backwards to deal with them and they have refused to be fair with us.”
“What they offered is totally unacceptable to try to save this project, for close to 2 years, it hurts but the decision needs to be made,” added Commissioner Ruiz.
“” I think we also need to bring to the surface the fact that Maverick County doesn’t have to pay for this particular building itself. It’s part of the contract that was made. We are just returning it because it’s not working and we had financial difficulties and the county taxpayer doesn’t have to pay for this building,” added Ruiz.
Maverick County Commissioners Court approved on July 13, 2015, to issue a $2 Million Anticipation Tax Notes Series 2015 (loan) to cover the financial operating expenses of the Maverick County Detention Center for the months of July, August, and September 2015 to close out the 2014-2015 Fiscal Year ending on September 30, 2015. In addition, Commissioners Court also approved to transfer the hefty sum of $800,000 from the County’s Road and Bridge Department Budget to the County’s General Fund to pay for any expenses during the remaining three months of the 2014 Fiscal Year Budget, such as payroll or whatever expenses come in during this period. The total amount of monies lost by Maverick County taxpayers for the unsuccessful operation of the Maverick County Detention Center during the past 21 months is unknown as of press time but is believed to be over $2 Million.
The Maverick County Detention Center currently is housing federal pre-trial inmates under the jurisdiction of the U.S. Marshal’s Service.
The Trustee and Bondholders will more than likely foreclose on their deed of trust lien on the real property together with improvements known as the Maverick County Detention Center against the Maverick County Public Facility Corporation and become the new owners of the detention center. It is unknown whether the Bondholders will seek to contract another prison management company to attempt to keep the facility open and turn its finances around or take their losses on their investment in the $43 Million bonds issued to finance the over-priced detention center. Possible litigation may also result between the parties.
Only County Judge David R. Saucedo and Commissioners Roberto Ruiz and Rosy Cantu attended the July 17th special meeting as Commissioners Gerardo “Jerry” Morales and Jose Luis Rosales were absent.
The Maverick County Public Facility Corporation Board of Directors also held a meeting on Friday July 17, 2015, solidifying the county’s decision to terminate its services to the Maverick County Detention Center and giving a 30 day notice to the bondholders and the U.S. Marshal’s office.
The Maverick County Public Facility Corporation Board of Directors also voted unanimously to reject the proposal as prepared by UMB Bank as trustee for the bondholders of the series 2007 A-1 and series 2007 A-2 revenue bonds.
The MCPFC Board of Trustees also voted to approve to cease operations of the Maverick County Detention Center by Maverick County Sheriff Tom Schmerber, including but limited to the trustee indenture agreement with UMB Bank and the lease agreement with Maverick County Public Facility Corporation, and any matter related thereto.
The Maverick County Public Facility Corporation is composed of President-Commissioner Roberto Ruiz, Vice-President-Sheriff Tom Schmerber, Treasurer-County Human Resources Director Jesus Sanchez, Secretary-Commissioner Rosy Cantu, County Judge David R. Saucedo, and Commissioners Gerard “Jerry” Morales and Jose Luis Rosales. Rosales , Morales and Sanchez were not present at this meeting.
Once the Bondholders foreclose on their deed of trust lien and indenture agreement on the detention center, they will more than likely find another operator of the facility and/or sell the facility to try to recoup their $43 Million investment.
Maverick County’s overall debt may be reduced from its near $70 Million to approximately $30 Million should the Bondholders decide to foreclose on the $40 Million debt and/or take over operations of the facility.
