DALLAS -- Texans have approved a $1.1 billion prison expansion program -- the largest debt proposal ever authorized in the state -- as part of $2.1 billion of debt programs authorized at the state and local level on Tuesday.
Voters also approved a budget-balancing lottery.
Even though the prison bond plan calls for the Texas Department of Criminal Justice to buy some existing facilities, a senior official said it was unlikely that for-profit jails -- facing possible defaults unless they are utilized soon -- will be bought, even at steep discounts.
"The problem with those jails always outweighs the benefits," said Seldlen Hale, chairman of the Department of Criminal Justice board. "We are going to look at them ... but they are terribly overpriced."
Mr. Hale, a critic of for-profit prisons developed with bond-financing in the last few years, said the state probably will not buy the projects for the same reason they will not lease space in them: They are too far from large cities, they are too small, and they carry too much debt to be puchased economically.
Representatives of bondholders of six 500-bed prisons built by N-Group Securities Inc. of Houston have already approached the state about a possible buyout and were meeting yesterday in Dallas, reportedly to discuss the future of the projects. One county official said bondholders may take control of certain projects by February 1992.
Mr. Hale said Texas will review existing facilities -- such as oil field warehouses -- near major cities to consider purchasing the buildings and converting them into low-risk alcohol and drug treatment centers that will account for half the state's 25,000-bed expansion.
Noting that private prisons have an esitmated $12.5 million in debt, Mr. Hale said the state can find better bargains by converting warehouses or building new, larger prisons.
"We can build a 1,000-bed facility that will last for 100 years for about $16 million," he said in an interview. Besides, he noted, "We need these things located in big cities."
In addition to the short-term implications for the for-profit prisons and their bondholders, the bond program approved by voters on Tuesday is likely to reduce any long-term need to lease space to relieve crowded prisons.
County officials could not be reached for comment yesterday.
Even though voters have approved the record debt program, Texas is not likely to market new prison bonds before mid-1993 because the state is still building nine prisons funded in the last bond program and has several construction problems to work out.
"I don't see letting any contracts anytime soon," Mr. Hale said. "We're sort of like a snake that swallowed a big egg. We need to digest it before we do anything else."
However, a $34 million issue is scheduled for sale in March 1992 to pay for initial design and engineering work on the expansion plan. This would give Texas about 90,000 cells and the distinction of having the largest criminal justice system in the nation.
Texas voters on Tuesday also approved a $300 million state-backed general obligation bond issue to fund student loan demand for the next three years. A similar measure had failed in an August special election.
In addition, voters amended a $500 million Texas Water Development Commission program approved in 1989 to allow up to half that GO bond authorization to be used for grants and low-cost loans to economically depressed areas lacking clean water and sewer services.
The state expects the first of an estimated $130 million in projects to be financed in January, but the long-term demand of the program could reach $1 billion.
Texans also approved a measure that changes the way they will decided future debt programs. Instead of voting on constitutional amendments that are difficult to understand, voters will not consider plain-language propositions.
"I think in the past people may have voted for debt out of ignorance," said Kay Bailey Hutchison, Texas treasurer. "I don't think with this that they will do that anymore."
In the state's largest metropolitan areas, taxpayers, approved major capital programs.
Dallas County voters approved three of four propositions to issue $215.5 million of bonds for roads parks, and a new juvenile detention center. In Houston, 64% of all voters backed a $500 million GO issue that is part of a record $3.1 billion capital program.
Statewide, Texans approved by nearly a 2-to-1 margin a constitutional amendment legalizing a lottery to begin in July 1992.
The lottery vote was good news for politicians who balanced the two-year budget with a projected $462 millin in lottery profits rather than raise taxes or consider implementing a first-ever personal income tax system in the double-A rated state.
Gov. Ann Richards was pleased, but not surprised by the outcome.
"We all knew we needed revenue, and with this vote we are going to bring in about a half-billion dollars," she said. "I thought the people preferred a lottery over taxation, and they proved it at the ballot box."
