Private prison companies that were bracing for a potentially sharp curtailment in federal contracts less than a year ago are now prospecting for new growth under President Donald Trump's evolving infrastructure plan.
In an alternate history where Hillary Clinton had won the 2016 election and proceeded with Obama administration plans to end the use of private prisons, the business would have taken a hit, but it would not have ended completely, industry leaders said.
"I think it just would have been less growth ... and more adversarial," GEO Group Inc. CFO Brian Evans said during a June 7 presentation at REITWeek in New York. "We would have had to go through more of these issues with the [Bureau of Prisons], where there was a lot of oversight ... from the Deputy Attorney General. But ultimately I think we would have still progressed forward and maintained our business."
At the conference, GEO Group and CoreCivic Inc. executives presented a range of prospective growth vectors for their companies, whose operations seemed severely at risk after former Deputy Attorney General Sally Yates set out to significantly limit the Federal Bureau of Prisons' business dealings with private prison operators. Trump's election in November 2016 delivered the two companies from a market free fall, but their shares have traded down since mid-May, as doubt about President Trump's efficacy as a policymaker has set in.
Both GEO Group's Evans and CoreCivic President and CEO Damon Hininger pointed to the Bureau of Prisons' Criminal Alien Requirement 19, or CAR-19, procurement, with the prospect for new contracts for up to 9,540 beds, as a significant growth opportunity. Proposals are due July 10.
"As Immigration [and] Customs Enforcement moves forward with their new directive on interior enforcement, as well as stiffer enforcement at the border and ending catch-and-release, we'll see some new contracts entered into by the end of the year," Evans said.
Hininger said some of CoreCivic's ICE contract facilities that are now only partially used could see increased utilization this year under the Trump administration's law enforcement directives. The prospect of further ICE contracts, meanwhile, awaits clarity on the federal budget for the next fiscal year, beginning Oct. 1. And clarity on new contracts with the U.S. Marshals Service and the Bureau of Prisons likely will have to wait until Trump fills still-vacant leadership roles within the Justice Department.
Stepping back, Hininger said the private prison real estate investment trusts could wind up playing a role in President Trump's infrastructure plan.
"We have been [in] active dialogue with the transition teams about how we could potentially be a solution in that whole ... narrative," Hininger said, adding that the Bureau of Prisons has roughly 40 facilities around 100 years old.
"We think that there is an opportunity where the private sector could use their balance sheet — or our balance sheet, I should say — and we can help the government replace these facilities with newer, modern [facilities]. They are more efficient, they are safer for staff, they are more humane for the population that are housed there."