APNewsBreak: Hardin may give jail to bondholders

BILLINGS, Mont. (AP) ? Hardin officials said Friday they are considering relinquishing control of a $27 million jail that was built with the promise of spurring economic development but instead became a source of frustration and embarrassment for the southeastern Montana city.

The 464-bed jail has sat vacant since it was built five years ago under the direction of Hardin's Two Rivers Authority.

With no short-term prospects for finding inmates, Two Rivers Executive Director Jeffrey McDowell said the title to the jail could be turned over to the bondholders who financed the project.

McDowell said bondholders "ran out of patience" with the city's efforts to put the jail to use and want to assume control over the 92,000-square-foot jail on 40 acres. A decision by the authority's board could come next week, McDowell said.

"They would like to get the debt off their books, and rather than go through the foreclosure process, they're asking us to simplify it by turning the title back to them," McDowell said.

The bondholders include four large money managers and at least two individuals, according to McDowell. They are represented by Mike Harling of Municipal Capital Markets Group Inc., a Texas company that raises construction money for jails and other facilities.

Harling did not immediately return a call from The Associated Press seeking comment.

After looking for prisoners from Vermont to Alaska, local officials became so desperate to put the jail to use they nearly turned it over to a convicted con artist who promised to turn it into a military training camp. They also sought unsuccessfully to house terrorism suspects being held by the military at Guantanamo Bay.

The jail was built at a time when state and local governments didn't need additional jail space.

Further hindering Hardin's efforts were strained relations between city leaders and Gov. Brian Schweitzer, whose administration said it had no use for the jail.

The privately operated facility defaulted on its bond in 2008, forcing authorities to dip into the jail's construction loan to meet its debt payments. The last of those payments was made in late 2008, McDowell said.

The Two Rivers Authority's former director, Greg Smith, was placed on paid leave in 2009 and formally resigned Oct. 5. Smith had opened talks about turning over control of the facility to Michael Hilton, the California man who formed a shell corporation to lease the jail for a supposed military training camp.

Hardin Mayor Joseph Koebbe said Friday that returning the jail to bondholders would free up city officials to find other development possibilities, such as an industrial park at the edge of the town. He added that the jail could yet be put to use if the bondholders can generate new interest in the facility.

"I'm not saying that it would be a good solution, but they will press more for an end one way or another," Koebbe said. He added that Two Rivers "tried everything they knew and everything possible to fill it, and nothing has worked."

McDowell said he still expects the jail to house prisoners sometime in the future, but he would be glad to no longer devote much of his time to making that happen.

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