COLUMBUS, Ohio — Unable to come close to the $200 million it had hoped to attract by selling five state prisons, the state announced on Thursday that it instead sold just one facility and reorganized the management and operations of four others.

Still, Ohio Department of Rehabilitation and Correction leaders said they ended up with a privatization package that meets their goal of reducing overhead costs by saving $13 million annually while adding 700 beds to house inmates in the overcrowded system.

"It meets the tenets of what we established," said prisons Director Gary Mohr.

The state sold the Lake Erie Correctional Institution in Ashtabula County for $72.7 million. Two prisons in Marion County will be turned over to a vendor who will manage the facilities but not own them. And two prisons in Lorain County, one of which is now under private control, will merge and be run by the state.

The moves are effective Dec. 31.

The state valued the five prisons at over $200 million but had an obligation to the General Assembly to produce at least $50 million from the transactions while cutting overhead costs 5 percent as required by a state law.

The corrections department's budget set this summer assumes that it would get $50 million from the sale of prisons. Anything over that amount -- in this case about $23 million, far less than Gov. John Kasich's administration had anticipated -- goes to the state's coffers.

"Definitely, the amounts were less than what we expected. The figures that we were being given. . . . did not equal out to an effective sale for us," said Annette Chambers-Smith, deputy director of administration at the corrections department.

But "it's not a disappointment at all," she later added, noting that the department met its fiscal obligation. "It's fabulous because we thought we would need to sell all five of them to net $50 million. In fact, we got a price of $72.7 million on only one property."

She said the transactions save the prisons about 6 percent in operational costs. Plus, the state thinks it will trim about $7 million by combining the two Grafton prisons in Lorain County. But the state still has outstanding bonds to pay off that were used to help fund construction of the Lake Erie prison in 2000.

The president of the Ohio Civil Service Employees Association, the union for prison guards, described Thursday's announcement as good news because it means fewer workers will lose their jobs or be forced to work for less compensation under privately run operations.

Previous Plain Dealer coverage

Ashtabula, Marion county prisons to be run by private operator (

Group sues over Ohio prison privatization plan (

Ohio may rue prison sales: Editorial (

Private corrections company with ties to government officials will not get special treatment while Ohio sells five prisons, officials say (

Governor Kasich plans to sell prisons (

"I was very surprised and we're very happy," said Christopher Mabe, president of the union.

Still, Mabe said he is concerned for workers at the Ashtabula and Marion county prisons, who will now be at private facilities. He believes inmates should be controlled by state-run systems with a focus on rehabilitation.

"A lot of the private-sector employees have lesser wages, lesser benefits. Those are the ways that private prison companies make money," Mabe said. "They don't make cars. They don't manufacture things. They save money off the backs of people. That's where this inherent savings comes from."

The losers in the deal could be Marion and Lorain counties. Those local governments would have reaped millions annually in property taxes that the state does not pay but a private owner would have.

For example, the city of Conneaut, its public school district and Ashtabula County will split about $1.2 million annually in property taxes to be paid by the new owner of the Lake Erie prison.

Linda James, chief of staff for corrections department, said there were purchase offers for all the prisons but it simply didn't make sense to sell the others.

To offset those property tax expectations, Marion is likely to see a boost in its economy with several hundred jobs coming to a prison being reopened as part of this deal. And while Grafton may not see a net increase in jobs, it is likely to have more higher-paying positions as North Coast prison, which is privately operated, transitions to becoming a state-run facility.

State Sen. Michael Skindell, a Lakewood Democrat who opposes the plan, said the Kasich administration fell on its face with this deal, proving it under-estimated how well run prisons already are without privatization.

"If that wasn't the case, [the corrections department] would have been able to find more private companies willing to purchase Ohio prisons with the stipulation they cut operating costs by at least 5 percent," he said.

Kasich favors privatizing state entities for cost savings and creating potential new revenue for the state. He has already moved to privatize economic development, prisons and liquor sales and is considering it for the lottery and turnpike.

Here are details of the prison deal:

• The Lake Erie prison is being sold to Corrections Corporation of America of Tennessee for $72.7 million. The state will pay CCA $44.25 per inmate per day in addition to $3.8 million for an annual ownership fee to cover wear and tear to the facility caused by inmates.

The state says CCA will operate the facility for 8 percent less than it would cost the state, for an annual savings to the corrections department of about $3 million. CCA will also add 304 beds to the prison to help alleviate overcrowding elsewhere. This is believed to be the first time in the country that a currently operating state-owned prison has been sold outright to a private company, Mohr said.

• The North Central Correctional Institution and the vacant Marion Juvenile Correctional Facility will be two separate adult facilities, each privately run but not owned by the Management and Training Corp. of Utah.

The state will pay MTC $41.20 per inmate per day. MTC does not get an annual ownership fee. By opening the vacant facility, MTC's plan also helps the system address overcrowding by adding about 400 beds. The Ohio corrections system is now at 132 percent of capacity. MTC estimates it will run the facilities for 6 percent less than the state and save $3 million.

• Finally, the North Coast Correctional Treatment Facility and its neighbor the Grafton Correctional Institute in Lorain County will merge into one facility that the state will run. The state expects to save $7 million yearly.

Mohr was hired earlier this year away from CCA, the only vendor to land a purchase deal with the state. Mohr said he wanted to avoid the potential appearance of granting a contract to his former employer and was not part of the screening or selection process. He said he reviewed the final deals for the first time on Wednesday at about 4:30 p.m.

Mohr said the agreements meet his goals of providing more safety for prison personnel, alleviating prison overcrowding, cutting agency costs and providing substantial security against inmate escapes.

To reach this Plain Dealer reporter: rfields@plaind.com, 1-800-228-8272