3 reasons the Thomson prison sale will boost the Illinois economy
Oct 22, 2012
Earlier this month, the federal government bought the Thomson prison in Illinois for $165 million. A level one, maximum-security facility, the prison was built in 2001 to hold up to 3,200 inmates, but was never opened because the state didn’t have the funds to operate it. Proponents of the deal say the purchase represents an investment in Illinois and is a step toward alleviating overcrowded prisons. Opponents worry that the prison could house suspected terrorists from Guantanamo Bay in Cuba, though a federal law prohibits that.
The political disagreement behind the deal has garnered a lot of media attention. But politics aside, the economic story is more important, especially when you look at the Thomson prison as an opportunity for developers. The purchase will bring new life to the facility and Thomson, an aging town in western Illinois, as well as provide a financial boost for the state. Let’s look at three major economic benefits of this purchase:
1. It will relieve pressure on the state budget. The prison has sat unused because the state couldn’t afford to open it. Now Illinois can receive revenue from the sale of the prison by the end of this year. Illinois Governor Pat Quinn says that he’d like to use the proceeds to pay down some of the state’s debt. State officials estimate that the prison’s operating expenditures could reach $122 million annually, and it will create $61 million in local business sales that will boost the economy and generate further income and sales tax revenue for the state.
2. It’s expected to create jobs. State officials expect the facility to create 1,100 jobs when it opens, including correctional officers, health care staff, maintenance workers, and administrative employees. In Thomson, a city with a 2011 population of 581, that’s big news. Its citizens will have new and potentially better jobs to move into. What’s more, the creation of jobs can help attract people to relocate to the area. This leads me to my next point.
3. Boost real estate development. Population increases help drive the development of health care facilities, retail stores, restaurants, multifamily buildings, and other real estate. Thomson stands to see new buildings constructed to meet the housing, grocery, dining, entertainment, and service needs of new residents. Cities surrounding Thomson are also gearing up for construction, especially those in the housing industry.
Ultimately, the greatest benefit of the Thomson prison sale might be for developers. That’s because working with the U.S. government is safer than working with any other purchaser. Developers can count on getting paid because the government appropriates funds before making any decision to build or own a property, and solidifies the decision in a contractual obligation. It’s practically impossible that the U.S. government will declare bankruptcy and fail to pay you what it owes. However, the government certainly applies more scrutiny than the typical real estate purchaser, and the delays for approval can slow the time it takes to initiate construction. But developers willing to endure these hurdles can benefit significantly from their work, much like Illinois did in selling the Thomson prison.
