The private prison company CoreCivic has sold two of the largest immigration detention facilities in California to the U.S. Department of Homeland Security in a deal worth $1.5 billion, the company announced Monday.
CoreCivic said it anticipates that the sale of the Otay Mesa Detention Center in San Diego County and the California City Detention Facility in Kern County will bring the company an estimated net proceeds of approximately $1.1 billion.
The sale closed on July 2, according to a recent filing with the U.S. Securities and Exchange Commission, with the federal government paying $739.2 million for the 1,994-bed Otay Mesa facility and $732.6 million for the newly-opened 2,560-bed California City facility.
CoreCivic said in a news release that it expects to continue running the day-to-day operations of both facilities under existing management contracts with the U.S. Immigration and Customs Enforcement. The company acknowledged in its filing that the terms of those contracts could be renegotiated now that the federal government owns both properties outright.
They also might not be renewed. CoreCivic’s contract in California City contract runs through August 2027, and its Otay Mesa contract is in effect through December 2029, with an option to extend for five more years.
The purchase comes as the Department of Homeland Security sits on an unprecedented influx of cash. The 2025 federal budget gave the department roughly $170 billion for immigration enforcement and detention, including $45 billion specifically earmarked for expanding detention capacity through fiscal year 2029.
The acquisition of the two sites is another step in the federal government’s plan to build out national immigration detention capacity that isn’t reliant on the two largest private prison contractors, according to a brief from the Brennan Center for Justice at NYU Law from February.
The proposed transition away from private detention was described at the time as the “ICE Detention Reengineering Initiative” in U.S. Immigration and Customs Enforcement documents released by the city of Social Circle, Georgia, where city leadership was worried about the strain on city services from a major detention facility housing between 7,500 and 10,000 people.
“This new model will allow ICE to create an efficient detention network by reducing the total number of contracted detention facilities in use while increasing total bed capacity, enhancing custody management, and streamlining removal operations,” according to the unsigned ICE memo.
The Department of Homeland Security’s purchasing program surprised local officials in at least five states, who only learned of the purchases and their purpose after the deals closed. Some of those projects have run into legal challenges, according to the New York Times, though the agency appears to be moving forward with four warehouse acquisitions.
Health inspections at ICE centers
California law allows state and local officials to inspect immigrant detention centers, and Democratic leaders have drawn attention to conditions at both sites since President Donald Trump began his second term. Eight ICE detention centers are operating within the state, up from six since former President Joe Biden left office.
The Otay Mesa facility has been at the center of an ongoing legal fight over local health inspections. San Diego County officials sued the federal government and CoreCivic in March after claiming health inspectors were blocked from a full inspection under a 2024 state law. A federal judge later granted county health officials access to the detention center.
Private prison companies CoreCivic and GEO Group have fought back against California’s 2024 county-inspection law in court, arguing that states can’t pass laws that directly burden the federal government’s core functions. GEO Group has argued the state law is unconstitutional because it steps on federal authority over immigration detention centers.
California City opened last year in eastern Kern County about 100 miles north of Los Angeles in a site the company previously operated as a state prison. A federal lawsuit is ongoing about whether the facility opened without proper permits in remote California City.
Grisel Ruiz, a staff attorney from the Immigrant Legal Resource Center, said the change in ownership does not change her organization’s opinion that the facility opened without the required permits.
The organization intends to ask California City’s planning commission on Tuesday to deny the permits and shut down the facility. Attorney General Rob Bonta has urged the same.
“The sale to DHS doesn’t change the fact that CoreCivic must still lawfully operate the facility,” said Ruiz.
Ruiz also noted the sale deal appeared favorable for CoreCivic in that they get the profits from the sale of the property, as well as revenue from continuing to operate the facilities for Immigration and Customs Enforcement.
“They get to have their cake and eat it too,” said Ruiz.
CoreCivic said the sale prices were set through a federal government process in which independent appraisers account for replacement cost, depreciation and land value to determine fair market value. Spokesman Ryan Gustin said the appraisals were reviewed by the government for compliance with federal standards.
“The process was marked with rigor and integrity,” he said in an emailed statement.
More sales possible
The company also disclosed that it is having ongoing talks with ICE about selling the federal government additional detention facilities, though it said those discussions are in the early stages of a deal and may not close.
Tennessee-based CoreCivic said the proceeds from the sale, which would be about $1.1 billion after taxes and transaction costs, could go toward paying down its bank credit and retiring $238.5 million in senior notes coming due in 2027. Any remaining funds are earmarked for further debt reduction or possibly stock buybacks.
Patrick Swindle, the president of CoreCivic, said in the news release, “We are pleased with the sales of these two mission-critical facilities for the Company’s government partner, while reflecting our role as a long-term, flexible solutions provider to government.” ___
This story was originally published by CalMatters and distributed through a partnership with The Associated Press.