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San Luis board reviews amendment to forbearance to allow receiver to market detention center
Summary
Legal counsel and the facility operator told the San Luis Facility Development Corporation board that a trustee-backed plan would let a receiver sell the San Luis Detention Center free and clear of liens, while offering priority payments to the operator; the board moved to discuss the mechanics in executive session and did not take a final vote.
The San Luis Facility Development Corporation board on the public agenda discussed a proposed amendment to a forbearance agreement that would permit a trustee or receiver to market and sell the San Luis Detention Center, legal counsel said, and the board planned to take the matter up in executive session for legal consultation.
Bill Sims, legal counsel for the San Luis Facility Development Corporation, told the board the trustee had proposed a creative mechanism to allow a receiver to sell the property "free and clear of all liens," pointing to Arizona Revised Statutes 33:2615 as the statutory basis. Sims said the trustee agreed to concessions intended to keep the facility operating and to provide some recovery to the operator, including proposals to increase estimated net sale proceeds and to treat certain accounts receivable and priority payments to the operator ahead of bond claims. "It's important to keep the facility open. It makes no sense to undertake a process that gets it closed," Sims said.
Tim, the project's chief financial officer and a CPA, described the operator's financial condition and why the forbearance amendment was being sought. He said the operator declined to renew a five-year management option after recording roughly $4 million in losses and that, under the current debt schedule, the project could not cash flow. He described negotiations with the trustee and said the trustee asked the operator to remain while a receiver markets the facility for sale. "We were already $4 million in the hole," Tim said, adding that the operator asked that direct operating expenses be paid during a forbearance period and that it receive a 6% management fee while it remains on site.
Tim gave additional financial details: he said the operator estimated outstanding bond debt at about $26 million, cited a prior figure for projected net proceeds that the trustee has proposed increasing "from $750,000 to $1.5 million," and described a timeline the parties discussed that would extend the forbearance period through Jan. 31, 2027 to allow time to market and sell the facility. He said the operator would consider bidding on the asset but did not expect to pay the full outstanding debt amount.
No formal vote on the forbearance amendment or appointment of a receiver was taken in open session. The board indicated it would enter executive session for legal advice and to consider the mechanics of authorizing a receiver and any needed amendments to the existing forbearance agreement; the timing and outcome of those closed-session discussions were not recorded in the public transcript.
The only formal action recorded in open session before that discussion was approval of the consent agenda, which included minutes from the Oct. 29, 2025 special meeting and the Jan. 28, 2026 regular meeting.
Next steps: the board planned to move into executive session to receive legal advice and to consider the proposed amendment and any authorization related to a receiver. The board did not announce a public vote or final resolution on the proposed amendment during the recorded public portion of the meeting.
