Good morning. My name is Anita, and I will be your conference operator. As a reminder, this call is being recorded. At this time, I'd like to welcome you to CoreCivic's Fourth Quarter 2021 Earnings Conference Call. All lines have been placed on mute to avoid any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions]. I would now like to turn the call over to Cameron Hopewell, CoreCivic's Managing Director of Investor Relations. Mr. Howell, you may begin your conference.

Thanks, Anita. Good morning, ladies and gentlemen, and thank you for joining us. Participating on today's call are Damon Hininger, President and Chief Executive Officer; and David Garfinkle, Chief Financial Officer. We are also joined here in the room by our Vice President of Finance, Brian Hammonds. The call today will focus on our financial results for the fourth quarter, our 2022 full-year financial guidance, and provide you with other general business updates. During today's call, our remarks, including our answers to your questions, will include forward-looking statements pursuant to the safe harbor provisions of the Private Securities and Litigation Reform Act. Our actual results or trends may differ materially as a result of a variety of factors, including those identified in our fourth quarter 2021 earnings release, issued after market yesterday, and in our Securities and Exchange Commission filings, including Forms 10-K, 10-Q and 8-K reports. You are also cautioned that any forward-looking statements reflect management's current views only, and that the company undertakes no obligation to revise or update such statements in the future. On this call, we will also discuss certain non-GAAP measures. A reconciliation of the most comparable GAAP measurement is provided in our corresponding earnings release and included in the supplemental financial data on the Investors page of our website, corecivic.com. With that, it's my pleasure to turn the call over to our President and CEO, Damon Hininger.

Thank you, Cameron. Good morning, everyone, and thank you for joining us today for our fourth quarter 2021 earnings conference call. Going to our agenda for the call, we will provide you with a breakdown of our fourth quarter financial performance, recent developments in our ongoing response to COVID-19, discuss business development opportunities and the latest developments with our government partners. We will also provide you with an update on our capital allocation strategy, and I will discuss our full-year 2022 financial guidance, issued in our press release yesterday. I will then turn the call over to our CFO, Dave Garfinkle, who will review our financial results and our 2022 guidance in greater detail, and we'll update you on our ongoing efforts to enhance our capital structure. In the fourth quarter of 2021, we generated revenue of $472.1 million, which was consistent with the prior-year quarter, despite the sale of 47 noncore real estate assets within our Property segment in multiple transactions between December of 2020 and June of 2021, and our decision to exit 2 managed-only contracts with local governments in the state of Tennessee during the fourth quarter of 2020. Collectively, the assets we sold and managed-only contracts we exited accounted for revenue of more than $15 million in the prior-year quarter. For the full year of 2021, we generated normalized funds from operations, or FFO, of $225.5 million, or $1.85 per share, which was a decline from the $2.25 per share we generated in 2020. Now the year-over-year decline was driven by our election to become a taxable C-corp, effective January 1, 2021. For illustrative purposes, we have presented the calculation of normalized FFO for each quarter of 2020, pro forma to reflect the estimated taxes had we been a C-corp in 2020 in our quarterly supplemental…

Thank you, Damon, and good morning, everyone. In the fourth quarter of 2021, we reported net income of $0.23 per share, or $0.27 of adjusted earnings per share; $0.48 of normalized FFO per share; and AFFO per share of $0.41. Adjusted and normalized per-share amounts exclude $4.1 million of noncash expenses for the write-off of costs associated with the pay-down of our term loan B and an impairment charge of $2 million to write down an asset held for sale to its fair value less cost to sell. Financial results in 2021 reflect a higher income tax provision under our new corporate tax structure, compared with 2020, when we operated as a REIT. For illustration purposes, in the supplemental disclosure report posted on our website, we present the calculations of adjusted net income, normalized funds from operations, and AFFO for each quarter and full year of 2020 on a pro forma basis, to reflect such metrics applying an estimated effective tax rate of 27.5%. Adjusted net income per share in the fourth quarter of 2021 of $0.27 compares to $0.30 on a pro forma basis, applying this estimated effective tax rate for the fourth quarter of 2020, while normalized FFO per share of $0.48 compares to $0.53 on a pro forma basis for the prior-year quarter and AFFO per share of $0.41 compared to $0.48 on a pro forma basis for the prior-year quarter. The decline in adjusted per-share amount was primarily the result of property sales and refinancing transactions, both of which strengthened our balance sheet, and an increase in G&A expenses. Facility-level EBITDA increased $6.1 million to $139.2 million in the fourth quarter of 2021 from $133.1 million in the fourth quarter of 2020, excluding $2.8 million of COVID-19 expenses. The growth in facility EBITDA was achieved despite…

[Operator Instructions]. We'll take our first question from Joe Gomes with Noble Capital.

So I wanted to start maybe here with Arizona, trying to get just a little more color here. First, on the ICE populations that you're moving, you keep saying they're moving to other facilities, including ones where you have excess space right now. Do you anticipate all of the ICE population to move into your facilities? Or is there an option for ICE to move some of those into other non-CoreCivic facilities. And two, you talked about the disruption of earnings and cash flow as you transfer the ICE out and Arizona in, and I know it's in your guidance. Can you get any type of quantification to what that disruption of earnings and cash flow is going to be?

Joe, thank you for that. I'll tackle the first part of your question, and I'll let Dave tackle the second part of your question. So for the first part, we started conversations with ICE well in advance of the due date at the proposal to Arizona. So we -- as you know, we've got a 40-year relationship with ICE. We're always talking to them about kind of their emerging or growing needs in certain parts of the country. So we, well in advance before we put in the paper on a proposal, we had a conversation with ICE. And with that, to say, if we did submit a proposal and we were successful on La Palma being the place [indiscernible] its new contract, give them ideas on alternate capacity that we would have available within our system, notably within the state of Arizona. So we can't say definitively right now, because as we said earlier, it's still a work in progress on kind of the ramp. But clearly, we've got capacity in Eloy. As you know, we've got the Eloy Detention Center just down the street from La Palma, and then we've also got capacity over in Florence, Arizona. But I think also, as I think you're well aware, ICE has got one facility, a processing center in Florence, too. And I'm sure that will be part of the equation as they think about, once we finalize the ramp-down of the population in La Palma, think about where we've got capacity available, but also maybe some capacity that's got with their own facility. So, a little bit more of kind of stay tuned. We're still in kind of active discussions with ICE on that. But as always, we've been very transparent, very collaborative, and obviously want to make sure that they could fulfill their mission on the Southwest border, primarily with their needs within the State of Arizona. But Dave, I'll let you tackle the second part there.

Yes. It's really difficult, Joe, to give you an amount, because that's one of the probably two to three main reasons our guidance range is so wide. As you know, it's wider than when we previously provided guidance; the range is thinner. And the two main reasons are really La Palma, and more -- probably a larger impact would be wage increases and our ability to get per diem adjustments that mitigate those wage increases. So I'd hate to provide you with a number, just because it is so fluid, particularly because we don't have a ramp plan. But one additional thing I'd say, in addition to Damon's comments is, at the La Palma facility, these are very short-term, transitory detainees. So it's not so much transferring the populations from one facility to another. It's really changing the flow of intakes and releases and the whole immigration process from one facility to multiple other facilities. And, as Damon mentioned, we have capacity, our Eloy facility, which is right down the road, so we'd expect that facility to start increasing the number of intakes that they receive. Does not require a contract modification; they could really just change the processing of the detainees currently at La Palma over to Eloy, as well as in Central Arizona, where we also have capacity. So it's very difficult to estimate the amount, because we don't know how many people will ultimately be processed at Eloy, Central Arizona, and other of our facilities. Because, while it's convenient to have facilities on the Southwest border, and that's where they would be logically processed, it's not -- ICE has the ability to transport them, fly them to other facilities. And we do see intakes at other facilities even outside of Arizona for people who are apprehended along the Arizona border. So, for all those reasons, it's just too difficult to give you a range for what the impact would be of the whole La Palma, Arizona ICE transition.

Okay. And just a little follow-up on the higher wages. And you talked -- I think you mentioned the -- your government partners, you saw like a 6% increase in the per diem for covering some of the higher wages that you guys are experiencing. How much of the overall wage increase would those types cover? Is it covering everything? Is it 50%, 75%, and how delayed is it? Is it more of a, we know we're going to get the higher wages covered, it's just on a delayed basis? I mean, maybe you can just kind of walk us through how that whole process works.

Absolutely. So let me just back up a tad and remind the audience, we've obviously got just over half of our business with the federal partners and another half with state partners. So as a reminder, our federal partners, we have -- we are required by contract to pay wage determinations, and those wage determinations are set by data from the Bureau of Labor statistics. And so, with wage inflation happening and likely will happen during the course of the foreseeable future, if those wages go up, we have to, by contract, adjust our salaries accordingly, and with that, have an equitable adjustment feature within our contracts to get reimbursed. So that, in that case, is dollar for dollar. On the state side, we've had really good success, and this is probably an obvious point, but the reason I think we've had good success is not only just a great relationships -- we've got our various state partners around the country -- but also our state partners own facilities, where they own and operate their own facilities, are dealing with the same challenges from a labor perspective like we are. So we're really hand-in-hand with the leadership with the Department of Corrections in these different jurisdictions around the country in asking for additional funding to raise salaries. And so, it's been pretty darn good. I mean, we've had good success on not only making the case of where we think salaries need to be -- and again, we're doing that in collaboration with the Department of Corrections -- but also doing it that quickly, and then with that, getting reimbursed fairly quickly. It's not perfect, but the overlap has been pretty tight, I should say, relative to when we want to do something versus when we get clarity on the reimbursement. So -- and I'll just tell you, Joe, being with this company 30 years and working with a lot of state partners the last 20 years, the rapport and the relationship and the partnership we've got with our state partners has never been better, especially in this environment. There's great appreciation and sensitivity to the labor market and understanding we just need to invest more in our employees with the very challenging mission they have, period, but even more so here in the last 24 months with a pandemic. But anything you would add to that, Dave?

Now that there have been more frequent communications, obviously, and some states have even provided temporary stipends that we get reimbursed to provide to our correctional officers as well. It's been a few states, not across the portfolio, but they're just -- the number of unusual adjustments we're making to salaries and corresponding per diem adjustments. Some of it is temporary to get through the fiscal year ended June 30, and then you'd expect to incorporate some of those into both the long-term wages and a long-term per diem adjustment. But it's just been extraordinary, the adjustments that we've been making and the extraordinary adjustments our partners are providing, as well, to help us support the staff and our operations.

Okay. And on ICE, if you look, and you guys kind of touched on a little bit, if you look at their monthly ADP, they kind of went up from the pandemic lows of the mid- to low teens to the mid-20s. It kind of backed off here lately to the low 20s. How have you guys' ICE populations been holding up across your system?

Yes. I think relatively stable.

Yes, they were very stable, especially if you're comparing Q4 to Q3, they were about flat, almost to the detainee. I think that was somewhat impacted by the Omicron variant because we started to see an increase in some detainee populations earlier in the year and then continue into Q3, but they kind of leveled off and remained flat in Q4. So, with the data getting better on the number of people infected by the Omicron variant of COVID, hopefully, those populations would trend similarly.

Okay. And then, maybe we could just switch gears here for a minute, if I can get one more question in here on the capital allocation. I think you mentioned you're trying to get the credit line facility done here shortly. And maybe give us some kind of timing and maybe just an idea of what kind of size you're looking at now versus where it was. And then, you mentioned share repurchases. When do you think you would go to the board looking for authorization for share repurchases? I don't know if you -- it's probably too early, but I'm going to ask you anyway. And what kind of size would you be talking about here on the share repurchase authorization that you would see?

Let me -- I'll let Dave do the first part second. I'll do the last part first, and that is the buybacks. So we've got a board meeting actually coming up next week. We've had really good, positive conversations with the board, really over the last 24, 36 months on all these really important decisions and things that we've executed on, from the conversion to a C-corp to the selling of assets that were noncore to some of the refinancing transactions we've done this past year. The board has been extremely, extremely supportive. And along the way, obviously, we've been talking to major investors to get their feedback and really appreciate not only their feedback, but really endorsement of the steps that we've been taking. So we, as we've said in the prior couple of quarters, really the next kind of key to-do on the list is the credit facility. And so, I'll let Dave talk about that in a minute, but I'd say once we get past that milestone, again, we've been -- have active conversations with the board. We'll talk about this again next week. But they agree, and again, we're getting good feedback from investors that, let's get the credit facility kind of done, get it finalized so we've got certainty both on the extension and the size, and then we can go to the next item on the to-do list, which is returning capital to shareholders, potentially through a share buyback program. But, Dave, I'll let you tackle the first part.

Yes. Thanks, Damon. Yes. So, as we mentioned, the total facility size today is $1 billion. We don't need anywhere near that; probably 1/4 to 1/3 of that size is what I estimate, and I think we'll have that buttoned up within the next few months with the maturity in April '23. It becomes current in April of '22. There is 0 balance on the revolver today. As I mentioned, we paid that off in the third quarter and have not used the revolver, have not drawn on it since then through today. We have $170 million on the term loan A, and we've got $300 million of cash on the balance sheet. So I think we're in a really, really good position from a debt maturity, being able to address maturities and still return capital to shareholders without needing to draw on a credit facility to any great extent. Nice to have one just for working capital purposes and things like that. So I would estimate, like I said, 1/4 to 1/3 of its size, and we should have that buttoned up over the next few months.

Great. I'll get back in queue, let to someone else ask some questions.

We'll take our next question from Kirk Ludtke with Imperial Capital.

As always, very, very helpful. A couple of topics. A follow-up on the guidance, and then maybe I'd like to touch on this monitoring opportunity and the Georgia opportunity, if I have time. With respect to the guidance, I think you mentioned that it does not reflect any new contracts, including contracts at West Tennessee or Leavenworth, if hopefully, I heard that correctly.

Yes, that's correct.

Could you give us -- I remember it seems like there was an RFP out for at least one of those facilities. And I was just curious if maybe you could give us a little more color as to where those discussions stand. And then I've got a couple of follow-ups on other topics.

Yes, sir. So this is Damon. So I think you're referring to West Tennessee. We did have very productive conversations with a couple of different government partners on that facility. And our sense is, and we've had interest from ICE probably most notably in that facility. Our understanding is that they're trying to get some clarity on the rest of the funding for this fiscal year. So, as you may know, the current federal government is funded through February 18. There has been some news reports here in the past week that they're potentially going to do a very short-term extension, maybe to early into March, and then do a full year funding. So our understanding, that is going to be kind of the milestone they'll be looking at on not only what their potential needs are going to be based on the funding they get from the budget, but also, again, as I said earlier, Title 42 and some of the other kind of policy things that they put in place, how that reconciles what kind of their needs this fiscal year going to the next fiscal year. So those are the things we're in looking at closely.

And Kirk, yes, you're correct. Our guidance is conservative with respect to both West Tennessee and Leavenworth and does not include any new contracts in 2022.

Got it. And on that topic, did the marshals enter into contracts to replace the capacity that they had at West Tennessee and Leavenworth, or are they still in place?

They've replaced. So it's our understanding they looked at either other government entities, either at the local level or the Federal Bureau of Prisons. And that's actually been one of the things they've put on the table with the enactment of the executive order, even going back to Ohio and Montana, that they were looking at all alternatives, and then based on all those alternatives kind of prioritize what is the most advantageous for their needs kind of going forward with those respective districts. So it's our understanding they looked at and utilized local capacity, and also capacity within the Federal Bureau of Prisons.

Okay. Got it. And then you mentioned this new monitoring program. Does -- is it incremental to -- I know there are -- ICE already has some monitoring contracts out there. Is it incremental to those contracts? Or does it cannibalize those contracts?

Good question. It's incremental. So it's our understanding with kind of this uniqueness of potentially, individuals that were initially unaccompanied minors that were under authority of another jurisdiction, as they reach age 18 or above, they're looking for a solution for that population -- so basically, 18- to 19-year-old males in different parts of the country. So it would be an addition to not in place of.

Okay. Excellent. And is it too early to estimate how big it might be and what -- if you win it, what the capital requirements might be?

It would be -- to the first part, yes, I'd say it's too early to say. It just came out here within, I think, the last 14 days, so we're still kind of assessing both the need and the opportunity and the size. But the second part, at the moment, we don't think there's going to be a big capital requirement. Still assessing that, but that is our kind of read at the moment.

Okay. Great. And then lastly, if I can squeeze this in, on Georgia, you mentioned the governor's budget includes some facility closures. And I know the lead time on these types of things can be long. But do you have a sense for timing and how many individuals are detained at those facilities that are potentially closing?

Yes. The first part is probably the easiest part. So the governor released a budget. I think Governor Kemp released it within the last probably 2 weeks. And don't hold me to this, but I want to say history has indicated that they usually enact their budget usually late April or early May. I think I've got that right in Georgia. Every state's a little different. So that, obviously, will work its way through the legislature. I'm sure legislature will have pretty strong feelings on this. Notably, if there is going to be multiple facilities closed in various districts around the state, that potentially are sensitive to these members of both the legislature and the Senate. But that, I think, is when we'll get clarity, ultimately, what is enacted when that budget gets finalized -- again, probably late April or early May. I think -- keep me honest here, Dave. I think we have heard it's probably a couple of thousand beds, maybe up to 3,000 beds potentially, they are looking at for potentially a population that would be displaced with multiple facility closures that are envisioning.

Yes, I think it was 3 to 5 facilities. I think they named a couple of them. But it's interesting that it sounds an awful lot like the same situation that Arizona was in where they had an outdated correctional facility that was obsolete and it needed to be shut down, so transferring the populations to the private sector. So we've talked about in the past that opportunity, either through the development opportunity and where we'd just be the landlord and managing the real estate, or an opportunity like Arizona, where we also manage the population. So we continue to believe that that's an opportunity going forward with a lot of states throughout the country with outdated criminal justice infrastructure that could result in a growth in our business without an increase in overall inmate populations. They're just transferring from older, outdated facilities to newer facilities.

Interesting. Do you have capacity in Georgia for that --

Yes. I mean, we mentioned the facility that currently has a BOP contract that expires in November. So, if that one is not renewed, that would certainly become available.

Got it. Fantastic. I appreciate it.

We'll take our next question from Ben Briggs with StoneX Financial.

So I think you addressed most of my questions on the higher general and administrative costs that we saw this quarter. So, if I heard you correctly, those were due entirely to increased incentive comp, correct?

Yes, if you're comparing Q4 '21 to Q4 '20, yes, almost -- a substantial portion of it due to higher incentive compensation, because as I mentioned, we haven't set -- the compensation committee had not set compensation level targets, or they had already been said, I should say, before the onset of COVID-19 in 2020. In this year, there were a couple of unusual, might even categorize them as nonrecurring expenses in Q4, if you're comparing it to Q3. But as I indicated in my comments, our 2022 guidance reflects a G&A level that's very comparable to the total G&A expense in 2021.

Right. Okay. So that increased G&A expense is going to kind of be offset a lower G&A expense later in the year, is kind of what it sounds like you're alluding to.

Yes. Correct; that's a fair statement, yes.

Got it. Got it. That's very helpful. And then next thing for me, so obviously, inflation is on the top of everybody's minds, and you guys addressed inflation, specifically wage inflation. Are you seeing any cost inflation impacting any purchased goods either in OpEx or CapEx? I know obviously, there's not a ton of purchased goods in your business, but you have food. And then obviously, for CapEx, it could impact some of that. So I'm curious to hear about what impact you're seeing from inflation.

Yes. I mean, for the most part, it's in salaries and wages, that's 2/3 of our cost structure. So I mean, we are seeing inflation in other expense areas, but those are not needle-moving for us as much as the salaries and wages are. We don't have -- I mean construction costs are certainly going up, but we don't have construction going on at our facilities. As I mentioned, our maintenance CapEx in '22 is comparable to 21%. Some of the costs in the construction area are higher, but that's factored into our guidance. So for us, unlike many other companies throughout the country, inflation is not as impactful.

Okay. All right. That's very helpful. I appreciate the time.

We'll now take our next question from Marla Marin with Zacks.

So I'm just wondering, it sounds like we're sort of in a situation now where you could see some really nice opportunities emerge, given the state of infrastructure of some of these federally or state-owned facilities. But given the challenges with hiring and all, what are you thinking in terms of are you hearing of anything? Is there -- are there certain geographic areas where you think you're more likely to be presented with an opportunity? And given what we're seeing with wage inflation and difficulties in actually even hiring people, what would be the timing, do you think, if you were presented with the new opportunity?

Yes, great question. Again, this is Damon. I'd say to the first part, pretty much nationwide. I mean, we've seen here in the last couple of years, especially with the property solutions in places like Kansas and New Mexico materialize. Again, we've talked about Arizona where, again, we're replacing the 110 or 120-year-old prison with our La Palma facility. We talked about Georgia and Hawaii earlier. So it's really kind of nationwide where you've got a lot of jurisdictions. And I think, to be honest, I think its manifested itself even more so here in the last 24 months, just because everybody has appreciated this old antiquated infrastructure is very difficult when you're living through a pandemic like we have with COVID-19 -- very hard to quarantine, very hard to make sure that transmission is limited if you don't have new modern HVAC systems and whatnot. So I think a lot of these systems knew they needed to improve, but even more so here in the last 24 months, just because they've had kind of tragic consequences with their facilities because of COVID-19. On the staffing front, again, we've got increases that we've put in place, and we're seeing great response where we've done these increases around the country. I'm encouraged. Labor workforce participation is starting to improve a little bit in certain parts of the country. So I think along with that and these wage increases, and again, I'll just reinforce, our partners have been extremely supportive of the need for these increased investments and in turn, reimbursing us through a per diem adjustment. So part of the lean forward this year is not just obviously to keep up on the labor market needs around the country, but also part of it is, I think as we all continue to feel pretty darn good -- obviously, we're not sure if we're there yet, but continue to feel pretty good that we're getting out of this pandemic -- we're starting to lean forward a little bit on increasing our staff and in anticipation that some of these restrictions will be eased and we'll see some of the capacity that we were utilizing kind of pre-pandemic come back online, so getting ourselves prepared from a staffing perspective. But anything you would add to that, Dave?

Not directly to your question, Em, but I put registry nursing in the same category as staffing. I mean, the national shortage of nursing, our health services department has done a fantastic job in identifying and coming up with resources to fill the shortage of nursing that we see across the country, but nothing else to add to the rest of your answer there, Damon.

We'll now take our next question from Jordan Sherman with Ranger Global.

A couple of quick ones. Did you quantify the amount of incremental labor expense you think you'll have in '22 versus '21? And then, how much of that do you think be able to offset -- directly offset with increased per diem?

Yes. No, that's the real tough question to answer. I think last year, I don't know, correct me if I'm wrong, Damon, I think it was around a $30 million number that we provided total aggregate wage increases. And I'd say we have at least that in the 2022 guidance number. But it is a moving target because it's a very dynamic environment in the labor market. And the other offsetting question is per diem adjustments, which our government partners, as we've mentioned, have been very supportive of per diem adjustments because, quite frankly, we're part of their system. So they don't want us stealing their staff. We don't want to steal their staff. And market's market. So it's been -- they are understanding of the challenges that we have because they do what we do. So that's just a very difficult question to answer to say what is the bottom line impact in our 2022 guidance of both wage increases and offsetting per diem adjustments. They're both in there, but that's the reason we have a wide range.

Yes, understood. That makes sense. And the disruption in -- what would be the -- your approximate disruption of revenue as a result of the La Palma transition? And is there any incremental cost associated with that as well?

There's -- we have about $3 million of capital expenditures that we'll be spending on renovations at the La Palma facility. What we've said is the annual revenue amount for Arizona is $75 million to $85 million, once they reach stabilization, which, again, we don't expect them to reach full stabilization until the end of the year. So again, difficult to say what the reduction in revenue would ICE be, especially if you're taking into consideration potentially just transferring that revenue from La Palma to other facilities in the region. So again, tough question to answer there, but $75 million to $85 million is the annual revenue for Arizona. So that would be the 2023 number, for example.

Okay. And I guess the question, what was the government's run rate in '21 for that facility?

We don't disclose that level of detail on revenue for our individual facilities.

Okay. So is the per diem going up or down? I guess the two questions are change in per diem and change in expected utilization -- full utilization, once all is said and done.

I would say the economics are very similar between the two contracts. So depending on how much we're able to transfer to other facilities, it's certainly -- if you look at '23 and assume that all of the ICE detainees were to go away -- and again, I don't want to lead you to believe that that's going to happen because we do have capacity in the region -- but the economics would be similar in '23 as they were in '21 with the Arizona contract.

So part of the gap in your guidance is you don't know exactly how this transition is going to work. You know when the ICE people are leaving the facility. You don't know exactly how quickly Arizona will ramp up. And so you --

You got it. And we also -- we are going to -- it's 2,700 Arizona inmates compared to 1,800 today, and that population fluctuates with ICE. And it's a longer-term sentenced population with Arizona. So we have programs, we have services that we have to offer that population that is not needed for an ICE population. So ramping up that staffing in anticipation of receiving the additional Arizona inmates is also part of that disruption.

Yes. And just to reinforce, I mean, it's our second-largest facility. So it's 3,000 beds. It's a very large facility, probably one of the largest in the country. So again, just imagine the ramp-down of the population from ICE, the ramp-up of Arizona population. Those were going to overlap, and then obviously, along the way, you've got to do all the appropriate training to make sure our employees meet all the training requirements. So a lot of moving parts that obviously, again, be very disruptive to earnings this year. The only thing I would just say is that Dave indicated that the earnings performance of '23 will be similar to the earnings performance of ICE in '21. But one thing I would just say is probably the earnings kind of ups and downs a little bit are probably a tad more stable with Arizona, just because that is going to be a longer-term population, which you indicated that it will be there for programs and other services. So you may not see as much volatility in earnings from, let's say, a year-over-year or quarter-over-quarter versus a state contract.

Once, I mean the government -- the ICE contract, right, from the state contract, got it. Can I just ask -- I know people have asked a couple of different questions about this potential alternative new ATD alternatives to detention contract. Can you just talk in round terms about the economics of that, how that actually works?

I can't speak to the economics yet, just because, again, it's only been out for a couple of weeks. But keep me honest here, Dave. I know the advertisement indicated probably about 16,000 participants.

Right.

So it gives you a sense of at least the quantity of people that would be in the program. And then it's our sense -- again, we are just now getting through the process on the proposal, but it'd be my sense that they probably would pay on a per-individual basis. So the actual participants in the program would be reimbursable to us from ICE. But again, obviously, more to learn, but at least the amount, which is 16,000, gives you a sense of the quantity.

I apologize. You answered the question I asked, but not the question I was hoping you could answer. I meant more in general. Not specifically to this contract, but in general, how do those contracts -- like what are the economics of those contracts for you? You have some in place now. Like, how does that look on a per-day basis, on a revenue, on a margin basis? I guess that's what I was sort of aiming at. And again, it can be round numbers, so you after disclose anything you don't want to disclose.

Yes. We -- and so, to be clear, we don't have an agreement in place like this with ICE. So this -- we provide these type of services with other jurisdictions and even on our community and safety segment. But to be clear, we don't have an existing contract today where I could point to relative to kind of revenues and margin. What I would say though, generally, obviously, we look at this throughout the entire profession and market. What I would say is, generally, the margins are actually pretty consistent with what you'd see in our owned and safety -- our owned and managed segment. So kind of 20% to 30% margins is typically what we have in that segment. And I'd say, generally, that's what we observe with other providers providing these solutions for the government.

And per diems in what kind of ranges for existing, not for ICE but for any other -- just some idea of per diem.

Yes, that being through a pending competitive procurement, it probably wouldn't be appropriate for me to give any detailed cap rate.

Fair enough. Okay. We'll follow up on that.

We'll now take our last question from Michael Christodolou with Inwood Capital Management.

Good discussion, and thanks for all the time on the call. I've got a few questions about occupancy and operating leverage. So first, at La Palma, Damon, you mentioned that's your second-largest facility. As I look at the sheet, it's I think the second-lowest occupancy right now at 60%. So looking through all the noise of 2022, it looks like that facility might jump to 88% occupancy when things stabilize in 2023. What kind of operating margin lift should that facility have, again, under a normalized cost structure? And then, I guess the same question would apply to the whole system. You're at 75,000 beds, 73% occupancy. La Palma would add 3.6 points, gets you towards 77%. You might lose a little bit, as you say, if ICE takes some prisoners back to Florence. But it looks like you could be high 70s operating margin or utilization. And then if you had Title 42 or COVID relax, could we see north of 80% occupancy? And talk through maybe what the operating leverage would be at that point.

Yes. I'll let -- great question. I'll have Dave tack a little bit on La Palma specifically, but let me tackle the last part of your question. We were -- I think -- keep me honest here, Dave. I think pre-COVID, we were, I think, system-wide in the low 80s.

81.9%, yes.

What was it?

81.9%.

81.9%. So I think yes, and we were getting great momentum there. You may remember, I mean, with a lot of new contracts, especially on the state side. So yes, again, being about 7,000 beds away from that mark, potentially, you could have -- keep me honest here, Dave -- probably $40 million to $50 million in EBITDA growth without a single dollar deployed for capital. So we think that's very, very possible. And again, that's why we're leaning forward this year a little bit to get staffing levels back to a level where we could get to that occupancy, potentially as early as the next, say, 24, 36 months. But I'll let you tackle the first part of that question, David, La Palma.

Yes. So La Palma, in 2021, has been subject to the occupancy restrictions for ICE to prevent the spread of COVID-19. And across the ICE portfolio, I think they tried to keep occupancy below 75%. You're right. I would say, generally speaking, across the portfolio, it is a leveraged model. You get mostly fixed costs. Your staffing doesn't fluctuate that much unless you're opening up a new housing unit or closing a housing unit. So obviously, the higher the occupancy, the more leveraged the model becomes, and the higher your margins are. And to go back on Damon's point, yes, at 81.9%, that was actually the number I was using in my script by saying we're down 7,000 residents from 2019 occupancy levels. If you just took Q4, it was 79.4%. So that would be about 5,200 residents that translates into about $45 million of incremental EBITDA, if you were to get those residents back.

Okay. And then, David, just one last question. You talked through the debt and the cash balance and the revolver. Where does the term loan B fit into the picture on that? Your most onerous on the covenants and the second-highest [indiscernible].

Yes, we paid it down by $90 million in the fourth quarter. It has a balance of about $130 million, I think it's $129 million outstanding as of the end of the year, and it matures in 2024.

There are no further questions at this time. This concludes today's call. Thank you for your participation. You may now disconnect.