The Tulsa County Sheriff’s Office is on pace to make $800,000 in its first year running the jail commissary, driven by sizable markups on convenience items sold to inmates.
Nine in 10 of the products sold — from potato chips to combs — are marked up at least double (100 percent) what the Sheriff’s Office pays and half are at least triple (200 percent).
By comparison, the Oklahoma Department of Corrections said it had an average price markup the past 12 months of 36 percent on its commissary items — or about one-third of wholesale.
Several other states reported standard markups in the roughly 30 percent to 40 percent range, according to a 2013 survey by the Association of State Correctional Administrators. Thirty-four states responded to the survey, of which 18 reported standard percentages.
By far the highest was Alabama, which reported a markup of “75 percent for most products.” The lowest standard markup reported was Wisconsin at 10 percent, followed by Maryland and Tennessee at 15 percent.
People are also reading…
The Sheriff’s Office has generated $400,000 in net revenue in its first six months operating the jail commissary, according to agency records. The top three profit generators were ramen noodles ($100,000 in sales), electronic cigarettes ($86,000) and coffee ($55,000).
The percent markups on the top two are about 370 percent and 333 percent, respectively. The coffee category comprises Colombian coffee ($48,000 in sales at about a 198 percent mark up) and vanilla cappuccino ($7,000 at about 261 percent).
Sheriff Vic Regalado emphasized that, unlike with the previous private commissary operator, the revenue goes back into the jail, easing the burden on Tulsa County’s tax base.
Regalado also noted that the commissary is “in its infancy,” with the Sheriff’s Office “always evaluating our prices and products.”
Most items are probably on par with or less than products found at convenience stores, he said.
“We are trying to run a jail, which is quite expensive,” Regalado said. “The taxpayer money that goes into the jail already isn’t enough to effectively run the jail.”
Michael Spencer had operated the commissary as M&J Snack Bar in a federal-state employment program that gives blind people priority to run vending facilities in public buildings.
The Sheriff’s Office successfully lobbied the state Legislature for an exemption to operate its own commissary beginning in fall 2017.
Brad Johnson, a special financial adviser to the sheriff, said the commissary is a convenience for inmates and not a 501(c)(3) nonprofit. It supplements the inmates’ three meals a day and goes “above and beyond” what the American Correctional Association requires, he said.
“Keep in mind the commissary is not a right; a commissary being offered at any correctional facility is a privilege,” Johnson said. “Do we want to gouge anyone? Absolutely not.”
In a discussion with the Tulsa World several months before taking over the commissary, Regalado said the prices under the previous private operator were “outrageous.”
Regalado had said there always will be a markup but “we don’t want to break inmates.” He also had mentioned looking at averages across the country to see “what’s fair.”
Johnson said the Sheriff’s Office benchmarks are based on the previous operator’s pricing levels. He said they have also been “attentive to inmate feedback” but don’t know what other commissary prices are in Oklahoma or nationwide.
“Our position is we had what M&J was doing; we’ve looked at the pricing and the markup scenarios for which they used and is available to us now, and find an appropriate operational level,” Johnson said.
The Tulsa World analyzed retail values of comparable goods offered by the Sheriff’s Office and Spencer. About 90 percent of items are of equal or lower cost under Regalado, with about half being a lower cost.
Of those items with lowered prices, about half were a 3 percent change or less, and two-thirds were not greater than 10 percent.
Under Spencer, the Oklahoma Department of Rehabilitation Services’ business enterprise program got a 12 percent cut of revenues, and the Sheriff’s Office received 18 percent.
Spencer’s revenue percentage is unknown. The Sheriff’s Office provided a list of Spencer’s items and retail prices, but his wholesale numbers aren’t shown on that document.
One example Spencer previously provided the Tulsa World was ramen noodles. He said he paid $0.40 for each and sold them for $0.79 — a 98 percent markup. The Sheriff’s Office purchases them for $0.18 apiece and sells them for $0.78 — a 333 percent markup.
Contacted for this story, Spencer said the Sheriff’s Office probably has better buying power than he did, allowing the agency to purchase wholesale cheaper than he could.
He said he averaged a 50 percent markup, which included the 18 percent and 12 percent commission to TCSO and DRS, respectively, leaving him with about a 20 percent cut.
“So I had to be real creative making a living for my people and my family,” said Spencer, who now manages the program he used to participate in.
Johnson also noted the Sheriff’s Office purchasing power may be different from Spencer’s, accounting for the lower wholesale price.
Commissary funds to benefit inmates
The mid-September date was sooner than the planned handoff of Nov. 1 after Spencer walked away early, declaring he didn’t think the Sheriff’s Office would be able to successfully operate the commissary.
“It’s very solvent,” Johnson said. “It will meet our expectations and more than likely exceed them.”
Johnson feels comfortable anticipating commissary revenue in a 12-month period to be a minimum of $600,000.
The commissary revenues have allowed the Sheriff’s Office to improve David L. Moss, with proceeds statutorily restricted to expenditures that benefit inmates and “improve or provide jail services.”
Johnson said the Sheriff’s Office purchased two commercial garment washing units at $25,000 apiece. The agency also is in the process of acquiring two food tray washing units.
Johnson said the commissary revenues can be a sort of “fall-back fund” for the jail to cover items or other needs that otherwise might go unaddressed.
The Sheriff’s Office also believes the commissary’s revenues will help offset some of the contingency monies from the county’s general fund when the jail’s sales tax and billable revenue from contracts fall short of operational costs.
Johnson said that in about 24 months the sheriff has been able to reduce the yearly contingency fund needs to $1.2 million from $3.5 million when he took office.
“So his programs and policies of operating the jail more efficiently obviously have proven to be successful,” Johnson said.
E-cigarettes, toothbrushes among largest markups
E-cigarettes are a boon for the Sheriff’s Office, which was granted approval in August by county commissioners to contract with a vendor to provide them. They weren’t previously available to inmates.
The Sheriff’s Office sells them for $11.98 each after purchasing them for either $2.05 or $2.90 — by far the highest individual profit margin at $9.08 or $9.93 per item.
E-cigarette prices “vary a great deal,” Johnson said, so the Sheriff’s Office asked around to see what others were charging to reach its price point. He said a pack of cigarettes costs almost $5, and e-cigarettes have an equivalency of three packs of cigarettes.
“So if you use that rationale, they are getting an added value with an e-cig as far as cost is concerned,” Johnson said.
Another item of note is a toothbrush, which the Sheriff’s Office purchases for $0.04 and sells to inmates for $0.50. Not knowing Spencer’s wholesale cost, he sold a toothbrush to inmates for $1.
That is a 50 percent retail price slash under Regalado that has a total mark up of 1,150 percent over wholesale.
Similarly, a five-inch comb costs $0.50 to an inmate after the Sheriff’s Office purchases one for $0.04, the same 1,150 percent mark up.
Johnson said he thought those markups were probably historical protocols that carried over from the previous operator.
“It’s not an inherited right to participate in a commissary program,” Johnson reiterated.
Salt/pepper packet is the item listed with the highest percentage markup — about 1,240 percent. Johnson said each purchase of that item is actually 25 packets each of salt and pepper that are “labor intensive” because workers must hand assemble them.
Fewer options for better shelf life
The inmates’ options have been narrowed under Regalado.
For example, Spencer offered five types of ramen: beef, chicken, chili, picante beef and spicy vegetable. That now is down to three: chicken, chili and picante beef.
Johnson said less is better in this instance because it’s difficult enough to properly account for inventory and that the focus is on providing the most popular items inmates desire.
“We don’t want a lot of products in there that become stale because of shelf life,” Johnson said.
Johnson said the Sheriff’s Office is respectful of the fact that it’s entrusted to handle inmates’ money, with a responsibility to accurately account for it and deliver the products.
“We’re very fortunate to have really, really good people that are manning that operation and overseeing all of its functions,” Johnson said.
