EAST MADISON — Inmates began arriving at the Somerset County Jail from Franklin County this week marking the end of a nearly four-month-long battle between state corrections officials and local authorities over the cost to house inmates from other counties.

An agreement was reached Tuesday at an emergency meeting of county sheriffs and the state Board of Corrections. Inmates began arriving at the East Madison jail on Wednesday.

The agreement provides $1.12 million annually to Somerset County for use of available beds through the state board’s investment fund and reimburses the county about $281,400 in a back payment from 2011, said jail Administrator Maj. David Allen and Sheriff Barry DeLong.

The $1.12 million is the annual amount Somerset County is supposed to receive from the Board of Corrections under the 2008 jail consolidation act.

A cap on local taxation to operate the jail was set by the Legislature at $4.86 million a year. The annual budget for the jail is about $6.6 million.

The Board of Corrections is supposed to pay most of the difference — $1.12 million — from the investment fund, the rest is covered by revenues collected from community corrections allocations from the federal government and from Social Security revenues, according to Allen.

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Payments by the Board of Corrections are made quarterly.

In 2011, the state withheld $281,400 — the final quarter payment — and Somerset stopped taking inmates from other counties.

“We moved inmates out in April — they didn’t pay us the final quarter payment and our threat was we weren’t going to house their inmates for nothing,” DeLong said. “We said we would run our jail with only our own inmates if that’s what it took to get in line with what the state should be paying us.”

Allen said the dispute with the state Board of Corrections boiled down to that one final payment.

“They refused to make that final payment because we made enough revenue that we technically didn’t need it to run the jail,” he said. “But when we get that money it goes to our capital improvements and if you take all that money away, we can’t fix things.

“Also, if we wanted to use that money to put down toward the debt service (from building the jail) we couldn’t do that. If they withhold the money, basically they’re taking our revenue away from us.”

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Col. Mark Westrum, chairman of the state Board of Corrections and administrator of the Two Bridges Regional Jail in Wiscasset, said he is happy with the agreement reached with Somerset.

“This brings closure to a unified corrections system that was on the brink of crisis,” Westrum said Wednesday. “The daily chaos created by the loss of those beds in May will end and provide much needed relief to Franklin, Penobscot and Aroostook Counties almost immediately.”

There are 15 jails in Maine under the 2008 consolidation law enacted by the Legislature. Four of them are considered “flagship” or receiving jails, which are large, modern jails that can take inmates from other counties in Maine.

The flagship jails are Somerset County Jail, Two Bridges Regional Jail in Wiscasset, York County Jail in Alfred and Cumberland County Jail in Portland. By the beginning of May, with Somerset and York no longer accepting prisoners, only Two Bridges and Cumberland were accepting out-of-county inmates.

Now all four jails are taking in prisoners.

The legislation also created the state Board of Corrections to oversee a unified state and county correctional system and capped the amount counties could raise from taxes to support corrections.

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Allen said the Somerset jail before the partial shutdown had a population of about 192 inmates. After April, with one pod closed, the population dropped to 93.

Somerset has agreed to take up to 44 inmates — the capacity of one pod — per day from Aroostook, Franklin and the minimum security prison in Warren.

DeLong said by Somerset taking prisoners from other counties, it takes the stress of overcrowding off of the other jails in the state. Closing the pod to out-of-county inmates forced the state’s hand in living up to the original payment agreement, he said.

“Every jail is full; every county jail is way over population — they had nowhere to put them,” the sheriff said. “And shipping an inmate from Aroostook County to York County or Cumberland made no sense.”

DeLong said the move also will save Somerset County taxpayers money in the long term because any surplus revenues could be used to pay down the debt on construction of the jail. He said the Board of Corrections has pledged support for legislation allowing surplus revenues to be used to draw down the debt, thus saving county taxpayers money.

The county borrowed $30 million in 2008 to build the jail. The bond is to be paid off in 20 years. The annual service on the debt is $2,557,616.

Allen said if expenses are reduced, the savings would occur every year.