The primary goal of the penitentiary system is to reform criminals and to reintegrate them into society as productive members. A reformed criminal is worth infinitely more than a person who you sent away and who is now contributing zero. We should focus on improving this high-level function of prisons, rather than look for new australias.
But as far as NYC goes: yes, 500k is a lot. NY taxpayers should look into why it costs so much.