Sale of state buildings is 'bad budgeting practice,' says new report
The state’s plan to make some quick cash by selling off office buildings and other properties then lease them back would cost taxpayers a bundle over the long haul, according to a new state report.
The nonpartisan Legislative Analyst's Office said Tuesday that selling off buildings, including the Ronald Reagan State Building in downtown Los Angeles, to help close a budget shortfall would merely create new debt -- about $200 million per year.
The report called the proposal a “bad budgeting practice” and “poor fiscal policy.” “It simply shifts costs to future years,” the report said.
Gov. Arnold Schwarzenegger has proposed selling 24 buildings at the 11 properties to pay down $598 million of the state’s roughly $20-billion general fund deficit. Investors began bidding on the buildings last week. The sale has come under increased scrutiny, with the governor removing critics of the plan from state building commissions that would oversee it.
The state Assembly has called an oversight hearing Wednesday for the proposed sales.
Schwarzenegger defended the plan last week, saying he was "not crazy and doing a fire sale."
“I can guarantee you that I will never sell state property if it doesn't make any sense from an investment point of view,” he said, touting himself as “one of the few Hollywood celebrities that doesn't owe any taxes, is not bankrupt, doesn't have to do the next movie, the next five movies, so I can pay my bills or anything like that.”
California’s budget shortfall is so large, with so few good choices, that the nonpartisan LAO stopped short of urging the outright rejection of the sale, saying that if the properties could fetch the state closer to $1.4 billion to close the deficit, it would be “one imperfect option among many.”
The LAO called for an outright rejection of the sale if it netted closer to the $598 million the governor’s office has estimated. The governor, in his press conference last week, said he was not wedded to continuing the sale “if it doesn't pencil out.”
“We understand that now is the best time to buy, but not a good time to sell. That's common sense,” he said. “So the California people can rest assured that we will take care of that. We will make a wise investment.”
-- Shane Goldmacher in Sacramento