California lawmakers skeptical about building sell-off
Associated Press Writer
SACRAMENTO, Calif. (AP) – California lawmakers on Wednesday ordered the Schwarzenegger administration to perform a detailed cost-benefit analysis of the governor’s plan to sell 24 state office buildings, expressing skepticism about whether taxpayers would save money in the decades ahead.
Their demand came during a legislative hearing called to examine whether selling some of the state’s most iconic buildings would be a bad deal for taxpayers.
Gov. Arnold Schwarzenegger wanted the cash – estimated at $660 million – to help close California’s budget deficit, projected at $20 billion over the next 14 months.
The state’s independent legislative analyst issued a report Tuesday that found California would spend up to $1.5 billion more over the next 35 years to rent the buildings after they were sold.
“Our obligation isn’t just to get the quick-year fix for this budget,” said Assemblyman Hector De La Torre, D-South Gate. “Our job is to think of taxpayers over the long run. We are on the verge of losing control of 5.6 million square feet if this proposal were to be followed through.”
Properties up for sale include the Reagan office building in downtown Los Angeles, the San Francisco Civic Center, which houses the state Supreme Court, and several buildings in downtown Sacramento, including those that house the attorney general’s office and state Department of Education.
Some of the buildings already are paid off, while most others will be paid off within 10 years.
The Assembly Accountability and Administrative Review Committee called the hearing after The Associated Press analyzed internal market documents and found the plan could cost the state far more than it would gain.
The committee voted 9-0 to instruct the Department of General Services to provide more details about the costs the state would incur during the next 50 years if it leases the buildings from new owners.
Last week, the department said it had received more than 300 offers for the buildings worth more $2 billion, but it has declined to release details.
An official with the agency that oversees the department also refused lawmakers’ requests for more information, saying the administration was in active negotiations with buyers.
“If the sale does not make good fiscal sense, we will not go forward with the sale,” said Laura Zuniga, deputy secretary of legislative affairs for the State and Consumer Services Agency. “We want to wait until we have the final numbers.”
Sales would enable the state to pay down $1 billion in bond debt and about $400 million in interest payments that come out of the general fund, she added.
Schwarzenegger won authorization last year from lawmakers to sell state office buildings as part of budget negotiations, but there were no committee hearings or financial plans to vet the proposal at the time.
Lawmakers delegated authority to the administration to pick the buildings and solicit bids.
Earlier this year, the administration removed four longtime appointees from the building authorities that oversee state offices in Los Angeles and San Francisco, after two members expressed concern about plans to sell buildings in their cities.
Jerry Epstein, who had served on the Los Angeles authority for 29 years, told lawmakers he was replaced because he repeatedly asked the administration for a complete economic analysis of the pros and cons of the proposed sales.
“The administration’s silence about the financial implications of the sale was deafening,” Epstein said.
He and San Francisco authority member Don Casper urged lawmakers Wednesday to stop the sales, saying owning property is much more cost-effective than renting it.
In San Francisco, for example, new building owners could raise rents on the state after the initial lease expires because there is so little office space available in the city.
“This is a great deal for a potential owners because the owners will have captive tenants. They will have no place to go,” Casper said.
The administration has proposed leases that would allow new property owners to raise rental rates every year based on inflation, and automatically raise rental rates 10 percent every five years.
The state could renew leases at market rental rates after 20 years. The state also would have to pay for parking spaces it currently operates.
“This thing would appear to me that we are looking out for the buyer,” said Assemblyman Tom Berryhill, R-Modesto.
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