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Schwarzenegger: No fire sale of Calif. buildings

Judy Lin
Associated Press Writer

SACRAMENTO, Calif. (AP) – Gov. Arnold Schwarzenegger on Wednesday promised there will be no fire sale of California state office buildings, responding for the first time to questions about whether his proposal will cost taxpayers more in the long run.

The governor addressed concerns that selling 24 state buildings and then renting them back from the new owners might be a long-term money-loser for state taxpayers. Schwarzenegger had pushed the Legislature into agreeing to the sale last year as a way to raise immediate cash to help close the state’s budget deficit.

He said he will study the sale carefully, consult with the Legislature and will not follow through if it doesn’t pencil out for taxpayers.

Last week, an Associated Press analysis of the proposed sale showed California would pay $5.2 billion over the next 20 years to lease back the office buildings, plus pay for parking spaces the state currently operates. The state projected net proceeds at $660 million after paying off about $1.1 billion in construction bonds.

A day after the AP story, Beacon Economics, an independent think tank, issued a report that came to a similar conclusion, saying it will cost the state more in the long run to sell its office buildings.

Unlike other Hollywood celebrities who run into money problems, Schwarzenegger said he is a savvy investor who has rarely lost money.

“I’m one of the few Hollywood celebrities that doesn’t owe any taxes, is not bankrupt, doesn’t have to do movies – the next five movies – so I can pay for bills or anything like that,” Schwarzenegger said in a response to a reporter’s question during a Capitol news conference. “I’m pretty proud of my record.”

The AP also reported that Schwarzenegger had quietly removed members of oversight boards in Los Angeles and San Francisco who had questioned his proposal and replaced them with people who support him.

Developer Jerry Epstein, who was removed from the Los Angeles State Building Authority, said he asked the state for a cost-benefit analysis of the plan to sell the Ronald Reagan State Building in downtown Los Angeles. The building is scheduled to be paid off next year.

The Schwarzenegger appointee who runs the state Department of General Services responded by telling Epstein and another appointee on that board that they were being replaced. The administration also removed appointees from the San Francisco State Building Authority.

The AP’s analysis – based on the state’s marketing reports to prospective buyers – and its reporting on the removal of the board members prompted a legislative review. The Assembly Accountability and Administrative Review Committee has scheduled an April 28 hearing to scrutinize the proposed sale.

“Our committee looks to identify savings and efficiencies,” said Assemblyman Hector De La Torre, a Democrat from South Gate who chairs the committee. “We will go through this with a fine-tooth comb to make sure this isn’t a situation where you get short-term gain with long-term expenses.”

De La Torre noted that the administration has already had to back out of selling the Orange County fairgrounds after bids came in at a fraction of what the state thought it could get for the property.

During last summer’s budget negotiations, lawmakers were made aware that the state likely would pay more in rent over time than it would if it continued to own and maintain the buildings, which include the San Francisco Civic Center in San Francisco and attorney general’s office and department of education in Sacramento. The state already owns three buildings and most of the offices are scheduled to be paid off within 10 years.

Yet there was no fiscal review to determine whether California ultimately would make or lose money on the deal. Just three of California’s 120 lawmakers voted against the proposal.

On Wednesday, Schwarzenegger said Californians can be confident that his administration will come to the right decision if the numbers don’t pencil out.

“I can guarantee you that I will never sell state property that doesn’t make any sense from an investment point of view,” the governor said.

Bids were due April 14.


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