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Gov. Brown drops plan to sell state buildings

February 9, 2011 12:08:25 AM PST
Governor Jerry Brown says he's canceling his predecessor's plan to sell two dozen state buildings and lease them back. He says it would amount to a gigantic loan that would cost too much in the long run.

Brown says he doesn't want to push California's financial problems down the road, so he's stopping the buildings sale to save taxpayers money.

Brown pulled the plug on a controversial plan to sell 24 state buildings, then lease them back for at least 20 years.

The transaction started under Governor Arnold Schwarzenegger and included iconic offices like the Ronald Reagan Building in downtown Los Angeles and the state Supreme Court headquarters in San Francisco.

"It didn't make much sense because it, in effect, is a gigantic loan with interest payments equal to over 10 percent every year," said Brown.

Schwarzenegger pushed the sale last year because it could bring a one-time cash infusion of $1.2 billion at a time when there seemingly were no other answers to get rid of the budget deficit.

The non-partisan Legislative Analyst found after 35 years, the sale/leaseback plan would cost California taxpayers $6 billion more than outright ownership.

The plan became tied up in court after two former Building Authority members who were fired for opposing the deal sued and temporarily blocked the sale.

Joe Cotchett is their attorney.

"I'm delighted, absolutely delighted that this governor saw the sham that was pulled on the public and stopped this outrageous sale of our beautiful public buildings," said Cotchett.

The private investors who bought the entire portfolio of buildings say they are disappointed.

"We had looked forward to assisting the state in addressing its fiscal crises and are available if our assistance is needed in the future," said Michael Bustamante in a statement, on behalf of California First LLC.

"This is fiscally prudent. It's honest and it's the very opposite of kicking the can down the road," said Brown.

By doing this, though, Brown just increased his budget problem by $1.2 billion. He plans to borrow from prison construction bonds and from special reserve funds to make it up. He projects he'll be able to pay it all back in three years.