CALIFORNIA
FOCUS
FOR RELEASE: FRIDAY, OCTOBER 25, 2013, OR THEREAFTER
FOR RELEASE: FRIDAY, OCTOBER 25, 2013, OR THEREAFTER
BY THOMAS D. ELIAS
“ARNOLD’S SHORT-SIGHTED BUILDING SALE PLAN WON’T DIE”
It
was one of the most smartest and also one of the most obvious decisions Gov.
Jerry Brown made after his latest term began in early 2011 – canceling the
planned sale of 11 choice state office buildings to private investors.
The only problem was that contracts
had been signed and commitments made while muscleman actor Arnold
Schwarzenegger was still governor, so this classic example of penny-wise,
pound-foolish fiscal policy just won’t go away, even though it’s always been an
awful deal for the state.
Not surprisingly, lawyers for the
private investors who would profit by billions of dollars over 30 years if the
deal goes through insist that a contract
is a contract, even if it was signed by a governor who has now left office.
Schwarzenegger made sure he signed as many papers on the deal as possible
before Brown took over, since Brown had expressed great skepticism over the
deal while campaigning in 2010.
Now a judge in San Francisco has
overruled state attempts to have the investor claims dismissed, so there will
likely be years of litigation before the ultimate ownership of the red granite
Ronald Reagan State Building in Los Angeles and several choice buildings in San
Diego, Sacramento and the San Francisco Civic Center is determined.
This lousy deal originated in late
2009, with Schwarzenegger desperately casting about for stopgap ways to raise
some bucks to relieve the state’s chronic budget woes. When the package of
buildings went out for bidding in early 2010, at the very bottom of the Great Recession’s
real estate crash, even Schwarzenegger’s pet economists predicted a net loss
for the state of $2.8 billion over 30 years.
Yes, the sale would have produced
about $600 million in immediate money – and if it eventually goes through, it
would now generate almost $1 billion because some bonds that would have been
paid off by proceeds from the sale have been paid down considerably in the
meantime. But long-term losses would be far higher as the state pays rent on
the buildings for decades.
The deal also would bring about $16
million in commissions to the firm of Coldwell Banker Richard Ellis, whose
executives contributed more than $79,000 over the years to various
Schwarzenegger campaign committees.
The sale drew little attention until
this column in February 2010 exposed its short-sighted nature. Protests built
after that, with a group of former state building officials eventually filing
suit to stop the sale.
Their action because moot when Brown
nixed the deal shortly after moving back into the governor’s office, unwilling
to tolerate the long-term losses. His contention was that Schwarzenegger’s
purchase agreement merely began an escrow process, which could be stopped
before it was finalized.
The California First partnership that
had won the 2010 bidding (its main partners include Irvine-based ACRE LLC and
Hines Inc. of Houston, Texas) has never taken possession of any building.
But the partnership won’t give up.
“The state negotiated and signed a contract with California First and has no
right to back out of the deal,” said one partnership lawyer. “Brown wanted to
distance himself from the sale,” said another. “It was a politically motivated
decision that left our client with a broken contract.”
Brown explained his canceling the deal
differently, saying he sought long-term solutions and not short-term Band-Aids
that merely “kick problems down the road.”
The bottom line is that this was one
of the worst real estate deals ever negotiated by California officials, who
could instead have sold off vacant state properties like a former CalTrans
building near San Diego’s Maritime Museum. But that wouldn’t have a provided
large enough short-term fix to satisfy Schwarzenegger.
And so, almost 10 years to the day after he
won office in the recall election that ousted Gray Davis from the governor's
office, the ghost of his deal lives on, and no one knows if or when it will
ever go away.
-30-
Elias is author of the current book “The Burzynski Breakthrough: The Most Promising Cancer Treatment and the Government's Campaign to Squelch It,” now available in an updated third edition. His email address is tdelias@aol.com. For more Elias columns, go to www.californiafocus.net
Elias is author of the current book “The Burzynski Breakthrough: The Most Promising Cancer Treatment and the Government's Campaign to Squelch It,” now available in an updated third edition. His email address is tdelias@aol.com. For more Elias columns, go to www.californiafocus.net
No comments:
Post a Comment