Halting building sale results in larger deficit, internal borrowing

SacBee: Capitol Alert ^ | 2/9/11 | Kevin Yamamura

[SmithL]

More notes on Gov. Jerry Brown's decision today to end the state sale of 11 office properties to private investors:

• The deficit grows from $25.4 billion to $26.6 billion, as Brown foresaw in a previous press release. By eliminating the sale, the state will not receive a onetime infusion of $1.2 billion, so that amount gets tacked on to the previous deficit total.

• Brown's proposal nearly doubles the amount of internal borrowing from special funds. His previous proposal relied on $1 billion in internal borrowing; the new plan takes that up to $1.8 billion. The governor also relies on $361 million in delayed repayment on previous internal loans.

[ColdOne]

You follow this, what is he really doing?

[Attention Surplus Disorder]

The immediate reaction to the idea of a state selling off “state” buildings is shock and surprise. I have no particular viewpoint one way or another as to whether CA should do this or not. Undoubtedly, there is an offer on the table, both for the purchase price of any given building, and the lease rate that the state would pay a private owner. There is a bump-up schedule as to how that rent roll will grow over time, and there are various numbers that can be plugged into very simplistic equations that will determine whether renting or buying is a more intelligent move. No emotion, no “nesting” instinct (like there is with a SF home) just dollars.

I have not the slightest delusion that the private investors who would purchase and lease back these buildings have a profit motive. I would bet any amount of money there are bribes being offered to state officials to bend the “vote” one way or another. I also have no delusion that many of these buildings may well date from the 70’s, may have asbestos issues, may not conform to current state seismic standards, and/or may need boatloads of maintenance now, soon, or in the foreseeable future. There are lots of people who have lots of skill estimating these things, in other words, with experience in commercial real estate.

While I have little doubt that the state will overpay for renting these buildings, I would suspect even more that the state would overpay for refurbing them as they become functionally obsolete.

I just don’t see what the emotion is about. This is a spreadsheet exercise.

[Da Coyote]

I felt sorry for CA under the governator - after all, we incorrectly surmised that he had a brain.

Under Gov Moonbeam, I could care less. CA residents have had plenty of time to conclude that Brown is nature’s second most perfect head vacuum (second to the Dung-Beetle-in-Chief).