On The Money: Calif. Votes To Sell State Buildings
SACRAMENTO (CBS13) - Today a controversial deal to sell- and then lease back - some prime California real estate got the green light to go forward – despite warnings from the State's top two financial officers. The State Controller's Office and the State Treasurer's Office voted NO on the sale/leaseback deal, but it wasn't enough to overcome the 3-2 majority of the California State Public Works Board.
"We're leaving close to a billion dollars on the table," said Rocky Delgadillo, the former Los Angeles city attorney. Delgadillo, now an attorney with Goodwin Procter told CBS 13, "The state lost a billion dollars today."
Delgadillo's firm represented a group advocating the so called public option, which called for selling the buildings but keeping the land surrounding them under public control.
The 24 buildings include 5 properties in the Sacramento region, among them:
• Attorney General Building in Sacramento
• Capitol Area East End Complex in Sacramento
• Department of Justice Building in Sacramento
• Franchise Tax Board Complex in Sacramento
• California Emergency Management Agency Headquarters in Rancho Cordova
The sale is expected to generate $1.2 billion this year for a cash-starved state. The 2011-2012 California budget is now projected to be $25 billion in the hole, according to the non-partisan Legislative Analyst's Office.
"Simply put, this covers our current needs at the expense of the future," said Jim Lombard of the State Controller's Office. The state will lose $1.4 billion over 35 years by leasing back the buildings, according to the Legislative Analyst's Office (see figure six, on page 9 of this document).
Today, those with rival plans came forward to say they were shut out of the bidding process.
"This is a very strange process that we've been through, very odd," said Lewis Feldman, who testified at the Capitol as a partner for Goodwin Procter.
Feldman told the State Public Works Board, "I've never seen it before. We're not allowed to talk to the legislators. We're not allowed to talk to people about good ideas. We're not allowed to share things. And yet other members who bid on this were talking almost on a daily basis to various folks. And we find the lack of transparency that existed in this process fostered this kind of behind-the-scenes deal."
But supporters of the deal – the Department of Finance, the Department of General Services and the Department of Transportation – all representing the Governor's Office – used their three votes to approve the deal.
"I believe this has not been a rush to justice," said Scott Harvey of the Department of General Services.
Harvey told a packed Capitol chamber, "This has been a process that has been carefully studied, carefully analyzed. There has been transparency and there has been an equal footing."
The vote was good news for the winning bidder, California First.
"This is generating a lot of money for the state, over the long term there's still a benefit to the state because it puts it into efficient ownership," said Rich Mayo, California First's Managing Director.
The Treasurer's office says hundreds of state workers who provide maintenance and engineering for the buildings could lose their jobs, but the new owners deny it.
"We are also committed to retaining any and all current employees who want to come work with us," Mayo told CBS 13.
The controversial deal is now in escrow and it seems unlikely anything can derail it at this point.
"It's short term gain for the budget, but it's long term pain for California taxpayers," said Tom Dresslar, a spokesman for the Treasurer's Office.
If you see examples of fraud, waste or questionable government spending, send us an e-mail to onthemoney@kovr.com. You can also follow On The Money stories in progress at http://twitter.com/mikeluery.