California Puts State Buildings up for Sale

California Gov. Jerry Brown announced Wednesday he is dropping a plan to sell 24 state government buildings to private investors.

Los Angeles, CA
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Los Angeles, CA

The state had been in negotiations to sell the properties for $2.3 billion under a proposal by former Gov. Arnold Schwarzenegger to help close the state's general fund budget deficit. Under a deal approved by lawmakers, the state would have continued using the space by entering into a 20-year lease with the new owners.

The Associated Press reported last year that the deal would end up costing the state $5.2 billion in rent over 20 years, perhaps saddling taxpayers with costs beyond whatever the state would net from the sale. That assessment was confirmed by the nonpartisan Legislative Analyst's Office.

"The sale of buildings didn't really make much sense," Brown said Wednesday. "It amounted to a gigantic loan."

Brown said selling and renting back the space amounted to a 10 percent loan and that the sale would have been "the ultimate in kicking the can down the road."

His administration instead is proposing to take out short-term loans from special funds for less than a 1 percent interest rate—a "fraction of the cost," Brown said.

Brown previously had not commented on the proposal. But as attorney general, he declined to represent Schwarzenegger in a lawsuit seeking to block the sale.

Three former members of the state building authority had sued to stop the sale, saying it amounted to an unlawful gift of public funds and illegally bypassed the state Judicial Council, which has authority over some of the buildings that Schwarzenegger wanted to sell.

A state appeals court temporarily blocked the sale until Schwarzenegger left office, leaving the decision to Brown as the new governor.