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Friday, February 26, 2010

Ex-S.F. GOP Boss Seeks to Halt Sale of Supreme Court, PUC Buildings

Posted By on Fri, Feb 26, 2010 at 2:30 PM

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As California seeks to raise $2 billion by selling off state-owned buildings in order to close its budget deficit, a San Francisco Republican official who sits on a key state committee says he will will seek to block investors from purchasing two Civic Center-area buildings housing the state Supreme Court, the Public Utilities Commission, and other state agencies.


"People who worship the market will snicker at this, but whatever arguments could be made for not selling the State Capitol can be made for not selling the headquarters of the California Supreme Court," said Don Casper, a former San Francisco Republican Central Committee Chair who is a member of the obscure San Francisco State Building Authority. That's a three-person joint powers authority that oversees the repayment of bonds issued to fund construction of California government buildings at 350 McAllister Street and 505 Van Ness Ave.

That authority could theoretically have the ability to block a sale. And Casper says he'll attempt just such a step.

"It is of paramount importance that all three branches of state government maintain every shred of independence," Casper said.

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Fire Sale

Eleven state office buildings across California officially go on sale today as California seeks to raise more than $2 billion to pay off debt and close the state budget gap. 

According to the plan, the state would then lease the buildings back from investors for 20 years. The California Department of General Services has not yet calculated how much the deal would ultimately cost taxpayers, a spokesman said. But a 2009 deal in which Arizona sold bonds based on lease payments on government office buildings, required the state to repay investors double the sale price during a 20-year period. The upside for the cash-strapped state: It gets the money it needs up front, despite paying far more down the road.

I know: Let's balance the budget by evicting kids

Aside from the billions of dollars in future taxpayer-funded additional lease payments, the deal has another downside: The new buyers may be allowed to evict day-care centers. Already, employees at the Elihu Harris State Office Building in Oakland have raised an alarm that investors may evict the child care center there.

"Yes, it's possible that they would no longer be able to remain in that space, "It just depends on all the factors. There are a lot of moving parts to this," said Department of General Services Spokesman Jeffrey Young. "It is not our intention to evict those tenants. But it may depend upon what the investor is looking for."

Also up for possible re-purposing may be auditoriums in state buildings, such as the Milton Marks Conference Center at the Supreme Court building, Young said.

Our vote: Live burlesque.

I want to talk about our relationship.

Gov. Arnold Schwarzenegger and the state Legislature approved the sale last June. But letters confirming the San Francisco buildings would be put up for sale were only delivered to tenants today.

Schwarzenegger has referred in public to the sale as a matter changing the way California manages its real estate assets.

"He's trying to change the relationship the state has with buildings," is how Young described Schwarzenegger's glorified borrowing spree.

Former state finance director Tom Campbell, who seeks the Republican nomination to oppose U.S. Sen. Barbara Boxer, suggested the new "relationship" is a sham.

"I can hardly contemplate a worse budget solution," Campbell said in an e-mail. "Selling a building is a one-time approach to a recurring problem. It does nothing to solve the deficit hole for next year. Indeed, we'll have incurred a rental obligation for next year."

Can I be the sheriff's deputy who evicts the Supreme Court?

Campbell continued: "Suppose budget woes continue, and the state can't pay its rent. Will a lessor evict the Supreme Court?"

Casper, for his part, raised the specter of an insurance conglomerate buying title to the San Francisco building, which also houses officials with the California Department of Insurance. Imagine Insurance Commissioner Steve Poizner under threat of eviction from Blue Cross.

"Insurance companies are prime players in this kind of market," Casper noted.

So has California taken measures to ensure companies such as PG&E can't take ownership of the building leased by the Public Utilities Commission? Will theoretical landlord Wells Fargo end up having to appeal an an unlawful detainer action to its possible tenant, the California Supreme Court?

Does the state plan ensure companies such as Blue Cross don't control the  lease of its regulator, the Department of Insurance?

"At this point that's not on the radar screen," Young said.

The Mouse That Roared

It so happens that San Francisco may have an ace in the hole that could stop, or at least complicate, sale of the state buildings near Civic Center.

Under the Schwarzenegger plan, part of the money from the buildings sale would be used to retire bonds used in the buildings' construction. But it so happens that bonds repayment -- as well as the leases paid by tenants in those buildings -- are overseen by a joint powers authority established to make sure the bonds got paid back.

The three-person authority could theoretically block the sale. Casper says he will oppose it. All that's left is for him to convince one other member of the three-person authority to oppose it, and it could spell headaches for the state. Authority members Stanley Moy and LeRoy King haven't yet returned our calls.

Young said he didn't know what the state would do if two San Francisco authority members rebelled against the plan.

"It sounds like a complicated lawsuit, and I'm sure some judge would make a decision," said Young. "It hasn't happened before. So I'm not sure how it would go down."

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