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Give Brown points for killing ill-advised state property sale deal

Gov. Jerry Brown showed smarts in backing away from his predecessor's plan to sell state buildings. He should show further wisdom and renege on his promise to bring a tax hike to voters.

February 10, 2011|George Skelton | Capitol Journal

From Sacramento — It was a big, early test for Gov. Jerry Brown. And he passed with an "A."

He opted for prudence rather than expedience.

Brown essentially walked out of escrow Wednesday on arguably the worst real estate deal the state of California had ever conjured up.

It was a transaction authorized by a wimpy Legislature — trying to avoid deeper spending cuts and higher taxes — and negotiated by the Schwarzenegger administration.

Former Gov. Arnold Schwarzenegger — a play now, pay later type of guy — had tried to close the sale before his successor could assume office and take a walk.

The voided deal involved the fire sale of 24 state buildings, some of them iconic, on 11 pieces of property. The agreed price to a group of politically connected investors was $2.3 billion. The state would have netted $1.3 billion after paying off existing loans on the properties. Then it would have been obligated to lease back, for 20 years, the 7 million square feet of space it peddled for short-term gain.

The nonpartisan Legislative Analyst called it "poor fiscal policy" and calculated that the sale-leaseback ultimately would cost the state billions more than it initially gained. The analyst equated it to a 10.2% loan.

That $1.3-billion one-time injection of cash, however, already had been accounted for in the current red-ink budget. So when Brown killed the deal, he dug the $25-billion deficit hole $1.3 billion deeper. But he found a much more economical source of money: internal borrowing.

Brown proposed borrowing $830 million from special fund reserves that are separate from the deficit-plagued general fund. He'll pick up another $190 million from internal revenue boosts and cost savings, he said. Whatever.

It returned some sanity to Sacramento and was a breakthrough for common sense.

The sale would have benefited us taxpayers for one year, but our kids and grandkids would have been paying for decades.

It "really didn't make much sense," Brown told reporters. It was "the ultimate kicking the can down the road."

He called Schwarzenegger's proposed deal "short-sighted," which is as critical as he has ever been of his predecessor.

State Controller John Chiang — like Brown a Democrat — issued a statement declaring that "selling low and renting high would not have served taxpayers' interests."

Regardless of the wisdom of Brown's move, it did not move him any closer to balancing the budget.

It may, however, have sent this message, as noted by Chiang: "It shows that Gov. Brown is serious about ending the budget gimmicks and sideshows."

Brown's solution basically is to split the baby: half spending cuts, half taxes. But he's hampered by his campaign promise not to raise taxes without voters' approval. So he's trying to coax Republican legislators into providing the handful of votes necessary to place a tax measure on a special election ballot in June.

The governor is proposing a five-year extension in temporary income, sales and car tax hikes. Republicans — practically all of whom have signed a pledge not to raise taxes — aren't having any of it.

Brown told reporters he remains "somewhat optimistic."

"Republicans, although they're sort of in the 'No' mode, are moving toward the 'knowing' mode," he said, implying that some have open minds. Negotiations are "positive," he continued, "but I don't think we've got to that moment of truth yet…

"At the end of the day, we'll split things down the middle. That's usually what happens."

That's usually the way it happened when Brown was governor in the 1970s and both parties hadn't become so polarized. This GOP seems to have no clue about what it might demand in trade for a tax measure.

So here's my radical solution: Brown should be patient with Republicans for only so long. Maybe three more weeks. Then break his promise to voters.

I heard Brown actually tell reporters Wednesday — to laughter — that "I don't make political calculations." He also said, "I'm not worried about the next election." So reneging on his vow shouldn't be a big problem for him.

But assuming it might be, here's what he could tell voters: I tried, but Republicans wouldn't let you vote. And my first duty is not to my political well-being, but to the fiscal health of the state. I hated to, but I was forced to sign the tax extension without asking you because they wouldn't allow it.

Let's face it, passing a tax measure in June is very iffy anyway. People don't turn out at special elections to vote for taxes. They show up to vote against them.

But why would Republican lawmakers vote for a tax bill to send the governor if they're not even willing to let the public decide the issue? Here's why, if they thought about it for half a second: It would force the Democrat into a tight spot where they could gleefully watch him squirm while breaking his solemn word.

And they could tell their anti-tax constituents: Look, voting for a special election on taxes is really the same as voting to raise them. The unions would spend enough to make sure they passed anyway. This way we save the $60 million cost of an election while squeezing some pro-business goodies out of Democrats.

Our elected representatives — the governor and legislators — should get on with doing their jobs. Leave the voters out of it. Save the expense.

Brown's on a roll blowing up a bad real estate deal. Soon he should blow up a bad promise.

george.skelton@latimes.com

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