Selling California - Cheap

In a blatantly boneheaded attempt to avoid facing the roots of California's budget crisis, the Schwarzenegger administration is proceeding with a plan to sell a number of office buildings, and then lease them back from the new private owners. And pay a large commission on the sale. The logic is obvious - get a bunch of cash now, so the budget looks better, and let someone else worry about 20 or 40 or 60 years of lease payments stretching into the future. It is nothing but another smoke-and-mirrors budget trick.

Selling the buildings is a bad idea for a number of reasons:
1) If you are going to sell a large amount of real estate, do it when the market is high, not when the market is low. This is probably the worst time to sell commercial real estate in recent memory.

2) Don't sell something you plan to occupy for a long time. Why should we pay forever to rent what we already own? How much will California have to pay when the leases run out in 20 years, and it goes to renew? How much leverage will California have in negotiations? Will it threaten to relocate?

3) These buildings are a long-term investment paid for by California taxpayers, and the governor (and the legislature) want to sell them for a short-term gain to cover up their inability to balance the budget. This sort of resembles what Bernard Madoff went to prison for.

4) The deal reeks of cronyism, with the broker handling the deal and the commercial real estate interests buying the properties standing to benefit at the expense of California taxpayers. But it is easy to give away something that someone else, like the citizens of California, paid for. And I am sure it is just a coincidence that the broker chosen for the deal (CB Richard Ellis) has been a significant contributor to Schwarzenegger and his causes.

5) It is a stealth form of union-busting. By selling the properties, California would pay the new landlord for maintenance and cleaning, instead of paying its own employees, meaning Schwarzenegger can get rid of hundreds of unionized state employees. The new landlord will likely hire lower-paid workers and pocket the difference as profit, so California won't save any money, but the janitors will find it even harder to make ends meet.

Selling ourselves into eternal debt for the financial equivalent of a bowl of porridge now is short sighted, and a quintessential example of the budget shams that have kept us mired in our current mess. Tell the governor and your legislators to stop this misguided sale of California's future.