Arizona Republic - July 29, 2009
Call it a sign of desperate times: Legislators are considering selling the House and Senate buildings where they've conducted state business for more than 50 years.
Dozens of other state properties also may be sold as the state government faces its worst financial crisis in a generation, if not ever. The plan isn't to liquidate state assets, though.
Instead, officials hope to sell the properties and then lease them back over several years before assuming ownership again. The complex financial transaction would allow government services to continue without interruption while giving the state a fast infusion of as much as $735 million, according to Capitol projections.
For investors, the arrangement means long-term lease payments from a stable source.
Earlier this month, Republican Gov. Jan Brewer vetoed such sale/leaseback provisions along with most of the rest of a fiscal 2010 state budget plan sent to her by the Legislature.
But the provisions are expected to return as part of a GOP-led legislative budget proposal surfacing this week. Although Brewer spokesman Paul Senseman called sale/leaseback deals "one of the governor's least favorite options," he conceded the likelihood that they'll play a key role in any plan to close a state shortfall estimated at $3.4 billion.
State properties now being considered for sale and leaseback include the House and Senate buildings, the Phoenix and Tucson headquarters of the Arizona Department of Public Safety, the State Hospital and the state fairgrounds, according to a document obtained by The Arizona Republic. Some prison facilities also are under consideration.
In total, the list comprises 32 properties that, if built from the ground up, come with a combined replacement value in excess of $1 billion.
The properties were chosen based on attractiveness to investors, buildings the state would be unlikely to walk away from, such as prisons or other facilities that provide essential government services.
Only one state property thus far is targeted for outright sale: the state Agricultural Laboratory in Phoenix.
The state has conducted sale/leaseback deals in the past, though rarely.
This is different. Manos believes it would be the first time the state has sold and leased back state buildings with the intent of using the revenue to fund general operations rather than particular projects.
Under the most recent legislative proposal, the state would seek a series of lease arrangements spanning as much as 20 years. Deals that would generate the targeted $735 million in revenue would mean state lease payments totaling $60 million to $70 million a year, according to budget analysts.
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