Arizona House OKs Additional $300 Million Sale Leaseback of State Buildings

Arizona Daily Star - February 10, 2010

Without a vote to spare, the House on Tuesday gave final approval to putting the state in debt for the next 20 years to balance the books this year.

The 31-27 vote came over objections by lawmakers from both parties who had different reasons they did not like the plan. But a majority said they saw little alternative.

Rep. Nancy McLain, R-Bullhead City, said the state's position is not unlike one she faced during the recession of the early 1990s with her janitorial firm.
First she and her husband stopped taking a salary, then borrowed against a bank line of credit until that was exhausted, then maxed out the credit cards, just to stay afloat, she said.

Rep. Bill Konopnicki, R-Safford, said he also has run into situations as the owner of McDonald's restaurant franchises, and recognizes there is a place for debt. But this is excessive.

"Never, never, never do you take a 20-year note to meet payroll," he said. "This is absolutely, totally irresponsible."

The measure, which now goes to the governor, orders the sale of another $300 million in state buildings, which the state will lease back for 20 years. At the end of that time, ownership will revert back to the state.

It also calls for borrowing $450 million outright for the next 20 years. To get around the constitutional limit on state debt, repayment will come from future lottery proceeds, not the state general fund.

Those moves still leave the state with a $450 million gap. A measure, already approved by the Senate, would delay making a $350 million payment due to public schools in April until the next fiscal year, and would defer $100 million in aid to the state's three universities.

House Republican leaders put off bringing that issue to the floor because they were unsure they could get the necessary 31 votes for final approval of that plan.

This won't be the first state building sell-off. It already sold off $735 million worth of buildings last month in a similar deal to generate immediate cash.
In addition to those measures, the House and Senate have previously approved asking voters for a temporary 1-cent-per-dollar hike in state sales taxes. But even if that measure is approved on May 18, the revenues won't flow into the treasury quickly enough to help balance the budget for the fiscal year that ends June 30. Sphere: Related Content