California Gov. Jerry Brown has decided against selling some state buildings, calling the plan of his predecessor "short sighted."
The governor is dropping a proposal to sell and then lease back 11 properties, including the state supreme court building and the Ronald Reagan State Building.
Brown, a Democrat who served two previous terms as governor three decades ago, is working to close a a $25 billion budget gap. The sale and lease-back plan would have gained the state $1.2 billion in revenue but in the long term would have cost taxpayers more.
The proposal was approved during in the 2009-10 budget authorized by former Gov. Arnold Schwarzenegger. It faced criticisms from officials from Building Authority, who were removed by Schwarzenegger for opposition. The officials later sued, and implementation of the plan was delayed as the case moved through the courts.
Critics had argued there would be an immediate windfall from the sale but when the cost of debts to be paid before the buildings are sold, and the rent over the 20 years it will take to lease back the properties would leave little revenue.
Brown said on Wednesday the state would spend $6 billion dollars over the next 35 years to gain back the buildings.
The governor instead plans to borrow $830 million from special reserves. The loan will not affect any programs in the current budget and will be paid back by 2014.
Brown cited the state legislative analyst office, which said the lease-back plan would be equivalent to borrowing at a 10.2 percent interest rate, or double what the government pays for general obligation bonds.Cash proceeds in result of a sale-leaseback have no limit on the expenditure. A sale-leaseback transaction is a great alternative form of financing which allows business owners to fully maximize the value and position of their real estate assets
Read more:http://www.allheadlinenews.com/
The governor is dropping a proposal to sell and then lease back 11 properties, including the state supreme court building and the Ronald Reagan State Building.
Brown, a Democrat who served two previous terms as governor three decades ago, is working to close a a $25 billion budget gap. The sale and lease-back plan would have gained the state $1.2 billion in revenue but in the long term would have cost taxpayers more.
The proposal was approved during in the 2009-10 budget authorized by former Gov. Arnold Schwarzenegger. It faced criticisms from officials from Building Authority, who were removed by Schwarzenegger for opposition. The officials later sued, and implementation of the plan was delayed as the case moved through the courts.
Critics had argued there would be an immediate windfall from the sale but when the cost of debts to be paid before the buildings are sold, and the rent over the 20 years it will take to lease back the properties would leave little revenue.
Brown said on Wednesday the state would spend $6 billion dollars over the next 35 years to gain back the buildings.
The governor instead plans to borrow $830 million from special reserves. The loan will not affect any programs in the current budget and will be paid back by 2014.
Brown cited the state legislative analyst office, which said the lease-back plan would be equivalent to borrowing at a 10.2 percent interest rate, or double what the government pays for general obligation bonds.Cash proceeds in result of a sale-leaseback have no limit on the expenditure. A sale-leaseback transaction is a great alternative form of financing which allows business owners to fully maximize the value and position of their real estate assets
Read more:http://www.allheadlinenews.com/
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