Metropolitan News-Enterprise


Wednesday, December 29, 2010


Page 3


High Court Thwarts State Plan to Sell Buildings Housing Appellate Courts


From Staff and Wire Service Reports


The California Supreme Court yesterday  denied Gov. Arnold Schwarzenegger’s request to let him complete the sale of state office properties before he leaves office next week.

In a one-sentence order, signed by Acting Chief Justice Patricia Benke, the court denied the governor’s petition for a writ of mandate and prohibition that would have allowed the sale and leaseback of two dozen properties, including those housing the Supreme Court and Court of Appeal in San Francisco and Los Angeles, to go through before the governor leaves office Monday.

The order means the decision to sell the buildings will fall to Gov.-elect Jerry Brown. As the state’s attorney general, Brown has declined to represent Schwarzenegger in the case. Three former members of the state building authority had sued to stop the sale, saying it amounts to an unlawful gift of public funds.

The action by the temporary justices of the Supreme Court—designated after all seven of the court’s regular members recused themselves—followed Monday’s ruling by the San Jose-based Sixth District Court of Appeal that blocked the sale until that court can hear arguments on a taxpayer suit challenging its legality. The panel is scheduled to hear arguments Jan. 23 on the plaintiffs’ appeal from a San Francisco Superior Court judge’s ruling that the sale may proceed.

The state high court justices, prior to recusing themselves, transferred the appeal from the First District to the Sixth District, whose headquarters is not one of the buildings potentially being sold.

Monday’s ruling “was extraordinary for the taxpayers of California,” said attorney Joseph Cotchett, who is representing plaintiffs Jerry Epstein and A. Redmond Doms.

Epstein and Doms, two former state building authority members, allege that the sale amounts to an unlawful gift of public funds and illegally bypassed the state Judicial Council, which has authority over buildings that house courts, as several of the for-sale state buildings do.

Schwarzenegger last year proposed selling 24 state-owned buildings to raise more than $1.2 billion to help close the state’s general fund budget deficit. Under the deal, the state would continue to use the space by entering into a 20-year lease with the new owners.

The Republican governor ousted Epstein and Doms earlier this year after they asked the state to perform a cost-benefit analysis and questioned the long-term consequences for taxpayers. Don Casper, a third member who was ousted for questioning the sale, also signed on as a plaintiff in the lawsuit.

Several independent analyses found the sale and subsequent lease arrangement will end up costing taxpayers more money in the long run. Many of the buildings are close to being paid off.

Cotchett said the sale amounted to a revenue scheme that was completed through a murky bidding process. He noted that both the state controller and treasurer voted against it.

Cotchett said the sale also violated the state’s ban on long-term borrowing to cover short-term budget deficits. Schwarzenegger’s attorneys warned that unless the state can close escrow before the end of the year, “the sale may well disappear forever.”

The state awarded the sale of the buildings — including the Ronald Reagan building in Los Angeles and the San Francisco Civic Center — to California First LLC, a consortium of investors led by a Texas real estate firm and a private equity firm based in Irvine, for $2.3 billion. The state would net $1.2 billion after outstanding loans on the buildings are paid off. California First remained interested in purchasing the properties, said the group’s spokesman, Michael Bustamante, a former deputy chief of staff to Democratic Gov. Gray Davis.

“We are looking forward to the court favorably concluding on behalf of the state so we can close on this portfolio,” he said. Brown spokesman Evan Westrup said Brown will review the proposal after he is sworn in.


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