Schwarzenegger administration removes dissenting voices in plan to sell Calif. state buildings

Schwarzenegger silences critics of Calif. sell-off

SACRAMENTO, Calif. — The Schwarzenegger administration has removed appointees from two oversight bodies that must sign off on its plan to sell California state office buildings, replacing potential critics of the move with people who support it.

The appointees — to building authorities in San Francisco and Los Angeles — were replaced quietly in recent weeks as the state began taking bids on the properties, and their removal likely quashes any dissent or independent financial studies that might have emerged as the property sales move forward.

In both cases, the replaced board members had questioned whether the administration’s plan is in the best long-term interests of California taxpayers.

Last month, the administration removed two longtime appointees on the San Francisco State Building Authority, just days before the panel was scheduled to review the sale of the San Francisco Civic Center.

It is one of about a dozen properties the state has put up for sale in an attempt to raise money to help close the state’s budget deficit. The sell-off was championed by Gov. Arnold Schwarzenegger and approved by the Legislature as part of last year’s budget package.

Two more appointees revealed this week that they had been removed from the Los Angeles State Building Authority for asking questions about Schwarzenegger’s plan. Marina del Ray developer Jerry B. Epstein told The Associated Press that he had asked the state for a cost-benefit analysis of the plan.

Specifically, he wanted to compare the projected proceeds from the sell-off to the long-term cost of having to rent the Ronald Reagan State Building in downtown Los Angeles. The building is scheduled to be paid off next year.

Instead, Epstein and retired real estate investment manager Rusty Doms received a two-sentence letter from the Schwarzenegger appointee who runs the state Department of General Services saying they were being replaced.

“It’s the first time in over 60 years that I’ve ever been fired,” said Epstein, 86, who has served as president of the Los Angeles Board of Airport Commissioners and as chairman of the California Transportation Commission.

He announced the move earlier in the week in an op-ed column he wrote for the Los Angeles Times.

Schwarzenegger’s office referred inquiries on the issue to the Department of General Services. Department spokesman Jeffrey Young said the agency simply felt it was time to change appointments to bring in fresh ideas that were “more in tune with DGS’s efforts and philosophies and strategies.”

“We didn’t fire them,” he said.

Other cash-strapped states, including Arizona and Connecticut, also are attempting to sell state assets, but California’s offering is by far the largest.

The budget bill that gave Schwarzenegger the authority to pursue the sale of state office buildings passed the Legislature last July. The legislation allowed Schwarzenegger to put 11 state properties containing more than a dozen buildings up for sale as a way to raise cash to shrink the budget deficit.

In addition to the Reagan building in Los Angeles and the Civic Center in San Francisco, the properties include the California Public Utilities Commission building in San Francisco and buildings in Sacramento that house the attorney general’s office and state Franchise Tax Board.

Real estate firm CB Richard Ellis won the contract to manage the sale and in February began taking offers on the so-called “Golden State Portfolio.”

State officials hope the properties will sell for about $2 billion total, but the net amount that will go to the state’s general fund will be far less. After paying off the various construction bonds, the state expects to be left with $660 million, which would cover only about 3 percent of California’s $20 billion deficit.

“It’s like getting a pail of water to help the Titanic not sink,” Epstein said.

Epstein and former San Francisco State Building Authority member Don Casper questioned whether the sell-off is in the best interest of taxpayers, especially since many of the buildings would be paid off in less than 10 years, meaning the state would own them free and clear.

The little-known building authorities oversee the state-owned properties in Los Angeles and San Francisco and must sign off on the plan before they can be sold. The Los Angeles authority is scheduled to meet April 15 to elect new authority members.

They were established three decades ago after the state decided that owning its government buildings was a smarter, long-term financial decision than being subject to annual rent increases. Then-Gov. George Deukmejian, a Republican, signed off on the plan as a way to save money and consolidate state offices.

Schwarzenegger’s plan marks a return to the days when California taxpayers were beholden to landlords.

“It’s a reverse mortgage, because at the end of the day, the state will no longer own the buildings. That means the state will be paying rent forever,” Casper said in an interview.

Under the administration’s plan, California would sell the buildings and enter 20-year leases with the new owners, who could impose rent increases every five years.

Experts in commercial real estate earlier told the AP that trying to sell such properties in the middle of the worst economy since the Great Depression was folly, ensuring that the state would not get full value.

The first attempt seems to support that logic. Last month, the Schwarzenegger administration rejected all seven bids for the state-owned Orange County Fairgrounds because they came in too low. State officials initially projected they could get between $96 million and $180 million for the Costa Mesa property, but the highest bid came was $56 million.

The recent moves by the Schwarzenegger administration had the effect of silencing dissenting voices.

Mike DeNunzio, a Republican from San Francisco, said he replaced Stan Moy as president of the San Francisco State Building Authority after being vetted by the governor’s office. Moy did not return a telephone message seeking comment.

DeNunzio said it was right for the governor to remove Casper, who told the San Francisco Weekly that he had concerns about turning the California Supreme Court into tenants of a commercial enterprise. The court is housed at the Civic Center, one of the properties to be sold.

“With all due respect, Don is the one who made the fuss,” said DeNunzio, who said he assured administration officials that he supported their plan. “He concluded whatever the reason, his concern or financial judgment, he would oppose this — and that was not his role. It was beyond his purview.”

Casper and Epstein disagree, saying they were acting in the best interest of the public in raising questions about the sell-off.

“It just doesn’t make economic sense,” Epstein said.