Why Is It a Secret Who's Buying California's Government Buildings?

Categories: Politics
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Uh, that'd be us. And we're paying for it, too.
The Bay Citizen this past weekend followed up on our series of scoops begun in February about Gov. Arnold Schwarzenegger's rotten deal to sell prize California government buildings for an upfront payment, and then lease them back at exorbitant cost. The new news -- coming out of a lawsuit filed by fired officials whose job it was to oversee the buildings' finances --  is that it's actually big secret who, exactly, is paying to own 11 state office complexes in San Francisco, Los Angeles, and elsewhere. Private attorneys working for Schwarzenegger are proceeding with unusual haste to get the deal closed before the governor leaves office Jan. 3. However, there seems to exist no procedural deadline that would require the deal to close by that date.

Events surrounding the lawsuit have prompted questions such as: Why is the outgoing governor in such a hurry to lose the state billions of dollars? Is it because people close to him might benefit financially?

Under the building sell-off deal , first approved in the summer of 2009, the state would get a one-time payment of $1.3 billion for the buildings, then pay back $6 billion in lease installments over the ensuing years. Schwarzenegger officials said in interviews that this was a prudent way to "get California out of the real estate business." The state legislative analyst said this was a lousy deal for taxpayers.

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When these buildings were erected decades ago with state bond funding, special commissions were set up to make sure the repayment of the bonds, and the financing of the buildings, was handled prudently. Schwarzenegger's sell-off involves retiring the old bonds; and the special commissioners had been hired to weigh in on just this sort of thing. Several of them called foul. And Schwarzenegger fired these whistleblowers so he could keep his sell-off deal on track.

The whistleblowers sued. A state appeals court halted the sale Dec. 13. The ensuing legal fight suggests this transaction is being pushed with unusual haste by attorneys working for Schwarzenegger, for the benefit of buyers who refuse to reveal their true identities.

The Bay Citizen story cites two influential opponents of the deal who suggest the secrecy and haste could be driven by political cronyism. The state legislative analyst reported that the deal would be a multi-billion-dollar loser for taxpayers.

In a deposition earlier this month, California Treasurer Bill Lockyer testified that he believed the mayor of Santa Ana, Miguel Pulido, would recieve a $500,000 finders fee if the building selloff deal closed. And the Citizen story quoted California Controller John Chiang as saying:  "I'm very concerned about political influences. It is very important to shed light on the parties involved and everyone with financial interest in this deal."

On paper, the buildings' buyer is slated to be California First LLC. Its leading partners are CityView, the real estate firm run by Henry Cisneros, executive chairman of After School All-Stars, the nonprofit Schwarzenegger founded in advance of his 2003 run for governor; and Richard Mayo, who was appointed during the administration of former Republican governor Pete Wilson to oversee the privatization of 35 million square feet of state-owned real estate.

Other partners include Grover McKean, a former state deputy treasurer, and Chandra Patel, a real estate investor from Mumbai. The state paid a $1.9 million fee to CB Richard Ellis, a company chaired by Sen. Dianne Feinstein's husband, Richard Blum, to broker the sale.

Left unanswered, however, was where the partners were going to get the $995 million up-front capital needed to close the deal. We placed a call to California Fist's attorney, Anton Nick Natsis, and we'll fill you in when he gets back to us.

Until further notice, it remains a bizarre mystery who's really behind a deal to profit by needlessly putting California billions of dollars further in debt.

Follow us on Twitter at @TheSnitchSF and @SFWeekly



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