Instead of raising taxes to pay for their spending the members of the Arizona House and Senate have sold the Arizona State Capital and other buildings to a pawn shop. Of course future members of the Arizona Senate and House will have to raise taxes to buy back the buildings and pay the intrest on the money loaned.
State gets $735 million in sale-leaseback deal
by Mary Jo Pitzl - Jan. 14, 2010 06:45 PM
The Arizona Republic
The sale of state buildings to investors was so successful that Arizona lawmakers say they hope to do another round to raise up to an additional $300 million.
The two-day sale that ended Wednesday drew $735.4 million from investors. "We'll have the money in state coffers by Jan. 26," said Alan Ecker, a spokesman for the state Department of Administration.
The state went to the public bond market to sell certificates of participation in a variety of state buildings, including the recently completed Archives Building, the tower that houses the Governor's Office, and six prison buildings in Florence. The state's death row is not part of the sale.
The investments carry a 4.57 percent interest rate, and maturity dates on the certificates vary from three years to 20 years. Interest is expected to cost the state about $400 million, for a total payback of $1.1 billion.
The state retains control of the 14 buildings, which it will continue to occupy and lease back from investors.
Repayments to the certificate holders will come from semi-annual lease payments made from the state's general fund, according to the prospectus the state issued on the sale. If the state were to default on the lease payments, the trustees for the investors would take ownership of the buildings.
House Speaker Kirk Adams, R-Mesa, was buoyed by the results, which matched legislators' projections of how much quick cash they believed the sale could net.
"We have more capacity," Adams said. He is aiming for another sale, this time to bring in $200 million to $300 million. Lawmakers must approve a bill to authorize a further sale. Rep. John Kavanagh, R-Fountain Hills, said the $735 million arriving in the treasury later this month will help, but not erase, the state's deficit.
"I don't think that gets us home," he said. Lawmakers had already factored the sale proceeds into their budget calculations, leaving a $1.4 billion deficit.
The state retains control of the buildings, which it will continue to occupy and lease back from investors.
The sale, akin to a bond sale, allowed investors to pay as little as $5,000 for a certificate of participation.
Retail investors, such as individuals, bought $113.8 million worth of certificates, or 15.5 percent of the total. Institutional investors accounted for the remaining 84.5 percent, or $621.6 million, according to the Department of Administration.
Other buildings that are now technically owned by investors include the state hospital, state legislative offices and the state Coliseum.
State buildings on the sales block
All 14 of these buildings, with their listed values, were sold in a certificates-of-participation sale on the public bond market that occurred earlier this week.
• The state Coliseum, $84.9 million
• Executive Tower (home to various state agencies and the Governor's Office), $43.9 million
• Legislative buildings, $37 million
• Archives Building, $29.5 million
• Department of Revenue, $30.9 million and its parking garage, $4.5 million
• Department of Public Safety headquarters, $53.3 million
• State hospital, $179.8 million
• Phoenix Day School for the Deaf, $29.5 million
• Four buildings at the Arizona State Prison Complex in Florence, $163.8 million
• Two units at the Eyman prison complex in Florence, $82.2 million
Source: Arizona Department of Administration