Wednesday, November 24, 2010

Lessons from the State for Encinitas

Selling Assets the Wrong Way

Suppose a grinning real estate agent knocks on your door with a proposal.  He will buy your home (which you own free and clear) for a fair price if, in return, you promise to spend all the proceeds within one year and agree to rent back your property over the next 20 years for an amount that exceeds what you were paid.  At the end of 20 years you will have to arrange a new rental agreement or become homeless.

At this point most property owners would recognize a scam and some might even summon the family pit bull to make sure that the slick salesman beats a hasty retreat. 

However, what is an obvious scam to average taxpayers is called sound public policy by Sacramento politicians.

The Schwarzenegger administration plans to sell 24 state buildings, including the Ronald Reagan State Building in downtown Los Angeles, to raise $1.2 billion to help offset the budget deficit.  If these were surplus properties for which the state had no further use, taxpayers would be cheering.  Indeed, we’ve consistently argued that the state’s real estate portfolio has been mismanaged and offloading surplus property should be vigorously pursued.  There is, for example, no reason whatsoever for the state owning a golf course which could be better managed in the private sector.

But, sadly, this is not the case with the current proposal.  These are facilities that are being used and are important enough that the state is agreeing to lease back these properties for the next 20 years.  Here is how this pencils out according to the Legislative Analyst's Office:  The transaction amounts to borrowing at 10% interest over the next 35 years, an amount much more than the state pays for bonds.

Indeed, the long term financial commitment – in the form of a 20 year lease – is a stark admission that the subject property is not surplus.  Thus we have the worst of all worlds from the perspective of fiscal prudence:    All downside and no upside (other than a quick infusion of cash that will be quickly squandered by the same political elites who are more focused on the debate over the official state rock than they are with balancing the budget).

This deal also runs contrary to the spirit of the law which requires voter approval of long term financial commitments.  But the forces behind this scam know that voters would never agree to so burden the next generation of Californians which is why they are jamming through this sale that does nothing to fix the state’s addiction to overspending and, in fact, makes it worse.

Only in Sacramento does this make sense.  Unemployment is up, personal income is down and so, too, is revenue to government.  The politician’s response is to use tricks to avoid reality and the obvious need to cut back on spending in these times of economic crisis.  Their goal is preserve the government status quo, regardless of how much it hurts already beleaguered taxpayers.

Ironically, the only two voices of reason that are coming from Sacramento on this issue are two officials affiliated with the political party not renowned for fiscal prudence.  State Controller John Chiang and Treasurer Bill Lockyer, both Democrats, have blistered the real estate agreement as bad for taxpayers.  Both serve on the Public Works Board, which granted final approval of the arrangement, but were outvoted by three Schwarzenegger appointees.

Taxpayers will be burdened with decades of lease payments, said Lockyer, while Chiang called the property sale and lease back another budget gimmick that pushes the state's fiscal challenges down the road.  A spokesman for the one of the firms involved in financing the deal has been quoted as saying, "We're happy we came out on top."

The firms involved in this horrible deal did in fact come out on top.  But the taxpayers came out on the bottom.

Now, where is the dog when we need him?

Jon Coupla (www.hjta.com)

11 comments:

  1. Swarzenagger is an incompetent hack that needed to fulfull his monumental ego with political power. The people elected him on the "Terminator" mystique, but he is only beholding to the ultra-wealthy in society. He never represented the common people and in fact, has a distain for them. What the hell does he or his cronies care about colletive indebtedness? He'll retire back to the plush confines of
    Beverly Hills and tell the peasants to eat cake. Say goodbye to Del Mar also...The political corruptness and deceipt are part of the reasons that America is on her knees - these attitudes are the true enemies of freedom and equality. Only with the collective action of activist citizens will there be any chance for positive change.

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  2. Yeah right. when the government can make wealth is the day. Lets see how GM does. I say government motors or gone motors. What worthless cars they produce.

    Say good bye to the slaves of taxation. Say hello to the next phase of America.

    Thanks giving!!

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  3. This quote is a sign of when your society is in collapse - sound familiar?:
    "Rulers will be corrupt, concerning themselves only with collecting taxes. Instead of protecting their citizens, they will behave like thieves and robbers. Those in power will believe anything they hear and will base their judgments on rumor. Oppressed by these rulers and other thieves, citizens will become apathetic, depressed, and pessimistic. Even the young will lose hope."

    On Crime:
    "Debtors will not repay their debts. Promises will no longer be honored; oaths will be meaningless. There will be theft in in the homes of thieves. Organized crime will be rampant in all countries, and people officially appointed to protect others will be powerless to do so."

    There is more if anyone is interested . . .

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  4. Economic and Social Life:

    Negativity will bear fruit, but positive thoughts and feelings will be barren. People will be dull-witted, selfish and greedy. Wealth will be the sole criterion for determining merit. Most people will engage in commerce; people in cities will sell grain; teachers will sell their knowledge; sex will be a commodity. Selling cooked food will become a business. Water, air, and light will be sold as commodities.
    The number of beggars will rise. Seeking livlihood and safety, people will leave their friends and families and migrate to foreign lands, where they will suffer poverty and loneliness. Because gold and gems will be scarce, women will wear ornaments of shells and straw. Monasteries will be loaded with wealth; the homes of the householders will be empty. Monks will indulge in sensual pleasures. Desires will be insatiable - thus people will always be unhappy. The only abundance will be in hunger, disease, desire, deceit, fear, and attachments.
    Wars will be waged over water. People will dam the rivers, and settlements will be concentrated on riverbanks. The shortage of food will force people to eat anything available - the meat of scavengers, snakes, insects, and the vegetables that grow in sewage. Lacking strength and motivation, even teenagers and young adults will look and behave as if they were old. Social activities will center around gossip, alcohol, neat, and sex."

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  5. "neat" should be "meat"

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  6. I think we've seen quite the opposite of apathy both at the local and national level recently.

    Never have I been prouder of my fellow Encinitans and Americans.

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  7. Yes, the activist citizens of Encinitas are a breed apart. They set a goal and draw a line in the sand - Pacific View will likely remain in the public domain as a legacy to their commitment to the best interests of the community now and in the future! Bravo!

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  8. We need to SAVE PACIFIC VIEW! How do I get involved?

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  9. There is obviously a lot to know about this. I think you made some good points in Features also. Keep working ,great job!

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  10. Just want to say what a great blog you got here!I’ve been around for quite a lot of time, but finally decided to show my appreciation of your work! Thumbs up, and keep it going!

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  11. А! Sangat posting baik.

    ReplyDelete

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