Arizona Considers Selling Capitol Buildings

Things are so bad in Arizona that legislators are considering selling the House and Senate buildings where they've met and worked for more than 50 years. Dozens of other state properties may also be sold. The plan is to sell the properties and then lease them back over several years before assuming ownership again. "We've mortgaged the legislative halls," said an exasperated state Rep. Steve Yarbrough, a Chandler Republican. "That just tells you how extraordinary the times are. To me, it's something we're going to have to do no matter how much we find it undesirable." I bet they could get a great price on the Grand Canyon.

Comments

Re:Really?

[Delwin]

You don't live in Arizona do you? They've already cut everything they can. There's constitutional restrictions on what they can touch (direct voter mandates cannot be cut) and there's a lot of essentials that cutting will cripple the future of the state if they're cut any farther than they already have been (Education being the most commonly talked about one).

They're out of things to cut and any attempt to raise taxes has been shot out of the water by the legislature. The final compromise sends the tax hike to the voters so the legislature doesn't get their political hands dirty with it.

Should they have saved during the boom more than they did? Yes. Did Arizona save a lot during the boom? Actually yes it did but all of that savings only covered last year's deficit. Now savings is depleted and current tax revenues have fallen by double digit percentages but the population hasn't fallen by much (most areas are actually still growing) so basic services that the government is responsible for still need to be covered.

As is a lot of the state parks are now shut down because there's no money to pay for them. So don't knock the government here for doing everything in their power to fix the problem. At least we haven't had to send out IOU's like California yet.

Re:How does this even work?

[hey!]

OK, answers to your question:

(1) Yes, they do have to pay rent. Where will the rent come from? From the proceeds of selling the building.

(2) Yes, they want to buy it back, they will pay more for it than they got. The rent money they'll have sent will be gone forever.

(3) Yes, the state will end up losing money on this.

(4) No, it is not a BS accounting scheme, it's actually quite straightforward. It might be a bad financial decision. Or it might not.

You see, this is not about saving money. It's about having enough cash on hand to pay the bills. From a financial standpoint, it's a lot like taking a loan. Does it make sense to take a loan to buy a car, even though you end up spending a *lot* more? Sometimes yes, sometimes no. If you don't need the car, it doesn't make sense. If you have the cash on hand to buy the car without risking running out, it doesn't make sense to take the loan unless you've got really *excellent* investments. If you don't have the cash to buy a car, and you *need* a car to get a job, then the loan makes sense.

Does this make sense for a state? Well, the deal is you get cash up front but in the end pay a fee for the use of that cash, just like a loan. The alternative is to either (a) obtain more cash or (b) eliminate current cash outlays. In other words, raise taxes or cut spending.

If you raise taxes, you may delay the economic recovery in your state as businesses choose to relocate to places with lower taxes.

If you cut spending, you may store up problems like bridges that need to be replaced because they hadn't been painted; an increasingly ignorant and unemployable population; greater costs of fire, crime, and public health crises which are borne in an arbitrary way by random population members, which *also* cause businesses and people to relocate.

Now if you can find the cash you need by identifying *wasteful spending* that accomplishes absolutely nothing, then hallelujah! On the other hand, reducing spending on *useful* things isn't always a financial bargain.