More Properties Placed on the State’s Not Exactly Brisk “For Sale” List

Six sites have been added to California’s list of surplus properties and two removed under legislation signed August 4 by Gov. Jerry Brown.

The measure – AB 1272 by Assemblywoman Betsy Butler, a Torrance Democrat – is the annual compendium of properties the state Department of General Services wishes to dispose of.

Revenue from the sale of surplus properties purchased using state general funds is earmarked to pay down principal and interest on the $15 billion in deficit reduction bonds approved by voters in March 2004 as part of a plan by former Gov. Arnold Schwarzenegger which he said would permanently erase the state’s budget gap.

Selling off unneeded state parcels or buildings is almost as hoary a budget-balancing gimmick as eliminating “wasteful” state boards and commissions. Disposing of every piece of surplus property and lining out every board and commission would still amount to well less than 1 percent of the $120 billion budget signed by the Democratic governor on June 30.

By size, the largest addition to this year’s state “For Sale” list is 40 acres in Tehama County that were purchased by the Department of Forestry and Fire Protection in 1971 for construction of a fire lookout.

After 40 years, no lookout has been built nor is one planned for the future.

However, that 40 acres is unlikely to fetch anywhere as much as the proposed sale of the Hollywood Employment Development Department office, located on 2.6 acres, or the Los Angeles Employment Development Department office building located on 1.7 acres at 1405 South Broadway near Interstate 10 in downtown Los Angeles.

The Los Angeles Employment Development Department site was acquired in 1962 – through condemnation. The Hollywood site was purchased for $59,247 in 1949, also through condemnation. Ten years ago the value of the Hollywood property was estimated at nearly $4.7 million.

Unfortunately for the state, the employment department uses federal funds – California’s unemployment insurance program, for example, is a joint federal/state effort – and whatever the sales price, the feds take a cut.

In the case of the Los Angeles office building, which cost $1.1 million, up to 94 percent of the ultimate sales price will be sent to Washington.

The state economy hasn’t been conducive to the sale of surplus property, according to the most recent annual report to the Legislature by the Department of General Services.

Of the 20 properties the department says were either sold, “removed from state rolls” or “pending disposition” on September 27 when the report was submitted, three had actually sold for a total of just over $6 million.

Interest and principal on the deficit reduction bonds for the fiscal year that began July 1, 2010 and ended June 30 was $758 million.

Over the past six years, sales of surplus property purchased through the general funds has contributed $45 million to pay down debt and principal on the bonds. Total payments during the same period were more than $8.8 billion.

A 17.6-acre parcel in Santa Clara County with a sale price of $44 million — the former Bay Area Research Extension Center — was supposed to close escrow in June.

Whatever the state reaps from the sale will be less $780,000 – the cost to clean up pesticide contamination of the site.

The issue of contamination also affected the sale of other sites. A .09-acre parcel zoned for residential development in Los Angeles County couldn’t be sold by competitive bid “due to concerns by multiple buyers regarding possible soil contamination from the former presence and operation of oil wells on the property,” the department’s annual report said.

Similarly, a one-third acre parcel in San Diego County that was to be a forest fire station attracted no buyers because of worries over groundwater contamination.

The Department of Forestry and Fire Prevention’s clean-up strategy for that site  is “attrition,” according to the surplus property report.

“The state should continue to own and lease the site until groundwater testing achieves acceptable levels – possibly three or more years,” General Services says, adding that it is entering into a lease with a private entity to operate a firefighter training facility there in the interim.

On “indefinite hold” is the sale or lease of a state Department of Military armory at 58^th Street in Sacramento. The neighboring St. Francis High School wants the 6 acres to build a sports facility but the Military Department is still looking for alternative sites for the units who operate out of the location.

A 2-acre parcel near the Los Angeles Civic Center, with an estimated value of $2 million, was held off the market “due to deflated real estate values,” the annual report said. Doldrums in the real estate market were also why a 3-acre parcel near Escondido in San Diego County was not offered for sale.

Removed from the “for sale” list was a one-half acre portion of the SUtter HIll Forest Fire Station near Sutter Creek in Amador County. Also struck from the list is a National Guard Armory in San Jose that was first declared surplus in 1984.

The department says that from the fiscal year beginning July 1, 2002 through June 30, 2008 nearly $241 million was generated through surplus property sales.

If all 20 properties on the state’s 2010 annual list are sold, total revenue – not counting pesticide cleanup costs and three parcels whose estimated values have not been determined – would be $169 million.

That’s 30 percent of the interest and principal the state will pay on its deficit reduction bonds during the current fiscal year.

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