Another State Involved in Sale-Leaseback Financing
State selling more buildings
to ease budget deficit
by Mary Jo Pitzl - Jun. 2, 2010 12:00 AM
The Arizona Republic
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More state buildings go up for sale next week, as officials hope to raise $300 million
by selling and then leasing back the schools for deaf and blind children, more state
prisons and other structures.
It’s the second time this year that the state has sold buildings to help close the state
budget deficit. A sale-leaseback in January raised $735.4 million for the state. The
healthy response prompted lawmakers to authorize a second sale. Proceeds will be
used to balance the current-year budget.
The sale begins Tuesday, and will continue until the $300 million has been raised.
Investors will be required to make purchases in $5,000 installments, according to
information on the Arizona Department of Administration’s website.
Investors must work through a list of underwriters provided by the state.
A full listing can be found at www.azdoa.gov/news.
The state retains control of the buildings, which it will continue to occupy and lease
back from investors.
The sale-leaseback comes on the heels of last week’s action in which the state
borrowed $450 million against the proceeds of future state Lottery revenues. The money also will help balance the current-year budget. Those bonds carried an interest rate
of 4.27 percent.
Next week’s sale-leaseback is expected to carry a similar interest rate, said Michael
Smarik, deputy state comptroller, although the rate won’t be set until next week.
While the sale-leaseback provides quick cash for the state, it also costs the state more in
the long run. The $735 million sale-leaseback from earlier this year carried $400
million in interest costs over 30 years, for a total payback of $1.1 billion.
It’s hard to calculate the cost to the state of Tuesday’s offering until the interest rate is
set.
Sale-leaseback, sale and leaseback, sale leaseback, leaseback