Friday, September 18, 2009

One-time revenues are hilarious

Here at the Forum, we've been cautioning local governments for years about making budgeting decisions that help balance the current budget but contribute to deficits in future years. We just didn't see much humor in these types of desperate budget tricks.

Leave it to Jon Stewart and The Daily Show to prove how funny one-time revenues can be. On Tuesday night's show they skewered a proposal in Arizona to sell and lease back their capitol building. The building (which has no real historic value, as it was built in the 1960s to replace the original capitol) and several other properties would be sold for over $700 million and then leased back at an annual cost of $60 million over the next 20 years. At that time the ownership of the buildings would revert to the state. In the meantime, the state would maintain responsibility for upkeep and repairs. As far-fetched as it sounds, Arizona's governor signed a bill in early September clearing the way for the sale.

As The Daily Show comedians pointed out--it's a great deal for the buyer, who would nearly double his investment in just twenty years, but what does the state get out of it except an extra $700 million in the current budget? Unlike the lease of a government asset designed to bring in annual revenue over the long term (such as privatizing Milwaukee's airport or water works), this proposed "sale" is actually functioning as a collateral loan.

While the extra cash for operating expenses is a windfall now, what about the $60 million in rent Arizona would be paying next year? Even a fake journalist asks the tough questions: Wouldn't that just make next year's budget even tougher? And the 19 years after that? And would the private owner require more in maintenance and upkeep than the state would otherwise have spent?

The response? A blank stare from an Arizona state legislator. She just didn't get the joke, I guess.

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