Going into long term debt to pay short-term operating expenses is fiscally unsound. Going into debt for 20 years for 3 months operating expenses is beyond the absurd. Nonetheless, that is exactly what Arizona did.
Inquiring minds are reading Arizona Sells Supreme Court Building in $300 Million Bond Deal.
Arizona, which sold state prisons and offices to raise cash six months ago, plans to borrow $300 million by marketing its Supreme Court building and about a dozen more properties through leaseback bonds starting today.
Investors will hold ownership of the court building in Phoenix, the fifth-largest U.S. city, and the Arizona Schools for the Deaf and the Blind in Tucson for as much as 20 years, with the securities maturing serially from 2012 through 2029, according to offering documents. Lease payments will back the debt, known as certificates of participation.
Arizona, whose foreclosure rate last year was ranked second-highest after Nevada by RealtyTrac Inc., will use the sale to pay for three months of school aid. The state raised $709 million for education payments when it sold and then leased back nine properties to investors in January.
“From an investor point of view, this is great,” state Treasurer Dean Martin, 35, said in an interview. “The state has to have buildings to operate and we’re the largest employer in Arizona.”
Wrong Point of View
Who gives a rat’s ass if “This is great From an investor point of view”?
Here’s what Arizona taxpayers need to decide: “Is this great from ataxpayer point of view?”
Obviously it is not. Just as with other states, this is more kicking the can down the road action in a bury your head in the sand mentality.
Arizona politicians need to accept reality: This economy is going to be weak for a decade thanks in part to refusal of politicians to address fiscal issues, union salaries, and union pensions now.
The problem is not lack of revenue, the problem is state spending gone rampant, with political hacks lacking the discipline to do anything about it. I do not care how favorable the interest rate or other terms are, going into debt for 20 years to get 3 months operating expenses is simply insane.