A state appeals court in San Jose today temporarily blocked the Schwarzenegger administration’s planned sale of 11 state buildings to a group of private investors for $2.3 billion.
The sale, which would include buildings in San Francisco, Oakland, Santa Rosa, Sacramento and Los Angeles, had been due to be completed Wednesday.
It will now be on hold until at least Dec. 29 while the Court of Appeal considers a lawsuit by three former state building authority officials challenging the deal.
The transaction was intended to help close the state’s budget gap by providing $1.3 billion in cash after $1 million in bonds on the buildings is paid off. Offices and court facilities would be rented back to the state for at least 20 years.
The lawsuit claims the transaction will cost the state millions and perhaps billions of dollars in the long run and is an illegal waste and gift of public funds.
It also contends the deal violates a law giving the state Judicial Council control over two court buildings. The buildings are the San Francisco State Building, which houses the California Supreme Court and an appeals court, and the Ronald Reagan State Building in Los Angeles, which contains a Supreme Court courtroom and an appeals court.
“We’re thrilled,” said Anne Marie Murphy, a lawyer for the plaintiffs. “We think the stay is excellent for the citizens of California. There is now more time to investigate this backroom deal, and the details may see the light.”
The state could appeal to the California Supreme Court to lift the stay so that the sale could meet the original Dec. 15 closing date.
“We’re considering all our options,” said Andrew Stroud, a lawyer for the administration of Gov. Arnold Schwarzenegger.
The plaintiffs in the case are former Los Angeles State Building Authority President Jerry Epstein, member Redmond Doms, and former San Francisco Building Authority member Donald Casper. All were fired by Schwarzenegger this spring after they objected to the sale.
The stay will be in effect until the appeals court takes further action. The court called for a brief from the state by Dec. 27 and a reply from the plaintiffs by Dec. 29. After that date, the court can either set a hearing or rule without a hearing on whether to grant a long-term stay while the lawsuit proceeds.
The plaintiffs appealed a ruling in which San Francisco Superior Court Judge Charlotte Woolard on Friday refused to block the sale.
They originally filed the appeal in the state Court of Appeal in San Francisco. But that court asked to have the case transferred because its own facilities are in one of the buildings. The California Supreme Court then moved the case to the San Jose-based appeals court.
The former officials argued that there is no urgency to close the sale since the fiscal year doesn’t end until June 30. Without a stay, they wrote, “The citizens and the state of California will forever lose ownership of 11 iconic and historic properties.”
In addition to the San Francisco State Building, the Bay Area structures included in the sale are the California Public Utilities Commission Building in San Francisco, the Elihu Harris Building in Oakland, and the Judge Joseph Rattigan Building in Santa Rosa.
Julia Cheever, Bay City News
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