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To cut deficit, Arizona may sell its Capitol

The state could sell as many as 32 of its properties to help cover a $3 billion shortfall.

By Lourdes MedranoContributor / September 8, 2009

For sale? Arizona’s Capitol is just one property the state has weighed selling. It would likely then lease the property back.

Matt York/ AP/ File

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Tucson, Ariz.

A state park with a spectacular limestone cave. A retirement home built in territorial days. Even state Capitol buildings in which laws have been crafted for a half century.

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Piece by piece, Arizona is planning to sell off as many as 32 state properties to cover a historic $3 billion budget deficit. The state is in good company: California, Pennsylvania, and Connecticut are unloading state holdings, too.

It is an indicator both of the depth of the fiscal crisis facing states and the extraordinary lengths to which they will go to try to avoid steep tax increases.

In Arizona, the sales could put between $350 million and $700 million into state coffers this year – but it’s a quick fix. The state would pay between $60 million and $70 million to lease back many of the properties, meaning the transactions will cost taxpayers more in the long run.

“It just shows how deeply the recession really has affected state finances,” says Todd Haggerty, a research analyst with the National Conference of State Legislatures.

“Desperate times call for desperate measures,” adds Linda Lopez, the Democratic House minority whip from Tucson.

What's on the auction block

Arizona Gov. Jan Brewer signed the bill that approves the sale of state buildings on Sept. 3. Now, the state is deciding what to sell.

Properties around the state that may be sold and leased back include the House and Senate buildings, the Arizona State Hospital, the Arizona Pioneers’ Home retirement facility (built a year before Arizona gained statehood in 1912), and Kartchner Caverns State Park.

If it sells its Capitol buildings, only employees of the state agricultural laboratory would have to pack up and leave. Others would stay where they are as the state government leases back the properties over several years, eventually resuming ownership when the arranged terms end. The state has placed a total replacement value of roughly $1 billion on all the properties.

“Although there may be problems with the symbolism surrounding this, I think that at the end of the day, it’s something that the state has to do,” Ms. Lopez says. “We don’t have any choice.”

Arizona’s official historian disagrees.

Marshall Trimble is no fan of the cramped House and Senate buildings on either side of the historical copper-domed state Capitol, which is now a museum. But state properties “belong to the people of Arizona,” he says. “I just don’t think we have a right to sell these things.”

Enough value for that real estate?