Yard sale for cash-strapped states
Selling surplus property is better than raising taxes in a weak economy.
Oxford, Miss. — States have a big problem. Years of out-of-control spending along with today's economic downturn means they're facing up to $40 billion in red ink.
Politicians, of course, are ready with their usual "solutions." But maybe they should consider a yard sale, instead.
Yard sales help homeowners dispose of unnecessary items and quickly raise cash in a pinch. Likewise, states have a great opportunity to sell off surplus assets to balance budgets without painful taxes, fees, and cuts.
Many states are sitting on valuable surplus real estate that could be sold to replenish their coffers. No authoritative list of such properties is available. But selling surplus property – such as an old artillery depot at the entrance to South Carolina's Charleston harbor, or the undisclosed $150 million in property that the New York Senate has eyed – would give states an immediate cash infusion while they ride out the economic slowdown. It would also relieve them of long-term maintenance obligations.
Yet few states seem to be taking the opportunity seriously.
Staring at a projected $15.2 billion deficit next fiscal year, California Gov. Arnold Schwarzenegger has proposed combining spending cuts with additional borrowing that would increase the state's bonded indebtedness by $3 billion. Following the lead of the many states that have "collateralized" the payments they receive from tobacco companies under the so-called Master Settlement Agreement, he also has asked for authority to sell to Wall Street the rights to $15 billion in future state lottery revenue.
Lawmakers elsewhere are leaning more toward tax and fee increases. The New York Assembly, for example, wants to raise $1.5 billion a year by increasing the top income-tax rate. Several states are considering new tolls on interstate highways, including I-70 in Missouri, I-80 in Pennsylvania, and I-81 in Virginia. And Mississippi Gov. Haley Barbour, facing a $90 million hole in the state's Medicaid budget, has submitted a plan to "consolidate" three separate hospital taxes.
Meanwhile, opportunities for raising revenue by selling surplus state property are being missed. In California, for example, nearly five dozen unused or underutilized state-owned properties occupying more than 4,800 acres were listed at the end of 2002 as candidates for disposal. Much of that surplus property has been carried on the books for years. Such foot-dragging is not unusual: A 152-acre parcel in Santa Clara County, declared surplus in 1996, for instance, was not sold until September 2001. Just before that, the California Department of Transportation finally disposed of a piece of property it had said was no longer needed 38 years earlier.
Nothing much seems to have changed since 2000, when California's auditor criticized state government agencies for failing to sell surplus property in a timely manner: Only three state properties were actively being marketed as of last fall.
The process of disposing of surplus property is not always straightforward, of course. State real estate transactions often are delayed by long-term lease commitments, environmental regulations and concerns, and zoning and planning issues.
And because of the popping of the real estate "bubble," now may not be the best time for states to be marketing their unneeded facilities. But selling surplus property is still better than raising taxes in a weak economy.
Disposing of surplus property is something of a one-time quick fix. The longer term answer to the states' financial problems is, of course, budget reform and spending restraint.
In addition to holding "yard sales," state and local governments nationwide should consider turning money-losing professional sports stadiums and arenas, convention centers, and other publicly owned facilities into revenue-producers by selling or leasing them to the private sector.
California, to its credit, is making an effort to lease 13 acres on the famous Cow Palace property in San Francisco. Mississippi, by contrast, could stand to lose millions on a state-owned football stadium and indoor coliseum, which sit on some of the most valuable land in Jackson.
Rarely do such facilities earn enough revenue to cover their operating and maintenance costs, let alone their capital costs.
Replacing red ink with black by selling or leasing such public properties has the further advantage of getting state and local governments out of businesses they never should have taken on in the first place.