At 4 p.m. Tuesday, seven acting California Supreme Court dustices denied Gov. Arnold Schwarzenegger’s last-ditch attempt to get court clearance to close the controversial sale of 11 premier state office complexes before the governor leaves office on Jan. 3.
The sitting state Supreme Court justices had all recused themselves from the case because their court is housed in the Earl Warren Building in San Francisco’s Civic Center. That complex is one of those slated to be sold to California First LLC, a mysterious consortium of private investors who have offered to pay $2.33 billion for them. The state would continue to rent the buildings for at least 20 years, should the deal close.
Tuesday’s Supreme Court ruling “is a huge victory,” said attorney Joseph Cotchett, who has been working with former San Francisco City Attorney Louise Renne to scuttle the deal.
The private attorneys representing Schwarzenegger and the state Department of General Services, which conducted the bid process for the sale, had asked the state Supreme Court to lift a stay that was issued by a state appellate court on Dec. 13, just two days before the deal was to have closed.
It is not known if incoming Gov. Jerry Brown will proceed with the plan to sell the state buildings. As attorney general, he declined in November to represent Schwarzenegger in the legal battle to close the deal.
The case now rests with the Sixth District Court of Appeal in San Jose. On Monday, that court set oral arguments in the case for late January. The attempt to get the Supreme Court to lift the stay likely represented Schwarzenegger’s last chance to close the deal before he leaves office.
Opponents of the deal, including state Treasurer Bill Lockyer and state Controller John Chiang, have sharply criticized its financial prudence and raised questions about political cronyism playing a role in the selection of California First LLC.
California First is a newly formed entity that has kept the identity of its equity partners obscure. Those listed as partners on California First’s offer letters to DGS have uniformly refused to respond to queries about their involvement.
The exceptions are Grover McKean, onetime state deputy treasurer, who said in an e-mail to The Bay Citizen last week that he is only an occasional advisor to the group, though he is listed as one of three lead partners in multiple documents submitted to DGS.
A man answering the phone last week at the offices of Belgravia Capital in Costa Mesa said that the firm was no longer involved in the deal. When asked his name, he hung up the phone.
On Monday, former cabinet secretary Henry Cisneros disavowed any involvement in the deal. Cisneros’s Los Angeles-based real estate company, CityView, appears on multiple California First documents as a partner. The most recent of these documents is dated May 21. Cisneros was not available to speak further about his involvement or to say when he severed his participation in California First.
The nonpartisan Legislative Analyst’s Office in November reported that the deal would end up costing California’s taxpayers an extra $6 billion over the next 35 years.
California First’s offer of $2.33 billion would net the state about $1.3 billion, after debt on some of the buildings is retired. All of the proceeds would be used to salve the looming $28 billion state budget deficit.