The Arizona State Fairgrounds, state prison complexes and the Department of Agriculture building are among the state properties that could be sold and leased back to the state.

The ubiquitous “for sale” signs that dot neighborhoods across Arizona could start popping up at prisons, government office buildings and even the state fairgrounds as lawmakers search for ways to balance the budget.
With the state facing a fiscal 2010 deficit of at least $3 billion and recalcitrant Republicans vowing unyielding opposition to Gov. Jan Brewer’s temporary tax hike proposal, some are looking at the sale of state assets as the only feasible solution for balancing the budget. Legislators and the Governor’s Office are working on a list of available assets that could provide much-needed injections of cash into the state’s general fund.
Determining which assets to put up for sale, however, could be tricky. Some lawmakers are wary of trading one-time money for long-term financial commitments, such as with privatizing prisons, or are hesitant to divest the state of assets it uses on a regular basis. Others worry that the poor economic climate would depress prices, forcing the state to sell valuable property for less than it is worth.
House Appropriations Chairman John Kavanagh, one of the Legislature’s most vocal supporters of state asset sales, said he would like to see Arizona generate about $600 million per year until 2012 with the sale and leaseback of some assets and the outright sale of others. That, along with spending cuts, he said, could help the state bridge a looming budget deficit without resorting to the temporary tax increase that Brewer has proposed.
“People who wish to not cut in ’10 forget that if we still have a large structural deficit in ’11 with only minimal stimulus money, and in ’12 with no stimulus money, we’re going to have a lot of grief ahead. So we need to cut and sell assets until the economy catches up with … the reduced budget spending,” Kavanagh said.
Probably the most frequently mentioned proposal involves the sale and leaseback of state prisons. Five prisons in the state, along with one county jail, are already operated by private companies, and some lawmakers would like to see that model applied to other prisons in the state. Kavanagh said he assumes such a plan would be applied only to low- and medium-security prisons.
Senate Majority Whip Pamela Gorman said the state has had a great deal of success with private prisons.
“It seems to me that doing more of what’s been successful is just good business,” the Anthem Republican said.
Sens. Steve Pierce and Al Melvin are spearheading a committee that is compiling a list of all available assets that the state might be able to sell. Brewer’s office is working on a list as well.
“I’ve been working with (the Governor’s Office) and I told them to give me a list of stuff and we’ll look at all of it. I don’t know what all there is. We’re not that far into it,” said Pierce, a Prescott Republican. “We’re going to look at all of them and see what we can do, if anything.”
Prisons are far from the only state assets that could wind up on the bidding block. Sen. Russell Pearce, a Mesa Republican, said there are other facilities besides prisons that might be better run by private companies, such as some state parks.
Kavanagh said the first things he would look at are undeveloped parcels of land owned by the state, particularly in the Phoenix metro area. The state owns one such parcel near Papago Park, he said, and there are others in the area that could be highly attractive to developers. Kavanagh emphasized that the land near Papago Park is not part of the Arizona Army National Guard complex in the area.
Other facilities could be on the auction block as well. Kavanagh said state buildings such as the Department of Agriculture at 1688 W. Adams St., could be sold, and several lawmakers are proposing the sale of a state-run airport at the Grand Canyon. The involvement of federal funds and federal land, however, has raised questions over whether the state could actually sell the airport.
Some are willing to look at the sale of state assets, but would prefer to sell only assets that the state does not use. For example, Sen. Ron Gould, Republican of Lake Havasu, said there is farmland owned by the University of Arizona that might be a viable candidate for sale, while Pearce said the state may have items such as planes and helicopters that are unnecessary, or at least needed less than the money they could generate for the general fund.
“I’d rather sell things that are unused before we sell things that we need, like prisons, because … we’re going to have to rent the prison back from people,” Gould said. “But that’s a one-time fix anyway, and that still doesn’t cure the long-term overspending problem that we have here in the state of Arizona.”
Kavanagh and others have suggested that the state fairgrounds at 19th Avenue and McDowell Road, including Veterans Memorial Coliseum, could be sold, as long as the state would be able to continue holding the fair at the mid-Phoenix location, or if another suitable location could be found.
Brewer has been skeptical about some of the proposals. During a recent speech to the Phoenix Rotary 100, the governor said lawmakers were talking about selling Veterans Memorial Coliseum in 1983, when she first joined the Legislature, and after more than 25 years, she didn’t seem convinced.
“For years that thing has been on the sales block,” Brewer said. “Nobody wants the darn thing because it’s full of asbestos and it’s going to cost them too much money to do anything with it. So it just sort of sits over there, and every year you get legislators (saying) let’s sell it, and we go through that same process, but nothing ever happens.
“Certainly today, I don’t know if anybody would go in there and buy it because property, if you have not noticed, has kind of gone down. And the cost and the regulation that we’ve incurred from the EPA, etc., has gone up. So when you have both those driving forces, it’s kind of a dead horse before you even begin.”
The governor also said the state has done “almost everything we can in regards to the prisons.” Brewer said some prisons can’t be sold because they are on state land, and said the only prison in the state that could realistically be sold is the facility in Yuma. Selling that prison, she said, could bring in as much as $70 million if a buyer could be found, but the governor questioned whether the one-time money would be worth it for the state.
“We have spoken with leadership and we’re getting that list compiled, as far as the assets. We have gone through and looked at a lot of them of which we knew people were interested in, and some of those just aren’t feasible,” Brewer said. “We have probably turned over every blade of grass that you can possibly see.”
Brewer spokesman Paul Senseman said the governor is open to the possibility of asset sales, and is examining each individual asset to determine what kind of impact the sales would have on the budget, and what the long-term ramifications would be.
“We’re going to develop the list and see what might be available and what could positively impact the deficit. It’s one of many, many, many pieces,” Senseman said.
Despite the fact that Arizona is mired in a re
cession that has deeply depressed land values, Pearce still feels that the state could get fair prices for high-value assets such as the state fairgrounds. He said he isn’t advocating a “fire sale” for state assets, and does not want lawmakers to be motivated solely by the budget crunch. Only assets that the state doesn’t need, or those that could be better administered by the private sector, should be considered, he said.
“We’re not going to sell things unless there’s a benefit to the taxpayer,” Pearce said. “We just aren’t going to do it. All of that will be factored in. Nobody’s going to get silly in this process.”
Even if the state does sell enough assets to reach the $600 million mark that Kavanagh is aiming for, it still would still be short of the $1 billion Brewer wants to generate with a temporary tax increase. In order to produce that $1 billion, Kavanagh said, the state would have to increase the sales tax by as much as 2 percent, “which is impractical and would devastate business in Arizona.”
Gould feels that assets that are of little use to the state should be sold, but he is not looking at asset sales as a cure-all for Arizona’s budget crisis. The only way to balance the budget without raising taxes or selling off important assets, he said, is to roll back the spending increases the state experienced during the past six years of former Gov. Janet Napolitano’s administration.
“It just depends on whether we have the intestinal fortitude to make those cuts. It appears that some members of my party do not have the intestinal fortitude to make those cuts, and I’m rather disappointed,” Gould said.