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Arizona lawmakers demand say on debt deals following Capitol buy-back

Arizona's Executive Tower in Phoenix is home to most of the statewide elected officials. The state sold off more than two dozen buildings, including the Executive Tower, during the Great Recession in a sale-leaseback agreement. (CARMEN FORMAN/ARIZONA CAPITOL TIMES)

Arizona’s Executive Tower in Phoenix is home to most of the statewide elected officials. The state sold off more than two dozen buildings, including the Executive Tower, during the Great Recession in a sale-leaseback agreement. (CARMEN FORMAN/ARIZONA CAPITOL TIMES)

Lawmakers were taken by surprise when Gov. Doug Ducey kicked off the legislative session with an announcement that the state had regained ownership of some state buildings sold during a tough financial situation in 2010.  

Some state lawmakers don’t want to be surprised again.

Rep. Anthony Kern introduced a bill to require legislative review of any plans to refinance state debt involving the deals lawmakers, under Gov. Jan Brewer, made to sell off, but lease back a slew of state buildings — including the House, Senate and Executive Tower.

Arizona lawmakers were unaware Ducey’s office worked behind the scenes with the Arizona Department of Administration to refinance the debt the state took on when agreeing to the 2010 “lease-back” agreements.

It wasn’t until Ducey made a vague, unscripted reference to regaining ownership of the state Capitol buildings in his State of the State speech that lawmakers found out.

But at the time, details of how Arizona could regain ownership of its Capitol buildings were scant and lawmakers were in the dark. In the days following Ducey’s State of the State speech and before the release of his executive budget, lawmakers quizzed budget analysts on what kind of deal the Governor’s Office had made to refinance the debt on the buildings.

Kern’s HB2598 would require any future debt refinancings on the lease-purchase agreements the state entered into nearly a decade ago to go before the Joint Committee on Capital Review — a 14-member committee made up of state lawmakers from both chambers.

In other words, the Glendale Republican’s bill could serve as a check on executive power.

Kern said he doesn’t intend for his bill to tie anybody’s hands or prevent debt refinancing deals, but he thinks the Legislature deserves a say in future agreements.

“We just want to make sure it goes through JCCR before any refinancing down the road,” he said.

But Kern also took issue with Ducey’s decision to refinance the debt at all. Lawmakers would have explored other options to regain ownership of the Capitol buildings, Kern said while discussing the state’s budget surplus.

“We would not have done it the way the governor did it,” he said. “We would have paid down our debt. We would have just outright paid cash to buy back our buildings.”

Ducey, in speaking to the Capitol Times on Tuesday, declined to comment on Kern’s bill, citing his aversion to commenting on pending legislation.

Budget numbers indicate the state could save approximately $84 million a year in interest payments if the state paid off all the debt on the “lease-back” agreements to reclaim ownership of the buildings this year.

Arizona is slated to pay off the debt and regain ownership of all the buildings that were previously sold by 2030. But Ducey’s push to refinance the debt does not remove the option to completely pay off the debt early.

Ducey’s office and ADOA will finalize a deal later this year to reclaim ownership of approximately nine state properties. By refinancing the debt the state owes on the “lease-back” agreements, the state will be able to continue paying off the debt at a lower interest rate and reduce the number of state facilities put up as collateral.

Arizona was approved to remove a cluster of buildings from its collateral debt package the same day as Ducey’s State of the State speech, which has led the Governor’s Office to claim the state once again owns those buildings.

But there has been some question about whether Ducey’s office can claim the state already regained control of its Capitol buildings since the debt refinancing deal isn’t slated to be finalized until July.

Rep. Regina Cobb has also signed onto Kern’s bill demanding JCCR review of certain debt deals.

“I was surprised during the State of the State and I don’t want to be surprised again,” she said.

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