Appeals court delays sale of 24 state buildings

A state appeals court has stalled the controversial sale of 24 government buildings, ruling Monday afternoon that the transaction cannot go forward this week as planned and delaying it until at least January.

The Schwarzenegger administration had hoped to help fill the state’s yawning budget deficit by selling the buildings — including the homes of the state Supreme Court and two appeals courts — to raise $1.2 billion for this year’s shortfall and then leasing them back.

But two former members of the state building authority filed suit last month to halt the sale, arguing that it was a waste of taxpayer money. On Friday, a San Francisco Superior Court judge ruled that the sale could go forward as planned.

Opponents of the sale appealed that decision to the 1st District Court of Appeal in San Francisco on Monday morning. But because that court is housed in one of the buildings that’s up for sale, the court recused itself and the case was assigned to the 6th District Court of Appeal in San Jose, which stopped the sale, at least temporarily.

“This is a great day for the people of the state of California,” said Joseph Cotchett, attorney for the opponents. “Now the state gets to keep these magnificent buildings.”

Cotchett called the transaction, in which the state would lease back office space for decades in the buildings they are selling, a bad deal for taxpayers. Two of the state’s top fiscal officers had objected to the sale by the state Department of General Services.

Andrew Stroud, a private attorney representing General Services, said he was “very disappointed” by the decision. “We just got a copy of it, and we’re still exploring all of our options and trying to figure it out,” he said.

The delay means that the future of the sale may ultimately rest in the hands of Gov.-elect Jerry Brown. Gov. Arnold Schwarzenegger has been the sale’s biggest booster.

Brown, the current attorney general, declined to represent the state in the lawsuit, authorizing Schwarzenegger to hire private attorneys. Spokesman Jim Finefrock said Brown “didn’t want to be locked into a position by representing the current governor.”

Finefrock said the decision not to defend the sale did not mean Brown had taken a position on it, but rather that he wanted the freedom “to be able to evaluate it fully” should the issue arise once he is governor.

Eric Lamoureux, a General Services spokesman, said the sale, if completed, would generate significant revenue for the cash-strapped state this year. “Our singular focus all along has been to finalize this transaction…to raise revenues that are desperately needed by the state,” he said.

maria.laganga@latimes.com

shane.goldmacher@latimes.com