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Hey buddy! Wanna buy a state capital building…cheap??

Repost from Finance Tangent … ~~~ The looming budget crisis affecting states like Arizona, California, Illinois and others, is prompting leaders to look at any option to raise money. Case in point is California that recently put up 17 commercial buildings for sale, including two San Francisco buildings that house the state supreme court and the federal appeals court. Investors are looking at this as a good deal with mutual funds like Fidelity and Vanguard picking up a recent Arizona offering. From an AP story

Arizona, hoping to make a dent in its $1.4 billion budget deficit, issued municipal bonds at $5,000 a piece against the value of several properties.The offering last month raised $735 million in two days. Some of the bonds were purchased by individual investors, but the majority were snapped up by mutual funds, including Fidelity Investments, The Vanguard Group and Northern Trust, said Alan Ecker, spokesman for the Arizona Department of Administration.

This deal was actually structured as a sale-leaseback, because the State of Arizona has no intention to leave because they signed a lease of at least 20 years.  Corporations use this method to get access to cash for expansion and now it appears that cash-strapped states are going to do the same thing. A real ironic thought is having an international fund invest in state capitals and federal buildings.  Not only will they be loaning us money to keep us afloat, they’ll own the buildings in which we govern ourselves and where we decide to borrow that money.

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From EMMA ( the municipal securities repository for offering documents)

Link for the Arizona underwriting… CERTIFICATES OF PARTICIPATION SERIES 2010A EVIDENCING PROPORTIONATE INTERESTS OF THE OWNERS THEREOF IN LEASE PAYMENTS TO BE MADE BY THE STATE OF ARIZONA ACTING BY AND THROUGH THE DIRECTOR OF THE DEPARTMENT OF ADMINISTRATION AS LESSEE FOR CERTAIN PROPERTY PURSUANT TO A LEASE PURCHASE AGREEMENT (AZ)

ARIZONA ST CTFS PARTN DEPT ADMIN-SER A (AZ)*

Dated Date: 01/26/2010