Buy High, Sell Low
I understand that California’s got budget problems, and looking into the sale of potentially valuable state owned land thus has some merit, but it seems to me that it would be pretty unfortunate to sell these parcels amidst a huge recession and real estate bust. The time to sell publicly owned property that’s ripe for redevelopment is when times are good. During good times when there’ll be plenty of buyers you can make sure to sell it to someone whose development plans serve some kind of reasonable conception of the public interest.
Besides which, the smart thing to do would be to monetize those assets during an upturn, and then sock the money to plug budgetary holes during downturns. Or even better, you could use the money to fund capital projects. Currently, we tend to do capital projects during good times when revenues are high, even tough this is also when costs are high. Meanwhile, we sell assets during bad times when revenues are low, even though this is when sale prices are low. The smart thing would be to do the reverse—the overall tax burden would be the same, but we could get much more infrastructure for our money. Not, of course, that sound budgetary practices are typical of state governments in general or California in particular. But our failure to adopt sounded budgeting at the state and local level significantly lowers our economic growth and overall well-being in the long term.
13 Responses to “Buy High, Sell Low”
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March 31st, 2009 at 8:55 am
But in good times they don’t need to sell their assets ‘cuz they’ll have tax revenue. Duh!
March 31st, 2009 at 9:24 am
Well, it would be nice if state governments did this. But I don’t think it will happen: sensible private entities like non-profit universities have big problems doing this even though it would be in their interests. You need to be a pretty well run shareholder value maximizing finance driven entity to pull this off consistently. And then you’re likely to blow yourself up for other reasons…
March 31st, 2009 at 9:58 am
I’m all for states and other jurisdictions selling off unnecessary properties, but as you’ve noted the near-bottom of a real estate bust isn’t exactly the best time to do it. Maybe a lease, but nothing permanent.
March 31st, 2009 at 10:02 am
Anyone who ever played Railroad Tycoon knows that you build infrastructure in a bust, and sell it in a boom.
March 31st, 2009 at 11:04 am
what MY writes makes sense, but if california had sold off valuable land for developement while experiencing a boom, how many of us would decry the loss of a valuable public asset so that corporate speculators could enrich themselves by developing it? we would all claim that the governore friends were getting rich at the peoples expense.
And again, if such assets were sold during boom times, how does government “sock it away” for bust times, when there is always so much pressure to cut taxes?
March 31st, 2009 at 11:34 am
The solution to CA fiscal problems starts with the repeal of Prop 13.
Until the people of CA are willing to take this step the state will continue to face massive fiscal problems.
March 31st, 2009 at 11:48 am
But isn’t the problem with selling when you’re high that you get really crummy deals? Like one time when me was mashed, me sold me car for 24 chicken Mcnuggets.
March 31st, 2009 at 12:17 pm
What makes you think that the price of these parcels is going to rise? I would think they might fall, might languish, or might rise. Please elaborate on your insight.
March 31st, 2009 at 12:51 pm
I think this is a bad idea, but I have often wondered about how we have a prison on what should be one of the most desirable properties in the state. I wonder how much more per acre the land is worth there than it is in Corcorran or (*ulp*) Chuckwalla.
March 31st, 2009 at 1:05 pm
Well I get the sense that if there’s any fiscally sound plan for California we can expect our state legislature to work hand in hand with the governor to do the exact opposite.
More Bonds anyone?
March 31st, 2009 at 1:32 pm
What the hell is that a picture of?
March 31st, 2009 at 1:46 pm
What the hell is that a picture of?
From the article:
“A ferry passes San Quentin State Prison, an aging 432-acre facility that sits on prime real estate overlooking San Francisco Bay.”
March 31st, 2009 at 2:45 pm
You know who’s going to make all the money? The Marine Corps when it develops and sells off Camp Pendleton. 125,000 acres of undeveloped coastal property, including 17 miles of beachfront between Orange County and San Diego.
And yes, I’m kidding. The Marines have never been kicked off of a beach and they’re not about to start with their largest base. Even if they did give it up (which won’t be until sometime after they forward deploy the 1st Marine Division to the moon), there’s no way Pendleton wouldn’t be converted into a National Park.