Schwarzenegger deal continues to haunt Jerry Brown

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Have you ever made a deal to buy something, only to have the seller tell you that it’s not actually for sale, after all?

That’s what a group of Texas and Irvine investors say happened to them – and the seller was the state of California.

A trial begins today in San Francisco that will determine whether California has to sell off 11 properties that Gov. Arnold Schwarzenegger agreed to part with in 2010 to help reduce California’s then $25 billion budget deficit. The $2.3 billion sale was controversial from the start, in part because the state agreed to lease back the buildings from the buyer.schwarzenegge2.

Gov. Brown nixed the deal shortly after taking office. He said it amounted to an accounting trick that would cost the state more than $1 billion over the long haul.

Two of the properties are in downtown Los Angeles, including the Ronald Reagan State Building on Spring Street. Others include the San Francisco Civic Center and the Secretary of State building in Sacramento.BROWN2

The state is expected to argue at trial that the deal was nullified when the investment group – California First – failed to make a payment on time.

California First says that’s baloney. The company claims California simply backed out of the deal when it got cold feet. In addition to asking the court to enforce the sale, the plaintiffs are seeking hundreds of millions of dollars in economic losses.