The Blagojevich administration has gotten considerable credit here for sqeezing the state bureaucracy, but some of its dealings to balance the budget should still make taxpayers queasy.
Here’s one: Looking for a quick infusion of cash, administration officials are moving ahead with plans to take out a $200 million mortgage. As collateral, the state will put up the James R. Thompson Center, the state’s glass-and-steel ode to postmodernism in the Loop.
Central Management Services Director Michael Rumman says the state is just “doing what any responsible business would do” by capitalizing on its assets–in this case, its real estate. The deal also has been likened to a homeowner taking out a home-equity loan.
It’s more desperate than that. A business takes on debt for the purpose of generating revenue to provide a return on the investment. A homeowner who takes out a second mortgage to remodel the kitchen expects to reap a financial reward by enhancing the asset.
What the state is doing is more like a business taking out a mortgage to meet payroll, or a homeowner putting up the deed to the house to pay utility bills and buy groceries. Sure, you can do it. And yes, you can hope the maneuver will buy time until the loan is paid off under more favorable economic circumstances.
But let’s not kid ourselves. Borrowing money to pay for operations is never a great idea. And for all the solid efforts the Blagojevich team has made to cut state spending, it has also relied heavily on borrowing to get through lean times.
After the state pays an expected $14 million annually for 10 years, it still will face a balloon payment of $148 million. If the state doesn’t have that kind of cash lying around, a future administration will have to negotiate a new finance plan to complete the repayment. The Blagojevich administration presumably hopes interest rates will be low 10 years from now. If not, well that’s a headache for another day, another administration.
Say this for the mortgage plan, though. At least the state is not selling off the Thompson Center in a budgetary panic. The administration’s original intent was to balance the budget by selling off the Thompson Center, the Illinois Toll Highway Authority headquarters in Downer’s Grove and the Elgin Mental Health Center. The administration still is weighing its options with the toll headquarters and Elgin facility.
The flashy, Helmut Jahn-designed Thompson Center, it turns out, is not the most marketable space. The building cost $172 million to put up nearly 20 years ago. But its quirky features–curved walls, cramped offices and a massive atrium that is hard to heat and cool–made it worth only about $100 million, unless the state stayed on as a long-term tenant.
Thus, if it had been sold, the state’s flagship office building bearing the name of a powerful former governor might have come to a humbling end: as a tear-down.
