SACRAMENTO / BRADLEY INMAN : Uncle Sam Given Choice Real Estate by State in Deal Dating Back to ‘50s

Thanks to a 40-year-old real estate deal struck between the federal and state government, the U.S. Treasury owns a hefty share in some prime California properties.

In the early 1950s, the state Employment Development Department (EDD) began buying land and building facilities throughout the state to house Social Security and unemployment compensation offices--programs mandated by the federal government but administered by the state.

To finance the developments, the state turned to the U.S. Department of Labor to pay off the construction financing. In exchange, the state gave the federal government a sizable equity interest in 39 state-owned properties. Most are in downtown locations and have appreciated handsomely.

For example, the federal government has a 63% stake in a state office building in Long Beach at 1313 Pine Ave., a 41% share in an El Centro property and a 90% equity position in the Los Angeles branch of EDD at 1525 S. Broadway.

The state Auditor General estimates the federal government’s total equity position to be at least $25 million.

According to the 1951 agreement, the state must obtain the federal government’s approval before selling its buildings and must hand over a share of the proceeds to the U.S. Treasury when a property sells.

The partnership hit a snag in 1989, when the state demolished an old EDD facility in Sacramento, sold the land and built a new building at 2901 50th St. A Labor Department audit revealed that the U.S. government had not been compensated for its equity in the old EDD office building.

After some haggling, the federal government got a stake in the new 50th Street property.

State Loans Will Help Reduce Air Pollution

Small- and medium-size firms are often under-capitalized and unable to afford the pollution control equipment that new state and federal air-quality laws require. To help companies out, an experimental state loan program is being tested that will help small businesses obtain financing for environmental equipment that reduces air pollution.

“These companies are being mandated to spend money and increase their overhead in an area where it’s not going to produce any income,” said Bill Harper, deputy director of the Office of Small Business for the state Department of Commerce, which is administering the $3-million pilot program. “The idea behind the loan program is to help these companies get through the federal and state environmental compliance maze.”

Beginning later this spring, companies with fewer than 400 employees can apply for the state loans and can receive up to $500,000 at 9% interest.

Any business from a “charbroiled steak house to a dry cleaner is eligible,” according to Harper. Companies interested in the loan program should contact the Office of Small Business at (916) 324-1295.

Lobbyists Hand Out More Than Just Cash

Financial contributions are not the only thing that keeps the political machinery lubricated in Sacramento. Recent political disclosure statements filed by lobbyists show that state lawmakers are showered with gifts, meals and other presents from lobbyists.

For example, Pacific Gas & Electric gave several legislators an $8.50 Christmas ornament, according to reports filed with the Fair Political Practices Commission. The clay Santa Claus figures handed out by the utility were adorned with the PG&E; logo on Santa’s toy pouch, according to company lobbyist Thomas H. Willoughby.

Philip Morris USA passed out $17.50 bags of Kraft Caramel to every state lawmaker, and the California Assn. of Nurserymen delivered $5 poinsettias to legislators last Christmas.

Assemblyman Tom Bane (D-Van Nuys) got a $12 case of beer from Anheuser-Busch Co., and Sen. Marian Bergeson (R-Newport Beach) received a $70 letter opener from Lusk Co., an Orange County developer.

Some gifts were more expensive. The California Teachers Assn. gave Assembly Speaker Willie Brown (D-San Francisco) a $566 crystal female head sculpture from the Virgin Islands, according to reports filed with the FPPC and compiled by Capitol Weekly Data.

Banks Asked to Help Find Welfare Fraud

The California Department of Social Services is turning to the banking community to help the state uncover welfare fraud.

The department’s fraud unit sent a letter earlier this month to every bank in the state, asking for their cooperation “in reducing the cost of welfare programs and saving tax dollars.”

The Department of Social Services does an annual computer match between welfare recipients and federal and state income tax returns. When records show that welfare beneficiaries have funds that exceed state limits, their aid can be cut off. (People receiving Aid to Families with Dependent Children--which is the state’s largest welfare program--cannot have more than $1,000.)

Before someone can lose state aid, however, county welfare departments must verify bank accounts by obtaining information either from financial institutions or by getting a search warrant. “The latter (court order) is by far the most expensive, time consuming and disruptive method of obtaining verification,” said the letter to the banks, which was signed by Michael F. Back, chief of the Fraud Program Management Bureau of the Department of Social Services.

“We are hoping that by having a thorough understanding of this process, financial institutions will be more inclined to provide necessary verification when requested by county welfare departments,” Back wrote.

The letter was sent to all California banks through the state Commissioner of Banks.

“Some banks are willing to cooperate after (we) obtain a release from the welfare recipient,” Back said. “Other (financial institutions) don’t want to be troubled by our requests.”