Does Fischer have the state building buy thing right?

by David Safier

Howard Fischer has an article today on the idea of the "selling" state buildings to generate revenue. He may have the details of the arrangement right, but I seem to remember something he doesn't mention.

The first part is what I remember. The state "sells" the buildings, then leases them back until they pay them off.

Here's how Fischer explains it, which is different in a small but significant way from what I believe I've read.

The deal is structured so the state would promise to lease back the buildings over the next 20 years, making payments to the "owners" over that period. It is only if the state defaults on the rent that actual possession of the building would go to the buyers.

But if all goes as planned, at the end of 20 years the state would again take full title to the buildings, unencumbered by debt.

What I remember is this. The state would have to buy back the buildings at whatever is considered their fair market value in the future, which would likely be more than it is now. If I'm right, that would mean the state pays principle, plus interest, plus appreciation of the properties' value. It's kind of a value-added (for the lenders) second mortgage.

I may have this totally wrong. Anyone know more than I do?