WASHINGTON - The vendor leasing industry won a victory in California last week with Gov. Pete Wilson's veto of a bill to consolidate the state's $100 million of annual equipment lease contracts into public lease offerings.

The veto, which came at nearly the last minute possible by law Wednesday night, puts the bill in limbo, according to Jody Fuji, legislative aide to state Assemblyman Rusty Areias, D-Gilroy, the bill's author. She said Areias has not decided whether he will push it again next year.

"Even if the Legislature passed it again next year, would the governor sign it?" she asked. "That's the question you have to ask yourself, and right now, I wouldn't think so."

Fuji said Areias is "very discouraged" by the leasing industry's tenacity and success at defending its "very lucrative business," even before the fiscally conservative Republican governor, who has frequently promised to save the deficit-ridden state money.

After six years of languishing in the Legislature, the bill passed at the eleventh hour before adjournment last month largely on the strength of its potential to save the state money.

State Treasurer Kathleen Brown estimated the bill could save up to $50 million over five years through the refinancing of hundreds of high-rate vendor lease contracts each year with tax-exempt certificates of participation and lease revenue bonds.

But the veto came as no surprise to Clayton R. Jackson of Jackson, Barish & Associates, a major Sacramento lobbying firm on retainer for several leasing companies. He said he "received assurances" of the veto long before it occurred.

"The only reason the bill passed the Legislature in the first place is because the governor let everybody know that he was going to veto it," Jackson maintained. Wilson "didn't take out a billboard" advertising his likely veto, but members of the Legislature were aware that the bill was unlikely to become law and only voted for it as a budget-saving gesture, the lobbyist said.

Wilson's veto message echoed the criticism of leasing bill opponents and the state's Department of General Services. The department manages the state's vendor leases and recommended a veto.

"The Department of General Services, as the business agent for the state, is best suited to evaluate a bid package, including financing," the governor said.

"By extending to the treasurer the financing authority for any equipment, software, and services acquisitions over $100,000, this bill would remove the sole discretion from the department to determine whether vendor financing, master lease financing, or any other form of financing is in the best interest of the state," he added.

"I support efforts to streamline the procurement process so the state may obtain the most cost-competitive financing arrangements for equipment purchases," Wilson emphasized. "However, this bill would limit the administration's discretion."

The bill's supporters pointed out that the General Services Department, despite its longtime authority to sponsor master lease offerings, has never done so and continues to negotiate high-rate vendor lease contracts. With rates averaging above 10% and ranging as high as 18%, those contracts charge two to three times the tax-exempt market rates for comparable short-term offerings.

Sponsors had hoped that the state's Republican director of finance, Thomas W. Hayes, appointed by Wilson, might prevail upon the governor to sign the bill. Hayes supported the bill when he was state treasurer, before being defeated by Brown, a Democrat. But he recommended a veto when the bill passed last month, sources said.

Brown actively pushed for the bill's enactment - and at one point last year believed she had the governor's agreement, a spokesman for Brown said. But that was before the leasing industry pulled out all the stops to defeat it, he said.

One important factor swaying the governor was political charges that Brown was trying to increase her "empire" at the expense of the Republican administration, bill sponsors said.

"The computer industry was trying to make this as political as possible," said the Brown spokesman, adding that the charges were spurious.

"She's not going to build an empire with this kind of financing," he said. "This would be a drop in the bucket compared to the aggregate financings the treasurer usually does."

The treasury official added that the governor's veto was bad news for the state's taxpayers. "When you consider what the governor and the Legislature have just gone through on the budget, you would think he would have wanted to save the state money, even if it were just a million here and a million there."

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