Desperate for money and on the verge of cutting schools, California has become a ready target for quick-cash ideas.

A British gaming company recently offered $1 billion to take over part of the California Lottery. Now a private investor group twice rejected by Gov. Jerry Brown is again pushing California to sell 11 office properties for $1.2 billion in immediate cash.

The Democratic governor hasn't changed his mind on selling prime state real estate, such as the Earl Warren Building that houses the state Supreme Court in San Francisco.

But with mid-year school cuts and an estimated $12.8 billion deficit on the horizon, California First LLC senses an opportunity.

The nonpartisan Legislative Analyst's Office panned the initial deal signed by Gov. Arnold Schwarzenegger last year. The state would have sold 11 properties to California First, five in the Sacramento region, then lease them back for at least 20 years.

The Analyst's Office said it was equivalent to paying more than 10 percent interest over 35 years to get $1.2 billion upfront. Brown called it the "ultimate in kicking the can down the road."

The idea hasn't disappeared entirely, in part because California First has some leverage. It filed suit in March alleging that the state had reneged on a contract signed by the Schwarzenegger administration to sell the buildings a year ago. The courts are reviewing that complaint alongside another case alleging that the original Schwarzenegger sale was illegal.

Brown officials met with California First in September, said Department of Finance spokesman H.D. Palmer, but the governor still opposes a sale.

"The governor made his views very clear when he reversed this back in February," Palmer said. "Meeting with this group doesn't translate into supporting whatever proposals they bring to the table."

California First is led by Antarctica Capital, described as "an international private equity firm with operations in the United States and India" in a document filed with the state last year. One managing partner was Rich Mayo, who previously oversaw state buildings as a Gov. Pete Wilson appointee.

The investor group has reconfigured its offer, this time relying on public bonds rather than private equity firms to front the money, according to a document obtained by The Bee. Under the new deal, the state would take back the properties after 30 years. A public financing authority would own the buildings during those three decades, during which the state would pay rent.

It isn't clear how much the deal would cost the state over 30 years. California First, in its document, suggests it is cheaper than the previous version because it relies on public bond financing and returns the buildings to the state. But much depends on the assumptions used, and no independent reviewer like the Analyst's Office has examined its cost.

Former Director of Finance Mike Genest, a consultant for the investor group, noted that the Analyst's Office suggested last year that this type of "public option" would be cheaper for the state than the version signed by Schwarzenegger.

Jerry Epstein, a businessman and former state building authority official who filed suit against the original deal, dismissed the idea.

"It's still costing the state," Epstein said. "This whole thing is so ridiculous, it's unbelievable."

Legislative Democrats signed onto the new sale-leaseback plan in June when they included it in the budget they sent the governor. At the time, they said the terms were better for the state than under the deal signed by Schwarzenegger. Labor groups representing some building employees also received assurances that union jobs would be protected.

But Brown swiftly vetoed the Democrats' budget, in no small part because it relied on selling state buildings.

Sen. Kevin de León, D-Los Angeles, said he remains open to considering a sale. He said lawmakers should have a special legislative session to find ways to avoid mid-year school cuts.

"If it comes down to a 1970s-circa government building or a child's education, I'm going to be on the side of the students," de León said. "What that means is every creative opportunity has to be on the table. It doesn't mean we're going to do it, but it means we have to scrutinize it to see how much bang we get for the buck."

© Copyright The Sacramento Bee. All rights reserved.

• Read more articles by Kevin Yamamura

Order Reprint