Dems push measure calling for review of no-bid office leases

ldemer@adn.comFebruary 14, 2014 

A large construction crane is used to lift off the cement outside walls during renovations to the Alaska Legislative Information Office building on 4th Avenue in downtown Anchorage on Feb. 6, 2014.

BOB HALLINEN — Anchorage Daily News Buy Photo

Two Democratic legislators questioning the high cost of a no-bid lease for a renovated Anchorage legislative building want to require a public airing of such deals from now on -- before the Legislature signs a contract committing to the space.

Sen. Bill Wielechowski and Rep. Les Gara, both from Anchorage, on Friday announced legislation that would require the Legislature to provide public notice and hold a public hearing for sole-source leases that top $250,000 over the full term, including any extensions.

"I'd rather there be enough money for schools and more important priorities than a legislative building for when the Legislature is not in session," Gara said.

In September, Rep. Mike Hawker signed a sole-source contract with developer Mark Pfeffer that extends the Legislature's Anchorage lease for 10 years at a cost of $3.4 million a year for expanded, remade quarters -- a fivefold jump over the $682,356 a year it had been paying. And the old lease including most operating expenses, unlike the extension.

Hawker, an Anchorage Republican, chairs the Legislative Council, the joint House-Senate committee that conducts the Legislature's business, and the council in June gave him authority to negotiate a deal with Pfeffer. He didn't return calls Friday but in the past said the Legislature had looked for new space and was out of time, with its lease for 716 W. Fourth Ave. expiring May 31.

The true cost is even higher, according to Larry Norene, a semi-retired commercial real estate broker who examined the deal. Once utilities, maintenance, property taxes, insurance and other operating costs are factored in, plus the $7.5 million the state is paying toward the renovations, the cost works out to just less than $5 million a year, he found.

"We looked at whether we could somehow get out of that lease and there's really no way to get out of the lease once Rep. Hawker signed it," Gara said. "The sticker shock was paralyzing."

Wielechowski said Friday he's heard from many constituents and real estate professionals upset about the price and what he called excesses, including glass elevators.

"It's really an outrageous contract," he said. "There's just a very visceral reaction to this at a time we are billions of dollars in debt."

The Parnell administration estimates a gap of $1.1 billion between revenues and expenses next budget year, and that's provided the Legislature cuts spending by $1.3 billion.

During the 90-day legislative session, the six-story building houses only a skeletal staff of 11 or so. Other times, 90 or so people counting aides and lawmakers may work out of it but with a part-time Legislature "you can walk through and it's not really bustling," Wielechowski said.

Under the legislation, a public hearing would be held for any proposed leases that weren't generated through competitive bids and that would cost more than $250,000 over their lifetime. The public would get details about the space to be provided, the costs and other lease terms. The public also could comment on the lease terms for at least 30 days after the hearing.

Pam Varni, executive director of the Legislative Affairs Agency, which oversees legislative office space, said the Legislature seeks competitive proposals for leases topping $35,000 a year and sometimes for smaller ones.

But it also can extend an existing lease without competition -- as it did in Anchorage -- if the cost will be 10 percent below "market rental value." An appraiser determined that the Anchorage building was 13.5 percent below market value, though he did so mainly by using the value of the building once Pfeffer completes the renovations, in effect comparing the building to itself and not by evaluating the going rate for commercial real estate in Anchorage.

Since 2008, the Legislature has extended five leases that way, including the legislative building in Anchorage, Varni said.

Wielechowski filed Senate Bill 174 on Friday and Gara tried to do the same with its House twin.

But the House measure didn't make it into the list of bills "read across" -- officially introduced -- during Friday's floor session. That means it doesn't have a number or committee assignments.

House Speaker Mike Chenault, R-Nikiski, said Gara's bill was among several -- including one of his own -- that were overlooked.

"What happened was the bill was in a folder on my desk under some other papers and it got missed," Chenault said.

The measure should come up on Monday, the speaker said. He said he might assign it to four committees. That could mean the death of it. In the Senate, it was referred to two, the State Affairs and Finance committees.

Gara said he wasn't worried.

"It's an effort to make sure what happened last fall doesn't happen again," he said.


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