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Anchorage could lose $425K in property taxes if Legislature buys downtown building

Sean Doogan
The Legislative Information Office in downtown Anchorage is the main office for Alaska's legislature in the state's largest city. It is undergoing a significant remodel. Loren Holmes photo

As the Alaska Legislative Council considers whether to buy the Anchorage Legislative Information Office, a multistory office building downtown, the decision has serious financial implications for Alaska's largest city and its property tax payers.

The building, currently leased by the state from a private owner, is undergoing $28.5 million in renovations. Rep. Mike Hawker, R-Anchorage, who chairs the Legislative Council that approved the renovations and, with them, a fivefold increase in rent, said if the state bought the LIO building instead of leasing it for the next 20 years, it could save almost $48 million in rent. But the sale of the building would also remove it from Anchorage's municipal tax rolls.

The building, an adjacent parking garage, and the land it sits on are valued at $3.7 million by the city and paid $56,753 in property taxes last year. But the renovations could increase the valuation of the building to about $30 million, according to the Municipality of Anchorage. Property taxes would be about $425,000 a year.

But if the state buys the building instead of leasing it, Anchorage would get nothing, as the state pays no property taxes. The Legislative Council proposal would have the current owner retain the land and the parking garage. After the retrofit, taxes could be as much as $120,000, according to Hawker. While that is about twice as much as is being paid in property taxes now, it is still about a quarter of what the Municipality of Anchorage would get if the state continued to lease the building after the renovations are complete.

The deal to renovate the building and the proposal to buy the building outright have been mired in controversy.

Hawker said the search for a new building has yielded no other alternatives in the area.

"The issue has been kicked down the road until there is no road left," Hawker said.

If the state buys the building, the Municipality of Anchorage won't be able to collect its $56,753 in property taxes. But considering the property's value after renovations, Anchorage is really losing out on about $425,000. That may not seem like a lot for Alaska's largest city. It's about 0.1 percent of the $500 million Anchorage collects in property taxes each year. But with the budgets of the municipality and its school district strapped for cash, some are beginning to wonder if the LIO deal makes sense for Anchorage. 

"The municipality would prefer that the property stay on the tax rolls, but it is up to the state to decide what is in its (own) best interests," said Anchorage Mayor Dan Sullivan.