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Anchorage legislative office lease estimated to cost $80 million over 20 years

Pat Forgey
Members of the Alaska Legislative Council last week wanted an extra week to study a proposal for the state to purchase the Anchorage Legislative Information Office, but that week got longer, and a critical meeting to hash out the deal set for Thursday was canceled. Loren Holmes photo

JUNEAU -- Members of the Alaska Legislative Council last week wanted an extra week to study Rep. Mike Hawker's proposal for the state to purchase the Anchorage Legislative Information Office it is now leasing at a cost of $80.5 million over 20 years.

But that week stretched into 10 days, and when the time came for the critical meeting Thursday, it was abruptly canceled.

What legislators are being asked to do by Hawker, an Anchorage Republican who chairs the joint House and Senate council that manages the daily operations of the Legislature, is spend $28 million to buy the Anchorage LIO. That's the Fourth Avenue building in which Anchorage-area legislators have offices, and which is used for public meetings when the Legislature is not in session in Juneau.

Hawker and the building owners last year signed a deal which would expand and renovate the LIO, at a cost five times what the Legislature was currently paying.

But with that deal facing criticism over its steep price tag, Hawker last week proposed spending $28 million to buy the building so the state would own it outright. The state would continue to lease the ground on which it sits, along with an adjacent parking lot.

In an election year and with billions of budget deficit forecasts that were announced not long after the lease was signed, a new LIO deal has been a tough sell among some.

At the end of the proposed 20-year ground lease, the state would have the option for purchase at market value.

Senate President Charlie Huggins, R-Wasilla, Thursday asked that the meeting be canceled. The meeting will likely be rescheduled for early next week, and will provide more time for legislators to review the deal, a spokesperson said.

While no committee members said so publicly, difficulty in lining up support for a purchase may have led to the twice-delayed Legislative Council meetings.

Hawker this week defended the deal in a press conference and a position paper. By buying the building for cash, he said, the state would save millions in interest payments that the building owner, a limited liability company in which Anchorage developer Mark Pfeffer is a partner, would have to pay. In addition, he said, public ownership would exempt it from local property taxes.

The Legislative Council, even before he became chairman last year, repeatedly sought to buy a building for its Anchorage office, Hawker said.

"We're always mindful that the Legislature has pursued and had four failed efforts to buy buildings in the past," he said. "We really did want to continue to try to buy a building."

One of those was the former Unocal building, but it was instead bought by NANA Corp. for its Anchorage offices.

That left the Legislature with little time to relocate and forced the expensive Fourth Avenue lease, he said. Hawker said all procurement rules were followed in adopting the new lease.

Now, he said, purchasing the building is an option that wasn't available before.

"They were unwilling to take the income tax penalty associated with a property sale," Hawker said.

But now with the involvement of experts at the Alaska Housing Finance Corp., a deal has been structured for the combination lease and purchase that the owners find acceptable, he said.

The purchase would save the state $20 million over the life of the lease, he said, and at the end would give the state ownership of the building.

While there would be an upfront cost of $28.25 million, the purchase would reduce the state's annual cost from $4 million to $1,625,000, he said.

The canceled Legislative Council meeting was also scheduled to address a needed seismic retrofit at the Capitol building in Juneau. The council was going to be asked to approve the first $5.6 million of a possible $33 million in repairs.

Contact Pat Forgey at pat(at)alaskadispatch.com.