Anchorage

City denies $38M tax break for proposed 4th Avenue Theatre redevelopment

A tax break that was part of a proposal to redevelop the historical but unused 4th Avenue Theatre downtown has been denied by the city’s chief fiscal officer, according to documents submitted to the Anchorage Assembly this week.

The owner of the theater and adjacent properties, Peach Investments, had proposed a complex costing roughly $278 million that would include pedestrian shopping, a parking garage and tower. The Assembly declared the property "deteriorated" last May, and in September, Peach Investments applied for partial tax exemptions amounting to about $38 million over 10 years.

Without a tax break, the owners argued, the project most likely couldn't happen. But in a memo to Mayor Ethan Berkowitz and the Assembly, Anchorage chief fiscal officer Robert Harris said the application didn't demonstrate that the tax break was in fact necessary — or that the project even qualified for one under current city law.

In an interview Wednesday, Harris said the proposal detailed a project that was just in its early stages and lacked specifics. He said the owners didn't pin down key details, like whether a hotel or a condominium would be built.

"If the taxpayers are being asked to give basically $38 million of tax exemptions, it's really great to know exactly what we're buying," Harris said.

[4th Avenue Theatre owners propose major redevelopment in downtown Anchorage]

Harris said he found "puzzling" a section of Peach Investments' application that said the tax break would mean the difference between a two- to three-story office building and a $278 million complex. He also said there wasn't enough data provided by the owners to show how the tax break would "measurably" benefit downtown Anchorage.

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Peach Investments is owned by Joe and Maria Fang, whose sons Terrence and Derrick Chang live in Anchorage.

Phone messages left with Terrence Chang Wednesday were not returned, nor was a message left with the project consultant, Agnew Beck Consultants. It wasn't clear what the developers' next steps would be. Harris said he wasn't aware of any kind of time frame that would limit how soon the owners could re-file a request for a tax exemption.

Harris wrote in his memo that Peach Investments declined in January to provide more details about the project, in response to a request from the city.

Peach Investments "indicated they would prefer to commit to a level of spending, rather than a specific development," Harris wrote. "However, at present, (city code) does not allow the Municipality to evaluate a project on those terms."

Harris' office took eight months to review the proposal. The city also hired a consultant, Northern Economics Inc., to conduct an economic analysis of the proposal under a $27,500 contract.

The owners of Peach Investments can go before the Assembly on June 7 and argue for a reversal of the decision.

To gain the "deteriorated" status for the theater and surrounding properties and apply for the tax exemptions, Peach Investments also agreed to tear down the blighted Northern Lights Inn in Midtown by the end of 2017, with the help of city fee waivers for trash removal. If the inn isn't torn down by then, the "deteriorated" status for the downtown properties will go away, Harris said.

The wrangling over the tax break means uncertainty for the future of a landmark Anchorage building held dear by both residents and visitors, and for a key segment of downtown that has languished for years. The application for the project, pitched as a major economic shot in the arm for downtown Anchorage, said the developers would incorporate elements of the original facade of the 4th Avenue Theatre and attempt to retain some elements of the lobby, though the future of the former auditorium and interior murals was murky.

Berkowitz declined to comment through a spokesman, but city development director Chris Schutte said the future growth of downtown Anchorage "does not necessarily hinge on one project."

"The 4th Avenue Theatre redevelopment proposal was just the first in what I hope will be many expressions of interest by the private sector in the potential for downtown redevelopment or new development," Schutte said.

Cities elsewhere in the United States have used tax breaks and fee waivers to encourage redevelopment in blighted or dormant urban areas. At this point, Anchorage only has three main options on the books: fee waivers, the deteriorated property designation and a related tax abatement program for which no developer, to Schutte's knowledge, had ever qualified.

In the application, the owners of Peach Investments cite high construction costs and an "untested market" as justification for a tax break from the city, but also say the size and scope of the project would depend in part on the amount of the break. Without 10 years of tax exemptions and five years of tax deferrals, the owners said, a "small, modest two or three story office building could be built in an effort to end the financial burden of maintaining two uninhabitable properties" at 608 W. 4th Ave. and 630 W. 4th Ave.

Downtown Assemblyman Patrick Flynn said Wednesday he wasn't particularly optimistic about the future of the derelict theater and properties nearby.

“I wouldn’t be the least bit surprised if it sort of sits there for awhile,” Flynn said.

Devin Kelly

Devin Kelly was an ADN staff reporter.

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