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Derelict Anchorage hotel plays pawn in developer's quest for rich tax breaks

  • Author: Charles Wohlforth
    | Opinion
  • Updated: July 1, 2016
  • Published January 27, 2016

Anchorage's worst eyesore, the derelict Northern Lights Hotel in Midtown, should have been gone last summer, according to what developer Joe Fang told the Anchorage Assembly in May, when he was asking for rich tax incentives for another project. The Assembly agreed, but the hotel is still there.

At Fang's request, the Assembly declared a chunk of his downtown property deteriorated, making it potentially eligible for a decade of tax exemptions that would be approved at a later date. Among the "deteriorated" properties are the historic 4th Avenue Theatre and the nine-story Key Bank Building at Fifth Avenue and F Street, which is full of upscale lawyers' offices and other professional tenants.

Fang had also promised to tear down the hotel in 2006, in a letter his contractor sent to the Anchorage Fire Department that formally submitted a plan of action for the building. The letter said: "Funds required to abate and demolish the building aren't currently available. We have decided to mothball the building as a temporary solution until the funds can be made available."

In 2007, blocks away, one of Fang's other companies built the beautiful 188 W. Northern Lights Boulevard office building, currently valued by the city at $31 million. In 2010, the state's economic development agency, AIDEA, agreed to lend the company $20 million at 3.27 percent interest for tenant improvements in that building (and for work at the theater).

So apparently, Fang did have some money.

The story of the failed hotel on Northern Lights Boulevard between Arctic Boulevard and C Street is rich with sordid Anchorage history, with various fires, five deaths by arson, a long-ago scandal and several bankruptcies. It failed for the last time in 2002 and was sold to pay debts.

Fang's company has owned the abandoned building most of the time since, through a period when the Anchorage Police Department used the hotel for tactical training, and in 2011, when city officials said it was unsafe for its employees to enter because of mold, dead animals and feces left by vagrants.

Over recent weeks, the security fence around the building has consistently been down. Last Friday, a homeless person's mattress lay under an overhang. Several upper windows were open or broken. Graffiti was everywhere.

On Jan. 14, an intoxicated man called the police from the third floor of the building saying he was lost and couldn't find his way out. With the help of a property manager, officers found the man and handed him over to the Anchorage Safety Patrol. APD received a report of men in the building on Jan. 10 as well, but couldn't find them.

I called Fang's Peach Investments for comment on Friday and Tuesday and did not receive a return call.

City officials say the building's property manager has been exceptionally responsive to addressing complaints. That makes sense, because as long as the building can't be designated as a hazard, the city can't force the owner to tear it down.

"I told the owners of the building to tear it down," said Mayor Ethan Berkowitz, "and they told me they are working through the process."

The process was created last May by the Assembly. I testified at a hearing on May 12 because I couldn't believe the Assembly would give a developer tax incentives to tear down the 4th Avenue Theatre, a National Historic Landmark. Although not yet an ADN columnist, I also wrote an opinion piece on it.

If you haven't seen the spectacular interior of the theater, take a look at the pictures held by the Library of Congress.

Fang showed the Assembly grandiose but vague renderings of a massive mall, office and apartment building he would build downtown. He said he would try to save historic elements of the theater that were economically feasible -- meaning the ones he wanted to pay for, I guess, since he didn't define "feasible."

In fact, Fang didn't really promise anything. He told the Assembly he expected to tear down the Northern Lights Hotel during the summer or "hopefully by the end of the year." He said something about building a senior housing high-rise on that site. Not a promise, either.

In business, people write down their promises in contracts. But the Assembly, as if recently disembarked from a turnip truck, was satisfied with vague expectations of what Fang would do.

On that basis, it declared deteriorated property of the theater, the building next door that houses the Sevigny Studio and the Cake Studio Bakery & Boutique, the alley and parking lot behind, and the bank building, with its granite-decorated legal offices. And, at the hotel site, it declared parts of the city's own road rights of way as deteriorated property, apparently expecting to give that land to Fang too. And it voted discounts on dump fees for the demolition.

The only condition on Fang was to tear down the Northern Lights Inn by the end of 2017 or lose the incentives.

Fang's company applied to the city's chief fiscal officer for the tax breaks on the downtown redevelopment on Sept. 30. Robert Harris, the CFO, has hired an economic firm for the review, which he expects to complete by the end of February.

The City Attorney's Office provided parts of the application, with few new details. Missing was the meat of the deal, a draft Memorandum of Understanding spelling out how the downtown redevelopment project would be reviewed. That information is supposedly proprietary.

Berkowitz, who came to office after the Assembly's May vote, will receive Harris' recommendation. He could reject the incentives for providing too little benefit for the city. But under the Municipal Code, the Assembly could ignore all that and still give the tax break. Which it might do, given that it voted 9-2 for Fang's plan in May.

Bringing me to my point. Which isn't about the historic theater, as much as I care about that. It isn't even about Fang inflicting his mess on us for a decade and then holding out for tax breaks to clean it up. My point is that the Assembly is too gullible to be taking care of our money.

Charles Wohlforth's column appears three times weekly.

The views expressed here are the writer's and are not necessarily endorsed by Alaska Dispatch News, which welcomes a broad range of viewpoints. To submit a piece for consideration, email commentary(at)alaskadispatch.com. Send submissions shorter than 200 words to letters@alaskadispatch.com or click here to submit via any Web browser.

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