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Other legislators share credit for the 'Taj' in downtown Anchorage

  • Author: Dermot Cole
    | Opinion
  • Updated: July 7, 2016
  • Published November 28, 2015

On June 7, 2013, the Legislative Council approved a plan allowing state Rep. Mike Hawker, its chairman, to cut a deal for renovating the office space occupied by Anchorage legislators.

After ducking the problem for years and with the lease on the downtown quarters about to expire, the 13 other members of the council handed everything to Hawker 2 1/2 years ago.

The blame for the furor that followed fell mostly on Hawker. But other legislators are being too modest about their roles and should have their names engraved on the Taj next to Hawker's. As a group, they failed to pay attention, failed to ask questions and failed to follow through.

Regarding the negotiations that produced the lease extension and renovation, documents made public from a lawsuit show Hawker repeatedly tried to undercut the work of legislative lawyer Doug Gardner and showed more affinity for working with developer Mark Pfeffer and his attorneys than in cooperating with the legislative staff and the head of the Legislative Affairs Agency, Pam Varni, who, theoretically, were on his side.

Internal emails and other documents uncovered as part of the lawsuit filed by attorney Jim Gottstein challenging the lease reflect what can only be called a disjointed approach.

"I don't see anything that Pam or Gardner can do now to derail this," Hawker wrote Pfeffer from his private email account on Aug. 25, 2013, well into the proceedings, "Not that they will not try." On another occasion, he referred to one or both as "obstructionist."

The lack of transparency with the lease extension and renovation began with the actions taken by the Legislative Council at its June 2013 meeting. It turns out that one of the key provisions cited as the legal justification for the extension was viewed one way by Hawker and the developer and another way by the legislative staff.

Under state law, the only way to allow the Fourth Avenue lease to be extended without a competitive bid was if the cost came in at 10 percent below the market for rentals.

In that June 2013 meeting, the Legislative Council — without a roll call vote — unanimously backed a no-bid lease extension, "as long as certain financial conditions are met as described in AS 36.30.083(a)," as Hawker put it. Without that assurance of a 10 percent savings, under the Alaska statute cited by Hawker, the lease could not have been extended. There was no confusion on that score.

But as soon as the lease had been extended, the financial rules either changed or they didn't. Within a few minutes, the council approved plans to modify the lease and have Hawker negotiate the renovation project. He said the building improvements had to cost less than "newly constructed facilities" in downtown Anchorage.

Developer Mark Pfeffer and his attorneys and Hawker believed the second step eliminated the need for the overall cost to be 10 percent below the market rate. But Gardner, the legislative attorney, didn't see it that way.

There should have been no confusion on this central issue. That there was such disagreement is a clear sign of a flawed process at the start.

In Gardner's mind it was clear. He was "dug in with his theory" that it had to be cheaper than comparable quarters, an attorney for the developers said, according to court records.

"I think Gardner is just flat out wrong," Pfeffer wrote July 13 in an email to Hawker.

A Pfeffer attorney said Gardner believed it could be seen as "disingenuous" to extend a lease based on the idea that it would be 10 percent below the market rate, if the lease was not actually 10 percent below the market rate.

Gardner was right. Disingenuous would be one word to describe that.

A representative of the developer argued the Legislature could "continue to enjoy that deal," meaning the 10 percent savings, but only if the renovation work did not take place and the Legislature accepted the building "as is."

Pfeffer attorney John Steiner said in an email Gardner told him he did not want to get "crosswise" with Hawker, but Gardner believed the sole-source, no-bid contract for renovation could be justified only if it came in at 10 percent below the market.

"We explained that the long term deal was not conceived with those expectations, which we believed was fully understood by Rep. Hawker. Gardner seemed to think some of the legislative council members voted in reliance on exactly the contrary understanding: that the renovated space would satisfy those parameters," Steiner wrote a little more than a month after the vote.

Anyone who listens to the recording of that June 7 Legislative Council meeting would hear the reason for that contrary understanding — Hawker mentioned the statute that required a 10 percent price difference and the other legislators did not question the provision or say they thought the rule did not apply.

Eventually, the parties found a way to produce an agreement that showed compliance with the 10 percent rule. But it was not done in a way that builds public confidence in the process.

They did it with an appraisal that compared the downtown building to its future self, comparing the lease to the value of what it was supposed to be when completed.

The contortions involved with this clever approach, founded on the notion that it was a specialized building — like a bowling alley — that couldn't be compared to a regular office building, produced the conclusion the rent of the renovated building would be more than 10 percent below the market rate for a specialized building like it. Others with knowledge of real estate values have argued the cost is not cheaper, but two to three times the going rate in Anchorage.

The disclosure that the 10 percent goal was not what the developers envisioned — contrary to the opinion of the legislative staff — raises new questions about which came first, the circuitous appraisal approach or the final number that showed the state would be paying less than the market rate, allegedly saving more than $500,000 a year compared to what a hypothetical building would require.

The Legislature is now paying about $4 million a year, up from about $680,000 when the building was in bad shape.

In multiple documents produced for the lawsuit, Hawker is quoted as privately saying, "I hate lawyers."

It is not necessary to hate lawyers or love lawyers. It is necessary to work with lawyers to get the best deal in a complicated real estate transaction, especially when legislators pass up the chance for private-sector competition.

The legislative staff or a hired professional should have negotiated this deal, not Hawker, a decision for which the leaders of the Legislature are responsible. At the very least, there should be an investigation of this flawed and secretive process.

The views expressed here are the writer's own 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)