Alaska lawmakers will stay in Anchorage offices at least three more months in spite of invalid lease

The Alaska Legislature will pay about six months of rent for its downtown Anchorage office space even though a judge ruled in March that its lease for the building violated state law.

A legislative leader, Kodiak Republican Sen. Gary Stevens, said Tuesday he hopes lawmakers will be able to move into offices in Spenard by the end of the year and expects to complete the $11.9 million purchase of the Wells Fargo-owned building within the next two weeks.

But even if the sale proceeds as planned, Stevens said, lawmakers will give their current landlords in the downtown building 90 days' notice before moving. That means that by the time the Legislature vacates its Fourth Avenue building, it will have paid at least $1.7 million under its $3.4 million-a-year lease after Anchorage Superior Court Judge Patrick McKay ruled March 24 that the contract violated state procurement law.

"I'm kind of in awe over the blatant disregard of the law," said Jim Gottstein, the Anchorage attorney who brought the successful citizen lawsuit challenging the lease.

Stevens, in a phone interview Tuesday, cited legal advice he's received from legislative attorneys in arguing that lawmakers have a "moral obligation to stick to the contract" with landlords Mark Pfeffer and Bob Acree until the Legislature moves out of the Fourth Avenue building.

In the budget signed last week by Gov. Bill Walker, the Legislature included money to pay for three months rent for the Fourth Avenue building — enough to cover payments through the end of September. Stevens said lawmakers have enough flexibility in their own $65 million budget to pay for extra time, if it's necessary.

Stevens, the chairman of the 14-member House-Senate Legislative Council, said he hopes to finish negotiations with Wells Fargo by July 15, and have lawmakers — as well as legislative auditors, and legislators currently housed in separate Eagle River offices — moved into the new Spenard building before the end of the year.

It wouldn't make sense to move out of the Fourth Avenue offices and into a separate space in the meantime, like the state-owned Atwood Building on Seventh Avenue and F Street, Stevens added.

"We would have to spend a lot of money and a lot of time doing reconstruction," he said. "We should stay where we are and get out of there as quickly as we can."

That mindset appears to be shared by legislators across the political spectrum, who agreed that remaining in the Fourth Avenue building was probably their best option.

"We can't just move out on the sidewalk," said Rep. Steve Thompson, R-Fairbanks, a House leader and alternate on the Legislative Council, which conducts the Legislature's business. One of Thompson's Democratic colleagues, Anchorage Rep. Andy Josephson, said: "It sounds like a headache to me to pack up those offices and move somewhere, and move somewhere again."

Lawmakers moved into their newly renovated Anchorage offices early last year, with annual payments for the space — including utilities, insurance and other costs — jumping to $4 million from $680,000 before the renovations.

Two months later, Gottstein, who owns an adjacent building, filed his lawsuit, challenging the 10-year lease for the legislative offices that Rep. Mike Hawker, R-Anchorage, the previous Legislative Council chairman, negotiated with the politically connected landlords.

McKay ruled in March that the no-bid lease was illegal because it wasn't a lease extension, even though the Legislature argued it was. Instead, McKay said, the lease should have been competitively bid.

McKay's 17-page decision sharply criticized the lease, saying that ruling it legal would "eviscerate" the state's competitive bidding laws.

But he ordered no remedy other than a simple "declaratory judgment" that the lease was invalid, even though Gottstein had requested a hearing on "further necessary or proper relief" like repayment by the landlords of some of the money spent by the state.

Neither the Legislature nor the landlords have appealed McKay's decision, but if they had, "I would have raised that issue," Gottstein said.

The landlords' spokeswoman, Amy Slinker, and one of their attorneys, Don McClintock, didn't respond to requests for comment Tuesday.

Meanwhile, one other aspect of the case is heading to the Alaska Supreme Court after Gottstein last week appealed a $2,200 reduction from the $26,100 in attorneys fees that he was awarded by McKay.

In his initial complaint, Gottstein asked for a whistleblower's award of 10 percent of any savings made by the state if the Legislature's lease for the Fourth Avenue building was invalidated or reformed.

There's no modern precedent in state law for the request, but there's also no explicit restriction that would have barred McKay from granting such an award, Gottstein said. He wrote in one of his filings that 10 percent would "make meaningful the right of citizen-taxpayers to seek judicial redress of illegal government action," while criticizing a 2003 law passed by the Legislature that shields the state from liability.

Federal law dating back to profiteering during the Civil War allows citizens to collect a percentage of fraudulent claims if they take the case to court on their own.

But McKay rejected Gottstein's request in a January decision, ruling he had "no legal grounds" to make it. McKay said the Legislature, not the judiciary, was the proper branch of government to set new public policy creating a financial incentive for whistleblower lawsuits.

Along with his ruling last month awarding Gottstein his fees, McKay deducted the $2,200 after the Legislature requested its own attorneys fees for its successful argument against Gottstein's whistleblower award.

McKay's order found that Gottstein's request was "frivolous"; Gottstein appealed the deduction to the Supreme Court, saying that the finding "impugns my character."

"I just wasn't going to let that stand without fighting it," he said.