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Disputed new proposal from Anchorage LIO landlord claims millions in savings

  • Author: Nathaniel Herz
  • Updated: September 28, 2016
  • Published February 5, 2016

A new proposal from the landlords of the Alaska Legislature's Anchorage office building says a purchase by the state could save millions of dollars, but a separate analysis by lawmakers' nonpartisan support agency accuses the landlords of using "misleading" data and creating a "statistical misperception."

The dueling documents come as lawmakers are considering whether to move out of the Anchorage Legislative Information Office on Fourth Avenue, which has drawn criticism for its luxurious design and expensive rent. After a no-bid lease extension negotiated by Rep. Mike Hawker, R-Anchorage, the lease for the renovated building jumped last year to $4 million from $682,000.

A joint House-Senate committee -- the Legislative Council -- voted in December to move lawmakers into the state-owned Atwood Building on Seventh Avenue unless the landlords, Mark Pfeffer and Bob Acree, responded with a proposal within 45 days to negotiate a deal for the current building at a "competitive cost."

That window closed this week. Sen. Gary Stevens, R-Kodiak, the committee's chair, released the landlords' proposal Friday, along with an analysis from Pam Varni, the director of the Legislative Affairs Agency.

A Legislative Council hearing to discuss the proposal is scheduled for Thursday in Juneau.

The landlords' proposal shows they haven't budged on their asking price of $37.9 million. But they're offering a 5 percent rent reduction while a sale is negotiated and say they may reduce the rent further.

The proposal also says the landlords have reached a tentative agreement to dismiss a lawsuit brought by Jim Gottstein, who owns an adjoining building. Gottstein sued the Legislature and its landlords last year, alleging that the no-bid lease renewal violated state law and that the renovations damaged his building.

An analysis attached to the proposal that the landlords said was done by the state revenue department says a debt-financed purchase of the office space could actually result in a negative "real cost" when the state accounts for the $37.9 million value of the building. That's compared to a real cost of more than $20 million over 20 years if lawmakers move to the Atwood Building.

Varni's own analysis argues that the landlords' proposal relies on several questionable assumptions. Accounting for a $37.9 million value for the building, she wrote, assumes the state would sell it at some point — and she added that an appraisal within the last six months pegged the building's value without the Legislature's lease at $20 million.

The landlords' proposal also accounts for decades of state debt payments connected to the state's purchase of the Atwood Building and an associated parking garage, even though those payments end in 2017 for the building, Varni said.

Her own analysis found that buying the Anchorage legislative offices using loans available to the state would cost $35.7 million over 20 years, compared to $11.8 million if lawmakers moved to the Atwood Building.

A spokeswoman for the landlords, Amy Slinker, responded to Varni's analysis with a prepared statement.

"We have just received Ms. Varni's memo, which lacks third party analysis," Slinker said. "The Department of Revenue's professional review shows the ability for clear savings."