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Judge gives green light to suit challenging Legislature's lease for Anchorage offices

  • Author: Nathaniel Herz
  • Updated: September 28, 2016
  • Published August 18, 2015

A trial court judge Tuesday rejected a request by the Alaska Legislature to throw out a lawsuit challenging its expensive lease of office space in downtown Anchorage.

After an hour of arguments, Anchorage Superior Court Judge Patrick McKay said he would give attorney Jim Gottstein citizen taxpayer standing in his lawsuit, rather than grant a request to dismiss the case made by an attorney for the state's Legislative Affairs Agency.

The attorney, Kevin Cuddy, had argued Gottstein didn't have standing in the case because there were other entities more affected by the no-bid lease the Legislature signed for its Anchorage offices, like potential landlords deprived of a big contract.

McKay disagreed and said the suit could go forward.

"When we're talking about a public procurement case, citizen taxpayers have a dog in those fights. They don't have to be big," McKay said. "There is nobody else."

The judge said he'd issue a written opinion later, and stressed his ruling Tuesday has no bearing on how the case will ultimately be decided.

"This is just barely a step into the door," he said.

Gottstein brought his lawsuit earlier this year. He owns the Alaska Building, which adjoins the Legislative Information Office on Fourth Avenue, and part of his lawsuit contends that a shared wall was damaged during renovations to the LIO.

He also argues that the Legislature broke a state law barring no-bid lease extensions unless the cost is 10 percent below market rates.

The Legislature now pays $4 million annually in rent for its Anchorage offices, up from $680,000 last year following renovations made by developers Bob Acree and Mark Pfeffer.

A state appraisal said the new cost is still below market rates, though an independent commercial broker has said it's substantially more expensive than rent for similar spaces elsewhere downtown.

The building has motion-sensing trash cans as well as glass-walled elevators and offices, leading critics to attack it as the "Taj Mahawker," after Rep. Mike Hawker, R-Anchorage, who negotiated the lease. Lawmakers considered voiding the lease and moving into a state-owned building during the legislative session earlier this year, but ultimately decided to explore buying the LIO instead.

McKay issued his decision Tuesday to a crowd of about 20 people that included legislative staffers, the Legislature's staff attorney, and Sam Combs, an architect who ran unsuccessfully against Hawker last year.

The ruling came after arguments by Gottstein and Jeffrey Robinson, who represented the LIO's developers, as well as by Cuddy, who's working under a legislative contract capped at $100,000.

Robinson called Gottstein a "sham plaintiff" and said Gottstein's arguments hinged on unsubstantiated claims.

"What the court has before it is Gottstein yelling, 'corruption, corruption, corruption,' without specifying who's involved in the corruption," Robinson said, citing some of Gottstein's public statements and press releases.

McKay responded that the arguments filed in legal briefings were more technical, adding at one point: "I don't read press releases."

In his own argument, Gottstein, in a charcoal suit, white shirt, and striped red tie, acknowledged one element of his case — his request for 10 percent of hypothetical savings the lawsuit nets for the state — was shaky.

But he maintained the overall suit was valid.

"It's hard to see when citizen taxpayer standing would ever be allowed if it's not allowed in this case," he said.

The ruling Tuesday allows the process of discovery, or evidence gathering, to move forward. Gottstein is seeking documents related to the lease from the Legislature, and from the building's developers.