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Lawmakers take initial step to leave Anchorage offices

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  • Updated: September 28, 2016
  • Published December 19, 2015

A legislative committee Saturday voted to end the Legislature's lease for its newly renovated Anchorage offices, but left the door open to buying the space if lawmakers can negotiate a better deal.

The vote by the Legislative Council — a nonbinding budget recommendation to the full Legislature — could lead to lawmakers moving out of their renovated downtown Anchorage offices and into the state-owned Atwood Building nearby. But the unanimous decision to withdraw funding for the lease also provided a 45-day window for lawmakers to come up with a deal for the current offices at a "competitive cost."

Juneau Rep. Sam Kito III, the sole Democratic minority member on the House-Senate council, said he was satisfied with the recommendation to defund the lease, but remained skeptical that the issue would be settled at the end of the 45-day period.

"At this point I'm hopeful," he said in an interview. "But I wouldn't be surprised if we get to that point and kick the can down the road again."

The decision came after a Saturday morning meeting that stretched more than four hours, with a plea for reason by the office space's developer and a lengthy debate over legislators' options. Several said they weren't ready to end their lease and risk a lawsuit that a legislative attorney said could cost as much as $2 million.

"We need to be fully aware of what we're doing, and I don't think we've gone deep enough," said Rep. Charisse Millett, R-Anchorage and the House majority leader, a day after she said she was leaning toward a move. She added later: "We shouldn't have half of the information that may be slanted one way or the other."

Over the course of Saturday's meeting, lawmakers heard from developer Mark Pfeffer, as well as attorneys and financing experts, in a painstaking discussion of the costs, benefits, risks and rewards of sticking out their existing 10-year lease, buying the renovated building, or moving to cheaper space in the state-owned Atwood Building on Seventh Avenue and F Street, which they would share with Gov. Bill Walker.

As they did at another meeting about the office space earlier this month, legislators said they wanted more time to digest competing analyses delivered to them by the council's chair, Sen. Gary Stevens, R-Kodiak, by the state's debt manager, and by the Alaska Industrial Development and Export Authority.

"Even in these sheets, I see ulterior motives as to why these numbers are the way they are," House Speaker Mike Chenault, R-Nikiski, said at one point as he held up a sheet of paper.

The discussion began at 9 a.m. Saturday and lasted until just before 2 p.m., when lawmakers, who had several tense exchanges during the meeting, emerged from about an hour of closed-door talks to make their unanimous decision.

Pfeffer, in a vest and a plaid shirt, sat in the back row next to a lobbyist and spokeswoman, and at one point he was called to testify before the committee. He urged members to "find a pathway to savings," a few minutes after they learned Pfeffer made a last-minute offer Friday afternoon to drop his asking price for his building by $1 million, to $36 million.

"We know you need to save money," Pfeffer said. "We believe there are reasonable ways to do that."

After the meeting, his spokeswoman, Amy Slinker, issued a prepared statement saying the developers were "pleased the Alaska Legislative Council decided to gather more information before making a decision."

"We believe there are several options that save the state money without taking the drastic step of breaking the lease," the statement quoted her as saying.

Several lawmakers not on the committee also came to watch on Saturday, with one, Rep. Bob Lynn, R-Anchorage, bringing prepared testimony urging the Legislature to rent smaller office spaces around the city instead of the full renovated building.

Another, Rep. Louise Stutes, R-Kodiak, offered a frank opinion to a reporter before the start of the meeting: "I think we ought to move."

Also in the audience was Jim Gottstein, an Anchorage attorney and plaintiff in a public interest lawsuit challenging the lease's legality, who sat in a suit in the front row. Behind him was Shirley Cote, a Democratic challenger to Anchorage Republican Rep. Mike Hawker, who negotiated the lease for the renovated offices.

The lease left annual costs for the space rising to $4 million this year, up from $680,000, as the state faces a $3.5 billion deficit — with lawmakers moving into offices with glass walls, glass elevators and motion-sensing trash cans.

Critics refer to the renovated building as the "Taj Mahawker." Chenault said Saturday that Hawker, who missed the meeting, had been "crucified" over the deal, even though it was "not his fault."

The lease extension came after lawmakers had pushed off the search for a replacement for their Anchorage offices for a decade, Chenault added.

"We've had to deal with this for the last 10, 12 years and we need to make a permanent decision," he said. "Not one that gets us out of hot water with the voters right now, but one that makes actual business sense."

During the meeting, lawmakers sparred over the assertions and calculations delivered to them by various experts. One of them, prepared by state debt manager Deven Mitchell at the request of House Republican leaders, showed that buying the renovated building using one type of financing would actually generate a $1.2 million return over the next decade — compared to an $8.5 million minimum cost for the Atwood Building.

Another new analysis prepared by Stevens' office calculated that moving to the Atwood Building, after accounting for opportunity cost, could save at least $2 million compared to purchasing the renovated space developed by Pfeffer and his business partner Bob Acree.

That was a change from a previous report by Stevens' office that said a purchase would cost the state at least $30 million more than moving to the Atwood Building over a 10-year period.

The competing accounts left many lawmakers frustrated. Rep. Craig Johnson, R-Anchorage, said Stevens' comparisons of the options were "not even in the same vegetable group, much less apples to apples," while Millett at one point asked for the creation of an apolitical committee to help with the number-crunching.

"Making us take a vote today on information that's imperfect would be a sad thing," she said.

Correction: An earlier version of this story contained an incorrect headline that said the Legislative Council had postponed action on the lease. Additionally this story originally quoted Mark Pfeffer as urging members of the committee to find "a pathway to save this," in reference to the lease. Pfeffer said "a pathway to savings."

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