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Report: State saves $7.5M if lawmakers leave new Anchorage offices

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

JUNEAU — The Alaska Legislature would save $7.5 million by moving to the state-owned Atwood Building in Anchorage instead of buying its existing, remodeled office space in the city, according to a new independent report commissioned by lawmakers.

The financial analysis, by a San Francisco-based employee of consulting firm Navigant, says issuing bonds to buy the existing offices on Fourth Avenue at the landlords' $37 million asking price would produce a $31.7 million total cost over a 20-year period.

Moving to the Atwood Building, on Seventh Avenue, would cost $24.2 million.

Much of that savings, however, stems from the fact that the Legislature says it would need 20 percent less space in the Atwood Building. The cost per square foot at the Atwood Building is only about 4 percent cheaper, at $2.95 compared to $3.08 if the existing building is purchased.

The total 20-year cost of the two options would match if the landlords for the current building, Mark Pfeffer and Bob Acree, dropped their asking selling price to $29.2 million. And the price-per-square-foot would match if the price fell to $35.6 million, the report said.

The 20-year cost of keeping the Legislature's existing lease, meanwhile, is $61.8 million, according to the report.

The joint House-Senate committee that approved the current lease, the Legislative Council, commissioned Navigant's analysis after members failed to reach consensus using competing reports from the landlords and legislative support staff.

Lawmakers have been considering whether to relocate for a full year, since just after they moved into the remodeled space.

Under the Legislature's no-bid lease extension, negotiated by retiring Rep. Mike Hawker, R-Anchorage, annual payments for the Anchorage office space jumped last year to $4 million from $682,000, and some lawmakers say that's unaffordable as the state grapples with a $3.8 billion budget deficit.

The House and Senate each passed different budget proposals this month that, between them, offer the flexibility to pay the existing lease costs, or pursue other options.

Sen. Gary Stevens, R-Kodiak, the Legislative Council's chair, called the Navigant report thorough. He said it was "surprising" to see how competitive the different options are.

"It puts it all on one piece of paper," Stevens said in a phone interview Friday. "We can all look at it, and the public can look at it, and we can figure out what the best route is for us."

Stevens' next step, he said, is to negotiate with the landlords on the building's purchase price. A Legislative Council meeting will likely be scheduled in the next two weeks for lawmakers to make a final decision, he added.

Stevens noted the analysis doesn't account for the cost of litigation if the Legislature decides to end its existing lease and the landlords file a lawsuit. And, he added, a public interest lawsuit by attorney Jim Gottstein that challenges the legality of the lease further complicates the situation.

Oral arguments on Gottstein's motion for a partial summary judgment to void the state's lease are set for Tuesday afternoon.