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Report: Buying Anchorage legislative building would cost $30 million more than moving

  • Author: Nathaniel Herz
  • Updated: September 28, 2016
  • Published November 30, 2015

When Senate lawmakers proposed canceling the Alaska Legislature's pricey lease for its renovated Anchorage office space earlier this year, some House members balked, saying they should proceed cautiously by first exploring whether to buy the building.

But now, a new report puts a price tag on that option for the first time — one that's at least $30 million steeper than moving lawmakers to existing state-owned office space.

The report, released Monday, said a cash purchase of the legislative offices on Fourth Avenue would cost the state about $43 million over the next decade: $37 million for the building and the land beneath it; $950,000 to cover the landlord's penalty for his early repayment of a loan; and $525,000 in annual operating expenses.

Moving lawmakers into the state-owned Atwood Building on Seventh Avenue, meanwhile, would cost $10 million -- $665,000 in annual operating costs, plus $3.5 million to get the new space ready for the Legislature. It would also mean the state would walk away from $7.5 million it has already invested in the Fourth Avenue building for "tenant improvements."

The new figures were compiled by the office of Sen. Gary Stevens, R-Kodiak. He chairs the Legislative Council, which handles lawmakers' internal business and budgets.

The 14-member committee is scheduled to meet Friday afternoon in Anchorage to consider the options in the report.

The Legislature's renovated offices on Fourth Avenue have drawn criticism for their cost and amenities.

While a state budget crisis forced lawmakers to make substantial cuts this year to state services and to their own legislative budgets, they moved into a newly remodeled building that has automatic trash cans, a pair of glass elevators and glass walls with expansive views of Cook Inlet and its surrounding mountains.

With the move, the annual payments for the Anchorage "legislative information office," or LIO, jumped to $4 million from $682,000. Critics call the building the "Taj Mahawker," a reference to Rep. Mike Hawker, R-Anchorage, who negotiated the lease that's now the subject of a public interest lawsuit.

Recent court filings in the case include documents showing Hawker working closely with the building's developers to make the deal conform to state procurement law, and to thwart concerns raised by a legislative attorney.

During the legislative session earlier this year, a Senate committee proposed stripping funding for the lease and forcing a move to the Atwood Building -- an option that Stevens was also exploring as chair of the Legislative Council.

But the council includes several of Hawker's allies in the House Republican leadership, and Stevens said members asked him to examine a purchase of the renovated space as a first step before breaking the lease with developers Mark Pfeffer and Bob Acree.

Stevens' report is the result of that request. It was published on a legislative website Monday, though Stevens was traveling to an education conference in Texas and couldn't be reached for comment.

In an interview earlier this year, he compared the Legislature's office problem to that faced by a car buyer, saying, "The question in the end is: Should we pay for a Cadillac when we could pay for a Ford?"

One of his Senate colleagues, Soldotna Republican Peter Micciche, said he was looking forward to Friday's discussion. It's not about Hawker and how the deal was put together, he added -- it's about how the Legislature should be "leading the way" on the budget crisis by cutting its own costs.

"If all was equal, clearly my choice would be to remain," he said in a phone interview Monday. "But all isn't. The costs are exorbitant and it's clearly time to take action on improving the cost of running the Anchorage LIO."

Pfeffer, the managing developer, didn't return a phone call Monday. His spokeswoman, Amy Slinker, responded to emailed questions with a brief statement: "We respect that the Legislative Council needs to consider its choices with regard to office space, and we look forward to discussing any alternatives with them."

Stevens' new report was issued to council members last week, and it describes five options.

One is to keep the existing lease, which it says would cost $40 million over a 10-year period.

Three other alternatives involve buying the building. A cash purchase would cost $43 million, while borrowing the money using two different types of debt would cost $45 million to $49 million.

The fifth option, moving to the Atwood Building, would cost $10.1 million over the same period. The total monthly cost for each usable square foot of office space would be $1.85, compared to $7.93 with a cash purchase and $7.41 to keep the existing lease.

The report does not account for the fact that the state would end up with a new asset if it buys the Fourth Avenue building, noted Micciche, the Soldotna senator. And it also does not factor in potential legal costs if the Legislature breaks the existing lease, which expires in 2024, and the developers decide to sue.

The lease, however, contains a clause making it subject to lawmakers appropriating the money required to pay for it.

"The lease language allows us to exit the lease," Juneau Rep. Sam Kito III, the Legislative Council's sole Democratic minority member, said in a phone interview Monday. "In the public's interest, it seems to make sense that we try to find the most reasonable-cost office space for our public presence in Anchorage."

Only one of the six Republican-led House majority members on the council, Rep. Bob Herron, D-Bethel, responded to phone calls Monday -- Hawker, House Speaker Mike Chenault, R-Nikiski, and others didn't respond.

Herron said he thought Stevens' report presented a "good set of options," but he added that he didn't favor any particular one.

"It's a big decision," he said.

He downplayed House majority members' ties to Hawker, saying that he and others would approach the decision based on "what's the best interest of our constituents," and the state.

"The past is the past," Herron said. "We're in the future."