Anchorage LIO owners file $37M claim against Legislature

  • The saga surrounding the Anchorage Legislative Information Office continues as the building owners have filed a contract claim of $37 million against the Legislature now that the members have voted to abandon the building and purchase a Midtown Anchorage office space from Wells Fargo. It’s the first step in what figures to be a lengthy legal process. Photo/Elwood Brehmer/AJOC

The owners of the Anchorage Legislative Information Office building filed a claim for just more than $37 million against the Legislative Affairs Agency on July 8 as the Legislature prepares to buy other office space in Anchorage.

In a 19-page claim signed by longtime Anchorage real estate developer Mark Pfeffer, who is the manager of the building owner group 716 West Fourth Avenue LLC, $37.01 million is being sought from the Legislative Affairs Agency.

The figure is the amount the owners invested in the six-story Downtown Anchorage office project in 2014.

The claim technically goes to Kodiak Republican Sen. Gary Stevens, because he currently chairs the Legislative Council. As chair of the council, Stevens is the de facto procurement officer for the Legislative Affairs Agency, which handles business matters for the council and the full Legislature.

According to State of Alaska claims process, Stevens has 90 days to decide on the claim. If he denies it, the claim then goes to an administrative law judge within the Department of Administration and then before the commissioner of Administration before heading to Superior Court as a lawsuit.

This spring, the council voted to buy a Midtown Anchorage office building owned by Wells Fargo bank at a price of up to $12.5 million. The money was included in the otherwise bare bones capital budget and Gov. Bill Walker did not veto the appropriation when he signed the budget on June 29. However, the governor did urge legislators to find another, more cost-effective option for Anchorage offices.

Stevens Chief of Staff Katrina Matheny said the claim does not immediately change plans to purchase the Wells Fargo property and that it has been turned over to Legislative Legal Services for review.

Stevens originally hoped to finalize a purchase agreement for the building by July 15, but scheduling conflicts have likely delayed signing the deal for about a week, she said. Stevens was traveling and unavailable for comment, according to Matheny.

Public pressure to get out of the 10-year, $3.3 million per year lease for the downtown space while the state grapples with yearly multi-billion dollar budget deficits pushed the council to consider other options starting late last year.

Last December, the council voted unanimously to not continue to fund the lease and to explore the cost of moving to the nearby state-owned Atwood Building versus a purchase of the LIO.

The council later voted to purchase the building for $32.5 million based on a cost analysis that found it to be cost competitive over 20 years compared to moving to Atwood.

After Walker said he’d veto that appropriation, saying it would be inappropriate to spend the money given the state’s bleak financial situation, it emerged that Wells Fargo would sell its Midtown building for $12.5 million and the council voted May 2 to rescind its offer on the LIO and purchase the Wells Fargo building.

In March, state Superior Court Judge Patrick McKay ruled the lease invalid because the council violated state procurement code when it signed the deal for the building project in 2013.

Rep. Mike Hawker, R-Anchorage, chaired the Legislative Council at that time and signed off on the deal, which totaled $44.5 million.

The Legislature invested $7.5 million in the redevelopment project.

“Under Alaska law, despite the (Superior) court’s order, the Legislature cannot impose the entire cost and burden of its flawed procurement process, and the effort and expense contractually required of 716, on 716’s shoulders,” the claim states. “Public policy and the need for the public to have faith in the state’s contracting obligations require that the Legislature bear the cost and consequences of its decision to abandon the (Anchorage) LIO building.”

Pfeffer has said repeatedly that the building, finished in late 2014 and occupied by the Legislature shortly thereafter, was custom-built to meet the Legislature’s needs.

“We still believe we can achieve a pathway to savings and are disappointed that we are forced to take this step. We are willing to work with the Legislature to achieve savings but without the Legislature’s cooperation, we have no choice but to seek legal recourse,” 716 spokeswoman Amy Slinker wrote in a formal statement.

In May, shortly after the Legislative Council announced a preliminary deal to purchase the Wells Fargo building, Florida-based EverBank wrote a letter to the Legislative Affairs Agency demanding the state follow through with its lease obligations upon which the bank based its $28.6 million loan to 716 for the LIO.

“In the future, if the McKay (court) order is upheld, EverBank will present its claim against the state,” an attorney for the bank wrote to the council.

Updated: 
07/13/2016 - 11:17am

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