Legislative Council makes $32.5 million offer for Anchorage LIO
The Legislative Council made a $32.5 million offer to purchase the Anchorage Legislative Information Office building late Thursday night. It is the first substantive progress to resolve an issue that has lingered during a session in which policymakers are faced with financial decisions that could impact the course of the state for years to come.
Rep. Mark Neuman, R-Big Lake, was the lone no vote among the 14 council members on a motion to approve the purchase offer.
Council Vice Chair Rep. Bob Herron, D-Bethel, said the purchasing the custom-built, six-story office building would save the state about 50 percent over 20 years compared to the $3.3 million per year lease terms the Legislative Council agreed to in 2013 for renting the building.
“It’s time to put this issue to rest either way. Our state faces great fiscal uncertainty and this distraction takes away valuable time and energy from our ability to focus on continuing the great work that we’ve done to shrink the day-to-day cost of government, and focus on reforms to major cost drivers like Medicaid, prisons and crime and retirement systems,” Herron said in a statement. “Thank you to my colleagues on the council for tonight’s decision.”
Amy Slinker, spokeswoman for the building owners, wrote in an emailed statement that the group is glad the council made a decision to try to resolve the issue that has become a burden for both sides. The offer has not yet been accepted, and the full Legislature will have to approve the appropriation to purchase.
“Now we have something to talk about,” Slinker wrote. “We are going to analyze it and get back to (the council) soon.”
The annual lease rate for the premium office space — nearly five times what the Legislature paid for the former, smaller, decrepit Anchorage LIO — has drawn public and political ire from many who say the state should not be spending multi-million dollars per year for off-season legislative offices when it is trying to find its way out of a $4 billion budget deficit.
The building owner group, 716 West Fourth Avenue LLC, named after the Downtown Anchorage address of the building and led by real estate developer Mark Pfeffer, had made repeated attempts to sell it to the Legislature for $37 million starting in October. That is the amount Pfeffer’s group invested in the $44.5 million project.
The Legislature contributed $7.5 million for tenant improvements. It moved into the building shortly after it was completed in December 2014.
The lease, which was invalidated by a March 24 Superior Court ruling, is paid through May 31. Judge Patrick McKay deemed the process by which the lease was procured in 2013, a process led by then-Legislative Council chair Rep. Mike Hawker, R-Anchorage, to have violated competitive bidding guidelines in state procurement code.
716 filed a motion for reconsideration with the court March 30, arguing the ruling was premature and exceeded the court’s authority — that simply finding the council’s procurement process to be flawed does not automatically invalidate the lease.
The Alaska Supreme Court has ruled in similar cases involving public procurement issues that the governing body can be obligated to pay for work done by a contractor under an improperly secured agreement because a private party should be able to trust a public body will uphold a deal and is not responsible for how it was reached.
An attorney for 716 cited multiple cases in which judgments in favor of the private contractor were reached in a March 27 letter to Legislative Council’s outside counsel.
Prior to the Legislative Council meeting, Pfeffer revised 716’s offer several times, ultimately settling on a sale price of just less than $34 million.
An independent financial analysis of the Legislative Council’s options done in early March found purchasing the LIO with low-interest bonds for $35.6 million would match the long-term price, on a per square-foot basis, of moving to the nearby Atwood Building. The state-owned Atwood houses executive branch agencies.
The full Legislature could seemingly purchase the building outright through a direct appropriation or finance a deal with state bonds. Council chair Sen. Gary Stevens, R-Kodiak, said during the public portion of the meeting that, “nothing is precluded from finding a way to finance this project.”
Some legislators have pushed to move the Anchorage offices into the Atwood Building to rid the state of its expensive political headache.
Department of Administration Commissioner Sheldon Fisher told the council prior to an executive session that included Pfeffer at its March 31 meeting that the prospective space at the Atwood would not be fully move-in ready until January 2018.
Look for updates to this story in an upcoming issue of the Journal. Elwood Brehmer can be reached at [email protected].