Proposal for crumbling Anchorage health department building could open up prime downtown real estate

The building that houses Anchorage's health department is on its last legs, city officials say, after years of failed efforts to find a new home.

Now the administration of Mayor Ethan Berkowitz wants to trade the property to a private developer for a new building elsewhere in town. If a deal emerges, it could mean a big shake-up for a prime piece of downtown Anchorage real estate. 

The five-story gray-and-red health department building sits at the corner of Eighth Avenue and L Street across from the Delaney Park Strip. Alaska Regional Hospital, one of Anchorage's three major hospitals, started out there as a faith-based nonprofit in the early 1960s. The structure survived the 1964 Good Friday earthquake and hundreds of babies were born in its delivery rooms during the '60s and '70s.

But in more than five decades, the building, which now houses the Anchorage Department of Health and Human Services, has seen little structural change. Much of the original piping and electrical wiring still churns along.

At least a decade ago, city officials started hunting for money to renovate the building or lease a new one. Nothing has panned out.  

Soon-to-be released bid documents will show a new tack. Chris Schutte, the city development director, said the city will propose swapping ownership of the land and building for a property of the same value that would house the health clinic.

Schutte and other officials say the land, a prime piece of downtown real estate, is ripe for housing or retail. Health department staff, meanwhile, say they're weary of leaky ceiling tiles, antiquated phone and electrical systems, broken elevators and the lack of air conditioning.

The city health clinic offers a variety of prevention and treatment services, including tuberculosis testing, immunizations and screenings for sexually transmitted diseases.

The annual costs associated with maintaining and operating the building have doubled in the past seven years to roughly $1 million, according to Schutte.

At this point, Schutte said, it makes more financial sense to tear down the building than renovate it.

Hospital roots

What is now the DHHS building opened in 1963 as the $800,000 Presbyterian Community Hospital. The nonprofit was operated by the national Presbyterian Ministries Synod of Washington-Alaska, which built seven hospitals in the territory.  

Presbyterian Community Hospital offered 45 beds and emergency medicine, surgery and obstetric services. The first patient arrived June 18, 1963, eight days after the building's dedication.  

Five years later, a group of local doctors took control of the hospital and changed the name to Anchorage Community Hospital. In 1976, the doctors sold the hospital to the Teamsters Union.

The union's Alaska boss, Jesse Carr, directed the hospital's move to DeBarr Road, where it would eventually become Alaska Regional Hospital.

By the time the city acquired the property in the mid-1980s, the Teamsters had sold it to Humana Alaska. Humana Alaska signed over the deed to the city Feb. 8, 1984, records show. A real estate agency was leasing the building at the time, according to Tammy Oswald, the city real estate director.

Lynn Van Horn gave birth to her second child in the hospital in 1975. She remembers sharing a room with one other person.

Van Horn, now 62, is a retired real estate manager for the city. She went back once about a decade ago, to visit the former city health director, Janet Vietmeyer. The place looked the same from the front, she said — and inside, there were other things that hadn't changed.

"One of the offices still had a sink in it," Van Horn said. "This obviously had been a hospital, plugged with rooms that had sinks in them."

When the city started using it as a health clinic, Oswald said, the arrangement was supposed to be temporary.

Uphill maintenance battle 

When something in the building breaks, the city maintenance staff comes to fix it. Alan Czajkowski, director of the city public works department, said it's a constant battle.   

"All the systems in it are shot," Czajkowski said.

The original boiler from the early 1960s has yet to be replaced, Czajkowski said. He said there's been minimal work done as far as renovation because of the expectation that the health clinic would be moving.

Melinda Freemon, the city health director, walked in recently to see the building's water heater had leaked and soaked the carpet. There's no air conditioning. Staff open windows in the summer to cool down.

About 108 people work in the building, Freemon said. Health department staff are jammed into small offices.

"The building is certainly not as robust or effective as the staff and services (we) provide," Freemon said.

Of the building's three elevators, only one is functional. The working elevator has been fully replaced, Freemon said. Before that, it was kept alive, Frankenstein-like, using parts from the other two.

Patients come to the clinic daily for tuberculosis testing. The TB test room is right next to the waiting room, and there's a sliver of space beneath the door. Every day, nurses test the air by the door to make sure it's being sucked inward, away from the waiting room. That testing would happen no matter what. But in a new building, Freemon said, the testing room would most likely have a separate entrance.

Problems with financing

The city started looking for a new home for the health department about a decade ago.

At that point, city officials wanted to find a lease for a new property, said Oswald, the real estate director. By 2009, the city had applied for $9 million in state grant funding toward replacing or renovating the building.

A February 2009 site selection report said construction costs would likely run into the tens of millions of dollars. A very rough estimate for renovating the existing building came to $12 million, not including costs associated with moving the clinic and all the staff to a temporary location.

At the time of the report, it cost $480,000 a year to maintain the facility, though the health department said those costs now run around $1 million. The report said that while maintenance costs would likely decrease with a renovation, "a new building may be more cost-effective to operate and maintain in the long run."

During Mayor Dan Sullivan's administration, real estate managers started on a new bid proposal, but they didn't finish, Oswald said. In the forthcoming bid documents, Oswald said the city is asking developers to be creative.

"Instead of us dictating to the developer what we think will work, we're asking the developer to come up with some ideas," Oswald said. "Because we have failed in the past to come up with something that is viable."

In general, she said the city is hoping to trade to a private developer the DHHS parcel and a second parcel immediately south with a parking lot. In 2015, the total value of both parcels was assessed at about $9.6 million.

Three neighboring parcels are owned by the Anchorage Community Development Authority and recently became K Street Eats, a food truck market.

Andrew Halcro, the executive director of the ACDA, said he envisions an L-shaped development in the future, combining the ACDA lots and the city-owned properties.

He called the health department building a "Jenga piece" — after the stacking block game — in a dormant swath of prime downtown real estate.

"Once you pull that (piece) … I think the whole block falls into a great development," Halcro said.