Anchorage Assembly OKs deal to purchase former LIO building

The Anchorage Assembly authorized the city redevelopment authority's purchase of former legislative offices on Fourth Avenue in downtown Anchorage Tuesday night, with one Assembly member calling it a "smoking deal."

The vote was 8-2, with Chugiak-Eagle River Assembly members Amy Demboski and Fred Dyson casting "no" votes.

The city redevelopment authority, the Anchorage Community Development Authority, has offered to buy the six-story former Legislative Information Office building at 716 W. Fourth Ave. for $14 million from the Florida-based bank that owns it. The amount is less than half what the state Legislature offered to pay for it more than two years ago.

The Assembly's approval was a critical step in moving the deal forward.

Meanwhile, the Anchorage Police Department, crammed into a 1980s-era building at the intersection of Tudor and Elmore Road, has proposed making the Fourth Avening building its new headquarters. The Assembly is set to vote separately on a proposed lease later this summer.

[City wants to move police headquarters into empty LIO building downtown]

Most Assembly members said it made sense for the ACDA to buy the building because police were going to pay for a far more expensive building. They also said the deal was good for public safety downtown, and could generate revenue for the city later on.

"We know the history and the optics, if you will, but it's not like this building is haunted," said Assemblyman Eric Croft. "It was a stupid move by the state and we get to take advantage of it."

Assemblywoman Amy Demboski said the deal looked good for the ACDA, but she said she didn't think it was a good deal for taxpayers. She said the Assembly should be talking about buying the building for police, not leasing it.

Objections also came from a representative of an Alaska Native regional corporation, who came to Tuesday night's meeting to urge the Assembly to turn down the deal. Sharon Lechner, the chief fiscal officer of Calista Corp., said the corporation was prepared to make a cash offer on the building. But she complained it had not been adequately marketed to the private sector.

Lechner also warned the city would lose out on millions in property taxes over time.

Andrew Halcro, the executive director of the ACDA, said it was no secret that the building was going up for sale and that he jumped at the opportunity. He said other developers had looked at the building, built specifically for government, and decided against investing in it. The Anchorage Police Department emerged as a tenant only after Halcro announced his agency planned to buy the building.

He said his agency, as a public entity, will make payments on the building that are equivalent to property taxes and the investment will grow the value of his agency's properties.

He said he was worried someone else would buy it and wait to sell it for several years, until the real estate market improves. Nothing would stop the ACDA from selling it later on, he said.

The ACDA deal is the latest in a saga for the glass-paneled office building on West Fourth Avenue. The building, the Alaska Legislature's longtime home base in Anchorage, got a $44 million renovation in 2014.

Two years later, a judge said the Legislature's $4 million monthly lease there was illegal and broke state procurement law. In October 2016, lawmakers moved to cheaper digs: The Wells Fargo building at the intersection of Minnesota Drive and Benson Boulevard.

The bank for the downtown building's developers filed a foreclosure complaint last fall and reached a settlement later.

In May, Halcro announced that the bank had accepted an offer from his agency to buy the building. A memo from the office of Mayor Ethan Berkowitz said the ACDA board decided the empty building was detrimental to the surrounding area and wasn't helping public safety downtown.

The Assembly's approval Tuesday night is a key step in a complicated deal that involves bankers, the board of the ACDA, the administration of Mayor Ethan Berkowitz and Halcro and his staff.

To finance the deal, the agency is essentially mortgaging two parking garages it owns — the 5th Avenue Mall parking garage, where the agency's offices are located, and a lot at Third Avenue and E Street.

The agency will make payments to a financial institution over 15 years, at an interest rate of about 5 percent, Robert Harris, the city's chief financial officer, told the Assembly at a recent work session.

The city has used similar financing arrangements at least three other times in its history. In 1995, the city covered unpaid pension bills by putting up what was then the downtown police headquarters, Sullivan Arena and the Egan Center as collateral, according to a memo from the mayor's office. Last year, the city also put up property to cover unpaid police and firefighter pensions.

Harris told the Assembly the deal offered the quickest possible financing available.

No taxpayer money is directly involved in the actual sale, though taxpayers would ultimately foot the bill for a lease with the police department. The police department has offered to pay $1.5 million per year.

The building, after the purchase was announced, was immediately rebranded the "Taj MaHalcro" on social media. Back in 2016, after the Legislature's lease deal was negotiated by then-Rep. Mike Hawker, R-Anchorage, critics pilloried the renovated building as the "Taj MaHawker."

Halcro told Assembly members at a recent work session he's happy to claim the mantle.

"We've parsed this deal seven ways to Sunday," Halcro said. "From every operational and financial aspect, it makes sense."

The Assembly will next have to authorize a lease with the Anchorage Police Department, which has faced what officials describe a crisis in space over the past decade. The downtown building would become the headquarters under a proposed deal, while APD expands its current headquarters on Elmore Road to house evidence, police dispatch operations, records and other support staff.

Chief Justin Doll has said he hopes the department can move in in early August after the purchase of the building is final. Officials said the lease proposal will likely come before the Assembly in late June or early July.