U.S. Treasury gives Anchorage officials two paths for purchasing buildings for homeless services with COVID-19 relief dollars

Anchorage Mayor Ethan Berkowitz’s plan to use federal coronavirus relief fund money to purchase buildings to house the homeless and provide more day and overnight shelter has new life.

On Monday, Berkowitz’s chief of staff, Jason Bockenstedt, and Municipal Attorney Kate Vogel met with two employees of the U.S. Department of the Treasury: attorney Stephen Milligan and Daniel Kowalski, counselor to the secretary of the Treasury.

According to subsequent email correspondence, Milligan and Kowalski laid out two paths for the city to move forward on its plan to bolster homeless services with the federal CARES Act money. Neither were available for an interview Thursday.

One of the two options is to spend CARES Act funds on first responder payroll, and then use general funds that would have otherwise gone to payroll on projects such as the purchase of buildings, or jobs programs.

“That is certainly the simplest route,” Vogel said in an interview Thursday.

The city’s plan to spend $12.5 million on the former Alaska Club building on Tudor Road, Bean’s Cafe near downtown and Americas Best Value Inn & Suites in Spenard was sharply opposed by some members of the public, largely Midtown residents who feared the new properties would drive down property values and increase crime.

During public testimony, which stretched five days, several claimed moving forward would be an inappropriate use of CARES Act funds. An online campaign started to encourage people to file complaints with the Treasury Department.

The Assembly approved the use of funds on Aug. 11, and included an amendment saying the administration needs to vet the use of funds through the Treasury Department. On Wednesday, Vogel said that process is complete following the Monday meeting with Milligan and Kowalski.

“This was the end of the road,” Vogel said. “... I think that’s as good as we’re going to get.”

Those complaints prompted the department’s Office of the Inspector General to call for a meeting with city officials. On Aug. 12, OIG staff told city officials that Treasury is the department that decides what is and isn’t a correct use of the money, but that it did not believe the city’s plan would pass muster.

However, in the Monday meeting, Milligan and Kowalski appear to have been more flexible. Following the meeting, Bockenstedt memorialized the conversation in an email to the two men. On Thursday morning, Kowalski responded, saying Bockenstedt correctly captured the substance of the meeting.

According to Bockenstedt’s email, one option for the city is to use CARES Act funds to buy the buildings and keep them in use long-term — a viable plan as long as services are provided in the building by Dec. 30, the current deadline to use the money. If Congress extends that date, the city would have more time.

“We are also aware of rumblings that that deadline may be changing, which would likely change the deadline for us, too,” Vogel said.

Bockenstedt said Bean’s Cafe and Americas Best could likely have services up and running by then, but the former Alaska Club needs renovations that would make the Dec. 30 timeline difficult.

Bockenstedt detailed a conversation with Milligan and Kowalski about how the COVID-19 pandemic has eliminated more than 300 shelter beds in Anchorage due to new physical distancing policies recommended by the federal government. Several other cities and states have used this money to purchase buildings for long-term use.

The second option involves diverting the money through payroll.

According to Bockenstedt’s email, Milligan and Kowalski said first responder payroll, even if it was already budgeted, is an appropriate use of CARES Act money. This would allow the city to divert general fund dollars that would normally be spent on salary instead to the purchase of the buildings.

Bockenstedt said the administration will take the options to the Assembly.

“I don’t think a decision has been made yet, but we want to do it in an open and transparent way,” he said.

Overall, Bockenstedt said the city is still in the early stages of looking at the three buildings, along with a fourth that would house treatment services and be paid for with proceeds from the Municipal Light & Power sale. He said all four are still being considered, but there is no other update.