Legislature(1997 - 1998)
04/23/1997 08:12 AM Senate FIN
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SENATE BILL NO. 178
"An Act giving notice of and approving a lease-purchase
agreement by the Department of Administration for an
office building in Anchorage; relating to the financing
of the lease-purchase agreement; and providing for an
effective date."
Co-chair Sharp introduced SB 178. Dugan Petty, Director,
General Services, Department of Administration was invited
to join the committee. He explained the purchase agreement
and said that it was subject to legislative approval. He
also noted the analysis attached to the fiscal note. He
explained the status of the negotiations for the Bank of
American building and also the status of the Frontier
Building. There was no alternative to compete with current
lease space.
Mr. Richard Thaler, Esq., Seattle, Washington was invited to
join the committee. He said that based on his experience
the Bank of America building would be the perfect purchase
and that it was a win/win transaction for both parties
included. There was a $25,955 million cash agreement and he
explained what the purchase would include. He estimated the
life of the building at 50 - 60 years.
In response to a question from Senator Phillips regarding
the parking spaces Mr. Petty responded that there were a
total of 646 spaces, which included across the street plus
underground. He said that 79 parking spaces were
underground. Senator Phillips asked about parking at the
Frontier Building. Mr. Petty said they were entitled to 467
spaces but there were over 1,000 spaces available. It was,
however, not their policy to obtain parking for each
employee. He gave a short current analysis of the parking
situation.
Senator Donley asked about the appraisal for the Frontier
building and Mr. Thaler said that it had been appraised at
patterns for the two buildings and asked for a comparison
regarding the comfort for the public.
Mr. Petty compared the traffic patterns for the two
buildings. He also noted the value of the Bank of America
building at $55 million and said it was a good bargain for
the State in terms of purchase price.
Mr. Ken E. Kincaid, Real Estate Consultant, Anchorage,
Alaska was invited to join the committee. He explained his
experience and background for the committee and said that he
was a source authority in the office space market. He
referred to a booklet handed out only to SFC members and
noted that it was developed by Hunt Trust. He noted the
high quality of the Bank of America building and the ample
parking. He said the Department of Revenue, Department of
Natural Resources and Human Services were already in the
building. With reference to a graph in the booklet he said
the lower line meant lower cost as far as expenses to the
State. Timing was most critical to real estate and he
explained the risk rate.
(Tape #123 switch to side 2.)
He explained the access traffic patterns and said they
mostly ran east to west. The downtown would therefore
remain stable. In his opinion the Frontier Building would
be impacted for traffic due to Wal-Mart, Eagle Hardware,
Home Depot and Marriott Hotel going in downtown. The
private sector viewed the purchase of the Bank of America
building as a superb deal.
Mr. Petty referred to page 16 attached to the fiscal note.
A lease saving for the year 2000 was reflected at $602,604
thousand. There was miscellaneous discussion between Mr.
Kincaid and other SFC members as to commute time. Senator
Phillips said he felt it was difficult to get downtown for
8:00 a.m. Mr. Petty said they have met the standard for
parking they were looking for as show on the aerial map in
Mr. Kincaid's report.
Senator Torgerson asked what the Governor's position was
regarding purchase of the Bank of America building and Mr.
Petty said the Governor had not taken a position.
Senator Parnell raised a concern of his constituents
regarding the competitive process. He said there were three
options available and wanted to know if the State was
getting a good deal in all that was available or only on the
building. Mr. Petty said according to procurement law the
purchase of the building made good economic sense. He felt
this deal was too good to pass up. The oil companies may
have space available but they were unable to get their arms
around anything.
Senator Phillips asked how they would take care of tenants
currently in the building. Mr. Petty said that not everyone
has to leave the building. Mr. Thaler further noted that
the State will honor the existing leases. A minor amount of
the leases will expire in the year 2000. The State already
occupies 60,000 feet in the building. He noted the
following reasons for buying out all remaining leases: 1.
to occupy the building completely; and 2. to qualify for
tax exemptions. Senator Phillips asked if they had spoken
to everyone leasing in the building. He said this was a
business decision and not a political one. Mr. Thaler
viewed it improper to speak with the tenants prior to
receiving approval to purchase the building. Mr. Petty
acknowledged that they had requested Bank of America to
notify the tenants of the possible purchase.
Co-chair Sharp asked for an explanation regarding the
lease/purchase agreement. Mr. Forrest Browne, Department of
Revenue was invited to join the committee. He explained
the advantage of the particular lease/purchase agreement
structure. There were semi-annual payments made to the
trustees.
(Tape changed to #124.)
Senator Donley commented regarding the parking situation.
He feared with legislative approval to purchase the building
the Department of Administration would cut parking in order
to reduce their budget. Mr. Petty said the Department felt
good government access was important.
Randy Welker, Legislative Auditor, Division of Legislative
Audit was invited to join the committee. He referred to a
memorandum dated 23 April 1997 and said the deal was clearly
in the State's interest. The analysis was fair and if
anything were to go wrong it would be the timing. There was
not a significant cost factor.
Co-chair Pearce set aside SB 178.
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