Legislature(2015 - 2016)ANCH LIO AUDITORIUM

12/04/2015 02:00 PM LEGISLATIVE COUNCIL


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Audio Topic
02:01:11 PM Start
06:07:54 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Contract Approvals TELECONFERENCED
- Homer Office Space Renewal
- New Teleconference Bridge System
Other Committee Business
- Anchorage LIO - EXECUTIVE SESSION if needed
- EXECUTIVE SESSION - Lawsuit Update by Doug
Gardner
                      ALASKA STATE LEGISLATURE                                                                                
                        LEGISLATIVE COUNCIL                                                                                   
                         DECEMBER 04, 2015                                                                                    
                              2:00 PM                                                                                         
                      Approved April 14, 2016                                                                                 
                                                                                                                              
      MEMBERS PRESENT                                                                                                         
                                                                                                                                
      Senator Gary Stevens, Chair                                                                                               
      Representative Bob Herron, Vice Chair                                                                                     
      Senator Lyman Hoffman                                                                                                     
      Senator Charlie Huggins                                                                                                   
      Senator Anna MacKinnon                                                                                                    
      Senator Kevin Meyer                                                                                                       
      Senator Peter Micciche                                                                                                    
      Representative Craig Johnson                                                                                              
      Representative Sam Kito                                                                                                   
                                                                                                                                
      MEMBERS ON TELECONFERENCE                                                                                               
                                                                                                                                
      Representative Mike Chenault                                                                                              
                                                                                                                              
      MEMBERS ABSENT                                                                                                          
                                                                                                                                
      Senator John Coghill                                                                                                      
      Representative Mike Hawker                                                                                                
      Representative Charisse Millett                                                                                           
      Representative Mark Neuman                                                                                                
                                                                                                                              
      OTHER LEGISLATORS PRESENT OR ON TELECONFERENCE                                                                          
                                                                                                                                
      Senator   Egan;   Representatives   Drummond,  Gruenberg,                                                                 
      Guttenberg, Josephson, LeDoux, and Saddler                                                                                
                                                                                                                                
      AGENDA                                                                                                                  
                                                                                                                                
      APPROVAL OF AGENDA                                                                                                        
      APPROVAL OF MINUTES                                                                                                       
      CONTRACT APPROVALS                                                                                                        
      OTHER COMMITTEE BUSINESS                                                                                                  
                                                                                                                                
      SPEAKER REGISTER                                                                                                        
                                                                                                                                
      Tina Strong, Procurement Officer, Legislative Affairs                                                                     
         Agency (LAA)                                                                                                           
      Sue Cotter, Information and Teleconference Manager, LAA                                                                   
      Pam Varni, Executive Director, LAA                                                                                        
                                                                                                                                
      (SPEAKER REGISTER CONTINUES ON NEXT PAGE)                                                                               
SPEAKER REGISTER CONTINUED                                                                                                    
                                                                                                                                
Tanci Mintz, State Leasing & Facilities Manager, Div. of                                                                        
  General Services, Dept. of Administration                                                                                     
Serena Carlsen, Partner, Stoel Rives, LLC                                                                                       
Peter Shorett, Exec. Vice President, Kidder Matthews Real                                                                       
  Estate Appraisal                                                                                                              
Juli Lucky, Staff to Rep. Mike Hawker, District 28                                                                              
                                                                                                                                
      2:01:11 PM                                                                                                              
                                                                                                                                
  I. CHAIR GARY STEVENS called the Legislative Council meeting                                                                
      to  order  at  2:05  p.m.  in  the  Anchorage  Legislative                                                                
      Information Office  Auditorium. Present at the  call were                                                                 
      Senators Stevens, Meyer,  Hoffman, Huggins, and Micciche;                                                                 
      Representatives Herron,  Johnson, and  Kito.  Absent were                                                                 
      Senators  Coghill  and  McGuire,  alternate  member,  and                                                                 
      Representatives Hawker and Neuman. Senator MacKinnon joined                                                               
      the meeting initially via teleconference until her arrival                                                                
      at the  Anchorage LIO; Speaker Chenault joined the meeting                                                                
      via teleconference after the roll call.                                                                                   
                                                                                                                                
 II. APPROVAL OF AGENDA                                                                                                       
                                                                                                                              
      VICE  CHAIR HERRON moved that Legislative Council approve                                                                 
      the agenda.                                                                                                               
                                                                                                                                
      There were  no objections and the  agenda was approved as                                                                 
      presented.                                                                                                                
                                                                                                                                
III. APPROVAL OF MINUTES                                                                                                      
      a. February 10, 2015                                                                                                    
      b. June 26, 2015                                                                                                        
      c. August 18, 2015                                                                                                      
      d. September 2, 2015                                                                                                    
      e. September 28, 2015                                                                                                   
                                                                                                                                
      2:02:30 PM                                                                                                              
      VICE  CHAIR HERRON moved that Legislative Council approve                                                                 
      the minutes of the following meetings as presented:                                                                       
                                                                                                                                
              a. February 10, 2015                                                                                              
              b. June 26, 2015                                                                                                  
              c. August 18, 2015                                                                                                
              d. September 2, 2015                                                                                              
              e. September 28, 2015                                                                                             
                                                                                                                                
      There were no objections and the minutes were approved as                                                                 
      presented.                                                                                                                
                                                                                                                                
 IV. CONTRACT APPROVALS                                                                                                       
      a. Homer Office Space Renewal                                                                                           
      b. New Teleconference Bridge System Approval                                                                            
                                                                                                                                
      a. Homer Office Space Renewal                                                                                           
      2:03:08 PM                                                                                                              
      VICE  CHAIR HERRON moved that Legislative Council approve                                                                 
      the  Homer office space lease  renewal to Clayton  & Joan                                                                 
Ellington in the amount of $59,580.60 for the time period                                                                       
of November 1, 2015 through October 31, 2016.                                                                                   
                                                                                                                                
CHAIR STEVENS objected for the purpose of discussion.                                                                           
                                                                                                                                
TINA  STRONG,  Procurement Officer  for  the  Legislative                                                                       
Affairs Agency, testified via teleconference that the Homer                                                                     
lease was approved as a three year lease beginning November                                                                     
1, 2012, through October 31, 2015. The lease has five one                                                                       
year renewal options available and approval is being sought                                                                     
for the first renewal period of November 1, 2015, through                                                                       
October 31,  2016.  She said  this was  a  standard lease                                                                       
renewal and would be happy to answer any questions.                                                                             
                                                                                                                                
2:04:41 PM                                                                                                                    
SENATOR MACKINNON noted that she was on teleconference on                                                                       
route to  the Legislative Council  meeting and asked  Ms.                                                                       
Strong how  the rental  rate in  Homer compared to  other                                                                       
rental rates across the state.                                                                                                  
                                                                                                                                
MS.  STRONG responded  that the  monthly  rental rate  is                                                                       
$4,965.05 and  they are  comparable with other leases  in                                                                       
Homer. In  response to a  follow-up question from Senator                                                                       
MacKinnon, Ms. Strong responded that the  office space is                                                                       
2,936 square feet. Senator Gary Stevens and Representative                                                                      
Paul Seaton, along with the Legislative Information Office                                                                      
all have office space in Homer. The price per square foot                                                                       
is $1.69.                                                                                                                       
                                                                                                                                
SENATE PRESIDENT MEYER said he understood there are three                                                                       
people in the Homer office and about 3,000 square feet. He                                                                      
said he didn't think Senator Gary Stevens was at the Homer                                                                      
office too much of the time, so there are probably only a                                                                       
couple of people in this office space. In looking at office                                                                     
space all over the state for the LIOs, he wondered whether                                                                      
there could be some consolidation or cutting back.                                                                              
                                                                                                                                
CHAIR STEVENS said that to  address the specific issue of                                                                       
who  is there,  there is  an  LIO officer  present during                                                                       
session; Representative Seaton has an office for himself as                                                                     
well as an office for his staff; and the Chair noted he has                                                                     
an office for  his staff but does not have  an office for                                                                       
himself.                                                                                                                        
                                                                                                                                
SENATE PRESIDENT MEYER followed-up to say  that there are                                                                       
about three people there year round and four people during                                                                      
session.                                                                                                                        
                                                                                                                                
      SENATOR MICCICHE asked if Ms. Strong knew the average cost                                                                
      for  legislative office space per square  foot across the                                                                 
      state.  He  clarified that  he wasn't  talking about  the                                                                 
      Legislative Information Office space, which  is space for                                                                 
      the  public; rather he was referring to  office space for                                                                 
      Legislators and their staff.                                                                                              
                                                                                                                                
      MS.  STRONG responded that  the office space  rental rate                                                                 
      varies from $5.18 per  square foot in Barrow to $1.63 per                                                                 
      square foot in Ketchikan, not including Anchorage.                                                                        
                                                                                                                                
      SENATOR MICCICHE said he  believed the Homer office space                                                                 
      cost  is reasonable but  that he would  like to  know the                                                                 
      average cost of legislative office space across the state                                                                 
      so that Council has some sort of model.                                                                                   
                                                                                                                                
      CHAIR STEVENS said  that Pam Varni, Executive Director of                                                                 
      the Legislative Affairs Agency, would compile and make that                                                               
      available to Senator Micciche and the full Council.                                                                       
                                                                                                                                
      2:10:11 PM                                                                                                              
   SPEAKER CHENAULT noted that he was on teleconference.                                                                        
                                                                                                                                
      CHAIR STEVENS  noted that  also  on  teleconference  were                                                                 
      Senator Egan; Representative Guttenberg; Senator MacKinnon                                                                
      who  would  be  arriving shortly;  Peter  Shorett, Kidder                                                                 
      Matthews; Serena Carlsen, attorney with  Stoel Rives LLC;                                                                 
      Deven Mitchell, Department of Revenue; and Chuck Burnham of                                                               
      Legislative Research.                                                                                                     
                                                                                                                                
      SENATOR MACKINNON said that in regard to Senator Micciche's                                                               
      request, and because of the tough times Alaska is facing,                                                                 
      it  would be nice to have a  look at the Executive Branch                                                                 
      space standards and Senator Micciche's request would get us                                                               
      there, but there were several components to that. One is to                                                               
      know  the space  that is  being  allocated to legislative                                                                 
      offices throughout the  state; the second is to  know the                                                                 
      cost per  square foot, which would then  give Council the                                                                 
      final number that Senator Micciche is looking for and that                                                                
      is  how much utilization per member on a  per square foot                                                                 
      basis exists around the state to support constituents. She                                                                
   requested that the information be presented together.                                                                        
                                                                                                                                
      CHAIR STEVENS confirmed with Ms. Varni that the information                                                               
      was available for  every LIO and other legislative office                                                                 
      space across the state. Ms. Varni agreed that could be done                                                               
      right away.                                                                                                               
                                                                                                                                
      There was a roll call vote.                                                                                               
                                                                                                                                
YEAS:  Stevens, Herron, Meyer, Hoffman, Huggins, MacKinnon,                                                                     
       Micciche, Chenault, Johnson, Kito                                                                                        
                                                                                                                                
NAYS: None                                                                                                                      
                                                                                                                                
The motion was approved 10-0.                                                                                                   
                                                                                                                                
b. New Teleconference Bridge System Approval                                                                                  
                                                                                                                                
2:12:46 PM                                                                                                                    
VICE CHAIR HERRON moved that Legislative Council award ITB                                                                      
612 to the  low bidder, Arrow Systems Integration, in the                                                                       
amount   of   $84,154.57  for   the   Legislature's   new                                                                       
teleconference bridge which includes installation costs.                                                                        
                                                                                                                                
CHAIR STEVENS objected for purpose of discussion.                                                                               
                                                                                                                                
SUE COTTER, Manager of Information and Teleconference, said                                                                     
she was  informed a little over  two months ago  that the                                                                       
manufacturer of the present bridge system would no longer                                                                       
support  the hardware  and software  for  the system.  As                                                                       
Council  understands, the  bridging  service  is  mission                                                                       
critical to participation by citizens around the state in                                                                       
legislative  committee meetings.  She  worked  with  Tina                                                                       
Strong, Procurement Officer, and the Media Services staff                                                                       
to issue a bid. Three bid proposals were received and the                                                                       
lowest was Arrow Technology; it took care  of all current                                                                       
needs and provided extra bells and  whistles as well. She                                                                       
said  the  information  provided  in  the  packet  covers                                                                       
everything she just  testified too as well  as additional                                                                       
details. She said she was available to answer questions and                                                                     
Tim  Power  was   on  teleconference  for  any  technical                                                                       
questions.                                                                                                                      
                                                                                                                                
REPRESENTATIVE KITO asked for a  quick explanation of the                                                                       
extra bells and whistles mentioned.                                                                                             
                                                                                                                                
MS. COTTER said that one of the things it will allow for is                                                                     
to  connect people to  meetings faster; it pre-identifies                                                                       
testifiers that are frequent callers, such as commissioners                                                                     
or Executive Branch staff and Legal Services staff. These                                                                       
callers will  no  longer need  to spell  their names  and                                                                       
identify  themselves, which  saves  a   lot  of  time  in                                                                       
connecting callers to the meeting. There are times that up                                                                      
to seven meetings are being held at  the same time, there                                                                       
will be two or three bridge operators answering the phone                                                                       
and it  takes up  a lot  of time  to ask  name, spelling,                                                                       
affiliation, etc.                                                                                                               
      A roll call vote was taken.                                                                                               
                                                                                                                                
      YEAS:   Stevens, Herron, Meyer, Hoffman, Huggins, MacKinnon,                                                              
              Micciche, Chenault, Johnson, Kito                                                                                 
                                                                                                                                
      NAYS: None                                                                                                                
                                                                                                                                
      The motion was approved 10-0.                                                                                             
                                                                                                                                
  V. OTHER COMMITTEE BUSINESS                                                                                                 
      a. Anchorage LIO                                                                                                        
      b. Gottstein Lawsuit Update (Executive Session)                                                                         
                                                                                                                                
      a. Anchorage LIO                                                                                                        
                                                                                                                                
      CHAIR STEVENS said he  had a couple of comments regarding                                                                 
      this issue. He said the Legislature has been dealing with a                                                               
      fiscal crisis here in the state; everyone in the room knows                                                               
      this because they have dealt with it in various committees                                                                
      and  in  the  budgets. There  were  several cuts  to  the                                                                 
      Legislative Affairs Agency budget resulting in a  loss of                                                                 
      personnel. Other  major changes were  made throughout the                                                                 
      system. He  said we  know there will  also be  significant                                                                
      reductions the next legislative session. He said we are all                                                               
      aware we are trying to find ways to reduce the budget, cut                                                                
      costs  and do  our job  as inexpensively as  possible. He                                                                 
      pointed out that what we are  doing as Legislative Council                                                                
      is  making recommendations to the  Senate and  House, and                                                                 
      along the way to the Finance Committees in both the Senate                                                                
      and the House. We  are not able to pass a budget; that is                                                                 
      not the job  of Legislative Council. He asked that members                                                                
      please keep that in mind that what happens here was simply                                                                
      a  recommendation to the rest of  the Legislature on what                                                                 
      Council thinks should be done.                                                                                            
                                                                                                                                
      Chair Stevens said that this is the ninth year he has been                                                                
      involved  in Legislative  Council. The  questions of  the                                                                 
      Anchorage LIO  has always been one that  has never really                                                                 
      been answered, and that is does Council want to own the LIO                                                               
      or  to lease the  LIO. That is  the very foundational and                                                                 
      fundamental question that we have dealt with, or not dealt                                                                
      with, frankly, over the years. He said he remembered when                                                                 
      Senator Cowdery was Chair of Legislative Council, there was                                                               
      talk about the possibility of a building that would combine                                                               
      legislative offices with the Court System on property that                                                                
      the State had. Senator Cowdery was quite frustrated in his                                                                
      attempts to move ahead on that legislative building and, of                                                               
      course,  that did  not happen.  He said  the  next Chair,                                                                 
      Representative Harris, found himself in the same position;                                                                
Senator Menard also worked hard to have the Anchorage LIO                                                                       
move  into what  is now  the  NANA Building, but  because                                                                       
Council took too long to make a  decision, we lost out on                                                                       
that building. Then, of  course, Representative Hawker in                                                                       
dealing with this issue the last two years found himself in                                                                     
real frustration trying to come to a conclusion; and now he                                                                     
is sharing in this experience as the current Chair.                                                                             
                                                                                                                                
Chair Stevens said he really hoped Council could move ahead                                                                     
and make that very foundational decision: does Council want                                                                     
to own or does it want to lease a building in Anchorage. He                                                                     
said several options would be presented at today's meeting                                                                      
on where Council might go.  There has been a lot  of time                                                                       
spent in dealing with this. There are five options and each                                                                     
one  will  be explained  in  detail. He  said  there  are                                                                       
certainly other options and there is no attempt being made                                                                      
to say  that these  options being presented are the  only                                                                       
options available to Council. There are also lots of ways                                                                       
to finance a purchase should that be  the choice. He said                                                                       
that while  there may be  other issues discussed, he  was                                                                       
asking that Council hear the five options being presented,                                                                      
discuss them in as much detail as members care to hear, and                                                                     
then he would ask Council to go into an Executive Session                                                                       
for confidential information. He requested Pam  Varni and                                                                       
Doug Gardner to come forward to explain the five different                                                                      
scenarios and  to answer  any questions that  members may                                                                       
have.                                                                                                                           
                                                                                                                                
Chair Stevens noted that also on teleconference to answer                                                                       
questions about financing  options and legal  issues were                                                                       
Deven Mitchell, Department of Revenue and Alaska Municipal                                                                      
Bond Bank Authority; Serena Carlsen, Stoel Rives LLC, who                                                                       
has been negotiating on  behalf of Legislative Council on                                                                       
the purchase price of the building; and Tanci Mintz, State                                                                      
Leasing   and    Facilities   Manager,    Department   of                                                                       
Administration.                                                                                                                 
                                                                                                                                
PAM VARNI, Executive Director of  the Legislative Affairs                                                                       
Agency, introduced herself and Doug  Gardner, Director of                                                                       
Legal Services, for the record. She said she would be going                                                                     
over  the  Chairman's report.  At  the  April  13,  2015,                                                                       
Legislative Council  meeting, the  Chair  was to  analyze                                                                       
options  for legislative  office space  in Anchorage  and                                                                       
report  back to  the  full Council  on  three items:  (1)                                                                       
purchasing 716 W 4th Avenue building and land; (2) request                                                                      
bonding  costs from  Alaska  Housing  Finance Corporation                                                                       
(AHFC) to purchase 716 W 4th Avenue building and land; and                                                                      
(3) evaluate State-owned office space.                                                                                          
                                                                                                                                
      She said  negotiations have been ongoing over the interim                                                                 
      between  the managing  owner of  716 W  4th  Avenue, Mark                                                                 
      Pfeffer;  his attorney Don  McClintock, with  Ashburn and                                                                 
      Mason;  Serena  Carlsen,  Council's outside  real  estate                                                                 
      attorney  with Stoel  Rives;  herself; the  Council Chair                                                                 
      Senator Stevens  and his staff  Katrina Matheny; and Doug                                                                 
      Gardner, Director of Legal Services. Serena Carlsen is the                                                                
      expert  that  has  been doing  the  negotiating with  Don                                                                 
      McClintock and Mark Pfeffer, and she is  on teleconference                                                                
      to answer questions.                                                                                                      
                                                                                                                                
      Ms.  Varni  said  that there  are  several  scenarios for                                                                 
      consideration: continue the current lease; purchase through                                                               
      AHFC;   Mark    Pfeffer   suggested  purchasing   through                                                                 
      Certificates of Participation, which was added as another                                                                 
      possible  scenario; a  cash purchase through  the Capital                                                                 
      budget; and  finally to move to  State-owned space at the                                                                 
      Atwood  Building. She  said  she would  go  through these                                                                 
   scenarios and welcomed members' questions at any time.                                                                       
                                                                                                                                
      CHAIR STEVENS interrupted to note copies of the scenarios                                                                 
      were available for members of the audience.                                                                               
                                                                                                                                
      MS. VARNI began with Scenario #1: Continue Current Lease at                                                               
      716 W 4th Avenue. She said the action required is that the                                                                
      Legislature needs  to fully fund  the Legislature's State                                                                 
      Facilities Rent component every year for the remainder of                                                                 
      the  10 year  lease. She  noted that  the reason  all the                                                                 
      scenarios were  for a  10 year  period was that  the real                                                                 
      estate attorney suggested that time frame as  that is the                                                                 
      period of the  lease obligation. Twenty year scenarios are                                                                
      available  for all  members  who want  to  look at  those                                                                 
      numbers.  She  advised members  that  the  graph in  this                                                                 
      scenario, as with all  the other scenarios, does not show                                                                 
      any  inflation figures. Naturally, as  time goes  on, the                                                                 
      operating  expenses  may  change. The  graph  under  this                                                                 
      scenario shows the  annual lease amount of $3,379,656 the                                                                 
      operating expenses budgeted for $652,344 for a total annual                                                               
      cost of $4,032,000. The 10 year total cost is  $40,320,000                                                                
      and a per square foot rate of $7.41.                                                                                      
                                                                                                                                
      SENATOR MICCICHE asked Ms. Varni to confirm that the total                                                                
      square footage of the building is 64,000.                                                                                 
                                                                                                                                
      MS.  VARNI  responded that  64,000  is  the  gross square                                                                 
      footage,  but  that   all  of  the   Legislature's leases                                                                 
      throughout the state as  well as for the Executive Branch                                                                 
      are based on usable square footage. These calculations are                                                                
based on  usable square footage and that total  is 45,371                                                                       
square feet plus 86 parking spots.                                                                                              
                                                                                                                                
SENATOR MICCICHE said  he asked the  question because the                                                                       
Homer office space  lease square footage number was  over                                                                       
4,000 square feet.                                                                                                              
                                                                                                                                
MS VARNI said she believed the Homer LIO square footage to                                                                      
be 2,900 and that is usable square feet, it is not gross.                                                                       
                                                                                                                                
SENATOR MICCICHE said that when he thinks about the office                                                                      
space that is used in Homer, there is a very large common                                                                       
area. When he compares it to  the Anchorage LIO, it seems                                                                       
like  more of  the  common space  would  be used  in  the                                                                       
calculation. He  asked  what areas  comprised the  20,000                                                                       
square feet of non-usable areas at the Anchorage LIO.                                                                           
                                                                                                                                
MS.  VARNI said  it included  the penthouse,  all of  the                                                                       
elevators, rest rooms, essentially every square inch of the                                                                     
building.                                                                                                                       
                                                                                                                                
SENATOR MICCICHE said that if you are using the space and                                                                       
the space is necessary in order to access the building or                                                                       
do the things that humans do  at work, you wouldn't lease                                                                       
another building or piece of property anywhere else without                                                                     
considering that usable space. He said he wondered why LAA                                                                      
chose to use  that number as the  way to determine usable                                                                       
space.                                                                                                                          
                                                                                                                                
MS.  VARNI asked  Tanci  Mintz to  address the  Senator's                                                                       
question.                                                                                                                       
                                                                                                                                
CHAIR STEVENS asked Senator Micciche to  confirm that his                                                                       
question is about the difference between usable and gross                                                                       
for the purposes of a lease. Senator Micciche confirmed.                                                                        
                                                                                                                                
TANCI MINTZ, State Leasing & Facilities Manager, Division                                                                       
of  General Services,  Department of  Administration, put                                                                       
herself on the record. She said there were three different                                                                      
methods  in  the industry  for  renting space:  "usable,"                                                                       
"rentable," and "gross." She said Ms. Varni was correct in                                                                      
that the State Executive Branch and the Legislative Branch                                                                      
use "usable," which signifies the space that one physically                                                                     
operates within, the demised walls. It does not include the                                                                     
mechanical rooms,  stairwells, main  lobby areas;  it  is                                                                       
strictly the space of the office suite. The "gross" square                                                                      
footage is everything in the building. Within the Executive                                                                     
Branch and, as she understands it, the Legislative Branch,                                                                      
"usable" square footage is used in all of  the leases, of                                                                       
      which, for  the Executive Branch there are 450 statewide,                                                                 
      even if the lease space is a full building.                                                                               
                                                                                                                                
      SENATOR MICCICHE said it was an interesting metric to use                                                                 
      when  leasing commercial space. He said  you simply can't                                                                 
      magically eliminate the other spaces that serve a building.                                                               
      He said he doesn't believe we do that in the other LIOs as                                                                
      well  when  he thinks  about  the common  space in  those                                                                 
      locations. He said if someone else was coming to lease this                                                               
      building at 716 W 4th Avenue, it would include that other                                                                 
      space just like  one would any other commercial space. He                                                                 
      didn't know if it was a fair comparison per square footage                                                                
      as  Council tries to process this decision. Common spaces                                                                 
      cannot be eliminated as you cannot use the building without                                                               
      those common spaces. He said that he'd like to expand his                                                                 
      initial  request to understand the  total space  that the                                                                 
      Legislature  is occupying  versus how  "usable" space  is                                                                 
      determined in those spaces across the state.                                                                              
                                                                                                                                
      SENATE PRESIDENT MEYER said  that since the Department of                                                                 
      Administration is at  the testifier's table, he  had some                                                                 
      questions he'd like to  ask about the Atwood Building. He                                                                 
      said that he has been on the Council periodically over the                                                                
      last 10  years and he is trying to figure  out how we got                                                                 
      where  we are  today. He  said he  thinks Council was  up                                                                 
      against a deadline and there really wasn't any other space                                                                
      available downtown that could house as  much space as was                                                                 
      needed. He said all government offices try to stay downtown                                                               
      whenever possible. At that time, the Atwood Building wasn't                                                               
      available  and  he  thought  the  plan  was  to  try  and                                                                 
      consolidate  all the  office  space  for  state employees                                                                 
      throughout the city. He said he asked how many leases were                                                                
      expiring for office space and there was a lot expiring in                                                                 
      2016. He  wondered how much space was available today and                                                                 
      how much space would be  available at the end of 2016, if                                                                 
      the consolidation process continues.                                                                                      
                                                                                                                                
      MS. MINTZ responded that there was currently a vacancy in                                                                 
      the Atwood Building of 23,000 usable square feet.                                                                         
                                                                                                                                
      SENATE  PRESIDENT MEYER  asked about  the  current square                                                                 
      footage at the Anchorage LIO.                                                                                             
                                                                                                                                
      MS. MINTZ, with information provided by Ms. Varni, replied                                                                
      that there was  45,371 usable square feet. She went on to                                                                 
      say that  it was the intention that another full floor be                                                                 
      identified for the LIO  and legislative office occupation,                                                                
      bringing the  total to approximately what  was needed. In                                                                 
      response to follow-up questions by Senator Meyer and Chair                                                                
Stevens, she  responded about other  lease space for  the                                                                       
Executive Branch that there are quite a few leases that are                                                                     
expiring  and many  of  them  have  options, which  would                                                                       
normally renew since the rate remains the same. The leases                                                                      
that do not have renewal options require an examination of                                                                      
the  particular office  to determine  if  the mission  is                                                                       
compatible  with  those  currently occupying  the  Atwood                                                                       
Building; if not and they are going to stay in that office                                                                      
space, they determine if downsizing is possible; each lease                                                                     
and occupying office is looked at individually on a case-                                                                       
by-case basis. She said there are some agencies that would                                                                      
be moved into  the Atwood Building if the LIO/legislative                                                                       
offices chose not  to move into the  Atwood Building. She                                                                       
said she would make available copies of what she provided                                                                       
to the Senate President.                                                                                                        
                                                                                                                                
SENATE PRESIDENT MEYER said that it would be good for the                                                                       
other Council members to  have the spreadsheet because it                                                                       
looks like  there is over  200,000 square feet  of leased                                                                       
office  space expiring.  If the  Administration continued                                                                       
their consolidation, there wouldn't be enough space in the                                                                      
Atwood Building for all the expiring leases let alone space                                                                     
for the Legislature. He agreed with the Chair that the cost                                                                     
of the office space leases is important, some of the leases                                                                     
are fairly cheap.  He asked what the  Atwood Building per                                                                       
square foot cost was.                                                                                                           
                                                                                                                                
MS. MINTZ said that it was $1.50 per square foot. The lease                                                                     
rate  is renewed  every  year, re-analyzed based  on  the                                                                       
previous year's operating expenses. For FY 16, the Atwood                                                                       
Building lease cost is  $1.50 per square foot for  a full                                                                       
service lease, which  includes all utilities, maintenance                                                                       
and operations, parking, security, and building management.                                                                     
                                                                                                                                
SENATE PRESIDENT MEYER said that was something to be looked                                                                     
at; for instance DEC has  45,000 square feet at $2.34 and                                                                       
the HESS at $1.98 and DOT  at $2.07. He said that granted                                                                       
that's still a  lot cheaper than what  the Legislature is                                                                       
paying for at  716 W 4th  Avenue but it's still something                                                                       
worth looking at  and making a  comparison so we can  see                                                                       
where we can maximize the savings.                                                                                              
                                                                                                                                
CHAIR STEVENS requested a copy of the spreadsheet be given                                                                      
to the full Council. He asked Ms. Mintz, based on something                                                                     
he had heard, about  whether there were state agencies in                                                                       
Anchorage who would not want to move into the Atwood or who                                                                     
would not be welcomed into the Atwood by the other tenants.                                                                     
                                                                                                                                
      MS. MINTZ said  that when considering who would be a good                                                                 
      fit for  the Atwood Building, they look at the mission of                                                                 
      the  agency, and  their  relationship with  the Executive                                                                 
      Branch  and  with  the  Governor's  Office,  due  to  the                                                                 
      proximity. She said Atwood is a Class A office building, so                                                               
      we want to bring in agencies that are a good fit. She said                                                                
      that the lease mentioned by Senator Meyer for DOT is their                                                                
      weight and measures office area where they have their labs,                                                               
      so that would not be a good fit; OCS, due to the amount of                                                                
      traffic they  have would also  not be a  good fit  in the                                                                 
      Atwood. She said they do look at the leases one by one to                                                                 
      see  which would be a  good relationship to be co-located                                                                 
      with the  other tenants in the building. In response to a                                                                 
      question by Chair Stevens, Ms. Mintz said the  Legislature                                                                
      would be a good fit.                                                                                                      
                                                                                                                                
      VICE CHAIR HERRON asked, if this option was executed, when                                                                
      could the Legislature move into the Atwood Building.                                                                      
                                                                                                                                
      MS. MINTZ said that it would be 1.5 to 2 years to have the                                                                
      space ready.                                                                                                              
                                                                                                                                
      CHAIR STEVENS said there  would be much more detail about                                                                 
      the Atwood when that option was discussed.                                                                                
                                                                                                                                
      SENATOR MICCICHE said that before the $1.53 price is picked                                                               
      up  and carried too  much further, that the  Legislature's                                                                
      cost for  the Atwood would be about $4.90 per square foot                                                                 
      with "all in." He said he wanted to make sure there was an                                                                
      apples-to-apples comparison.                                                                                              
                                                                                                                                
      MS. VARNI  said that was correct although the  Legislature                                                                
      has already paid the $7.5  million for tenant improvements                                                                
      at 716 W 4th Avenue, the total actually would be $2.82 per                                                                
      square foot if  one is just looking at  the costs for the                                                                 
      Atwood  and the  tenant improvements for the  Atwood, not                                                                 
      including what was already paid for the tenant improvements                                                               
      in the current building.                                                                                                  
                                                                                                                                
      SENATOR  MICCICHE said then  the  $7.5 million  should be                                                                 
      removed from all the comparisons.                                                                                         
                                                                                                                                
      MS. VARNI responded that was why the  amount was put in a                                                                 
      separate table so that it didn't look like she was trying                                                                 
      to hide it.                                                                                                               
                                                                                                                                
      SPEAKER CHENAULT asked if it was possible to get a list of                                                                
      buildings owned by the State of Alaska in Anchorage.                                                                      
                                                                                                                                
MS. MINTZ said that there were quite a few other buildings                                                                      
owned by  the State, but  not a large  quantity of office                                                                       
buildings' there was the crime lab, the troopers, UAA has a                                                                     
few office buildings, the Mental Health Land Trust  has a                                                                       
few office buildings, the DOT complex on Tudor; but as far                                                                      
as large scale office buildings owned by the State, there                                                                       
are not very  many of them. She said that  she would work                                                                       
with Ms. Varni to provide a list of those buildings.                                                                            
                                                                                                                                
SENATOR  MACKINNON asked  to follow-up  on the  Speaker's                                                                       
request and said  that the utilization of that  space had                                                                       
been  a   factor  under  consideration  by  the  previous                                                                       
Administration and  she  believed by  this Administration                                                                       
looking at design standards for all of us  and that's why                                                                       
she was asking the question about the Homer LIO. She said                                                                       
she was thinking about the DOT facility out by the airport                                                                      
and she  wanted to  know how many  employees are actually                                                                       
utilizing that square footage so that they can see if the                                                                       
best use is happening for each of the facilities. She said                                                                      
she certainly thinks the people of Alaska are interested in                                                                     
how we  are utilizing space  everywhere, not only in  the                                                                       
Anchorage LIO, but how we are looking at square footage and                                                                     
how it  is utilized throughout the  state. She understood                                                                       
that some of  that space was pretty sprawling now  and in                                                                       
these tough  times, she does think  that consolidation of                                                                       
some of  the  lease space is  something that  they should                                                                       
consider and do. She  said she would like  an update, not                                                                       
necessarily for this committee, but on the space standards                                                                      
study that  this Administration set aside. She  said that                                                                       
there was a planned use for all 20,000 square feet that is                                                                      
currently sitting vacant and has sat vacant for close to a                                                                      
year that  the Atwood Building has  foregone revenue. She                                                                       
wasn't sure why and she understood that the Legislature had                                                                     
an issue at this particular facility that we're trying to                                                                       
work through but there  were opportunities in last year's                                                                       
cycle to move  additional agencies into the Atwood square                                                                       
footage and not have it sit vacant. She said she knows the                                                                      
Administration is looking at that and she would just like                                                                       
to  understand more  so  that when  we're  evaluating, as                                                                       
Senator Micciche said, apples-to-apples instead of apples-                                                                      
to-oranges.                                                                                                                     
                                                                                                                                
CHAIR STEVENS said that was a very appropriate question in                                                                      
these hard times. Speaking about the Atwood, the top floor                                                                      
he  understood was a  firm of  attorneys that  have since                                                                       
vacated;  that entire  floor  was  leased to  an  outside                                                                       
business, not an agency of the State.                                                                                           
                                                                                                                                
      MS.  MINTZ confirmed that the 19th  and top floor  of the                                                                 
      Atwood  Building had  been  occupied  by  the Alaska  Bar                                                                 
      Association. When  they vacated,  the Administration used                                                                 
      that   space,  as   had   been  done   in   the  previous                                                                 
      Administration, as temporary space for agencies while space                                                               
      standard remodels and consolidation were completed over the                                                               
      past few years.                                                                                                           
                                                                                                                                
      SENATOR MACKINNON said she had the opportunity on several                                                                 
      occasions last  year to walk  through some of  the Atwood                                                                 
      Building and the vacancy in the cubicles there was huge, at                                                               
      least  at that  particular time. She  said she understood                                                                 
      there was movement going on  and she looks forward to the                                                                 
      space standards study so they can see what is happening and                                                               
      appreciated the  document titled "Anchorage Office Leases                                                                 
      Expiring." She said  she wondered if they  should look at                                                                 
      lease space across the state in its entirety for the same                                                                 
      purpose: what do we have, how is it  being utilized, could                                                                
      it  be placed in  the hands of  the private sector, could                                                                 
      resources be consolidated together. She said she knows that                                                               
      earlier in  the meeting, there  was a  discussion of some                                                                 
      expensive lease  space up in  Barrow, we understand those                                                                 
      challenges in that market but when she has traveled in past                                                               
      years to other parts of the state, she saw entire buildings                                                               
      vacated from the federal government because people couldn't                                                               
      afford to pay the rents that those communities were asking                                                                
      for those facilities. She said that was just one facility,                                                                
      it was a federal project but it would be nice to know what                                                                
      is happening with our lease space.                                                                                        
                                                                                                                                
      Senator MacKinnon said maybe  we should just request that                                                                 
      from the Senate Finance Committee to be ready for the next                                                                
      legislative session to have a review of the assets that the                                                               
      State owns from  the Administration as well as the square                                                                 
      footage  that we're  paying  as well  as  any  outstanding                                                                
      capital requests, something that  is all encompassing for                                                                 
      how we are utilizing that space.                                                                                          
                                                                                                                                
      CHAIR STEVENS said he  agreed that it is very  appropriate                                                                
      that we do this. He said walking through the Atwood space,                                                                
      it was surprising how much empty space there was, but Ms.                                                                 
      Mintz also took him through the other buildings - the one                                                                 
      with white arches near the Captain Cook Hotel and the one                                                                 
      down more on the waterfront by the Railroad - there is just                                                               
      a lot  of space that is not being utilized because of the                                                                 
      reduction that we see in staff. He said he wanted to pursue                                                               
      a  little farther that there are agencies that either are                                                                 
      not wanted in  the Atwood because of the activity or that                                                                 
      would rather be in other places and one that he personally                                                                
knew of he asked Ms. Mintz to address, which is the Whale                                                                       
Building right next to  the Courthouse, which he believed                                                                       
was occupied by Law and was a pretty substantial occupancy.                                                                     
                                                                                                                                
MS. MINTZ said the  Department of Law, which includes the                                                                       
Attorney General's Office, is  in the  1031 W  4th Avenue                                                                       
building, the Brady Building, and the District Attorney's                                                                       
Office is in  the Whale Building. The District Attorney's                                                                       
Office does not occupy the  entire building but they have                                                                       
had a presence there for a long time. The standard within                                                                       
the  Executive Branch is  that any  agency that does  the                                                                       
business with the Court System be  located within a three                                                                       
block radius because of the amount of traffic between the                                                                       
Courthouse and their offices.                                                                                                   
                                                                                                                                
SENATE PRESIDENT  MEYER said,  of these  leases that  are                                                                       
expiring in 2016, and as he  mentioned there are a lot of                                                                       
them, some of them are happening in January or February and                                                                     
didn't know if Senator MacKinnon and the Finance Committee                                                                      
would have time to address some of these. He asked if Ms.                                                                       
Mintz had identified which  groups, if any, that  they do                                                                       
want to  move to the  Atwood Building. He said  his other                                                                       
question was  that the  Atwood  Building isn't that  much                                                                       
farther  away  from  the  Courthouse  than  the  building                                                                       
mentioned by the Chair. He said it sounds like we do rent                                                                       
out the Atwood Building to other law  firms so he guessed                                                                       
maybe they should  question whether they have to  be that                                                                       
close. He said he thought the rent at that other building                                                                       
was pretty  high although he  didn't have the  numbers in                                                                       
front of him.  He asked how much  square footage has been                                                                       
identified as being able to move into the Atwood Building                                                                       
of the leases that are going to expire in 2016.                                                                                 
                                                                                                                                
MS. MINTZ said that there is one specifically that will be                                                                      
expiring May 31, 2016, with four one year renewal options;                                                                      
she said they would most likely be exercising the first one                                                                     
year renewal option  to give them  time to build out  the                                                                       
space to make it ready for them and that is the Department                                                                      
of Environmental Conservation (DEC). She said that they are                                                                     
waiting  to  see  if  the space  would  be  used  by  the                                                                       
Legislature. DEC is the largest lease that they would look                                                                      
to move  in and whatever couldn't be  accommodated at the                                                                       
Atwood would be moved to the Bayview Building where other                                                                       
DEC staff  are currently located. That  was one that  the                                                                       
Chair and some  other Members walked through to  see that                                                                       
vacancy and  utilize the  space  that is  not being  used                                                                       
efficiently. As it  relates to legal firms in  the Atwood                                                                       
Building, all the private tenants have vacated the Atwood                                                                       
Building so there are no law firms there now. She said that                                                                     
      to complete their mission and to have everyone next to each                                                               
      other, they try to keep Department of Law and the District                                                                
      Attorneys  together  because  they  use  so  many  shared                                                                 
      resources.                                                                                                                
                                                                                                                                
      SENATE  PRESIDENT  MEYER  asked  Ms.  Mintz,  after  some                                                                 
      discussion to identify the functions of certain groups with                                                               
      leases also  expiring May 31,  2016, to  confirm how much                                                                 
      space  DEC had  currently and what  was available  at the                                                                 
      Atwood Building.                                                                                                          
                                                                                                                                
      MS.  MINTZ confirmed  that DEC  currently occupied 45,000                                                                 
      square feet and that there is 23,000 square feet available                                                                
      at the Atwood Building, with the opportunity to consolidate                                                               
      through space  efficiency to retain another 13,000 square                                                                 
      feet. Each floor is about 12,000-13,000 square feet.                                                                      
                                                                                                                                
      SENATE PRESIDENT MEYER said then that it would be a stretch                                                               
      to try and get all of DEC in at Atwood.                                                                                   
                                                                                                                                
      MS. MINTZ repeated that what didn't fit would be moved into                                                               
      the  Bayview Building where  there are other  DEC offices                                                                 
      already located.                                                                                                          
                                                                                                                                
      SENATOR  MACKINNON said  she  wanted to  go  back to  the                                                                 
      conversation about the Whale Building. She asked Ms. Mintz                                                                
      whether the  State owns or  leases that  building and Ms.                                                                 
      Mintz confirmed that the building is leased. She asked for                                                                
      the average square footage cost lease on that building.                                                                   
                                                                                                                                
      MS.  MINTZ responded that it  was approximately $3.00 per                                                                 
      square foot for a full service lease.                                                                                     
                                                                                                                                
      SENATOR MACKINNON  said we find  ourselves in  interesting                                                                
      times.  Alaska has  a revenue  shortfall of  $3-4 billion                                                                 
      dollars and we  need to do business differently. She said                                                                 
      she was putting that on the table and that is the primary                                                                 
      basis and the foundation for her comments. She said she has                                                               
      heard  this body  and other  bodies during  three special                                                                 
      sessions talk about the need to fulfill our commitments, we                                                               
      need to  complete our contracts, we need to  do the right                                                                 
      thing for the people of Alaska. So, we're just as close to                                                                
      the  Boney Courthouse in this  facility and we  have more                                                                 
      utilization or at  least square footage available in this                                                                 
      facility if we  wanted to bring other occupants into this                                                                 
      building to do that. She said she just put that out there                                                                 
      if  we're short and trying to get  our team together that                                                                 
      there is  an opportunity to move  things around and still                                                                 
      fulfill commitments. She  said she wondered what  kind of                                                                 
analysis we're doing to honor our contracts. She said she                                                                       
thought she heard Ms. Mintz say that the Administration is                                                                      
anticipating over  at the  Atwood Building  through space                                                                       
standards utilization the  opportunity to  save space  of                                                                       
about 13,000 square feet or one more  floor. She asked if                                                                       
that was accurate.                                                                                                              
                                                                                                                                
MS. MINTZ replied that it was.                                                                                                  
                                                                                                                                
SENATOR MACKINNON asked which floor was  being cleared to                                                                       
achieve that space.                                                                                                             
                                                                                                                                
MS.  MINTZ said  it would  be  the Department of  Natural                                                                       
Resources and they would need to work with them closely to                                                                      
see which floor would work  best for them to consolidate;                                                                       
they have approximately four or five floors currently.                                                                          
                                                                                                                                
SENATOR  MACKINNON  directed  a  comment  to   Ms.  Varni                                                                       
concerning her  mention of a  "penthouse." She asked  Ms.                                                                       
Varni to elaborate.                                                                                                             
                                                                                                                                
MS. VARNI said the "penthouse" is the word used to refer to                                                                     
the mechanical space, it is not office space.                                                                                   
                                                                                                                                
REPRESENTATIVE JOHNSON said  the list  of  expiring State                                                                       
leases goes  through 2017 and  since it  was going to  be                                                                       
approximately two years  before the  space was ready,  he                                                                       
requested a list for 2018 as well. Ms. Mintz said she would                                                                     
certainly provide that. He asked  when the Whale Building                                                                       
lease  would  expire  and  then  asked  if  there  was  a                                                                       
consolidated list of all leased State space.                                                                                    
                                                                                                                                
MS. MINTZ replied that there is a list of all leased State                                                                      
space  on their  website and  that she  could get  him  a                                                                       
consolidated list like  the one  she provided  for Senate                                                                       
President Meyer through 2018.                                                                                                   
                                                                                                                                
REPRESENTATIVE KITO said that when we look at this list of                                                                      
leased spaces that are expiring, he doesn't see any of that                                                                     
space exceeding $2.70  a square foot.  He said  20,000 or                                                                       
30,000 square feet of our utilization is going to save the                                                                      
State of  Alaska, because  we are  part of  the State  of                                                                       
Alaska, a significant amount of money if we were to go into                                                                     
the  Atwood Building versus  having another  State agency                                                                       
move. He said there is no comparison because we are paying                                                                      
so much more. He then asked if the lease rate was based on                                                                      
the number of  tenants, so based on the  actual costs; in                                                                       
other words, if  there are more tenants  in the facility,                                                                       
then the lease rate actually goes down.                                                                                         
      MS. MINTZ responded that was not correct. The lease rate is                                                               
      based  on  the  actual operating  expenses  and projected                                                                 
      operating expenses from the year before. Each agency pays                                                                 
      the same rate under the Public Building Fund Program that                                                                 
      was established in 2000; so  no matter if the building is                                                                 
      two-thirds full with  a one-third vacancy, everyone still                                                                 
      pays the same rate. The fund pays the vacant portion of the                                                               
      space until it's filled.                                                                                                  
                                                                                                                                
      REPRESENTATIVE KITO said, to confirm, it's the same rate as                                                               
      if  it were  full and  the fuller it  gets, the  less the                                                                 
      vacancy  fund  is  utilized. Ms.  Mintz  agreed that  was                                                                 
      correct.                                                                                                                  
                                                                                                                                
      CHAIR  STEVENS asked  Ms. Mintz  if the  State  owned the                                                                 
      building outright and owed no money on it.                                                                                
                                                                                                                                
      MS. MINTZ said the State does own the building. AHFC holds                                                                
      the master lease and in 2017 the lease will be paid in its                                                                
      entirety and  will revert  strictly to the  Department of                                                                 
      Administration. The cost last year was $1.56 a square foot                                                                
      and through the times we are in right now, they did as much                                                               
      as they could to bring costs down. They looked at service                                                                 
      contracts  and  renegotiated, which  brings them  a  less                                                                 
      expensive rate this coming fiscal year. She said they would                                                               
      continue to do that.                                                                                                      
                                                                                                                                
      CHAIR STEVENS said that it's a small point, but an issue he                                                               
      knows the Senate President dealt with the Borough Assembly                                                                
      here, is that the Atwood Building owned by the State pays                                                                 
      no tax to the City. Right now, this building owned by Mr.                                                                 
      Pfeffer pays City  tax, but we pay that  to the owner. He                                                                 
      asked Ms. Varni if that was correct.                                                                                      
                                                                                                                                
      MS. VARNI said that was correct. She said we paid a total                                                                 
      of  $262,335  and that  was  for  the  assessed value  of                                                                 
      $17,845,982 for this building.                                                                                            
                                                                                                                                
      CHAIR STEVENS said that it  was fair to say that whatever                                                                 
      happens to  this building short of the Legislature buying                                                                 
      it,  if  it stays  in the  public  arena, taxes would  be                                                                 
      collected  on this  building. Ms.  Varni agreed  that was                                                                 
      correct.                                                                                                                  
                                                                                                                                
      SENATOR MACKINNON said that under Scenario #1, continuing                                                                 
      the current least at 716 W 4th Avenue, she said she hadn't                                                                
      heard any conversation about the flat rental rate. She said                                                               
      it looks like the proposal somehow built in a ten year flat                                                               
      fee. She wondered about the cost benefit and time value of                                                                
money, and how that structures out. So what she is saying,                                                                      
if the  general public is listening, is  however this was                                                                       
negotiated it looks like it was negotiated to hold the same                                                                     
and there is value to that. She said you signed a ten year                                                                      
lease, my rental rate is not going up and we could have had                                                                     
the rental rate significantly less in the  first year and                                                                       
escalate up  over time at  percentages. She asked if  the                                                                       
analysis had been done on the flat fee.  She said she had                                                                       
not done the analysis and she just sees $4 million dollars,                                                                     
which sounds  like an  incredibly large amount of  money,                                                                       
$7.41 per  square foot seems  like price gouging to  this                                                                       
Legislator, but then she has to take  that second look to                                                                       
say that she is still paying that same rate in 2025 and she                                                                     
doesn't know what the escalator looks like after that and                                                                       
she has  a $7.5 million investment of  the people's money                                                                       
that she is trying to protect. She wanted to hear about the                                                                     
time value of money and the rental fee that stays flat, and                                                                     
the lease space actually to  get it reported correctly is                                                                       
approximately $3.4 million dollars.                                                                                             
                                                                                                                                
MS.  VARNI said  that through  the leases  throughout the                                                                       
state, where we have a full service lease, and there's only                                                                     
a couple leases that are very small where we might do our                                                                       
own janitorial, but the rest of the leases include a full                                                                       
service lease. She said this is the only lease that is not                                                                      
a full service lease. In some of the earlier drafts of the                                                                      
lease, before it was  finalized, there was a 3%  per year                                                                       
escalation but we are paying the utilities. When we do  a                                                                       
full service lease throughout the state, that's the reason                                                                      
there is a CPI, the formula that gives that landlord a cost                                                                     
of living increase. Since we are paying the utilities, that                                                                     
did not make sense to  give the landlord an increase, and                                                                       
she  said she  wasn't in  on  the negotiations, that  was                                                                       
Representative Hawker. She said that's why you see the $3.4                                                                     
million a year without an escalation in there.                                                                                  
                                                                                                                                
SENATOR MACKINNON said she  appreciated the answer though                                                                       
it's not the answer to the  question she asked. This is a                                                                       
flat fee and she will use  Juneau as an example. She said                                                                       
she had the honor of serving Alaskans for nine years and is                                                                     
going into her  tenth session this year, and  she started                                                                       
paying rent for $1200 in Juneau and now  she pays rent at                                                                       
$1750 and  she has been  told that the  rent is going  to                                                                       
escalate again. So, there is property, a CPI, an escalation                                                                     
process for the  lease space that  you rent and  it's not                                                                       
apparent in this scenario. She said she is with the people                                                                      
of Alaska looking at that number saying that number is too                                                                      
big but she  hadn't heard any discussion from a financial                                                                       
perspective to understand what  the real cost  of today's                                                                       
      rent  is versus paying  it now  and not paying  it later.                                                                 
      Somehow this lease looks like it was based on the thought                                                                 
      that the  CPI would continue to go up and somehow someone                                                                 
      was trying to protect us in the future because we're going                                                                
      to  pay the  same price later.  If that doesn't  work out                                                                 
      pencil-wise, she just wants to know because if I'm paying                                                                 
      in 2016 $3.4 million for the lease amount, not the actual                                                                 
      cost because it's not a full service lease, and I'm still                                                                 
      paying that in 2025, there is some security at least out in                                                               
      2025 that we benefit from. She said she doesn't know what                                                                 
      that looks like based on the spreadsheet she had. She said                                                                
      it's  not a  trick question, she just  wanted to  see the                                                                 
      numbers.                                                                                                                  
                                                                                                                                
      MS. VARNI  said that Serena Carlsen was on  teleconference                                                                
      and asked her to address that question.                                                                                   
                                                                                                                                
      SERENA  CARLSEN, Partner  at  Stoel Rives,  said she  was                                                                 
      retained by the Legislative Council to work on both a lease                                                               
      negotiation  and  negotiation for  the  purchase  of  the                                                                 
      building. She  said she was not  involved in the original                                                                 
      lease but has looked at all the documents and what was done                                                               
      is  that an escalator was applied  to the original number                                                                 
      through year ten and  then the rent was averaged. That is                                                                 
      the reason you  do not see the lease amount changing over                                                                 
      the ten year period.                                                                                                      
                                                                                                                                
      SENATOR  MACKINNON asked if  Ms.  Carlsen could give  the                                                                 
      general public the original lease number so  we know what                                                                 
      was averaged. She said that really still doesn't accomplish                                                               
      the math on the time value of money as far as front paying                                                                
      the amount.                                                                                                               
                                                                                                                                
      MS. CARLSEN said she could not answer the question of the                                                                 
      time value of money and she would have to go back to pull                                                                 
      the original documentation when the  lease was signed for                                                                 
      the mathematics of how the number was derived; she doesn't                                                                
      know  that off  the top  of her  head because  she didn't                                                                 
      participate in the original lease negotiation.                                                                            
                                                                                                                                
      SENATOR  MACKINNON said  she  appreciated that and  asked                                                                 
      whether Ms. Carlson recalled if it was $1 million or $1.5                                                                 
      million  in year  one, escalating  in $1.7  in  year two,                                                                 
      escalating to  $1.9 in year three  and then those numbers                                                                 
      were divided to arrive at the average.                                                                                    
                                                                                                                                
      MS.  CARLSEN  said  that  as  she  recalled there  was  a                                                                 
      conservative inflation factor added but  she couldn't say                                                                 
the exact number although she thought it was somewhere in                                                                       
the 2-3% range and then averaged over the ten years.                                                                            
                                                                                                                                
SENATOR  MACKINNON said  she  just  thought it  would  be                                                                       
valuable to have that average. She said when you give the                                                                       
general public a flat fee of ten years, it would have been                                                                      
nice to  know  some of  the background so  that we  could                                                                       
understand the math. She said we may be paying too much up                                                                      
front  if the  price  on  inflation is  very low  or,  if                                                                       
inflation gets very high, it could be just the reverse. In                                                                      
making the flat payment you're taking somewhat of  a risk                                                                       
over time that you're CPI numbers are accurate.                                                                                 
                                                                                                                                
REPRESENTATIVE KITO, directing a  question to  Ms. Varni,                                                                       
said that when she mentioned the recent tax payments, she                                                                       
indicated an assessed value and asked her  to repeat that                                                                       
number.                                                                                                                         
                                                                                                                                
MS.   VARNI  responded  that   the  assessed  value   was                                                                       
$17,845,982.                                                                                                                    
                                                                                                                                
REPRESENTATIVE KITO then asked about the purchase price for                                                                     
the building.                                                                                                                   
                                                                                                                                
MS. VARNI said that a letter was sent to Chairman Stevens                                                                       
from Mark  Pfeffer and he  is asking $37,000,000 and,  in                                                                       
addition to  that, whatever  his cost  is  for prepayment                                                                       
penalty for  his $28,000,000 loan; at  this point, it  is                                                                       
estimated to be  about $950,000 but we  wouldn't know the                                                                       
exact amount until we're closing.                                                                                               
                                                                                                                                
CHAIR STEVENS said then that the best guess at this point                                                                       
is $37,950,000.                                                                                                                 
                                                                                                                                
REPRESENTATIVE KITO followed up to say that if he bought a                                                                      
house and put a bid on the house that exceeded the assessed                                                                     
value of the house, he wouldn't be able to get a loan for                                                                       
that. He  said  he is  concerned that our  value in  this                                                                       
building is much less than the building is worth.                                                                               
                                                                                                                                
SENATOR MICCICHE said that the difference between assessed                                                                      
value and appraised value is  fairly significant. He said                                                                       
that if you asked any investor for any commercial building                                                                      
if they could purchase an investment for the assessed value                                                                     
there would be lots of folks swarming to the table.                                                                             
                                                                                                                                
CHAIR STEVENS said he wanted to clarify a comment Ms. Varni                                                                     
made for the  Council. When we started to put  together a                                                                       
comparison of these five scenarios, we started with a  20                                                                       
      year  basis and that  seemed to  make sense. As  we moved                                                                 
      along,  Ms. Carlsen said  the current  lease was  only 10                                                                 
      years, so to compare apples-to-apples, each scenario should                                                               
      be for a period of 10 years for all five. He said a 20 year                                                               
      scenario was available to Council; they could also do a 30                                                                
      year because that may be what a mortgage term would be. He                                                                
      just  wanted members to be  aware that the reason  we are                                                                 
      using a 10  year comparison is so Council will be able to                                                                 
      make a better evaluation of all five options.                                                                             
                                                                                                                                
      SENATOR  MACKINNON wanted confirmation that  the assessed                                                                 
      value  of $17,000,000  was for  2015 and  asked what  the                                                                 
      assessed value was before the building was repaired.                                                                      
                                                                                                                                
      MS. VARNI said that she did have that figure and would need                                                               
      a  minute to find it. She said  she believed it was under                                                                 
      $2,000,000 and that the landlord requested and received a                                                                 
      reduction in the  assessed value due to problems with the                                                                 
      HVAC system.                                                                                                              
                                                                                                                                
      SENATOR MICCICHE asked if the Chair had the appraised value                                                               
      of the building to accentuate the difference between those                                                                
      two terms.                                                                                                                
                                                                                                                                
      3:11:23 PM                                                                                                              
      DISCUSSION FOLLOWED between Chair Stevens, Senator Micciche                                                               
      and Doug Gardner, Legal Services Director, who had advised                                                                
      the Chair to  discuss the different appraisal values first                                                                
      in  Executive Session. In  response to Senator Micciche's                                                                 
      questions and concerns that the assessed value number was                                                                 
      made public and the appraised values should be as well, Mr.                                                               
      Gardner said that while the assessed value was not the same                                                               
      as the appraised value, and that purchases are based on the                                                               
      appraised value, the assessed value was one more number for                                                               
      Council to consider. Mr. Gardner recommended that Council                                                                 
      hear from the  commercial real estate expert Peter Shorett                                                                
      with  Kidder Matthews first in  Executive Session so that                                                                 
      they  could have  a  good understanding of  the different                                                                 
      appraisal values and then decide how they wanted to share                                                                 
      that information with the public. Chair Stevens agreed to                                                                 
      hold  the initial  discussion of  appraisals in Executive                                                                 
      Session.                                                                                                                  
      3:15:33 PM                                                                                                              
                                                                                                                                
      SENATOR MACKINNON said that she was one of the Legislators                                                                
      that advocated for  the purchase of the  NANA Building by                                                                 
      Legislative  Council. She  said one  of  the  things that                                                                 
      happened when  the Legislature was  trying to  allow more                                                                 
      parking for the  people of Anchorage in the downtown area                                                                 
was  that constituents contacted her  office and  Senator                                                                       
Cowdery's office and  many others. The Legislature had  a                                                                       
debate about sharing parking with the people and the City                                                                       
of Anchorage. She said there was a business agreement that                                                                      
brought in revenue to the Legislature and basically ran the                                                                     
cost of  our own lease space up  by basically showing the                                                                       
owners of  the property that  there was parking that  was                                                                       
under-utilized in  evening  hours  and  that  they  could                                                                       
actually make more money on that property.                                                                                      
                                                                                                                                
Senator MacKinnon asked how parking was being handled now.                                                                      
She said she wasn't part of the original discussion on this                                                                     
process. She  said there is  now paid parking  outside of                                                                       
business hours and she asked if the Legislature shared in                                                                       
any of that revenue or is that just a portion of the lease.                                                                     
She thought the Legislature had received some benefit from                                                                      
opening up our parking to the people of Anchorage.                                                                              
                                                                                                                                
MS. VARNI said that the Legislature had a separate contract                                                                     
with  EasyPark  and  it  was  her recollection  that  the                                                                       
Legislature receives  approximately $20,000  annually  in                                                                       
revenue. She said Jessica Geary, Finance Manager, would be                                                                      
able to provide the exact figure.                                                                                               
                                                                                                                                
SENATOR  MACKINNON asked  if  that  was  reflected  as  a                                                                       
reduction or  revenue  in the  lease  costs presented  to                                                                       
Council.                                                                                                                        
                                                                                                                                
MS. VARNI said it is  not figured in the scenarios, it is                                                                       
not paid to  the landlord. If it were to  be included, it                                                                       
would  probably show  as  a  reduction in  the  operating                                                                       
expenses. It isn't a  documented revenue, it goes back to                                                                       
the general fund.                                                                                                               
                                                                                                                                
SENATOR MACKINNON said she raised this because (1) it is a                                                                      
revenue source that is not reflected here and (2) it is a                                                                       
negotiated fee, if the State actually didn't have EasyPark                                                                      
doing it and did it ourselves, there is a revenue generator                                                                     
that is  vacant that could offset  some of the  costs and                                                                       
that's how we negotiated it originally. We thought it would                                                                     
be  additional income  for the  State.  She said  $20,000                                                                       
compared to $3.4 million dollars, while huge in her books,                                                                      
is not significant to move the percentages up or down. She                                                                      
said she was just wondering what wasn't included as revenue                                                                     
from that particular revenue stream that we identified. She                                                                     
noted to the  Chair that particular move caused our lease                                                                       
prices to go up  when the owner recognized that there was                                                                       
profit to be made in the parking lot too.                                                                                       
                                                                                                                                
      REPRESENTATIVE JOHNSON  asked if  the  Legislature rented                                                                 
      parking spaces during the renovation process at a cost of                                                                 
      $600 per month.                                                                                                           
                                                                                                                                
      MS. VARNI  said there were parking expenses and said Juli                                                                 
      Lucky, staff  to Representative Hawker, would probably be                                                                 
      able to answer that question.                                                                                             
                                                                                                                                
      JULI  LUCKY,  staff to  Representative  Mike Hawker,  put                                                                 
      herself on the record and said she didn't have the actual                                                                 
      numbers  but could  provide  them. She  said  it was  her                                                                 
      understanding that part  of the negotiation was  that the                                                                 
      landlord would pay for the parking, so we didn't actually                                                                 
      cut a  check or see  the numbers. She said what basically                                                                 
      happened is that we would send the landlord the number of                                                                 
      parking permits  needed per month and  the landlord would                                                                 
      purchase the permits  and give them to her.  There was no                                                                 
      cost to the Legislature for parking.                                                                                      
                                                                                                                                
      REPRESENTATIVE JOHNSON said  he wasn't  talking about the                                                                 
      cost to the Legislature, but looking at the math, at a cost                                                               
      of $600, that's $28,000 per month just if  we use the top                                                                 
      half of our parking lot. So, all of a sudden, the $20,000                                                                 
      becomes a fairly big number if you multiply it, take half                                                                 
      the  parking spaces times $600  times 12 is  $300,000-plus                                                                
      that we could generate in revenue.                                                                                        
                                                                                                                                
      SENATE PRESIDENT MEYER directed a question to Ms. Lucky. He                                                               
      said Ms.  Varni mentioned that the lease on this building                                                                 
      was  negotiated  by  Representative Hawker, the  previous                                                                 
      Legislative Council Chair. He believed that Representative                                                                
      Hawker   had  assistance  from   Alaska  Housing  Finance                                                                 
      Corporation in helping  him to determine what was  a fair                                                                 
      amount for the State and asked Ms. Lucky to speak to that.                                                                
                                                                                                                                
      MS.  LUCKY  said  that  she  was  not  involved with  the                                                                 
      negotiations. One  of  the reasons  was because AHFC  was                                                                 
      retained as  the tenant representative and she  knew that                                                                 
      they did a substantial amount in the negotiations and also                                                                
      a substantial amount in determining the fair prices of the                                                                
      tenant  improvements. She  could  not  provide that  many                                                                 
      details  as  she  was  not  involved  in  the  day-to-day                                                                 
      negotiations. She said  she does  know that AHFC  did the                                                                 
      majority of  working with the Legislature's legal counsel                                                                 
      and the landlord in coming up with the lease. She said Mr.                                                                
   Gardner might better be able to address that question.                                                                       
                                                                                                                                
CHAIR STEVENS asked members if Council was comfortable in                                                                       
moving on to Scenario #2; noting that  many issues in the                                                                       
upcoming scenarios may have already been discussed.                                                                             
                                                                                                                                
MS. VARNI, before moving on to Scenario #2, said she just                                                                       
received a  text noting that the  Legislature did receive                                                                       
$26,200 in FY 14 for parking revenue.                                                                                           
                                                                                                                                
Ms.  Varni  said the  action  required for  Scenario  #2:                                                                       
Purchase 716 W 4th Avenue Funded by AHFC Issuing Fixed-Rate                                                                     
Bonds is that the Legislature would need to pass a stand-                                                                       
alone bill to enable AHFC to finance the purchase of this                                                                       
building;  with the  issuance  of  bonds with  a  10-year                                                                       
maturity at a fixed rate of approximately 2.16 percent. She                                                                     
said she  did receive the debt service  interest costs as                                                                       
well as the cost of bond  issuance and administration from                                                                      
Mike Strand, Finance Director of AHFC. She said it  was a                                                                       
total  of  $48,850,000;  which includes  the  $37,950,000                                                                       
purchase price, $4,800,000 debt service interest total, and                                                                     
the cost of bond issuance and administration. This brings                                                                       
the annual lease purchase cost to AHFC to $4,360,000 plus                                                                       
$5,250,000 for operating and maintenance expenses. She said                                                                     
the operating expenses went down under any of the purchase                                                                      
scenarios because  we would  not be  paying insurance  or                                                                       
property taxes. Because  we would own  this asset and  be                                                                       
responsible  for  any  and  all  ongoing maintenance  and                                                                       
operating costs, one  position was  added for  a building                                                                       
manager to the operating expenses.                                                                                              
                                                                                                                                
CHAIR STEVENS said  he wanted to  acknowledge the several                                                                       
Legislators not on Legislative Council who are  either in                                                                       
the  room or  on teleconference and  invited them to  ask                                                                       
questions if they had any.                                                                                                      
                                                                                                                                
There being no questions regarding Scenario #2, the Chair                                                                       
had Ms. Varni move to Scenario #3.                                                                                              
                                                                                                                                
MS. VARNI said Scenario #3 was to purchase 716 W 4th Avenue                                                                     
via  the   issuance  of  variable  rate  certificates  of                                                                       
participation. The  action  required would  be  that  the                                                                       
Legislature would need to pass a stand-alone bill outlining                                                                     
the project, cost, annual payment and total payments. This                                                                      
information was obtained from Deven Mitchell, Debt Manager                                                                      
with the Treasury Division in  the Department of Revenue.                                                                       
These figures show a flat rate interest of 0.6%, which is                                                                       
the current variable rate. She said there is a risk that if                                                                     
interest rates rise, the State's credit quality diminishes,                                                                     
or there is a market dislocation, the interest rate would                                                                       
increase;  however,  the  calculations  use  the  current                                                                       
      variable  rate. The  total  shows the  purchase price  of                                                                 
      $37,950,000; the debt service interest rate of $1,149,600,                                                                
      and operating costs over the 10 year period of $5,250,000.                                                                
      The total cost would be $44,614,600.                                                                                      
                                                                                                                                
      VICE CHAIR HERRON said he needed to understand the advice                                                                 
      from both in-house and outside counsel why only a 10 year                                                                 
      window was used. He said if he was going to buy a new home,                                                               
      he couldn't afford to pay it off in 10 years.                                                                             
                                                                                                                                
      DOUG GARDNER, Legal Services Director, said that the idea                                                                 
      was, since the  Legislature does an annual budget, to try                                                                 
      and look at some examples of scenarios that look at a cash                                                                
      flow type of analysis so members would know what they were                                                                
      facing; and make some effort, as was alluded to earlier, to                                                               
      try  and do  an apples-to-apples comparison. He  said Ms.                                                                 
      Carlsen was online and may be able to answer that question.                                                               
      The two examples pointed out both in comparison to a cash                                                                 
      purchase price illustrate that there are financing costs,                                                                 
      illustrate that  there are  metrics we don't  know enough                                                                 
      about; but the purpose was to illustrate the fact that it                                                                 
      is more expensive to finance. Were the Legislature to want                                                                
      to purchase, the Legislature might want to look at 20 or 25                                                               
      years,  something like that.  The  total price  would get                                                                 
      larger because you're financing it over a period of time;                                                                 
      and the  annual cash price would likely drop. Ms. Carlsen                                                                 
      might be able to provide enough information to address the                                                                
      Vice Chair's question.                                                                                                    
                                                                                                                                
      MS. CARLSEN  said that in the commercial world, buildings                                                                 
      are typically financed between 20 and 30 years; 20 probably                                                               
   the most common in the current financing environment.                                                                        
                                                                                                                                
      CHAIR  STEVENS  asked Ms.  Varni  to  share the  20  year                                                                 
      comparison costs for Scenarios 2 and 3.                                                                                   
                                                                                                                                
      MS.  VARNI said she would be  happy to share the  20 year                                                                 
      total cost in  each of the five scenarios. The total cost                                                                 
      for  Scenario #1  (continue  in current  lease) would  be                                                                 
      $80,640,000;  #2 (purchase  using  AHFC  bonds) would  be                                                                 
      $62,800,000; #3 (purchase via issuance of certificates of                                                                 
      participation) would  be $51,037,600; #4  (cash purchase,                                                                 
      plus  operating costs  over a  20  year period) would  be                                                                 
      $55,950,000; and #5 (moving to State-owned Atwood Building)                                                               
      would be $13,295,520.                                                                                                     
                                                                                                                                
      VICE CHAIR HERRON said it was important that be explained                                                                 
      because in the early '80s, when he hardly had two nickels                                                                 
      to rub  together, his wife and he did take out  a 30 year                                                                 
note for their home, which they still live in. He said that                                                                     
they realized within seven years that they should refinance                                                                     
for a period of 15 years because they would have paid two                                                                       
or three times over if they had gone the full 30 years. He                                                                      
said the shock value of Scenarios 2 and 3, when one doesn't                                                                     
know why we  did the scenario; that is  important for the                                                                       
public to know.                                                                                                                 
                                                                                                                                
SENATOR MACKINNON said she would  like the square footage                                                                       
costs in the 20 year version of Scenarios 2 and 3, because                                                                      
that is what we were comparing. She also asked how long we                                                                      
have been in this particular facility renting already. She                                                                      
said  there was  some  value  in  being located  in  this                                                                       
building. She  said  Anchorage's Comprehensive Plan  2020                                                                       
actually asks  for government services to  locate in  the                                                                       
downtown area as part of their planning efforts.                                                                                
                                                                                                                                
MS. VARNI said the square footage cost in Scenario #2 was                                                                       
$6.46 and in Scenario #3 was $5.38.                                                                                             
                                                                                                                                
SENATOR MACKINNON asked about the square footage costs for                                                                      
Scenario #4 to include the amount of time the Legislature                                                                       
had already been in the building, and, in response to Ms.                                                                       
Varni saying she would need to refigure those costs, agreed                                                                     
that it would be acceptable to get those numbers after the                                                                      
meeting.                                                                                                                        
                                                                                                                                
REPRESENTATIVE JOHNSON asked what the square footage costs                                                                      
would  be  in year  2026  under  the  10 year  purchasing                                                                       
scenarios.                                                                                                                      
                                                                                                                                
MS. VARNI said she believed it would be similar to what the                                                                     
square footage cost was in Scenario #5: Move to State-Owned                                                                     
Space at the Atwood Building, maybe in the $1.70 range.                                                                         
                                                                                                                                
REPRESENTATIVE JOHNSON said so if we bit the bullet for 10                                                                      
years and then after that for 20 or 30 years we pay $1.70.                                                                      
Agreeing that any maintenance and operating costs would be                                                                      
on top  of that, he  said his point  was that this was  a                                                                       
really front end loaded lease with the 10 years. He said he                                                                     
was less interested in comparing apples-to-apples then he                                                                       
is in comparing what is best for the State in the long run.                                                                     
He said he wanted to look at  all of the scenarios and he                                                                       
doesn't think he has all the scenarios in front of him. He                                                                      
said in  2026, $1.70  plus maintenance is  going to  look                                                                       
really good.                                                                                                                    
                                                                                                                                
REPRESENTATIVE KITO said that if we choose Scenario #5, we                                                                      
are in  a situation where we already are, at  that point,                                                                       
      paying $1.80 per square foot for the next 10 years, which                                                                 
      is a significant savings to the State between now and year                                                                
      10, when then, as an owned facility, we would drop down to                                                                
      the  level of  what  the State  is paying  at  the Atwood                                                                 
      Building.                                                                                                                 
                                                                                                                                
      REPRESENTATIVE JOHNSON  said that  was assuming  the rent                                                                 
      doesn't  go up.  He said  his point  was for  illustrative                                                                
      purposes only, somewhere in the next 10 years, there's got                                                                
      to be a balance between the $7.00 and the $1.70 per square                                                                
      foot cost that we  can come to. Or not. He said he thinks                                                                 
      that unless we look at that, and look at that scenario as                                                                 
      well as these five, we may have 10 scenarios here and he is                                                               
      not comfortable at this point with the information we have                                                                
      because he  thinks there are  a lot of  other options out                                                                 
      there  that we haven't  really looked at. And  we haven't                                                                 
      looked at  the long term costs  of the money. He  said he                                                                 
      can't disagree with what Representative Kito said, but it's                                                               
      just a  balance and was for illustrative purposes that he                                                                 
      mentioned that.                                                                                                           
                                                                                                                                
      SENATOR MACKINNON said we're comparing all the scenarios to                                                               
      moving to  the Atwood Building because that appears to be                                                                 
      the lowest cost,  at least for tomorrow versus today. She                                                                 
      asked the  Administration if they're planning on building                                                                 
      that out for  free or whether there are going to be costs                                                                 
      associated and charged to  the Legislature for the build-                                                                 
      out. She heard it stated that it will take one to two years                                                               
      to modify that space and it's been sitting vacant somehow,                                                                
      not sure  where that request came from that  we would ask                                                                 
      anyone to hold  office space open; she asked if the State                                                                 
      was going to  try to recoup then the cost they would have                                                                 
      received  from  leasing that  space  somewhere else.  She                                                                 
      summarized her  two questions as: (1)  is the  Legislature                                                                
      going to  pay for  the cost to  re-purpose its own square                                                                 
      footage and (2) will we be charged for any of the vacancy                                                                 
      rate while that remodel is  being done. She then asked if                                                                 
      there were  relocations costs for the people who  have to                                                                 
      move out on behalf of us being able to move in.                                                                           
                                                                                                                                
      MS.  VARNI responded to  the first  question by referring                                                                 
      Council to the  bottom of the page on Scenario #5 showing                                                                 
      tenant  improvements total cost of  $3,500,000. She noted                                                                 
      that all State agencies, when they remodel their space, are                                                               
      financially responsible for their improvements.                                                                           
                                                                                                                                
      MS. MINTZ said that her office had provided LAA with some                                                                 
      temporary space and  costs they had identified should the                                                                 
      LIO and legislative offices need to move out if the lease                                                                 
was terminated.  She said they  do not  anticipate moving                                                                       
anyone out  of the Atwood Building  to make room for  the                                                                       
Legislature.                                                                                                                    
                                                                                                                                
MS. VARNI added that the temporary space available would be                                                                     
at  a  total yearly  cost of  $394,083;  it includes  the                                                                       
McKinley  Building across  the  street, which  served  as                                                                       
temporary space during the remodel of 716 W 4th Avenue, and                                                                     
would offer four floors that are currently sitting vacant                                                                       
at between $1.75 and $1.95 per square foot depending on the                                                                     
floor. She said there's also quite a bit of  space in the                                                                       
Alaska Legal Center at 6th and K Street by the Captain Cook                                                                     
Hotel.                                                                                                                          
                                                                                                                                
SENATOR MACKINNON said  that didn't answer  her question,                                                                       
which was that  if we were to  enter into a lease  in the                                                                       
Atwood Building to build-out the space for us, would there                                                                      
be a square footage cost for the time that the improvements                                                                     
were made and, on top of that, would there be, if somehow                                                                       
someone has led  the Administration to believe you should                                                                       
just hold this open  for us and not rent  the space right                                                                       
now, are you going to try to recoup the cost of it sitting                                                                      
vacant. She said that's what she believed happened at the                                                                       
current building, that we paid rent  during the period of                                                                       
the remodel.                                                                                                                    
                                                                                                                                
MS.  MINTZ  said  she  would need  to  confirm  with  the                                                                       
Administration but it has been the practice that you would                                                                      
start paying rent the day you start physically occupying.                                                                       
                                                                                                                                
SENATOR MACKINNON said that  sounds like a  good business                                                                       
practice.                                                                                                                       
                                                                                                                                
CHAIR STEVENS asked Ms. Varni with  regard to Scenario #4                                                                       
and purchasing the building, there have  been some issues                                                                       
with this building, so what problems are we buying or will                                                                      
we wind up with that have not been solved to date, and for                                                                      
which he assumed we would be responsible for.                                                                                   
                                                                                                                                
MS.  VARNI said  there  have been  quite  a few  building                                                                       
pressurization problems that cause the front doors and the                                                                      
door to  the parking lot to not  completely close. We did                                                                       
have a glass outside window shatter on the 5th floor, which                                                                     
took seven weeks to be replaced. We have had  quite a few                                                                       
complaints on noise transmission between the offices; also                                                                      
noise transmission issues between the ABC conference rooms                                                                      
on the  first floor; water  bottle filling stations can't                                                                       
work with cups; multiple sidewalk ramp to garage deck heat                                                                      
failures; complaint from next door neighbor of ice buildup                                                                      
      onto  their property; multiple door hold-opens in offices                                                                 
      requiring multiple repairs throughout the building; a large                                                               
      water leak in  Suite 216 with a frozen radiator; multiple                                                                 
      roof  leaks into  a suite  on the  6th floor;  temperature                                                                
      control problems;  false alarms with  the fire protection                                                                 
      system; generator not shutting off when power is restored                                                                 
      to the building; HVAC problems in the server room; battery                                                                
      failures  in  the  auto  trash  cans,  faucets  and  soap                                                                 
      dispensers; multiple elevator errors; drain traps dry which                                                               
      cause sewage smells; proximity card system problems; glass                                                                
      canopy water problems; and recently maintenance checks on                                                                 
      the HVAC system show the system is  very inefficient, that                                                                
      the heat  and cooling are kind of  chasing each other and                                                                 
      running simultaneously in  some cases,  applying heat and                                                                 
      cooling most of the time. She said we will have continuous                                                                
      maintenance problems and that's why they looked  to add a                                                                 
      building maintenance person. Also in the current lease, it                                                                
      says that they will not be doing any painting for 10 years                                                                
      and we  do know that offices move or people want painting                                                                 
      done, which is another reason to add a building maintenance                                                               
      person.                                                                                                                   
                                                                                                                                
      CHAIR STEVENS  said that one issue that  bothered him was                                                                 
      that when they tried to hold an Executive Session in this                                                                 
      conference room  for the Ethics Committee, people  in the                                                                 
      hallway could hear what was  being said. He asked if that                                                                 
      was something that could be fixed and whether it would be                                                                 
      expensive. This room is not soundproof.                                                                                   
                                                                                                                                
      MS. VARNI said we have not looked into trying to fix that,                                                                
      so she  is unsure if it could be  fixed nor what the cost                                                                 
      might be. She said the glass doors may have something to do                                                               
      with it.                                                                                                                  
                                                                                                                                
      SENATOR  MICCICHE said  his  understanding was that  this                                                                 
      building was on a warranty and asked if the building owner                                                                
      had been approached to correct those issues.                                                                              
                                                                                                                                
      MS. VARNI  said it has been  ongoing. She said she didn't                                                                 
      know if  the landlord would be able or willing to replace                                                                 
      the  water bottle  filling stations with  actual drinking                                                                 
      fountains or replace all the door closures with a different                                                               
      type  of hardware. She said  that Mike Warenda, Anchorage                                                                 
      Information Officer, has had problems with the key locking                                                                
      system, so perhaps a higher quality hardware. She said that                                                               
      the warranty expires in  January and she didn't know what                                                                 
      the landlord was willing to do.                                                                                           
                                                                                                                                
SENATOR  MICCICHE said  he doesn't  have  a predetermined                                                                       
objective on location and he doesn't have an agenda about                                                                       
where we go. He  said he has one consideration and that's                                                                       
competitiveness on a cost  per square foot basis, but  he                                                                       
wants that  basis to be  compared apples-to-apples and he                                                                       
doesn't think  we  have that  today. He  asked about  the                                                                       
Chair's timeline and is he considering a smaller task force                                                                     
that helps to get some of these scenarios on the table. He                                                                      
said he doesn't know that we've processed these numbers to                                                                      
a point of looking at a unit cost that varied between $5.18                                                                     
in Barrow to  something less in most  other locations. He                                                                       
doesn't think we have processed the scenarios to where we                                                                       
understand  if  we  can  get  this  location  down  to  a                                                                       
competitive per square foot basis. He asked again  if the                                                                       
Chair was  thinking about a  task force that  gets better                                                                       
numbers, and answers to some of these questions to where we                                                                     
can  make  a  decision. He  said  if  we can't  get  more                                                                       
competitive, it's clear that this is a space  that is not                                                                       
putting the Legislature on lower cost operating priorities.                                                                     
                                                                                                                                
CHAIR  STEVENS said  he  was really  concerned about  the                                                                       
timeline. He  said we  have several timeline  issues that                                                                       
we're facing. One issue is that we've negotiated a purchase                                                                     
price with Mr. Pfeffer and that price is good through the                                                                       
end of  January 2016. We  also need  to send  the Finance                                                                       
Committees a budget request and need to know what that is                                                                       
going to be;  he reminded Council that what they  will be                                                                       
doing is making a recommendation to the Finance Committees                                                                      
and, frankly, the ball stops at the Finance Committees and                                                                      
at the Legislature to decide how we're going to pay for all                                                                     
that.  He said  he  is  also concerned  about the  Atwood                                                                       
Building; if that is  a serious consideration that we are                                                                       
making, we  could dawdle  our way  through this and  find                                                                       
ourselves in  the  same place  as we  did  with the  NANA                                                                       
Building - that we've waited too long and no longer is that                                                                     
space available. As  Senator MacKinnon has said, at  some                                                                       
point they  should, and  we would  expect them to,  begin                                                                       
looking for other  tenants if we're not  ready to make  a                                                                       
decision. He  said honestly,  in working  with the  prior                                                                       
Chair, his options were very, very limited; he did not have                                                                     
the option in going to the  Atwood Building as we do now.                                                                       
There were others that were involved in trying to negotiate                                                                     
with the Administration on that  and it was simply not  a                                                                       
possibility as he  understood it. He repeated that he  is                                                                       
really concerned about those timelines, it really puts us                                                                       
under the gun. We can keep fighting and arguing and kicking                                                                     
this can down the road; we've already done it for 10 years                                                                      
that he's been involved and we can keep doing it another 10                                                                     
years, he supposed, and  just stay right here.  That's an                                                                       
      option. He  said to  fully answer the  question about the                                                                 
      price of the building, we need to hear from Serena Carlsen                                                                
      again because he sat in on some of those meetings for the                                                                 
      negotiations, as did Doug  Gardner, Pam Varni and Katrina                                                                 
      Matheny of his staff, but some of them they were not privy                                                                
      to. It was  his decision to hire an expert to do this; he                                                                 
      said  he's a history  professor, what does he  know about                                                                 
      negotiating a contract. He doesn't want to be put in that                                                                 
      position and he won't be put in that position, so we hired                                                                
      Serena Carlsen to do that for us. She went back and forth                                                                 
      on various prices and wound up at this $37,950,000 purchase                                                               
      price.  He asked  Doug Gardner if  we could  discuss what                                                                 
      happened in those negotiations with Mr. Pfeffer.                                                                          
                                                                                                                                
      MR. GARDNER said it is the Chair's decision on the scope of                                                               
      how to  handle things. He said we've  got Ms. Carlsen and                                                                 
      Peter Shorett from Kidder Matthews who can probably answer                                                                
      a  lot of these questions; they're on teleconference, Mr.                                                                 
      Shorett needs to catch a ferry and we're paying them by the                                                               
      hour. He said at  some point the members need to get this                                                                 
      information and these are the kinds of questions he thinks                                                                
      can be very fluidly answered in an Executive Session; they                                                                
      can  be answered publicly if  you would  like; it  is the                                                                 
      Chair's prerogative.  In  response to the Chair's concern                                                                 
      about  discussing legal  issues in  the  public eye,  Mr.                                                                 
      Gardner said we  are in litigation with Mr. Gottstein and                                                                 
      there  is overlap with  these issues; he has  made claims                                                                 
      against us -  the issue of the lease and appropriation is                                                                 
      clearly  a  legal  question  and  a  money  question.  He                                                                 
      recommended that Council receive that information and then                                                                
      choose how to  relay it. It will enable you to  ask a lot                                                                 
      more questions in Executive Session and he commented that                                                                 
      to the extent that he's answering those questions or Serena                                                               
      Carlsen is, that's legal  advice to the Council which has                                                                 
      traditionally been received in an Executive Session.                                                                      
                                                                                                                                
      CHAIR STEVENS said he asked Mr. Gardner to give him a high                                                                
      sign if we were straying into an area that should not be in                                                               
      the public and so  we'll take Senator MacKinnon's question                                                                
      and  then move  into Executive Session  so Council has  a                                                                 
      chance to talk to Peter Shorett and Serena Carlsen who will                                                               
      not be available soon.                                                                                                    
                                                                                                                                
      SENATOR MACKINNON said that to keep the record accurate, we                                                               
      just  went through a  laundry list of  problems with this                                                                 
      current  building and she  was wondering who  managed the                                                                 
      project. She asked how did we  get a sound system that is                                                                 
      louder than the  walls. She said it was her  understanding                                                                
that the State of Alaska took over the technical aspects of                                                                     
the sound system that we're currently utilizing.                                                                                
                                                                                                                                
MS. VARNI said  that she believed that  Chariot Group was                                                                       
hired to  recommend equipment for this room,  though Juli                                                                       
Lucky might know more. In response to a follow-up question                                                                      
by Senator MacKinnon, she said that the State of Alaska did                                                                     
not put  in the equipment, it was the  Chariot Group. She                                                                       
said she did not know if  the State of Alaska picked what                                                                       
system was  installed and would  get that  information to                                                                       
Senator MacKinnon.                                                                                                              
                                                                                                                                
SENATOR MACKINNON said that she hoped when Council came out                                                                     
of Executive Session, we would have a number to share with                                                                      
the  people of  Alaska about  the cost  of  litigation in                                                                       
reference to any of  the scenarios that have been  put in                                                                       
front of Council.                                                                                                               
                                                                                                                                
CHAIR  STEVENS said  it  was  his  intention that  during                                                                       
Executive  Session  Council  will  be  appraised  of  the                                                                       
potential costs of  litigation; whether we want  to share                                                                       
that in a public meeting or not is up to you.                                                                                   
                                                                                                                                
SENATOR MACKINNON asked if there was a divider behind the                                                                       
wall so that Council is actually in Executive Session.                                                                          
                                                                                                                                
CHAIR STEVENS said there wasn't, but he would request Mike                                                                      
Warenda to keep people away from the doors. In response to                                                                      
a request by Representative Johnson for a 10 minute recess,                                                                     
he said  that it would take  some time to go  through the                                                                       
process to  go into Executive  Session and he  would call                                                                       
folks back as soon as that was done. He asked for a motion                                                                      
to go into Executive Session.                                                                                                   
                                                                                                                                
3:59:07 PM                                                                                                                    
VICE CHAIR HERRON moved  that Legislative Council go into                                                                       
Executive Session under Uniform Rule 22(B)(1), discussion                                                                       
of  matters,  the  immediate  knowledge  of  which  would                                                                       
adversely affect the  finances of  a government unit  and                                                                       
22(B)(3), discussion of  a matter  that may,  by law,  be                                                                       
required to  be  confidential. I ask  that  the following                                                                       
individuals remain in the room;  Doug Gardner, Pam Varni,                                                                       
Katrina Matheny, Linda Hay, and legislative staff working                                                                       
for  Council members and  that  Serena Carlsen and  Peter                                                                       
Shorett be on line.  We also welcome any Legislators that                                                                       
are not  on Legislative Council to remain in the  room or                                                                       
online.                                                                                                                         
                                                                                                                                
      A roll call vote was taken.                                                                                               
                                                                                                                                
      YEAS:   Stevens, Herron, Meyer, Hoffman, Huggins, MacKinnon,                                                              
              Micciche, Johnson, Kito                                                                                           
                                                                                                                                
      NAYS: None                                                                                                                
                                                                                                                                
      The motion was approved 9-0.                                                                                              
                                                                                                                                
      CHAIR  STEVENS,  in  response to  a   request by  Senator                                                                 
      Micciche, agreed that Tanci Mintz could remain in the room                                                                
      for Executive Session. He noted that Council was in recess                                                                
      until they came back together for the Executive Session.                                                                  
                                                                                                                                
      Legislative Council went into Executive Session.                                                                          
                                                                                                                                
      Legislative Council came out of Executive Session.                                                                        
      6:06:34 PM                                                                                                              
                                                                                                                                
      CHAIR  STEVENS said Council  had an  Executive Session in                                                                 
      which no action was taken, and he requested a motion from                                                                 
      Vice Chair Herron.                                                                                                        
                                                                                                                                
      VICE CHAIR HERRON moved that Legislative Council authorize                                                                
      the  Legal Services Division to represent  and defend the                                                                 
      Alaska Legislature, and a former Alaska Legislator sued in                                                                
      the  Legislator's  official  capacity  in  Patterson  vs.                                                                 
      Governor Bill Walker, et al, lJU-15-692 CI, and to report                                                                 
      to  Council  during the  litigation as  requested by  the                                                                 
      chairman regarding the progress of the case.                                                                              
                                                                                                                                
      A roll call vote was taken.                                                                                               
                                                                                                                                
      YEAS:   Stevens,  Herron,  Huggins,  MacKinnon, Micciche,                                                                 
              Chenault, Johnson, Kito                                                                                           
                                                                                                                                
      NAYS: None                                                                                                                
                                                                                                                                
      The motion was approved 8-0.                                                                                              
                                                                                                                                
      There being no further business before the committee, the                                                                 
   Legislative Council meeting was adjourned at 6:08 p.m.                                                                       
                                                                                                                                
      6:07:54 PM                                                                                                              

Document Name Date/Time Subjects
December 4th Leg. Council Agenda.docx JLEC 12/4/2015 2:00:00 PM
JLEC 021015.pdf JLEC 12/4/2015 2:00:00 PM
JLEC 062615.pdf JLEC 12/4/2015 2:00:00 PM
JLEC 081815.pdf JLEC 12/4/2015 2:00:00 PM
JLEC 090215.pdf JLEC 12/4/2015 2:00:00 PM
JLEC 092815.pdf JLEC 12/4/2015 2:00:00 PM
Homer Office Space.pdf JLEC 12/4/2015 2:00:00 PM
ITB 612 Teleconference Bridge System.pdf JLEC 12/4/2015 2:00:00 PM
Anch LIO 10 YR Comparison.pdf JLEC 12/4/2015 2:00:00 PM