Legislature(2015 - 2016)ANCH LIO AUDITORIUM
12/04/2015 02:00 PM House LEGISLATIVE COUNCIL
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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 |