City attorney says use of parks and rec money OK

A deal between the Municipality of Anchorage, the Alaska Club and Hickel Investments to purchase Valley River Center Building A received the thumbs up from both the Anchorage Assembly and the municipal attorney Nov. 6.In the joint private-public deal, the Alaska Club and the municipality offered to purchase the building for $3 million Oct. 10.

Local Assemblyman Bill Starr supported the ordinance and encouraged approval by the Assembly.

“I support this for several different reasons,” he said during the meeting. “One is it gives the city the go-ahead to look closer at the purchase. The second reason is that we still have the opportunity to watch the dollars and make sure we’re not getting ourselves locked into this deal at any cost.”

Assemblywoman Sheila Selkregg of Anchorage also spoke favorably of the deal during the meeting.

“I support this because I think the community’s been working hard to make it happen,” she said. “I think it’s time to recognize that Eagle River needs this kind of facility, and I’m glad to support it.”

After hearing from supporters of the deal, including Chugiak-Eagle River Chamber of Commerce president-elect Joe Hegna, Eklutna Inc. CEO Curtis McQueen and others, the Assembly voted unanimously to authorize the purchase of the building.

The actions set in motion a 75-day due diligence period for the city to complete work necessary to close the deal by the targeted date of Feb. 9, 2008. During the process, the municipality will examine the feasibility of attracting new businesses to the remainder of the building and looking in depth into the integrity of the building structure. Also, exact financial breakdowns will be completed, including the cost per department, which is cause for concern for Starr.

“Some of the statements on the preliminary spreadsheet I’ve seen indicate there is an unfair burdening of some departments with more than their fair share.” he said. “It appears there are some significant re-allocations to the various departments’ budgets. For example, our parks and rec budget would need to be reviewed. What happens if the board of supervisors out there says that’s not a good deal for us to increase our rent costs.”

According to Mayor Mark Begich, without the money to pay increased rents in the budget for the various departments planning to relocate to the building, the deal would not work.

While work is being done to determine the funding source for each department, the Assembly’s vote of approval also meant a $25,000 non-refundable payment was made by the municipality to Hickel Investments as a deposit on the deal. The Alaska Club made a similar $25,000 payment Oct. 10 with the signing of a Letter of Intent. The money will be credited toward the purchase price when the deal is closed.

The legality of using $1 million from the Eagle River-Chugiak Parks and Recreation Service Area fund balance was clarified by Municipal Attorney Jim Reeves.

“There is an assumption that the magnitude of the parks and rec funds is a legal issue,” he said. “As I understand it, this is a policy issue that is to be made by the board and the Assembly.

“The contribution to this property acquisition is based on the parks and rec board’s determination that acquiring this space for occupancy is a sufficient justification for utilizing the funds in this manner,” he said. “The (City) Charter and (Municipal) Code authorize the board to exercise its best judgment in considering this proposal and making its favorable recommendation on it.”

He added that the Assembly is the final authority on the matter.

“If it decides to follow the board’s recommendation and approve this use of the funds as, evidently, it has done in several approved budgets in the recent past,” he said. “I believe that a court would defer to that judgment.”

In addition to the $1 million contribution from parks and rec, the city is also hoping to secure $1 million in private grants to pay for the purchase and renovation of the 43,000 square feet that was once The Alaska Marketplace grocery store. The remaining $1.7 million needed to cover all the costs for the city’s portion of the deal will be an inter-fund loan.

Appropriation of all funding must be approved by the Assembly before the end of the due diligence period, or Jan. 22.

Before the Assembly revisits the issue, Starr wants to see the various departments take a closer look at the impact the purchase will have on their budgets.

“We need to get some real numbers before the boards and department heads,” he said. “Give them some time to be a little less emotional and start dealing with the facts up front so they won’t be surprised in February when the deal closes.”

By DARRELL L. BREESE, Alaska Star

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