Legislative audit critical of way AHFC handled Fairbanks housing

Posted: Tuesday, December 26, 2000

FAIRBANKS (AP) -- A legislative audit is critical of the Alaska Housing Finance Corporation for its efforts to demolish the old Spruce Park low-income housing units in South Fairbanks.

''AHFC elected to pay a contractor to destroy the buildings, rather than allow a private developer to move and renovate them,'' the legislative audit division concluded. ''Overall, we found this transaction to be both poorly conceived and executed.''

Dan Fauske, executive director of AHFC, responded with some equally harsh words in his official reply to the audit.

''AHFC has found the process of this audit to be very poorly conceived and executed (in a manner) that can only support a politically myopic conclusion,'' Fauske wrote. ''This is a sad comment considering the long-standing and cooperative and professional relationship between our agencies.''

Newly elected Sen. Gene Therriault, R-North Pole and an eight-year veteran of the House, is the incoming chairman of the Legislative Budget and Audit Committee.

Several legislators, including Therriault and others from the Interior, inquired about the Spruce Park housing situation.

Sen. Dave Donley, R-Anchorage, requested the legislative audit.

Therriault, who believes the AHFC acted improperly in trying to demolish the buildings, expects the Legislature will look into whether the housing agency's procedures should be changed.

''There are probably some things in (the audit) that AHFC needs to be asked this coming session,'' he told the Fairbanks Daily News-Miner.

The controversy dates back to 1998 when AHFC decided to destroy the buildings, which were most of the old Spruce Park housing project, to make room for new low-income housing.

After an analysis by an architectural and engineering firm, the agency determined that it made no economic sense to renovate the buildings, which were built around 1973.

AHFC said local officials and residents were told about the demolition plan and did not object.

The agency hired Fairbanks contractor Jerry Timmons to destroy the 15 duplexes, triplexes and four-plexes for $148,000. Timmons decided, however, that the buildings had some potential and believed the contract language gave him ownership of anything he salvaged.

He moved the buildings and sold them for $150,000 to an Anchorage developer. Some South Fairbanks residents complained when the old units appeared in their neighborhood.

AHFC successfully sued Timmons and the developer and reclaimed the buildings. The agency ran up over $100,000 in costs and attorney fees for its victory, the audit said.

''However, after winning the right to destroy the buildings, AHFC reversed course ... and put the intact buildings up for bid after all,'' the audit said.

''For all but one of the buildings, the successful bidder was the same party that had originally purchased them from (Timmons) before litigation began.''

The auditor found fault with the housing agency in a number of areas, especially what it called a failure under the law to determine the buildings' market value.

''My primary finding is that AHFC should have considered the value of the buildings before deciding whether to sell or demolish them,'' the auditor wrote.

AHFC said the law did not require a market value appraisal. When it later became apparent there was a willing buyer for the buildings, the housing agency was flexible enough to reconsider its initial decision for demolition, officials said.

John Bitney, AHFC's legislative liaison, said the housing agency believes the audit is a flawed piece of work with questionable findings.

''Our bottom line is we think it was poorly done,'' he said.

He pointed to the auditor's assertion that AHFC encroached upon the authority of borough community planners in resolving to demolish the buildings rather than keep them in Fairbanks' stock of housing.

''We thought that was just a ludicrous finding,'' Bitney said. ''Whether or not a property owner chooses to demolish a building is not any authority local governments have.''

Bitney said the AHFC has no plans to change its policies as a result of the audit. ''It's an issue that has come and gone and we would like this to be the end of it,'' he said.

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