1995-1998 Land Disposal Program Reevaluated

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Land Disposals: 1995-1998

The 1995 Land Management Plan set the stage for the disposal of a number of CBJ properties. Since the adoption of the plan, thirty parcels of CBJ land have been sold, traded, or donated and are now in private ownership or dedicated for public projects. The current value of that land is $2,368,728. In addition to the revenues from the land sales, the CBJ benefits from the property taxes now generated by this land that has been converted into private ownership.

Table 8

CBJ Land Disposals: 1995 - 1998

Legal Description Year Disposed Acres Value ($) /Transaction Development
Si’it’Tuwan Subdivision Lots 4, 26, & 42 1998 0.75 Donation Low-income housing construction projects by non-profits
Fr. Lots 1, 2, 3, 4, 6, & 7, Blk. 22 Townsite of Juneau (Capital School) 1998 --- Donation Legislative Offices
USS 3801 Fr and USS 5504, Fr Lot 3 1998 43.91 439,100 Glacier Gardens
Auke Rec. By-pass Right of Way 1998 18.39 Donation Road R-O-W
USS 3258 Fr (7 Mile Glacier Highway) 1998 10.00 Donation National guard armory
Lena Marie Subdivision, Lot 1 1997 1.45 60,000 Residential lot
S. Douglas, Sect. 21 & 22, Fr Lot 1 1997 4.31 Trade Rural recreational
Thane Road ROW 1997 0.14 Donation Road R-O-W
USS 3808, Lot 1A Fr. (Lena Point) 1997 0.01 135 Driveway
USS 3764, Lot 2A Fr. (Lena Point) 1997 0.85 25,500 Added to adjacent property owner
Hurlock, Bl B, Lot 3 1997 0.26 180,000 Student-built house
USS 5504, Fr. 1996 3.60 168,000 Gruening Park-Multi-family housing
Tidelands, Bl 66, Lots 2, 3, & 7 1996 1.00 935,000 Juneau Lodges
Golden Heights Subdivision, Tract A 1996 27.00 526,987 IHH-Multi-family residential tract
Otter Way Subdivision, Lot 3 1996 0.63 81,500 Residential lot
Otter Way Subdivision, Lot 2 1996 0.90 101,500 Residential lot
Otter Way Subdivision, Lot 4 1996 0.77 87,226 Residential lot
Otter Way Subdivision, Lot 1 1996 1.05 126,000 Residential lot
USS 2392, Lot 6 (Back Loop Road) 1996 0.85 Trade R-O-W trade
Irwin Addition, Tract 3 Fr. 1995 0.24 31,050 Added to adjacent lot
Pacific Coast Add., Bl 2, Lots T 8 & 9 1995 0.29 87,250 Multi-family residential
40 Lots, S’it’Tuwan Subdivision 1995 11.10 Donation Tlingit-Haida housing program
Forest Grove, Block D, Lot 3 1995 0.22 35,000 Residential lot
USS 2901, Lot 10 (Mendenhall Peninsula) 1995 2.32 80,100 Residential lot
Golden Nugget, Block F, Lot 7 1995 0.30 Reversion Residential lot
Highlands, Block H, Fraction Lot 7 1995 0.06 7,800 Isolated parcel
Fraction of USMS 173(West Juneau) 1995 0.14 14,162 Added to private lot
USS 3546, Lots 217 & 218 (North Douglas) 1995 3.40 13,748 Tax Repurchase

Lessons Learned

Several important observations about these early land disposals warrant discussion. First, while the CBJ is one of the largest landowners in Juneau, much of its land is not suitable for development. There are misperceptions in the community about the CBJ’s land base and land disposal potential. Second, while public sentiment appears to favor a program in which the CBJ is the developer/seller of its land, as a practical matter the CBJ does not have the ready finances to pay the significant up-front costs to construct improvements and subdivide its large tracts of land. Third, some buyers of CBJ land have used the CBJ’s financing package but then defaulted on payments. The CBJ should reevaluate its financing terms and conditions to see if there are ways to reduce the problem. Fourth, the concept of a ten year disposal schedule, as outlined in the Municipal Code, is perhaps an approach too rigid to be practical in an ever-changing real estate market. Finally, the CBJ’s utility expansion priorities do not necessarily support its land disposal program; coordination of the two is essential to the success of future land disposals.

 

Quality of CBJ Land

A number of significant factors have emerged during the recent land disposal program regarding the quality of CBJ land. There is a perception that the CBJ has an enormous land base which can be easily developed. The opposite is actually the case. Much of the CBJ land is located on the steeper side slopes which greatly increases development costs. Additionally, much of the CBJ land includes wetlands which pose unique regulatory challenges.

An extreme example of the constraints is the 250 acres which the CBJ owns at the base of Thunder Mountain. After consideration had been given to the steep slopes, avalanche run out zones, wetland areas, and habitat for Jordan Creek, approximately 30 acres remained available for development. A more modest example is the proposed development on CBJ land at Lena Point. Of 185 acres of CBJ land, approximately 80 acres will to be set aside as open space because of wetland concerns. A study of the soil conditions also revealed that the property was not suitable for on-lot waste disposal requiring a more expensive alternative of providing a sewage collection line and marine outfall.

Road access and utilities are also significant factors in the developbility of CBJ lands. Most parcels of land will require expensive access roads which often will not have lots adjacent to them to reduce the costs. Many of the parcels also are not served by municipal sewer or water.

The combination of accessibility factor, physical constraints, and presence or absence of utilities are factors often overlooked when considering the role that the CBJ can play in the future development of the community. Undoubtedly, development costs will be much greater than what developers of flatter land have experienced in the past. Housing costs are likely to also increase because of higher development costs.

CBJ as Developer v. Private Sector as Developer

Much of the CBJ land consists of large parcels which need to be subdivided and infrastructure installed before individual lots can be sold. The CBJ subdivision regulations require that street and utility improvements be constructed (or bonded to ensure completion) before lots can be offered for sale.

Large parcels of land are difficult to sell for two reasons. First, large parcels are particularly expensive, thereby limiting the market to a few participants. Second, the amount of land which is developable in a large parcel is difficult to determine without a close examination of the topography, wetlands, soil conditions, etc. If this information is unknown at the time of sale, then the land value can be significantly reduced due to the uncertainties. Often a greater return can be realized with the sale of a large parcel if a preliminary subdivision feasibility study is completed prior to the sale. This information will increase the confidence of prospective purchasers. It is also information which is needed if the CBJ is to be the developer of the land.

Public hearings held in 1994 on the first land management plan indicated a strong interest among Juneau residents for the CBJ to develop the subdivisions and offer lots for sale to residents on a competitive basis. There was a perception that only a few developers would be able to obtain large parcels of land and that the availability of individual lots to the public would not be ensured.

One of the challenges of the CBJ being a developer of large parcels is that it generally costs the CBJ more to do the same project that a private developer. The most significant factor is that construction contracts would require Davis/Bacon (federally-mandated) wages and also include high overhead costs. However, the concept of creating partnerships with others has proved to be a reasonable approach for developing a subdivision. The S’it’Tuwan Subdivision, developed by the Tlingit-Haida Housing Authority, is an example of a successful partnership. In this case, the CBJ provided the land for the subdivision and Tlingit-Haida provided the capital for constructing the improvements. Upon completion of the subdivision, Tlingit-Haida obtained 40 lots for its low income housing project and the CBJ obtained fifteen lots for its use.

A variation of this partnership concept can be accomplished by the CBJ soliciting proposals from private developers through a Request for Proposals (RFP) process and selecting a developer to work with the CBJ on the subdivision development. The private developer would be responsible for designing, permitting, financing, and constructing the improvements. Upon completion of the subdivision, the developer and the CBJ would each receive lots based on the ratio of the value of the land to the value of the improvements. In order to not unfairly compete with the developer, the CBJ would only sell its lots after the developer’s lots had sold.

This partnership concept has a number of advantages which include:

 

Financing and Other Terms of Sale

The CBJ has offered financing terms for the sale of municipal land in order to allow wider participation by Juneau residents. Financing of undeveloped land is difficult to obtain from traditional financial institutions such as banks. The CBJ’s terms of sale have generally been 5% down, with annual payments over 10 years at 10% interest.

One of the problems with the financing terms is the low down payment. With only 5% down, there is not sufficient investment by the purchaser to ensure that they will keep current with their land payments if problems arise during the development of the property. It is recommended that future land sales include a provision of a 15% down payment. Additionally, if there is a significant value in timber on the property, the down payment should also include the value of the timber.

 

Ten Year Disposal Schedule

The CBJ code requires a ten year disposal schedule. However, this concept is too rigid and inflexible to account for rapid changes in the real estate market as experienced in the last few years. A more flexible schedule is proposed in this plan update. This chapter identifies parcels of land which are suitable for immediate disposal, near term disposal, and long term disposal. Instead of committing to the disposal of land on a strict ten year schedule, the CBJ will actively monitor the market and conduct the disposals until such time that vacancy rates are approaching unhealthy levels or private land prices are adversely impacted.

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