My turn: City land sale method needs to be by lottery

Current method with sealed bids can skew adjacent property values

Posted: Friday, January 05, 2007

This month the city of Juneau will start advertising the subdivision of plus or minus 40 lots at Lena Point. The majority of these lots front the new access road leading to the National Oceanic and Atmospheric Administration and University of Alaska facilities near Lena Point.

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By established ordinance, the method of sale will be a sealed bid. The appraised value for each lot will be determined by the city assessor and set as the minimum bid. Under this method, an interested party places a bid at or above the appraised value. For example, if a lot is appraised for $80,000, that lot, depending on desirability and interest, could easily be bid up to a much higher value. The only limitation is the financial capability of the bidder.

Just prior to the Dec. 2 Housing Summit, I sent an e-mail to all Assembly and Planning Commission members, Chamber of Commerce and others advocating that the city should consider selling this subdivision not though the sealed-bid or auction process but by lottery. Using the lottery method, an interested party would apply for the lots of interest, and if they are drawn for the lot, they would pay the appraised value - not a higher value which can easily occur under the sealed-bid method.

The lottery method is a win-win situation for several reasons. The city receives the appraised value and long-term revenue from the assessed value of land and homes, more potential bidders can participate because they know what the price will be (unlike a sealed bid), and adjacent property values are not skewed due to the domino effect of abnormally high sealed-bid prices.

The city has invested a tremendous amount of staff time and money into this subdivision (including consulting fees, survey, road access and utilities). Juneau could recover a greater portion of this investment if it used the sealed-bid method, but its goal should not be to maximize revenue. Receiving, 1) appraised land value, 2) interest from the land-sale contracts and 3) annual assessment revenue for the land and future houses offers a very good return to the city. Given high land prices throughout our borough, no one should expect that these lots will be a bargain.

Additionally, the purchaser will be responsible for all costs associated with construction of a driveway, building pad, sewage treatment plant and mounded drain field. The shortage of desirable lots is part of the problem in our tight housing market, and limited land availability creates high housing costs even for middle income families. If the city is truly committed to providing more affordable housing options, offering these lots through the lottery system would be one contribution toward that goal.

My e-mail to participants of the Housing Summit generated several positive responses from Assembly members. Telephone discussions with Mayor Bruce Botelho and Assemblyman Jeff Bush were also received in a positive light.

Changing the method of sale to lottery will result in the need for a new ordinance. Considering the years this subdivision has been on the drawing board, a little additional time to create a new ordinance is a very minor delay. If people are interested in being potential bidders in this sale or believe that the city should contribute toward making public land more affordable, I would encourage them to contact the Assembly and the city manager's office to lend support for a land lottery.

• Ron Schonenbach, a Juneau resident, is a retired state employee. For the last 25 years, he was a land manager for the Department of Natural Resources.

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