It’s a deal with a catch.

City and Borough of Juneau Assembly members voiced concerns about a $922,175 development deal in the works on a piece of land near the downtown library. Private company Archipelago Properties LLC, a subsidiary of Morris Communications (a former owner of the Empire), owns most of the lot, known now as the Archipelago lot, and CBJ Docks and Harbors owns the other portion.

A term in the deal, which most Assembly members on Monday said worried them, essentially acts like a non-compete clause. As a part of the proposed deal, Archipelago Properties LLC would have the right to object to improvements placed on a specific portion of the lot which may “impair, interfere or unfairly compete with businesses taking place on its adjacent upland property,” according to the draft appraisal report, conducted by Horan & Company based in Sitka.

In return for this ability to influence, the city would pay $194,625 less for the land, according to the value of the right to object clause listed in the appraisal report.

[City looks for bargain with downtown waterfront development]

The vague terms of the clause “impair, interfere or unfairly compete” concerned members of the Assembly who stated this wasn’t specific enough to determine what would and wouldn’t be allowed in the future.

Assembly member Jesse Kiehl said he was worried that CBJ might be sued if they held any events that could be considered competition.

“Generally I would prefer not to buy or create property that may be subject to discussion at a further date,” Kiehl said.

“It might be worth $200,000 to not have that impairment,” Deputy Mayor Maria Gladziszewski added.

City Manager Rorie Watt said the Assembly can propose to strike the clause from the ordinance, but then the cost of the property would go up, since the current draft calls for buying the portion of the property subject to the clause at a rate 50 percent lower than the full value. He further defended the plan, which has been in the works for more than a year, saying that by keeping in the clause, the city would be saving a good deal of money.

“It makes perfect sense from a property line standpoint,” Watt said. “Once you change those property lines for both parties, it lets development happen more economically for both parties.”

There are always limitations on property, Watt said, but “this one is just more peculiar and specific.” He also said at the meeting he thought it would be unlikely that there would be a proposed competitor.

Municipal Attorney Robert Palmer said there are not many other properties that CBJ owns that have any similar restrictions about how to use them. That alarmed Assembly member Carole Triem.

“I have a couple of worries about it,” said Triem. “One is that it could set a precedent when CBJ enters into land purchases with other parties. I’m also worried that it will bind future Assemblies and what they’re able to decide what to do with that piece of land.”

Assembly member Michelle Hale also wanted to the language of the clause to include how the right to object clause would work out if they property owners were to object to a future decision. For instance, if the Archipalego property owners did object to something, what would the process be for the city and landowners to agree on what could or couldn’t happen? Another worry was that future owners of the property might not be so willing to work with the city, and use the clause to their advantage.

Morris Real Estate did not immediately respond for comment Tuesday.

Palmer said that more specific language would be drafted in the next meeting with the property owners and then it will be presented in an ordinance before the next Assembly meeting. Mary Becker, Assembly member, motioned that an ordinance be sent to the Assembly. Loren Jones, Assembly member, objected the motion and was the only no vote subsequently, meaning the ordinance will be drafted and sent before the Assembly.

Jones doesn’t think the almost-million dollar deal is worth it — with or without the clause.

“I think that this process isn’t needed,” Jones said. “I don’t think the city needs the parking, I don’t think we need the boardwalk. I don’t think the million dollars to realign the properties to move forward is useful, and I don’t intend to support [it] moving forward. It just doesn’t make economic sense to me at this point.”

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• Contact reporter Mollie Barnes at 523-2228 or mbarnes@juneauempire.com.

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