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Land Exchange Between Borough, Local Resort Hits Snag

Fairbanks, AK - For nearly a decade, the Fairbanks North Star Borough and Chena Hot Springs Resort have been working on a land exchange sale.  The Resort would buy 1480 acres in exchange for a series of easements that allow access to neighboring Borough property, which includes access to land popular for recreation.  Last fall, the Assembly passed an ordinance to approve the sale.  The deal is at an impasse, because neither side can agree to the value of the property.

Chena Hot Springs Resort Owner Bernie Karl is known for his ideas.  “Some people are doers.  I’m a doer,” he says.  For years, he’s envisioned expanding his resort to add a wildlife viewing area and a ski hill.  Karl has been working with the Fairbanks North Star Borough to buy land adjacent to his own.  “I’ve been trying to purchase this piece of land for ten years," he says.  "I think I’ve gone beyond the call of duty.  I haven’t ever changed my stance on my agreement to purchase the land.”  Karl already has a five-year temporary use permit from the Borough for winter activities on the land.  Last August, he signed a deal to pay fair market value for it.  He also agreed to a series of easements across resort property.  He says that includes building a bridge and road with a 250-thousand dollar price tag.  Karl also agreed to pay $15-thousand dollar in earnest money.  But that deal has hit a roadblock. 

Paul Costello is the Director of the Borough’s Department of Land Management. “It’s sort of like hitting yourself in the head with a hammer," he laughs.  "It feels so good when you stop!” He says both sides disagree on what “fair market value” means.  “We have done everything by the book.  We were working with the resort quite diligently and I think they were too," explains Costello, "but they just never disclosed that their definition of fair market value was different.”

As part of the purchase agreement, the Borough hired an independent appraiser last fall.  A two day visit included a tour by four-wheeler and an aerial inspection of the land.  It was valued at $390 dollars per acre.  Karl says that’s much too high. “I refuse to pay an inflated price.  I want to pay fair market value!” Karl argues that the appraisal didn’t fairly compare the property to other surrounding land. So, the Borough had the original appraisal reviewed.  Paul Costello says the review concludes the valuation are appropriate. “That’s a good deal.  It’s a good appraisal," says Costello.  "It’s got a lot of potential.  I don’t understand, other than the fact that they don’t want to pay the price.”

Bernie Karl says neither appraiser is familiar with the land.  “The second party that reviewed it doesn’t even live in Alaska, never even seen the property," he says.  "What they did was not moral!”

In a letter dated March 26th, Karl offered to hire a local appraiser of his own.  He asked Borough Mayor Luke Hopkins to agree that the valuation from that appraisal be binding on both parties.  In a March 29th response, Mayor Hopkins wrote that “there are no provisions in the approving [exchange sale] ordinance for hiring a second appraiser.”  Paul Costello offers three possible solutions to move forward: The assembly can repeal the approving ordinance.  They can authorize continued negotiations with Karl.  Or they can authorize the sale of the property at public auction, with a starting bid at $390 dollars per acre.  “The resort could bid on it," says Costello.  "If they choose to. I would expect that they would.”  Bernie Karl says he’s considering the option.  If the land is sold at auction, all easement agreements will be lost. The Borough can still seek Karl’s $15-thousand dollars in earnest money.  According to Paul Costello, the Borough has spent more than $260 thousand dollars on the land sale since negotiations first began.