Skagway’s city hall and museum. (Greta Mart)
The Skagway Borough Assembly rejected an appraisal of its waterfront that would have substantially increased the rent that White Pass and Yukon Railroad Route pays to the municipality.
While some assembly members agreed that the company did not pay the municipality enough for the use of the waterfront, the majority felt there could be severe consequences for accepting the appraisal.
White Pass’s rent of Skagway’s waterfront is determined by the appraised value of the land according to a lease agreement drafted in 1968.
Every five years, the municipality gets a new appraisal of the waterfront to adjust the lease rate.
For decades this appraisal has been carried out by Horan and Co. Last year the appraiser listed the value at $2.2 million. But according to a review by real estate firm Integra, the appraisal did not accurately assess the land’s market value.
The municipality then paid Integra to carry out its own appraisal of the waterfront. It listed the value of the municipal property at $14.7 million, over six times as high as the Horan and Co. appraisal.
Tory Korn of Survey Point Holdings addressed the appraisals on behalf of White Pass president Bob Berto on Thursday. He said that Integra’s appraisal breaks with the precedent set by past lease adjustments.
“It’s very disappointing to receive a letter with very little notice that your annual lease payments could be increased by almost 600%. It’s clear to us that the municipality is at least considering an option to basically rebuke 50 years of appraisal practices and valuations to implement what we view is a gross misinterpretation of the lease,” Korn said.
The Integra appraisal and the Horan and Company appraisal are so different because of their methods. While Integra accounted for the value added by improvements that have been made by White Pass to the land over the years, Horan & Company appraised the land as if it had not changed since the lease began in 1968.
At the meeting Thursday, Assemblyman David Brena voted to adopt Integra’s appraisal. He said that even if it breaks with past practices, it was important to ensure White Pass paid its fair share.
“This is White Pass. We haven’t charged them market rate since 1988 when they re-opened. It’s been a pretty big gift, but is that a reason to continue it at all of our expense? I don’t think so,” Brena said.
Currently, White Pass pays $127,000 a year to lease the tidelands from the municipality. Brena said this number is dramatically low.
“We’re here representing the citizens of Skagway, not trying to give somebody a ‘friends and family’ rate of some kind. If people don’t pay a market rate on their properties, guess who gets to make it up: The taxpayers,” Brena said.
While Assemblyman Orion Hanson agreed the current lease rate is inadequate, he said if they raise the lease payments to $882,000 a year, White Pass will transfer the cost to other businesses.
“By putting White Pass in the position where they’re going to either raise their rates on their other tenants, whether that is right or wrong, try to squeeze a dollar down the road and that affects the price of bread and price of gasoline. That’s really I think what it will cause is it’ll cause further gridlock,” Hanson said.
Assemblyman Steve Burnham agreed that adopting the Integra appraisal could cause problems. He highlighted the legal consequences.
“I think that the Integra appraisal is the correct one,” Burnham said. “I don’t know if it is the correct one for our community. If we adopt it as the lease calls for, the decision on disagreements is made up in court. Without a doubt, we’ll be whirlwinded into court.”
The assembly rejected the Integra appraisal in a 3-2 vote. However, a vote on whether to adopt the Horan and Co. appraisal was postponed until the assembly could consult with the borough’s attorney.
Correction: A previous version of this story incorrectly reported that the Integra appraisal was rejected in a 4-2 vote. The vote was 3-2.
