Anchorage Daily News

U.S. Sen. Lisa Murkowski said Thursday she believes she followed the rules when she bought Kenai River property from a friend and political supporter, but national watchdog groups said disclosure of the price raises new questions.

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A former Pennsylvania prosecutor now chairing the anti-corruption National Legal and Policy Center said Murkowski's purchase from real estate developer Bob Penney for the borough's assessed value of the property constitutes an illegal gift to the senator. Ken Boehm said he is considering filing a complaint with the Senate Select Committee on Ethics and the U.S. Justice Department.

"You have two grown-ups who know what this piece of property is worth, and they picked a sales price that's not what it's worth," Boehm said.

Murkowski, a Republican and Alaska's junior senator, said Thursday that she believed she paid a fair price, $179,400, for 1.27 acres next to Penney's riverfront home. That was the assessed value in January 2006. The sale went through on Dec. 29, and in the new year the Kenai Peninsula Borough reassessed the property at $214,900.

"By law in the state of Alaska, the municipalities are required to base their assessment on the fair market price," Murkowski said. "That's what our statute says. What we went off of, what we utilized as our transaction price, was the price that had been set by the municipality."

The borough sets an assessed value to determine property taxes, and state law requires it to reflect the "full and true value" as of Jan. 1 each year. That value is defined as "the estimated price that the property would bring in an open market" when the buyer and seller are familiar with local price trends.

Real estate professionals on the Peninsula and beyond say sellers sometimes base property price on the assessed value, though they are not an accurate reflection of values in areas where prices are escalating rapidly. Kenai River lots have steadily increased in value, and the assessed value on the lot in question has more than quadrupled since 2001.

Little property on the world-class salmon river is available, and what has gone on the market rapidly rises in value, said Judy Cloud, a Kenai agent and president of the Alaska Association of Realtors. "If you are able to get it at assessed value, that's a wonderful thing," she said.

Cloud said such transactions happen at times, especially between friends, and if she had been in Murkowski's place she would have bought the land. She said it's unfortunate for Murkowski that she has a high profile and the deal is under scrutiny.

"If I had been offered that deal I probably would have taken it too," she said. "A person would be pretty silly not to if they were offered something like that."

PRICES UP TO THE OWNER

Art Clark, a broker and president of the Anchorage Board of Realtors, said he advises clients not to base prices on assessed values. Assessments don't generally reflect actual values, especially where prices are either rising or declining, he said.

"Assessed value in my estimation here in Anchorage is given marginal consideration. The actual value of the property is going to be above or below that, sometimes 10 to 20 percent," Clark said.

"I try to discourage people from looking too closely at assessed value when they're making a decision about what to ask or what to offer."

But a Peninsula land developer, Buzz Kyllonen in Anchor Point, said he sometimes sells at or below assessed value, because the borough's estimates can be high.

"I've been selling a lot of property in Anchor Point," Kyllonen said. "At one time I said, 'Hey, if the borough would give me what the assessed value was I'd be thrilled to sell it.'"

Kenai Peninsula Borough Assessor Shane Horan was away from his office this week and did not return phone calls.

Prices should be up to the property owner, Kyllonen said, and it seems unfair to him that Murkowski and husband Verne Martell face criticism for the deal.

"They've been friends with Penney for years and years and years, and he probably said, 'I'll sell for a whole lot less than I would somebody walking down the street."

Penney said Wednesday that the land had not been for sale but he offered it because he wanted Murkowski and her family as neighbors. On Thursday Murkowski reiterated that they were old friends.

"I bought the property from a friend that I think I have known since I was probably 5," she said. "It was before elementary school, let's put it that way. My husband knew him before he knew me. So we go back a long way."

She said the family sold its house in Anchorage because her sons will be leaving for school and she and her husband wanted to be on the Kenai, a river whose salmon first drew Martell to Alaska. When she mentioned that to Penney, she said, he offered the lot.

"And I remember saying, 'Oh yeah, but I can't buy a lot from you. I know you,'" she said. "And he said, 'Lisa, you know everybody in the state."

ETHICS QUESTIONED

Boehm said Senate ethics rules ban giving senators anything of value, and in this case there appears to be a gift of equity in the property. "Presumably she could turn around and sell it for $250,000 or $350,000," he said.

He also said the Ethics of Government Act requires disclosing transactions on annual senators' annual financial reports, and Murkowski didn't. She reported a mortgage as one of her financial liabilities, but did not report the transaction price.

Murkowski said she erred in not checking a box to note the value of transactions but has since corrected the oversight.

The sale was first reported Monday on a national political Web site. Murkowski and Penney initially declined to talk about it, but on Wednesday --with the sale getting attention on local talk radio, with hosts and callers alternately hammering Murkowski and defending her -- the senator and Penney disclosed the details.

Keith Ashdown of Taxpayers for Common Sense has investigated the sale, even sending a staffer from Washington to Alaska to attempt to learn the price last month. His interest is in how gifts from influential donors affect government spending. Until now he and others concerned about corruption had not focused on Murkowski, he said.

"You have to give them the benefit of the doubt, but you have to make sure there's a robust review of the facts," Ashdown said. "Right now it doesn't look good for the senator."

Brandon Loomis reported from Soldotna and can be reached at bloomis@adn.com. Erika Bolstad reported from Washington and can reached at ebolstad@adn.com.