Alaska lawmaker criticizes state loan to former Dunleavy administration official

House State Affairs Committee co-chair Rep. Zack Fields, D-Anchorage, questions Dunleavy administration representatives at a joint meeting with the Health and Social Services Committee in Juneau on April 2, 2019. The purpose of the meeting was to examine procurement procedures that led to a controversial contract to manage the Alaska Psychiatric Institute.
Rep. Zack Fields, D-Anchorage. (Photo by Skip Gray/360 North)

A former deputy commissioner in Gov. Mike Dunleavy’s administration has been approved for a more-than-$4-million loan backed by a public authority whose board is appointed by the governor.

The loan is drawing scrutiny from a state legislator, who has also criticized the authority for a no-bid contract it awarded earlier this year.

The loan will help add 33 new rooms to the Land’s End, a hotel in Homer owned by Jonathan and Sara Faulkner. Jonathan Faulkner served as the deputy commissioner of the Alaska Department of Commerce, Community and Economic Development from December 2018 until April 2019.

The board for the Alaska Industrial Development and Export Authority, or AIDEA, voted last week to back 90% of a $4.7 million loan issued by Northrim Bank. The authority’s participation will allow for the loan to be at 3.52% over 22.5 years.

AIDEA is mandated to finance economic development in the state.

Jonathan Faulkner
Jonathan Faulkner. (Photo by KBBI)

Jonathan Faulkner said the loan has nothing to do with his former state employment. He said his business applied for the loan before he joined the administration, and he listed that he had the AIDEA loan on his public official financial disclosure with the state.

“Everything’s above-board. There’s absolutely zero conflict of interest,” Jonathan Faulkner said. “And what potential there was, was disclosed.”

The Faulkners’ business paid off three earlier AIDEA loans between 1995-2004.

Jonathan Faulkner said the loan fits into the authority’s goals.

“It’s precisely the kind of loan they want to do if they want to make money,” he said.

He added that he recused himself from any involvement with AIDEA as the deputy commissioner.

The Alaska Executive Branch Ethics Act bars public officers from using information gained in the course of their official duties that could in any way result in the receipt of any benefit for the officer — if the information has not also been disseminated to the public.

Jonathan Faulkner said there was no opportunity to receive such information in his state job.

When asked about the loan, Anchorage Democratic Rep. Zack Fields questioned whether a former administration official should receive an AIDEA-backed loan.

“I think it’s very legitimate to be concerned about the appearance of a conflict of interest, given AIDEA’s recent history,” Fields said.

Fields is referring to a no-bid, $8,000-a-month contract AIDEA gave to a company owned by Clark Penney, the grandson of Bob Penney, who donated more than $300,000 to a political group supporting Dunleavy’s election. Jonathan Faulkner said the loan has nothing to do with Clark Penney.

Fields said the authority should be scrutinized over the loan.

“I think the onus is on the administration to demonstrate that this particular deal is fair and is not a result of special connections,” Fields said.

AIDEA spokesperson Karsten Rodvik said the loan is proper.

“Jon Faulkner is an Alaska resident and a businessman,” Rodvik said. “And he’s not prohibited in any way from utilizing AIDEA’s loan participation program.”

Rodvik emphasizes that Faulkner didn’t participate in AIDEA in any way as an official. Deputy commerce commissioners attended AIDEA board meetings in the past, but Faulkner didn’t.

“There was no special treatment on this loan whatsoever. It was underwritten in a standard manner.”

While the board voted unanimously to back the loan, the authority’s participation won’t be finalized until authority staff make an environmental inspection of the site.

Andrew Kitchenman

State Government Reporter, Alaska Public Media & KTOO

State government plays an outsized role in the life of Alaskans. As the state continues to go through the painful process of deciding what its priorities are, I bring Alaskans to the scene of a government in transition.

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