It is unlawful to discharge a firearm in Anchorage.  Only necessity justifies breaking that law.  Any such act is likely to be reviewed by the prosecutor.  Merely "brandishing a firearm" is a violation of state law - no matter where you are.  Threatening people with drawn firearms is always illegal and dangerous behavior.   It is also quite possible that the APD officers initially responding did not know who was shooting or what his mental issues might be.  But IF he had diagnosed mental problems, it was not lawful for him to also possess firearms.  That he did is not the fault of APD.  

I share your concerns about the use of military equipment and indeed uniforms that appear to belong to soldiers rather than police.   The very purchase of such sets expectations (among the police themselves as well as the public) which probably contributed to unfortunate outcomes.  But at least APD took its time, called negotiators and attempted to put them in sustained communication.