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Thursday, February 27, 2014

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UT System Administration to consolidate operations in downtown Austin to save millions in annual expenses

Millions of dollars in savings to be redirected to support UT student success

AUSTIN – The University of Texas System is moving ahead with a plan to consolidate UT System offices, currently located in five antiquated buildings, into a modern, highly-efficient office building on property already owned by UT System on 7th Street between Lavaca and Colorado streets in downtown Austin.

The System will issue a Request for Qualifications, or RFQ, for architectural services on Friday.

Studies prepared by the UT System financial and real estate staff indicate that over the next 30 years the move will yield a net savings of more than $125 million and total net present value savings of more than $40 million. The UT System Board of Regents approved a plan in 2012 directing Chancellor Francisco G. Cigarroa, M.D. to begin work on a strategy to apply annual savings to programs for students across the System’s 15 institutions that will boost graduate rates and help students achieve success.

Aggressively seeking savings in operation costs and reinvesting those savings in Texas students is a primary focus of Chancellor Cigarroa’ s Framework for Advancing Excellence, which the Board of Regents approved in August 2011.

The key component of the plan is building a new facility to house UT System departments currently spread throughout five separate buildings. Over many decades, the UT System has added more institutions and consequently more staff to the UT System Administration. Over time, the system has had to acquire more buildings and space to accommodate that growth, but it is no longer efficient or organizationally optimal to continue that practice. The move is expected not only to save money but also enhance effectiveness and efficiency of System operations. Cost savings are projected to average between $2 million and $8 million per year over the next three decades. The savings will be achieved through a combination of decreased maintenance, repair and energy costs as well as additional revenue generated from leased space or redevelopment of three of the older buildings.

Construction of the new building is expected to cost $102 million and will be funded with Revenue Financing System Bonds. No tuition dollars or general revenue money will be used.

Currently, UT System Administration offices are located in buildings between Colorado and Lavaca streets and between 8th and 6th streets (map location). The buildings are O. Henry Hall, Claudia Taylor Johnson Hall, Ashbel Smith Hall, the Lavaca Building and the Colorado Building. The average age of the buildings is roughly 80 years old. The oldest, O. Henry Hall, is 132 years old.

The proposal recommends the demolition of the Colorado and Lavaca buildings, both located on 7th Street, and the construction of a new building to fill the half block. The other three downtown buildings – including the historic O. Henry Hall and Claudia Taylor Johnson Hall – will remain the property of The University of Texas System and be available for redevelopment once the new building is occupied. O. Henry Hall will be leased to new tenants. The property housing the Claudia Taylor Johnson Building and Ashbel Smith Hall will be available for improvement or redevelopment. Besides providing revenue for the System, leasing and/or redeveloping the buildings will also yield an increase in tax revenue for the City of Austin, Austin Independent School District, Travis County and the Austin Community College District, since the UT System is exempt from paying property taxes.

Chancellor Cigarroa said consolidating business operations in one building is part of a strategic realignment with the purpose of allocating resources to mission-critical services and new innovations in support of the nine academic and six health institutions while also identifying additional cost containment measures and efficiencies.

The new nine-story building with six parking levels will provide more than 258,000 square feet of office space, with about 200,000 square feet for immediate use by UT System and the remaining square footage available for lease, including retail. The building will include a parking garage for 650-700 cars and space for more than 700 employees, including UT System staff, office tenants, and retail tenants on the ground floor.

“We see this as an opportunity not only to create a more modern and efficient work space and yield significant cost savings for the UT System that can be passed on to our institutions, but also as a chance to revitalize this part of downtown with added retail space that will lend itself to pedestrian traffic,” said Scott Kelley, UT System’s executive vice chancellor for business affairs.

A new office building will significantly reduce capital expenses and operating costs compared to the current antiquated building complex, which increasingly requires deferred maintenance expenses. The existing five buildings cost, on average, about $4.8 million per year to operate, repair and maintain while a new building is projected to cost about $2.1 million per year to operate and maintain.

The new location would provide for bright, efficient work spaces that offer more opportunity for integration and collaboration across system departments. It also maintains convenient access to the Texas Capitol, UT Austin and mass transit.

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