Redevelopment of UT System downtown property will generate millions in revenue for city

AUSTIN—Plans to consolidate The University of Texas System’s administrative offices will generate significant revenue for the City of Austin, the state and several other local public entities over the coming decades. 

The System’s downtown Austin headquarters, which historically has been housed in five antiquated, costly-to-maintain buildings, will move in late summer to a new, efficient building currently under construction on property that already was owned by the UT System on 7th Street between Lavaca and Colorado streets. 

UT System leaders recently signed an agreement with Trammell Crow Co. to lease a full city block—property fronting 6th Street, between Colorado and Lavaca streets—as part of the transition. The site is now home to two UT System office buildings, Ashbel Smith Hall and Claudia Taylor Johnson Hall. Trammell Crow will design a commercial development on the block, which could include condominiums or a hotel, office space and retail at ground level.

The new development, which will maintain the façade of Claudia Taylor Johnson Hall, means that for the first time in more than 100 years, the property will generate property tax revenue for several public entities, including Travis County, the City of Austin, Austin Independent School District, Austin Community College District and Central Health.

The amount of tax revenue generated will depend on what is ultimately developed, but could reasonably exceed $6 million a year. If a hotel is part of the development, there is also a potential for substantial hospitality and sales tax revenues that would benefit local governments and the state of Texas.

“This new development will be UT System’s next-door-neighbor, so we are eager to see what Trammell Crow ultimately creates,” said Scott Kelley, Ed.D., UT System’s executive vice chancellor for business affairs. “Additional retail space and a development that attracts more people to the area will revitalize a section of 6th Street that historically has been devoid of foot traffic, particularly on evenings and weekends. My expectation is that it will connect the east and west sections of this prominent thoroughfare, creating an uninterrupted stretch that is dynamic and pedestrian-friendly.”

The UT System Board of Regents approved the administrative office relocation in November 2012. At that time, UT System offices were located in buildings between Colorado and Lavaca streets and between 8th and 6th streets. [Map location: http://goo.gl/maps/ywhwi]. The average age of the buildings, which included O. Henry Hall, Claudia Taylor Johnson Hall, Ashbel Smith Hall, the Lavaca Building and the Colorado Building, was nearly 80 years old. The oldest, O. Henry Hall, is 136 years old.

The Lavaca and Colorado buildings were razed in 2013 to make room for the new facility. O. Henry Hall was sold to the Texas State University System, which will take over the building later this year, for $8.2 million.

The Trammell Crow ground lease will net the UT System $60 million, in present value, over the 95-year life of the lease. The System will also share in a portion of the revenue generated by the new development.

 “The decision to consolidate UT System offices into one building was a financial decision based on cost-effectiveness and savings,” Chancellor William H. McRaven said. “It was also imperative that we gather our employees into one office building to raise the level of efficiency and collaboration toward achieving excellence in our support to our institutions.”

About The University of Texas System

Educating students, providing care for patients, conducting groundbreaking basic, applied and clinical research, and serving the needs of Texans and the nation for more than 130 years, The University of Texas System is one of the largest public university systems in the United States. With 14 institutions and an enrollment of more than 228,000, the UT System confers more than one-third of the state’s undergraduate degrees, educates almost two-thirds of the state’s health care professionals annually and accounts for almost 70 percent of all research funds awarded to public institutions in Texas. The UT System’s operating budget for FY 2017 is $17.9 billion, including $3 billion in sponsored programs funded by federal, state, local and private sources. With more than 20,000 faculty – including Nobel laureates and many members of the National Academies – and nearly 80,000 health care professionals, researchers, student advisors and support staff, the UT System is one of the largest employers in the state.

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