Travis County Commissioners Court
January 26, 2010,
Item 26
>> now, we have a very important item on today's agenda, number 26, which I recommend with go into executive session on now in case there are legal issues for us to discuss and we come back out in open court and have a discussion and take any required action.
we have txi scheduled for 1:30 this afternoon so if this item takes us the rest of the morning, we get it behind us this morning.
and 26 is to receive legal briefing and take appropriate action regarding the potential purchase of real estate in the central Austin area.
that's the only item that I will announce.
and it's under the consultation can attorney in real estate exceptions to the open meetings act.
>> we return from executive session where we discussed the only item we announced for executive session discussion, number 26 regarding potential real estate in the central Austin area and we believe we have a presentation.
okay?
>> thank you, judge.
prior to 2009 we had engaged in a needs analysis for a new civil courthouse and during that period of time realized that we had space needs beyond just a civil courthouse.
so we began looking at what we needed to do to put together a comprehensive master plan for the downtown space needs.
obviously, the county has a desire to own property versus lease property, and so in 2009, we engaged broaddus and associates to begin the process of going a long-range master plan that we could use for planning purposes for facilities and space needs going forward to 2035.
in conjunction with that, we competitively bid a broker contract and selected ugl equis to represent the county for transactions in the downtown area.
during phase one of the master plan to determine space needs and adjacent cies which we anticipate will be approved next week we looked at the court's and general government's function and realized that we have a current space need for both courts and for the general government's function going forward, and that need will only grow over the years, and we'll touch on that as we get into the presentation.
during this phase one analysis, we were presented with an opportunity to acquire a piece of property, and it provides an excellent opportunity for general government's use, which immediately frees up some space for county operations, but also gives us an opportunity to take a bigger look at the overly ovel needs, not only just general government, but the courts as well, going forward, and it provides us with some opportunities.
and so with that, what we would like to do today is present just a brief presentation about the property, give you some facts about the property, and then what has led us up to this, and so we're going to kind of tag-team the presentation.
so with that, I'm going to turn it over to roger, let him lead into some of the issues in the specific facilities related discussion, and then we'll go back and forth.
>> thank you.
director.
the building is about 314,000 or 315,000 roughly square feet of space, and it is 14 -- I mean 15 stories high with a basement.
and it's located on one city block, full city block, and connected to the parking garage by underground tunnels under the eighth street.
the parking garage is about like 245,500 square feet, seven stories high, and about 675 parking spaces and it's located on half of city park.
the building was built in 1979, according to tax records, and the location, it's only about two blocks away from the courthouse.
and with the improvement on the building, the owner has spent about a million and a half in the last year, building improvements, but so many building improvements have happened since lately.
and I visited the building right there and confirmed some of the improvements.
some of the improvement is -- I'm going to touch base on highlights of those improvements.
it's the replacement of the original chillers, environmentally friendly chillers, and that would design for county buildings.
and an installation of new condenser and chiller pumps, and has installation of a new cooling tower on the roof.
and the replacement of the original system, the mechanical system, for seven driven cable montgomery elevators, the system has been replaced, and also the installation of you new building automation system.
and other improvement, it has common area lighting, upgrading common area lobby and restroom on several floors, and some other improvements to the building, so I would as facility management director, have a look at those improvements, and they did a good maintenance and upkeep to this building.
and this building, also the property has a pending lease certification which preparing for the performance period, and also the building is -- right now has a nernl star rating of '82.
82 is based on energy use only.
it takes energy used per square foot of the building and compares to the national average.
and the rate of the building, rates of all buildings on scale, 1 to 100.
and 50 is the national average.
if you have 75 or higher, it gets you an energy star rating.
this building has 82 star rating.
this building also has a good green program it practices along the buildings, and it has a long list of some practices that happen over there, like extended recycling program, bike storage for building tenants.
it has facility for exercise equipment.
all of those lists, when you have certification for existing buildings, those account for points right there.
so thblg, if it obtained 40 points, it would become a lead certified existing building, which all those items, the practice that facility has, it can lead to those 40 points.
now, also, I would like to mention about the building features.
on that it has first floor space with a ceiling high, really the Commissioners court courtroom, it's a very high space.
and it's located on the network for its, very important, and convenient to capital metro routes, and it also has security and court access system in the buildings and on-site management and maintenance.
and adequate meeting space for building interaction with the county.
very important, it has five public elevators, one service vairts that goes to all floors and two that go to the first two floors.
and it has a basement and storage and loading dock.
the building is a good building and we recommend that building from the facility management department.
it's -- this building, it has a -- our estimate right now, it would have a good service life for an additional 50 years on the structure, and then eventually you have the equipment will change every 25 years.
and also, what we're doing at this time is we're doing a due diligence.
and let me just briefly go over the due diligence item.
we're not going to go into detail about those due diligence.
we're doing a structural system inspection.
we will be doing structural system inspection, mechanical system inspection, electrical system inspection, plumbing system inspection.
also, fire detection, fire detection, and fire subpoena presmghts architectural and code compliances, roof inspection, ada, accessibility inspection also.
data communication inspection, and will engage environmental assessment phase one with consultant, indoor air quality, and last but not least the security assessment will be done by the sheriff's office.
this is kind of like a brief summary about the building.
i will turn it over to susan, or back to rodney, I'm sorry.
>> okay.
what we'd like to do is just kind of readdress some of the needs.
obviously, as I mentioned earlier, based on the broadest findings of the phase one needs analysis, we do recognize that not only for courts but for general government, we are out of space.
if we do not take action in the very near future, there could be the possibility of limiting some of the services that we provide to our citizens, and susan will talk a little bit about how our staffing ratios have grown with population.
and there's a very tight correlation between our population and our staffing ratios.
based on the phase one findings from the broaddus study, we do know that we have about a 31% deficiency in space currently.
it is projected to grow to 53% by 2015, which is just a few short years away.
and so we do recognize that we have a deficiency currently that we need to address and a deficiency in the very near term.
one of the things that roger pointed out about the building as it currently sits today, it is about 65% occupied, which does provide some rental income from the building to take care of some maintenance and upkeep while we're transitioning into a fully occupied government building.
so it does allow us to maintain and upkeep the facility without putting any undue burden on the taxpayer.
it's in a strategic location, fairly contiguous to our other county facilities, and gives us an opportunity to tie more of a campus feel to our county facilities that we currently have today, and provides, as I said earlier, an opportunity for us to do some -- some expedited space needs for not only general government, but for our courts as to looking at our currently owned facility, so it provides a tremendous opportunity for us looking forward, not only just today but going forward in the years to come.
i want to talk -- or turn it over to susan now, and she's going to touch on the purchasing process and why this particular building makes sense now from a financial standpoint.
>> and, chris, would you put up on the screen
>> [inaudible] of the building?
one thing we forgot to say, the building is at 700 lavaca.
we've fallen in love with the building and forgot to say that.
if you look out the door, you can see it here, as everyone said, it is contiguous.
i think it's extremely important to understand, and I'm not going to try to talk from a financing and taxpayer viewpoint, is that what we are looking at is not an idea of what expanded government programs are there going to be, how are we going to make government bigger.
that's not what we're looking at.
what we hired broaddus to do was say what do we think our space needs are going to be?
and that was projected based on population growth of Travis County.
and that's the schedule, the first schedule that you see there on the screen, and Commissioners, in your packet, and anyone that would like a packet here, we'll be glad to get you one.
>> may I just interject for a moment, broaddus was hired before we had any inkling that this building was at all available.
>> available.
>> and these projections were arrived at in advance of any consideration of any specific building or purchase of the building at all.
>> that's exactly right.
and so one of the things they did at that first chart, what they did is they looked at population, and then they looked at the number of fte's working in Travis County.
and what you can see is, that's pretty much of a straight linear regression, and that is you would say that the growth in population projects the amount of people that we probably are going to need in terms of space.
and the population growth in Travis County is not something that we can control here.
those population numbers in the past, these are accurate numbers.
they are from the city demographer.
we're trying to project in the future what we're going to need and the next chart there shows -- you can see the population is going up steeply, and down here it shows where we are in terms of employees.
so looking at the future, there is no question that not only do we have the deficiencies now that broaddus analyzed and reported, but also we are going to see a dramatic need for space, not if we expand what government does, but keep doing the services that we do now, tied to the population.
and just as a reminder for people who are watching this, the vast majority of what county government does is dictated by the state.
in many of the programs that we run, we do not have control over demand.
that is why this population number is very important.
for instance, the jail population.
we don't have control over that.
the number of cases that are filed in a court system.
we run two 24/7 facilities, and whoever is in those facilities, Travis County has to pay for and manage.
and with the management between the justice system and the jail system is about 42% of our budget.
but with that comes the services that support that.
and that is, if the jail gets bigger, there are more people, the payroll gets bigger.
if we are looking for grants for programs, we need more people to service that.
so the general government operations, treasury, procurement, auditing, planning and budget, legal, follow those demands.
and so the population I think is really important for people to understand, and that is the population is growing, it is projected to grow.
the future growth projections are from the state Decemberographer, so there's no mistake we are going to need more facilities.
one of the things you pointed out, at the beginning we had broaddus study what we're going to need, then we also hired a realtor, a brokerage firm, competitively, to be looking in the area so that while we're determining need, we also have someone out there looking at what's available.
and what we thought initially, many of our buildings are very specialized.
of course they're very specialized buildings.
you don't really retrofit an office building for a court.
and we worried that we wouldn't be able to retrofit this one.
this is very pleasant strategic opportunity to have this building because as roger mentioned, the first floor, because it's so tall, will house a Commissioners courtroom.
and that really is the focus for the people's access to the Commissioners court, come here, talk to you, talk about their issues, and have enough pace to do that.
and so this building not only is it close, but it really strategically meets the needs of the county.
the other important part of this is, you know, do we go and take this to the bank, the population study?
the beauty of this building is that we have lease tenants in there, and so what we can do now is, we can start occupying the building, and then as other leases terminate business and we grow, we take more of that building.
if all of a sudden the population stopped growing in Travis County, which is very unlikely, but if it did we still have this -- we have a facility that we can lease out.
it's in the central business district.
and so that is taken care of.
so that's kind of the building.
now I want to talk about the financing, what that looks like, how it impacts the taxpayer and Travis County's ability to financially purchase this building.
the first thing is that we have financial statements prepared as of September 30th, 2009.
they are being audited right now.
these are not audited statements but I would be surprised if they were very different.
and the general fund unreserve balance increased from '08 to '09 by 14.8%.
and so the county in the general fund undesignated reserves have actually increased, which means we are structurally in balance, in terms of spending.
and we are probably one of the few governments in the country that are in that position today.
so the financial position of the county is strong.
why is that important?
when we go to borrow money that impacts the bond rating we have.
the reason that's important is that impacts the interest Travis County taxpayers pay.
Travis County has long held a aaa bond rating.
those that read the newspaper know there's been a lot of discussion about aaa bond ratings and government bond ratings, and the width of aaa, the band of aaa's have expanded but Travis County always has had, for many years, a natural aaa bond rating, which means when we take this to the bond market, we will get the most favorable interest rate in terms of borrowing money.
so we are in a good position.
now, how does this impact the taxpayer?
first of all, I think it's important to know that we are not in a position where we're saying should we get more facilities.
the position we're in is, how will we handle the people that we have, how will we handle the growth?
there's really a couple of ways to do that.
one is, we dramatically cut services and say buildings dominate services.
and the state really won't let us do that because we have to render certain services.
the other one is that we go out and lease space.
and that will be our next step.
we're leasing space now.
we're going to have to go out and find more.
that, when we lease space, that comes out of the operating tax rate.
and that hits directly our provision of services, social services, all of the operating of the county.
that's where that leasing -- that's where leasing money comes from in the tax rate.
the other thing about leasing is that it really does not take care of people working together in productivity because what you have to do, and we've been in that position before and we're kind of moving there now, is, you take a division and put it here, another division of an office over here, and pretty soon you've got people scattered all over.
they really do not productively work together, and there is a cost to that.
so leasing is a short-term solution.
it doesn't really look to the productivity or the ability of the county to be as productive as it can.
the buying of the building allows us to do that.
it allows us to figure out what businesses in the county need to be together, how business operates, where the public interfaces, and really have business -- have the facility as an integral part of our productivity in delivering services.
it's extremely important.
this building will, in fact, allow us to do that.
why would we issue debt?
well, it's like when you buy your house.
most people do not pay cash.
but in this case, it makes a lot of sense to issue debt for several reasons.
first of all, it does spread the cost out.
the population, I want to come back to that because it's so important.
when we are expanding or buying space because population is growing, it makes sense to use debt financing that spreads the cost over that growing population, so that when we get more people moving into Travis County, which the population numbers suggest, those people are also paying for the facilities that house the services.
so there's a very logical reason to debt-finance this.
the other thing is that we are looking at very favorable interest rates now, so this is a good time to borrow money.
the county is in good financial shape.
we've got a good aaa rating.
the interest rates are low.
and building -- this is a good time for us to be procuring a building like this.
the debt service on this will depend, we'll get closer to projecting that when we find out what the exact debt service is.
some of this building would be financed with taxable certificates of obligation, and some tax-free, those parts that are rented, we would have -- those would be taxable.
little different than anything we've done before, but we're working on that now.
it will run probably a little bit more -- probably between four million and four and a half million dollars a year would be the debt service.
we can look at structuring those payments so we can put them a little bit bigger out when we have a population expansion so that all of the burden -- the burden kind of stretches out as we get new population.
but even today, what that looks like, just so you can see the impact on the tax roll, for the average homestead, the debt service on this building would run roughly 10 -- $10.30 a year.
that would be the debt service.
and that comes out to about 86 cents a month.
so that would be the impact on the average homestead's tax bill.
in areas where the --
>> susan, what's the sales price of this building?
>> this building, judge, the price is 61,250,000, and we would have closing and some miscellaneous expenses.
we would expect to borrow between 63 million and $65 million, depending if we had to put money in for due diligence or things that we would want to do.
>>
>> [inaudible] included in the administration cost and all that to 61.
>> yes, it was.
>> the administration cost and debt and all that other stuff.
is that correct?
>> right.
the other thing that we looked at is in areas of town that are less, that the homesteads are less than the average homestead -- for instance, in del valle, and I know, admissioner Gomez, you aske -- Commissioner Gomez, you asked this, of course the county gets the maximum exemption as well as senior citizens and disabled people, but in that area the average tax increase would be about $4.97 a year, so of course depending on the value of the home.
so this is not a massive increase in taxes.
it of course is an increase in taxes.
we would get rent from the facility right now, and we could use those rent-rolls in terms of building a maintenance and capital budget, and also in terms of paying for some of the renovation to get them ready for county space.
so from a financing viewpoint, the analysis that we have done shows that, really, it's a good building, it meets our needs.
in the long run, it makes sense to buy this building, as opposed to leasing space out.
the county's financial position is very strong, in as good a position as we could be in to go out and borrow money.
and so it is certainly this committee's recommendation that 700 lavaca be the new county seat for county government, and we think it's a good dolly for deal for thetaxpayer, good deale people that work here, and the elected officials that run business in the county.
and I'll be glad to answer any questions that you have.
>> one of the things we did recognize going into this thing right up front is that this was not a project or an endeavor that any single department could do, so we immediately put together what we're calling our core team of folks that comprise planning and budget, the auditor's office and facilities management.
susan, roger, and I have been working very closely with keith, and we bring sid and the county attorney in on an as-needed basis.
our staff has been integral as part of putting this thing together.
but this is probably the largest acquisition that Travis County has made in recent years, or -- or forever, for that matter, and we recognize that it's going to require a collaboration of efforts in order to go through the due diligence period, and through the final contract period to ensure that all the steps are taken and all the issues are addressed.
so this core team will continue to stay in place during the process of acquisition.
we will work closely with -- with our downtown master plan consultant as we go forward, should the court move forward with this acquisition, and we will -- we will be working hand in hand as this process goes through.
>> I want to say about the $61,250,000, that I include the buildings, 700 lavaca, the parking garage, and the land on both building -- one and a half city block.
>> we'll be happy to answer any questions you might have.
>> go ahead.
>> I was just going to say, could you address the purchase of this existing building, as opposed to other options that we might need to consider as we would expand like buying raw land and able new building and how this compares to that?
>> it compares favorable.
this building, it is a good condition building, and the due diligence will tell us that downtown road.
however, from our initial inspection on the building is great buildings, and even though 30 years, but it has a good price, what comes with it.
my estimation is at $61,250,000, if you take the land cost, you know, for a city block and another half a block, this would be, in my estimation, about $22,500,000.
and if you take the parking graifntle, you know, which is about eight million dollars a structure itself, that would put you down, the price will go down to about 30 million, if I divide that by the square footage of the building, which is 314, 314,000 -- I mean 315,000 square feet, that will get you 97 to $100 a square foot.
that is a great price to purchase a building at this time.
if you want to build a new building, just to build a new building it's going to be between 175 and $200, to buy.
>> there's something, too, that is advantageous as far as this piece of property, it provides immediate office space.
it's not a ground-up construction which could take as long as tree to four years, as we know.
so what this building does for us, it does provide us with the opportunity to take our immediate needs and address those, and then grow into the building over time systematically, based on what our needs are as the rents roll off.
and so strategically, it makes sense.
>> another -- to expand on that, if we were to buy -- if we were to build a new building, the first thing we need to do is find a block in this area that, in fact, we could use a block and a half for parking, so that's the first thing we need to find land that we could do that, and in the central business district there isn't that much out there.
the next thing is that we would be building that downtown road, and our borrowing costs probably are going to go up because we're probably at an all-time interest rate low right now because of the recession.
so interest rates in a new building would probably go up.
taking construction costs, I think you can also assume will increase by the time we get ready to build a new building.
so the combination really of the location, the land we're getting, and the price of this building just seems to outwas hh the building of a new building for the county seat.
the other thing, from the whole planning perspective, is that we are looking at some construction, like a civil courthouse, that really probably will be -- have to be new construction just because of the nature of trial court, it doesn't really lend itself to a building like that.
so we will be doing some of that, but for this building, it was just a great opportunity, instead of having to build, and we would be leasing out space to put our people in until we got a building up.
and so I think that all things considered, this is a least expensive and more effective way really for us to meet the general government requirements downtown.
>> as you mentioned earlier about the debt service --
>> yes.
>> -- model.
right now we're kind of grasping around because we really don't -- well, it's a little -- I guess a couple of uncertainties but anyway, I guess you suggested it would probably be about $4.5 million for did he say service.
what I'm trying to get to, though, those persons that are looking at this today, they're probably asking, well, I hear what they're discussing, I understand that, you know, there will be an increase in paying for this particular debt, even at the low interest rates, there will be such amount, $10 and something cents, as opposed to $4 and something cents for households over there, but what is the length -- the question is, what is the length to retire this particular endeavor, maybe a little more than $61 million, plus the administration of those other due diligence costs that will be on top of it?
how long are we looking to be engaged in this particular debt?
>> we're looking at an issue of 20 years, which is pretty standard for government borrowing.
and we are looking for this building to last us longer than 20 years.
and when travis -- one of the reasons we have a aaa rating, when we borrow, the way the average length of the asset always exceeds the borrowing time.
so, in other words, we're not paying for assets that have worn out.
i mean that's the commonplace.
so, yes, it would be a 20-year issue.
and when you're looking at debt service, Commissioner, what we're doing is we have many issues out there, and some are rolling off and we're putting more on.
and so, you know, this year we'll pay off some debt service and next year we'll add a little.
so it, you know, depends on our need but this would be a 20-year issue.
>> also, I guess -- I guess -- I think roger brought up pint earlier, about 50 years maybe being the life of the building itself, or is that pretty -- pretty accurate, or will it go beyond the 50-year life expectancy of the building?
>> well, it is 50 years, you know, we're estimating the building structurally could last.
it might last more, and I think we have someone who will tell us how long the building can go, an independent estimate from the structural perspective.
if you're talking about the mechanical system, most of the mechanical system on any buildings, you know, the life of those mechanical systems would be 25 to 30 years.
>> 30 years?
okay.
>> then have to be replaced.
that's normal with any buildings.
>> yeah.
right.
i just wanted to get that on the table since we were discussing that, and especially the debt structure that we're looking at as far as the debt service is concerned, and the length of the debt.
thank you.
>> any other questions?
>> no, no questions, just a comment.
i guess I really couldn't feel prouder of Travis County at this point for a lot of different reasons.
i think the planning that goes into making these kinds of decisions, we don't take them lightly, we spend a lot of time in conversations with each other, and it's very clear that the result is a collaborative decision so that we meet in favor of our taxpayers and our constituents.
and especially the financial position that we are in.
you work for aaa rating for several years by installing financial policies that will favor taxpayers in the long run, especially when the economy is in a slump.
because I think we've learned that that's when the public needs to have some assistance, to help the economy bounce back, and then -- and make some good purchasers.
so I guess I just couldn't feel prouder of Travis County and the way we make our decisions, our planning and our -- not only for this kind of purchase, but for the financial policies that I think a lot of constituents have been made aware of recently, and I think they're proud of us, too.
so let me just say congratulations to all of you for all of the time that was spent on trying to come to this decision.
thank you.
>> any other questions or comments from the court?
last Tuesday we approved a purchase and sale agreement for 700 lavaca that was presented to the owners of the property or their agent late last week, and I understand that that was approved and signed by them on Friday and delivered to us yesterday.
and there's a 90-day due diligence period that begins when?
>> it was signed -- Friday is when the 90-day due diligence signed, when we got acceptance of the contract, that's when everything was accepted.
>> okay.
and we have located several consultants to help us during this due diligence period to perform due diligence activities.
okay?
so with that, we're moving.
and I move that a subcommittee of the Commissioners court assist with that and that the subcommittee be made up of Commissioner Huber and the county judge.
>> second that.
>> thank you.
>> any discussion of that motion?
all in favor?
show that passes by unanimous vote.
any other action required of us today?
the presentation today can be made available for those who want to see it, if they will contact any member of the court or.
>> committee?
>> any of you all?
>> rodney?
>> okay.
>> judge, maybe one more thing is that we will want to -- the county will want to contact the tenants in that building, and perhaps you could -- the court could direct our broker to contact and talk to the tenants and look at their leases and assure them we're going to be can a good lender.
>> I would second that.
>> and the broker is keith zimmerman?
>> zimmerman from he can with z.
>> his contact information can be made available by the court also.
>> thanks for the tremendous work, you all.
>> I know how difficult it is.
>> all in favor?
that passes by unanimous vote.
regarding this afternoon, we did note on the agenda that we call up txi at 1:30.
are we still doing that?
>> I guess we could.
>> what if we take another 15 minutes and do it at 1:45?
>> okay.
>> is that okay?
>> all those in favor?
that passes by unanimous vote.
The Closed Caption log for this Commissioners Court agenda item is provided by Travis County Internet Services. Since this file is derived from the Closed Captions created during live cablecasts, there are occasional spelling and grammatical errors. This Closed Caption log is not an official record the Commissioners Court Meeting and cannot be relied on for official purposes. For official records please contact the County Clerk at (512) 854-4722.
Last Modified:
Tuesday, January 26, 2010 2:15 PM
