Bonds come later as Texas Capitol Complex work begins
DALLAS – A year after groundbreaking on a $581 million redevelopment of the Texas Capitol Complex in Austin, long-term financing is still in the planning stage, officials said.
“We’re pretty early in the commercial paper phase,” said Lee Deviney, executive director of the Texas Public Finance Authority. “We could be issuing bonds sometime in the next 12 months.”
After the legislature authorized funding for the first phase of the project in its 2015 session, the TPFA board approved plans to issue $767.7 million of revenue bonds for the Capitol project and another state campus in north Austin.
At the same meeting, the board hired First Southwest Co., now Hilltop Securities, as financial advisor and the law firm of Bracewell as bond counsel.
Deviney told the board that possible private use of the facilities could create a taxable component to the bonds but that the main goals are to move state employees out of leased space, improve efficiency and generate savings.
The TPFA, which issues debt for most state agencies and charter schools, will provide the proceeds of the bonds to the Texas Facilities Commission, which is supervising and hiring contractors for the projects. The TFC will enter into a lease-purchase agreement with the TPFA.
Before issuing bonds, the TPFA is seeking to double the TFC’s $75 million liquidity cap set by the Texas Comptroller’s Office, Deviney said. At a meeting in May, the TPFA board agreed to seek the higher cap.
The Legislature authorized the TFC lease revenue commercial paper note program in 2015 as one of several programs that benefit from standby liquidity agreements with the Comptroller. The liquidity agreement for the program limited the maximum outstanding notes to $25 million during fiscal 2016 and $75 million during fiscal 2017.
With Texas’ general obligation debt rated triple-A by four rating agencies, TPFA can obtain low-cost financing for state agencies using revenue bonds. The state’s two other major issuers are the Texas Water Development Board and the Texas Transportation Commission.
The first phase of the Capitol Complex redevelopment, adding 1.1 million square feet, is budgeted at $581 million and will add two state office buildings, with above- and below-ground parking. The plans also call for replacing Congress Avenue from the Capitol to the University of Texas campus with a pedestrian mall.
A second, $357 million phase of the project that would add two more office buildings and complete the pedestrian mall could be funded in the next legislative session that begins in January.
State officials broke ground on the project a year ago after some upheaval in the administrative ranks of the TFC, but actual construction did not begin for 10 months.
The first building will rise 14 stories across Congress Avenue from the Bullock Texas State History Museum and will bear the name of George H.W. Bush, the U.S. president from 1989 to 1993.
With work about four months behind schedule, completion of the building and other elements of the complex originally expected in late 2021 was pushed back to May 2022.
The Capitol Complex covers 122 acres of the Capitol grounds and surrounding property. The TFC has identified about 21 acres of under-used property that allows for development of pedestrian-friendly retail, entertainment venues, and first-class office space.
Creation of the four-block-long Texas Mall on what is now Congress Avenue is designed as a cultural gateway on the north axis of the Capitol, linking a new museum district to the Capitol grounds. The new mall will end north-south vehicular traffic on the section of Congress Avenue north of the Capitol.
To manage the project, TFC hired the Page architectural and engineering firm with Balfour Beatty Construction as construction manager. The firms report to a compliance panel appointed by the Gov. Greg Abbott, Lt. Gov. Dan Patrick, and the speaker of the House.
The state Capitol building, designed in 1881 and completed in 1888, anchors the 40-block Capitol Complex of state office buildings. A $75 million underground extension of the Capitol was completed in 1993.
The Capitol Complex provides office space for more than 10,000 state employees, contains historic buildings and sites, and attracts more than a million visitors a year.
Congress Avenue to the south of the Capitol feeds traffic from downtown Austin onto one-way roads that circle the building and emerge on the north side. East-west traffic currently crosses Congress on the north side of the building. Under the new plan, those streets would be converted to two-way from one-way, ending at the pedestrian mall.
From as far back as the 1940s, planners envisioned a leafy public gathering spot among state office buildings north of the Capitol. The mall will end at Martin Luther King Jr. Boulevard, which separates the Capitol Complex from the University of Texas campus. To the east of the Capitol Complex, UT has built the Dell Medical School, which is expected to expand further east toward Interstate 35.
The North Austin Complex is north of the University of Texas campus and serves as headquarters for the Texas Health and Human Services Commission. Upon completion, HHSC will have one centralized campus-like setting.
The first phase of development approved by the 84th Legislature in 2015 authorized the construction of one 406,000 square-foot state office building and parking on the north Austin campus.
When completed, the state will retire $7.4 million of annual lease expenses. Consolidating the leases into state-owned facilities is projected to provide a full return on the state’s investment within 38 years.
The TFC is requesting funding for the second phase of the project during the upcoming 86th Legislative Session. The second phase consists of a new office building and adjoining above-ground parking.
Texas is one of several states with redevelopment projects in progress around state capitols. In Baton Rouge, Louisiana recently added a $34 million building to house state workers. Mississippi’s plan for its capitol complex ties in with a major downtown restoration in Jackson. In Denver, the Colorado government is planning buildings around the capitol to improve efficiency.
In a recent study for its master plan for the Capitol, Colorado researchers found that state agencies occupied about 700,000 square feet of leased office space in the downtown Denver area near the Capitol Complex.
“It is significant to note that entire agencies such as the Department of Regulatory Agencies and the Department of Higher Education and half of the Department of Labor and Employment are located in leased space,” the study said.