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Thursday, November 15, 2012

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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 Board of Regents approved a plan Thursday 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.

Studies prepared by the UT System financial and real estate staff and reviewed by J.P. Morgan indicate that over the next 30 years the move will yield a net savings between $60 million and $240 million. Regents have directed Chancellor Francisco G. Cigarroa to begin work on a plan 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 would be achieved through a combination of decreased maintenance, repair and energy costs as well as additional revenue generated from leasing space in three of the older buildings.

Construction of the new building is expected to cost $102 million and would 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 St. and Lavaca St. and between 8th St. and 6th St. [Map location: http://goo.gl/maps/ywhwi]. 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 76 years. The oldest, O. Henry Hall, is 131 years old.

The proposal recommends the demolition of the Colorado and Lavaca buildings, both located on 7th St., 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 ground lease once the new building is occupied. Besides providing revenue for the System, ground leasing the buildings will also yield an increase in tax revenue for the City of Austin as this property is currently tax exempt.

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.

A work group was created to study current facility operations and determine if cost saving alternatives existed. The group found that maintaining five older buildings was cost prohibitive going forward and that a single building would be cost effective while also realizing better organizational efficiencies. Space need studies and alternative cost analyses were conducted by System staff, assisted by Parsons, Inc. 

“Several locations in the Austin area were considered for a new building, as were several different construction scenarios and the possibility of leasing existing space,” Cigarroa said. “After taking all of the data and staff feedback into consideration, the construction of a single building on existing UT System land to house all of our business units made the most sense financially and organizationally.”

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. 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 a few small retail or commercial tenants on the ground floor.

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 facility clearly yields significant cost savings over the long term while also offering greater operational and organizational efficiencies,” said Regents Chairman Gene Powell. “This project is perfectly aligned with the productivity and efficiency goals of our Framework for Advancing Excellence and the savings will directly benefit our students. This is a win-win opportunity for our students, institutions, the UT System and the City of Austin.”

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.

About The University of Texas System

Educating students, providing care for patients, conducting groundbreaking 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 nine academic universities and six health science centers. Preliminary student enrollment exceeded 216,000 in the 2012 academic year. The UT System confers more than one-third of the state’s undergraduate degrees and educates nearly three-fourths of the state’s health care professionals annually. The UT System has an annual operating budget of $13.1 billion (FY 2012) including $2.3 billion in sponsored programs funded by federal, state, local and private sources. With roughly 87,000 employees, the UT System is one of the largest employers in the state.

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