Concerns about plans to build out the Capitol complex have some lawmakers reconsidering the role of public-private partnerships, including changes in state law that could afford Austin neighborhoods some protection from commercial development on state lands.
Public-private partnerships — commonly called P3s — aren’t going away, but powerful legislators are telling Terry Keel, executive director of the Texas Facilities Commission, that the controversial financing option might not be right for the heart of the Capitol complex.
Also, state Sen. Kirk Watson, D-Austin, has filed legislation that would require the state, in most instances, to follow local land use and zoning rules when it develops state lands in neighborhoods outside the Capitol complex.
Negative reaction to the prospect of a 47-story tower at the Capitol complex seems to have invigorated discussion of how legislators can best steer the construction of new state office buildings in the Capitol complex and reduce the state’s reliance on leased office space.
Lawmakers are talking about paying for new state office buildings with debt as opposed to inviting the private sector to help finance, design and build them.
For almost three years, Keel and the Texas Facilities Commission have touted public-private partnerships as a means to finance and build state office buildings without raising taxes or selling bonds.
The agency also received unsolicited proposals from developers to build a grocery store and new housing on state lands in the Bull Creek neighborhood — a prospect that had some North Austin residents worried that the project would overwhelm the neighborhood’s streets and infrastructure.
But state Sen. Tommy Williams, R-The Woodlands, who chairs the powerful Senate Finance Committee, recently told Keel to stop pursuing public-private partnerships while the Legislature considers financing the construction of office buildings by selling bonds.
“I don’t see any need for you to waste any of your resources or time working on P3s if there is an opportunity for us here to get a long-term bonding package put together to address some of these needs,” Williams said. “I’d rather not do that.”
The chairman’s comments echoed the sentiments of another legislative body, the Sunset Advisory Commission, and followed remarks by state Rep. Kevin Eltife, R-Tyler, to Keel during the finance committee’s hearing.
Eltife, who is in the real estate business, said he’s not opposed to public-private partnerships but it is better for the state to finance its own projects, particularly in the Capitol complex.
“We’re not California. We’re not broke,” Eltife said. “We should not run out and go do ground leases and public-private partnerships unless absolutely necessary and it makes total sense for the state.”
Eltife, who leads a subcommittee on the issue, said he understands the political concerns.
“I know it’s hard to go build a government building because everybody says you are expanding government, but we are expanding government,” he said. “We’re leasing more space.”
Keel has urged the Legislature to get a handle on its cost of leasing office space.
He testified that the state’s lease portfolio has ballooned 250 percent over the past decade.
In Travis County alone, the state leases 2.3 million square feet. The last state office building constructed in the Capitol complex came in 2000.
The facilities commission has plans for up to three office buildings, north of the Capitol along North Congress Avenue, as part of a new grand entrance to the grounds.
“Members, we’d much rather own our house than rent it,” Eltife told his Senate Finance colleagues.
Keel, a former state lawmaker, said he welcomed direction from the Legislature.
Another issue is who should plan for the Capitol complex’s future.
In January 2011, the facilities commission approved the concept of constructing state office buildings with savings from expiring leases, but also for the first time approved allowing commercial development in the Capitol complex.
For example, state parking garages along San Jacinto Boulevard could be replaced with condos and businesses that would generate revenue for the state and tie the Capitol complex to the UT campus and the future medical school.
But in December the Sunset Advisory Commission warned that the facilities commission had gotten ahead of itself and hadn’t involved enough stakeholders, including the State Preservation Board, the General Land Office and the Legislature.
“Anything we are doing should stand a 100-year test,” said Rep. Byron Cook, R-Corsicana, chairman of the House Committee on State Affairs. “There is not confidence that some of these projects stand the test of time.”
Watson, who is serving on Eltife’s public-private partnership subcommittee, said he is drafting legislation to address the issue of planning for the Capitol complex expansion.
Mary Scott Nabers, a former state official, is president and CEO of Strategic Partnerships Inc. and author of “Collaboration Nation,” a book about public-private partnerships.
She said the issue of what to do at the Capitol complex has gotten intertwined with public-private partnerships that all levels of government can use to finance projects.
“The Capitol complex is sacred ground,” she said. “That is a completely separate debate from P3s. The (state) leadership supports P3s.”
Indeed, Watson, a former Austin mayor, said he cooperated with the private sector for some civic projects.
Today, as senator, Watson said he is trying to balance the need for the state to maximize its return on state lands with the concerns of neighborhoods.
Outside of the Capitol complex, there are several parcels of state land around Austin targeted for eventual commercial and residential development.
“A big chunk of all this land is in my Senate district,” Watson said. “It’s important it’s right for my community.”
Senate Bill 507, filed by Watson and Eltife, would require a project on state land to comply with local zoning and land use regulations unless the new project would continue the state property’s current purpose.
But the legislation also increases the Legislature’s role in public-private partnerships.
The Partnership Advisory Commission, a legislative body, would review guidelines for public-private partnerships from all subdivisions of the state, including higher education. And a governmental entity that decided to pursue an unsolicited proposal from a developer would have to invite competitors by issuing a request for proposals.
“One of the things missing has been the Legislature as a key stakeholder has not been involved enough,” Watson said. “Since we passed P3 legislation (in 2011) we haven’t been in session.”
Laylan Copelin has covered public policy and politics for the American-Statesman for three decades. Focusing on business issues in recent years, he has examined topics including the use of taxpayer incentives for private industry, plans to develop the Capitol complex with private sector projects and the risk of a statewide electricity shortage.
JUST A CUTLINE ALERT!: Be aware that the short stretch of Congress Avenue north of the Capitol (and only that short stretch of Congress) is officially “North Congress Avenue.”