HealthSouth - 1215 Red River and 616 East 12th St.

[Ashley Richardson (D9)]

On behalf of Council Member Tovo:

Colleagues,

Thank you again for honoring my request for more time as we contemplate the benefits, costs, and advantages of each of the four proposals prior to entering into an exclusive negotiation agreement for the redevelopment of HealthSouth at 1215 Red River and 616 East 12th St.

For many years, members of our affordable housing and planning communities have urged that we create affordable housing on city-owned tracts, and I am excited to be at this important stage to achieve that vision at Health South.

Below are some initial thoughts about the information we received Tuesday (December 4); I look forward to hearing my colleagues’ thoughts about these and other issues.

AFFORDABLE HOUSING
The current recommended proposal would create a 36-story residential tower in which 25% of the total rental housing would be affordable to families with Median Family Income of 60% or less with some homeownership opportunities for those earning 80% of the Median Family Income – though the exact details of this affordability component have not been provided in a public document yet. We absolutely need those affordable units in this area, but I believe that we can and should use this public asset to achieve even more affordable units at this site.

As I said during this week’s work and Council sessions, I’m interested in seeing how we can realize more affordable housing on this tract to fully achieve the Council direction to use the site primarily for that purpose.

The staff’s new decision announced Tuesday that the project does not need to bear the $3 million+ cost of the Red River realignment changes the requirements presented in the Requests for Proposals, and thus moves us further along that path. A few of the questions I’ve offered below ask staff how removing that $3 million requirement changes the four proposals, particularly with regard to the proposed affordable housing.

COMMUNITY USES
I’m also interested in engaging in a conversation – including with our community – about what uses at this site would offer the fullest community benefits.

The recommended proposal includes a 15-story office tower; I’d like to consider, first and foremost, whether the creation of additional private office space is our priority use for this public tract. If Council determines office use to be preferable to additional housing, I’d like our staff to explore *city* uses within this office store, including exploring the community suggestions we’ve received over the last weeks to locate the Downtown Austin Community Court at this site.

Another use contemplated for this site was childcare, and I plan to bring direction that this use be included in the redevelopment. There is a recognized scarcity of childcare resources in the Downtown area; creating a high-quality early childhood facility in this location would recognize a need that the Families and Children Task Force of 2008 identified and that has been reiterated in the years since. Such an amenity could serve both the families in this area and the children of Downtown workers.

I plan to bring amendments and direction to the Health South conversation that will address the above issues so that staff will incorporate them into the negotiations. As we did with the McKalla Place public/private partnership, I believe it would be most useful to direct staff to proceed with the negotiations and to return to Council prior to execution of the Exclusive Negotiation Agreement so that Council can provide input into the deal points of the agreement before staff embark on the more involved negotiations associated with a Master Development Agreement. As you’ll see in the questions below, I’m also asking staff to explore how we might use the new Economic Development Corporation to achieve the highest level of community benefits on this public tract.

COMMUNITY INPUT
And as I noted in our session yesterday, I’d like to build opportunities for public input into the process, and I welcome your ideas. Mine at the moment include: having the City Manager construct a project page on the city website that allows submission of questions and ideas and hosting at least one public session to provide information and receive feedback. I believe such a process would be consistent with how we have approached public discussion about past redevelopment projects, such as the Seaholm Intake Building and others.

Below are initial questions I’ll be submitting through the Q/A. Some may be able to be answered only in a real estate executive session.

I’ve also included some of the documents that I find helpful as I think through the history of this property and the opportunity we have before us to use this city-owned land for affordable housing. We’ve received and reviewed these documents at one point, but I think having them in one place may be helpful to us and to the public as we engage with the proposals. If I’ve missed a critical document or mis-hyperlinked a document, please feel free to include it in this thread.

I look forward to working with all of you in the days leading up to our Council vote to authorize the next step.

This tract is a catalytic project for affordable housing in the Downtown area, and I look forward to my colleagues’ creativity, scrutiny, and contemplation as we choose the path with the greatest community benefit, which is a vision I know we all share.

Acquisition of HealthSouth

Item 19 - December 15, 2016
Approve an ordinance amending the Fiscal Year 2016-2017 Office of Real Estate Services Capital Budget (Ordinance No. 20160914-002) to increase appropriations by $6,500,000 for HealthSouth facilities. (Related to Items 20 and 38)

* Executed Ordinance – Ordinance No. 20161215-019: https://www.austintexas.gov/edims/docum ... ?id=268943

Work Papers and Other Backup Documentation
* 20161215-019, Agenda Backup Draft Ordinance: https://www.austintexas.gov/edims/docum ... ?id=268413

* 20161215-019, Agenda Backup Fiscal Note: https://www.austintexas.gov/edims/docum ... ?id=268414

* 20161215-019, Agenda Backup Recommendation for Council Action: https://www.austintexas.gov/edims/docum ... ?id=268412

Item 20 - December 15, 2016
Approve a resolution declaring the City of Austin's official intent to reimburse itself from proceeds of certificates of obligation to be issued for expenditures in the total amount of $6,500,000 for Health South facilities and the adjacent garage. (Related to Items 19 and 38)

* Executed Resolution No. 20161215-020: https://www.austintexas.gov/edims/docum ... ?id=268908

Work Papers and Other Backup Documentation
* 20161215-020, Agenda Backup Draft Resolution: https://www.austintexas.gov/edims/docum ... ?id=268416

* 20161215-020, Agenda Backup Fiscal Note: https://www.austintexas.gov/edims/docum ... ?id=268417

* 20161215-020, Agenda Backup Recommendation for Council Action: https://www.austintexas.gov/edims/docum ... ?id=268415

Item 38 - December 15, 2016
Authorize the negotiation and execution of all documents and instruments necessary or desirable to acquire from HEALTHSOUTH OF AUSTIN, INC. its interest as tenant of approximately 1.382 acres of land at 1215 Red River Street, including rights to improvements, and title to approximately 0.349 acre of land and improvements located at 606 East 12th Street, for an amount not to exceed $6,500,000. (District 1) (Related to Items 19 and 20)

Work Papers and Other Backup Documentation
* 20161215-038, Agenda Backup Map: https://www.austintexas.gov/edims/docum ... ?id=268448

* 20161215-038, Agenda Backup Recommendation for Council Action: https://www.austintexas.gov/edims/docum ... ?id=268447

* 20161215-038, Agenda Backup Site Photos: https://www.austintexas.gov/edims/docum ... ?id=268449

* 20161215-038, Agenda Backup Site Photos 2: https://www.austintexas.gov/edims/docum ... ?id=268450

November 18, 2016 Memo – Acquisition of HealthSouth Hospital Facility and Parking Garage: http://www.austintexas.gov/edims/pio/do ... ?id=266964

Resolution No. 20170323-052 - Approve a resolution directing the City Manager to evaluate and explore the options available for repurposing the properties at 1215 Red River Street and 606 East 12th Street, which were previously occupied by HealthSouth. (Sponsor: Council Member Ora Houston. Co-Sponsors: Mayor Pro Tem Kathie Tovo, Council Member Sabino ‘Pio’ Renteria, Council Member Jimmy Flannigan.)

* Executed Resolution: http://www.austintexas.gov/edims/document.cfm?id=274168

* March 21, 2017 Council Work Session Transcript (begins on Page 19): http://www.austintexas.gov/edims/document.cfm?id=273947

* Mary 23, 2017 Council Q&A Item #52: http://www.austintexas.gov/edims/document.cfm?id=273931

* March 23, 2017 Council Meeting Transcript (begins on Page 3): http://www.austintexas.gov/edims/document.cfm?id=273946

* Resolution No. 20170323-052 was approved on Mayor Pro Tem Tovo’s motion, Council Member Pool’s second on a 9-0 vote. Council Members Casar and Garza were off the dais.

May 30, 2017 Memo – Item from Council on March 23, 2017 Council Agenda: http://www.austintexas.gov/edims/pio/do ... ?id=277680

August 22, 2017 Memo – Council Resolutions Related to Re-Use of City-Owned Real Estate: http://www.austintexas.gov/edims/pio/do ... ?id=282482

November 20, 2017 Memo – Health South Property: http://www.austintexas.gov/edims/pio/do ... ?id=288217

July 30, 2018 ULI report, “City of Austin: 5 Sites Considered for Affordable Housing – ULI Affordability Strategic Council Ranking:” https://ulidigitalmarketing.blob.core.w ... 5Sites.pdf

Resolution No. 20181004-042 - Approve a resolution directing the City Manager to solicit plans for the development of 1215 Red River and 606 E. 12th Street. (Council Sponsor: Council Member Ora Houston. Co-Sponsors: Mayor Pro Tem Kathie Tovo, Council Member Sabino 'Pio' Renteria, Council Member Leslie Pool.)

* Executed Resolution: https://www.austintexas.gov/edims/docum ... ?id=307522

* October 2, 2018 Council Work Session Transcript (begins on Page ~19): https://www.austintexas.gov/edims/docum ... ?id=306969

* October 4, 2018 Council Q&A Item #42: https://www.austintexas.gov/edims/docum ... ?id=306986

* October 4, 2018 Council Meeting Transcript (begins on Page 44): https://www.austintexas.gov/edims/docum ... ?id=307102

* Resolution No. 20181004-042 was approved as amended on Council Member Houston’s motion, Mayor Pro Tem Tovo’s second on a 10-0 vote.
Council Member Troxclair was absent

November 6, 2018 Memo – Update on Resolution 20181004-042: Former Health South property, 1215 Red River and 606 East 12th Streets: http://www.austintexas.gov/edims/pio/do ... ?id=310148

February 7, 2019 Council Q&A Item #55 which stated that “the proposed realignment of Red River Street between East 12th Street and East 15th Street is not anticipated to negatively impact the City of Austin’s Health South property at 1215 Red River.” https://www.austintexas.gov/edims/docum ... ?id=314444

November 5, 2019 Memo – Update on Resolution 20181004-042: Soliciting interest in the
Redevelopment of the former Health South property (1215 Red River and 606 East 12th Street): http://www.austintexas.gov/edims/pio/do ... ?id=330907

November 18, 2019 RFP Solicitation Packet (which was amended on April 3, 2020 to allow for proposals to be submitted digitally in the wake of the pandemic): https://www.austintexas.gov/financeonli ... sid=132936

February 4, 2020 Memo – Estimated Costs and Timeline for Temporary Occupancy of 1215 Red River (former HealthSouth Property): http://www.austintexas.gov/edims/pio/do ... ?id=335221

November 3, 2020 Memo – Redevelopment of former Health South property (1215 Red River and 606 East 12th Street): http://www.austintexas.gov/edims/pio/do ... ?id=349833

Lastly, I will be submitting the following questions to the December 10, 2020, Council Q&A so staff have adequate time to respond comprehensively prior to our Tuesday Council work session. I may submit more questions as my staff and I work over the weekend, but I wanted to highlight what is top of mind for me in my decision-making process:

1. Please provide the rationale for why the City’s real estate portfolio consultant, CBRE, recommended that the City switch from an RFI to an RFP for the HealthSouth tract.

2. To the greatest extent legally feasible, please provide a detailed breakdown of each applicant’s proposal. Please provide the details surrounding each proposal’s ratio of uses by square footage – for instance, Proposal #1 - % office use, % residential use, % entertainment use, etc.

3. To the greatest extent legally feasible, please provide a detailed breakdown of each proposal as it relates to housing. Please provide a breakdown of each proposal as it relates to market housing units vs. affordable housing units. Then, within each proposal please provide the total number of proposed units (market and affordable combined), the total number market rate units and total number of proposed affordable units for each proposal. Then, please provide how many affordable units are rental vs. ownership and please provide the unit mix (bedroom count) for each category of rental and ownership affordable units.

4. Please provide information about how the amenities contemplated by each proposal are intended to be utilized by households residing in the income-restricted homes.

5. Please provide responses from each of the applicants as to how their pro forma and financing strategies may change now that the Red River realignment revenue requirement in the RFP is no longer required.

6. Please provide projected profits for the developer from each of the respective projects.

7. Please describe the contemplated lease arrangement in terms of phasing of payments and plans for the City having an equity-stake in the revenues generated from any commercial activity on the site.

8. Which staff and which departments will be involved in the negotiation of the Master Development Agreement? Which staff/departments have been involved in negotiation of other public/private redevelopments on city-owned land, such as McKalla Place, Seaholm, Green Treatment Plant, and the new COA Planning and Development Center?

9. Has the tract been assessed for the relocation of the Downtown Austin Community Court? Please describe this assessment and detail how this could be utilized within the office / commercial uses within each of the four proposals.

10. Please detail procedurally how Council can provide direction in the negotiations of the contract to realize different community uses on the tract, such as an on-site childcare facility that could be open to both residents and the public.

11. Should the Council select a proposal that includes a music / entertainment venue on-site, please detail how noise mitigation would be addressed for the residents, as well as what resources the City intends to allocate toward enforcing sound violations.

12. Given that Council has now created an Economic Development Corporation with a scope that allows the redevelopment of city-owned parcels to achieve maximum community benefits, have staff considered what role the EDC might play with regard to the redevelopment of Health South and how that would impact affordable housing and community benefits?

13. Please describe in detail what affordable housing each developer has constructed in the Austin area.

14. The Request for Proposals included a revenue requirement of $8.7 million for acquisition costs. The purchase price for this tract was $6.5 million. Has the city issued debt for this project and begun accruing interest? Please detail what expenses account for the difference between the $6.5 million and the $8.7 million.

Best,

Kathie

[Greg Casar]

Thank you, CM Tovo, for laying out your thoughts and providing the documents above.

I am supportive of finding ways to achieve even more affordable housing at the Health South location. If we can give direction on Thursday to continue to increase the affordable housing component (both # of units and depth of affordability) as we negotiate a final MDA, then I'd support that direction.

The staff recommendation currently provides the most affordable units of any of the proposals, but I agree that through our work together we can increase that number of affordable units.

I support exploring if we can get childcare on site. I also plan to offer direction, similar to that on the convention center ENA, to protect workers in the buildings.

-Greg

[Natasha Harper-Madison]

Councilmember Tovo, this is very thorough and greatly appreciated, the historic context is especially helpful. I look forward to continuing to work together on this development. District 1 is in desperate need of much of what you seek to accomplish in your direction/questions/amendments including affordable housing, childcare and community amenities. I join my our colleague CM Casar, and probably the entire dais, in full support of seeking maximum community benefit from the project.

I appreciate what you've presented as an option for including community feedback and will work with my staff to consider additional options. My primary concern with community input is that the voices of all residents are considered equally, I hope that can be accomplished. I'm looking forward to the responses to your thoughtful questions and appreciate your continued effort.

Good evening,
NHM

[Steve Adler]

I appreciate the comments from my colleagues Tovo, Casar and Harper-Madison and join in recognizing that there remain unanswered questions. I’m not clear on how best to get them answered and whether that has us moving forward with negotiations with a single bidder or opening the process to greater discussion.

I think we should be maximizing income restricted housing in the city, including in the downtown area, and especially using city-owned land as one of the most effective ways to do this. I am unclear if additional units should be on this site or not. If there is value (cash) to the City as part of the transaction, should we invest it on this site for additional units or deeper affordability? Or do we invest it nearby? E.g., do we buy down and get more units or deeper affordability in, say, the South Central Waterfront or other location? From a housing policy perspective, is it better for residents and children of all financial strata to be in a development with a mix of various income levels? And what’s the optimum mix? What is the optimum percentage of income restricted and market units that is best we should be trying to achieve in any given project?

I, too, would like to explore this site as a location for the Downtown Community Court, and for child care.

I would like to also explore if we could program in a live music venue space that could be leased to one of our legacy venue operators in the area (assuming we can property and sufficiently noise mitigate such a space as to be compatible with the other uses).

This tract is in the “Innovation Zone,” and I would like to know what that consortium and planning group thinks about the use of this tract and how it fits into the dynamics of the larger area.

Among the questions to be asked is one of priority -- whether we could or should use this asset to generate revenue or resources that we could apply to permanent supportive housing so that the use of this public asset could help us house some of the people downtown that are otherwise living on our streets and in tents?

s