The TRS Board of Trustees responded to concerns that had been expressed by members and legislators about a highly publicized downtown Austin lease agreement, voting Feb. 20 to begin alternative negotiations to remain in the building that currently houses the TRS investment division.
TRS came under fire for entering into a lease agreement to move its investment division to three stories of a new downtown office building (the Indeed Tower). Though the agency had negotiated lower-than-market-rate rental costs, the price tag of more than $326,000 per month was shocking to active and retired educators concerned about their retirement security when the Austin American-Statesman disclosed the amount in an article published in January.
Trustees were informed during the board’s February meeting that new space had recently become available in the 816 Congress Avenue building that currently offices the investment staff, enough to accommodate the planned expansion of the division. TRS expects to be able to negotiate a per-square-foot rate at 816 Congress lower than the Indeed Tower lease, and will attempt to sublease the Indeed space rather than moving into the new building in 2021. If successful, staff estimates savings of at least $9 million over a 7-year period.
Despite the change in plans, TRS Executive Director Brian Guthrie was grilled by the Senate Finance Committee in a Feb. 25 hearing that included discussion of the lease agreement. Sen. John Whitmire (D-Houston) said he believed that “somebody’s head ought to roll” for what he considers “one of the more dumb decisions I’ve seen….”
Committee Chair Jane Nelson (R-Flower Mound) echoed Whitmire’s concerns, asking “What were you thinking?!” Committee members were unhappy in part because they felt that the goodwill generated by approving a bonus check for retirees last session had been eroded through the actions of the TRS staff and board.
Whitmire subsequently requested a state audit of TRS’s real estate investments, as well as an attorney general’s opinion regarding the constitutionality/legality of such investments. TRS is prohibited by law from investing directly in real estate, but has been able to invest indirectly through the creation of limited partnerships. Guthrie has cited this arrangement in explaining why TRS has been unable to release more information about the Indeed Tower lease agreement and other related details.
The lease agreement also was a topic at the March 9 meeting of the House Pensions, Investments and Financial Services Committee. Guthrie apologized for a perceived lack of transparency in TRS discussions and decisions, and acknowledged that the agency has appeared to be “tone-deaf” to member concerns. He pledged to work with legislators and stakeholders to ensure that in future endeavors, all of the facts surrounding such decisions can be shared. TRS has maintained that current law does not allow the agency to make certain information public.
In his presentation to the House committee, Guthrie disclosed that the current TRS building that houses most TRS employees (those not in the investment division) is estimated to be worth up to $100 million, and future plans may involve selling or leasing out that building and moving all staff to a single location outside the downtown area.
In recent testimony, TCTA reminded the TRS Board that TRS members are becoming wary of how the agency is spending pension funds at a time when retirees are struggling to make ends meet. We also communicated concerns about the agency’s planning for future office restructuring to the Sunset Advisory Commission staff, who are conducting a review of TRS efficiency and effectiveness.