Renovation of the 1970s-era former Frost Bank building is on track to be completed by 2022. Its design and construction will cost taxpayers $75.1 million, $15.6 million more than was budgeted, City staff told City Council at a Dec. 17 meeting.
The City bought the old Frost Bank headquarters in 2015 with the goal of consolidating all of its departments there. In 2018, City Council approved a $59.5 million contract with Skanska Nunnelly (a joint venture between local general contractor F. A. Nunnelly and Sweden-based construction company Skanska USA) to complete the renovations at the downtown fixture, now renamed City Tower.
City Council members unanimously voted this month to increase the renovations contract to $75.1 million, but not without some pushback. Councilman Clayton Perry (D10) chided City staff for the project’s price tag.
“This is another big increase on this project,” he said. “And if I can remind you, I voted against this project originally, as I thought we could do some other things wisely with the amount of money that we were putting into not only this building but the City Hall and some other facilities. … What I want to make sure is, at this point, we’re set on the price. We’ve already escalated this project almost $50 million over the last couple of years. That’s way above what we should have identified initially and where we’re at today.”
Assistant City Manager Lori Houston assured Perry this was the final estimate for the project.
“We feel very confident that we are going to stay on schedule within this budget,” she said.
About $1.7 million of the $15.6 million in additional costs can be attributed to redesigning workspaces with coronavirus precautions in mind. The City has opted to add things like motion-activated doors, elevators that can be operated with a foot, and upgrades to ensure that social distancing can be achieved in the office.
In addition, $4.6 million will go toward mechanical, electrical, and plumbing issues that were not originally identified and $2.7 million toward security enhancements. City Council also approved adding $1.4 million to the project to purchase presentation and broadcast equipment. Find a breakdown of the newly budgeted items here.
The total project cost – including the purchase of the building – is now at $141 million. The City plans to house 1,400 employees from 24 departments at City Tower when it’s completed.
Chief Financial Officer Ben Gorzell told Council members that the City expects cumulative savings of $3.2 million over 30 years. The City plans to lease seven floors of the building, according to Gorzell, resulting in parking and rent revenues. And savings as a result of no longer paying rent at non-City-owned buildings – estimated at $3.8 million by Houston – will go toward paying interest on debt that funded the project.
Councilman John Courage (D9) said he was skeptical of the $3.2 million projection, especially with many businesses facing pandemic-induced hardship.
“I don’t think we’re going to come out with a $3 million savings over the life of this,” he said. “I think there’s a lot of variables. For example, how are we gonna go ahead and rent [seven] floors? What’s going to be the vacancy rate for the first five years with so many businesses under the gun?”
Courage also said he had been apprehensive about the project from the beginning when then-City Manager Sheryl Sculley reassured him that the City sticks to project schedules and price tags. Current City Manager Erik Walsh promised that he prioritizes that as well.
“The vast majority of our projects are on schedule and on budget,” Walsh said. “And if they’re not on budget, then we make adjustments to become within budget as part of our commitment to the community.”
Councilman Manny Pelaez (D8) applauded Houston and City staff for the work they have put into the project, despite the increased cost.
“Let’s not forget, we’re talking about a really old building,” he said. “And it’s an old building that’s been ridden really hard, right? Imagine every time you take a wall out of there just to look to see what’s behind that – you’re finding new things that you didn’t expect. And the same goes true for any old building that you’re ever going to rehab.”
The 2015 public-private partnership deal that allowed the City to acquire the original Frost Bank building will lead to more downtown housing, Houston added. Weston Urban is scheduled to build 265 residential units downtown on properties it received from the City as part of the 2015 deal.
Houston estimated that City department staff would begin moving into areas of the new City Tower between July 2021 and February 2022. The project is scheduled to be finished in September 2022.