Austin News

The Texas teacher retirement fund will spend $40 million in rent over a 10-year period to rent space in a towering new office building in Austin.

Many teachers are giving the deal a failing grade.

The Teacher Retirement System of Texas (TRS) has signed a lease to rent three floors in Indeed Tower on Spring Street in downtown Austin when it opens in 2021. The space, which will mostly be used by the TDS Investment Management System, will rent for $326,000 per month initially but that will increase to $391,000 by the end of the decade.

Carolyn Perez, a spokeswoman for the retirement fund, declined to answer questions from the Austin News on the phone or via email about the lease.

“We are right in the midst of preparing for an upcoming board meeting. With so much going on, we are unable to participate in this media opportunity at this time,” Perez said in an email. “The issue of long term space planning and our lease at Indeed Tower will be discussed at the Feb. 20-21 meeting if you’d like to check out the live webcast.”

The Texas Classroom Teachers Association declined to comment and did not respond to questions sent via email or to calls from the Austin News.

The Texas Classroom Teachers Association reported on the TRS Board of Trustees’ December meeting and noted that while the system was spending millions to rent space in the gleaming new building, it was falling short of its goal of a 7.25 percent return on its investments. Instead, it produced a 5 percent return.

However, that was somewhat offset by a 2019 bill overwhelmingly approved by the Texas Legislature and signed into law by Gov. Greg Abbott. It increased teacher, school district and state contributions to the retirement fund – Texas is last in the nation in funding teacher retirement – in an effort to stabilize it. In exchange, retired teachers received a one-time payment of $2,000.

Teachers will see their contributions rise from 7.7 percent of their paychecks to 8.25 percent by 2024, while school districts will increase their contributions from 1.5 percent of teacher payroll to 2 percent. The state will tap into its savings account to contribute $1.1 billion, raising its contribution from 6.8 percent of teacher payroll now to 8.25 percent in 2024.

The TRS, which is partially funded by the state, was founded in 1937 and serves more than 1.6 million educators in Texas, from public schools to colleges. The retirement fund has a $150 billion trust fund, making it the state’s largest public retirement system. It ranks sixth nationally.

But finances have become a concern in recent years, which is why the expensive new quarters have raised hackles. 

"TCTA cautioned the board about the move, noting that members are already concerned about past decisions regarding facilities, such as holding investment offices overseas and leasing prime downtown office space for its investment division," the teachers agency stated in a release. "TCTA asked the board to hold open discussions on the issue and clearly articulate the need for and benefits of such a move, to ensure that the plan will not have an adverse impact on the fund, and to keep in mind primarily whether and how members will benefit."

The Trammel Crow Co. is the building’s developer. Its website states that the tower “will deliver a vibrant mixed-use environment with a prominent 6th Street address through its three main components: a 683,000-square-foot Class AA office tower with ground floor retail, a historic 1914 post office re-positioned into a 25,000-square-foot retail/restaurant destination, and a 20,000-square-foot urban greenspace.”