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Incentives of more than $15 million designed to lure Intel downtown

Tuesday, May 16, 2000 by

City Council to approve package Thursday

The cost of having Intel inside downtown Austin is estimated at $7.7 million in an incentive package that will go the Austin City Council Thursday for approval. Not everything that's in the menu of incentives has even been costed out yet, so the total amount may increase later. In addition, Intel would profit from an additional $7.4 million in avoided capital costs, bringing the total package to more than $15 million.

Sue Edwards, director of the city's Redevelopment Services created in March, says, "I want to go to the council one time to approve all incentives. If specific dollars are tied to those we can come back, but my goal is for the council to see the entire package. I don't like to piecemeal things."

Edwards says Intel Corp. would like to break ground in June on Phase I of the Museum Park Development, consisting of a nine-story office building of about 660,000 square feet and a nearby parking garage with approximately 1,050 spaces. Edwards says DPR Construction of Austin will be construction manager on the project.

Jeanne Forbis, media relations manager for Intel Corp., based in Chandler, Ariz., says Phase I will cost approximately $100 million. As to timing of the groundbreaking, Forbis says, "It depends on what you want to call groundbreaking. We have some demolition to do first." The building to be torn down is the former Covert Buick-Isuzi facility at 501 W. 5th St., which covers the block bounded by West 5th, San Antonio, West 4th and Nueces streets. Phase I parking will be constructed immediately west of the state parking garage and north of the Austin Music Hall on property bounded by 4th, Nueces and 3rd streets and Shoal Creek.

Phase II, to be built perhaps three or four years later, would consist of a nine-story building on about three-quarters of the block immediately north of Phase I, bounded by West 5th, San Antonio, West 6th, and Nueces streets. Phase II parking would consist of a parking structure on the south half of the block immediately west of the Phase II building, Edwards says.

Forbis says Intel expects the "eventual head count will be 2,000" and there are approximately 300 employees in Austin now. The Intel Texas Design Center is currently located at 1501 S. MoPac Blvd.

Since Intel proposes to build out its campus over a period of years, the company seeks a Managed Growth Agreement that would lock in the Land Development Code regulations that are in effect May 18, 2000, for a period up to 10 years. The city will provide a dedicated review and inspection team to expedite processing for Intel.

As in all Smart Growth incentives offered to date, not all of the $7.7 million package represents cash outlays by the city. The incentives include $368,000 in waived development fees; $136,000 in waved capital recovery fees, tap fees and inspection costs; $635,000 in reimbursements for water and wastewater; $4.5 million in reimbursements over time for parking facilities; $192,000 in capital improvement project improvements; and $1.8 million in waivers for temporary use of rights of way. The city will also waive certain annual license fees for the private use of public property, including but not necessarily limited to the placement of electric vaults in the sidewalks adjacent to the proposed buildings, the right to construct a subterranean tunnel to connect the two office buildings, and the right to construct an aerial passageway to connect one office building with its parking facility. The amount of this waiver will be determined and brought to the City Council at a later date. In addition, the city will provide financial assistance for necessary modernization, relocation and upgrading of utilities, and when construction costs are determined the waiver or reimbursement of such costs will be brought to the City Council for approval.

Edwards says some of the $192,000 for city funded capital improvement projects will be used for traffic improvements. Some streets that allow only one-way traffic may be opened to two-way traffic to improve access to Intel's site, she said. One possibility being examined is the 100 block of San Antonio Street, which currently is one-way southbound. Allowing traffic to flow north from Cesar Chavez would provide more direct access to Intel's facility. "We're still looking at that to see if it will happen," she says. Edwards also says that $40,000 is included for a customized traffic control plan.

The $7.4 million in avoided capital construction costs could go higher or lower as Intel's design criteria change. The estimate consists of avoided capital costs of $4.5 million in buying chilled water services from Austin Energy's downtown district energy plant under construction in the state garage bounded by West 4th, San Antonio, West 3rd and Nueces streets; $1.2 million in avoided capital costs by Austin Energy paying for engineering, construction and operation of the heating and ventilation systems within the buildings; and $1.8 million avoided by Austin Energy furnishing materials and labor and ongoing operation and maintenance costs associated with emergency back-up power systems to provide uninterruptible power for Intel's computer laboratories.

Chuck Manning, general manager of Austin Energy, says for Intel to take advantage of these avoided costs the company will have to sign up as a long-term customer of the utility, although for how long will be determined by negotiations. The contract is driven by the need to recover the utility's capital costs for building the facilities, he says. "They pay back through the rates negotiated, but it avoids the capital cost up front," Manning says. He says the utility benefits not only from securing a long-term customer but also from shaving the peak load on the system. Instead of having to generate air-conditioning loads during peak hours, the central plant will store chilled water in the form of ice made at night, during off-peak hours.

Intel Corp. is the world's No. 1 maker of microchips, with 80 percent of the personal computer microprocessor market, according to Hoover's Online, and ranks No. 39 in the Fortune 500. In 1999 Intel had 70,200 employees and racked up income of $7.3 billion on sales totaling $29.4 billion. Austin-based Dell Computer Corp. and Houston-based Compaq Computer Corp. were Intel's largest customers, each accounting for 13 percent of Intel's sales.

Council addendum…Monday afternoon several items were added to the agenda for the Thursday, May 18, City Council meeting. These include Item 89, a 2:30 p.m. briefing on the Police Oversight Focus Group; Item 90, an extension of the moratorium for a site plan on the Bennett Tract; Item 91, direct the city manager to investigate potential sites in the city for relocation of the Fontaine House for St. David's Church; and Item 92, approve a resolution adopting the Austin Development Design Guidelines (sic). Juan Cotera, chair of the Design Commission, says the latter item should be called the Downtown Design Guidelines, which are to be adopted as recommended standards and then work on how to implement them… Transportation forum…The Trans Texas Alliance is sponsoring an open forum on Monday, May 22, 7-8:30 p.m. called Can the Market Solve Austin's Traffic Problems? The program will be held at the board room of the Lower Colorado River Authority, 3700 Lake Austin Blvd. The program will consist of a lecture delivered by UT Economics teacher Steven Tomlinson, followed by a question-and-answer session. "Market-based mechanisms ultimately benefit everyone by allocating scarce roadway space more efficiently among drivers while preserving freedom of choice," Tomlinson says. "The trick is to coordinate and motivate drivers to act in ways that reduce congestion and emissions. We now have the technology to implement variations on the familiar toll road that can eliminate traffic jams altogether." For more info, call the Alliance at 469-7905 or send e-mail to transtexas@compuserve.com.

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