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Downtown Commission eyes housing, other details on HealthSouth redevelopment

Tuesday, June 22, 2021 by Chad Swiatecki

Members of the Downtown Commission expressed some concern last week that the ongoing negotiations over the redevelopment of the former HealthSouth property downtown could result in a project that doesn’t meet the expectations of City Council or the community as a whole.

The commission received an update at its most recent meeting on the recently opened exclusive negotiations between the city and potential developer Aspen Heights Partners, with the expectation that an office tower and residential tower with significant affordable housing would be the end result.

Last month the city entered into the negotiating agreement, which could last for up to 15 months, that Council approved in January after extensive additions. Among their concerns were requirements for the amount of affordable housing and other community benefits that would be included in the redevelopment of the former medical facility and parking garage located at East 12th and Red River streets.

During the presentation from redevelopment program manager Margaret Shaw, chair August Harris said exclusive negotiating agreements such as the one with Aspen Heights can result in any terms of the project being renegotiated.

“Should they, in the process of the discussions, come back with something that was less than what was offered by the other firms submitting under the RFP, would that change anything? I see this frequently where you go under a contract … they try to renegotiate the deal and it ultimately becomes less than other deals that were offered. That would just be a concern that I have.”

Citing state law covering purchasing decisions by municipalities, Shaw declined several times throughout the meeting to give parameters of what features could be included in the final deal.

She did note that Council put specific conditions into the resolution that was approved in January, including features that weren’t included in the original RFP.

“In those December and January conversations, the Council changed a lot of the dynamic in terms of what they wanted, so all of those portions of the bid are going to change when we come back,” Shaw said.

“If in collecting feedback from the community on what that final package looks like, if that was something the community and Council was not pleased with, then yes, they would have the option I believe to restart the negotiations.”

Council Member Kathie Tovo referenced the handling of the HealthSouth redevelopment during discussion earlier this month on restarting the reconstruction process for the Austin Convention Center. Specifically, Tovo wants staffers to return to Council with updates so she and others can give feedback on what should be included in any requests for qualifications or proposals. She said that staff members moved ahead with the RFP for HealthSouth without conducting an RFQ or asking Council what housing features and other community benefits were expected for the site.

“There were proposals that came back that didn’t necessarily reflect some of those values as strongly as they needed to, in my opinion, for a piece of publicly owned property. I want us to have that checkpoint because I don’t want an RFP to be released without the Council having an opportunity to review it,” she said.

“What happened with HealthSouth was staff would tell us we can’t require this of developers because we didn’t put it in the RFP. But they didn’t put it in the RFP because they drafted it on their own and released it without that checkpoint with Council, so I’m going to work hard on any other project of this sort that we have that important check in.”

Tovo said the high-profile nature of the property and its attractive location downtown has made it an occasionally controversial matter among Council members, some of whom want it developed privately at market rate while she and others want it accessible to service industry and creative workers.

“One challenge we’ve had with HealthSouth is, it’s an extremely attractive piece of property and so there have been different voices in our community conversation, possibly even before we bought it. … There are many private interests who would like to redevelop it and then others in the community who would like to see it used to the highest profitability of the private market, and that cannot be our driving force.”

Rendering of proposed project by Aspen Heights Partners courtesy of the city of Austin.

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