History of the Foundation
Brief History
The Texas Retired Teachers
Foundation (TRTF) is preparing to celebrate its twentieth year of serving Texas
retired teachers and school personnel and supporting public education in Texas.
TRTF is in a unique stage of development; the organization has experienced in
depth Board involvement, achieved landmark goals and is at the same time
launching new programs to affect positive change for public education in Texas.
TRTF was formed in 1988 as
a part of the Texas Retired Teachers Association (TRTA) under the name, the
Building Fund Trust. The trust was formed for the purpose of acquiring and
providing a home office building in Austin, Texas for TRTA.
From 1988 to 2000 the
Building Fund Trust raised funds through the “Walk to the Wall” campaign at the
annual TRTA Conventions raising as much as $125,000 in one year. The Building
Fund Trust also bought a lot at 12th and Trinity streets in Austin,
TX in 1992 which was rented out for parking until construction started.
In the late 1990s the
Building Fund Trust committee members became aware that it was not possible to
accept tax-deductible donations while being a part of TRTA, which is a 501(c)(4)
nonprofit, chiefly because TRTA is involved in legislative activities.
In 2000, the Texas Retired
Teachers Foundation was incorporated as a 501(c)(3) nonprofit organization
formed for educational and charitable purposes. A nonprofit foundation like
the Texas Retired Teachers Foundation is prohibited from participating in
lobbying or any other political activities.
The funding raised
through the Building Fund Trust and the responsibility for the building program
were transferred to the Foundation Board of Trustees. This action was followed
by the Board of Directors of TRTA authorizing a 99 year lease of the lot at 12th
and Trinity Streets to the Texas Retired Teachers Foundation. In return, the
Association would receive prepaid rent on 10% of the available office space and
seven parking spaces.
In order to achieve the
goal of building the office center, TRTF formed an alliance known as the 12th
Street Limited Partnership with Development 2000, Inc. Under the agreement,
Development 2000, Inc. assumed the role of managing partner and 30% ownership of
the building and TRTF gained 70% ownership of the office center. This financial
structure will prevail until the partnership ends in 2029. At that time the
Foundation will own 100% of the building and the TRTA is the owner of the lot.
Construction of the Trinity Office Center finished in 2004 and the building
was fully leased in 2006.
In 2006 the Texas Retired
Teachers Foundation entered a new phase of growth and development by hiring its
first Executive Director, Ann Dowdy. Dowdy brings more than 30 years of
nonprofit experience to the Foundation. In 2007 the TRTF is launching new
programs to support public education in Texas and enhance the lives of Texas
retired teachers and school personnel.
/AMB
10/8/07
Detailed History
The following is a brief history of the building program and related information about the Texas Retired Teachers Foundation. The sketches cover the time period from 1988, when the Building Fund Trust was started, through January 1,2007, when the last space in the new building was leased. It is designed for use by Foundation Contacts at the local unit and district levels as they perform their communication roles.
Building Fund Trust: The fund drive for building construction began in 1988 and continued for 11 years. In 1993, the TRTA Board of Directors authorized the purchase of a valuable lot at 12th and Trinity on which to build. Adequate funds could not be raised during the period of 1988-1999 to build even the small building that was originally planned. This was during the time that Texas Retired Teachers Association (TRTA) members benefited from a four-step Consumer Price Index catch-up program approved by four different sessions of the Texas legislature. This legislation provided large annuity increases for retirees but never resulted in the level of donations expected - perhaps because they were non-deductible. Even though the Building Fund Trust drives ended in 1999, some units and individuals continue to make contributions.
Creation of the Foundation: The Texas Retired Teachers Foundation (TRTF) was created by the TRTA and became an official 501 (c) (3) non-profit (donations tax deductible) entity, formed for “educational and charitable purposes” in July, 2000. Most strong associations have foundations because they are non-profit, attract tax-deductible donations, and are designed to support the activities of the association. Under current law, associations like the Texas Retired Teachers cannot receive a 501 (c) (3) non-profit status from the Internal Revenue Service because of its legislative activities. A non-profit foundation like the Texas Retired Teachers Foundation is prohibited from participating in legislative lobbying or any other political activities.
Building Trinity Office Center: After the Foundation was approved by Internal Revenue Service and appropriate state agencies, the building program was transferred to the Foundation Board of Trustees by the TRTA Board of Directors. The Building Fund Trust was transferred at the same time with the stipulation that it be used in the construction of a building. This action was followed by the Board of Directors of TRTA authorizing a 99 year lease of the lot at 12th and Trinity Streets in Austin to the Texas Retired Teachers Foundation. In return, the Association would receive prepaid rent on 10% of the available office space and seven parking spaces.
Creation of 12th St. Limited Partnership: A “request for proposals” to developers in the private sector to offer a plan to work with the Foundation in the development of a building program was advertised. Several proposals were received. A plan presented by Development 2000, Inc. was deemed the most favorable and provided the greatest advantages for all parties – TRTA, TRTF, and a private corporation. Subsequently, a limited partnership was formed between Development 2000, Inc. and the Texas Retired Teachers Foundation. The alliance became known as the 12th Street Limited Partnership. Development 2000, Inc. assumed the role of managing partner and 30% ownership of the building. The Texas Retired Teachers Foundation owns 70%. This financial structure will prevail until the partnership ends in 2029. At that time the Foundation will own 100% of the building and the Association is, of course, the owner of the lot. Development 2000, Inc. will no longer be involved after the dissolution of the partnership. According to the lease documents, the 99 year lease expires in 2100 when the building ownership will be transferred to TRTA and the lease to TRTF expires.
Funding for the Building: Funding for the construction phase of the program was provided from the following sources:
Building Fund Trust $750,000
Loan from American Bank of Austin @ 5.75% $3,000,000
Loan from TRTA @6.25% $1,400,000
TOTAL $5,150,000
The Texas Retired Teachers Association received $80,126 in interest during the construction phase. A similar amount in CDs would have produced less than one-third of that amount.
Once the building was completed, 10 year financing was arranged from two sources:
Loan from GMAC Commercial @ 5.8% $4,300,000
Loan from TRTA @6.3% $1,000,000
TOTAL $5,300,000*
*The extra funds above construction costs provided for change-orders and escrow funds
TRTA will earn $567,945 in interest during the 10 year loan period. With interest from the construction phase and ten year loan, added to the value of the prepaid offices and parking spaces, the value to TRTA will total $1,513,821. Add to that amount the value of the office and parking space for an additional twenty years in the partnership, the total value to TRTA will be $2,597,250.
CURRENT FINANCIAL STATUS: The figures in the section above reveal the favorable financial return for TRTA. Projections at the time the leases were developed indicated that the Foundation would receive approximately $77,000 in annual preferential returns and building profits. These funds were designated for operational use. The building has been operating at a loss due primarily for two reasons: (1) ten percent (10%) of the space was not leased for about twenty eight months (it has now been leased and will be occupied in January of 2007 when the offices are finished out to specifications), (2) the common costs, which include taxes, insurance, and utilities, have increased dramatically beyond the 2001-2002 projections. The projections also anticipated a higher square foot lease rate than materialized. Add to this the fact that 10% of the total space occupied by TRTA does not produce any revenue and the common costs associated with TRTA’s space has to be absorbed by the Partnership. This means TRTF underwrites 70% of these costs, thereby reducing potential revenue.
During the planning stages in 2001 to 2002, there was a general understanding that any inequities arising from the original projections could be resolved through negotiated adjustments. The project was to be a “win-win-win” for the three involved entities. This outcome has not materialized. Consequently, the Managing Partner had to deplete all escrow funds to pay for the losses. Since May of 2006, “cash calls” to the partners have been necessary in order to absorb the continuing losses in excess of balances. A “cash call” was made for the Foundation to pay its pro rata share of the costs for finishing out the office space for the new renter in accordance with their specifications. Through January 1, 2007, the Foundation will have paid a total of $194,683.14 in “cash calls.”* The University of Texas Medical School will occupy the remaining office space soon. When this occurs, there will be a small positive “cash flow” and the Foundation will receive 70% of this amount. This will approximate $4,000 per month but an additional $3,000 per month is needed just to produce the income originally projected from the building to be applied toward Foundation operation.
FUTURE MONEY RAISING ACTIVITIES: The Foundation needs to raise money for two purposes: basic operation and programs. Basic operations funds must be derived from activities of the Foundation itself: e.g. “Walkway by the Wall,” annual donor drives, and building income. The monies raised from past activities were used to pay the legal costs of the lease and sublease documents, documents creating the partnership, other developmental obligations, and to pay the cash calls explained above. All totaled, the Texas Retired Teachers Foundation has paid over $300,000 for these necessary costs. The 2006-2008 annual campaign that is underway becomes paramount when looking at the future of the Foundation. Adequate operational funds must be raised before proposals can be submitted to prospective donors, including business and industry, and other foundations that support programs like those envisioned by TRTF.
FINAL THOUGHTS: There is no evidence that a building project with the characteristics of this one has ever been previously attempted. The lot is owned by a quasi-public association (TRTA), leased to a quasi-public foundation (TRTF), and the foundation in turn formed a partnership with a private development corporation (Development 2000, Inc.), to carry out the project. The TRTA Board of Directors determined this to be the best way to construct a building since raising funds for a much smaller building failed. Other possible alternatives were investigated and found unfeasible. Moreover, it became evident that construction of a much larger building was better stewardship by making maximum utilization of such a valuable lot close to the capitol. Borrowing the money for a larger structure would have been difficult, if not impossible, without the involvement of a private developer with a successful track record. The building is now fully occupied. Tenants besides TRTA and TRTF include Daughters of Charity (Seton Hospital), Texas Association of Builders, and the University of Texas Medical School.
Even with the problems involved in this process, all educational retirees can take pride in a functional and beautiful home office for the Texas Retired Teachers Association and Foundation so strategically located. It is the closest to the capitol of any association in Austin.
