Tax Increment Financing Gives San Antonio a Blank Check for Downtown Projects —  and for Developer Subsidies

click to enlarge Tax Increment Financing Gives San Antonio a Blank Check for Downtown Projects —  and for Developer Subsidies
Sanford Nowlin
Editor's Note: Cityscrapes is a periodic column of opinion and analysis.

Let’s review some recent city spending downtown:
  • $6 million for bike lanes on Avenue B and Alamo Street
  • $1.3 million for public improvements at St. Paul Square
  • $3.1 million for HVHC parking subsidies
  • $3.4 million for Argo Group parking subsidies
  • $40.2 million for “Bexar County Projects,” including San Pedro Creek improvements
  • $76 million for “Other City Projects”
A million here, a million there, $40 million over there — pretty soon it amounts to real money. In this case, it’s public money, real money from a Tax Increment Reinvestment Zone, shorthanded as TIRZ in city speak. Tax increment finance has been around for decades, beginning with a few states in the era of federal urban renewal projects. It enables cities to capture the increased property value from new private development in a specific “zone.” The idea is those future “increments” could be employed to pay for the public investment needed to spur that private investment.

The first major use in downtown, the Houston St. TIRZ, was created in 1999 to support the plans of Federal Realty Investment Trust to “revitalize” Houston Street. The initial zone was a modest one, with just enough taxable value to finance the public improvements Federal wanted, including connections from the River Walk to Houston Street, handicap-accessible elevators, façade improvements on Houston and work on Presa Street.

Federal promised to turn Houston Street into a retail mecca boasting major national stores — maybe even a Barnes & Noble or Bath & Body Works! — but that dream largely fizzled, although we did get a new Walgreens.

But in 2015, the city expanded the boundaries of the zone, pushing them up North Main Street beyond Martin Street and south all the way to César Chávez Boulevard, increasing the area’s taxable property base by about five times. And that meant there were a lot more public dollars to be spent on big downtown projects, like the Alameda Theatre restoration, the new Frost Bank Tower and the San Pedro Creek improvements.

Houston Street, while still not a retail mecca, has now become a fiscal goody basket yielding tens of millions in new public dollars committed to the area, with little public oversight and recognition. And those dollars will continue to flow to “Houston Street” until the zone expires in 2034, well beyond former Mayor Julián Castro’s Decade of Downtown.

One big question about the TIRZ involves public accountability. Having seen the earlier promises of revitalization go unfilled, are city officials capable of providing some serious assessment of what the public improvements and investment in this part of downtown have actually yielded? Or are we looking at a perpetual cycle of new plans and proposals to bring Houston Street back to its glory days, accompanied by the need for more public funds?

And Houston Street isn’t the only big TIRZ money machine in the central city. The funds for the bike lanes on Avenue B come from a separate Midtown TIRZ. That zone encompasses a total of 458 acres, stretching north along Broadway all the way to Hildebrand Avenue and along North St. Mary’s Street to Mulberry Avenue, and south down to East Houston Street. The Midtown TIRZ therefore includes all of the Pearl, neatly capturing the increased property values from that project and the adjacent areas and using them to fuel tax subsidies for the new apartment and condo developments.

That means subsidy deals for things like the renovation of the former San Antonio Light building on Broadway, at a cost of $2.5 million, the new office building for Credit Human and even $2.7 million for the new Brackenridge Park Garage being completed on the west side of U.S. Highway 281. And just like its Houston Street counterpart, the Midtown TIRZ is the gift that keeps on giving, in effect — for now — until 2031.

Then there’s the $1.3 million for St. Paul Square and Sunset Station. That’s from yet another zone, the Inner City TIRZ.

For a city where local officials seem addicted to big projects — and developers addicted to public subsidies — the TIRZs appear to be the gift that keeps on giving.

Heywood Sanders is a professor of public policy at the University of Texas at San Antonio.

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