San Antonio Report
by Andrea Drusch
The City of San Antonio plans to join Fort Worth, Dallas and Houston in taking advantage of a little-used financing tool that allows cities to spend state tax money on downtown development projects benefiting tourism.
San Antonio has designated the Alamodome and the Henry B. González Convention Center as renovation projects that would benefit from the money, and the city received permission from the Legislature to proceed with the move earlier this year.
That’s despite an uncertain future for the 30-year-old Alamodome, however, and swirling rumors of the San Antonio Spurs’ desire for a new downtown arena.
“This does not commit us to either project,” Chief Financial Officer Ben Gorzell told reporters Monday. “It is the first procedural step.”
A Project Financing Zone (PFZ) allows a city to draw a 3-mile radius around a convention center facility or venue, then collect the growth in the state’s revenues from hotels and businesses within its boundaries for a 30-year period to spend on qualified projects.
The City Council plans to approve the agreement Tuesday naming the Alamodome and the convention center as its chosen projects. The convention center underwent a $325 million expansion in 2016, nearly doubling its size.
City Attorney Andy Segovia said there’s little legal precedent for how a city would go about changing those plans if needed.
“What we talked about when we testified up in Austin was that this financing method … was going to be utilized for the convention center and the Alamodome in order to draw more business outside of Texas into Texas,” City Manager Erik Walsh said.
Texas’ major cities also compete fiercely with each other when it comes to drawing conventions and arena events. Last year San Antonio beat out Fort Worth to host the state’s 2024 Republican convention, in large part because of the quality of the venue.
Fort Worth used a PFZ to fund its new rodeo and event space, Dickies Arena, while Dallas is putting the money toward its convention center. This year, after much lobbying, Senate Bill 2220 expanded the program to include San Antonio and Houston.
San Antonio isn’t sure how much money the arrangement will generate, but Gorzell said local funds would be required to complete both projects.
If the council approves the plan Tuesday, 2023 will become the base year of the PFZ, and the growth in state’s revenues would be captured for a 30-year period, beginning in 2024.
The agreement applies to the state’s share of the zone’s hotel occupancy tax, sales tax revenue, mixed beverage sales tax revenue and mixed beverage gross receipts tax revenue collected from hotels and businesses located within hotels.
A fiscal note from the Legislature estimated the arrangement would provide the city with $222 million over 30 years, but Gorzell said it’s hard to estimate taxes from businesses that will open after the zone is approved.
Two new hotels, an InterContinental and a Kimpton property, are expected to open within the zone in late 2024.
Gorzell said the state accumulates the funds in a suspended account, then releases them to the city when it is ready to move forward on the projects. Releasing the funding requires a second approval process, so it’s unclear whether the state would allow funds to be spent on a project that’s substantially different from what was proposed.
“The statute references venues, an arena is a venue, but we’re designating this zone based on these two qualified projects,” Gorzell said. “A lot more legal work would have to be done” if the funds were to be used for projects other than the Alamodome and convention center.
The city must start using the money within five years or the fund automatically dissolves.
Right now San Antonio hasn’t approved renovation plans for either project, nor has it lined up local funding sources.
Walsh said the city’s next step is providing a more realistic outlook on how much the fund will generate.
“If we do these two projects, we’ll have to issue debt,” he said. “So we’ll have to have more than just an estimate. We’re going to have to really understand the cash flow.”