Weeks after progressives on the City Council lost a fight to press pause on plans for a publicly funded NBA arena, one of the development tools being used to finance the arena — as well as a new Minor League Baseball stadium and a gorilla habitat at the San Antonio Zoo — is facing new opposition.
Tax Increment Reinvestment Zones, or TIRZs, have been around in Texas since the 1980s, and were designed to help cities incentivize development in unsafe or deteriorated neighborhoods through concentrated investments in the area’s infrastructure and public amenities.
While many of San Antonio’s TIRZs have succeeded in spurring new development, a City Council that just added several progressive voices in this year’s municipal election now wants more oversight of money they say has increasingly veered from its intended goals.
“What we’re seeing is the construction and facilitation of the haves and have-nots, and essentially, the hoarding of wealth concentrated in one area,” Councilwoman Teri Castillo (D5) said Wednesday at a special council meeting on the subject.
“We’re creating this beautiful community downtown, but one in which the majority of San Antonio residents can’t afford to live here if they wanted to.”
TIRZs fuel development by allowing participating taxing entities set a baseline for the zone’s taxable value, and then direct the property taxes from any new development, as well as on growth of existing properties, into a fund for projects within its boundaries.
In the case of the baseball stadium and proposed downtown Spurs basketball arena, developers behind the projects are promising to build significant new housing and mixed-used development around the projects — bolstering the TIRZ with funds that will eventually pay off bonds issued to build the sports venues.
Because of that, they insist that new housing built within these two downtown zones must be either luxury or market-rate, so that it produces enough property taxes to pay for the venues.
While both projects were signed off on by a majority of council members — as is required for TIRZ projects — the wonky, long-used funding mechanism has been gaining more attention from policy experts in recent years.
TIRZ explainers are now even showing up in the social media feeds of community activists in the wake of San Antonio’s heated sports venue debates.
Research from the University of Texas and Rice University suggests that since coming onto the scene in the 1980s, TIRZs often create pockets of wealth at the expense of other areas of a city.
They bring in the desired development, the findings argue, but levy an additional tax burden on residents outside the zone when extended beyond the initial purpose — though both sets of research noted San Antonio had used them more effectively than other cities.
“When I was comparing TIRZ across the state, honestly San Antonio was like the poster child for how to have good TIRZ,” said John W. Diamond, a tax and finance expert at Rice University’s Baker Institute for Public Policy. “Most of the TIRZs came to fruition and closed down on schedule.”
New leaders, old deals
On the heels of two high-profile venue agreements that lean on TIRZ funding, Mayor Gina Ortiz Jones is among the new leaders joining Castillo’s push to review the city’s active zones and put more guardrails in place for how the money is spent.
TIRZ critics say new development and housing within their boundaries doesn’t contribute to the city’s general fund to bolster police, fire and other city services those residents and businesses will need.
Jones has suggested the money tied up in TIRZs should be considered alongside other funding sources when trying to address San Antonio’s projected budget deficit of nearly $150 million by 2027.
San Antonio Mayor Gina Ortiz Jones (right) and District 5 Councilmember Teri Castillo listen to comments from the public about a downtown Spurs arena on Aug. 21. Credit: Amber Esparza / San Antonio Report
On Wednesday, the council members were granted a special meeting to discuss the use of TIRZ funding — just days after Assistant City Manager Lori Houston, who oversees downtown development, announced plans to retire at the end of the month.
In a presentation to the council, the city’s Chief Financial Officer Troy Elliott said that for the 2025 fiscal year, roughly $45 million, or about 5% of the city’s $819 million levied property tax dollars, would be captured in a TIRZ.
Some of that money is expected to fund neighborhood improvements that council members are excited about, like renovations to the West Side’s historic Basila Frocks building in Castillo’s district, and a University of the Incarnate Word eye clinic in Eastside District 2.
Other TIRZs reimburse developers for roads and infrastructure around housing developments that wouldn’t otherwise exist, such as the massive master-planned community Condalia that’s being built east of Southeast Loop 410 by VersaTerra Development.
“The TIRZ is more than a financing tool, it’s a commitment to revitalization across the city,” said Neighborhood and Housing Services Director Veronica Garcia, who has worked for the city for more than two decades. “Since adopting the tax increment financing over 20 years ago, we have used this tool to reinvest in areas that have been overlooked, areas which without significant city Investment would continue to remain underutilized.”
Divisions over downtown
Most of the council members agreed the city-initiated TIRZs are starting to produce some quality projects their residents want, and that developer-initiated zones creating new housing outside the urban core were working as desired.
But divisions arose at Wednesday’s meeting over three city-initiated zones in particular, the Midtown, Houston Street and Hemisfair TIRZs, which are expected to pay for zoo projects and Witte Museum upgrades, the San Antonio Missions’ Minor League Baseball stadium district northwest of downtown, and the new $1.3 billion Spurs arena, respectively.
The Midtown TIRZ was created in 2008 in an area with high crime, and now includes some of the city’s wealthiest enclaves, like the Pearl district. It’s been extended and repurposed to help fund dozens of projects over its lifetime, including the zoo’s gorilla exhibit.
It has a termination date of 2041, and is even being considered as a funding source to purchase the land for the Spurs arena that’s several blocks south of its current boundaries.
A topiary gorilla at the San Antonio Credit: Scott Ball / San Antonio Report
Rendering of renovated Basila Frocks Credit: Courtesy / Overland Partners
The Witte Museum on Broadway Credit: Brenda Bazán / San Antonio Report
Councilwoman Sukh Kaur (D1) said there’s still work to be done on pivoting to affordable housing in the Midtown TIRZ area, but she believes its board was right to keep it going and advance new projects that children across the whole city can enjoy.
“If the funds go back to the general fund, we don’t have that direct access to where the funds go,” said Kaur, who wants the city to find a different funding source for the arena land.
Meanwhile, city staff said the Houston Street TIRZ is in the process of being redrawn so that it can fund the baseball stadium. It will absorb some property from the West Side TIRZ and be given an expiration date of 2060.
The Hemisfair TIRZ will capture new development around the proposed Spurs arena, and its expiration date will be extended as long as needed to repay the city’s share of the area bonds.
The zones are overseen by a board a directors appointed by the city — often including council members and city staff members — and the City Council approves the board’s projects and spending.
“These are long-term investments that do so much for our city, and it’s really growth paying for growth in a lot of ways,” said Councilman Marc Whyte (D10), one of the council’s few fiscal conservatives.
District 1 Councilmember Sukh Kaur speaks at a budget town hall on public safety on Aug. 19 at City Hall. Credit: Diego Medel / San Antonio Report
Jones, Castillo, Leo Castillo-Anguiano (D2), Edward Mungia (D4) and Ric Galvan (D6), on the other hand, each called for changes.
They want more council representation on the TIRZ boards to ensure fair distribution of the money. Some also called for a reexamination of how TIRZ projects align with the city’s goals, including an explanation for how city staff decided zones funding the Spurs’ arena and baseball stadium would be allowed to disregard a 2022 city policy mandating that they promote affordable housing.
“While I can certainly appreciate gorilla housing, it’s a hard sell when we’re talking to our own folks about housing for gorillas and not affordable housing in our community,” Jones said.
“I would appreciate some documentation, either from Mr. Elliott or Ms. Garcia, about why that that policy wasn’t adhered to, so we can learn from that mistake and understand how that policy would be adhered to moving forward,” the mayor added.
City Manager Erik Walsh said staff would return with some feedback, but cautioned that past councils approved the TIRZ projects that are currently in motion, making it tough to pull that funding back for other uses.
“They may have not come to you all, but I think we need to vet that out a bit more,” said Walsh, who noted that the zoo renovations were taken out of the city’s 2022 bond program because city leaders promised to fund them with TIRZ money instead. “[With the exception of] probably two or three of the city-initiated TIRZ, they’ve all got plans.”