In May, in our first column, we noted that San Antonio wasn’t growing like the rest of Texas. Truthfully, we were being generous. Six months later, in a range of measures, San Antonio is losing ground.
According to the Dallas Fed, while Texas has continued to add jobs this year, San Antonio payrolls were actually down 0.4 percent through August. In fact, the Fed’s scorecard of the big Texas metros ranked San Antonio the worst performing of the group. In September, unemployment rose in San Antonio and fell or held in every other major Texas metro. Indeed, employment here is up just over eight percent since the pandemic, three percent behind the rest of the state.
This actually makes a lot of sense. Bexar County has roughly the same number of private business establishments today as it had five years ago, and fewer than it had a year ago. Over the same five years, Travis County was up six percent, Nashville’s county was up twenty percent, and Charlotte’s was up nearly twenty five percent. Comparing the thirteen peer cities on the Civic data dashboard, the average city is up about eight percent while we stood still.
There are signs of this wherever money has to be raised. City staff budgeted for a $4.3 billion decline in taxable value this year, San Antonio’s first in over a decade. The county’s budget staff called it the worst property-tax year they had seen, worse than the housing crisis. The city, a borrower itself, cut its next bond significantly from the previous bond total, despite $5.8 billion in identified needs, because City Manager Erik Walsh will not assume the tax base recovers: “We are not betting that we’re going to recover 12 months from now.” Project Marvel, financed on thirty years of projected hotel-tax growth, has lost its land bridge, cut the thousand-room hotel, and lost a large parking garage in this year’s bond deliberations.
The new downtown Missions baseball ballpark, meanwhile, was sold on the promise that “the general taxpayer will not be paying for this ballpark,” because a billion dollars of private apartments and a hotel would be built around it and repay the public bonds. And yet, in April, the developer told the city that it was still trying to secure financing. By July, the private development had been delayed by two years and opening day was pushed to 2029 after what the city manager’s memo called “delays in securing full financing commitments.” But it’s not just the big projects. Through September, venture investors had put just $39 million into San Antonio companies for the year. Austin’s companies raised $10.7 billion over the same time, Dallas’s $1.9 billion, and Houston’s $1.4 billion.
It’s easy to blame this sort of bad news on the state of the American economy, and many do. The ballpark’s developers told the authority that will issue its bonds that “anything that goes into a data center is escalating.” A local developer gave the other half of the story: either rents go up or costs come down, David Adelman said, and costs are not coming down. “The numbers don’t work.” Costs are up in Austin, Nashville, and Charlotte too—but they have the demand and the income to carry those costs. The most useful comparison is on jobs: the country added jobs this year and Texas added jobs this year, yet San Antonio lost them. The sad truth is that San Antonio simply continues to underperform its potential.
What has City Hall done about it? Well, for starters, the tax rate was raised by 3.9 percent, the first increase in decades, with a second increase already expected for next year. We also added more than 100 new or higher fees. The bond was cut to a third of the last one, out of necessity. Then City Council spent two weeks fighting over which districts should get new sidewalks. Six months ago, we described the dynamic of a failing city: “Stagnate, raise rates to cover the gap, erode the cost advantage, watch jobs and families choose elsewhere, and raise rates again.” Now each and every step is underway, and the second rate increase is already on the calendar.
Walsh’s refusal to bet on an economic recovery is the most candid thing anyone in city government has said about the local economy this year. The city’s answer arrives on Thursday, when council reviews a five-year update to its economic development framework, the city’s plan to increase economic competitiveness with peer cities. The document is candid in its description of the city’s weaknesses: it lists, among the weaknesses within the city’s control, “lack of vision,” “too many organizations operating in silos,” “perception as not business friendly,” and a “stringent incentives policy.” Its survey of 182 local businesses found “City leadership & management” among the most-cited obstacles to doing business here, next to “lack of support from local government” and “high taxes,” and recorded “frustrations with a lack of transparency regarding the vision of City leadership and disagreements with local government spending.” The consultant’s conclusion: the city’s policy environment “scored as a poor retaining factor for local businesses.”
Outside of Project Marvel, which, despite its controversy, is one of the very few forward-looking projects in San Antonio, and a few other local bright spots, the agenda for the foreseeable future is entirely defensive. You will get a smaller bond, higher taxes, more fees, and an expanded convention center.
Choosing growth would look different. San Antonio would ask why businesses pick Austin or Nashville, and try to fix it with city policy instead of marketing. The city’s new economic development framework says businesses see it as unfriendly and its vision as unclear. Start there. The fees we raised, and many others, are a tax on businesses—look at ways to pull them back. And when local developers say the math doesn’t work, find out what would make them work, instead of waiting for the tax base to recover on its own.
Of course, City Hall may still get its priorities in a smaller form. Project Marvel will be built, albeit with a little less of what was planned. The ballpark will open a year late, and the smaller bond will pass. But none of it addresses the main problem, which is the one thing that would make everything else unnecessary.
Nicely done! I've been saying for yrs that SA has never practiced "economic development"; in fact it hasn't even been defined. Worse, it's been assumed by its boosters that it means business development, which is not the case. In CED, we've simply lacked the professionalism required. As such, SA will always rank nat'lly as a poor, impoverished, economically segregated city.