San Antonio is that’s about one third the size of the last one passed in 2022 — a reflection of a slowing economy that’s made city financial analysts nervous about issuing too much debt.
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Bond programs pay for infrastructure like streets, drainage and other public amenities such as parks and libraries all across the city.
The money is borrowed against future growth — something that’s normally reliable in a fast-growing city, but has been changing with rising inflation and softening property values.
The last city bond program totaled $1.2 billion, and for months, city leaders have talked about raising taxes to bring their bond capacity that high again in 2027.
Many council members believe underserved parts of the community shouldn’t have to wait for amenities that wealthier parts of the city already have, which just drove the city’s first tax increase in decades to fund day-to-day city operations.
A similar move on the debt service portion of the rate once appeared inevitable, but City Manager Erik Walsh told reporters Wednesday that current economic realities no longer support that approach.
“Plain and simple, from my standpoint, I don’t feel comfortable doing that on the debt service side,” Walsh said. “… We’re in a position where taxable values are declining. I’m a little hesitant to make assumptions that it’s going to recover in 2029 or 2030.”
The $442 million bond is what city financial analysts say San Antonio can afford without raising taxes, but it’s smaller than the five-year bond program San Antonio approved 20 years ago, which came in at $550 million.
Walsh said the city could always come back for another bond election in two or three years if the economy turns around, but some council members say they’ll just be paying more for projects that are rising with inflation.
“The best time to plant an oak tree is 20 years ago, and the second best time is now,” Councilman Edward Mungia (D4) said. “The same is true for projects — the best time to have done all these streets and projects was 20 years ago when you could do it for a lot cheaper. But here we are.”
City Council asked staff to come back with information about how much a $1 billion bond would cost taxpayers, as they consider an election in either May or November of 2027.
“I suspect we’ll have a lot of conversation with the council about how that number can be higher,” Walsh told reporters. ” … [But] if the downward cycle continues, it could require an adjustment in the debt service tax rate.”
An equity question
A bond program must go to voters for approval, and the city hasn’t lost one since 1979.
But much of the council discussion surrounding the 2027 bond program has focused on Project Marvel — an estimated $3 billion to $4 billion major downtown renovation project anchored by a new Spurs basketball arena.
The arena has its own public-private funding agreement, but the surrounding sports and entertainment district was projected to consume about $225 million worth of infrastructure dollars.
On Wednesday, Walsh said Marvel-related requests have now been scaled back to $35 million in this smaller bond, after striking an $85 million parking garage and a complete renovation of Durango Boulevard.
The city also plans to partner with TxDOT on some of the highway projects, Walsh said, leveraging roughly $21 million in bond dollars for tens of millions more.
“TXDOT has been studying the ring of highways around downtown to improve ingress and egress, so some of that work had already been done,” Walsh said.
The Marvel component is the most controversial piece that could go before voters — yet some council members were unhappy to see it scaled back.
Councilwoman Phyllis Viagran (D3) said she wants the city to pursue a bigger bond, in part to maintain the integrity of that already evolving project.
“We need to provide the best product possible,” Viagran said. “I don’t think now is the time that we start taking the pressure off of the gas.”
Critical flood infrastructure
On the heels of one of the most deadly summers for flash floods, Mayor Gina Ortiz Jones had been sounding the alarm about Marvel eating up funding for critical flood and drainage projects.
The city’s Storm Water Advisory Board just completed a new matrix to rank flood control projects by need, but San Antonio hasn’t received much help from the state or the federal government to pay for them in recent years.
In addition to reducing the Marvel expenses, Wednesday’s presentation called for increasing the stormwater fee on residents’ water bills to provide $175 million for drainage and flood projects.
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Residential properties are categorized into three tiers in the stormwater fee, with most falling in Tier 2, which currently pays about $59.28 per year.
Under Wednesday’s proposal, that would go up about 16.5% over five years, or $9.78 per year, something some council members objected to at a time when SAWS rates are also about to increase.
An equity question
Big picture, San Antonio has spent years recalibrating its infrastructure programs to spend more in parts of the city that were neglected or skipped over in historic redlining.
Now that the money is finally flowing in their direction, members who represent underserved parts of the community say it isn’t fair to start scaling back.
City staff said they have a list of roughly $5.8 billion worth of infrastructure needs, which they’ve prioritized for the bond based on existing city plans, public safety and economic viability, as well as those that leverage funds from other sources.
Some council members argued that excludes amenities their residents want, but don’t rise to the level of critical — allowing parts of the city to fall further behind.
For example, Mungia pointed to the Leon Creek Greenway Trail, which is built out in other parts of the city, and would have finally been slated for completion on the South Side.
“Now that it is actually my time — the southwest side of town’s time — to get the investment for Leon Creek, we’re talking about cutting this back,” Mungia said. “When folks are saying, ‘Well, we’ve got to stay within our means,’ some communities have more means than others.”
Councilwoman Teri Castillo (D5), who represents the West Side, said her residents are also most concerned about public amenities like splash pads and basketball courts.
“These are two things that may sound minimal, but when you’re talking about an area in which our community members don’t turn on their AC because they’re concerned about their utility bill … They’re going to the park,” Castillo said.
Fiscal conservatives on the council were largely in favor of Walsh’s plan, but make up a small minority on the council.
“I don’t know what y’all are hearing in your districts, but the feedback that I’m getting from that property tax hike is that people are upset that more money is being taken from them, and here we are lining up to do it again a month later,” Councilman Marc Whyte (D10) said.
Walsh agreed to come back with more information about alternative scenarios, but stressed the need for a united council when they eventually take a plan to voters.
“[To the] question about what happens if the bond fails, it will be critical that you 11 are on the same page,” Walsh told members Wednesday. “There are other cities north of here that are going through a process where they are not on the same page … but from my standpoint, that’s a critical piece [of passing a bond].”
A $1B bond?
The debt service portion of the tax bill hasn’t changed since 2004, and is currently set at $0.21150 per $100 of valuation.
Using the “variable rate” that city staff presented last year, City Council could go for a 2027 bond that’s comparable to the $1.2 billion voters approved in 2022, but would have to give staff permission to raise it as high as is needed to repay bonds.
“Moderately conservative as we are, we’re going to tell you that it’s going to require a rate increase,” Walsh said Wednesday of that approach. “We are not betting that we’re going to recover 12 months from now.”
The city is still paying off debt from its 2012, 2017 and 2022 bond programs, Walsh said.
Those bond programs kept the tax rate even, but borrowed larger and larger sums against projected future growth.
Now growth has slowed, Walsh said, and the city can use other levers to keep repaying those debts without raising rates, like extending maturities.
But future borrowing should be conservative, he warned, because taxpayers are on the hook if projections fall short.
“If we had a decline of taxable value of say 7% or 8% or 9% and we still have debt payments … you all would have to change the tax rate in order to pay back bondholders,” Walsh told the council Wednesday. “That’s an apocalyptic scenario, but I wanted to provide the context.”
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