Tax subsidy sometimes used for affordable housing redirected to Broadway attractions north of downtown San Antonio

By Ben Olivo | @rbolivo | Heron editor

A financial tool the city of San Antonio has used to help fund affordable housing was recently repurposed so that future revenue is funneled to the San Antonio Zoo, the Witte Museum, San Antonio Botanical Garden and Brackenridge Park—all city-owned properties—a move that has some nonprofit developers scratching their heads.

City officials and City Council members argue the financial resources are benefitting much-needed, long-overdue upgrades at some of San Antonio’s most cherished attractions; with $6.6 billion in infrastructure needs across the city, officials say, even huge funding sources such as the upcoming $1.2 billion, 2022-2027 bond—which will be decided during an election on May 7—are stretched thin.

Affordable housing developers describe the repurposing of the tool, a mechanism known as tax increment financing, as a lost opportunity that could have helped add affordable housing to this area north of downtown that is fast becoming a neighborhood only for the affluent as rents continue to rise.

The tool is called the Midtown Tax Increment Reinvestment Zone, or Midtown TIRZ.

Under state law, municipalities are allowed to set up TIRZs: designated areas where revenue gained from the rise in property taxes is collected and reinvested back into the region often in the form of infrastructure upgrades.

San Antonio has nine TIRZs set up throughout the city, but the Midtown TIRZ has been by far the most active, helping to fund mostly private developments, and some public projects.

With an infusion of $21.8 million in reimbursements to developers from 2010 to 2021, the Midtown TIRZ has played a major role in the maturation of the Midtown region, along the Museum Reach stretch of the river and around the Pearl, north of downtown.

It has served as an incentive for luxury housing developments such as Jones & Rio and Cellars at the Pearl. It has aided in office renovations such as the former ButterKrust Bakery and San Antonio Light buildings on Broadway. It has helped produce public projects such as the parking garage at Brackenridge Park and the Maverick Dog Park.

[ View the city’s Midtown TIRZ page for a list of the projects. ]

One of the most celebrated of the Midtown TIRZ projects has been the 94-unit Museum Reach Lofts, which opened in late 2020 at North St. Mary’s Street and West Jones Avenue just down the road from the San Antonio Museum of Art. With rents starting at around $300 for a studio for someone making 30 percent of the area median income, or $15,570 a year, the lofts offer true affordable housing in downtown proper—a rarity, especially given its proximity to the Pearl, one of the poshest submarkets in San Antonio.

[ Scroll down for a chart showing AMI levels. ]

However, the days of the Midtown TIRZ funding housing of any price point appear to be a thing of the past.

Currently, Midtown TIRZ revenue is tied up through 2031 in debt related to major infrastructure improvements on Broadway and North St. Mary’s Street, meaning it will not fund any project other than those two in the next 10 years.

Then, on Feb. 10, the City Council voted to extend the Midtown TIRZ another 10 years—through 2041—so that it could acts as a major funding source for the four aforementioned city-owned sites along what the city describes as the Broadway cultural corridor.

Already, the Midtown TIRZ board has allocated up to $10 million towards the zoo’s future gorilla habitat and the reconstruction of its 1950s entrance; $5 million for the Botanical Garden for upgrades to the Lucile Halsell Conservatory, among other greenhouse structures; and $3 million for improvements to the Witte Museum’s auditorium.

Another $15 million could go to the Sunken Garden Theater renovation project and $4.5 million toward Brackenridge Park repairs, but those allocations have been put on hold because of community pushback to current versions of those plans.

These four institutions are also due to receive $20 million total from the 2022-2027 bond should it pass this May. The institutions had originally asked for more from the bond, but their requested amounts were lowered to send more money to bond projects specific to each council district—hence the need to find another city funding source: the Midtown TIRZ.

“The city has its own properties. The zoo is on city property. We have Brackenridge Park, the Botanical Garden,” District 1 Councilman Mario Bravo said. “Those are city properties and the city is looking at how do we continue to invest on property we own, and that’s why we have the restructured (Midtown) TIRZ.”

But the Midtown TIRZ could have also helped place affordable housing in this opulent area the Midtown TIRZ helped create, one developer argues.

“I’m really disappointed to see that funding like TIRZ dollars—that are very flexible dollars, that aided in building Museum Reach Lofts, which put some very needed deeply affordable housing in a very high-priced part of the city—has been repurposed for something other than housing,” said Jennifer Gonzalez, executive director of Alamo Community Group, the local nonprofit that built the lofts.

To that point, Assistant City Manager Lori Houston said the city is committed to affordable housing, and has proven so with the passing of the Strategic Housing Implementation Plan, or SHIP, in December.

The SHIP document outlines $1.07 billion in public funding over the next 10 years, leveraging an additional $2.3 billion from the private sector—all to go toward the preservation or production of affordable housing, and toward efforts to lift wages mainly through SA: Ready to Work. [ Download the SHIP document from the city’s website. ]

“The policy decision to maintain and improve our city-owned cultural facilities does not replace the policy decision to produce and preserve more affordable housing,” Houston said in an email.

[ Editor’s note: In San Antonio, affordable housing is defined as “housing that’s restricted to households making up to 60 percent of the area median income, and who pay an ‘affordable percentage of gross income on housing costs,’ as determined by the U.S. Department of Housing and Urban Development (HUD).” Read our piece, “What is ‘affordable housing’ in San Antonio? City Council to consider adopting this definition,” Aug. 11, 2021, which dissects the definition developed by the Housing Commission, and which was ultimately approved by the City Council. ]

One of those public funding sources is the $150 million housing bond, part of the larger $1.2 billion bond package coming up, Houston said.

But Gonzalez asserts that there’s no guarantee voters will approve the housing bond.

“We don’t have a housing bond,” Gonzalez said. “We have the idea, because it hasn’t been voted on.”

She continued, “What are we going to do come May should the housing bond not pass?”

Bravo has talked about the importance of assessing the city’s housing incentives for their effectiveness and level of impact.

Since November, he’s been calling for such as assessment of the city’s TIRZ program, “to make sure we have alignment on why we have these TIRZs, and how do we achieve (and measure) success.”

On Thursday, Houston will brief members of the City Council on potential updates to the city’s TIRZ policy during the Planning and Community Development Committee meeting.

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Wait, what’s a TIRZ?

Briefly, here’s a look at how tax increment reinvestment zones, or TIRZs, work.

In a TIRZ, the assessed valuation of properties in a designated area is essentially frozen for a specified number of years. It’s frozen not for the property owners—they keep paying taxes—but for the city. Tax revenue gained from the increase in assessed values, or the increment, stays within the zone, instead of going into the city’s general fund.

TIRZs are allowed under Chapter 311 of the Texas Tax Code, and can pay for a variety of improvements, including environmental remediation of public or private land; facade preservation of a public or private building; demolition of a public or private building; the construction of roads and sidewalks (including the “cost of acquiring the real property); and “the costs of providing affordable housing or areas of public assembly in or out of the zone.”

[ Read the Tax Increment Financing Act, Chapter 311 of the Texas Tax Code ]

Over time, TIRZ revenue that’s collected and turned into improvements fuels the rise in property values and thus more property tax revenue. The cycle continues.

The funding often takes the form of reimbursements. For example, with a housing development, a developer pays for public upgrades, such as rebuilding streets and sidewalks around the development, or burying overheard power lines, and the city reimburses the developer for those expenses from the TIRZ coffer.

TIRZ funding usually composes a small percentage of the overall development cost—but a critical portion, developers say.

Two multi-faceted developments, currently under constructionm demonstrate the complexity of such deals.

A 386-unit apartment building by Encore Multifamily, a block east of Broadway in Government Hill, was recently given a Midtown TIRZ incentive worth up to $7 million—with reluctant support from the City Council.

For the most extreme example, see the $24 million in Inner City TIRZ reimbursements for the redevelopment of the Lone Star Brewery site, which developers Midway and GrayStreet Partners are receiving, south of downtown.

Other TIRZs include the Houston Street TIRZ (downtown), the Brooks City-Base TIRZ (South Side) and the Westside TIRZ.

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2022-2027 bond at a glance

» What: $1.2 billion citywide infrastructure upgrade program that requires voter approval
» When: May 7 election
» More info: sanantonio.gov/2022bond

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The Midtown TIRZ extension

The nonprofit conservancies that run the zoo, the Witte Museum, Botanical Garden and Brackenridge Park are collectively seeking nearly half a billion dollars—$490.7 billion—for major upgrades over the next 10 years.

But first, they seek a collective $151.2 million for “priority projects.”

Both the 2022-2027 bond program and the Midtown TIRZ are two sources—$20.4 million and $38 million, respectfully. But the nonprofits must also raise funding from philanthropic sources and grants, totaling $92.8 million, city officials say.

[ Download a city presentation on the Midtown TIRZ extension and repurposing ]

Bravo views the improvements as a quality of life issue for all San Antonians. In an interview over the weekend, Bravo had just come from a dedication ceremony for major renovations to San Pedro Springs Park, including repairs to the historic acequia, new lighting, and the planting of 183 new trees, all funded from the 2017-2022 bond.

“There’s a renewed interest in parks, because of the pandemic,” Bravo said. “People appreciate green spaces as places to get out and connect with the earth, play outside in the sunlight, breathe fresh air. But also they’ve been a place for us to socialize safely when it’s not safe to meet indoors.”

“A park is not just for the plants and animals. It’s for quality of life for citizens.”

As for the $150 million housing bond, Bravo said, “I’m going to work in my individual capacity to try to get that passed.”

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Here’s a summary of the Broadway corridor facility upgrades:

» Witte Museum ($6 million): Renovation and expansion of the Prassel Auditorium, which will double the capacity for the museum’s Science Showcase STEM programs.

» San Antonio Botanical Garden ($8.3 million): Repair glass panels and controls on the 90,000-square-foot conservancy structures, “which are 33 years old and are home to thousands of rare orchids, rainforest plants, desert cacti, and ancient ferns.” Also, replace the 40-year-old green houses with “state of the art facilities.”

» San Antonio Zoo ($67 million): New entrance allowing for two-way ADA traffic and a flatter approach, rather than the current sloped surface.

“Our entrance was built in the 1950s, and so it doesn’t handle the capacity of people we see now,” said Tim Morrow, the zoo’s president and CEO. “It’s not very inspiring or signature of a world-class zoo.”

The renovation will also create a plaza in front to get people away from the street, which will help with vehicular traffic flow, Morrow said.

Then, the zoo plans to build a new gorilla habitat on the property’s northwest corner, past the lions and rhinos.

Mopie, the zoo’s last gorilla, moved back to the National Zoo in Washington, D.C. in the 1990s. He died there in 2006 at age 34.

“Every day, people ask me where the gorillas are when they enter,” Morrow said. “At least once a week, people ask me about Mopie, and he hasn’t been here for 32 years. There’s a connection and affinity for gorillas at the zoo.”

The San Antonio Zoological Society must raise $47 million for these two projects by June 1, 2025, or Midtown TIRZ funding will be redirected to “another project identified in the partnership plan.” This goes for Midtown TIRZ funding all four Broadway corridor properties.

» Brackenridge Park ($69 million): A continuation of park improvements from the 2017-2022 bond, which include “reconstruction of historic masonry walls, restoration of Pump House No. 1, acequia restoration, interpretation of the 1776 Upper Labor Dam, and lily pond improvements.”

Such improvements, city officials say, require the removal of several trees at the park, a plan that has drawn stiff opposition from environmentalists. Just yesterday, City Manager Erik Walsh said the city would delay its request to the Historic and Design Review Commission for approval to remove the trees, a temporary win for the activists.

Another major project at Brackenridge Park, the renovation of Sunken Garden Theater, has also drawn opposition, this one from the River Road neighborhood.

[ Related: Bond dollars for Sunken Garden Theater could go to other Brackenridge Park projects | Feb. 12, 2022 ]

If the Brackenridge Park Conservancy does not raise $42 million to complete the Sunken Garden Theater renovation by June 2025, the $15 million from the Midtown TIRZ and $5 million from the 2022-2027 bond will go to other projects at the park, city officials said.

It should be noted that none of the four city-owned facilities are actually located within the Midtown TIRZ boundary. But state law allows for projects outside the boundary to be funded as long as they aid “affordable housing, transportation, and areas of public assembly,” city officials said.

Some affordable housing developers understand the need for the city to invest in its properties. But they also see the need to keep affordable housing tools in place, especially in a city where housing prices continue to climb.

“I’m not going to begrudge the city’s desire to do some capital improvements to the zoo, etc.,” said Ryan M. Sweeney, executive vice president of operations for Prospera Housing Community Services, a local manager and developer of affordable housing. “As a developer of affordable housing … I’m not sure that taking a potential funding source away is the best strategy.”

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Limited resources

In the past, both Gonzalez of nonprofit developer Alamo Community Group and Houston, the assistant city manager who oversees housing, have described the importance of adding layer upon layer of incentives, or subsidies, in order to offer rents affordable to San Antonio’s low-income earners—especially downtown.

“We are dealing with trying to find creative ways to really put affordable units on the ground,” Gonzalez said in a 2018 interview. “We’re not trying to maximize those profits. At the end of the day, we’re just trying to figure out how to drive down those rents.”

At the Museum Reach Lofts, where all but four apartments are priced for people making up to 60% of the area median income, or AMI, subsidies included a $2.8 million Midtown TIRZ reimbursement grant, 9 percent low-income housing tax credits (an IRS program) worth an estimated $10 million; and a city incentive package that included a 75 percent rebate on city property taxes over 10 years.

Gonzalez said projects like the Museum Reach Lofts, because of their proximity to employment hubs such as the Pearl and downtown, are critical to providing housing for workers in the service industry, and those with lower-paying office jobs.

There’s a reason there aren’t more projects like the Museum Reach Lofts, housing experts say—those layers of subsidy are hard to come by, even with a $150 million housing bond, which will be used in a multitude of ways, including building permanent supportive housing for chronically homeless individuals.

The fact is, the Midtown TIRZ has helped fund mostly market-rate apartments north of downtown. The Museum Reach Lofts is the only affordable housing project it has funded.

To Gonzalez’s larger point—of the $1.3 billion in local funding sources for affordable housing over the next 10 years, $300 million in bond dollars ($150 million from the upcoming housing bond in May, and another $150 million from a planned housing bond in 2027) is not guaranteed, because those dollars require voter approval.

Among the $1.3 billion in local affordable housing funding identified by the city, $170 million is anticipated to come from other TIRZ contributions in the next 10 years—but not from the Midtown TIRZ.

In west downtown, for example, Alamo Community Group is seeking an incentive from the Westside TIRZ for its Cattleman Square Lofts project.

“There may be an affordable housing project that comes up in the next year or two (in Midtown) that the city might be interested in,” Sweeney said.

As a consultant, Prospera is in the process of applying for TIRZ dollars for an affordable housing development on the northeast side of town on behalf of another nonprofit that’s developing a 9-percent tax credit project.

Sweeney said Prospera would consider building affordable housing anywhere, including the Midtown region.

“We are open to building anywhere in San Antonio,” he said. “We have looked at some potential sites in downtown.”

It currently owns and operates Vista Verde Apartments across North Frio from Haven for Hope, west of downtown, which it acquired 15 years ago. At Visa Verde, almost 100 percent of the units are Section 8 housing.

“The bottom line for us: I’m very happy the city extended the (Midtown) TIRZ,” Sweeney said. “I wish the extension didn’t restrict for affordable housing.”

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Heron Editor Ben Olivo has been writing about downtown San Antonio since 2008, first for mySA.com, then for the San Antonio Express-News. He co-founded the Heron in 2018, and can be reached at 210-421-3932 | ben@saheron.com | @rbolivo on Twitter

Kaylee Greenlee Beal is a freelance photojournalist based in San Antonio. She graduated from Baylor University in May 2020 with a major in journalism and minor in political science. Follow her on Twitter at @kayleegreenlee or on Instagram at @kgreenleephoto.