By Ben Olivo | @rbolivo | Heron editor
The Residence at Grayson Heights, a 281-unit, market-rate development near JBSA-Fort Sam Houston in Government Hill, was awarded a $2.1 million tax incentive by the City Council last week, but not without heavy criticism from some council members who say public resources shouldn’t benefit such projects.
In May, construction had already started on the apartment complex, a series of three- and four-story buildings with retail and office space on four acres of torn up parking lot and vacant land facing East Carson Street at Spofford Avenue. It’s part of an overall $80 million mixed-use development, according to city records, that includes an office building that’s already been renovated and more retail that will include a micro brewery.
For J.J. Feik, the businessman who’s leading the local partnership, the project revitalizes a part of this East Side community that was decimated following the closure of the JBSA-Fort Sam Houston gate at North New Braunfels and East Grayson streets following 9/11. Feik says the rents will be $400-$500 less than the ones found down East Grayson around the Pearl. Micro offices or shops will comprise 2,000 square feet of small retail space, Feik said.
“I stand proud that we’re making a significant change on this corner,” Feik said in an interview last week.
But the debate about gentrification, and whether public subsidies should be used for private, market-rate developments—which has been ongoing in San Antonio for several years—resurfaced on the City Council dais, where council members voted 7-3 last Thursday in favor of the incentive deal.
For District 2 Councilman Jalen McKee-Rodriguez, it was the second vote over tax incentives in his district that caused him great consternation.
He admits he’s wrestled with approving subsidies—in both cases, tax increment dollars that pay for infrastructure upgrades the developer would otherwise be obligated to cover—for market-rate deals such as the one at Grayson Heights.
In November, he reluctantly agreed to approve an incentive package worth up to $7 million for infrastructure around a market-rate development on the southern edge of Government Hill, closer to the Pearl, by Dallas developer Encore Multifamily. After campaigning against such use of public dollars, he said the project was too far along in the process—having had the support of previous council members, and having had been successfully rezoned (a separate public process)—to demand some level of affordability so late in the process, or thwart the project altogether.
[ Related: Olivo: How McKee-Rodriguez’s support for a luxury housing project helps shape the Decade of Downtown | Dec. 2, 2021 ]
On Thursday, he described that decision as a poor one.
“I felt almost pressured to vote ‘yes’ on (the Encore development),” McKee-Rodriguez said on the dais. “And it was for a number of reasons … it could have been because I was led to believe that other council members were going to vote (‘yes’) anyway so I would lose. Or, you know, you’re going to be viewed this certain type of way: anti-business, anti-development. And I think that first vote I made a poor decision.”
“With this one (Grayson Heights), I wanted to not make that same decision and so there were some amenities added such as a public park and street lighting … the public improvements to the street takes a project off of the IMP (Infrastructure Management Program),” he said.
McKee-Rodriguez described how both dominant neighborhood associations in Government Hill support the project, how the community said it wanted market-rate housing, and how five previous District 2 council members backed the project, which has been in the works since 2016.
“I’m going to be very honest, I was not initially excited about this project,” he said. “And I still believe that any incentive going to a private housing development should come up with some form of affordable housing.”
Among some of the concessions was that $500,000 of the $2.1 million in reimbursement dollars be added to city’s affordable housing fund for use in Government Hill specifically. The overall development will also include a community park, a dog park, and a pathway that cuts through the development so people can traverse the apartments from East Carson to Quitman streets without having to walk around the four-acre property to get from one side to the other.
It’s expected to be completed by May 2024.
It’s unclear just which concessions McKee-Rodriguez negotiated, and which Feik worked out with the Government Hill neighborhood before the councilman was elected.
But some of the tension on display on the council dais on Thursday was carried over from a meeting in early May of the Inner City Tax Increment Reinvestment Zone (TIRZ) board, which includes McKee-Rodriguez as chair, District 5 Councilwoman Teri Castillo, and District 1 Councilman Mario Bravo.
During that meeting, Castillo voted against the deal, as she did again on Thursday. “I believe that we should use our public dollars for public good,” she said.
“I’m extremely concerned that this is a second 100-percent market-rate project going in the East Side financed by our public dollars,” Castillo said. “And no doubt this is going to have a ripple effect in the surrounding neighborhoods. And we don’t need a study to study that we can look at case studies throughout the nation to see what projects of this magnitude due to economically poor areas.”
Feik said his project will create more revenue for the Inner City TIRZ, one of several zones throughout the city where the rise in property tax revenue is collected and reinvested back into the area—for the most part. [ Editor’s note: TIRZs are very complicated municipal tools; scroll down for an explanation on how they work. ]
“With projects like this you replenish the TIRZ, so that there are tax (revenues) for future programs, for projects,” Feik said. “All I can say is we bought a 60,000-square-foot office building—the office building was empty. We put 200 jobs on this corner with more coming.”
But how those dollars should be spent has been a point of contention among those on the council. At least in the downtown area, they mostly fund developments infrastructure. In the Midtown area, just south of Government Hill, developments have received up to $21.8 million in TIRZ reimbursement dollars, one of the main mechanisms responsible for the rapid growth in the area since 2010. Smaller amounts from the TIRZ have helped fund the Maverick Dog Park and the parking garage at Brackenridge Park, for example.
Feik also points to the retail building at the end of the retail strip on East Grayson where a new brewery called Breakaway Brewing Co. is slated to open later this year. These were all improvements Feik and his partners—which include Tim Sanford and Robert Hunt, each of whom have been involved in developments of all types—have shouldered on their own, he said.
[ Related: Breakaway Brewing Co. slated to open in Government Hill in this fall | Feb. 20., 2022 ]
In Government Hill, property values have risen 121 percent since 2017, the third highest jump of any San Antonio ZIP code, according to data collected by the Heron from the Bexar Appraisal District. (Denver Heights was first with an 171 percent appreciation of property values; Dignowity Hill was second at 130 percent; which, along with Government Hill, compose the largest East Side neighborhoods touching the downtown area). Castillo said developments such as Feik’s will exacerbate rising property values, which result in displacement of long-time residents who can no longer afford to pay property taxes.
McKee-Rodriguez has initiated a policy where developments such as Feik’s would be assessed to gauge the level of displacement that may occur as a result of the development. During the meeting, there was no mention of a displacement study; Feik confirmed the ownership group is not required to conduct one for The Residence at Grayson Heights.
[ Related: ’We’ve been gentrified.’ McKee-Rodriguez spurring new conversation about gentrification | June 11, 2022 ]
One ardent supporter of the project is Mayor Ron Nirenberg.
“From a TIRZ standpoint, there is public benefit in two ways. First, the public improvements around a particular development are obviously in a public right of way,” Nirenberg said. “But most importantly, I think it’s really critical: This isn’t just about this project … if we lose control over the supply/demand imbalance in the housing ecosystem, in general—whether that’s market-rate, affordable, deeply affordable, or even beyond market rate—we are going to suffer the impacts of it broadly as a public, in particularly among the most vulnerable members of our population.”
[ Related: Olivo: Housing needed at all price points, Nirenberg says | May 25, 2022 ]
To Nirenberg’s point, Castillo said infrastructure expenses such as sidewalks are not a public benefit because the developer is obligated to make those improvements on their own.
“I want to be sure we don’t perverse what community benefits are,” Castillo said. “If many of our residential property owners, if they had issues with their sidewalk or apron, the city tells them that that’s their responsibility. So us giving this new project in this area new sidewalks is not a community benefit. So I’m going to have to strongly disagree, but thank you.”
Castillo also described the $500,000 in rehab dollars as a drop in the bucket. During the meeting, she asked one of the city’s top housing officials how much an average home repair job costs from the city’s various programs.
“We were at $110,000,” Ian Benavidez, the city’s assistant director of the city’s Neighborhood and Housing Services Department (NHSD), told the council.
She compared how many more homes one could rehab with $2.1 million compared to $500,000.
Overall, Feik said $3.6 million is the cost for upgrading streets, drainage, water lines, sidewalks and lighting in and around the complex’s footprint.
Bravo’s issue with the Grayson Heights project was that it lacked a higher standard of environmental sustainability measures, he said.
“For me to want to invest public dollars towards this, I would want to see something that’s catalytic, something that’s going to stand out, something that goes above and beyond when it comes to energy efficiency,” Bravo said. “In my opinion, from what I saw, I wasn’t convinced that this project did that.”
In an interview after the meeting, Feik strongly disagreed, saying the partnership put more than $1 million into making the building more energy efficient, not including what he called environmental clean up of the site.
Feik also described a robust public engagement process that included dozens of meetings over the five or so years.
“I’ve had a business here in the neighborhood, DPT Laboratories, we’ve been in and around this area for a very long time,” Feik said. “We met with over 80 stakeholders, we met with two different neighborhood associations, churches. We met with business owners. We met with religious leaders. We met with COPS Metro. And through those listening sessions, and those dialogues with one another, a lot of these concessions were our ideas and (we) modified through various listening sessions.”
For example, Feik said the community would be able to use the development’s meeting space.
“We’re good community people,” he said. “We’re not just building it and selling it. This is a long-term hold (at least 10 years, he said), and also costing a lot of money to build because we are in a historic district.”
For McKee-Rodriguez, he describe Grayson Heights as the last project he inherited from previous council members.
“Moving forward, I want to be clear that I’m looking for a substantial community buy-in and feedback,” he said. “This was a project where you have multiple entities within Government Hill that don’t often agree on things—and they agreed. They agreed on this project. I want to see public spaces and community benefits to (be) include (with) deep affordability and a significant level of investment in the community. And those are going to be the standards, we will be moving forward. And I believe that I can vote ‘yes’ on this comfortably.”
How they voted
City Council meeting
June 16, 2022
Agenda item #29: approval of reimbursement of up to $2.1 million from the Inner City TIRZ toward the Grayson Heights project at 1422 and 1518 E. Grayson St.
» Mayor Ron Nirenberg — Yes
» Mario Bravo (D1) — No
» Jalen McKee-Rodriguez (D2) — Yes
» Phyllis Viagran (D3) — Yes
» Dr. Adriana Rocha Garcia (D4) — Yes
» Teri Castillo (D5) — No
» Melissa Cabello Havrda (D6) — Yes
» Ana Sandoval (D7) — absent
» Manny Peláez (D8) — Yes
» John Courage (D9) — No
» Clayton Perry (D10) — Yes
Inner City TIRZ board meeting
May 6, 2022
Agenda item #5: reimbursement agreement up to $2.1 million for the Grayson Heights project. During the meeting, the item was amended to include the $500,000 that would fee the affordable housing fund. Also, the first vote resulted in a tie, when Bravo abstained. On second vote, Bravo voted in favor of the project.
» D2 Councilman Jalen McKee-Rodriguez — Yes
» D1 Councilman Mario Bravo – Yes
» Mohammad Rasool – Yes
» Stephen Lucke – Yes
» Edward Collins – Yes
» D5 Councilwoman Teri Castillo – No
» Jessica Guerrero – No
» Marlon Davis – No
» Alex Birnel – No
» Troy Elliot – absent
» Mario Salas – absent
» Juan Garcia – absent
» Alicia Sebastian (SAISD) – absent
» Commissioner Tommy Calvert (Bexar County) – absent
» ACCD representative – absent
How TIRZs work
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 | firstname.lastname@example.org | @rbolivo on Twitter
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