How the city plans to pay for a new $1 billion Spurs arena in downtown San Antonio became clearer on Thursday when the council agreed to use a state fund previously designated only for convention center and Alamodome upgrades.
City Council approved an ordinance modifying the Project Financing Zone (PFZ) to allow for funding a “convention center complex” that includes the arena as a qualifying project in the proposed sports and entertainment district.
Established by the Texas Legislature and adopted by San Antonio in 2023, the PFZ allows a city to draw a 3-mile radius around a convention center facility or venue, then collect the incremental growth in the state’s revenues from hotels and businesses within its boundaries during a 30-year period to spend on qualified projects.
Fort Worth used a PFZ to fund its new rodeo and event space, Dickies Arena, while Dallas is putting the money toward its convention center.
Houston established a PFZ to upgrade its convention center and briefly considered, but abandoned, the idea to establish a second zone for improvements to NRG Stadium, according to a Houston Business Journal report.
In 2023, the City of San Antonio voted for the state funding source to go toward expanding the Henry B. González Convention Center and improving the Alamodome.
With the city now looking to use the funds for a third project, council voted to modify the existing PFZ district, which by law, also changes the start date.
At the request of state lawmakers, in April, the Texas Comptroller’s Office approved ending the original PFZ and creating a new one, this time directing funds to a “complex” of projects with the convention center as the epicenter.
“We’ll be eliminating two projects from 2023 and creating one project, the convention center complex in one zone, going forward,” said City Manager Erik Walsh.
The change also adds some funding flexibility for the city in when and how it uses the funds, said Ben Gorzell, the city’s chief of financial and administrative services.
“Under the law, we have five years to commence a qualified project [and] under the previous zone, that was the dome and the convention center,” he said.
Creating a new zone resets the five-year clock on the PFZ, resetting the base year to 2025.
Because the zone is a kind of financial tool that generates incremental revenue — extra money earned over time — the amount is small to start with and grows over a 30-year period.
The time limit makes it challenging to select which project to start when.
“The complex solves that issue for us because … the Alamodome, the convention center and potential NBA arena are all part of the complex,” Gorzell said. “[If] we start any one of those three projects, we meet that requirement under state law.”
Walsh said the convention center is the priority among those.
The PFZ is part of a framework of funding the city is building to fund the entire downtown sports and entertainment district, he said.
The framework includes five sources, including the Hemisfair Tax Increment Revenue Zone (TIRZ), a potential increase in the county venue tax, future development at Hemisfair, revenue generated from the proposed arena and funding from the Spurs.
The specifics of that funding plan will go before City Council in about a month, he said. It won’t include the use of property tax dollars.
Spurs Chairman Peter Holt said much the same in remarks earlier this month: “We are not looking to add a new tax to San Antonio citizens,” he said, promising that the Spurs are committed to San Antonio and the district’s development.
The letter to the comptroller, signed by state Sen. José Menéndez and state Rep. Barbara Gervin-Hawkins, states a coalition of public and private stakeholders is working toward developing the sports and entertainment district.
The private stakeholders could include San Antonio’s tourism industry — Visit SA, hoteliers and restaurants — local developers and the Spurs, said a city spokesman.
“Cities in Texas are restricted on how they can utilize property tax dollars in sports facilities,” Walsh said. “The only way that can happen is if it goes to voters, and … when we had that initial presentation of council, they made it very clear that was not something that they were interested in pursuing.”
Though the TIRZ funds are considered public dollars, the funds must be used within the zone and only for infrastructure improvements in the district.
Last year, the Hemisfair TIRZ generated $650,000, the least of all the city’s TIRZ districts, because development in that area has been slow to come.
A new arena is expected to be built south of the convention center on the site of the UTSA Institute of Texan Cultures in Hemisfair.
On Tuesday, a lawsuit brought in April by the Conservation Society of San Antonio against UTSA and the City of San Antonio to halt deconstruction of the ITC was moved to the 15th Court of Appeals. Demolition appears to be ongoing at the site.
At the council meeting Thursday, District 1 Councilwoman Sukh Kaur asked Walsh about public and community input to the project, who said a plan for that will be completed within the next couple of days.
“I know the meat of that work is going to happen over the next several months, and … I just wanted to say that we have not forgotten about that, and it is a key priority for all of us,” Kaur said.
