Brockhouse Questions City’s Free-Rent Policy for Select Nonprofits

The City of San Antonio owns and leases dozens of buildings and park facilities across the city, charging most nonprofit tenants $1 in monthly rent or no rent at all. But who decides which tenants get such deals on the City’s real estate?

That’s one of many questions Councilman Greg Brockhouse (D6) has about the City’s approximately 100 contracts with various organizations. On Thursday, he sent an email to staff and media, calling for an audit of those contracts. Leaders of nonprofit arts organizations also have raised the issue with City officials.

Some entities that receive free rent from the City are able to sublease property to others, including fellow nonprofits, for revenue.

“How does the little man get the equity incentive that the big dogs get?” Brockhouse asked rhetorically during an interview with the Rivard Report. “It’s the City’s preferential treatment of people they like.”

Brockhouse specifically named the San Antonio Chamber of Commerce‘s lease at 602. E. Commerce St. and the Jefferson Woodlawn Lake Community Development Corporation‘s lease of the Deco Building at 1800 Fredericksburg Rd. in his Thursday statement.

“These are prime real estate locations and any true equity conversation must include those organizations that have historically received preferential City treatment, such as hundreds of thousands of dollars of free rent each year in exchange for other considerations such as building or property maintenance,” Brockhouse wrote. “We must ensure we are being wise and fiscally responsible with all City resources and that means we must audit these rent strategies and make any adjustments to the agreements for the benefit of all.”

Brockhouse has not yet filed an official council consideration request, which requires signature support from four Council colleagues. A spokesperson for Mayor Ron Nirenberg said the mayor declined to comment for this story. If Brockhouse were to file a council consideration request, either a Council committee or Nirenberg would have to direct staff to take action.

Since winning the District 6 seat in the June 10 runoff election, Brockhouse has been the minority voice on several issues that have come before Council. Many expect him to run for mayor in 2019.

There isn’t a standard policy across City departments that dictates how lease agreements are carried out with external entities, Assistant City Manager Lori Houston said. “Each of these leases are handled on a case-by-case basis,” and some date back to the 1960s.

In lieu of rent, most nonprofits are responsible for routine and/or major maintenance costs, utilities, and general management of the property, Houston said. These costs vary depending on the size and condition of the building.

“There is consideration on every lease agreement we have with a nonprofit – either through them contributing money back to community, making improvements to the building, or activating an area that has been vacant for years,” she said.

The Ella Austin Community Center faces major repairs and an uncertain future as center officials work to find funding for the 1920s building that sits on 4.2 acres on the Eastside. Smaller offices and more modern buildings require less maintenance. Houston Street Charities, which organizes the charitable San Antonio Cocktail Conference, for instance, used 1,750 square feet of office space in a public garage on North St. Mary’s Street in 2017.

The City’s Department of Arts & Culture is developing its five-year Cul-TÚ-Art plan, which looks at arts funding as well as ways to enhance accessibility and programming. One component of that plan is a review of how the City rents out its facilities to nonprofits that support the arts.

“As part of this strategic planning process and the development of updated arts funding guidelines, we are considering a rental support component of City-owned facilities for programming by nonprofit arts and culture organizations,” stated Debbie Racca-Sittre, director of the Arts & Culture Department, in an email. That could include providing organizations with grants to help with rental costs for events. “Doing this helps establish cultural equity and create a rich environment for sustainable arts and culture to thrive in San Antonio.”

That consideration was a result of organization leaders reaching out to the City about its rental policies, Houston said. There will be further discussion on how to identify performing and practice spaces that social service agencies can use for free as the Cul-TÙ-Art plan develops, she added. 

For instance, if an organization wanted to host a poetry reading, it may be able to use the Cultural Commons exhibit space in the City-owned Plaza de Armas, she said.

According to lease summary documents obtained by the Rivard Report, the Jefferson Woodlawn Lake Community Development Corporation occupies the 17,892-square-foot historic building at 1800 Fredricksburg Rd. in the Deco District rent-free. The corporation, which fosters revitalization efforts in the Deco District commercial corridor, charges its tenants – some private, some nonprofit – market rate and reduced rents.

“The proceeds of the leases is what we use to maintain the building,” said Paul Stahl, president of the nonprofit corporation. Revenue is also used to support community grants and programs.

Nonprofits typically get a discounted rent, Stahl said, since they contribute to the vitality of the neighborhood and often trade other services for further discounts.

The corporation rents space to several organizations, Stahl said, including a photography studio, an architect, the San Antonio Police Department, Centro Cultural Aztlan, and Network for Young Artists.

Centro Cultural Aztlan is offsetting some rent with janitorial services, he said, and at one point Network for Young Artists was working on trash and graffiti abatement.

“We’re trying to be respectful of the nonprofits, but [the corporation is] not in the position to give them free rent,” Stahl said.

The Jefferson Woodlawn Lake Community Development Corporation also provides monetary assistance to neighborhood associations and other nonprofits that help revitalize area storefronts, including donations to the Woodlawn Theatre, Stahl said.

In 2015, rent from tenants made up more than 32 percent of the nonprofit’s total revenue, according to tax filings.

The historic building was vacant and derelict for years before the City partnered with Jefferson Woodlawn Lake in 2012 to revitalize the building and surrounding area, Houston said.

“All the money from those leases goes back into the building or into the community,” she added.

Because many nonprofits are responsible for original or ongoing build-outs of their office space in the historic building, they receive further discounts for that investment, Stahl said.

In his Thursday statement, Brockhouse noted that the San Antonio Chamber of Commerce does not pay rent for the City-owned, 19,151-square-foot building that overlooks the downtown River Walk.

The nonprofit Chamber advocates on behalf of the interests of hundreds of local and regional business members. It develops programs and partnerships to enhance workforce and military development, transportation, international trade, and more. While it is not a government agency, CPS Energy CEO Paula Gold-Williams was selected as its board chair for 2018.

“The Chamber has become an arm of the City’s messaging machine,” Brockhouse told the Rivard Report, citing utility rate increases and major economic development projects that both City staff and the Chamber supported. “That’s a pretty cozy relationship.”

According to the Chamber’s tax filings, it received between approximately $67,000 to $80,000 in revenue from rental properties each year from 2011 to 2015. Total revenues each year during that period range from almost $3 million to $4.2 million. Revenue from leases made up about 2.4 percent of the Chamber’s total revenue in 2015.

“To me, it’s wrong,” Brockhouse said, noting that the San Antonio Hispanic Chamber of Commerce, also a nonprofit, pays rents for its offices at the privately owned Pearl. “What about the [subleasing] nonprofits [that tenants are] taking money from? Do they matter? Or is your nonprofit just that special?”

While the SA Chamber doesn’t pay rent, its lease agreement requires it to fully maintain the building. The decades-long agreement requires the Chamber to assume all liability and unexpected maintenance costs. It is allowed to sublease the property with City permission and did so for years to various organizations including the San Antonio Economic Development Foundation, BioMed SA, San Antonio Mobility Coalition, and others.

“We charged them rent and then we also had a deal that we helped them” with payroll services, health insurance pools, and 401k programs, said Richard Perez, SA Chamber president and chief executive officer. The Chamber, which has occupied its offices in the building since the late ’60s, does not currently have any sublease agreements.

The Chamber building is unique because it was the business community – namely Chamber members – that built it in the first place, Perez said. It was first used as headquarters for the 1968 World’s Fair.

Perez estimates that the Chamber pays about $3,750 in utilities per month. For the last three years, it has “paid an average of $123,000 per year in building expenses,” including utilities, according to SA Chamber spokeswoman Julie Ring. According to a 1988 lease (renewed in 2012), the building required a major $250,000 repair and renovation project, which the Chamber subsequently completed.

“We get no other financial assistance from the City other than a long-term lease,” Perez said.

Rent assistance for arts organizations included in the Cul-TÙ-Art plan will be presented to City Council for consideration in February.