To annex or not to annex, that is the question. In fact, it’s been the lingering question for San Antonio’s City Council since 2012 when officeholders first began to ask if San Antonio should reverse its decade-long policy of not annexing new territory into the city limits.
City Council will tackle the question again on Wednesday and consider a staff briefing that takes a new look at the financial benefits and challenges as well as the political consequences of moving forward and not moving forward.
Of greatest interest, perhaps, will be the findings of the Annexation Technical Work Group, a committee of seven outside professionals convened by City Manager Sheryl Sculley, that has met five times to review and discuss the City’s financial assumptions if it were to move forward with the annexation of three select areas along IH-10 West, U.S. 281 North, and IH-10 East. The task force was not asked to express a finding for or against annexation, only to conduct a cost-benefit analysis.
The seven members of the task force are Roger Arriaga, San Anotnio Chamber of Commerce vice president for public affairs; Afamia Elnakat, UTSA associate professor of research/Sustainable Energy Institute and SA Tomorrow tri-chair; Laurie Griffith, executive vice president of Texas Capital Bank’s San Antonio region and Real Estate Council member; Jennifer Martinez, director of language services and San Antonio outreach at Nationwide Insurance; Lew Moorman, founding member of Tech Bloc; Steve Nivin, director and chief economist of the SABER Institute and associate professor of economics at St. Mary’s University; and Steve Patmon, president and owner of SJPA and co-chair of SA Tomorrow’s Growth and Urban Form Technical Working Group.
Tech Bloc, the urban tech advocacy group that sprung to life one year ago, underwrote the cost of an independent study of the financial complications of annexation. That study, performed by HR&A Advisors, strongly cautioned against annexation and aggressively challenged the City’s optimistic financial assumptions resulting from annexation. The City commissioned The PFM Group to carry out another third party study. Click here to download the Tech Bloc report and here for the City’s report.
Moorman said another reason is opportunity cost of urban core investments that will not be made due to the tens of millions of dollars that Phase One annexation will cost the City in the initial years of the 20-year financial model that the task force considered.
“I, personally, oppose annexation,” Moorman said Friday, “but I expect a good discussion at City Council next week and I want to give credit to City Manager Sheryl Sculley who has run a very open process with a lot of good dialogue. Annexation is a complicated issue. You can make the analysis show whatever you want it to show. Most people think it’s a great economic windfall for the city when you annex. I think the analysis proves otherwise. I think the analysis shows it’s a close call.”
Moorman said the main flaw in the city’s financial projects is that its estimate of police and fire costs – the number one cost in annexation – is based on the City’s last offer to the police union in the now discontinued collective bargaining talks. The union rejected the offer.
The initial costs to the City are estimated at $55 million, with an eventual Phase One net gain in revenue between $9 million and $29 million over 20 years, Moorman added.
“I think there is secondary development and growth out there in the IH-10 West and U.S. 281 corridors,” Moorman said, “but any returns to the City will only come in the outlying years and only if the economy remains strong. In the short-term, it will cost the City $55 million. I also think the City already has its hands full, and the best opportunities to invest right now are inside the city. We have so many cool opportunities where $55 million could make a such a difference and drive new economic development.”
City staff, on the other hand, appear to strongly favor annexation, believing the only way to manage growth and capture tax revenue is by bringing the fast-developing corridors into the city limits, even at the expense of further sprawl. Mayor Taylor and City Council seem more ambivalent, perhaps a slim majority proving enough to back annexation.
Wednesday’s briefing comes as City staff prepares to spend the summer months assembling the proposed fiscal 2017 budget, and as attention grows for the projects that will and will not be funded in the 2017 bond. Voters will go to the polls and cast their votes on the bond and city Council elections in May. If annexation proceeds, City Council needs to direct staff to move forward before the traditional July summer break so plans can be presented in August or early September.
“That’s a good assumption, although I can’t disclose too much information because we have not briefed Council yet,” Deputy City Manager Peter Zanoni, who will lead the Wednesday briefing, said Friday. “We will show Council our findings and recommendations, and hope Council provided staff with directions to proceed. We would need to do something before the end of this fiscal year (on Sept. 30).”
Although the annexation study began in 2012, when City Council under then-Mayor Julián Castro directed staff to explore the pros and cons, the debate has sharpened in the last two years as officials have taken a much deeper look at what San Antonio might look like in 25 years with a population of 2.5 million people or more.
Mayor Ivy Taylor’s SA Tomorrow planning initiative is now being reviewed in draft and will be amended and voted on in August. Its final version will be shaped in part by City Council’s decision on annexation.
In the background of Wednesday’s presentation will be the growing calls for City Council to make more catalytic investments in the urban core rather than spend so much capital in the fast-growing suburbs, on traffic congestion relief, and major drainage projects. The latter kind of bond projects are increasingly necessary due to sprawl and tend to yield little economic development.
On the other hand, suburban residents vote in far greater numbers than inner city residents, higher property values in the suburbs yield more property tax revenue, and commercial and retail development contribute more sales tax revenue.
The Annexation 360 Report first presented to City Council in April 2014 identified 30 different annexation target areas. That number was reduced to five target areas to be considered in two phases over a two-year period.
Wednesday’s briefings will focus on the three sites in Phase One: IH-10 West north of Loop 1604, U.S. 281 north of Loop 1604 and IH-10 East between the Windcrest municipality and downtown. Phase Two will include Alamo Ranch and U.S. 90/Loop 1604, and presumably would be taken up one year after Phase One if the Council moves forward.
The IH-10 West and U.S. 281 corridors are the focus of significant investment by the Texas Department of Transportation, which will generate important new commercial development along the rights of way. This is the type of economic development the City wants to capture since residents in those areas are heavy users of City services and utilities.
The IH-10 West area includes an added complication: U.S. Army officials in Washington, D.C. have expressed serious concerns about future missions at Camp Bullis and Camp Stanley if continuing development encroaches any further on military operations. In this instance, annexation by the City will allow the establishment of buffer zones and closer regulation of future development in sensitive zones.
Officials say the benefits outweigh the costs over the course of a 20-year period if the City annexes the IH-10 West and U.S. 281 corridors, while annexation of the IH-10 East corridor carries negative financial consequences.
Arguments for moving forward on the IH-10 East area include delivering basic levels of municipal services to low-income residents currently living in inhumane conditions including inadequate streets and lighting, poor drainage and waste management, and insufficient law enforcement protection. The IH-10 East annexation would also bolster the city’s small African-American population and make it easier in future redistricting efforts to maintain at least one council district with strong African-American representation.
Top image: Traffic at the intersection below the Loop 1604 to Highway 281 interchange. Photo by Scott Ball.