The issue of how to balance funding for Project Marvel with the rest of the city’s needs is looming large over the next bond program, already forecasted to be only about half the amount of the previous bond.
At a City Council meeting Wednesday, officials raised questions about how future bond dollars would be directed to streets and drainage projects within the planned sports and entertainment district downtown, and how that would affect the rest of the city’s needed projects.
Council members also said they want to continue support for affordable housing even as the city faces a harsh budget reality. The 2027 bond is projected to be around $625 million, roughly half of the $1.2 billion bond from 2022, as decreased property values impact the city’s budget and diminish bonding capacity.
Now city staff is floating a plan that could bring that number up by implementing a variable debt rate strategy.
“Based on the current forecast, a bond program comparable in size to the 2022 program would require a tax rate increase to meet the bond repayment obligations,” said Troy Elliott, the city’s chief financial officer. “A variable debt rate strategy … means the rate may increase or decrease annually based on property valuations.”
The council was mixed on that suggestion and city staff said exact figures for such a plan wouldn’t be available until later this summer.
Voters could be asked to weigh in on the proposed bond package next year, according to a proposed timeline that would put propositions on the ballot in either May or November.
2017, 2022 bond projects
San Antonio funds most of its infrastructure projects through a bond — money that’s borrowed against the city’s future growth and repaid through the debt service portion of the property tax rate.
The other portion of the tax rate, known as maintenance and operation, funds day-to-day general fund expenses like salaries and programs.
The city considers a bond program every five years to fund major capital infrastructure projects throughout the city. The last bond program was approved by voters in May 2022, and consisted of five propositions with 188 projects totaling $1.2 billion.
A city bond is a debt security issued by the city to raise money for public infrastructure projects like roads, bridges and water systems. Through the bond, investors lend money to the city and receive regular, tax-exempt interest payments until the principal is repaid.
Several projects are still in the works from the last two bonds, 2017 and 2022.
Capital Delivery Director Mike Shannon said 59 projects in the fourth year of the 2022 bond have been completed, 64 are in construction, 63 in design and one in pre-design.
Under the $150 million affordable housing bond approved by voters in 2022, 3,138 residential units have been completed, 1,094 are under construction and 971 are in the pipeline, said Veronica Garcia, director of the city’s Neighborhood and Housing Services Department.
The city has reserved $9 million to acquire property for affordable housing projects along VIA Metropolitan Transit’s Green Line advanced transit system.
Nearly all of the 2017 bond projects have been completed, Shannon said, with litigation involving plans for Brackenridge Park holding up that project.
Shannon outlined a process for the latest bond program that would include establishing community bond committees to vet and recommend projects, allow for scoping and estimating projects and public input, and putting the list of projects before council in late summer.
Priority projects to fund include items that align with adopted plans and department assessments, multi-phased projects and those with completed designs or that did not make it onto the 2022 bond, city board recommended projects and those with leveraged funding opportunities.
May versus November
Most council members favored polling voters in May so that shovels could possibly go in the ground before construction costs rise. Most also supported bond dollars for affordable housing, even increasing the amount of funding in the next cycle.
“I do strongly believe we need another housing bond,” said Councilman Edward Mungia (D4). “I think we do need to have it at the same level or greater, and I think we’ve got to do a deep dive into what projects haven’t happened.”
Mayor Gina Ortiz Jones said she needs more information about all the funding sources to determine how much she thinks should go toward housing.
“Because we’re dealing with a much smaller amount of money, and because the Housing Trust has their own bonding capacity, and then when you couple their bonding capacity with other incentives like tax exemptions from us, all of a sudden, there’s a lot of ‘not our money’ that is building housing,” Jones said.
Five or six categories
A proposition related to funding affordable housing through the 2022 bond was among the five categories on the ballot, including streets, bridges and sidewalks; drainage and flood control; parks and recreation, and facilities.
But Mungia said a sixth proposition is possibly needed in the 2027 bond, one that is focused on funding needs in the sports and entertainment district downtown.
“Embedding entertainment district projects into what would probably be ‘Prop A streets and bridges and sidewalks’ puts too much of that together, and I think it is really a separate conversation to have,” he said. Councilman Jalen McKee-Rodriguez (D2) agreed.
Elliott said propositions specific to the district could be put on the ballot as a part of another proposition, such as streets, bridges and sidewalks. But it was unclear how the dollars would be allocated if one part of the proposition passes and the other does not.
Councilwoman Phyllis Viagran (D3) said she’d rather keep the five major categories and let community bond committees decide how to spend the dollars, adding she thinks the bond value needs to stay at $1.2 billion.
Councilman Marc Whyte (D10) said he also was against any district-specific propositions. But he vehemently opposed a variable tax rate.
“Under absolutely no circumstances should we consider the variable tax rate, because it’s not really going to be a variable tax rate,” Whyte said. “This is going to be a tax rate increase for the citizens of San Antonio, and to do that right now, to me, is just an absolute non-starter, should not be considered.”
Councilwoman Misty Spears (D9) said she also was “very leery” of a variable tax rate to expand the bond value, “because I think when you give an inch, people will take a mile.”
Variable tax rate
But Councilwoman Sukh Kaur (D1) wanted to know more about how that approach would play out for taxpayers.
“As we get more information from the appraisal district, we can come back to you and present,” Elliott said. “In theory, as values are going down, applied against that stagnated historical tax rate, their tax bill is going down. In theory, we have to model this, but it should level out their tax bill over time.”
The city’s debt service tax rate, which is 21 cents per $100, has been constant for the past 20 years, he said. It could be increased to as much as $1.50. “There are a lot of cities that do the variable rate method,” he said.
City Manager Erik Walsh said those detailed numbers will be presented to the council in August.
Kaur said that later date makes it hard to forge ahead with the bond process and decide now to set a May 2027 election date versus November.
“I understand inflation costs … but I just need to know what we’re giving up by giving up those six months,” she said.
“I would like a holistic image of what, if we increase the [maintenance and operations tax] rate, what would that mean for an average rate?” Kaur said. “If we change this to variable, what would that mean? What would a CPS rate increase mean? What would a SAWS rate increase mean? I just want to see what the impact to our most underserved communities would be. That’s where my focus is.”
