Am I the only one who is less than excited about last week’s announcement that the City and County will hand out more than $750,000 in tax breaks to GM Financial Co.? In return, the auto loan financing arm of General Motors Co. will employ at least 490 people at a new $24.5 million facility it will build in Westover Hills, home to most of the city’s call and data centers.
GM Financial will receive a $406,148 tax abatement from Bexar County when Commissioners Court meets Tuesday, and it received a $339,594 abatement from City Council last week. The state is giving the Fort Worth-based company a $2.5 million grant from its controversial Texas Enterprise Fund, which an independent audit found led to tens of millions of dollars in squandered tax dollars by former Gov. Rick Perry, who often used the fund with little oversight to reward political supporters rather than grow the state’s economy.
Stories in the Rivard Report, the Express-News, and elsewhere state that the GM Financial jobs will pay an average of nearly $50,000 a year, according to local officials. Such broad generalities mask some less appealing numbers.
City and county officials will argue that over 10 years more tax dollars will flow into than out of local budgets, but that misses the point. We are spending our time, energy, and money building a low-performance economy. I’m actually surprised these jobs aren’t going to Mexico. Perhaps that’s how Fort Worth-based GM Financial sees us: San Antonio, a city with all the benefits and none of the risks of Mexico.
The City’s tax abatement rules require all jobs to pay at least $11.66 per hour. That’s not a living wage, it’s a working poor wage. Why would any Texas city incentivize a company based elsewhere in the state to come here and hire people at such low wages and offer to forgive half of their taxes in return?
The same rules also state that at least 70% of the jobs must pay $14.96 hourly. Is there something wrong with $15 an hour? Can’t we at least give workers that extra four cents of dignity without worrying over what business owners think about hitting the $15 an hour level? Salaries for leadership and management positions, of course, raise the average wage and leave the impression that all 490 people will be well paid. It’s a false impression.
The truth is most of the new workers will not earn a salary at all. They will earn an hourly wage answering phones and processing auto loan paper. A Forth Worth-based company is coming here because San Antonio offers the things they can’t get at home: cheap land, low-wage labor, and attractive city incentives.
Why not offer GM Financial a far better deal to move their entire company here? Instead we get the back office work and the smart jobs stay in Dallas-Fort Worth.
Is that the SA Tomorrow city Mayor Ivy Taylor and this City Council, that Judge Nelson Wolf and this Commissioners Court, want to build? If so, it’s a blueprint for perpetuating the status quo. It’s a deal with the devil rather than an investment in the future.
The presence of even a subsidiary of a major company such as General Motors is a major boon for the City, Mario Hernandez, the SAEDF president who has announced his retirement next June, said last week.
“The name itself, General Motors, attracts attention of companies all over the world whenever they make an announcement,” Hernandez said. “Having 500 full-time positions, good-paying jobs, will also have a significant economic impact.”
Will it? I found very little attention paid to the news beyond some auto industry websites, which repeated GM Financial’s claim that one appealing aspect of San Antonio is its location in the Central Time Zone, an odd note of appeal for a company located five hours up Interstate-35 in the very same time zone.
With an annual economic growth rate of 3.6% and an unemployment rate of 3.8%, San Antonio can afford to be pickier. Welcome the new jobs, but limit tax breaks to companies that locate in the urban core, where there is abundant land. Let’s not incentivize more sprawl.
Job creation is robust enough that San Antonio employers must import talent to fill skilled labor positions. We simply do not produce enough educated and skilled workers at home. That’s why we should shift our focus and our incentive dollars to appeal to skilled labor and startups. Once more smart, educated workers move here, the jobs will follow.
There is an interesting debate going on in San Antonio right now about the future of the San Antonio Economic Development Foundation, and no less than 22 other entities in the city and county engaged in some form of economic development. Yes, you read that right: 22 different organizations. When I asked for an organization chart showing the 22, no one even had a master list of names. Still, when a private-public committee reconvened recently to report to a City Council subcommittee on economic development, it recommended a stay-the-course approach.
That struck me as polite affirmation of Hernandez’s many years of good service, but it also would perpetuate a Byzantine system that should be streamlined with a new generation of recruiter at the helm. San Antonio’s leadership should hit the pause button and engage in some serious introspection before hiring Hernandez’s replacement.
The SAEDF and its many affiliate partners presently operate without a clear vision or obvious strategy, and with far too little transparency for citizens to participate until after deals like the GM Financial are cut and done.
I am struck by two exchanges I had last week with two prominent and highly successful business leaders in our city. One I will call a conservative builder, the other a tech sector executive and investor. Both are feeling bearish about San Antonio.
The conservative business owner works with municipal governments throughout Texas. While he loves his hometown and his business is thriving, he told me, “You go to Dallas, Houston or Austin and they are different cities with very different economies and ways of doing business. I come home and feel I live in a second or third class city.”
The tech sector leader cited recent unsuccessful efforts to recruit an out-of-state cloud computing service to San Antonio. Incentives were not a factor. Talented programmers were the issue, and San Antonio simply does not have enough to meet the needs of growing companies. Austin does.
“Companies choose Austin because that’s where the talent is, even though everything is much more expensive,” the frustrated tech leader said. “No incentive could change that reality.”
That’s why any honest evaluation of San Antonio’s economic development strategies going forward in the post-Mario Hernandez era ought to start with a conversation about education strategies. If we had shifted education strategies and investment 20 years ago, we would be producing far more college-bound STEM students and not be in the situation we are in today.
Tomorrow I’ll write about elevating our education investment, a strategy that would require the City, County, San Antonio Independent School District, UTSA and the private sector all to work together on a single integrated plan.
At the same time we should put elected leaders, the SAEDF board and representatives from the other 22 economic development entities in the same room and ask one question to start the conversation: Does anyone believe the current system really works?
*Top Image: The San Antonio skyline as the sun rises. Photo by Scott Ball.
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More call center work…
Horrible deal for the city. As always.
This is a GOOD DEAL for the City and County if you know anything about how property tax abatement works. The abatement is to hold off the increase in assessed value (and the corresponding increase in taxes) by the amount of CAPITAL (mostly) and ECONOMIC (from jobs) IMPROVEMENTS made. These are improvements THAT WOULD NOT NECESSARILY BE MADE WITHOUT THE ABATEMENT. The City of County are not “losing” anything they would not have received otherwise. This is NOT the same as a grant. The project is not increasing the need for municipal services, so this is a net gain for taxpayers, because this doesn’t increase the property tax of any other parcels.
This would be different if the new project increased municipal spending and was passing the tax burden to everyone else to share.. But this abates something that would NOT be there if the project did not occur.
I fault the assessor or whichever eco development office works with this abatement as to not explaing to people the value it has to eventually add to the assessed value rolls in the future. So it’s a net benefit all around if the project doesn’t increase costs that are passed to other tax payers… which this does not..
Because any time a large corporation is offered incentives to move into a city, a certain end of the political scale starts moaning about ‘corporate welfare’ and how big business is getting a sweet deal. They never think about the jobs and influx of money into the cities economy, as well as intangibles like the impact on the city as a great place to move a business.
Exactly right. Call centers make no physical investment and can pull out at as soon as the tax abatement is over. Our ‘leaders’ consistently fail to think things through. Take the abatement granted to the manufacturing company at Port San Antonio a couple of months ago. No disrespect to that company, but they got a cushy deal and most of their jobs don’t pay a living wage. At least they’ll be bringing some physical plant. In all, it’s a bad way to spend city and county dollars. Building human capital is a far better investment.
How’s that SA2020 going?
I understand that UTSA is a large public institution in our backyard, and I don’t disagree they should be included, but I’ve noticed your posts often favor UTSA. What about the other 12 universities in the area? St. Mary’s (and Trinity) while smaller in number have strong programs, incentives and faculty in STEM areas as I’m sure other local schools do too. If you’re going to talk about education initiatives, there needs to be inclusion of all of SA’s assets and strengths.
To play Devil’s Advocate: Could this be the “Finger in the Pie”.
The answers would seem fundamental and should be a metric SA economic development officials readily capture, report, and we care about. Why more hotels and call centers? I recount reports of why San Antonio lost AT&T and GDC Technics to DFW, airport and talent pool. I agree with Mr. Rivard, the status quo is alive and well no matter how much we tell ourselves San Antonio is a city on the “rise.” We must raise our education and political standards in this city.
Interesting that DFW ranks among the worst airports in the country isn’t it?
It’s not just the airport and talent. The real estate options and business processes need updating too. GDC took its expansion to DFW because Port SA was too expensive and couldn’t find a way to make the numbers work for the company.
The 20 or more entities don’t care as long as they get their cushy city salary. This city is backwards, it might as well be Mexico, the way city positions are given to relatives and friends. As I stated before in your comment sections, the city must invest in our own people who have the support and STABILITY of family and housing passed on from generation to generation to focus teaching good paying STEM programs. The truth hurts and it’s time move forward, rather then languishing in our second and third rate status.
Back forty years ago when I thought about applying to work for the city someone said if you don’t have a relative working for the city, you won’t get employed. I stopped applying for city jobs. You mention the same thing today. It would be helpful if the RR did a story on the demographics of city employees to include employees who are related to one another.
It speaks to a “well, it’s better than nothing” mentality. GM opened an IT innovation center in Austin a few years ago and are in the process of expanding it. There’s no way San Antonio would have been in the running for the very reasons you mention, but we have to find a way to at least enter the conversation. I don’t necessarily think that more start-ups are the key, because they come with their own challenges that an established company isn’t facing. You touched on it in the article – we need bigger firms to move their core business AND their people here.
Sometimes I wonder if we’re just too comfortable with how things operate in San Antonio and if our leaders don’t want to deal with the issues that relative prosperity brings – housing, transportation, and quality of life. As an example, I’ll hear comments from my peers who are thankful that we don’t have the level of congestion on our roads that Austin, Houston, and Dallas have, but are we missing something else on the other side of the coin?
Um, why aren’t we incentivizing to get these companies to bring their skilled labor with them? It’d cover lots of bases and even save those pitching time and effort. Sounds like a no brainer to me.
Agreed! This is not a win for our city. Thank you for starting the conversation Bob.
The 20 or more entities don’t care as long as they get their cushy city salary. This city is backwards, it might as well be Mexico, the way city positions are given to relatives and friends. As I stated before in your comment sections, the city must invest in our own people who have the support and STABILITY of family and housing passed on from generation to generation to focus teaching good paying STEM programs. The truth hurts and it’s time move forward, rather then languishing in our second and third rate status.
Jobs=money
Until San Antonio can offer more than cheap land and low cost labor, we will struggle to build a dynamic, self reinforcing economy. You are 100% right about these jobs. They are fine but won’t add much to our power as a city or create leverage beyond the jobs themselves. Low wage, no local upward mobility, no contribution to density of workforce.
Cities are like companies in that they compete for share of jobs. We are not winning our share of the good jobs. Why? The talent is not here nor drawn to be here. San Francisco is the most expensive, most regulated, highest taxed place in America. Why is it thriving? Simple, its where the talent is and wants to be. We need to get serious about building our own talent to compete in the modern economy but also building a city that will keep them here and attract others. As millennials increase their role in the economy our disadvantages here just grow. The GM deal does nothing to help with that fundamental issue. It’s time to get a deliberate plan that does.
Totally agree, These aren’t quality jobs that promote growth. The city & even state keeps touting the low cost of living to entice businesses. But everything is so closely tied to the next, & our leaders don’t connect the dots. We have failed to plan on infrastructure of roads to grown the city (1604), or improve the public schools in our urban areas, (closing elementary schools downtown bc of low numbers) or build affordable family housing near downtown where they want the city to be “redeveloped”. $11hr can’t get you an apartment at the pearl or any of the new housing areas built. And it’s not like we’ve got a great public transportation system in place so these low wage workers can get to their new jobs. It’s frustrating how delusional our leaders are in thinking this is what our city needs.
Yes, STEM education is a key. We keep hearing this again and again. And it’s true. I don’t dispute that. But let’s keep a balanced perspective. A large portion of our population are adults who do not have a STEM education. They have a high school diploma (and some not even that). These people also need jobs. And while perhaps not ideal, jobs like this often come with tuition-reimbursement, wellness and retirement benefits that these people would not have otherwise. So yes, let’s continue to strive for a more educated population and investment to close the talent/skills gap, but I don’t think we should demonize city leaders for sometimes playing the cards they’re dealt.
I welcome the jobs, but don’t welcome paying for them.
It they are just getting a tax abatement, then no one is “paying for the jobs” other than the company that is creating them. This is NOT money “lost” to the schools. It is an increase in assessment that would not occur otherwise, which is eventually add more to the tax base when the abatement burns off.
A “loss” to the schools only occurs when the project receiving the abatement substantially ADDS to the school budget above what each individual worker would be paying anyway in their own property tax, etc.
Agreed, Bob. We give tax abatements to service-related employers setting up office in San Antonio, which hurts the schools by reducing already limited resources, which affects student learning, which affects the city’s ability to produce college-ready students, which….
And so we get stuck with low-skill service-oriented jobs.
Eusebio – this deal does not reduce any resources. The amount of taxes that were being paid on the property will continue to be paid. Any NEW improvements made will also add 40% of their value to the tax rolls for the first 5 years, and 100% of the value starting in year six. How does that take anything away?
I live close to where GM Financial will be building and I’m pretty excited to see the property will be used for a 100,000 sf office building that could house 500+ workers. It’s better than vacant land, and much better for that area than another large apartment development. My understanding is these are mostly new jobs, and for a whole lot of people in this city the wages are very attractive. Companies can keep opening call centers here until the land or labor costs get out of hand. I can’t fault the company or the city for working with what they have now.
Build more high rises downtown!
The problem here is the tax abatements. Anytime a city, county or school district gives tax abatements to corporations the burden is on the every day citizen. Their taxes go up as they subsidize the corporation. In Arlington Jerry Jones got such a sweet deal from the city ,county and school district that he doesn’t have to pay one cent in taxes until 2026. My property taxes as a result of his palace went up 64% since it was built. There were “temporary” well paying construction jobs, but now they have low paying service industry jobs which are seasonal. Corporate lobbyists pay for lavish dinners,sometimes free trips, incentives( Jerry allows arlington to have a suite but only the mayor and business leaders get to use it, not the citizens). The average everyday citizen gets shafted. Its time for a change on how business is done.
Ray Kennedy, you are wrong about how tax abatement works when it is tied to the increase in assessments due to improvements. Your property taxes can’t go up unless the MUNICIPAL budget increases. If the Jerry Jones project increased the need for municipal services beyond what was captured in the project utility fees, trash, etc.,, then yes it was spread around to others.. but this is not was is being talked about at the GM deal.
I don’t care about GM, it’s just that people don’t understand tax abatement programs based on increased improvement assessments and should push for them instead of grants (fee waivers) and abatements where nothing is provided in return and where the increase in utilization of services is not recaptured (basically another grant).
Well said, Bob.
This is where the City and County can take a real leadership position and invest to fix our education system.
If just a small portion the hundreds of millions spent on big infrastructure was spent to upgrade our education system, we’d see material change.
The state isn’t going to fix it. We’ll have to own it ourselves.
Its all in the city council and their moves.
Great analysis and looking forward to more of these types of articles to start good discussion. It would also be interesting to see the number of leaders that were hired from outside of San Antonio as we began the Decade of Downtown and City on the Rise .. and how many are left. I think that the issues cited above with hiring relatives and friends and organizations saying they want change until the changes happen will show that a mass exodus. There is also a lot of duplication of organizations, which blurs the line of who is in charge. San Antonio still lags behind the major Texas cities, despite the population numbers.
If the 22 entities ever do convene, another task should be for them to brief everyone on their missions. We might learn we have 22 entities with the same mission going in 22 different directions.
Oh that’s what we need…a car debt bubble call center for loans to shuttle around in oil dependent, 19th century technology.
Hi Bob,
Thanks for shining a renewed light on what has been a point of contention throughout my almost thirty years in San Antonio. In spite of many commendable individual efforts to effect change, San Antonio remains, and will be for the foreseeable future, a third-tier city with uninspired me-too aspirations, and a mostly banana-republic power structure.
At its core, San Antonio is still a hitching post with a fort attached to it.
In past years I have written several essays on the general topic. Some of your readers may find them of interest. Links to a few samples below.
http://michaelmehl.com/recession-proof/
http://michaelmehl.com/snitches/
http://michaelmehl.com/easy/
Michael Mehl
Chicken or the egg. I don’t think all the high tech talent is primarily home grown in Austin or most cities, given our education system is similarly weak across the state. Austin has a long history with tech start ups dating back to the 70’s. It also has high profile music scene. Enough cool to overcome its lack of infrastructure. But it’s also a majority white city. San Antonio needs to do more investment in infrastructure and attract start ups that want / need to be in a majority Latino city that is also majority English speaking (unlike Mexico). We should be strategically competing with Miami for telecommunications, marketing, research firms with presence in Latin America, not just DFW. Building more housing downtown isn’t going to attract employers like building real transportation infrastructure that makes living wherever you want easy for downtown commute– what every other city our size that has diverse economy in the core has. You should be able, by train, to get from 1604 to city core in same or less time than driving during rush hour. That will make downtown a viable place for startups that employ ppl with families and dogs who don’t want to rehab an historic home and don’t want to live in a high rise. Sure there’s cool eclectic neighborhoods inside 410, but large numbers of higher paid tech ee’s are not gonna see that from the outset, and those neighborhoods lack a lot of basic things like sidewalks and grocery stores and dog parks. And the airport is not only too small, it’s the dumbest airport I’ve ever traveled to and from– the placement of rental car facility, the signage on the roads around it, the convoluted flow of traffic, it’s a mess. It’s like the planners have never been to other cities or something. And anything involving mid level mgt requires a better airport for business travel.
Bad companies in general don’t make a city on the rise. From employees to customers, they’re 100% exploiters. GM Financial is dirty…
Act like a big city and get treated like one and vise versa. Stop letting the historical society control the development of the town. Big cities have to compromise in order to grow! Austin has got the memo, now San Antonio needs to climb aboard or they’ll get passed by again as usual…
I have been thinking the same thing about our city for years! I see city leaders tout accomplishments when other major cities in Texas are doing similar accomplishments on a grander scale (i.e. we get excited about a 10 story condominium being built downtown while Austin is finishing up yet another 30 story condominium, we get excited about getting a call center when Dallas took AT&T global headquarters from us.)
Why does DFW win over San Antonio? You have a more diversified cultural setting, 3 major airports DFW, Love Field, Alliance ( for corporate traffic – Fed ex, etc) plus executive jets at Red Bird Air Port. You have diversified suburban cities that have grown and are not relying on Dallas or Ft. Worth. Arlington alone has two major sports franchises, Irving is a major media center, The other cities are more Tech like Plano and Richardson. Going Back to sports- DFW has the Cowboys, The Mavericks, The Stars plus TCU and SMU athletics. San Antonio only has The Spurs as a major franchise,and a great stadium not utilized well accept for some events. Sa Has Fiesta Texas, DFW has the original Six Flags over Texas. SA has Sea World. Dallas and Suburb city Grapevine have very large Aquariums. One thing SA has that DFW doesn’t , more natural lands for wildlife. Why take that away for low paying jobs? Use the hill country to lure progres respectfully. SA then can lead by example.
Question though, why was SAISD the only district mentioned that needs to be a partner in moving ahead? It barely represents 10% of the county’s schools by land, 12% by number of students, and 15% by number of schools and is 1 of 16 districts within the county boundary.
The two largest districts outside downtown, NEISD and NISD, are not a factor in people’s decision to live downtown. SAISD, with 54,000 students, is the defining downtown district. Other inner city districts are important, of course, but their size, even taken together, is comparatively small. –RR
Northside and Northeast may not cover downtown, but they are a huge part of the education landscape. Even though RR has a focus on downtown issues, education is a city-wide issue.
I’d love to see a study of where NISD and NEISD graduates choose to live in SA compared to SAISD, Edgewood, Harlandale, and South San.
I’m glad San Antonio sees the these “opportunities” for what they are as the try to evolve San Antonio to a city with some real clout.
Your observations regarding low wage job creation in San Antonio is absolutely correct. I would also add the none of the jobs incentives are being directed into locations close to the Commuter train boondoggle planned to soon run between Austin and San Antonio. In fact, new businesses are being incentivized to build closer to loop 1604 than downtown Rail stops. All new businesses are being located where it will be impossible for rail to be practical. Tax abaitment policies of both City and County are guarantees that the political will does not exist to make a Austin – San Antonio commuter train even close to viable.
It seems to me that we need both approaches. We need jobs for the San Antonio we have, as well as the San Antonio we want.
If a tech company moved here and brought a bunch of well-educated employees from other cities, that would be good for San Antonio overall, but wouldn’t particularly help the 75% of SA that doesn’t have a college degree.
The reality is that stable service jobs that includes benefits would be a step up for a lot of families. Many of the leaders of today grew up in San Antonio with parents working blue collar jobs at Kelly AFB. Those jobs enabled a lot of first generation college kids to have opportunities their parents could only dream about.
I want to attract more tech jobs, too, but I also know it takes time. The Austin of today has a direct link to the founding of Dell there in 1984. It took 15-20 years after that, with a lot of other things falling into place, for Austin to have what it has now.
The same happened with TMMTX. The best wages come from working with Toyota and a few of their suppliers. The rest of the jobs are low wage positions.
BOB RIVARD FOR MAYOR!
I haven’t seen anyone talk about who these jobs are really going to; high schoolers, college students, and young adults who are less likely to stay in these job roles. Call center positions are not looked at as long term, and are mostly short term and highly demanding roles to begin with.
Great article and really hit the nail on the head. Hopefully we are on a path to work together.
As a native south Texan (from Laredo) I wonder if part of the problem or lack of organzation is rooted in our (at times) divisive culture that doesn’t exist in other parts of Texas where people work together for the betterment of the region and aren’t threatened by each other. I was oblivious to this and thought this was business as usual, never realizing this culture existed until a former colleague from Massachusetts explained and shared her perception to me. We focus too much on competing with each other or bringing others down for our individual gain and need to think collectively.
The larger issues you bring up are nothing new and the core reasons we are pursuing call center jobs instead of thinking boldly. Frankly San Antonio deserves better and shouldn’t settle for less. Yes, San Antonio has come a long way but sadly enough we need to think boldy and invest in our city, recruit top talent and companies (if that isn’t working then figure out what we need to do). Prime example is the lack of leadership you cited and that no one seems to have an organization chart or an answer to an overall recruitment plan. Really? That is embarrassing, we are a large city and need to get our act together.
Another example of lack of cohesive vision and lack of vision and priorities: the annexation debate. The mayor backtracked on a plan (vetted and studied for years) by city staff for years. in the DFW metroplex annexation is not even a debate but rather a part of planning. Look at Fort Worth and the outer Dallas suburbs (cities over 100k) this is not even a debate. Instead of debating annexing areas the mayor should have followed suit and focused on bringing jobs into the city rather than debating and rethinking a plan that has been studied and vetted. The mayor cannot prevent people from building homes and sprawling out, she can choose to incorporate it into city’s blueprint and manage it or not. My examples are to show a lack of vision and a focus on different priorities. The council should be thinking about quality jobs and how to get those to San Antonio to improve our economy rather than restudy vetted plans.
The mayor is an urban planner. She stopped the annexation because it doesn’t make sense for San Antonio the government entity. It should be applauded.
The folks who have built their homes out in the county should incorporate their own suburban cities (just like they did in the Dallas area) so they can manage their own issues. San Antonio has enough on its plate already.
Is there a tax giveaway that the SA City Council/Bexar County Commission doesn’t support?
This is NOT a tax giveaway. My understanding is they are building a new building (which does not currently exist). The abatement is on part of the tax that would have been paid (but is not being paid now and won’t be paid if the building is not built.)
The City/County is investing in the future assessment rolls by encouraging new construction now that will be added at the end of the abatement period.
It is important to know the difference, because it would be a giveaway, if the new project required, say, a full extension of city services that are not there now and are passed on to other taxpayers during the abatement period. But this new project will be a net gain, plus whatever you think about the jobs. The fact that that are “new” jobs and not being relocated from another area of the region is also a net benefit.
I don’t support abatements when jobs are relocated within the region without a real net benefit. Growing the job base and increasing construction provide more benefits than the temporarily abated taxes that don’t even exist now.