Developers of a new retail and office spot soon to be built near Pearl say they want to carve out a unique taxing subzone to help offset the cost of public improvements in the area.
Plans for the development at Camden Street and West Jones Avenue in River North, revealed during a recent council committee meeting, include an “art focused” retail district along the River Walk, between Pearl and the San Antonio Museum of Art.
In the architectural renderings by Studio8 Architects, several buildings encircle a plaza, a pedestrian bridge spans the river, connecting Pearl to the site, and the river bank and existing parking areas under the highway are redesigned with stadium-style seating.
McCombs Enterprises acquired the six acres of untaxed land from CPS Energy for the project in early 2023. CPS had deemed the former service center as surplus property and put it up for sale. The purchase price was $29.5 million.
“Pearl has done tremendous work, the San Antonio Museum of Art is one of our great civic institutions, and the river, frankly, is the reason we’re all here,” said Jon Wiegand, managing director, McCombs Enterprises. “One of our stated goals is to make sure that we weave this area together with a really thoughtful project that all of San Antonio can be proud of.”
In May 2023, the state passed legislation that made the property eligible to become a municipal management district (MMD), which would allow McCombs to direct the collected tax revenue toward redevelopment of the site.
“It just gives us the opportunity to … be able to charge a line item of taxes to help repay and refund the initial upfront cost of that infrastructure and development that’s going to be necessary to actually get that large of a site going,” Joe Shields, executive vice president of McCombs Enterprises and grandson to the late Red McCombs, said at the time.
Shields estimated the redevelopment would have a “nine-figure” price tag.
Two years later, on August 6, the City Council approved placing the MMD on the ballot, which allows property owners within the district to vote on whether to authorize the proposed measure.
“One of the reasons we set up the MMD … is it allows us to go sell bonds, putting no credit risk or no ask of the city [which is] especially relevant at a time like this,” Wiegand said.
Meanwhile, the developer has applied to the city’s Midtown Tax Increment Reinvestment Zone (TIRZ) for funding a possible park, community space, public art, a parking structure and other infrastructure.
The developers aslso are exploring potential affordable housing options, which could be located off-site, said a city staffer.
TIRZ funds are generated from any new value, or growth, created within the zone when new development occurs. The tax increment base is the starting property value of all taxable property within the TIRZ when it was created.
The council recently approved millions in Midtown TIRZ funding for the San Antonio Botanical Gardens and the San Antonio Zoo, and financing the purchase of land for a new Spurs arena downtown. Those projects exist outside the boundaries of the Midtown TIRZ, which is currently set to expire in 2060.
But council members who see the tool as having achieved its goal of drawing private investment to the area recently asked city staff to evaluate an earlier term date, which could mean rolling an estimated $500 million in tax increment over to the city’s general fund.
That could still happen, Wiegand said. “We’re not proposing to touch any of the increment that exists in Midtown [TIRZ] today,” he said. “Our entire project has been focused on participating in the increment that we deliver at our own risk going forward.”
The developer will ask the TIRZ board to approve creating a “subzone” within the TIRZ that would pay its own increment into the subzone and receive the funds back over time.
A subzone is a term the City uses to separate the finances of one project from the general TIRZ, said a City spokesman, and was used previously with the Midtown TIRZ for projects developed by Oxbow at Pearl.
Chapter 311 of the state’s tax code spells out uses of a subzone for cases in which the zone’s boundaries are expanded, thereby creating a subzone.
It states that subzones within a TIRZ are expected to report the tax increment base value, captured appraised value and total appraised value of the additional acreage for each reporting year.
The Jones Avenue project subzone would be located within the existing TIRZ boundaries which encompasses River North, Pearl and areas along Broadway Street. City staff are still analyzing the proposal.
Wiegand also reminded the council’s Planning and Community Development Committee, during which the request was presented, that the project as a retail development would generate “incredible sales tax” for the city.
“We project to contribute incredibly meaningful to the tune of north of $160 million to be used for the City of San Antonio property tax, sales tax, and that does not include SAISD,” he said.
District 4 Councilman Edward Mungia asked if a sales tax abatement would be part of a package offered to the developer through the TIRZ.
“We would not recommend doing sales tax abatements,” said Justina Tate, assistant city manager. “That just opens the door to additional public dollars going to a development.”
