Facing a $158 million budget deficit over the next two years, an early draft of the city of San Antonio’s 2026-2027 budget calls for raising property taxes as high as legally allowed without seeking permission from voters.
Even with that additional revenue, City Manager Erik Walsh said other big changes will still be needed to close the gap in these dire financial straits.
Those could include delaying the hire of more police officers, continued increases to city fees, shifting more of the city’s Fiesta costs onto event organizers, and financing streets projects over multiple years — to name a few of the proposals presented to council on Thursday.
“At the end of the day, our expenses are growing faster than our revenue,” Walsh told reporters ahead of that meeting. “So we’re going to have to approach it from both sides.”
San Antonio hasn’t proposed raising the tax rate for 33 years.
But slowed economic growth yielded a 2.1% drop in the city’s base taxable values this year. That’s been a hit to the property taxes that account for about 30% of the city’s general fund, which also receives money from CPS Energy, sales taxes and other sources.
The property tax increase city staff presented Thursday would equate to about $81 per year on the average San Antonio homestead. It would not apply to residents whose rates are frozen because they’re over the age of 65 or disabled — which account for about 46% of the city’s homesteads.
The final budget and tax rate won’t be approved until September.
But given the early opposition from council members surrounding the tax increase, Walsh told reporters that he was laying out a more detailed budget outline earlier than usual so they could conceptualize the realities of $158 million in cuts.
“Some of the council members [said] in the budget work session, ‘We don’t want to do any revenue issues. How do we cut our way out of it?'” Walsh said.
“We’re going to walk them through what that looks like.”
The biggest rate increase allowed
State law caps the amount that cities can collect in property taxes at 3.5% over the previous year — not including new growth added to the tax rolls — before they’d have to seek permission from voters.
It’s not clear yet what rate the city is proposing for the coming year, because property valuations are still being contested with the appraisal district.
But Thursday’s trial budget called for raising it as high as needed to reach the 3.5% growth cap, while also taking advantage of a provision in state law that lets the city go even further. By using what’s known as the “unused increment,” cities can grow revenue beyond the 3.5% cap if they came in below that in either of their past two budget years.
“The Legislature said, ‘We’re going to add this increment model so that you can tap into the unused property taxes when you voluntarily kept your rate below the state-allowed number,'” Assistant City Manager Jeff Coyle said Thursday. “[Cities can] apply that to sort of smooth out the ups and downs of the real estate market.”
San Antonio has some unused increment to roll over from the years when property valuations were rising rapidly.
Given the massive deficit the city faces this year, staff is recommending using it to generate another $58.2 million in property tax revenue over two years.
That’s in addition to the roughly $66.6 million the city would take in from raising rates to the allowed 3.5% growth cap.
Library admission, environmental fees and staff freeze
Given the rapidly rising expenses of a growing city, even maxing out the available property tax revenue won’t be enough to close a ballooning budget gap.
The city’s public safety budget alone is expected to grow by $80 million over two years due to a changing collective bargaining agreement and rising general expenses.
That’s without adding any of the new police officers called for by a study of the city’s law enforcement needs.
“Some council members will say that [more officers] needs to be the first thing you put in place, but the first thing we’re going to do is balance what we have,” Walsh said.
Other city costs are also going up with inflation, so staff is proposing an array of potential fee increases to help bring in more revenue.
The city presentation mentioned increasing a monthly parks and environmental fee on residents’ CPS Energy bills, as well as charging people who don’t live in San Antonio city limits to use the libraries, and passing down more Fiesta-related costs to partner organizations.
Councilwoman Phyllis Viagran (D3) suggested the city should also bump up fees on garage sale permits, while Councilwoman Marina Alderete Gavito (D6) recommended making speeding tickets much more expensive.
City staff also laid out possible cost-saving efforts it could use if the council doesn’t accept the full property tax increase being proposed. Those could include forgoing raises for civilian employees for the next two years, and slashing spending the city typically directs to local nonprofits.
The public presentation didn’t include specific examples, but Mayor Gina Ortiz Jones appeared to have some in front of her as she encouraged staff to go even further with the cuts.
“If you are a private entity charging a ticket fee, for example — you just have to be on the list. San Antonio Botanical Garden — they have an event called Bubbles and Blooms. They’ll be okay,” Jones said.
The city was suggesting cutting its botanical garden contribution down from $1.2 million to $1 million, which Jones said should be $0, before moving on down the list.
“A lot of these things, I mean frankly we shouldn’t be funding these things at all,” Jones said. ” … I’m not saying we don’t need [the San Antonio Book Festival] — I was just there this last time and it was great — but these are not things that the public needs to be paying for.”
‘Putting it on our credit card’
Slowed economic growth has already left city leaders with smaller-than-expected capacity for their upcoming 2027 bond election, which pays for major infrastructure programs.
Bonds allow cities to finance projects by borrowing money against their future growth, and under the city’s current debt service rate, that would only yield about $625 million for infrastructure projects in the 2027 bond — compared to a $1.2 billion bond in 2022.
The city hasn’t changed the debt service rate on residents in many years.
But since that portion of the property tax bill isn’t subject to the state’s 3.5% growth cap, city leaders are now recommending moving to a “variable rate” that will allow them to increase it as needed.
That could bring the bond up to size, while also allowing the city to move some projects it typically funds through the budget over to the capital program.
“We have about $7.3 million in the 2027 budget right now for street maintenance, and we’re cash funding it,” Walsh said. “We’re going to recommend we move that $7.3 million into the capital budget … and that frees up $7.3 million in operating [expenses].”
Jones hasn’t said whether she supports raising taxes for a bigger bond next year. The mayor typically helps rally support for such changes with voters.
Much of the next city bond is already committed to projects related to the sports and entertainment district that Jones has been critical of — at the same time San Antonio faces many critical infrastructure needs for flood and drainage.
On Thursday, Jones questioned the idea of moving even more projects into the city’s capital program.
“In plain speak for the public watching today, one of the recommendations is transferring items from our operational budget to debt,” Jones said. “That essentially means not paying for it in cash today, but putting it on our credit card.”
City staff will take the council’s comments into consideration as they put together a formal budget proposal that will be presented on August 13.
At that point, most changes the council wants to see will require at least six members to ban together and override city staff.
