This story has been updated.
San Antonio’s financial state has only worsened since city leaders first floated the idea of raising taxes earlier this year.
Rather than bumping up the tax rate as high as they can, however, city staff is now pitching bigger budget cuts and financial restructuring that will offer more wiggle room if the economy doesn’t turn around in the next few years.
Their budget proposal on Thursday called for a 3.9% increase to the city property tax rate — amounting to about $36 more per year for the average San Antonio home with a taxable value of $231,356.
None of the changes are final until debated and approved by City Council in the coming weeks, but the proposed $4.4 billion fiscal year 2027 budget eliminates more than 100 civilian positions, consolidates city departments and defunds several senior nutrition centers, among other cuts.
It doesn’t add a single new police patrol officer, but it raises fees the city collects on everything from Alamodome parking to trash carts and missing library books.
“What we’re feeling is probably the same thing that other tax entities in Bexar County are feeling,” City Manager Erik Walsh told reporters in a media briefing Wednesday. “So we felt like we needed to be conservative.”
As of this week, city leaders say San Antonio’s net taxable value is down about 2.7% — worse than projections issued earlier this year — due to slowed economic growth and new tax exemptions for business property and homeowners.
Sales tax is also coming in below expected levels, as is revenue that the city anticipated bringing in from CPS Energy selling energy onto the Texas grid in the hot summer months.
Walsh said they’ve beefed up budget cuts to help bridge the gap, choosing programs they didn’t think were getting much use and wouldn’t be particularly disruptive to residents.
The senior nutrition centers they’re closing, for example, were serving very few people per year, he said.
“I don’t think there’s any major reductions to services that people feel,” Walsh said. “We have our comprehensive budget reviews … [and] we are making recommendations in terms of reductions based on efficiencies.”
Originally, the city had plans to max out property tax revenue this year to avoid major cuts.
But Walsh said they backed off that approach so they’ll have room to grow in the coming fiscal year, while staying within the state’s revenue cap.
Texas caps the amount of property tax revenue cities can collect at 3.5% over the previous year, but also allows them to roll some of that growth forward if they don’t max out, in what’s known as the “unused increment.”
San Antonio has some unused increment from rosier years that it will roll over this time, Walsh told reporters Wednesday, and it will avoid hitting the 3.5% cap in fiscal year 2027, so that it can do the same again next year if needed.
City leaders are also planning to build in a larger cash reserve than normal, putting away the usual 15%, plus another $48 million that could be used to cushion a future budget in case revenues dip even further.
“We’re projecting that in fiscal year 2028 — taking into account new improvements — there will be zero taxable value growth,” Walsh said. “We’ll see what happens as we go as we move closer next spring and late early summer.”
San Antonio’s fiscal year runs Oct. 1 through Sept. 30.
The council will receive more in-depth briefings from the city departments in the coming weeks, and approve the final budget on Sept. 17.
Council leaves door open on tax increase
The staff presentation is just the start of a lengthy budget approval process, in which the City Council can make changes before the final vote.
On Thursday, however, Councilman Marc Whyte (D10) sought to go ahead and shut down the prospect of a tax increase, urging colleagues to vote against an agenda item detailing that proposal.
“If Item 5 today fails, we shut down the conversation on property tax increase. Is that right?” Whyte asked.
Walsh responded in the affirmative. While the council doesn’t have to commit to a tax rate for several more weeks, Walsh said rejecting staff’s proposal would force budget-writers to immediately start identifying roughly $30 million more to cut from this year’s budget.
“We should say, ‘hell no’ to Item 5,” Whyte replies. “Vote no. Stop it now. Make the appropriate cuts and move forward.”
While numerous members stressed their concerns about piling a tax increase onto families’ already strained budgets, they ultimately approved the rate proposal, with Whyte, Marina Alderete Gavito (D7) and Misty Spears (D9) casting the lone nays.
Mayor Gina Ortiz Jones has spent the past month urging colleagues to consider dramatic changes to avoid raising taxes, but said that Whyte’s idea would cut council out of the process, leaving city staff in charge of what to cut.
“There’s obviously an opportunity as we go through this for that [rate] to be lower,” she said Thursday. “Closing that [discussion] off would trigger cuts … absent an understanding of where the [money] would come from [and] absent an understanding of the impact on the community.”
As it stands, Jones said, city staff’s plan to close a $158 million deficit relies on both a 3.9% increase this year — plus another 4.4% tax increase in the coming year as well.
Less cash, more borrowing
Even though major revenue sources are down, this year’s $4.4 billion proposed budget comes in a whopping 8.6% larger than the city’s 2025-2026 budget.
That’s mostly due to major projects coming online in the capital budget, Walsh said, including a $2.5 billion San Antonio International Airport (SAT) redevelopment that’s expected to be completed in 2028.
Airport construction alone accounts for 6.3% of this year’s budget growth, while the city’s overall operating expenses rise by a more modest 2.3%.
As the general fund has gotten tighter, San Antonio has leveraged its strong credit rating to pay for more projects over time instead of with cash, according to Walsh.
But this week’s budget presentation indicated that slowed economic growth is also hitting the city’s bond capacity — meaning the council will likely be asked to raise taxes a second time if they want to fund projects like libraries, parks, streets and drainage in their districts.
The latest projections indicate San Antonio could have about $450 million to spend in its 2027 bond program, compared to about $625 million projected last year and $1.2 billion in the city’s last bond election in 2022.
Walsh plans to ask the council for flexibility to bring the bond capacity back up as high as $1 billion through a “variable rate,” which would allow the debt service portion of the property tax bill to rise and fall as needed.
He wants to start the bond discussion after the council finishes the city budget, when he’ll have an update on how much of the bond is needed for the Spurs’ downtown sports and entertainment district known as Project Marvel.
“It will be less than the $220 million to $250 million we shared with them last June,” he said Wednesday.
But Jones, who is still calling for a public vote to reaffirm the city’s commitment to the project, said the bond program and city budget are too closely intertwined to be considered separately.
“It’s really hard to kind of appreciate the significance of these things when we have not been provided with a debt management plan,” she said.
