Tax freezes might come to San Antonio. Where exactly, and who's eligible?

by Ben OlivoJuly 30, 2019
The East Side community of Government Hill is being considered for a tax freeze program. Photo by V. Finster | Heron contributor

City officials continue to hammer out a policy that will offer eligible homeowners in certain neighborhoods an abatement on the city portion of their property tax bill, up to 10 years. A 1999 Texas law allows municipalities to power to offer incentives, including tax abatements, to property owners in struggling areas, in exchange for investment into the property. It gives property owners an incentive to fix up their structures without fear of their taxes increasing as a result.

However, in San Antonio, city officials are tailoring the policy to help more established homeowners whose neighborhood is gentrifying around them.

The city's Neighborhood and Housing Services Department wants to use existing programs, such as Under 1 Roof or owner occupied rehab, to count as the investment toward the property, which would then trigger the tax relief. Veronica Soto, director of the Neighborhood and Housing Services Department (NHSD) said her department has checked with the city attorney's office on the strategy, but hasn't been given a ruling as to whether the law will allow a benefit to activate an incentive.

In defining the targeted areas, Soto and her team are considering the area's size, population, homeownership rate, age of housing stock, and income levels.

"If there's an area that has significant displacement pressures, this is a way to relieve that pressure," Soto said. "With a program like this, they can have more time—5 years, 10 years—where that pressure is not as intense."

Communities being considered as neighborhood empowerment zones (NEZs), as they are known at the state level, are Government Hill and Denver Heights on the East Side, the near West Side, and Hot Wells and another community near Brooks. Soto said her team hasn't decided which areas to bring to the City Council for first consideration, potentially as early as September.

Soto wouldn't comment specifically as to each targeted area's boundary, nor about how homeowners would qualify. However, she described the spirit of the policy as it's being written here.

"The neighbor who just bought the house next door may be in an NEZ, but if they are not the five-year owner of the home, they can't benefit from it," Soto said.

State law says cities can designate NEZs for up to 10 years.

[ Previously published: Tax freezes sought for near West Side, Denver Heights, Government Hill. ]

Pressure everywhere

About 200 members of COPS Metro Alliance packed City Council chambers on March 20, 2019, to raise concerns over the city's displacement prevention strategy. Photo by Ben Olivo | Heron

In recent years, city leaders have felt the pressure to create policy to counter some of the unintended consequences of growth spurred by incentive policies, such as the Center City Housing Incentive Policy. The pressure ramped up earlier this year leading up to the May 4 election. In particular, community organizing group COPS Metro strong-armed Mayor Ron Nirenberg to fast-track his anti-displacement policy, of which NEZs are a component.

One of the main factors NHSD is considering is the lost property tax revenue the program would take from San Antonio's general fund—of which there is no preliminary figure, Soto said. Keep in mind, the tax abatement would only apply to the city portion of an owner's property tax bill; they'd still pay other taxing entities.

In the current city budget, projections showed property tax revenue of $362,000 amounted to 28 percent of the general fund total of $1.26 million. The total city budget is $2.8 billion.

Ian Benavidez, NHSD's affordable housing administrator, implied there would be a cap, or amount of lost tax revenue the city could absorb, in order to offer the relief. He said the city could help more people by giving less of a tax rebate, and less people by giving more of a tax rebate.

"These limits are still be explored as we develop the policy," Benavidez said.

This all must still be approved by the City Council, which could happen in concert with the budget adoption process in September, before it takes effect.

In the coming weeks, as they do every year around this time, the City Council is expected to make some tough decisions regarding the city budget, which is already feeling the constraints of external and internal policy making.

It's unclear the level of impact, for example, recently passed state legislation, such as Senate Bill 2—which limits local governments' ability to increase tax revenue to 3.5 percent without voter approval—will have on the budget process. Or SB 1125, which eliminates right-of-way fees telecom companies pay to cities—a $7.3 million hit to the local budget, city officials contend.

In June, the City Council approved a local homestead exemption, which city officials said would save the average San Antonian $28 annually on their property tax bill, while costing the city $5.8 million in lost tax revenue—about the same as 36 police officers.

Lessons from Fort Worth

In crafting its own policy, San Antonio looked to Fort Worth, which began using NEZs to spur economic development in 2001, and which caps their zones at five years.

Two years ago, Fort Worth revamped its program, and dwindled the number of NEZs from 20 to six. However, the move was more of an expansion, which increased the square miles of the policy from 33 to 47.

From 2009 to 2016, Fort Worth saw a 71 percent increase in property values inside its NEZs—from $3.9 million to $5.6 million.

In its policy, Fort Worth uses NEZs to increase investment, create affordable housing, rehab existing affordable housing, and better the quality of social services, education and public safety in each zone. It's targeting areas with an abundance of substandard and aged housing stock, low median incomes, and a scarcity of businesses.

Whereas San Antonio is looking more at homeowners, Fort Worth targets residential and commercial property owners, and offers them tax abatements, fee waivers and a release of city liens (as long as they are not the responsible party). In recent changes to its program, Fort Worth no longer incentivizes investor-owned properties, or single-family rentals. No stand-alone bars, either. Bars that are part of mixed-used development, however, can benefit.

Sarah Odle, Fort Worth's neighborhood development coordinator, said the big tax abatement deals that typically go to larger companies are good for local economies. Neighborhood empowerment zones, she said, allows smaller property owners a similar benefit.

"There's nothing else that's going to help a homeowner get a tax abatement, that is going to give you a break to make improvements to your property, that's going to give the small family-owned business the chance to have the same break these huge corporations get," Odle said.

"When you think about your neighbors ... they're made up of people who live there and the small businesses that make up that neighborhood and how they all integrate together. We need that. We need the dry cleaners on the corner and the mom-and-pop small grocery store or florist. We don't need just huge deals. We need the small things that make up our neighborhoods."

Contact Ben Olivo: 210-421-3932 | ben@saheron.com | @rbolivo on Twitter

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