Jobs and wages are at the center of proposed changes to the city’s policies around potential tax breaks for businesses that expand or put down roots in San Antonio.
The new guidelines could help San Antonio more efficiently and effectively compete against other cities for new jobs and better pay, said Brenda Hicks-Sorensen, director of the city’s economic development department, and be more transparent while doing it.
“There were always some nuances [in our policies] that were negotiation points that sometimes then caused — I don’t want to say confusion,” she said. “But you want to be very transparent for both the end users, our customers, City staff, City Council and the public.”
In a briefing to City Council on Wednesday, Hicks-Sorensen laid out the components of a policy that might be less nuanced but provides a matrix that also would ensure a higher level of capital investment in parts of San Antonio where it’s needed most, she said.
The council is scheduled to vote on the policy at its Dec. 1 meeting and it would take effect Jan. 1, if approved.
The proposed policy is the first of other anticipated changes to the city’s Strategic Framework and Workplan the council approved in September.
Economic development incentives are a tool most major cities use to attract new investment and include Chapter 312 tax abatements and Chapter 380 tax rebates that, for businesses looking to relocate, cut the initial cost of moving or growing.
“We’re really looking at what kinds of revisions we need to make to the incentive policy in order to really address the modern economy … and better compete with our peer cities,” Hicks-Sorensen said. “The proposed policy continues the emphasis on job creation.”
It also supports wraparound services for employees and high-wage opportunities with an increase in the minimum wage requirements, she added.
Under the current policy, in order for a company to qualify for incentives, it has to provide at least 50 jobs or make a capital investment of $10 million in something like a new factory. The company had to pay what is considered a living wage ($13.34/hour) for 100% of its jobs, and 70% of the jobs had to pay an “all-industry” wage of $18.25.
The proposed policy would increase both of those requirements, compelling the company to both create at least 50 jobs and make an investment of at least $10 million. The wage requirement increases to 100% of jobs paid $17.50 an hour and 90% paid $20.54.
Any job creation and investment above those levels make a company eligible for longer tax abatement/rebate periods — from three to four years up to 10 years (the maximum by state law) for a $200 million investment or jobs creation that exceeds 1,000.
In the end, the more a company pays its workers, or the more jobs it creates, the higher the base tax abatements or rebates it qualifies for.
Additional incentives are available to companies that choose to expand or locate in regional centers identified in the SA Tomorrow Comprehensive Plan or areas with an equity atlas score of seven or more. The incentives are created out of city taxes alone, Hicks-Sorensen said, and if an existing company qualifies for abatements or rebates, the incentives are applied only to new investment.
“The proposal also includes enhancements for our target industries,” Hicks-Sorensen said. Targeted industries that also qualify for added incentives include information technology security and infrastructure, mobility, sustainable energy, corporate services and bioscience anchors and catalysts.
Catalytic projects, the kind that have major infrastructure requirements such as a vehicle manufacturer or semiconductor plant, can also get the city’s assistance with things like building roads and with site acquisition and site development.
“Rather than them coming to us necessarily and saying, ‘Could you possibly do something like this?,’ we want to be proactive and say we will do things like this if you bring that kind of project to us,” said Alex Lopez, assistant city manager.
Also incorporated into the policy is a change in how the city responds to prospective companies that inquire about incentives.
The new process cuts the time it takes to generate an offer letter from three months to 48 hours. It “keeps San Antonio in the game,” Hicks-Sorensen said, by reducing the chance San Antonio will be eliminated by a site selection consultant early on.
“That to me tells me everything we need to know about our past competitiveness with regard to being able to compete for some of these larger types of economic development initiatives,” Mayor Ron Nirenberg said of the current lengthy process for responding to site selectors.
“The speed at which we can begin to get this through our process is a huge step in the right direction.”
Nirenberg also likes that the proposed policy changes are more defensible to the public, he said. “Clearly we will not be offering incentives in the cases that we used to across the board.”
Councilman Jalen McKee-Rodriguez (D2) said he appreciated the new policy because his district expects that incentives go toward businesses that provide a community benefit, including jobs.
But because the zoning in his East Side district “isn’t quite ready for a particular industry,” McKee-Rodriguez also asked for the city’s planning department to be part of the conversation around attracting targeted industries.
Councilwoman Teri Castillo (D5) also requested more discussion with the economic development department on how tax abatements for large commercial or industrial developments impact neighboring property values.
“One of the concerns I continually hear from my neighbors is that we do want to see businesses [come to San Antonio] but we want to ensure folks are paying their fair share as residential property taxes continue to skyrocket,” Castillo said.
Hicks-Sorensen said her department is continuing to look into that issue.
State law requires taxing entities like the City of San Antonio evaluate their guidelines for granting tax abatements every two years, an interval that was interrupted by the COVID pandemic. The city embarked on the effort earlier this year.
But the changes are not related to pandemic-related effects on the economy or the city’s budget, said Councilman Manny Pelaez (D8), who is chairman of the city’s Economic and Workforce Development Committee.
“What we’re trying to do is align our policy with best practices but also bake in our values … inclusion, equity, diversity, internships, second-chance hiring, workforce development, employee advancement,” Pelaez said.
The incentive policy standardizes what is expected in return, he added, obligating “them to be good corporate citizens and join us in our efforts to make the tide in San Antonio rise for all San Antonians.”