The City of San Antonio’s program for attracting and retaining new business is undergoing an overhaul.
Leaders of the Economic Development Department told a City Council committee Monday they will kickstart a strategic planning initiative to review the city’s role in economic development and update the guidelines used to qualify business investments for various tax breaks and grants.
The planning process will begin after an industry consultant is selected in February, said department Director Brenda Hicks-Sorensen, who was hired in July 2021 shortly after a proposed set of guidelines was introduced but never finalized.
Since then, and in the wake of a pandemic that has battered the local economy, the department has worked to embark on a strategic plan initiative that will define the city’s role in economic development and identify effective incentives guidelines.
That includes determining the fiscal impact of projects that could be incentivized and how those projects serve the community’s goals for equity and sustainability, said Hicks-Sorensen, adding she looks at incentive policies as an investment strategy.
“If I did not have to ever do an incentive deal in my career, that would be fantastic,” she said. “One of the emphases that we look at when we’re doing policies is how do you make a strong investment for the community that really serves [the] long term?”
Though state law requires taxing entities like the City of San Antonio to evaluate their guidelines for granting tax abatements every two years, the entire process was delayed by the pandemic. There is no such review mandate for grant and loan agreements.
The proposed guidelines put forth in June 2021 were designed to allow the city staff to evaluate a company seeking economic incentives based upon criteria in several categories — targeted geographic areas, economic benefit to the city, the character of job creation and labor force, and infrastructure impact — rather than on a promise to meet certain terms and fixed numbers.
Staff would then give the business a score that correlates to incentive levels and the duration of the agreement. The Austin-based public policy consulting firm TXP assisted in developing the new guidelines.
One major change proposed to the policy was using tax abatements for larger, more substantial projects, those requiring an investment of $200 million or more, and granting smaller projects only tax rebates. It was also proposed that the minimum wage for workers on incentivized projects be increased to $15 an hour.
“I certainly have some questions and some concerns” about the proposed plan, Hicks-Sorensen told members of the Economic and Workforce Development Committee. “We’ve really focused a lot on the policy but I think we need to take a step back and look at process.”
In her briefing to members of the committee, Hicks-Sorensen laid out a planning process that includes gathering feedback, analyzing best practices and educating city leadership on the administration of policies.
It will also include a “perception study” to determine reasons why a business would not consider investing in San Antonio in order to address and improve those perceptions, she said. Such a study has never been done in the context of economic development.
“One of the questions that I have been having with our partners is, ‘Do our incentives impact our current deal flow?’” Hicks-Sorensen said. “Meaning, is there a perception out there about our incentive policy that maybe is precluding people from even expressing an interest?”
Council members said they would like to see incentive guidelines that contribute to the city’s housing needs, workforce development, higher wages and gender pay parity.
Councilman Manny Pelaez (D8), who chairs the committee, said he worries that the incentive policies being developed have the potential to discourage investment by companies like Toyota.
The Japanese automaker chose San Antonio for its $2.1 billion Tundra assembly plant in 2003 after being awarded more than $1 million in incentives from the city plus more from the county and state. More recently, the city awarded Toyota nearly $10 million in incentives for a major plant expansion.
“Are we scrubbing so hard to where, if we had to do [that] all over again, what would the result be?” Pelaez said.
Hicks-Sorensen said the planning process also will take a look at projects “in hindsight” to ensure that the city is attracting the companies it wants as well as declining to offer incentives when appropriate.
The updated set of economic development incentive guidelines is scheduled to be presented to the council for consideration in the fall and for approval in December.
