In response to the September 22 San Antonio Express-News article, Credit Human $8.8M incentive package at Pearl provokes skepticism, Centro San Antonio’s Pat DiGiovanni has outlined why incentivizing a Class A office at Pearl is appropriate, and how it is supported by market analysis, and in line with SA Tomorrow. Let’s work together to build more great destinations throughout our city and continue the momentum of building a great downtown for the entire community.
In a recent Editorial in the Express News, the headline reads, “No incentives for Credit Human move.” The editorial states that the deal does not include enough new jobs, the incentives are not reflective of the city’s equity budgeting priorities and that the city and county would be reducing tax revenue from the overall community. Three key points need to be made in response to the editorial.
First, let’s break the city and county incentive package down to the facts. Economic Development 101 suggests the best and most cost effective economic development programs are the ones that retain and expand existing businesses. Kudos to the County for offering a ten-year 90% tax abatement worth $2.97 M to preserve 435 jobs and adding another 50. The cost to attract 500 jobs from outside San Antonio would be far greater than the dollars we are talking about here.
Next, without the city’s incentives, this project does not move forward. In a recent market analysis conducted by the city and Centro, new office development did not meet the required threshold of a reasonable rate return to investors (7.75%) to warrant this product type. The economics just don’t work. More importantly, if there is no project, there are no incremental tax dollars generated to offer. With the city’s tax abatement incentive, the city is delaying collection of the incremental dollars and allowing Credit Human to apply those tax dollars toward $5.6M of critically needed public infrastructure. Counter to what was stated in the editorial regarding “equity budgeting”, the city is not taking dollars it is already spending elsewhere and directing it toward this project. As a matter of fact, the vast majority of these incentives are coming from a special revenue fund and not the general fund. In the end, kudos to the city for leveraging a 13:1 ratio of private investment to public support.
Second, great cities have great downtowns and great downtowns have great places and neighborhoods that surround them. Public investments like the Museum Reach extension of the San Antonio River and moderate levels of incentives have created this incredible renaissance within the urban core. In 2002, when Silver Ventures acquired the Pearl property, the annual ad valorem taxes on the property were less than $150,000 per year. Today, Silver and its related entities pay $5.6 M in annual ad valorem taxes, which factors in any rebates they receive. The Pearl and the Credit Human project symbolize what is possible in creating places that benefit the entire community. One should recognize that moderate levels of incentives are more than recouped through new property taxes, sales taxes and CPS revenues on this new development.
Lastly, the Pearl has elevated San Antonio’s status as a 21st Century City. It has created momentum like we have never seen before, or at least in recent history. It is a place that has attracted the creative talent and workforce to our community that enables San Antonio to compete for economic opportunity. And perhaps just as important, the Pearl has incubated local, small and midsize businesses like Twig Book Shop, Local Coffee, La Gloria, Dos Carolinas, Bike World and many others that call Pearl home. This would not have been possible without public support and a vision to create this extraordinary place along the river.
These incentives are not entitlements. They are economic tools supported by thoughtful analysis to retain and grow jobs and increase the tax base. We should not lose sight of the fact that private capital is a taking significant risk in an unproven sub-market, especially the commercial office market.
Let’s congratulate the City and County for making the investments that are needed to catalyze development and retain an 82 year old company along with the additional jobs and talent it affords. Let’s work together to build great destinations throughout our City and continue the momentum of building a great downtown.