Public-private partnership for Spurs arena is creative, sound, equitable — and worthy of approval

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Bexar County voters will determine in the Nov. 4 election, with early voting Oct. 20-31, whether the county and city of San Antonio proceed with a plan to partner with the Spurs on building a new NBA arena downtown.

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We recommend voting for both county propositions, A and B, which call for investing money generated by the county’s hotel occupancy tax and vehicle rental tax to improve facilities associated with the San Antonio Stock Show & Rodeo, including Freeman Coliseum and the Frost Bank Center, and help pay for building an estimated $1.3 billion downtown arena.

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Proposition B, which involves the arena, is critical because the proposed arrangement between the city and Spurs for financing, building and operating a new arena is contingent on voters approving this ballot measure.

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In August, the City Council approved a nonbinding term sheet with the Spurs that provides a framework for each party’s obligations and states that its terms are void if the proposition fails.

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So, when county voters consider Proposition B, they’re also voting on the city’s arrangement with the Spurs.

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And that arrangement is an objectively sound and equitable deal that establishes a public-private approach to achieving the kind of bold vision for San Antonio’s urban core that has eluded our city for decades.

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The (good) deal
To be sure, the city and county are committing a lot — up to $489 million and $311 million, respectively, from multiple funding sources.

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For that investment, the Spurs would be making an unprecedented financial commitment for a small-market major league sports franchise. To begin with, the Spurs would contribute no less than $500 million to the arena project and would be responsible for any cost overruns despite being the arena’s main tenant.

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That is not only a significantly greater share of the cost — 38.5%, although likely more after paying for overruns — than the Spurs contributed to building the Frost Bank Center, it’s also far more than contributions from peer small-market franchises. By comparison, the Oklahoma City Thunder are contributing $50 million for a future arena that has been reported to be budgeted at $900 million to $1 billion.

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If that were the extent of the Spurs’ commitment, it would be substantial, but it’s merely part of what the team is agreeing to provide:

• Paying annual rent of $4 million, which will increase by 2% every year, resulting in more than $160 million over the initial 30-year lease.

• Contributing $75 million over 30 years to the city under a community benefits agreement in which the City Council will determine how to use the money for priorities such as early childhood education.

• Providing, either as a donation or a capital contribution, $30 million for the city to buy property from the federal government near the John H. Wood Jr. Federal Courthouse, which Project Marvel calls for converting into a music venue.

• Investing $500 million in the first phase of a $1.4 billion development plan within the Hemisfair Tax Increment Reinvestment Zone, with the Spurs and other developers delivering the remaining $900 million over 12 years.

 

A different approach
That last part is in many ways the most significant aspect of the deal.

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This arrangement follows the funding model for the future downtown stadium for the San Antonio Missions Double-A baseball team. The issuing of bonds for the baseball stadium is contingent on real estate development company Weston Urban — whose co-founders, Graham Weston and Randy Smith, also are Missions investors — having completed the design and financing for the first two phases of a development plan around the ballpark.

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That’s critical because those two phases — totaling about $575 million in planned hotel and apartment buildings — will create the taxable property value above the existing baseline in the Houston Street Tax Increment Reinvestment Zone to help repay the bonds.

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Similarly, the Spurs’ $500 million commitment, working with other developers, would get the ball bouncing on increasing the tax base around the new arena. And like the baseball stadium, the bonds for the arena won’t be issued until that development is moving forward.

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One other parallel is that both sports venues will be owned by entities controlled by the city and county.

Rather than scorned for committing public money toward these venues, the city and county should be lauded for forging a public-private partnership that is creative, sound and equitable.

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A different story
Many people are understandably wary of proposals to build another major sports venue here. They point to the Alamodome and Frost Bank Center as failing to deliver on promises, concluding that a downtown arena will do the same.

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But just as past success in one endeavor is no guarantee of future success in a new one, past failure doesn’t inherently mean that a new attempt with a different approach will also fail.

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For one thing, it’s unfair to label the Frost Bank Center and Alamodome as failures in that they both have brought some significant benefits.

Without the Alamodome, we would not have hosted multiple NCAA Final Four events, and the Valero Alamo Bowl would not be the tremendous generator of visibility, scholarship money and flat-out excitement every year.

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The Frost Bank Center, besides being the Spurs’ home for multiple championships, hosts many other sports and music events. And neither venue has been a financial drain on the city or county.

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Nevertheless, it’s true that the Alamodome didn’t lure an NFL team as many said it would, while the Frost Bank Center did not become a catalyst for uplifting that part of the East Side. On that latter item, though, a new Western culture-themed plan to expand the facilities around the Frost Bank Center and Freeman Coliseum offers an even better opportunity to bring economic development and educational opportunities to that area, engaging with the community in a more intimate way than a professional sports team is equipped to do.

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And to do that, Bexar County Judge Peter Sakai has said repeatedly that the Spurs need to leave.

To that end, we’ve previously articulated our support for the San Antonio Stock Show & Rodeo’s plans, so our support for Proposition A follows. In many ways, opponents of the arena and rodeo propositions are arguing for the status quo.

 

No reason to delay
A sizable part of the community, led by Mayor Gina Ortiz Jones, seeks to delay — if not derail — this endeavor. Jones has been beating the drums for an independent economic analysis, complaining that the one recently presented was conducted by a company with ties to Spurs ownership. But the company is the same one that conducted a similar study in Philadelphia that the mayor specifically cited in her failed City Council resolution to delay voting on the nonbinding term sheet.

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There are three things to consider in rejecting such calls for delaying the process.

First, the term sheet approved in August is not a final deal. That will be negotiated in much greater detail as the project progresses, and laying out a proposed framework is a critical early hurdle that must be cleared.

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Second, there’s nothing stopping the mayor from pursuing an independent analysis now. Its findings may be able to inform those more earnest negotiations. While Jones’ call for an independent analysis is reasonable in that respect, the idea that approving the nonbinding term sheet needs to wait for one is an illogical siren call to the not-a-dime-of-public-money crowd.

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But what we hope not to see is a repeat of the mayor’s crass display at the Aug. 21 City Council meeting at which she attempted to embarrass Peter Holt, chairman and managing partner of Spurs Sports & Entertainment, by repeatedly asking whether the Spurs would object to doing another study.

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It’s irrelevant whether the Spurs are OK with the city doing another study, and there’s no reason for the organization to call for one. If the mayor wants to commission such a study, that’s up to the city. It was clear that what she wanted to do — summoning him to the gallery podium with no notice — was to get her supporters in the audience riled when he politely, and correctly, refused to play her game.

 

And third, Jones speaks of an independent economic analysis in almost religious reverence that belies and obscures some basic realities. The mayor has said that if a second analysis shows the “Spurs’ numbers … are right on,” then all will be well with the deal. Perhaps she’s sincere about that.

It’s an appealing statement until you strip the veneer of its simplicity. To start with, all economic impact analyses of proposed projects are estimates. So if they don’t match precisely, then what?

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The mayor’s worshipping of data comes off as if she envisions that the estimates from such an analysis will be entered into a formula to calculate precisely how much the Spurs should contribute and how much — if anything — the city should commit. That’s not, nor should it be, how deals are negotiated.

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What’s not an estimate — and should be focused on — is the unprecedented commitment from the Spurs outlined in the framework as it’s been structured. The Spurs are not merely investing in San Antonio, they’re betting on San Antonio. Voters should, too.