Monday Musings #20: Bringing the Spurs Back Home to Hemisfair

City Council took a big step forward in its campaign to bring the San Antonio Spurs back to Hemisfair with its Thursday vote to expand the convention complex plan as described in the original Project Finance Zone (PFZ) to include a sports and entertainment district.

Count me among those excited by the action, and eager to see the city’s most ambitious investment ever enter a new public phase as voters prepare for the June 7 runoff to select a new mayor and several city council members.

Some misconceptions about the financial terms agreed upon by the Spurs and Bexar County 26 years ago have surfaced, which I untangle below.

The Spurs did not promise to give Bexar County 20% of the team’s profits as part of the original SBC Center deal, despite some saying otherwise now, 26 years after Bexar County and the Spurs negotiated the deal that created the SBC Center, now the Frost Bank Center. More on that down page.

How San Antonio will pay for the expanded convention center complex

With its vote to modify the existing Project Finance Zone (PFZ), City Council has now made it possible for the PFZ, approved by the Texas Legislature and originally adopted by council in 2023, to help fund a new arena for the Spurs that is expected to cost more than $1 billion.

That taxing mechanism shifts the burden from local taxpayers to the state, which supports the downtown development plans by allowing San Antonio to retain a greater share of hotel occupancy taxes paid by visitors that otherwise would go to the state.

The convention center complex plan, as it exists conceptually, includes another expansion of the Henry B. Gonzalez Convention Center that likely will keep it the biggest such meeting and event site in the state; significant upgrades to the Alamodome, and a pedestrian land bridge over Interstate-37 that would better connect the Alamodome and near-Eastside to Hemisfair and the central business district and convention hotels.

Coupled with the looming redevelopment of Hemsifair’s southern acreage, much of it previously occupied by the federal government, what has been called Project Marvel by city planners now is on track to become San Antonio’s most ambitious public-private investment ever, a multi-billion enterprise set to unfold over the next decade that will dwarf the city’s $325 million expansion of the convention center in 2016.

 For many city residents who have been impatient to see confidential negotiations transition to a new phase of public participation and information sharing, the vote also signals a new period of community engagement that will include multiple public hearings and the release of exactly how the new Spurs arena would be funded.

As matters stand today, there are five sources of funding for the convention center complex, including a new arena:

• Economic activity in the PFZ, which means sales tax revenues that otherwise would have belonged to the state, instead will be returned to the city.
• Revenues generated by the continuing redevelopment of Hemisfair.
• Bexar County’s existing hotel occupancy tax, which could be increased by county commissioners. The tax was used to provide the majority of funding for the 2002 opening and subsequent upgrades to the Frost Bank Center.
• Significant funding from the Spurs ownership group.
• Revenues generated by operations at the new arena.

The new mayor and city council could also include infrastructure projects related to the convention center complex plan in the 2027 bond program. Additionally, private sector partners are expected to open new businesses in what would become an entertainment zone around the new arena. Zachry Group plans to complete the 200-room, 17-story Monarch Hotel, which is currently under construction, in 2026. The plan envisions an additional convention hotel.

Local residents will not see any increases in their property taxes or the sales taxes they pay. Spurs Chairman and CEO Peter J. Holt has stated on multiple occasions that the Spurs intend to stay in San Antonio and that any new arena would not be paid for by local residents.

The Spurs did not promise Bexar County 20% of the team’s profits 

At a recent mayoral candidate forum sponsored by Leadership San Antonio Alumni Association at the Centre Club atop the Weston Centre, mayoral hopeful Gina Ortiz Jones repeated a claim made by former Bexar County Judge Nelson Wolff that the Spurs promised to give the county 20% of its profits as part of the deal that saw the county persuade the team to move out of the Alamodome to a new arena on the Eastside.

The mayoral forum was moderated by Eddie Aldrete and recorded for distribution today on his Beyond the Bite podcast. 

Ortiz Jones expressed qualified support for the convention center complex plan that now includes a new Spurs arena, calling for greater transparency on the part of City Manager Erik Walsh and staff, and saying she would await further financing details. Rolando Pablos, her runoff opponent, expressed support for the project, calling it critical to the future of the city’s central business district and San Antonio’s ability to attract and recruit talented workers drawn to the city’s cultural amenities.

Both candidates agreed the Spurs are central to San Antonio’s identity, and pledged to keep them in the city, although no one associated with the team, including Austin investors in the ownership group, have ever suggested the team could leave the city. Still, the NBA franchises located in regional cities, including San Antonio, like Oklahoma City, Portland, Sacramento, New Orleans, and Memphis, are always considered targets for bigger metros seeking a team willing to move.

Voters in Oklahoma City approved a sales tax increase in 2023 to give the Thunder, formerly the Seattle SuperSonics, a new $900 million arena. More than 70% of voters approved the deal that has the city paying $850 million of the cost with the owners paying the other $50 million.

Unlike the Spurs, which have five NBA Championship trophies to their name and multiple former players in the Hall of Fame, the Thunder have yet to achieve any playoff success since moving to Oklahoma. The team was able to get a local sales tax overwhelmingly passed in December 2023 despite no major playoff success since their move to OK City in 2008.

This year could produce a very different result. The Thunder blew out the Denver Nuggets, 125-93, in Game 7 of their Western Conference Semifinals series on Sunday. The win returns them to the conference finals with home court advantage against the Minnesota Timberwolves and a chance to advance to the NBA Finals.

Wolff was not in office at the time of the county’s negotiations with the Spurs. Former Bexar County Judge Cindy Krier, who led the effort to wrest the Spurs away from the Alamodome and the promise of a new city-owned sports facility, held the office at the time. 

David Marquez, the county’s Executive Director of Economic and Community Development, led the arena negotiations in 1999 and remains in his leadership position today. County officials agreed to allow the Spurs to create a new subsidiary, Community Arena Management (CAM), to manage the new facility and its operations, including bookings by music acts and other entertainment entities. The deal meant the CAM, rather than the county, would be responsible for annual operational costs, in effect, obligating the Spurs to cover those costs if the CAM did not turn a profit each year. 

It was agreed that the county would receive 20% of CAM’s profits in the event third-party bookings and concessions at the arena exceeded expectations and CAM’s annual revenues were greater than $4.75 million. San Antonio, however, has traditionally not been a destination like nearby Austin for a steady offering of major music acts; in the 23 years since the arena came into operation, CAM has never turned a profit.

Marquez told the San Antonio Express-News in 2015 that county officials never expected the CAM to generate enough revenue to trigger the profit-sharing agreement.

CAM does pay an annual license fee of $1.3 million to the county as well as an annual payment of $1 million for arena maintenance. The Spurs paid more than $46 million of the $193 million construction cost, and in 2015, more than $25 million of the $110 million costs in arena upgrades. Since the arena’s opening, the Spurs have covered operational costs that have averaged more than $5 million a year, costs that would have been paid by the county had it retained control of arena operations.

Recent media reports have repeated the incorrect profit-sharing claim, which then made its way into the mayor’s race. All the more reason for the city of San Antonio and Bexar County to now share with the public all financing and revenue-sharing developments going forward.