The Midweek #75: Trust the City Manager and Team to Balance the 2027 Budget

San Antonio City Manager Erik Walsh returned this week from an annual meeting of city managers in Philadelphia. What did he learn there?

“I learned we are not alone,” Walsh said after returning home to complete staff work on the city’s fiscal 2027 budget, which goes into effect on Oct. 1. “Managers in other cities, especially in Texas, are all struggling with deficits and having to make tough decisions to balance their budgets.”

Flattening and declining real estate values and cautious consumer spending have combined to  force Texas municipalities to face tough choices: cut spending, raise taxes, or do both to comply with state law and produce a balanced budget.

Mayor Gina Jones isn’t making Walsh’s job any easier. In the past few weeks, she has targeted nonprofit organizations dependent on city funding, and called two different times in the space of one week for voters to go to the polls in November to support or oppose two signature city initiatives: the Ready to Work job training program, and the city’s Project Marvel, the most consequential downtown public-private development project since HemisFair ‘68.

While the mayor is promoting controversial approaches to cutting the budget and reallocating existing funding, there is no guarantee any of her ideas will carry the day. Since winning the election in a June 2025 runoff, Jones has consistently failed to persuade a council majority to vote in support of her initiatives. She has until Aug. 17 to win over council skeptics if she wants any issues added to the November ballot.

The mayor has put forward her proposals by memo, letter, and town hall. She seems less comfortable or interested in engaging Walsh and her fellow council members in face-to-face meetings.

The mayor and city manager have corner offices on the same floor in the historic city hall building. That doesn’t mean the mayor drops in on the city manager to informally kick around ways to address the budget deficit. People close to Walsh say he reads the mayor’s memos at the same time as everyone else. 

Walsh and team will present their proposed budget to the City Council on Aug. 13. It likely will contain a mix of spending cuts and enhanced revenue collections. San Antonio has not raised city tax rates for decades, and while a possible tax increase will now be part of the conversation, it’s possible that the numbers will work without one. Council will vote on the finalized budget on Sept. 17.

Meanwhile, Mayor Gina Jones is not waiting for Walsh. She is busy on social media promoting  her ideas for addressing the $158 million shortfall the city could face over the next two years.

There is an impulsive quality to the mayor’s hurried proposals, one following the other in quick succession without prior consultation with city hall colleagues. None of her proposals have come with detailed analysis, which is essential to testing their relevance.

Jones’ latest surprise came in a July 31 memo to city council posted on Facebook. Her latest impulse is to renew her quixotic and solitary campaign to undermine Project Marvel and construction of a new Hemisfair arena for the San Antonio Spurs.

“I support letting City taxpayers vote this November on their $489 million contribution to the Spurs arena, in the same way County voters voted on their $311 million contribution last November,” Jones commented this week atop the posted memo. 

Jones appears willing, even eager, to reverse the city’s course on Project Marvel, which includes a new arena, an expanded convention center and enhanced Alamodome, and redevelopment of properties acquired by the city from the federal government. Bexar County voters approved the public-private project to build the new arena in November following city council’s approval of a nonbinding term sheet with the Spurs.

That term sheet calls for the city to contribute $489 million and the county to contribute $311 million toward a new city-owned arena. The Spurs have agreed to a $500 million contribution, an additional $1.4 billion investment in surrounding private investment, and annual rent payments of $4 million to the city for the 30-year life of the deal. The Spurs are on the hook for any construction cost overruns.

“November would allow city voters to vote clearly informed by what they are paying, what they are receiving in return and whether the latter is good enough,” Jones wrote in a memo to City Council on Friday, as reported in the San Antonio Report.

Except taxpayers aren’t really the ones paying. Thank our visiting industry for providing the revenue the state has agreed to forego to allow San Antonio to fund such deep investments in downtown. The revenues ultimately will come from the taxes generated by the added economic activity in the zone. Those funds, of course, will be generated independently of local tax collections that go into the General Fund.

Spurs Chairman and Managing Partner Peter J. Holt and his fellow owners must be wondering if the city can be trusted to honor its agreements. Demonstrating a willingness to trash the term sheet in bad faith is a serious concern. There are other serious deficiencies with the mayor’s proposal, one that once again leads me to question her grasp of municipal finances and politics.

City voters are county voters. City voters constituted the majority of those who voted on the county’s November  ballot issues and, to the mayor’s enduring disappointment, approved the deal. The Spurs went on to reach the Finals in a season where they were hardly expected to get past the first round of playoffs. Were the election held today, the margin of victory would likely be even greater. 

Second, the funds dedicated to the new arena and other Project Marvel improvements will come courtesy of the state after legislators passed a bill allowing San Antonio to retain tax revenues  that otherwise would go to the state, provided that they be used for development projects downtown that enhance the visitor experience.

None of those Project Marvel funds will come from the city’s General Fund. The mayor is wrong to suggest to unsuspecting supporters that some sort of revisionist vote against the Spurs will result in the funds flowing to working class neighborhoods or the mayor’s preferred programs.

The mayor’s latest seat-of-the-pants fix for the budget follows her call the previous week to prematurely end Ready to Work, former mayor Ron Nirenberg’s signature initiative. The funding for that program comes from a 1/8 cent sales tax that voters overwhelmingly approved in November 2020. The mayor's proposal would ask voters this November to reverse that decision. 

Based on 50 years of experience as a working journalist, I am skeptical of Ready to Work and other job training programs. They tend to attract private sector contractors who under-deliver at best, or in documented instances over the years, are caught misusing public funds. People who stay in school and pursue a post-secondary degree enjoy the material benefits and other advantages that come over a lifetime. “Upskilling” adults in low-wage, unskilled jobs that keep them in poverty is a much bigger challenge.  

Ready to Work’s outcomes have been disappointing, and with funding set to expire, it’s doubtful the program will win sustained support in the long term. But as City Attorney Andy Segovia informed the mayor after she went public with her proposal, the decision to stop the program is not hers or council’s to make. It’s up to the voters. And given that voters approved Ready to Work by a 77% margin, I would argue elected officials should honor the vote and assess the program after the remaining $138 million is invested.

Even if the mayor succeeds in winning a council majority to add  Ready to Work on the November ballot, it’s questionable how much of its unspent funding can go to qualified city projects. The money can’t simply be added to the General Fund.

Nirenberg, meanwhile, is all but certain to be elected as the next Bexar County Judge on that November ballot. Many hope that he will bring the county staff into closer alignment with city staff, but how well he will work with Jones if she manages to kill his job training project remains to be seen.

Finally, the mayor is going after the General Fund support for nonprofits, which is modest in its totality, yet dangerous in terms of the unintended consequences of undermining so many organizations central to the city’s safety net of services and cultural institutions. Jones did not meet with any of the nonprofit leaders before calling for their organizations to be defunded. I’m not sure how familiar she is with their records in the community.

My advice to readers is the same I’d give to the mayor if she were to ask: Let Erik Walsh and his team do their job. I’ve been a close observer of city government in San Antonio for nearly 40 years, and the arrival of Sheryl Sculley in 2005 led to a transformation in the way the city manages its finances, bond programs, credit ratings, and its forecasting and budgeting. Year after year the city has hit its targets thanks to competent city staffers who might not be household names, but have served San Antonio taxpayers very well. Such work is difficult and requires significant institutional knowledge. So let’s await the Aug. 13 budget presentation with great interest, but also a little good faith. Enough trial balloons, and let’s end any talk of backing out of the city’s commitment to voters and the Spurs.