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The San Antonio City Council has approved a non-binding term sheet with the San Antonio Spurs for a new arena downtown after an effort to pause it failed 4-7.
The term sheet outlines how a new $1.3 billion to $1.5 billion Spurs arena on the site of the former Institute of Texan Cultures in Hemisfair would be paid for, who would own it, and how nearby development would be built.
Here’s the framework the city council just agreed to:
What money is going into the arena?
The Spurs have committed to contribute a “minimum” of $500 million directly to the construction of the arena. The team has also committed to cover any and all construction cost overruns.
Bexar County would contribute $311 million or 25%, whichever is less, to the arena. That contribution is contingent on county voters approving an increase in the county’s venue tax in November.
The City of San Antonio would contribute $489 million or 38% of the arena cost, whichever is less. The upfront contribution would be paid by an issuance of debt in the form of city bonds, which would then be paid back through four separate revenue streams. The bonds would only be triggered if guaranteed Spurs development is ready to break ground.
Where is the city’s contribution coming from?
The city’s bonds will be paid by rent from the Spurs, ground lease payments from private developers, new tax revenue captured in the Hemisfair Tax Increment Reinvestment Zone (TIRZ), and state hotel tax revenues from the Project Finance Zone (PFZ).
The Spurs will pay $4 million in rent to the city, which will own the arena through a controlled subsidiary, with 2% annual increases. That will generate $160 million over the 30-year lease term.
Private developers will pay ground rents to the city for new development on city-owned land surrounding the arena.
The Hemisfair TIRZ collects the increment of property taxes for the geographic area around Hemisfair. That increment is all tax revenue above the amount of taxes collected in the “base year,” when the TIRZ was first created. The Hemisfair TIRZ will capture the taxable value of new development.
These first three revenue sources would pay for 52% of the city’s debt service on its bonds. The PFZ would pay for the remaining 48%.
The PFZ is a special tax zone the Texas legislature authorized for San Antonio after local lobbying that sets aside what would normally be state hotel tax revenues for certain eligible projects. The state identified those eligible projects as convention centers or venues. Infrastructure improvements around those venues can also be funded with PFZ dollars.
What else is the city on the hook for?
The city still has to purchase the land of the former Institute of Texan Cultures from UTSA, valued at around $60 million.
The city will also have to pay, through a potential 2026 bond, for infrastructure improvements downtown for all of the Project Marvel Sports & Entertainment District developments. The city has estimated those infrastructure needs will cost up to $250 million.
Once the arena is built, the city will have to foot the bill if it wishes to increase police presence and support other related public services in the area. It’s unclear what those costs would be.
What else are the Spurs offering?
The term sheet outlines that the Spurs will guarantee $1.4 billion in private development surrounding the arena, split into two phases over 12 years.
The development is “guaranteed” because under the deal the city would not issue its bonds for its arena contribution until the first phase of $500 million in development from the Spurs was ready to break ground.
The Spurs are offering $75 million in a community benefits agreement, $2.5 million every year for the next 30 years.
The use of those funds would be up to the city council’s discretion.
The Spurs would pay $30 million to the city to purchase the U.S. General Services Administration property across Cesar Chavez St. from the ITC for the arena site.
The Spurs have also committed to paying the city’s entry wage as a minimum for all full-time employees who will eventually staff the arena. That minimum wage would be $18/hour.
Spurs Chairman Peter J. Holt did not commit to making that the entry wage for the arena's part-time workers.
What else does the term sheet outline?
The term sheet allows for the arena owner — the city-controlled entity — and the public to have input on the arena design.
It also described a peer-to-peer mentorship program for small business contractors and subcontractors that the Spurs would lead.
The term sheet gives the Spurs exclusive broadcast, naming, and advertising/signage rights.
The Spurs will be responsible for all operations and maintenance costs for the arena but will work with the city and county to develop funding mechanisms for renovations between the 13th and 15th years of the arena. Those mechanisms will be decided at the time of the renovations, not in current negotiations.
The term sheet also includes a 30-year non-relocation agreement. That agreement limits the Spurs to playing nearly all home games in San Antonio, including some potentially in the Alamodome. The Spurs would be allowed to play a limited number of home games at international or “neutral” sites “as required by NBA rules and regulations.”
Walsh said it was not clear if the agreement as written would prevent the Spurs from playing home games in Austin as they have in the last several years and as they plan to in the upcoming 2025-2026 NBA season and said that would need to be worked out in further negotiations.
What’s next?
Bexar County voters, which include all city voters, will decide on November 4 on whether to raise the county’s venue tax.
If that is successful, the city council could choose to call an infrastructure bond election for either May or November of 2026, according to City Manager Erik Walsh, and still have enough time to finish necessary improvements ahead of the arena’s construction.
City voters would then get a second chance to vote up or down on the project through that bond election.
Mayor Gina Ortiz Jones said after Thursday's votes that she would push to put that bond election on the city ballot rather than council issuing the bonds on its own, which it legally can.
If the venue tax vote fails, Walsh said the city, county, and Spurs would have to “regroup.”
Walsh said even though the term sheet is approved, he won’t return to the negotiating table with the Spurs until after November’s venue tax election has made the path forward clearer.
Design and construction of the arena is expected to take 57 months, just shy of five years, according to the terms sheet. That design would need to begin in 2027 to meet the goal of opening for the 2032-2033 NBA season.
