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The prospect of cutting millions of dollars from the city budget and raising the property tax rate for the first time in 33 years weighed heavily on the San Antonio City Council on Wednesday.
During a mid-year budget briefing, city officials, including City Manager Erik Walsh, painted a grim picture of declining property tax revenue growth, the first time since 2011 during the waning years of the financial crisis, and expenses that will outweigh city revenue over the next five years.
“We've not been in this position for some time,” he said. “This is preliminary information that works its way through the process to eventually a certified roll that we receive from the appraisal district at the end of July, along with every other taxing entity, so governments can set their budgets.”
That included forecasts of taxable revenue from existing properties declining by 3.54%, while new construction is expected to add 1.41%. Combined, that amounts to a projected 2.13% decline in revenue growth.
For Fiscal Year 2027, the city expects property tax revenue collections to decline by 1.7%.
Long term, the city projects a $264 million shortfall through 2031 without intervention.
San Antonio’s fiscal year runs from October through September. During the summer months, the annual budget is refined before being presented to the council in August and approved in September.
The city has three primary sources of revenue for its general fund, which funds most city services: property taxes, CPS Energy payments, and sales taxes, among other revenue sources.
Potential utility rate increases are not factored into the forecast.
“We don't assume in either SAWS or CPS that the council ever approves a rate increase, so the forecast does not include any assumption in the next five years on any additional revenue because of any rate adjustments,” Walsh told council members.
City budget staff presented two scenarios: one does not include a property tax increase and involves cutting more than $130 million combined in 2027 and 2028. The second calls for a rate increase and reduces the two-year cuts to $70 million.
San Antonio Mayor Gina Ortiz Jones noted that between last year’s five-year forecast and this year’s, the projected deficit grew by about 17%, from roughly $240 million.
“When we're talking about increasing costs and potentially making some significant cuts, I want to make sure that those that are the biggest chunks of our budget, we're not needlessly expending resources, and that we have sufficiently accounted for all the corrections that need to be made so that we're good stewards of the people's money.”
Council members were split on how to move forward.
District 7 Councilwoman Marina Alderete Gavito said she could not support raising property taxes without the city first doing what it can to tighten its belt.
“To me, if we're not doing our part to make reductions, it's not fair to ask the taxpayers to help, to take the hit, to support our overspending,” Alderete Gavito said. “And I hate to classify it that way, but this is where the rubber meets the road, and we have to focus on our core services.”
District 3 Councilwoman Phyllis Viagran pointed to federal COVID emergency funds received by the city known as ARPA, or the American Rescue Plan Act.
“We knew in the pandemic, if the ARPA dollars didn't come, that we would be facing severe cuts. Nobody would be getting raises,” she said. “We don't know what our public safety would have looked like. ARPA came through. This is life after ARPA.”
Viagran, who was a city employee before becoming a city council member after her sister held the seat for eight years, said previous city leadership had no issue with issuing layoffs.
“I was an employee with the city of San Antonio in 2011 and I can tell you that that city manager had no problem laying people off. So if we are going to talk about where budget cuts come, you better be prepared to lay staff off. And I don't think any of us have that appetite,” she said.
The city has roughly 12,000 employees, and salaries make up about 70% of the city’s general fund budget.
Among other council members, District 4 Councilman Edward Mungia said he would not favor a tax rate increase. District 1 Councilwoman Sukh Kaur said she would consider it.
On the more conservative wing of the council, District 9 Councilwoman Misty Spears appeared eager to reduce the city’s spending.
“I’m ready to cut back on things. I'm real ready,” she said. “I've already looked at other cities and where they cut back on and there's some dangerous places you just can't cut 2% across the board.”
Spears, however, said she would not be open to any cuts in the police or fire departments.
District 10 Councilman Marc Whyte said a property tax hike should be completely off the table.
“Why are we having to spend so much money?” Whyte said. “I don't believe we have a revenue problem. This is a spending problem that we have to get a handle on and get a handle on it.”
District 2 Councilman Jalen McKee-Rodriguez responded directly to remarks from Spears and Whyte.
“I’m not going to be supporting across-the-board budget cuts if any departments are exempt from that, I did see that coming, but no deal,” he said. “In response to Councilman Whyte’s remarks, you can penny-pinch and shake our city departments’ piggy banks and find $100,000 here and $100,000 there if you want to cut entire programs, but you're not going to find much more than a few million dollars in savings across these departments. You're not going to find $130 million in cuts within departments whose budgets are $10 million.”
The city council has a daylong budget work session scheduled for May 22 to set priorities for the 2027 budget before it is refined by city staff and department heads.
