The Spurs want to build a $1.2 billion basketball palace downtown, and they’re working behind the scenes with city leaders to figure out how to pay for it, according to sources familiar with their discussions.
Taxpayers could be on the hook for most of the construction costs.
Spurs Sports & Entertainment is proposing footing the bill for about one-fifth of the planned arena, say the sources, who requested anonymity. And the NBA franchise owner is eyeing a city-controlled downtown tax zone to help pay for the project.
Several weeks ago, Spurs executives approached state Sen. José Menéndez, who co-sponsored the 2023 bill creating the zone — which sets aside hotel and sales tax revenue for convention center and professional sports facilities — about the possibility of tapping it for an arena.
“They’ve asked me do I think the legislation would apply,” the San Antonio Democrat said. His answer was yes.
The zone is expected to collect more than $200 million in tax revenue.
But the city may have other plans for the money. City Manager Erik Walsh has said the tax fund will pay for upgrades at the Alamodome and an expansion of the Henry B. González Convention Center.
Not that city officials are standing in the way of a new arena in the center city. They’ve been talking with the Spurs for at least the last year and a half about relocating the team’s home court from the Frost Bank Center on the East Side in a bid to infuse San Antonio’s sleepy downtown with more energy and spectacle.
The parties have signed non-disclosure agreements to keep their talks under wraps. But sources say the Spurs and the city have already set part of their emerging plan in motion.
The city is looking to lease or buy the University of Texas at San Antonio’s Institute of Texan Cultures property at Hemisfair to potentially contribute for a Spurs facility. UTSA President Taylor Eighmy has also signed a non-disclosure agreement, according to documents obtained by the San Antonio Express-News under Texas’ open records law.
City officials are also considering how to pay for construction of the arena.
Potential government funding sources could include municipal bonds, a visitor tax like the one that paid for the Frost Bank Center and the sales tax zone created by the Legislature last year.
The Spurs will likely pitch a mixed-use development around the arena, with apartments, restaurants, stores and office space, as team owners building sports facilities in other cities have done, sources say. It’s unclear whether the $1.2 billion estimated cost includes those components.
The Crypto.com arena, home of the Los Angeles Lakers, is next to the Los Angeles Convention Center and surrounded by restaurants, bars and hotels. The Fiserv Forum, where the Milwaukee Bucks play, anchors a complex called the Deer District that’s packed with apartments, restaurants and bars.
A Spurs arena would be built amid a bundle of other projects, such as an expanded Convention Center and upgraded Alamodome, the Alamo Visitor Center and Museum, more apartments, a hotel at Hemisfair and renovations to San Pedro Creek. Arena supporters say the combination of amenities would appeal to San Antonians who want to live and play downtown, not just tourists.
Downtown San Antonio is still struggling to recover from the pandemic downturn that took hold four years ago.
Office tenants have reduced their spaces or decamped to other parts of the city in the wake of the pandemic, and the convention business has yet to fully rebound. That means fewer customers for restaurant, bar and store owners, who are also grappling with a maze of torn-up streets and traffic cones outside their establishments.
David Adelman, a local developer who has renovated historic buildings along Houston Street and built apartments at Hemisfair, said he isn’t privy to conversations between the Spurs and the city, but said an arena surrounded by a mixed-use development would be a “shot in the arm for downtown.”
But some San Antonians are loath to see their tax dollars used to benefit wealthy team owners instead of residents struggling to make ends meet. Since 2021, the Spurs ownership group has re-capitalized, bringing in a troop of new investors that includes Austin tech billionaire Michael Dell, San Francisco-based private equity firm Sixth Street Partners and Airbnb co-founder Joe Gebbia.
Forbes magazine in October pegged the team’s value at $3.2 billion, a figure based on revenue-sharing among teams in the league, market size, the Frost Bank Center and the Spurs brand. That estimated value was up 63% from the previous year and came several months after the Spurs selected French phenom Victor Wembanyama with the No. 1 pick in the NBA Draft.
Another big question for taxpayers: What about the Frost Bank Center? The $186 million arena, which can hold around 19,000 fans, opened in 2002 and was renovated in 2015 for $101.5 million. The team hasn’t publicly said why it’s looking to leave the facility, which it leases from Bexar County, though some outsiders have said it lacks the trappings of a modern arena.
Hopes that the East Side arena would draw more businesses to the neighborhoods around it never materialized — a fact Spurs and city officials will have to address if they roll out plans for a downtown facility.
The Spurs’ lease expires in 2032.
Academics point to decades of research showing professional sports facilities spur little economic activity, and question whether government subsidies are worth it. David Macpherson, an economics professor at Trinity University, described spending tax dollars on pro sports facilities as the act of a “reverse Robin Hood” — “taking money from low-income taxpayers and giving it to rich team owners.”
“Skip the public subsidies. Have the teams pay for it. If it’s really that good of an economic deal, then they should pay for it,” Macpherson said. “If it’s a good investment, people should be clamoring to build stadiums.”
Spurs and city officials declined to comment for this story. A Bexar County spokesperson said County Judge Peter Sakai has not received an arena proposal.
New pot of money
One option that wouldn’t involve residents’ tax dollars would be the new “project financing zone” that the Spurs recently asked Menéndez about.
It allows the city to take the growth in the state’s share of tax revenue generated by hotels within 3 miles of the Convention Center for 30 years. The taxes are collected on hotel rooms and retail and beverage sales. Legislative analysts predicted the city could reap $222 million in tax revenue, though Walsh has said his staff will produce its own estimate.
Menéndez said city officials pitched him on drafting legislation for the zone because they said San Antonio is in intense competitions with other cities for conferences, trade shows, concerts, exhibition games and other events. They wanted to use the funds to upgrade the 31-year-old Alamodome and expand the Convention Center, which has less exhibit space than some rival venues.
“It’s a way to finance expansion of our facilities without putting it on the backs of our taxpayers, who are already stretched thin enough,” Menéndez said.
The money can be spent on “qualified projects,” which the legislation defines so as to make both the Convention Center and Alamodome eligible, along with an “arena, coliseum, stadium” or other facility dedicated to sports and community events.
“If it would work for the Alamodome, it would definitely work for another arena,” Menéndez said. “The question is what the city wants to do — that policy decision lies with the city.”
Sources say city officials have told SS&E executives that the money should be used to pay for renovations to the Convention Center and Alamodome, but that talks are ongoing.
Fort Worth and Dallas have used project financing zones to help pay for the Dickies Arena, which hosts the Fort Worth Stock Show & Rodeo, and to expand the Kay Bailey Hutchison Convention Center in downtown Dallas. Corpus Christi plans to use such funds to upgrade the American Bank Center arena.
Since 2000, state and local governments have provided $19 billion for financing professional sports stadiums, or about $330 million per venue, according to a research paper published in 2023 in the Journal of Policy Analysis and Management.
Cities have used venue taxes from ticket sales and other purchases made in stadiums, taxes from assessments within special districts, visitor taxes from hotel stays and car rentals, “sin” taxes on products like tobacco and alcohol, and taxes on businesses as well as surplus funds to finance professional sports facilities, stated the authors — researchers at Kennesaw State University in Georgia, the University of Maryland and West Virginia University.
Local governments have also used tax-exempt municipal bonds and revenue bonds.
Last year, Oklahoma City voters overwhelmingly approved a proposition to use at least $850 million in taxpayer funds to build a $900 million arena downtown for the Oklahoma City Thunder, the Oklahoman reported. Most of the money will come from a one-penny sales tax, and the NBA team is kicking in $50 million.
The newest NBA venue is Chase Center, the Golden State Warriors’ home court in downtown San Francisco, which cost $1.4 billion and opened in 2019. The team self-financed the arena, making it the only privately-financed NBA facility in the modern era.
The second-newest arena is the $524 million Fiserv Forum in Milwaukee, where the Bucks have played since 2018. About $250 million came from state and local governments, a portion of Milwaukee County’s annual share of state revenue and a ticket surcharge, the Milwaukee Journal Sentinel reported. Another $174 million came from the team’s owners and $100 million from former owner Herb Kohl.
Wheels turning
SS&E confirmed in April it is in negotiations with the city and other parties for an “economic development project” at the Institute of Texan Cultures site, a disclosure that came in a letter the team owner sent to the state arguing against disclosing information sought by the Express-News under state open records law.
The University of Texas Board of Regents conditionally approved a plan to lease or sell the roughly 13½-acre site to the city for what the meeting agenda described as a “potential downtown revitalization project.”
UTSA plans to demolish the building occupied by the museum, which is known as the Texas Pavilion and is one of the last remaining structures erected for the 1968 World’s Fair. The university has said it will build a new home for the institute either near the Alamo or at UTSA’s Southwest Campus.
Returning to Hemisfair would be a homecoming for the Spurs, who played at HemisFair Arena for the team’s first 20 seasons from 1973 to 1993. The facility was later razed.
In 1993, the team moved to the $183 million Alamodome, a facility the city built in an unsuccessful bid to attract an NFL team. It was too big for NBA games but San Antonio residents didn’t want to pay for another arena, so Bexar County proposed raising hotel occupancy and car rental taxes to build the facility now known as the Frost Bank Center.
Like the dome, the arena could soon be without a marquee tenant. During a recent address hosted by the North San Antonio Chamber of Commerce, Sakai said the county would have to figure out how to repurpose the Frost Bank Center if the Spurs leave.
“The county’s at the table, but at the same time, the conversations really are between the City of San Antonio and the Spurs,” Sakai said.
