Boom With A View

The peril and promise of being one of the fastest-growing cities in Texas.

December 2007By Comments

In a state full of legendary boomtowns, the city of San Antonio has long been the odd man out. While Houston, Dallas, and Austin all experienced multiple economic explosions in the past quarter century, San Antonio held fast to its old identity—a drowsy, largely poor, peacefully irrelevant tourist and military town where you could get a good chalupa, wander through the Alamo, and take a sun-dappled stroll along the river. The city remained, charmingly, the Land That Time Forgot.

No more. In case you haven’t been stuck in one of its newfangled traffic jams, San Antonio is now riding the crest of a broad, diversified boom that is unlike anything Texas has ever seen. Corporate campuses of granite and travertine blossom like bluebonnets on the city’s undeveloped outer edges. Vast residential subdivisions bearing names like Redbird Ranch march north and west across parts of the Hill Country that until recently housed only rock quarries and raccoons. Roads are being torn up and rebuilt, pipelines and power lines laid, limestone ridges blasted with dynamite and sculpted by Caterpillar tractors. It is hog heaven for builders, boosters, and developers and a slowly gathering nightmare for environmentalists, residents of old core neighborhoods left behind by the skyrocketing growth, and a lot of folks who liked San Antonio as it was. Either way, there is no stopping it—at least not yet—and there is no going back.

Though the local economy was beginning to change by the late nineties, most people date the San Antonio boom from 2003, when Toyota and 21 of its suppliers made the stunning announcement that they would be building a pickup truck plant with 4,700 jobs in what was previously considered the middle of nowhere—a stretch of sparsely populated ranch land about ten miles south of downtown. Since then, the city has seen the sort of growth most places in America can only dream about. From 2003 to 2007, 22,060 jobs were created when 97 companies opened new local operations—a list that includes, in addition to Toyota (which opened its plant in 2006), Microsoft, Washington Mutual, Accenture, American Funds, Caterpillar, Wachovia, and the National Security Agency. All were aggressively pursued by San Antonio, which is highly organized and deadly serious in its hunt for new jobs. In spite of the closing of two large Air Force bases—Kelly and Brooks—San Antonio has emerged as a net gainer of military jobs, as two other bases, Fort Sam Houston and Lackland, have both undergone dramatic increases in personnel. These are in addition to the city’s existing success stories: AT&T, which moved to the city in 1992; homegrown companies like Clear Channel, Valero, and USAA, respectively the nation’s largest radio company, its largest refiner, and one of its largest insurers; and a mushrooming multihospital biomedical industry that now employs 108,000 people. The new San Antonio campus of Texas A&M, to be located not far from the Toyota plant, will begin construction in 2010 and eventually enroll 25,000 students.

All this has attracted a good deal of the right sort of media attention, particularly since the population in the metropolitan area is 53 percent Hispanic and much of it has traditionally been poor. In May, Forbes.com ranked San Antonio third on its list of “The Best U.S. Housing Markets”; Fast Company had already ranked it as one of the “15 Hot Cities for Creative Types.” It has made Inc. and Entrepreneur magazines’ lists of best cities to do business in, and the AARP recently named it one of the nation’s top fifteen “retirement dream towns.”

The city is simply taking off, and taking off in very specific directions—thus far mostly to the north and the west. To fully grasp what is happening, take a drive along what was once the lonely, undeveloped, outer-outer rim of the city—Texas Loop 1604, which used to be the back way to Sea World. West of U.S. 281, you can see how much the land is filling in, how many malls and strip malls and mall-ettes and office buildings and access roads and apartment complexes and residential subdivisions now crowd in where there used to be only live oaks and prickly pear. As you head west, counterclockwise around the city, you pass Texas Highway 16, the modest four-lane road to Helotes that is jammed with new Hill Country residents at rush hour. Farther down is Texas 151, which leads to a gigantic, 3,500-acre mixed-use development called Westover Hills—perhaps the single best example of the sort of economic development that is going on. There you can see the site of Microsoft’s billion-dollar data center, rising on steel girders and circled by power lines. Everywhere there is new construction, much of it high-tech (data centers, back office operations), and everywhere there are recognizable names (JPMorgan Chase, Scientific Games, Capital Group, Lowe’s, Hartford Insurance).

Why now, you might ask, after such a long and peaceful metropolitan slumber? Though there are many factors, including the enormous ripple effect of the Toyota move, the development here is also clearly a product of overdevelopment elsewhere. “Other cities that were ahead of us—like Houston, Dallas, Denver, Atlanta, Los Angeles—to some degree logically topped out,” says former San Antonio mayor Henry Cisneros, the city’s first public official to strongly advocate diversified economic growth. Cisneros now chairs BioMed SA, a nonprofit group that promotes San Antonio’s health care and medical research sectors. “Their land prices got high, the congestion was heavy, the distances to work were long, and workforce availability began to get tighter. Suddenly, the development community discovers a place that not only had the infrastructure and the political will but also wasn’t oversold, overbuilt, overcrowded.”

And it wasn’t expensive. By the standards of most established cities, San Antonio’s real estate is startlingly cheap. The median home price is $146,400. Think: one fifth the cost of San Francisco’s. Even electricity is cheap: 30 to 40 percent less than in Houston and Dallas. This is why, in the lands due west of downtown, 80,000 new house sites have been built or platted by developers.

But not everyone is thrilled with what is going on in San Antonio. Much of the environmental community is aghast at the extent of the construction on the city’s north side, the location of a political hot potato known as the Edwards Aquifer Recharge Zone. San Antonio gets nearly 100 percent of its drinking water from wells drilled into the aquifer, which you can think of as a huge slab of extremely porous limestone. But unlike most underground reservoirs, this one—a type known as a karst aquifer—does not filter water that runs down into it. So any pollutants that go in (as they did last summer when a sewage line near the intersection of U.S. 281 and Loop 1604 ruptured and leaked for a month in the heart of the recharge zone) go directly into the city’s drinking water.

Concern for water quality was at the core of a bitter, years-long battle over a development now being built near 281 known locally as PGA Village—a 1,000-room Marriott resort featuring two PGA golf courses and more than 1,500 luxury homes. Environmentalists lost, and the project is now being marketed as “Cibolo Canyons.” The city is moving so aggressively northward with such developments, in fact, that Boerne, Bulverde, and New Braunfels have maneuvered to block it, annexing land and asserting their extraterritorial jurisdiction in the form of what has come to be known as the Boerne Wall. (Part of the reason is to keep San Antonio from getting its hands on the water in Canyon Lake.) In the west, Castroville and Helotes, also directly in the path of the city’s growth and terrified of what is about to happen to them, for a variety of reasons have no such convenient defenses.

Then there is the related question of how the city spends its development dollars at a time when, in spite of its booming outer zones, the old urban core on the south, west, and east sides remains poor, underdeveloped, and stuck with abysmal schools. For Cibolo Canyons, the city allowed developers to set up what amounted to their own tax district; they, not the city, would get the tax revenue, a form of subsidy. “Those amount to huge tax breaks to do the development,” says San Antonio Express-News columnist Carlos Guerra, who has been a persistent critic. “They wind up paying taxes to themselves. PGA Village is an outrageous waste of public resources. We are funding the infrastructure of gated communities.”

In the downtown area, which draws 9 million tourists a year, the city is using $130 million of federal “empowerment zone” bonds—designed to give a boost to struggling inner-city businesses in distressed areas—to build an enormous Hyatt Hotel topped by luxury condominiums. The city council is currently considering another $25 million of those bonds to help a private developer fund a large “luxury urban village” called Piazza San Lorenzo on the River Walk. “It’s a misuse of empowerment zone bonds,” says Heywood Sanders, a professor at the University of Texas at San Antonio and a leading expert on the economics of cities. “It’s not going to help the poorer neighborhoods on the east and west sides of town. This is all about making a downtown that works only for tourists.”

Less affluent neighborhoods do seem to have been left out of the economic bonanza. Nowhere is this more obvious than in the recent flight of families from inner-city school districts to districts farther out on the rim, a phenomenon affecting Hispanics and blacks as well as whites. A recent study that compared 1988 school enrollment with 2004 enrollment shows predictably huge increases in the school districts located beyond Loop 410. Boerne ISD is up 109 percent; Northside up 52 percent; North East up 45 percent; and Southside up 85 percent. In the inner city, Edgewood dropped 17 percent, San Antonio dropped 8 percent, and South San Antonio dropped 10 percent. On the east side, where most of the black population lives, student enrollment at Sam Houston High School has dropped 25 percent since 2002, as people moved farther east, apparently toward better schools. Fully 48 percent of all new construction in the past few years has occurred in a single school district: Northside, which, if you think of the city as a clock, sits between 9 and 11.

Though home to few big companies (AT&T being an exception), downtown San Antonio is prospering because of the city’s tourism. But it is increasingly surrounded by areas that are declining even as the outer rim of the city explodes, and its workforce reflects this: Only 9.5 percent of it consists of 25- to 34-year-olds with college degrees, giving the downtown a rank of 49th among major metropolitan areas in what is considered a key indicator of urban success (by contrast, the percentage for the Portland, Oregon—Salem, Washington area is 54.7).

Still, there aren’t many people from any political camp arguing against jobs these days, especially when they are in non-tourist industries in a town that still desperately needs a strong wage base. One of the city’s great points of pride is a homegrown company called Rackspace Managed Hosting, which is currently renovating a shopping mall on the city’s east side into offices. Started by former Trinity University students, Rackspace has grown over the past seven years from 12 to 1,800 employees, and its revenues have risen from $1.6 million to more than $224 million. By San Antonio standards, the company pays very well (the average annual salary is $51,000), and it is expected to double in size within the next few years.

Jobs like these were the cornerstone of Henry Cisneros’s vision for the city when he became mayor in 1981, a vision that went well beyond just attracting businesses. “The purpose here was not to line some people’s pockets,” says Cisneros, who is now the executive chairman of CityView, a company that builds low-cost housing, or as they prefer to call it, workforce housing, for working families. “The purpose here is to create a new middle class out of people who are poor in a city that is ethnically mixed, very diverse. If we can do this, it really does constitute a model for how cities can advance the national agenda of social progress.” It’s a breathtaking idea, but in the old neighborhoods of the inner city, the work is just beginning.

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