Local NewsTaxes & SpendingSan Antonio Allows California-Based Petco to Keep Tax Incentives After Company Missed Required Jobs Target

Petco is incorporated in Delaware and primarily headquartered in San Diego, California.

The city council, led by Mayor Ron Nirenberg, adopted an ordinance and a mutual termination agreement that indicated the city would relinquish its right to “recapture” any of the tax incentives, even though Petco only created 250 of the 400 jobs required by the contract. The package included a 10-year property tax abatement worth $278,000, a $250,000 grant, and $100,000 in training credits. 

Instead of overlooking the 150-job gap, the City of San Antonio had the right to enter a “clawback” phase in which it could have recovered the entirety of the tax incentive package, according to city officials.

Petco had originally been eligible for a $650,000 grant, but that amount was reduced in part due to the jobs shortfall. San Antonio taxpayers are still on the hook for the $250,000 grant and the taxes that Petco might have otherwise paid. The city said it reduced the tax abatement by about $43,000.

In a call with The Texan, Caitlin Cowart de León, public relations manager for the City of San Antonio’s Economic Development Department, highlighted Petco’s “philanthropic investment” and indicated the decision was based in part on the fact that the company invested $21.8 million, which is beyond the agreed-upon $5 million investment.

“They invested $21.8 million. They created 250 jobs. That didn’t meet the full requirement of 400, [but] it was still 250 jobs that were exceeding the wage requirements in the contract,” Cowart de León said, adding that Petco had given $6.5 million to causes such as city animal care services and Canines for Warriors.

“So, we look at these on a case by case basis and evaluate, to what degree they met the requirements of the contract, and then the amounts are adjusted accordingly, which is what happened here,” Cowart de León emphasized.

One of the members who voted against the decision was Councilman Clayton Perry (District 10), who cited the importance of the city enforcing its agreements.

“There’s great operation, great things that they’ve done here for the city. I understand that. Great philanthropy, but that’s not in the contract,” Perry said.

Echoing Perry’s concerns, Councilman John Courage (District 9) pointed out that there are other companies that are good “community partners,” but there is still a mutual expectation that the terms of contracts will be kept by both parties.

“I think we need to take a hard line on making sure that every contract that we agree to, we fulfill our part and that our partners fulfill their part, so I won’t be voting in support of the recommendation from staff today,” Courage said.

Councilman Manny Pelaez (District 8) said Petco went “above and beyond” and argued contracts are not intended to be “suicide pacts.”

While Petco sent someone to the council meeting to speak for its charitable foundation, the company did not send someone who could speak on behalf of the corporate office in San Diego.

Councilwoman Ana Sandoval (District 7), though she did vote to forgive the breach, said she was “disappointed” that Petco did not send someone to answer for the jobs shortfall. Referring to the mutual termination agreement, she added that they may have “assumed it would be approved.”

Sandoval also contended that the council was not engaging in “quid pro quo” with Petco, separating the mutual termination agreement from the philanthropic activities.

In a written statement to The Texan, the company pointed to the contributions it has made to charitable causes.

“At Petco, we are proud to be active members of the San Antonio community through the work at our San Antonio support center and Petco pet care centers, as well as the significant support provided to local animal welfare groups — including [Canines] for Warriors and the new center to support pets and military veterans — in partnership with Petco Love (formerly Petco Foundation), an independent nonprofit organization,” the company wrote.

“We remain committed to working closely with the city, county and state, and doing everything we can to further support the people and pets of San Antonio.”

As for Perry, he is uneasy about the long-term consequences of Thursday’s decision.

In his closing remarks, Perry said, “I see a dangerous precedent here on future opportunities where a company can come in here and sell the city a big bag of things with the knowledge, ‘Hey, in five or 10 years, they’ll forgive us this, we don’t have to pay that money.’”