San Antonio Council approves application for $5M DIAG grant to renovate Defense Health Agency site at Fort Sam

San Antonio City Council on Oct. 9 approved an ordinance authorizing the city to apply for and accept, if awarded, $5,000,000 from the Texas Defense Economic Adjustment and Assistance Grant (DIAG) program, with a $10,000,000 cash match included in the city's FY2026 capital budget.

The request, presented by interim director and retired Marine Maj. Gen. Juan Ayala of the Office of Military and Veterans Affairs, would support renovation of the Defense Health Agency'preferred site aboard Fort Sam Houston known as the South Beach Pavilion. Ayala said contractor estimates place renovation costs between $36,000,000 and $40,000,000 and that the Defense Health Agency projected the move could create approximately 560 jobs.

"The purpose today is to request, from you all city council the approval to apply for and accept the 2025 DIAG grant, Defense Economic Adjustment Assistance Grant, in support of the Defense Health Agency," Ayala told council during the presentation. He said the site selection followed a multi-year effort that included federal and local partners and cited prior DIAG awards the city secured for other military infrastructure projects.

Ayala and other presenters said the city and Bexar County have each committed $10,000,000 toward the project and that staff and county partners are seeking additional funding to cover remaining renovation costs. In the presentation, Ayala stated, "We've committed 30,000,000 and the difference is between 6,000,000 and and 10,000,000," and said Defense Health Agency funding or other sources would be pursued to fill gaps.

Jeff Webster, co-chair of the Military Transformation Task Force and president and CEO of the Greater San Antonio Chamber, told council that the project requires both technical work and political advocacy at the federal level. "There's a lot of things happening that can change the direction of this city, not just the next year or two, but for generations to come," Webster said, urging continued coordination among city, county and federal partners.

Councilmembers pressed staff on timeline and regulatory steps. Councilmember Phyllis Fria Grande (Councilwoman Spears in the transcript) asked whether environmental and historic-preservation assessments had been completed; Ayala said NEPA and environmental assessments have been done and contractors had prepared scope estimates. Ayala described DIAG awards as typically structured over a two-year grant period and said staff would provide a detailed timeline if the grant is awarded.

Action and next steps: A motion to approve item 3 was made and seconded during the Oct. 9 meeting; the motion carried. City staff will proceed to submit the DIAG application and, if awarded, accept the funds and continue coordinating with Bexar County, Joint Base San Antonio and the Defense Health Agency on project funding and scheduling.

The ordinance caption read in council records requests authority for submission of application and acceptance upon award of DIAG funds in the amount of $5,000,000 with a $10,000,000 cash match and lists the Office of Military and Veteran Affairs as lead staff. The council did not record a roll-call vote in the meeting transcript; the mayor announced that the motion carried.

Community and economic impact: Presenters said the renovation would bolster San Antonio's defense and medical mission ecosystem, support local job creation and strengthen civil-military partnerships. Contractors' cost estimates and final federal decisions will determine the full funding plan and construction timeline.

Council members and local partners said they would continue political outreach and technical coordination to improve the city's competitiveness for defense missions and related economic activity.