With all the air-glockenspiel that goes on when you're rocking out to "O Valencia!", you probably aren't paying much attention to the verb tenses of the lyrics. But when you take a closer look at the words, you'll notice that they make a lot of jumps in time. The tenses in this song are all over the place, but, because we're dealing with a lyricist who has a creative writing degree and is well known for his intellectual lyrics, maybe there's a reason for it. Let's take a closer look at how the past, present, and future tenses fit into the narrative of this song.
The speaker uses past tense verbs like "gave," "swore," "heard," " ran," "hit," "went," and "was," to describe the actions that immediately surround Valencia's death.
There does seem to be a common thread here. You'll notice there is never a mention of Valencia ever doing anything for herself; she always acts for the good of the speaker or simply does what he wants. Since all of these events are described in the past, maybe the speaker is trying to either forget about or overcome the guilt he feels for being—he probably believes—the sole cause of Valencia's bloody death.
Both of the first two verses have the same structure: two lines describing why the two lovers shouldn't be together, then the speaker having a display of passion that overrides reason. For example, the first verse tells us that Valencia, in the present, "belong[s] to the gang" and "can't break away" but the speaker's "hands on [his] heart" show his desire for her to try to be with him. The second verse explains in more detail why the two can't be together, but the speaker tries to overcome this by "shout[ing] out [his] love to the stars."
How exactly do these images of hopeless love fit with the present tense image of her "blood still warm on the ground?" Well, they display the two most immediate emotions the speaker needs to deal with: overwhelming love and soul-crushing grief. While trying to fight back feelings of guilt by placing them in the past, the speaker places the purity of his love and the sadness of his love's death in the forefront of his mind by putting it the song's present tense. Also, by placing the beginning and ending of the love story in the present, they seem to happen at the exact same time. This fits well with the predetermined tragic ending that we get with stories like this.
The future tense only comes up in two places: in the bridge to the chorus ("we'll go, we'll go") and when the speaker swears, "I'll burn this whole city down." These lines show both a hope for an escape to a better life and the threat of revenge when those plans are destroyed.
Even though the speaker does switch to future tense "I'll burn this whole city down" in the middle of the chorus, it comes in a much more intense form in the last two lines of the song. By placing the lines of hope for the future—"we'll go, we'll go"— before lines recognizing Valencia's death—"with your blood getting cold on the ground"—and then finishing with a threat—"I swear to the stars/I'll burn this whole city down"—we see a very quick progression of the speaker's emotions from something like romantic fantasy, to recognition that Valencia is dead, to full-fledged anger. The fact that the future is used for both the fantasy and the oath of revenge shows how quickly and violently plans can change.
Essentially, this song creates a map of a mind twisted by a wide range of emotions. Guilt is in the past tense; love and grief are in the present tense, since they're the primary emotions driving the song; and hope and anger are in the future tense, showing that the speaker has a lot more to work through as he deals with the tragic events that he set in motion. Don't take our word for it, though. Do you have a better explanation?