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Manteca needs to heed lesson of Weston Ranch

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POSTED January 9, 2010 3:05 a.m.
Managing a bust is perhaps more important than directing a boom.

Manteca like other cities must now figure a way to survive the tail end of The Great Recession, the pro-longed recovery, or whatever you want to call it.

Manteca for a variety of reasons has weathered the past year and - it looks like this year – much better than the rest of San Joaquin County when it comes to new housing starts. Manteca had almost 60 percent of all housing starts in the fiscal year that ended June 30. That translates into 237 of the 414 new home starts countywide.

 Like it or not, the only way reasonable housing can be built is if key infrastructure such as the wastewater treatment and water treatment plant are built before growth occurs. That requires long-term borrowing. In both instances, the treatment plants benefit existing residents. In the case of wastewater, there were state imposed requirements to upgrade treatment plus the need to replacement of aging equipment. Even if Manteca didn’t add one more connection, the work had to be done. That is the part of the $60 million treatment plant work that by state law is on the back of the existing users. Since most people can’t cough up $1,000 or so per connection all at once, the money to cover the work is borrowed and the repayment spread out over the years.

The bond is therefore secured in two ways. Monthly charges for the existing users and charges assessed on new growth when it connects to the system. A high default rate on municipal sewer bills paid by residents and others would create a problem but so would a severe slowdown in growth.

Manteca modeled bond debt repayment for the water and wastewater treatment plants based on a specific level of growth. That target needs to be hit consistently or else the city would fly through reserves and then face a hellacious problem. Since the courts won’t allow them to default on debt, they would have to start raising sewer rates even higher or cannibalize the already stressed general fund.

It is in the best interests of existing residents that housing construction continues. The only provisos being is the city still can’t afford a fire sale when it comes to fees or else it will come back to bite them in the rear. Nor can they afford to allow just any type of building in a panic as that will create situations down the road that become detrimental to the community as a whole.

The prime example of what can go wrong is in Weston Ranch. It started out as a planned community under the guidance of one developer who was going to retain tight controls on housing development. Then the recession in the early part of the 1990s hit and the developer went belly-up. That triggered a fire sale of completed lots with a good number going to builders who didn’t share the original vision. So instead of a strong mix of housing aimed at different price points, you got a tidal wave of homes essentially built to move quickly.

It has made it harder to secure other amenities that a community desires ranging from shopping to public facilities.

The key for Manteca is to find a way for developers now at the table to go forward and finish out their subdivisions to avoid tanking. A new builder buying a lot at fire sale from a bank isn’t going to have the same commitment. That’s not saying all builders that buy fire sale lots are bad or all developers who are in it for the long term are good. It’s economic reality. Even if someone pays $5,000 for a finished lot that cost the original developer $55,000 per lot for land, site development, environmental fees, and such just to prepare it to the point they can pay growth fees and then build the house doesn’t mean they can afford to wait for the market to turn around.

Most buy such lots so they can sell and build now. There is a high risk of planting the seed for long-term problems that can create blight and overtax municipal services epically police protection.

On the flip side, the community can ill afford clearance mentality at city hall even if they figure a way of covering the growth costs associated with each lot once a home is placed on it. If Manteca somehow to manages to build 900 homes in the next year it may be good news for the building trades but it will severely stress the city’s ability to provide municipal services for its existing 67,000 residents and the 3,000 or so those homes would generate.

It is a delicate balancing act. Simply waiting to see what pans out though is fraught with pitfalls at every corner.

There is little doubt developers are losing money and have essentially entered a cash management situation to keep treading water. The city also isn’t flush and there is the question of long term impacts on the community’s ability to repay bond debt and enjoy municipal services.

It is in everybody’s best interest to come up with a workable solution that keeps things moving forward without planting the seeds that will deteriorate the quality of life in Manteca
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