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$12.2 million in bonus bucks kept Manteca afloat

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POSTED January 11, 2010 1:31 a.m.

One of the big reasons why Manteca isn’t in as bad financial shape as some of it neighbors has everything to do with developers and their fear of costly legal infighting among each other.

It was the fall of 1999 and Manteca was about to build 1,075 new homes in the coming months. There were 13 developers jostling for limited sewer allocations under the city’s first-come, first-served process that took place at the start of each year.

Developers could smell blood in the water – their own blood.

In other cities with growth caps and limited sewer capacity when development picked up, those who failed to get a share of the sewer allocation pie usually sued because it meant they’d be on the sidelines for at least a year.

To avoid lawsuits, the 13 developers hammered out a unique concept. They’d be willing to pay the city development agreement fees dubbed bonus bucks that the city was free to do with as they pleased in exchange for sewer allocation certainty over multiple years.

The bonus bucks tied to development agreements eventually increased after starting at $2,200 per home. They were put on a tiered plan in 2007.

That tier is $7,350 per home for one to 50 housing units a year, $8,172 per home for 51 to 99 housing units a year, and $13,340 per home for 100 or more housing units a year. The tiered approach was designed to reduce the per home costs in slow years.

Some amenities have been built with the bonus bucks including the skate park, Tidewater traffic signals, part of the Union Road fire station, and soccer lights at Woodward Park. Most of the bonus bucks, though, have been spent on covering municipal shortfalls.

In 2002 as the city started expanding staff without rethinking how they delivered services the bonus bucks became critical to balance the general fund.

In the past seven years $12.2 million in bonus bucks have covered general fund revenue shortfalls.

It  started in 2002 as a $512,000 infusion to help ease the pain of dropping the $2.35 monthly household tax on garbage, water, and sewer service that generated $690,000 annually to help cover part of the tab of operating Manteca’ s municipal storm drain system.

Another $429,500 in bonus bucks was used to cover a revenue shortage in 2003. The city used $780,000 in bonus bucks in 2004 to assist with storm system expenses. Then in 2005 they used $2.4 million in development agreement fees for general fund operations and personnel. The city used $2.1 million in 2006 to also cover a general fund shortfall.

This fiscal year, the City Council tapped $6 million in bonus bucks to balance the budget.

There might be a temptation to drop – or back off somewhat – on development fees to help reduce the costs that it takes for a developer to simply acquire land, put in on-site and off-site improvements and pay fees so they have a lot that is ready to build on. That figure – without the house being started is -$121,079 for a typical 2,500-square-foot home that is part of a 250-unit subdivision with 4.2 homes per acre in Manteca.

Simply knocking off $10,000 or so in bonus bucks might look like a good solution, but it isn’t.

The city – once it gets its cost recovery for development-related work from processing, maps and permits to inspections in place – it should revisit the bonus bucks as it is obvious they were being used to cover costs the developers were getting for free.

At that point, the bonus fees should be reduced in an amount equal to what the actual costs are that the developers will then be charged.

It is doubtful that will exceed several hundred dollars.

If the city has indeed addressed its structural deficit through cost recovery, rethinking how it does business, and reducing staff then in a year or so after it is clear what property and sales tax trends are and if voters in November make it impossible for the state to raid local funds then the council should revisit bonus bucks again.

When they do, they can look for “in-lieu” improvements to replace bonus bucks with such things as having a developer – or group of developers – build a community center. They arguably could do it at a lower cost.

They could also be used in the future to addresses affordable housing and provide some relief to developers but only if there is an air-tight program developed that achieves below market housing.

Bonus bucks have saved Manteca’s financial bacon. In the future they could help Manteca achieve affordable housing goals.

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