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Orchard Valley: Initial sales $26.7M

1st sales tax split check of $110,375 going to developer

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Orchard Valley: Initial sales $26.7M

Bass Pro Shops was one of three stores that generated transactions toward $26.7 million in taxable sales in the first seven months after stores started opening at Orchard Valley.

HIME ROMERO/The Bulletin


POSTED January 13, 2010 3:13 a.m.

Retail sales at The Promenade Shops at Orchard Valley reached $26,758,000 in the initial seven months after the first store opened its doors.

The time period – which stretches from late October 2008 to the start of May 2009 – reflects  the sales of three stores. They are Bass Pro Shops, JC Penney, and Best Buy. Bass Pro Shops was open that entire time, Best Buy opened the last week of February, and JC Penney opened the first week of March.

Under the terms of a 35-year lease of the 1,922 parking spaces for “municipal use” at Orchard Valley, Manteca will return 55 percent of the local sales tax generated – with set caps – over the next 35 years to Poag & McEwen. In any given year, Poag & McEwen cannot receive a check for larger than $1.1 million in any year as its 55 percent cut of each penny on the dollar in local sales tax that is collected. If after 35 years the payments to Poag & McEwen do not reach $18.5 million, any remaining amount due by the city is forgiven. The sales tax split account starts at zero at the first of each year.

The city’s first payment to center developers Poag & McEwen this spring will be $110,375. It is less than 55 percent of the $267,580 in sales tax collected for the reporting period as another part of the agreement requires the city only to pay on sales tax it has in its possession from the reporting period. The State of California’s so-called “triple flip” regarding substituting property tax for sales tax to fund schools plus the fact the state passes through just 70 percent of the sales tax that a local jurisdiction is entitled to when it is supposed to be sent back to local government. The balance is sent  seven or so months later. The state put such a delay in effect two state budget deficit cycles ago so it could avoid cutting state spending and instead tap local sales tax for an interest free loan.

The Measure M sales tax – the half cent voter approved levy for public safety- generated $133,790 that goes 100 percent to the city. It is basically enough to cover the salary and benefits of one police officer.

The scheduled annual payments project $200 million in annual taxable sales by the fourth year – or the start of 2013 – when the mall has ben 100 percent completed and in operation for a year. When that occurs, Poag & McEwen’s sales tax payment will be $1.1 million a year while the city would receive $900,000 or equivalent to just over a seventh of the amount of sale sales tax received from all retail operations in Manteca in the year prior to the first store at Orchard Valley opening.

Any time sales tax exceeds $2 million in any given year, 100 percent of it goes to Manteca. After 25 years, the entire sales tax collection belongs to Manteca.

At the same time Measure M sales tax for police and fire from Orchard Valley alone would hit $1 million or enough to fund the equivalent of 7.5 police officers.

Third quarter sales tax up 7.6% in Manteca
Orchard Valley – specifically Bass Pro Shops – is getting credit for Manteca’s third quarter of 2009 surge in overall sales tax receipts compared to the same three-month period of July, August, and September in 2008 when Manteca still had Sexton Chevrolet, Manteca Dodge, and Mervyns.

Manteca was among a handful of California cities- and the only one on the Northern San Joaquin Valley – to record a positive gain in sales tax receipts. Manteca’s went up 7.6 percent. The next closest was Tracy with a minus 9.6 percent. After that losses were scored by Lodi -11.1 percent, Escalon -20.1 percent, Stockton -18.6 percent, San Joaquin County -23.5 percent, Lathrop -29.7 percent, and Ripon -35.6 percent.

The sales tax data was gleaned from State Board of Equalization records by MuniServices LLC.

At the time the sales tax deal was made, Manteca was mulling over the model that Tracy used to secure West Valley Mall. In that case, Tracy fronted $35 million in redevelopment agency funds for infrastructure related improvements.

Orchard Valley is using the receipts to pay off, in part, a community facilities district that was formed for various infrastructure improvements within the basic lifestyle center. The only entity on the hook for those fees is whoever owns Orchard Valley. Under the agreement Poag & McEwen is required to retain 51 percent ownership until such time the lifestyle center is 100 percent completed.

It is now building the balance of the center primarily as in-line space that in turn is being leased by Craig Realty. The firm specializes in upscale outlet store centers. Poag & McEwen is leasing the remaining eight restaurant pads. Red Robin is schedule to open in the next month or so.

Under the lease agreement for the parking lot, the city has use of the spaces as a park-n-ride lot for commuters, for emergency response staging with helicopter landing capabilities, and other recreational activities. Poag & McEwen may restrict portions of the lease space for no more than six times a year and for no more than seven days per event. Poag & McEwen is responsible for all maintenance of the parking at its own expense and must carry insurance covering the city.
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