View Mobile Site

Key RDA loans paid in full

Made Spreckels Park, Kelley Brothers possible

Text Size: Small Large Medium
POSTED January 21, 2010 3:08 a.m.

Three of the biggest – as well as most pivotal and controversial Manteca Redevelopment Agency loans – have been paid in full and ahead of schedule.

Those loans included:

•$6.1 million for sewer and water lines as well as streets and other improvements in Spreckels Park. It was paid off three years ahead of schedule with interest.

•$950,000 for public infrastructure and reduction of fees to secure the Manteca Target store in Spreckels Park at least five years ahead of schedule.

•$250,000 to help finance the $1.4 million conversion of the burned out shell of the El Rey Theater into Kelley Brothers Brewing Co. It was paid off last fiscal year along with accrued interest.

Critics blasted the loans as “corporate welfare” at the time they were made insisting that the projects should not proceed if the private sector didn’t provide 100 percent of the funding.

“They were business deals,” noted Manteca Mayor Willie Weatherford of various RDA loans that have also helped keep Mt. Valley Express jobs in Manteca plus helped numerous small firms such as Manteca Veterinary Clinic, Precision Automotive, and Tubbs Electric.

In all cases, Weatherford noted the city developed a performance evaluation that was on the conservative side.

“Actually, they all did better than expected,” Weatherford added.

The reason why almost every dollar for the various projects couldn’t be secured through conventional banks wasn’t due to how successful the business had been. Most were extremely successful. It was either due to the location such as Precision Automotive being located on Moffat or the lack of signed tenants or buyers as in the case of Spreckels Park.

The ability for cities to put in place redevelopment agencies was created by the California Legislature for the express purpose of helping municipalities fight blight, stimulate economic development, and secure affordable housing. Twenty percent of all RDA tax generated must go to affordable housing projects. One of the city’s biggest affordable housing programs is grants of up to $5,000 to senior homeowners for the express purpose of making health and safety repairs. The city has distributed more than $1.5 million through the senior housing program.

The $6.1 million RDA loan was made to AKF development in lieu of being able to have future employers access the fee reduction program for water and sewer service when they built distribution centers.

The developers were able to get Frito-Lay in place along Moffat Boulevard and Spreckels Avenue’s southern end that was stubbed near the Moffat intersection at the time in 1999. Food-4-Less and the rest of the initial Manteca Marketplace were completed in early 2000 with Spreckels Avenue stubbed at the southern access to the grocery store parking lot.

They were relatively easy projects to secure as they were on top of existing streets as well as sewer and water lines.

The rest of Spreckels Park was more problematic. There were firms interested but they wouldn’t locate without the basic roads and infrastructure in place. Banks wouldn’t lend the developers money to put in the infrastructure unless they had a signed deal. The RDA loan resolved that problem and opened the door for ADPS Packaging. A number of others soon followed including Ford, American Modular, Dryers, and Millard Refrigeration to name a few.

AKF had been lobbying Target to place a store in Spreckels Park but were told repeatedly that opening a store in 2003 in Manteca was premature but come back and talk to them in 2008 or 2010.

Working with the Manteca RDA, a proposal was made to Target that it wouldn’t have to pay for the infrastructure needed to open and it would get a fee reduction if they’d build then instead of waiting at least five years.

But there was a dilemma. The developers had already agreed not to access the fee reduction program for any other project in Spreckels Park. The City Council sitting as the RDA commission was leery of another RDA loan given they have just made one for $6.1 million a year earlier to the project.

Not every RDA loan is a success

That is when the proposal advanced that the five parcels designated for retail use would be used as “collateral.” The RDA would get 50 percent of the increase value that was expected to happen once the basic infrastructure was in place and Target was opened. Within several years, the RDA had recovered their investment while Target opened in late 2003 as agreed some five years ahead of corporate planning.

The burned out shell of the El Rey Theatre for 24 years stood as a three-story monument to blight just a stone’s throw from the city’s most high profile intersection – Yosemite Avenue and Main Street.

The $250,000 RDA loan for Kelley Brothers was essentially gap funding that couldn’t be covered by investors or banks.

Not every RDA loan plan has gone according to plan.

There was a $265,930 RDA loan made to make the $6 million Sexton Chevrolet dealership possible that opened in 2003. The relocation of Tradeway Chevrolet to the Sexton Chevrolet site freed up the southwest corner of the Highway 99 and Yosemite Avenue interchange for highway services.

The loan had a five percent simple interest that was compounded annually and was supposed to be paid in full in five years from the start of business at the new site unless all of the following conditions are not met:

• Completion of the Sexton Chevrolet project as designed.

•Continuous operation of Sexton Chevrolet for at least five years.

•Proper maintenance of the property.

•Production of a five-year average of taxable sales of $30 million a year ($20 million in existing sales and $10 million additional annually).

•Creation of at least 32 additional jobs with a minimum salary of $42,500 a year.

Municipal staff has indicated that the criteria has not all been met but did not elaborate. It is most likely to be the taxable sales goal.

The issue of what to do with the Sexton Chevrolet loan will be brought to the RDA commission in the coming months to determine the next course of action.

Commenting is not available.

Commenting not available.

Please wait ...