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Bonus bucks blowback

Opposition arises to allowing developers off hook for $6.9M

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POSTED August 26, 2014 1:56 a.m.

Bonus bucks — or more precisely a decision to let developers off the hook for as much as $6.9 million they agreed to pay in exchange for the privilege of building homes — has emerged as the first major issue of the Nov. 4 municipal election.

The two hopefuls for mayor — Steve DeBrum and Ben Cantu — are not happy with the City Council’s decision last week to instruct staff to essentially give builders an additional 18 months of not having to adhere to development agreement terms that were negotiated with the city in good faith.

DeBrum — who missed Tuesday’s meeting due to a business commitment when the rest of the council voted 4-0 to extend the bonus bucks being held in  abeyance beyond June 30, 2015 to Dec. 31, 2016 — believes the council may have acted too soon and did not give enough consideration to a proposal to flatten bonus bucks across the board to $5,000 per home.

Cantu’s opposition to the council’s action was more blunt.

“I am amazed how the council can rationalize kissing away $6.9 million ‘that can be used for anything’ and then wonder why there is never enough money in the coffers to provide for community needs,” Cantu said. “In addition, it is absurd to believe that developers will not build homes in Manteca if the city does not reduce or forgive fees. History has shown that Manteca has always been a hot market for new homes whether the fees are lowered or higher or there is a recession. The truth is that the council is simply helping the builders balance their profitability on the backs of the residents.”

The council vote on bonus bucks irked Cantu enough that he is going to do something that he’s never done in his previous runs at getting elected: He plans to attend the Sept. 2 council meeting to express his displeasure with the decision.

The item is coming back before the council essentially for ratification of documents that would implement their directive. It was on last week’s agenda to get direction from staff about the request. Staff presented several options including flattening all the fees to $5,000 per home to reflect a cooler housing market than when some of the fees were agreed upon just before the start of the housing collapse.

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Hernandez willing to listen to DeBrum’s pitch

Councilman Vince Hernandez pushed to have the bonus bucks held in abeyance longer citing his belief that the housing recovery was precarious at best. Hernandez advocated taking action to extend the 2010 decision to temporarily not collect bonus bucks at the depth of the recession based on concerns it could cost Manteca construction jobs by forcing developers to build elsewhere.

Hernandez on Monday said he is willing to listen to input from DeBrum on the issue.

Hernandez, who is a facing challenges from Mike Morowit and Richard Silverman for the two available council seats, said it was only right to take into consideration DeBrum’s thoughts since he was unable to attend last week’s meeting.

DeBrum said at the very least he would have preferred the council have waited until March or April of next year to make a decision. That would have been  three or four months before the  moratorium on bonus bucks was scheduled to end instead of doing so 10.5 months in advance.

DeBrum said the council would have a better handle on what the short range outlook  for the housing economy looks like. Hernandez last week said he wanted a decision made in advance of the election instead of afterwards so politics would essentially have no impact on the decision.

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DeBrum wants to pursue two options

DeBrum indicated he wants to explore two options. If the council feels the economy justifies continuing not collecting bonus bucks he’d prefer they do so only for six additional months and then make another assessment. The other was to flatten bonus bucks collected in return for sewer allocation certainty to $5,000 per home. Some builders agreed to pay as much as $19,000 a home when the housing market was reaching record prices.

The $6.9 million is how much City Manager Karen McLaughlin estimated the city could stand to lose through the 18-month extension.

The bonus bucks are on top of growth fees. Manteca collected almost $41.2 million in bonus bucks over 11 years before they were suspended 38 months ago. Bonus bucks helped pay for two fire stations, soccer field lights at Woodward Park, the skate park, Tidewater Bikeway traffic signals, hire six additional police officers, pay part of the tab for aerial Fourth of July fireworks, and to cover $12.8 million in general fund budget shortfalls among other things.

Holding the bonus bucks in abeyance was in response to the collapsing housing market that made building new homes unprofitable.

As such developers, who had more than $40 million in infrastructure stranded in the ground for 965 lots that were ready to build new homes, could not keep construction workers employed or pay off bank loans.

It also meant the city didn’t have growth it needed to help keep the general fund and enterprise accounts from retracting even more and in turn forcing municipal, layoffs beyond wage and benefit concession.

Ironically, one of the developers asking for the bonus bucks suspension to be extended inked an agreement to pay them just three months ago.

At the same time not all developers building homes agreed to pay bonus bucks. That’s because given the city’s current 3.9 percent growth cap and how it works there is no danger of them not obtaining sewer allocations to build homes.

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