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Housing collapse: Domino effects hitting all cities

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POSTED February 16, 2009 4:36 a.m.
Many of Manteca’s neighboring cities are laying off municipal workers as the ripple effect of the housing meltdown is sending property taxes plunging and curtailing consumer spending.
Stockton is eliminating the jobs of 29 police officers plus preparing to close fire stations and possibly lay off firefighters.
Modesto isn’t filling 24 vacant police positions and is instituting “rolling brownouts” of fire stations where equipment will go unmanned.
Tracy is hiking development fees and outsourcing street tree maintenance.
Lodi is raiding $1 million combined from its liability reserves as well as worker’s compensation reserves gambling they won’t get hit with big claims.
Turlock is dipping into $20 million they’ve squirreled away over the years as they can’t even balance their budget with revenues in the current fiscal year even if they cut every non-public safety worker in the city.
Ripon is laying off almost all public works hourly employees, cutting funding to the chamber and library, laying of 10 part-time employees, and is seriously thinking about asking remaining employees to take a 10 percent pay cut.
Lathrop has indicated it has financial problems and that city staff is trying to get a handle on it. Lathrop, more so than Manteca, relies on property tax receipts for city operations. Home prices were higher in Lathrop than in Manteca and have dropped lower than in Manteca based on the tracking of the sale of foreclosed homes.
The measures listed weren’t instituted at the start of the current budget year but instead were put in place during the past month. Each city – except Lathrop – took steps in July to reduce expenditures.
Manteca City Manager Steve Pinkerton told the citizens budget advisory committee appointed by the City Council on Thursday that “it caught every city flat-footed” in terms of how hard and how fast the recession triggered by the subprime mortgage mess hit.
Manteca at the start of the budget year in July kept discretionary spending at the 2007-08 levels, imposed further reductions of $800,000 in departments, kept six positions vacant to save $455,890, and used $6 million in bonus bucks paid by developers for residential sewer allocation certainty to plug a structured deficit of $7.3 million.
Manteca was in a better position than neighboring cities when it came to property taxes thanks to a large dollar value of retail and business park projects being added to the assessment rolls. Manteca’s receipts actually jumped over 2 percent this year while everyone else started to drop. Manteca, though, wasn’t immune from the housing slowdown, and drop in retail spending and sales tax.

State borrows part of city sales tax for 18 months
A mid-year examination of revenue puts next year’s deficit at $11.3 million for Manteca. That’s with word from the county assessor that property tax receipts through San Joaquin County will probably drop 15 percent for the upcoming budget year. To be on the safe side, Finance Director Suzanne Mallory is using up to a 20 percent drop to make revenue predictions and even she isn’t too sure that is enough of a cushion.
The state isn’t helping ether. The 8.25 cents collected on retail sales in Manteca includes a half a cent for the voter-approved public safety tax and a half cent for the voter approved Measure K for transportation projects. The remaining 7.25 percent has 6.25 cents dedicated to the state and a cent to the city.
The dilemma the city faces is the state is now taking 25 percent of the city’s sales tax share and holding on to it for up to 18 months before giving it to Manteca. It is the same elsewhere in California.
That means even if Bass Pro Shop and Costco were able to generate enough sales to counter other retail drop offs in Manteca it may actually not do as much good as it should as 25 percent of those receipts wouldn’t be seen for 18 months.
Bass Pro projected it would generate a conservative $1.5 million in sales tax for the city the first year. Manteca would get 55 percent of that in a revenue sharing agreement that ends in 29 years that allowed the developer to build the mall. The state, though, would take $200,000 of what remains and keep it for 18 months.
The sales tax revenue sharing was made for the lifestyle center based on the fact it would bring regional sales tax dollars into town that Manteca wouldn’t get otherwise.
Manteca, as the result of a mid-year examination of its finances, has renegotiated labor contracts to obtain a $1.8 million annual savings through forced furloughs equivalent to a 3.8 percent pay cut for all municipal workers, is reviewing staffing levels, offering early retirements, reviewing existing levels of services, conducing a development services fee study to make sure they are recovering all costs they legally can, and re-examining how they are delivering services.
That is where the 15-member committee comes in. The council is asking them to make suggestions on how to reduce service levels. Pinkerton, as things stand now, believes the city has put in motion strategies that can bridge about half of next year’s projected $11.3 million deficit.
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