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No bonus bucks = 851 new homes

Council move strengthened Manteca’s hand regionally

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POSTED November 12, 2012 12:56 a.m.

Developed lots minus homes are a scare commodity in Manteca these days.

Back in March of 2010, the housing crash left Manteca developers with 957 finished lots. Thirty-one months later the number of finished lots remaining has dwindled down to 106. Now several developers - Atherton Homes as well as Raymus Homes - are preparing to move forward with major infrastructure projects to create more buildable lots.

Getting Manteca to the point earthmovers would be turning land into new neighborhoods was one of the goals of the Manteca City Council in March of 2010 when they voted to forgive pre-negotiated bonus bucks for any home that was built and closed escrow by June 30, 2015 Bonus bucks is shorthand for cooperative sewer development agreement fees that were agreed to in exchange for residential sewer allocation certainty.

The stakes were high 31 months ago. Developers needed money to avoid going belly up. The city needed more tax revenue to keep municipal services afloat. Construction workers needed jobs. And retailers and services alike in the Manteca private sector needed an infusion of new business to help counter slowdowns in consumer spending.

The requirement of bonus bucks averaging $12,000 per home was a major impediment to home construction in the new economic landscape. Foreclosure priced resales made it impossible for new home builders to compete with the resale, market. That meant if they built homes they’d have to sell them for a loss. No bank was willing to underwrite construction loans for that reason. Yet the developers had something in the ground that could make everything pencil out financially. That “something” was $54.6 million worth of ground work and infrastructure ranging from underground utilities plus water and sewer service to streets and even street light poles plus the cost of buying the land.

The only way developers could retrieve that money was to build. But they couldn’t build if they couldn’t convince banks they’d be able to pay off loans. The decision to drop bonus bucks helped grease the pump by reducing costs by an average of  $12,000 a home.

At the same time Manteca leaders were projecting enough property and sales taxes could be generated from the new homes to stave off additional cutbacks. Since all of the finished lots were within established service areas for everything from garbage to police and fire, the city anticipated they could absorb the additional population projected to reach 3,000 once all of the lots were built on without having to hire additional personnel.

As an extra bonus, growth fees collected from the homes would be able to allow the city to move forward with a number of projects ranging from a new animal shelter and vehicle maintenance facility to a fourth fire station.



Decision led to Manteca leading region in new housing starts for past 3 years


It is why Manteca in 2009, 2010 and 2011 was able to build more than 300 homes annually - more than the combined total of new home construction each year in all of San Joaquin County. It also helped make Manteca’s retreat in property value less severe than anywhere else in the Northern San Joaquin Valley when coupled with new commercial that came on line such as Bass Pro Shops just as the foreclosure induced recession hit.

Without the bonus bucks that 13 developers back in 1999 viewed as the best way to avoid lawsuits over how sewer allocations were allocated under growth management rules, Manteca would not have had the 957 finished lot inventory in March of 2009. It would have been significantly less. Banks, though, when shown the assurance that a developer could continue building homes and selling them in multi-year development agreements without worrying about allocations they funded essential ground work and infrastructure.

The move in March 2010 essentially meant $36 million in potential bonus bucks vanished in the time it took for the council to conduct a roll call vote. Forgoing the bucks wasn’t easy. Since bonus bucks were first collected in 1999, some $41.2 million has flowed into municipal coffers. It has helped cover $12.2 million in general fund deficits, establish an $8 million public safety endowment fund where the interest is now  paying for six police officers, and built a number of amenities ranging from soccer field lights at Woodward Park to part of the Union Road fire station.

But pragmatism and a desire to do whatever to keep the council could to stop the Manteca economy from backsliding farther ruled the day. Council members noted developers weren’t building homes and that the city - and local economy - wasn’t getting any new sources of income.

At one point Manteca Mayor Willie Weatherford noted, “A percent of nothing is nothing. Ten times the amount of fees we would never collect is nothing.”

Weatherford was referencing the strong possibility that a lot of the homes that were under development agreement contracts tied to bonus bucks for the next two to five years back in 2009 would never be built. Instead, developers would wait until agreements lapsed and they could then get sewer allocations unencumbered by anything except growth fees that pay for amenities such as streets, parks, sewer and water.

As it stood at the time, no developer in the Northern San Joaquin Valley was moving forward with turning dirt on a new project. Manteca’s momentum in the past three years of having almost 60 percent of all housing starts in San Joaquin County – which is also tops in the Northern San Joaquin Valley – coupled with a trend that has city sales tax at a virtual breakeven point year to year instead of suffering double digit drops as in nearby cities – would catapult Manteca’s recovery ahead of the region and put local people back to work quicker.

Based on housing starts and how the city avoided further cutbacks in services as well as Manteca’s retail economy showing more resilience than in neighboring cites, the strategy appears to have worked.

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