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Retail sales in Manteca drop 12%

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Retail sales in Manteca drop 12%

City of Manteca Finance Director Suzanne Mallory, right, listens as Public Works Director Mark Houghton, left, outlines his department's plans to help deal with the municipal deficit for the 2009-1...

HIME ROMERO/The Bulletin/

POSTED January 11, 2009 1:12 a.m.
A boom in retail construction, ironically, is the only bright spot in the revenue outlook for the City of Manteca as it contends with a projected deficit in excess of $11.3 million for the fiscal year starting July 1.
Manteca bucked a countywide trend and saw its property taxes actually increase this year by 3 percent. The big assessment gains through the building of Bass Pro Shops, Costco, Office Depot, Ross Department Store, Kerasotes Showplace Cinema, Best Buy, and JC Penney — almost $50 million in new assessments — plus 223 new homes and two senior citizens complexes countered the dropping residential property values due to foreclosure pricing.  Property tax receipts are expected to top $5.215 million when the current fiscal year ends June 30. Next year, however, Manteca is expected to take a hit in property taxes.
The strength of retail construction is ironic because sales tax — the city’s No. 1 general fund revenue source — is taking a hammering. Sales tax receipts are running 12 percent behind projections, according to Finance Director Susan Mallory.
Manteca had budgeted for no growth — or $6.625 million in sales tax — in the current budget year that ends June 30.
Mallory told City Council members during their retreat Thursday at Chez Shari at the Manteca Golf Course that if the trend continues, the city will come up $725,000 short in sales tax revenue this fiscal year. Sales and property taxes are the two biggest sources of revenue for the municipal general fund.
The city is counting on the opening of JC Penney on March 6 to capture Manteca consumer dollars currently going to that chain’s Modesto store plus even lure soft good consumer dollars from nearby cities including Tracy. The JC Penney store in Tracy’s West Valley Mall is a smaller version than the 103,000-square-foot store opening in the Promenade Shops at Orchard Valley. The Mervyn’s store that closed last month on South Main Street is about half the size.
Mallory said the city is hopeful Kohl’s — which aims for the same market segment that Mervyn’s did — will pick up much of that store’s business.
The opening of Best Buy Feb. 27 may pull away electronics sales from Circuit City and other Manteca stores. Councilman Vince Hernandez, though, noted that Best Buy has a strong loyalty among customers.
“I know many people who are loyal to Best Buy and they go to the store in Modesto,” Hernandez said. “They’re telling me they can’t wait for the store to open here.”
Unlike in previous years, the sales tax budget projection include revenue from stores that were opening during the year although just two are included— Costco and Bass Pro Shops.
Costco had a better opening two weeks that anticipated. Sales data beyond that has not been reported to the state. Manteca also does not have Bass Pro Shops sales tax data in yet.
Sales data so far for the year in Manteca shows that:
• new car sales are down 41 percent.
• used car sales are down 36.5 percent.
• department store sales are down 6.7 percent.
Autos sales are 11 percent of Manteca’s tax base. Department stores are 17 percent. There is also a six-month delay until the city receives its cut of the sales tax.
“The news is not positive,” Mallory noted.
Building permit fee revenue is down $380,000 while business license receipts are holding fairly steady.
Supplemental property tax bill receipts — a one-time charge when buyers purchase a home that takes increased tax assessments back to the first of the year — have dried up since property values are dropping
The state is also not paying vehicle license fees to the city due to a drop in the state’s tax receipts. A portion of those fees was given to cities in a previous move by the state to divert a chunk of local property tax to state coffers in Sacramento.
The local share of gas tax revenues — that are used to maintain streets — is down. There is good news, however, connected with gas prices. The city had budgeted based on gas hitting $5 a gallon. Based on current trends and what is projected through June, the city will end up saving $300,000 due to lower fuel prices.
Measure K receipts are down which poses a challenge for funding regional road projects as well as the part of the half cent that goes to cities such as Manteca to help with street maintenance.
There are various long-range expense that are going to impact the budget including a 2 to 4 percent increase in the public retirement account contributions in 2010-11.
City Manager Steve Pinkerton indicated with cuts and other strategies currently being implemented, the city should be able to bridge up to half of the $11.3 million deficit.
That doesn’t include $2 million in additional revenue generated last fiscal year that could be used —in part — to further reduce the projected deficit.
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