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Bonus bucks saved Manteca’s bacon

$41.2M for sewer certainty led to Manteca Miracle

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Bonus bucks saved Manteca’s bacon

Manteca used sewer allocation to generate $41.2 million in bonus bucks.

HIME ROMERO/The Bulletin


POSTED January 1, 2013 12:53 a.m.

Uncle Sam uses printing presses to generate more money.

Manteca used toilet flushes to snag more revenue.

And while the federal government dances along the fiscal cliff Manteca is on the path to living within its means.

Manteca was able to turn sewer into greenbacks - $41.2 million to be exact - thanks to a series of events set in motion back in 1986. That’s when Manteca put in place the Central Valley’s first growth cap limiting housing to a 3.9 percent increase each year. It was in response to double digit growth and the growing concern Manteca couldn’t keep up with the housing pace as municipal services were being overwhelmed.

It wasn’t until 1999 that the cap was reached. That’s when 13 developers with projects containing more than 1,700 building lots were slugging it out for about 650 annual sewer allocations being awarded in 1999 by the City of Manteca. To avoid suing each other they agreed to enter development agreements and started bonus buck payments to the city that - as more projects came on line - generated well over $42.1 million in windfall municipal revenue in exchange for sewer allocation certainty over multiple years.

Unlike other growth fees, there was no restriction on how the city could spend the bonus bucks paid to secure sewer allocation certainty over multiple years of a housing project.

The bonus bucks were billed as a way to have growth to provide amenities for all of Manteca to share. And they did to a degree. They paid to cover about 60 percent of the Union Road fire station’s cost, build the skate park, install soccer lights at Woodward Park, place traffic signals along the Tidewater Bikeway and even cover the cost of aerial Fourth of July fireworks.

But a large chunk of the money ended up covering multiple year general fund shortfalls as the city scrambled to find ways to broaden the retail base and bring in employers to fill private sector business parks that in turn pumped up property tax receipts. Property and sales tax account for the majority of the municipal general fund that pays for day-to-day services such as police, fire, parks, and streets.

Over $12.2 million in bonus bucks were used over multiple years to bridge general fund deficits while the city worked with employee bargaining units to get Manteca’s financial house in order.

Bonus bucks also were used to establish an $8 million public safety endowment fund that is now paying the salaries of six police officers including the four man gang unit that was resurrected in July. The endowment is also helping build the new fire station on Lathrop Road via a loan that will be repaid as fire facilities fees are collected on new growth.

Bonus bucks also helped Manteca survive recession via home building

The bonus bucks also were key to making the Manteca Miracle of building more homes annually in the past three years than anywhere else in the Northern San Joaquin Valley. The annual average of 300 housing units built was also more than the combined total of all of San Joaquin County as well as Modesto.

It is also credited with adding close to 3,000 new consumers that have been critical in helping some Manteca businesses survive and for retail and service workers to keep their jobs.

Back in March of 2010, the housing crash left Manteca developers with 957 finished lots. Forty-one months later the number of finished lots remaining has dwindled down to less than 50. 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.

The stakes were high 41 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 $12,000 a home on average.

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 allowed 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.

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 inventories in March of 2009.

Manteca gave up another $36 million in bonus bucks to help private sector economy

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. 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 – helped put Manteca’s recovery ahead of the region and put local people back to work quicker.

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