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State demands $1.7 million

Manteca pays RDA loan back ‘under protest’

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State demands $1.7 million

Manteca paid the state $1.7 million to avoid derailing economic development plans.

Bulletin file photo/

POSTED May 22, 2013 2:18 a.m.

Sacramento made it clear to Manteca: Pay back a $1.7 million redevelopment agency loan now or risk having local sales and property taxes seized.

That was the edict issued on Friday by the state Department of Finance with the proviso it is paid in full within five business days. The Manteca City Council did just that Tuesday with three days to spare. The council noted they are paying the $1.7 million under protest keeping the door open for possible legal action.

By cutting the state a check for the $1.7 million Manteca also will clear a hurdle needed to access $43 million in redevelopment agency bond proceeds that is the city’s legally to spend on projects aimed at enhancing the city’s economic growth. Part of that $43 million could go to  pay for infrastructure that may pave the way for the Great Wolf Resort, the family entertainment zone, and a South County San Joaquin County government center that have the combined  potential of generating well over 2,000 more jobs.

“The state has what it takes to take what we have,” mused Councilman John Harris.

Mayor Willie Weatherford pointed out the state is demanding more money when it is sitting on a budget surplus of at least $850 million. The mayor noted that instead of banking it there is a growing demand in the legislature to spend it.

The city and state have been quibbling over the $1.7 million for months after Sacramento pulled the plug on redevelopment agencies last year to cover perennial state budget shortfalls.

The $1.7 million is a loan the Manteca RDA made to the City of Manteca in 2009-10 to set up a development services account. It was the outgrowth of a decision by the council to put services associated with moving development through the planning process on a near 100 percent paying basis.  In short, the idea - embraced by a citizen’s budget advisory committee - was to have development pay its own way. It avoided severely curtailing development related services due to budget cutbacks from a sharp drop in sales and property tax revenues. The city set up a freestanding account within the general fund. The loan was designed to fund the department operations until such time as enough money was rolling in for it to stand on its own feet as well as repay the $1.7 million.

The separate account allowed the city to see how much it was “subsidizing” development related services from the general fund.

The council on Tuesday approved a $1.7 million no-interest, 20-year inter-fund loan from the business license excise tax charged on new home construction. There is $4.7 million in that fund that was established with the idea of assisting with over sizing water and sewer pipelines although no specific expenditure was formally attached to the fee when it was implemented. The council used $1 million three years ago from the account to help plug a hole in the general fund budget.

The loan will be paid back  by developers services at the rate of $85,000 a year. Ironically, that amount will be reduced by annual distributions from the redevelopment agency tax stream the state seized of which part still legally belongs to the city.

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