A private lodging tax is the linchpin that financial experts believe is crucial for a complex deal to secure a 500-room Great Wolf Resort Lodge to make sense for the City of Manteca.

In a financial analysis document delivered on Nov. 21 by MuniCap Inc. — a firm specializing in public financing –  a 5 percent private lodging tax would generate $2.3 million a year using 2019 as the base year. That is in addition to $4.2 million projected from the basic 9 percent transit occupancy room tax, the city’s share of property taxes and its cut of general sales tax connected directly with the resort project.

An estimated $2 million would be generated in 2019 that would be in excess of annual payments. The type of bonds is critical to the deal as well. Of that, $1.4 million would flow into municipal coffers.

Manteca is insisting on certificates of participation (COPS) to finance improvements associated with the building of the resort, indoor water park and conference center that would represent a $135 million private investment by McWhinney Development. That means the city will have no responsibility for the repayment of the COPs other than from the increase in tax revenues provided by the Great Wolf Lodge. That means if the resort fails to generate the room tax, sales tax and property tax in a large enough of an amount the city is not on the hook to make up the difference.

While that increases the risk to those who purchase the COPs, the appeal is the income tax exemption on interest that the COPs carry. Over the life of the 30-year payment of the $30 million for municipal improvements needs to make the site ready for development including streets as well as pipe for sewer, water, and storm service, the holders of the COPs would collect $46 million in tax-free interest on top of $30 million in principal.

Great Wolf also intends to level a private lodging tax of 5 percent to finance bonds for a Community Facilities District for site improvements directly related to the resort project. That is designed to cover about $23 million worth of on-site infrastructure. The CFD is used by many cities to assist developers with the financing of subdivision improvements with taxes for repayment collected by those who buy homes. Lathrop has a number of new neighborhoods where streets plus water, sewer, and storm run-off lines are paid for in such a manner.

The CFD would generate $600,000 in revenue in 2019 beyond the debt repayment.

That means $1.4 million is the number Manteca leaders are working with to determine by the fall of 2014 whether Great Wolf is something that they want to see go on 30 acres currently owned by the city immediately west of Costco along the 120 Bypass. That is what would be left over after debt payments in city room taxes, sales taxes and property taxes generated by Great Wolf that Manteca could use for other purposes.

The $1.4 million surplus projected in 2019 would grow to $2.5 million annually by 2029, $3.6 million annually by 2030 and $4.2 million the year the bonds are paid off in 2044. Then in 2045 Manteca would receive a projected $7.1 million a year from room, sales, and property taxes connected specifically with the Great Wolf resort.

That is in addition to $81,000 a year starting in 2019 in Measure M sales tax generated by Great Wolf guests that could not be used for bond repayments and must be spent on public safety personnel. That represents either one police officer or one firefighter,

The overall municipal, benefit would be just under $1.5 million in 2019 and would continue to increase annually each year after that.

That assumes McWhinney builds a 500-room resort hotel that maintains a 71.1 percent occupancy. That occupancy rate is on the low side of average for similar Great Wolf resorts. The financing assumes a coupon rate of 6 percent with bonds issued in 2015.

Great Wolf projects a $9.4 million annual payroll with 414 permanent jobs and 156 part-time jobs. They also expect 400,000 annual visitors.