Manteca is trying to parlay a $28 per night surcharge on a $200 a night room into a $200 million plus private sector investment that has the potential of generating 560 new jobs, an annual payroll of $9.4 million, and provide at least $600,000 yearly to underwrite city services.
The Manteca City Council Tuesday unanimously blessed negotiation parameters for the city’s $32 million contribution toward the 500-room Great Wolf Resort that is proposed for being built on city-owned land McWhinney Development will lease for 99 years.
Comments on the project’s environmental documents close Friday. A series of informational meetings are being planned for the public before going to the Planning Commission in September and then the council for a final decision in October.
To secure McWhinney’s $200 million investment, Manteca will spend $32 million to build a 30,000-square-foot conference center, the parking lot, and install some infrastructure.
Manteca wants McWhiney to finance the $32 million in improvements with the city paying them back with interest over 30 years.
City leaders made it clear from the start the financing for the city’s contribution could not encumber the general fund or put city residents on the hook for even a penny either to pay for the facilities or if things went wrong.
The end result was a proposal to use a 14 percent room tax collected by the city from Great Wolf guests — the current 9 percent room tax with a 5 percent resort tax added — to repay McWhinney.
At no time, however, would Manteca in a given year be required to pay McWhinney more than 75 percent of the room taxes collected. The cost including borrowing would represent up to a $116.2 million liability for the city’s room tax fund collected exclusively from Great Wolf. While the city could accelerate payments if they so chose, at the end of 30 years if money is still owed McWhinney the balance will be dismissed with Manteca collected 100 percent of the room tax starting in the 31st year.
McWhinney expects to generate $2.4 million in room taxes in the resort’s first full year of operation. That would equate to Manteca receiving $600,000 in room taxes after making a payment to McWhinney.
Council members noted Tuesday that would be enough to pay the salaries of four police officers or firefighters. The amount of room taxes are expected to increase in subsequent years.
“Twenty-five percent of something we wouldn’t have (isn’t bad),” Councilman Richard Silverman noted of the deal. He was referencing the fact without the Great Wolf Resort there would not be $2.4 million in room taxes generated.
It is the same philosophy that guided Manteca’s two other tax sharing deals that brought Bass Pro Shops and Costco to Manteca.
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Bass Pro & Costco tax sharing deals
The most high profile of the two is with Poag & McEwen, developers of The Promenade Shops at Orchard Valley that secured the Bass Pro Shops store.
Manteca is renting the 1,922 parking spaces at Orchard Valley for 35 years from Poag & McEwen.
The terms of that agreement calls for Poag & McEwen to get 55 percent of the local sales tax collected — excluding the public safety tax (Measure M) and county transportation tax (Measure K) — and the city 45 percent based on the first $1.1 million annually over a 35-year period. If it is less than $1.1 million, the city’s payment to Poag & McEwen is capped at 55 percent of the amount collected. If it is more than $1.1 million the excess all goes to the city.
The maximum that Poag & McEwen can receive over 35 years is $18.5 million.
Orchard Valley in its first full year with just JC Penney, Best Buy, and Bass Pro Shops in place took in close to $2 million in local sales tax with the bulk of it from Bass Pro.
Using $2 million that meant Poag & McEwen received $605,000 and Manteca $495,000. In addition the Measure M tax receipts for the complex were $1 million the first year. Sales tax has since increased.
Responding to critics in 2008 who contended the Bass Pro Shops deal was “corporate welfare”, then City Manager Bob Adams said, “(Manteca) is giving up 55 percent of what we don’t have. If we didn’t have a Bass Pro Shops, we’d get none of that revenue.”
Manteca’s willingness to split sales tax to get Costco to locate within the city until such time the warehouse store received $3.7 million was driven by hard numbers.
Manteca residents shopping at the Modesto and Tracy Costco’s were dropping $600,000 in local sales tax every year.
The city is rapidly approaching paying $3.7 million paid to Costco based on the company receiving 45 percent of all sales tax received in a given year. Once the $3.7 million figure is reached, all of the sales tax flows into Manteca’s general fund coffers.
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Costco was looking at different city for expansion store
Manteca municipal officials found out through commercial leasing agents with Kitchell that Costco was going to locate another store in the region and were considering the east side of Modesto.
Manteca municipal leaders figured if that happened it would have been years before Manteca had a chance at landing a Costco. And down the road that may not have happened as Lathrop would have been grown making the appeal of locating on the Interstate 5 corridor as being a central location for the Manteca-Lathrop-Weston Ranch region would have been a tough one for Costco to pass up.
Costco told city leaders the Manteca market numbers “weren’t high enough” yet to locate a Costco in Manteca. They’d consider Manteca, though, it there was some type of “help” in covering the site development.
When Manteca approached Costco the firm originally wanted a straight sales tax split with no cap but Manteca balked.
When Costco said they needed $3.7 million to make the project work, the City Council wasn’t convinced it was a good deal.
The City Council retained a Los Angeles firm that specialized in such analysis that also – through Costco’s permission – got access to confidential and proprietary information that is collected by the State Board of Equalization on each business that has taxable sales in California.
They used that hard, state-audited data to determine whether a sales tax split deal would really benefit Manteca.
Data recorded every time a club member used their Costco card showed Manteca residents spent $60 million in taxable sales at Costco stores in Modesto and Tracy in 2006.
The $60 million Costco was pulling out of Manteca consumer pockets represented $600,000 in local sales tax that Manteca residents were paying to support municipal services in Modesto and Tracy.
The end result of the discussions with the big box retailer was that it would take $3.7 million for Costco to build a wholesale store in Manteca. The $3.7 million would come out of sales tax the city would receive from Costco shoppers buying items at the store. The deal gave Costco 45 percent of the city’s share of sales tax — excluding Measure M public safety sales tax that the city would retain — in any given year until the $3.7 million obligation was met.
