State lawmakers may clear up the fate of $46.7 million set aside for Manteca transportation infrastructure projects and affordable housing efforts.

The $46.7 million are unspent proceeds from bonds sold by the Manteca Redevelopment Agency years in advance of the decisions in Sacramento that led to the end of the agency and 400 other RDAs up and down California on Feb. 1.

State leaders were caught off guard when the California Supreme Court upheld their right to disband RDAs but then shut down “pay to play scheme” that would have allowed RDAs that provide annual property tax payments to the state to continue to operate.

The original plan was to simply divert a large chunk of the annual property taxes such agencies collected to the state to help solve the perennial budget shortfall. The legislation adopted never addressed what would happen to unspent proceeds for tax-exempt bonds that are restricted on how they can be spent under law.

“It is among the things that everyone is hoping the legislature will clear up,” noted Suzanne Mallory who serves as the City of Manteca’s finance director.

This week the State Senate on a 34-1 vote passed legislation that was sent to the Assembly to allow $1.4 billion held by RDAs statewide for affordable housing to go ahead and spend that money on appropriate programs. The measure still needs to pass the Assembly.

If the measure by State Senate President Pro Tem Darrell Steinberg is signed into law that would clear up the status of $3 million of Manteca’s bond proceeds that have not been spent.

City Manager Karen McLaughlin said it would most likely allow the continuation of popular affordable housing programs such as the forgivable loans for senior citizen homeowners to make health and safety repairs.

Qualified individuals are eligible to receive up to two $5,000 “loans” for such work. The loan is forgiven after a number of years. But if the home is sold or the person dies before enough time passes, the agency is reimbursed the amount loaned plus interest.

The Manteca RDA has distributed well over $1 million in such loans over the past 20 years.

McLaughlin said if the city is able to keep the money for affordable housing then the $3 million would be spent on programs already in place until it ran out.

The remaining $43.7 million in Manteca RDA bond proceeds was earmarked for transportation project on Jan. 18, 2011 by the Manteca City Council sitting as the RDA commission.

When the original bonds were issued, transportation projects were among the justifiable uses given to assure the tax-free status for bond buyers.

Mallory said the city is hoping the legislature will allow RDAs to use such encumbered money set aside for infrastructure “for the maximum benefit” of residents.

Although there is no specific project that the money is earmarked for, the list of eligible projects is long. It includes interchange work at McKinley Avenue and the 120 Bypass as well as Union Road and the 120 Bypass that could just about be covered by the bond proceeds.

Redistributing the property taxes that come in each year for RDA to other agencies is fairly clean. So is the case of encumbered contractual debt that the RDA must pay back. The murky issues center on the unspent bond proceeds.

If the bond proceeds are spent on one-time expenses to run government day-to-day - if that is legal to do - then essentially taxpayers will be paying for almost 20 years to finance one year’s worth of expenditures. Experts equate that to taking out a $10,000 cash advance on your credit card for the express purpose of spending it on home improvements and then taking the money and spending it on one-time expenses such as dining out and then paying it back over 20 years.

Legislation could be introduced and passed that would enable RDAs to spend the unspent bond proceeds. The state could also allow the bond proceeds to help pay off RDA debt earlier.