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$36M gone in 10 seconds?
Developers off the hook for bonus bucks thru 2015
The cost to build a typical new home in Manteca dropped around $12,000 on Tuesday night when the City Council suspended bonus buck charges until June 30, 2015. - photo by Bulletin file photo
Manteca’s City Council is forgoing $36 million in bonus bucks – the bulk of which they were likely never to collect anyway.

It is part of a four-point strategy to improve the potential for new home construction and the jobs it would create that was adopted by the council Tuesday on a 10-second roll call following a short discussion .

There are roughly 3,500 lots ranging from those finished and ready to build homes to projects that are entitled but haven’t broken ground yet that now have the requirement to pay pre-negotiated bonus bucks lifted for any home that is built and closes escrow by June 30, 2015. The bonus bucks is shorthand for cooperative sewer development agreement fees that were agreed to in exchange for residential sewer allocation certainty.

A request by Building Industry of the Delta Executive Director John Beckman to have the bonus bucks dropped entirely was met with deaf ears from council members.

“A percent of nothing is nothing,” said Manteca Mayor Willie Weatherford. “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 are under development agreement contracts tied to bonus bucks for the next two to five years 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.

The goal from the council’s perspective was to lift the discretionary bonus bucks fees for five years in a bid to make Manteca even more appealing to build homes. In doing so, they hope to significantly ratchet up the number of single family home permits issued this year and perhaps encourage new subdivisions to break ground to create more jobs.

As it stands, no developer in the Northern San Joaquin Valley is moving forward with turning dirt on a new project. The hope is Manteca’s momentum in the past year of having 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 – could catapult Manteca’s recovery ahead of the region and put local people back to work quicker.

Manteca has a 15 percent unemployment rate.

Councilman Vince Hernandez who chaired the council subcommittee that hammered out the strategy with input from builders and municipal staff said he was willing to “take some dings” for doing what was needed locally to get the economy rolling again.

“We’ve had recessions before but not this prolonged,” Hernandez said.

Councilwoman Debby Moorhead, who also served on the committee, added that the city needed to do what it could within reason to make houses affordable to encourage more investment which in turn generates jobs.

The other parts of the strategy includes:

• deferring all standard development fees to be paid at the close of escrow instead of when a building permit is applied for by a developer.

• requesting that Manteca Unified School District, the San Joaquin Board of Supervisors, and the San Joaquin Council of Governments defer their fees as well to the close of escrow.

• city staff continuing to work with the building community to finalize a new set of cost recovery fees that will be submitted to the City Council by June 15, 2010.

Several developers had indicated they were holding off on submitting building permits for homes they have deposits on until Tuesday’s vote so they could avoid paying the bonus bucks that typically run about $12,000 per home but can go as high as $17,500 if they also agreed to pay a $5,000 public safety fee to fund an endowment for more police officers and firefighters.

Virtually all of the 304 built in Manteca during 2009 paid the bonus bucks. Developers, though, contend they are losing money in most cases as they are building and selling homes to retrieve upfront costs pushing $24,000 per lot that have stranded in the ground after making on and off-site improvements as well as land costs. That refers to the 957 finished lots and not the 3,312 entitled lots where site work has yet to start.

Developers have characterized the period they are in simply as “money management” in a bid to stay in business adding that the dropping of the bonus bucks would allow them to be more competitive against foreclosures plus do so without losing money.

Since bonus bucks were first collected in 1999, some $41.2 million has flowed into municipal coffers. It has helped cover $12.2 million in general fund deficits, establish an $8 million public safety endowment fund where the interest is now  paying for two police officers, and built a number of amenities ranging from soccer field lights at Woodward Park to part of the Union Road fire station. There is still $6 million in bonus bucks yet to be spent that are earmarked for 11 different projects.