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Hasta la vista, bonus bucks?
Home builders make case to pull plug
Will dropping bonus bucks for at least five years spur housing starts in Manteca? That’s the question the City Council will have to answer Tuesday. - photo by Bulletin file photo
The days of free-flowing bonus bucks – up to $17,000 charged on each new tract home built in Manteca – may be ending.

The council subcommittee charged with finding ways to jump start housing in Manteca to generate jobs as long as the solutions don’t create legal or financial problems in the future is sending a recommendation to the full council next Tuesday to hold all negotiated bonus buck fees in abeyance through June 30, 2015.

Builders, though, have made it clear they intend to make a pitch at the March 2 council meeting to completely do away with bonus bucks that are paid for sewer allocation certainty as part of development agreements for subdivisions.

Such a move has support among some elected leaders.

“Do away with it is my personal opinion,” said Councilwoman Debby Moorhead at Monday’s subcommittee meeting. “I don’t see us getting it (the bonus bucks) any way.”
Councilman Vince Hernandez indicated he was “on the fence” between going with putting the fees in a five-year abeyance or scratching them altogether until market conditions change.

Dropping them altogether could mean the main reason for paying the bonus bucks in the first place – sewer allocation certainty – would go to the wayside. As part of the debate Monday Assistant City Manager Karen McLaughlin in response to a question about what would happen should the fees not be paid when they are due under individual agreements, she noted it would null and void the agreement basically structured to guarantee sewer allocations over multiple years. That means the subdivision map would then be governed by statute that sets a length of time that the project must be started or else the builder runs the risk of losing all approved development rights.

Unlike growth impact fees collected for a specific purpose, the bonus bucks can be spent as the city council pleases. Some of the money collected over the years has paid for the skate park, traffic signals along the Tidewater, soccer field lights at Woodward Park, and part of the cost of the Union Road fire station. Ultimately the lion’s share of bonus bucks – over $12.2 million – has been used to cover general fund operating deficits. It took $6 million in bonus bucks in the current fiscal year to help cover the balance of the $11.3 million deficit.

City Manager Steve Pinkerton has indicated the city started budget planning for the fiscal year starting July 1, 2010 assuming there would be no bonus bucks flowing into municipal coffers. The upcoming fiscal year has a working deficit of $3.8 million.

The concept of bonus bucks came up 11 years ago when 13 builders were jockeying for limited sewer allocation as the new housing market started to take off. The 13 builders agreed to pay the bonus bucks – they started at $2,200 back in 1999 – in exchange for sewer allocation certainty over multiple years. They were fearful that whoever didn’t come up with sewer allocations under the growth management ordinance that awards up to 3.9 percent in allocation on January first of each year based on the number of existing residential units might sue.

Back then the maximum allowed sewer connections that could be issued in one year was just over 600. This year, the maximum allowed is 901.

Manteca builders started 304 single family homes in 2009 or just about a third of what the growth cap would allow this year.

Builders framed the issue of dropping the bonus bucks charge altogether as an issue of fairness.

There are at least three new projects going through the planning process today that are not encumbered with bonus bucks. They could get to the point they are ready to break ground within a year – should market conditions allow. That means developers either with finished lot or entitled lots could be at a $17,000 per home disadvantage.

Many of the 957 finished lots spread between seven neighborhoods in various stages of build-out have not paid the bonus bucks yet.

There are eight entitled subdivisions with 3,252 lots that have bonus bucks attached to development agreements. There are also 5,429 pending lots  in 11 new neighborhoods going through the approval process that do not have bonus bucks attached to them.

Builders also generally agreed that should the market heat up again that bonus bucks would in all likelihood be resurrected should the city opt to go with their recommendation to drop them entirely.

The subcommittee’s recommendation to the council notes that no developer “shall be entitled to any credits or reimbursements for any development fees paid to date.”