Manteca Unified could see an increase in annual property tax receipts of $510,000 while the City of Manteca revenue will jump $175,390 a year if $93.3 million in outstanding Manteca Redevelopment Agency debt is refinanced.
The issuance of new bonds at a fixed rate reflecting today’s lower interest would pay off variable interest rate bonds the RDA issued in 2002, 2004, 2005, and 2006. All other bonds the RDA issued were at fixed rates.
Based on current market conditions, that means 10 local taxing agencies ranging from Manteca Unified and the City of Manteca to Delta College, San Joaquin County, and the South San Joaquin Irrigation District would split $1,078,000 a year based on their percent of property tax bill revenues. The increased funds would come without any increase in property taxes paid by homeowners and businesses that are within the RDA boundaries that includes most of the pre-1990 developed areas of Manteca. Within in those boundaries was Spreckels Sugar whose redevelopment powered in part by a $7 million RDA loan that was paid back in full three years ahead of schedule with interest ballooned the bonding capacity of the RDA. That made a number of major projects possible such as the Big League Dreams sports complex, the Union Road interchange project now underway and a previous and current extension of Daniels Street that allowed Stadium Retail Center, Costco, and Great Wolf resort to develop among other endeavors.
The City Council when they meet tonight at 7 o’clock as the oversight board for the Manteca RDA that was dissolved in 2010 under state directive along with other RDAs will be asked to set the refinancing in motion. The RDAs were dissolved by the state to primarily free up money for local school districts that in the case of Manteca receive 50 percent of all local property taxes. That allowed the state then to reduce school funding and use that money they saved to avoid the layoff of state employees and reducing services as cities, counties, and school districts had to do to remain solvent during the Great Recession.
If the council doesn’t move forward they run the risk that a letter of credit needed to make a deal work that keeps the aggregated interest of the variable rate bonds affordable may not be renewed in 2020. That could send interest costs soaring.
The savings of $1,078,000 a year is calculated based on bonds being issued at 2.78 percent, the $2.6 million in various bond underwriting costs and a $12.1 million swap termination fee required to pay off the 2005 bonds.
That will leave a remaining principal of $91.6 million that will end up costing $138.8 million with interest when the debt is paid off.
After the costs of termination and refinancing are factored in, there will be a $24.8 million savings over the course of a 30-year bond.
Based on the $139.8 million in principal and interest the new bond would cost $4.6 million to retire. Once it is retired in 30 years, Manteca Unified would start receiving just over $2.3 million more a year and the City of Manteca over $600,000. As other fixed rate RDA bonds are retired, what went toward annual payments will also be split among the 10 taxing agencies.
RDAs were set up by the state as a local economic development tool designed to eliminate blight and create new jobs. Twenty percent of what was generated from bond sales had to be spent on affordable housing endeavors.
How the RDA worked was simple. After the base year was established any increase in property tax — whether it was an increase in value do to a sale, incremental increases up to 2 percent as allowed under Proposition 13, or taxes on the value of new improvements — went to the RDA. That effectively flat-lined the dollar amount the 10 taxing agencies received for property taxed within the RDA boundary.
In the case of raw land developed within RDA boundaries, 100 percent of property taxes assessed on new construction went to the RDA. The only thing the 10 taxing agencies got were taxes based on the land at the time it was not developed. That means a $25 million distribution center built on land valued at $200,000 prior to construction would result in $250,000 a year in taxes going to the RDA and $2,000 a year split between the 10 local taxing agencies.
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