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Challenge is for City Council to avoid repeat of housing crisis budget & service cutbacks

Twelve years ago when the housing crisis had yet to start impacting the city’s bottom line, Manteca continued spending as if it were 1999.

It made sense. The city was growing. Sales and property taxes were climbing every year. There was plenty of money in reserves. Plus Manteca was still flush with nearly $10 million in bonus bucks collected from developers in exchange for sewer allocation certainty.

But within a year the bubble had definitely burst. Manteca was still building homes due to a deal that essentially dropped bonus bucks commitments to make it possible for banks to retrieve millions they had fronted developers who put it into infrastructure to create just over 900 buildable lots. It was money advanced because developers had secured sewer allocation certainty and the housing market was strong. And the only way for banks to get the money they were owed back — $30,000 per lot based on numbers developers said in 2008 that they had invested in infrastructure — was for lenders to make sure developers were extended credit to keep building homes.

Manteca ended up building an average of almost 300 housing units a year with the lion’s share being at Del Webb Woodbridge during the three deepest years of the Great Recession. The city’s housing starts during the time were more than every other jurisdiction in San Joaquin, Stanislaus and Merced counties combined for four consecutive years.

The city was able to weather the first two years of the housing downturn without staff cutbacks while still giving pay raises by cannibalizing the bonus bucks as well as various funds squirreled away such as more than a $1 million in taxes collected on new home construction.

By 2009, the new reality had finally hit home. While Bass Pro Shops and Costco taxable sales were added to the mix to help the city post gains in taxable sales while all surrounding cities slipped, sales at other Manteca venues slowed. Since there was a 12 to 18 month delay at the time before actual sales tax collected is distributed to cities by the State of California, Manteca’s sales tax numbers didn’t start slipping until 2010. By then property taxes started going into free fall as the housing market was struggling to absorb 600 to 800 foreclosures per year sending property values downward.

The cash drain meant the city unless they did something quick would be facing an $18 million deficit within a few years. Most employee groups agreed to 20 percent pay cuts to save as many of their fellow employees’ jobs as possible. The police officers declined the pay cut and the city slashed the force by 12 sworn personnel.

Manteca now is facing a challenge from the coronavirus pandemic with the potential of chilling consumer spending across the board virtually overnight as well as triggering potential job losses. The drop off in sales tax revenue when it happened during the housing crisis was over an extended period of time. Drops in property tax may not factor in with the coronavirus. But estimates that severe restrictions of public gatherings and discouraging people to go outside of their homes except for work — in counties where that is still allowed — and essential needs could go on for eight or more weeks is charting new economic territory.

Manteca is fairly well positioned with $17.8 million in general fund reserves. Based on best practices for cities experts say such reserves should be the equivalent of two months of expenditures. With a general fund of $44.4 million that would translate into a reserve of $7.4 million. Manteca has an additional $10 million in reserves. Cities that Manteca officials historically use to measure the city against on a wide away of endeavors have reserves of 20 to 25 percent and not the 47 percent Manteca has in place.

It was against that backdrop at a meeting closed to the public’s presence on Tuesday due to social distancing that fighting the coronavirus required that the council implemented the first phase of what Interim City Manager Miranda Lutzow described a 5-year municipal staffing. The goal is to improve city services and to make them more efficient at the same time.

The council unanimously approved the creation of positions for an assistant city manager, budget manager, recreation supervisor, deputy director of development — economic development, and deputy director of development — planning.

The money to cover all of those positions is already in the budget. It is being covered by positions that had been left vacant and are unlikely to be filled as the city’s reorganization moves forward.

The council’s action means Lutzow can start recruiting to fill the positions.

The city also approved job descriptions for seven new positions including two that would head up new departments being split from existing departments — the  director of engineering as well as the director of Information, Technology & Innovation. The other positions are deputy city manager-public information officer, accounting manager, executive assistant to city manager, purchasing officer, and economic development specialist.

The city’s engineering functions are now split between community development and public works. The IT function is currently lumped with human resources and risk management.

Both council members Dave Breitenbucher and Gary Singh stressed that just because the staff is developing job descriptions, doesn’t mean the positions will automatically be filled.

They both said the council will look at money available when the budget is presented before decidimng whether Lutzow can fill those positions as well.

Given that is three months or so from now, the city will not have a clear picture of how hard sales tax may be hit by the forced economic slowdown caused by the coronavirus. That’s because first quarter taxable sales reports for January through March will still being processed by the state. It also won’t include second quarter sales information for April through June — a period where Centers for Disease Control experts anticipates the current wave of coronavirus will be at its zenith.

 The silver lining this time around is Great Wolf Resort. While the pandemic could delay its opening, it is clear it will still open at some point just like Bass Pro Shops and Costco did back in 2008.

Even if it opens as scheduled, Manteca will not have a firm number of how it benefits the general fund for a full year until at least September of 2021 with the city’s share of the receipts for the first 12 months will trickle all in until after that.


To contact Dennis Wyatt, email