Manteca is advancing a four-pronged “tax” proposal with a goal to cover revenue shortfall to support current service levels and to work toward making sure growth indeed carries its full weight as the years unfold.

It involves:

*Asking voters to approve as much as a one cent increase in sales tax.

*Leveraging requests by developers to use Statewide Community Infrastructure Program (SCIP) bond proceeds to finance subdivision improvements such as sewer and water lines to put in place expanded community facilities districts (CFD) on subdivisions that already have secured full entitlements but will fail to cover their ongoing costs once developed.

*Updating growth-related fees on new projects to cover growth’s true share of costs as well as include improvements not yet identified while at the same time tacking on automatic inflation clauses on fees paid by future homeowners as the years unfold.

*Increasing water and sewer rates — that haven’t been raised for 14 years — to cover ongoing costs, make required paybacks of interfund loans that kept the operations solvent, and collect money to fund anticipated pipeline and related replacement projects needed due to aging and deteriorating infrastructure.

The strategies are aimed at:

*Covering current and anticipated funding shortfalls to simply maintain current service levels.

*Bringing up service levels for police, fire, street upkeep, parks and more to targeted standards.

*Making sure as many new neighborhoods already approved — as well as all yet to have plans submitted in the coming years — generate their own pool of funds through CFD fees to cover the upkeep and future street overlays and repairs within their neighborhood to further avoid stressing the general fund.

*Having those same newer neighborhoods contribute additional CFD funds annually to bolster the city’s ability to put additional police officers on the street and staff more fire engines.

*Improving the city’s ability to address municipal infrastructure issues and related costs in older and even more recently built subdivisions and areas of Manteca as they age. That would be accomplished by shifting more costs for new subdivisions to pick up their own tab for municipal services through a more robust CFD fee as well as increased sales tax.

The “taxes” the city is seeking may be called that by most but under state law they are not pure taxes as defined by California.

They also have different paths to becoming a reality.

*Sales tax is a straight-up “tax” requiring voter approval.

*A sales tax restricted like Measure M, the current half-cent public safety tax funding 18 police officers and 18 firefighters, requires a two third majority to pass.

*An unrestricted sales tax that allows the city to use money generate for general fund purposes as they see fit requires a simple majority.

*Charges for water, sewer, and garbage service are user fees under the law given those accessing the services pay for what they use. The three municipal services are structured as enterprise fund accounts meaning they are supposed to cover the costs they incur through user fees. The council can impose user fees unless 50 percent plus one of those impacted submit written opposition during a protest hearing.

*Growth fees can legally be imposed or increased by the council after a nexus study is performed. Such a study identifies overall growth and — as required by state law — assigns the percentage that growth creates the need for something such as a new police station through fees. The balance of a project’s cost needs to be covered by existing residents or by other means.

*Projects already entitled or so far along more robust CFDs can’t be placed on them — perhaps 6,000 plus of 11,000 housing units in the city’s development pipeline — would require developers to add them on their own. That is where the SCIP financing comes in. Since such financing requires city approval to access state bonds, Manteca intends to leverage more robust annual CFD fees for streets, parks, fire, and police in exchange for their approval to allow SCIP financing.

New home buyers

would be hit hardest

The taxes and fees would have a bigger impact on buyers of most new homes than those living in existing homes.

That’s because they not only would pay existing CFD fees but also more robust CFD fees plus have the cost of stepped up growth fees collapsed into their home purchase price.

They also would pay increased user fees like everyone else.

Even their property taxes — and likely sales tax — payments would be higher.

A new $700,000 home bought in Manteca has a basic $7,000 a year property tax bill before CFDs, special district taxes, and bond repayments are tacked on. They also, if the city agrees to allow the developer to use SCIP financing for subdivision infrastructure, would be paying that off as well for 30 years through their property tax bill.

More financially well off households also tend to spend more on taxable items. As such they spend more money on taxable big ticket items such as vehicles, furniture, appliances, and electronics as well as do things such as dining out more frequently which is subject to sales tax as opposed to buying unprepared food at a grocery store.

There will be buyers of new homes that will escape the plan for enhanced CFDs for streets, police, and fire. The same applies for more robust growth fees. While builders pay the growth fee in place at the time a building permit is requested, they can’t be subject to growth fees not  already in place.

Those in existing CFDs would also escape the higher growth frees and additional CFD charges for streets, fire and police.

And older sections of Manteca, households would be subjected only to the increased sales tax when they purchase taxable items as well as the readjusted user fees for water, sewer, and solid waste service.

The lure of SCIP financing

for Manteca developers

Under state law, SCIP financing can be tapped to pay for improvements that will be publicly owned.

The list includes streets, sewer and water lines, storm drain pipe, frontage improvements such as sidewalks and curbs/gutters, landscaping, street lighting, bike trails, and such.

Those costs without SCIP financing are 100 percent financed through loans obtained by developers and paid off with proceeds of new home sales.

Under SCIP financing the future owner of the home being sold is on the hook for retiring their property’s proportional share of the SCIP loan.

Either which way the home buyer ends up paying for all of the improvements.

As for those that argue that SCIP makes housing more affordable, the cost of the mortgage and insurance as well as all taxes — including SCIP repayments and annual CFD fees — are all weighed by lenders in determining a borrower’s ability to repay a mortgage.

SCIP does make financing for developers more attainable which is considered crucial to securing more housing to meet the state’s chronic housing shortage.

There is a 2 percent debt cap that can be placed in the form of CFD fees, Mello-Roos taxes for schools, and SCIP financing on property tax bills.

Manteca is at less than half that cap. River Islands at Lathrop, on the other hand, is at the maximum.

Given it is adding to the tax bill, cities such as Manteca need to approve the developer’s request before the state will consider processing it.

In most cases pending now, developers are seeking SCIP funds to pay for sewer, water, and storm lines primarily.

The city’s stance is simple. If you want to access SCIP financing then you have to agree to encumber already entitled lots with a CFD to cover streets, fire, and police impacts those neighborhoods will create.

To contact Dennis Wyatt, email dwyatt@mantecabulletin.com