Manteca’s elected leaders want the brakes applied to any new municipal spending whether it is hiring for new positions or embarking on new projects.
That sentiment was expressed Tuesday as the Manteca City Council unanimously extended the local emergency that has been in place since March 15 due to the COVID-19 pandemic.
“There are a lot of unknowns,” noted Councilman Gary Singh.
Gov. Gavin Newsom’s stay at home orders and edict that non-essential businesses be closed to deal with the pandemic has set in motion a number of things that could impact the city’s revenues for years to come.
Singh credited previous councils for building a rainy day fund — cash reserves of $17 million — that he said was designed for situations such as the one Manteca is now facing with the pandemic.
That $17 million reserve that Mayor Ben Cantu two months ago was pushing to spend to jump start projects that he wants to see tackled such as a new city hall could take a big hit.
*Manteca could easily lose a quarter of the $13.8 million in annual sales tax receipts or $3.45 million. While the lion’s share of consumer sales tax is typically collected in the fourth quarter (October through December), it is possible non-essential businesses could be shut down for three months. Unprepared food bought in grocery stores — the bulk of sales that remain — are not taxed. Restaurant sales are taxed although based on reports elsewhere in California they could be down as much as 80 percent. Also economists expect with the sudden shock of major job loss that consumers are unlikely to return to previous spending patterns for an extended period of time as employment returns.
*What sales tax is collected may not come to the city for months. The governor has proposed allowing small businesses to defer payment of sakes tax they collect up to $50,000 as a loan of sorts to bridge the drop off in business due to stay-at-home orders.
*Given that California state budget lives and dies on capital gains taxes, the state could deplete their reserves quicker due to orders related to the pandemic than they did during the Great Recession. To avoid state budget cuts and layoffs, the state withheld sales tax payments due cities for up to nine months during the Great Recession. Since the bulk of sales tax is paid months after it is collected and a “true up” that makes sure everything a city is due is paid doesn’t come for months later the state at any time could disrupt the sales tax flow to cities that was collected before the pandemic hit.
*Room taxes on existing hotels generate $1.7 million a year. The loss of three months would cost $425,000. Just like with taxable retail sales, experts don’t see travel snapping back overnight.
*Gas sales are plunging along with the price. Gas dropped below $2 on Wednesday hitting $1.99 a gallon a Quiki-Kleen on East Yosemite Avenue. The city gets a share of sales tax on gas sales based on the price. It also gets a share of the gas tax — a per gallon charge — that typically runs close to $1 million a year and is used locally to pay for the salaries and benefits of the street maintenance crews, street lighting, and other reoccurring expenses. If driving drops off by 50 percent with a corresponding drop off in gas sales Manteca could take a hit in excess of $150,000.
*The closing of the golf course during the start of the peak season of play increases the likelihood the golf enterprise account will need to be supported with more money from the general fund.
*Manteca has been receiving in excess of $440,000 a year from the gross receipts from the city-owned Big League Dreams sports complex from the firm leasing it that has gone directly into the general fund. The loss of three months of play translates into a loss of $110,000.
*While Great Wolf Resorts is on target to complete the 500-room hotel and indoor water park resort by late June, the pandemic has thrown into question the targeted opening of July 1. A potential postponement of the opening or a softer demand driven by aftershocks of the pandemic would delay the city seeing the projected $1.9 million in receipts from room taxes the city expects to receive in the first 12 months of operation.
*The weakened stock market could mean a drop in return on California Public Employee Retirement System investments. That could trigger increased payments for cities toward the retirement fund.
It is against that backdrop that Councilman David Breitenbucher argues it would be foolish for the city to fill recently created positions. Breitenbucher said he favors only filling vacancies of positions that have been in place.
Breitenbucher’s call for a conservative approach to municipal spending was echoed by Councilman Jose Nuño who stressed it was the prudent thing to do. Councilwoman Debby Moorhead agreed as did Cantu who said the city needs to postpone new spending initiatives.
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