It was the $5.4 million wake-up call.

Manteca’s spending and revenue trends in 2006 showed that if the city didn’t change its ways that by 2015-16 the municipal general fund that pays for day-to-day services such as police, fire, parks, and streets would have a $5.4 million deficit.

City leaders didn’t hesitate or keep their fingers crossed. They engaged a citizen’s blue ribbon panel to examine Manteca’s financial situation and to make recommendations. City leaders listened and acted.

They pared back the municipal workforce by almost 30 percent primarily through early retirements and not filing positions.

City workers agreed to take compensation reductions in excess of 20 percent.

Staff looked at long-range ways to save money by leveraging other funds to make investments to reduce general fund expenses. The street light retrofit project using federal stimulus funds, for example, will cut the city’s PG&E bill for street lights by 40 percent.

At the same time, Manteca’s growth cap policy that gave birth to bonus bucks and development agreements set the stage for developers to continue building 300 homes on average a year since 2006 while building dropped to a virtual standstill in neighboring communities.

All of that is now paying off.

A mid-budget year presented to the City Council Thursday shows Manteca is on target to bring in $227,043 more than it spends when the 2015-16 fiscal year rolls around. If that happens, it would represent a $5.6 million turnaround.

Manteca has been able to balance budgets since 2006 by drawing on reserves spending down bonus bucks developers pay for sewer allocation certainty, and slashing expenses.

Meanwhile, all other municipal funds are solid. In fact they are so solid that Standard & Poor  issued Manteca an improved rating going from “A+” to “AA-“on their outstanding water bond debt of $41.6 million. At the same time Manteca is spending more than $6 million on system upgrades while holding water rates unchanged for four consecutive years.

Fitch - another one of the big three credit rating agencies that also includes Moody’s - kicked up Manteca’s wastewater treatment bonds to “AA-“from “A+”. There is $45.8 million in outstanding wastewater bond debt. Municipal sewer customers have also gone four years without rate increases while the city has spent millions on upgrading sewer lines.

Finance Director Suzanne Mallory noted that sales tax is on track to increase 7 percent by the time the fiscal year ends on June 30. Property tax is trending up 1 percent.

Backing up Mallory’s “most likely” projection of the structure deficit disappearing in the 2015-16 fiscal year is the fact the city projected revenue in 2010-11 to total $26,180,217. It actually came in higher at $27,269,767.

Expenditures were projected at $29,692,509 but were actually just $27,937,314.