Manteca’s elected leaders in the past 10 years blessed two sales tax sharing deals to secure major retailers.
The deals in 2008 that landed Bass Pro Shops and Costco are getting credit for keeping Manteca municipal sales tax receipts fairly healthy.
Finance Director Suzanne Mallory during the mid-year budget review workshop on Friday warned the City Council there are storm clouds on the horizon in the form of increased inroads into retail sales buy online sales.
Mallory noted if you live within 300 miles of an Amazon distribution center that someone wanting to watch TV from their bed while eating bonbons can order the bed, bonbons and TV and have same or next day delivery.
There are proposals being fashioned in Sacramento that would tax services — things such as haircuts, health club memberships, plumbing services, tax preparation and possibly even funeral services — to help fund general government.
Mallory also indicated the city is working to land more retail to bolster sales tax receipts.
There is a basic 7.25 cents per $1 assessment on taxable items statewide. Manteca has an extra cent on top of that. Of the 7.25 cents, 4 cents goes to the state’s general fund, 0.5 cents goes to the Local Public Safety Fund to support the criminal justice system, 0.25 cents to county transportation funds, and 1 cent to the city or county jurisdiction where the tax is collected.
Manteca shoppers pay another half cent in sales taxes under Measure K to fund road and transit projects throughout San Joaquin County. The Measure M sales tax is a half cent charge that covers the salaries and benefits for 15 Manteca police officers and 15 Manteca firefighters.
The sales tax sharing deals with Costco and Orchard Valley where Bass Pro Shops is located excludes Measure K and Measure M sales tax recipts.
Taxable sales are expected to generate $11.3 million for the City of Manteca for the current fiscal year ending June 30. That accounts for 33 percent of the city’s $35 million general fund revenue that covers day-to-day municipal operations such as police, fire, parks, street crews, and general government.
It is the second highest source of source of general fund revenue. Property tax is No. 1 at $12.7 million. That represents 37 percent of the general fund budget.
The two sales tax deals include:
uCostco getting 45 percent of the local share of annual taxable sales until it recovers $3.7 million the firm invested to open the Manteca store. Based on payments so far, it may take up to eight years to pay off the Costco obligation
uThe owners of the Promenade Shops at Orchard Valley receiving 55 percent of the city’s share of local sales tax collected by tenants at the center over the course of 35 years. There are 27 years left on the deal.
Costco will get about $250,000 for last year under the terms of the deal. That means Manteca received $305,000 as its cut or enough to cover the salary and benefits of two police officers with some change left over.
Manteca’s willingness to split sales tax to get Costco to locate within the city until such time the warehouse store received $3.7 million in sales tax receipts was driven by hard numbers.
Every time a Manteca resident shopped at the Modesto and Tracy Costco’s they were dropping $600,000 in local sales tax based on 2006 data tracking purchasing and where Costco members resided..
Once the $3.7 million figure is reached, all of the sales tax flows into Manteca’s general fund coffers.
Costco would have
elsewhere if it
wasn’t for tax deal
Manteca municipal officials found out through commercial leasing agents with Kitchell that Costco was going to locate another store in the region and were considering the east side of Modesto.
Costco is a huge generator of taxable sales in the communities they are located in.
Manteca municipal leaders figured if that happened it would have been years before Manteca had a chance at landing a Costco. And down the road that may not have happened as Lathrop would have been grown making the appeal of locating on the Interstate 5 corridor as being a central location for the Manteca-Lathrop-Weston Ranch region would have been a tough one for Costco to pass up.
Costco told city leaders the Manteca market numbers “weren’t high enough” yet to locate a Costco in Manteca. They’d consider Manteca, though, it there was some type of “help” in covering the site development.
When Manteca approached Costco the firm originally wanted a straight sales tax split with no cap but Manteca balked.
Even after they were told $3.7 million, the City Council wasn’t convinced it was a good deal.
The City Council retained a Los Angeles firm that specialized in such analysis that also – through Costco’s permission – got access to confidential and proprietary information that is collected by the State Board of Equalization on each business that has taxable sales in California.
They used that hard, state-audited data to determine whether a sales tax split deal would really benefit Manteca.
Data recorded every time a club member used their Costco card showed Manteca residents spent $6 million in taxable sales at Costco stores in Modesto and Tracy in 2006.
The $6 million Costco was pulling out of Manteca consumer pockets represented $600,000 in local sales tax that Manteca residents were paying to support municipal services in Modesto and Tracy.
The end result of the discussions with the big box retailer was that it would take $3.7 million for Costco to build a wholesale store in Manteca. The $3.7 million would come out of sales tax the city would receive from Costco shoppers buying items at the store.
Costco meet several critical criteria to get the council’s nod for the deal. First, Costco could prove they were already taking a significant chunk of consumer dollars out of Manteca. Second, there wouldn’t be a major shift of taxable sales dollars on non-grocery items from existing Manteca stores.
95% of sales tax
paid at Bass Pro
is from residents
outside of Manteca
The Bass Pro deal is based on Manteca renting the 1,922 parking spaces for 35 years at Orchard Valley from Poag & McEwen.
The terms of that agreement calls for Poag & McEwen to get 55 percent of the local sales tax collected — excluding the public safety tax (Measure M) and county transportation tax (Measure K) — and the city 45 percent based on the first $1.1 million annually over a 35-year period. If it is less than $1.1 million, the city’s payment to Poag & McEwen is capped at 55 percent of the amount collected. If it more than $1.1 million the excess all goes to the city.
The maximum that Poag & McEwen can receive over 35 years is $18.5 million.
Orchard Valley in its first full year with just JC Penney, Best Buy, and Bass Pro Shops in place took in close to $2 million in local sales tax with the bulk of it from Bass Pro.
Using $2 million that meant Poag & McEwen received $605,000 and Manteca $495,000. In addition Measure M tax receipts for the complex were $1 million.
Bass Pro would have gone wherever it got the best deal from the developer or the city. Well over 95 percent of Bass Pro’s receipts are from money not spent by Manteca residents. And if Bass Pro Shops hadn’t located here Orchard Valley would not have been built and there would be no Manteca JC Penney store.
To contact Dennis Wyatt, email email@example.com