Against a backdrop of repeated warnings that Manteca may need some form of new tax to maintain current service levels, the City Council is being asked Tuesday to approve a master community facility district for 655 homes that excludes a $69 annual fee to cover a per house funding gap to maintain the existing level of police and fire services that buyers of new homes being built to the west will pay.
The proposal in its current form may streamline the process for the staff as outlined in a memo to the council by avoiding the advancement of smaller districts with just a portion of the housing units Meritage Homes seeks to build, but if passed will rob elected officials of a chance to collect fees for to cover funding shortfalls that adding new housing creates.
That shortfall was documented in a city study that showed the 1,237-home Manteca Trails project next door would generate insufficient property and sales tax to help maintain the city’s current level of police staffing. The end result is a $69 annual fee indexed for inflation that every future homeowner in Manteca Trails will pay.
While that fee is being assessed via Manteca’s first “service fee” imposed through the development agreement process, state law allows cities to use the community facility fee mechanism to help pay for police and fire services.
Once a community facilities district is formed, the city losses leverage to have fees collected for additional items. At the same time Meritage Homes does not have to enter into a development agreement to build homes.
City can’t force Meritage
into development agreement
that includes a ‘service fee’
That leaves growth fees as the only avenue the city has to make growth pay for what can be legally be attributed to the impacts they create. Those fees, however, are for infrastructure, facilities such as police and fire stations, and amenities. Outside of a developer agreeing to a service fee in a development agreement fee they don’t need to negotiate and agree to in order to build homes, the community facility district is the only mechanism the city has to make new growth pay for “gaps” in funding services that they will use.
The city could at a future date seek a communitywide facilities district or a parcel tax indexed for inflation to address funding gaps for police and fire but that would require a majority approval at the ballot box and apply to all homes in the city regardless of when they were built.
Given the fact the current council — just like their predecessors — say they want to make sure growth pays its way and after they had no issue hitting Raymus Homes’ Manteca Trails project with a $69 annual police services fee indexed for inflation, it raises questions about:
*following through on repeated promises to Manteca residents.
*how serious the staff and elected officials are about exploring and implementing fees that they can legally charge against growth given in June 2019 the council majority — although not on a roll call vote — made it clear to staff that is what they want to see happen. The issue was never brought back to the council.
*how serious the city’s general fund situation really is if they are making no effort to cover the $69 annual per home funding shortfall for police services that their own studies show exist.
*the fairness of homes that will be priced as “affordable” on the Manteca Trails side of a fence paying $69 a year to cover the funding gap for police services while the homes on the Meritage side of the fence that will likely start at the mid-$500,000 range will escape the fee.
The CFD for the 159.9-acre Meritage Homes property if approved Tuesday would cap the household annual fee at $318 per home built with a 3 percent annual cap on the increase of the fee. The annual fee on undeveloped land will be $1,302 an acre.
It will cover the maintenance of street lights, streetscapes, and park improvements.
Meanwhile Manteca Trails next door will be in a CFD as well to cover the cost of maintaining street lights, streetscapes, and park improvements plus each homeowner paying $69 annually to keep police and fire services whole. Again, that figure is the gap is from an independent study that determined each new home built in Manteca will create given property and sales taxes they will generate that goes to the city is not enough to fund their fair share of maintaining the current police and fire service levels.
That means at buildout the Manteca Trails home buyers will collectively pay $85,353 a year to cover the gap in per capita status quo police and fire services.
If such a fee was in the Meritage Homes CFD it would be bumped up to $387 a year per house and generate $45,195 annually for police and fire staffing.
The Meritage project is on land south of Woodward Avenue where McKinley Avenue T-intersects with it.
Ball dropped by staff,
council back in 2019
The Manteca City Council while discussing ways of generating new revenue to fund ongoing municipal services during the June 11, 2019 meeting on the proposed budget for the then upcoming 2019-2020 fiscal year made it clear to staff they wanted to explore the possibility of implementing a CFD tax.
Cities that have done so have either applied it to specific new developments, a blanket tax on all new development citywide, or — if it goes to an election and is approved by two thirds of the voters — it can be a tax on existing and new development. Typically California cities that seek CFD taxes impose them only on new development.
Manteca has a number of landscape maintenance districts that focus on caring for common landscaping as well as sound walls and accompanying landscaping that are assessed as new developments move forward.
About eight years ago the city — faced with a stressed general fund — started requiring new developments to include maintenance and other upkeep costs of neighborhood parks as part of CFD taxes. Some recent ones even have street light maintenance, energy use, as well as replacement of lights and — if needed — poles.
A staff suggestion at the time pitched by then City Manager Karen McLaughlin about including a charge for police services and possibly storm drainage system costs in CFDs had been quickly batted down by the council in office at the time.
Mayor Ben Cantu in June 2019 along with several council members acknowledged the only way that the city can provide the level of services many residents want as well as provide desired amenities is to secure an additional reliable and robust source of new municipal revenue.
What CFDs can be legally
placed on growth to pay
Under state law a CFD special tax can fund police and fire services, recreation programs, libraries, street maintenance, parks and open space maintenance, as well as flood and storm maintenance.
Local agencies under the Mello-Roos Community Facilities Act of 1982 can form a CFD to fund construction of street improvements; water, sewer and storm drain improvements; parks; as well as libraries, schools, and public buildings.
Manteca Unified has CFDs that help pay for school facilities. The City of Lathrop has put in place CFDs in the Mossdale Landing section of the city that allowed developers to finance infrastructure such as water and sewer lines as well as streets.
River Islands at Lathrop has an all in compassing CFD that covers construction of streets, sidewalks, schools, parks, public safety facilities and even more as well as staff to oversee community recreation and social activities. The River Island CFD is capped at a set percentage of the assessed value of property. And like in all CFDs that involve new development the developer goes from paying 100 percent of the assessment over time to a smaller portion as homes are built and sold. Then, after the last home or property has been sold, the developer no longer has an obligation.
In some of the Mossdale Landing CFDs the taxes were not capped. As a result when the values of homes plummeted during the Great Recession the CFD tax skyrocketed on each home in order to cover debt payment. That pushed some homeowners into defaulting on home loans.
Manteca Unified CFDs — since they involve construction of specific facilities — are not only capped but they only encumber property once it is developed for 30 years.
CFDs set a maximum annual tax rate, may fund 100 percent of costs with the exception of landowner approved CFDs, and tax rates may run in perpetuity.
The Mello-Roos Act creating the ability of local governments to create CFDs was in response to the impact of Proposition 13 passed in 1978 that limited property tax hikes on property that doesn’t exchange hands to 2 percent a year.
Prior to passage of Proposition 13 cities, schools, and counties would set up a planned spending program, count up money they have coming in from various sources and whatever shortfall they had would jack up property taxes to cover it.
To contact Dennis Wyatt, email dwyatt@mantecabulletin.com
