Study finds potential revenue if Modesto annexes Salida, but deficits at first

02/11/2013 10:03 AM

06/26/2013 2:31 PM

A long-awaited study released Monday shows that the proposed Salida annexation to Modesto, coupled with development of the Salida Now plan, would create surplus revenues for Stanislaus County and the city.

The study by Sacramento-based Goodwin Consulting outlines the cost to Modesto taxpayers if the city absorbs the unincorporated community of 13,700 people. Modesto would take on a $2.65 million annual fiscal deficit because the revenues from Salida's tax base would not cover the cost for police, street maintenance and other government services.

As business parks and shopping centers are developed in Salida's 3,400-acre growth plan, however, tax revenue to the city would increase faster than expenses, the study predicts.

If Salida became part of Modesto, the county immediately would shed $2.4 million in red ink and benefit when the area develops.

Salida, on Modesto's northwest flank, is the county's largest unincorporated community, with more residents than the cities of Waterford, Newman and Hughson. Many Salidans would prefer to chart a path to city status, but without a viable commercial or industrial tax base to pay for services, that appears unlikely in the short term.

The Goodwin study was commissioned to help city officials decide whether the annexation makes sense as local government grapples with budget issues. Modesto and Stanislaus County split the $60,000 cost.

Shifting expenses

The 64-page report discusses the impacts on county and city budgets if Salida remains under the county's jurisdiction and if it's annexed by Modesto.

The county spends almost $3.5 million annually on law enforcement in Salida, and other expenses such as road maintenance, parks, health and human services, and jails pushes the total tab to almost $8 million a year.

Taxes from homes and the limited number of businesses in Salida gives county government about $5.4 million a year, resulting in a $2.6 million deficit, the study says.

With annexation, the annual deficit essentially would shift to Modesto. The county still would be $200,000 in the red because it would continue to provide health and other countywide services to Salida.

The study also estimates the public service costs and tax revenue as the 3,400-acre Salida growth plan is developed into a complex of business parks, shopping centers and 4,500 homes, capable of boosting the Salida-area population to 26,000 or more. The growth plan approved by the county in 2007 stretches from Kiernan Avenue north to the Stanislaus River.

The city and county would have to hire more staff and purchase more vehicles and equipment to service the larger area, but there would be a strong tax base to pay for expenses.

At full development, the Salida area would produce $22.8 million in yearly revenue for Modesto against $18.1 million in annual service costs, a surplus of $4.7 million, the study says. The county would see $15.9 million in tax revenue and have $7.8 million in expenses, an $8.1 million annual surplus.

The report doesn't project when the revenue would offset the cost of services or begin to create a surplus.

The Modesto Regional Fire Authority, composed of the Salida, Modesto and county fire agencies, today gets about $2.2 million in annual revenue from the Salida community and spends $1.8 million on fire protection.

Development of the Salida growth area would give the regional fire authority a $2.2 million annual surplus, the report estimates.

Focus on potential jobs

Modesto Councilman Dave Cogdill said Monday the results of the fiscal study are a green light to further explore annexation. He stressed that the reason to consider it is not the fiscal benefits to local government, but the potential to create jobs.

"I think it is in the best interests of Salida and the city of Modesto," Cogdill said. "It comes back to jobs and economic development and diversifying our economy. That is what we need to focus on."

According to the rosiest projections, the Salida development area could put 27,000 people to work.

Vito Chiesa, chairman of the county Board of Supervisors, said he will reserve judgment on the fiscal numbers until they are vetted before the county board.

"The people of Salida are going to be important in this conversation," he said. "I am not rushing into anything. We need to listen to the residents and the city of Modesto."

Chiesa noted that the study looks at two extremes: what happens if there's no development in Salida and what happens with development of the entire Salida growth area, a process that could take 20 to 30 years.

County leaders would possibly allow the Salida area to be developed under Modesto's jurisdiction because of the city's apparent ability to supply water and pay for business park improvements. The Salida growth plan approved in 2007 was designed so that fees on the homes then proposed would fund the roads and other improvements for the business parks.

City and county officials still would need to talk about the timing of Modesto annexing the Salida community and assuming the service costs. It's not known how quickly the business parks or shopping areas could develop to generate the sales and property taxes needed to pay for services.

Modesto land grab?

Katherine Borges, a Salida Municipal Advisory Council board member who opposes the annexation, said the employment promises are just a selling point for a land grab.

"The question is whether Salida residents see any benefits to them. I don't see anything in the Goodwin study except taxes for Salidans," Borges said.

Keith Boggs, assistant executive officer for the county, said the revenue projections in the report are conservative. Based on the success of bringing distribution centers to Patterson near Interstate 5 and Blue Diamond to Turlock's industrial area, Highway 99 access should make the Salida business parks attractive for companies, he said.

Now that the fiscal study is completed, an ad hoc committee will review the results and discuss how to present the information to Salida residents at town hall meetings.

Bee staff writer Ken Carlson can be reached at kcarlson@modbee.com or (209) 578-2321.


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